Natco to start pharma retail chain in US

Hyderabad-based Natco Pharma limited is planning to start a pharma retail chain in the United States. The company, which had already acquired a retail store in New Jersey, proposes to acquire 10 more retail stores across the East Coast of the US by December, this year. It has earmarked an investment of $20 million for this purpose.

The mid-size pharma company has identified pharma retail as a key growth area and proposes to sell generic drugs directly through the retail stores without any tie-up with US-based marketing companies.

"We feel that there is a potential for retail business in the pharma sector. In fact, we want to ensure that the proposed retail chain in the US will achieve an annual turnover of the order of $150 million," Natco Pharma director-finance, P Bhasakara Narayana, told Business Standard.

In January this year, Natco acquired a majority stake in Nicks Drugs, a drug retail store based in Newark, at a cost of $5 million. Narayana said that the store was expected to generate an annual revenue of $22 million and a net profit of about $2 million. It grossed a turnover of $400,000 in the last two months.

According to Narayana, Natco has decided to sell generic drugs directly as the US distribution companies "are asking us not only to bear a portion of the costs but also a share in our profits". The pharma company will be launching two oncology products in the US in the first quarter of the current fiscal. It has entered into a marketing tie-up with Acorm in this regard.

The company, which filed 7 to 8 generics for USFDA approval, has discovered two new molecules useful for the treatment of blood cancer.

Narayana said that Phase I clinical trials of the new discoveries would commence in the US in June this year. Last month, the company commissioned a dedicated new block, built at a cost of Rs 18 crore, for the manufacture of anti-depressants for the US market.

Company sources revealed that Natco, as a part of the strategy of de-risking its business, intends to spin-off its retail segment as a separate company once the revenues from the sector reached the level of the parent company.

Besides establishing a retail chain, Natco is setting up a separate company in Chennai at a cost of Rs 20 crore for production of drug intermediaries.

The company's formulations unit, being established at Dehra Doon in Uttaranchal, is expected to be operational by June 2006. Natco's dedicated cyto-toxic oncology block will be operational by this month-end.