Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Natco Pharma Ltd (BOM:524816, Financial) recorded a consolidated total revenue of INR1,410.7 crores for Q1 FY25, reflecting a 21.6% growth compared to the same period last year.
- The net profit for the period was INR668.5 crores, showing a significant 59% growth from the previous year's INR420.3 crores.
- The growth in revenue and profits was primarily driven by the Export Formulations business, with the domestic pharma business remaining stable.
- The company's export business, particularly in Canada, achieved its highest turnover ever, contributing significantly to overall revenue.
- Natco Pharma Ltd (BOM:524816) has a strong pipeline of future products, including Semaglutide and Olaparib, which are expected to drive growth in the coming years.
Negative Points
- The Agro business underperformed, with net sales only reaching INR15 crores due to returns and provisions for discounts.
- The company faces uncertainty regarding the future market dynamics and profitability of Revlimid post-January 2026.
- There are ongoing challenges with the FDA warning letter for the Kothur plant, impacting new approvals from that site.
- The domestic pharma business, while stable, only shows a modest growth of 8% to 10% after removing one-offs.
- The company has significant cash reserves but faces difficulties in finding suitable acquisition targets due to high valuations in the market.
Q & A Highlights
Q: Congratulations on a good set of numbers. Sir, just two questions. First on the Revlimid front. So it appears that the contribution from Revlimid is a significant driving factor. Any insight on the market share would be valuable here?
A: It's very difficult to judge, Nirali. I mean, how the market will form over a period of time. I think in terms of market share and all, I think it's already publicly stated. We start off with a single digit, and we go up to one-third of the market before January '26. So I think that answers your share question. Regarding the price environment and all, it's hard to judge. I mean -- for now it's doing well. That's all I can say. I mean, the market dynamics change. So for now it's doing well. And we see that it will do well in -- I think, in the coming quarter also, I think it looks good. Beyond that, I think I can't comment further.
Q: This being the third year we are expecting a significant ramp-up in the Revlimid side?
A: I think, yes, in the last year, I think we are expecting to go to one-third of the market, yes, I think, based on the agreement that we have. But again, how much you will do and how well we'll do and all, it's all function of the market at that time.
Q: Just, Rajeev, if you can shed some more light on how the ex-Revlimid business has been performing?
A: I think the domestic has been stable. I think we're doing about INR100 crores per quarter. I think it's been fairly stable. I could remove the one-offs. I think on an overall base business-wise, we'll remove the one-offs, it's growing around 8% to 10%. So we are fairly happy with how things are in domestic. Our Agro has not done well. We had first year full launch last year. And we build about INR50 crores gross. So -- but just that we had some returns. So we prudently made the provisions for discounts and returns. That's the reason why our net sale is only INR15 crores. But I mean it's a new business for us. This is our second full year of operations. So I think we will take some time to settle down. But overall, I think the prospects look good and the season has started. So we think that we should do well in the coming quarter. Our export business has done extremely well. Canada has the highest turnover ever. And then if we can -- give me a moment, I'll just pull out the numbers. So the subs, which represent a significant part of our RoW business is doing -- indeed last quarter at about INR180 crores and fairly profitable. So we had a PBT of INR43 crores. So that business has done well. So overall, I think we are happy. I mean, we are building a reasonable business in RoW in Middle East as well. So we're doing a reasonable amount of diversification. So I think we could do better in Agro. If you reflect -- we could have done a little bit better in Agro, and I think we are looking for better momentum in domestic. But otherwise, the export business has been very stable for us. Revlimid and non-Revlimid both, Yes.
Q: Sir, on the sub part, you just disclosed about the revenues. Sir, in the next 2, 3 years, how should we look at the contribution coming from our Brazil and Canada subsidiary, any ballpark growth indication if you could provide?
A: I think they're doing well. I mean -- and we have good filings from these subsidiaries. So hopefully, they will continue to grow. I think, see this business, Abdul, it's essentially the filings that you have. That's what drives the earnings. And the good filings you have, we get great earnings. And see, it's a very product-specific strategy or product-specific strategy. And I think the more interesting filings we have, the better they do. And they're all a function of what the market formation is going to be. All we can tell you is that we are doing multiple filings in multiple geographies, and we believe that the growth will happen. As of now, as I said, it is INR179 crores. It's probably - I mean, we had one tender order in Canada that's why it had a higher sale. But if it normalizes, it's a little less than -- it's probably INR140 crores, INR150 crores a quarter. But see, I think our idea is to build more pipeline in this and hopefully acquire business, which is outside these four geographies that we are actively present, which is Brazil, Canada, US and India, and hopefully build a more diversified business, so that there's less volatility in our earnings.
Q: Sir, generally, you don't give guidance, but this is probably the first time that you have at least given visibility for the current quarter. I just like to -- one clarification, like you said that the current quarter looks good. So is it on a YoY basis or also on QoQ basis?
A: Comparatively Q on Q.
Q: Sorry?
A: I will compare Q on Q. I'm comparing this Q1 with Q2, and I'm saying Q1 and Q2 also, we should do well like Q1 as well.
Q: Okay. And at what price would buyback be attractive, like if -- let's say the share price dips to INR1,200, will you consider buyback or you don't have it in your plans at all?
A: I think we did a buyback already. I think we -- last year, I think we did a buyback. So that's why (inaudible) I was looking at implication. They don't look very good, honestly from what I can be. But again, as of now we are just conserving cash for some bigger acquisitions. So at this time, we don't have any plans for buyback. But if something changes, we'll speak about it. But at least my thinking now is no -- not at this time.
Q: My question was revenue has been increased by 21.5% QoQ. So what are the factors like geographical and otherwise both which led to the boost? And it is recurring revenue at the base or due to any large order?
A: I think we have multiple factors, I think, obviously, Revlimid plays a role as well. Yes, I think that's what has driven the earnings. And I think things are stable. And I think overall, our business -- our international generic business has done well. And so I think that's one of the factors why -- one of
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
