A Billion-Dollar Market to Open "Very Soon"

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Generic-drug makers' long wait may finally be over. Bloomberg quoted FDA Commissioner Margaret Hamburg as saying that the agency will have guidance for how to get biosimilars approved "very soon."

That's an untapped multibillion-dollar market, Fools.

Currently, generic-drug makers can get copycat versions of small-molecule drugs approved, but there's isn't a corresponding pathway to get biologics approved. Last year's health-care reform law provided a framework for the FDA to establish one, but the agency hasn't determined the rules yet.

I don't think the agency is dragging its feet; it's just a very complicated issue. Because they're produced in living cells, there are a lot more variables in manufacturing biologics compared to small-molecule drugs that are produced through chemical synthesis. There's a reason they call them biosimilars.

Teva Pharmaceutical (Nasdaq: TEVA  ) hasn't been willing to wait. The drugmaker filed for FDA approval of its biosimilar version of Amgen's (Nasdaq: AMGN  ) Neupogen under the standard FDA approval process for biologic drugs. If it's approved, the drug would technically be a branded drug with all the rights and privileges that go along with that, but it also means it'll have to meet the higher standard.

When the agency finally releases its guidance, the thing investors should look for is whether clinical trials will be required to prove that the biosimilars work the same as their branded counterparts. In addition to delaying biosimilars' entry into the market, clinical trials could be prohibitively expensive, making them not worth developing. Merck (NYSE: MRK  ) was working on an improved version of Amgen's Aranesp, but ditched the idea when the FDA requested a cardiovascular study.

My guess is that the agency will tailor the rules to the individual drugs. Well-characterized drugs will have more lenient rules than those where the variables are less-known. The FDA actually approved one generic biologic years ago, Novartis' (NYSE: NVS  ) Omnitrope, because the company argued that human growth factor was well characterized enough.

I guess we'll know "very soon."

Novartis is a Motley Fool Global Gains choice. The Fool owns shares of Teva Pharmaceutical Industries. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.

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