EU antitrust regulators launch an investigation into Johnson & Johnson’s acquisition of Takeda’s TachoSil

Takeda Pharmaceutical sold TachoSil (surgical patch product) to Johnson & Johnson (NYSE:JNJ) in May 2019. The largest Japanese drug manufacturer had announced a £339.28 million deal with J&J’s subsidiary, Ethicon. On Wednesday, however, the European Union antitrust regulators expressed concerns that the deal is expected to hurt competition.

Ethicon Inc. earned the stature of a separate company in 1949 under the umbrella of J&J. The subsidiary its product line and enter the market of wound closure devices and surgical sutures.

EU
Regulators Say Acquisition May Reduce Choice And Increase Prices For Consumers

The
EU regulators said that the acquisition may reduce choice and increase prices
for consumers and launched a full-scale investigation into the deal.

As
per the finding of the preliminary investigation, the European Commission
added, its concern stems from TachoSil’s stature of the market leader in
Europe. Ethicon is also a prominent name that manufactures similar surgical
patches that are distributed in different markets. In Europe, however, the
J&J subsidiary doesn’t make such dual patches.

The
EU regulators also said on Wednesday that the high development cost is likely
to make it unnecessarily challenging for the competitors to enter the European
market. Margrethe
Vestager, the European Competition Commissioner, was reported quoting on
Wednesday:

“In
this concentrated space, we need to carefully assess whether the proposed
merger would lead to reduced choice for surgeons and patients, to higher prices
for our health services, or to slower development of alternative solutions to
manage problematic bleeding.”

Vestager
also announced a deadline of August 10^th for the Commission to reach
a verdict.

Johnson
& Johnson’s Performance In The Stock Market

The
news didn’t cast a strong impact on Johnson & Johnson’s stock. At the time
of writing, J&J is exchanging hands at £102.37 in the stock market that translates
to a little under 15% decline in 2020 so far.

Its
performance in 2019, on the contrary, was reported fairly upbeat with an annual
gain of around 15%. The stock opened at £107.70 per share in January 2019 and closed
the year significantly higher at £122.50 in December. Johnson & Johnson
currently has a market cap of £270 billion with a price to earnings ratio of
21.51.