Natco Pharma results are out.
Revenue has increased by 28% YoY and Net profit has increased by 93% YoY
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Total Consolidated Revenue increased by Rs. 125.80 cr yoy from Rs. 448.70 cr in Q1FY18 to Rs. 574.5 cr. in Q1FY19. Out of this Income from Profit Sharing increased by Rs. 120.17 cr., Domestic Oncology Formulation increased by Rs. 18 cr. and Other Income increased by Rs. 32 cr. Almost every other business segment of the company showed decline in yoy revenue numbers, something we need to keep a watch on.
Latest Investors Presentation: https://www.bseindia.com/xml-data/corpfiling/AttachLive/24274c20-032e-44a7-899d-6ccc30df1a0e.pdf
Regards
Harshit
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NATCO PHARMA FY18 Annual Report Notes
- Sales Total = Rs. 2242 cr.: API = Rs. 285 cr. (12.71%), Domestic Formulation = Rs. 720 cr (32%), International formulations = Rs. 1041 cr (47%).
- With the long-awaited blockbuster launch of the generic Glatiramer Acetate (Copaxone) injection and the generic Liposomal Doxorubicin in the US, in addition to other niche and several first-to-launch products in India, we have achieved our financial targets. Lanthanum Carbonate (Fosrenol) was also launched in FY18.
- Additionally, the generic Oseltamivir (Tamiflu) sales in the US was a strong contributor for the Company for the second year in a row in spite of competition.
- International formulations facility
Kothur facility: Oncology, Gastroenterology, Central Nervous System (CNS) and Cardiology
Visakhapatnam facility located in a Special Economic Zone (SEZ), to be commissioned shortly. - Domestic Formulation facility
Nagarjuna Sagar facility: Oncology, Antibiotics and Antiviral
Dehradun Unit 6 facility: Oncology and Antiviral
Dehradun Unit 7 facility: Oncology
Guwahati facility: Gastroenterology - API Facility
Mekaguda facility, Telangana
Chennai facility, Tamil Nadu - We have seven manufacturing facilities for formulations and APIs. Our business is supported by an employee strength of 4,831.
- 3 USFDA approved facilities: Kothur (formulations), Mekaguda and Chennai (APIs).
- 60% ANDAs for the US backward integrated with our own API.
- 46 niche ANDA filings in the US, 29 approved ANDAs and 42 DMFs filed in the US.
- Received six ANDA approvals from the USFDA in FY 2017-18. Our R&D spends for the fiscal stood at Rs.166.5 cr., 7.8% of the standalone revenue vs 6% in the previous fiscal.
- The Company earned foreign exchange amounting to Rs.1032.1 cr and used foreign exchange amounting to Rs. 297.8 cr during the year ended 31 March 2018
- Have a well-established presence in the domestic formulations market, particularly in the gastro hepatology and oncology therapeutic areas. Further, we have diversified our product portfolio by launching products in cardiology and diabetology (CnD) therapeutic areas in 2017. Launched 7 products in India in 2017-18; 3 of which were first to launch in the country
- NATCO Pharma (Canada): 15 product approvals with a mix of in-house and a few in-licensed products. Active products include generic versions of Oseltamivir Phosphate, Imatinib Mesylate, Citalopram and Ondansetron
- Natcofarma do Brasil: Backed by a strong portfolio of oncology products, we expect to file several products in the coming years. Recently received first product approval for Letrozole.
- The subsidiaries generated a total revenue of
945.5 million (net). Amongst these, Canada was profitable with about737 million in revenue, while our arm in Singapore had a fruitful year with eight product approvals. - In FY 2017-18, we raised around `9,150 million via a Qualified Institutional Placement (QIP). This capital will be invested in organic growth and potential niche inorganic opportunities.
- Products Launched in Domestic Market
Oncology: Carfilnat (Carfilzomib), Pomalid (Pomalidomide), Alphalan (Melphalan injection) (Note: All were first-to-market in India)
Pharma Specialty: Velpanat (Sofosbuvir + Velpatasvir), Tafnat (Tenofovir)
CnD: Arganat (Argatroban) Dabigat (Dabigtran Etexilate) - Our six flagship brands,Geftinat, Erlonat, Veenat, Sorafenat, Lenalid and Bortenat in Oncology in Domestic market, recorded annual sales of over Rs. 100 million each in FY 2017-18.
- The Group has two customers who contributed more than 10% of the Group’s total revenue during the current year and one in the previous year. The revenue from such major customers during the year is Rs. 845.6 cr. (31 March 2017: Rs. 642.9 cr).
- In the US, there is significant pricing pressure driven by payer consolidation, restrictive reimbursement policies and cost control tools such as exclusionary formularies and price protection clauses. In addition, patients are seeing changes in the design of their health plan benefits and may experience variation, including increases, in both premiums and out-of-pocket payments for their branded medications. Outlook According to IQVIA Market Prognosis, real net per capita spending on medicines in the US will decline in 2018 and continue almost unchanged at almost $800 per person through 2022. The combination of rising off-invoice discounts and rebates, slowing overall medicine spending growth and a strong economy resulted in the aggregate adjustment of normalised medicine spending to decline in three successive years following the peak in 2015 and this is estimated to continue unchanged upto 2022.
