AFT Pharmaceuticals Limited (OTCPK:AFTPF) Q2 2023 Results Conference Call November 23, 2022 4:00 PM ET
Company Participants
Dr. Hartley Atkinson – Managing Director
Malcolm Tubby – CFO
Conference Call Participants
Soo Romanoff – Edison Investment Research
Matt Montgomerie – Forsyth Barr
Christian Bell – Jarden
Chris Steptoe – DMX
Operator
Thank you for standing by, and welcome to AFT Pharmaceuticals FY 2023 Half Year Results Analyst Briefing. All participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions]
I would now like to hand the conference over to Dr. Hartley Atkinson, Managing Director. Please go ahead.
Dr. Hartley Atkinson
Good. Thank you very much. Thank you everyone for attending.
So, I look perhaps just to work through initially the investor presentation. To flex through that, I’ll just talk to the pages. This page number 1 is the cover page. Page number 2 is just the disclaimer. So, please be aware of the details of that.
Now moving on to page 3, what this is looking at is basically growth from — and we have had strong growth across our local Australasian business. Just the background, we have 150-plus products across seven key therapeutic areas, and they’re distributed across 6,800 pharmacies. So, there’s about 5,800 in Australia and about 1,000 in New Zealand. Asia, we’ve — as our other region, we have a broad range of products sold in the Asia region. And then anywhere outside Australasia and Asia, we characterize as rest of the world, we’re — primarily we’re commercializing our R&D pipeline and that’s across — presently across some 51 countries, including Australia and New Zealand. And we do have agreements in more than 100 territories or countries. And that’s what we’re working on to get out to that 100-plus.
So basically, in the first half of this financial year, we delivered overall revenue growth of 18%. So, that’s including licensing income. We’ll talk a bit more about that later. And we also launched 11 new products in Australasia, with the majority of those being in Australia. And then, we also continued on with our international growth with additional countries launched for Maxigesic.
So, to flex to page 4 to start to drill down into the results a bit more. What we can see is overall, the half year sales were $65.8 million, which is an increase of 18.4% from last year. These sales do include licensing income, which is actually a lumpy item. Basically, we had quite a good amount of licensing income in last year’s results. This year, we didn’t really have any significant licensing income, the first half result. And if we look at just sales and royalties, we actually increased product sales and royalties by 30%. So, we actually had strong underlying growth in our sales.
In terms of operating profits, they were — we’ll talk about this in more detail as well. They were down a bit from $5.5 million to $3.5 million. And then net profit after tax was down. Primarily this was due to impacts of licensing income. And when we recognized that — we’ll talk more about that, and then also increased investment which we’re making and actually increasing in the new product launches.
You can see, looking at the graphs underneath, revenue by region. We’re growing, as we always have, year-on-year. Revenue by territory in that middle kind of pie graph, you can see essentially, Australia as the major chunk of our revenue. New Zealand, we actually had a pretty strong half. So, that actually has increased a little bit. International, we’ll talk about that in more detail. Although it appears small, our product sales were up quite a lot. But we also include licensing income, so that went backwards a bit when we look at overall — the overall licensing income plus product sales, but product sales increased. And then, Asia is a relatively consistent kind of 5% or 6% chunk of the pie presently.
So, flicking over to the next page to start to look a bit more — page number 5, to look at a bit more at the Australian market. So, basically sales in Australia were up 24%. And certainly, we’ve seen some benefit from normalization of trading, post COVID restrictions. And also we had 11 new product launches, which only really started to come in towards the end of the half year. So we will see those contribute as well in the second half. We’re seeing good growth in our OTC channel where sales were up 36.9% and then we also had growth across our hospital and prescription channels as well.
You can see looking at the bottom right, the pie graph of what our product splitters. We were getting actually more — a higher percentage of sales from OTC this half year, which is an area we have been focusing on. Yes. So, that was positive really. That’s page number 5.
Page number 6, looking at New Zealand. We didn’t really have a lot of product launches in the New Zealand market, but we actually had strong organic growth. Sales grew 35% from last — same comparable time period last year. A lot of that was due to easing back of COVID restrictions, but also we had a number of business activities that worked pretty well. And that’s behind that 35% growth, which is, in our view, a really good result.
