CELEX: 32020M9995
Language: en
Date: 2020-12-04 00:00:00
Title: Commission Decision of 04/12/2020 declaring a concentration to be compatible with the common market (Case No COMP/M.9995 - PERMIRA / NEURAXPHARM) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

EUROPEAN COMMISSION
                                                                Brussels, 04.12.2020
                                                                C(2020) 8771 final
                                                                                 PUBLIC VERSION
                                                                 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                                                                 information omitted has been replaced by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.
                                                                To the notifying party
Subject:            Case M.9995 – PERMIRA HOLDINGS LIMITED / NEURAXPHARM
                    MIDCO S.C.A.
                    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 30.10.2020, the European Commission received notification of a proposed
        concentration pursuant to Article 4 of the Merger Regulation (“the Transaction”), by
        which Permira Holdings Limited (“Permira”, Guernsey) acquires within the meaning
        of Article 3(1)(b) of the Merger Regulation sole control of the whole of Neuraxpharm
        Midco S.C.A. (“Neuraxpharm”, Luxembourg).3 Permira is designated hereinafter as
        the “Notifying Party” and together with Neuraxpharm as the “Parties”.
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 380, 11.11.2020, p.11.
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--- 1. THE PARTIES
(2)   Permira is a European private equity firm, which makes long-term investments in
      companies active in a wide variety of sectors.
(3)   Neuraxpharm is a European specialty pharmaceutical company focused on the
      treatment of Central Nervous System ("CNS") disorders with their main activity being
      the production and sale of Finished Dose Pharmaceuticals ("FDPs"). Neuraxpharm
      also provides Contract Development and Manufacturing Organization ("CDMO")
      services for FDPs and Active Pharmaceutical Ingredients (“APIs”) both to the
      Neuraxpharm group companies and to third parties.
2. EU DIMENSION
(4)   The Parties have a combined aggregate worldwide turnover of more than EUR 5 000
      million (Permira EUR […] million, Neuraxpharm EUR […] million). Each of them
      has a Union-wide turnover in excess of EUR 250 million (Permira EUR […] million,
      Neuraxpharm EUR […] million), but they do not achieve more than two-thirds of
      their aggregate Union-wide turnover within one and the same Member State. The
      notified operation therefore has a Union dimension pursuant to Article 1(2) of the
      Merger Regulation.
3. THE CONCENTRATION
(5)   Pursuant to a Sale and Purchase Agreement dated 20 September 2020, between
      Neuraxpharm’s current owners and Permira, Permira will acquire all shares of
      Neuraxpharm and each right attached to these, within the meaning of Article 3(1)(b)
      of the Merger Regulation. Therefore, Permira will have sole control over
      Neuraxpharm.
4. MARKET DEFINITIONS
4.1. Finished Dose Pharmaceuticals
(6)   FDPs are pharmaceutical products that have undergone all stages of production, including
      packaging in the final container and labelling. Production and sale of FDPs is one of the
      most common activities of pharmaceutical companies. Neuraxpharm produces and sells
      FDPs focused on the treatment of CNS disorders.
                                                   2
 ---pagebreak--- (7)    In its previous decisions,4 the Commission used the Anatomical Therapeutic
       Classification (“ATC”) system as the basis for the product market definition. The first
       level (ATC 1) is the most general and the fourth level (ATC 4) the most detailed. More
       specifically, the Commission referred to the ATC3 level, where pharmaceuticals are
       grouped in terms of their therapeutic indications, i.e. their intended use, as the starting
       point for defining the relevant product market, since these groups of products generally
       have the same therapeutic indication and cannot be substituted by products belonging to
       other ATC 3 classes.
(8)    However, the Commission also recognized that it may be appropriate, if the circumstances
       of the case show that competitive constraints make it necessary, to carry out analyses at
       the more detailed ATC4 level, or possibly at the level of groups of molecules5 or
       individual molecules6. Relevant factors to take into account include therapeutic (e.g.
       prescription only, or administration allowed only under medical supervision) or
       pharmacological criteria such as molecule class, formulation or mode of administration
       (e.g. topical versus systemic).7
(9)    The Notifying Party suggests to follow this approach in the present case. It submits that its
       products fall into the C4A, N2B, N4A, N5A, N6A, N5B, N5C and N6D classifications at
       ATC3 level and into the C4A1, N2B0, N4A0, N5A1, N5A9, N5B1, N6A9, N5C0 and
       N6D0 classifications at ATC4 level.
