Dive Brief:

• Johnson & Johnson's Ethicon business and Takeda Pharmaceutical agreed to terminate the J&J unit's planned $400 million acquisition of Takeda's patch treatment for surgical bleeding, a J&J spokesperson said in an emailed statement.
• The decision follows a Federal Trade Commission investigation into the proposed deal that focused on the potential loss of competition in the market for fibrin sealant patches. The TachoSil patch is made of human fibrinogen, a protein in blood plasma, and the human enzyme thrombin coated onto an equine collagen sponge. 
• FTC staff had recommended the commission block the transaction due to "significant concerns about the likely anticompetitive effects," FTC Chairman Joseph Simons said Friday in a press release.

Dive Insight:

Takeda's TachoSil and J&J's Evarrest are the only two fibrin sealant products approved in the U.S. to stop bleeding during surgery, the FTC said. The Takeda patch, which gained its initial U.S. approval in 2010, is indicated for use with manual compression in cardiovascular and liver surgeries when bleeding cannot be controlled by standard techniques such as suture. It is marketed in the U.S. by Baxter.

J&J and Takeda made a mutual decision to terminate the TachoSil transaction given the regulators' concerns, a J&J spokesperson said, adding that the Ethicon unit's biosurgery business will continue to develop products to improve treatment of surgical bleeds and leaks.

Last year, the FTC denied a motion by the companies to limit the antitrust investigation. The U.S. regulator has also said it worked closely with staff of the European Commission​ during its investigation. The EC had also voiced concern the merger could reduce competition and innovation for hemostatic patches in Europe, where Takeda's product leads the market.

J&J does not sell its own patch in Europe. According to the EC, the hemostatic patch market has high barriers to entry and expansion due to significant development costs, strong brand loyalty among surgeons, and the established position and clinical track record of the Takeda product. The Commission said it was concerned J&J's acquisition of the TachoSil patch would remove any incentive for the company to enter Europe's market for the patches and would also hinder competitors' expansion.

With the companies' decision to abandon the deal, the FTC voted 5-0 to end its investigation, the agency said Friday.

When it announced the agreement to sell the TachoSil patch to J&J in May 2019, Japan's largest pharmaceutical company had hoped the divestiture would help it to deleverage its business after it borrowed $30 billion to finance its $62 billion acquisition of Shire.