CELEX: 32018M9044
Language: en
Date: 2018-12-04 00:00:00
Title: Commission Decision of 04/12/2018 declaring a concentration to be compatible with the common market (Case No COMP/M.9044 - CVC Capital Partners SICAV-FIS S.A. / Recordati S.p.A.) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 04.12.2018
                                                                C(2018)8437 final
  In the published version of this decision,
  some information has been omitted pursuant                             PUBLIC VERSION
  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                     To the notifying party:
  […]. Where possible the information omitted
  has been replaced by ranges of figures or a
  general description.
Subject:            Case M.9044 – CVC / RECORDATI
                    Commission decision pursuant to Article 6(1)(b) of Council
                    Regulation No 139/20041 and Article 57 of the Agreement on the
                    European Economic Area2
Dear Sir or Madam,
(1)       On 26 October 2018, the European Commission received notification of a
          proposed concentration pursuant to Article 4 of the Merger Regulation by which
          CVC Capital Partners SICAV-FIS S.A. ("CVC") acquires within the meaning of
          Article 3(1)(b) of the Merger Regulation sole control of Recordati SpA
          (”Recordati” or the "Target") by way of purchase of shares ("the Transaction").
          CVC and Recordati are referred to hereinafter as the Parties and CVC as the
          Notifying Party.3
     1. THE PARTIES
(2)       The primary business activities of the undertakings concerned are:
         […]* manages and provides advice to investment funds and platforms. The
            following portfolio companies are active in markets horizontally or vertically
            related to the Target's activities:
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
     Publication in the Official Journal of the European Union No C 400, 6.11.2018, p. 15.
* Should read: “the CVC network”
Commission européenne, DG COMP MERGER REGISTRY, 1049 Bruxelles, BELGIQUE
Europese Commissie, DG COMP MERGER REGISTRY, 1049 Brussel, BELGIË
Tel: +32 229-91111. Fax: +32 229-64301. E-mail: COMP-MERGER-REGISTRY@ec.europa.eu.
 ---pagebreak---             o Alvogen is a global pharmaceutical company whose product portfolio
                 consists of a broad range of generic, branded, and biosimilar products for
                 use in oncology, cardiology, respiratory, neurology and gastroenterology
                 treatments. Alvogen currently has commercial operations in 35 countries
                 across North America, Central and Eastern Europe and Asia Pacific.
            o DOC Generici is a generic pharmaceutical company in Italy focused on
                 developing and manufacturing cardiovascular, gastroenterology &
                 metabolic and neurology products.
            o Elsan is a French private healthcare business, operating more than 35
                 health clinics primarily focused on medicine, surgery and obstetrics.
            o Metropolitan is a Greek private hospital.
     Recordati develops and markets branded and generic drugs for the treatment of
        hypertension and other cardiovascular disorders, disorders of the lower urinary
        tract as well as drugs for treatment of rare diseases such as metabolic deficiencies
        of a genetic nature.
    2. THE OPERATION
(3)     On 29 June 2018, the Parties entered into a share purchase agreement according
        to which CVC acquires through special purpose vehicles a controlling
        shareholding of approximately 51.8% in the Target. None of the other
        shareholders besides CVC will have any veto right over the strategic decisions of
        the Target, including decisions regarding the Target's annual budget, business
        plan or appointment of senior management.
(4)     Therefore, the Transaction involves the acquisition of sole control of Recordati by
        CVC within the meaning of Article 3(1)(b) of the Merger Regulation.
    3. EU DIMENSION
(5)     The undertakings concerned have a combined aggregate world-wide turnover of
        more than EUR 5 000 million4 (CVC: EUR […] million; Recordati: EUR […]
        million). Each of them has an EU-wide turnover in excess of EUR 250 million
        (CVC: EUR […] million; Recordati: EUR […] million). The Parties do not
        achieve more than two-thirds of their Community-wide turnover within one and
        the same Member State.
(6)     The notified operation therefore has an EU dimension by virtue of Article 1(2) of
        the Merger Regulation.
4
    Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the Commission
    Consolidated Jurisdictional Notice (OJ C95, 16.4.2008, p. 1).
                                                       2
 ---pagebreak---     4. COMPETITIVE ASSESSMENT
        4.1       Market definitions
(7)     The Transaction gives rise to horizontal overlaps in relation to several finished
        dose pharmaceuticals ("FDPs") marketed by both Parties.5 […]* also develops
        pipeline products that overlap with FDPs marketed by […]**. Finally, the
        Transaction also gives rise to potential vertical links between Recordati’s
        activities on the markets for FDPs (upstream markets) and the provision of
        hospital services by CVC […]*** portfolio companies (downstream markets).
        4.1.1     Finished dose pharmaceutical products ("FDP")
        Product market definition
(8)     In previous decisions6 concerning the pharmaceutical sector, the Commission has
        noted that pharmaceutical products may be classified into therapeutic classes by
        reference to the Anatomical Therapeutic Classification (ATC)7. This
        classification has the advantage of being developed and maintained for
        commercial use and providing ready access to statistics. It is based on finished
        dose pharmaceutical products and their approved indications in the various
        countries, which may in many cases vary from one country to another.
(9)     In the EphMRA ATC system, medicines are classified into groups at four
        different levels. In the first and broadest level (ATC1), medicinal products are
        divided into the 16 main anatomical groups. The second level (ATC2) represents
        either a pharmacological or therapeutic group. The third level (ATC3) further
        groups medicinal products by their specific therapeutic indications, i.e. their
        intended use. The ATC4 level is the most detailed one (not available for all
        ATC3) and refers for instance to the mode of action (e.g. distinction of some
        ATC3 classes into topical and systemic depending on their way of action) or any
        other subdivision of the group. Finally, the level of the chemical substance is the
        so-called molecule level (ATC5).
(10)    In previous decisions, the Commission has referred to the ATC3 level as the
        starting point for defining the relevant product market. The Commission found
        however that the ATC3 level classification did in many cases not provide the
        appropriate market definition within the meaning of the Commission Notice on
        Definition of the Relevant Market8. Thus, where appropriate and based on the
5
    Finished dose pharmaceuticals are essentially pharmaceutical products in the form in which they are
    marketed for use, typically involving a mixture of active drug components and nondrug components
    (excipients), along with other non-reusable material that may not be considered either ingredient or
    packaging (such as a capsule shell, for example).
6
    M.7746 – Teva/Allergan Generics; M.7559 – Pfizer/Hospira; M.7379 – Mylan/Abbott EPD-DM;
    M.6613 – Watson/Actavis.
7
    The ATC classification devised by the European Pharmaceutical Marketing Research Association
    ("EphMRA") and maintained by EphMRA and Intercontinental Medical Statistics ("IMS").
8
    OJ C 372, 9.12.1997, p. 5.
* Should read: “CVC Funds portfolio companies”
** Should read: “the Target”
*** Should read: “Funds”
                                                       3
 ---pagebreak---        factual evidence collected during the market investigation, the Commission
       defined the relevant product market at the level of the molecule9.
(11)   As regards genericised products, for which the originator drug lost market
       exclusivity and competes with generic drugs, the Commission has taken the view
       that the molecule level is the most plausible starting point for the product market
       definition, given that generic pharmaceutical companies typically produce copies
       of originator drugs10 and thus it can be considered that a generic molecule is the
       closest substitute to the originator medicinal product based on the same molecule
       or API11. As set out in the Commission's Horizontal Merger Guidelines12, the
       higher the degree of substitutability between the merging firms' products, the
       more likely it is that the merging firms will raise prices significantly13.
(12)   As regards a potential distinction between generic and originator medicines, in
       previous decisions14, the Commission set out that where the market is genericised,
       originator drugs and generics could be considered to be close substitutes for a
       given indication and a product market may be defined as including both the
       generic and the originator medicine.
