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Natco Pharma Ltd.

BSE: 524816 Sector: Health care
NSE: NATCOPHARM ISIN Code: INE987B01026
BSE 00:00 | 07 Jul 633.40 -6.35
(-0.99%)
OPEN

642.05

HIGH

642.35

LOW

629.65

NSE 00:00 | 07 Jul 633.40 -5.90
(-0.92%)
OPEN

642.45

HIGH

642.70

LOW

629.65

OPEN 642.05
PREVIOUS CLOSE 639.75
VOLUME 14188
52-Week high 1188.05
52-Week low 607.95
P/E 83.12
Mkt Cap.(Rs cr) 11,563
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00
OPEN 642.05
CLOSE 639.75
VOLUME 14188
52-Week high 1188.05
52-Week low 607.95
P/E 83.12
Mkt Cap.(Rs cr) 11,563
Buy Price 0.00
Buy Qty 0.00
Sell Price 0.00
Sell Qty 0.00

Natco Pharma Ltd. (NATCOPHARM) - Chairman Speech

Company chairman speech

TENHCITV IN THE FHCE OF HDUERSITV

Dear Shareholders

The COVID-19 pandemic has changed our notion of a challenge or a crisis. The unexpectedimpact of the pandemic has reminded us of the most fundamental element of our existence:making positive difference to people's lives. All through our response to the twosuccessive waves of the pandemic we addressed the concerns of our stakeholders tookindividual care built resilience and positioned the organisation for a reimaginedfuture.

We stayed rooted to the fundamentals - addressing the basic needs of business andemployee safety - despite the challenges that stretched our resources.

We showed extraordinary organisational tenacity as the pandemic evolved. The crisis wasnot one where we could have mounted a predefined response. But our fit-for-purpose plansenabled our teams to continue operations and support our customers and partners.

The indomitable human spirit unfolded as we met our commitments with optimism and trustin the emerging realities. The spirit and tenacity of our employees and their unwaveringcommitment helped. They rose to the occasion and did a commendable job amid theuncertainties and the rapidly changing priorities. We ensured that we prioritised a fewcritical behaviours - discipline in how we worked empathy in how we interacted with eachother and our stakeholders and flexibility in adapting to the changing circumstances.

Our people-first culture gave our employees confidence as we designed new ways ofworking with their safety at the core. A combination of preventive measures and rapidresponse kept us resilient. We set up a task force to implement strict protocols fortesting health monitoring and social distancing while proactively supporting employeesimpacted by COVID-19. An isolation ward was set up for affected employees. Simultaneouslywe updated the employee benefit policy and extended support to the contractor staff aswell. At the same time we supported communities with health programmes and contributed togovernment funds set up to mitigate the impact of the pandemic.

Pharma business

Domestic business

The year was not without its share of disappointments.

Our oncology vertical could not reach more patients as the healthcare communitycontinued to be wary of COVID-related risks and postponed hospital-based treatment.Additionally COVID-19 caused cancer patients to postpone hospital appointments andtherapy that required their physical presence. COVID-19 hit major metros in India whichset back our oncology business performance.

Our Hepatitis-C business continued to deteriorate due to market size contraction.Disruptions in the supply chain was another outcome of the pandemic. To offset the impactwe focused on product launches in the non-oncology category. Despite the challengingcircumstances we launched a total of 10 products across our three key domestic segmentsduring the year.

International business

Our international business which comprises the US and RoW was also partly a victim ofthe pandemic conditions. Although the majority of our US portfolio remained stable a keyflu product Oseltamivir suffered significant revenue loss. This led to the overalldecline in revenue in the US market when compared to the previous year.

We are constantly looking at ways to propel our business growth in the US whetherthrough niche filings or by strategically positioning ourselves for better profitabilityfor which we are considering establishing a front-end entity in the US.

During the year contribution from the subsidiaries increased appreciably driven bygrowth in our portfolio of products in Canada. We are getting more attuned to theregulatory environment and market challenges in our Brazilian and other subsidiaries andexpect robust growth from the region in the coming years.

Agri business

We started making our presence felt in the agri space with limited launches of productsduring the year. The initial foray was through the launch of third-party products and thelaunch of the first pheromone-based product Natmate PBW for control of pest in cottoncrop. We are putting together a strong team of product developers salespeople andmarketers to offer NATCO's goods to farmers across the country.

Sustaining growth

In spite of significant negative impact of the pandemic on the base business we wereable to sustain our revenue during the year. We recorded consolidated total revenue of Rs121557 million for the year ended on March 31 2021 as against Rs 120224 million lastyear reflecting a y-o-y annual revenue growth of 6.6%.

