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



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FEDERAL TRADE COMMISSION

[File No. 951-0140]


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

AGENCY: Federal Trade Commission.

ACTION: Consent agreement.

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SUMMARY: In settlement of alleged violations of federal law prohibiting 
unfair acts and practices and unfair methods of competition, this 
consent agreement, accepted subject to final Commission approval, would 
require The Upjohn Company and Pharmacia Aktiebolag to divest 
Pharmacia's assets in ``9-AC,'' a topoisomerase I inhibitor drug for 
the treatment of colorectal cancer, to a Commission-approved buyer who 
will ensure that research and development will continue in competition 
with the merged company's product ``CPT-11,'' a topoisomerase I 
inhibitor drug developed by Upjohn.

DATES: Comments must be received on or before January 8, 1996.

ADDRESSES: Comments should be directed to: FTC/Office of the Secretary, 
Room 159, 6th St. and Pennsylvania Avenue NW., Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:
Ann Malester, Bureau of Competition, Federal Trade Commission, S-2308, 
6th Street and Pennsylvania Avenue NW., Washington, DC 20580, (202) 
326-2682.

Claudia Higgins, Bureau of Competition, Federal Trade Commission, S-
2308, 6th Street & Pennsylvania Ave., N.W., Washington, DC 20580, (202) 
326-2682.

SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal 
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of 
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby 
given that the following consent agreement containing a consent order 
to cease and desist, having been filed with and accepted, subject to 
final approval, by the Commission, has been placed on the public record 
for a period of sixty (60) days. Public comment is invited. Such 
comments or views will be considered by the Commission and will be 
available for inspection and copying at its principal office in 
accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of 
Practice (16 CFR 4.9(b)(6)(ii)).

    In the matter of The Upjohn Company, a corporation, and 
Pharmacia Aktiebolag, a corporation.

File No. 951-0140

Agreement Containing Consent Order

    The Federal Trade Commission (``Commission''), having initiated an 
investigation of the merger of The Upjohn Company (``Upjohn'') and 
Pharmacia Aktiebolag (``Pharmacia''), and it now appearing that Upjohn 
and Pharmacia, hereinafter sometimes referred to as ``Proposed 
Respondents,'' are willing to enter into an Agreement Containing 
Consent Order to (i) divest certain assets, (ii) cease and desist from 
certain acts, and (iii) provide for certain other relief:
    It is hereby agreed by and between Proposed Respondents, by their 
duly authorized officers and their attorneys, and counsel for the 
Commission that:
    1. Proposed Respondent Upjohn is a corporation organized, existing, 
and doing business under and by virtue of the laws of the State of 
Delaware, with its principal place of business located at 7000 Portage 
Road, Kalamazoo, Michigan 49001.
    2. Proposed Respondent Pharmacia is a corporation organized, 
existing, and doing business under and by virtue of 

[[Page 56154]]
the laws of Sweden, with its principal place of business located at 
Frosundaviks alle 15, S-171 97 Stockholm, Sweden.
    3. Proposed Respondents admit all the jurisdictional facts set 
forth in the draft of complaint.
    4. Proposed Respondents waive:
    (a) Any further procedural steps;
    (b) The requirement that the Commission's decision contain a 
statement of findings of fact and conclusions of law;
    (c) All rights to seek judicial review or otherwise to challenge or 
contest the validity of the Order entered pursuant to this Agreement; 
and
    (d) Any claim under the Equal Access to Justice Act.
    5. This Agreement shall not become part of the public record of the 
proceeding unless and until it is accepted by the Commission. If this 
Agreement is accepted by the Commission it, together with the draft of 
complaint contemplated thereby, will be placed on the public record for 
a period of sixty (60) days and information in respect thereto publicly 
released. The Commission thereafter may either withdraw its acceptance 
of this Agreement and so notify Proposed Respondents, in which event it 
will take such action as it may consider appropriate, or issue and 
serve its complaint (in such form as the circumstances may require) and 
decision, in disposition of the proceeding.
    6. This Agreement is for settlement purposes only and does not 
constitute an admission by Proposed Respondents that the law has been 
violated as alleged in the draft of complaint or that the facts as 
alleged in the draft complaint, other than jurisdictional facts, are 
true.
    7. This Agreement contemplates that, if it is accepted by the 
Commission, and if such acceptance is not subsequently withdrawn by the 
Commission pursuant to the provisions of Section 2.34 of the 
Commission's Rules, the Commission may, without further notice to 
Proposed Respondents, (1) issue its complaint corresponding in form and 
substance with the draft of complaint and its decision containing the 
following Order to divest and to cease and desist in disposition of the 
proceeding, and (2) make information public with respect thereto. When 
so entered, the Order shall have the same force and effect and may be 
altered, modified, or set aside in the same manner and within the same 
time provided by statute for other orders. The Order shall become final 
upon service. Delivery by the United States Postal Service of the 
complaint and decision containing the agreed-to Order to Pharmacia's 
counsel, Steven Sunshine, Esquire, of Shearman & Sterling at 801 
Pennsylvania Avenue, NW., Washington, DC 20004-2604, and Upjohn's 
counsel, Stuart Meiklejohn, Esquire, of Sullivan & Cromwell at 125 
Broad Street, New York, New York 10004, shall constitute service. 
Proposed Respondents waive any rights they may have to any other manner 
of service. The complaint may be used in construing the terms of the 
Order, and no agreement, understanding, representation, or 
interpretation not contained in the Order or the Agreement may be used 
to vary or contradict the terms of the Order.
    8. Proposed Respondents have read the proposed complaint and Order 
contemplated hereby. Proposed Respondents understand that once the 
Order has been issued, they will be required to file one or more 
compliance reports showing they have fully complied with the Order. 
Proposed Respondents further understand that they may be liable for 
civil penalties in the amount provided by law for each violation of the 
Order after it becomes final. By signing this Agreement, Proposed 
Respondents represent that the relief contemplated by this Agreement 
can be accomplished.