(13)   In the present case, in line with the previous practice, the Commission takes the
       molecule level as the most plausible starting point for the product market
       definition.
(14)   Regarding a potential distinction between originator and generic products, during
       the market investigation in the present case the respondents indicated that brand
       recognition and price differentiate originator products from the generic products
       based on the same molecule15. In this regard, brand loyalty to the originator
       medicine may play a role in limiting the number of customers switching away
       from the originator drug in certain instances, and thus limiting the competition
       that takes place between originator and generic providers16. However, such
       dynamics are typical of differentiated products within a product market where
       brand recognition and marketing can influence customers' decision between
       substitutable products. Therefore, for the purposes of the competitive assessment
9
   See for example M.7559 – Pfizer/Hospira and M.5253 – Sanofi-Aventis/Zentiva.
10
   Generics are in general less expensive versions of the originator drugs. In regulatory approval
   procedures, a generic drug manufacturer has to demonstrate that the generic version of the originator
   drug has identical composition in active substances, same strength and pharmaceutical form; and is
   biologically equivalent to the originator drug. See for example M.5253 – Sanofi-Aventis/Zentiva and
   M.5295 – Teva/Barr. Note however that there may still be small differences, such as in inactive
   ingredients, which may lead in certain, probably relatively uncommon cases, to the drugs being non-
   equivalent from a medical standpoint.
11
   See M. 7746 - Teva/Allergan Generics; M.7559 – Pfizer Hospira; M.7379 – Mylan/Abbott EPD-DM;
   M.6613 – Watson/Actavis.
12
   Guidelines on the assessment of horizontal mergers under the Council Regulation on the control of
   concentrations between undertakings (“Horizontal Merger Guidelines”), OJ C 31, 5.2.2004, p. 5, para
   28.
13
   See M.5253 – Sanofi-Aventis/Zentiva.
14
   See M. 4418 - Nycomed Group/Altana Pharma and M.3751 - Novartis/Hexal.
15
   See Section 4.2.1.2 below.
16
   See for example M.5865 - TEVA/ RATIOPHARM.
                                                       4
 ---pagebreak---         of the Transaction, the Commission considers that in relation to the overlapping
        molecules the product market includes both generic and originator versions.17
(15)    In addition, medicines are differentiated not only by their active ingredient(s), but
        also, as recognised by the European regulatory framework for medicines for
        human use18, by their dosage, pharmaceutical form and route of administration,
        which may limit their substitutability. The Commission looked in the past at the
        pharmaceutical form or "galenic" form with reference to the first letter of the
        typology of form codes ("New Form Code 1", or "NFC1"), for the purposes of
        defining the relevant product market.
(16)    The market investigation in the present case has shown, for some of the molecules
        considered, that different routes of administration and the pharmaceutical forms
        of a medicine may have limited substitutability19. In any event, the question of
        whether the relevant markets should be further subdivided according to the
        galenic form can be left open for the purpose of this decision as the competitive
        assessment of individual markets would not change irrespective of galenic form
        concerned. 20
        Geographic market definition
(17)    As regards the geographic market definition, the Notifying Party has submitted an
        overview of the overlapping molecules on a country-by-country basis. The
        Commission has consistently held that the market for finished pharmaceutical
        products is national in scope21. This conclusion has been reached because of (i)
        varying regulatory controls for pharmaceutical products; (ii) perceived differences
        in price setting and purchasing patterns/reimbursement by Member States; (iii)
        differences in national clinical guidelines, medical views and patient preferences;
        (iv) differences in brand, pack size and distribution systems; and (v) because
        competition between pharmaceutical companies generally takes place at national
        level22.
(18)    There is no reason to depart from the previous practice in the present case.
17
   In any event, in the present case, a potential distinction between generic and originator medicines
   would significantly reduce the overlaps between the activities of the Parties since, in most cases, the
   overlaps result from the combination of the Target's originator product and CVC's generic product.
   Therefore, should the market be defined at originator or generic level, the Parties' activities would not
   overlap (subject to one exception, i.e. aciclovir in Italy – see Section 4.2.1.2).
18
   The European regulatory framework for human medicines sets standards to ensure a high level of
   public health protection and the quality, safety and efficacy of authorised medicines and to promote
   the functioning of the internal market. It is based on the principle that a medicinal product requires a
   marketing authorisation by the competent authorities before being placed on the market.
19
   See replies to questions 11, 38, 65, 74 of questionnaire Q2 to customers in Italy and questions 6, 22, 42
   of questionnaire Q1 to competitors.
20
   See below recital 31.
21
   See for example M. 7746 - Teva/Allergan Generics and M.7559 – Pfizer/Hospira.
22
   See for example M.6705 Procter&Gamble/Teva Pharmaceuticals OTC II and M.6280 P&G/Teva
   OTC Business.
                                                           5
 ---pagebreak---        4.1.2   Pipeline generic pharmaceuticals
       Product market definition
(19)   Following the same approach as for FDPs and in line with past decisions,23 the
       Commission takes the molecule level as the most plausible relevant market for
       pipeline generic pharmaceuticals, considering that a pipeline generic molecule is
       typically the closest substitute to the other generic medicinal product based on the
       same molecule. There is no reason to depart from the previous practice in the
       present case.
       Geographic market definition
(20)   For pipeline products, the Commission previously considered that the geographic
       scope of the relevant market is at least EEA-wide.24 There is no reason to depart
       from the previous practice in the present case.
       4.1.3   Hospital services
       Product market definition
(21)   The Commission has analysed the market for the provision of hospital services in
       a number of decisions, distinguishing between inpatient (acute) hospital
       procedures conducted in hospitals and outpatient (ambulatory) procedures
       conducted in hospitals.25 The Commission has also examined whether a
       distinction between different specialist medical departments should be made26,
       ultimately leaving open the exact definition. Furthermore, the Commission has
       considered whether a distinction between private (or independent) hospitals and
       public hospitals could be appropriate although the exact delineation largely
       depended on the specificities of the case and the national market in question.27
       For example, a separate market for private acute general hospitals was defined for
       the UK because on the UK market the demand for such services was different
       from the demand for public acute general hospitals.28
       Geographic market definition
(22)   As to the geographical definition, in prior decisions the Commission indicated
       that the market for private hospitals was not broader than national in scope.29
       Ultimately, it was left open whether the market is national, regional or local in
       scope.30
23
   See M.7645 – Mylan / Perrigo; M.7559 – Pfizer / Hospira; M.7379 - Mylan/ Abbott EPD-DM.
24
   See M.7645 – Mylan / Perrigo; M.7559 – Pfizer / Hospira; M.7379 - Mylan/ Abbott EPD-DM.
25
   M.8146 – Carlyle/Schön Family/Schön Klinik.
26
   M.8146 – Carlyle/Schön Family/Schön Klinik.
27
   M.4010 – Fresenius/Helios.
28
   M.4367 – APW/ Nordic Capital/ APSA/ Capio.
29
   M. 4229 APHL/L&R/Netcare General Healthcare Group; M.4788 Rozier/BHS.
30
   M.4010 – Fresenius/Helios.
                                                    6
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak--- (36)   Second, post-Transaction, the Parties will continue to face competition from
       numerous players: six other sellers of aciclovir have shares of supply of over 5%
       in value in Italy and two of them (Stada and Mylan) have value shares equal to or
       higher than the combined Parties.38
(37)   Third, at molecule level, the Parties' products do not seem to be close substitutes.
       There are three different galenic forms for J5B aciclovir: class A (oral solid
       ordinary), class D (oral liquid ordinary) and class F (parenteral ordinary). The
       Parties' activities overlap with none of them in Italy. They supply different
       galenic forms, with modes of administration that are entirely different (oral vs.
       injectable), under different channels: DOC Generici (CVC) sells orally-
       administered products (NFC1 A and D classes) to wholesalers and pharmacies,
       while the Target sells injectable products (NFC1 F class) to hospitals.
