Hoechst AG; Proposed Consent Agreement With Analysis To Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 951 0090]

Hoechst AG; Proposed Consent Agreement With Analysis To Aid

Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: This consent agreement, accepted subject to final Commission

approval, settles alleged violations of federal law prohibiting unfair

or deceptive acts and practices and unfair methods of competition

arising from the $7.1 billion merger of Hoechst AG and Marion Merrell

Dow, Inc. The consent agreement, among other things, would require

Hoechst--a pharmaceutical firm--to provide Biovail Corporation

International with a letter of access to the toxicology data necessary

to secure additional FDA approvals for a hypertension and cardiac drug

called Tiazac (diltiazem). It would also require Hoechst to return any

confidential information obtained from Biovail; to refrain from using

the information; to dismiss a patent infringement lawsuit filed by

Marion Merrell Dow regarding Tiazac; to withdraw a citizen petition

Marion Merrell Dow filed with the Food and Drug Administration relating

to Tiazac; and to agree not to file any subsequent litigation against

Biovail regarding diltiazem. In addition, the consent agreement would

require Hoechst to divest the rights to either Trental or Beraprost

(two drugs intended to treat intermittent claudication, a painful leg

cramping condition); to divest the rights to Pentasa (or the generic

formulation), which is one of two oral forms of mesalamine used to

treat ulcerative colitis and Crohn's Disease; and to divest the rights

to Rifadin (or the generic formulation), which is used to treat

tuberculosis. The required divestitures would have to be made to

Commission approved entities. If they are not completed within nine

months of the date on which the Commission accords final approval to

the consent agreement, the consent agreement would permit the

Commission to appoint a trustee to complete them.

DATES: Comments must be received on or before November 27, 1995.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: William Baer, FTC/H-374, Washington,

DC 20580 (202) 326-2932; or Ann Malester, FTC/S-2308, 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 Sec. 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

Sec. 4.9(b)(6)(ii) of the Commission's rules of practice (16 CFR

4.9(b)(6)(ii)).

In the Matter of Hoechst AG, a corporation.

Agreement Containing Consent Order

The Federal Trade Commission (``Commission''), having initiated an

investigation of the merger of Hoechst AG (``Hoechst''), through its

United States subsidiary, Hoechst Corporation, and Marion Merrell Dow

Inc. (``MMD''), and it now appearing that Hoechst, hereinafter

sometimes referred to as ``Proposed Respondent,'' is 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 Respondent, by its duly

authorized officers and its attorneys, and counsel for the Commission

that:

1. Proposed Respondent Hoechst is a corporation organized,

existing, and doing business under and by virtue of the laws of

Germany, with its principal place of business located at 65926

Frankfurt am Main, Germany.

2. Proposed Respondent admits all the jurisdictional facts set

forth in the draft of complaint.

3. Proposed Respondent waives:

(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.

[[Page 49610]]

4. 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 Respondent, 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.

5. This Agreement is for settlement purposes only and does not

constitute an admission by Proposed Respondent 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.

6. 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 Sec. 2.34 of the Commission's

rules, the Commission may, without further notice to Proposed

Respondent, (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 Proposed

Respondent's counsel, William C. Pelster, of Skadden, Arps, Slate,

Meagher & Flom, 919 Third Avenue, New York, New York 10022-3897, shall

constitute service. Proposed Respondent waives any right it 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.

7. Proposed Respondent has read the proposed Complaint and Order

contemplated hereby. Proposed Respondent understands that once the

Order has been issued, it will be required to file one or more

compliance reports showing it has fully complied with the Order.

Proposed Respondent further understands that it 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 Respondent

represents 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. ``Respondent'' or ``Hoechst'' means Hoechst AG, its directors,

officers, employees, agents and representatives, successors and

assigns; its subsidiaries, divisions, groups and affiliates controlled

by Hoechst AG; subsidiaries, divisions, groups and affiliates in which

Hoechst AG owns more than 25 percent of the voting securities; and the

respective directors, officers, employees, agents and representatives,

and the respective successors and assigns of each.

B. ``MMD'' means Marion Merrell Dow Inc., its directors, officers,

employees, agents and representatives, successors and assigns; its

subsidiaries, divisions, groups and affiliates controlled by Marion

Merrell Dow Inc.; and the respective directors, officers, employees,

agents and representatives, and the respective successors and assigns

of each.

