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Brussels, 8 May 2000

Commission grants conditional clearance to merger between Glaxo Wellcome and SmithKline Beecham
The European Commission has given the green light to the merger between Glaxo Wellcome and SmithKline Beecham. The new company, Glaxo SmithKline, will be the world's biggest pharmaceuticals firm with 7.3% of global sales. The merger raised concerns about creation of a dominant position in several treatment areas for human pharmaceuticals. In most of these markets, the Commission found that the overlapping activities of the parties were unlikely to lead to adverse competition effects. However, serious doubts arose in a number of key areas. Anti-virals The parties own leading anti-viral drugs Zovirax, Famvir and Valtrex, which are anti-herpes treatments. The merged entity would have attained very high market shares in most Member States, ranging from 50% to 100%. The investigation showed that Zovirax faces limited competition from generic products while so-called second generation drugs Famvir and Valtrex will be protected by patents for a long time in the future. In order to restore competition, the parties offered to divest by means of a licensing agreement Famvir in the EEA, which will remove the entire overlap between GW and SB. Anti-emetics Anti-emetics are drugs that prevent or relieve nausea and vomiting. The parties' products include Kytril and Zofran and their combined market shares would have been up to 90% in a number of Member States. Moreover, the combination of the parties' products would give them the possibility to set up barriers to market entry. The parties undertook to outlicense Kytril in the EEA, eliminating the GW-SB overlap in this market. Cephalosporins Cephalosporins are part of antibiotics family. The merger would have lead to a combined market share of more than 40% in Spain. GW and SB are the number one and number two suppliers for the product in the Spanish market and the largest competitor, Eli Lilly, would have less than one third of the sales. The parties proposed to grant a license of the Spanish trademark rights to SB's Monocid. Asthma Finally, the concentration was found to give rise to competition concerns in pipeline products related to asthma treatment. GW has a very strong position in particular in second line therapy, with market shares up to 50%. AstraZeneca is the strongest competitor in this segment but with substantially lower market shares. Although SB does not currently produce any anti-respiratory products, its pipeline compound could further strengthen GW's strong position. The parties agreed to license SB's pipeline compound Ariflo in Europe, in the event that competing pipeline products fail to reach the market. The Commission considers that the undertakings are sufficient to eliminate competition concerns. They have also been supported by 3rd parties in the Commission's market test.