[Federal Register: November 7, 1995 (Volume 60, Number 215)]
[Notices]
[Page 56153-56159]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr07no95-51]
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FEDERAL TRADE COMMISSION
[File No. 951-0140]
The Upjohn Company and Pharmacia Aktiebolag; Consent Agreement
With Analysis to Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Consent agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair acts and practices and unfair methods of competition, this
consent agreement, accepted subject to final Commission approval, would
require The Upjohn Company and Pharmacia Aktiebolag to divest
Pharmacia's assets in ``9-AC,'' a topoisomerase I inhibitor drug for
the treatment of colorectal cancer, to a Commission-approved buyer who
will ensure that research and development will continue in competition
with the merged company's product ``CPT-11,'' a topoisomerase I
inhibitor drug developed by Upjohn.
DATES: Comments must be received on or before January 8, 1996.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pennsylvania Avenue NW., Washington, D.C. 20580.
FOR FURTHER INFORMATION CONTACT:
Ann Malester, Bureau of Competition, Federal Trade Commission, S-2308,
6th Street and Pennsylvania Avenue NW., Washington, DC 20580, (202)
326-2682.
Claudia Higgins, Bureau of Competition, Federal Trade Commission, S-
2308, 6th Street & Pennsylvania Ave., N.W., Washington, DC 20580, (202)
326-2682.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the following consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. Public comment is invited. Such
comments or views will be considered by the Commission and will be
available for inspection and copying at its principal office in
accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of
Practice (16 CFR 4.9(b)(6)(ii)).
In the matter of The Upjohn Company, a corporation, and
Pharmacia Aktiebolag, a corporation.
File No. 951-0140
Agreement Containing Consent Order
The Federal Trade Commission (``Commission''), having initiated an
investigation of the merger of The Upjohn Company (``Upjohn'') and
Pharmacia Aktiebolag (``Pharmacia''), and it now appearing that Upjohn
and Pharmacia, hereinafter sometimes referred to as ``Proposed
Respondents,'' are willing to enter into an Agreement Containing
Consent Order to (i) divest certain assets, (ii) cease and desist from
certain acts, and (iii) provide for certain other relief:
It is hereby agreed by and between Proposed Respondents, by their
duly authorized officers and their attorneys, and counsel for the
Commission that:
1. Proposed Respondent Upjohn is a corporation organized, existing,
and doing business under and by virtue of the laws of the State of
Delaware, with its principal place of business located at 7000 Portage
Road, Kalamazoo, Michigan 49001.
2. Proposed Respondent Pharmacia is a corporation organized,
existing, and doing business under and by virtue of
[[Page 56154]]
the laws of Sweden, with its principal place of business located at
Frosundaviks alle 15, S-171 97 Stockholm, Sweden.
3. Proposed Respondents admit all the jurisdictional facts set
forth in the draft of complaint.
4. Proposed Respondents waive:
(a) Any further procedural steps;
(b) The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
(c) All rights to seek judicial review or otherwise to challenge or
contest the validity of the Order entered pursuant to this Agreement;
and
(d) Any claim under the Equal Access to Justice Act.
5. This Agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
Agreement is accepted by the Commission it, together with the draft of
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this Agreement and so notify Proposed Respondents, in which event it
will take such action as it may consider appropriate, or issue and
serve its complaint (in such form as the circumstances may require) and
decision, in disposition of the proceeding.
6. This Agreement is for settlement purposes only and does not
constitute an admission by Proposed Respondents that the law has been
violated as alleged in the draft of complaint or that the facts as
alleged in the draft complaint, other than jurisdictional facts, are
true.
7. This Agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Section 2.34 of the
Commission's Rules, the Commission may, without further notice to
Proposed Respondents, (1) issue its complaint corresponding in form and
substance with the draft of complaint and its decision containing the
following Order to divest and to cease and desist in disposition of the
proceeding, and (2) make information public with respect thereto. When
so entered, the Order shall have the same force and effect and may be
altered, modified, or set aside in the same manner and within the same
time provided by statute for other orders. The Order shall become final
upon service. Delivery by the United States Postal Service of the
complaint and decision containing the agreed-to Order to Pharmacia's
counsel, Steven Sunshine, Esquire, of Shearman & Sterling at 801
Pennsylvania Avenue, NW., Washington, DC 20004-2604, and Upjohn's
counsel, Stuart Meiklejohn, Esquire, of Sullivan & Cromwell at 125
Broad Street, New York, New York 10004, shall constitute service.
