Completed acquisition by Parexel International Corporation of ClinPhone plc

Affected market: Clinical trial software and support

No. ME/3736/08

Please note that the full text of the decision can be downloaded by using the link on the right. What follows are extracts regarding the parties, the transaction, jurisdiction, third party views, assessment and decision.

The OFT's decision on reference under section 22(1) given on 29 August 2008. Full text of decision published 4 September 2008.

PARTIES

PAREXEL International Corporation (PAREXEL) is a contract research organisation (CRO) based in the United States that provides planning and management related services to pharmaceutical and biotechnology companies. These services include outsourced clinical trial services, clinical trial technology products (under the Perceptive Informatics brand), and consulting and medical communications services.

ClinPhone plc (ClinPhone) is a UK public company active in the supply of clinical trial technology, comprising software products and related services. ClinPhone's total and UK turnover was, respectively, £47.3 million and £5.5 million for the year to 29 February 2008.

TRANSACTION

PAREXEL acquired the entire issued share capital in ClinPhone through an indirect wholly-owned UK subsidiary for approximately £91million on 14 August 2008. The parties notified the transaction to the OFT on 9 July 2008. The OFT's administrative deadline is 29 August 2008 and the statutory deadline is 8 November 2008.

JURISDICTION

As a result of this transaction PAREXEL and ClinPhone have ceased to be distinct enterprises. The parties overlap in the supply of interactive voice recognition services and submit that their combined share of supply does not exceed 25 per cent. However, the OFT believes it is or may be the case, based on third party evidence, that the parties combined share of supply does exceed 25 per cent in the supply of interactive voice recognition services and the share of supply test in section 23 of the Enterprise Act 2002 (the Act) is met. The OFT therefore believes that it is or may be the case that the transaction has resulted in the creation of a relevant merger situation.

THIRD PARTY VIEWS

Third party responses were received from three customers and five competitors, some of whom are also customers. One competitor asserted that the parties had a majority share of supply in IV&WR services and CTMS, and thus sufficient market power to force customers into a combined solution, neither of which were borne out by the competitive assessment. One customer indicated a limited number of alternative suppliers, which was also not supported by the competitive assessment.

ASSESSMENT

The parties overlap in the supply of IV&WR services and technology consulting in the UK. The parties' activity in the latter is minimal. ClinPhone is also a supplier, and PAREXEL a purchaser, of electronic data capture (EDC) software. However, ClinPhone has a minimal share of supply, and PAREXEL is a minimal customer, in this sector.

In IV&WR services, third parties suggest the parties are close competitors and have shares of supply higher than the [15-25] per cent estimated by the parties. Despite this, third parties generally consider the market to be highly competitive with a range of alternative suppliers. Further, there appears to be significant multiple sourcing and switching in the sector. Any attempt to increase prices would be met with such switching.

Third parties also confirmed that much of the combined activity in IV&WR would be attributable to ClinPhone and the merger increment is low.

The OFT does not consider that the merger raises competition concerns in relation to tying, bundling or portfolio effects relating to an integrated eClinical suite. There is no product in which the parties could leverage market power, competitors also offer competing eClinical suites, and customers can retaliate by sourcing products independently from more than one supplier.

There also appears to be some evidence of countervailing buyer power. Customers are mainly large sophisticated pharmaceutical and biotechnology companies that source a range of products in the eClinical industry and with the potential to supply internally. However, in the absence of competition concerns, it has not been necessary to determine the extent of any countervailing buyer and, for similar reasons, the extent of barriers to entry.

No evidence has been presented to the OFT to suggest that the proposed merger would create or strengthen coordinated behaviour in the industry.

Consequently, the OFT does not believe that it is or may be the case that the merger has resulted, or may be expected to result, in a substantial lessening of competition within a market or markets in the United Kingdom.

DECISION

This merger will therefore not be referred to the Competition Commission under section 22(1) of the Act.

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