Natco Pharmaceuticals - Continues Its Good Work; Result Update Q2FY15 :: Edelweiss

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Natco Pharmaceuticals Ltd. (NPL) reported a topline of INR 219.2 cr, which was 7.9% above our estimate of INR 203.2 cr on account of all-round growth in both, API and formulation segments. The PAT came in at INR 32.4 cr, which was substantially ahead of our estimate of INR 30.0 cr due to higher revenue and improved margins. NPL reported a growth of 23.6% YoY in the formulations business, mainly benefiting from the Venezuela tender business. The domestic formulations market was supportive, registering a growth rate of ~23% YoY. The management remains confident of securing USFDA approval for Copaxone and expects green light on the same early in 2015. We believe that the company has a very impressive pipeline in the US, which is expected to contribute substantially to the company’s future growth and margins.

All-round growth, product mix helps improve margin

During the quarter, NPL reported a 33.4% YoY growth in the API business and a 23.6% YoY growth in the formulations business. The management indicated that domestic formulations, along with the Venezuela tender business did really well during the quarter. The company launched Vidaza in the domestic market, following the Trabectedin injection launch last quarter. The company is planning to launch an undisclosed major product in the Indian market in Q4FY15. It remains confident of its niche pipeline, and expects to monetize at least 3 of the 5 near-term opportunities in the next 15-18 months. Further, the company is challenging the patent of Sovaldi in India, which it expects to be at least INR 100 cr opportunity in India alone. Going forward, with the monetization of its pipeline, the product mix would be more skewed towards formulations than API.

Confident of monetizing pipeline

NPL expects approval of gCopaxone by early 2015, as all outstanding regulatory queries have been answered and all the scientific data has been submitted. The company expects Supreme Court verdict on the case by early next year, as all the arguments have already been heard. It remains optimistic to launch gTamiflu in 2016 if the double patenting case is in its favour in the lower court (trial expected to start next year). Further, it continues to believe that it is not infringing the polymorph patent of gRevlimid, and expects the trial to start next year. The company has also filed for a Process Patent for polymorph, and if approved it would make Natco’s case much stronger against Celegene. With few of its limited competition products expected to be in the market, the company is on the verge of exciting times ahead.

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https://www.edelweiss.in/research/Natco-Pharmaceuticals--Continues-Its-Good-Work;-Result-Update-Q2FY15/10005188.html