Medical Developments International Limited (MVP) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Medical Developments International FY '23 Half Year Results Conference Call. [Operator Instructions] I would now like to hand the conference over to Mr. Brent MacGregor, CEO. Please go ahead.

Thank you very much. Good morning, everyone, and welcome to today's investor briefing for our half year results. Yes, I'm Brent MacGregor, the CEO, and I'm also joined today on the call by Anita James, our Chief Financial Officer. So as usual, I'll share with you the highlights of our results and our key achievements through the first half of this fiscal year. I'll then pass over to Anita, who will run you through the financials in more detail before returning at the back end to provide you with an update on the progress we have made on key initiatives and our priorities for the second half of this year. And as mentioned, after that presentation, we'll have plenty of time for any questions you will have. So on that note, why don't we go to Slide 3, here it is. So these are the financial highlights of the period. And at a headline level, what you'll see that we've delivered is on the top line, 45% growth with revenue at $13.9 million. This is built upon 27% growth in the Pain Management space, essentially Penthrox of course, and 81% growth in our Respiratory business. The underlying EBIT loss, you'll see here is $8.1 million, which is an improvement on the prior corresponding period. And then finally, you see the net profit after tax is $2.7 million. That's a strong improvement but this has included a gain of $11.5 million before tax, and that was mostly related to the closing out of the clinical program in China, which we announced to the market back in January. So we have increased the penetration of Penthrox in global markets, the specific ones that we have targeted. And our Respiratory segment is reflecting the gains we are making in growing market share. That's particularly in the U.S. But against this backdrop, there continues to be some challenges for us in the markets. And while these results show encouraging progress, we are very much focused on addressing these challenges. Now let's move to Slide 4, more on the operational highlights. First and foremost, in the near term, our strategic focus has been and will continue to be to accelerate the penetration of Penthrox in select European markets, in particular France, and here at home in Australia, and to grow our Respiratory segment through market share gains, again particularly in the U.S. Now in the longer term, our aspiration is to deliver the next wave of growth through Penthrox entry into the U.S. market. So we have plans in place that we expect we'll continue to grow our sales volume significantly over time, and that will ultimately transform us into that global health care company that we are aspiring to be, that global health care company based here in Melbourne. So let's take a brief look at the progress we have so far this year. So in Australia, as you would have heard at the full year results, we deployed a field team to capture the attractive growth opportunity for Penthrox we see in the hospital emergency departments, as well as to drive further penetration in existing segments, and that's mainly the ambulances. In France, where we already have a field team deployed, we delivered volume growth of 24%. This is encouraging, but it's less than our expectations. And our progress has been slowed by some challenging conditions across the health care system in that market, but I'll speak to that in more detail later in the presentation. Now as regards our partner markets, they performed well in the U.K. and Ireland with our partner, Galen. Demand is up 29%, while the Nordics, which is also a Galen partnership, and Central Europe, which is with [ Metis ], both of those regions have also seen growth. But in addition to that, we've expanded our market reach with essentially the relaunch of Penthrox in Canada. And so we have a new partner in Canada you may recall, and that launch occurred back in about the November window. Early feedback has been very positive, and we're looking forward to seeing growth in this market as we go forward. Now our focus on growing market share in our Respiratory business has delivered really good results, great results in fact. Sales in the U.S. are up 100%. It's a low base, but it has been growing at quite a good clip and it supports the overall growth in this segment of 81%. So that's a very encouraging outcome. And finally, we are advancing our planning for entry into the U.S. market for Penthrox in earnest. This planning is not just about completing the clinical trial, but it's certainly about delivering commercial success in this large and very attractive market. I'll speak to that a bit further as well. So overall, an encouraging first half that has delivered momentum. We're highly focused on how to accelerate this momentum through the second half of this year. I will speak to how we will continue with this trajectory and with this momentum in the near term after Anita has taken you through the financials for the first half in more detail. So over to you, Anita.

