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Published on 23/10/2020 1:45:37 PM | Source: HDFC Securities Ltd

Pharma Sector Update - Cardiac: the heartbeat of domestic market By HDFC Securities

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Cardiac: the heartbeat of domestic market

Cardiac is the largest therapy (Rs183bn in size) in the Indian pharma market (IPM), accounting for ~13% share in it and growing at 10% CAGR. We expect it to remain a dominant therapy for the next 10-15 years and gain 300-400bps share in the same period. Taking into cognizance the importance of this therapy, we deep dive into the Indian cardiac market to identify the potential winners in this space. Based on our analysis, Lupin, Glenmark, JB Chemicals, & Cipla are likely to gain market share among listed players, and Mankind & USV could gain market share among unlisted players.

 

* A silent killer, cardiovascular disease accounts for one-third of global deaths: Cardiovascular disease (CVD) is the leading cause of mortality and accounts for ~18mn deaths every year, globally. With ageing demographics and changes in diet and lifestyle, this number is likely to increase in the coming years. The WHO estimates that by 2030, CVD would be responsible for more than 35% deaths in India (vs. 25% in 2016) with ischemic heart disease and stroke responsible for >80% of this burden.

 

* Gains the leadership crown in India: Cardiac has displaced anti-infectives as the leading therapy in India (July 20) and has grown at 10% CAGR over the last four years, outperforming the IPM by 200bps. More importantly, the volume growth has been ~6%, which is double the industry average. While domestic firms dominate this market, the share of MNCs is restricted to less than 13%Notwithstanding COVID disruption, the cardiac market grew at 10% YoY vs. 4% decline in IPM from Apr-Aug 20.

 

* Hypertension drugs form 65% of the cardiac market: Broadly, the market is categorised based on treatments for hypertension, hyperlipidemia (high cholesterol), and thrombosis (blood clot). Hypertension (65%) – ARBs (sartans), calcium channel blockers (dipines) are growing faster than beta-blockers (prolols) and ace inhibitors (prils) (Exhibit 9). Hyperlipidemia (19%) – Statins are by far the biggest and most important drug class to manage cholesterol. Thrombosis (14%) – Platelet aggregations inhibitors and clotting factor inhibitors are growing faster than the older drugs such as heparins (Exhibit 13).

 

* Combination regimens, patented molecules are growing faster than market: Key distinct trends observed are as follows: (a) combination drugs for statins/sartans/beta blockers/calcium channel blockers are growing faster than monotherapy; (b) Diuretics (hypertension), clotting factor inhibitors (anti-thrombotic) are emerging as the fastest-growing drug class within respective categories; (cpatented/in-licensed molecules such as Entresto, Xarelto and Brilinta (recently went off patent) are growing significantly ahead of the market.

 

* Lupin, Glenmark, JB chemicals, Cipla are potential winners: We have created a framework to rank companies based on key parameters that are critical to identifying potential outperformers in this space. The key determinants, among others, are (a) portfolio exposure to high-growth molecules; (b) covered market; (c) ability to build brands; (d) historical performance vs the IPM. Based on our analysis, Lupin, Glenmark, JB Chemicals, & Cipla are likely to gain market share among listed players, and Mankind & USV could gain market share among unlisted players (Exhibit 27). Top picks – Cipla, Lupin, and Aurobindo.

 

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