Overlooked in the Labor Day exodus was the news Friday from across the pond that the Sandoz division of drug giant Novartis AG got the green light from European regulators to sell generic epoetin alfa, or EPO, the red blood cell booster used to treat anemia in cancer and kidney disease patients.

It's another twist in one of the most fascinating sagas in the drug world today, and one with significant dealmaking implications. EPO brands such as Amgen Inc.'s Aranesp and Epogen and Johnson & Johnson's Procrit (which is Epogen under a different name) accounted for $14 billion in worldwide sales last year, more than 2% of all drug sales. The European market is $2.8 billion, according to drug data service IMS Health Inc.

Add generic (or in industry-speak, "biosimilar") EPO to the list of barbarians at the gate of Amgen, once the world's largest biotech but whose market cap has been cut nearly in half the past year. Amgen has suffered from questions about the safety of EPO that has led to a new U.S. Medicare reimbursement policy and less revenue for Amgen and J&J, both of which have recently revised their earnings forecasts. Amgen plans to challenge the new rules that effectively curtail the use of EPO, but it's expecting the worst. Officials announced Aug. 15 that 14% of its workers would be laid off.  

Here's where the dealmaking comes in. Amgen is historically an aggressive acquirer. Now that EPO problems have blown a hole in future sales, the firm is likely to use its cash reserves and business development expertise to plug those holes quickly. One industry veteran who has been at the negotiating table recently with Amgen called its deal team "a bunch of ninjas" — the next strike could come at any time.

Sandoz's plain-vanilla EPO isn't an immediate threat; it won't be on offer in the U.S. anytime soon. The Food and Drug Administration has no mechanism to evaluate and approve biosimilars, a situation that has become a hot political issue in recent months, with a Democratic Congress and presidential candidates more likely to force the FDA to establish a system. Congress has begun deliberations, but there's no guarantee of legislation anytime soon.

But another threat from Europe looms: competition from Roche Holding AG's Mircera, a branded EPO drug that Amgen says violates its patents. A court battle begins this week to see if Roche can sell Mircera stateside when — or is that "if"? — the FDA approves it. —Alex Lash

Tags: Biotech, pharmaceutical, healthcare, medicine