Thank you for standing by, and welcome to the Medical Developments International Investor Call. All participants are in a listen-only mode. There will be a presentation followed by a question and answer session. If you wish to ask a question via the phone, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please enter it into the Ask a Question box and click Submit. I would now like to hand the conference over to Mr. Brent MacGregor, CEO. Please go ahead.
Thank you, and thanks, everyone, for coming on the call this morning. Why don't we jump right into it? You know, before we start really in full, just a couple of points I want to make, but let me make them on... With slide five as a backdrop. This is a modest raise that we're seeking. It's, it's, it's AUD 10 million, and it'll provide us with capacity to invest in some very targeted initiatives that we believe will accelerate our growth, as well as to shore up the balance sheet as, as we reach operating cash flow positivity by the end of FY25, which has been our objective and continues to be our objective. Ahead of seeking this funding, you know, we have done a lot of work internally or what we've like to term self-help.
We've reduced costs, we've paused investment in activities that have a longer runway to delivering returns, such as the U.S. We have reexamined our commercial approach. We're very focused on delivering positive cash flows. We are more financially disciplined. Our results in FY24 clearly illustrate the work that we've done in this regard. We are going to speak to you today about the plans and the opportunities that are realistic and achievable, and also reflect our experience and learnings over the last 18 months to two years. We've changed our strategy in some areas where a more capital-light approach made sense, and you'll be hearing that phrase a few more times during this presentation. What hasn't changed, though, is our belief in what the company can achieve with our lead product, Penthrox.
We continue to believe there's significant growth yet to be realized for Penthrox in existing markets as well as in new markets over time. It's a great product. It's been used over nine million times. It's incredibly sticky, meaning once it's adopted, it stays in use. Our experience in France, where we've grown volumes despite no active commercial effort for almost 12 months, is really a testament to this point. While it's hard to embed the product, once Penthrox is being used, our customers don't let it go, which is another way of saying product loyalty is high. We're used by 100% of the ambulance bodies here in Australia, despite an aggressive step-up in price over the last year, we've seen no change in demand during this period of time.
It also has a place in the large, almost untapped market of the emergency department. The lead indicators we've seen in Australia with respect to the opportunity in hospital EDs is encouraging and illustrates a belief in the value proposition of Penthrox in this segment as well. As a result, our conviction in the product is strong, and our expectations for growth remain high. This expectation is further fueled by our MAGPIE pediatric study in Europe and the doors that it may open for growth, both in international markets, where we don't have a pediatric indication, but also in our home market, where we do.
Over the next five years, we see a pathway that could deliver revenue, a CAGR of up to-- a compound annual growth rate of up to 15%, and that's effectively doubling our revenues of today and at approved margins. As I said, this is both realistic and it's achievable. This raise will give us the funding capacity to accelerate our progress and to achieve this outcome. Let me take you through some of our successes from FY24 and our growth drivers for FY25 and beyond. Let's move to six in that regard. Here on slide six, you'll see what I was referring to regarding the margin improvement, the impact of our cost-out efforts, and the effect on our underlying EBIT and our current cash position.
As for the raise itself, I want to highlight that AUD 6.5 million of the 10 would be focused on investments in our growth plans, while the remaining AUD 3.5 million will strengthen our working capital, as well as cover the fees of the raise. We'll go to slide seven. Here on slide seven is a business overview, and perhaps a number of you are already familiar with the business overall. This is simply to remind you of the fact that our global business consists of these two franchises. Our lead pain management franchise is represented by Penthrox and our suite of respiratory products, as you see here on the right. What you also see here is the, the spread of our global sales, and the pie graphs below is a real testament to the diversity of our business geographically.
