Olswang EU merger control bulletin – Life science focus

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

In this update, we provide an outline of recent European Commission merger decisions in the life science sector, including an overview of the $20bn GSK/Novartis asset swap which the Financial Times recently highlighted as an example of the trend towards streamlining of portfolios by pharmaceutical groups. Where relevant we provide details of the divestments accepted by the Commission in order to grant clearance.

GlaxoSmithKline ("GSK") - Novartis ( M.7275 Novartis/GSK oncology business and M.7276 GSK/Novartis vaccines business/Novartis consumer health business)

In December we reported that Novartis and GSK had submitted two notifications to the Commission for approval of their three-part inter-conditional transaction. The Commission's approval was granted in January, subject to the following conditions:

• As part of Novartis' acquisition of GSK's oncology products, it is required to divest and/or surrender certain rights in skin cancer treatments to Array BioPharma Inc. The Commission was concerned, in particular, about a reduction in the number of companies developing B-Raf and MEK inhibitors, which are expected to become the standard of care for the treatment of skin cancer and to reach peak sales in the the EU in the next few years. The Commission found that the transaction would lead to a duopoly between the merged entity and Roche in the area. The Commission also assessed the transaction's impact on innovation and found that the merger would lead to the abandonment of Novartis' efforts to launch a combination skin cancer treatment and to engage in broader clinical trials.

• As part of the GSK acquisition of the Novartis vaccines business, GSK has committed to grant a worldwide, exclusive perpetual licence of GSK's Nimenrix vaccine and to divest GSK's Mencevax vaccine worldwide. Both are used in the treatment of bacterial meningitis. GSK will also enter into an exclusive distribution agreement for Germany and Italy, a ten year supply agreement, and transfer marketing authorisations in the relevant countries for Novartis' vaccines for diphtheria and tetanus.

• As part of the joint venture in respect of consumer healthcare, GSK has committed to divest several assets, including its NiQuitin business in the EEA and Turkey, Coldrex cold and flu products in the EEA, Nezeril and Nasin nasal sprays/drops products for cold and flu in Sweden and its Panodil pain management products in Sweden. In addition, Novartis' Fenivir, Pencivir, Vectatone and Vectavir cold sore management products will be divested in the EEA and Turkey and a temporary licence will be granted for Fenistil in the UK and the Netherlands.

GSK acquisition of the controlling stake in the newly formed consumer healthcare joint venture was examined by the Commission under the EU Merger Regulation. However, Novartis' minority stake also required a notification to the German and Austrian competition authorities who both approved the deal. The deal has also been under scrutiny in several other jurisdictions, including the US, Brazil, Canada and Australia. The Novartis Chief Executive, Joe Jimenez was reported in the Financial Times as describing the deal as a model for the industry.

Mylan acquisition of Abbott Laboratories' non-US branded generic drugs (M.7379 Mylan/Abbott Laboratories)

Mylan's acquisition of Abbott Laboratories' portfolio of non-US branded generic drugs was approved by the Commission in January subject to the divestment of a number of local Mylan businesses. The Commission's investigation identified potential concerns in relation to five products in certain geographic areas, in particular, because of the lack of substitutable products, high combined market shares, few competitors present and low likelihood of entry. The divestment remedies included marketing authorisations, customer information and supply contracts for mebeverine in Germany and the UK, pygeum africanum in France, betahistine in Ireland and delorazepam in Italy.

IMS Health acquires Cedegim subject to conditions ( M.7337 IMS Health/Cedegim Business)

IMS Health's acquisition of the major part of Cegedim S.A.'s customer relationship management and strategic data businesses was cleared by the Commission in January subject to conditions. In order to remedy Commission concerns that the merger would lead to higher prices for customers, IMS Health was required to divest parts of its primary market research business and to commit to providing third-parties with access to the structure underlying its sales data tracking.

Commitments offered in Zimmer Holdings' acquisition of Biomet ( M.7265 Zimmer Holdings/Biomet)

In December, we reported that the Commission had stopped the clock in its review of that Zimmer Holdings' proposed acquisition of Biomet. The administrative timetable started to run again on 9 February with Zimmer stating that the "time out" was required in order for the Commission to market test proposed remedies. A decision is expected in advance of the statutory deadline of 26 May.

Becton Dickinson's acquisition of CareFusion cleared ( M.7459 Becton Dickinson and Company/CareFusion)

Becton, Dickinson & Co received clearance from the Commission for its acquisition of CareFusion on 13 March 2015. Although both companies are active in the supply of IV sets for intravenous drug delivery and biopsy needles, the Commission concluded that the transaction would not give rise to competition concerns.

Clearance for Actavis' acquisition of Allergan( M.7480 Actavis/Allergan)

In our last bulletin we reported that Actavis has agreed to acquire Allergan in a deal worth $66 billion. The transaction has now been cleared by the European Commission. US merger control approval is also required before the deal can be completed.