1. Edelweiss maintains ‘Buy’ on Natco Pharma; target price Rs 770

Edelweiss maintains ‘Buy’ on Natco Pharma; target price Rs 770

For Q3FY17, Natco Pharma posted stellar earnings, primarily driven by exclusive sale of gTamiflu in the US.

By: | Published: February 17, 2017 3:43 AM
eld he base business grew 22% y-o-y. At the current run rate, gTamiflu is likely to contribute million/50million to FY17 revenue/profit, with upside possible subject to flu season and competition.

For Q3FY17, Natco Pharma posted stellar earnings, primarily driven by exclusive sale of gTamiflu in the US. Reported earnings came in far ahead of expectations with both the base India onco business and the US business firing. The Hep C franchise has now stabilised with pricing erosion offsetting the 25-30% volume growth.

The base business will continue to improve as a number of US launches like gDoxil, gCopaxone, gFosrenol, gTracleer and gVidaza happen over medium term, in addition to ramping up of the cardiology/diabetology divisions in India. Maintain ‘buy’ with rolled TP of R770.

This quarter’s exceptional growth was driven by the R3.25 million benefit from gTamiflu launch in the US (sales to partner at nominal margin: R1.3 billion + trading income: R170 million + profit share of R1.77 billion). On the other hand, other expenses included total write-off of Venezuelan receivables worth R237.8 million.

The base business grew 22% y-o-y. At the current run rate, gTamiflu is likely to contribute $80million/50million to FY17 revenue/profit, with upside possible subject to flu season and competition. The company’s FY17 guidance sets a Q4FY17 hurdle rate of R5.2-6.2 billion sales/R1.2-1.3 billion PAT. The firm filed five ANDAs (including four P-IV shared FTFs) during 9mFY17.

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