ETF Trends
ETF Trends

U.S. regulators approved the sale of a lower-priced copy of an expensive blockbuster biologic drug, paving the way for further biosimilars to hit the market and supporting the outlook for the relatively new generic drugs exchange traded fund.

The Market Vectors Generic Drugs ETF (NasdaqGM: GNRX) tries to reflect the performance of the Indxx Global Generics & New Pharma Index, which tracks a number of global drug makers that generate significant revenue stream from generic drug sale. [An ETF to Access a Growing Health Care Segment]

When a company first develops a drug, a patent is filed on the new drug, which typically expires 20 years from the date of filing. As patents expire on various brand name drugs, generic drug providers can step in to the market at a significant discount. Looking ahead, the biologics patent cliff over the next decade could add to a new group of affordable generics. Biologics are drugs derived from animal or other biological sources to treat diseases, as opposed to chemically based pharmaceuticals.

On Tuesday, the Food and Drug Administration voted to recommend that the agency approve Celltrion and Pfizer (NYSE: PFE) Remsima biosimilar, a cheaper knockoff version of Johnson & Johnson (NYSE: JNJ) anti-inflammatory biologic Remicade, reports Peter Loftus for the Wall Street Journal.

GNRX includes a 2.5% tilt toward Celltrion.

This is the second biosimilar to pass through regulatory scrutiny. The FDA previously approved the Novartis Zarxio, a copy of Amgen’s Neupogen, last year.

The FDA’s ruling on biosimilars suggests that the government is growing more open to moving biosimilars through the regulatory process, which could help support the generic drug industry’s next growth spurt. The FDA could use looser criteria for marketing approval than some observers anticipated.

However, drugmakers like J&J, AbbVie (NYSE: ABBV) and Amgen (NasdaqGS: AMGN) are trying to block the biosimilars and are making new U.S. patents to extend their monopolies into the 2020s and 2030s.

Max Chen contributed to this article.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.