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Europe's got 'em. Now Japan has 'em. When will the U.S. follow suit?
We're talking about follow-on biologics, also known as "biosimilars," depending on the country of origin. Novartis (NYSE: NVS ) said yesterday that it had received approval of the first biosimilar in Japan. The drug, somatropin, is a generic version of Pfizer's (NYSE: PFE ) human growth hormone, Genotropin.
Technically, Japan isn't ahead of the U.S. While the U.S. doesn't have a pathway for approval of follow-on biologics, the Food and Drug Administration has let one through: the same human growth hormone that Japan just approved, which is marketed under the name Omnitrope. But Novartis had to sue the government to finally get the drug approved, and no other company has tried a similar tactic that I know of.
But Japan will surely pass us up since the country has established a pathway for approval. In fact it only took about three months for the country to approve the first biosimilar after the government published guidelines for companies. I expect Amgen (Nasdaq: AMGN ) and Johnson & Johnson's (NYSE: JNJ ) anemia drugs to be the next target, as they were when Europe opened up its process for approvals. And Hospira (NYSE: HSP ) and Teva Pharmaceuticals (Nasdaq: TEVA ) , among others, are likely to be hot on Novartis' tail.
In the U.S., the main hang-up is how much guaranteed patent protection branded biologics will be given. Biotech companies want 12 to 14 years of protection, the Federal Trade Commission thinks five years is sufficient, and yesterday the White House said seven years was enough. How many years biotech companies will get remains to be seen, but it's clear that the question is when we'll have a pathway for approval, not if.
Investors looking to take advantage of this billion-dollar industry that's about to open up should take a good look at Novartis. The company is clearly at the forefront of the biosimilar development and I expect it'll be at the front of the line when the U.S. opens its doors.