Natco Pharma - Imminent Growth Cycle (?)

harsh.beria93 · December 22, 2020, 11:48am

I am adding my notes from their last 5 annual reports.

FY16AR:

Has 38 ANDAs with 16 approvals (including 4 tentative approvals); filed 33 DMFs; Expect 10+ ANDA filings over next 2 years
September 2015 Successfully completed the issue of equity shares for Qualified Institutional Buyers (QIB) subscription with gross proceeds of 340.88 crore
Launched 3 HepC product; Foreyed into gastroenterology
NCE program:
o The discovery of new medicines and its success is a long journey, filled with challenges on its way. At Natco, we have been extending our horizons with fundamental research on discovery of new molecules in the anti-cancer segment. We believe there are appreciable synergies coming out of generic research and fundamental research that we conduct in R&D. A compact group of clinical scientists and coordinators are an integral part of the discovery group to design the clinical protocols.
o We continue to work on two key molecules which are in clinical phase studies- NRC 019 & NRC 2694. There are also a string of molecules in the pipeline at the pre-clinical stage.

FY17AR:

Has 43 ANDAs with 22 approvals; 20 PARA IV filings; filed 37 DMFs
NATCO ramped up by monetizing on years of effort through the launch of first generic version of Oseltamivir Capsules – in the United States and through strong growth in our domestic formulation portfolio
We de-risked by expanding further in India including the launch of a new division in Cardio & Diabetic therapy segment
Launch of Imatinib in EU by TP API customers was one of the key highlights of FY 2016-17.
We saw an accelerated growth during the financial year due to Hepatitis C product growth in India and blockbuster launch of generic Oseltamivir in the USA
Wish to invest 6-8% of sales into R&D
As part of our wider strategy, we launched India’s first generic Bone Marrow Transplant (BMT) product, Thiotepa, as we intend to build a full-fledged BMT portfolio
8 product launches in India; target 10+ in FY18

FY18AR:

Has 46 ANDAs with 29 approvals; 16 PARA IV filings; filed 42 DMFs
With the long-awaited blockbuster launch of the generic Glatiramer Acetate injection and the generic Liposomal Doxorubicin in the US, in addition to other niche and several first-to-launch products in India
Copaxone: A resourceful collaboration with a partner resulted in USFDA approval for the generic version of the top selling multiple sclerosis (MS) drug in 20 mg/mL and 40 mg/mL dosages. In the same month, through our marketing partner, we launched Glatiramer Acetate injection of 40 mg/mL (a 3-times-a-week injection) and 20 mg/mL (once-daily injection) in the US. The Glatiramer Acetate injection is a key launch for us as we have invested over a decade in seeing it fructify
Received approval for another complex product, the anti-cancer drug Liposomal Doxorubicin hydrochloride injection. It is one of the most complex drugs to manufacture. We accomplished the development of the product in-house with guidance from our co development partner. This is the 1st complex drug delivery system
Lanthanum Carbonate, an inorganic compound with high quality standards, was also launched in the US market as a generic equivalent and is indicated to reduce serum phosphate in patients with End Stage Renal Disease (ESRD)
After a decade of labor led by our robust R&D strengths and resourceful collaboration with our marketing partner, in FY 2017-18, we launched our first Glatiramer Acetate injection of 40 mg/mL and 20 mg/mL in the US.
US revenues continued to grow with successful launches of first-time complex generics and the success of our blockbuster product, Oseltamivir Phosphate
Our agreement with Gilead Sciences Inc., Medicines Patent Pool and Bristol Myers Squibb allows us to expand access of our Hepatitis portfolio in 112 developing countries.
Launched 7 products in India in 2017-18; 3 of which were first to launch in the country
Our specialty pharma segment witnessed some corrections owing to price erosion and thereby reduction in market size of our Hepatitis C product basket
Oncology: Our six flagship brands — Geftinat, Erlonat, Veenat, Sorafenat, Lenalid and Bortenat — recorded annual sales of over 100 million each in FY 2017-18.
Cardiology and Diabetology (CnD): In the year under review, we launched two niche products in this segment, Arganat and Dabigat, which are first-time launches in the Indian market.
In FY 2017-18, we raised around 9,150 million via a Qualified Institutional Placement (QIP).