We can see in the pie graph, we actually did get quite a lot of growth in the prescription area as well, we saw some strong there. But still OTC was the majority of our sales in the New Zealand market. So, that’s New Zealand on page number 6.
Page number 7, just having a bit of a look at the overall Australasian growth and investment. Look, this is part of the story behind our profit and the forecast that we are looking at a lot more investment in the new products. So basically, we launched 11 products in the first half, a lot of those coming in towards the back end of the first half. And then, in this half, we have a launch of about 15 products, so.
And we did launch products, like for example, we launched five OTC products, which included Maxigesic hot drink sachets, which went very well, actually better than we expected. One of our biggest challenges was staying in stock. There are still quite a lot of challenges with logistics and lead times for product launches, because there seem to still be quite of shortages of some of the ingredients and excipients often launches do get delayed. And often we have had to airfreight some stock and to try and keep to a reasonable launch timeline that does tend to eat into our product margin. But really, it’s primarily a short-term thing. And we think it’s better to get the product launched, even if we do with some extra cost to do that. But over time, we do primarily sea freight, which is generally a lot cheaper.
So, by the end of FY 2025, that’s over a three-year horizon, we are launching 76 new products into the Australasia, and Australia, New Zealand markets. And this year, we’ve just signed off an additional $10 million of expenditure on sales and distribution to really support the new product launches. There’s just a bit more than and our budget is about $10.7 million, so almost $11 million. And three also too we’ve got a new dedicated GP sales force for the Australian market, which we’re going to bring in-house, so they are working directly for AFT. So look, that’s a bit of a snapshot on our new products.
And moving on to page number 8, which is our Asian business segment. So sales in Asia grew 26% comparison with last year. What we’ve been focusing on is the OTC area, where we — in Singapore we’ve taken on a ASX-listed McPherson to assist us with distribution and selling at a local level and to drive those OTC sales. And we saw a more than doubling of our OTC business, which in part, with Singapore, but also we’ve seen good Maxigesic growth in Malaysia and Hong Kong as well. So yes, we are starting to pick up some momentum in that area.
Our hospital business as well, which is still quite a large chunk of the pie presently, also grew by about 44%. So that’s still quite a chunk of a business. But certainly, we are focusing on the OTC side as well because that’s an area we want to grow out in the future. So that’s slide number 8.
Moving on to slide number 9, International. We saw strong organic sales growth. The licensing income, as I mentioned, is relatively lumpy. So we didn’t have any significant licensing income. So overall, there was a decrease in international sales, if you’re looking at overall sales being licensing income plus product sales and royalties. If you strip out the licensing income, the product sales and royalties grew by 68%. So we’re certainly seeing good growth of product sales and also good growth in royalties as well.
One of the key items that also does impact for the whole year the licensing income is the United States Maxigesic IV and presently there has been a delay. We still are confident of registration next calendar year. But basically, we have to go back to FDA with some additional data on what’s called extractable and leachables, which is out of the glass and the binding [ph] of the Maxigesic IV container, and that work is presently in the U.S.
We did have a slightly slower rollout of Maxigesic of dose forms. We had originally targeted 90 countries. We believe for this year it’s going to be more like 70 — or sorry, I mean, next year, we believe it’s more going to be like 73, down from 90. We have put Russia on hold. And also, in countries like a lot of the African countries, certainly COVID has slowed down the regulatory progress in those countries, so that has slowed some things down. But still, we’re getting good growth in overall product sales and royalties. So it’s that page.
Going on to page number 10, which is our global map. Look, this is just a snapshot. I think, as we’ve explained before, we basically have countries we’ve launched in are in yellow. Countries we’re in registration are in blue or have agreements are in blue. And then countries where we haven’t got agreements are in white.
The key countries at the moment are China, where we’re still undergoing discussions. And China certainly has been very much slowed down by COVID restrictions presently. Also Japan, we have discussions underway still, and Brazil as well. And we also have some discussions starting in Argentina. So, those are really the primary sort of a flank white on the map. And countries like India, we decided not to target that at all. So, that won’t change. That’s page number 10.
