 "Huge strategies by pharma companies")
The number of strategies employed by diverse Indian pharmaceutical companies are as numerous as the companies themselves.
Some pharma companies select to work with efficiency in the volume-driven active pharmaceutical ingredients (API) space, perfectly happy with thin margins because it keeps competition out. Others focus on research-intensive niche complex formulation spaces without back-ended integration. And there are others and others.
From the various pharma companies, whose strategies one has studied to appraise whether the stock is buyable or not, the recurring theme has been a prudent avoidance of resource-depleting litigation related to patent defence and process non-infringement. This strategy has been justified on the grounds that most Indian companies do not possess the scale or the surplus to engage in expensive litigation, so better to conserve resources and make the business sustainable.
The one maverick (too strong a word?) company that has looked this theory in the eye has been the Hyderabad-based Natco Pharma.
The doctor would have indicated that in the early years it would have been easier growing one's presence in large industry segments; Natco selected to enter niche complex therapeutic areas instead.
The doctor would have indicated that perhaps it may have been easier marketing products in unregulated markets; Natco graduated to demanding regulated markets instead.
The doctor would have recommended that the company gun for small opportunities corresponding to its aukaat; Natco positioned itself for mega opportunities which can potentially transform its destiny within quarters.
The one area where the company's contrarian spirit is most easily visible is its preference for litigation-intensive processes and spaces. Most companies avoid litigation; Natco embraces it. Most companies are intimated by litigation; Natco sees opportunities within.
Natco is usually engaged in 15-20 litigations at any time, transforming risk into opportunity through various initiatives. One, Natco has engaged with larger partners (Mylan and Lupin) with a deep insight into global procedures and protocols to guide its litigation strategy. Two, Natco has de-risked itself through an arrangement whereby the litigation expenses are borne completely by the larger partners in exchange for a share of the profits that could accrue following successful litigation. Three, Natco is using these opportunities to enrich its own understanding of litigation processes across international geographies.
The strategy is paying off. The upside from favourable orders far outweigh the downsides arising out of unfavourable decisions. In the event of the latter, Natco's pipeline (17 flanking products) enjoys Abbreviated New Drug Application (ANDA) filings at various approval stages, which ensures periodic revenue growth waiting for the huge upside.
The scorecard: Natco won 17 litigations in recent years , the most significant being pulling off the first compulsory licence from Bayer for its patent-protected anti-cancer drug Nexavar in a landmark judgment by India's patent office in March 2012. Besides, despite global pharma giants blocking Natco's attempts to genericise Copaxone, Natco's United States (US) marketing partner Mylan filed an ANDA for a three-times-a-week generic Copaxone which has been accepted by the US Food and Drug Administration (FDA).
What I like about this story is that this represents the face of the modern India - knowledge-driven, self-assured and best of all, willing to stake out for the big game.
This then is a Rs 756 crore company (revenues, 2013-14) gunning for potential multi-year revenues a number of times its present size.
Only one adjective goes for companies like these. Spunky.
Some pharma companies select to work with efficiency in the volume-driven active pharmaceutical ingredients (API) space, perfectly happy with thin margins because it keeps competition out. Others focus on research-intensive niche complex formulation spaces without back-ended integration. And there are others and others.
From the various pharma companies, whose strategies one has studied to appraise whether the stock is buyable or not, the recurring theme has been a prudent avoidance of resource-depleting litigation related to patent defence and process non-infringement. This strategy has been justified on the grounds that most Indian companies do not possess the scale or the surplus to engage in expensive litigation, so better to conserve resources and make the business sustainable.
The one maverick (too strong a word?) company that has looked this theory in the eye has been the Hyderabad-based Natco Pharma.
The doctor would have indicated that in the early years it would have been easier growing one's presence in large industry segments; Natco selected to enter niche complex therapeutic areas instead.
The doctor would have indicated that perhaps it may have been easier marketing products in unregulated markets; Natco graduated to demanding regulated markets instead.
The doctor would have recommended that the company gun for small opportunities corresponding to its aukaat; Natco positioned itself for mega opportunities which can potentially transform its destiny within quarters.
The one area where the company's contrarian spirit is most easily visible is its preference for litigation-intensive processes and spaces. Most companies avoid litigation; Natco embraces it. Most companies are intimated by litigation; Natco sees opportunities within.
Natco is usually engaged in 15-20 litigations at any time, transforming risk into opportunity through various initiatives. One, Natco has engaged with larger partners (Mylan and Lupin) with a deep insight into global procedures and protocols to guide its litigation strategy. Two, Natco has de-risked itself through an arrangement whereby the litigation expenses are borne completely by the larger partners in exchange for a share of the profits that could accrue following successful litigation. Three, Natco is using these opportunities to enrich its own understanding of litigation processes across international geographies.
The strategy is paying off. The upside from favourable orders far outweigh the downsides arising out of unfavourable decisions. In the event of the latter, Natco's pipeline (17 flanking products) enjoys Abbreviated New Drug Application (ANDA) filings at various approval stages, which ensures periodic revenue growth waiting for the huge upside.
The scorecard: Natco won 17 litigations in recent years , the most significant being pulling off the first compulsory licence from Bayer for its patent-protected anti-cancer drug Nexavar in a landmark judgment by India's patent office in March 2012. Besides, despite global pharma giants blocking Natco's attempts to genericise Copaxone, Natco's United States (US) marketing partner Mylan filed an ANDA for a three-times-a-week generic Copaxone which has been accepted by the US Food and Drug Administration (FDA).
What I like about this story is that this represents the face of the modern India - knowledge-driven, self-assured and best of all, willing to stake out for the big game.
This then is a Rs 756 crore company (revenues, 2013-14) gunning for potential multi-year revenues a number of times its present size.
Only one adjective goes for companies like these. Spunky.
The author is a stock market writer, tracking corporate earnings and investor psychology to gauge where markets are not headed