FY19 AR:

Has 51 ANDAs with 36 approvals; 20 PARA IV filings; filed 45 DMFs
NATCO has seen strong growth in the oncology segment in India and through our high barrier-to-entry products, Liposomal Doxorubicin and Glatiramer Acetate in the US; Some of our key products in the US have seen strong competitive pressures while in India, we have seen market size reduction in the Hepatitis C portfolio
We filed 5 ANDAs in the US, of which we believe three are potential first-to-file products. We strengthened our pipeline through the filing of Ibrutinib tablets which we believe to be a large potential opportunity for the company
We have benefited significantly from the sale of Oseltamivir during the past two years with an expected decline in revenue in the coming years due to increased competition and price erosion.
Number of generic players have significantly increased in US which adds to the tough pricing environment. However, list prices of recently launched drugs, especially in the specialty, orphan and oncology areas are often at higher prices.
We have demonstrated our ability to handle different manufacturing processes, such as lyophilisation and complete isolation technology to manufacture cytotoxic products; During the past several years the Company has carefully chosen to enhance certain capabilities into new manufacturing techniques such as spray drying and hotmelt extrusion technologies to enable novel solid dispersion methodologies
R&D diversification: Create multiple products, combination products and innovative dosages; The Company has continued to advance its technology platforms of peptide chemistry and liposomes, with an intent to diversify its product portfolio; the company has also added novel solid dispersion technologies
Fixed-dose combination (FDC): A combination drug is an FDC that includes two or more active pharmaceutical ingredients (APIs) combined in a single dosage form. While these are more complex to manufacture, they ensure increased compliance by patients and result in lower side effects. During the year, we launched an FDC of Sofosbuvir-Daclatasvir tablets to treat Hepatitis C under the brand name Hepcinat Plus and an oral fixed-dose combination of Sofosbuvir and Velapatasvir under our brand Velpanat.
Expanded oncology portfolio through launch of 2 new products and non-oncology segments through 4 launches
Has 6 oncology brands - Veenat, Lenalid, Erlonat, Geftinat, Sorafenat and Bortenat- which have recorded sales of over 100 million in FY 2018-19.
Net revenue from cardiology and diabetology segment was <10 cr.
Launched 6 products in India during the year; target to launch 6-8 products a year
Launched its first generic version of oral tablets Teriflunomide for Multiple Sclerosis in India; and generic Posaconazole injection, available for the first time in India
Has ten brands in excess of 100 million revenue in the domestic oncology and pharma specialty segment
We have worked on increasing our capacities across various units and have spent 4,413 million on it. Our new plant at Visakhapatnam is operationally ready and will commence operations in FY 2019-20.
During the year, we announced a buyback and purchased about 30 lakh shares worth 1.86 billion
Crop health sciences: We are targeting a unique set of molecules for the Indian market, which have a potential to expand to other regions

FY20AR:

Has 51 ANDAs with 36 approvals; 20 PARA IV filings; 39 active DMFs; 49 cumulative DMFs filed
US business:
o Faced pricing pressure and competition for antiviral flu medicine Oseltamivir
o US revenue growth came from Glatiramer acetate and Liposomal doxorubicin, aided by a strong exchange rate
o We also observed a more stabilised pricing scenario in the US market
o In addition to having a strong supply from our manufacturing base in India, we associate with strong partners in the US, some of them with local manufacturing presence, which positions us well for expanding our business
Our API manufacturing capabilities include multi-step synthesis, semi-synthetic fusion technologies, high-potency APIs and peptides
Launched 8 products in domestic market out of which four were first-to-launch branded generic products; 5 launches in cardiology and diabetology and 3 in oncology
FY 2019-20 has witnessed significant improvement in the cardiology and diabetology product segments with sales doubling against those recorded in FY 2018-19
Target 8-10 launches in India each year
Our oncology segment suffered due to pricing controls from the National Pharmaceutical Pricing Authority (NPPA) impacting margins along sales channels and our Hepatitis-C business continued to decline due to reduction in market size. On top of this, during Q4, COVID-19 outbreak resulted in cancer patients postponing their hospital visits and chemotherapy procedures affecting the sales of our oncology medicines
We have a portfolio of 33 brands across two segments: hematology (14 brands) and solid tumors (19 brands). We intend to build a full-fledged Bone Marrow Transplant (BMT) portfolio in India and have already launched Thiotepa, India’s first generic BMT product
Apigat (Generic Apixaban) is a drug used in the prevention and treatment of blood clot. The drug is safer than other anticoagulants without the side effect of gastric bleeding
We launched a combination drug Vildanat M (Vildagliptin and Metformin) for diabetes, which has considerable potential to achieve better blood glucose control and improve therapy compliance. This is a first to launch product
Incurred capital expenditure of 3,492.85 million, a majority of which was used to enhance our capabilities in our manufacturing facilities. A significant portion of this capex was done at our Vizag facility. The remaining part was primarily used in our formulation facilities across the country.
Crop health: The greenfield project in Nellore district of Andhra Pradesh is close to completion and expected to be commissioned in FY 2020-21. We have disclosed one key product, Chlorantraniliprole (CTPR) and plan to launch other unique products which will be a part of the Integrated Pest Management (IPM) solutions
In Brazil, majority of sales are institutional or government sales
Our capabilities span synthetic chemistry of small molecules, peptide chemistry, oligonucleotides, nanopharmaceuticals and new drug discovery
With the environment in mind, we have improved our capability in solid dispersion technology and built efficient processes that use less solvent. Our manufacturing with hot melt extrusion is one such example
Over the past few years, we have placed more emphasis on increasing our network of third-party suppliers in addition to our own backward integration. This has enabled us to target more complex processes with significantly greater number of steps to manufacture
Doesn’t hedge currency risk (consistently through annual reports)
Capabilities:
o Glatiramer acetate: A complex peptide used in the treatment of multiple sclerosis is manufactured with specific controls of critical process parameters, enabling us to produce quality product effectively The finished dosage, sold in pre-filled syringes, is an example of developing a complex API, tying up with manufacturing partner and drug delivery device provider.
o Liposomal doxorubicin: The liposomal-based product delivers the medicine in a targeted manner. Liposome drug products are complex formulations where physical and chemical stability is vital, including the need for sophisticated physicochemical testing and very narrow particle size management
o Hepatitis-C portfolio of products: The Hepatitis franchise of molecules require to be made suitable for dissolution for increased bioavailability, which is achieved through our our internally optimized solid dispersion process. The bioavailability of APIs depends on its solubility in water. Making water-insoluble drugs more soluble presents a significant challenge in drug development. Hot-melt technology is a proven method for bioavailability enhancement of poorly soluble APIs.
o Lanthanum carbonate: We are the only generic player for this product. The novelty is in the API development of a stable dihydrate form of an inorganic salt for use by patients with end-stage renal disease. The technology breakthrough and IP together have made it possible for us to launch this molecule, accessed mainly by geriatric patients.

harsh.beria93 · December 23, 2020, 10:07pm

I have been working on the chemistry and process capabilities of Natco and have summarized the same from their last 5 annual reports.

Chemistry skills: Synthetic chemistry of small molecules, peptide chemistry, oligonucleotides, nanopharmaceuticals and new drug discovery
API capabilities include multi-step synthesis, semi-synthetic fusion technologies, high-potency APIs and peptides
Process chemistry:
o Lyophilisation (freeze drying) and complete isolation technology that go into manufacturing cytotoxic products. Have also keep environment in mind by investing in solid dispersion technology and built more efficient processes (such as hot melt extrusion) that end up using less solvent (FY19 AR)
o Have mastered hot-melt technology to enhance solubility of APIs. This has resulted in the entire portfolio of their HepC products where the APIs are largely insoluble
Drug delivery: Liposomal Doxorubicin hydrochloride was the 1st targeted drug delivery system developed by Natco (FY18 AR). Liposome drug products are complex formulations where physical and chemical stability is vital, including the need for sophisticated physicochemical testing and very narrow particle size management (FY20 AR)
Have focused on creating combination drugs (such as fixed-dose combination) which are more effective and also complex to manufacture. Examples: FDC of Sofosbuvir-Daclatasvir tablets to treat Hepatitis C, FDC of Sofosbuvir and Velapatasvir (FY19 AR), a combination drug for diabetes using Vildagliptin & Metformin (FY20 AR)
Fosrenol (only generic player). The novelty is in the API development of a stable dihydrate form of an inorganic salt. This was possible because of a technology breakthrough leading to IP generation

Donald · December 24, 2020, 6:44am

Started looking at the Domestic Oncology Portfolio for Natco.
Here’s what I could find on the impact of the NPPA order of Feb 2019

Sources:
https://www.nppaindia.nic.in/wp-content/uploads/2019/03/Brands-List-for-OM.pdf
https://pib.gov.in/Pressreleaseshare.aspx?PRID=1670707
https://www.nppaindia.nic.in/wp-content/uploads/2018/12/DPCO2013_03082016.pdf
https://www.natcopharma.co.in/our-business/domestic-formulations/oncology/

Note: Could find 16 of NATCO brands affected by NPPA order. Safe to assume most of these would have suffered upwards of 25-50%+ price reductions. Also, an equal number 16 more brands are at Risk (?). Letrozole was the one Natco brand in the original list of scheduled cancer drugs under NPPA price control Order 2013

Donald · December 24, 2020, 9:33am

India’s NPPA follows the recommendations from WHO Essential Medicines List - with a lag effect (?).