The last thing I'll just point out here on slide seven is the split of revenues, about 65, 35 in favor of Penthrox. Let's move to slide eight. Slide eight shows the priorities that we set for ourselves as we began the last fiscal year, FY24. It also is intended to be what we've achieved during the past year. I want to accentuate the progress we've made in significantly improving our margins once again, and now during FY24. This has come through a combination of efficiencies that we've driven in our operation, as well as the improved pricing that has come from our customers who recognize the inherent value that Penthrox represents. We've grown our volumes in the hospital ED setting. We have generated lead indicators in the form of new protocol listings, as well as an expanded list of purchasing hospitals.
That includes hospitals like The Alfred and the Austin, here in Melbourne, Westmead Hospital in Sydney, to name a few. Our pediatric study, and I'll talk further to this, offers the potential to expand our market in Europe, particularly in the U.K. By the way, we're, we are quite pleased about the extension that we've reached with our U.K. partner and at improved terms, and that's going to capitalize on a successful outcome to our regulatory submission, and this submission is due to occur in a little more than a week from now. Lastly, I would say our respiratory business has continued to generate double-digit growth in the U.S. market, where our efforts have been focused. Overall, I want to say that, you know, we've done the hard yards in FY24, and they have produced very encouraging results that bodes well for FY25 and beyond.
Let me switch to slide nine, and I just wanted to amplify MAGPIE study a little bit further as a growth enabler for us going forward. Here's a bit further detail, and that's before we move into our growth driver section of this presentation. That since the results of this study, successful regulatory outcome that we anticipate in August of 2025, makes it the growth enabler for our business. Just for a bit of background on this, the current age indication is 18 years of age for Penthrox across Europe, and a successful outcome for our regulatory submission could lower this age to six years of age. Now, such an outcome would expand our addressable market across our key European countries, UK, France, Switzerland, and the Nordics, just to name a few.
There's actually a second benefit to the MAGPIE data insofar as it represents new data that unlocks Penthrox use in kids. It further strengthens the safety profile, and it supports the rollout of a broad engagement strategy here in Australia to medical experts who can speak further to the benefits of Penthrox. The goal here is to accelerate uptake in a hospital setting that has up until now been fairly resistant to behavioral change. On that note, let's move to our growth drivers in FY25 in greater detail, and that starts up on, on slide 11. There we are. Thank you. We've been speaking a lot about our financial gains in FY24 from a margin and an earnings perspective, and this effort will continue in FY25 and forms the bedrock of our capital-light approach. There's that phrase again.
We're going to continue our journey here in Australia to align Penthrox pricing with the value it represents. Our successful pricing effort in FY24, as I mentioned, was a testament to the value it has represented in the traditional ambulance setting, since the usage of Penthrox here was not impacted at all. In a hospital ED setting, we intend to demonstrate efficiency and throughput benefits of Penthrox in the hospital, as well as the core pain relief benefits that all who use it have come to appreciate. Additionally, the efficiencies we have identified and implemented in our operation is going to have, of course, an annualized effect in FY25. Let's move to slide 12. Here on 12 is where we have focused our efforts in the Australian Penthrox market and where we're going to continue to place our efforts.
Now, I spoke about the learnings of the past year, and here are a few key ones. Certainly, the positive attributes were amplified in the past year. The value proposition of the product remains strong, and in fact, it's abundantly clear that once Penthrox is established in an institutional setting, it embeds a standard of care. Furthermore, we're seeing increasing interest in other procedural settings like O&G, obstetrics and gynecology. That, I think, is not surprising, considering the growing emphasis on pain management that we're seeing now in women's health. In fact, there was a recent story about Penthrox, probably some months ago now. A recent story about Penthrox use in the O&G ward at Frankston Hospital, and that's a really good example of what we're talking about here.
Additional to that is the focus of our Canadian partner, who also has a focus on that O&G space. What we've also learned, though, and especially in the hospital setting, is that changing long-held behaviors in favor of a well-known and regarded product like Penthrox, it takes a lot of time and targeted effort. In short, ED physicians will need to hear more from peers to shift their behavior toward Penthrox over time, despite the ubiquity of the product here in the home market. Let's swing to slide 13. Thank you. 13 is the revised approach that we're going to take into FY25, as what we'll call our acceleration strategy. Our plan in FY25 is going to be to pivot away from a conventional field-based sales approach toward a stronger medical engagement strategy in the hospital segment.
