The European Commission has cleared under the EU Merger Regulation both the proposed acquisition of the vaccines business of Novartis' by GlaxoSmithKline ("GSK"), as well as the proposed creation of a new entity combining the consumer health activities of GSK and Novartis. The decision is conditional upon the divestiture of assets in the vaccines and consumer health businesses. The Commission had concerns that the transaction would have eliminated an important competitor to GSK for the supply of several vaccines and consumer health products, which might lead to price increases for European consumers. The commitments address these concerns.
GSK and Novartis are active worldwide in the research, manufacturing and supply of pharmaceuticals, vaccines and consumer health products.
As a result of the transaction:
- GSK will acquire Novartis' global human vaccines business, except the influenza vaccines business; and
- GSK and Novartis will combine their global consumer health business in a new entity, which will be controlled by GSK.
This transaction is part of a 3-part inter-conditional deal between the two companies: in a separately notified case (M.7275) Novartis plans to acquire part of GSK's oncology business portfolio. In a separate decision taken today, the Commission has also approved that part of the deal (see IP/15/3842).
The Commission had concerns that the transaction, as originally notified, would have a detrimental effect on competition in a significant number of markets in the European Economic Area (EEA). The areas of concerns were:
- meningitis and diphteria tetanus vaccines, and
- consumer health products to stop smoking and to treat cold sores, cold and flu, and pain.
Vaccines: concerns and commitments
GSK and Novartis are the only suppliers of vaccines for bacterial meningitis of serogroups A, C, W and Y in the EEA. The transaction would therefore have led to a monopoly. GSK and Novartis are also competing suppliers of bivalent vaccines for diphtheria and tetanus in Germany and Italy, where the remaining players would have been unable to sufficiently constrain the merged entity to avoid price increases for vaccines.
To dispel the Commission's concerns, GSK committed to:
- grant a worldwide, exclusive, perpetual licence of GSK's Nimenrix vaccine for bacterial meningitis (serogroups A, C, W and Y), and divest GSK's Mencevax vaccine for bacterial meningitis (serogroups A, C, W and Y) worldwide, and
- enter into an exclusive distribution agreement for Germany and Italy, a 10 year supply agreement, and transfer marketing authorisations in the relevant countries for Novartis' TD-Pur and Dif-Tet-All vaccines for diphtheria and tetanus.
Consumer Health: concerns and commitments
The Commission identified competition concerns for the supply of smoking cessation aids (such as patches), cold sore management products, cold and flu products as well as pain management products. The new entity would combine key branded products which might lead to price increases for consumers.
To dispel these concerns, GSK committed to divest several assets:
- GSK's NiQuitin smoking cessation business in the EEA and Turkey;
- Novartis' Fenivir, Pencivir, Vectatone and Vectavir cold sore management products in the EEA and Turkey, together with a temporary licence for Fenistil for cold sore management in the UK and the Netherlands;
- GSK's Coldrex cold and flu products in the EEA;
- GSK's Nezeril and Nasin nasal sprays/drops products for cold and flu in Sweden; and
- GSK's Panodil pain management products in Sweden.
The commitments address the competition concerns identified by the Commission. The Commission therefore concluded that the proposed transaction, as modified by the commitments, would not raise competition concerns. The decision is conditional upon full compliance with these commitments.
The Commission maintained close cooperation with other competition authorities during its investigation, notably in the US, Canada, Brazil and Australia.
The transaction was notified to the Commission on 28 November 2014.
Companies and products
GSK is a British healthcare company, active in three main areas, namely pharmaceuticals, vaccines and consumer healthcare. GSK develops, distributes and markets globally medical products including respiratory, oncology, vaccines, HIV, and consumer health medicines.
Novartis is a Swiss healthcare company, active globally in the development, distribution and marketing of medical products. Its main areas of activity cover: pharmaceuticals, eye care, generics, consumers health and vaccines.
Merger control rules and procedures
The Commission has the duty to assess mergers and acquisitions involving companies with a turnover above certain thresholds (see Article 1 of the Merger Regulation) and to prevent concentrations that would significantly impede effective competition in the EEA or any substantial part of it.
The vast majority of notified mergers do not pose competition problems and are cleared after a routine review. From the moment a transaction is notified, the Commission generally has a total of 25 working days to decide whether to grant approval (Phase I) or to start an in-depth investigation (Phase II).
More information will be available on the competition website, in the Commission's public case register under the case number M.7276.