A quick perusal of the WHO list finds in it another 6 Natco Oncology products (NOT yet covered under NPPA) namely, Anastrozole, Capecitabine, Zoledronic Acid, Deferasirox, Chlorambucil, Melphalan

Wrong to infer NPPA Price control threat is behind Indian Oncology industry? Government is seen touting the success of its price control order leading to savings of 984 Cr in 2019 (press release cited in earlier post). This also helps reduce the Ayushman Bharat Medical Insurance outgo.

Donald · December 24, 2020, 10:06am

Lets turn some attention to the HepC Market steep downslide (after euphoric rise to 513 Cr in FY17). What are the major factors? Where do we see this headed?

Quoting from Harsh’s table in earlier post

So actually the latest figures are 117 Cr HepC Sales in FY20 (typo in Harsh’s post -request to correct). So this might have actually slide below 100Cr (70-75 Cr is an educated guess) by FY21 close.

There are reasons for reduced incidences/treatment requirement as mentioned in this Hepatitis C: A Success Story in the Making journal article found. Some excerpts:

In India, HCV infection affects about 0.4%–0.7% of the population and is responsible for 20%–40% of cases with cirrhosis.[8] Data on transmission are scanty, but it appears
that a majority of cases are related either to transfusion of blood and blood products prior to introduction of screening for HCV in blood banks or to unsafe infection control practices, such as reuse of injection equipment.
Given this happy trade‑off, governments of some states, in particular Punjab, have started programs for free HCV treatment for all those eligible.[10] More recently, Government of India has launched a national viral hepatitis control program.[11] This program has been able to procure anti‑HCV drugs at prices even far below the market prices indicated above (of the order of US$ 40 for 3-month regimen for treating one person). Thus, the country is on the cusp of a large hepatitis C treatment program.

Talking to domain experts might help establish this revenue stream may go on to becoming insignificant soon (in the context of a much larger Natco Revenue Pool)?

Donald · December 24, 2020, 10:33am

Cardiology and Diabetology Segment: NLEM Risks (?) here too.

Selected Excerpt:
The changes to the list of essential medicines, according to industry experts, is expected to be made on the lines of the World Health Organization’s essential list published earlier this month. “The committee will look into the drugs with the potential to improve outcomes with advanced therapies for cancer, cardiac ailments and diabetes. It will also look into antibiotics drugs and its resistance," said a senior member of a pharma lobby group on condition of anonymity.

2 Natco Cardiology & Diabetology Drugs found in WHO List are Dabigatran, Rivaroxaban. Isn’t Apixaban (also on the list) a NATCO product (if I remember correctly some questions were asked in Concalls)?

T11 · December 24, 2020, 10:54am

Hi @donald,

This is important perspective, thanks for bringing this up.

I have little different view. Did an exercise on these lines long back. My understanding is that Onco may not have been impacted this drastically due to NPPA since their price positioning is not such to cross the NPPA threshold by big margin. To the best some drugs would fall into the 4th (25%) or 3rd slab (25%-50% cut) at worst.

Hep-C though had double whammy - shrinking pool and price cap.

This is one action item on me to firmly establish if there is any foreseeable pain left due to price capping. Will get back to you on this.

Tarun

T11 · December 25, 2020, 8:34pm

So here is my understanding about the DPCO 2013 and its impact on Natco Pharma:

DPCO act/order enables National Pharma Pricing authority (NPPA) to govern ceiling price for formulations listed under scheduled 1 (referred to as NELM). Effectively, all brands for that formulation will have a blanket price cap.

Based on the most recent updates (Sep’20) to the formulation with ceiling prices list, following 4 Natco drugs are under the purview of Schedule 1. Out of these, effectively 2 will have downward price adjustment.

