(Repeats story first published late on Friday)
By Caroline Humer and Ransdell Pierson
NEW YORK, April 24 (Reuters) - Teva Pharmaceutical Industries' bid for Mylan NV would create a company controlling nearly 25 percent of the U.S. generics market, including drugs in short supply, according to industry experts and a Reuters review of regulatory filings.
Both issues will factor into any antitrust review, they said.
Teva , the world's largest generic drugmaker, made its $40 billion offer public on Tuesday and quickly signaled it was ready to sell some overlapping assets to win antitrust approval for a deal.
Mylan has not responded to the unsolicited bid but has said it wants to remain independent and that the overlap with Teva's products could scuttle a combination. It is also pursuing a hostile takeover of drugmaker Perrigo Co Plc .
Most treatments used by the U.S. public are cheaper generic copies of brand-name medications. The percentage has grown as leading drugs lost patent protection in the last decade and health insurers sought ways to rein in costs. But manufacturing generics is a low-margin business, prompting companies to reduce production of some drugs over time.
Previous industry mergers have also reduced capacity, and manufacturing lapses at some plants have delayed or shuttered production, leading to temporary shortages of cancer drugs, anesthesia and other medicines.
Teva has already looked at the competitive overlap between its portfolio and Mylan's, and started discussions with the Federal Trade Commission about the possible merger, sources familiar with the situation said. Mylan makes 360 generic products for the U.S. market, while Teva manufactures 375.
The FTC has studied the potential impact of a pharmaceutical deal on drug shortages. In reviewing the 2012 merger of generics makers Actavis and Watson Pharmaceuticals, the agency said it "evaluated whether the proposed transaction would exacerbate any of those (drug) shortages."
Typically, the FTC wants to be sure there are several competitors making a particular medicine so that production would continue even if one manufacturing source shuts down, sources familiar with the situation said.
"The FTC should be thinking about and not wanting to approve mergers that would worsen the conditions that would cause shortages," said an antitrust expert who requested anonymity because he wished to protect his business relationships. "The fewer production facilities that there are, the greater susceptibility to price fluctuations."
Prices for generic drugs sometimes spike when supplies dry up. Last fall, Independent Senator Bernie Sanders and Democratic Representative Elijah Cummings opened an investigation into 14 drug companies about generic price increases. The office of the inspector general of the Department of Health and Human Services is also planning to a review.
"All the manufacturing consolidation makes us nervous," said Dr. Beverly Philip, a professor of anesthesiology at Harvard Medical School.
With some shortages, doctors have had to shift patients to medicines that may not work as well. If Teva buys Mylan and phases out some of its less-profitable sterile injectable drugs, both for anesthesia and other uses, she said, it would tighten the screw another notch.
Globally, Teva holds 12 percent of the global generic market, while Novartis AG, Actavis and Mylan each account for about 9 percent, according to UK market intelligence firm Evaluate Ltd. Their U.S. market shares are less clear because generic drug company reporting on product sales varies.
Wells Fargo analyst Michael Faerm estimates a combined Teva-Mylan would account for 22 percent of U.S. prescriptions. Morningstar Research analyst Michael Waterhouse put the U.S. combined share at about 25 percent of the retail generic market, which is about $31 billion.
But those numbers do not reflect the overlap between their businesses. Teva sells more than 50 percent of the U.S. generic products also sold by Mylan, said Louise Pearson, an analyst with Germany's Berenberg Bank, citing data from IMS Health. IMS Health was not immediately available to verify the figures.
In the case of overlapping products, antitrust regulators will want to see that they have at least three or four competitors. If not, the companies considering a merger may need to sell the product line to another party, the antitrust experts and two of the sources said. The FTC would also take into account whether new competitors are about to start production.
The U.S Food and Drug Administration considers more than 70 drugs to be in short supply. At least three of them are made by both Teva and Mylan: doxorubicin injections for cancer patients, haloperidol lactate injections for psychiatric patients, and antibiotic injection tobramycin. Each has three or four other manufacturers listed on the FDA website.
Separately, Mylan makes four medicines in short supply, while Teva accounts for another five scarce drugs.
Pressure to divest assets may also hit some big drugs that are not in short supply. Teva's biggest product is multiple sclerosis treatment Copaxone, and Mylan's generic version is under FDA review.
In addition, Teva's plans for a generic version of EpiPen, Mylan's best-selling treatment for severe allergic reactions, would probably need to go, industry experts said.
"In most deals you have to give up something," BMO Capital Markets analyst David Maris said, "but these are two pipeline products that both companies have highlighted over and over as important for them."
Additional reporting by Diane Bartz in Washington; Editing by Michele Gershberg and Lisa Von Ahn