(38)   As regards pricing and reimbursement of medicinal products in Italy, as indicated
       by the Notifying Party, the Italian National Healthcare System reimburses the
       lowest price among the prices of off-patent medicinal products with
       interchangeable active ingredients, the same pharmaceutical form, same method
       of administration, same number of units and same unit dosage. Any difference
       from this reference price is paid by patients if they refuse an interchangeable
       generic alternative and/or their doctor prescribes a pharmaceutical product with a
       price higher than the reference price and specifically provides that this product
       cannot be substituted with other products. Thus, the reimbursement system
       provides incentives to the generic suppliers to price their products similarly,
       unless they are successful in differentiating them in terms of package size,
       dosage, etc.39
(39)   Based on the above considerations, in particular the fact that the Parties are not
       close competitors and that the overlap is moderate, the Commission concludes
       that the Transaction does not raise serious doubts as to its compatibility with the
       internal market in relation to the supply of J5B aciclovir in Italy irrespective of
       whether the market is subdivided by galenic form.
       Domperidone – Italy
(40)   Domperidone is a blocker of dopamine receptors. It is used for the treatment of
       nausea and vomiting.
(41)   The overlap on the domperidone market in Italy is between Recordati’s originator
       product (Peridon) and DOC Generici's generic product (Domperidone DOC).
(42)   The Notifying Party submits that despite the high combined market shares of the
       Parties for domperidone, the increment arising from DOC Generici is minimal
       and the Transaction does not materially change the competitive landscape.
38
   See Form CO, Annex 17.
39
   See Form CO, Annex 20.
                                                13
 ---pagebreak--- (43)    The Commission considers that concerning the market for domperidone in Italy
        and its potential sub-segments40, the Transaction does not raise serious doubts as
        to it compatibility with the internal market for the following reasons.
(44)    First, the overlap is limited. The Parties' high combined market share in the
        Domperidone market in Italy primarily reflects the strong market position of
        Recordati's originator product. DOC Generici's sales are very limited ([…] k€ in
        2017). As a result, the increment brought by the Transaction is modest ([0-
        5]%both in value and volume).
(45)    Second, the domperidone market in Italy is largely genericised and there are more
        than 15 companies active on the market (both at molecule and NFC1 A levels), of
        which 4 have market shares larger than the increment brought by DOC Generici
        (namely Johnson & Johnson, Stada, Teva, and Mylan). Some offer originator
        products (namely Johnson & Johnson's Motilium), but most supply generic
        versions. Both customers and competitors consider that the market is competitive
        due to the large number of alternative suppliers.41 In fact, most customers
        multisource and have between 4 and more than 10 different suppliers. For the vast
        majority of them, switching suppliers is relatively easy.42
(46)    Third, the market investigation indicated that the Parties are not close
        competitors, as DOC Generici's generic domperidone competes more closely with
        multiple other generics of the same medicine than with Recordati's originator
        domperidone. In particular; price and brand recognition are considered as key
        parameters of competition by most respondents and Recordati's originator product
        is differentiated from generics due to its established brand and a certain degree of
        customer loyalty.43 Conversely, no specific competitive advantage was identified
        for DOC Generici’s generic domperidone, which is described as being
        comparable to the other generic products.44 According to a generic competitor,
        "the brand market and generic one have market dynamic completely different".45
        Also, price competition appears greater between generics than it is between
        generics and Recordati's originator domperidone. According to the national
        pricing and reimbursement rules, explained above, patients are reimbursed only
        up to the amount of the cheapest generic version. If they choose to buy the more
        expensive originators, they pay the price difference. Due to this feature, price
        competition on the domperidone market takes place more intensely between the
        different generic supplies, which are numerous and will continue to exert
        competitive pressure on the merged entity.
(47)    Fourth, there are three different galenic forms for A3F domperidone: class A (oral
        solid ordinary), class D (oral liquid ordinary), and class H (rectal systemic). The
        market investigation suggests that, at molecule level, due to the difference in
40
   On this market, the Parties' activities overlap both at molecule and galenic form levels.
41
   Replies to question 12 of questionnaire Q2 to customers in Italy and question 7 of questionnaire Q1 to
   competitors.
42
   Replies to questions 8, 18, and 20 of questionnaire Q2 to customers in Italy.
43
   Replies to questions 13 to 16 of questionnaire Q2 to customers in Italy and questions 8 to 11 of
   questionnaire Q1 to competitors.
44
   Replies to question 16 of questionnaire Q2 to customers in Italy and question 11 of questionnaire Q1
   to competitors.
45
   See Aristo Pharma's non-confidential reply to question 13 of questionnaire Q1 to competitors.
                                                         14
 ---pagebreak---        galenic form, the Parties are not close competitors: (i) the replies of the market
       participants show that substitutability between the three galenic forms may be
       somewhat limited46 and (ii) DOC Generici's products fall within the NFC1 A
       class and the Target's products fall within classes A, D and H; in other words, the
       Parties overlap only with respect to one galenic form.
(48)   Finally, the Commission notes that all informative respondents consider that the
       impact of the Transaction will be "neutral" on the domperidone market in Italy. A
       large number of customers indicated that there will remain sufficient alternative
       sources of supply post-Transaction regardless of the galenic form. The customers
       that took the opposite view mostly complained about the lack of alternatives to
       Recordati in relation to galenic forms for which the Parties' activities do not
       overlap.47
(49)   Based on the above considerations, in particular the fact that the Parties are not
       close competitors and that the overlap is limited, the Commission concludes that
       the Transaction does not raise serious doubts as to its compatibility with the
       internal market in relation to the supply of domperidone in Italy irrespective of
       whether the market is subdivided by galenic form.
       Ketorolac - Italy
(50)   Ketorolac is a pyrrolizine carboxylic acid derivative. It is used as an analgesic.
(51)   The overlap on the ketorolac market in Italy is between Recordati’s originator
       products (Toradol) and DOC Generici's generic product (Ketorolac DOC).
(52)   The Notifying Party submits that the increment arising from DOC Generici is
       minimal and the Transaction does not materially change the competitive
       landscape.
(53)   The Commission considers that concerning the market for ketorolac in Italy and
       its potential sub-segments48, the Transaction does not raise serious doubts as to it
       compatibility with the internal market for the following reasons.
(54)   First, the overlap is limited. Similarly to domperidone, the Parties' high combined
       market share on the ketorolac market in Italy primarily reflects the strong market
       position of Recordati's originator product. DOC Generici's sales of ketorolac are
       very limited ([…] k€ in 2017). As a result, the increment of the Transaction is
       modest [0-5]% in value and [0-5]% in volume.
(55)   Second, the ketorolac market is largely genericised, with a large number of
       competitors. Post-Transaction, there would remain no less than 10 other suppliers,
       including several players with market share larger than the increment brought by
46
   Replies to question 11 of questionnaire Q2 to customers in Italy and question 6 of questionnaire Q1 to
   competitors.
47
   Replies to questions 21-22 of questionnaire Q2 to customers in Italy and question 13 of questionnaire
   Q1 to competitors.
48
   On this market, the Parties' activities overlap both at molecule and galenic form levels.
