FDA Gives Generic Drug ETF a Helping Hand | 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.