Order

I

    It is ordered that, as used in this Order, the following 
definitions shall apply:
    A. Upjohn means The Upjohn Company, its directors, officers, 
employees, agents and representatives, successors and assigns; its 
subsidiaries, divisions, groups and affiliates controlled by Upjohn; 
and the respective directors, officers, employees, agents and 
representatives, and the respective successors and assigns of each.
    B. Pharmacia means Pharmacia Aktiebolag, its directors, officers, 
employees, agents and representatives, successors and assigns; its 
subsidiaries, divisions, groups and affiliates controlled by Pharmacia; 
and the respective directors, officers, employees, agents and 
representatives, and the respective successors and assigns of each.
    C. Respondents means Upjohn and Pharmacia.
    D. Commission means The Federal Trade Commission.
    E. Merger means the combination of Upjohn and Pharmacia pursuant to 
a Combination Agreement dated August 20, 1995.
    G. 9-AC or 9-amino-20 (S)-camptothecin means the semisynthetic 
compound which refers to the compound 1-pyrano [3',4':6,7] indolizino 
[1,2-b] quinoline-3,14 (4H,12H)-dione, 10-amino-4-ethyl-4-hydrozy-(S) 
in respect of its therapeutic indication for the treatment of cancer.
    H. CPT-11 or irinotecan hydrochloride trihydrate means the chemical 
compound which refers to the compound (+)-(4S)-4, 11-diethyl-4-hydrozy-
9-[(4-piperidinopiperidino) carbonyl-oxyl]-1H-pyrano [3',4':6,7] 
indolizino [1,2-b] quinoline-3,14 (4H, 12H)-dione hydrochloride 
trihydrate.
    I. Pharmacia's 9-AC Assets means an exclusive license to all 
Pharmacia's assets relating to the research and development of 9-AC for 
sale in the United States that are not part of Pharmacia's physical 
facilities or other tangible assets. ``Pharmacia's 9-AC Assets'' 
includes, but is not limited to, all formulations, patents, trade 
secrets, technology, know-how, specifications, designs, drawings, 
processes, testing and quality control data, research data, technical 
information, stored on management information systems (and 
specifications sufficient for the Acquirer to use such information), 
proprietary software used in connection with Pharmacia's 9-AC, and all 
data, contractual rights, materials and information relating to 
obtaining FDA approvals and other government or regulatory approvals 
for the United States for Pharmacia's 9-AC. ``Pharmacia's 9-AC Assets'' 
also includes the assignment of all rights of Pharmacia to NCI patents, 
trade secrets, technology, know-how, specifications, designs, drawings, 
processes, testing and quality control data, research materials, 
technical information, stored on management information systems (and 
specifications sufficient for the Acquirer to use such information), 
proprietary software used in connection with Pharmacia's 9-AC and all 
data, contractual rights, materials and information relating to 
obtaining FDA approvals and other government or regulatory approvals 
for the United States for Pharmacai 9-AC.
    J. Acquirer means the entity to whom the Respondents shall divest 
Pharmacia's 9-AC Assets pursuant to this Order.
    K. Cost means Pharmacia's actual per unit cost of manufacturing 
Pharmacia's 9-AC, which may be adjusted once annually to reflect any 
increases in Pharmacia's actual cost, provided, however, that for any 
year, the total rate of such adjustment with respect to all components 
of cost other than material and labor shall not exceed the rate of 
increases in the Consumer Price Index for such year.

