Natco, always 2 steps forward and 1 step back

2023年10月31日

Just when the profits of years of perseverance have begun rolling into the bank for Natco Pharma, the minority investors are in a spot of bother due to twin negative news of legal action in US pertaining to gRevlimid and the USFDA Form 483 with 8 observations during the Kothur plant inspection earlier in the month.

The legal action is of lesser concern as the company has a marketing partner in US who most likely has to bear the legal costs, and there are well established laws regarding patents in the country. Kothur plant is only one of the 2 USFDA approved manufacturing plants for Natco and this plant is capable of manufacturing cytotoxic orals and injectibles. It is imperative for the company to get a clean chit in its follow up from the USFDA. The management of Natco has an impeccable track record and Kothur is their older USFDA approved plant which has been subject to audits from last many years.

Meanwhile the share price has taken a beating after the most impressive quarterly performance in the companys history.

In the long run price is a slave to earnings and with that adage one can take a position and look forward to the completion of an INHS in the making which may coincide with stellar Q2 numbers as guided by the mgmt in the Q1 concall.

By the time Q4 results get declared we are looking at net profit of +1000 crores (management guidance) and this has a 50% probability of being bettered in the following year.

2023年11月1日

注释

Sometime in early 2017 I was holding Divis and used to diligently follow their concalls. The promoter had assured the investor/analyst that he was confident of coming out of the usfda issue that was plaguing the company at that time by the end of the current quarter but during the concall post the quarter results the problem was still not over.. I was making a 50 rupee profit, probably bought around 575-600 and decided to book out as the promoter couldnt fulfill his word... the issue got resolved soon after I sold and looking back on hindsight that was just the beginning of the bull run for Divis Labs and the share price went on a tear till 5000...

Having followed Natco Promoters I am of the view that they are experienced, have a clear goal and growth path for their company in complex generics ...They have faced USFDA observations in the past and this time too I am confident that they will resolve it in a quarter or a month more. That being said, Kothur is a big dedicated export manufacturing plant for them and most likely handles the bulk of the export items for the company. I dont know how or whether these usfda observations restrict exports to US from this plant, but it is this very fear that is sinking the share price for now.