The Hindu Business Line : Natco's thrust on cheaper life-saving drugs to continue

NATCO Pharma Ltd, the Hyderabad-based Rs 154-crore pharmaceutical company known for its timed release technology, is back on track after a bad show for a few years with the help of new strategies for restructuring the product portfolio, research & development, marketing and financials.

On the products side, the strategy of focussing on specialised Oncology products helped the company reach a prominent place among the industry leaders in a short span. The company has chalked out a clear strategy to enter the regulated markets such as the US and the EU to exploit the potential in the generics market. Chairman and Managing Director, Mr V.C. Nannapaneni, spoke to Business Line at length on these strategies. Excerpts of the interview:

You have gone in for tapping the specialised Oncology products aggressively in the recent past. What is the strategy for this segment? How do you plan to go ahead?

We entered the Oncology segment during early 2003 and, within a short span, could achieve market leadership in Imatinib Mesylate (for treatment of blood cancer); Temozolamide (for brain tumours); Zolodronic Acid (supportive in cancer therapy); Geftinib (non-small cell lung cancer); and Chlorambucil (lymph glands cancer).

This strategy of focusing on Oncology pushed Natco to a prominent place among the Indian players in the segment. We would continue with the strategy of making available life-saving medicines at an economical cost and expect to achieve and retain a top slot in the Oncology segment in the country.

How did you manage to register an all-round improvement in revenues of API division, finished dosage formulations division and contract manufacturing division during the last fiscal?

I would say that quality is the main forte of our products. Under no circumstances do we permit any compromises in terms of quality. This earned a good name for Natco among the global community.

During the last couple of years, we had concentrated on improving our infrastructure and facilities so as to be on comparable terms with world-class standards. We could see, on the horizon, that playing in the regulated markets would become the order of the day, and we have been preparing ourselves. As a result, we are one of the very few companies that have world-class facilities and world-class quality products. This, in turn, helped us to expand our customer base. As a parallel, shifting of our focus from `me-too' products to high-value technologically advanced products had also helped.

In the finished dosage formulations segment, Oncology products provided a swing to the revenues, and would continue to do so. The manufacturing facilities that we had created had attracted and continue to attract several multinationals for contract manufacturing.

You were planning to raise funds to the tune of $13 million through issue of FCCBs. Where do you exactly plan to deploy those funds?

There are several products that would be going off patent beginning 2005. We see this as an opportunity for making our presence felt in the international markets and we believe we are aptly suited to be there, given the kind of quality product line that we have. Entry into regulated markets would mean filing of Abbreviated New Drug Applications (ANDAs), which are expensive. The number of ANDAs and DMFs that we have planned to file and the kind of improvements that we are planning in our facilities would warrant large amount of spending towards preparation of documents and other capital expenditure. The amount being raised through FCCBs would go towards meeting this expenditure.

What is the progress in tapping the regulatory markets of the US and the EU for the generics?

The US and European markets for generic products is quite big (around $60 billion) and it provides a very good opportunity for Indian companies such as Natco. Tapping these markets has always been on our agenda and planning for this purpose began sometime in 2002. I must say that we are ahead of most of the pharmaceutical companies in this respect. We have already filed one ANDA and five more are in the process. In addition, we have already received marketing approvals from Denmark and the UK. Some more approvals are expected shortly. These would help the company's entry into the US and European markets.

What are the new strategies for the domestic formulations market?

Oncology would remain the core focus area. However, emphasis would also be laid on new generation drugs for ailments such as migraine, CNS disorders, and peptide formulations.

The company had earlier embarked upon a major business and financial restructuring programmes. What were the benefits reaped so far from this exercise and what more is expected?

The business and financial restructuring programmes had really helped the company in exhibiting a turn around. There has been an overall reduction in our cost of funds and in terms of business the changed strategies have helped us record a growth rate of around 25 per cent each year.

What prospects do you see in the areas of contract manufacturing and custom synthesis?

With our modern manufacturing facilities, we have been able to attract international customers to support them in their manufacturing activities. We are expanding our existing facilities to facilitate continuation of contract manufacturing activities and to cater to our own products. Therefore, contract manufacturing would remain a significant contributor to our revenues in formulations.

On the custom synthesis front, in the chemical business, we have been able to successfully develop two intermediates for a multinational. The finished formulation has already been launched by the multinational. Consequently, we have been able to commercialise these intermediates and have received repeat orders during the last two years. We are in the process of developing intermediates for some of our other customers as well.

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