[[Page 56155]]


II

    It is further ordered that:
    A. Respondents shall divest, absolutely and in good faith, within 
twelve (12) months of the date this Order becomes final, Pharmacia's 9-
AC Assets.
    B. Respondents shall divest Pharmacia's 9-AC Assets only to an 
Acquirer that receives the prior approval of the Commission and only in 
a manner that receives the prior approval of the Commission. 
Respondents shall obtain all necessary approvals and releases for such 
divestiture from NCI as a condition of the Commission's prior approval. 
The purpose of the divestiture of Pharmacia's 9-AC Assets is to ensure 
continued research and development of Pharmacia's 9-AC, in the same 
manner in which Pharmacia's 9-AC would be researched and developed 
absent the proposed Merger, and to remedy the lessening of competition 
resulting from the proposed Merger as alleged ion the Commission's 
Complaint.
    C. At the Acquirer's option, Respondents shall enter into a supply 
agreement with the Acquirer. Such agreement, if entered into, shall be 
provided to the Commission as part of Respondents' application to the 
Commission for approval of the divestiture. This supply agreement shall 
include the following and Respondents shall commit to satisfy the 
following:
    1. Respondents shall manufacture and deliver to the Acquirer in a 
timely manner the Acquirer's requirements for 9-AC at Respondents' Cost 
for a period not to exceed three (3) years from the date the 
divestiture is approved. This supply agreement can be cancelled at the 
request of the Acquirer.
    2. Respondents shall make representations and warranties to the 
Acquirer that the 9-AC manufactured by Respondents for the Acquirer 
meets the United States Food and Drug Administration approved 
specifications therefor and are not adulterated or misbranded within 
the meaning of the Food, Drug and Cosmetic Act, 21 U.S.C. Sec. 321, et 
seq. Respondents shall agree to indemnify, defend and hold the Acquirer 
harmless from any and all suits, claims, actions, demands, liabilities, 
expenses or losses alleged to result from the failure of the 9-AC 
manufactured for the Acquirer by Respondents to meet FDA 
specifications. This obligation shall be contingent upon the Acquirer 
giving Respondents prompt, adequate notice of such claim, cooperating 
fully in the defense of such claim, and permitting Respondents to 
assume the sole control of all phases of the defense and/or settlement 
of such claim, including the selection of counsel. This obligation 
shall not require Respondents to be liable for any negligent act or 
omission of the Acquirer or for any representations and warranties, 
express or implied, made by the Acquirer that exceed the 
representations and warranties made by Respondents to the Acquirer.
    3. During the term of the supply agreement, upon reasonable request 
by the Acquirer, Respondents shall make available to the Acquirer all 
records kept in the normal course of business that relate to the cost 
of manufacturing 9-AC.
    D. The time period for divestiture pursuant to Paragraph II. of 
this Order shall be tolled if and when Respondents:
    1. Provide to the Commission objective evidence, including, but not 
limited to, results of clinical trials indicating that, based on 9-AC's 
or CPT-11's medical profile, and through no fault of Respondents, 
either Pharmacia's 9-AC or Upjohn's CPT-11 is not medically safe or 
efficacious for use in the treatment of colorectal cancer; and
    2. Petition the Commission to modify this Order, pursuant to 
section 5(b) of the FTC Act and Section 2.51 of the Commission's Rules 
of Practice, based on the circumstances described in Subparagraph 
II.D.1. of this Order.
    This tolling of the time period for divestiture shall end when the 
Commission rules on Respondents' petition to modify this Order.

