FTC orders Novartis to sell nicotine patch biz to approve consumer deal with GSK

The U.S. Federal Trade Commission found only one antitrust wrinkle in the combo of the consumer health units of GlaxoSmithKline ($GSK) and Novartis ($NVS) and says it has been ironed out. Novartis will sell its Habitrol nicotine patch business so the new joint venture will not have too much market sway in pricing of nicotine patches in the U.S.

Novartis will unload Habitrol to India's Dr. Reddy's Laboratories, which sells lots over-the-counter products in the U.S. so will be well positioned to keep the market competitive, the FTC said. Habitrol turned in more than $58 million in sales in 2013, the FTC said. GSK sells Nicoderm CQ.

"GSK and Novartis are the only companies that market branded nicotine patches in the United States and are two of only three companies that supply private label patches to retailers," the FTC said in its announcement. Without the divestiture, the market concentration of the two would "lead to higher prices for Habitrol and Novartis's private-label patches."

The companies in April announced the JV, which will create GSK Consumer Healthcare, a combo of GSK's $6.5 billion consumer health unit with Novartis' much smaller $3.5 billion asset operation. In keeping with their size, GSK will own 63.5% of the new operation and Novartis 36.5%.

The joint venture has plenty of other well-known brands to sell, like Novartis' pain reliever Excedrin, which joins GSK's globally popular headache powder Beecham's and its Panadol acetaminophen product. Novartis has flu and cold products Theraflu and Triaminic, while Glaxo sells the Coldrex line in Europe, Hong Kong and New Zealand.

GSK does not break out Nicoderm sales in the U.S. and declined to provide it. But smoking cessation products are important enough to GSK that it in the U.K., at least, it has lobbied the European Commission (EC) to do as the U.K. has and license so-called e-cigarettes as medicines. E-cigarettes sales are forecast to hit $7 billion by the end of this year and if smokers go that route instead of trying to kick their habit altogether than GSK products stand to lose.

The consumer health hook-up was part of a three-way deal between the companies. GSK also is buying much of Novartis' vaccine business and Novartis is buying a substantial portion of GSK's oncology portfolio. The deals are expected to close in the second half of next year.

- here's the FTC announcement

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