Further, para 19 of DPC order empowers NPPA with extraordinary powers to fix the price (not capping) for each of the brands of any given formulation which are not covered under schedule 1 (NELM list), if deemed necessary in public interest. In early 2019, NPPA came out with a notification covering some 526 anti-cancer brands under dictated MRP regime. Impact to Natco from this order was:

Specific points to keep in mind:

Non-scheduled drugs has prescribed MRP at brand level whereas schedule 1 list has price cap at formulation level itself. Effectively, for non-scheduled drugs, NPPA ends up prescribing different price for each of the brands coming from different manufacturer - though contain same formulation (underlying methodology being …somewhat like cost out of gate + 30% margin).
Above Non-scheduled drug MRP enforcement came into effect in March’19. That explains the de-growth that we saw in FY’20 for Onco segment.
Important: In my mind, this exercise of para 19 of DPCO is a stop gap arrangement by NPPA till the time they officially get those formulations added to essential list. Most likely there will be further price constrain if officially moving to schedule 1 list (reason being the price determination mechanism somewhat being …“Average price to retailer” of all players + 16% trade margin).
so far NPPA has used this extraordinary power under para 17 on Onco drugs, however Cardio and Diabetic segment is very much part of their report card They will have to show performance across.
As @Donald rightly pointed out, recently launched C&D drugs DABIGAT® (Dabigatran), APIGAT®(Apixaban) and Rpigat® (Rivaroxaban) are part of the WHO essential drug list. , fat margin may not be a possibility for these formulations.

Conclusive view: The segments that they are into (Onco, Cardio) etc. are such to get first hit by any such populistic measures. More so when if it enables the stated objective towards affordabiliy of care for all.

Tarun

Donald · January 26, 2021, 9:20am

Recording of Team VP discussions on Natco Pharma business on Dec 24th.

spatel · February 16, 2021, 7:15am

Regarding CTPR patent expiry date -

“… submits that the genus patent, held by the plaintiff, IN 204978, is expiring on 20th March, 2021, and that, therefore, his client would be entitled to launch with effect from 21st March, 2021, under Section 53(4) of the Patents Act,1970…”

“… the undertaking not to launch the product may be modified to the extent that the defendant would not launch the product till 21st March, 2021,…”

Source: Delhi High Court Order dated 12.02.2021 (here)

T11 · May 30, 2021, 5:13pm

Another positive, this time for Natco Crop Science: Patent infringement case filed by FMC Corp against Natco Crop Science has been disposed off by Delhi HC.

https://www.casemine.com/judgement/in/60a68b2b9fca192f67f15785

Some interesting read-out from judgment:

The basic premise, on which these applications are based, is that, as IN 307 and IN 332 are ab initio invalid patents and as IN 978 has expired, the defendants are now entitled to launch their CTPR product in the market.
IN 978 expired on 20th March, 2021, and the suit patents IN 307 and IN 332 are due to expire in August, 2022
Mr. Subxxx also emphasises the aspect of public interest, by stating that the product of his client is priced 25% lower than the product of the plaintiff.
The plaintiff has already licensed the suit patents, for exploitation by others. What, essentially, the plaintiff is interested in, therefore, according to Mr. Sai Deepak, is money in the form of the license fee, which the plaintiff would earn.

However, this judgment is little nuanced (or may be my limitations with legal jargons).

On further reading with details (huge thanks to Rohit (@rohitbalakrish_ for reading through the fine prints and alerting on time), Natco may not be allowed to launch CTPR just now.

Two follow up hearings has been scheduled for 25th May and 28th May for hearing of plaintiff’s applications under Order XXXIX of the CPC.

Note of caution: Judgment is full of legal semantics. Please draw conclusion/implication based on your own interpretation of the same.

Once again, thanks Rohit (@rohitbalakrish_ ) for on time alert. Cheers

Thanks,
Tarun

harsh.beria93 · September 2, 2021, 12:36pm

Here are my notes from their FY21 AR.