C. ``Merger'' means the merger of Hoechst and MMD through the

acquisition by Hoechst of the voting securities of MMD pursuant to a

Stock Purchase Agreement and an Agreement and Plan of Merger both dated

as of May 3, 1995.

D. ``Commission'' means the United States Federal Trade Commission.

E. ``FDA'' means the United States Food and Drug Administration.

F. ``NDA'' means new drug application.

G. ``ANDA'' means abbreviated new drug application.

H. ``Diltiazem'' means any formulation of the compound diltiazem

hydrochloride used in the treatment of hypertension or angina.

I. ``Biovail'' means Biovail Corporation International, organized

and existing under the laws of Canada and with its offices and

principal place of business at 460 Comstock Road, Scarborough, Ontario,

Canada, including its successors, licensees and assigns.

J. ``Biovail Diltiazem Products'' means the sustained release and/

or extended release diltiazem products that Hoechst was developing with

Biovail pursuant to the Rights Agreement that Hoechst and Biovail

entered into on June 30, 1993.

K. ``Documents'' means all computer files and written, recorded,

and graphic materials of every kind. The term ``documents'' includes

electronic correspondence and drafts of documents, originals and all

copies of documents, and copies of documents the originals of which are

not in the possession, custody or control of the company.

L. ``Non-Public Information'' means any information or documents

not in the public domain furnished by Biovail to Hoechst in connection

with the Biovail Diltiazem Products. Non-Public Information shall not

include information that subsequently becomes public or falls within

the public domain through no violation of this Order by Respondent or

nor shall it include information that subsequently becomes known to

Respondent from a third-party not in breach of a confidential

disclosure agreement.

M. ``Beraprost'' means the prostaglandin analog(s) licensed by

Toray Industries, Inc. to MMD used for the treatment of peripheral

arterial disease, including, but not limited to, intermittent

claudication.

N. ``Beraprost Assets'' means all of MMD's U.S. assets and rights

relating to the research and development, manufacture and sale of

Beraprost, that are not part of MMD's physical facilities. ``Beraprost

Assets'' include, but are not limited to, all rights to brand or trade

name, formulations, patents, trade secrets, technology, know-how,

specifications, designs, drawings, processes, production information,

manufacturing information, testing and quality control data, research

materials, technical information, distribution information, customer

lists, information stored on management information systems (and

specifications sufficient for the Acquirer to use such information),

software specific to MMD's Beraprost, inventory sufficient for the

Acquirer to complete all safety and efficacy studies, clinical trials

or bioequivalency studies necessary to obtain FDA approvals, and all

data, contractual rights, materials and information relating to

obtaining FDA approvals and other government or regulatory approvals

for the United States.

O. ``Trental'' means the compound pentoxifylline marketed

by Hoechst for use in the treatment of vascular disease, including, but

not limited to, intermittent claudication.

[[Page 49611]]

P ``Trental Assets'' means all of Hoechst's U.S. assets

and rights relating to the research and development, manufacture and

sale of Trental, including the unique physical assets used by

Hoechst to manufacture Trental and all of its brand names and

trade names. ``Trental Assets'' include, but are not limited

to, all rights to brand or trade name, formulations, patents, trade

secrets, technology, know-how, specifications, designs, drawings,

processes, production information, manufacturing information, testing

and quality control data, research materials, technical information,

distribution information, customer lists, information stored on

management information systems (and specifications sufficient for the

Acquirer to use such information), software specific to Hoechst's

Trental, and all data, contractual rights, materials and

information relating to obtaining FDA approvals and other government or

regulatory approvals for the United States.

Q. ``Mesalamine'' means the compound mesalamine used for the

treatment of ulcerative colitis and Crohn's disease.

R. ``Mesalamine Assets'' means either (1) all of Hoechst's U.S.

assets and rights relating to the research and development, manufacture

and sale of mesalamine by Hoechst that are not part of Hoechst's

physical facilities and that were not acquired through the Merger; or

(2) all of MMD's U.S. assets and rights relating to the research and

development, manufacture and sale of mesalamine by MMD, including the

unique physical assets used by MMD to manufacture mesalamine and all of

its brand names and trade names. ``Mesalamine Assets'' include, but are

not limited to, all rights to brand or trade names, all formulations,

patents, trade secrets, technology, know-how, specifications, designs,

drawings, processes, production information, manufacturing information,

testing and quality control data, research materials, technical

information, distribution information, information stored on management

information systems (and specifications sufficient for the Acquirer to

use such information), inventory sufficient for the Acquirer to

complete all ongoing safety and efficacy studies, clinical trials or

bioequivalency studies necessary to obtain FDA approvals and all data,

contractual rights, materials and information relating to obtaining FDA

approvals and other government or regulatory approvals for the United

States.

