In a rare bit of good news about its Galvus pill, Novartis was told by the European Medicines Agency that the med can be used in combination with other Type 2 diabetes treatments, such as metformin. The EU commission generally acts within three months on recommendations from the panel, which also backed the drugmaker’s Aclasta osteoporosis med and the Exelon skin patch for Alzheimer’s.

Novartis is counting on Galvus, which some analysts say may generate $1 billion in annual sales, to compensate fo patent losses on older products such as the Lamisil antifungal. An ongoing delay in approval in the US has put Novartis far behind Merck and its Januvia pill, which is generating considerable prescription volume.

Novartis received an approvable letter for Galvus in February, which means the FDA is prepared to approve the drug, but some conditions must still be met. A safety study required by the FDA may delay Galvus until 2010, prompting Citigroup this week to downgrade Novartis. This wasn’t the first setback - last November, the FDA delayed approval by three months waiting for more safety data after skin lesions had been seen in monkeys.