Thank you for standing by, and welcome to the Medical Developments International FY 2023 half year results conference 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 phones, 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 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 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. 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've 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. On that note, why don't we go to slide three? Here it is.
These are the financial highlights of the period. At a headline level, what you'll see that we've delivered is on the top line, 45% growth, with revenue at AUD 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 AUD 8.1 million, which is an improvement on the prior corresponding period. And then finally, say the net profit after tax is AUD 2.7 million.
That's a strong improvement. This has included a gain of AUD 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. We've 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. Against this backdrop, there continues to be some challenges for us in the market. While these results show encouraging progress, we are, we are very much focused on addressing these challenges. Let's move to slide four. 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. In the longer term, our aspiration is to deliver the next wave of growth through Penthrox's entry into the U.S. market. We have plans in place that we expect will continue to grow our, our sales volume significantly over time, and that will ultimately transform us into that global healthcare company that we are aspiring to be, that global healthcare company based here in Melbourne. Let's take a brief look at the progress we have so far this year.
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 healthcare system in that market, but I'll speak to that in more detail later in the presentation. As regards our partner markets, they've also 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 Medis, both of those regions have also seen growth. In addition to that, we've expanded our market reach with essentially the relaunch of Penthrox in Canada. 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. 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 a quite a good clip, and it supports the overall growth in this segment of 81%. That's a very encouraging outcome. 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. 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, you know, with this trajectory and with this momentum in the near term after Anita's taken you through the financials for the first half in more detail. 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 AUD 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 AUD 11.5 million. This mostly reflects the decision to discontinue the clinical program in China. We had received a non-refundable upfront payment for distribution in China several years ago.
As a consequence of our decision to discontinue in this market, we have released AUD 18.5 million to the P&L as contract termination revenue, and we've also fully impaired registration costs of AUD 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 seven. 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 UK 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 in-market volumes were up 31%. This included growth in France at 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 grow, 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 eight 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 AUD 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 AUD 1 million in commercial and marketing resources to drive the penetration of Penthrox in hospital emergency departments in Australia, AUD 400,000 to underpin our growth in the U.S. respiratory market, and AUD 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 nine, our balance sheet and cash flow. Trade working capital for the period was AUD 5.6 million, AUD 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 AUD 9 million, AUD 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 were solid at AUD 37.1 million. I will now hand over to Brent to speak further on our priorities for the period ahead. Thanks, Brent.
Okay, thanks, Anita. We'll go to slide 11 now, and, we'll speak to, we'll start by speaking to France. Now, as I mentioned earlier at the start of the presentation, our, 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 healthcare system there. These include staff shortages, budget constraints, and h-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. 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. This affirms the growth opportunity that we continue to see in the market. Now, recently, I traveled to Europe a couple of weeks ago. I did some field rides with one of our French key account managers. Additionally, I did another field ride with one of our Galen representatives in London.
The firsthand feedback that I received was overwhelmingly positive about the product and its potential to, quote, "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. Where we see Penthrox in use, the feedback is always uniformly positive. 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. 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. That's, that's the latest story as it relates to France, which is a key component of our last capital raise. Moving on to slide 12, speaking of Australia. Australia is already our most profitable, our most highly penetrated market, and yet, as we've mentioned in the past, there are large parts of the addressable market that we had 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.
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. As you all know from our full year results presentation in August, our focus in this market is to drive our commercial effort into the hospital and those procedural segments. 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. Penthrox in the emergency department offers compelling advantages, including both patient and efficiency benefits. 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, 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, our, our partner growth strategy. As you know, the 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 an opportunity on my recent trip to sit down with the national sales manager in the U.K., and it's a very encouraging conversation. Even after 5+ 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 the second half, for second half delivery in about the March, April window.
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. 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're advancing our plans 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. 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, in that way. As we come to the final slide of the presentation, just to look our, 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 then 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, you know, 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 gonna continue to support our partner markets to deliver growth, with a particular focus on the launch in Canada.
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. Finally, I would say on the respiratory front, we're gonna continue to grow our market share with particular emphasis on the U.S. market. That effort will continue unabated. On that note, I'll bring the presentation component to an end. I thank you for coming on the call, and now let's open up the lines or online to any questions you may have.
Thank you. If you wish to ask a question via the phones, you will need to press the star key, followed by the number 1 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 from the phone comes from Roy Taouk with MST. Please go ahead.
