How VC Nannapaneni built Rs.15,103-cr pharma giant with just `33 lakh

VC Nannapaneni, a US-returned technocrat-turned-entrepreneur founded Natco Pharma in 1981. Today, with a fortune of Rs8,600 cr Nannapaneni is the 10th richest person of Hyderabad

Hyderabad: VC Nannapaneni, Chairman and Managing Director of Natco Pharma, is the tenth richest person in Hyderabad. With a fortune of Rs8,600 crore, he has been ranked at 164 in India and 2,686 globally, but it has not been a smooth ride for Nannapaneni.

A post-graduate in pharmacy from Andhra University, Visakhapatnam in Andhra Pradesh, he also holds a Master degree in Pharmaceutical Administration from the Brooklyn College of Pharmacy, US. After working in the US for various pharmaceutical companies, he returned to India in 1981.

The US-returned technocrat-turned-entrepreneur founded Natco in 1981 with a small loan of Rs 33 lakh that he managed to secure with support from family. But, it was not until 2003 - nearly 22 years after its inception, that Natco got global attention when it launched Veenat, the generic version of Swiss multinational Novartis AG's anti-cancer drug Glivec (or Gleevec, as it is referred to in the US) in India at one-tenth the cost of the listed price, and later in 2013 when it beat Novartis in its patent protection battle for the drug.

Today, the Pharma major focuses on niche therapeutics areas and complex products, spread over 40 countries. It sells FDF (finished dosage form) products in the US, India, Europe and other parts of the world. It also has substantial clientele in Canada and Brazil as well.

As of March 31, 2021, it employs around 5,000 people. Having forayed into the agrichemical business in 2019, NATCO has two units under its crop health sciences division at Attivaram in Nellore.

VC Nannapaneni prefers to stay in the background and lets his son and the vice-chairman and CEO, Rajeev Nannapaneni, to take charge, while he mentors, urging all to singularly focus on product development. He sees no reason to worry thereafter. Today, the company has eight manufacturing facilities in its pharmaceutical business, which include six FDF and two API facilities, spread across India with dedicated modern research laboratories and capabilities in new drug development.

Performance in the recent past

Drugmaker Natco's consolidated net profit increased 27 per cent to Rs80.4 crore for the quarter ended December 2021 from Rs63.40 crore in the same period a year ago.

The higher net profit came on the back of a 53 per cent increase in total income to Rs590.7 crore (Rs386 crore a year ago), which included product licensing income. During the quarter, there was a one-time expense against the product licensing income. The company declared a third interim dividend of Rs2 per equity share of Rs 2 each.

Driving the growth in revenue was increase in the share of formulations exports, including profit share, licensing and foreign subsidiaries, to Rs383.1 crore (Rs162.1 crore a year ago). Other operating income and non-operating income during the quarter increased to Rs 45.3 crore from Rs 5.9 crore a year ago. While revenue from formulations (domestic) marginally moved up to Rs 100.3 crore (Rs 95.3 crore), the contribution of API declined to Rs 61.7 crore from Rs 97.8 crore.

The success strategy

Analysts say it's Natco's ability to pick its battles well and capitalise on the opportunities, steered by a nimble leadership structure that ensures quick decision-making. Nannapaneni believes that the company's strategy of identifying niche opportunities has paid off. He credits his team - led by his son, Rajeev Nannapaneni for doing things right.

Natco's product launches in the US and India had a big impact on its growth. One was the launch of the first generic version of Tamiflu (Oseltamivir oral capsules), used to treat influenza, for which Natco tied up with marketing partner Alvogen in the US. In India, it was among the first to launch the hepatitis C basket of products - the drug and its combinations - under a licensing agreement with Gilead Sciences. The launch of the generic version of Teva's drug Copaxone for multiple sclerosis in the US, with its partner Mylan, in the second half of 2017 was another major move.

Typically, Natco's strategy has been to work with a partner in markets like the US. The partners handle litigation costs and marketing and share the revenues in return. Alvogen, Mylan, Breckenridge Pharmaceuticals, Dr Reddy's and Lupin are among its many partners.

The journey from investing Rs33 lakh in 1981, to building a pharma giant of Rs15,103 crore in market capitalisation in last four decades has been a roller coaster ride for VC Nannapaneni. Strong impetus to exports and business outside the US are expected to benefit the pharma major in future.