S. ``Rifampin'' means the compound rifampin used for the treatment

of tuberculosis.

T. ``Rifampin Assets'' means either (1) all of Hoechst's U.S.

assets and rights relating to the research and development, manufacture

and sale of rifampin by Hoechst that are not part of Hoechst's physical

facilities and that were not acquired through the Merger; or (2) MMD's

U.S. assets and rights relating to the research and development,

manufacture and sale of rifampin by MMD, including the unique physical

assets used by MMD to manufacture rifampin and all of its brand names

and trade names. ``Rifampin Assets'' include, but are not limited to,

all rights to brand or trade names, all formulations, patents, trade

secrets, technology, know-how, specifications, designs, drawings,

processes, production information, manufacturing information, testing

and quality control data, research materials, technical information,

distribution information, information stored on management information

systems (and specifications sufficient for the Acquirer to use such

information), inventory sufficient for the Acquirer to complete all

ongoing safety and efficacy studies, clinical trials or bioequivalency

studies necessary to obtain FDA approvals and all data, contractual

rights, materials and information relating to obtaining FDA approvals

and other government or regulatory approvals for the United States.

U. ``Acquirer'' means the entity or entities to whom Hoechst shall

divest the assets required to be divested pursuant to this Order.

V. ``Contract Manufacture'' means the manufacture of

Trental, mesalamine or rifampin, as applicable, by Hoechst

for sale to an Acquirer in a form acceptable for commercial sale in the

United States, in each form of packaging used by Respondent or MMD in

the distribution and sale of such product, with information including,

but not limited to, the name and identification codes of the Acquirer

inscribed on the packaging, and packaged in units specified by the

Acquirer, as permitted by the FDA.

W. ``Cost'' means Respondent's or MMD's actual per unit cost of

manufacturing the assets to be divested pursuant to this Order.

X. ``Formulation'' means any and all information, including patent,

trade secret information, technical assistance and advice, relating to

the manufacture of the assets to be divested pursuant to this Order

that meet FDA approved specifications therefor.

II

It is further ordered That:

A. Within seven (7) days of the date this Order becomes final:

1. Respondent shall grant to Biovail the right of reference to the

pharmacology, toxicology and animal reproductive toxicology data

contained in MMD's NDA No. 18-602 for Diltiazem on file with the FDA.

Respondent shall make the necessary filings with the FDA authorizing

the FDA to refer to the appropriate section(s) of MMD's NDA No. 18-602

for such data (including, but not limited to, pharmacology and

toxicology data) in support of Biovail's NDA No. 20-401 for the Biovail

Diltiazem Products, including any supplemental NDAs or related NDAs.

Provided however, the right of reference granted to Biovail pursuant to

this Paragraph does not constitute a general release of the data

contained in MMD's NDA No. 18-602, except as it might appear in

labelling.

2. Respondent shall withdraw the Citizen Petition(s) that MMD filed

with the FDA relating to NDAs under section 505(b)(2) of the Food, Drug

and Cosmetics Act, 21 U.S.C. 355(b)(2), including the NDA for the

Biovail Diltiazem Products. Respondent shall not file any further

Citizen Petition with the FDA relating to the NDA under section

505(b)(2) of the Food, Drug and Cosmetics Act, 21 U.S.C. 355(b)(2),

that could have the effect of delaying the approval of the NDA for the

Biovail Diltiazem Products.

3. Respondent shall file a stipulation of dismissal with prejudice

to MMD of all litigation currently pending in the United States between

or among MMD, Hoechst, and Biovail, including, but not limited to,

Marion Merrell Dow Inc., Carderm Capital L.P. and Elan plc v. Hoechst-

Roussel Pharmaceuticals, Inc., No. 93-5074 (D.N.J), and shall not

institute or cause any other person to institute any patent

infringement action against Biovail relating to the Biovail Diltiazem

Products.

