Novartis (NYSE:NVS) received final marketing approval today for only the second biosimilar product ever to gain a regulatory OK in the European Union.
Unlike small molecule compounds, biologics (sometimes known as biopharmaceuticals) are more complex molecules and often much harder to make generic copies of (if at all). Due to this molecular complexity, regulators in the United States and European Union have struggled in the past to develop guidelines for a way for biogeneric (biosimilar) compounds to gain marketing approval.
With this extra regulatory difficulty there has been only one biosimilar compound approved in the U.S., and until today only one in the European Union as well.
Novartis' biosimilar that received the go-ahead is a compound that mimics the effects of epoetin alfa, sold by Johnson and Johnson (NYSE:JNJ) as Eprex in the European Union and by Amgen (NASDAQ:AMGN) and JNJ as Epogen in the United States. The drug is used to help with anemia related to kidney disease or chemotherapy.
Novartis' epo compound was given the preliminary go-ahead by European regulators back in June, but because of a quirk of the European regulatory system, drugmakers have to wait an additional three months for final marketing approval -- which is always granted if the preliminary decision is positive.
The multibillion-dollar market for epo products in the EU has gotten much more crowded with Shire (NASDAQ:SHPGY) receiving approval for Dynepo and Roche getting a positive opinion on Micera this year. Approval of Novartis' biosimilar makes it a triple whammy.
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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. Johnson and Johnson is an active Income Investor pick. The Fool has a disclosure policy.
