US hospital products company Hospira and German generics company Stada have joined forces to develop and market a biosimilar version of erythropoietin, used to treat anaemia in dialysis and cancer patients.

Stada recently filed for approval of the biosimilar - called erythropoietin zeta - and said it hopes for approval in 2007 with a peak sales forecast of 70 million euros a year. If approved in Europe it would compete with other EPO-based products, such as Roche’s NeoRecormon (epoetin beta), Johnson & Johnson’s procrit (epoetin alfa) and Amgen’s Aranesp (darbepoetin alfa), which together make up a multibillion dollar market.

Under the terms of the agreement, Stada will receive $21 million in an upfront licensing payment and up to $34 million in milestones while Hospira gains exclusive European sales rights in return.

"Developing and providing access to biosimilars is a natural extension of Hospira's leadership position in generic injectable pharmaceuticals and an important part of our strategy of investing for growth," said the firm’s chief executive Christopher Begley.

Biologic drugs with sales of more than $20 billion are at immediate risk of generic competition, and could help reduce the cost of delivering these therapies to cash-strapped health system, although because of high manufacturing costs savings are expected to be limited - perhaps coming in 10% to 20% lower than brandname drugs initially.

And the exclusion of the US market from the collaboration was almost inevitable. The US regulatory authorities are still struggling to tease out a legally-workable route to market for biosimilars, which are also known as follow-on biologics.

In contrast, the European Medicines Agency has already approved biosimilar versions of human growth hormone, but turned down a copycat version of Roche’s Roferon A (interferon alfa-2a).