Natco Pharma: gRevlimid bumps exports

Natco Pharma is an Indian multinational pharmaceutical company based in Hyderabad. The company manufactures finished dosage formulations, active pharmaceutical ingredients and crop health science products, and also provides contract manufacturing services. Natco has, over the years, developed manufacturing complex generic products with few competitors, especially for the US market. 

- India formulations mainly comprise oncology products (38 brands). For the US, it follows partnership products for risky launches and acquired Dash Pharma for front-end presence. It has six FDF, two API manufacturing facilities and two crop health sciences units  

- Maiden entry into crop protection was via launch of pheromone product, Natmate PBW for controlling pink bollworm in cotton  

- FY22 revenue break-up - domestic business: 25%, international business: 62% (mainly from the US), APIs: 13% 

In Q4FY22, Revenues grew 80% YoY to Rs.597 crore driven by 193% YoY growth in the export formulation business to Rs.465 crore mainly on back of gRevlimid sales. Natco's revenue grew on account of a sharp uptick in exports. The company focused on the export business of gRevlimid to drive growth in FY23. Natco was carrying a significant inventory of Covid products and writeoff is mainly due to diminishing Covid opportunities.

Natco received profit share (30%) for gRevlimid supplies to Teva, post launch in March, 2022. About 70% of supplied products will be sold in FY23. The management expects Q1FY23 to be on similar lines to Q4FY22 and then contribution should taper off in Q2 and Q3. The gRevlimid gains are likely to shoot up again in Q4FY23 as per the terms of launch. gRevlimid is also doing well in Canada, with Natco having 40-50% of market share.

In the base US business, the management indicated Copaxone is steady while Afinitor is doing well (~30% of base business in exports). Natco is the sole generic for Afinitor in Brazil and also expects to launch in Canada. The management indicated at ex-Revlimid, exports base business to be less than Rs. 300 crore. Natco also filed three FTF although all were small opportunities.

In the domestic market, inability to grow the base business remains a challenge with very little spread of portfolio. The management indicated a domestic formulations base business of Rs. 400 crore and is aiming at 10-12% growth in FY23. Natco has started a division to target general physicians. PCPM is at Rs. 8-10 lakh.

Natco is carrying agrochemical inventory of Rs. 85 crore. Amid legal challenges related to patent infringement for CTPR, it remains a risk. The management guided for incremental spend on R&D and also remains on the lookout for inorganic opportunities in both domestic and export markets