Schering-Plough / Organon Biosciences Regulation (Ec)
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EN Case No COMP/M.4691 - SCHERING-PLOUGH / ORGANON BIOSCIENCES Only the English text is available and authentic. REGULATION (EC) No 139/2004 MERGER PROCEDURE Article 6(1)b in conjunction with Article 6(2) Date: 11/10/2007 In electronic form on the EUR-Lex website under document number 32007M4691 Office for Official Publications of the European Communities L-2985 Luxembourg COMMISSION OF THE EUROPEAN COMMUNITIES Brussels, 11-X-2007 SG-Greffe (2007) D/206087 In the published version of this decision, some PUBLIC VERSION information has been omitted pursuant to Article 17(2) of Council Regulation (EC) No 139/2004 concerning non-disclosure of business secrets and other confidential information. The omissions are MERGER PROCEDURE shown thus […]. Where possible the information ARTICLE 6(1)(b) DECISION IN omitted has been replaced by ranges of figures or a general description. CONJUNCTION WITH ARTICLE 6(2) To the notifying party Dear Sir/Madam, Subject: Case No COMP/M.4691 – Schering-Plough / Organon BioSciences Notification of 23/08/2007 pursuant to Article 4 of Council Regulation No 139/2004 1. On 23.08.2007, the Commission received notification of a proposed concentration pursuant to Article 4 of Council Regulation (EC) No 139/20041 ("the Merger Regulation") by which the undertaking Schering-Plough Corporation ("Schering- Plough", United States) acquires within the meaning of Article 3(1)(b) of the Council Regulation control of the whole of the undertaking Organon BioSciences N.V. ("Organon BS", the Netherlands) controlled by Akzo Nobel N.V. ("Akzo", the Netherlands) by way of purchase of shares. 2. After examination of the notification, the Commission has concluded that the notified operation falls within the scope of the Merger Regulation. Following submission by the parties of undertakings designed to eliminate serious doubts identified by the Commission, in accordance with Article 6 (2) of the Merger Regulation, the Commission has concluded that the notified operation does not raise serious doubts as to its compatibility with the common market and with the functioning of the EEA Agreement. 1 OJ L24, 29.01.2004 p.1 Commission européenne, B-1049 Bruxelles / Europese Commissie, B-1049 Brussel - Belgium. Telephone: (32-2) 299 11 11. 1 I. THE PARTIES 3. Schering-Plough is a New Jersey-based global healthcare company with activities in (i) human prescription and over-the-counter ("OTC") pharmaceutical products; (ii) personal care products (Dr. Scholl foot care products and Coppertone sun care products); and (iii) animal healthcare products. Schering-Plough's human pharmaceuticals and consumer product division together account for 91% of Schering-Plough's turnover. Its pharmaceutical unit is the most profitable in the company. 4. Organon BS is the holding company for the human and animal healthcare activities of Akzo. It consists of two operating units: (i) Organon International bv, the human pharmaceutical business ("Organon"); and (ii) Intervet International bv, the animal health business. Organon accounts for […] % of Organon BS' turnover and Intervet for […] %. Intervet is the more profitable business of Organon BS. II. THE CONCENTRATION 5. On 12 March 2007, Schering-Plough made an irrevocable offer to Akzo to enter into a share and purchase agreement with Akzo whereby Schering-Plough will acquire the entirety of the shares of Akzo's wholly-owned subsidiary, Organon BS. Schering- Plough thus intends to acquire sole control of Organon BS. 6. The notified operation will confer on Schering-Plough sole control over Organon BS. It, therefore, constitutes a concentration within the meaning of Article 3(1)(b) of the Merger Regulation. III. COMMUNITY DIMENSION 7. The undertakings concerned have a combined aggregate world-wide turnover of more than EUR 5 000 million (Schering-Plough 8 437 million EUR, Organon BS […] million EUR)2. Each of them have a Community-wide turnover in excess of EUR 250 million (Schering-Plough […] million EUR, Organon BS […] million EUR), but they do not achieve more than two-thirds of their aggregate Community-wide turnover within one and the same Member State. The notified operation therefore has a Community dimension. IV. COMPETITIVE ASSESSMENT 8. The concentration concerns human health products and animal health products, where both parties are active. 9. According to the parties, Organon's human health business is the primary driver for 2 Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission Notice on the calculation of turnover (OJ C66, 2.3.1998, p25). To the extent that figures include turnover for the period before 1.1.1999, they are calculated on the basis of average ECU exchange rates and translated into EUR on a one-for-one basis. 