Hi, Brent and Anita. Thanks for taking my question. I know there's been some challenges in France, do you still believe the FY 2023 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. We're tracking to get, we're tracking to see the monthly run rate go above what it's gone. 110,000 is not where we're gonna land, unfortunately. We still see a lot of momentum there. It's just gonna be slower than we had anticipated this year.
Okay. Okay, thank you. Regarding the price increases that have been implemented, when were those price increases implemented, and which geographies have those price increases been implemented? Has that had an impact on volumes?
I'm sorry, I, I missed part of the question. You asked about when the price increases were implemented and where? I'm sorry, what was the second part of the question?
Has that, has that had an impact on volumes?
Ah, has that had an impact on volumes? I suppose you're asking a question, has it had an impact in reducing volumes? No, we have not seen that. The implementation was around November, it was around November and December, that, that was put in place.
Okay. Okay, thank you. I'll, I'll get back to you. Thank you.
Sure thing. Thanks for the questions.
Your next question comes from Dan Hurren with MST. Please go ahead.
Look, again, thanks for taking my question. Obviously, you've had some challenges in France, more on, I think, your side, by the sound of it. I guess in terms of your desired final structure, for what you want to look there in terms of staffing, where are you there? Where are you today versus where you want to be?
Yeah, well, we, you know, we have, as you know, we have a, we have a, a sales force through a CSO on the ground in France. We have the numbers there, Dan, that we wanted to have. We went, 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, the retention, piece.
Yes.
We're back up again where we wanted to be there. I think the other, the other comment I would make is, you know, one thing we're doing internally, especially from a cash perspective, is constantly evaluating the manner by which we are, which we are penetrating the market and the resources required to do that. 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, those number of people, but our evaluation of how best to go forward continues.
Understood. Just staying on the, the theme of France, you know, 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, what is the feedback that doctors know about Penthrox and they can't get access to it because of hospital formularies and funding? 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?
Yeah, it's, it's more, you know, it's, it's not a, it wasn't a question, I didn't get the impression, Dan, it was any question of, of access. I think it's still an awareness build, even after all this time as well. You know, just to kind of, you know, paint a bit of a picture-... You know, when I was in one of the hospitals, in, in Grenoble, you know, when I went into when, when, when the, 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. Okay, it's, it's, it's something, but, you know, it was, it was, 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. I don't know if that, that answers your question. I did not, I did not, it did not come out for me on my visits that, oh, there's issues with availability of the product, there's issues with access to the product. We were in, granted, 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 two critical administrative pieces, the real challenge with the key account manager, of course, is ensuring that the ED staff remains familiar with the product.
This is the conference operator.
Of mixing. They, they knew exactly the ED nurses that we spoke to. Yeah, yeah, it's like that. We were testing that as well. That's, that's the take I took from my visit there. I mentioned the real positive thing again, was those you speak to, for those who know of the product, right? They sing its praises. They talk about the benefit, and, and I, I, I still continue to marvel at the fact that I've yet to come across an example or a story, an anecdotal story of, "Yeah, we had the product, it didn't work, or it didn't do this." I've yet to come across such a story. It, 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, I've kind of pushed my luck with one more question, and then I'll get back in the queue.
Yeah, yeah, sure.
I read there are some there's some changes in the way, potential changes in the way that the drug is classified, in regards to hospital formularies in France. You know, those changes would make it a lot easier to get into new hospitals. What is the timeframe on that? You know, I guess, as much as you can tell us, the likelihood of being able to achieve those changes.
Yeah. I, I think, I think we're talking about kind of the ASMR, ASMR scale, but I'll, I'll keep it, I'll keep it broad and not, not go down the rabbit hole of the details. Our latest understanding, that submission of ours went in, and it went in a couple, some months ago. I believe we expect and, and should be getting a response back by the middle of this year, so let's say toward the end of this fiscal year. Certainly from our standpoint internally, we believe, we believe quite strongly that, we're gonna be successful there.
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, was sent in by our team. We think it's by the middle of the year, but I would hasten to add, which is a source of frustration, these, these kinds of bodies, these recommending and bodies, it's, it's not uncommon that, you know, oh, we think it's gonna be in this timeframe, and then it gets delayed. Our current understanding is it'll be by about the middle of this calendar year, we'll know.
Understood. Thanks very much.
Sure thing.
Your next question is an online question from Steve Richardson with Bridges Financial. This reads: France had a unit sales target of 100,000-
Yep.
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?