                                                         15
 ---pagebreak---         DOC Generici (such as Mylan and So.Se.Pharma) and one alternative originator
        product (namely Atnahs Pharma's Lixidol). The Commission also notes that, over
        the past three years, Mylan's market share has significantly increased (+[5-10]%
        in value and +[5-10]% in volume in 2017 compared to 2015), while the Parties'
        combined share has decreased (-[0-5]%in value and -[0-5]% in volume in 2017
        compared to 2015). In fact, most market participants consider that the ketorolac
        market is rather competitive.49 The market investigation also shows that most
        customers multisource, with up to 10 different suppliers, and a large number of
        them indicated that switching is relatively easy.50
(56)    Third, the market investigation indicated that the Parties are not close
        competitors, as DOC Generici's generic ketorolac competes more closely with
        multiple other generics of the same medicine than with Recordati's originator
        product. Price and brand recognitions are among the key parameters of
        competition for both customers and competitors. Recordati's originator product is
        differentiated from generics due to its established brand and a certain degree of
        customer loyalty. Conversely, no specific competitive advantage was identified
        for DOC Generici’s products.51 Also, competition appears greater between
        generics than it is between generics and Recordati's originator ketorolac due the
        national pricing and reimbursement rules, according to which patients are
        reimbursed only up to the amount of the cheapest generic version. If they choose
        to buy the more expensive originator, they pay the price difference. Due to this
        feature, price competition on the ketorolac market takes place more intensely
        between the different generic supplies,52 which are numerous and will continue to
        exert competitive pressure on the merged entity.
(57)    Fourth, there are three different galenic forms for ketorolac: class A (oral solid
        ordinary), class D (oral liquid ordinary) and class F (parenteral ordinary).
        Recordati offers the three galenic forms, contrary to DOC Generici, which offers
        only classes D and F. This product portfolio difference further limits the degree of
        closeness of competition between the Parties at molecule level.53
(58)    Finally, all informative respondents (both customers and competitors) consider
        that the impact of the Transaction will be "neutral" on the ketorolac market in
        Italy regardless of the galenic form.54
(59)    Based on the above considerations, in particular the fact that the Parties are not
        close competitors and that the overlap is limited, the Commission considers that
        the Transaction does not raise serious doubts as to its compatibility with the
        internal market in relation to the supply of ketorolac in Italy irrespective of
        whether the market is subdivided by galenic form.
49
   Replies to question 28 of questionnaire Q2 to customers in Italy.
50
   Replies to questions 24, 34, and 36 of questionnaire Q2 to customers in Italy.
51
   Replies to questions 28 to 32 of questionnaire Q2 to customers in Italy and questions 16 to 20 of
   questionnaire Q1 to competitors.
52
   See Form CO, Annex 20.
53
   Replies to question 27 of questionnaire Q2 to customers in Italy and question 15 of questionnaire Q1
   to competitors.
54
   Replies to question 38 of questionnaire Q2 to customers in Italy and question 22 of questionnaire Q1
   to competitors.
                                                       16
 ---pagebreak---         Lercanidipine – Italy
(60)    Lercanidipine is an antihypertensive drug. It is used for the treatment of mild to
        moderate hypertension.
(61)    The overlap on the lercanidipine market in Italy is between Recordati’s originator
        products (Lercadip and Zanedip) and DOC Generici's generic products
        (Lercanidipina DOC).
(62)    The Notifying Party claims that lercanidipine is demonstrably substitutable with
        several other calcium channel blockers (CCBs). In particular, it submitted that
        […]. Doctors in Italy contacted in the context of the market investigation
        explained that both lercanidipine and amlodipine belong to dihydropiridine CCBs.
        Dihydropiridine CCBs are among the most effective antihypertensive agents.
        Amlodipine shares similar effects with lercanidipine. However, considering that
        neither the Notifying Party nor the market investigation produced conclusive
        evidence that the CCBs were not only therapeutic substitutes, but were actual,
        economic substitutes, the Commission cannot exclude that the product market is
        limited to lercanidipine. Therefore, the subsequent assessment takes into account
        the candidate market for medicines with lercanidipine as the active ingredient.
(63)    The Notifying Party also submits that despite the relatively high combined market
        shares of the Parties for lercanidipine in Italy, the Transaction does not raise
        competition concerns on the grounds that (i) the Parties are not close competitors
        (originator vs. generic), (ii) the Target's market share has steadily declined since
        its loss of exclusivity in 2010, (iii) the Parties face a large number of competitors,
        and (iv) the Italian price regulation is strict favouring price competition to the
        benefit of generic competitors.
(64)    The Commission considers that concerning the market for lercanidipine in Italy55,
        the Transaction does not raise serious doubts as to it compatibility with the
        internal market for the following reasons.
(65)    First, the overlap is moderate, with a [5-10]% increment in value ([10-20]% in
        volume) brought by DOC Generici. The Parties' high combined market share on
        the lercanidipine market in Italy primarily reflects the strong market position of
        Recordati's originator product.
(66)    Second, the market is largely genericised and there are more than 10 companies
        active on the market, including Mylan, which has a higher market share than
        DOC Generici ([5-10]% in value and [10-20]% in volume in 2017), as well as
        many other credible players, such as Polifarma, Novartis, Stada, and Teva. Post-
        Transaction, the new entity will face both competing originator products
        (Polifarma's Cardiovasc) and generic products. In fact, most market participants
        consider that the lercanidipine market is competitive due to the larger number of
        suppliers.56 For instance, a competitor indicated that the market is “very
        competitive because of takeover of generics […] the generics’ market shares
55
   The segmentation based on the galenic forms is not relevant on lercanidipine market where there is
   only one galenic form.
56
   Replies to question 27 of questionnaire Q2 to customers in Italy and question 15 of questionnaire Q1
   to competitors.
                                                      17
 ---pagebreak---          increase every year”57, which is corroborated by the Parties' market share
         estimates. The market investigation also showed that most customers (including
         both wholesalers and pharmacies) multisource and have between 4 and more than
         10 different suppliers. For a large number of them, switching is relatively easy.58
(67)     Third, despite relatively high market shares of Recordati for its originator
         lercanidipine, the Parties are not close competitors, as DOC Generici's generic
         lercanidipine competes more closely with multiple other generics of the same
         medicine.
(68)     In the first place, the price, brand recognition and reliability of supply are
         considered as key parameters of competition by both customers and competitors.
         Recordati's originator product is differentiated from generics due to its established
         brand and a certain degree of customer loyalty. No specific competitive advantage
         was identified for DOC Generici’s generic lercanidipine.59 For instance, a
         competitor stated that: "Lercadip and Zanedip [i.e. Recordati's brand products]
         are well known brands prescribed by physicians since years. Lercarnidipine DOC
         (as for the other generic products) is not differentiated but has a lower price".60
         This has allowed Recordati to retain a significant market share despite the
         presence of several generics at significantly lower prices.
(69)     In the second place, price competition is more intense between generics than it is
         between generics and Recordati's originator lercanidipine. According to the
         national pricing and reimbursement rules, explained in recital 38, patients are
         reimbursed only up to the amount of the cheapest generic version and they pay
         the price difference if they choose to buy the more expensive competing product.
         Due to this feature, price competition on the lercanidipine market takes place
         more intensely between the different generic […]*, which are numerous and will
         continue to exert competitive pressure on the merged entity. Accordingly, the
         evolution of prices, volume and value shares does not suggest intense competition
         between originator and generic products after the initial period of genericisation
         around the generic entry in 2010, when a significant part of demand for
         lercanidipine shifted to generic products. 61
(70)     Finally, the Commission notes that all informative respondents consider that the
         impact of the Transaction will be "neutral" on the lercanidipine market in Italy.
         Moreover, 80% of the customers indicated that there will remain sufficient
         alternative sources of supply post-Transaction.62
(71)     Based on the above considerations, in particular the fact that the Parties are not
         close competitors and that the overlap is moderate, the Commission concludes
57
    See Polifarma's non-confidential reply to question 25 of questionnaire Q1 to competitors.
58
    Replies to question 27 of questionnaire Q2 to customers in Italy and question 15 of questionnaire Q1
    to competitors.
59
    Replies to questions 44 to 47 of questionnaire Q2 to customers in Italy and questions 26 to 29 of
    questionnaire Q1 to competitors.
60
    Sandoz (Novartis)'s non-confidential reply to question 28 of questionnaire Q1 to competitors.
61
    See notably Form CO, Annex 20.