Proposed Respondents waive any rights they may have to any other manner
of service. The complaint may be used in construing the terms of the
Order, and no agreement, understanding, representation, or
interpretation not contained in the Order or the Agreement may be used
to vary or contradict the terms of the Order.
8. Proposed Respondents have read the proposed complaint and Order
contemplated hereby. Proposed Respondents understand that once the
Order has been issued, they will be required to file one or more
compliance reports showing they have fully complied with the Order.
Proposed Respondents further understand that they may be liable for
civil penalties in the amount provided by law for each violation of the
Order after it becomes final. By signing this Agreement, Proposed
Respondents represent that the relief contemplated by this Agreement
can be accomplished.
Order
I
It is ordered that, as used in this Order, the following
definitions shall apply:
A. Upjohn means The Upjohn Company, its directors, officers,
employees, agents and representatives, successors and assigns; its
subsidiaries, divisions, groups and affiliates controlled by Upjohn;
and the respective directors, officers, employees, agents and
representatives, and the respective successors and assigns of each.
B. Pharmacia means Pharmacia Aktiebolag, its directors, officers,
employees, agents and representatives, successors and assigns; its
subsidiaries, divisions, groups and affiliates controlled by Pharmacia;
and the respective directors, officers, employees, agents and
representatives, and the respective successors and assigns of each.
C. Respondents means Upjohn and Pharmacia.
D. Commission means The Federal Trade Commission.
E. Merger means the combination of Upjohn and Pharmacia pursuant to
a Combination Agreement dated August 20, 1995.
G. 9-AC or 9-amino-20 (S)-camptothecin means the semisynthetic
compound which refers to the compound 1-pyrano [3',4':6,7] indolizino
[1,2-b] quinoline-3,14 (4H,12H)-dione, 10-amino-4-ethyl-4-hydrozy-(S)
in respect of its therapeutic indication for the treatment of cancer.
H. CPT-11 or irinotecan hydrochloride trihydrate means the chemical
compound which refers to the compound (+)-(4S)-4, 11-diethyl-4-hydrozy-
9-[(4-piperidinopiperidino) carbonyl-oxyl]-1H-pyrano [3',4':6,7]
indolizino [1,2-b] quinoline-3,14 (4H, 12H)-dione hydrochloride
trihydrate.
I. Pharmacia's 9-AC Assets means an exclusive license to all
Pharmacia's assets relating to the research and development of 9-AC for
sale in the United States that are not part of Pharmacia's physical
facilities or other tangible assets. ``Pharmacia's 9-AC Assets''
includes, but is not limited to, all formulations, patents, trade
secrets, technology, know-how, specifications, designs, drawings,
processes, testing and quality control data, research data, technical
information, stored on management information systems (and
specifications sufficient for the Acquirer to use such information),
proprietary software used in connection with Pharmacia's 9-AC, and all
data, contractual rights, materials and information relating to
obtaining FDA approvals and other government or regulatory approvals
for the United States for Pharmacia's 9-AC. ``Pharmacia's 9-AC Assets''
also includes the assignment of all rights of Pharmacia to NCI patents,
trade secrets, technology, know-how, specifications, designs, drawings,
processes, testing and quality control data, research materials,
technical information, stored on management information systems (and
specifications sufficient for the Acquirer to use such information),
proprietary software used in connection with Pharmacia's 9-AC and all
data, contractual rights, materials and information relating to
obtaining FDA approvals and other government or regulatory approvals
for the United States for Pharmacai 9-AC.
J. Acquirer means the entity to whom the Respondents shall divest
Pharmacia's 9-AC Assets pursuant to this Order.
K. Cost means Pharmacia's actual per unit cost of manufacturing
Pharmacia's 9-AC, which may be adjusted once annually to reflect any
increases in Pharmacia's actual cost, provided, however, that for any
year, the total rate of such adjustment with respect to all components
of cost other than material and labor shall not exceed the rate of
increases in the Consumer Price Index for such year.
[[Page 56155]]
II
It is further ordered that:
A. Respondents shall divest, absolutely and in good faith, within
twelve (12) months of the date this Order becomes final, Pharmacia's 9-
AC Assets.
B. Respondents shall divest Pharmacia's 9-AC Assets only to an
Acquirer that receives the prior approval of the Commission and only in
a manner that receives the prior approval of the Commission.
Respondents shall obtain all necessary approvals and releases for such
divestiture from NCI as a condition of the Commission's prior approval.