III

    It is further ordered that:
    A. If Upjohn and Pharmacia have not divested, absolutely and in 
good faith and with the Commission's prior approval, Pharmacia's 9-AC 
Assets within the time required by Paragraph II.A., of this Order, the 
Commission may appoint a trustee to divest, at Pharmacia's option, 
either (1) an exclusive United States license and a nonexclusive 
worldwide (excluding the United States) license in perpetuity, and in 
good faith, to all Pharmacia's assets relating to the research and 
development of 9-AC for sale throughout the world or (2) an exclusive 
worldwide license, in perpetuity, and in good faith, to all Pharmacia's 
assets relating to the research and development of 9-AC for sale 
throughout the world. The trustee shall obtain all necessary approvals 
and releases for the applicable license from NCI. Neither the decision 
of the Commission to direct the trustee nor the decision of the 
Commission not to direct the trustee to divest a license shall preclude 
the Commission or the Attorney General from seeking civil penalties or 
any other relief available to it, including a court-appointed trustee, 
pursuant to Sec. 5(l) of the Federal Trade Commission Act, or any other 
statute enforced by the Commission, for any failure by the Respondents 
to comply with this Order.
    B. If the trustee is directed under Subparagraph A. of this 
Paragraph to divest, at Phamacia's option, either (1) an exclusive 
United States license and a nonexclusive worldwide (excluding the 
United States) license or (2) an exclusive worldwide license, 
Respondents shall consent to the following terms and conditions 
regarding the trustee's powers, duties authority, and responsibilities:
    1. The Commission shall select the trustee, subject to the consent 
of Respondents which consent shall not be unreasonably withheld. If 
Respondents have not opposed, in writing, including the reasons for 
opposing, the selection of any proposed trustee within ten (10) days 
after notice by the staff of the Commission to Respondents of the 
identity of any proposed trustee, Respondents shall be deemed to have 
consented to the selection of the proposed trustee.
    2. Subject to the prior approval of the Commission, the trustee 
shall have the exclusive power and authority to divest, at Pharmacia's 
option, either (1) an exclusive United States license and a 
nonexclusive worldwide (excluding the United States) license or (2) an 
exclusive worldwide license.
    3. Within ten (10) days after the appointment of the trustee, 
Respondents shall execute a trust agreement that subject to the prior 
approval of the Commission, and in the case of a court-appointed 
trustee, of the court, transfers to the trustee all the rights and 
powers necessary to permit the trustee to assure Respondents' 
compliance with the terms of this Order. As part of the trustee 
agreement, the trustee shall execute confidentiality agreement(s) with 
Respondents.
    4. The trustee shall have twelve (12) months from the date the 
Commission approves the appointment of the trustee to accomplish the 
divestiture, which shall be subject to the prior approval of the 
Commission. If, however, at the end of the twelve month period, the 
trustee has submitted a plan of divestiture or believes that 
divestiture can be achieved within a reasonable time, the divestiture 
period may be extended by the Commission, or, in the case of a court-
appointed trustee, by the court; 

[[Page 56156]]
provided, however, the Commission may extend this period only two (2) 
times.
    5. The trustee shall have full and complete access to the 
personnel, books, records, facilities and technical information related 
to Pharmacia's 9-AC, or to any other relevant information, as the 
trustee may reasonably request, including but not limited to all 
records kept in the normal course of business that relate to research 
and development of, and the cost of manufacturing, Pharmacia's 9-AC. 
Respondents shall develop such financial or other information as the 
trustee may request and shall cooperate with the trustee. Respondents 
shall take no action to interfere with or impede the trustee's 
accomplishment of the divestiture. Any delays in divestiture caused by 
Respondents shall extend the time for divestiture under this Paragraph 
in an amount equal to the delay, as determined by the Commission or, 
for court-appointed trustee, by the court.
    6. The trustee shall use his or her best efforts to negotiate the 
most favorable price and terms available in each contract that is 
submitted to the Commission, subject to Respondents' absolute and 
unconditional obligation to divest at no minimum price. The divestiture 
shall be made in the manner and to the Acquirer as set out in 
Paragraphs II and III of this order, as appropriate; provided, however, 
if the trustee receives bona fide offers from more than one acquiring 
entity, and if the Commission determines to approve more than one such 
acquiring entity, the trustee shall divest to the acquiring entity 
selected by Respondents from among those approved by the Commission. If 
requested by the trustee or Acquirer, Respondents shall provide the 
Acquirer with the assistance required by Paragraph IV. of this Order.
    7. The trustee shall serve, without bond or other security, at the 
cost and expense of Respondents, on such reasonable and customary terms 
and conditions as the Commission may set. The trustee shall have the 
authority to employ, at the cost and expense of Respondents, such 
consultants, accountants, attorneys and other representatives and 
assistants as are reasonably necessary to carry out the trustee's 
duties and responsibilities. The trustee shall account for all monies 
derived from the sale and all expenses incurred. After approval by the 
Commission and, in the case of a court-appointed trustee, by the court, 
of the account of the trustee, including fees for his or her services, 
all remaining monies shall be paid at the direction of the Respondents. 
The trustee's compensation shall be based at least in significant part 
on a Commission arrangement based on a percentage of the selling price 
of the assets divested.
    8. Respondents shall indemnify the trustee and hold the trustee 
harmless against any losses, claims, damages, liabilities, or expenses 
arising out of, or in connection with, the performance of the trustee's 
duties, including all reasonable fees of counsel and other expenses 
incurred in connection with the preparations for, or defense of, any 
claim whether or not resulting in any liability, except to the extent 
that such liabilities, losses, damages, claims, or expenses result from 
misfeasance, gross negligence, willful or wanton acts, or bad faith by 
the trustee.
    9. If the trustee ceases to act or fails to act diligently, a 
substitute trustee shall be appointed in the same manner as provided in 
Paragraph III.A. of this Order.
    10. The Commission or, in the case of a court-appointed trustee, 
the court may on its own initiative or at the request of the trustee 
issue such additional orders or directions as may be necessary or 
appropriate to accomplish the divestiture required by this Order.
    11. The trustee shall report in writing to Respondents and the 
Commission every sixty (60) days concerning the trustee's efforts to 
accomplish divestiture.
    12. if a divestiture application filed pursuant to this Paragraph 
III. is pending before the Commission, and Respondents petition the 
Commission to modify this Order based on the conditions in Paragraph 
II.D., then the Commission shall not approve the divestiture 
application until it rules on the petition to modify.