Going to page number 11, the R&D pipeline. The approach we’ve taken is that we believe presently is an opportunity. Like effectively, we’ve gone shopping, I guess, is one way of putting it, where we’ve gone out to seek additional in-licensing, additional R&D, whereas a couple of years ago we were focused on paying down our CRG loan facility. But now we’re actually looking at investments and putting our foot on — putting our foot on the accelerator, both with sales but also with R&D as well. Our expenditure, though, is relatively flat. And the first half it was pretty much as expected and still sticking within our guidance, so spending about $12 million per annum.
So, the projects we have underway is NasoSURF, which is a patented ultrasonic nasal mesh nebulizer. And we just got our first study is underway, which we’re expecting to complete this financial year. And then we want to move into first entry into human study. And then we’re looking to move out to do some larger clinical studies with the first initial indication having an addressable market in the U.S. of roundabout $1 billion. So that’s the one that we’re targeting first.
We have a number of other projects, HS; BT, that’s a gastrointestinal medicine, which we’re just starting to get the dossier ready to file during this financial year to be ready to be filed. This is an example of a product where we were able to pick this product up from a company that was having a few financial difficulties. And really, we’ve got the whole product for about $750,000 by the time all the various amounts were paid. And we think that’s an example of good expenditure, which previously we would not have had the opportunity.
Strawberry birthmarks is another area. We have reached agreement with Gillies McIndoe Research Institute in Wellington and Massey Ventures to in-license some of their IP. And we’re starting a big drug development project around strawberry birthmarks, which is an area we feel there is a good opportunity and also we feel it’s something that would be really good for parents and children to have a topical treatment. Presently, there is an oral treatment, which is only used in a limited number of patients because it can be toxic. So yes, really, we see there is a good need for this sort of development. So that project is underway presently.
So, we’ve got a number of other ones, KW, SD. Medicinal cannabis is progressing. We’re keeping most of that confidential, but we’re making reasonable progress on that as well. But that’s certainly — it’s not our prime focus, but it’s just basically one of our R&D areas.
So yes, we’re making good progress and still looking at potentially adding another significant R&D project, but we’re basically still looking around presently.
The advantages, though, is that a lot of companies in the United States, for example, it’s very difficult to raise capital presently. So normally, they would have been able to do that. Presently, they can’t. So what we typically do is we will be able to take over the drug development, and they would get a share of the proceeds once — provided we were able to successfully complete the R&D and to commercialize it. But, I guess, in the past, those wouldn’t have been available as companies just would have gone to the market and raised capital and done it themselves. So, there are a number of opportunities like that that have come to us.
So moving on to the next page, number 12. I’ll hand over to our CFO to talk about the numbers. Thank you, Malcolm.
Malcolm Tubby
Thanks, Hartley. So, revenue at the top, just under $66 million, a growth of 18%. Gross profit up to $28.7 million. Margin overall comes down to 43.6%. If we look at the bottom of the slide, we’re showing you the gross profit on just the product sales and the royalties. So, they stayed same or improved a little tiny bit, to 43.6%. Operating expenses overall stayed around about the same at 38%. Operating profit of $3.4 million, down on the total from last year of $5.5 million. And if we take the license income out of last year, that would have been $700,000. So, a good uplift there in the product sales side of the business.
Finance, interest rates are going up a little bit, as we all know. Tax, we are back into a tax-paying position now. We’ve utilized all of the losses that we ran for a couple of years on that our R&D program. So, that leaves us overall with a profit after tax of $1.4 million.
If we move over to the next slide on the cash flow. So, we generated $6 million from our operating activities, and we’re holding high inventory levels still on the existing stock plus within — bringing in the new product launches. So, higher inventory levels at this stage. Investing activities, we’ve spent $4.8 million. So, that’s our ongoing investment into R&D and intellectual property. Financing activities, the $3 million outflow is the interest, and we’ve repaid $2 million of the BNZ facility. So at the half year, down a couple of million, but leaving us overall our cash balance roundabout the same of $5.8 million.
