On Aug. 23, CVS Health (CVS -0.22%) made waves when it announced that it will be launching a new business called Cordavis that will be devoted to commercializing biosimilar medicines. If you aren't familiar, biosimilars are generic versions of biologic drugs, which tend to be newer, more complex, and more expensive compared to others.

The move means that the company will soon develop another major revenue stream, starting with its biosimilar to AbbVie's cash-cow arthritis drug Humira that's anticipated to launch next year.

But astute investors know that Humira is the blockbuster drug of yesteryear. Could CVS develop a copy of one of today's hottest medicines, like Novo Nordisk's (NVO 0.84%) Ozempic or Wegovy? It's possible: Here's why. 

Ozempic could fit the bill

First, let's examine why CVS decided to target Humira as its first biosimilar to commercialize. 

Revenue and profit-seeking were doubtlessly the largest motivators. In 2022, sales of Humira were worth $21 billion for AbbVie. Plus, the drug treats a slew of different maladies, like ulcerative colitis, psoriatic arthritis, Crohn's disease, hidradenitis suppurativa (a painful skin disorder), and more. CVS will thus find a vibrant level of demand for its copy.

It should also be able to produce the therapy at a rate that's competitive with other biosimilar-drug makers. One carton with two doses costs around $6,240 without insurance. When Cordavis launches its copy of Humira in early 2024, it plans to discount that price by 80%. That price point will ensure it can stake out a slice of the market, since it won't be able to differentiate its version from the competition except by passing on the savings associated with cost-cutting to buyers.

Last but not least, Humira's exclusivity protections have expired as of 2023. If AbbVie's exclusive rights to make the drug were still legally in force, neither CVS nor anyone else could market a biosimilar.

So, on the basis of its large market of multiple indications, attractive cost-cutting potential, and lapsed exclusivity protections, how does Novo Nordisk's Ozempic rate? 

The molecule that's branded as Ozempic is called semaglutide, and it's already being used to treat obesity and type 2 diabetes. It might also be used one day to reduce cardiac risks or even treat Alzheimer's disease or perhaps addiction.

In the second quarter, the drug brought in more than $3 billion in revenue. Global Data, a research company, thinks that Ozempic sales could be worth as much as $17 billion for Novo by 2029. So it looks quite lucrative to copy.

Each dose has a list price of $935, though many retailers sell it for closer to $1,000. That's not quite as pricey per dose as Humira, but considering the need for chronic administration to maintain its benefits, it's certainly expensive enough to be worth undercutting by making a generic. But there are two catches to be aware of.

Some of the patent protections covering Ozempic are set to lapse in 2026, whereas others last until 2031. Generic drug makers like Viatris are already lined up in wait -- it has already submitted its approval packet to regulators at the Food and Drug Administration (FDA).

In fact, Viatris is currently fighting Novo Nordisk in court regarding whether it has the right to commercialize its copy. It's unclear what the outcome of that case will be, but either way, there is a solid chance that CVS would need to wait at least a couple of years before it could have its chance to make a generic version of Ozempic. 

There's one other complication, which could end up being an irrelevant technicality depending on how CVS' management approaches Cordavis' mandate. Ozempic isn't a biologic medication, so there won't be biosimilars for it, merely generics. If Cordavis stays true to its biosimilars focus, Ozempic won't be on its radar.

Still, it would be leaving money on the table by avoiding commercializing a generic medicine because of terminology, so there's reason to believe the distinction might not matter in the long term.

Don't count the chickens before they hatch

In conclusion, yes, it's very possible that CVS could make a copy of Ozempic, but it probably won't happen this year or next year. If it does, it will need to have some kind of competitive advantage in cost if it wants to beat the other players that will be in the market. Whether or not it opts to pursue generic Ozempic, the company will likely opt to commercialize another medication before 2025. Don't expect the new segment to be a major driver of revenue right away. 

It'll take time for CVS to establish its biosimilar operations, and because it's opting to work through a manufacturer called Sandoz rather than manufacture the medicines itself, its margins might be lower than what one might expect. Keep an eye on what management says is next for Cordavis, and one day it just might be Ozempic's turn.