What do the new statin guidelines mean for investment?

Statins are a class of drugs to lower cholesterol levels. This is a huge market because high cholesterol has become epidemic in developed world, especially in the US. I guess everyone understands that high cholesterol is one of the major risks for cardiac diseases. Heart disease is the No. 1 killer of men and women in the United States. It is estimated that one in four deaths, or roughly 600,000 annually in the United States, are caused by heart disease. Understandably, selling statins is very profitable. Do you know how big the sale used to be for the top statin drug, Lipitor sold by Pfizer? The annual sale for Lipitor topped $12 billions. Yes, correct with just one drug, the biggest drug ever in the whole pharma industry! Until now, the indication for statins are purely based on the levels of cholesterol but this is about to change, a big time.

A few days ago, the American Heart Association and the American College of Cardiology released new guidelines for the way doctors treat high cholesterol. In a nutshell, using statins are not just based on the cholesterol levels; rather, it calls for considering the risk factors such as age, weight, blood pressure, or whether a patient smokes or has diabetes. Since such risks are so prevailing for Americans, likely the majority of the people having more or more, it virtually dramatically expands the indication population for statins. With this new guidelines, the medical insurance will cover the drug cost, which means the sales for such drugs will be of moonshot. Actually it is estimated that about 10% of Americans who are not qualified for statin treatment per the old guidelines will now be qualified for the treatment. This a tremendous profit potential for drug companies which sell statins.

While many companies will be the beneficiaries, I think the biggest winners are probably the generic companies which sell cheap statins which have lost patent protection. There are many such generics and more to come in the next few years. I like Teva (TEVA), an Israel company that is also the largest generic company in the world. It is already selling a billion dollar statin, a generic version of Zocor. With the new guidelines, the sales will likely shoot up significantly. Another generic company that may benefit a lot is Mylan (MYL), it is selling a generic version of Lescol, which is not only indicated for both heredity and non-familial high cholesterol, but also for the secondary prevention of cardiovascular disease. One stone for two birds, sort of speaking.