Thank you, Brent, and good morning, everyone. Firstly, to recap on the headlines of our half year performance. Revenue was up 45% with both Penthrox and Respiratory performing well. Both volumes and pricing were improved. Underlying EBIT was slightly improved at a loss of $8.1 million, with higher gross margins supporting continued investment in commercial, leadership and functional capability that will underpin delivery of our growth agenda. Underlying adjustments were a net gain of $11.5 million. This mostly reflects the decision to discontinue the clinical program in China. We had received a nonrefundable upfront payment for distribution in China several years ago. As a consequence of our decision to discontinue in this market, we have released $18.5 million to the P&L as contract termination revenue, and we've also fully impaired registration costs of $6.5 million we had previously capitalized in relation to registration activities. Reported EBIT and NPAT for the half, because of these adjustments, were strongly improved. Moving ahead to revenue and volume on Slide 7. Our top line performance in the half illustrates progress we are making on a number of initiatives targeting growth for our lead products. Revenue in the Pain Management segment was up 27% despite a deferred shipment to our U.K. partner that will be realized in the second half. And as Brent mentioned, a challenging backdrop for our team in France. Pricing was improved with increases achieved across all products in Australia by the end of the period and in several partner markets. Volumes in most markets were up. In Europe, demand was stronger despite economic challenges. European end market volumes were up 31%. This included growth in France of 24% and 29% in the U.K. and Ireland. Volumes in the Nordics, Central Europe, Switzerland and Belgium were also up. In Australia, there was solid demand from the ambulance sector, with volumes generally in line with the prior year. Steady volumes here only highlight the need to drive growth in segments beyond ambulance, which Brent has highlighted is our current focus. Volumes into other markets were up threefold, driven by the relaunch of Penthrox in Canada. Revenue in the Respiratory segment was a pleasing 81%, a strong result that reflects pleasing market share gains, particularly in the U.S., and solid underlying demand. Inflationary pressures were managed through disciplined pricing. Moving ahead to Slide 8 and the key changes to underlying EBIT in the period. Our earnings reflect the outcomes of our growth agenda at this time. These are illustrated on the chart. Firstly, we are expanding margin as we grow volumes in new markets and segments. Higher volumes and improved pricing increased margin by $2.4 million in the period, with increases in both the Pain and Respiratory segments. Secondly, we are investing in building out our capability to deliver our growth ambitions. This included $1 million in commercial and marketing resources to drive the penetration of Penthrox in hospital emergency departments in Australia, $400,000 to underpin our growth in the U.S. Respiratory market and $800,000 relating to leadership and functional capability. We will deliver leverage from these investments over time as our volumes increase. Inflationary impacts in the period were more than offset by a one-off adjustment to share-based payments expense. This follows the implementation of a new long-term incentive plan for senior managers. The new plan better aligns rewards with shareholder interests and replaces all historic incentive plans. It's important to note that no changes have been made to the incentive arrangements for the CEO. We said at the time of the capital raise that we expected our investments to underpin growth in our portfolio and that we would return to profitability as our volumes and margins improved. It is encouraging to see progress this period. Moving ahead to Slide 9, our balance sheet and cash flow. Trade working capital for the period was $5.6 million, $1.8 million higher than June 30. This reflects improved customer collections and higher inventory levels. We have increased our stock holdings to support growth in both the Pain Management and Respiratory segments. The deferral of the U.K. shipment to the second half has also had an impact here. Payables were up due mostly to stock-related purchases. These changes in working capital increased operating cash outflows, with operating cash outflow for the period at $9 million, $4 million higher than the PCP. In the second half, we should see improved operating cash flows as working capital levels stabilize, and we benefit from the realization of sales deferred from the first half. Finally, on our cash position, cash reserves at the end of the period was solid at $37.1 million. I will now hand over to Brent to speak further on our priorities for the period ahead. Thanks, Brent.

