(Bloomberg) -- Takeda Pharmaceutical Co. is expected by analysts and lawyers to face intense scrutiny of its research activities from European Union antitrust watchdogs before ultimately winning the nod for a 46 billion-pound ($62 billion) takeover of bigger drugmaker rival Shire Plc.
Takeda is buying Shire’s lucrative new therapies, such as treatments for rare diseases like hemophilia. The merger will save $600 million in duplicated research and development costs, the company said in a statement, with $1.4 billion in overall savings expected by the third year.
"Cutting R&D for certain drugs may raise a red flag and this will be subject of scrutiny and possible remedies," said Aitor Ortiz, an analyst at Bloomberg Intelligence. "Yet, it is unlikely to put the deal at risk as there are minimal overlaps" in neuroscience and gastrointestinal markets where products have different mechanisms that are unlikely to be viewed as anticompetitive.
Pharmaceutical deals often face detailed reviews from the European Commission as regulators look at how drugmakers compete in each of the bloc’s 28 nations where national healthcare systems purchase and finance drugs in different ways. An additional risk may be increased EU concerns about innovation as it examines how some deals may eliminate an important rival product, an issue it raised in Pfizer Inc.’s acquisition of Hospira in 2015.
Dow Chemical Co. and DuPont Co. were told last year by the EU to address concerns that their deal would combine important innovators for pesticides. DuPont agreed to sell a large part of its pesticide business, including R&D activities to allay these worries. The EU review went deep into the companies’ research activities, comparing what patents they held and how important those were.
Some 43 percent of savings will come "through rationalizing ongoing research and early stage pipeline programs to optimise value of R&D spend and reducing overlapping resources," Takeda said Tuesday.
"Given the impact on R&D spend, this is an angle that the commission will be giving close attention to as they already did with" Pfizer and Hospira, said Sophie Lawrance, a lawyer at Bristows LLP in London.
"On the other hand, the market is quite different from the pesticides products seen in Dow/DuPont,” she said. “Markets for finished pharma products tend to be very narrowly defined" and "the path to market is subject to high attrition rates."
The EU didn’t identify any antitrust concerns with Shire’s 2016 bid for Baxalta or AbbVie’s unsuccessful takeover attempt of Shire two years earlier.
The European Commission declined to comment on the Takeda deal or how it might look at its research pipelines. Takeda said its deal would need antitrust clearance in the EU, U.S., China, Japan, Brazil and other relevant jurisdictions.
Mick Cooper, a healthcare analyst at Trinity Delta in London, said he would be "surprised if there were any regulatory issues because they are very much complementary."
"Takeda doesn’t have any major presence in the rare diseases and ADHD, and those are the key areas for Shire," he said.
Ortiz said the European Commission has dealt with similar cases involving rival drugs and has dealt with them "either by requesting the parties to divest those drugs or by making them pledge more funding in some R&D areas."
"We are talking about rare diseases and it isn’t likely to expect many companies to heavily invest in them, so a sort of lack of competition is expected, like the winner takes all," he said.
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