Most companies treat a record-breaking product as something to protect. Natco Pharma is treating its own as something to spend. The Hyderabad-based drugmaker has just come off the most lucrative product in its four-decade history: gRevlimid, its US generic of the blood-cancer drug Revlimid. Rather than defend that plateau, it is putting the windfall to work at speed. It is buying into a South African pharmaceutical major, launching the first Indian generic of a best-selling weight-loss drug, spinning off its agrochemicals arm, and backing frontier science its own chief executive frankly calls a long shot.
Natco is not a broad, volume-driven generics house in the mould of Sun Pharma, Cipla or Dr Reddy’s. It is a specialist, a company that picks a small number of genuinely difficult-to-make, high-value medicines, mostly in oncology, and fights the patent battles required to launch them cheaply. In 2012, it became the first company anywhere to be granted a compulsory licence in India, for a generic of Bayer’s cancer drug Nexavar. Founded in 1981 and listed in 1995, the company today has a market capitalisation of about $1.82 billion, exports to more than 50 countries, ranks among the top 10 generic companies in Canada, and employs over 5,000 people across nine manufacturing sites.
The paradox is in the numbers. For the year to March 2026, Natco reported consolidated revenue of Rs4,376 crore and net profit of Rs1,418 crore, at a robust EBITDA margin of 39.6 per cent. Yet its chief executive is guiding investors, quite deliberately, to a softer year ahead – revenue of Rs3,400-3,500 crore and net profit of Rs700-750 crore – before the business turns up again. That is not the profile of a company in distress. It is the profile of a company placing a bet – several, in fact, at once. The stock trades at roughly 13 times trailing earnings, low for the sector, the market’s way of pricing that admitted lumpiness. Rajeev Nannapaneni, vice-chairman and chief executive, has made his peace with the discount. What he will not accept is dependence on one lucky molecule.
Success strategy
Nannapaneni outlines how that reinvention is taking shape. Speaking about the model that has made Natco, and its costs, he describes it candidly: “The nature of this business is that you’re going to have a couple of good years, and then one or two years where it’s going to dip. It’s a cyclical business – that’s the nature of the beast. You bet on a lot of these jackpots; when the jackpot comes, earnings look good, and when you don’t have the exclusivity, you take the bigger picture.” The company runs on two engines. In India, it launches complex drugs by challenging patents and prices them at a fraction of the innovator’s. In the United States, its profit centre, it plays the Paragraph IV game: challenging a branded drug’s patents in court for the right to sell a generic before they expire. Win that fight first, and a spell of exclusive sales – and outsized profit – can follow. It partners front-end distributors to share both the economics and the litigation risk. Both engines, by design, are episodic. That is the trait the whole story turns on.
The company’s origins lie with VC Nannapaneni, the founder and chairman, who started Natco in Hyderabad in 1981 and remains its patriarch. From modest beginnings, it grew into a respected mid-sized player with an outsized reputation for taking on the world’s largest drugmakers on the question of access.
The founder frames that journey with an eye already on the future. “From its humble beginnings, Natco has grown into a respected global pharmaceutical player,” says VC Nannapaneni. “This journey has been powered by our deep expertise in complex generics and innovative drug delivery technologies. As we move forward, we will continue to invest in these core strengths to improve patient accessibility and create long-term value. We believe the future growth of the Indian pharmaceutical industry will be led by innovation and the development of complex generics.”
The moments that defined Natco’s character came in oncology. Its imatinib generic, Veenat, was the first generic in India for chronic myeloid leukaemia, a disease it helped turn from a death sentence into a manageable condition, cutting the cost of treatment by more than 90 per cent: from around Rs2 lakh a month to Rs10,000. Then, in 2012, came the landmark: Sorafenat, the generic of Bayer’s kidney- and liver-cancer drug Nexavar, launched under India’s first-ever compulsory licence and priced more than 95 per cent below the original, at Rs8,800 a month against Rs2.8 lakh. It was a watershed in global intellectual-property law, and it cast Natco, permanently, as the industry’s patent challenger. More recently, its risdiplam generic, Natsmart, for the rare and debilitating spinal muscular atrophy, challenged the evergreening of the innovator’s patent and brought the cost down from Rs6.2 lakh a bottle to Rs15,900 a month.
