CELEX: 32014M7339
Language: en
Date: 2014-10-16 00:00:00
Title: Commission Decision of 16/10/2014 declaring a concentration to be compatible with the common market (Case No COMP/M.7339 - ABBVIE / SHIRE) according to Council Regulation (EC) No 139/2004 (Only the English text is authentic)

|[pic]                             |EUROPEAN COMMISSION                                                                                      |

Brussels, 16.10.2014
C(2014) 7681 final

                                        |To the notifying party:                                                |                                                                       |
|                                                                       |                                                                       |

Dear Sir/Madam,

Subject:    Case M.7339 - ABBVIE/ SHIRE
Commission decision pursuant to Article 6(1)(b) of Council Regulation No 139/2004[1]

1) On 11 September 2014, the European Commission received notification  of  a  proposed  concentration  pursuant  to  Article  4  of  the  Merger
   Regulation by which the undertaking AbbVie Inc. ("AbbVie", USA) acquires within the meaning  of  Article  3(1)(b)  of  the  Merger  Regulation
   control of the whole of the undertaking Shire Inc. ("Shire", Ireland) by way of purchase of shares.[2] AbbVie is  referred  to  as  "Notifying
   Party" and AbbVie and Shire are collectively referred to as "Parties" to the proposed concentration.

       THE PARTIES

2) AbbVie is a US based  biopharmaceutical  company  active  globally  in  the  discovery,  development,  manufacture  and  sale  of  proprietary
   pharmaceutical products. AbbVie's products are used  to  treat:  chronic  autoimmune  diseases,  including  rheumatoid  arthritis,  psoriasis,
   ulcerative colitis ("UC"), and Crohn’s disease ("CD"); testosterone deficiency; HIV;  endometriosis;  thyroid  disease;  Parkinson’s  disease;
   complications associated with chronic kidney disease and cystic fibrosis, among other health conditions. AbbVie's key products include Humira,
   the world’s top selling drug in 2013, used for the treatment of arthritis, psoriasis, UC and CD.

3) Shire is a biopharmaceutical company, headquartered in Ireland and active globally. Shire is mainly active in the manufacturing and  sales  of
   pharmaceuticals products used for the treatment of rare diseases, neuroscience, gastrointestinal diseases and internal medicine.  Its  leading
   brands and products include Vyvanse, Lialda/Mezavant, Cinryze, Elaprase and Replagal.

       THE OPERATION

4) On 18 July 2014, the Parties signed a Cooperation Agreement and announced a recommended bid, pursuant to which AbbVie  acquires  100%  of  the
   share capital and voting rights of Shire through its wholly owned subsidiaries AbbVie Private Limited and AbbVie Holdings Private  Limited[3].
   Therefore, the proposed transaction qualifies as a concentration within the meaning of Article 3(1)(b) of the Merger Regulation.

       EU DIMENSION

5) The undertakings concerned have a combined aggregate world-wide turnover of more than EUR  5  000  million[4]  (AbbVie:  EUR  14 148  million,
   Shire: EUR 4 047 million). Each of them has an EU-wide turnover in excess of EUR  250  million  (AbbVie:  EUR  […]  million,  Shire:  EUR  […]
   million), but they do not achieve more than two-thirds of their aggregate EU-wide turnover within one and the same Member State. The  notified
   operation therefore has an EU dimension within the meaning of Article 1(2) of the Merger Regulation.

       COMPETITIVE ASSESSMENT

6) The Parties' activities overlap in the area of treatment of UC and CD. UC and CD are chronic inflammatory  diseases  affecting  the  digestive
   system. They are the two main forms of inflammatory bowel disease.

7) The principal difference between UC and CD is the location and the nature of the inflammation. UC causes inflammation and  ulceration  of  the
   inner superficial lining of the large intestine, whereas CD can affect any part of the gastrointestinal tract from the mouth  to  the  rectum,
   affecting the full thickness of the intestinal wall.

8) In both diseases, as a matter of common clinical practice, patients are classified as displaying  mild,  moderate  or  severe  symptoms,  with
   treatment calibrated according to symptom type.

9) As UC and CD are chronic diseases they are treated medically, in some cases surgically, but are medically not curable. The aims  of  treatment
   are to reduce symptoms and maintain or improve quality of life, while minimising drug-related toxicity over both  the  short-  and  long-term.
   Clinical management will depend on many variables, including disease activity, symptom severity, response to  previous  medications,  and  the
   costs and side-effect profiles of available medications.

10) Accordingly, treatment is generally undertaken on a phased basis, through use of first-, second- and third-line  treatments,  with  drug  use
   calibrated according to patient circumstances, particularly symptoms severity.[5]

1 Product Market Definition

11) AbbVie commercialises Humira (adalimumab), a biologic[6] anti-TNF product. In the gastrointestinal area, Humira is  primarily  used  for  the
   treatment of patients suffering from CD, but is also prescribed for the treatment of UC. Shire commercialises Mezavant (mesalamine, in the EEA
   referred to as mesalazine), essentially used for the treatment of UC; however it is also used off-label for patients suffering  from  mild  to
   moderate symptoms in CD.

