Markets Slide Down In Search of Fresh Traction
The stock markets were down after a good run in the previous week
On Episode 585 of The Core Report, financial journalist Govindraj Ethiraj talks to Vinay Singh, Co-Founder and Partner at Fireside Ventures as well as Sheetal Sapale, VP Commercial at Pharmarack.
SHOW NOTES
(00:00) The Take
(01:00) Markets slide down in search for fresh traction
(03:41) Gold prices are back up
(04:10) Britain has kissed and made up with the EU as it signs another trade deal
(05:42) Why sales of cardiac drugs are shooting up and the segments driving it
(11:26) How silver consumers are driving demand for new types of products and services
NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on [email protected].
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Good morning, it's Tuesday, the 20th of May and this is Govindraj Ethiraj headquartered. Broadcasting and streaming from Mumbai, India's financial capital, are top stories and themes.
The stock markets slide down as they search for fresh traction.
Gold prices are back up.
Great Britain has kissed and made up with the European Union as it sightens yet another trade deal.
Why sales of cardiac drugs are shooting up and the segments driving it and why you should be careful.
How silver consumers or aging millennials are driving demand for new types of products and services after cure is prevented.
The Markets Are Down
The stock markets were down after a good run in the previous week though the markets had already begun drifting down on Friday on the last day of trade last week. The Sensex on Monday fell about 271 points to close at 82,059. The NSE Nifty 50 was also down 75 points to close at 24,944.
The Nifty small cap index and the Nifty mid cap both were a little better, rising about half a percent that's a small cap and the mid cap a little less than 0.1 percent. While Indian markets look for some fresh cues, Wall Street is and where the action will be in the next day or two. Stocks fell on Monday as a downgrade of the U.S. credit rating by Moody's caused treasury yields to jump. The Dow Jones was down about 230 points on Monday morning. The S&P was down about 0.1 percent. The Nasdaq composite was down about 1 percent.
Now all of this followed that downgrade of U.S. credit rating and instead by Moody's ratings which led those treasury yields to jump once again. Longer date treasury yields hit the psychological 5 percent level after the credit rating was reduced to AA1 from AAA. Longer dated treasury yields hit the psychological 5 percent level after Moody's reduced America's credit rating to AA1 from AAA.
The 10-year bond yields were at 4.5 percent. Moody's blamed successive presidents and congressional lawmakers for a ballooning credit deficit and it said that showed little sign of narrowing according to Bloomberg. The 10-year yield hit 4.5 percent as we just said and that is the level that pressured equity markets last month and also put pressure on Trump to take a step back from the stiff tariffs. Last week was a good one for Wall Street just like India and the technology heavy Nasdaq composite was up almost 7 percent and the S&P 500 5 percent and the Dow Jones was up about 3 percent. That's last week.
Rupee Stays Strong
The Indian rupee was slightly higher on Monday thanks to a weaker dollar concerns over U.S. debt and deficits following the Moody's downgrade of America's sovereign credit rating last week. The rupee closed at 85 rupees 40 paise against the U.S. dollar up slightly for the day. It had fallen to a low of 85 rupees 60 paise in early trading but reversed course as the dollar declined by about 0.6 percent against major peers according to Reuters which also added that Asian currencies were also strong on Monday with a Thaibat leading gains with a 0.8 percent rise. ING bank in a note reported by Reuters also said that the link between U.S. sovereign risk treasuries and the dollar is one of capital flight adding that it expected the risk premium to stay in the dollar this week.
Gold Is Up
Meanwhile gold prices are back up thanks to that weaker dollar and safe haven demand after Moody's downgraded the U.S. government's credit rating. Spot gold was about $3,239 per ounce which reversed the previous session's losses and oil was also weighed down by the same downgrade which as you can see is having effects or impact across the markets as it should and was quoting near $65 a barrel.
