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http://content.icicidirect.com/mailimages/ICICIdirect_NatcoPharma_ManagementMeet.pdf
U S , O n c o l o g y f u t u r e g r o w t h d r i v e r s …
We met the management of Natco Pharma Ltd to understand its future
growth strategies in US formulation business and domestic oncology
business. Natco Pharma is a small sized Pharmaceutical Company
having presence in Active Pharmaceutical ingredients (APIs),
Formulations, Contract research and manufacturing services business
(CRAMS) and US Retail business. It is a leading domestic player in the
oncology space. The company derives around 27% of sales from
domestic oncology business. It owns 6 manufacturing facilities
including 4 formulation facilities and 2 API facilities. With the USFDA, it
filed 18 ANDAs and developing product pipeline of another 13 ANDAs.
Among 18 ANDAs, 3 were filed with Para IV certification.
Business model
Formulation
Around 78% of total sales come from formulation business which are
divided into domestic (52% of formulations and 41% of total sales) and
exports (48% of formulations and 37% of total sales). Being an early
entrant in Oncology segment, the company enjoys dominant position in
this segment. Sales from Oncology products accounts for 35% total
formulation business and 27% of total sales. It currently markets more
than 15 products in the domestic market and it plans to increase its
product basket in the next two years.
The maximum portion of exports comes from US market in general and
US Retail business in particular. The company entered the US retail
business in 2007 by acquiring 3 stores. Due to market slow down in US
market, it closed one store in the last fiscal. Sales from these store
accounts nearly 32% of total sales. EBITDA margins from this business
are lower single digits. It filed 18 ANDAs till date, received approvals for 5
ANDAs and launched 3 products. Among 18 ANDAs filed with US FDA, 3
have been filed with Para IV Certification. The products are Lanthanum
Carbonate (Nephrology) and Revlimid (Anti-Cancer). Beside US, it also
has presence in Canada, Ukraine and Belarus. It operates in these markets
though partnership model.
Tie up with Mylan
Natco entered into exclusive licensing and supply agreement with Mylan
for Glatiramer Acetate. Under the agreement, Mylan has exclusive
distribution rights for Glatiramer Acetate syringes in US, Europe,
Australia, New Zealand, Japan and Canada, and includes an option to
expand into additional territories. The drug is the generic version of
Teva’s Copaxone, and falls under Central Nervous system (CNS) segment.
In 2009 it registered annual sales of ~US$ 2 billion in US market.
Currently, Natco markets the drug both in Indian market as well as
Ukrainian market.
Tie up with Lupin
Natco and Lupin signed agreement to jointly commercialise Lanthanum
Carbonate tablets. This drug is used in the treatment of kidney failures.
The company filed ANDAs with Para IV certification for Lanthanum
Carbonate tablets with USFDA. Natco is the first to filer for the drug and
expects to get 180 days exclusivity. The drug is the generic version of
Shire Plc’s Fosrenol tablets. Shire plc has filed law suite against the
company for infringement of patent for Fosrenol tablets. Under the
agreement, legal risk will be borne by Lupin.
Tie up with Dr Reddy’s Laboratories
The company also entered into an agreement with Dr Reddy’s for
development and manufacture of 5 Oncology products. Dr Reddy’s and
Natco will jointly develop the products for registrations and global
commercialisation. Natco will exclusively manufacture these products to
be supplied to Dr Reddy’s for commercialisation.
Tie up with Watson Pharmaceuticals
Natco entered an agreement with Watson for development and
commercialisation of Oncology drug Lenalidomide in the US market. The
drug is the generic version of Celgene Corp’s Revlimid. Natco has filed
ANDA with Para IV certification with the US FDA seeking approval to
market generic version of Revlimid in multiple strengths of 5 mg, 10mg,
15 mg and 25 mg, and Natco is the first to filer for this product. Celgene
has sued Natco for infringement of patent for Revlimid tablets. Under the
agreement, Watson will be responsible for the ongoing regulatory, legal,
and commercial expenses related to Natco’s lenalidomide product, and
profits will shared by the both the companies.
APIs
Sales from API business account nearly 20% of total sales and majority of
this comes from exports. API business is under pressure over the last
three years due to significant price correction in most of the APIs. The key
APIs of the company are Citalopram (anti-depressant), Imatinib Mesylate
(anti-cancer), Geftinib (anti-cancer), Erlotonib (anti-cancer), Sumatriptan
(anti-migraine), Seratraline (anti-hypertensive), Rizatriptan (anti-migraine
and Letrazole (anti-cancer).
CRAMS
For CRAMS Natco has tied up with the leading companies like GSK
Pharmaceuticals, Wyeth, Ranbaxy Laboratories and Dr Reddy’s
Laboratories. Sales from CRAMS business account for nearly 2% of total
sales.
Capex
Natco is planning to rise | 100 crore for funding capex. It is planning to
setup a dedicated manufacturing facility for Mylan with estimated cost of
Rs 70 crore.