The purpose of the divestiture of Pharmacia's 9-AC Assets is to ensure
continued research and development of Pharmacia's 9-AC, in the same
manner in which Pharmacia's 9-AC would be researched and developed
absent the proposed Merger, and to remedy the lessening of competition
resulting from the proposed Merger as alleged ion the Commission's
Complaint.
C. At the Acquirer's option, Respondents shall enter into a supply
agreement with the Acquirer. Such agreement, if entered into, shall be
provided to the Commission as part of Respondents' application to the
Commission for approval of the divestiture. This supply agreement shall
include the following and Respondents shall commit to satisfy the
following:
1. Respondents shall manufacture and deliver to the Acquirer in a
timely manner the Acquirer's requirements for 9-AC at Respondents' Cost
for a period not to exceed three (3) years from the date the
divestiture is approved. This supply agreement can be cancelled at the
request of the Acquirer.
2. Respondents shall make representations and warranties to the
Acquirer that the 9-AC manufactured by Respondents for the Acquirer
meets the United States Food and Drug Administration approved
specifications therefor and are not adulterated or misbranded within
the meaning of the Food, Drug and Cosmetic Act, 21 U.S.C. Sec. 321, et
seq. Respondents shall agree to indemnify, defend and hold the Acquirer
harmless from any and all suits, claims, actions, demands, liabilities,
expenses or losses alleged to result from the failure of the 9-AC
manufactured for the Acquirer by Respondents to meet FDA
specifications. This obligation shall be contingent upon the Acquirer
giving Respondents prompt, adequate notice of such claim, cooperating
fully in the defense of such claim, and permitting Respondents to
assume the sole control of all phases of the defense and/or settlement
of such claim, including the selection of counsel. This obligation
shall not require Respondents to be liable for any negligent act or
omission of the Acquirer or for any representations and warranties,
express or implied, made by the Acquirer that exceed the
representations and warranties made by Respondents to the Acquirer.
3. During the term of the supply agreement, upon reasonable request
by the Acquirer, Respondents shall make available to the Acquirer all
records kept in the normal course of business that relate to the cost
of manufacturing 9-AC.
D. The time period for divestiture pursuant to Paragraph II. of
this Order shall be tolled if and when Respondents:
1. Provide to the Commission objective evidence, including, but not
limited to, results of clinical trials indicating that, based on 9-AC's
or CPT-11's medical profile, and through no fault of Respondents,
either Pharmacia's 9-AC or Upjohn's CPT-11 is not medically safe or
efficacious for use in the treatment of colorectal cancer; and
2. Petition the Commission to modify this Order, pursuant to
section 5(b) of the FTC Act and Section 2.51 of the Commission's Rules
of Practice, based on the circumstances described in Subparagraph
II.D.1. of this Order.
This tolling of the time period for divestiture shall end when the
Commission rules on Respondents' petition to modify this Order.
III
It is further ordered that:
A. If Upjohn and Pharmacia have not divested, absolutely and in
good faith and with the Commission's prior approval, Pharmacia's 9-AC
Assets within the time required by Paragraph II.A., of this Order, the
Commission may appoint a trustee to divest, at Pharmacia's option,
either (1) an exclusive United States license and a nonexclusive
worldwide (excluding the United States) license in perpetuity, and in
good faith, to all Pharmacia's assets relating to the research and
development of 9-AC for sale throughout the world or (2) an exclusive
worldwide license, in perpetuity, and in good faith, to all Pharmacia's
assets relating to the research and development of 9-AC for sale
throughout the world. The trustee shall obtain all necessary approvals
and releases for the applicable license from NCI. Neither the decision
of the Commission to direct the trustee nor the decision of the
Commission not to direct the trustee to divest a license shall preclude
the Commission or the Attorney General from seeking civil penalties or
any other relief available to it, including a court-appointed trustee,
pursuant to Sec. 5(l) of the Federal Trade Commission Act, or any other
statute enforced by the Commission, for any failure by the Respondents
to comply with this Order.
B. If the trustee is directed under Subparagraph A. of this
Paragraph to divest, at Phamacia's option, either (1) an exclusive
United States license and a nonexclusive worldwide (excluding the
United States) license or (2) an exclusive worldwide license,
Respondents shall consent to the following terms and conditions
regarding the trustee's powers, duties authority, and responsibilities:
1. The Commission shall select the trustee, subject to the consent
of Respondents which consent shall not be unreasonably withheld. If
Respondents have not opposed, in writing, including the reasons for
opposing, the selection of any proposed trustee within ten (10) days
after notice by the staff of the Commission to Respondents of the
identity of any proposed trustee, Respondents shall be deemed to have
consented to the selection of the proposed trustee.