4. Respondent shall return to Biovail all documents relating to the

research, development, FDA approval, patenting, manufacture, marketing,

or sale of the Biovail Diltiazem Products.

B. Respondent shall not use any Non-Public Information relating to

the Biovail Diltiazem Products and shall not provide, disclose or

otherwise make available to MMD any Non-Public Information relating to

the Biovail Diltiazem Products.

C. The purpose of this Paragraph II is to remedy the lessening of

competition resulting from the Merger as alleged in the Commission's

Complaint.

[[Page 49612]]

III

It is further ordered That:

A. Respondent shall divest, absolutely and in good faith, within

nine (9) months of the date this Order becomes final, either the

Beraprost Assets or Trental Assets.

B. Respondent shall divest the Beraprost Assets or

Trental 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. The purpose of the divestiture of the

Beraprost Assets or Trental Assets is to ensure continued

competition between Trental and Beraprost, in the same manner

in which Trental and Beraprost would compete absent the

Merger, and to remedy the lessening of competition resulting from the

Merger as alleged in the Commission's Complaint.

C. The time period for divestiture pursuant to this Paragraph III

of this Order shall be tolled if and when Respondent:

1. Provides to the Commission objective evidence, including, but

not limited to, results of clinical trials, indicating that, based on a

compound's medical profile, and through no fault of Respondent, the

Beraprost Assets are not viable or marketable; and

2. Petitions the Commission to modify this Order, pursuant to

section 5(b) of the FTC Act and Sec. 2.51 of the Commission's rules of

practice, based on the circumstances described in Paragraph III.C.1 of

this Order.

This tolling of the time period for divestiture shall end when the

Commission rules on Respondent's petition to modify this Order.

IV

It is further ordered That:

A. Respondent shall divest, absolutely and in good faith, within

nine (9) months of the date this Order becomes final, the Mesalamine

Assets.

B. Respondent shall divest the Mesalamine 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. The

purpose of the divestiture of the Mesalamine Assets is to ensure

continued competition between Hoechst's mesalamine and MMD's

mesalamine, in the same manner in which these compounds would compete

absent the Merger, and to remedy the lessening of competition resulting

from the Merger as alleged in the Commission's Complaint.

V

It is further ordered That:

A. Respondent shall divest, absolutely and in good faith, within

nine (9) months of the date this Order becomes final, the Rifampin

Assets.

B. Respondent shall divest the Rifampin 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. The purpose of the

divestiture of the Rifampin Assets is to ensure continued competition

between Hoechst's rifampin and MMD's rifampin, in the same manner in

which these compounds would compete absent the Merger, and to remedy

the lessening of competition resulting from the Merger as alleged in

the Commission's Complaint.

VI

It is further ordered That:

A. Upon reasonable notice and request from the Acquirer(s) to

Hoechst, Hoechst shall provide information, technical assistance and

advice to the Acquirer(s) with respect to any assets divested pursuant

to this Order such that the Acquirer(s) will be capable of continuing

all applicable research, development and manufacturing. Such assistance

shall include reasonable consultation with knowledgeable employees of

Hoechst 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 the assets divested pursuant to this

Order. However, Respondent shall not be required to continue providing

such assistance for more than twelve (12) months after divestiture of

such assets. Respondent may require reimbursement from the Acquirer(s)

for all of its own direct costs incurred in providing the services

required by this Subparagraph. Direct costs, as used in this

Subparagraph, means all actual costs incurred exclusive of overhead

costs. If an Acquirer hires any of Respondent's officers, directors,

agents, or employees whose work relates to a divested asset being

acquired by the Acquirer, Respondent shall waive any confidentiality or

non-competition employment rights relating to assets divested pursuant

to this Order that Respondent has against such employee.

B. Pending divestiture of the assets to be divested pursuant to

this Order, Respondent shall:

1. Take such actions as are necessary to prevent the destruction,

removal, wasting, deterioration or impairment of the assets to be

divested pursuant to this Order, except for ordinary wear and tear; and

2. Maintain research and development of the assets required to be

divested by this Order, at the levels planned by either Hoechst or MMD

for such assets as of June 1, 1995.

