Natco Pharma has built its business around a familiar playbook for years: cracking complex and difficult-to-make generics that can deliver outsized earnings if they succeed. But as competition intensifies and the growth in generics stalls, the Hyderabad-based company is looking beyond the US, its key market, to broaden its bets, both geographically and further up the value chain.
The mid-sized drugmaker, known for its aggressive patent challenge strategy for complex or specialty molecules, especially in the US generics market, has acquired a significant stake in South Africa’s second largest drugmaker, and has raised investments in innovation.
“Globally, generics is consolidating,” chief executive Rajeev Nannapaneni told Mint, pointing out that most Western companies have exited the commodity generics space, leaving Indian drugmakers to compete fiercely with each other. While this has helped Indian pharma companies grow dramatically over the past decade, it has also created a new challenge: growth is becoming harder to find.
New markets
In July 2025, Natco acquired a 35.75% stake in South African firm Adcock Ingram, in a deal valued at $226 million. A year later, it raised its stake to 49% with a total investment of ₹3,000 crore (approximately $315.4 million) for the total stake.
In July, the company’s board approved a fundraise of ₹2,000 crore through a qualified institutional placement (QIP), which the company says will be used to fund further inorganic growth.
Natco is seeking a bigger “bang for your buck” by expanding its geographical footprint, said Nannapaneni. Adcock Ingram gives the company access to a market where building a business organically would have been difficult. “South Africa is a unique market. I think you need to have a good portfolio,” said Nannapaneni.
Unlike the traditional Indian pharma presence in South Africa, which has often been built around HIV tenders, Adcock gives Natco an access to a broader portfolio, including branded over-the-counter products. Meanwhile, the Indian drugmaker will bring its own pipeline to South Africa to improve Adcock’s growth and profitability.
“I think the value of Natco and Adcock's pipeline will come in the next two to three years, not today. So, we are playing the long haul… But Adcock also has a lot of meaningful strength to our base business,” Nannapaneni told investors at an earnings call in August, adding that the 35-40% of the firm’s earnings for the first quarter came from Adcock. “So, we are able to sort of build that strong base business; so it brings less volatility in our earnings, which has always been the case at Natco. I think we're trying to strengthen that,” he added.
Strategic shifts
The recent decline in earnings that several companies, including Natco, have posted on account of loss of exclusivity for blood cancer drug Revlimid, highlights the issue. In the first quarter of FY27, Natco’s revenue fell 43% year-on-year while net profit slid 57% largely due to loss in sales of Revlimid that went off patent in January.
The loss of Revlimid reflects a phase of transition for the firm, said analysts.
In FY27, India would be a key driver, especially with blockbuster semaglutide, that is used to manage diabetes and obesity, being launched by the firm in March 2026, which would accelerate domestic growth to 20% in FY27, noted ICICI analysts in a note on 13 February. “Management is investing its windfall gains from gRevlimid (generic Revlimid) towards R&D for future pipeline building and M&A in new promising areas,” the note said.
While it is hard to pinpoint how much each company that inked a deal with Celgene made from generic Revlimid, as Indian firms do not give a product-wise split, Vishal Manchanda, pharma analyst at Systematix Group, estimates that Indian generic firms collectively made $4–5 billion from the drug between 2022 and 2026. Natco’s consolidated revenue and net profit peaked in FY25 at ₹4,784 crore and ₹1,883.4 crore, respectively.
Nannapaneni said the Indian industry built on generics saw steady income but limited growth, making the pursuit of complex products increasingly important. This doesn’t mean the small molecule opportunity is decreasing; this is about innovators shifting focus to niches.
The company expects difficult-to-make generics, including peptides, oncology products and biosimilars, to account for the bulk of future industry earnings.
Natco will still remain primarily a generics company, said Nannapaneni, adding that one success is enough to drive earnings for two to three years. “These complex (drugs) are harder to do. But even if you have less than five successes in a decade, it more than takes care of your earnings,” he added.
Beyond generics
The bigger question, however, is whether Natco can eventually move beyond generics. The company has started making small, calculated bets on drug discovery and novel technologies, including its in-house candidate NRC2694, which is being developed for late-stage head and neck cancer.
On 25 August, it announced an investment of $14 million in eGenesis, a company working on CRISPR-Cas9 gene editing. This follows an initial $8 million investment in the firm in 2024.
For a mid-sized company, Nannapaneni sees such moves as a way to participate without putting the business at stake. “You need to dabble in it,” he said, arguing that the binary risk of drug discovery is necessary, and that there is a need for an ecosystem better suited to absorb failure.
For Indian drugmakers to really go down the innovation path, promoters need greater risk appetite, investors must be willing to fund that risk, and regulators need the capacity to review novel technologies faster, said Nannapaneni.