Regards
Harshit
Disclosure: Invested
12 Likes
My take away from Q1FY19 result and concall:
- 23% top line growth Y-O-Y from 449 Cr to 575Cr.
- EBIDTA margin jumped from 31.2% to 44.1%.
- PAT margin from 20.9% to 31.6%.
- As rightly pointed by @harshitgoel above, segment wise not that great result though base Onco business holding and further strengthening (as per concall vibes).
- Summary of segment wise trending over past 9 quarters:
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gCopaxone - Approx 18% market share (think this was 15% start of the quarter). So far Mylan + Natco has been conservative on pricing war with Teva. Mylan’s gCopaxone was pitched just 14% below the brand price, i.e. $5,000 vs Teva’s $5,800. However, off lately Mylan has been into all out showdown with aggressive 60% price to $1900. This is expected to shift market for them fro incumbent. Other important aspect that Natco management acknowledged was that this is not entirely pricing aspect, from therapeutically perspective this has some short of stickiness due to which the market share acquisition
is slow. -
Hep-C franchise: There was a slow down in run rate from ~110 Cr/Quarter to 75 Cr/Quarter. Management assessment to stabilize around 85ish Cr. Expanding foot print to rest of the word particularly condensed pockets of HepC like Indonesia and Philippine. based on past comments, 12 countries has HepC approval against filled for 30 countries.
Though recently NPPA has imposed price cap on certain Hep C medicines however may not have significant impact o Natco as its flagship drug Velpaat is already priced much lower than the cap. (this was indicated in one of the concall as well, think in Q3’18 call)
http://nppaindia.nic.in/ceiling/press04July18/FormulationPrices(50).pdf
VELPANAT ( Velpatasvir 100mg + Sofosbuvir 400mg): Proposed retail price 15482 vs. Natco price 13875.
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Tamiflu: with other generics coming in fray the numbers will not repeat itself from what they saw during flue season CY17 and CY18. Though they have approval for both suspension and table now. Interesting comment during concall is that they have not booked entire profit in Q1 and will spill over to Q2. (Substantial -in managment words).
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Substantial cash in books: company is sitting with whopping 1450 Cr. cash/liquid instruments. Additional strong cashflow expected from Copaxon and Doxil for the FY. Though Rajeev has been very tight lipped during concall, Investor presentation calls for inorganic growth.
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CnD segment: Growing well. They had a projection of ~150 Cr topline by FY’19. Again, targeting niche products under CnD. Within a very short duration of forming CnD segment they are looking at gBrilinta for India market. This appears to be one of the top drug in US market with $1B clocking. Though have been stayed by AstraZenca:
AstraZeneca sues DRL on patent - The Economic Times -
CapEx: 400 Cr. for FY out of which 100 Cr. so far utilized. Vizag plant expected to come online by mid of year.
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Revlimed: Same stance, they have limited launch agreement with Innovator however can move early (as early as 2019) if competition comes in.
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Targeting at least two, three FTFs this year.
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Operational break even for Brazil sub by year end.
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Other income break-up: approx 56 Cr. other income as against 40 Cr last quarter.
export credit 20 Cr.
Forex gain: 15Cr.
Interest income: 20 Cr.
Overall, seems that the same industry wide headwinds (short of) are at play for Natco as well. However, couple of big opportunities makes it equally interesting. Additionally, managements focus on play by strength gives some confidence.
Thanks,
Tarun
Disc: Invested, no transaction in last 90 days.
15 Likes
6 Likes
Good news for Natco
4 Likes
Hi All,
Natco to consider buyback of equity shares in a board meeting, to be held on 5th November.
You can read the official announcement by clicking here.
Regards,
Yogansh Jeswani
Disclosure: Holding
3 Likes
- buyback announced at a price of Rs.1000 per share for a total consideration of 250 cr.
- revenue at 583.5 cr vs 432.2 cr last year.
- PBT at 235.3 cr vs 107.2 cr yoy
- CWIP of 532.4 cr as on Sept 18.
6 Likes
Back to back good result in last two quarters . Share buy back also announced at Rs 10OO. The stock is range bound for quite some time. Whether market is anticipating lower profit realisation in FY19…Can any one share some light on its future growth prospect hereon…
Market adversely reacted after publication of decent results and buy back from Open market not exceeding @Rs 1000/- Let us see how it opens in next trading session…
I wonder, Natco Pharma looks like an excellent value pick, kind of market mis-pricing. Any specific reasons for the same.
Growth looks fantastic.