Yeah. France is tracking year to date, you know, 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. Yes, we do feel the staffing issues having been sorted now, can get us closer to the 100. You know, I, I'll say again, just to be clear, I think we said approximately 100-110, 110 in the full year. We don't see ourselves, we don't see ourselves getting to that level at this point. Yes, we do feel the staffing issues can get us closer to it than the current run rate.
Thank you. Your next question is from Craig Orbell with Century Private Wealth. When is the target for Germany rollout, Italy rollout, and Spain rollout?
Yeah. You know, Germany, these, these have all been in advance, and we've been, you know, we've been waiting for more experience to come from France. Germany, we do see as the, you know, the next cab off the rank in Europe for sure, for reasons that'll be obvious to everyone. That will be... That is our intention as we'll start to prepare objectives for FY24. That we would like to see, you know, we would like to take steps forward in Germany in FY24. I, I can't give you a more specific date than that at the present time. Spain and Italy are, are different questions altogether. Those I don't see necessarily happening in 24.
Our focus would be on Germany next. We'll take it in a, in a very, a deliberative way. That's our, 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 go through by end of FY 2023?
Yeah, there are, we just, we haven't given names and because we wanna, you know, working with those hospitals. I think we've had three new ones that have come on. It's two or three, and that's really just since kind of October, November. There are some hospitals for which the Penthrox 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, you know, are aware of how best to use it. We see opportunity there beyond even the new EDs that we're bringing on. I'd say it's around, it's, it's around two or three already. I think what was the back half of the question? It was around what we expect going forward.
It's, you know, it, it, it's hard to say right now because since we're, since we're breaking new ground, into the emergency department, you know, 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 on the key account side, but also on the medical side. I hasten to add the medical side, too, because this is a very much critically important collaborative effort. We do believe we're gonna 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, 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, reads: Do you think the U.S. growth rates for respiratory are sustainable?
I do think the growth rates are sustainable for, for the next little while. I mean, we come at it obviously from a, we have a small slice of a very large market. You know, okay, we're, we're growing from a, 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, you know, without a huge amount of resource put to it. Does it mean 100% per year? I, I, I don't wanna necessarily lean out and say that, but I do believe we can have very meaningful double-digit growth for, for a pretty extended period in the respiratory market in the U.S.
Your next question is from Liam Collins, with Sunsuper, and reads: Europe pain management revenue increased by less than the French growth, which markets fell?
I might just jump in there, Craig. Revenue for the, for the European region was up around 2%. We called out in the presentation that was related to the timing of a shipment into the U.K. We obviously recognize revenue when we, 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, of really, you know, what our customer demand is. You'll note there that European in-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, and reads: In reference to the difficulty in retaining key account managers in France, what were the most common reasons for leaving?
Really, there's, there really is one primary reason, 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, the prospect is that they will go there, you know, for some greater security. That said, I mean, that's, that's a challenge that we're always gonna have with the model we were deploying in France. You know, we've, we've combated that on a number of fronts. You know, you 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, they love the product. We have a couple of...
We have certainly a couple of our reps that have been there since we started, I think two or three of them, and others have moved on. 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 have been one, or there have 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.
Where we, along with our partner, the CSO, have deemed that maybe their performance, you know, is, you know, not to our liking, we switch them out, and try look to hire someone else. That's some of the benefit of being a little bit more nimble there. The primary reason is the one that I mentioned initially.
Your next question is from Steven 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. Part of my answer to the first question will be a bit of an answer to the second one as well. The ambulance services in a number of cases are attached to the hospital, so the procurement can be similarly so there. 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. Yeah, it's definitely not solely in the ED. 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.
It is a bit of a different, a different model in that regard.
Thank you. Your next question is a phone question from Roy Taouk with MST. Please go ahead.
Hi there. Thanks for taking my question again. Regarding the development of the next generation Penthrox, Penthrox device, when do you expect that to reach market?
Here in Australia, should it? It's 2025 or 2026. I think we still have more engineering work to do on it. That continues unabated. We have a steering committee on it, but I think it's, I think it's FY 2026. It'll start here. The intent would be to start here in Australia. We're soon gonna have a meeting. We're gonna schedule to talk to the U.S. as well, the FDA, have a discussion about Selfie. As I mentioned earlier as well, we, we're, we're contemplating right now whether we have Selfie as, you know, in the phase III for the U.S. That's the timeframe as it stands right now, regarding the potential first appearance of the device in a market.
Okay. Thanks for answering my questions.
Thank you.
Yep. Your next question is an online question from Raymond Jang with CCZ Equities, and reads: 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?
