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ZURICH, Dec 17 (Reuters) - Galvus, a diabetes medicine produced by Novartis (NOVN.VX: Quote, Profile, Research), has received a positive opinion from European health authorities after the firm made changes to prescribing recommendations due to liver safety concerns.

The drug, which had been expected to garner over $1 billion in sales before the liver and other safety issues became apparent, would be available in the first European markets in the first half of 2008, Novartis said in a statement on Monday.

Novartis shares eased 0.8 percent to 63.10 Swiss francs by 0906 GMT, compared iwth a 0.9 percent fall for the DJ Stoxx health care index .

Separate skin toxicity worries have also put back Galvus's approval in the United States, where the company aims to resubmit the drug in 2009.

"A path for U.S. approval of Galvus is still not clear," said Lanksbanki Kepler analyst Denise Anderson.

"Thus, our forecasts for the drug are modest, at $270 million by 2010, as we expect cheaper generics to be preferred in most markets and due to lingering safety concerns."

The European Committee for Medicinal Products for Human Use issued a positive opinion on Galvus in 50 milligram doses taken either once or twice daily in combination with other diabetes drugs. A 100 mg once-daily dose will not be available.

The European Commission generally follows the CHMP's recommendations.

Galvus was approved in 50 mg and 100 mg doses by the European Union in September 2007. The drug was to be used in combination with anti-diabetes medicines metformin, thiazolidinedione or a sulphonylurea.

In November, Novartis said it had found liver safety problems with the higher dose of Galvus. The discovery disappointed analysts who had been expecting the drug to generate significant annual sales.

The discovery pushed back the launch of the medicine and gave Merck & Co Inc's (MRK.N: Quote, Profile, Research) similar rival treatment Januvia an even greater lead in the marketplace for next generation of diabetes treatments.

Both Galvus and Januvia are DPP-4 inhibitors, designed to boost the body's ability to lower elevated blood sugar. They are expected to become a key way of treating type 2 or maturity onset diabetes, the most common form of the disease.

The drugs are expected to do well as they are not associated with weight gain, a major side effect of some established diabetes drugs. (Reporting by Tom Armitage and Sam Cage; Editing by Louise Ireland)