Our strategy

NATCO is on the verge of another inflection point driven by the strategic filings doneyears ago. In spite of the dip in profits due to the completely unforeseen macro-economicpandemic forces we are confident of a rebound in the coming few years due to therealisation of our strategy.

During the last few years we have built adequate manufacturing capacities across allour plants and positioned ourselves for expanded growth - both in the pharma as well as inthe agri segments. We spent the last year trying to adapt to the extraordinarycircumstances around us. We pivoted the short-term product pipeline to address treatmentchallenges of COVID-19 without losing focus on our long-term high impact productdevelopment.

Launches and product pipeline

Our R&D as well as product development teams tenaciously pursued criticalactivities during the year to alleviate the situation for patients affected by thepandemic. An integral part of our DNA has been our commitment to R&D which remainscrucial to our success. During the year our expenditure in R&D amounted to Rs 11596million. We spent 9.1% of our standalone revenue towards R&D - a sign of ourcommitment. We have also spent Rs 12281.24 million as capital expenditure which was usedto enhance our facilities. We undertook product innovation technology transfer andadaptive improvements in manufacturing and supply chain.

The list of products which were successfully pivoted to address pandemic needs includeChloroquine Apixaban Amphotericin and Posaconazole to treat post-COVlD-19 complications.Additional products include Baricitinib which was repurposed for use in COVID-19 patientsand the anti-viral drug Molnupiravir which is in the clinical trial stage. We are glad tobe part of efforts which is trying to combat the effects of the pandemic.

Our pipeline and technology are on the right track and we are focused on expanding ourproduct basket. We expect significant growth in the market share in the forthcoming yearsbecause of multiple high-value product launches in the US.

On the Crop Health Sciences front we launched the first indigenously manufacturedpheromone-based product in India for controlling Pink Bollworm (PBW) which affects thecotton crop. We have a series of products in the pipeline including Chlorantraniliprolewhich is sub-judice.

Plans for next year

We look forward to reaping the efforts we have been making in a sustained manner forover the past two years. There is a huge emphasis on broadening the base business in Indiawith respect to pharma as well as our agri business. In pharma we are on track for thelaunch of 8-10 new products every year across our business segments in India. We look atagri in two primary buckets - one is green chemistry and includes agriculturepheromone-based businesses and pest prevention rather than pest elimination. The secondcategory is niche pesticides.

Towards a better world

Health is intrinsically connected to the environment and hence we continue to exploreways to mitigate climate change by reducing our impact on the environment throughecologically sustainable practices across the value chain. Similarly we are taking stepsto reduce waste generation through recycle and reuse. We are also focusing on renewableenergy (RE) to serve our energy needs in an ecologically friendly manner and sourcing REfrom our captive projects and third-party sources.

During the year we were uncompromising in our actions to conserve natural resourcesand to empower our communities.

We lowered our carbon footprint and improved our energy mix increasing our solarenergy capacity at our three major manufacturing facilities in Kothur Nagarjunasagar andMekaguda. As of today ~26% of our energy consumption is from renewable sources.

Standing with our people and stakeholders

We invest in the long-term well-being and development of our associates andcommunities. COVID-19 has been a test of our resilience and flexibility as a team. We gavethree interim dividends amounting to Rs 1956.48 million resulting in a pay-out of 30.90%of the standalone profit after tax of the Company. As we traverse through difficult timesour culture of empowering our employees and creating trusted connections continue to serveus well. Our community interventions that straddle education health and livelihoodsdemonstrate our dedication to society.

NATCO Trust schools generate value for the communities. Online and offline classesafter-school tuitions Gurukula coaching and home visits were some of the activitiescarried out under the NATCO Trust umbrella which helped around 8800 children. Ourhealthcare and farm-based livelihood programmes have earned the trust and confidence ofthe community. During the year ~50000 people benefited from our community outreach andhealthcare services which included two mobile health clinics and two independentsatellite clinics for communities and employees respectively. Committed to sustainabledevelopment and being a responsible corporate citizen we closely monitored the situationand supported our communities all through the pandemic year.

Going from strength to strength

With our medicines impacting lives every day it's reassuring to know that we aremaking progress toward our goal of making positive change in the lives of our stakeholdersand society in general. The tenacity of our employees partners stakeholders andinvestors who have always been by our side makes us confident of our ability to succeed.

We would like to conclude by extending our sincere gratitude to our employees for thepassion and commitment they have shown during the year and to our shareholders for theircontinued support in our endeavours. We are confident that NATCO will continue to be acompany that puts its people first and enjoys the trust of society. We are sure that theCompany will stand the test of time.

V.C. Nannapaneni Rajeev Nannapaneni
Chairman and Managing Director Vice-Chairman and CEO

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