Natco Pharma’s high-stakes game of risk and reward. Will it pay off?

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Subscribe to enjoy similar stories. Natco Pharma Ltd isn’t your run-of-the-mill pharmaceutical company. It’s a story of calculated risks, high-stakes bets, and a fair bit of drama.

At the heart of this journey is Rajeev Nannapaneni, the company's vice-chairman and CEO, whose leadership has shaped the company's aggressive strategy. Under Nannapaneni’s guidance, Natco has embraced litigation-heavy patent challenges to pursue niche markets, particularly in the US generics space. This strategy has not only brought in substantial rewards but also recurring challenges.

It has been a rollercoaster ride, but for Natco, more often than not, it has paid off. Natco’s performance in FY24 is a testament to the company’s high-risk strategy. The company reported revenues of ₹3,998 crore, marking an impressive 47% year-on-year growth.

With Ebitda margins at a robust 45.5%, investor sentiment surged, driving the stock up by over 80% between January and August 2024. Also read: Sun Pharma: Down but not out? However, after peaking at an all-time high of ₹1,592 in September, the stock has declined by more than 15%, prompting the question: What lies ahead for Natco? To answer that, let’s dive deeper into Natco’s business model and the factors at play. At the core of Natco’s strategy is its play in the US market, specifically leveraging the Hatch-Waxman Act.

This law allows generic drugmakers to challenge patents on high-value drugs. If Natco manages to be the first to challenge a patent (via a Paragraph IV certification), and it wins, the company gains a 180-day exclusivity period to sell its generic version. This gives Natco a huge financial advantage by allowing it to capture market share before other generics companies can enter.