Source: EURLEX
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31 . 3 . 94 Official Journal of the European Communities No C 94 / 15

# Notice pursuant to Article 19 ( 3 ) of Regulation No 17 (*) concerning notification No IV / 34.776

( ex M.285 ) Pasteur-Mérieux — Merck

( 94 / C 94 / 06 )

( Text with EE A relevance )

I. The application and notification The parties gave a further undertaking on 25 February

1 . On 4 June 1993, Merck & Co ., Inc ., ( Merck ) and
Pasteur - Mérieux Scrums et Vaccins ( PMsv ) notified to
the Commission under Article 4 of Council Regulation
( EEC ) No 4064 / 89 ( the Merger Regulation ) an
operation under which they will organize their existing
activities in the human vaccine business within a territory
defined as being the EEC and EFTA, through a jointly
controlled company ( the IV ).

On 5 July 1993, the Commission decided that the
operation does not fall within the scope of the Merger
Regulation because it does not constitute a concentration
within the meaning of Article 3 of the said Regu ­
lation ( 2 ).

On 8 July 1993, the parties were informed that, upon
their request, the Commission will treat, pursuant to
Article 5 ( 1 ) of Commission Regulation No 2367 / 90 of

25 July 1990, the notified operation as an application
within the meaning of Article 2 and / or a notification
# within the meaning of Article 4 of Regulation No 17 / 62 .

This was understood to apply equally to the ' ancillary

agreements ' and in particular to the Overview
Agreement between the JV and Behringwerke AG
( Behring ).

The parties have, pursuant to § 24 of the German
' Gesetz gegen Wettbewerbsbeschränkungen ' ( compe ­
tition law ), also notified their operation to the German
Bundeskartellamt . This notification is still under
consideration by that authority .

On 13 August 1993, the Commission informed the
parties that it had serious doubts as to the compatibility
of the notified operation with EC competition rules, and
invited them to submit satisfactory proposals to avoid the
case being closed by a negative decision .

As a result, the parties gave, with a view to obtaining an
exemption under Article 85 ( 3 ), an undertaking on 3
November 1993 to amend substantially the agreements
with Behring and to grant specific rights to third parties
in respect of some vaccines as detailed below .

In view of the entry into force of the EEA - Agreement on

1 January 1994, the parties requested, pursuant to the
transitional rules laid down in Article 8 of Protocol 21 to
the EEA-Agreement, that their notification be extended
to Article 53 of the EEA-Agreement .

1994 to use their best endeavors to grant specific rights
to a potential third party in respect of a certain vaccine
for the Scandinavian EFTA-countries .

This notice summarizes the notified operation as
amended pursuant to the above undertakings .

II . The parties

2 . PMsv is a subsidiary of Institut Mérieux, itself a
subsidiary of Rhône-Poulenc, a recently privatised
French group of chemical and pharmaceutical companies
active worldwide . PMsv is a specialist manufacturer of
human vaccine products, blood proteins and other
related biological products . The turnover figures ( million
ECUs for 1992 ) for Rhône-Poulenc and PMsv are
Rhône-Poulenc ( worldwide 11 962, EEA 6 481 ) and
PMsv ( worldwide 588, of which 416,6 from vaccine
sales ; EEA 293, of which 226 from vaccine sales ).

3 . Merck is a major US company active worldwide in
pharmaceuticals . Its total turnover ( million ECUs for

1992 ) was ( worldwide 7 444, of which 374 from vaccine
sales, EEA 1 847, of which 43,9 from vaccine sales ). In

1991 Merck formed a separate division for its vaccines
business .

4 . The United States Federal Trade Commission
approved in April 1992 a joint venture between PMsv 's
indirect subsidiary, Connaught Laboratories, Inc ., and
Merck for the development and marketing of new multi ­
valent ( ie . a combination of several antigens in one
vaccine ) pediatric vaccines in the USA . The parents will

distribute the vaccines for the JV by way of
co-promotion . Merck distributes the vaccines to the
managed health care organizations and Connaught to
the private pediatricians . The parties have also entered
into similar co-promotion agreements for their existing
pediatric vaccines .