2. Subject to the prior approval of the Commission, the trustee
shall have the exclusive power and authority to divest, at Pharmacia's
option, either (1) an exclusive United States license and a
nonexclusive worldwide (excluding the United States) license or (2) an
exclusive worldwide license.
3. Within ten (10) days after the appointment of the trustee,
Respondents shall execute a trust agreement that subject to the prior
approval of the Commission, and in the case of a court-appointed
trustee, of the court, transfers to the trustee all the rights and
powers necessary to permit the trustee to assure Respondents'
compliance with the terms of this Order. As part of the trustee
agreement, the trustee shall execute confidentiality agreement(s) with
Respondents.
4. The trustee shall have twelve (12) months from the date the
Commission approves the appointment of the trustee to accomplish the
divestiture, which shall be subject to the prior approval of the
Commission. If, however, at the end of the twelve month period, the
trustee has submitted a plan of divestiture or believes that
divestiture can be achieved within a reasonable time, the divestiture
period may be extended by the Commission, or, in the case of a court-
appointed trustee, by the court;
[[Page 56156]]
provided, however, the Commission may extend this period only two (2)
times.
5. The trustee shall have full and complete access to the
personnel, books, records, facilities and technical information related
to Pharmacia's 9-AC, or to any other relevant information, as the
trustee may reasonably request, including but not limited to all
records kept in the normal course of business that relate to research
and development of, and the cost of manufacturing, Pharmacia's 9-AC.
Respondents shall develop such financial or other information as the
trustee may request and shall cooperate with the trustee. Respondents
shall take no action to interfere with or impede the trustee's
accomplishment of the divestiture. Any delays in divestiture caused by
Respondents shall extend the time for divestiture under this Paragraph
in an amount equal to the delay, as determined by the Commission or,
for court-appointed trustee, by the court.
6. The trustee shall use his or her best efforts to negotiate the
most favorable price and terms available in each contract that is
submitted to the Commission, subject to Respondents' absolute and
unconditional obligation to divest at no minimum price. The divestiture
shall be made in the manner and to the Acquirer as set out in
Paragraphs II and III of this order, as appropriate; provided, however,
if the trustee receives bona fide offers from more than one acquiring
entity, and if the Commission determines to approve more than one such
acquiring entity, the trustee shall divest to the acquiring entity
selected by Respondents from among those approved by the Commission. If
requested by the trustee or Acquirer, Respondents shall provide the
Acquirer with the assistance required by Paragraph IV. of this Order.
7. The trustee shall serve, without bond or other security, at the
cost and expense of Respondents, on such reasonable and customary terms
and conditions as the Commission may set. The trustee shall have the
authority to employ, at the cost and expense of Respondents, such
consultants, accountants, attorneys and other representatives and
assistants as are reasonably necessary to carry out the trustee's
duties and responsibilities. The trustee shall account for all monies
derived from the sale and all expenses incurred. After approval by the
Commission and, in the case of a court-appointed trustee, by the court,
of the account of the trustee, including fees for his or her services,
all remaining monies shall be paid at the direction of the Respondents.
The trustee's compensation shall be based at least in significant part
on a Commission arrangement based on a percentage of the selling price
of the assets divested.
8. Respondents shall indemnify the trustee and hold the trustee
harmless against any losses, claims, damages, liabilities, or expenses
arising out of, or in connection with, the performance of the trustee's
duties, including all reasonable fees of counsel and other expenses
incurred in connection with the preparations for, or defense of, any
claim whether or not resulting in any liability, except to the extent
that such liabilities, losses, damages, claims, or expenses result from
misfeasance, gross negligence, willful or wanton acts, or bad faith by
the trustee.
9. If the trustee ceases to act or fails to act diligently, a
substitute trustee shall be appointed in the same manner as provided in
Paragraph III.A. of this Order.
10. The Commission or, in the case of a court-appointed trustee,
the court may on its own initiative or at the request of the trustee
issue such additional orders or directions as may be necessary or
appropriate to accomplish the divestiture required by this Order.
11. The trustee shall report in writing to Respondents and the
Commission every sixty (60) days concerning the trustee's efforts to
accomplish divestiture.
