AFT Pharmaceuticals Ltd (AX:AFP) recently announced an agreement with Baxter Healthcare to divest to Baxter some of its non-core and low-margin hospital products in New Zealand. An agreement for similar products is expected in Australia in the coming weeks. Once both are complete, the company expects the divestments to represent approximately 7.5% of operating revenue (likely between NZ$5m and NZ$6m). The divestments are expected to generate NZ$5m in cash and make a positive contribution of “several million dollars” to EBITDA. Whatever is lost in revenues is likely to be made up in higher overall gross margin, and lower sales and marketing expenses.
Increasing focus on Maxigesic
With the divestment of some of its hospital products in Australia and New Zealand, AFT will be achieving two things: it will improve its overall profitability and generate cash to fund its plans for Maxigesic across the globe which, if successful, would be transformative for the company.
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