Thanks, Anita. So we'll go to Slide 11 now, and we'll speak to -- we'll start by speaking to France. And now as I mentioned earlier at the start of the presentation, our progress in France in the period was not as strong as we had planned. While, as I mentioned, the volume growth was up 24%, is encouraging in and of itself, the rate of growth that we had anticipated has been slowed by challenges across the health care system there. And these include staff shortages, budget constraints and hospital closures, but even within hospitals, what are referred to as cold beds, where there's not sufficient staff to support all the beds that are available. We have also experienced some difficulties with retaining and recruiting staff for our field team, and that has also impacted our penetration rate. We're focused on all of these fronts. Now while our progress has slowed, our confidence in the product and its potential in the market has not slowed. We still have over 300 customers using Penthrox in France. We still have positive feedback that comes from customers, from patients and industry experts regarding the use of Penthrox, and this affirms the growth opportunity that we continue to see in the market. Now recently I traveled to Europe, a couple of weeks ago, and I did some field rides with 1 of our French key account managers. And then additionally, I did another field ride with 1 of our Galen representatives in London. And the firsthand feedback that I received was overwhelmingly positive about the product and its potential to "change the game". It is a phrase I heard, I don't mean from the rep, I mean from actual emergency department doctors and nurses. And so where we see Penthrox in use, the feedback is always uniformly positive. So there's undoubtedly significant value in the market, and we continue to focus intensely on how we can unlock that value even at a greater rate than we are doing currently. So we're working hard to accelerate penetration and realize this value. We have a number of marketing initiatives planned, an ongoing collaboration between the global team here and our European team on the continent. We've also completed a new cost-effectiveness model to better illustrate to hospital environments, the efficiency benefits of Penthrox in a hospital emergency department setting. So that's the latest story as it relates to France, which is a key component of our last capital raise. Now moving on to Slide 12 and speaking of Australia. Australia is already our most profitable, our most highly penetrated market. And yet, as we mentioned in the past, there are large parts of the addressable market that we have yet to touch. The Australian market for Penthrox has historically, as many of you know, been focused on the ambulance services. In fact, 75% of our volumes today are into this segment despite the segment being really only about 30% of the addressable market. But our product label in Australia is broad and in fact broader than anywhere else in the world, and it's able to be used for patients in segments well beyond the ambulance. So as you'll know from our full year results presentation in August, our focus in this market is to drive our commercial effort into the hospital in those procedural segments. And that graph here that some of you have seen before, it shows these segments represent around 60% of that addressable market, which is twice that of the ambulance. So Penthrox in the emergency department offers compelling advantages, including both patient and efficiency benefits. And so to support the penetration here, we have deployed a field team to target the hospitals. We've also enhanced our medical department to support access to support this field effort, and we've launched activities to position Penthrox in these settings here in Australia. We've already made early progress getting Penthrox on the formulary of select hospitals even after only the first few months of having people on the ground, and we expect to see this translate to sales by the end of this financial year. Now as we move to Slide 13, just to speak further about our partner growth strategy. As you know, we work with partners for the sale of Penthrox in actually over 20 markets globally. And so supported by this stronger partner engagement, we are making good progress in growing Penthrox in these markets. As I mentioned, our largest partner worldwide, Galen, has delivered strong growth in their markets with that 29% demand growth seen in the U.K. and in Ireland. I had the opportunity on my recent trip to sit down with the national sales manager in the U.K., and it's a very encouraging conversation. And even after 5-plus years, Galen continues to be a very, very strong and positive and enthusiastic partner for us. Their Penthrox business in the Nordic region has also been growing since launch at a good clip. Now as mentioned, in this period, our newest partner successfully relaunched Penthrox in Canada. The initial market demand was quite positive, and in actual fact a further shipment has already been ordered by our partner for second half delivery in the March-April window. And in other markets where we have had historic service agreements that are expiring, we have been successfully resetting commercial terms with some of these partners to better reflect the value in our product and our margin expectations as we go forward. And we expect to see both volume and margin growth in these markets in the future as a result. Now I'll move to Slide 14 and talk a bit about the U.S., specifically as it relates to Penthrox market entry. As I mentioned, we are advancing our plan for market entry to the U.S. Entry into this market, of course, will be transformational for the company and is a primary strategic focus for the business, and we have several streams of work that are underway. We are undertaking a detailed commercial market assessment. This, of course, will inform the addressable market and commercial pathway, the resource and requirements to access this market and importantly, to ultimately help identify potential well-suited partners who can support us in realizing value from the opportunity that we have there. Our planning for the clinical program is advancing. We're continuing to review the protocol with an aim to broadening the opportunity at launch. So that work continues unabated. Development of our next-generation device is on track. You see a photo of it here on the slide. This is an important stream of work as it will be the device that we use at launch and we are currently assessing the possibility of using this device in our clinical program as well. And then finally and importantly, we're developing our funding strategy. The likely pathway we take will be a partner model of some form and our commercial market assessment, as I mentioned, will help to inform that strategy. Preliminary findings from our market assessment study affirm that there are substantial opportunities for Penthrox in the U.S. Delivering a trial outcome is part of our planning, but importantly, so is delivering commercial success in this large and attractive market, and we're heavily focused in that way. And so as we come to the final slide of the presentation, just to look -- our priorities through the second half of this year. In our Pain Management space, in the Penthrox space, we'll continue to advance our work on the U.S. We expect to complete the commercial market assessment in the coming months. And this will help advance our funding plan for Penthrox in the U.S. As I mentioned earlier, we're working hard to accelerate growth in France. We've had good success recently in bolstering our field team and have marketing initiatives planned that are being rolled out in the second half of this year. Here in Australia, our field team is now fully on board. It's working hard to open doors in the hospital emergency departments in concert with their medical colleagues here in the company. And from experience in other markets, we know the selling cycle can take several months, but with some early wins that we've already seen, we expect to see sales momentum through the second half of this financial year. Of course, we're going to continue to support our partner markets to deliver growth with a particular focus on the launch in Canada. And then as Anita mentioned, with the realization of some sales that were deferred from the first half, our operating cash flow is expected to improve in the second half. And then finally, I would say on the Respiratory front, we're going to continue to grow our market share with particular emphasis on the U.S. market, that effort will continue unabated. And on that note, I'll bring the presentation component to an end, thank you for coming on the call. And now let's open up the lines or online to any questions you may have.

