Mergers: Commission approves acquisition of Bayer’s animal health division by Elanco, subject to conditions

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The European Commission has approved, under the EU Merger Regulation, the proposed acquisition of Bayer AGs animal health division by Elanco Animal Health Inc. The decision is conditional on the divestment of otitis products and several types of parasiticides in the European Economic Area (EEA), the UK and globally. Executive Vice-President Margrethe Vestager, responsible for competition policy, said: “Veterinaries, pet-owners and farmers count on innovative and competitively priced pharmaceutical products for animals. The acquisition by Elanco of Bayer’s Animal Health division would have significantly reduced the current and future choice of competing and innovative drugs available to vets, pet owners and farmers for certain animal diseases. With the divestment of current and pipeline products treating ear infections and parasites in pets and livestock, the merger can go ahead whilst preserving competition and innovation in these markets.“ The transaction would lead to the creation of the second largest animal health company globally. Both Elanco and Bayer’s animal health division (“BAH”) develop and supply pharmaceuticals for pets and livestock worldwide. The Commission’s investigation The Commission’s investigation focused on the market for pharmaceuticals products for pets and livestock, which are sold to vets, farmers and pet-owners. Animal pharmaceuticals encompass a wide group of products to prevent or treat a large range of animal diseases and disorders. Within pharmaceuticals for animals, there is a clear distinction between drugs for pets and livestock. For each of them, it is possible to distinguish different groups of drugs used to treat different diseases, such as parasiticides to kill parasites or antimicrobials to treat infections caused by microbes or bacteria. The Commission found that the transaction, as originally notified, would have raised competition concerns in a number of countries in the EEA/UK in relation to otitis products for pets, as well as several types of parasiticides, namely (i) anticoccidials for ruminants (cattle and sheep) and (ii) parasiticides for pets (treatments against parasites). In these markets, both companies have strong positions and/or face a limited number of competitors. The Commission found that for the pharmaceuticals for animals involved in this case, competition between suppliers typically takes place at the national level, due to the existence of national regulatory regimes and distribution systems. The Commission’s investigation found that no competition concerns arise for the majority of the products supplied by both Elanco and BAH. The proposed remedies To address these concerns, Elanco and BAH offered to divest to one or more suitable purchasers, Elanco or BAH’s products and/or pipelines in relation to otitis, anticoccidials, parasiticides for pets in the EEA/UK, including all the necessary assets such as applicable licenses, contracts, and brands, as well as relevant studies and data. The proposed divestment includes:

• BAH’s Drontal and Profender brand-family products as well as related pipeline assets (endoparasiticides for pets) at EEA/UK level;
• Elanco’s Osurnia (otitis treatment for pets) at global level;
• Elanco’s Vecoxan (anticoccidials for ruminants) at global level.

The proposed commitments remove the entire overlaps between Elanco and BAH in the markets raising serious doubts and fully address all of the Commission’s competition concerns. The Commission therefore concluded that the transaction, as modified by the commitments, would no longer raise competition concerns in the EEA. The decision is conditional upon full compliance with the commitments. Companies and products Elanco Animal Health Inc. is a US-based animal health company that develops, manufactures and markets products for pets and livestock worldwide. Formerly part of the US pharmaceutical group Eli Lilly, Elanco became a fully independent company in March 2019. Bayer AG’s animal health division, controlled by Bayer AG of Germany, is active in the development, production and marketing of veterinary products for pets and livestock worldwide. Merger control rules and procedures The Transaction was notified to the Commission on 14 April 2020. The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the EU 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 or to start an in-depth investigation. This deadline is extended to 35 working days in cases where remedies are submitted by the parties, such as in this case. More information will be available on the Commission’s competition website, in the Commission’s public case register under the case number M.9554.