Then moving to the balance sheet. I guess the key pieces here are net debt remaining around the same, just under $30 million. We are in the process of renewing the banking arrangements with the BNZ. We’ve signed the committed term sheet, and we’ll be signing the documentation we anticipate by the — it will be in probably next week or the week after. And that will extend the facility. The main facility then goes out to April ‘26. And there is — a part of it is the $5 million, which actually goes out to May. So then, I think the other key feature on the balance sheet really is the current assets, which is — and that’s primarily the inventory holdings.
That’s it to the balance sheet. Hartley, I’ll turn to prospect — to you.
Dr. Hartley Atkinson
Yes. Look, just the final page, the kind of outlook and the summary. So traditionally, we have always had a stronger second half with more like 60% of the sales carry in the second half. We expect this year — this period to be at least the same or even more so as we have a lot of additional launches in the second half planned, and our key focus at the moment is getting those launches completed and things are on time, which is not always 100% simple, presently with shipping and production lead times. So we’re certainly focused on that.
Look, we have had higher and we are increasing our investment as well in the second half in sales and distribution because we want to make sure we — that those launches are successful and have the right amount of investment behind them. So that, together with delayed licensing income, we have revised our guidance to $18 million to $23 million for this financial year.
We do expect the sale of — if we split it out, we see sort of the sale of existing products and product royalties to generate profits of between $17.5 million to $21 million, which is up quite a lot from last year, where we did also have a chunk of licensing income as well.
So basically, and then in terms looking separately at licensing income, this, by its nature, tends to be less predictable and lumpy. And we’re looking at that contributing between $0.5 million to $2 million to operating profit. And going forward, we are looking at splitting this out because certainly people have said to us that this is the area they find as a little bit confusing and hard to follow. And certainly, there is that lumpiness, and the timing can cause issues. So look, that sort of is what makes up the $18 million to $23 million.
While we’re going to very much though is we want to put our foot on the accelerator. We are looking to exceed our target. Our near-term target is to exceed a couple of hundred million dollars in annual sales. And we’re pushing on to that. It wasn’t that long ago we broke $100 million. So, we’re certainly making sure and gearing the business to really ramp the sales up, which long term is what we see as the key item going forward.
We are confident of securing that previously budgeted licensing revenue around Maxigesic IV, which we see as basically delayed by additional regulatory questions. So, we see that as occurring next year as opposed to this year.
And in terms of a maiden dividend, look, we’re still on track. The cash position is good and positive. We’re normally always tighter in terms of cash flow in the first half; and the second half we’ve always found as more positive. So, even despite the extra spend, we’re still looking at declaring a maiden dividend for the FY23 financial year.
So, that is hopefully an overview to give you an idea of where we’re at. And happy to try and answer any questions that you may have.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Your first question comes from Soo Romanoff from Edison Investment Research.
Soo Romanoff
Hi, Hartley and Malcolm. Congratulations, nice next performance here. I have a few questions here. In the first half, we had — we were strong across almost all the regions, I think particularly in the domestic markets. Was this broad-based, or is there any particular product categories that you want to highlight that drove this uptrend?
Dr. Hartley Atkinson
It is generally quite broad-based, actually. We had — in New Zealand, we were having very strong allergy sales, despite the rain. And in Australia, Maxigesic performed well. Eyecare is one of our biggest segments, and that’s sort of performed pretty solidly as well. Yes, plus we’ve had some new product launches in Australia, which have generally gone well, like the Maxigesic hot drink sachets went much better than we thought, to be honest. So they really helped to contribute to Maxigesic sales. So really, it’s not any one product. It’s quite broadly based, which we always prefer, because I think that’s generally safer. We have quite a broad portfolio and just think that’s much safer than being reliant on just one product or product line.
Soo Romanoff
Yes. And even though it’s strong, I think we’re still waiting to the second half. And I think there’s — you mentioned several product launches, and I think there’s some seasonality also here.
Dr. Hartley Atkinson
Yes. We traditionally always had stronger sales in the second half. And then on top of that, we’ve got additional product launches, which also will have a contribution. I mean, in Australia, for example, we just launched our liposomal vitamins, which made a couple of months of sales contribution to the first half results. But really, the major contribution is going to start over this time period now, including going into the southern winter. We get usually quite good sales in March where we have our winter deals and winter sell-ins. And we’ve got a number of winter products that we’re launching into the Australian market. So, sort of things like that will really shape the whole second half, really.
