Natco Pharma trades lower for 10th straight day; tanks 40% on weak Q3

The pharma stock hit its lowest level since December 2023 and tanked 52 per cent from its record high level of Rs 1,638.35, touched on September 12, 2024.

Shares of Natco Pharma hit a fresh 52-week low of Rs 790.50, falling 3 per cent on the BSE in Thursday’s intra-day trade, and extending its decline after the company reported weak earnings for the quarter ended December 2024 (Q3FY25). 

 

The stock of the pharmaceutical company is quoting lower for the 10th straight trading day, plunging 40 per cent during the period. The stock has hit its lowest level since December 2023. It has tanked 52 per cent from its record high level of Rs 1,638.35 touched on September 12, 2024.

 

At 11:14 am; Natco Pharma shares were trading 1 per cent lower at Rs 807.50, as compared to the 0.23 per cent decline in the BSE Sensex. 

 

 

In Q3FY25, the company’s consolidated profit after tax (PAT) declined 37.8 per cent year-on-year (YoY), at Rs 132.40 crore. On a sequential basis, PAT fell 80 per cent from Rs 676.5 crore in Q2FY25. Earnings before interest, tax, depreciation and amortisation (Ebitda) margin decreased to 33.0 per cent in Q3FY25 from 38.3 per cent in Q3FY24 and 60.5 per cent in Q2FY25.

 

The total revenue of the pharmaceutical company declined 18 per cent YoY and 54.6 per cent quarter-on-quarter (QoQ), at Rs 651 crore. During the quarter, contribution from the export formulation business was lower, most likely on account of the absence of anti-cancer drug, gRevlimid.

 

The formulation export segment recorded 52.8 per cent YoY and 76.4 per cent QoQ decline in revenue at Rs 285.80 crore. However, the company expects healthy growth of business in the ensuing quarters.

 

Natco’s pharma segment constitutes a major portion of its revenues, where export formulations contribute a major portion of the company's revenues, followed by Active Pharmaceutical Ingredients (API). 

 

The company's export formulations business focuses on high entry barriers and complex products and comprises customers in the US, Canada, Brazil, Asia-Pacific region and other countries. The company derives majority of its US formulation revenues from gRevlimid, gCopaxone, gFosrenol, gTykerb, gTamiflu, gDoxil, gAfinitor and gZortress. 

 

A significant portion of the company's revenue comes from the US market, making Natco vulnerable to regulatory and market changes there. As an export-oriented company, it faces risks from exchange rate volatility as well. The generic pharmaceutical industry is highly competitive, putting pressure on prices and margins.

 

However, Natco is now banking on some new First-to-File (FTF) opportunities, notably gOzempic (Anti-diabetic), gWegovy (Weight management) and gLynparza (Anti-cancer) among others. (Total pipeline- Key Solo Para IV FTFs- 8; Key Para IV products -7). The management is confident about the prospects of some of these products to maintain the blockbuster traction beyond FY26, analysts at ICICI Securities said in the company's results update.

 

Already, its partner Mylan has settled a US patent litigation with NovoNordisk for generic Ozempic (to be outsourced from Stelis) which registered ~$ 9 billion sales in the US in CY23. The Kothur warning letter is not expected to have much impact as the company has dome dual filing including from Vizag for most of the important products and tie-ups with the CDMO players, the brokerage firm said.

 

Analysts further said they continue to have faith in Natco’s ability to focus on blockbusters which are capable of generating robust cash flows for a 3-5 year horizon before they fade. The company is spending a good amount of money on R&D (8-10 per cent on normalised sales).