III . The markets

5 . The business of the JV will relate to human
vaccines, specific immunoglobulins, in vivo diagnostics,

. sera and such additional products as the partners may

from time to time determine . By far the most important
product group within this operation is that relating to
O OJ No 13, 21 . 2 . 1962, p . 206 / 62 . human vaccines and this notice therefore only refers to
O OJ No C 188, 10 . 7 . 1993, p . 10 . this product group .

No C 94 / 16 Official Journal of the European Communities 31 . 3 . 94

6 . Vaccine companies distribute their products on a vaccines . This last vaccine was in turn the most
country by country basis, given differences relating to important vaccine in Germany with its sales amounting

to about 25 % of total vaccine sales . Sales of flu vaccines
in Germany were worth about ECU 15 million ( 12 % of
total sales ). In France, Hep B and flu vaccines repre ­
— epidemiology e.g., Haemophilus Influenzae b ( Hib ) sented sales of over ECU 35 million each ( given each

vaccine is in pediatric use mainly in Northern over 25 % of total sales ).

6 . Vaccine companies distribute their products on a
country by country basis, given differences relating to

vaccine is in pediatric use mainly in Northern
Europe, Hepatitis B ( Hep B ) is in pediatric use
mainly in Southern Europe,

— the necessary national product authorization for each

vaccine,

— the different immunization schemes requiring
compulsory vaccination with certain vaccines,
whereas the same vaccines are only recommended in
other EEA countries ; even the time schedules for
identical vaccines vary from country to country for
some pediatric vaccines ( the tuberculosis vaccine
BCG, Diphteria / Tetanos / Pertussis — DTP —
vaccine, polio vaccine ),

— the widely varying price and reimbursement mech ­

anisms, where in some EEA countries vaccination is
free of charge for some or all vaccines, and in other
countries patients receive a partial or complete reim ­
bursement,

— differences in the demand structure : in the Scandi ­

navian countries, the Netherlands and Greece the
supply of vaccines is nearly exclusively generated by
Public Health Institutes who either produce their
own vaccines or purchase products in bulk or
finished form through public tenders ( in Iceland,
Norway and Finland these Institutes still have an
import monopoly ); in Ireland, Italy, Spain and the
UK, vaccines are purchased mainly through public
tenders, but the doctors choose the vaccine they
prescribe from a range of recommended available
vaccines, in other EEA countries, chiefly France and
Germany, vaccines are to a large extent supplied to
the private market and distributed via wholesalers to
pharmacies or directly to hospitals and, in the case of

Germany, doctors .

7 . These varying characteristics result in the
competitive structure of the vaccine markets in the EEA
being very different from vaccine to vaccine, and from
country to country . This can be illustrated by reference
to the three largest national markets in the EEA : France,
Germany and Italy which each totalled sales of about
ECU 130 million in 1992 . In Italy, the only country with
a recommended general pediatric vaccination against
Hep B, sales of this vaccine alone totalled over 50 % of
total sales, whereas there were virtually no sales of Hib

8 . Merck 's European vaccine portfolio consists of
measles mumps / rubella ( MMR ) and its individual and
bivalent components, Hib, Hep B and pneumococcus .
The distribution of all these vaccines occurs in only one

EEA country, Germany, where they are distributed by
Behring . Sales in Germany represented in 1992 almost
50 % of Merck 's total vaccine sales in the EEA . Another
30 % of total sales was accounted for by Hep B vaccine
sales in Italy . No vaccine was distributed in France .

9 . PMsv has a much larger vaccine operation in the
EEA, offering many more vaccines in more countries
than Merck . It has however no recombinant Hep B
vaccine on offer outside France as it lacks blocking
patent licenses necessary for it to offer this product
outside France . Furthermore, intervention by national
health authorities is causing PMsv to withdraw its mono ­
valent mumps and MMR vaccines from the market in all

EEA countries . Vaccine sales in France, where in 1992
PMsv was the only distributor for all vaccines except for
flu and Hep B, accounted for almost 60 % of PMsv 's
total vaccine sales in the EC, UK sales accounting for
another 20 % and German sales for almost 10 % .

10 . At presenet PMsv and Merck actually compete
only on the German monovalent rubella monovalent
measles and monovalent Hib market, the Portuguese
pneumococcal market and the Greek MMR market .