12. if a divestiture application filed pursuant to this Paragraph
III. is pending before the Commission, and Respondents petition the
Commission to modify this Order based on the conditions in Paragraph
II.D., then the Commission shall not approve the divestiture
application until it rules on the petition to modify.
IV
It is further ordered that:
A. Upon reasonable notice and request from the Acquirer to
Respondents, Respondents shall provide information, technical
assistance and advice to the Acquirer with respect to Pharmacia's 9-AC
Assets such that the Acquirer will be capable of continuing the current
research and development. Such assistance shall include reasonable
consultation with knowledgeable employees of Respondents and training
at the Acquirer's facility for a period of time sufficient to satisfy
the Acquirer's management that its personnel are adequately
knowledgeable about Pharmacia's 9-AC Assets. however, Respondents shall
not be required to continue providing such assistance for more than one
(1) year after divestiture of Pharmacia's 9-AC Assets. Respondents may
require reimbursement from the Acquirer for all of their own direct
costs incurred in providing the services required by this Paragraph.
Direct costs, as used in this Paragraph, means all actual costs
incurred exclusive of overhead costs.
B. Upon reasonable notice and request from the Acquirer,
Respondents shall provide information, technical assistance and advice
sufficient to assist the Acquirer in obtaining all necessary FDA
approvals to manufacture 9-AC for use in clinical trials in the United
States. Upon reasonable notice and request from the Acquirer,
Respondents shall also provide consultation with knowledgeable
employees of Respondents and training at the Acquirer's facility for a
period of time, not to exceed one (1) year, sufficient to satisfy the
Acquirer's management that its personnel are adequately trained in the
manufacture of 9-AC. Respondents may require reimbursement from the
Acquirer for all of their own direct costs incurred in providing the
services required by this Paragraph. Direct costs, as used in this
Paragraph, means all actual costs incurred exclusive of overhead costs.
V
It is further ordered that Respondents shall comply with all terms
of the Interim Agreement, attached to this order and made a part hereof
as Appendix I. Said Interim Agreement shall continue in effect until
the provisions in Paragraphs II., III. and IV. of this Order are
complied with or until such other time as is stated in said Interim
Agreement.
VI
It is further ordered that if, following approval of the
divestiture required by Paragraph II. of this Order, disputes arise
between Respondents and the Acquirer regarding: (1) fulfillment of the
terms of the supply agreement described in Paragraph II.C of this
Order; (2) the continuation of the clinical trials for the testing of
9-AC described in Attachment A to Appendix I of this Order; or (3) the
continuation of the defense of existing patents and the pursuit of the
filing of new patents relating to Pharmacia's 9-AC, the Acquirer may
elect to cause the issue to be submitted to outside, independent,
binding arbitration in the District of Columbia. In the event the
Acquirer so elects, Respondents shall agree to submit to such
arbitration, and the issue shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association (``AAA'') and AAA's Supplementary Procedures
for
[[Page 56157]]
International Commercial Arbitration or any successor rules thereto.
Judgment upon the award rendered by the arbitrator(s) may be entered in
any court having jurisdiction thereof. The decision of the arbitrator,
after confirmation by the court pursuant to 9 U.S.C. 9, or succeeding
statutory provisions, shall be final and binding upon the parties, and
the failure of the Respondents thereafter to abide by the arbitrator's
award shall be a violation of this Order.
VII
It is further ordered that:
A. Within sixty (60) days after the date this Order becomes final
and every sixty (60) days thereafter until Respondents have fully
complied with the provisions of Paragraphs II.A. and II.B. or III. of
this Order, Respondents shall submit to the Commission a verified
written report setting forth in detail the manner and form in which
they intend to comply, are complying, and have complied with this
Order. Respondents shall include in their compliance reports, among
other things that are required from time to time, a full description of
the efforts being made to comply with Paragraphs II., III., IV. and V.
of this Order, including a description of all substantive contacts or
negotiations for accomplishing the divestiture and the identity of all
parties contacted. Respondents shall include in their compliance
reports copies of all written communications to and from such parties,
all internal memoranda, and all reports and recommendations concerning
divestiture.
B. One (1) year from the date this Order becomes final, annually on
the anniversary of the date this Order becomes final, and at all other
times as the Commission may require, until Respondents have fully
complied with Paragraphs II.C., IV. and V., Respondents shall file a
verified written report with the Commission setting forth in detail the
manner and form in which they have complied and are complying with
Paragraphs II.C., IV. and V. of this Order.
