Buy Natco Pharma; target of Rs 1240: Axis Direct

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26 Aug, 2025 12:21

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Natco’s (partner Mylan) 1st generic approval for gCopaxone 40mg (USD 2.9 bn market; possibility of 180 day exclusivity) and 2nd generic approval for gCopaxone 20mg (USD 700 mn market) demonstrate its R&D ability to execute on complex generics with intricate chemistry and complex processes (also demonstrated by 2nd generic approval for gDoxil Liposomal injection in May'17).

In our recent note gCopaxone – Delayed, not Derailed, we had assumed 20mg/40mg launch in Apr’18/ Oct’18. With earlier than anticipated approvals, we now build in immediate launch for 20mg; expect 40mg launch in end-CY17 (given on-going litigation). Our base case scenario analysis suggests 20 mg sales of ~USD 20 mn in H2FY18/USD 32 mn in FY19 and 40mg sales of ~USD 32 mn in Q4FY18/ USD 107 mn in FY19. Raise FY18/19 EPS est. by 56%/37% with revised SOTP of Rs 1,240 (20x FY19E EPS + Rs 117 for R&D pipeline) vs Rs 940 earlier. Maintain BUY. At CMP, the stock trades at 27x FY18E EPS of Rs 35 and 17x FY19E EPS of Rs 56.

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