Britain Makes Up With The European Union
Trump's tariff moves have led to more trade partnerships and coming together of nations than in a long time. Whether this was the intended consequence of course is not clear. Britain agreed to the most significant reset of defence and trade ties with the European Union since Brexit on Monday after U.S. President Donald Trump's appending of the global order forced the two sides to move on from their acrimonious divorce according to Reuters. This comes nine years after it voted famously to leave the bloc and Britain, a defence heavyweight, will take part in joint procurement projects, said Reuters. The EU and Britain also agreed to make it easier for UK food and visitors to reach the EU and signed a contentious new fishing deal. Trump's tariffs alongside warnings that Europe should do more to protect itself has forced or have forced governments around the world to rethink trade defence and security ties and this has brought, according to Reuters, British Prime Minister Keir Starmer close to France's Emmanuel Macron and other European leaders.
Starmer who backed remaining in the EU in the Brexit referendum almost a decade ago also bet that offering tangible benefits to Britain such as the use of faster e-gates at EU airports will drown out the cries of betrayal from Brexit campaigner Nigel Farage. This is the third deal Britain has struck this month including of course a fairly significant though much delayed one with India though the details and fine print of that is something that we are waiting for.
Sales of Cardiac Drugs Are Rising
while the overall pharmaceutical industry continues to grow. The cardiac segment which represents the largest segment with about 14 percent of total industry sales grew at close to 11 percent last month amongst the highest across segments.
Cardiac also has the highest sales value. A report from PharmaRac, the industry tracking agency, says this reflects a significant expansion in cardiac related drug sales over the past few years. The report also quotes external data to point out that the prevalence of coronary artery disease in urban India has gone from about one to two percent in the 1960s to about 10 to 12 percent in recent years.
On the other hand rural areas have also seen an increase from about two to three percent to about four to six percent in the same period. Importantly cardiovascular diseases or CVDs now account for about 27 percent of all deaths in India highlighting the significant health burden and corresponding demand for cardiac medication says PharmaRac. I spoke with Sheetal Sapale, vice president at PharmaRac and a frequent guest on the core report and I began by asking her why the sales numbers were rising at this pace and also to break it down for us.
INTERVIEW TRANSCRIPT
Sheetal Sapale: Yeah so cardiovascular diseases are something which have really picked up well. I wouldn't say picked up well but yes they have increased in the market recently. So the prevalence incidence of cardiovascular diseases was close to the extent of 10 percent in the urban population which has now moved to 12 percent and it was around two to three percent in the extra urban population which is now four to six percent.
The way the country is progressing actually the lifestyle diseases now have started also percolating to the lower town classes or the extra urban. So the life you know or you have all the modern facilities, ease of life as well as the stress of urban life now has also started percolating to the extra urban life and obviously it also connects with association with lifestyle diseases especially cardiovascular diseases and once you talk about cardiovascular it everything gets connected. Cardiovascular gets connected to diabetes, gets connected to some other lifestyle diseases as well.
Govindraj Ethiraj: Right and how are you seeing growth in rural areas specifically? I mean are you able to make out from your existing data how the I mean what's the difference or is there a split?
Sheetal Sapale: I wouldn't be able to talk from existing data on the split as such. See I wouldn't talk about incidence increasing in the rural population. The country is broken down into urban and extra urban and rural.
It would be the extra urban population which would be the tier three, tier four cities which may be driving the growth of the market but then in terms of contribution it is still the urban cities which are the biggest contributing chunk. So growth is happening in the extra urban layers but then major contributing cities would be the urban cities.
Govindraj Ethiraj: Right so if you were to break down the cardiac itself so when we say 11 percent growth in the month of April or what is driving the growth within this? I mean are there some kinds of drugs which are more prevalent than the others?
Sheetal Sapale: Antihypertensives, lipid lowering drugs and heart failure drugs. So these are the major chunk and all of them are growing pretty well. In fact antihypertensives are more than 50 percent of the cardiac market.
Many of the patients actually are on antihypertensives for a lifetime. So it's one drug per day, one tablet to be taken per day but then lipid lowering agents and heart failure drugs they are also picking up well. In fact they fall in the little more critical segment of the cardiovascular diseases and it is not just the incidence but then awareness and willingness to pay and willingness to get treated is something which is also pushing use of these drugs or growth of this section.
Govindraj Ethiraj: But when you say that many of these drugs are consumed or prescribed for a long time, almost a lifetime and yet the market is growing that means that there are newer people coming into the market so to speak.