View
With aggressive Para IV filings (including an FTF) the company is taking
calculated risk in order to penetrate the US Generic space. Although most
of them are risky ventures, the company has cautiously tied up with
leading marketing players to mitigate litigation risk. One successful
product launch will change the prospects drastically. Being a niche player
in the Oncology segment, Natco should fair well in the domestic
formulations. We remain cautious on the growth prospects which are
contingent upon the litigation success in the US.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://content.icicidirect.com/mailimages/ICICIdirect_NatcoPharma_ManagementMeet.pdf
U S , O n c o l o g y f u t u r e g r o w t h d r i v e r s …
We met the management of Natco Pharma Ltd to understand its future
growth strategies in US formulation business and domestic oncology
business. Natco Pharma is a small sized Pharmaceutical Company
having presence in Active Pharmaceutical ingredients (APIs),
Formulations, Contract research and manufacturing services business
(CRAMS) and US Retail business. It is a leading domestic player in the
oncology space. The company derives around 27% of sales from
domestic oncology business. It owns 6 manufacturing facilities
including 4 formulation facilities and 2 API facilities. With the USFDA, it
filed 18 ANDAs and developing product pipeline of another 13 ANDAs.
Among 18 ANDAs, 3 were filed with Para IV certification.
Business model
Formulation
Around 78% of total sales come from formulation business which are
divided into domestic (52% of formulations and 41% of total sales) and
exports (48% of formulations and 37% of total sales). Being an early
entrant in Oncology segment, the company enjoys dominant position in
this segment. Sales from Oncology products accounts for 35% total
formulation business and 27% of total sales. It currently markets more
than 15 products in the domestic market and it plans to increase its
product basket in the next two years.
The maximum portion of exports comes from US market in general and
US Retail business in particular. The company entered the US retail
business in 2007 by acquiring 3 stores. Due to market slow down in US
market, it closed one store in the last fiscal. Sales from these store
accounts nearly 32% of total sales. EBITDA margins from this business
are lower single digits. It filed 18 ANDAs till date, received approvals for 5
ANDAs and launched 3 products. Among 18 ANDAs filed with US FDA, 3
have been filed with Para IV Certification. The products are Lanthanum
Carbonate (Nephrology) and Revlimid (Anti-Cancer). Beside US, it also
has presence in Canada, Ukraine and Belarus. It operates in these markets
though partnership model.
Tie up with Mylan
Natco entered into exclusive licensing and supply agreement with Mylan
for Glatiramer Acetate. Under the agreement, Mylan has exclusive
distribution rights for Glatiramer Acetate syringes in US, Europe,
Australia, New Zealand, Japan and Canada, and includes an option to
expand into additional territories. The drug is the generic version of
Teva’s Copaxone, and falls under Central Nervous system (CNS) segment.
In 2009 it registered annual sales of ~US$ 2 billion in US market.
Currently, Natco markets the drug both in Indian market as well as
Ukrainian market.
Tie up with Lupin
Natco and Lupin signed agreement to jointly commercialise Lanthanum
Carbonate tablets. This drug is used in the treatment of kidney failures.
The company filed ANDAs with Para IV certification for Lanthanum
Carbonate tablets with USFDA. Natco is the first to filer for the drug and
expects to get 180 days exclusivity. The drug is the generic version of
Shire Plc’s Fosrenol tablets. Shire plc has filed law suite against the
company for infringement of patent for Fosrenol tablets. Under the
agreement, legal risk will be borne by Lupin.
Tie up with Dr Reddy’s Laboratories
The company also entered into an agreement with Dr Reddy’s for
development and manufacture of 5 Oncology products. Dr Reddy’s and
Natco will jointly develop the products for registrations and global
commercialisation. Natco will exclusively manufacture these products to
be supplied to Dr Reddy’s for commercialisation.
Tie up with Watson Pharmaceuticals
Natco entered an agreement with Watson for development and
commercialisation of Oncology drug Lenalidomide in the US market. The
drug is the generic version of Celgene Corp’s Revlimid. Natco has filed
ANDA with Para IV certification with the US FDA seeking approval to
market generic version of Revlimid in multiple strengths of 5 mg, 10mg,
15 mg and 25 mg, and Natco is the first to filer for this product. Celgene
has sued Natco for infringement of patent for Revlimid tablets. Under the
agreement, Watson will be responsible for the ongoing regulatory, legal,
and commercial expenses related to Natco’s lenalidomide product, and
profits will shared by the both the companies.
APIs
Sales from API business account nearly 20% of total sales and majority of
this comes from exports. API business is under pressure over the last
three years due to significant price correction in most of the APIs. The key
APIs of the company are Citalopram (anti-depressant), Imatinib Mesylate
(anti-cancer), Geftinib (anti-cancer), Erlotonib (anti-cancer), Sumatriptan
(anti-migraine), Seratraline (anti-hypertensive), Rizatriptan (anti-migraine
and Letrazole (anti-cancer).
CRAMS
For CRAMS Natco has tied up with the leading companies like GSK
Pharmaceuticals, Wyeth, Ranbaxy Laboratories and Dr Reddy’s
Laboratories. Sales from CRAMS business account for nearly 2% of total
sales.
Capex
Natco is planning to rise | 100 crore for funding capex. It is planning to
setup a dedicated manufacturing facility for Mylan with estimated cost of
Rs 70 crore.
View
With aggressive Para IV filings (including an FTF) the company is taking
calculated risk in order to penetrate the US Generic space. Although most
of them are risky ventures, the company has cautiously tied up with
leading marketing players to mitigate litigation risk. One successful
product launch will change the prospects drastically. Being a niche player
in the Oncology segment, Natco should fair well in the domestic
formulations. We remain cautious on the growth prospects which are
contingent upon the litigation success in the US.
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