Natco Pharma: Complex Molecules, Owner-Operator, Capital Discipline

Nandan Madhiwalla of East72 Capital Management presented his thesis on Natco Pharma (India: NATCOPHARM) at Asian Investing Summit 2026.

This session was hosted by Alex Gilchrist.

Thesis summary:

Natco Pharma, a ~$1.9 billion market cap Indian pharmaceutical company, pursues a differentiated first-to-file (FTF) strategy in US generics paired with compulsory licensing and patent litigation in India. Founded in 1981 by V.C. Nannapaneni and now run by his son Rajeev, Natco has compounded revenue from 176 crore to 4,764 crore and PAT from 24 crore to 1,883 crore. Promoters hold ~49.5%, with a track record of conservatism, candor, and minimal debt. Nandan views the founder-led management team as trustworthy and prudent capital allocators who have not cheated minority shareholders across a multi-decade listed history.

The business has two engines. In India, Natco litigates to launch complex drugs 80–95% below innovator pricing in hospital-driven niches where a large field force is not required—cases include Nexavar (compulsory license), Sovaldi (in-licensed from Gilead), and Everysdi (risdiplam). In the US, Natco files Paragraph IV ANDAs on the NCE-minus-1 date with front-end partners (Mylan, Teva, Viatris, Breckenridge) sharing economics roughly 50/50 to derisk litigation. Lenalidomide (Revlimid), under a volume-linked settlement with Celgene/BMS, generated ~3,500 crore of cash flow between FY23 and FY26.

Natco holds sole FTF status on drugs representing ~$20 billion of global innovator revenue and shared FTF on ~$30 billion, with key assets in carfilzomib, olaparib, apixaban, pomalidomide, and semaglutide. Nandan conservatively models ~$4 billion of cumulative Natco revenue at ~50% EBITDA margins over seven to eight years—roughly $2 billion of cash flow, approximating the current market cap. Near-term catalysts include pomalidomide in the US (launched March 2026) and generic semaglutide in India priced 80–90% below the innovator.

Management deployed Revlimid proceeds into a 37.5% stake in Adcock Ingram at ~8x EV/EBITDA, retaining ~2,500 crore for another global branded acquisition. R&D runs at ~8% of sales. Management has refused inflated Indian M&A multiples, raised equity only when valuations were high, and repurchased stock when cheap.

The shares recently traded at Rs 1,080, equating to ~19,000 crore market cap and ~12x TTM PAT of Rs 1,550 crore. The stock has already derated from ~Rs 1,500 ahead of the Revlimid cliff, and Natco has historically capped out at 10–12x P/E given the non-linear nature of US profits. Nandan’s case is that a growing recurring base (semaglutide India, Adcock Ingram consolidation, oncology abroad) combined with ~$2 billion of prospective FTF cash flow—roughly equal to today’s market cap—offers favorable risk/reward if management executes on both fronts.

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About the instructor:

Nandan Madhiwalla is a co-founder and managing partner of East72 Capital Management and Advisors. East72 Capital is a long only India focused fund. Previously, Nandan founded and served as the Principal Officer of a SEBI RIA firm from 2018 to 2024, providing equity research-based investment advisory services. Nandan has also held the position of Research Analyst at PPFAS Mutual Fund from 2015 to 2018, where he focused on Indian and US stocks in the financial and media sectors. Additionally, he contributed to investment models and reports at Lebenthal Asset Management and conducted buyside equity research at The Roosevelt Investment Group. Nandan holds a CFA Charter and a Master of Science in Financial & Risk Engineering from New York University. He also earned a bachelor’s in computer science engineering from D J Sanghvi College of Engineering in Mumbai.