C. Hoechst shall maintain the physical assets, if any exist,

necessary to manufacture Trental, Beraprost, mesalamine and

rifampin, until Respondent's obligations pursuant to Paragraphs III,

IV, V, VI and VII of this Order have been fulfilled. The maintenance of

physical assets described in this subparagraph shall not exceed two (2)

years following divestitures pursuant to Paragraphs III, IV and V of

this Order.

D. Respondent shall obtain from each Acquirer a certification of

the Acquirer's good faith intention to obtain in an expeditious manner

all necessary FDA approvals to manufacture and sell in the United

States the assets to be divested pursuant to this Order and a

commitment by the Acquirer to use reasonable diligence to continue to

research and develop the assets to be divested pursuant to this Order

for sale in the United States.

VII

It is further ordered That:

A. If Respondent fulfills its obligations pursuant to this Order by

divesting assets relating to a product for which the FDA has issued

either approval of a NDA or an ANDA (hereinafter Divested Product),

Respondent shall execute an Agreement (hereinafter Divestiture

Agreement) with the Acquirer of such Divested Product.

B. Each Divestiture Agreement shall include the following and

Respondent shall commit to satisfy the following:

1. Respondent shall Contract Manufacture and deliver to the

Acquirer in a timely manner the requirements of the Acquirer for the

Divested Product at Respondent's or MMD's Cost for a period not to

exceed five (5) years from the date the Divestiture Agreement is

approved, or six (6) months after the date the Acquirer obtains all

necessary FDA approvals to manufacture the Divested Product for sale in

the United States, whichever is earlier.

2. Respondent shall commence delivery of the Divested Product to

the Acquirer within two (2) months from the date the Commission

approves the Acquirer and the Divestiture Agreement.

3. After Respondent commences delivery of the Divested Product to

the Acquirer pursuant to Paragraph VII.B.2 of this Order, all inventory

of the Divested Product produced by Respondent for the U.S. market at

the facility that produced such Divested Product, regardless of the

date of its

[[Page 49613]]

production, may be sold by Respondent only to the Acquirer.

4. Respondent shall make representations and warranties to the

Acquirer that the Divested Product Contract Manufactured by Respondent

for the Acquirer meets the FDA approved specifications therefor and is

not adulterated or misbranded within the meaning of the Food, Drug and

Cosmetic Act, 21 U.S.C. 321, et seq. Respondent 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 Divested Product Contract

Manufactured by Respondent to meet FDA specifications. This obligation

shall be contingent upon the Acquirer giving Respondent prompt,

adequate notice of such claim, cooperating fully in the defense of such

claim, and permitting Respondent 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 Respondent 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

Respondent to the Acquirer.

5. During the term of Contract Manufacturing, upon reasonable

request by the Acquirer, Respondent shall make available to the trustee

appointed pursuant to Paragraph VIII.A. of this Order all records kept

in the normal course of business that relate to the cost of

manufacturing the Divested Product.

VIII

It is further ordered That:

A. Within forty-five (45) days of the date this Order becomes

final, the Commission shall appoint a trustee to ensure that Respondent

expeditiously performs its responsibilities required by this Order.

Respondent shall consent to the following terms and conditions

regarding the trustee's powers, duties, authorities, and

responsibilities under this Paragraph:

1. The Commission shall select the trustee, subject to the consent

of Respondent, which consent shall not be unreasonably withheld. If

Respondent has 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 Respondent of the

identity of any proposed trustee, Respondent shall be deemed to have

consented to the selection of the proposed trustee.

2. Within ten (10) days after the appointment of the trustee,

Respondent shall execute a trust agreement that, subject to the prior

approval of the Commission, confers on the trustee all the rights and

powers necessary to permit the trustee to assure Respondent's

compliance with the terms of this Order, including the rights and

powers necessary to divest assets, if the trustee is so directed by the

Commission. As part of the trustee agreement, the trustee shall execute

confidentiality agreement(s) with Respondent.

