CELEX: 32015M7685
Language: en
Date: 2015-08-21 00:00:00
Title: Commission Decision of 21/08/2015 declaring a concentration to be compatible with the common market (Case No COMP/M.7685 - PERRIGO / GSK DIVESTMENT BUSINESSES) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 21.08.2015
C(2015) 6002 final

To the notifying party:

Dear Sir/Madam,

Subject:    Case M.7685 -  PERRIGO  /  GSK  DIVESTMENT  BUSINESSES  Commission  decision  pursuant  to  Article  6(1)(b)  of  Council  Regulation
No 139/2004[1] and Article 57 of the Agreement on the European Economic Area[2]

 1) On 22 July 2015, the Commission received a notification of a proposed concentration pursuant to Article 4 and following a referral  pursuant
    to Article 4(5) of Council Regulation (EC) No 139/2004[3] by which the undertaking Perrigo Company Plc ("Perrigo", Ireland) acquires  within
    the meaning of Article 3(1)(b) of the Merger Regulation sole control of the assets constituting certain consumer healthcare businesses  (the
    "GSK Divestment Businesses" or the "Target") of GlaxoSmithKline Consumer Healthcare Holdings Limited ("GSK",  United  Kingdom),  by  way  of
    purchase of assets.[4]

 2) Perrigo is referred to as "the Notifying Party". Perrigo and the GSK Divestment Businesses are jointly referred to as "the Parties".

       THE PARTIES

 3) Perrigo is active globally in the  development,  manufacture,  and  marketing  of  consumer  healthcare  (over-the-counter,  or  "OTC")  and
    prescription pharmaceuticals, nutritional products, and active pharmaceutical ingredients (APIs). On 23 June 2015, Mylan N.V. ("Mylan",  the
    Netherlands) notified its unsolicited takeover bid to acquire control over Perrigo. The Commission has approved under the Merger  Regulation
    the Mylan / Perrigo transaction on 29 July 2015.[5]

 4) The Target comprises consumer healthcare businesses divested by GSK as part of commitments submitted by GSK in the context  of  case  M.7276
    GlaxoSmithKline / Novartis vaccines business (excl. influenza) / Novartis Consumer Health business  ("GlaxoSmithKline  /  Novartis  Consumer
    Health").[6] Within the EEA, the relevant businesses are:

a. GSK’s NiQuitin nicotine reduction therapy ("NRT") business in the whole of the EEA;

b. GSK’s Coldrex cold & flu business in the whole of the EEA and GSK’s Nasin and Nezeril cold & flu business in Sweden;

c. GSK’s Panodil pain management business (including both prescription and non-prescription products) in Sweden; and

d. Novartis' topical cold sores management business (including the Fenivir, Pencivir, Vectavir, and Vectatone brands) in the whole of the EEA.

       THE OPERATION

 5) On 1 June 2015, [Acquiring entity], an indirectly controlled subsidiary of Perrigo, and GSK entered into transaction agreements, pursuant to
    which [Acquiring entity], and ultimately Perrigo, will acquire the Target, for a cash consideration of EUR 200 million.

       EU DIMENSION

 6) The operation does not have a Union dimension within the meaning of Article 1 of the Merger  Regulation.  The  Parties'  combined  worldwide
    turnover is below EUR 5 000 million (Perrigo: EUR 4 218 million, the Target: EUR 99 million) and the  thresholds  in  Article  1(3)  of  the
    Merger Regulation are not met.[7]

 7) On 22 June 2015 the Notifying Party informed the Commission in a reasoned submission that the transaction  was  capable  of  being  reviewed
    under the national merger control laws of three Member States (Portugal, Romania and the UK) and requested the  Commission  to  examine  the
    transaction. None of the Member States that were competent to review the  transaction  indicated  its  disagreement  with  the  request  for
    referral within the period laid down by the Merger Regulation.

 8) The transaction is therefore deemed to have a Union dimension pursuant to Article 4(5) of the Merger Regulation.

       COMPETITIVE ASSEMENT

 9) The consumer healthcare industry comprises pharmaceutical products which can be  purchased  without  a  prescription  (over-the-counter,  or
    "OTC") in pharmacies, as well as in other type of stores such as supermarkets in certain countries.

10) The Parties' activities give rise to affected markets in the following areas: (i) nicotine reduction therapies  ("NRT");  (ii)  cold  &  flu
    treatments; (iii) topical cold sores management treatments. The Commission has recently analysed those markets  in  case  GlaxoSmithKline  /
    Novartis Consumer Health business.[8]

11) In accordance with past Commission's practice in the consumer health sector,[9]  the  Commission  applied  a  system  of  filters  aimed  at
    determining the group of markets where concerns are most likely to arise and on which it focused its analysis.[10]

1 Nicotine Reduction Therapies (NRT)

1 Relevant product market

12) Smoking cessation products are aimed at reducing and ultimately eliminating the nicotine addiction that comes with smoking.