Sheetal Sapale: So two types of things, newer population of say age 50 plus, younger population also getting inflicted with these conditions. So work-related stress, it may actually lead to hypertension. Heart failure, now heart attack or heart failure is not a condition which somebody will see only in the age group of 50 plus.
It's a slightly more common condition also seen in certain candidates in the age group of 30 to 40. So the age group is also coming down.
Govindraj Ethiraj: Amongst the other categories that are growing very fast, I just want to pick one, it seems to be urology and is that new or is there some other reason for it?
Sheetal Sapale: So it could not be a new thing because urology as a segment has been growing at that pace for quite a good number of years. So I don't find that you are an outlier or anything. So I mean in fact our capture has also improved to a good extent.
Govindraj Ethiraj: Then coming back to cardiac, would you say that most drugs in the cardiac segment now including hypertensives and lipid lowering are affordable and accessible to most people?
Sheetal Sapale: Antihypertensives were never that expensive products for the general population because nothing in that category was under patent protection or something. But yes, in the lipid lowering category and the heart failure drug, especially the heart failure drug after Vyadmada went off patent, a good amount of this treatment has started getting affordable. Also the scientific studies that Rovatis had published at the time of launch of Vyadmada also ensures or pushes the patients to go for this treatment and first of all the patient is pushed to go for the treatment which is now very affordable.
Govindraj Ethiraj: Sheetal, thank you so much for joining me.
Sheetal Sapale: Yeah, thank you so much.
Ageing Millennials and New Markets
Sticking to health, as concerns about health rise so do opportunities for investing in solutions to them. One category that is perhaps more disposed to caring about health and maybe doing and spending on it is the silvers or ageing millennials, while Generation Z on the other hand is focused on areas like health and gut, which is of course a separate opportunity. Not surprisingly, funds like Fireside Ventures are scouring for and betting on companies in this space.
If our earlier report on cardiac care focused on the cures, this is broadly where the prevention lies, at least the opportunity in the kinds of companies, if not the specific ones. I spoke with Vinay Singh, co-founder of Fireside Ventures and I began by asking him where he was seeing specific demand in the silver category and the background to it.
I spoke with Vinay Singh, co-founder of Fireside Ventures and I began by asking him where he was seeing specific demand in the silver category and the background to it.
INTERVIEW TRANSCRIPT
Vinay Singh: On the silver side, what we are seeing especially post-COVID, right Govind, is that COVID was accelerated for digital adoption. Whatever inhibitions or objections, just inertia that people had in terms of adopting digital technologies, they had to find a way to just adopt it to get stuff going whether it was for professional or for just personal purposes or I don't know, stocking their homes with food or medicines or just having doing digital consultation with doctors, communicating with their family etc. Now, the two paths to silvers, one is people who already are in the 55 plus age bracket and then there is a whole emerging what we call the ageing millennial cohort.
And I think millennials turned, if I'm not mistaken, about 45 this year or 46 this year and they will in the next 10 years certainly become silver and we know that millennials are very digital native when it comes to either discovery of products and services or consumption of services or buying of products. And that's the spectrum that we are dealing with, right. So, there's already a silver who has become digital savvy because of the COVID acceleration, that's on one end and on the other end in the next 10 years you're having ageing millennials becoming silvers themselves.
And that's the spectrum that we're dealing with. Now, and they have a whole bunch of things that they are concerned about, right. And especially COVID was an accelerant for another category of behaviour which was preventive healthcare.
Or preventive wellness. Yes, some of us go for our annual checkups, the number of people per capita going for annual checkups has actually taken a jump. We were forced to measure our SpO2 levels because we wanted to understand the impact of COVID.
Now, variables have become much more common in everyday use in terms of smartwatch penetration, veins, patches, various form factors, but variables which allow you to measure some vitals about your body. But between the uptick of, hey, I want to know more about my body through diagnostics and I want to continuously monitor it through variables, we are seeing that a lot of these people have taken a keen interest in their own health, in their own wellness and therefore wanting to do things that prevent issues in the future. And that leads to products and services which could be around bone health, around joint health, around gut health, around wellness, around these areas which could be either in the form of topicals, ingestibles, procedures or benefits.
