Zeneca Group PLC.; Analysis to Aid Public Comment

FEDERAL TRADE COMMISSION

[File No. 9910089]

Zeneca Group PLC.; Analysis to Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed consent agreement.

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SUMMARY: The consent agreement in this matter settles alleged

violations of federal law prohibiting unfair or deceptive acts or

practices or unfair methods of competition. The attached Analysis to

Aid Public Comment describes both the allegations in the draft

complaint that accompanies the consent agreement and the terms of the

consent order--embodied in the consent agreement--that would settle

these allegations.

DATES: Comments must be received on or before June 1, 1999.

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

Room 159, 600 Pennsylvania Avenue, NW, Washington, DC 20580.

FOR FURTHER INFORMATION CONTACT: Steven Berstein or David Inglefield,

FTC/S-2308, 601 Pennsylvania Avenue, NW, Washington, DC 20580, (202)

326-2423 or (202) 326-2637.

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 above-captioned 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. The following Analysis to Aid Public

Comment describes the terms of the consent agreement, and the

allegations in the complaint. An electronic copy of the full text of

the consent agreement package can be obtained from the FTC Home Page

(for March 25, 1999), on the World Wide Web, at ``http://www.ftc.gov/

os/actions97.htm.'' A paper copy can be obtained from the FTC Public

Reference Room, Room H-130, 600 Pennsylvania Avenue, NW, Washington, DC

20580, either in person or by calling (202) 326-3627.

Public comment is invited. Comments should be directed to: FTC/

Office of the Secretary, Room 159, 600 Pennsylvania Avenue, NW,

Washington, DC 20580 Two paper copies of each comment should be filed,

and should be accompanied, if possible, by a 3\1/2\ inch diskette

containing an electronic copy of the comment. 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).

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

from Respondent Zeneca Group PLC (``Zeneca''), which is designed to

remedy the anticompetitive effects resulting from the merger of Zeneca

and Astra AB (``Astra''). Under the terms of the agreement, Respondent

will be required, among other things, to transfer and surrender all of

Zeneca's rights and assets relating to levobupivacaine, a long-acting

local anesthetic, to Chiroscience Group plc (``Chiroscience''), the

developer of levobupivacaine.

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

proposed Consent Order and the comments received, and will decide

whether it should withdraw from the proposed Consent Order or make

final the proposed Order.

Pursuant to a December 9, 1998, Merger Agreement and Plan of

Merger, Zeneca agreed to acquire 100 percent of all issued shares of

Astra stock for approximately $30.5 billion. Upon completion of the

merger, Zeneca will be renamed AstraZeneca. The proposed Complaint

alleges that the merger, if consummated, would violate section 7 of the

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

Trade Commission Act, as amended, 15 U.S.C. 45, in the U.S. market for

long-acting local anesthetics.

Long-acting local anesthetics are pharmaceutical products used to

relieve pain during the course of surgical or other medical procedures

by blocking pain impulses from reaching the central nervous system.

Long-acting local anesthetics have an effective duration of up to six

to seven hours, and allow patients to remain awake and conscious

throughout the medical procedure.

[[Page 15167]]

The U.S. market for long-acting local anesthetics is highly

concentrated, with a pre-acquisition HHI of 6,682. Astra is the leading

supplier of long-acting local anesthetics in the United States and

worldwide, and is one of only two companies (along with Abbott

Laboratories) with Food and Drug Administration (''FDA'') approval for

the manufacture and sale of long-acting local anesthetics in the United

States. While Zeneca does not currently sell long-acting local

anesthetics, it had entered into an agreement with Chiroscience to

market and assist in the development of levobupivacaine (known

commercially as Chirocaine), a new long-acting local anesthetic being

developed by Chiroscience. Thus, through this agreement with

Chiroscience, Zeneca is an actual potential competitor in the U.S.

market for long-acting local anesthetics.

The impending introduction of levobupivacaine in 1999 was expected

to result in increased competition in the U.S. market for long-acting

local anesthetics, leading to lower prices and potential improvements

in product safety. The proposed merger of Zeneca and Astra would

eliminate this significant source of new competition and leave the

long-acting local anesthetic market highly concentrated for the

foreseeable future.

It is unlikely that this lost competition would have been replaced

by new competitors due to the substantial barriers to entry that exist

in the U.S. market for long-acting local anesthetics. A new entrant

into this market would need to undertake the difficult, expensive and

time-consuming process of researching and developing a new product,

obtaining FDA approval and gaining customer acceptance. Because of the

difficulty of accomplishing these tasks, new entry into this market,

other than Zeneca's and Chiroscience's imminent introduction of

levobupivacaine, would not be timely, likely or sufficient to deter or

counteract the anticompetitive effects resulting from the merger.

The proposed Consent Order effectively remedies the merger's

anticompetitive effects in the U.S. market for long-acting local

anesthetics by requiring Zeneca to transfer and surrender all of its

rights and assets relating to levobupivacaine to Chiroscience, the

developer of levobupivacaine, no later than ten (10) business days

after the date the Commission accepts the Consent Agreement for public

comment. Under the terms of the Consent Order, Zeneca is required to

transfer and surrender these assets pursuant to an agreement entered

into between Chiroscience and Zeneca that is defined in the Agreement

Containing Consent Order as the ``Chiroscience/Zeneca Agreement.'' The

assets to be transferred to Chiroscience consist principally of

intellectual property and know-how and include, among other things, all

of the applicable patents, trademarks, copyrights, technical

information and market research relating to lovobupivacaine. In

addition, the Consent Order requires Zeneca to comply with the other

provisions of the Chiroscience/Zeneca Agreement. That agreement

establishes, among other things, a trasitional period during which

Zeneca is required to continue carrying our certain ongoing activities

relating to the commercialization of levobupivacaine, including

manufacturing, regulatory, clinical, development and marketing

activities. The Chiroscience/Zeneca Agreement also contains provisions

that will protect the confidentiality of any informaiton provided by

Chiroscience to Zeneca in the past, or during the transitional period.

In addition, the Consent Order requires Zeneca to divest its

approximately 3% investment interest in Chiroscience within four (4)

months of the expiration of the Agreement Amending Share Subscription

Agreement, as defined in the proposed Consent Order. Pending

divestiture of this investment interest, the Order prohibits Zeneca

from, directly or indirectly: (i) Exercising dominion or control over,

or otherwise seeking to influence, the management, direction or

supervision of the business of Chiroscience; (ii) seeking or obtaining

representation on the Board of Directors of Chiroscience; (iii)

exercising any voting rights attached to the investment interest; (iv)

seeking or obtaining access to any confidential or proprietary

informaiton of Chiroscience; or (v) taking any action or failing to

take any action in a manner that would be incompatible with the status

of Zeneca as a passive investor in Chiroscience.

The proposed Consent Order also requires Zeneca to provide the

Commission a report of compliance with the Order within thirty (30)

days following the date the Order becomes final and every ninety (90)

days thereafter until its has complied with the terms of the Order.

Finally, the Order allows the Commission to appoint an Interim Trustee

to facilitate an orderly transfer of the levobupivacaine assets and to

ensure that Zeneca carries out its obligations under the Consent

Agreement and the Chiroscience/Zeneca Agreement.

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.

By direction of the Commission.

Donald S. Clark,

Secretary.

[FR Doc. 99-7752 Filed 3-29-99; 8:45 am]

BILLING CODE 6750-01-M