All these markets except the German monovalent Hib

market, are, in view of their relative turnovers in 1992,
of limited importance ; about ECU 2,5 million for the
German monovalent rubella, less than ECU 700 000 for
the Greek MMR market, less than ECU 300 000 for the
German monovalent measles market and less than ECU
3 000 ( exfactory prices ) for the Portuguese pneumo ­
coccal market .

The German monovalent Hib market totalled sales of

over ECU 30 million in 1992, of which vaccines
belonging to PMsv or its Canadian subsidiary
Connaught Laboratories Ltd realised about 75 % and
the Merck vaccine, distributed by Behring, about 10 % .
The only other competitor is Lederle which introduced
its vaccine in 1992 and achieved a market share of about

15 % .

31 . 3 . 94 Official Journal of the European Communities No C 94 / 17

In 1991 and 1992 in Sweden and in 1992 in Norway
PMsv 's and Merck 's monovalent Hib vaccines were the
only Hib vaccines sold : sales of these vaccines in 1992
amounted to about ECU 4 Million in Sweden and over
ECU 1 Million in Norway . PMsv 's Hib vaccines
accounted for some 90 % of these sales . However,
almost no sales of the Merck vaccine took place after

1992 because of changes on the Swedish market .

Each party will transfer to the JV its existing product
registration rights and will exclusively license to the JV
the existing patents and the know-how owned by or
licensed to it, except for any rights retained ( i ) to permit
the continued manufacture of products solely for sale to
the JV in the territory and ( ii ) for sale for use outside the
territory, and except for rights of third parties existing
prior to the JV .

All other existing product rights such as copyrights, trade
dress and tradenames will be licensed or transferred to

IV . The notified operation the JV . In addition PMsv will transfer or license certain

11 . Objectives and business scope of the JV tangible assets, its fonds de commerce and the capital

stock of certain of its subsidiaries . Each parent will also

The primary purposes and objectives of the JV are transfer to the JV its respective rights and obligations

under distribution agreements with third parties, except
for the agreements between Merck and Behringwerke
AG ( Behring ), its German distributor, with whom the JV
— the creation and development of new multivalent concluded the Behring Agreements .

IV . The notified operation

11 . Objectives and business scope of the JV

The primary purposes and objectives of the JV are

vaccines which would result in significant public

health benefits, including lower overall cost to society
and more comprehensive immunization . Neither
party has access to all the necessary components ( e.g.
for the combination DTP, Hib, Hep B and polio )

— the distribution of existing ( and new ) products in

countries where they are not yet marketed ( or would
not be were it not for the creation of the JV )

— future research in new vaccines, concentrated on

specific European requirements, in particular from
clinical phase II onwards, and related new techno ­
logies, e.g. delivery systems .

The business scope of the JV will be to facilitate the
research of, oversee the development of, register, arrange
for the manufacture of, distribute, market and sell in the
EC and EFTA vaccines, immunoglobulins, in vivo diag ­
nostics, sera and such additional products as the partners
may from time to time require .

12 . Transfer of the existing business to the JV

The JV will be set up in the form of a ' Society en nom
collectif ( SNC ) under French law, capitalized with FF
265 million by Merck 's French Subsidiary ( Merck Sub ),
but on closing Merck Sub and PMsv will each hold a
50 % ownership . The SNC Assembly of Partners will be
composed of two voting members representing the
parents Day-to-day activities will be managed by the
G6rant in the form of a French ' Societe Anonyme a
Directoire et Conseil de Surveillance ' in which each
parent will have equal shareholding and equal represen ­
tation .

13 . New vaccines :

Each parent agrees, subject to third party rights, to
transfer or license to the JV the product rights ( other
than registrations ) necessary to market the pipeline
products ( ie . those vaccines which are at a late devel ­
opment stage ) in any country of the territory as they
arise, or, at the option of the JV, to render all reasonable
assistance to enable the JV to obtain these rights in its
own name . If the JV elects to commercialize such a
product, the originating party will permit the JV to
obtain product registrations for the product in the
territory, subject to retention of such registrations as the
originating party may require to continue to manufacture
such product solely ( i ) for sale for use outside the
territory, or ( ii ) for sale to the JV for use within the
territory . If the JV elects not to commercialize such a
product, it many transfer or license the product rights

( except for a product containing Merck 's Hep B ) to a
third party . If the JV pursues the development, it will
fund and direct the post-phase II testing and post-launch
development studies used to support the registration and
marketing of the product in the territory . The patents
and know-how resulting from development work funded
by the JV shall belong to the JV for the territory,
whereas the party engaged in the relevant development
work outside the territory shall own the patents and
know-how there .