Govindraj Ethiraj: Do you have a sense that, you know, I mean, I'm just guessing it seems a little natural that as people get older, and as you say, they approach silver status, which means they're closing retirement or close to retirement, they're also careful about what they spend. So therefore, while they could spend a lot, what they will spend on may not be as big, but their verticals may be large.
Vinay Singh: No, I think it's going to be a bit of both, right? Like, for example, I don't think that we have wealth solutions today, in general for the population, leave alone specialised wealth solutions for silvers. They have properties put into reverse mortgages put into, you know, living a better lifestyle today, there's a lot to be done.
What we are seeing from our vantage point, at least what we are seeing is that there are already big spend pools that are getting organised. And there are new emerging spend pools. For example, we met a couple of businesses where they specialise in senior travel.
And this is not spiritual travel. This is either domestic or global travel. Because the other issue that they are seeing is empty nesters, especially people after they have become, you know, lost one of their partners, get very lonely.
And one of the ways to deal with it is to travel. And they do it in groups. They also have a doctor travelling with them in case there's an issue, etc.
So yeah, that's another big vertical. Another big vertical we are seeing emerging is just senior living. I mean, this was a concept that did not exist in India 20 years ago, right?
And today we see most big cities, whether it's MCR, whether it's Mumbai, Pune, Hyderabad, Bangalore, we are seeing senior living as a concept coming up in the real estate area.
Govindraj Ethiraj: Yeah. So at this point of time, I mean, which of these categories look, let's say, more profitable? I mean, I know that senior living has been around for some time.
Care as a platform has been around. And I also realise or recognise that not all of it is seeming profitable. So the ideas are good, and the need is there.
So I mean, as you look back, in terms of what's been already done or attempted, and in the entire silver category, what are the top two or three categories that to you at this point seem profitable, exciting, and I'm leading with the word profitable.
Vinay Singh: I was kind of trying to address that saying that senior living may be profitable. We haven't spent enough time on that, where we are spending a lot of time just given our DNA of consumer brands is on the health and wellness side. We are seeing an explosion of opportunities out there.
We are spending some time on at home devices, appliances, etc., which might be either just appliances or variables, might take a nature of more testing diagnostics data. We're spending some time on services, because especially single speciality, somebody who just wants to get a small procedure done, they need to go all the way to a multi-speciality hospital, expose themselves to, you know, super dogs, etc. These are three areas where we feel a lot of excitement.
Interestingly, what we have started also seeing go in is, for example, mainstream categories. While our exploration led us here, food categories, actually creating fortified foods, which are specifically meant for a certain set of the single population. Women, postmenopause, loss of bone density, osteoporosis, osteopenia are issues with all women in their 50s and 60s.
Govindraj Ethiraj: So, in your portfolio of investments present and maybe work in progress, where do you see this category in terms of, let's say, the overall allocation as things stand and how it would be?
Vinay Singh: Actually, the answer is different for how you cut the data, right? For example, in about Fund One, which was about five, six years ago, we had maybe one company doing wellness, which was Kapiva. It's trying to solve issues of diabetes and so on.
As we got into Fund Two, we had four companies in wellness. In Fund Five, we already have six companies. In terms of percentage allocation, Kapiva would have taken, what, 6-7% of the fund.
And today, we're already up to about 20% out of the fund investing in healthcare and wellness. Now, is all the 20% going into only silver-related themes? No.
Some of it, for example, in Fund Two, has gone into gut health. Now, there's a company called The Good Bar. It's in the probiotic space.
They also cater to seniors. A good third of their business comes from 50-plus people. But two-thirds of the business is with younger people.
So, the right way to look at this is what percentage of the health and wellness business is coming from seniors. And that is across businesses except for very specific, let's say, we have a business in the fertility space, which obviously is the late 20s, 30s. But if it's a general wellness company, at least a third of the business comes from 50-plus people.
If you look at e-commerce adoption and contribution of 50-plus to e-commerce, it's less than about, single digits, it's about 78%. So, there's a significant adoption of health and wellness online products-slash-services amongst this cohort as compared to general population groups.
Govindraj Ethiraj: Thank you so much for joining me.
