EU regulator likely to look at early-stage pipeline products when reviewing planned Shire and Baxalta merger, says expert

Specialist in competition law in the life sciences sector Natasha Pearman of Pinsent Masons, the law firm behind Out-Law.com, said that the Commission last year intimated its intention to scrutinise what products pharmaceuticals companies have at 'phase one' in their pipeline as part of its merger control role. Phase one drugs treatments are those that are subject to initial clinical trials testing.

Pearman was commenting after Shire announced that it had agreed a deal worth approximately $32 billion to buy US-based drugs company Baxalta. Shire chief executive Flemming Ornskov said the merger of the two companies would result in the establishment of the world's "leading biotechnology company focused on rare diseases".

"Together, we will have leadership positions in multiple, high-value franchises and become the clear partner of choice in rare diseases," Ornskov said. "Our expanded portfolio and presence in more than 100 countries will drive our growth to over $20 billion in anticipated annual revenues by 2020. Our due diligence has reinforced our belief in the combination, and we look forward to welcoming Baxalta colleagues to a shared entrepreneurial, patient-driven culture."

The takeover deal is subject to the approval of competition authorities around the world, including in Europe. The European Commission is responsible for assessing the effect that major mergers and acquisitions could have on competition in EU markets.

Pearman said: "Early last year the Commission approved Novartis' acquisition of GlaxoSmithKline's oncology business on the condition that the Swiss drugs manufacturer divest its interest in a clinical trials project for a new drug it was working on. This was because the Commission had concerns that Novartis would abandon the project once it had acquired GSK's oncology business, potentially harming competition and innovation in the market."

"That case highlighted the appetite the Commission has for looking at early-stage pipeline products, and not just those at the latter stages of development, when assessing the potential impact on competition of planned mergers in the life sciences sector," she said.

Pearman said that following Shire's announcement of its planned deal with Baxalta some industry commentators had been quick to highlight the different focuses of each business and that there was no real overlap in the products they sell.

However, recent acquisitions Shire has made, including its takeover of Dyax late last year, show that Shire has "strategically been moving into the same territory as Baxalta", Pearman said. It is likely therefore that the Commission will consider all pipeline products across both companies when it comes to review the planned merger later this year.