3. The trustee shall serve until either (a) the Acquirer(s) has

filed a complete application with the FDA for approval to manufacture

and sell a product(s) based on the Trental Assets or the

Beraprost Assets, the Rifampin Assets and the Mesalamine Assets, as

applicable; (b) the trustee determines that the Acquirer(s) has

abandoned its efforts to obtain FDA approval to manufacture and sell a

product(s) based upon the Trental Assets or the Beraprost

Assets, the Rifampin Assets and the Mesalamine Assets, as applicable;

or (c) the trustee determines that the Acquirer(s) has failed to

exercise reasonable diligence in research and development toward

obtaining FDA approval to manufacture and sell a product(s) based upon

the Trental Assets or the Beraprost Assets, the Rifampin

Assets and the Mesalamine Assets, as applicable, which lack of

diligence will have been certified to and accepted by the Commission,

whichever comes first. The trustee's service shall continue for no more

than two (2) years following divestiture of the Trental

Assets or the Beraprost Assets, the Rifampin Assets and the Mesalamine

Assets, as applicable.

4. The trustee shall have full and complete access to the

personnel, books, records, facilities and technical information related

to the Trental Assets or the Beraprost Assets, the Rifampin

Assets and the Mesalamine Assets, 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 the

research and development of and the cost of manufacturing

Trental or Beraprost, mesalamine and rifampin. Respondent

shall develop such financial or other information as the trustee may

request and shall cooperate with the trustee. Respondent shall take no

action to interfere with or impede the trustee's accomplishment of his

or her responsibilities pursuant to this Order.

5. The trustee shall serve, without bond or other security, at the

cost and expense of Respondent, on such reasonable and customary terms

and conditions as the Commission may set. The trustee shall have

authority to employ, at the cost and expense of Respondent, 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 expenses

incurred. The Commission shall approve the account of the trustee,

including fees for his or her services.

6. Respondent 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.

7. 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 VIII.A. of this Order.

8. The Commission 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 requirements of this Order.

9. The trustee shall report in writing to Respondent and the

Commission every one hundred and eighty (180) days concerning the

trustee's obligations pursuant to this Paragraph VIII.

B. Respondent shall comply with all reasonable directives of the

trustee regarding Respondent's obligations to comply with this Order.

C. The trustee may require Respondent to manufacture Beraprost for

use by the Acquirer in conducting clinical trials or other actions as

required by the FDA if:

1. the Acquirer has depleted its inventory of Beraprost acquired

pursuant to the divestiture;

2. the Acquirer has a need to conduct further trials or studies

prior to submission of an application to the FDA to manufacture and

sell a product based on the Beraprost Assets; and

3. despite good faith efforts to establish its own manufacturing

capability for Beraprost, the Acquirer has not succeeded in doing so as

of the time Beraprost is needed for such

[[Page 49614]]

clinical trials or other actions as required by the FDA.

The trustee shall determine reasonable compensation for Respondent,

based upon the costs of manufacture for such production.

IX

It is further ordered That:

A. If Respondent has not divested, absolutely and in good faith and

with the Commission's prior approval, (1) either the Trental

Assets or the Beraprost Assets; (2) the Mesalamine Assets; and (3) the

Rifampin Assets, within the time required by Paragraphs III.A., IV.A.,

and V.A. of this Order, the Commission may direct the trustee appointed

pursuant to Paragraph VIII of this Order to accomplish any divestiture

required pursuant to this Order. Neither the decision of the Commission

to direct the trustee nor the decision of the Commission not to direct

the trustee to divest the assets required to be divested 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 section 5(l) of the Federal Trade Commission Act, or any

other statute enforced by the Commission, for any failure by the

Respondent to comply with this Order. Respondent shall consent to the

following terms and conditions regarding the trustee's powers, duties,

authorities, and responsibilities under this Paragraph:

B. If the trustee is directed under Subparagraph A. of this

Paragraph to divest any assets, Respondent shall consent to the

following terms and conditions regarding the trustee's powers, duties,

authority, and responsibilities:

1. The Commission shall extend the authority and responsibilities

of the trustee appointed under Paragraph VIII of this Order to include

divesting any assets required to be divested by this Order that have

not been divested.

2. Subject to the prior approval of the Commission, the trustee

shall have the exclusive power and authority to divest any assets

required to be divested pursuant to this Order that have not been

divested.

3. Within ten (10) days after the extension of the trustee's

authority and responsibilities, Respondent shall amend the existing

trust agreement in a manner 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 rights and powers necessary to permit the

trustee to effect the divestitures required by this Order.

4. The trustee shall have twelve (12) months from the date the

Commission approves the extension of the trustee's authorities and

responsibilities as described in Paragraph IX.B.3 to accomplish the

divestiture(s), 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(s) or believes that

divestiture(s) 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; 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 the assets to be divested by the trustee, 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 the research and development of, and the cost of

manufacturing, Trental, Beraprost, mesalamine and rifampin.