Return ratios >30%
PE of 18
PEG of 0.34
4 Likes
me too wonder the same. if some one have idea on future earnings please share with us
Seems market is discounting earning from profit sharing/services …If we exclude the same result would be negetive or at most flat as far as Q1 presentation…But I am not able to understand whether this earning under profit sharing/services is sustainable for next few years or not…
Disc …Invested …
cef2640d-a3cb-4a5e-afd2-44c6596427f7.pdf (2.1 MB)
- EPS of 10.43 against 4.97 same quarter last year despite expanded equity base.
- approx 26% revenue growth YoY
- ~39 cr. Other income.
Will be interesting to go through investor presentation to see which segments have given the boost to top line.
Disc- invested for some time now. No transaction in last 6 months.
2 Likes
One of the best margin numbers in the sector (Divis is closest, however Natco leads). The question is, is it sustainable in the long term? High base in quarters to come.
Possible triggers
- Ramp up in gCopaxone
- Revenue growth from gTracleer and gGleevec
- Couple FTF’s in FY19
- Ramp-up in Brazil and Canada
Possible dampers
- Degrowth in Tamiflu
Disc: On radar (no holding currently)
8 Likes
Concall Q2FY19 notes
-
Formulation Domestic Sales: Rs. 193.87 cr
Formulation Export: Rs. 247.81 cr
API: Rs. 66.81 cr.
Other Income = Rs. 53 cr
Subsidiary = Rs. 22 cr. -
Our top 4 products in USA are Tamiflu, Copaxone, Liposomal Doxorubicin and Lanthanum Carbonate.
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Copaxone: It is doing well. Market share increased from 15% to 20%. Our discounts are much better than Teva so price is not a challenge. New Generics not a challenge as the prices are already low. Problem is to take market share from Teva. Market share will improve further, it will show in results next year.
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Key Triggers
Near Term: Increased market share of Copaxone.
Medium Term (FY20-21): Brazil, Canada and India.
Long Term (Beyond FY21): Revlimid and other exclusivities. -
Capex: Rs. 400-450 cr planned this year. Already spent Rs. 200-250 cr. Three main areas of Capex will be Vizag Plant, API in Hyderabad and Oncology expansion in Hyderabad. Vizag should be completed and go online in FY19, inspections will be triggered early next financial year.
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Tamiflu: Flu this year is not as intense as last year. We will see decline in flu earnings this year. Margins in current quarter reflects some portion of of delayed profits of Tamiflu of last season.
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Brazil: Bullish on Brazil due to two reasons - New partner and Good Product Profile. This new partner was earlier associated with Mr. Arun Kumar of STRIDES. He has made some strategic changes for Brazil. Will see positive affects in FY19. Brazil is a Branded Generics market. For Oncology it’s tender based business. We are making 2 unique launches in December 2018 and this will wipe out our losses in Brazil, some other launches in April-June 2019. In FY19-20 we will see meaningful contribution from Brazil to our balance sheet. Base case turnover is $10mn and best case is $ 20 mn, but depends on products.
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China: We are looking to enter China. Some positive regulatory changes have taken place in China. One of them is that if you have approval in western countries (USA) then they will fast track approvals in China. It will take 12-18 months for approvals in China if already approved in USA. We have 3 filings pending in China. If you get 1 product approval in China then numbers will be as good as US launch or India Branded launch. Will do business through local partners there. We are cautiously optimistic on China.
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Domestic: Oncology = Rs. 97 cr., Non Onco = Rs. 79 cr and Other = Rs. 17 cr.
15-20% growth in domestic oncology will be maintained this year.
15% market share in domestic oncology market. (educated guess by management).
12-15 unique launches this year.
Hep C did sales of Rs. 74 cr this qtr as compared to Rs. 69 cr in previous qtr. Volumes and Prices are stable.
Domestic and Subsidiary sales are around Rs. 220 cr currently, going forward would like to see this number increase to Rs. 300-350 cr. in next few qtrs. -
Buyback: Cash as on September end is Rs. 1365 cr. Doing buyback as cash position better than anticipated. Buyback does not mean that future investment opportunities not there.
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Bullish on Oncology and MS pipeline in Brazil, Oncology pipeline in Canada, Oncology and Cardiac in India.
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Focus on Non USA business. Spending 60-70% of R&D on Non USA business and 30% on USA. Earlier it was other way round.
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10-12 filings in USA in next 12 months. 2-3 FTFs approval expected.
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Earnings guidance intact as given in earlier quarter.
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We do only niche products. We never did any combinations, so no affect of ban on FDCs in India.
Regards
Harshit
25 Likes
Very valid questions, Bharat. I did some high level research and found that the company did multiple QIP in past years - which explains the dilutions. Also the dilution is not a lot while at the same time as Tarun and Sandeep highlighted, the returns have been good. I did not find any reflags here - hope I dint miss anything.
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It might be one of reason. Working capital to sales is very high particular to this year (~67%) & average 35-45%. Looks very high.
Hi Bharat, From which site did you get this info of Promoter & Promoter Group?
The promoter share holding had gone down from 51.19% to 48.36% because the promoter Mr. Rajeev Nannapaneni had donated 1.5 lac shares to LV Prasad Eye Insitute .
The link for the same is given below:
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