Introduction

Mergers and acquisitions (M&A), asset sales, spin-offs and similar activities in the pharmaceutical, medical device and other health-related industries were abundant in 2016 and 2017. For example, many companies:

  • acquired competitors or device companies;
  • merged;
  • separated business lines; or
  • spun-off or acquired smaller specialised companies or specific assets.

In addition, there was a notable increase in the participation of smaller specialised companies in niche areas of these industries, as well as the number of companies engaged in the necessary raw material, ingredient, chemical, controlled substance and additive sectors.

Mexico is the second largest market for the pharmaceutical and medical device industries in Latin America. Thus, as the above activities are often global or at least multinational, they often affect companies that operate in Mexico. Companies carrying out business in the life sciences sector, particularly the pharmaceutical and medical device industries, should therefore consider how global or regional reorganisations, M&A, spin-offs or similar activities will affect their operations in the Mexican market. Although there have been many unfortunate situations where such activities have been delayed or cancelled, this can be avoided by undertaking appropriate legal due diligence and seeking advice.

Marketing authorisations

A common barrier in this regard concerns the transfer of a marketing authorisation or sanitary registration to the new entity in charge of the relevant operations in Mexico. This is particularly risky where goods are imported, manufactured or marketed in Mexico and a transfer of operations to a multinational may result in a change of:

  • the raw materials or manufacturing processes used to make goods;
  • product names;
  • the origin of goods; or
  • any other information originally submitted to the Mexican health authorities.

Although mergers and spin-offs theoretically involve the transfer of all or part of a legal entity's assets to another entity, these assets do not include the corresponding marketing authorisations or sanitary registrations from the health authorities.

A marketing authorisation is a permit or licence granted by the authorities which allows a specific legal entity to market a product in Mexico, subject to the requirements therein. Holders of marketing authorisations must duly evidence proper compliance with the applicable requirements and provide certain information (eg, a dossier, good manufacturing process certificates and patent use authorisation). A marketing authorisation is not an asset that is subject to an asset transfer. Rather, it is issued to a specific individual or legal entity that is thereby permitted to import, store, distribute, sell and carry out any kind of act involving a specific product.

In the case of a merger, acquisition, spin-off or similar activity, a marketing authorisation concerning a pharmaceutical or medical device is not automatically transferred. Since the acquirer will be a different legal entity to that which was awarded the authorisation, the health authorities can question and even impede such a transfer.

Although an official assignment procedure is outlined in the health regulations, in practice, the original holder must refile most of the information initially required for the marketing authorisation's issuance (eg, the dossier, good manufacturing practice certificates and patent use authorisation). These authorisations may take several months (and sometimes years) to be completed. Due to their specific nature, it is impossible to guarantee that the authorities will grant the authorisations without additional requirements. Likewise, any change in the manufacturing processes or facts on which a marketing authorisation was granted may be deemed a change in conditions and thus a reason for its cancellation.

Further, in some cases, a marketing authorisation already held by a purchasing company can prevent the acquisition of a separate one. This is due to various prohibitions in Mexican law regarding multiple authorisations for the same product.

Comment

In light of the above, entities engaged in M&A, spin-offs, asset acquisitions and similar activities involving products that require a marketing authorisation must consider the timing and process for obtaining such an authorisation. Companies which may be affected by global or multinational operations in the pharmaceutical and medical devices industries should also be aware of these issues.

For further information on this topic please contact José Alberto Campos Vargas or Juan Luis Serrano-Leets at Sanchez-DeVanny Eseverri SC by telephone (+52 55 5029 8500) or email (jacampos@sanchezdevanny.com or jlserrano@sanchezdevanny.com). The Sanchez-DeVanny Eseverri SC website can be accessed at www.sanchezdevanny.com.

This article was first published by the International Law Office, a premium online legal update service for major companies and law firms worldwide. Register for a free subscription.