Patent win against Teva to boost revenues: Natco Pharma

With the company having won the patent case against Teva Pharmaceuticals enabling them to launch the generic drug for multiple sclerosis (Copaxone), Bhaskar Narayana, Finance Director & CFO, Natco Pharma feels it will help boost the topline and bottomline of the company because size of the market for the drug is very big.

Post the approval from FDA, they will be able to launch the drug in May 2014, he adds in an interview to CNBC-TV18.

Moreover, he is also confident of maintaining the current growth rate in terms of margins going forward. The EBITDA margins for the company went up from 26 percent to 31 percent on a year-on-year basis.

Below is the verbatim transcript of his interview on CNBC-TV18

Q: The news item which hit the wires that Natco Pharma has won a patent against Teva Pharmaceuticals and this will enable it to launch generic drug for multiple sclerosis. Can you take us through what gains you will make, when you will launch this drug, how big is this victory?

A: Federal court ruling upheld our contention that the patent for multiple sclerosis drug called Copaxone, a brand name of Teva would be expiring in May 2014 and not in May 2015. This means the generic version of this drug can launched in May 2014. That is welcome news as far as Natco is concerned.

Though we are yet to get the formal approval of our abbreviated new drug application (ANDA), which is to be approved by the Food and Drug Administration (FDA) and subject to that we will be launching this drug in May 2014.

This drug is a very high value drug. USD 4 billion is the US market size for this drug with Teva being the innovator. If at all the launch takes place in May 2014, there would be three players; one is Teva the innovator, Natco and a third company called Momenta and Sandoz combination.

Q: What will this mean to your own profit and loss (P&L) in FY15?

A: This would give a big booster dose to the topline as well as the bottomline but I would not like to hazard a guess because essentially when a generic is launched, there are bound to be downward price adjustments. One needs to see how deep the adjustments take place.

This is a new launch therefore it takes time to capture the market etc but given that the size of the market is so big, we may get sizeable revenues from this product.

Q: Aside of this positive which will come from your sclerosis drug, the Q2 performance is not very flattering; your sales is down 3.5 percent, EBITDA is down 15.5 percent though net profit  has saved the blushes. Can you take us through how margins fell so much and how they will pan out in the second half?

A: If you are comparing it on a sequential basis then there is a drop in sales to the extent of 3 percent, not much compared to the Q1 quarter of FY14. However, there has been a change in product mix, we are down to Rs 610 crore in active pharmaceutical ingredients (API) but at the same time we have done significantly well in combination sales, especially exports. 

This has caused profits to boost. There have also been some adjustments in the tax rates because there is deferred tax asset instead of deferred tax liabilities, as was the case in last quarter. All these put together has resulted in the net profit shooting up from Rs 22 crore to Rs 27 crore.

Q: What might you do in the second half for the current year in terms of margins and revenues?

A: It depends on how things shape up but we are certain that we will continue this growth rate. The EBITDA margins have gone up from 26 percent to 31 percent on a year on year basis for the quarter ended September 2013, as compared to quarter ended September 2012. So the situation is not alarming, we think, we can continue with this growth rate.