12) The Commission has previously not analysed the market for the treatment of UC or of CD. As a starting point of its analysis of  the  relevant
   product market, the Commission generally refers to the Anatomical Classification  of  Pharmaceutical  Products  (ATC)  devised  for  marketing
   purposes by the European Pharmaceutical Marketing Association (EphMRA)[7] and more  specifically  to  level  ATC  3,  namely  the  therapeutic
   indication and the intended use. However, the Commission may also consider appropriate to conduct the analysis across ATC classes, if specific
   circumstances indicate that ATC3 is  not  the  most  appropriate  level.  Lastly,  the  Commission  may  also  take  into  account  additional
   characteristics, such as the ATC 4 level, the "molecule", the "active ingredient" or the galenic form or the line of treatment.[8]

13) The Notifying Party submits that Mezavant and Humira are not part of the same product market for several reasons. First, they do  not  belong
   to same ATC 3 class: Humira is classified under ATC 3 L4B "anti-TNF immuno-suppressants", whereas Mezavant  is  classified  under  ATC  3  A7E
   "Intestinal anti-inflammatory agents". In addition, Mezavant is  approved  for  the  treatment  of  UC  only,  although  the  Notifying  Party
   acknowledges some off-label use in CD.

14) Second, the Notifying Party submits that clinical guidelines[9] recommend a treatment in three lines for UC and CD, starting  in  first  line
   with aminosalicylates (which include mesalazine compounds, such as Mezavant) followed in second line by immuno-suppressants  (neither  of  the
   Parties produces such a drug) and may continue into third line with an anti-TNF product, such as adalimumab (Humira).

15) Third, the treatment with anti-TNF is via the intravenous or subcutaneous route and is only indicated where there has  been  no  response  to
   conventional therapies. This treatment may have severe side effects. In addition, the mechanism of  action  of  Mezavant  is  believed  to  be
   predominantly topical, at the side of the inflammation and particularly in the colon. In contrast Humira is systemic product,  acting  on  the
   bloodstream to supress the action of the naturally occurring protein, TNF, which plays a role in the body's immune system.

16) Fourth, Mezavant and Humira use different active ingredients, respectively a small molecule  chemical  drug  (mesalazine)  and  a  biological
   product (adalimumab).

17) Fifth, the products are distributed through different distribution channels; while Mezavant is available under  prescription  in  pharmacies,
   Humira is purchased by Hospital pharmacies and distributed to patients in a hospital setting. An  annual  cost  per  patient  treated  differs
   significantly.

18) Accordingly, the Notifying Party considers that Mezavant and Humira are not substitutable; neither from demand side,  nor  from  supply-side,
   and should not be regarded as part of the same product market.

19) Respondents to the market investigation indicated that pharmaceuticals which belong to ATC 3 L4B and ATC 3 A7E are not  substitutable  either
   from the supply or from the demand side perspective.

20)  As to the demand side, competitors as well as key opinion leaders active as physicians and researchers in the field of UC and  CD  indicated
   that the two diseases are increasingly treated in a similar way, while in the past there were differences regarding the treatment  of  UC  and
   CD. However, mesalazine is less commonly used to treat CD.

21) Also, responses received during the market investigation indicated that Mezavant and Humira do not belong to  the  same  line  of  treatment.
   Physicians prescribe mesalazine (Mezavant) in first line of treatment. Mesalazine is most commonly used to  maintain  remission  in  UC,  even
   though the product is also prescribed for the treatment of CD. Anti-TNF products such as adalimumab are used in the third line  treatment  for
   patients with severe symptoms.

22) Respondents to the market investigation  also  indicated  that,the  purchasing  mechanism  of  mesalazine  and  Anti-TNFs  is  different.  In
   particular, Humira is sold to hospital pharmacies which distribute the product to the patients in a hospital setting and the initial  purchase
   is made by health insurers, whereas Mezavant can be purchased by the patients themselves as  they  purchase  Mezavant  in  pharmacies  outside
   hospitals.

23) Respondents to the market investigation also  indicated  that  Humira  and  Mezavant  have  different  modes  of  administration:  Humira  is
   administrated trough an injection, while Mezavant is taken orally as a systemic  product  or  administrated  locally  as  a  topical  product.
   Further, the market investigation revealed a substantial price difference between the treatment with Humira and  Mezavant.  The  cost  of  the
   treatment with Humira is estimated at more than 10 times higher than the cost of the treatment with Mezavant.

24) From the supply side, mesalazine and Anti-TNF products such as adalimumab are produced following  different  production  processes  and  with
   different types of ingredients.

25) Further, respondents indicated during the market  investigation  that  the  Parties  are  not  competitors  and  their  products  are  rather
   complementary for the treatment of UC and CD. In particular, respondents suggested that AbbVie competes with Janssen Biologics and Merck which
   market a product similar to Humira, namely Remicade (infliximab), an anti-TNF agent.  The  market  investigation  also  suggested  that  Shire
   competes with other companies marketing mezalasine or similar products namely Ferring (Pentesa), Actavis (Asacol), Falk Pharma (Salofalk)  and
   USB Pharma (Olsalazine).