US
o 25 commercial products; 19 PARA IV filings (12 approved); 39 active DMFs; 49 cumulative DMFs filed
o Revenues of 791 cr. (FDF + API)
o Looking for a front-end entity in US
o Majority of US portfolio remained stable except Oseltamivir (flu product) which suffered significant revenue loss due to very bad flu season
Domestic
o Launched 10 products, on track to launch 8-10 new products annually
o Focused on Oncology, Cardiology & Diabetology, & Specialty Pharmaceuticals
o Oncology: 38 products as on 31st March 2021 with 7 brands clocking sales over 10 cr. Postponed hospital visits adversely impacted oncology business
o Cardiology & Diabetology: Launched 2 products
o Hep-C business continued contraction due to market size contraction
o In Specialty, focused on enhancing anti-infective therapy segment to improve product variety
ROW
o Canada (29 filings, 22 approvals, 18 launches): Revenue grew from 128.3 cr. to 424.193 cr. Launched Nat-Lanthanum which is the only generic.
o Brazil (10 filings, 5 approvals, 4 launches): Revenue de-grew from 39 cr. to 28.8 cr. Has cumulatively invested 126.2 cr. and reported loss of 6.2 cr. in FY21. Accumulated losses till date is 117 cr. Mostly government tender business. Wants to build branded business. Launched first generic of Oseltamivir, gained market share in Everolimus and continue to be the only generic. Upgraded to a new quality control lab and warehouse in Vitoria, Brazil.
o Singapore (10+ approvals): Bulk procurement is done through government bodies and is a tough market to break into. NATCO has improved its position in government and private hospital procurement by building a niche pipeline of Oncology drugs with low competition
o Others: targeting China (6 filings), Australia, Thailand, Vietnam, Philippines (launched Liposomal Doxorubicin), Indonesia, Malaysia, Singapore, CIS countries, South Africa, Russia, Mexico, Saudi Arabia
Agrochem (2.1 cr.)
o Two types of products: (1) green chemistry including agriculture and pheromone-based products for pest prevention rather than pest elimination, (2) Niche pesticides
o Initial foray through launch of third-party products and launch of first pheromone-based product, Natmate PBW for control of pest in cotton crop
<10% of raw materials are procured from abroad
6 formulations facilities, 2 API facilities, 2 crop health science units (technical and formulations), 2 R&D facilities
Capabilities
o Multi-step synthesis, semi-synthetic fusion technologies, production of high potency APIs and peptides
o Extended use of hot melt technology thus avoiding use of large quantities of solvents which is the case in traditional spray drying. Used this technology for a few oncology products that required use of cytotoxic materials.
o Working on a peptide-based formulation for a non-oncology product
o Liquid-filled hard gelatin capsules technology: Novel versatile dosage form which offers several advantages over soft-gels
o API: Development of Oligonucleotides. Growing its presence across low-volume APIs, such as Eribulin (oncology product using enzymatic synthesis) and Trabectedin.
o Working on projects related to flow chemistry, enzymatic reactions, membrane-based technique for solvent recovery, and supercritical fluid chromatography
o Supercritical fluid chromatography (SFC) is being put in place for low volume product purification and preparation of impurities.
o Can now handle Raney nickel catalyst in a fixed bed with better catalyst recovery.
o Consumption of solvents has been reduced by ~70% through usage of liquid carbon dioxide in the mobile phase
R&D expense: 159.6 cr., CAPEX: 228.12 cr.
Number of employees: 5’046 (433 contractual workers), Median remuneration: 452’628 (increased by 10.95%)
Share price: Low (491), High (996), # shareholders: 85’522 (increased from 71’594)
Auditor fee: 65.61 lakhs (increased from 47.98 lakhs)

Disclosure: Not invested

spatel · May 19, 2023, 2:46pm

An update about gRevlimid from an insightful article by BQ.

Source: Revlimid: The Star Drug In U.S. For Indian Pharma Companies — BQ Exclusive

Jadewade · May 30, 2023, 1:23pm

Bumper quarter !

PAT of ₹275.8 crore in Q4FY23, as against a net loss of ₹50.5 crore a year ago same period.
Revenue up by 51.80% to ₹926.9 crore as against ₹610.6 crore during Q4FY22.

For the full year FY23, Natco posted a consolidated total revenue of ₹2811.7 crore as against ₹2043.8 crore for the last year. The net profit for the period, on a consolidated basis, was ₹715.3 crore, as against ₹170 crore last year.

Natco said, the increase in revenue and profits for the year was driven by business growth in the US market and growth in our subsidiaries in Canada & Brazil. Our Crop Health Division started off well with strong growth potential in the ensuing years.