13) The majority of smoking cessation aids consists of NRT products, which provide smokers with a slow release of nicotine in gradually  smaller
    doses, thereby slowly reducing smokers’ dependence on it. The three main formats of NRT products are (i)  nicotine  patches,  (ii)  nicotine
    gums and (iii) nicotine lozenges. Other formats include nicotine inhalators, sprays, orally dissolving strips and  sublingual  tablets.  NRT
    products are mostly sold as branded products but, in some countries, are supplied to retailers to be sold under private labels.

14) In GlaxoSmithKline / Novartis Consumer Health business,[11] the Commission found that NRT products and other smoking cessation products (for
    instance nicotine de-addiction therapies) did not belong to the same market. It left open whether or not all NRT  formats  belonged  to  the
    same market.

15) The Notifying Party submits that all NRT formats (patches, gums, lozenges etc.) belong to the same product market, and  that  private  label
    NRT products do not belong to the same relevant market as branded NRT products.

16) The exact product market definition for NRT products can be left open in this case as the transaction does not give rise to  serious  doubts
    as to its compatibility with the internal market under any plausible market definition.

2 Relevant geographic market

17) The Commission has previously defined the geographic market for pharmaceutical products, including  for  NRT,  as  national  in  scope.  The
    Notifying Party does not contest this.

3 Competitive assessment

18) The GSK NiQuitin branded products which are being purchased by Perrigo are sold throughout the EEA. In the UK, Perrigo has been selling  NRT
    products under its own Galpharm brand since 2011, as well as supplying private label lozenges  to  retailers  such  as.[Retailer  name]  and
    [Retailer name], Perrigo will also, in 2015, start supplying NRT products to a Dutch retailer.

19) The only affected markets arising from the transaction are in the UK[12], in particular in relation to NRT products in general, as  well  as
    to NRT lozenges.

20) Sales of NRT products in the UK are predominantly branded sales. The main competitors of the Parties are Johnson & Johnson ("J&J") with  its
    Nicorette brand and GSK with its Nicotinell brand. The Notifying Party submits that GSK and J&J (McNeil) are also suppliers to UK  customers
    of certain private label NRT products.

21) Gums are the most popular NRT format in the UK, followed by lozenges. In  2014,  the  Target  experienced  shortages  in  its  NRT  NiQuitin
    lozenges, resulting in a decrease of the total volume of the NRT lozenges market in the UK as illustrated in Figure 1 below.

                                           Figure 1: Evolution of the NRT in the UK, Feb 2014-Feb 2015

                                                                      [pic]

   Source: Internal document of Perrigo entitled "[…]"

22) The Target's sales are expected to recover from this supply disruption, although only partly. Internal documents from Perrigo estimate  that
    "NiQuitin will regain […]% of lost share between now and 2019".[13]

23) Concerning plausible markets encompassing: a) branded and private label NRT products (all formats) in the UK;  and b)  branded  and  private
    label NRT lozenges in the UK, the Notifying Party submits that the transaction does not lead to affected markets due to the drop of NiQuitin
    sales.[14]

24) Concerning private label NRT products, the Notifying Party submits that no overlap arises as the  Target  is  not  active  in  this  market.
    Furthermore, in relation to the supply of private label products, the Notifying Party submits that there are no vertically affected  markets
    arise as Perrigo does not contract manufacture NRT products for any third party pharmaceutical company in the EEA.

25) In a market encompassing only branded NRT products, the transaction gives rise to a group 1 market for branded NRT lozenges with  a  limited
    increment, and a group 3 market for branded NRT products.

                                   Table 1: Market share of the Parties' and competitors in NRT in the UK, 2014

|                             | Branded NRT products                       |Branded NRT lozenges                      |
|Perrigo                      |< [0-5]%                                    |< [0-5]%                                  |
|Target NiQuitin              |[20-30]%                                    |[30-40]%                                  |
|Combined                     |[20-30]%                                    |[30-40]%                                  |
|J&J Nicorette                |[60-70]%                                    |[20-30]%                                  |
|GSK Nicotinell               |[5-10]%                                     |[30-40]%                                  |
|Others                       |[0-5]%                                      |                                          |

   Source: Notifying Party's submission based on IMS data

26) The increment brought about by the transaction is limited, and J&J and GSK remain as strong branded competitors in the NRT area  in  the  UK
    with their Nicorette and Nicotinell brands. Brand recognition is key in the NRT area.[15] The Notifying  Party  submits  that  its  Galpharm
    brand is a value brand. Internal documents of Perrigo [Assessment of Galpharm].[16]

27) The customers contacted in the course of the market investigation did not raise any concerns as regards the transaction's  potential  impact
    on the NRT market in the UK.[17]
    A respondent for instance stated that it was "not concerned by the merger because there is sufficient competition in the  smoking  category,
    even on restricted licence".[18]

28) In view of the above, the transaction does not raise serious doubts as to its compatibility with the internal  market  in  relation  to  NRT
    products in the UK.