IV

    It is further ordered that:
    A. Upon reasonable notice and request from the Acquirer to 
Respondents, Respondents shall provide information, technical 
assistance and advice to the Acquirer with respect to Pharmacia's 9-AC 
Assets such that the Acquirer will be capable of continuing the current 
research and development. Such assistance shall include reasonable 
consultation with knowledgeable employees of Respondents and training 
at the Acquirer's facility for a period of time sufficient to satisfy 
the Acquirer's management that its personnel are adequately 
knowledgeable about Pharmacia's 9-AC Assets. however, Respondents shall 
not be required to continue providing such assistance for more than one 
(1) year after divestiture of Pharmacia's 9-AC Assets. Respondents may 
require reimbursement from the Acquirer for all of their own direct 
costs incurred in providing the services required by this Paragraph. 
Direct costs, as used in this Paragraph, means all actual costs 
incurred exclusive of overhead costs.
    B. Upon reasonable notice and request from the Acquirer, 
Respondents shall provide information, technical assistance and advice 
sufficient to assist the Acquirer in obtaining all necessary FDA 
approvals to manufacture 9-AC for use in clinical trials in the United 
States. Upon reasonable notice and request from the Acquirer, 
Respondents shall also provide consultation with knowledgeable 
employees of Respondents and training at the Acquirer's facility for a 
period of time, not to exceed one (1) year, sufficient to satisfy the 
Acquirer's management that its personnel are adequately trained in the 
manufacture of 9-AC. Respondents may require reimbursement from the 
Acquirer for all of their own direct costs incurred in providing the 
services required by this Paragraph. Direct costs, as used in this 
Paragraph, means all actual costs incurred exclusive of overhead costs.

V

    It is further ordered that Respondents shall comply with all terms 
of the Interim Agreement, attached to this order and made a part hereof 
as Appendix I. Said Interim Agreement shall continue in effect until 
the provisions in Paragraphs II., III. and IV. of this Order are 
complied with or until such other time as is stated in said Interim 
Agreement.

VI

    It is further ordered that if, following approval of the 
divestiture required by Paragraph II. of this Order, disputes arise 
between Respondents and the Acquirer regarding: (1) fulfillment of the 
terms of the supply agreement described in Paragraph II.C of this 
Order; (2) the continuation of the clinical trials for the testing of 
9-AC described in Attachment A to Appendix I of this Order; or (3) the 
continuation of the defense of existing patents and the pursuit of the 
filing of new patents relating to Pharmacia's 9-AC, the Acquirer may 
elect to cause the issue to be submitted to outside, independent, 
binding arbitration in the District of Columbia. In the event the 
Acquirer so elects, Respondents shall agree to submit to such 
arbitration, and the issue shall be settled by arbitration in 
accordance with the Commercial Arbitration Rules of the American 
Arbitration Association (``AAA'') and AAA's Supplementary Procedures 
for 

[[Page 56157]]
International Commercial Arbitration or any successor rules thereto. 
Judgment upon the award rendered by the arbitrator(s) may be entered in 
any court having jurisdiction thereof. The decision of the arbitrator, 
after confirmation by the court pursuant to 9 U.S.C. 9, or succeeding 
statutory provisions, shall be final and binding upon the parties, and 
the failure of the Respondents thereafter to abide by the arbitrator's 
award shall be a violation of this Order.

