Skip to content

    Natco Pharma

    NATCOPHARMMixed
    Healthcare·13 Aug 2025
    Management Summary

    Natco Pharma reported a marginal revenue decline in Q1 FY26, with strong EBITDA margins despite pricing pressure on its U.S. Revlimid portfolio. The company is strategically investing in high-value R&D projects and diversifying through the Adcock acquisition in South Africa, which is expected to significantly contribute to future earnings. Management anticipates a decline in R&D expenses in the latter half of the fiscal year and is optimistic about new product launches like Semaglutide and Risdiplam.

    Highlights

    8
    • Consolidated total revenue for Q1 FY26 was INR1,390.6 crores, a slight decline from INR1,410.7 crores in Q1 FY25.

    • EBITDA for the quarter stood at INR632.7 crores, with margins of 45.5%.

    • Net profit on a consolidated basis was INR480.3 crores.

    • An interim dividend of INR2 per equity share was declared.

    • Formulation exports were the largest segment at INR1,126.5 crores, followed by Domestic Formulation at INR107 crores.

    • The company faced pricing pressure in the U.S. product portfolio, primarily from Revlimid, which is expected to decline post-September quarter.

    • R&D expenses were higher in Q1 and are expected to remain high in Q2, then decline in Q3 and Q4 FY26.

    • The Adcock acquisition is expected to complete in 2-3 months, contributing 35.75% of Adcock's PAT (approx. $15-17 million) to Natco's base earnings by FY27.

    Concerns

    1
    • U.S. Pricing Pressure on Revlimid

    What Changed3

    vs Q2 FY26

    Tone shiftNeutral → MixedGuidance items10 → 15 (+5)Risks discussed3 → 4 (+1)

    Segment breakdown

    • API Business₹52.6 Cr3.8%
    • Domestic Formulation₹107 Cr7.7%
    • Formulation Exports (including profit share and subsidiaries)₹1,126.5 Cr81.0%
    • Crop Health Sciences₹34.7 Cr2.5%
    • Other Operating and Non-Operating₹69.8 Cr5.0%
    Donut· Share of Revenue

    Guidance & targets

    15
    CategoryTargetPriority
    Profitability
    Revlimid Contribution
    decline
    High
    Profitability
    Crop Health Sciences Breakeven
    breakeven
    Medium
    Profitability
    Adcock PAT Consolidation
    35.75% of Adcock PAT ($15-17 million)
    High
    Profitability
    South Africa Business Contribution to Base Earnings
    15% to 25%
    Medium
    R&D
    NRC-2694 Phase II Patient Enrollment
    60 to 70 patients
    Medium
    R&D
    NRC-2694 Data Readout
    meaningful data readout
    Medium
    R&D
    US Product Filings (Annual Run Rate)
    7 to 8 products
    High
    R&D
    Oligo Space Product Filings (Annual Run Rate)
    1 or 2 products
    High
    Sales
    Crop Health Sciences Sales
    INR140-150 crores
    Medium
    Sales
    Domestic Base Portfolio Growth
    7%, 8% a year
    High
    M&A
    Adcock Transaction Completion
    completed
    High
    Regulatory
    Kothur Plant USFDA Resolution
    positive resolution
    Medium
    Expenses
    R&D Expenditure
    decline
    High
    Product Launch
    Semaglutide Launch (India)
    launch
    Medium
    Product Launch
    Risdiplam Launch
    launch
    High

    Risks & concerns

    7
    RiskSeverity

    U.S. Pricing Pressure on Revlimid

    Business faced pricing pressure in the U.S. product portfolio, primarily Revlimid, impacting profitability, with further decline expected post-September quarter.Management acknowledged

    high

    Potential U.S. Pharma Tariffs on Indian Exports

    Management stated there would be 'some impact' if tariffs are implemented, but they would have to deal with it and potentially pass costs to customers.Analyst acknowledged

    medium

    Regulatory Delays for Kothur Plant

    The Kothur facility had multiple USFDA observations; management is hopeful for a positive resolution within 90 days of their July response.Management acknowledged

    medium

    Regulatory Delays for Risdiplam Launch

    The launch of Risdiplam is pending a verdict from the Delhi High Court, with management awaiting clarity on the timeline.Management acknowledged

    medium

    Areas of Evasion(3)

