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Corporate transactions and maintenance of medical device certificates and pharmaceutical authorisations

  • Europe
  • Health and life sciences

08-06-2022

Concerning corporate transactions within the medical devices or pharmaceutical industry, the maintenance of certificates, authorisations and approvals throughout the transaction is of crucial importance. In this context, the question arises of whether and how such certificates, authorisations and approvals may be transferred, and what the former and the intended certification, authorisation or approval holder need to do in order to carry out the transfer or, if necessary, facilitate a new application process.

This article looks at the transferability of medical device certificates and pharmaceutical authorisations and approvals in the European Union and compares transfer possibilities and prerequisites within share deal and asset deal structures.

Transferability of medical device certificates within corporate transactions

With respect to medical device certificates, a share deal and an asset deal have entirely different consequences concerning the possibility of a transfer. Medical device certificates are each issued to and remain with the manufacturer of the specific medical device, so are linked to the manufacturing entity.

Share deal

When opting for a share deal, the transfer of the company happens by means of a transfer of the respective shares and thus on the shareholder level, which consequentially leads to a change of control. However, the legal identity of the manufacturing company with all its legal relationships stays the same. Consequentially, the legal entity that is the holder of a granted certificate does not change. Therefore, a Conformitè Europëenne (CE) certificate, for example, remains with its holding entity without changes and without the need to conduct any transferring action or additional applications.

However, there are exceptions to the above that apply in the case of certain changes, although the below is merely the consequence of deliberate alterations and applies regardless of whether those are implemented in connection to a company transaction or not. Certificates only remain valid if the (transferred) company maintains its seat within the European Union or European Economic Area as this is a prerequisite for obtaining medical device certificates such as CE certificates.

As the certificate is issued to the legal entity, its identity must not be changed in the process of a share deal transfer. Otherwise, in the case of a change of name of the transferred company, for example, this leads to an update of the certification being necessary as the manufacturer's legal identity is thereby altered. However, in this case, as a name change does not concern the manufacture itself, it is sufficient to notify the competent regulatory authority of the alteration in order to obtain an updated certification. In order to facilitate the process of notification and recertification, it may be advisable to remain with the same competent authority or notified body as the process will likely be more minimal in effort and scope compared with involving a new party.

Besides that, just as with organisational or structural changes in general, a new certificate must be obtained if the buyer executes any significant alterations within the manufacturing process, such as the allocation of responsibilities in product surveillance or quality management. As such changes directly concern the manufacture and therefore the medical device itself, the recertification process is likely to be more extensive – depending on the specific process. The scope of the conformity assessment is thereby similar to that outlined below regarding asset deals.

In the case of so-called "carve-out" transactions (ie, the intended separation of one or more divisions from a company and the subsequent purchase of the shares of this newly created entity) it is important for the buyer to keep in mind that the buyer only obtains those certificates that were effectively transferred to the newly established company in the course of the preliminary restructuring of the original company. Therefore, the buyer is advised to verify that the certificates concerning the medical devices whose manufacturing division the buyer is purchasing have been transferred to the newly created carved-out entity – and potentially reissued to the name of such company, if necessary – prior to the contemplated transaction.

Of particular importance when it comes to the choice of transaction structure is also the handling of class I medical devices that have been self-issued by means of a declaration of conformity by the manufacturer pursuant to the EU Medical Device Directive (MDD),(1) as amended from time to time. As long as such declarations of conformity were issued before 26 May 2021, they remain – pursuant to the new Medical Devices Regulation (MDR)(2) – valid until 26 May 2024.(3) Thus, in case of a share deal, such declarations of conformity will transfer to the buyer without the need to reapply. This is of particular importance as, under the MDR, numerous medical devices that are currently class I medical devices will need to be reclassified. As a consequence, self-certification by means of declarations of conformity might not be possible anymore for such reclassified medical devices and opting for an asset deal brings challenges, as set out below.

Asset deal

In comparison with share deals, an asset deal does not lead to an automatic transfer of certificates alongside the transferred company. On the contrary, as (for example) a CE certificate is granted to and remains with an individual manufacturer, and in case this manufacturer entity is not the subject of the purchase, a transfer of certificates is not possible at all.

For each medical device product that is intended to be manufactured by the buyer, a new certificate must be obtained. A notification to the competent authority may suffice if no structural changes are intended; otherwise, a complete conformity assessment needs to be conducted. In order to facilitate the process of notification and recertification, it may be advisable to remain with the same competent authority or body as the previous certification holder, or to enter into an agreement with the old and new competent authorities to determine until when the product may be placed onto the market using the already-existing identification number.

An exception to the above are class I medical devices, as for those, self-certification is possible. Therefore, the buyer, as the (future) manufacturer of class I medical devices, can perform the conformity assessment on its own when obtaining the certificates.