[Operator Instructions] Your first question from the phone comes from Roy Taouk with MST.

Brent and Anita. I know there's been some challenges in France. But do you still believe the FY '23 target unit sales of 110,000 is achievable given the current run rate of [ 60,000]?

I do not. We're not going to achieve 110,000. So we're tracking to get -- we're tracking to see the monthly run rate to go above what it's gone, but 110,000 is not where we're going to land, unfortunately. But we still see a lot of momentum there. It's just going to be slower than we had anticipated this year.

Okay. Okay. And regarding the price increases that have been implemented, when were those price increases implemented and which geographies have had the various price increases been implemented? And does that have an impact on volumes?

Sorry, you're asking -- I'm sorry, I missed part of the question. You asked about when the price increases were implemented and where. And I'm sorry, what was the second part of the question?

Has that had an impact on volumes?

Oh, has it had an impact on volumes. I suppose you're asking a question has that had an impact in reducing volumes. No, we have not seen that. The implementation was around November and December that, that was put in place.

Your next question comes from Dan Hurren with MST.

I was just -- obviously, you've had some challenges in France more on, I think, your side by the sound of it. So I guess in terms of your desired final structure, for what you want to look there in terms of staffing, where are you today versus where you want to be?

Yes. Well, we have -- as you know, we have a sales force through a CSO on the ground in France. We have the numbers there, Dan, that we wanted to have. So we went down in terms of the size of our sales force, and that was my reference which you're picking up on about the retention piece, but we're back up again where we wanted to be there. I think the other comment I would make is one thing we're doing internally, especially from a cash perspective, is constantly evaluating the manner by which we are penetrating the market and the resources required to do that. And so the quick answer is, from the model that we have in place in France, we're back where we wanted to be in terms of those number of people. But our evaluation of how best to go forward continues.