Alongside the access battles, Natco built something rarer still: the ability to make medicines most Indian firms would not attempt. Its glatiramer acetate, a generic of the multiple sclerosis therapy Copaxone – a complex peptide and drug-device combination for which no regulatory pathway even existed at the outset – took a decade from laboratory to launch, running from research in 2006 to approval in 2017, in partnership with Mylan. The biggest of these was lenalidomide, the generic of Revlimid, cleared through a one-of-a-kind litigation settlement with the innovator and partnered with Teva, a 12-year journey from research in 2010 to a 2022 launch. From revenue of a few hundred crore two decades ago, the company reached Rs4,376 crore in FY26, and a market value near $1.82 billion.
Reality check
For all the momentum, the immediate reality is a descent, and Nannapaneni meets it head-on rather than skirting it. gRevlimid enjoyed a window of lucrative, semi-exclusive sales in the United States that is now closing as competition arrives. The effect is stark in the numbers: export-formulation revenue in the March 2026 quarter roughly halved year-on-year, from Rs1,053 crore to Rs540 crore, and the full-year EBITDA margin fell from 53.3 per cent in FY25 to 39.6 per cent. By FY27, on the company’s own guidance, those gRevlimid sales will have all but disappeared, and profit will roughly halve.
What keeps this from reading as a company on the back foot is the framing its CEO describes. In his argument, the down-cycle is not an accident to be explained away but the cost of a model chosen with open eyes. “We have always guided that there will be a decline,” he says. “You’re going to have one or two years of difficulty, but in the long run we’ll build stable growth. As an investor, you need to accept that they’re going to have this roller-coaster ride.” The volatility, in other words, is the strategy, and the money it threw off is precisely what is funding what comes next. “We don’t have anything in 2027,” he concedes, “but post-27 some of these other exclusivities will start kicking in, and from 2028 you’ll see a reasonable rise.”
If the cliff is the problem, diversification is the answer Natco has chosen, and it is pursuing three routes at once, each aimed at reducing its reliance on the next big American launch.
The largest is Africa. Having first bought 35.75 per cent of South Africa’s Adcock Ingram through the company’s 2025 delisting, Natco completed a further 13.25 per cent in July 2026, taking its holding to 49 per cent, completing the move for an additional Rs1,060 crore, or ZAR 1.81 billion, through its wholly owned subsidiary, Natco Pharma South Africa.
Adcock is no minor player. Established in 1891, it is the second-largest pharmaceutical company in South Africa, spanning prescription, over-the-counter, consumer and hospital products, with household brands such as Panado and Myprodol, a tenth of the private market, and leadership in OTC. The associate turns over around $549 million a year, far steadier than a US exclusivity window; Natco’s FY26 share of its profit, on a stake held only from November 2025, was Rs46.6 crore. Taken with Natco’s own $495 million, the combined enterprise now turns over more than $1 billion. The majority shareholder is the Bidvest group, and Nannapaneni is blunt about why scale of this kind matters. “This business now is all about scale,” he says. “You have to be present in eight or ten countries, with filings in multiple markets. And to get share in these markets you have to buy; if you start from scratch, it’s a ten-year journey. If you want to jump-start things, you need to acquire.”
The second bet is on weight loss. When the Indian patent on semaglutide, the molecule behind Ozempic and Wegovy, lapsed, Natco was first out of the gate, launching a generic vial in India with its partners Eris and Glenmark. It could not match the innovator’s pen on day one, but the vial gave it a distinct opening. “There’s a market that’s unwilling to pay Rs3,000 to Rs4,000 a month and is willing to pay only Rs1,000,” Nannapaneni explains. “That market we’re able to capture.” The brand is annualising towards Rs75-100 crore, and in the United States the company holds coveted first-to-file positions on both Ozempic and Wegovy strengths, a far larger prize still to play out.
The third is a tidying of the house: the demerger of Natco’s crop-health business, its agrochemicals arm, which turned over Rs60.6 crore in FY25 and grew to around Rs140 crore in FY26, a small but fast-growing unit. Under a scheme with an appointed date of 1 October 2026, shareholders will receive one share of the resulting company for every share held, Natco will retain 20 per cent, and the unit will be separately listed, with the process expected to run into CY2027. The logic is the one that has worked for Bayer and Novartis: pharma and agri-science share chemistry and formulation skills but deserve separate homes, separate managements and separate valuations. Spun out, the argument goes, the business can be judged on its own merits and unlock value invisible inside the parent.
More than generics
Beneath the three headline bets runs a slower, riskier current: an attempt to become something more than a generics house. Natco has taken small stakes in frontier science, most strikingly an $8 million investment in eGenesis, a US biotech engineering gene-edited pig organs for human transplant, whose first genetically modified pig-kidney transplant was performed in 2024. Closer to home, it is developing NRC-2694, an in-house small-molecule cancer drug now in a US- and India-based Phase 2 trial for recurrent or metastatic head-and-neck cancer in patients who have progressed on Merck’s Keytruda.