Now, this strategy aligns with our capital-light approach and reflects a key learning of the past year, where behavioral change in the ED has been slower than anticipated. We have the example of the Austin, where use of Penthrox has been steadily increasing, as a reminder of what our product can become in these settings. We know FY24 experience, that there is a belief in Penthrox in the ED. Our medical engagement approach will therefore facilitate the building of an expert network in Australia that can establish advocacy in key institutions and ultimately facilitate this behavioral change. This approach will be fueled by our MAGPIE pediatric data, which will serve as the basis upon which these engagements can occur. It also necessitates the building of a broader arsenal of evidence that can fuel the medical engagement approach and lead to accelerated Penthrox uptake going forward.
Lastly, our efforts in this regard in Australia will be leveraged in support of our partner efforts in international markets, that bridges me to slide 14. Speaking of international markets, this slide reflects another key growth driver for our business in FY25, that is our success in other markets, particularly those in Europe. I've already spoken to positive outcome with our partner in the UK and Ireland. That's Galen, by the way, they're also our partner in the Nordics. This extension that we've signed with them, at enhanced terms for, for us, for MDI, testament to the enduring belief in Penthrox and its growth potential.
Now, in its eighth year of growing the Penthrox business in the U.K., our partner is keen to leverage the MAGPIE outcome to unlock further growth in what is actually our second-largest market worldwide, including in the ambulance segment, where some of the largest trusts in the country have actually been reticent to adopt Penthrox until the age indication actually captures young kids. We also anticipate successful partner outcomes in France and in Switzerland to continue the growth trajectory for Penthrox in Europe. We'll go to slide 15. This is the last driver I wanted to speak to. This has been primarily a presentation, of course, around Penthrox, I'd be remiss if not speak to what we've been able to do in our respiratory franchise.
Our growth of this franchise has been at 30+% compounded annually since FY21, and that's been driven primarily from our focus on the U.S. market. In fact, if you look over on the right of the slide, that figure is 80% when looking strictly at that market. We've been very successful in building our presence, in what is a multi-hundred million-dollar market in the U.S. We've made considerable headway in the retail pharmacy sector, although there's still a lot of upside potential here. When you consider that in actual fact, we have not yet penetrated the two largest retail pharmacy chains in the country. Our growth is still coming despite being with the two biggest guys.
Our strategy remains focused there and will continue to remain there, and we anticipate this trajectory to continue in FY25 as we push. We stay in retail, but we push beyond retail into institutional settings like hospital networks and group purchasing organizations. That section that we're just through now is the growth drivers. Let me hand over to Anita now, and she's going to walk us through our results to a degree, because we are going to talk to the results in greater detail in a few weeks from now. Over to you, Anita.
Yeah, thanks, Brent. Just moving to page 17 of the deck. As Brent said, we will be releasing results in three weeks, on the 26th of August. I won't take up too much time talking to the numbers in detail at this time, but happy to take questions at the end of the presentation, if you wish. What I will say is we delivered in FY24 what we set out to do, and that was to strongly improve earnings and cash flow and to set us on a pathway to deliver positive operating cash flows by the end of FY25. Through the year, we have been very disciplined in driving financial improvements. We've improved volumes, reduced costs, delivered efficiency, and strongly improved margins.
Earnings improved by AUD 7 million, free cash flow improved by AUD 10 million, revenue improved 3%, despite cycling tough comps in some markets. What is most pleasing is the improving trend in earnings and cash flow over the last six months, which will continue to drive positive momentum in the year ahead. This includes AUD 3 million-AUD 4 million in earnings improvements from efficiency initiatives already implemented. We expect earnings this year to be, again, strongly improved, we expect to achieve positive operating cash flow by the end of FY25. I'll skip ahead to page 20. We can touch on the revenue details a little further in three weeks, touch on our cash position. Cash at the end of the period was AUD 9.7 million.