The_Seeker · May 30, 2023, 3:12pm

Three points:

Unless my memory fails, i think there was covid inventory write-off and other issues (court case preventing crop division related product sales) that impacted Q4 FY22 which is not the case in Q4 FY23
Contribution of Revlimid for Q1 needs to be checked. At most that contribution will repeat in Q2 but not in Q3 and Q4.
Crop division sales is due to inventory pushed to vendors or actual demand on ground needs to be seen

So results in that sense are not strictly comparable Y-o-Y unless one does the adjustments. having said that, it is good to see crop division scaling up and contributing and also focus on expanding to other markets.

But in the end as they say “Bhaav Bhagwan Che”. Would be interesting to see how Market perceives the result and what price it is willing to give!

Jay_Shah · May 31, 2023, 4:39am

Key take-aways I can recollect from the investor call:

Natco has only booked 25% of Revlimid in Q4 and 75% is left. Majority of the balance 75% would come in the June quarter and the remaining in the September quarter.
Inventory of Agro is ~150 cr (major portion would be CTPR). Majority of the sales happen in June and July so the inventory should be liquidated then.
Planning to spend 300 cr+ in R&D (~10% of sales compared to 8% in FY23) this year since the he cash flow is expected to be good.
Looking to close down on a domestic acquisition this year (although this is what they’ve been targeting since the past two years). My sense is that the valuations have gone down so this might actually be the year they go ahead with something. As Rajeev alluded earlier, he doesn’t want to make an acquisition for the sake of utilising the cash at any price. It has to be at the right price.
Planning to launch 7-8 products in the Canada, Brazil, US subs.
Expecting the international subs and the API business to grow at 20% CAGR for the next 2-3 years.
While the domestic business profits have gone down in the past 3 years, it seems they will be stagnant from here-on and no further downside is expected.
Will continue to file multiple FTFs - (not sure about the number but back of my head I think he mentioned 7-8 in the coming year)
Expecting Agro to be 10% of the sales in the coming years. Planning to launch more products in the next 4-5 years where there is hardly any competition/litigative in nature. Do not intend to give away the pipeline due to competitive reasons (obviously)
The company is not in the CDMO side of APIs because working with global companies doesn’t give them the flexibility and also their strategy is completely different.
Planning on a couple of launches and FTFs in the US via Dash - some in collaboration (profit share), some individually. They have filled FTF for Semgalutide (ofcourse this could be a big one. I believe, incase there are any alternatives in the segment going forward, they might even file FTF for those looking at how aggresive they are and their diabetology expertise)

Based on this, I believe Q1FY24 could be a bumper quarter with major Revlimid profits kicking in. The previous years did see Copaxone, Tamiflu sales taking a major hit, Covid inventory getting written off. Hopefully this could be one year where there are no major challenges. I would’ve appreciated if Rajeev would’ve alluded on the UK acquisition (though it seems to be just a marketing front end) and the competitive landscape and their strategy for that particular market. Also, clarity on Imbruvica would’ve been helpful - the last update from what I remember is that J&J had won the litigation and Natco with it’s partner was to appeal further. I believe this could be a major trigger that the market is looking for since none of their other FTF pipeline drugs are perhaps as big as Imbruvica and that is going to be important once Revlimid becomes generic in 2026.

Disc : Invested. Added more in the past 30 days.

pranav18 · May 31, 2023, 4:39am

Yeah that impacted Q4FY22.
Based on the concall, only 25% of the Revlimid sales have been done by their partner and the revenue numbers are reflecting the same. The company is expecting that the majority of the 75% will be realized in Q1 and somewhat little in Q2.
They are hopeful to push the CTPR inventory between June to September during the Kharif season. They are confident of the product.

Based on the concall, I am expecting better days ahead for the company. Q1FY24 should be much stronger. Q2 should be better YoY.

Also I was able to sense that we can see an inorganic opportunity for Natco this year. Mr. Rajeev sounded quite optimistic about that.

Disclaimer: Invested, Added more in last 30 days

T11 · June 18, 2023, 12:40pm

Can not be a better time than now to re-visit Natco thesis considering that Natco has completed one full financial year of Lenalidomide (gRevlimid) supply (in a quantity restricted manner though) for US markets. I think we need to evaluate this from two/three broader dimensions:

1. Market share impact to Innovator:

Below is revenue contribution data for Bristol Mayers Squibb for Revlimid (both Global and US specific) collated from different regulator fillings over past 10 quarters. This is a good starting point to see how competition is unfolding, impact on their market share and overall market structure.