VIII
It is further ordered that, for the purpose of determining or
securing compliance with this Order, Respondents shall permit nay duly
authorized representatives of the Commission:
A. Access, during office hours and in the presence of counsel, to
inspect and copy all books, ledgers, accounts, correspondence,
memoranda and other records and documents in the possession or under
the control of Respondents, relating to any matters contained in this
Order; and
B. Upon five (5) days' notice to Respondents, and without restraint
or interference from Respondents, to interview officers, directors, or
employees of Respondents, who may have counsel present regarding such
matters.
IX
It is further ordered that Respondents shall notify the Commission
at least thirty (30) days prior to any proposed change in Respondents
such as dissolution, assignment, sale resulting in the emergence of a
successor, or the creation or dissolution of subsidiaries, or any other
change that may affect compliance obligations arising out this Order.
Appendix I
In the Matter of the Upjohn Company, a corporation, and
Pharmacia Aktiebolag, a corporation.
File No. 951-0140
Interim Agreement To Maintain Research and Development
This Interim Agreement to Maintain Research and Development
(``Interim Agreement'') is by and among Pharmacia Aktiebolag
(``Pharmacia''), a corporation organized, existing, and doing business
under and by virtue of the laws of Sweden, with its office and
principal place of business at Frosundaviks alle 15, S-171 97
Stockholm, Sweden, The Upjohn Company (``Upjohn''), a corporation
organized, existing, and doing business under and by virtue of the laws
of the State of Delaware, with its principal place of business located
at 7000 Portage Road, Kalamazoo, Michigan 49001 and the Federal Trade
Commission (``the Commission''), an independent agency of the United
States Government, established under the Federal Trade Commission Act
of 1914, 15 U.S.C. 41, et seq. (collectively, the ``Parties'').
Premises
Whereas, on August 20, 1995, Pharmacia entered into a Combination
Agreement with Upjohn providing for the combination of Pharmacia and
Upjohn (hereinafter ``Merger''); and
Whereas, Pharmacia is involved in, among other things, the research
and development of 9-Amino-20(S)-camptothecin (``9-AC''), a
topoisomerase I inhibitor; and
Whereas, Upjohn is involved in, among other things, the research
and development of Camptosar (``CPT-11''), a topoisomerase I inhibitor;
and
Whereas, the Commission is now investigating the Merger to
determine whether it would violate any of the statutes enforced by the
Commission; and
Whereas, if the Commission accepts the Agreement Containing Consent
Order (``Consent Order''), the Commission must place it on the public
record for a period of at least (60) days and subsequently may either
withdraw such acceptance or issue and serve its Complaint and decision
in disposition of the proceeding pursuant to the provisions of Section
2.34 of the Commission's Rules; and
Whereas, the Commission is concerned that if an understanding is
not reached, preserving the ongoing and future research of Pharmacia's
9-AC, as defined in Paragraph I of the Consent Order, during the period
prior to the final acceptance of the Consent Order by the Commission
(after the 60-day public comment period) and until the divestiture
required by Paragraphs II or III of the Consent Order has been
accompanied may not be possible and divestiture resulting from any
proceeding challenging the legality of the Merger might not be
possible, or might be less than an effective remedy; and
Whereas, the purpose of the Interim Agreement and the Consent Order
is:
1. To ensure continued research and development of Pharmacia's 9-Ac
in the same manner in which Pharmacia's 9-AC would be researched and
developed absent the Merger; and
2. To preserve the Commission's ability to remedy any
anticompetitive effects of the Merger; and
Whereas, Pharmacia's and Upjohn's entering into this Interim
Agreement shall in no way be construed as an admission by Pharmacia and
Upjohn that the Merger is illegal; and
Whereas, Pharmacia and Upjohn understand that no act or transaction
contemplated by this Interim Agreement shall be deemed immune or exempt
from the provisions of the antitrust laws or the Federal Trade
Commission Act by reason of anything contained in this Interim
Agreement;
Now, therefore, the Parties agree, upon the understanding that the
Commission has not yet determined whether the Merger will be
challenged, and in consideration of the Commission's agreement that, at
the time it accepts the Consent Order for public comment, it will grant
early termination of the Hart-Scott-Rodino waiting period, as follows:
1. Pharmacia and Upjohn agree to execute and be bound by the
Consent Order.