Following the raise on a pro forma basis, we expect cash reserves to be around AUD 19 million, provide us with sufficient balance sheet capacity to implement the growth initiatives Brent has spoken to and support the company through to free cash flow positivity. Overall, we're in a good place. Our financial performance is improving. We have several levers for growth, and following the capital raise, we have a strong balance sheet to support execution of our strategy. Over to you, Brent.
Why don't we move to, let's see, 22, and we'll talk about use of funds. We're coming to the tail end of the presentation, and then we'll open it up to questions. I mentioned at the start of the presentation about the split to 6.5- 3.5. Just to give you a bit further color on, on the, the target investment and the growth initiatives section that you see here. I'd mentioned earlier in the presentation about the, the importance of MAGPIE, not just in expanding the addressable market, but also that new clinical data actually opening up our ability to build advocates, but that we needed to build out more evidence, and that's what, that's what this is about.
We're building on the MAGPIE pediatric data, which is really to you know, to stimulate greater uptake of Penthrox in a hospital setting, as well as in the ambulance setting, as I've said as well. We're also looking at additional data generation over time, and that's not clinical data, just to be clear. It's investigator-initiated studies, observational studies, and these can include topics like patient report studies, length of stay, tolerability, data linkage, and the like. That's what an evidence generation is about. Supporting local and international knowledge exchange- This is about really, again, capitalizing on the data we generate, participating in targeted congresses, other key meetings for poster presentations, involvement of key opinion leaders from abroad in key meetings, et cetera. An example of this is coming up in November.
Our MAGPIE study lead investigator will be presenting at the Australasian College for Emergency Medicine, at which we'll be present, and then conducting a speaker tour in the country thereafter. That's a, that's an example of that. The third piece around expansion of commercial investment in Australia, as the advocacy strategy takes hold and we gain traction through FY25, we'll explore and invest in other targeted investments, both from a commercial personnel and tactics perspective as well as medical. That will come over time. I don't see that happening really in the current fiscal year. But that's really just to give you a bit further color on the AUD 6.5 million that will be dedicated to the growth initiatives. That's the final slide of our presentation.
What I propose we can do right now, is we can go to Q&A. We have, I think, two means of doing that. I think people can ask questions either directly on the line or, or via the chat as well. Let me turn it over to Anita, where are we at with the- should we be at? Sorry, is it, Melanie, are you gonna walk us through the questions?
Thank you. If you wish to ask a question via the phone, you will need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type your question into the Ask a Question box. Your first question is a webcast question from Dean Kelly, who asks: What gives the board and leadership confidence the startup will not exploit the opportunity in the U.S. now that the company has moved its entire focus away from that opportunity?
I wouldn't say we've moved our focus away. I mean, our, our focus is clearly as the presentation states, but we remain very vigilant regarding the US opportunity. We maintain a lot of our interactions associated with the US opportunity. We monitor other entities on a regular basis. As for whether others can, you know, exploit the opportunity, we don't see that on the near term horizon from our own monitoring, but we watch it closely, and we believe fundamentally that we are still in the driver's seat to capitalize on that opportunity according to our timeframe.
Thank you. Your next question comes from Brett Westbury, who asks, Please comment on why director participation was not alongside the retail offering only.
Why it's not alongside the retail offering only? I mean, this is the structure that we set up for the, for the directors to participate. I don't know if there's anything else to say on this.
No, all, all the directors will be participating, so they'll be taking up their entitlements, along with every other-
Yeah.
-shareholder.
Thank you. Your next question is from Brett Westbury, who asks: How was the discount to the market price determined?
Yeah, I mean, as you can well imagine, you know, Brett, there's a variety of factors that go into this, and there was a lot of deliberation at the board level with our advisors. That was the discount that was proposed, based on these factors, and that was the discount that we ultimately accepted and felt was the discount that needed to be put in place to deliver the outcome that was that we needed from this raise.
