European Commission gives nod to Boehringer Ingelheim’s purchase of Merial, with certain conditions

In November 2016, the European Commission under the EU Merger Regulation approved the purchase of Sanofi’s animal health business by Boehringer Ingelheim. While the former is a French company also known as Merial, the latter is a German conglomerate. The approval is subject to the divestment of some animal pharmaceuticals and vaccines. The proposed acquisition leads to a union of two major competitors in the Companion Animal Speciality Drugs Market who have been extensively involved in developing, producing, marketing and selling animal speciality drugs in the European Economic Area. The European Commission investigation focus area was the overlap between the two organisations in the following areas –

• Biologicals such as ruminant and swine vaccines

• Pharmaceuticals – Anti-inflammation drugs in both oral and injectable forms, anti-microbial, and other types of animal speciality drugs

• Feed supplements such as pet osteoarthritis feed nutrients

Commission Observations

After a thorough market investigation, the European Commission was of the opinion that there were certain competition concerns in the pharmaceutical and biological areas. The Commission found a number of markets where Merial and BI products were directly competing against each other. Those were various bovine and porcine vaccines, non-steroidal anti-inflammatory drugs and NSAID tablets meant for horses. In these markets, the EC identified either Merial or BI as a strong player while the other was already in competition with or was developing a product to do just that. In light of these findings and keeping in mind the limited number of players in the companion animal speciality drugs market, the Commission decided that eliminating either company would negatively affect the supply of these speciality drugs in the EU with a chance of price increases or even potential service quality issues or supply constraints. The Commission did not find any pharmaceutical competition concerns other than NSAIDs or feed supplements as the market position of the companies is quite limited and the key competition is highly active in this space.

Company Commitments

To adequately address the competition concerns raised by the EC, the two companies pledged to divest several of Merial’s marketed products. These include existing vaccines such as Progressis, Mucossifa, Parvovurax, Parvovax, and Circovac and pharmaceuticals Equioxx Paste, Wellicox,Ketofen, Equioxx Injectable, Genixine, and Allevinix. On account of the highly specific nature of these products coupled with the consistency and stability needed in all the production processes, the divestment also comprises the complete transfer of the production technology to the potential purchaser. During the transfer, both companies promised to provide the purchaser with a transitional supply agreement and necessary technical support.

To make the production transfer a success and to ensure that the commitments were effective, it was vital to find a purchaser worthy of acquiring the divested products. Thus, BI agreed to transfer the technology to Ceva Santé Animale. Ceva is a renowned company in the animal health market with experience and expertise in the required production technologies. The company has a well-established marketing and distribution network across Europe. The transaction will need distinct merger approval from all the applicable competition commissions. Post the investigation and a market test, the EC concluded that the company commitments were enough to address the competition concerns raised. The Commission was satisfied with the purchaser suggested as it had strong capabilities and was more than capable of running the divested businesses profitably in the long run. The decision is conditional upon complying fully with these commitments. The transaction was notified to the EC on the 19^th of September 2016.

Company profiles

Boehringer Ingelheim is a pharmaceutical company based in Germany that is active in the pharmaceutical market in four major business segments – consumer healthcare, animal health, biopharmaceuticals, and prescription products.

Merial is a subsidiary of Sanofi with a focus on animal health. Merial produces an assortment of pharmaceutical vaccines and other products for both production and companion animals.