Understood. And just staying on the FEMA front. You've obviously been on the road there now, you've had a bit of a look around. You're saying that you're getting good feedback from doctors and clinicians. I was just wondering, is the feedback that doctors know about Penthrox, and they can't get access to it because of hospital formularies and funding? Or is it more of a matter of, they're not familiar with Penthrox and when it's presented to them, they then want to get involved?

Yes, it's more -- it's not -- it wasn't a question -- I didn't get the impression, Dan, it was any question of access. I think it's still an awareness build even after all this time as well. Just to kind of paint a bit of a picture. When I was in 1 of the hospitals in Grenoble, when the rep I was with, Isabelle and I went into the back, where we waited for some of the ED nurses to come through, there was a Penthrox poster on the door. And okay, it's something, but it was encouraging to see. I think it's the ongoing challenge of the behavioral change and recognizing when the opportunity arises with someone presenting in the ED, that Penthrox becomes a more instinctive tool and a product that they reach for. So I don't know if that answers your question. I did not -- it did not come out for me on my visits that although there's issues with availability of the product, there's issues with access to the product. Granted, when I was in a hospital where Penthrox is being sold, so it's already on formulary and it already has a protocol, it was more a question really on the ground. Once you get past those 2 critical administrative pieces, the real challenge with the key account manager, of course, is ensuring that the ED staff remains familiar with the product, remain... [Technical Difficulty]

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of mixing. They knew exactly the ED nurses that we spoke to. Yes, yes -- it's like that. So we were testing that as well. But that's the take I took from my visit there. I mentioned the real positive thing, again, was those you speak to were those who know of the product, right? They sing its praises. They talk about the benefit. And I still continue to marvel at the fact that I've yet to come across an example of a story, an anecdotal story of, yes, we had the product, it didn't work or it didn't do this. I haven't -- I've yet to come across such a story. But it is a reminder to us as well. The effort that continues to be required to change behavior in these kinds of environments where there are existing standards of care.

Look, if I can push for 1 more question and then I'll get back in the queue. I heard there's some changes in the way -- potential changes in the way that the drug is classified in regards to hospital formularies in France, and those changes would make it a lot easier to get into new hospitals. What is the time frame on that? And I guess, as much as you can tell us the likelihood of being able to achieve those changes?

Yes. I think we're talking about kind of the [ ASMR ] scale, but I'll keep it broad and not go down the rabbit hole of the details. Our latest understanding, that submission of ours went in, and it went in some months ago. I believe we expect and should be getting a response back by the middle of this year, so let's say toward the end of this fiscal year. And certainly from our standpoint internally, we believe quite strongly that we're going to be successful there. And the main reason we believe that is when that classification first got placed upon Penthrox in the market, it was without the aid of the additional data and additional studies which now exist. And those studies were the basis upon which the submission was sent in by our team. So we think it's by the middle of the year, but I would hasten to add, which is a source of frustration, these kinds of bodies, these recommending bodies, it's not uncommon that oh, we think it's going to be in this time frame and then it gets delayed. But our current understanding is it will be by about the middle of this calendar year we'll know.

Your next question is an online question from Steve Richardson with Bridges Financial. This reads, France had a unit sales target of 100,000, now tracking at 60,000 per annum. Do you feel staffing issues can be sorted to get closer to the initial 100,000 per annum? How is France tracking year-to-date?

Yes. France is tracking year-to-date, to about that 60,000 as Steve, you're mentioning in your question. The quick answer to your question, you probably just heard my answer to another question. But yes, we do feel the staffing issues, having been sorted now, can get us closer to the 100,000. But I'll say again, just to be clear, I think we said approximately 100,000 to 110,000, 110,000 in the full year. We don't see ourselves getting to that level at this point. But yes, we do feel the staffing issues can get us closer to it than the current run rate.

Your next question is from Craig Orbell with Century Private Wealth. When is the target for Germany rollout, Italy rollout and Spain rollout?