VII

    It is further ordered that:
    A. Within sixty (60) days after the date this Order becomes final 
and every sixty (60) days thereafter until Respondents have fully 
complied with the provisions of Paragraphs II.A. and II.B. or III. of 
this Order, Respondents shall submit to the Commission a verified 
written report setting forth in detail the manner and form in which 
they intend to comply, are complying, and have complied with this 
Order. Respondents shall include in their compliance reports, among 
other things that are required from time to time, a full description of 
the efforts being made to comply with Paragraphs II., III., IV. and V. 
of this Order, including a description of all substantive contacts or 
negotiations for accomplishing the divestiture and the identity of all 
parties contacted. Respondents shall include in their compliance 
reports copies of all written communications to and from such parties, 
all internal memoranda, and all reports and recommendations concerning 
divestiture.
    B. One (1) year from the date this Order becomes final, annually on 
the anniversary of the date this Order becomes final, and at all other 
times as the Commission may require, until Respondents have fully 
complied with Paragraphs II.C., IV. and V., Respondents shall file a 
verified written report with the Commission setting forth in detail the 
manner and form in which they have complied and are complying with 
Paragraphs II.C., IV. and V. of this Order.

VIII

    It is further ordered that, for the purpose of determining or 
securing compliance with this Order, Respondents shall permit nay duly 
authorized representatives of the Commission:
    A. Access, during office hours and in the presence of counsel, to 
inspect and copy all books, ledgers, accounts, correspondence, 
memoranda and other records and documents in the possession or under 
the control of Respondents, relating to any matters contained in this 
Order; and
    B. Upon five (5) days' notice to Respondents, and without restraint 
or interference from Respondents, to interview officers, directors, or 
employees of Respondents, who may have counsel present regarding such 
matters.

IX

    It is further ordered that Respondents shall notify the Commission 
at least thirty (30) days prior to any proposed change in Respondents 
such as dissolution, assignment, sale resulting in the emergence of a 
successor, or the creation or dissolution of subsidiaries, or any other 
change that may affect compliance obligations arising out this Order.

Appendix I

    In the Matter of the Upjohn Company, a corporation, and 
Pharmacia Aktiebolag, a corporation.

File No. 951-0140

Interim Agreement To Maintain Research and Development

    This Interim Agreement to Maintain Research and Development 
(``Interim Agreement'') is by and among Pharmacia Aktiebolag 
(``Pharmacia''), a corporation organized, existing, and doing business 
under and by virtue of the laws of Sweden, with its office and 
principal place of business at Frosundaviks alle 15, S-171 97 
Stockholm, Sweden, The Upjohn Company (``Upjohn''), a corporation 
organized, existing, and doing business under and by virtue of the laws 
of the State of Delaware, with its principal place of business located 
at 7000 Portage Road, Kalamazoo, Michigan 49001 and the Federal Trade 
Commission (``the Commission''), an independent agency of the United 
States Government, established under the Federal Trade Commission Act 
of 1914, 15 U.S.C. 41, et seq. (collectively, the ``Parties'').

Premises

    Whereas, on August 20, 1995, Pharmacia entered into a Combination 
Agreement with Upjohn providing for the combination of Pharmacia and 
Upjohn (hereinafter ``Merger''); and
    Whereas, Pharmacia is involved in, among other things, the research 
and development of 9-Amino-20(S)-camptothecin (``9-AC''), a 
topoisomerase I inhibitor; and
    Whereas, Upjohn is involved in, among other things, the research 
and development of Camptosar (``CPT-11''), a topoisomerase I inhibitor; 
and
    Whereas, the Commission is now investigating the Merger to 
determine whether it would violate any of the statutes enforced by the 
Commission; and
    Whereas, if the Commission accepts the Agreement Containing Consent 
Order (``Consent Order''), the Commission must place it on the public 
record for a period of at least (60) days and subsequently may either 
withdraw such acceptance or issue and serve its Complaint and decision 
in disposition of the proceeding pursuant to the provisions of Section 
2.34 of the Commission's Rules; and
    Whereas, the Commission is concerned that if an understanding is 
not reached, preserving the ongoing and future research of Pharmacia's 
9-AC, as defined in Paragraph I of the Consent Order, during the period 
prior to the final acceptance of the Consent Order by the Commission 
(after the 60-day public comment period) and until the divestiture 
required by Paragraphs II or III of the Consent Order has been 
accompanied may not be possible and divestiture resulting from any 
proceeding challenging the legality of the Merger might not be 
possible, or might be less than an effective remedy; and
    Whereas, the purpose of the Interim Agreement and the Consent Order 
is:
    1. To ensure continued research and development of Pharmacia's 9-Ac 
in the same manner in which Pharmacia's 9-AC would be researched and 
developed absent the Merger; and
    2. To preserve the Commission's ability to remedy any 
anticompetitive effects of the Merger; and
    Whereas, Pharmacia's and Upjohn's entering into this Interim 
Agreement shall in no way be construed as an admission by Pharmacia and 
Upjohn that the Merger is illegal; and
    Whereas, Pharmacia and Upjohn understand that no act or transaction 
contemplated by this Interim Agreement shall be deemed immune or exempt 
from the provisions of the antitrust laws or the Federal Trade 
Commission Act by reason of anything contained in this Interim 
Agreement;
    Now, therefore, the Parties agree, upon the understanding that the 
Commission has not yet determined whether the Merger will be 
challenged, and in consideration of the Commission's agreement that, at 
the time it accepts the Consent Order for public comment, it will grant 
early termination of the Hart-Scott-Rodino waiting period, as follows:
    1. Pharmacia and Upjohn agree to execute and be bound by the 
Consent Order.