Respondent shall develop such financial or other information as the

trustee may request and shall cooperate with the trustee. Respondent

shall take no action to interfere with or impede the trustee's

accomplishment of the divestiture. Any delays in divestiture caused by

Respondent shall extend the time for divestiture under this Paragraph

in an amount equal to the delay, as determined by the Commission or,

for a 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 Respondent's absolute and

unconditional obligation to divest at no minimum price; to assure that

Respondent enters into Divestiture Agreement(s) that comply with the

provisions of Paragraph VII; to assure that Respondent and the

Acquirer(s) comply with the remaining provisions of this Order. The

divestitures and the Divestiture Agreement(s) shall be made in the

manner set forth in Paragraphs III, IV, V, VI and VII of this Order;

provided, however, that if the trustee receives bona fide offers from

more than one acquiring entity for any of the assets to be divested

pursuant to this Order, and if the Commission determines to approve

more than one such acquiring entity for any of the assets to be

divested pursuant to this Order, the trustee shall divest to the

acquiring entity selected by Respondent from among those approved by

the Commission.

7. The trustee shall serve, without bond or other security, at the

cost and expense of Respondent, on such reasonable and customary terms

and conditions as the Commission may set. The trustee shall have

authority to employ, at the cost and expense of Respondent, 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 Respondent.

The trustee's compensation shall be based at least in significant part

on a commission arrangement contingent on the trustee's divesting the

assets to be divested.

8. Respondent 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 VIII.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 divestitures required by this Order.

11. The trustee shall report in writing to Respondent and the

Commission every sixty (60) days concerning the trustee's efforts to

accomplish the divestiture(s) required by this Order.

12. If a divestiture application filed pursuant to Paragraph III.A.

is pending before the Commission, and Respondent petitions the

Commission to modify this Order based on the conditions in Paragraph

III.C., then the Commission shall not approve the divestiture

application until it rules on the petition to modify.

[[Page 49615]]

X

It is further ordered That, for the purpose of determining or

securing compliance with this Order, Respondent shall permit any 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 Respondent, relating to any matters contained in this

Order; and

B. Upon five (5) days' notice to Respondent, and without restraint

or interference from Respondent, to interview officers, directors, or

employees of Respondent, who may have counsel present regarding such

matters.

XI

It is further ordered That, within sixty (60) days after the date

this Order becomes final and every sixty days (60) days thereafter

until Respondent has fully complied with the provisions of Paragraphs

II, III, IV, V, VI and VII of this Order, Respondent shall submit to

the Commission a verified written report setting forth in detail the

manner and form in which it intends to comply, is complying, and has

complied with this Order. Respondent shall include in its 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, V, VI and VII of this Order, including a description of all

substantive contacts or negotiations for accomplishing the divestiture

and the identity of all parties contacted. Respondent shall include in

its compliance reports copies of all written communications to and from

such parties, all internal memoranda, and all reports and

recommendations concerning divestiture.

XII

It is further ordered That Respondent shall notify the Commission

at least thirty (30) days prior to any proposed change in Respondent

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 of this

Order.

Analysis of Proposed Consent Order To Aid Public Comment

The Federal Trade Commission (``Commission'') has accepted, subject

to final approval, an agreement containing a proposed Consent Order

(``Order'') from Hoechst AG (``Hoechst''), which remedies the

anticompetitive effects of Hoechst's merger with Marion Merrell Dow

Inc. (``MMD''). The proposed order requires Hoechst to divest assets

and undertake certain actions to restore competition in four separate

markets: (1) Once-a-day diltiazem, (2) drugs for the treatment of

intermittent claudication, (3) oral dosage forms of mesalamine, and $4)

rifampin.

The proposed 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 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.

On June 28, 1995, Hoechst merged with Marion Merrell Dow, which was

formerly 71% owned by The Dow Chemical Company. Hoechst was permitted

to complete the merger prior to the conclusion of the Commission's

investigation under the terms of a Hold Separate Agreement, which

provided that Marion Merrell Dow would be operated separately from

Hoechst until the conclusion of the investigation. As a further

condition to the Commission allowing Hoechst to consummate the merger,

Hoechst agreed to accept the terms of the proposed Order if after the

conclusion of its investigation, the Commission determined that the

proposed Order was necessary.

