Key highlights from NATCO Pharma Limited (NATCOPHARM) Q3 FY22 Earnings Concall
Q&A Highlights:
- Tarang Agrawal from Old Bridge asked about the thought process behind Dash acquisition. Rajeev Nannapaneni CEO said that for the plain vanilla generics the company wants to do its own front end and for complex generics the company wants to continue to do partnerships. Therefore, Dash came at a reasonable valuation and as the business is more difficult, it’s better to keep most of the economics with the company as opposed to sharing.
- Tarang Agrawal from Old Bridge enquired about revenue and EBITDA ex the product licensing income, which is a one-off. Rajeev Nannapaneni CEO replied that licensing income covers most of the expense. The run rate of revenue is similar to what it was last quarter. The difference is from licensing income, which is due to a partner who gave the company a reimbursement of certain expenses.
- Ahmed Madha with Unifi Capital asked about the competitive scenario in Canada for Revlimid, considering market share gains and the price erosion. Rajeev Nannapaneni CEO said the price erosion has been quite anticipated and has been fairly comparative. There is some margin. Overall the company is happy with Revlimid performance in Canada.
- Ahmed Madha with Unifi Capital also asked about the sequential jump seen in the export formulation business from INR190 crore to INR380 crore. Rajeev Nannapaneni CEO replied that it’s partly due to the one-off licensing income.
- Danesh Mistry asked that when does the company see uptick in the domestic business. Rajeev Nannapaneni CEO said that in domestic the company started the year nicely, especially June quarter, as there was the benefit of the COVID portfolio. The benefit of COVID was not there in subsequent quarters. Without COVID, the run rate is about INR100 crore a quarter.
- Danesh Mistry asked that in the Agrichem business why the company had a INR10 crore EBIT loss. Rajeev Nannapaneni CEO commented that the company is losing money in agro and consistently losing INR10-12 crores a quarter. The reason being the launches anticipated by the company didn’t happen. The company anticipates it won’t get better.
- Danesh Mistry asked the reason for other expenses jumping from INR88 crore to about INR247 crores in 3Q22. Rajeev Nannapaneni CEO said that it is related with the ANDA expenditure. The general expenses are in the INR100 crore per quarter region.
- Kunal Randeria from Edelweiss enquired about the challenges in growing oncology business. Rajeev Nannapaneni CEO said it’s pricing. In oncology, the discounts are very high, there’s a gross price and a net price. Losing a few accounts creates a dramatic decrease of sales. It’s a structural issue and competition is the biggest reason for growth. The company’s portfolio being a niche portfolio is seeing more pressure.
- Kunal Randeria from Edelweiss enquired if Revlimid profit share would come in 4Q22 or 1Q23. Rajeev Nannapaneni CEO answered that the launch is in 4Q22. So hopefully there will be some profit share in March. And thereafter, every quarter there will be profit share, which will become a significant part of earnings.
- Ritika Agarwal from Value Quest asked if the company has filed any FTFs. Rajeev Nannapaneni CEO replied that the company so far has filed two FTFs. It’s a competitive market and even though the company filed, five other people have filed on the same day.
- Nitin Agarwal from DAM Capital asked about any progress on the company’s China initiatives. Rajeev Nannapaneni CEO said the company is not having front end in China and the company is all doing partnership. The company has filed about 4 or 5 products. There’s not been a single approval, but expecting just a couple of approvals this year. But as of now, we don’t have any approvals.