EU Approves Three-Part Deal Between Novartis, GlaxoSmithKline

By Tom Fairless 

BRUSSELS--Drug giants Novartis AG and GlaxoSmithKline PLC won European Union regulatory approval Wednesday for a complicated series of deals worth more than $20 billion that will focus Novartis' scope and turn Glaxo into a vaccines-and-consumer-drug powerhouse.

The European Commission, the EU's top antitrust authority, said the deals could go ahead provided the companies divest a number of assets and sign distribution agreements aimed at assuaging competition concerns.

Novartis of Switzerland agreed last April to buy GlaxoSmithKline's high-margin oncology unit for up to $16 billion, while Novartis agreed to sell its lower-margin vaccines division to GSK for $5.25 billion. GSK and Novartis are also creating a joint venture, majority owned by GSK, for its consumer business--essentially those drugs that can be bought over the counter--creating a new giant in that business. The combined companies will have revenue of about $11 billion and include household names like Excedrin and Panadol.

The commission had concerns that the latter two transactions 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 regulator said in a statement.

To dispel those concerns, Glaxo agreed to divest a number of business lines and vaccines, including cold and flu treatments and a smoking cessation business. It also agreed to enter into supply agreements for two vaccines.

The commission was also concerned that the sale of GSK's oncology business would have "reduced competition and innovation" for a number of cancer drugs. To allay those concerns, Novartis agreed to return the rights of one cancer drug, MEK162, to its owner and licenser, Array BioPharma Inc., and to divest another drug to Array.

Separately, the commission also approved Mylan Inc.'s $5.3 billion acquisition of part of Abbott Laboratories' generic-drugs business. The approval is conditional on the sale of certain businesses in Germany, the U.K., France, Ireland and Italy, the commission said.

Write to Tom Fairless at [e-mail]

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