Yeah. Really and truly, you know, I look at the leadership team. When I arrived, we were 10 people. It's nine right now, and we've, we've changed out seven of the nine. Why was that done? It was really focused very heavily on a couple of things, broadly speaking. One was the global aspiration, of course. The other was, I think, as I've, I've defined it before, about transforming into a global company. 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 that there was a similar aspiration for those businesses as well.
I'm really, really happy with the caliber of the talent that we have on the leadership team. Of course, what those individuals do as well, once they come on board, is they evaluate their teams. There have been changes, obviously, above the leadership team level. I would say for the you know, that, that, that transformation, at least, organizationally, operationally, is essentially done. 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. 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.
The next question comes from Liam Collins with Sunsuper, reads: What is the status of the Penthrox children's trial in the U.K.? Some time ago, it was noted as the key to unlocking growth there.
Yeah. Yeah, 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. 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.
The next question is from Steve Richardson with Bridges Financial and reads: What is year-end revenue target, AUD 35 million plus or higher? Do you still feel 2024 will be break even?
Yeah, thanks, Steve. We don't give, we don't give specific, specific outlook guidance, but what we can say for the second half is certainly we, we'll benefit from the deferral of those sales that we missed in the first half into the U.K. That will certainly help the, the, the second half. I think the trajectory across most of our markets should be positive to, to, to up in the, in the second half, that should be positive there. Your question around, will we be break even in 2024? I think you might be referring to comments we made at the capital raise, where we referred to being break even in 2025. Yes, absolutely, that is still our focus.
Your next question comes from Raymond Jang with CCZ Equities and reads: Could you please provide further details regarding the creative campaign you undertook for Penthrox?
Yeah, I mean, the, the, the creative campaign, broadly speaking, which has been rolled out by the global team here and is being deployed in, in France, and also we're interacting with, with Galen as well. It focused heavily on, on, you know, I think points you, you, you'll, you'll not find terribly surprising, but I mean, it's, it's meant to be creative in terms of getting at some of the key benefits, the ease of use, the, the, the, how rapidly the analgesic effect is felt, the efficiency gains that come from all of these, this basket of benefits, in different kind of settings, specifically hospital ED settings. That's really fundamentally what the creative campaign is about.
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 products, to try and amplify them more fully in support of the in support 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. That's fundamentally what it is. I know it's maybe not all the detail you're looking for, but broadly speaking, that's the detail of the creative campaign.
Thank you. Your next question is a phone question from Dan Hurren with MST. Please go ahead.
Oh, 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 the first half?
Yeah, thanks, Dan. From a depreciation level, no. CapEx, we do call out in the financials. You'll notice there was AUD 3.6 million in capital accruals at the end of December. We would expect that to that to flow through cash in the second, in the second half.
Okay. Just, not looking for guidance, but just notice that the occupancy selling and the admin expenses have been bouncing around quite a bit. What would be your advice on how we think about those, you know, 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. We might take that one offline. We can, we can have a look at.
Sure.
what period we're looking at there.
Okay, no problem. My last question is a much broader one, broader or philosophical. Just looking at 2025 when we're break even, you know, not looking for guidance, but in broad terms, where will we see the leverage? What will the P&L look like at that time? You know, is it largely gross margin with costs largely the same, or, you know, I'm just wondering if you can give us a bit of a shape there.
Yeah. No, no, it's a good question, Dan. Yeah, certainly from a cost perspective, the, the, the rate of growth in, in cost will absolutely stabilize. We've, 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, there's possibly a little bit of that coming through in FY 2024, but I would expect after the first half of FY 2024, that's full. We have invested, and we called out in the, in the presentation, investment in the commercial field team in Australia to, to drive the penetration into the EDs there.
That's been a, 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 annualized effect of that next year. Again, a, a slight increase there. But really outside of those, you know, and outside of inflation, costs should really stabilize. It then really does become a gross margin story. You will see gross margins, expand, you know, progressively from, from, from now.
Great. Sorry, I'll be cheeky, just one more, just for Anita. I, I may have missed it in the presentation as we were running through it, but just currency impact. Any, any notable currency impact that we should think about when we're looking forward.
Yeah.
Sorry, in, in this last result that we could...
Yeah. nothing material, Dan.
Understood. Hey, thanks so much for taking all those questions. Cheers.
Thanks, 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. Thank you as well for all the questions. We appreciate it. We appreciate the opportunity to bring clarity where, where it's needed. We are excited about the second half. We see momentum. We're 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.