We are confident of the course we are defining for ourselves
It gives us immense pleasure to report another year of continuedpositive performance for NATCO against a backdrop of wider industry slowdown. It has beena busy fiscal for the Company with industry-leading launches across all our key growthmarkets and a successful round of fundraising through our Qualified InstitutionalPlacement (QIP) positioning us strongly for prudent capital allocation and sustainedgrowth in future.
NATCO has been able to stay resilient through this course owing to itslong-term strategy to focus on high-value niche products.
In 2017 the global economy witnessed signs of recovery which wasreflected in the growth across major markets.
The Indian economy continued its growth momentum with the GDPexpanding to 6.7% in FY 2017-18. The continued progress on economic and institutionalreforms has been a guiding force in enhancing the economy's high growth potential.
However the global pharma industry experienced some impediments owingto customer consolidation in the US rising pricing pressures and increasing competition.Similarly domestic companies have registered significantly lower growth over the past fewyears. These are signs of an industry facing headwinds owing to several macroeconomicfactors. This to a large extent has posed a hindrance to the industry's capacityexpansion and R&D plans.
Nevertheless NATCO has been able to stay resilient through this courseowing to its long-term strategy to focus on high-value niche products. With key launchesin the US and Indian markets we continued to make progress and deliver strong results inthe year under review.
Complex products simple strategy
Since inception we have tried to make our products accessible andaffordable. In the last fiscal strengthened our R&D pipeline to develop generic drugsthat meet the evolving medical threats affecting patients across the globe.
It was certainly a successful year in terms of financial results andin laying the groundwork for our future pipeline. The year reinforced our vision to lookfor complex products that may involve long gestation periods but drive long-term growth.We are confident of the course we are defining for ourselves.
A year of many wins
NATCO made considerable progress during the year and registered a PATof Rs 6962 million an increase of 43.2% compared to the previous financial year. Mostimportantly our total revenue exceeded our targets and came in at Rs 22424 millionposting a growth of 7.9% over FY 2016-17.
In formulations overall revenue has improved from the prior year. Thisis notable given the pricing pressure and a volatile geo-political environment faced bypharmaceutical companies in the US during the year.
The fiscal was marked by launches in the US that validated our effortsto focus on complex products. After a decade of labour led by our robust R&D strengthsand resourceful collaboration with our marketing partner in FY 2017-18 we launched ourfirst Glatiramer Acetate injection of 40 mg/mL and 20 mg/mL in the US. With this launchwe have been able to penetrate into the
US market with more affordable pricing of this drug to the patient basesuffering from a chronic inflammatory
Our aim remains to stay sufficiently cash-rich to move forward withhigh-risk R&D.
disease of the central nervous system. We also received approval foranother complex product the anti-cancer drug Doxorubicin Hydrochloride Liposomeinjection. This approval is an extension of our commitment to bring generic versions ofcomplex products to patients at large.
The RoW markets also supported our growth in the last fiscal. Thesubsidiaries generated a total revenue of
Rs 945.5 million (net). Amongst these Canada was profitable withaboutRs 737 million in revenue while our arm in Singapore had a fruitful year with eightproduct approvals.
Our domestic formulations business accounted for 32% of our revenuefrom operations for FY 2017-18. As one of the major pharmaceutical companies in oncologyin India we have strengthened our presence in the domestic market. The domestic oncologyformulations business continued to be strong during the year in spite of temporaryheadwinds driven by policy reforms such as the Goods and Services
Tax (GST). This was possible due to some first-to-launch genericdomestic oncology products and the continued growth of our existing products.
Our specialty pharma segment witnessed some corrections owing to priceerosion and thereby reduction in market size of our Hepatitis C product basket.
However as Hepatitis C cases are on the decline we continue on ourbusiness goal to find cost-effective medicines for unmet patient needs.
Last year we launched our new business vertical Cardiology andDiabetology (CnD). In the year under review we launched first-to-market niche products inthis segment and we remain enthused about the growth opportunities the segment has tooffer for specialised and niche molecules.
Following the well-defined path
We will continue to focus on high barrier-to-entry products as a corebusiness strategy in order to create long-term growth opportunities. In FY 2017-18 weraised around Rs 9150 million via a Qualified Institutional
Placement (QIP). This capital will be invested in organic growth andpotential niche inorganic opportunities.
Our aim remains to stay sufficiently cash-rich to move forward withhigh-risk R&D and build long-term business prospects.
At NATCO we have relied on our robust R&D manufacturingcapabilities and strategic partners to drive growth through focus on exclusivity-drivenniche products no matter how long the development period. We have carefully chosen tobalance a long-gestation approach for the US market with shorter gestation andhigh-growth opportunities in the Indian market. We remain focused on creating solutionsdesigned to address the challenges of today and anticipate the needs of tomorrow.
Globally we intend to focus on sales growth in existing geographies inEurope Canada and Brazil and grow our market share in newer markets such as Australia andPhilippines by increasing our product portfolio. We will continue to carefully selectproducts of value for launch in Europe. We are in the process of marketing anddistributing our products in South East Asia through our subsidiary in Singapore and otherthird-party distributors with a similar strategy in Australia. In the future we mayeither engage with companies with strong local presence or appoint local distributorsthrough whom we can undertake our own sales and marketing in Europe and the RoW.
Our strategy in the emerging markets will be to create strong localpresence and expertise with required infrastructure and develop capabilities to exploitthe growth potential offered by these markets. Further it remains one of our core focusareas to improve the reach of the Hepatitis C generic in these markets.
Science. Success. Stability
One of our business strengths remains our knowledgeable R&D teamand product development capabilities. We continue to sharpen our focus and drive effortsthat involve identifying risks at the R&D stage to enable better and quickerdecisions and thereafter accelerate the pace at which we receive product approvals. Wereceived six ANDA approvals from the
USFDA in FY 2017-18. Our R&D spends for the fiscal stood at Rs1665 million 7.8% of the standalone revenue. We persist on driving our R&D team toidentify unique pharmaceutical solutions that may have a life-changing impact on patientswhile creating enhanced value for our stakeholders.
Enabling inclusive growth
At NATCO Corporate Social Responsibility (CSR) has been an integralpart of the way we have been doing our business since inception. The Company's CSRinitiatives provide vital support in the fields of healthcare education and also providelivelihoods to the communities we serve and the society at large. We have also made steadyprogress towards reducing our environmental impact by enhancing the utilisation ofrenewable energy across our units and having a well-defined Environment Health and
Safety (EHS) policy in place. We endeavour to build a more sustainablefuture and accordingly enhance our business from financial environmental and socialperspectives.
Our skilled team
At NATCO our team consistently strives to drive business potential andcontribute to the global pharma landscape more impactfully. We continue to deep-dive intointellectual property aspects while developing technologies. We are thankful for thepassion with which our teams collaborate and create limitless possibilities. This isdriven by a goal to create solutions that help patients live longer and healthier lives.
We would like to applaud the commitment and determination of ouremployees and the esteemed Board. Their perseverance and trust has enabled our progressover the years. With an increased focus on strategy execution and talent development weare better organised to serve healthcare needs and enhance shareholder value.
V. C. Nannapaneni
Chairman and Managing Director
Vice Chairman and CEO