    • FY27 revenue guidance (post-Revlimid)
    • Specific names of high-value R&D products
    • Detailed Semaglutide pricing strategy

    Q&A highlights

    3

    “I think we're seeing pricing pressure on Revlimid, of course. So I think that's the reason why there's been a dip. Are we seeing pressure in other products? They've been stable, but we also had, fortunately, other launches that have happened. That has also contributed to our profit.”

    Analyst sought clarity on the impact of Revlimid's decline on EBITDA margins and broader U.S. pricing trends, which management confirmed for Revlimid but noted stability in other products due to new launches.

    asked by Rashmi from Dolat Capital

    2 min read6 chapters

    Detailed Narrative

    01

    Q1 FY26 Financial Performance and Segmental Contributions

    Natco Pharma reported a consolidated total revenue of INR1,390.6 crores for Q1 FY26, a slight decrease from INR1,410.7 crores in the same period last year. EBITDA for the quarter was INR632.7 crores, achieving a robust margin of 45.5%, with a net profit of INR480.3 crores. The company's largest revenue contributor was formulation exports, including profit share and subsidiaries, at INR1,126.5 crores, while domestic formulation sales stood at INR107 crores. An interim dividend of INR2 per equity share was declared.

    02

    Impact of Revlimid and U.S. Pricing Pressure

    The U.S. product portfolio experienced pricing pressure, primarily affecting Revlimid, which contributed to a dip in profitability. Management indicated that Revlimid's contribution remained consistent in Q1 but is expected to decline significantly post-September quarter, with most of its earnings for FY26 captured in the first half. While other U.S. products have remained stable, the ongoing decline of Revlimid is a key factor influencing the company's near-term outlook.

    03

    Strategic Diversification through Adcock Acquisition

    Natco Pharma is actively diversifying its earnings base, notably through the acquisition of a 35.75% stake in Adcock, a South African pharmaceutical company. This transaction is anticipated to be completed within the next 2-3 months, subject to regulatory clearances. Adcock, with an annual PAT of approximately $47-48 million, is expected to contribute $15-17 million to Natco's consolidated PAT by FY27 and represent 15-25% of Natco's base earnings in the coming years, strengthening its presence in the African market.

    04

    Elevated R&D Investments and Future Pipeline

    R&D expenses were notably higher in Q1 FY26 due to significant investments in high-value projects, particularly in cancer products requiring clinical trials and in the peptides and oligopeptide space. These elevated expenses are projected to continue into Q2 but are expected to decline in the December and March quarters of FY26. Annually, Natco typically files 7-8 products in the U.S., with 1-2 specifically in the oligo space, indicating a strategic focus on complex generics and novel entities.

    05

    Key Product Development Updates: Semaglutide and Risdiplam

    The company is on track for the launch of Semaglutide in India, with market formation expected next year (FY27) following the completion of Phase I dosing and readout anticipated by November-December. For Risdiplam, Natco has completed preparations for launch and is awaiting a verdict from the Delhi High Court, with management expecting a decision 'any moment' in the next week or month. Both products represent significant future growth opportunities for the domestic market.

    06

    Crop Health Sciences Performance and Regulatory Outlook

    The Crop Health Sciences segment reported sales of INR34.7 crores in Q1 FY26 and is nearing breakeven, with a full-year sales target of INR140-150 crores. Regarding regulatory matters, the Kothur facility, which received multiple USFDA observations, has submitted its responses in July, and management is cautiously optimistic about receiving a positive resolution within 90 days. The Mekaguda API facility has already received its EIR clearance.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.