https://www.bseindia.com/xml-data/corpfiling/AttachLive/ca54d130-ce45-42db-8feb-51cfd699b1b8.pdf Natco Pharma has entered into a settlement agreement with Celgene (now part of Bristol-Myers Squibb) for the product Lenalidomide Capsules in
Canada. The terms of the agreement are confidential as per the
agreement.
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Any technical inputs or views on the stock? It seems to have broken out after a long time when fundamentally the numbers haven’t good unlike pharma peers.
Disc: Invested in family and client accounts
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It is perhaps because of the PLI ( Production Linked Incentive) scheme that the Govt has announced for API makers to encourage API making in India…there are many other announcements such as Bulk drug Park for API with common infrastructure management…They have also granted PLI even if the API maker wants to import starting Raw material up to 30% max…
Overall, Going forward the API industry likely to have a lot of tailwinds in view of Govt support and in view of US - India trade relations opening up with a lot of push through USIBC…
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Natco had spent some time pre-COVID in 500-600 range and formed a cup and handle pattern.
Post March fall, it formed an ascending triangle pattern, which indicates accumulation. It broke out at 665, spent some time there and today it seems to be breaking out again with volumes. During this move is also broke the slightly longer term resistance trendline. Next resistance can come at 840
Discl: Invested
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@ayushmit Ayush Bhai
And excerpt from Natco Concal
We had a good quarter in April to June because of – some of it was also in March quarter, and we had a very good quarter in April to June, again, because of chloroquine. So we had a good take-off of chloroquine. Now it has sort of slowed down a bit because the infection rates in the U.S. have dropped a little bit. So we’re also doing a clinical trial for prophylaxis use of chloroquine. So I think – but those trial numbers are not out yet. So I think we need to wait for any further jump on that one. But overall, I think we have – overall, there’s been – there are 2 things that have happened in the export market, Nitin. One is that we have a couple of good pandemic products. We have chloroquine and oseltamivir, which is helping drive the export business. The second is, there’s been – the exchange rate benefit is also there. And the third factor is there’s been – especially for the export product, there’s been reasonable amount of stocking that has happened. People are buying product, which has also improved the export orders. And we’re seeing very good demand for overall oncology products, especially. I think we were trying to differentiate that a few minutes ago even the domestic. What we’re seeing is because people are not going for chemo, there’s been a general improvement in oral. So if the doctor is unable to treat a patient for – and obviously go through a chemo, he may not be comfortable doing – he probably will do oral after the chemo. But because he’s not able to do chemo, doctors are prescribing oral onco products as compared – as a substitute to chemo. So we’re seeing very good demand on that sense. So I think net-net, I think whatever volatility that we’re seeing in the domestic has been offset by the export business.
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Natco’s result is actually quite reasonable aided by the export formulation business. Management has guided for a 20-25% growth in FY21 earnings, despite Q1 earnings being down by 14.5%. Market probably read this before the actual results came out. Lets see how it plays out.
https://www.bseindia.com/xml-data/corpfiling/AttachLive/b9bf9f58-c7b0-4d1d-907b-9b7ebf186090.pdf
Disclosure: Invested (position size here)
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Natco Pharma Q1 concall Notes -
- Consolidated sales at 582 cr vs 513 cr YoY…increase of 13.4 pc. Net Profit at 122cr vs 143cr…down about 14.5 pc. Topline growth led by lower value, high volume formulation exports…like Oseltamivir, Cloroquine ( basically COVID related supplies ). Domestic oncology business was slow due lesser hospitalizations due COVID situation.
- Earnings growth guidance for this FY at 25 pc !!!
- Domestic onco business hit hard by COVID. Its the most profitable part of the business. Improvement seen in June, July.
- Revlimid ( cancer drug ) - approval expected in Dec. Huge opportunity for the company.
- Natco’s key US products include- Copaxone ( used to treat multiple sclerosis ), Doxil ( anti cancer ), Lanthanum carbonate ( used to reduce phosphate levels in patients with end stage renal problems ) . All these are limited cometition products. In lanthanum carbonate, Natco is the only generic player in the Mkt. Tamiflu is another major product, but the margins are thin due higher competition.
- Company hopeful of a positive outcome wrt Coragen ( insecticide ) both on the court case and the regulatory filing.
- New niche filing in US - Trabectedin ( in partnership with Sun, again a chemotherapy drug ) . Only one more Chinese company has filed for the same. So, its again a limited competition product.
