* Abasria is first biosimilar insulin to win EU green light
* Copycat medicine seen likely to be launched in mid-2015
* Sanofi hit may be limited as EU market smaller than U.S. (Adds comment from Lilly, more on competition)
LONDON, June 27 (Reuters) - European regulators have for the first time recommended approval of a copycat insulin for diabetics, posing a threat to French drugmaker Sanofi whose top-selling Lantus is now set to face a cheaper rival in 2015.
The new drug, known as Abasria, is made by U.S. rival Eli Lilly, which has developed it as a so-called biosimilar version of Sanofi's $8 billion-a-year Lantus, or insulin glargine.
The green light from the European Medicine Agency (EMA) for Lilly and its partner Boehringer Ingelheim marks another step forward for biosimilar medicines, which are copies of biotech drugs that promise to cut the cost of treatment.
Biosimilar versions of drugs such as EPO, used to boost red blood cells, and human growth hormone, for treating certain growth abnormalities, have been available for several years, while the first antibody-based biosimilar, for rheumatoid arthritis, was approved in Europe last September.
The evolution of such medicines represents a long-term challenge to makers of complex biological drugs, which are given by injection and have been largely immune to generic competition up until now.
Industry analysts expect Lilly's version of insulin glargine to be priced significantly lower than Lantus, in order to attract patients and healthcare providers.
Enrique Conterno, president of Lilly's diabetes division, said his company's product would provide "an important new option for the millions of patients in the EU who need basal insulin to help manage their diabetes."
Basal insulin is intended to provide long-lasting blood sugar control between meals and at night. Lantus currently dominates the market for such products, out-selling a rival treatment called Levemir from Denmark's Novo Nordisk.
Because biotech drugs are made from living cells it is impossible to manufacture exact copies, as happens with simple chemical medicines, so European regulators have devised an approval process for products that are similar enough to do the job.
The EMA, which announced its recommendation on Friday at the end of a monthly meeting of experts in London, said clinical studies had shown Abasria to have a comparable quality, safety and efficacy profile to Lantus.
The positive recommendation from the agency's Committee for Medicinal Products for Human Use (CHMP) will now go to the European Commission for final approval, but Lilly will not be able to launch immediately as Sanofi still has patent protection.
With the European compound patent on Lantus set to expire in May 2015 in most markets, Deutsche Bank analyst Mark Clark said he expected Lilly to start rolling out the drug for type 1 and type 2 diabetes from around the middle of next year.
Although a challenge for Sanofi, Clark said the financial impact of European approval of biosimilar Lantus would be limited as Europe accounted for only 14 percent of the product's global sales of 5.7 billion euros ($7.8 billion) last year.
The U.S. market accounts for two-thirds of Lantus sales and the rules for biosimilars are different there, suggesting no direct read-across from the EMA decision.
Sanofi is also developing an improved successor to its long-running cash cow. This follow-on, Toujeo, could also be ready for launch in mid-2015 and Sanofi is expected to work hard to shift patients on to the new medicine.
The EMA said a pharmacovigilance plan would be implemented for Lilly's product as part of its marketing authorisation. Lilly's drug was previously known as LY2963016.
($1 = 0.7359 Euros) (Editing by Kate Kelland, Sophie Hares and Pravin Char)