Mergers & acquisitions: CCP conditionally approves GSK’s acquisition of Novartis’ vaccine trade

Anti-trust watchdog wants strong network of distributors.

ISLAMABAD: The Competition Commission of Pakistan (CCP) has conditionally approved acquisition of Swiss drug-maker Novartis’s vaccine business by its British rival GlaxoSmithKline (GSK), amid concerns over impact of the merger on prices of drugs in Pakistan. 

The anti-trust watchdog sanctioned the merger on the same conditions that both GSK and Novartis accepted during its review in front of the European Commission and the United States regulator. However, CCP added two new conditions that GSK will ensure a strong network of distributors and availability of drugs in the local market.



GSK is acquiring the vaccine business, excluding influenza vaccines, from Novartis under a share purchase agreement valuing $5.25 billion. The potential milestone payments of $1.8 billion and ongoing royalties are over and above this cost.

The order was passed by a five-member bench, headed by the CCP Chairperson Vadiyaa Khalil. In September last year, GSK had filed an application seeking approval for acquisition of the vaccines business from Novartis.

In January, the European Commission (EC) has also cleared the acquisition as well as the proposed creation of a new entity combining the consumer health activities of GSK and Novartis.

Both entities are active worldwide in research, manufacturing and supply of pharmaceuticals, vaccines and consumer health products. GSK will acquire Novartis’ global human vaccines business, except the influenza vaccines business and both companies will combine their global consumer health business in a new entity, which will be controlled by GSK.

The CCP had concerns that GSK is a dominant player in the relevant product market of meningococcal meningitis vaccines and the acquisition would strengthen its dominant position in the relevant market, which would raise competition concern in Pakistan.

They said the only overlapping product between the merger parties is meningitis vaccines, which both these companies market in Pakistan. The merger will substitute Mencevax of GSK with Menveo of Novartis.

After holding a hearing, CCP directed GSK to ensure reliable availability of Meneveo in Pakistan. GSK will divest its worldwide MenACWY vaccine business to a suitable purchaser, which will be an independent third-party vaccines supplier with the capability to maintain and continue to develop the divested business as a viable and active competitive product line, as committed by GSK to the EC. GSK will also enter into an agreement with a third-party purchaser within a period of six months from the receipt of the EU clearance decision, said the CCP.

An independent divesture trustee, which will be appointed by the EC, will have the mandate to sell the divestment business within another six months. GSK has already agreed to these conditions in front of the EC.

CCP will assess the effects of the transaction on the relevant market after one year from the date of the closing transaction. GSK was also directed to file an update report with the registrar of the commission every three months until the divestment is complete.

In another pre-merger application, the CCP also approved the acquisition of the business relating to a portfolio of oncology products (excluding manufacturing) by Novartis. Novartis was acquiring the oncology product business in return of $16 billion.

According to CCP, in 2013, GSK was the largest player in the market for Meningococcal vaccines having a market share of 85.53%, which is much above the market power threshold of 40%. After the merger, GSK will have a 100% market presence in Pakistan. Recently, a third player, Sanofi Pasteur, began selling its products but the latest market share data was not available.

Published in The Express Tribune, February 26^th,  2015.

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