2 Cold & flu treatments

1 Relevant product market

29) Cold and flu OTC products treat the variety of symptoms generated by the common cold and influenza, commonly referred to as  flu.  Cold  and
    flu typically present multiple symptoms which can be treated by a number of different OTC products.

30) Two broad categories of OTC products treating a cold and flu can  be  identified:  (i)  multi-symptoms  products  and  (ii)  single-symptoms
    products. Multi-symptoms products contain more than one active ingredient and treat multiple symptoms of the cold and  flu.  Single-symptoms
    products on the other hand contain a single active ingredient treating only a specific symptom.

31) In GlaxoSmithKline / Novartis Consumer Health business,[19] the Commission has left open whether or not multi-symptoms products and  single-
    symptoms products belong to the same market(s).

32) The Notifying Party submits that single-symptom and multi-symptom products exert a competitive constraint upon one another.

33) As the transaction does not raise serious doubts as to it compatibility with the internal market under any plausible market delineation, the
    precise scope of the market can be left open.

2 Relevant geographic market

34) The Commission has previously defined the geographic market for pharmaceutical products, including for the OTC  products  relevant  in  this
    case, as national in scope. The Notifying Party does not contest this.

3 Competitive assessment

35) In the EEA, Perrigo is active in the cold and flu segment with its Antigrippine and Aflubin products, each classified as Multi-Symptom  Cold
    and Flu Treatments (R5A). Perrigo also sells small volumes of Throat Preparations (R2A) in Lithuania and Poland.

36) The Target is active with the following cold and flu products:

a. Coldrex, a multi-symptom preparation,

b. Coldrex Lary, a throat preparation,

c. Nezeril and Nasin, topical nasal preparations (purchased only for Sweden).

37) The transaction results in three group 3 markets.

38) In Latvia, the combined market share would be of [20-30]% with a [5-10]% increment. Competitors include GSK ([20-30]%),  Boiron  ([10-20]%),
    KRKA ([10-20]%) and Marsans Pharma ([5-10]%).

39) In Lithuania, the combined market share would be of [20-30]% with a [0-5]% increment. Competitors include GSK ([20-30]%), US Pharmacia ([20-
    30]%), KRKA ([10-20]%) and Boiron ([5-10]%).

40) In the Netherlands, the combined market share would be of [20-30]% with a [5-10]% increment. Competitors  include  Reckitt  Benckiser  ([20-
    30]%), Sanofi ([20-30]%), and Schwabe ([10-20]%).

41) Given the limited combined market shares, the size of the increments, and the presence of various  alternative  suppliers  including  strong
    competitors,  the transaction does not raise serious doubts as to its compatibility with the internal market in the cold and flu area.

3 Topical cold sore management treatments

1 Relevant product market

42) Cold sores (herpes labialis, also commonly known as herpes of the lips or fever blisters) are groups of  small  blisters  on  the  lips  and
    around the mouth, typically caused by a viral strain of the herpes simplex virus. Products aimed at cold  sore  management  include  notably
    topical antiviral (creams and gels), patches, lip balms, herbal remedies, analgesics and light/heat therapy devices.

43) In GlaxoSmithKline / Novartis Consumer Health business,[20] the Commission found that the relevant market was topical  antivirals  used  for
    the treatment of herpes labialis. The Commission has assessed the present transaction on the basis of this market definition.

44) At the upstream level of APIs, in a previous decision, the Commission considered the acyclovir API as a possible product market.[21]

2 Relevant geographic market

45) The Commission has previously defined the geographic market for pharmaceutical products, including for the OTC  products  relevant  in  this
    case, as national in scope. The Notifying Party does not contest this.

46) In past decisions, the Commission has considered the API markets to be at least EEA-wide and possibly global in scope.[22] The  exact  scope
    of the relevant product and geographic market can be left open as  the  transaction  does  not  give  rise  to  serious  doubts  as  to  its
    compatibility with the internal market under any plausible market definition.