As regards products at an early development stage ( the

future pipeline products ), the originating party will at the
commencement of post-phase II testing, offer the
product to the JV . If the JV accepts the product, the JV
will receive an exclusive licence, subject to third party
rights in the territory, for the product rights . The
mechanism for product registration, sharing of devel ­
opment costs an intellectual ownership is identical to that
for pipeline products . If the JV does not want to

No C 94 / 18 Official Journal of the European Communities 31 . 3 . 94

commercialize the product, it is the originating party
which may transfer or license all rights to a third party in
the territory on terms no more favourable than those
offered to the JV .

A Development Committee will be assembled in order to
formulate, implement and direct the R&D strategy of the
JV and the parents for the benefit of the JV in the

territory .

Connaught shall grant the JV an exclusive ( subject to
any third party rights ) licence for the territory of product
rights to its future products for a term of 30 years, which
agreement shall terminate in the event that Connaught
ceases to be a PMsv affiliate . The JV shall manage the
existing distribution arrangements of Connaught in the
territory and, at the opinion of the JV, shall serve as
Connaught 's dustributor for its existing products, subject
to any third party rights .

15 . Duration :
The Development Committee shall :

— oversee communications regarding the R&D acti ­

vities of the parents undertaken for the JV, including

communications concerning discoveries

— oversee the development of JV multilatent products

— identify the most efficient utilization of the available

resources of the parents for such development acti ­
vities, and also identify the appropriate multivalent
products for development

— advise the management bodies of the JV .

All patents and know-how resulting from development
work funded by the JV shall belong to the JV, provided
that the parents shall each be granted a non-exclusive,
worldwide, royalty-bearing licence .

14 . Other arrangements

Administrative and support services ( including
accounting, treasury, management information, currency
hedging and other financial services, legal, medical and
regulatory services ) may be provided by each of the
parties on a cost basis .

Merck and PMsv will each supply, on a cost basis, the
JV 's requirements of existing products, the rights to
which the parent transferred or licensed to the JV, and
future products with respect to which the parent is the
originator, and these the JV will either sell ( as mono ­
valent ) or include them in multivalent products . PMsv
will, for so long as it has the capacity and can do so at a
competitive cost, complete the finishing of the JV 's
multivalents unless all components come from Merck .
The JV shall have the right to audit all these costs every
two years . In the event that the JV determines that the
costs are not reasonable, it may procure the relevant
service ( if permissible under the terms of patents / licenses
relating to such products ) from the other or a third
party, provided that this is on substantially more advant ­
ageous terms than the existing party is willing to offer .

The agreement shall terminate automatically at the end
of the year 2023 unless extended by mutual consent in
writing . However, Merck has the right to sell its interest

at any time after 2001, with PMsv having the first option
to purchase .

16 . Non-competition

The parents agree not do sell or supply, nor to license to

a third party, prior to termination, a JV product or a
competing product for use in the territory .

Merck will not, for a period of five years following the
sale of its interest, sell, supply or license to a third party
a JV product das von diesem vor der Veraufierung der
IntereSsen von sold by the JV prior to the sale of the
Merck interest or a competing product .

None of the parents will solicit an employee of the JV to
leave the JV for three years after the termination of the
JV or the sale of its interest

V. The Behring Agreements

17 . The German monovalent Hib market

The parties will grant Behring an exclusive license to
manufacture ( and distribute ) monovalent PedvaxHIB
( the Merck Hib vaccine ) for sale in Germany . The
license enables Behring to establish its own manufac ­
turing facility, or to arrange for the manufacture to be
subcontracted to Merck or to a licensee in the EEC of

Merck or the JV .

