The stock of Hyderabad-based pharmaceutical and crop protection chemical maker Natco Pharma rose 4 per cent in trade early on Tuesday, though it gave up a good portion of the gains and closed the day with 1.5 per cent gain. The company’s legal win in a case filed with the Delhi High Court helped the rise.
The High Court has now allowed Natco to manufacture and sell Chlorantraniliprole (CTPR) active ingredient and its formulations in India. The insecticide, used against moth and butterfly caterpillars (larvae), was originally developed by the US-based DuPont De Nemours and was acquired by crop protection company FMC Corporation in 2017.
Early this year, FMC Corp had sued Natco claiming infringement of its patent, even as the latter argued it had a non-infringing process to develop CTPR. The favourable ruling by the Delhi High Court now paves the way for Natco to launch products containing CTPR formulation as well as active ingredient in India.
CTPR is used in FMC’s products Ferterra (0.4 per cent) and Coragen (18.5 per cent).
According to Natco, the market opportunity for CTPR in India is about ₹2,000 crore. Natco claims to be the first company in the country to receive registration approval from the Central Insecticide Board and Registration Committee (CIB & RC).
Natco has had a successful track-record in winning patent challenge litigations in the pharma side of the business, which is now replicated in the crop protection segment. Natco was the first Indian company to be granted compulsory licence for Bayer’s advanced kidney cancer drug Nexavar in 2005. The company challenged and won a favourable ruling to sell Novartis’ Glivec in India in 2013. After leading patent challenges in India, Natco exhibited the same skill with products in US markets with Tamiflu (Gilead) and Revlimid (Celgene).
Challenging Celgene’s Revlimid patent in the US in 2015 has recently paid off for Natco, as the company doubled its revenue year on year to ₹885 crore in the June 2022 quarter. Being the first-to-file and first generic player in the US, Natco was able to mop up significant revenue and profit from Revlimid, which is an $8-billion innovator market in the US.
The company’s operating margin rose from 27 per cent in April-June 2021 to 45 per cent in June 2022 quarter. There may be a moderation in revenue and profits from generic Revlimid for Natco, with Dr Reddy’s having launched the drug early this month and a few more players such as Sun, Cipla and Zydus Lifesciences likely to launch in the near future.
However, given that all the players will have volume restriction, as per settlement with Celgene, the price erosion is unlikely to be significant, and this makes it an interesting opportunity for Natco.