The proposed complaint alleges that the merger violates section 7

of the Clayton Act, as amended, 15 U.S.C. 18, and section 5 of the FTC

Act, as amended, 15 U.S.C. 45, in four markets in the United States:

(1) The research, development, manufacture and sale of once-a-day

diltiazem; (2) the research, development, manufacture and sale of drugs

for the treatment of intermittent claudication; (3) the research,

development, manufacture and sale of oral dosage forms of mesalamine;

and (4) the research, development, manufacture and sale of rifampin.

The proposed Order would remedy the alleged violations. First, in

the market for once-a-day diltiazem the proposed Order facilitates

effective competition in the once-a-day diltiazem market. MMD markets

the leading once-a-day diltiazem product, Cardizem CD, which

is used to treat hypertension and angina. In 1993, Hoechst and MMD

began the negotiations that culminated in the merger of the two

companies. At the same time, Hoechst and Biovail Corporation

International (``Biovail'') were developing, Tiazac, a once-

a-day diltiazem product intended to compete directly with MMD's

Cardizem CD. The Hoechst-MMD merger negotiations affected

Hoechst's incentives to develop Tiazac as an independent

competitor to Cardizem CD, delaying and impeding entry of

Tiazac into the market. Just before the merger was announced,

Hoechst returned its rights to Tiazac. However, this

purported ``fix-it-first'' failed to remedy the anticompetitive effects

resulting from the merger.

Under the proposed Order, Hoechst is required, within seven days of

the date the Order becomes final, to provide Biovail with a letter of

access to the toxicology data necessary to secure additional Food and

Drug Administration (``FDA'') approvals for Tiazac. In

addition, the proposed Order requires Hoechst to return any

confidential information obtained from Biovail in the course of their

relationship, to refrain from using this information, to dismiss a

patent infringement lawsuit filed by MMD relating to Tiazac,

and to withdraw a Citizen Petition filed with the FDA by MMD relating

to Tiazac. These provisions will remedy the loss of

competition that resulted from the merger.

Second, in the market for drugs for the treatment of intermittent

claudication, Hoechst markets Trental, the only drug

currently approved by the FDA for the treatment of this disease, which

is painful leg cramping as a result of arteriosclerosis. MMD was

developing Beraprost, one of only a few drugs in development for the

treatment of intermittent claudication. Thus, the merger eliminates

significant potential competition between Trental and

Beraprost. The proposed Order would remedy the alleged violation by

requiring Hoechst to divest either Trental or Beraprost.

Hoechst must accomplish the divestiture to a Commission-approved

acquirer within nine months.

Third, in the market for oral dosage forms of mesalamine, MMD

markets Pentasa, one of two oral forms of mesalamine

available for the treatment of the gastrointestinal diseases of

ulcerative colitis and Crohn's Disease. Hoechst was one of only a few

firms developing a generic formulation of mesalamine. Therefore, the

merger eliminates significant potential competition between these two

products. The proposed Order requires Hoechst, within nine months, to

divest either Pentasa or the generic formulation in

development to a Commission-approved acquirer.

[[Page 49616]]

Fourth, in the market for rifampin, which is used to treat

tuberculosis, MMD markets Rifadin. Hoechst was one of only a

few firms developing a generic formulation of rifampin. Thus, the

merger eliminates significant potential competition between these two

products. The proposed Order requires Hoechst, within nine months, to

divest either Rifadin or the generic formulation of rifampin

in development, to a Commission-approved acquirer.

The proposed Order also provides for the appointment of a trustee

to assure that Hoechst appropriately completes the required

divestitures. If Hoechst fails to divest any of the products within

nine months, then the trustee's authority may be extended to include

responsibility for accomplishing the required divestitures. The Order

also requires Hoechst to provide technical assistance and advice to

assist the purchaser(s) in obtaining FDA approval to manufacture and

sell the divested products.

Under the provisions of the Order, Hoechst is also required to

provide to 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 Hoechst

has completed the required divestitures. The Order also requires

Hoechst to notify the Commission at least thirty (30) days prior to any

change in the structure of Hoechst resulting in the emergence of a

successor.

The purpose of this analysis is to facilitate 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. 95-23797 Filed 9-25-95; 8:45 am]

BILLING CODE 6750-01-P