Yes. Germany, these have all been in abeyance, and we've been waiting for more experience to come from France. Germany, we do see as the next cab off the rank in Europe for sure, for reasons that will be obvious to everyone. That will be -- that is our intention as we'll start to [ pair ] objectives for FY '24 that we would like to see -- we would like to take steps forward in Germany in FY '24. And I can't give you a more specific date than that at the present time. Spain and Italy are different questions altogether. And so those I don't see necessarily happening in '24. Our focus would be on Germany next and we'll take it in a very deliberative way. So that's our thinking at this point.

Thank you. Your next question is also a follow-up from Craig Orbell with Century Private Wealth. How many EDs in Australia have you brought on so far, which is expected to flow through by end of FY '23?

Yes, there are -- we just -- we haven't given names because we want to work in with those hospitals. I think we've had 3 new ones that have come on. It's 2 or 3, and that's really just since kind of October, November. And there are some hospitals for which the product was always on the formulary from the past, but I don't think there was ever a commercial effort that is actually truly required to ensure that hospitals are aware of how best to use it. And so we see opportunity there beyond even the new EDs that we're bringing on. But I'd say it's around 2 or 3 already. I think the -- what was the back half of the question. It was around what we expect going forward. It's hard to say right now because since we're breaking new ground into the emergency department, we feel good about the caliber of the people. Like I said, we feel very good about the caliber of people we've brought on board not only in the key accounts side, but also on the medical side. I hasten to add on the medical side, too, because this is a very much critically important collaborative effort. And so we do believe we're going to see some meaningful growth coming out of that effort. Fine, the selling cycle, as I mentioned earlier, is what it is, but we're still quite bullish that we can see some real steps forward in the second half of this year with the resources we've put in place here in Australia.

Your next question also from Craig Orbell. Do you think the U.S. growth rates for Respiratory are sustainable?

I do think the growth rates are sustainable for the next little while. I mean we come at it, obviously, from a -- we have a small slice of a very large market. And so okay, we're growing from a small base, but we're growing, and we're growing at a good pace, and we're growing at a good place -- a good pace, sorry, without a huge amount of resource put to it. Does it mean 100% per year? I don't want to necessarily lean out and say that. But I do believe we can have very meaningful double-digit growth for a pretty extended period in the Respiratory market in the U.S.

Your next question is from [ Liam Collins ] with [ Sunsuper and REITs ]. Europe Pain Management revenue increased by less than the French growth. So which market fell?

I might just jump in there, Brent. Revenue for the European region was up around 2%, and we called out in the presentation that was related to the timing of a shipment into the U.K. So we obviously recognize revenue when we make deliveries and invoice our customers. Included on a chart on the deck in the revenue and volume slide, we provide the in market volumes, and that's a better reflection of really what our customer demand is. And you'll note there that European end market volumes were up 31%, with every market in Europe improved on the prior period.

Your next question comes from Raymond Jang with CCZ Equities. In reference to the difficulty in retaining key account managers in France, what were the most common reasons for leaving?

Really there's 1 primary reason, and that's the challenge when you have a contract sales organization. You have individuals who if they secure roles, permanent roles in other pharmaceutical companies, the prospect is that they will go there for some greater security. That said -- so I mean that's a challenge that we're always going to have with the model we were deploying in France. And -- but we've combated that on a number of fronts. You hire -- we spend a fair bit of time ensuring that we're hiring the people that we feel are best capable of delivering the product and delivering the key messaging. They have a maturity level to them. And they love the products. And so we have a couple -- we have certainly a couple of our reps that have been there since we started, I think 2 or 3 of them, and others have moved on. Now the other thing, too, that's the primary reason, I would say. The secondary reason was -- and this is sometimes the benefit of using a CSO, a contract sales organization. There've been a couple -- where a couple of occasions where the rep having gone into the field, having gone through the full tranche of training, was not performing to the level that we thought, and tracking that performance closely in terms of activity level as well as sales level. And where we, along with our partner, the CSO, have deemed that maybe their performance is not to our liking, we switch them out and look to hire someone else. And that's some of the benefit of being a little bit more nimble there. But the primary reason is the 1 that I mentioned initially.