(10) In any event, for the purposes of this Decision, it is not necessary to conclude on the exact
       product market definition for FDPs for the treatment of CNS disorders, as, regardless of
       the market definition considered, the Transaction does not give rise to serious doubts as to
       its compatibility with the internal market or the functioning of the EEA agreement.
(11) According to Commission precedents,8 the relevant geographic market for FDPs is
       national in scope, due to the regulatory barriers which result inter alia from the national
       reimbursement systems of the EU Member States.
(12) The Notifying Party suggests to follow this approach in the present case. The Commission
       did not find any reason to depart from this approach in the present case.
4.2. Contract Development and Manufacturing Organisation services
(13) CDMO is an arrangement under which a manufacturer provides upstream
       manufacturing services of FDPs and APIs under contract on behalf of third party
       pharmaceutical companies.9
4   COMP/M.1846 – GlaxoWellcome / SmithKline Beecham, 8 May 2000; COMP/M.1878 – Pfizer / Warner-
    Lambert, 22 May 2000; COMP/M.3751 –Novartis / Hexal, 27 May 2005; COMP/M.4402 – UBC /
    Schwarz Pharma, 21 Nov 2006; COMP/M. 5253 – Sanofi-Aventis / Zentiva, 4 Feb 2009; COMP/M.5295
    – Teva / Barr Pharmaceuticals, 19 Dec 2008; COMP/M.5555 – Novartis / EBEWE, 22 Sep 2009;
    COMP/M.5778 – Novartis / Alcon, 9 Aug 2010; COMP/M.6258 – Teva / Cephalon, 13 Oct 2011;
    COMP/M.6969 – Valeant Pharmaceuticals International / Bausch&Lomb Holdings, 5 Aug 2013;
    COMP/M.7480 – Actavis / Allergan, 16 Mar 2015; COMP/M.7559 – Pfizer / Hospira, 4 Aug 2015.
5   COMP/M.5865 – Teva / Ratiopharm, 3 Aug 2010, paras. 12-14.
6   COMP/M. 7559 – Pfizer / Hospira, 4 Aug 2015, paras. 84, 90 and 98.
7
    COMP/M.3354 – Sanofi-Synthelabo / Aventis, 26 Apr 2004, paras. 15 and 16; COMP/M.4314 – Johnson
    & Johnson / Pfizer Consumer Healthcare, 11 Dec 2006, para. 12; COMP/M.7480 – Actavis / Allergan, 16
    Mar 2015, para. 11.
8   COMP/M.7480 Allergan/ Actavis, 16 Mar 2015, para.14; COMP/M.6969 – Valeant Pharmaceuticals
    International / Bausch & Lomb Holdings, 5 Aug 2013, paras. 48-50.
                                                      3
 ---pagebreak--- (14) In the past, the Commission distinguished the CDMO market for FDPs from the
      CDMO market for APIs. On the one hand, CDMO for APIs involve the evaluation,
      characterisation, development of production and scaling-up processes in relation to the
      manufacture of APIs. On the other hand, CDMO services at the FDP level mainly
      pertain to the development of an appropriate dosage formulation and the large-scale
      manufacture of the final drug products. Second, from a supply-side perspective,
      CDMO services at the API and FDP levels do not involve the same equipment and
      require specific know-how and expertise. The Commission has found in the past that
      multiple CDMO players do not have the capability to be active throughout the CDMO
      value chain and are exclusively active either at the API level or at the FDP level.10
(15) As regards the CDMO market for FDPs, further segmentations were considered in
      relation to (i) the pharmaceutical form manufactured (e.g. solids, semi-solids,
      injectables), (ii) the conditions of manufacture (toxicity, sterile environment, etc.), (iii)
      the type of API used for its production and the delivery mechanism used (swallowing,
      intravenous, injection, etc.).11 The Notifying Party suggests to follow this approach in
      the present case.
(16) In any event, for the purposes of this Decision, it is not necessary to conclude on the
      exact product market definition for CDMO services, as regardless of the market
      definition considered, the Transaction does not give rise to serious doubts as to its
      compatibility with the internal market and the functioning of the EEA Agreement.
(17) The relevant geographic market for CDMO services according to Commission
      precedents was found to be worldwide or at least EEA-wide12, as CDMO services are
      generally procured anywhere in the EEA, regardless of the EEA country where the
      pharmaceutical products are subsequently marketed, given the economics of the
      services under consideration, as well as the lack of any trade or other barriers.