Soo Romanoff
Yes. And for the second, so it looks like we maintained our R&D guidance of $12 million for the year. So in the first half, we didn’t spend as much. So, can you give me a little bit more granularity, like the key drivers and programs for this uptick in the second half?
Malcolm Tubby
Yes. So it’s — the $12 million is — that’s the total cash spend, and it’s roughly $6 million in the P&L and $6 million capitalized. So, it’s roundabout on track at the half year, the spend.
Soo Romanoff
Okay, okay. Got it. Thank you for the correction. I have a few more, but I’ll just do one more last one, since you probably have a lot of folks in queue. The FDA decision on Maxigesic IV, can — does that have any impact on the traction in any of your international markets? And how has that been — the performance for the overall portfolio across the region — regions?
Dr. Hartley Atkinson
Yes, it may have some impact on regulatory approval in Canada, where they may wait, which is — they pay more attention to FDA. It doesn’t really have any impact on other territories where we’ve got Maxigesic IV approved across all of Europe presently, and we’re just focusing on rolling it out. So I mean, we are — the sort of thing with Maxigesic IV is it’s a product that’s a slow build because literally you have to get it in certain hospitals and then you get it in other hospitals, and it’s literally kind of building it leg by leg. But once that sort of gets that momentum underway, it goes well. And we’ve seen sales in Germany. We had record sales last month.
So generally, we’re getting sales growth literally every month when we look at big markets, like Germany; Austria, we’ve got on a number of the guidelines and stuff, which is also part of the process, like it’s on the guideline for Caesarian post-op, Caesarian pain relief. So sort of things like that, it’s just very much a kind of rollout. And that’s really the process that’s underlying. Look, this will be — won’t be an instantaneous thing, this will be 3-, 4-, 5-year project, really.
Operator
Your next question comes from Matt Montgomerie from Forsyth Barr. Please go ahead.
Matt Montgomerie
Maybe firstly, I’ll just start with the gross margins. I guess that was the key area of surprise for me, particularly given the strong OTC growth in New Zealand and Australia that you’re talking to. So I guess on a ex-licensing income basis, sort of 44%, I guess if you look in a pre-COVID world, it was quite volatile, but FY19, you reported 47%. And if I cast my mind back to that time, commentary then was that sort of a reasonable steady-state guidance on a go-forward basis. So, I guess, my question is twofold.
One, despite the strong OTC — principally just reflecting COVID impacts in the half, airfreight et cetera? And then two, is that prior guidance that you’d given to the market around that line still current in a post-COVID world or from F’24 as the sort of pressures abate?
Malcolm Tubby
Yes. Thanks, Matt. Yes, longer term, we do see the margins improving into the late 40s. The suppression in this half, partly that was we have spent quite a lot of money air-freighting product then. We’ve had the blip in the U.S. dollar, which come back now, but we did have to buy a little bit, which we will — so we’ll see that coming in the second half in our margins. So, we think we’re going to be lower in our margin in the second half. We don’t think it will be up in the late 40s. So, it may be a slight improvement in what we’ve seen in the first half as we go through.
We have put some price increases in, so we will get a benefit from those. Again, it’s easier to build on the OTC ones. And if we can, we are reviewing an opportunity, which we haven’t put in the forecast, but we are looking to see if we can put some more price increases in as well.
Dr. Hartley Atkinson
I mean we are seeing some changes in freight and shipping certainly on some of the major routes like China to LA, where they’ve almost come back down to what they originally were. But they certainly have not come through to Australia and New Zealand. They’ve been not going up any longer. They’re starting to come back. But our guess and our estimates in Australia, Australia will start to ease sooner, and New Zealand will ease later. So we’re going to be behind the major markets, to be honest, in terms of shipping. So, we should — we would expect to see some improvement in shipping costs, which really have gone up a lot like a 40-foot container used to be US$6,000 to US$8,000, and even at the moment, we’re paying US$26,000. There’s quite a lot of difference in that, but that will ease going forward, and they’ll help margins as well.