Your next question is from Stephen [ Agnew ], a private investor. Are business development teams in France targeting ambulance services at this time, or are hospitals the sole target? Are there similarities between the French ambulance service structure and other markets where MVP has seen some success in ambulance use?

Well, in answer to the first question, yes, the team is targeting ambulance services. And part of my answer to the first question will be a bit of an answer to the second 1 as well. The ambulance services in a number of cases are attached to the hospital. So the procurement can be similarly so there. But having said that, there are some legislative changes that have occurred in France that render it easier for ambulance services, fire brigades and the like to be able to use Penthrox. So yes, it's definitely not solely in the ED. And so my answer to your second question is, the French market is not so much like the Australian or like the U.K. market where U.K. ambulance trusts here in Australia with the ambulance services per state. So it is a bit of a different model in that regard.

Your next question is a phone question from Roy Taouk with MST.

Regarding the development of the next-generation Penthrox device. When do you expect that to reach market?

Here in Australia, it's '25 or '26. I think we still have more engineering work to do on it. And that continues unabated. We have a steering committee on it. But I think it's FY '26 and it will start here -- the intention would be to start here in Australia. We're soon going to have a meeting. We're going to schedule to talk to the U.S. as well. The FDA could have a discussion about [ selsy ] because as I mentioned earlier as well, we're contemplating right now whether we have [ selsy ] in the Phase III for the U.S. But that's the time frame as it stands right now regarding the first appearance of the device in a market.

Your next question is an online question from Raymond Jang with CCZ Equities. On your comments regarding leadership and functional team changes, could you please provide insights into what the key differences are in the makeup of the teams now compared to before? What are you changing to improve organizational efficiency?

Yes. So really and truly, I look at the leadership team when I arrived, we were 10 people. It's 9 right now, and we've changed out 7 of the 9. And why was that done? It was really focused very heavily on a couple of things, broadly speaking. One was that global aspiration, of course. The other was, I think as I've defined it before, about transforming into a global company. And so I know that's kind of a broad statement, but what did it mean in terms of the hiring of new talent. It was the hiring of people who have that kind of experience, hiring of people who have been in entities where there was a similar aspiration for those businesses as well. And so I'm really, really happy with the caliber of the talent that we have on the leadership team. And then, of course, what those individuals do as well once they come on board, is they evaluate their teams. And so there have been changes, obviously, below the leadership team level. I would say that transformation, at least organizationally operationally, is essentially done. And so I believe in the aggregation and with the focus we have with the manner by which we set objectives. We are continuing on our journey of increasing, enhancing operational efficiency in the organization. And I absolutely -- I've got a high level of confidence in the caliber of the people around the table to ensure that we're able to do that.

Your next question comes from Liam Collins with [ Sunsuper and Reeds ]. What is the status of the Penthrox children's trial in the U.K.? Sometime ago, it was noted as the key to unlocking growth there.

Yes. Yes, the Penthrox Children's trial, we're in the closeout right now. We had stopped the study a number of months ago. And what we are in the throes of doing right now is to evaluate the data with the entity in the U.K. that had done the study for us, IQVIA. And so we're looking to evaluate the data. We're looking to put together a dossier with the data that has been compiled. And the intention right now that we would have something that we hope to be able to submit to the authorities by about the middle of this year. That's our hope right now. But it is dependent on really all the evaluation, the data assessment that's getting underway right now.

Your next question is from Steve Richardson with Bridges Financial. What is year-end revenue target, $35 million plus, or higher? Do you still feel 2024 will be breakeven?