(18) The Notifying Party suggests to follow this approach in the present case. The
      Commission did not find any reason to depart from this approach in the present case.
5. COMPETITIVE ASSESSMENT
5.1. Analytical Framework
(19) Under Articles 2(2) and 2(3) of the Merger Regulation, the Commission must assess
      whether a proposed concentration would significantly impede effective competition in
      the internal market or in a substantial part of it, in particular through the creation or
      strengthening of a dominant position.
(20) Frequently, a merger can entail horizontal effects. In this respect, in addition to the
      creation or strengthening of a dominant position, the Commission Guidelines on the
9   Among others these can be i) pre-formulation/formulation development services; (ii) drug substance
    development and API synthesis services; (iii) drug product services; (iv) drug packaging services; and (v)
    analytical testing of drug substances and drug products.
10 COMP/M.9315 – CHR. Hansen / Lonza / JV, 16 Jul 2019, para. 17.
11 COMP/M.9315 – CHR. Hansen / Lonza / JV, 16 Jul 2019, para. 20; COMP/M.8541 – Thermo Fisher
    Scientific / Patheon, 23 Aug 2017, para. 47; COMP/M.8385 – Pillarstone / Famar, 27 Feb 2017, para. 25.
12 Case M.5953- Reckitt Benckiser/SSL, 26 Oct 2010, paras. 64-66.
                                                          4
 ---pagebreak---         assessment of horizontal mergers under the Merger Regulation13 (“the Horizontal
        Merger Guidelines”) distinguish between two main ways in which mergers between
        actual or potential competitors on the same relevant market may significantly impede
        effective competition,14 namely (a) by eliminating important competitive constraints
        on one or more firms, which consequently would have increased market power,
        without resorting to coordinated behaviour (non- coordinated effects); and (b) by
        changing the nature of competition in such a way that firms that previously were not
        coordinating their behaviour are now significantly more likely to coordinate and raise
        prices or otherwise harm effective competition. A merger may also make coordination
        easier, more stable or more effective for firms, which were coordinating prior to the
        merger (coordinated effects). Concentrations which, by reason of the limited market
        share of the undertakings concerned are not liable to impede effective competition
        may be presumed to be compatible with the internal market. An indication to this
        effect exists, in particular, where the market share of the undertakings concerned does
        not exceed 25 % either in the internal market or in a substantial part of it.15
(21) Furthermore, a merger can entail vertical effects. The Commission Guidelines on the
        assessment of non-horizontal mergers under the Merger Regulation16 (the “Non-
        Horizontal Merger Guidelines”) also distinguish between two main ways in which
        non-horizontal mergers may significantly impede effective competition: (a) when they
        give rise to input and/or customer foreclosure (non-coordinated effects); and (b) when
        the merger changes the nature of competition in such a way that firms that previously
        were not coordinating their behaviour, are now more likely to coordinate to raise
        prices or otherwise harm effective competition (coordinated effects).17 The Non-
        Horizontal Merger Guidelines distinguish two types of foreclosure: (a) where the
        merger is likely to raise the costs of downstream rivals by restricting their access to an
        important input (input foreclosure) and (b) where the merger is likely to foreclose
        upstream rivals by restricting their access to a sufficient customer base (customer
        foreclosure)18. According to the Non-Horizontal Merger Guidelines, the Commission
        is unlikely to find concern in non-horizontal mergers, where the market share post-
        merger of the new entity in each of the markets concerned is below 30%.19
5.2. Competitive Assessment
(22) Neuraxpharm’s main activity (amounting to [significant share] of its 2019 turnover) is
        the production and sale of FDPs. Moreover, Neuraxpharm, via its subsidiary
        Laboratory Lesvi S.L.U. (“Lesvi”, Spain), provides CDMO services for FDPs, and,
        via its subsidiary INKE S.A.U. (“INKE”, Spain), provides CDMO services for APIs
        both to Neuraxpharm group’s companies and to third parties.
13 Commission Guidelines on the assessment of horizontal mergers under the Merger Regulation, OJ C 31, 5
     February 2004, p. 5–18.
14 ibid, para.22.
15 ibid, para. 18.
16 Commission Guidelines on the assessment of non-horizontal mergers under the Merger Regulation, OJ C
     265, 18 October 2008, p. 6–25.
17 ibid, paras 17-19.
18 ibid, para. 30.
19 ibid, para. 25.