62
    Replies to questions 52 and 53 of questionnaire Q2 to customers in Italy and question 31 of
    questionnaire Q1 to competitors.
* Should read: “suppliers”
                                                        18
 ---pagebreak---        that the Transaction does not raise serious doubts as to its compatibility with the
       internal market in relation to the supply of lercanidipine in Italy.
       Fixed combination lercanidipine and enalapril - Italy
(72)   The molecular combination lercanidipine and enalapril (C9B – ACE inhibitors,
       combinations) is a combination hypertension therapy of lercanidipine (a calcium
       channel blocker) and enalapril (an ACE inhibitor).
(73)   The overlap on the fixed combination lercanidipine and enalapril market in Italy
       is between Recordati’s originator product (Zanipril) and DOC Generici's generic
       product (Enalapr/Lercan Doc).
(74)   The Commission considers that concerning the market for lercanidipine and
       enalapril in Italy63, the Transaction does not raise serious doubts as to its
       compatibility with the internal market for the following reasons.
(75)   First, DOC Generici only began selling its generic version of this Recordati-
       originated product in 201864 and the increment brought by the Transaction is very
       limited (below 0.5% in both value and volume). The Parties' high combined
       market share on the lercanidipine market in Italy primarily reflects the strong
       market position of Recordati's originator product.
(76)   Second, there are five other competitors offering this molecule combination. Two
       companies market originator products (with market shares of respectively [10-
       20]% and [10-20]% in value in 2017) and three sell a generic version (one with a
       market share of [5-10]% in value in 2017).65
(77)   Third, Recordati's and DOC Generici's respective originator products and generic
       products are not close competitors. This is notably illustrated by the significant
       price differentials between Recordati's originator product, on the one hand, and
       the generics products, on the other hand (+[50-60%]).66
(78)   Based on the above, the Commission concludes that the Transaction does not
       raise serious doubts as to its compatibility with the internal market in relation to
       the supply of lercanidipine and enalapril in Italy.
       Rupatadine - Italy
(79)   Rupatadine is a dual histamine H1 receptor. It is used as an anti-allergenic.
63
   The segmentation based on the galenic forms is not relevant on this market where there is only one
   galenic form.
64
   See Form CO, footnote 31.
65
   See the Notifying Party's reply to RFI 4, question 2.
66
   See the Notifying Party's reply to RFI 4, question 2.
                                                         19
 ---pagebreak--- (80)   The overlap on the rupatadine market in Italy is between Recordati’s originator
       products (Rupafin) and DOC Generici's generic product (Rupatadina DOC).
(81)   The Notifying Party submits that the increment arising from DOC Generici is
       minimal and the Transaction does not materially change the competitive
       landscape.
(82)   The Commission considers that concerning the market for rupatadine in Italy and
       its potential sub-segments67, the Transaction does not raise serious doubts as to it
       compatibility with the internal market for the following reasons.
(83)   First, the overlap is limited. The increment brought by DOC Generici on the
       rupatadine market in 2017 is [0-5]% in value and [0-5]% in volume. The Parties'
       substantial combined market share ([40-50]%) primarily reflects the market
       position of Recordati's originator product.
(84)   Second, the Parties face several credible competitors, including the market leader,
       Mylan, which offers on the rupatadine market both originator products (Pafinur)
       and generic products (Rupatina Myl PH). Mylan's market share of [50-60]% in
       value and [50-60]% in volume in 2017 is higher than the combined share of the
       Parties. Moreover, following the recent expiry of patent protection and market
       exclusivity in 2017, besides DOC Generici, two other credible generic
       competitors entered the Italian rupatadine market, namely Teva and Stada. In fact,
       most customers multisource and have between 4 and 5 different suppliers. For the
       vast majority of them, switching suppliers is relatively easy.68
(85)   Third, the market investigation indicated that the Parties are not close
       competitors, as DOC Generici's generic rupatadine competes more closely with
       the three other generics of the same medicine than with Recordati's originator
       rupatadine. Price and brand recognitions are considered as key parameters of
       competition by both customers and competitors and Recordati's originator product
       is differentiated from generics due to its established brand and a certain degree of
       customer loyalty. Conversely, no specific competitive advantage was identified
       for DOC Generici’s generic rupatadine.69 Also, price competition appears greater
       between generics than it is between generics and Recordati's originator
       rupatadine. As previously explained, under the national regulation, patients are
       reimbursed only up to the amount of the cheapest generic version. If they choose
       to buy the more expensive originators, they pay the price difference. Due to this
       feature, price competition on the rupatadine market takes place more intensely
       between the different generic suppliers, which will continue to exert competitive
       pressure on the merged entity.70
(86)   Fourth, the market investigation suggests that, due to the difference in galenic
       form, the Parties are not close competitors at molecule level. There are two
       different galenic forms for rupatadine, i.e. class A (oral solid ordinary) and class
       D (oral liquid ordinary), and the Parties overlap only with respect to one galenic
67
   On this market, the Parties' activities overlap both at molecule and galenic form levels.
68
   Replies to questions 71, 81, and 83 of questionnaire Q2 to customers in Italy.
69
   Replies to questions 76 to 79 of questionnaire Q2 to customers in Italy and questions 44 to 47 of
   questionnaire Q1 to competitors.
70
   See Form CO, Annex 20.
                                                         20
 ---pagebreak---          form: DOC Generici's products fall within the NFC1 A class and the Target's
         products fall within classes A and D. The replies of the market participants show
         that substitutability between the […]* galenic forms may be somewhat limited.71
(87)     Finally, the Commission notes that all informative respondents consider that the
         impact of the Transaction will be "neutral" on the rupatadine market in Italy
         regardless of the galenic form. In particular, half of the customers indicated that
         there will remain sufficient alternative sources of supply post-Transaction
         regardless of the galenic form. The customers that took the opposite view mostly
         complained about the lack of alternatives to Recordati in relation to galenic forms
         for which the Parties' activities do not overlap (NFC1 D class).72
(88)     Based on the above considerations, in particular the fact that the overlap is
         marginal and that the Parties are not close competitors, the Commission considers
         that the Transaction does not raise serious doubts as to its compatibility with the
         internal market in relation to the supply of rupatadine in Italy irrespective of
         whether the market is subdivided by galenic form.
         Metoprolol – Italy
(89)     […]** is a cardioselective β1-adrenergic blocking agent. It is used for the
         treatment of acute myocardial infarction, heart failure, angina pectoris and mild to
         moderate hypertension.
(90)     The overlap on the metoprolol market in Italy is between Recordati’s originator
         product (Seloken) and DOC Generici's generic product (Metoprololo Doc).
         Seloken is an originator product that Recordati sources from AstraZeneca.
         Seloken was first put on the market in Italy in 1978, but Recordati acquired the
         rights to sell it in 2017.73 DOC Generici’s metoprolol product is a generic product
         and was launched in 2003.
(91)     The Notifying Party submits that the combined market share in value and in
         volume is not particularly high and barely surpasses the Group 1 threshold of
         35%. The Notifying Party also notes that the merged entity will continue to face
         strong competition from numerous generic distributors.
(92)     The Commission considers that concerning the market for metoprolol in Italy and
         its potential sub-segments74, the Transaction does not raise serious doubts as to its
         compatibility with the internal market for the following reasons.
71
    Replies to question 74 of questionnaire Q2 to customers in Italy and question 42 of questionnaire Q1
    to competitors.
72
    Replies to questions 84 and 85 of questionnaire Q2 to customers in Italy and question 49 of
    questionnaire Q1 to competitors.
73
    Recordati acquired the rights to sell AstraZeneca's metoprolol in Italy but also in other of EEA
    countries, including Iceland and Romania, where the Transaction gives rise to affected markets.
74
    On this market, the Parties' activities overlap both at molecule and galenic form levels.