Yes. Thanks, Steve. We don't give specific outlook guidance. But what we can say for the second half is certainly it will be -- will benefit from the deferral of those sales that we missed in the first half into the U.K., so that will certainly help the second half. And I think the trajectory across most of our markets should be positive to up in the second half. So that should be positive there. Your question around, will we be breakeven in 2024, I think you might be referring to comments we made at the capital raise where we referred to being breakeven in 2025. And yes, absolutely, that is still our focus.

Your next question comes from Raymond Jang with CCZ Equities. Could you please provide further details regarding the creative campaign you undertook for Penthrox?

Yes. I mean the creative campaign, broadly speaking, which has been rolled out by the global team here and is being deployed in France. And also, we were interacting with Galen on it as well. It focused heavily on -- I think points you -- you'll not find terribly surprising, but I mean it's meant to be creative in terms of getting at some of the key benefits. The ease of use, the -- how rapidly the analgesic effect is felt. The efficiency gains that come from all of this basket of benefits in different kind of settings, specifically hospital ED settings. And so that's really fundamentally what the creative campaign is about. And sometimes it's not necessarily going in a completely different direction, but it is trying to refresh all the benefits, of which there are several, associated with our product to try and amplify them more fully in support of the -- not only of the new key account managers that have been rolled out here in Australia. But for those that were already in the market, in France, translating into French, getting them approved over there and refreshing the approach over there as well. So that's fundamentally what it is. And I know it's maybe not all the detail you're looking for, but broadly speaking, that's the detail of the creative campaign.

Your next question is a phone question from Dan Hurren with MST.

Thank you again. Just some boring questions, I'm afraid, for Anita. Just in terms of some of the mechanics, depreciation level CapEx for the second half, is there anything that would significantly change from first half?

Yes. Thanks, Dan. From a depreciation level, no. CapEx, we do call out in the financials, you'll notice there was $3.6 million in capital accruals at the end of December. We would expect that to flow through cash in the second half.

Okay. And just -- not looking for guidance, but just noticed that the occupancy selling and the admin expense has been bouncing around quite a bit. What would be your advice on how we think about those over the next couple of halves? Will that settle down? Or is there still more to be done there?

Look, it should settle down, Dan, I might take that 1 offline. We can have a look at [ some of the periods you're ] looking at there.

Okay. No problem. And my last question is a much broader one, border on philosophical. Just looking at 2025 when we're breakeven, not look at the guidance, but in broad terms, where will we see the leverage? What will the P&L look like at that time? Is it largely gross margin with costs largely the same? Or I'm just wondering if you can give us a bit of a shape there.

Yes. No, no it's a good question, Dan. Yes, certainly, from a cost perspective, the rate of growth in cost will absolutely stabilize. We really -- we've mostly built out the leadership and functional changes. So what you're seeing through the P&L now is really sort of the annualization of that impact. There's possibly a little bit of that coming through in FY '24. But I would expect after the first half of FY '24, that [Technical Difficulty] [ roll ]. We have invested and we called out in the presentation, investment in the commercial field team in Australia to drive the penetration into the EDs there. That's been an investment progressively over the first half. So we'll see costs slightly higher in the second half as a consequence of that. And then the [ annualization effect ] of that next year. So again, a slight increase there. But really, outside of those -- and outside of inflation, costs should really stabilize. So it then really does become a gross margin story. And so you will see gross margins expand progressively from now.

Great. And sorry, [ if I can cheek you ] just 1 more. Just for Anita. I may have missed it in the presentation as you were running through it, but just currency impact, any notable currency impact that we should think about looking forward? Sorry, in this last result that we could [ look ]...

Nothing material, Dan.

That concludes our question-and-answer session. I'll now hand back to Mr. Brent MacGregor to close.

Okay. I'll close ever so quickly. First of all, thank you all for coming on the call, and thank you as well for all the questions. We appreciate the opportunity to bring clarity where it's needed. We are excited about the second half. We see momentum. We are very focused on building on that momentum, and getting to a good outcome through the end of this fiscal year. We look forward to talking to you again formally at the full year results. Thank you all again. Have a good day.

That does conclude our conference for today. Thank you for participating. You may now disconnect.