[[Page 56158]]
2. Pharmacia agrees that from the date this Interim Agreement is
accepted until the earliest of the time listed in subparagraphs 2.a.-
2.b., it will comply with the provisions of Paragraph 4 of this Interim
Agreement:
a. Three business days after the Commission withdraws its
acceptance of the Consent Order pursuant to the provisions of Section
2.34 of the Commission's rules;
b. The time that the divestiture obligations required by the
Consent Order are completed.
3. Pharmacia and Upjohn agree to take such actions as are necessary
to prevent the destruction, removal, wasting, deterioration or
impairment of Pharmacia's 9-AC Assets, except for ordinary wear and
tear.
4. With respect to the continued research and development of
Pharmacia's 9-AC, Pharmacia agrees:
a. To continue to pursue its obligations under the Cooperative
Research and Development Agreement with the National Cancer Institute
and the previously determined 9-AC research and development plan, as
set forth in confidential Attachment A to this Interim Agreement; and
b. To fund the research and development of Pharmacia's 9-AC at
levels no less than those contained in the budget for 1995, as set
forth in confidential Attachment B to this Interim Agreement; and
c. To use its best efforts to support and defend Pharmacia's rights
relating to 9-AC in U.S. Patent # 5,106742 dated April 21, 1992
(Camptothecin Analogs as Potent Inhibitors of Topoisomerase I), U.S.
Patent # 5,225,404 dated July 6, 1993 (Methods of Treating Colon Tumors
with Tumor-Inhibiting Camptothecin Compounds), and U.S. Serial # 08/
323081 filed October 14, 1994 (pending patent application for
Lyophilizate of Lipid Complex of Water Insoluble Camptothecins); and
d. To use its best efforts to obtain all necessary approvals and
releases from the National Cancer Institute to accomplish the
requirements of Paragraphs II and III of the Consent Order; and
e. Within thirty days of acceptance of this Interim Agreement by
the Commission, to have available for clinical trials at least
sufficient inventory of Pharmacia's 9-AC sufficient to supply the
clinical trials set forth in confidential Attachment A to this Interim
Agreement that are likely to be initiated through November 1996.
5. Upjohn agrees to allow Pharmacia to fulfill its obligations
under paragraphs 2 and 4 of this Interim Agreement, without restraint
or interference from Upjohn.
6. Should the Commission seek in any proceeding to compel Pharmacia
to divest itself of the Pharmacia 9-AC Assets, as provided in the
Consent Order, or seek any other equitable relief relating to
Pharmacia's 9-AC Assets, Pharmacia and Upjohn shall not raise any
objection based on the expiration of the applicable Hart-Scott-Rodino
Antitrust Improvements Act waiting period or the fact that the
Commission has permitted the Merger. Pharmacia and Upjohn shall also
waive all rights to contest the validity of this Interim Agreement.
7. Should the Commission, pursuant to Paragraph II.D of the Consent
Order, act on a petition from Pharmacia and Upjohn to modify the
Consent Order based on the circumstances described in Subparagraph
II.D.1, this Interim Agreement shall be automatically modified to
reflect any changes made by the Commission.
8. For the purpose of determining or securing compliance with this
Interim Agreement, subject to any legally recognized privilege, and
upon written request with reasonable notice to Pharmacia and Upjohn
made to its General Counsel, Pharmacia and Upjohn shall permit any duly
authorized representative or representatives of the Commission:
a. Access during the office hours of Pharmacia and Upjohn and in
the presence of counsel to inspect and copy all books, ledgers,
accounts, correspondent, memoranda, and other records and documents in
the possession or under the control of Pharmacia and Upjohn relating to
compliance with this Interim Agreement; and
b. Upon five (5) days' notice to Pharmacia and Upjohn, and without
restraint or interference from it, to interview officers or employees
of Pharmacia and Upjohn, who may have counsel present, regarding any
such matters.
9. This Interim Agreement shall not be binding until approved by
the Commission.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission (``Commission'') has accepted
provisionally an agreement containing a proposed Consent Order from The
Upjohn Company (``Upjohn'') and Pharmacia Aktiebolag (``Pharmacia''),
under which Upjohn and Pharmacia will be required to divest U.S. assets
relating to the research and development of a chemotherapeutic drug for
the treatment of colorectal cancer (``Pharmacia's 9-AC Assets'') to a
Commission approved purchaser. In addition, the Commission has accepted
an Interim Agreement to Maintain Research and Development, under which
Pharmacia and Upjohn will be required to continue fulfilling the
previously established 9-AC research and development plan and its
obligations to the National Cancer Institute.