- Earnings guidance of 25 pc growth is based on the order book. This does not include products like - Sorafenib, Everolimus, Lapatinib.
- Domestic Onco business still at 75-80 pc of pre covid levels, inspite of the pick up in june, july.
10.Looking at launching 10-12 new products per yr in domestic mkt !!! - If Revlimid launch happens as planned, company can even clock a PAT of Rs 1400 cr in FY22 !!!
- Non US export earnings - 10-15 pc…from countries like Canada, Brazil. Domestic earnings at 20-22 pc. Company inteneds to increase both to broad base its business.
- US mkt fairly stable. People exiting tail / low mkt share brands. Therefore mkt shares in already good mkt share products is going up. Pricing pressures are also easing.
- Agrochemicals - 3 niche products filed.Mkt size-2000 cr. A number of other commodity products also filed. A few nice products are in the pipeline. In 2-3 yrs time, it should reach 10-15 pc of India business.
- API base business outlook - good.
- No inorganic plans for the company. Company wants to grow its presence in Cardio and Diabetology in domestic mkt…slowly and steadily.
Disc: invested.
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Hi Ranvir,
Good Morning.Regarding the below point I have couple of doubts.
1->Which companies are going to be competitors of Natco in this field?
2->And I have a doubt regarding the market size of 2000 crore.I think the market size in general for agrochemicals should be higher than that figure.so are the products natco is going to launch are only catering to 2000 crore market piece of whole agrochemicals market?
Thanks,
Deb
Hi Ranvir, did management say December?
Excellent summary Ranvir - I also listened to the concall…
Lenalidomide is the next biggest trigger for Natco for sure. Approval expected before December 2020. Sales should start from Q4 2022 (March 2022 launch as per the agreement with celgene) - stocking for March 2022 will start from Q4 2021/22 financial year…
Natco is a niche company and their strategies are unique.
Discl - invested and accumulating since 2013 - 25% of portfolio at present
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Hi…
@paresh.sarjani1 …The management said that the targetted Action Date is Dec 2020 and that is when they expect it to get an approval.
@babu44b…they were talking about the 3 niche agrochemical products that they plan to launch while talking about the mkt size of 2000 cr.
Regards,
Ranvir Dehal
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Hi,
investor presentation for the Quarter ended June 30, 2020.
Thanks,
Deb
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Company’s profits in FY20 was Rs461crs. Guided for 25% PAT growth implying PAT of Rs576crs in FY21. So at current market cap of Rs15420crs company trades at 26x FY21. If Revlimid gets launched FY22 PAT could be Rs1400crs also. Implying company trading at 11x FY22. Stock looks quite cheap compared to where other pharma names are trading
Disclosure: Invested
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Hi Venkatesh - I think better to describe lenalidomide opportunity as "large’, and it is impossible to put a $ value to it at this stage. There are so many variables…Also, it is better for us shareholders not to advertise this opportunity too much 
I haven’t finished buying, the cheaper the share price, the better it is for us…
Discl - holding since 2013, continuing to add
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venkatesh,
How would launch of Revlimid get to PAT of 1400Crs?. Would help if you could clarify
The management said this during the Q1 concall.
I was also surprised to hear this. But then, this is what it is.
What I understand, this drug is not going off patent. NATCO has out of court settlement where NATCO will be allowed to sell certain percent of drug every year. This market share will increase every year. So price erosion will not be there. Once drug is off.patented, NATCO is free to sell any quantitity. It is blockbuster drug having more than 5 billion dollar market 2 years before. And it was growing, I dont know the condition now.
This drug is special. Once doctor recommends, pharmacy enters the data and get approval from manufacturer, only then it is sold. So it is taken in extreme medical supervision. This will help NATCO to track the total quantitity of drug sold so that they can claim their market share.
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10% of 5 billion dollar is 500 million dollar i.e. Rs 3600 crore. Here I am considering 10% market share in first year. This is the difference between reserch driven pharma company and pure generic pharma company. Patent holder is let down for out of court settlement. In court there were chances that patent was challanged.
Disclosure - No holding. May buy anytime.
Dr Reddy’s also has made a deal with celgene/bms
Good for natco due to the accelerate clause I think - they might be able to sell lenalidomide earlier than previously agreed - need to double check this…
Discl - holding and adding since 2013. Bought few more yesterday
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