However, problems might occur when it comes to medical devices that were classified as class I under the MDD but that will need to be reclassified under the MDR. Unless such medical devices are classified as class I under the MDR again, self-certification will not be possible anymore. In this regard, it must be carefully reviewed whether the to-be-transferred medical devices will need to be reclassified and whether proper certification may be maintained throughout the process – in particular, as declarations of conformity that were self-issued without the involvement of a notified body will lose the benefits of the transition period until 26 May 2024 as set out above as a consequence of an asset deal.(4)

In any case, the scope of the conformity assessment after a company acquisition depends essentially on the changed processes, if any. The competent authority, usually and as far as possible, uses the existing documents for the new assessment. Process changes that trigger an actual reassessment are changes in development, production, quality assurance, monitoring or distribution processes. In practice, the notified body uses, if possible, already-existing documents and information for a reassessment, so that these do not have to be provided again by the new manufacturer. For this reason, the assessment can be more or less intensive depending on the individual case. There is no general rule.

If only individual operating sites are transferred without any changes, a notification to the responsible notified body and the surveillance authority may be sufficient. This would, however, have the consequence that the new manufacturer must relabel the product. To guarantee a smooth transition, measures should be taken early on to provide for the buyer having all necessary certificates upon the transition becoming effective. Processes may be stepped up if underlying documentation relating to certification processes will be transferred as part of the transaction in order to put the buyer into a position to handle requests by notified bodies within due time when it comes to (re)certification.

Regarding the above, it is advisable to include certain guarantees and liability provisions into the transfer agreement – for example, pertaining to:

  • the seller's actual power of disposition regarding medical device certificates;
  • the absence of any usage rights of third parties;
  • the proper management of certificates up to date;
  • complete documentation of certification processes; or
  • any knowledge of circumstances that may lead to a revocation of certifications

Transferability of drug authorisations and approvals within corporate transactions

Unlike medical device certificates, drug authorisations and approvals are linked to the drug and are therefore not inseparable from the manufacturing legal identity, which distinguishes them greatly from medical devices when it comes to transferability.

Share deal

As for the transfer of medical device certificates within a share deal structure, the same applies for drug authorisations: all such authorisations, certificates and approvals generally remain with the unchanged legal entity. Therefore, with the purchase of the company, drug authorisations are automatically transferred and obtained by the buyer.

However, in the case of a change of name of the manufacturing company that is the marketing authorisation holder, notification obligations apply. Under certain circumstances – for example, in case of significant changes concerning the product itself – a new authorisation may become necessary. In such cases, the same applies as outlined below for asset deals.

Asset deal

Within an asset deal structure, drug authorisations can be included within the to-be purchased items, due to their nature as being product- rather than manufacturer-linked and therefore generally transferable. Hence, no new approval needs to be obtained after the transaction, as the approval itself is purchased by the buyer.

However, regarding asset deals, a change of name of the approval holder is very likely, as the buyer does not purchase the legal entity itself. Hence, additional actions are necessary in those cases – usually in the form of notifications to the competent authority. Besides that, the implementation of significant changes relating to the product itself or its manufacturing process can lead to an entirely new approval being necessary. Here, requirements differ, depending on whether the drug authorisation is issued based on national law or on the EU regulation.

For drugs that have been awarded, for example, a German marketing authorisation, the new holder of each specific authorisation must be notified to the competent national authority and must be registered in an EU member state or within the European Economic Area.(5) This obligation is not a prerequisite to the effective transfer from a civil law perspective, but a regulatory duty of the seller. Such duty is regarded as an accessory contractual obligation, which is why it applies even if not explicitly stated in the purchase agreement. Note that the respective pharmaceutical products must then be relabelled accordingly with respect to the new authorisation holder details. Also, authorisation-relevant documents should be transferred together with the authorisation. Other changes pertaining to the product itself or its manufacturing must also be notified to the competent authorities and may be subject to approval, if concerning certain information.(6) Under certain circumstances even entirely new authorisations must be obtained. These include changes in the composition of additives, in the dosage form or the area of application. Regarding advisable liability provisions, see above.

Regarding authorisations that were issued based on EU Regulation EC/2309/93 or EC/726/2004, changes must be notified to the European Medicines Agency (EMA) following the provisions of EU Regulation EC/2141/96 concerning the examination of an application for the transfer of a marketing authorisation for a medicinal product falling within the scope of regulation EU Regulation EC/2309/93. Unlike the transfer of, for example, a German drug authorisation, the effectiveness of a transfer of an EU authorisation depends on a transfer of the application at the EMA, which has to be requested by the "old" holder (ie, the seller). The application may be denied if not all the necessary documents are provided, or if the intended new holder (ie, the buyer or a designated (affiliated) company), is not based within the European Union or the European Economic Area.

(1) Directive 93/42/EEC.

(2) Regulation EU/2017/745.

(3) Pursuant to article 120(3) of the MDR.

(4) Pursuant to article 120(3) of the MDR.

(5) Pursuant to sections 9, 29 and 22 of the German Medicines Act (AMG).

(6) In Germany, for example, pursuant to sections 22 through 24a, 25a and 29 of the AMG.

This article was originally edited by, and first published on, www.lexology.com/commentary