Going through the presentation and the post Q2 conference call the following points are forming my bullish thesis on Natco for the medium term (3-5 years)
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Company is expecting 2 more years of growth from gRevlimid as the percentage share increases to 33% calendar year by Jan 2026 (pg 10), so 2024 & 2025 may still build over 2023 for this drug. Competition from other players have been factored in.
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In these 2 years there could be atleast 3 formulations from the present approved para IV pipeline for which Natco may get to launch in the US and possibly other reguated markets. These being Ibrutinib, Carfilzomib & Bosentan, the brands being Imbruvica, Kyprolis, Tracleer and for all three they have the first to file as well. So Natco in all likelihood is not going to be a one trick pony in the coming years. If one looks at their presentations going 3 years back Imbruvica, Kyprolis, Tracleer brands were all there in the para iv pipeline and therefore this makes perfect sense when the promoter expects these molecules will provide growth (pg 7)
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Company is targetting 25% annual growth from the Brazil & Canada subsidiaries (pg 6) and agro business (pg 8). Promoter has stated that he is confident of maintaining the margins for the next couple of years based on the product pipeline and launches (pg 14)
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Despite the USFDA observations on Kothur plant, as all major products including Lelanomide has approvals from Vizag plant so the company expects minimum impact from the fallout. We should get some idea of it by February 2024.
In the mean time company has Rs. 1550 crores in cash equivalents and hopefully it would spend this growing cash wisely for the benefit of all its shareholders. Natco is maturing as a disruptive complex generics player and it is building up the para iv pipeline continuously. Q1 presentation it stated it had 19 para iv products in the pipeline of which 7 were approved and in Q2 this became 23 of which 15 are approved (on second thoughts this could be a typo in the Q1 presentation and I have queried the management on this. However, it doesnt take away the shine from the envious list that it is lining up).
Based on the above I expect the share price to form lows in Nov - Dec from a medium term perspective.
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