The proposed Consent Order has been placed on the public record for
sixty (60) days for reception of comments by interested persons.
Comments received during this period will become part of the public
record. After sixty (60) days, the Commission will again review the
agreement and the comments received and will decide whether it should
withdraw from the agreement or make final the agreement's proposed
Order.
Pursuant to an agreement dated August 20, 1995, Upjohn and
Pharmacia propose to merge their respective businesses in a transaction
valued at approximately $13.9 billion. Based on 1994 sales, the
combined company would rank among the top ten pharmaceutical
manufacturers worldwide, and it would be the fifth largest drug company
in the United States.
The proposed complaint alleges that the merger, if consummated,
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C.
Sec. 18, and Section 5 of the Federal Trade Commission Act, as amended,
15 U.S.C. Sec. 45, in the market for the research, development,
manufacturer and sale of topoisomerase I inhibitors for the treatment
of colorectal cancer in the United States. Topoisomerase I inhibitors
are a specific class of chemotherapeutic drugs that inhibit the
multiplication of cancer cells inside the body. By curtailing cancer
cell growth, topoisomerase I inhibitors may aid in the treatment of
colorectal cancer, a form of cancer that does not respond well to
currently available chemotherapy agents.
While no topoisomerase I inhibitor has yet been approved for sale
in the United States, it is anticipated that sales of all topoisomerase
I inhibitors for the treatment of colorectal cancer will exceed $100
million by 2002. Approximately 443,000 people in the United States are
diagnosed with colorectal cancer each year. For most solid tumors, the
first method of treatment is surgery, with radiation therapy and
chemotherapy typically used as adjuncts to the surgery.
Current protocols for colorectal cancer suggest that patients be
treated with the chemotherapy agents 5-fluorouracil
[[Page 56159]]
(``5FU'') and either leucovorin or levamisole. For those patients whose
cancer recurs, the survival rate is only fifteen percent. Topisomerase
I inhibitors are expected to increase the rate of survival for
colorectal cancer patients.
The proposed Consent Order would remedy the alleged violation by
replacing the lost competition that would result in the U.S. from the
merger. Presently, only a very small number of companies worldwide are
developing topoisomerase I inhibitors. Upjohn has the U.S. rights for
CPT-11, a topoisomerase I inhibitor developed in Japan by Yakult Honsha
and Daiichi. Pharmacia has the worldwide rights for 9-AC under a
Cooperative Research and Development Agreement with the National Cancer
Institute. Upjohn's and Pharmacia's products may be effective
treatments for colorectal cancer. Because the information obtained
during the Commission's investigation about the status of
pharmaceutical research projects is highly confidential, the Commission
cannot disclose publicly what, if any, other research projects are
currently underway on topoisomerase I inhibitors.
Under the proposed Consent Order, Pharmacia and Upjohn are required
to divest 9-AC assets relating to the research and development of 9-AC
for sale in the United States. As a result, two independent
pharmaceutical companies will continue to research and develop their
respective topoisomerase I inhibitors in the United States following
the proposed merger.
The proposed Order requires that if Upjohn and Pharmacia fail to
divest the product within 12 months, a trustee will be appointed to
divest Pharmacia's 9-AC Assets in the U.S. as well as either a
worldwide exclusive or a nonexclusive worldwide (excluding the U.S.)
license for 9-AC. The Order also requires Upjohn and Pharmacia to
provide technical assistance and advice to ensure that the acquirer is
capable of continuing present research and development and to produce
9-AC if needed by the Acquirer for its clinical trials.
An Interim Agreement is incorporated into the proposed Order to
protect the ongoing research and development of 9-AC. In the Interim
Agreement, Pharmacia and Upjohn commit to continue the planned research
and development of 9-AC pending the divestiture required under the
Order. The Interim Agreement remains in effect until Pharmacia has
divested its 9-AC Assets pursuant to the Order.
Under the provisions of the order, Upjohn and Pharmacia are also
required to provide the Commission a report of compliance with the
divestiture provisions of the Order within sixty (60) days following
the date the Order becomes final, and every sixty (60) days thereafter
until Upjohn and Pharmacia have completed the required divestiture.
The purpose of this analysis is to facilitate the public comment on
the proposed Order, and it is not intended to constitute an official
interpretation of the agreement and proposed Order or to modify in any
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 95-27552 Filed 11-6-95; 8:45 am]
BILLING CODE 6750-01-M