18 . Distribution of other vaccines :

Until 2004 Behring will in Germany ( with the right to
make sales outside Germany in response to unsolicited
requests ) be the sole distributor of Merck 's existing
MMR ( and its components ) and pneumococcal vaccines,
the sole agent for the distribution of Merck 's existing
Hep B vaccine ; and the sole co-promotor of the JV 's

31 . 3 . 94 Official Journal of the European Communities No C 94 / 19

future varicella, MMR Varicella and Hep A vaccines,
subject to any rights of third parties . If Behring
distributes any third party competing product . Behring ' s
appointment will become non-exclusive for that vaccine .

19 . Development by Behring of multivalents

The parties have entered into a set of agreements with
Behring under which Behring has the right op procure
from the JV its requirements for its Hib, acellular
Pertussis and / or Hep B antigens for inclusion in multi ­
valents developed by Behring for sale in Germany ( with
the right to make sales outside Germany in response to
unsolicited requests ). This right lasts until 2004, but
should Behring develop a multivalent as any time before
that date, the right to procure the JV 's antigens for that
particular multivalent shall last for a minimum of five
years from its first marketing and in any event until

2004 . This development work will be on the basis of
technology licensed by the JV for its antigens and / or in
such form as to respect third parties ' intellectual property
rights .

This agreement gives Behring the opportunity to develop

a particular multivalent for sale in Germany, based on its
own antigens, JV antigens and / or third party antigens
Behring is also free to exploit outside Germany its own
severable intellectual property rights created in
developing a multivalent containing an antigen of the JV .

VI . French vaccine markets

20 . French monovalent Hib market

valent Hib ( PRP-T ) vaccine presently marketed by PMsv
in France .

21 . The French MMR ( individual and in combination )
markets

By the same letter of intent these parties have also
agreed to enter into negotiations to grant to Pierre Fabre
distribution rights for France to Merck 's MMR and its
individual and bivalent components . These rights will be
exclusive, except for the JV or its French affiliate in
regard to MMR, monovalent mumps and bivalent
measles / mumps Pierre Fabre shall have the option at its
sole discretion of using Merck 's trademarks in France for
MMR, monovalent mumps and bivalent measles / mumps,
or of usinhg its own trademarks .

VII . Scandinavian vaccine markets

22 . By an undertaking dated 25 February 1994, the
parties offered to use their best endeavors to submit,
before May 15, 1994, a letter of intent with an interested
third party to enter into negotiations to grant such a
party an exclusive licence to manufacture monovalent
PedvaxHIB for sale in the Scandinavian EFTA-countries .
Such a licence will be along the same lines indicated
under point 20 above .

VIII . The Commission's intentions

The Commission intends to take a favourable position,
under both the EC and EEA-Agreement 's competition
rules, in respect of the agreement, a summary of which is
published here, if the letter of intent mentioned at
Chapter VI results in actual agreements reflecting the
content of the above summary and if the undertaking
mentioned at Chapter VII has been implemented . Before
doing so the Commission invites all interested third
parties to submit their observations within one month
from the date of this notice, quoting reference IV / 34.776

to :

The parties have concluded a letter of intent with Pierre Chapter VI results, in actual agreements reflecting the
Fabre Medicaments SA ( Pierre Fabre ) by which they content of the above summary and if the undertaking
have Fabre agreed an exclusive to enter licencse into negotiations to manufacture to grant monovalent Pierre mentioned at Chapter VII has been implemented . Before
PedvaxHIB for sale in France . This licence will enable doing so the Commission invites all interested third

parties to submit their observations within one month

Pierre Fabre to establish its own manufacturing facility, from the date of this notice, quoting reference IV / 34.776
or to Merck to arrange or to for a the licensee manufacturing in the EEC to of be Merck subcontracted or the to :
JV . Commission of the European Communities,
Directorate-General for Competition,
The rights to be granted to Pierre Fabre shall not affect Directorate for Restrictive Practices, Abuse of Dominant
the right of the JV or its French affiliate to sell mono ­ Position II,
valent PedvaxHIB in France, should any regulatory or 200, Rue de la Loi,
medical problems arise in connection with the mono B-1049 Brussels .

Position II,
200, Rue de la Loi,

B-1049 Brussels .