Fresh triggers kick in for Natco, market share gains for copaxone drug

Natco Pharma remains as one of the few Indian pharma companies to have medium-term revenue visibility

Natco Pharma, which had fallen sharply by 20 per cent in the past one month, and is currently trading near its 52-week lows, surged over six per cent on Monday. These gains follow a favourable judgment by a US court with respect to copaxone drug, and is among the last few patent infringement cases Natco's partner Mylan is defending. With this, and a good show expected in the second half of 2018-19, there could be more gains ahead for Natco, which is among top domestic drug makers that also exports to global markets.

The latest news also eases earlier concerns on the company’s market share in multibillion-dollar multiple sclerosis treatment drug Copaxone generics. Natco had launched the product in collaboration with Mylan a year ago. Copaxone, along with generics of Tamiflu (flu treatment), had given significant boost to Natco's earnings in the second half of 2017-18. But, as the flu season declined and competition increased, the June quarter was soft for Natco. 

Analysts are of the opinion that Copaxone remains a complex molecule, and will see limited competition for long, allowing gradual market share gains for Natco. Analysts at Antique Stock Broking said while Mylan had indicated it was likely to be aggressive in gaining the market share, the growth in market share was likely to be back-ended. 

Meanwhile, generics of drugs such as Traclear (hypertension control) and Imatinib Mesylate (oncology), whose deadlines for regulatory approvals are nearing, could also provide triggers if approvals come in time. For generic of Revlimid (multiple myeloma treatment drug), after certain amendments to ANDAs (abbreviated new drug applications), if Natco can get approval by FY19-end, it can significantly boost earnings. Analysts estimate the addition to Natco's stock value on account of this drug at Rs 217.

As a strategy, Natco launches complex (difficult to manufacture) molecules in partnership with larger peers. Ranvir Singh at Systematix Shares says Natco has had a history of surprising with earlier than expected launches of complex drugs, and expects the profit-share from key products in the US to bounce back in the second half of FY19. The guidance of 15-20 per cent growth in domestic formulations business in FY19, and stabilisation in its Hepatitis-C business are also positive. Those at Antique Stock Broking say Natco remains one of the few Indian pharma companies to have medium-term revenue visibility, a potentially sticky emerging markets portfolio and strong domestic oncology franchise.