Thank you. Your next question is from Dean Kelly. You are driving revenue growth through increased pricing in a time of economic uncertainty, when many governments will be looking to any areas to save costs. You have said, to paraphrase, that you are not interested in more competitive pricing, which can be achieved through improved manufacturing to drive market share. What is preventing you from exploring this path? A more competitively priced whistle would be unstoppable. As per the recent relaunch in Canada and France, sales team, failure demonstrates uptake is not where it could be. You have also referenced a slower uptake in ED, which also supports the need to improve pricing.
Yeah. Yeah, well, we hold a very different view, Dean, on this point. I know we've talked to. I know there's been talk about pricing in the past. I know I've said it a few times in the presentation. We believe the pricing of Penthrox reflects the value it represents. We don't want to undervalue, we don't want to undervalue that whatsoever. I, I, I would also add, you know, we've, we've done market research. The market research has not shown us that pricing is the barrier to uptake. I think when we talk about the ED, let's use that as an example. That's not the feedback that - is that behavioral change that needs to occur in the ED is not pricing based. I, I would just add one more thing.
When you look at Canada and you look at France. I'll start with France. The sales team failure, I just want to amplify again, this is not a pricing failure. You know, I, I wanna, I wanna add that in the three years, in the 2.5 years that we had resources on the ground, we grew the business in France, units from 37,000 to 49 to 65, and we finished this past year at 67. No field promotion. What is that, what was the issue we had in France? It was too costly to generate that growth. That's why we're looking at other models. The growth came.
Again, even in a, even in a market like France, we did not see pricing and the fact that it was priced the way it was, as the barrier. Our view, our view is that Penthrox is priced for the value it represents, and that's the strategy we're going to continue to take.
Thank you. Your next question comes from Murray Hewitt, who asks: Can you discuss what the Oz field team will look like going forward?
Yeah, sure. Right now, what we've done, we've reframed how we're investing in our field effort. As you heard in the presentation, more towards a medical engagement. Just, you know, as a precursor, Murray, to answering your question, that was predicated also on the view that that behavioral change that was becoming challenging, despite the fact everyone knows Penthrox, there's still a behavioral change that comes in that channel. As a result, we've determined that a more optimal use of cash, of spend is on this medical engagement. We have. Right now in the field, we're revising our field effort with our national business manager, who was across our key account managers.
She remains as the lead person focused on the core hospitals on which we're focused, but also within the existing commercial team. That also includes me, by the way. Our engagement, our external engagement with customers, whether they be hospitals, or ambulances, is being altered to become more cost-effective. Right now, that's our field effort. It's with our, our lead national business manager and the involvement of others that are based here in the home office. As we go up through the, through the course of this year, as we see the traction we get from our medical engagement, we're ready to revisit what our commercial effort and engagement should be in support of the medical engagement. I hope that answers your question.
Thank you. Your next question comes from Steven Agnew, who asks: Ambulance sales have always been the cornerstone of the Australian and NZ market. Why wasn't the MAGPIE study identified far earlier as the means of penetrating ambulance sales in offshore markets?
Well, and actually, Oh, sorry. Keep going.
Are the results of the MAGPIE study, the only impediment to far greater offshore growth in ambulance sales?
Well, maybe the last question. No, I wouldn't say that that necessarily cures all, all those challenges when it comes to behavioral change. On the first question, the MAGPIE, especially when you look at the U.K., the Irish, but the U.K. market in particular, it's always been seen as a means of broadening penetration of Penthrox in the U.K. It wasn't that we didn't know. The challenge was more about getting the MAGPIE study closed. You know, the MAGPIE study started before COVID. COVID, obviously, hindered the progression of that study. I would add another point that, you know, that challenged the progression of that study, is the mere fact of trying to do a pediatric study in an emergency setting. It's a bloody hard thing to do.