3 Competitive assessment

47) The Target is active across the EEA with sales of branded products based on the active ingredient penciclovir, under  various  brand  names.
    Perrigo sells small quantities of cold sore treatments in Belgium, Italy, Netherlands, Portugal and the UK.

48) The transaction would lead to one group 3 market: Italy, where the combined market share of the Parties would reach [20-30]% with a  [5-10]%
    increment.[23] The market for topical cold sore management treatments is  to  a  large  extent  genericized.  Post-transaction,  Perrigo  is
    expected to face competition from the biggest remaining competitor, GSK ([30-40]%), followed by a large number of smaller  competitors  with
    individual market shares ranging between 1% and 10%.

49) Furthermore, the Commission also assessed a possible vertical link  given  that  Mylan,  as  a  manufacturer  of  the  API,  acyclovir,  has
    significant activities upstream from the market for topical herpes labialis antivirals.  The  Notifying  Party  submits  that  the  Target's
    products use the active ingredient penciclovir. Furthermore, apart from Mylan, a large number of API providers exist for topical  cold  sore
    management APIs. Therefore, the transaction is unlikely to result in foreclosure effects.

50) In view of the above, the transaction does not raise serious doubts as to its compatibility with the internal market in the area of  topical
    cold sore management treatments.

       CONCLUSION

51) For the above reasons, the European Commission has decided not to oppose the notified operation  and  to  declare  it  compatible  with  the
    internal market and with the EEA Agreement. This decision is adopted in application of Article 6(1)(b) of the Merger Regulation and  Article
    57 of the EEA Agreement.

                                        For the Commission

                                        (signed)
                                        Miguel ARIAS CAÑETE
                                        Member of the Commission

-----------------------
[1]   OJ L 24, 29.1.2004, p. 1 ('the Merger Regulation'). With effect from 1 December 2009, the Treaty on the Functioning of the  European  Union
('TFEU') has introduced certain changes, such as the replacement of 'Community'  by  'Union'  and  'common  market'  by  'internal  market'.  The
terminology of the TFEU will be used throughout this decision.
[2]   OJ L 1, 3.1.1994, p.3 ("the EEA Agreement").
[3]   OJ L 24, 29.1.2004, p. 1 (the "Merger Regulation").
[4]   Publication in the Official Journal of the European Union No C249, 30.07.2015, p. 14.
[5]   See case M.7645 – Mylan / Perrigo. The Commission's competitive assessment of Perrigo's acquisition of the GSK Divestment Businesses  takes
into account the ongoing Mylan / Perrigo bid.
[6]   See case M.7276 – GlaxoSmithKline / Novartis vaccines business (excl. influenza) / Novartis Consumer Health business.
[7]   The aggregate Union-wide turnover of the Target is below EUR 100 million (EUR [70-75] million).
[8]   See case M.7276 – GlaxoSmithKline / Novartis vaccines business (excl. influenza) / Novartis Consumer Health business.
[9]   See for instance case M.7276 – GlaxoSmithKline / Novartis vaccines business (excl. influenza) / Novartis Consumer Health business.
[10]  The filters identify the following groups: (i) Group 1 markets, where the Parties' combined market share  exceeds  35%  and  the  increment
exceeds 1%, (ii) Group 2 markets: where the Parties' combined market share exceeds 35% but the increment is below 1% and (iii) Group  3  markets:
where the Parties' combined market share is between 20% and 35%.
[11]  See case M.7276 – GlaxoSmithKline / Novartis vaccines business (excl. influenza) / Novartis Consumer Health business.
[12]  In particular, no affected market arises in the Netherlands.
[13]  Internal document of Perrigo entitled "[…]", dated March 2015.
[14]  IRI data for year ended 21 March 2015. IRI is an information and business services  provider  focusing  on  the  consumer  packaged  goods,
retail and healthcare industries. IRI data is based upon grocery and retail market.
[15]  See case M.7276 – GlaxoSmithKline / Novartis vaccines business (excl. influenza) / Novartis Consumer Health business.
[16]  Internal document of Perrigo entitled "[…]", dated June 2014.
[17]  See responses from customers dated 20 July, 21 July, and 4 August 2015.
[18]  Response of a customer submitted by email dated 20 July.
[19]  See case M.7276 – GlaxoSmithKline / Novartis vaccines business (excl. influenza) / Novartis Consumer Health business.
[20]  See case M.7276 – GlaxoSmithKline / Novartis vaccines business (excl. influenza) / Novartis Consumer Health business.
[21]  See case M.7645 – Mylan / Perrigo.
[22]  See case M.5865 – Teva / Ratiopharm.
[23]  These figures take into account Mylan's sales.

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 In the published version of this decision, some 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  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

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