I was reading about xenotransplantation a few days back. Pig kidneys, genetically edited, transplanted into humans. eGenesis, a Cambridge biotech, did the first one in March 2024 (Indian company Prana XT has planning to do similar). The patient survived on it for six months, the longest anyone has lived with a pig organ. That is a genuinely wild sentence to write in 2026.

Somewhere in that reading I noticed a name I did not expect. NATCO Pharma had put 8 million dollars into eGenesis. An Indian generics company, known for suing MNCs over patents and winning, writing a cheque into pig kidney biology.

That felt odd enough that I went and looked at what else NATCO was doing. And that is how I ended up staring at the stock price instead of the kidney.

NATCO is trading at a trailing PE of about 11.7x. Book value per share is around 515. The stock itself is trading around 900 with a mcap of 16,500 Cr. For a pharma company with deep pockets and a pipeline that includes a shot at the next Ozempic in the US, 11.7x PE looks like someone left the door open.

So naturally the question arises, is it actually cheap, or am I about to fall for a number that means nothing.

What NATCO actually does

NATCO’s core business is filing what are called Para IV challenges against patented drugs in the US, mostly complex generics in oncology. This is not the easy generics game where fifteen companies file on day one and margins get commoditised within a quarter. NATCO specifically hunts for molecules that are hard to manufacture, hard to litigate, and where being first matters enormously. Win one of these and you get a period, sometimes 180 days, sometimes years, where you are one of a handful of companies allowed to sell that drug in the US. Margins on that window can be extraordinary.

They pair this with API manufacturing, a domestic India formulations business, and a small but growing crop protection unit that is actually being spun off into a separate listed company later this year. Over the last four years they also built actual operating presence in Brazil, Canada, and now South Africa through a 35.75 percent stake in Adcock Ingram, rather than just exporting into those markets. Five countries now generate real base earnings instead of one.

That is the company. A patent litigation and a manufacturing company that occasionally hits a jackpot, wrapped around a slowly diversifying base.

The Revlimid story

If you want to understand why the PE looks the way it does, you have to understand Revlimid.

Revlimid, generic name lenalidomide, is a multiple myeloma drug that was one of the best selling cancer drugs on the planet, originally made by Celgene and then Bristol Myers Squibb after the acquisition. NATCO won the right to sell a generic version in the US through a settlement, but under volume caps that increased gradually each year. Full unrestricted volume only kicked in from the end of January 2026. The underlying patent expires in April 2027.

For about four years, this one molecule was doing an enormous amount of the heavy lifting on NATCO’s income statement. FY25 revenue was 4,784 Cr, EBITDA margin was 53.3%, net profit was 1,883 Cr. Those are not normal generics-company numbers. Those are jackpot numbers, and everyone including NATCO’s own management knew it.

FY26 is the year that jackpot started rolling off. Consolidated revenue fell to 4,376 Crore, EBITDA margin compressed to 39.6%, net profit fell to 1,419 Crore. By Q4 FY26, management said on the earnings call that there was literally zero Revlimid contribution in the quarter, and Q4 revenue nearly halved year on year to 817 Crore. They called this the new base quarter going forward, not a one off dip.

So when you look at a PE of 11.7x today, you are dividing today’s price by an EPS of roughly 80 that still has Revlimid’s fingerprints all over it, plus a one time 115 Crore tax benefit from switching tax regimes. That is the trap in reading this stock off a screener.

So is it actually cheap?

Do the same exercise on what management themselves are guiding for FY27, net profit of 700-750 Crore. On the same market cap of 16,570 Crore, that is a forward PE closer to 23x. Not 11.7x.

That is not a cheap stock. That is a stock priced for a company going through a guided earnings cliff, where the market has already done the arithmetic you and I just did.

There are also structural reasons the market refuses to reward this business with a rich multiple even when earnings are peaking. NATCO’s own leadership describes their strategy as chasing jackpots. That is refreshingly honest, but it also means the market has never fully trusted the durability of any single year’s profit, Revlimid included. Even at the absolute peak of Revlimid earnings, NATCO never traded at the kind of multiple you’d give a steady compounder. The market was pricing in exactly this kind of cliff, years in advance.

Then there is the cash. NATCO is sitting on roughly 2,400 Crore of net cash, earning close to bank interest, doing nothing productive. Management has explicitly ruled out a buyback and says the money is being kept for a large acquisition, ideally outside India, that has not yet materialised.

Where the actual upside sits

This is not a company without a story. It just is not the story the trailing PE is telling you. The big one is semaglutide in the US, the molecule behind Ozempic and Wegovy. NATCO claims sole first to file status on certain strengths of both. No FDA approval yet, Wegovy litigation is still unsettled, but if this lands the way Revlimid did, it genuinely could be the next multi year earnings event. It is also, by definition, unknowable in timing right now, which is exactly why the market is not pricing it into today’s multiple.

There is also a real pipeline behind that one headline drug. 28 Para IV filings, over 20 of them first to file either solely or shared, 17 already approved in some form, with launches management says will play out anywhere between now and 2035. Individually most of these are small. Collectively, this is what NATCO actually is, a company that plays a portfolio of long dated options against patents, and every few years one of them pays off enormously.

And then there is the eGenesis bet. 8M dollars is nothing on NATCO’s balance sheet. But it tells you something about how this management thinks. They are not just filing Para IVs anymore, they are taking small stakes in genuinely frontier biology, betting that if xenotransplantation works even a little, being an early cheque writer in a multi-bagger platform beats not being in the room at all. Management in their own words, called it an idea of the decade. Honestly, it can also be a coin flip that could be worth nothing.

In summation, NATCO is not a bargain sitting in plain sight. The trailing multiple is doing exactly what trailing multiples do after a jackpot year, understating how much the underlying earnings are about to shrink. On the number that actually matters, next year’s guided profit, the stock is priced roughly in line with, maybe slightly above, where a diversifying, still lumpy generics business probably deserves to sit.

What makes it interesting is not the current price. It is the question of what happens to that 2,400 Crore of idle cash, whether semaglutide in the US turns into the next Revlimid or turns into another expensive litigation, and whether the 5 country base business NATCO has spent four years building can eventually smooth out the earnings enough that the market stops discounting every good year of theirs.

None of that is answerable by looking at a PE ratio. It requires actually reading the concalls, tracking the FDA filings, and watching what they do with that cash pile over the next few quarters. I will be doing exactly that.

Disclaimer: Not a recommendation or investment advice. I work in equity research and hold opinions on this company. Do your own verification before putting a single rupee to work. The only person responsible for your money is you.