It's not a question of, "Oh, we didn't realize it," or, "Our partner didn't realize it." We've always known it. The challenge was getting the study to a place where we could close the study, we could generate the data, we could package the data, and now we're in a position to, preparing to submit that data, data to the regulatory authorities in Europe in mid-August.
Thank you. Your next question comes from Paul Higgins, who asks: Over AUD 70 million in cap raises since 2020, what does the company have to show for that? Certainly not obvious when one looks at the balance sheet.
Yeah, look, there have been two raises since 2020. We took aggressive decisions with the support of the market and the support of our investors to grow the business in the ways that we've done. What we've seen since then, we have grown the business. If you look back on four years ago, the underlying business, I don't, I don't mean the milestones that were one-offs. I mean, the underlying business in FY21 was between AUD 15 million-AUD 16 million, and as you can see here, with unaudited results, it's double that. We anticipated it being more than that still. I would say what we have to show, we have growth to show. We've learned a great many things. I realize it's come at a price. I won't deny that.
The business, the underlying business, is more than double what it was when we embarked upon this journey from beginning of 2021 until where we are today. What I can also say, and what I hope came through in the presentation, we've learned a great many things. We believe we're in a very strong position financially with our base, our financial base, I should say, for more appropriate and aspirational growth going forward. That growth is going to come in a much more, let's say, prudent way, financially. I don't know if, Niamh, you want to add anything to that?
Yeah, look, I think, as Brent said, I, I think maybe growth isn't quite where we, we maybe anticipated it to be three years ago. What we are seeing in the business are really positive lead indicators. What the business set out to do three years ago, which was to, to grow Penthrox and, and penetrate effectively hospital EDs, where this product hasn't had a, had a big place previously. I think where we find ourselves is absolutely, we feel confident there is a place in the ED for this product. Progress here as well as in France, as well as in, in, in other markets, UK and, and Ireland particularly, demonstrates that there is a place in the ED for Penthrox.
Our challenge has been, you know, working, working on how to efficiently unlock the doors, and, and grow that, grow that quickly and efficiently. I think we've come a long way on that journey. Yeah, I think that the last three years puts us in a place where I think the, the progress in the next three years, for example, will be a lot easier.
Thank you. Your next question comes from Paul Higgins, who asks: In April, you said no cap raise was intended or needed, yet now appears false or at best, misleading.
I'm thinking of April. I mean, we've the question that's always been asked of us, you're thinking of the quarterly cash report. The question that's always been asked of us is if, if you're gonna need to do another raise in order to reach your objective of positive operating cash flow by the end of FY25. The answer to that question has been no, and it is still no. I realize that perhaps for you, Paul, and for others, it rings hollow in light of, in light of this particular raise. As I mentioned, the purpose of this raise ultimately was to accelerate some of the, you know, the growth initiatives that we've identified, but also to shore up the balance sheet.
We recognized there was still some, I think, a lack of confidence in the market, and we believe these circumstances, that under the circumstances, with a lot of deliberation, internally, we felt that this was in the best interest, ultimately, of shareholders over the long term, and we believe that quite strongly.
Thank you. There are no further questions at this time. I'll now hand back to Mr. MacGregor for closing remarks.
Okay, I'll be quick about it. First off, I wanna thank you all, who, who came on the call today. I also wanna thank you as well. We wanna thank you for the candor of your questions. It's important to have the opportunity to hear that, and we'd heard it through other great, other, portals as well. It doesn't come as, as a huge surprise, admittedly. We appreciate that you're invested in us. We hope that you'll continue to be invested in us and are on the journey with us in the story that we have going forward. We've learned a lot over the last two years or so, as I've mentioned, as we've mentioned, and we believe very strongly in the trajectory that we're now on.
On that note, I, I thank you all again for coming on the call, and we'll be, of course, back online in a couple of weeks to do the full year results with audited results. We'll see you then. Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.