[[Page 56158]]

    2. Pharmacia agrees that from the date this Interim Agreement is 
accepted until the earliest of the time listed in subparagraphs 2.a.-
2.b., it will comply with the provisions of Paragraph 4 of this Interim 
Agreement:
    a. Three business days after the Commission withdraws its 
acceptance of the Consent Order pursuant to the provisions of Section 
2.34 of the Commission's rules;
    b. The time that the divestiture obligations required by the 
Consent Order are completed.
    3. Pharmacia and Upjohn agree to take such actions as are necessary 
to prevent the destruction, removal, wasting, deterioration or 
impairment of Pharmacia's 9-AC Assets, except for ordinary wear and 
tear.
    4. With respect to the continued research and development of 
Pharmacia's 9-AC, Pharmacia agrees:
    a. To continue to pursue its obligations under the Cooperative 
Research and Development Agreement with the National Cancer Institute 
and the previously determined 9-AC research and development plan, as 
set forth in confidential Attachment A to this Interim Agreement; and
    b. To fund the research and development of Pharmacia's 9-AC at 
levels no less than those contained in the budget for 1995, as set 
forth in confidential Attachment B to this Interim Agreement; and
    c. To use its best efforts to support and defend Pharmacia's rights 
relating to 9-AC in U.S. Patent # 5,106742 dated April 21, 1992 
(Camptothecin Analogs as Potent Inhibitors of Topoisomerase I), U.S. 
Patent # 5,225,404 dated July 6, 1993 (Methods of Treating Colon Tumors 
with Tumor-Inhibiting Camptothecin Compounds), and U.S. Serial # 08/
323081 filed October 14, 1994 (pending patent application for 
Lyophilizate of Lipid Complex of Water Insoluble Camptothecins); and
    d. To use its best efforts to obtain all necessary approvals and 
releases from the National Cancer Institute to accomplish the 
requirements of Paragraphs II and III of the Consent Order; and
    e. Within thirty days of acceptance of this Interim Agreement by 
the Commission, to have available for clinical trials at least 
sufficient inventory of Pharmacia's 9-AC sufficient to supply the 
clinical trials set forth in confidential Attachment A to this Interim 
Agreement that are likely to be initiated through November 1996.
    5. Upjohn agrees to allow Pharmacia to fulfill its obligations 
under paragraphs 2 and 4 of this Interim Agreement, without restraint 
or interference from Upjohn.
    6. Should the Commission seek in any proceeding to compel Pharmacia 
to divest itself of the Pharmacia 9-AC Assets, as provided in the 
Consent Order, or seek any other equitable relief relating to 
Pharmacia's 9-AC Assets, Pharmacia and Upjohn shall not raise any 
objection based on the expiration of the applicable Hart-Scott-Rodino 
Antitrust Improvements Act waiting period or the fact that the 
Commission has permitted the Merger. Pharmacia and Upjohn shall also 
waive all rights to contest the validity of this Interim Agreement.
    7. Should the Commission, pursuant to Paragraph II.D of the Consent 
Order, act on a petition from Pharmacia and Upjohn to modify the 
Consent Order based on the circumstances described in Subparagraph 
II.D.1, this Interim Agreement shall be automatically modified to 
reflect any changes made by the Commission.
    8. For the purpose of determining or securing compliance with this 
Interim Agreement, subject to any legally recognized privilege, and 
upon written request with reasonable notice to Pharmacia and Upjohn 
made to its General Counsel, Pharmacia and Upjohn shall permit any duly 
authorized representative or representatives of the Commission:
    a. Access during the office hours of Pharmacia and Upjohn and in 
the presence of counsel to inspect and copy all books, ledgers, 
accounts, correspondent, memoranda, and other records and documents in 
the possession or under the control of Pharmacia and Upjohn relating to 
compliance with this Interim Agreement; and
    b. Upon five (5) days' notice to Pharmacia and Upjohn, and without 
restraint or interference from it, to interview officers or employees 
of Pharmacia and Upjohn, who may have counsel present, regarding any 
such matters.
    9. This Interim Agreement shall not be binding until approved by 
the Commission.