Matt Montgomerie
No, that all makes sense. Maybe secondly, on the Australia business, another good half, on an annual basis, I guess you’re approaching that $100 million revenue target that you had published previously. And arguably, you probably got there quicker than what people may have thought, as I said, continue to perform well. You can see a scenario here where it continues to grow quite strongly on the back of the new launches. Just interested in, I guess, broad-based comments you can provide on the trajectory of that business over the medium term, acknowledging that you sort of put out a target to the market, $200 million for the group, but just more specifically on the Australia business…
Dr. Hartley Atkinson
Yes, we still see that growth continuing. To be honest, New Zealand surprised us at 35% on the positive side. And in Australia, we see there’s a lot more growth potential, which is why we’re doing increased focus on doctors in the Australian market with that additional in-house rep force we did — we have one at the moment where we have — we do pay for some other reps as part of a team. But we see it’s better to bring that in-house, and that’s what we’re going to do from the start of next financial year to sort of increase our focus on that Aussie market. And yes, we see there’s lots of potential going forward, and we want to make sure that we take advantage of that, really.
Matt Montgomerie
And do you have a feel for growth in that market organically over this period? Now, you’ve got a lot of new products coming to market, primarily in that market. Just the breakdown, I mean, just what you’re seeing in key products there today to give you confidence in that underlying?
Dr. Hartley Atkinson
Yes, we said for most of our [ph] products, we’re still seeing pretty good growth. We’ve obviously — quite a broad portfolio. We have got some products that are declining a bit, some are flat. But overall, we’ve still got organic growth. It’s not just coming from new products. Because really, those new products — they are contributing, but yes, they don’t contribute quite as much when they first launch and they contribute more as the growth starts. And we certainly had some really good growth with some products. We struggled with a bit introducing them over COVID, like we had our kids’ diarrhea product, DiaRelieve, which we’re very confident in, and it actually didn’t go that well. But now things have eased up in terms of travel and everything. It’s been [ph] performing really well. So it is important we have access to hospitals and access to doctors and pharmacies, and that’s what really hammered us during COVID period, to be honest.
Operator
[Operator Instructions] The next question comes from Christian Bell from Jarden. Please go ahead.
Christian Bell
Just the first question, I’m just trying to reconcile from your original guidance of $27 million to $32 million to the new range. So just firstly, when you had provided the guidance for $27 million to $32 million, what was your investment budget for the sales and distribution at that point? Now that is $10 million. So, what was it previously?
Malcolm Tubby
The change is — that is the change. The change in the budget is $10 million in total.
Christian Bell
Yes. So, what was it when you set your original guidance, the change? Was it more like 5?
Malcolm Tubby
I’ll let — so I have to come back to you on that one, Christian.
Christian Bell
What I mean, if you had originally planned on spending an additional $5 million and now you’re planning on spending additional $10 million. That sort of explains $5 million of the change in the guidance?
Dr. Hartley Atkinson
Yes. It’s something like that…
Malcolm Tubby
I think it’s higher than that. I think — I can take that…
Christian Bell
Okay. But sort of broadly, it’s kind of…
Malcolm Tubby
Yes.
Christian Bell
Okay. Cool. And then secondly, I guess, the second key driver would have been the licensing income. So you’ve gone from — it’s now $0.5 million to $2 million originally in that guidance, it was probably more like $7 million, from memory. So is that kind of the other $5 million?
Dr. Hartley Atkinson
Yes, 7, 7-plus. Yes.
Christian Bell
Okay. So if we put those two together, that basically explains the $18 million to $23 million.
Malcolm Tubby
The $9 million, there’s more — it’s actually more skewed in — more of it is license. It’s probably about 6, something like that. 6 and 3, something like that.
Christian Bell
Okay. Great. And then just secondly following on that, are you — so is that FY22 plus $10 million sales and distribution budget — is that the new base level? And is that going to come back next year? Or is it kind of — are you going to grow from there? Or what’s going to hit?
