Commissioner Margrethe Vestager, responsible for competition policy commented: “Effective competition is important to stimulate research and development of innovative drugs, to the benefit of patients and our healthcare systems. Our decision makes sure that the development of innovative insomnia drugs will continue following the Johnson & Johnson and Actelion merger".
Johnson & Johnson and Actelion both develop and sell innovative pharmaceutical products. Their activities are largely complementary, with Actelion marketing medicines in the European Economic Area (EEA) primarily for the treatment of pulmonary arterial hypertension, where Johnson & Johnson is not active.
The Commission's investigation focused on two areas where the medicinal products and research programmes of the two companies compete: (i) treatments for multiple sclerosis; and (ii) treatments for insomnia.
Concerning treatments for multiple sclerosis, Johnson & Johnson distributes Biogen's products in a number of Central and Eastern European countries, whereas Actelion has a medicine under development. The Commission found no concerns in this regard, since Actelion's medicine under development is likely to be used in a different setting than Biogen's products.
Concerning treatments for insomnia, both Johnson & Johnson and Actelion are currently developing treatments in this area. The two treatments under development are based on a novel mechanism of action. No other treatments of this kind are currently marketed in the EEA and only a very limited number of medicines with this new mechanism of action are currently being developed. Therefore, the Commission concluded that there would not be a sufficient level of competition if one of the two research and development programmes were discontinued after the merger.
The transaction as notified provided that Actelion's insomnia research programme would be transferred before the merger to Idorsia, a newly created company in which Johnson & Johnson would have a minority shareholding of up to 32%. The investigation found that Johnson & Johnson could still have influenced Actelion's strategic decisions since it would be an important shareholder and finance provider of Idorsia.
As for Johnson & Johnson's own insomnia research programme, this is co-developed with a third party, Minerva Neurosciences, which will commercialise the product in the EEA. The investigation found that Johnson & Johnson could still have influenced the research programme, in particular based on the information it could have obtained through its Idorsia's minority shareholding.
The Commission concluded that the transaction as notified would raise competition concerns as it would give Johnson & Johnson the ability and incentive to rationalise its competing insomnia research and development programmes by either delaying or discontinuing one of them.
In order to address the competition concerns identified by the Commission, Johnson & Johnson offered remedies to ensure that:
- Johnson & Johnson cannot influence Idorsia's strategic decisions, nor get commercially sensitive information on its insomnia medicine in development, through limiting its shareholding below 10% (or up to 16% provided that Johnson & Johnson is not the largest shareholder) and a commitment not to nominate any board member.
- Johnson & Johnson will remove its incentives to negatively influence the development of its insomnia research programme, by granting Minerva Neurosciences new rights over the global development and waiving its royalty rights on Minerva's sales in the EEA.
In view of the specific features of this case, these commitments addressed the Commission's competitive concerns concerning treatments in development for insomnia.
Companies and products
Johnson & Johnson (United States) is active in the business sectors of consumer goods, medicines and medical devices.
Actelion (Switzerland) is active in the pharmaceutical sector and specialised in the research and development of prescription medicines and late-stage medicines in development related to a number of therapeutic areas.
The two treatments for insomnia under development are based on a novel mechanism of action, orexin-antagonists. If successfully brought to market they could constitute a significant improvement over existing treatments for insomnia by causing less dependency, minimising risk of abuse and producing fewer central nervous system side-effects (such as drowsiness or residual effects on the next day).
Merger control rules and procedures
The transaction was notified to the Commission on 12 April 2017.
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II). This deadline is extended to 35 working days in case remedies are submitted by the parties, such as in this case.