* Should read: “two”
** Should read: “Metoprolol”
                                                          21
 ---pagebreak--- (93)   First, the overlap in the Italian metoprolol market is moderate. Recordati is the
       second largest player, with a market share of [30-40]% by value and [20-30]% by
       volume (in 2017), while DOC Generici is one of the several generic companies,
       with a moderate market share of [5-10]% and [10-20]% by value and in volume
       respectively. Post-Transaction, the new entity would have a combined market
       share of around [30-40]% in value and volume.
(94)   Second, the market for metoprolol in Italy is largely genericised, with several
       suppliers, and perceived as competitive by most market participants.75 The market
       evolution shows that several generic companies have entered the market since the
       originator products lost market exclusivity. Currently, besides the Parties, there
       are five competing generic products and one originator product (namely Daiichi
       Sankyo's Lopresor). Thus, even though the Transaction may result in the loss of
       one generic competitor, the merged entity will still be facing active originator and
       generic competition. In particular, post-Transaction, Daiichi Sankyo, which is
       perceived by market participants as the top supplier thanks notably to its well-
       known brand,76 would remain the market leader in terms of value (with a [30-
       40]% market share in 2017). The Parties will also face two other players, i.e.
       Novartis, and Stada, with market shares higher than DOC Generici (above [10-
       20]% both in value and volume).
(95)   Moreover, the market investigation tested whether a sufficient number of
       alternative suppliers exists and how easy and quickly customers can switch
       suppliers. All responding customers indicated that they purchase metoprolol from
       several suppliers.77 Most customers also pointed out that the number of alternative
       supplies would remain sufficient post-Transaction regardless of the galenic
       form.78
(96)   Third, the market investigation indicated that the Parties are not close
       competitors, as DOC Generici's generic metoprolol competes more closely with
       the other generics of the same medicine than with Recordati's originator Seloken.
       In particular, price and brand recognition are considered as key parameters of
       competition by most respondents and Recordati's originator product is
       differentiated from generics due to its established brand and a certain degree of
       customer loyalty.79 The market investigation did not point out other differences
       between the originator and the generic product over and above brand recognition
       and price80. A customer indicated that the choice of metoprolol products is
       between the generics and originator products81 and that the difference between
       originator and generics is that the latter’s price list is lower.82 Also, price
       competition appears greater between generics than it is between generics and
       originator products. As previously explained in relation to other markets, under
75
   Replies to question 34 questionnaire Q1 – Competitor and Replies to question 59 of questionnaire Q2
   – Customers - Italy.
76
   Replies to question 36 questionnaire Q1 – Competitors.
77
   Replies to question 65 of questionnaire Q2 – Customers - Italy
78
   Replies to question 68 of questionnaire Q2 – Customers - Italy.
79
   Replies to question 37 questionnaire Q1 – Competitors.
80
   Replies to question 37 questionnaire Q1 – Competitors.
81
   Replies to question 63 of questionnaire Q2 – Customers - Italy.
82
   Replies to question 59.1 of questionnaire Q2 – Customers - Italy
                                                      22
 ---pagebreak---         the national regulation, only the lowest price among the prices of off-patent
        medicinal products is reimbursed and if patients choose to buy more expensive
        originator products, they must pay the price difference. Due to this feature, price
        competition on the Italian metoprolol market takes place more intensely between
        the different generic suppliers, which are numerous and will continue to exert
        competitive pressure on the merged entity.
(97)    Fourth, the market investigation suggests that, due to the difference in galenic
        form, the Parties are not close competitors at molecule level. There are three
        different galenic forms for metoprolol: class A (oral solid ordinary), […]* B (oral
        solid long acting), and class F (parenteral ordinary). In Italy, the Parties' activities
        overlap only with respect to one of them: DOC Generici's products fall within the
        NFC1 A class and Recordati's products fall within classes A, B and F. The replies
        to the market investigation are not conclusive to the extent to which different
        galenic forms are substitutable83. Regarding the parenteral metoprolol, it is
        unlikely that the merged entity will have any incentive to suspend or delay its
        supply to customers in Italy for the sake of potentially maximising the profits of
        the other forms, which are already facing significant competition.
(98)    Finally, the Commission notes that all informative respondents consider that the
        impact of the Transaction will be "neutral" on the metoprolol market in Italy
        regardless of the galenic form.84
(99)    Based on the above considerations, in particular the fact that the overlap is
        moderated and that the Parties are not close competitors, the Commission
        concludes that the Transaction does not raise serious doubts as to its compatibility
        with the internal market in relation to the supply of metoprolol in Italy
        irrespective of whether the market is subdivided by galenic form.
        Metoprolol – Iceland
(100) In Iceland the Transaction will combine an originator product to be marketed by
        Recordati (Seloken) and Alvogen's generic metoprolol products (Metoprolol
        Succinate Teva and Metoprolol Tartrate Teva).
(101) Earlier in 2018, Alvogen began distributing Teva's generic metoprolol-based
        products in Iceland, which was previously distributed by Medical Limited (a
        Lyfis subsidiary) on behalf of Ratiopharm (a Teva subsidiary). This followed
        Alvogen's acquisition of a portfolio of products from Teva as a consequence of
        divestment commitments in case M.7746 - Teva/Allergan Generics85. The
        acquisition agreement included provision for transfer of the marketing
        authorisation for metoprolol in Iceland from Ratiopharm to Alvogen.
83
    Replies to question 58 of questionnaire Q2 – Customers - Italy.
84
    Replies to question 69 of questionnaire Q2 – Customers – Italy and question 40 of questionnaire Q1 -
    Competitors.
85
    Case M.7746 — Teva/Allergan Generics
* Should read: “class”
                                                      23
 ---pagebreak--- (102) As regards Recordati, it acquired the rights to sell AstraZeneca's metoprolol-
       based products in Iceland in 2017. […]
(103) The Parties claim that in Iceland there is currently no overlap, as Recordati's sales
       will begin in […]. Nevertheless, based on the historical sales figures achieved by
       the previous distributor of AstraZeneca's and Teva's metoprolol in Iceland, the
       Parties' combined market share is between [60-70]% (in volume) and [70-80]%
       (in value) in 2017.
(104) The Commission considers that, concerning the metoprolol market in Iceland and
       its potential sub-segments86, the Transaction does not raise serious doubts as to its
       compatibility with the internal market for the following reasons.
(105) First, despite the small size of the metoprolol market in Iceland (EUR […] in
       2017), the Parties face several generic competitors active, namely Artasan Ehf
       ([10-20]% in value and [20-30]% in volume), followed by Lyfis Ehf ([5-10]% in
       value and [5-10]% in volume) and Icepharma Hf ([0-5]% in value and [0-5]% in
       volume). Pharmacies consider that the number of alternative metoprolol suppliers
       would be sufficient post-Transaction.87 Moreover, according to most responding
       pharmacies, it is easy to switch suppliers of metoprolol.88 It was notably pointed
       out that suppliers provide a next-day-delivery on workdays making it easy and not
       long to switch.89
(106) Second, the market investigation showed that the Parties are not close
       competitors, as Alvogen's generic metoprolol competes more closely with
       multiple other generics of the same medicine than with the Recordati's originator
       Seloken. This is corroborated by several elements.
(107) In the first place, the market investigation indicated that Recordati's originator
       product is differentiated from generics due to its established brand and a certain
       degree of customer loyalty. The respondents pointed out brand recognition as a
       particular advantage of the originator product in comparison with generic
       products. This is in line with the Notifying Party’s claims that consumers easily
       switch between generics but are more reluctant to switch away from the originator
       drug. A customer indicated that many people choose the original brand-name
       product over the generic version only because they dislike generic medicines.90
(108) In the second place, as shown in Table 2 above, the Parties' combined market
       share has significantly decreased over the past three years (-[10-20]% in value
       and -[20-30]% in volume in 2017 compared to 2015). This is mainly due to the
       declining market shares of Alvogen's generic product (-[10-20]% in value and -
       [20-30]% in volume over the 2015-2017 period) to the benefit of several generic
       competitors. For example, in the last three years the Parties’ largest competitor
       Artasan Ehf more than doubled its market presence (+[10-20]% in value and
       +[10-20]% in volume in 2017 compared to 2015). At the same time, the previous
86
   On this market, the Parties' activities overlap both at molecule and galenic form levels.