Malcolm Tubby
Yes. So the dollars will grow, but they will become a smaller percentage of revenue. When you launch a new product, a fairly big cost is what we call co-op, which is listing fees in the main buying groups, and that’s a set fee. So when you first — you have to put that money up before you — to get the distribution, but then that becomes just a much more acceptable — you see it in the first year, but then it just becomes business as usual as you go forward.
Dr. Hartley Atkinson
There is promotional stuff around that, like, for example, in Australia starting I think very soon, we’ve got what’s on in the warehouse and they’re doing a liposomal vitamins and things like that. So, when we talk about co-op, it does also include that sort of activity as well, like in-store promotions, going right through to TV and things like that. And that ends up being more-chunky relative to sales when you first launch, but once sales pick up, you still have to keep doing it. But then it doesn’t really have the same impact on the P&L because you’ve got more sales and more gross profit from the launched products.
Christian Bell
You get your leverage in years forward?
Dr. Hartley Atkinson
I mean, we could have decided to turn things back and done that sort of approach to manage our guidance number, but really, we thought what we really want to do is put our foot on the accelerator and really hit that sales growth, which we think in the long term will have a much better impact on the overall business. And then that’s really our strategy, and we just sort of finalized.
Malcolm Tubby
And the other step that we talked about is that the GP sales rep force, so that will be a fixed cost going forward. And the same thing, revenue will catch up to that and overtake it.
Christian Bell
With that being said, just looking at your Australasian product — launch pipeline, you’re actually planning on launching more products in FY24 than FY23. I mean, does that sort of mean — do we expect an additional $10 million again in FY24, or is it kind of flat?
Malcolm Tubby
We’re actually right in the process of budgeting. We approved those in January time line. So, as I said, yes, the marketing and co-op will be an increase in dollars, but a reduction as a percentage of revenue.
Christian Bell
The increase in dollars, can we expect them to increase as large as another $10 million in FY24?
Malcolm Tubby
No. Because the — you’ve got the — once we’ve hit that number for the marketing and co-op for these new products and then the rep sales force — well, it will go up by how much — the salary increases, but it’s fairly fixed in its nature, like the other salary costs.
Christian Bell
And then just curious as to the Maxigesic IV, what’s kind of — just interested in your recent discussions with — if you’re able to sort of shed some light on that. Sort of what are they saying to you? How are they sort of positioning themselves at the moment? Do they see it’s quite a strong competitor to the paracetamol on top of IV products? Or are they expecting it to sort of cannibalize some of their opioids as well?
Dr. Hartley Atkinson
Yes. I mean they’re still working through. They’ve done agreement with some — with sales company as well to further increase their reach in addition to what they really have. So that’s certainly underway. So they are looking at doing quite a lot of promo around it as well, certainly in terms of their kind of work at the hospital level, which is what we’ve seen elsewhere as well. It takes a bit of work literally hospital by hospital. So, they’ve done a lot of work with a local American company on that. So that’s really the sort of point they’re at, so. And they’re looking — we’re looking to finalize the approval to sort of quarter four — start of quarter four or during quarter four next calendar year. And then after that, we’ll look to launch it.
Operator
Your next question comes from Chris Steptoe from DMX.
Chris Steptoe
Just a quick question on the gross margin. So overall, the gross margin was 44% for products, excluding licensing. Can you just sort of break it down between what would be international sales — gross margin be?
Malcolm Tubby
It will be in that same range, around that 44% range. The main difference you’ll get is it’s really more in the channel. You’ll see more of the difference between OTC, which is the best margins. But then obviously that means sales and marketing spend behind it. And then the hospital and prescription will be a lower margin, but it doesn’t need the promotional support.
Operator
There are no further questions at this time. I’ll now hand back to Dr. Atkinson for closing remarks.
Dr. Hartley Atkinson
Thank you very much. That is, I think, all from us. And the overall message really is we want to push our growth and want to take advantage of the opportunities we’ve got, which is behind our in-licensing where we’ve done a lot of that over the last couple of years and really now is to push hard on the product launches and existing organic growth and really to push out to new sales territories for Maxigesic in the international markets and also to grow the existing markets. That’s really where we’re at, looking forward to that $200 million target as soon as possible. So, thank you very much for your attention.
Operator
Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.
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