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Pharma sector: Traditional Vs Lifestyle - Views on News from Equitymaster

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Pharma sector: Traditional Vs Lifestyle

Jan 5, 2005

Indian pharmaceutical industry is different from the global pharmaceutical industry. While in the global pharma industry, lifestyle segment drugs rule the roost, anti-infectives continue to dominate the domestic market. The reason for the same is higher prevalence of infective diseases as well as lower incident of lifestyle diseases due to social structure. Let's look at the following chart.

Major Therapeutic Segments Rs bn Market Share
Anti-Biotics 33 15.70%
Cardiac 10.2 6.90%
CNS and Psychatric 9.6 6.50%
Vitamins 8.9 6.10%
NSAID 8.8 6.00%
Respiratory 7.8 5.30%
Antasids and anti ulcerants 6.2 4.30%
Source: Equitymaster

Although the anti-infectives segment is dominant in the domestic market, lifestyle drugs are catching faster and have taken a center-stage in the last few years when one looks at the growth rates in the sector.

At the global level, for the first time in 2003, CVS (cardiovascular) drugs overtook anti-ulcerants as the largest therapeutic class worldwide. The better performance by the CVS segment can be attributed to launch of new drugs as well as strong growth shown by ‘Lipitor' (up 20%).

Global Pharma Growth
2003 2002 2001
Cholest. & Triglyceride Reducers 14% 12% 22%
Anti-ulcerants 9% 9% 14%
Antidepressants 10% 5% 20%
Antirheumatic Non-Steroidals 6% 1% 16%
Antipsychotics 20% 19% 30%
Calcium Antagonists, Plain 2% -1% 4%
Erythropoietins 16% 18% -
Anti-Epileptics 22% - 22%
Oral Antidiabetics 10% 0% 30%
Cephalosporins & Combinations 3% -3% 0%
Overall Pharma growth 11% 6% 16%

Lifestyle drugs are basically medicines used to cure diseases that are linked to stress, urbanization, changing diet pattern and lifestyle of high-income level population. Major drugs in this segment are anti-diabetes drugs, cardiovascular drugs, gentio-urinary and sex hormones drugs, CNS drugs, anti-depressants and psychiatry.

India continues to be a market where anti-infectives continue to lead the therapeutic drug class with about 16% market share. Having said that, lifestyle drugs have been the key growth driver for the domestic pharma industry and this is the reason Indian companies have started focusing on lifestyle drugs with slew of launches in the last few months.

Among the various therapeutic segments, respiratory and anti-infectives (non lifestyle drugs) fuelling growth till FY02. But, as is evident from the table below, there has been a slowdown in these segments. At the same time, impressive growth in the life style drug segment has brought a new lease of life. This can be attributed to the changing lifestyle and increasing urbanization in India. The following table shows the market growth rates for FY04 and FY03.

Therapeutic Segment Market Growth Rate FY03 Market Growth Rate FY04
Respiratory 5.60% 9.00%
Anti-Infectives -0.20% 5.00%
Lifestyle Drugs:
Anti-Diabetics 20.30% 11.60%
Cardio Vascular Segments 12.40% 17.20%
CNS 13.40% 8.90%

While Indian markets seems to be catching up with the global trend of moving into lifestyle segments, we still have long way to go. The higher share of lifestyle drugs is a reflection of the changing patterns in the society. As the economy progresses, we will witness higher growth rates in the lifestyle segment. Since the lifestyle segment is not price sensitive, major portion of the growth will be driven by value rather than volume. Consequently, margins are also high. With the new patent regime coming into force, we might see launches on this front.

Where are the Indian companies? Rising demand and relatively better margins have resulted in Indian companies concentrating more on lifestyle drugs in the recent past. For instance, in case of Nicholas Piramal, the share of lifestyle drugs in its portfolio increased by about 6% in the last two years (24% in FY02 to 29% in FY04). In case of Sun Pharma, the three segments of lifestyle drugs accounted for 61% of its domestic prescription sales in FY04. Companies like Cipla and Ranbaxy, who have been big players the traditional segments, have launched several products in the lifestyle category in recent times. While we expect higher benefits from such an industry transition in the medium-term, as competition increases, margins will be squeezed.


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