Zarxio, the bio similar drug manufactured by Novartis AG (ADR) (NYSE:NVS) got approved by the US Food and Drug Administration, last Friday. Zarxio is basically a copy of Neupogen, manufactured by Amgen Inc. (NASDAQ:AMGN), however it is cheaper in price than the former drug. Thus, Zarxio attains the status of being the very first biosimilar drug that managed to get approved in US.

Both Neupogen and Zarxio contain essentially the same active compound in them. Various tests and clinical trials were conducted by the US Food and Drug Administration on the said drug in order to establish its efficacy. In all of these test trials, no significant changes were observed as such.

Up till now, there is no established system to give names to biosimilars, since Zarxio is the very first such drug to get approved by the FDA. However, until an appropriate naming develops, this biosimilar drug is probably going to be known as filgrastim-sndz.

The application for the approval of Zarxio was brought forth into the notice of FDA in the year 2014 and in the month of July. On 7^th of January, 2015, the advisory committee of US Food and Drug Administration recommended this drug to get approved by the authority. This recommendation for approval was enough to make Amgen Inc. (NASDAQ:AMGN) stop dead in its tracks; since up till then its drug Neupogen had been enjoying the star-light. Amgen Inc.’s (NASDAQ:AMGN) block-buster oncology drug alone contributed into the gross revenue of the company by generating an income of $1.2 billion in the year 2014.

It is suspected that Zarxio would take away this popularity enjoyed by Neupogen, since both essentially contain the same active compound; whilst the former is also cheaper in price as compared to the latter.

In order to ensure that Neupogen continues in its successful venture, Amgen Inc. (NASDAQ:AMGN) filed a suit against Zarxio, in order to put a stop to its commercialization in the US market. Not only did Amgen Inc. (NASDAQ:AMGN) file a suit against the drug, rather Novartis AG (ADR) (NYSE:NVS) division, Sandoz, which came up with the drug was also sued. Court would attend to this hearing on thirteenth of March and most likely would come up with its final decision by the tenth of April.

In accordance with the Court’s decision, Novartis AG (ADR) (NYSE:NVS) has made a public announcement, stating that it wouldn’t launch Zarxio in the markets, even though it has been approved by the FDA, until the court gives its final decision on the tenth of April.

Zarxio was only approved once the FDA had carried out a thorough and extensive evaluation of the biosimilar drug. These drugs are basically cheaper imitation versions of biologic drugs which are obtained from living substances, and thus tend to be expensive. Yet, it is possible to manufacture other drugs that have a similar effect as that of the biologic drug. These imitation versions are called as biosimilar drugs. These drugs might resemble their biologic counter parts as far as the drug’s effect is concerned; yet, since these are not the completely accurate and hundred percent true copies, therefore their evaluation has to be done on an extensive scale, before they can ultimately be approved.

This decision of undergoing an exchange of assets between the two companies was culminated in April, 2014. There is a mutual alliance between the two companies which is reflected in GlaxoSmithKline plc (ADR) (NYSE:GSK) decision of taking up vaccine business of Novartis AG (ADR) (NYSE:NVS) and giving off its oncology business in return.

The company has various expectations of profits which it hopes to yield from this three-way deal. One of its plans is to make sure that an income of worth $6.16 billion is returned to its shareholders. More light on this matter shall be shed after the investor meeting which is planned to be held on 6 May.

Between the two companies, GlaxoSmithKline plc (ADR) (NYSE:GSK) is the one which is going to benefit the most from this deal, because it amounts to almost half of Novartis. This deal would serve GlaxoSmithKline plc (ADR) (NYSE:GSK) in various beneficial ways; the most important of which is getting rid of its oncology portfolio, as this division has undergone a decrease in its generated income.  The Chief Executive Officer of GlaxoSmithKline plc (ADR) (NYSE:GSK), Andrew Witty, made a point of mentioning that the company’s oncology section has been occupying the 14^th position in the international market of cancer drugs. Not only was the ranking low, but the prospects concerning the establishment of the oncology portfolio as a leading power in cancer drug arena weren’t so bright either. Therefore, the company had to make this deal as a last resort to save the company’s division.

On the contrary, the company’s vaccine business has seen a continuous progression, since its contribution in the total revenue of the company increased from 9% to 14% in the year 2014. Therefore, in light of this context, GlaxoSmithKline plc (ADR) (NYSE:GSK) decision of taking up Novartis’s AG (ADR) (NYSE:NVS) vaccine business can be considered a rational and a wise one.

The company being benefited from this deal isn’t GlaxoSmithKline alone, rather the decision of taking up it oncology portfolio by Novartis AG ADR (NYSE:NVS) also has a profitable ring to it. At present, Novartis AG (NYSE:NVS) has access to oncology as well as hematology medicines. However, the deal would increase the company’s access points; and bring various therapies at its disposal, such as those related to kidney, melanoma and other drugs of the same kind.

The deal states that Novartis AG (NYSE:NVS) would have to make a payment of $16 billion to GlaxoSmithKline plc (NYSE:GSK) for its oncology division, however the company is authorized to ask for a refund of $1.5 billion, in case melanoma drugs fails to cope up with the required standard. In a nutshell, these asset swaps are a positive way forward for both the companies and has the promise of a better, profitable future.

The shares owned by Novartis have fallen from -0.29% to $89.99 and NOVARTIS AG has been classified as a Buy by members of TheStreet Ratings; the same team has placed the company in an A- category. When asked about it, TheStreet Ratings shared their views regarding their decision. They said that they classified NOVARTIS AG (NVS) as a BUY due to the company’s recent constructive investment proceedings, the consequence of which will most likely be that they shall surpass a greater number of stocks TheStreet Ratings have rated. They were also of the view that the company has some tremendous strength that is becoming increasingly visible in the revenue growth, the stock prices, the significant valuation levels and the positive figures seen for their net income and growth in earnings per share. Fortunately for the company, these factors pretty much cancel out the fact that their equity return was highly depressing.

To summarize the evaluation done by TheStreet Ratings Team:

-The previous industry average of NVS was about 5.6% which has somewhat improved recently and consequently, increased the earnings per share.

-During the previous year, the stock has increased and that too at a prominent speed as compared to the S&P 500. This shows that there has been a significant growth in earnings and that the company has some positive strategies implemented. In future, if the market is towards the downside, the stocks may fall, but if the situation remains favorable, this stock has great capability to rise further.

-Taking into account the Pharmaceutical industry average for net income growth, the company has gone beyond that as well as that against the S&P 500. There has been a rise in the net income by 22.6% in comparison with their own net income for the same quarter exactly a year ago. They have gone from $2398.00 million to $2941.00 million.

-To talk about the earnings per share, a progression by 22.7% has been recorded for NOVARTIS AG in comparison with last year’s same quarter. Even though the company has had an inconsistent earning in recent times, it is expected that the EPS growth shall stabilize in the following year. The earnings for NOVARTIS AG were recorded $3.70 in the last financial year, lesser than those in the previous years which were $3.80. However, the expected earnings for this year are $5.18 versus $3.70, which shall be quite an achievement.