11 March 2015

EU Commission Conditionally Approves Three-Part GSK/Novartis Deal

Van Bael & Bellis


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On 28 January 2015, in two separate decisions, the European Commission conditionally approved a complex transaction between pharmaceuticals producers GlaxoSmithKline (GSK) and Novartis.
European Union Antitrust/Competition Law
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On 28 January 2015, in two separate decisions, the European Commission conditionally approved a complex transaction between pharmaceuticals producers GlaxoSmithKline (GSK) and Novartis that will result in: (i) GSK's acquisition of Novartis' human vaccines business; (ii) the formation of a joint venture for consumer healthcare; and (iii) the acquisition by Novartis of GSK's oncology business. Each element of the transaction involved significant commitments by the parties to address competition concerns.

GSK's acquisition of Novartis' vaccines business

In the vaccines sector, the parties are currently the only suppliers in the EEA for vaccines against bacterial meningitis of certain serogroups. Furthermore, the parties have horizontal overlaps on the Italian and German national markets for bivalent vaccines against diphtheria and tetanus, where the Commission considered remaining competitors unable to competitively constrain GSK after the transaction.

GSK therefore committed to grant a worldwide exclusive perpetual licence for one of its meningitis vaccines and to divest a second meningitis vaccine. It also agreed to enter an exclusive distribution agreement for Germany and Italy, a 10-year supply agreement, and to transfer marketing authorisations in the relevant countries for its diphtheria and tetanus vaccines.

Joint venture in consumer healthcare

In the consumer healthcare sector, the Commission identified several distinct markets in which the joint venture would combine key branded products. In each identified market, the parties committed to divestitures.

On the market for anti-smoking aids in the EEA and Turkey, GSK divested its NiQuitin product. On the market for cold sore management products in the EEA and Turkey, GSK divested four branded products and committed to offer a temporary licence for a fifth in the UK and the Netherlands. On the market for cold and flu products in the EEA, GSK divested its Coldrex product. On the market for nasal sprays/drops for cold and flu in Sweden, GSK divested its Nexeril and Nasin products. Finally, on the market for pain management in Sweden, GSK divested its Panodil product.

Novartis' acquisition of GSK's oncology business

In a separate decision, the Commission identified concerns regarding the development and marketing of two oncology products: a B-Raf inhibitor called LGX818 and a MEK inhibitor called MEK162.

B-Raf and MEK inhibitors block cell proliferation responsible for tumour growth and progression. LGX818 and MEK162 are being developed and marketed for use against skin cancer but could also potentially be adapted to treat a number of different cancers as well.

The transaction would have reduced the number of companies developing and marketing B-Raf and MEK inhibitors for skin cancer from three to two, and the Commission furthermore considered that the deal would have likely resulted in Novartis abandoning its broad clinical trial program investigating the use of LGX818 and MEK162 against other cancers.

Novartis therefore agreed to a post-closing commitment by which it would return rights over MEK162 to its owner and licensor, Array BioPharma, and would divest LGX818 to Array BioPharma as well. Both commitments are conditional upon Array BioPharma itself having entered a Commission-approved binding partnership with a suitable healthcare company in order to keep the two products active.

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