Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Novartis to divest nicotine patch assets to proceed with GlaxoSmithKline joint venture, (Dec 1, 2014)

By Greg Hammond, J.D.

The FTC has conditioned its approval of a proposed joint venture agreement between pharmaceutical companies Novartis AG and GlaxoSmithKline, PLC (GSK), requiring that Novartis divest its Habitrol assets. Habitrol is a nicotine replacement therapy patch, which is used to reduce nicotine intake gradually while quitting smoking, similar to GSK’s product—Nicoderm CQ (In the Matter of Novartis AG, File No. 141 0141).

Novartis and GSK both manufacturer and market a number of health care products in the United States, including cold-and-flu remedies, ingestion remedies, skin care aids, smoking cessation products, and toothpaste. The two companies entered into a proposed joint venture agreement in April 2014, which would provide Novartis with a 36.5 percent interest in the joint venture and continued ownership of the Habitrol business. Habitrol earned over $58 million in sales in the United States during 2013.

According to its complaint, the Commission alleged that the proposed joint venture agreement between Novartis and GSK would be anticompetitive, because it might reduce competition between GSK and Novartis in the supply of branded and private label nicotine replacement therapy patches. Consequently, there would be a larger incentive for Novartis to increase the prices of its Habitrol products, and Novartis would be more likely to actually increase the prices of those products.

The consent agreement and decision and order require Novartis to divest its Habitrol Assets to Dr. Reddy’s Laboratories SA. The divestment, according to the Commission, would alleviate concerns that the joint venture would prevent potential competitors from developing new patch products and securing Federal Drug Administration approval, as well as lead to increased prices for Habitrol and Novartis’ private-label patches.

Companies: Novartis AG; GlaxoSmithKline, PLC; Dr. Reddy’s Laboratories SA

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