                                                       5
 ---pagebreak--- (23)     None of Permira’s controlled portfolio companies are pharmaceutical companies
         producing and selling FDPs. However, Permira currently controls four portfolio
         companies that are active in providing CDMO services. For FDPs, these are the
         Cambrex Corporation (“Cambrex”, U.K.), Quotient Sciences (“Quotient”, U.S.A.)
         and Lyophilization Services of New England (“LSNE”, U.S.A.). For APIs these are
         Cambrex and CABB Group GmbH (“CABB”, Germany).
5.2.1. Horizontal Overlaps
(24)    According to the Notifying Party, the activities of the Parties overlap horizontally in:
        (i) CDMO services for FDPs between Lesvi and Cambrex, LSNE and Quotient, and
        (ii) CDMO services for APIs between INKE and Cambrex.
(25)    For both overlaps, the combined market shares of the Parties post-Transaction would
        not exceed [5-10]% under every possible market definition, i.e. either in the overall
        CDMO market, or in the CDMO market further segmented in the production of (i)
        FDPs and any of the possible relevant further sub-segmentations and (ii) APIs, under
        either an EEA or a global market definition.
(26)    In view of the combined market shares which are well below the threshold of
        paragraph 18 of the Horizontal Merger Guidelines, the Commission concludes that
        the Transaction does not raise serious doubts as to its compatibility with the internal
        market or the functioning of the EEA agreement, as regards this horizontal overlap
        in the market for CDMO services.
5.2.2. Vertical Relationships
(27) According to the Notifying Party, the Proposed Transaction would result in vertical
      relationships for:
         (i) the provision of CDMO services for APIs by Cambrex (upstream) and CDMO
               services for FDPs by Lesvi (downstream);
         (ii) the provision of CDMO services for FDPs by Cambrex, LSNE and Quotient
               (upstream) and Neuraxpharm’s pipeline products (downstream);
         (iii) the supply of chemicals by CABB (upstream) and CDMO services for APIs by
               INKE (downstream);
         (iv) the provision of CDMO services for APIs by the INKE (upstream) and CDMO
               services for FDPs by Cambrex, LSNE and Quotient (downstream); and
         (v) the provision of CDMO services for FDPs by Cambrex, LSNE and Quotient
               (upstream) and Neuraxpharm’s manufacture and supply of FDPs (downstream).
                                                  6
 ---pagebreak--- (28) According to the Notifying Party, the combined market shares of the Parties do not
        exceed 30% under any plausible market definition in the vertical relationships listed in
        paragraph (27) (i)-(iv) above. In view of the low combined market shares,20 the
        Commission concludes that the vertical relationships listed under (i)-(iv) above cannot
        in any way result in input or customer foreclosure post-Transaction.
(29) A vertically affected market arises between the provision of CDMO services for FDPs
        by Permira’s portfolio companies Cambrex, LSNE and Quotient (upstream) and FDPs
        manufactured and supplied by Neuraxpharm (downstream).
(30) According to the Notifying Party’s best estimates, the market shares of Permira
        (including Cambrex’, LSNE’s and Quotient’s activities) in the upstream market for
        CDMO services for FDPs are below [5-10]% both globally and in the EEA. If the
        CDMO for FDPs market were to be further sub-segmented in line with the plausible
        market definitions described above, the Notifying Party confirms that the market share
        of Permira’s portfolio companies would be well below 30%. The possible sub-
        segmentations are listed in Table 1 below:
20 ibid.
                                                   7
 ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---  ---pagebreak---      market power to harm rival upstream CDMO services providers. 23 This is because the
     needs for CDMO services for FDPs are not differentiated according to the specific
     pathology covered by a specific FDP. Therefore, CDMO services providers provide
     the same services for all FDPs. Consequently, this limited potential demand for
     CDMO services by Neuraxpharm for its FDPs for CNS disorders would in any event
     not allow the merged entity to foreclose its rival CDMO services providers upstream
     from accessing customers in the downstream markets for FDPs by withholding or
     reducing Neuraxpharm’s purchases (which are limited to FDPs for CNS disorders).
(37) Therefore, the merged entity cannot foreclose its upstream competitors in the
     provision of CDMO services by denying access to the downstream market for FDPs
     for CNS disorders.
    6. CONCLUSION
(38) 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)
                                                            Margrethe VESTAGER
                                                            Executive Vice-President
23 See, to that effect, Cases M.7975 Mylan/Meda of 20 Jul. 2016, paragraph 598 and COMP/M.5253 -
   Sanofi-Aventis / Zentiva, of 4 Feb. 2009, paragraph 533.
                                                        12