Ranbaxy, which is awaiting US FDA approval for its generic version of anti-acne product Accutane, will be able to capture significant value addition in the generic Accutane market.

Merck KgaA's US subsidiary Genpharm has just secured the final approval from US FDA for this product. This approval also clears decks for approval of Ranbaxy's generic by USFDA in the very near future and neutralizes concerns of increased competition for this generic for Ranbaxy, analysts said here.

This is because Mylan-Merck (Mylan had signed a marketing agreement with Merck in 1999) will have to outsource their bulk drug unlike Ranbaxy which is vertically integrated and has a DMF filing.

Analysts expect Ranbaxy to launch this anti-acne generic in February 2003 at a 40 per cent price discount to Accutane and garner an average 15 per cent market share for the year. Accutane has sales of $ 500 million in the US and global sales of around $ 700 million.

On approval, Ranbaxy is expected to produce its own formulation while Mylan has stated that the formulation will be manufactured by Cardinal Health Inc.

Competition will be low for this generic due to large bottlenecks placed by Roche in marketing and distribution of this product. Accutane of Roche is generally prescribed to teenagers - largely females. Its side effects are major deformities in embryo (when consumed in pregnancy) and suicidal tendencies, analysts said.

The side-effects and product-life-cycle management by Roche has resulted in Roche and the US FDA going for tough prescription as also product distribution norms. These include certification by user and by doctor and the chemist dispensing the product only after getting these certifications. These are then handed over to the company, who can then keep a close track on the users.

Mylan has stated that it will brand this product and analysts believe that all generics will follow suit.

There are only five bulk drug suppliers for Accutane -- BASF (two sites approved in 1982 and 1998), Eastman Kodak (1983), Laborador Mac (1988), RP Scherer (1999) and Ranbaxy (2000). Of these, the first 2 would be the suppliers to the patentholder Roche. Hence the commercial suppliers would be only the last three.

Ranbaxy has made it clear that it sells very little bulk drugs to the developed markets and further states that it never supplies a bulk to a market in which it also sells the formulation, analysts said. This reduces the number of commercial suppliers of bulk drug to only RP Scherer and Labrador Mac (an Italian company).

Mylan markets its branded pharmaceuticals through Bertek Pharma which operates as a stand-alone proprietary pharmaceutical company with independent clinical development, business development and sales and marketing efforts.

While Ranbaxy will have to outsource marketing efforts for this product, analysts believe that Bertek will also have to significantly increase the size of its marketing team to effectively market its generic Accutane.