87
   Replies to question 21 and 21.1 of questionnaire Q3 – Customers – Iceland.
88
   Replies to question 20 of questionnaire Q3 – Customers – Iceland.
89
   A reply to question 20.1 of questionnaire Q3 – Customers – Iceland
90
   A reply to question 21.1 of questionnaire Q3 – Customers – Iceland.
                                                         24
 ---pagebreak---  ---pagebreak---        stated that “the price will not lower because both products are very strong and
       they will probably not increase because of competition (for metoprolol succinat
       Teva) and because of governmental price roof (Seloken Zoc)”.93
(112) Based on the above considerations, , the Commission concludes that the
       Transaction does not give rise to serious doubts as to its compatibility with the
       internal market in relation to the supply of metoprolol in Iceland irrespective of
       whether the market is subdivided by galenic form.
       Metoprolol – Romania
(113) The overlap on the metoprolol market in Romania is between an originator
       product (Betaloc and Betaloc ZOK), supplied by Recordati, and Alvogen’s
       generic product (Alvogen LPH). Recordati acquired the rights to sell Betaloc and
       Betaloc ZOK (AstraZeneca's metoprolol-based products) in 2017. Recordati has
       already started supplying metoprolol in Romania but […].
(114) With respect to the supply of metoprolol in Romania, the Notifying Party points
       out that some interchangeable use of metoprolol and bisoprolol has been noted in
       the literature and claims that the merged entity will be constrained by competing
       molecules, even if they do not belong to the same relevant product market.
       However, considering that neither the Notifying Party nor the market
       investigation produced conclusive evidence that the metoprolol and bisoprolol
       were not only potential therapeutic substitutes, but were actual, economic
       substitutes, the Commission cannot exclude that the competitive constraints are
       limited to metoprolol products. Therefore, the subsequent assessment takes into
       account the candidate market for medicines with metoprolol as the active
       ingredient.
(115) The Notifying Party also claims that despite the combined market shares of the
       Parties (respectively [70-80]% in value and [60-70]% in volume in 2017), the
       Transaction is unlikely to have a material impact on competition because the
       merged entity would combine an originator drug with a generic drug, with the
       remaining generic suppliers being a source of competitive pressure on the market.
(116) The Commission considers that concerning the market for metoprolol in
       Romania,94 the Transaction does not raise serious doubts as to its compatibility
       with the internal market for the following reasons.
(117) First, the market for metoprolol in Romania is highly competitive. The
       Commission notes that the Romanian metoprolol market, which decreased in
       value from EUR […] million in 2015 to EUR […] million in 2017, is largely
       genericised. The market investigation indicated that metoprolol is an old molecule
       and there are multiple generic companies on the market.95 In this regard, the
       Transaction leads to a merger of one of the originator suppliers with one of the
93
   A reply to question 21.1 of questionnaire Q3 – Customers – Iceland.
94
   At galenic form level, the Parties' activities do not overlap on this market.
95
   A reply to question 68 of questionnaire Q1 – Competitors.
                                                          26
 ---pagebreak---         many generic companies. Post-Transaction, 10 competitors will supply
        metoprolol-based products, one of which (Servier) offers another originator
        product. The three larger competitors have market shares in value respectively of
        [10-20]%, [5-10]% and [5-10]%. The largest of these, Sun Pharma commands a
        higher market share in value ([10-20]%) than Alvogen. Seven additional smaller
        competitors will also remain active on the market. The market investigation
        showed that they exert sufficient competitive pressure on the Parties and most
        customers consider that the number of alternatives suppliers would remain
        sufficient post-Transaction.96
(118) Furthermore, the Commission notes that the new entity will also face competitive
        constraints from potential competitors that could enter the market within a short
        time frame. This applies in particular to Slavia, a generic provider, which has a
        marketing authorization for metoprolol in Romania and could therefore enter the
        market segment at any time. The Parties also submit that a number of firms that
        either (i) have supplied metoprolol in Romania in the past (such as Arena Group,
        Fabiol, Incdcf, Laropharm, Medico Uno, and Teva) or (ii) are selling metoprolol
        in neighbouring geographic markets (Bulgaria, Croatia, Czech Republic,
        Hungary, Poland, Slovakia, Slovenia) (such as Dipharm, Biofarm, Bioton Group,
        Cefarm.Lab) are likely to have the relevant expertise to (re-)enter the Romanian
        metoprolol market within a short timeframe.
(119) Customers rated the market conditions for the supply of metoprolol in Romania as
        competitive.97 In their view many and significant players are present on the
        market, which “insures price competition for the molecule”.98 A customer states
        that “the prices are really low and there are a lot of suppliers and discounts to
        make a product more desirable that the one produced by the competition”.99
        Competitors described the metoprolol market as “a crowded market”,100
        particularly in relation to the oral solid ordinary form.
(120) Pharmacies multisource metoprolol from several suppliers.101 The typical
        duration of the contracts is one year, with a possibility for extension.102 showing
        that they can be changed fairly quickly. The fact that pharmacies can negotiate
        discounts103 demonstrates that they can exert pressure on the suppliers and further
        intensify competition.
(121) Second, the Parties's respective metoprolol products are not close substitutes.
(122) In the first place, the market investigation suggests that, due to the difference in
        galenic form, the Parties' products are not close therapeutic substitutes. Alvogen's
        products fall within the NFC1 A class (oral solid ordinary) and the Recordati's
        products fall within classes B (oral solid long acting) and F (parenteral ordinary).
96
    Replies to question 20 of questionnaire Q4 to customers in Romania.
97
    Replies to question 11 of questionnaire Q4 – Customers – Romania.
98
    Replies to question 11.1 of questionnaire Q4 – Customers – Romania.
99
    Replies to question 11.1 of questionnaire Q4 – Customers – Romania.
100
    A reply q 65.1 Q1
101
    Replies to q 7 Q4 – Customers - Romania
102
    Replies to question 8 of questionnaire Q4 – Customers – Romania.
103
    Replies to question 9.1 of questionnaire Q4 – Customers – Romania.
                                                       27
 ---pagebreak---         In other words, the Parties' galenic forms do not overlap. Though not conclusive,
        the replies of the market participants show that substitutability between the
        different galenic forms may be somewhat limited. On the one hand, some
        pharmacists explained that the ordinary and the long-acting forms can be
        considered similar products, as they are prescribed alternatively for the same
        diagnosis104, and there is a large base of patients who have long-term treatment.105
        On the other hand, the choice of galenic form is made by the physicians, after
        which the pharmacists cannot automatically substitute it with another form but
        must dispense the prescribed pharmaceutical form.106 Furthermore, due […]* an
        entirely different mode of administration, the parenteral form of metoprolol is an
        even more remote substitute, suitable only for very specific patient populations.
(123) In the second place, the respondents pointed out brand recognition as a particular
        advantage of the originator product in comparison with generic products.107
(124) In the third place, although customers are price sensitive, there appears to be more
        limited price competition between Recordati's originator product and other
        metoprolol products, whether generic or originator (Servier). Both suppliers and
        customers affirmed that Romanian customers are very sensitive to prices and that
        price is therefore one of the main factors for customers' choice of metoprolol
        suppliers.108 High price competition is driven by generic penetration due to a high
        number of generic companies.109 These observations appear to be particularly
        relevant for competitive dynamics between generic metoprolol (including
        Servier's originator product), but do not explain the fact that Recordati's originator
        metoprolol enjoys a considerable price premium over other metoprolol
        products110 while maintaining a significant market share.