The threat lands squarely on the export engine that drives Natco’s windfalls, and on an industry that ships more than a third of America’s generic medicines from India. Yet analysts are near-unanimous that the plan, as framed, is close to unworkable for ordinary generics: the margins are too thin and American costs too high to make low-price pills economically at home, so the likelier result is higher prices, product withdrawals and shortages rather than a wave of reshoring. Only complex, higher-value products, precisely Natco’s niche, could plausibly justify an American plant, and even that would be costly. With the deadline falling in a US election year, and the measure not yet even a formal proclamation, many are betting it will be softened or negotiated away.
For Natco, the episode reads less as a fresh danger than as a vindication of the diversification it is already pursuing; its bets on Brazil, Canada, India and now South Africa are, in part, an insurance policy against exactly this kind of policy shock. “We were always very US-focused,” Nannapaneni says. “What we are doing deliberately now is building a diversified portfolio – Brazil, Canada, India and the US – so that our earnings are more diversified.” The American question, in other words, is one more reason to be less American.
For a company so comfortable with risk on the product side, Natco is strikingly conservative with its balance sheet, and that, in Nannapaneni’s account, is deliberate. It sits nearly debt-free, with net cash of about Rs2,400 crore as of March 2026 and a promoter holding of 49.42 per cent. It has returned money steadily, paying interim dividends of Rs5 a share through FY26 and buying back Rs210 crore of stock in 2023 at up to Rs609 a share. But with the cliff ahead and a war chest in hand, the chief executive is clear about where the cash should go. “My personal belief is that this cash should be used for an acquisition, which will give us more long-term returns,” he says, ruling out a fresh buyback for now and adding that he is “bullish outside India”, where valuations look more reasonable. The company is evaluating one or two large acquisitions and hopes to close something in the current financial year.
Amit Parekh, the chief financial officer, frames the discipline this way. “Our capital-allocation strategy is centred on disciplined investments that strengthen our long-term competitive position while maintaining financial prudence,” he says. “We continue to prioritise investment in R&D to build a pipeline of differentiated, complex, low-competition products, while actively evaluating strategic acquisitions and partnerships to strengthen our geographic footprint and broaden our portfolio. By maintaining a balanced approach to organic growth, inorganic expansion and prudent capital deployment, we remain committed to delivering consistent long-term returns to our shareholders.”
For all the moving parts – Africa, weight loss, agri-science, gene-edited organs – the thread that gives Natco’s story its coherence is older than any of them: affordability. The imatinib generic cut cancer therapy by more than 90 per cent; the Nexavar generic, under India’s first compulsory licence, by more than 95 per cent; the risdiplam generic brought a rare-disease treatment from Rs6.2 lakh a bottle to Rs15,900 a month. The same instinct now runs through the newest bet: a semaglutide vial at roughly Rs1,000 a month, against a branded pen many times the price. The company that broke Bayer’s monopoly on a cancer drug in 2012 is, in its own telling, the same one now trying to put a generic of the world’s most coveted weight-loss drug within reach of ordinary patients.
Future outlook
The forward map is, by Nannapaneni’s own design, an honest one: FY27 a base year of consolidation, and from FY28 onwards a steadier climb, with earnings expected to compound at 15 to 25 per cent a year as new US exclusivities and launches in Brazil and Canada land. Diversification is already visible in the geography of the business: earnings now come from five markets rather than one, with India and the United States now joined by Brazil, at around Rs280 crore; Canada, at Rs229 crore; and, through the associate, South Africa, which accounts for about a fifth of normalised base earnings. It runs front-end operations in six countries and reaches eight more through partners, and is opening a subsidiary in Nigeria while winding down a dormant one in Australia.
Outside the company, the read is broadly similar. Natco enjoys “a balanced medium-term outlook, supported by strategic global expansions, upcoming complex product launches, and robust cash generation,” says Avinash Gorakshakar, head of research at Avinash Mentor Research Services. He flags the near-term drags – tougher generic competition on lenalidomide and rising R&D and scaling costs that could cap margins – “but long-term prospects look strong.”
Whether the three bets pay off is unknowable today; the boss would be the first to admit it. But the intent is unmistakable, and for a company that has spent 40 years turning contrarian wagers into a business, it is entirely in character. Natco is spending the proceeds of one lucky molecule to make sure it never again lives or dies by a single one. “In the next 5 years,” Nannapaneni says, “our vision is to build a global company with more geographical diversification and less volatility in our earnings.” The jackpot, in other words, is being spent so that Natco never again needs a jackpot.