The Upjohn Company and Pharmacia Aktiebolag; Consent Agreement With Analysis to Aid Public Comment

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.

-----------------------------------------------------------------------

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