(125) Limited price pressure on Recordati can be explained by brand recognition, as
        well as the limited therapeutic differentiation (not all generics, including Alvogen,
        supply the long acting galenic form). According to the pharmacies responding to
        the investigation, customers’ choice is to a larger extend determined by
        branding111, as certain patients specifically ask for a certain product or brand.112
(126) Finally, the Commission found that Recordati's originator products (Betaloc) are
        already priced at the maximum permissible level under the national regulatory
        regime. Pursuant to Romania's pharmaceutical regulatory pricing regime, there
        are three different reference prices set for each given product – the manufacturer's
        price, wholesale price and retail price. General practice for originators is to price
        at the maximum permissible level for all three prices. Betaloc, the Target's
        originator product in Romania, is already priced at the maximum retail price
104
    A reply to question 10 of questionnaire Q4 – Customers – Romania.
105
    A reply to question 10 of questionnaire Q4 – Customers – Romania.
106
    Replies to question 11 of questionnaire Q4 – Customers – Romania.
107
    Replies q 69 Q1 and Replies to question 14 of questionnaire Q4 – Customers – Romania.
108
    A reply to question 66 of questionnaire Q1 – Competitors.
109
    A reply to question 8 of questionnaire Q1 – Competitors.
110
    In Romania generic providers can set prices only up to 35% below the price of the originator drug.
111
    A reply to question 14 of questionnaire Q4 – Customers – Romania.
112
    A reply to question 10 of questionnaire Q4 – Customers – Romania.
* Should read: “to”
                                                       28
 ---pagebreak---  ---pagebreak--- (131) The Notifying Party claims that should the merged entity not enter the […]
        market with generics, it would not be able to have a market offering for those
        customers that consider switching to lower priced generics. In other words, the
        merged entity would forego attracting part of the demand by not entering the
        market, thus decreasing its profitability.
(132) The Notifying Party indicated that it intends to commercialise its generic product
        once the regulatory procedure is completed.
(133) The market investigation showed that several other […]-based products are
        currently undergoing authorisation procedures, which has been confirmed by the
        Agenza Italiana del Farmaco. Consequently, once on the market these products
        will exert competitive pressure on the merged entity’s originator product even if
        the merged entity were to discontinue or delay the development of its generic
        product in an attempt to preserve its marketed originator product sales.
(134) Thus, in the light of the above, the Transaction does not raise serious doubts as to
        its compatibility with the internal market in relation to the development of […]-
        based generic pharmaceuticals in the EEA.
        […]
(135) […]
(136) In relation to […], Recordati holds [90-100]% of the market in Czech Republic,
        Estonia, Greece, Ireland, Latvia, Lithuania, Poland, Romania and Slovakia. In
        Germany, France, Italy, Portugal and Spain the Target’s share of sales is above
        35%.
(137) In relation to […], and similarly to […], the Notifying Party claims that should
        the merged entity not enter the […] market with generics, it would not be able to
        have a market offering for those customers that consider switching to lower
        priced generics. In other words, the merged entity would forego attracting part of
        the demand by not entering the market, thus decreasing its profitability. The
        Notifying Party also indicated that it intends to commercialise its generic product
        once the regulatory procedure is completed.
(138) The […] market at both the EEA and in a number of Member States is not yet
        genericised as Recordati’s product is still patent protected in many member
        States. Generic products are, however, under development. The Notifying Party
        indicated and the Commission notes that it has submitted a marketing
        authorisation application for a generic version of its originator […] product under
        the centralised procedure. Furthermore, as is generally observed in the
        pharmaceutical industry towards the expiry of patent and market exclusivity, the
        market investigation showed that several companies are developing […]-based
        products.116 Consequently, once on the market these products will exert
        competitive pressure on the merged entity’s originator product even if the merged
115
    Apart from Italy, the other EEA Member State where the Recordati is active with […] is Portugal,
    where its 2017 share of sales in value was [0-5]% ([0-5]% in volume).
116
    See replies to question 74.2 of questionnaire Q1 to competitors.
                                                         30
 ---pagebreak---         entity were to discontinue or delay the development of its generic product in an
        attempt to preserve its marketed originator product sales.
(139) Thus, in the light of the above, the Transaction does not raise serious doubts as to
        its compatibility with the internal market with respect to development of the […]-
        based generic pharmaceuticals in the EEA.
        4.2.2. Vertical links
(140) The Transaction creates some potential vertical links between Recordati’s
        activities on the market for finished dose pharmaceutical products (upstream
        markets) and the provision of hospital services by CVC Fund Portfolio
        Companies (downstream markets). Potential vertical links between the Parties
        were considered in each geographic market where Recordati and relevant CVC
        Funds' Portfolio Companies are active. Vertically affected markets arise in France
        and in Greece.
        France (Elsan and Recordati)
(141) Downstream, the market share of Elsan, a CVC Fund Portfolio Company active in
        the French private hospitals market, does not exceed 30% under any plausible
        market definition.117
(142) Upstream, Recordati sells a number of products to French hospitals and holds a
        monopoly for the supply of methadone, phosphoneuros, citrafleet, recholan,
        logimax, otofa, adiazine, nordaz, urispas, basdene, abufene, and hexaspray. For
        four other products – urorec, seloken, polydexa and ery, Recordati's market shares
        in France are above 30%.
(143) The Notifying Party explained that the monopoly position is due to historical
        reasons – either no other competitor has decided to develop and market a
        competing product based on the same molecule or competitors have decided it
        was not commercially interesting to maintain these products in the market. There
        are, however, no intellectual property constraints which would prevent an
        interested third party from procuring Active Pharmaceutical Ingredients (APIs)
        and manufacturing and selling originator or generic products based on the
        molecules, subject to obtaining the required marketing authorisations and other
        permits.
(144) Further, the Commission notes that Recordati currently does not supply any of the
        molecules referred to in recital […]* to Elsan and will not have any incentive to
        provide its products on an exclusive basis only to Elsan for the future, as it is
        hardly thinkable that the merged entity would be able to divert patients to a
        specific hospital chain by refusing supply of medicines to other hospitals. It
        would therefore run against the merged entity's commercial interests to attempt
        refusing supplies to Elsan's competitors. In addition, except for methadone (2017
        sales of EUR […]), Recordati's sales to hospital are negligible (well below EUR
117
    See the Notifying Party's reply to RFI3 question 7.b.
* Should read: “(142)”
                                                        31
 ---pagebreak---         0.5 million per molecule). Based on these considerations, the Commission
        considers it unlikely that the Parties will have ability to implement foreclosure
        strategies in respect of the molecules.
        Greece (Metropolitan and Recordati)
(145) Downstream, Metropolitan's market share slightly exceeds 30% only in one
        plausible market, i.e. the Greek private general hospital market ([30-40]%).118
        Upstream, even though Recordati generates some sales to the hospital network in
        Greece, its market shares do not exceed 30% under any plausible product market
        definition. Taking into account also that Metropolitan's purchases from the Target
        are negligible, the Commission considers that the Transaction does not give rise
        to risks of input or customer foreclosure.
        Conclusion
(146) Based on the foregoing considerations of the vertical links, the Commission
        considers that the Transaction does not raise serious doubts as to its compatibility
        with the internal market and the EEA Agreement.
5.    CONCLUSION
(147) For the above reasons, the Commission has decided not to oppose the notified
        operation and to declare it compatible with the internal market and with the
        functioning of 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)
                                                               Margrethe VESTAGER
                                                               Member of the Commission
118
    See the Notifying Party's reply to RFI3 question 7.b. Metropolitan's market share estimates include the
    Hygiea Group, which is currently in the process of being acquired by Metropolitan.
                                                        32