2 their acquisition. Schering-Plough is looking to broaden its human health products (Schering-Plough is currently over-dependent on a few successful products which are all susceptible to patent expiration) and to increase its portfolio of pipeline products. The concentration will add two new business units (Organon's women's health care (gynaecology and fertility) and central nervous systems) to Schering-Plough's human health business, and fill the gap in Schering-Plough's late-stage pipeline products. 10. In the human health sector, the parties' activities are largely complementary and the concentration does not give rise to any overlaps or vertical issues. 11. By contrast, the concentration gives rise to horizontal overlaps between the activities of Schering-Plough and Organon BS for the manufacture and marketing of vaccines and pharmaceuticals in the animal health sector. There are overlaps in over 40 products markets, in several EEA countries for each product. 12. The present decision first examines the definition of the relevant markets for human health and the competitive assessment of the proposed transaction in the human health sector (Section A), and then the relevant market definition for vaccines and pharmaceuticals in the animal health sector and the competitive assessment of the transaction are examined market by market (Section B). 13. As explained in the Commission notice on remedies3, where a concentration raises serious doubts about its compatibility with the common market, the parties may seek to modify the concentration in order to resolve the serious doubts identified by the Commission. In order to remove the serious doubts identified by the Commission in 17 markets in the animal health sector, Schering-Plough submitted remedies on 20 September 2007. The Commission market tested the proposed remedy package with a questionnaire sent to competitors of the parties on 24 September 2007. A revised version taking account of concerns that the Commission raised as a result of the market test of the first set of remedies was submitted by the parties on 10 October 2007 (for further details, please see the non-confidential version in Attachment 1). 14. The Commission's competitive assessment of the proposed transaction includes its assessment of the proposed remedies, where applicable. In assessing whether or not the remedy will restore effective competition, the Commission considers the type, scale and scope of the remedies by reference to the structure of and particular characteristics of the markets in which serious doubts arise. In so doing, the Commission has to assess both (i) the independence, the viability and the competitiveness of the divested business on the long term and (ii) the effectiveness of the proposed remedy in removing the serious doubts. 3 Commission Notice on remedies acceptable under Council Regulation (EEC° No 4064/89 and under Commission Regulation (EC) No 447/98. 3 A. Human health 1. Product market definition 15. In previous decisions4, the Commission has applied the Anatomical Classification Guidelines (or “ATC” classification) devised by the European Pharmaceutical Marketing Research Association (EphMRA). The ATC classification is hierarchical, and it includes 16 categories, each containing up to four levels. In previous decisions, the Commission has relied on the third level of the ATC classification (ATC3) which allows medicines to be grouped in terms of their therapeutic indications, i.e. their intended use, as a starting point for market definition. However, in certain cases, it may be necessary to analyse pharmaceutical products at a higher or lower level than ATC 3 or to combine ATC 3 classes on the basis of demand-related criteria5. 16. The Commission has in the past6 defined separate markets for over the counter ("OTC", i.e. non-prescription bound) pharmaceuticals and prescription-bound pharmaceuticals because medical indications (as well as side effects), legal framework, marketing and distribution patterns tend to differ between these categories. The parties have followed this subdivision between OTC and prescribed medicines. The present concentration only concerns prescription pharmaceuticals as Organon is not active in OTC pharmaceuticals and personal care products. 2. Geographic market definition 17. In previous decisions7, the Commission held that the relevant geographic market for pharmaceutical products was national. The parties share this view. While the harmonisation of technical legislation and marketing authorisation proceedings at EU- level has contributed to the creation of an EU-wide market for pharmaceutical products, at this stage the market is still imperfect. Variations between Member States in relation to price setting, conditions of reimbursement and channels