Natco Pharma Limited

Natco Pharma reported a consolidated total revenue of Rs 1,463 crores for Q2 FY26, a modest increase from Rs 1,434.9 crores in the prior year's quarter. The company achieved an EBITDA of Rs 679.2 crores, translating to a healthy margin of 46.4%. Net profit for the period stood at Rs 517.9 crores. The board also declared an interim dividend of Rs 1.5 per equity share, reflecting a stable financial position despite market challenges^🌐.

The company anticipates a significant drop in revenue contribution from Lenalidomide in Q3 and Q4 FY26. Management stated, 'There is nothing in Q3. We do not expect anything.' This is attributed to increased competition, leading to uncertainty about market share. Consequently, Natco is not budgeting much revenue from this product for the upcoming quarters, signaling a cautious approach to its future contribution.

Natco is targeting a March-April 2026 launch for Semaglutide in India, with clinical trials expected to conclude by December 2025 and regulatory filing by early January. While acknowledging the Indian market will be 'very competitive' with other players, management expects generics to have a 'substantial discount' advantage, aiming for Rs 80-90 crores in additional domestic business. The US launch, however, is 'a few years away' as the regulatory file is still under review, with the US market offering a '100x difference' in opportunity compared to India.

The Adcock acquisition in South Africa is a key strategic move, with Natco consolidating approximately 36% of its PAT. The acquisition is expected to contribute Rs 135-150 crores PAT per quarter from Q3 FY26 onwards, fully consolidating from the next quarter. Management justified the acquisition by highlighting the significantly lower valuation (10-12x EBITDA) compared to Indian assets (30-40x EBITDA), emphasizing better returns and business diversification. The ROW business, including Saudi and Brazil, is performing well, with new launches in Brazil like Carfilzomib.

The Crop Health Sciences business has shown positive momentum, growing to Rs 52.4 crores this quarter and achieving EBITDA positive status. Natco plans to demerge and list this entity separately by 2026. This move is aimed at unlocking shareholder value by giving the business more attention and allowing it to raise its own capital, as it is currently a 'very small business' within the larger pharmaceutical setup.

Natco plans to file another 'three, four products' in the next few months^⏳, focusing on Para-IV filings. The company maintains a robust pipeline with several FTFs (First-To-File) expected over the next 10 years, including Ibrutanib, Olaparib, and Erdafitinib. While '26, '27 might be a bit slow, 'all the big launches are coming in '27, '28, and then slowly we have things in '29,' with some opportunities valued at US$25-30 million and a couple at US$100-150 million.

Following the Adcock acquisition, which utilized Rs 1,600 crores of cash and Rs 400 crores of borrowed funds, Natco expects its net cash balance to settle around Rs 2,700-2,800 crores. The company remains open to different investment options, particularly in the US, provided good opportunities arise. Management also highlighted small, disruptive investments like eGenesis (kidney transplant) as strategic for building relationships and understanding future trends.