Remain positive on Natco, target price Rs 950

By: | Published: March 9, 2017 4:21 AM

Natco has in CY17 seen positive surprises in its key products - strong sales and outlook in Tamiflu and favourable ruling and warning letter (WL) to competitor in Copaxone. Growth in base business in India and RoW remains strong.

Given the differentiated US pipeline, R&D strength and base business growth we remain positive with increased DCF based TP of R950.

Natco has in CY17 seen positive surprises in its key products – strong sales and outlook in Tamiflu and favourable ruling and warning letter (WL) to competitor in Copaxone. Growth in base business in India and RoW remains strong.

Our FY17-FY19 EPS consequently sees upgrades despite delay in Copaxone approval. Given the differentiated US pipeline, R&D strength and base business growth we remain positive with increased DCF based TP of R950.

Tamiflu’s 9MFY17 benefits are higher than our earlier full year expectation. More importantly, post patent expiry, only one player has received approval vs expectation of 2-3.

Natco has also filed suspension for Tamiflu ($300 million brand), which will contribute in FY18.Natco recently won the court ruling for 40mg and Teva has indicated a likely 2017 generic entry. This has increased the visibility on launch post approval. We thus build 40mg launch from Q2FY19. Additionally, Sandoz (the key competition) recently annnounced that it has received a WL for its fill CMO faclilty (Hospira).

The WL is in our view serious and will require at least 18m to remediate. This will imply 18m delay in approval for Sandoz 40mg as it shifts to new facility, likely fast-tracking of Natco’s 40mg filing making an early launch and supply disruptions in 20mg leading to market share gains for peers. However, we do not build this in our estimates and factor Natco launch in 3 player market for both 20 and 40mg.

The management is positive that new divisions in India — diabetology and cardiology — will see strong growth.

Get live Stock Prices from BSE and NSE and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Switch to Hindi Edition