Innovation competition, economic dependence and exceptional remedies

On 9 June 2017 the European Commission cleared Johnson & Johnson’s USD 30 billion takeover of Swiss biopharmaceutical company Actelion, subject to conditions. The transaction’s unique structure involved a demerger of Actelion’s R&D operations into a new listed company, Idorsia, in which J&J would have a minority shareholding.

This client briefing considers three interesting aspects of the Commission’s decision (published on 23 August 2017): (1) the Commission’s theory of harm relating to two pipeline compounds for insomnia in phase 2 clinical trials only – one of which would be transferred to Idorsia, (2) the Commission’s finding that J&J would have the ability to influence the development of one of the overlapping compounds on the basis of Idorsia’s economic dependence, even though J&J would only have a minority shareholding, and (3) the J&J commitments accepted by the Commission in return for Phase I clearance, which still allow J&J to retain an interest (albeit reduced) in both compounds.