95-27552. The Upjohn Company and Pharmacia Aktiebolag; Consent Agreement With Analysis to Aid Public Comment  

  • [Federal Register Volume 60, Number 215 (Tuesday, November 7, 1995)]
    [Notices]
    [Pages 56153-56159]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 95-27552]
    
    
    
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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
    
    

Document Information

Published:
11/07/1995
Department:
Federal Trade Commission
Entry Type:
Notice
Action:
Consent agreement.
Document Number:
95-27552
Dates:
Comments must be received on or before January 8, 1996.
Pages:
56153-56159 (7 pages)
Docket Numbers:
File No. 951-0140
PDF File:
95-27552.pdf