BMS was able to hold the fort for 3 full quarters maintaining $2B+ run rate from even after Natco launched first generic in the market in March’22. Part of that can be explained by the fact that Natco had volume limited launch (that too for 4 strengths out of 6).
Real impact has started unfolding starting recently closed March’23 quarter. ~25% Q-o-Q / 33%Y-o-Y revenue drop. Must be to do with entry of 4 new generics in the month of Sep’22.
Even from guidance perspective, till last quarter, BMS was maintaining an annual $9B+ revenue guidance. Only in the march’23 filling they have cut the guidance by good ~30%+ (to $6.5B). Broadly, thinking this ~INR 20000 Crs. is the number that is pivotal to gauge revenue visibility for Natco and rest generics for next 12 months (or so). Off course, volume quota will get increased for each player every 12 months and accordingly BMS will have revision to revenue guidance.
BMS has bigger challenge in ‘Global’ sales. Reading through investor presentation (link) of Lotus/Alovgen (who is the second generic in US, after Natco), looks like they garnered significant chunk in EU, Canada and JP. This has some implication to Natco since they too want to grab chunk of Lenalidomide market through subs outside US.

2. Most updated competitive Landscape of generic Lenalidomide:

Based on current visibility, this is a 6 players market as of now with due settlement, FDA approval and market launch. Speculation that Auro to launch by Sep’23 (via subsidiary Eugia Pharma).
There are 6/7 more player waiting to join-in, however, none of them have reached BMS settlement as of now. Therefore, safe to conclude that initial wave of competition is topping out and this will be a 8 player game for next couple of quarters.
Even if new competitors comes in, they may have to start with low single digit dispensing quota with step-up quota every 12 months - as the norm has been for most of the settlements. This is a significant edge for anyone who started early. Natco has clear head start and will be ahead of rest all competitors (existing and future one) since they will cross the time milestone ahead of rest.

[ Think Zydus concall has a subtle cue that first year quota for all/them was 4% going up to 9% second year]
Another important factor to notice is the drug strengths that each one has approval for. As of now, its Natco and Dr. Reddy who looks to have approval for most strengths (2.5 mg, 5 mg, 10 mg, 15 mg, 20 mg, and 25 mg). Zydus may end up being a peripheral player only with currently approval of 2.5 mg and 20 mg only (which are <20% of all prescriptions), unless adding more prevalent strength to kitty.

3. Natco Profit Share Projection:

This is little tricky, for the very fact that each of the participants are very guarded about the communication. Incidentally, Wallgreens has a class action suit against BMS where Teva/Natco/Dr. Reddy/Sun are co-accused - challenging BMS settlement with generics as anti competitive/anti-free market. So, effectively, will be very hard to get a sense on price erosion, market share split (between innovator/generics and within generic players). Keeping those considerations/limitations in mind, below is a broad excel work to see what the conservative case can be:

[Clear call-out: This working has certain assumptions built-in since disclosed info is very limited]

Interestingly, Teva (Natco’s) partner is very subtle about Revlimid prospects while being reasonable transparent about rest of the other block buster drugsin pipeline.
On the other hand, Indian generic players like Dr. Reddy and Cipla are sounding very upbeat about market share. Some estimates suggests that Dr. Reddy had infact higher share than Natco at some intervals since they had 180 days of generic drug exclusivity in 2.5 mg and 20 mg strengths.

Dr Reddy Q3,FY23 concall:

image940×172 68.4 KB

Cipla Q3’FY23 concall:

image940×267 119 KB
Even a marginal player like Zydus who has approval for limited strengths only are confident that there is no price war at the moment.

Zydus Q4’FY23 concall:

image723×149 23.7 KB
With current facts and assumptions in the mix, looks like Natco can have addition of incremental ~300 Crs. to bottom line for each of the years till Jan 2026 (when no holds barred field opens up for all). Some estimates even suggests that beyond 2026 Natco and Dr. Reddy will be big winners on account of early mover and distribution reach respectively.

As a follow-up activity, I intend to cover some aspects related to US pipeline, further growth prospects for ROW subsidiaries, scalability of Agchem vertical etc.

Call for help: Inhouse RRR trio (Rajat (@rajats ), Rohit (@rohitbalakrish_ ), Rupesh(@rupeshtatiya.) , I think you guys track Natco. Feel free to add your perspective, additional info etc. to make it more comprehensive.

Regards,
Tarun
Disc: Sold my holding in Natco once 180 days exclusivity was over in Sep’22, as per initial plan.