X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Pharma: Hale and ‘heart’y! - Views on News from Equitymaster
StockSelect
  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

Pharma: Hale and ‘heart’y!
Jul 13, 2005

Cardiovascular segments (CVS) currently represents the largest therapeutic category worldwide owing to a shift in the demographics from the young to the aged and a change in lifestyles. A number of patients are seeking cardiovascular therapies mainly driven by diabetes and obesity. Statins constitute a major portion of the CVS therapy segment and are among the largest selling drugs worldwide (total statins market is above US$ 20 bn). Currently, they have gained importance as a couple of statins are scheduled to go off patent in 2006. In this article, we take a look at the revenue earning potential of the statins industry.

Statins unplugged
As far as therapeutic classes are concerned, cholesterol reducers lead the segment with US$ 30 bn revenues in 2004, followed by anti-ulcerants (US$ 25 bn), anti-cancer (US$ 24 bn) and anti-depressants.

Amongst cholesterol reducers, statins have assumed significant importance over the past few years and have grown at a CAGR of 25% between 1992 and 2002. Statins are cholesterol-lowering agents used to treat and prevent heart disease. Currently, some of the statins, which have achieved blockbuster status are Atorvastatin, Simvastatin, Pravastatin and Lovastatin.

The limelight is on…
Two statins currently enjoy the status of the top two best-selling drugs worldwide. Lipitor (Atorvastatin) followed by Zocor (Simvastatin) head the pharma product list currently. These two products constituted over 50% of the revenues generated by the ‘cholesterol reducer’ therapeutic class.

Lipitor (Atorvastatin) innovated by Pfizer, earned the distinction of being the pharmaceutical industry’s first US$ 10 bn product garnering revenues to the tune of Rs 12 bn in 2004 (23% of Pfizer’s revenues). The drug held approximately 40% of the worldwide sales in the lipid-lowering market and more than 42% of the US market in total prescriptions. With its ability to bring the vast majority of patients to target cholesterol goals, with an excellent safety profile and proven range of unparalleled cardiovascular benefits, Lipitor has continued to gain wide physician and patient acceptance.

Merck’s product Zocor (Simvastatin) earned revenues to the tune of US$ 5.9 bn in 2004 to become the second largest selling product in the world. It must be noted that while the patent for ‘Simvastatin’ already expired in the European markets in 2003, the patent in the US market will expire in 2006, opening the door for generic players to flood in.

India: Jumping the ‘statins’ bandwagon
2006 is likely to be an action packed year for the global pharmaceutical industry (read generic companies) as a large number of blockbuster drugs are scheduled to go off patent. The global generics market is estimated to be worth US$ 55 bn post 2006. The statins that will lose patent protection in the US markets in 2006 are ‘Simvastatin’ and ‘Pravastatin’ (US$ 4 bn product of Bristol Myers Squibb).

Biocon is one of the first companies to realise the importance of statins and in fact capitalized on this opportunity to launch its IPO. In FY04, revenues from statins soared 152% YoY, contributing 60% to overall revenues as against 47% in FY03. Biocon supplies ‘Simvastatin’ and ‘Pravastatin’ in the bulk form to generics players in Europe. Since the generics market is competitive in nature, the case for outsourcing the bulk drug requirements is strong, which is where Biocon stands to benefit. The estimated US market size of these two drugs is about US$ 7 bn post 2006. Biocon is well placed to capitalize on this growth opportunity, as it has got the capacity and the capability to deliver these technologically complex products at the cheapest rate.

Recognizing the might of ‘Lipitor’ (Atorvastatin), Ranbaxy filed a Para IV filing challenging the validity of Lipitor’s patents, to launch a generic version of the drug much before its scheduled expiry in 2011. The decision on the same by US courts is expected either towards the end of 2005 or early 2006. However, it must be noted that a win for Ranbaxy will earn it a 180-day exclusivity period to manufacture and market the drug with a substantial upside to its revenues. On the other hand, Pfizer is under pressure as the drug is the star of the pharma giant’s portfolio and entry of generic players ahead of 2011 will significantly impact its revenues. Just to give an idea, if Pfizer loses the case, it will lose around 5 to 6 years of patent protection on the drug. This will translate into potential revenue losses to the tune of US$ 50 to 60 bn. ‘Simvastatin’ also remained the best selling cardiovascular product for Ranbaxy generating revenues to the tune of US$ 33 m in 2004. It was also amongst the top 5 products for the company.

So, what’s in store?
Going forward, with changing lifestyles and increased risk of chronic diseases, cardiovascular related in particular, the growth potential of statins is unlikely to diminish in the medium to long term. Therefore volumes are most likely to record robust growth rates going forward. However, as these drugs start losing patents, large-scale entry of generic companies to grab a slice of the statins pie, will lead to price erosion.

Having said that, manufacture of statins also requires expertise in fermentation technology, which is not likely to be mastered by all companies. Therefore, though there will be price erosion, chances are that it may not be as severe as is the case with most of the generics.

Therefore, as is the case with any generic product, the key to survival in the statins market will be low cost advantage, superior technological capabilities and increased visibility amongst the doctor and patient class.

To Read the Full Story, Subscribe or Sign In


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE HEALTHCARE


Feb 23, 2018 (Close)

S&P BSE HEALTHCARE 5-YR ANALYSIS

COMPARE COMPANY

MARKET STATS