26) Companies generally produce one or the other product and they are active in the market for one or the other product respectively.

27) On the basis of the result of the market investigation, the Commission concludes that Mezavant (mesalazine) and Humira (adalimumab) are  part
   of separate product markets, since they have different mechanism of action and are intended for use in different lines of  treatment  and  for
   the treatment of different symptoms.

2 Geographic market definition

28) In the area of finished pharmaceutical products, the Commission has considered that the markets for pharmaceutical products are  national  in
   scope. This conclusion has generally been reached because of (i) varying  national  regulatory  controls  for  pharmaceutical  products;  (ii)
   perceived differences in price setting and purchasing patterns/reimbursement by Member States; (iii)  differences  in  brand,  pack  size  and
   distribution systems.[10]

29) For the case at hand, the Notifying party submits that the market should be national.

30) Based on the results of the market investigation,[11] the Commission notes that suppliers usually  deliver  and  customers  usually  purchase
   mesalazine and anti-TNFs at national level. Accordingly, the Commission considers the relevant geographic market(s) for the case at hand would
   be national in scope.

3 Competitive Assessment

31) The proposed concentration does not give rise either to horizontal or vertical concerns since the  substitutability  between  mesalazine  and
   the anti-TNFs belong to different product markets, and none of the Parties is active in any upstream or downstream related areas. In addition,
   the Parties do not have overlapping pipelines products.

32) Further, based on the evidence gathered in the market investigation, the Commission considers that the Parties will likely continue  to  face
   competitive constraints in their respective markets from generic companies.  Generic  mesalazine  is  already  marketed  in  the  EEA.  As  to
   adalimumab (Humira), several companies have phase III pipeline products  for  bio-similar  anti-TNFs,  among  which  are  Pfizer  and  Sandoz.
   Celltrion Healthcare has obtained a regulatory approval for marketing a biosimilar anti-TNF (Infliximab) in the European Union.

33) Potential conglomerate effects appear unlikely in particular because Mezavant and Humira are dedicated to different groups  of  patients  and
   the purchasing mechanisms are different for both products.

34) Further, neither customers nor competitors perceive Shire to be a particularly innovative competitor  in  the  market  for  mesalazine  based
   products. The Parties also submit that their respective pipelines are complementary, both at Phase III and Phase II level, so that there would
   be neither an overlap between marketed and pipeline products nor between pipeline and pipeline products.

35) Finally, no market participant expressed any concerns with regard to the combination of the existing products of the Parties. In this  light,
   the Commission does not have serious doubts as to the compatibility of the proposed concentration with the internal market.

       CONCLUSION

36) 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.

For the Commission
(signed)
Joaquín ALMUNIA
Vice-President

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[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]   Publication in the Official Journal of the European Union No C 325, 19.9.2014 p. 6.

[3]   As part of the transaction, AbbVie will move its headquarters from the United States to the Island of Jersey.

[4]   Turnover calculated in accordance with Article 5(1) of the Merger Regulation and the  Commission  Consolidated  Jurisdictional  Notice  (OJ
C95, 16.04.2008, p1).

[5]   The lines of treatment are based on the Guidelines of European Crohn's and Colitis Organisation ("ECCO"),  which  are  widely  followed  by
physicians across the EEA.

[6]   A biologic is a medicine whose active substance is made by or derived from living organisms (e.g.,  immunological  products  and  medicines
derived from human blood and plasma).

[7]   See for example Cases M.5865 Teva/Ratiopharm, M.1835 Monsanto / Pharmacia & Upjohn,  paragraphs  17-19  and  M.1397  Sanofi  /  Synthélabo,
paragraphs 31, 32.

[8]   See for example Cases M.6969-Valeant Pharmaceuticals International/Bausch & Lomb Holding, M.6705  Procter  &  Gamble/Teva  Pharmaceuticals,
M.5778 – Novartis/Alcon, M.5476-Pfizer/Wyeth.

[9]   Such as the Guidelines by the European Crohn's and Colitis Organisation ("ECCO").
[10]  See, for example, Case M.6705 - Procter & Gamble /Teva Pharmaceuticals OTC II, paragraph 11.

[11]  See replies to questions 15, 16, 17 of questionnaire M.7339 – Q1- Questionnaire to Competitors and replies  to  questions  19,  20,  21  of
questionnaire M.7339 – Q2 – Questionnaire to Customers

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 In the published version of this decision, some information has been omitted pursuant to Article 17(2) of Council Regulation (EC)  No  139/2004
 concerning non-disclosure of business secrets and other confidential information.  The  omissions  are  shown  thus  […].  Where  possible  the
 information omitted has been replaced by ranges of figures or a general description.

                                                                  PUBLIC VERSION

                                                                 MERGER PROCEDURE