Analysis of Proposed Consent Order To Aid Public Comment

    The Federal Trade Commission (``Commission'') has accepted 
provisionally an agreement containing a proposed Consent Order from The 
Upjohn Company (``Upjohn'') and Pharmacia Aktiebolag (``Pharmacia''), 
under which Upjohn and Pharmacia will be required to divest U.S. assets 
relating to the research and development of a chemotherapeutic drug for 
the treatment of colorectal cancer (``Pharmacia's 9-AC Assets'') to a 
Commission approved purchaser. In addition, the Commission has accepted 
an Interim Agreement to Maintain Research and Development, under which 
Pharmacia and Upjohn will be required to continue fulfilling the 
previously established 9-AC research and development plan and its 
obligations to the National Cancer Institute.
    The proposed Consent Order has been placed on the public record for 
sixty (60) days for reception of comments by interested persons. 
Comments received during this period will become part of the public 
record. After sixty (60) days, the Commission will again review the 
agreement and the comments received and will decide whether it should 
withdraw from the agreement or make final the agreement's proposed 
Order.
    Pursuant to an agreement dated August 20, 1995, Upjohn and 
Pharmacia propose to merge their respective businesses in a transaction 
valued at approximately $13.9 billion. Based on 1994 sales, the 
combined company would rank among the top ten pharmaceutical 
manufacturers worldwide, and it would be the fifth largest drug company 
in the United States.
    The proposed complaint alleges that the merger, if consummated, 
would violate Section 7 of the Clayton Act, as amended, 15 U.S.C. 
Sec. 18, and Section 5 of the Federal Trade Commission Act, as amended, 
15 U.S.C. Sec. 45, in the market for the research, development, 
manufacturer and sale of topoisomerase I inhibitors for the treatment 
of colorectal cancer in the United States. Topoisomerase I inhibitors 
are a specific class of chemotherapeutic drugs that inhibit the 
multiplication of cancer cells inside the body. By curtailing cancer 
cell growth, topoisomerase I inhibitors may aid in the treatment of 
colorectal cancer, a form of cancer that does not respond well to 
currently available chemotherapy agents.
    While no topoisomerase I inhibitor has yet been approved for sale 
in the United States, it is anticipated that sales of all topoisomerase 
I inhibitors for the treatment of colorectal cancer will exceed $100 
million by 2002. Approximately 443,000 people in the United States are 
diagnosed with colorectal cancer each year. For most solid tumors, the 
first method of treatment is surgery, with radiation therapy and 
chemotherapy typically used as adjuncts to the surgery.
    Current protocols for colorectal cancer suggest that patients be 
treated with the chemotherapy agents 5-fluorouracil 

[[Page 56159]]
(``5FU'') and either leucovorin or levamisole. For those patients whose 
cancer recurs, the survival rate is only fifteen percent. Topisomerase 
I inhibitors are expected to increase the rate of survival for 
colorectal cancer patients.
    The proposed Consent Order would remedy the alleged violation by 
replacing the lost competition that would result in the U.S. from the 
merger. Presently, only a very small number of companies worldwide are 
developing topoisomerase I inhibitors. Upjohn has the U.S. rights for 
CPT-11, a topoisomerase I inhibitor developed in Japan by Yakult Honsha 
and Daiichi. Pharmacia has the worldwide rights for 9-AC under a 
Cooperative Research and Development Agreement with the National Cancer 
Institute. Upjohn's and Pharmacia's products may be effective 
treatments for colorectal cancer. Because the information obtained 
during the Commission's investigation about the status of 
pharmaceutical research projects is highly confidential, the Commission 
cannot disclose publicly what, if any, other research projects are 
currently underway on topoisomerase I inhibitors.
    Under the proposed Consent Order, Pharmacia and Upjohn are required 
to divest 9-AC assets relating to the research and development of 9-AC 
for sale in the United States. As a result, two independent 
pharmaceutical companies will continue to research and develop their 
respective topoisomerase I inhibitors in the United States following 
the proposed merger.
    The proposed Order requires that if Upjohn and Pharmacia fail to 
divest the product within 12 months, a trustee will be appointed to 
divest Pharmacia's 9-AC Assets in the U.S. as well as either a 
worldwide exclusive or a nonexclusive worldwide (excluding the U.S.) 
license for 9-AC. The Order also requires Upjohn and Pharmacia to 
provide technical assistance and advice to ensure that the acquirer is 
capable of continuing present research and development and to produce 
9-AC if needed by the Acquirer for its clinical trials.
    An Interim Agreement is incorporated into the proposed Order to 
protect the ongoing research and development of 9-AC. In the Interim 
Agreement, Pharmacia and Upjohn commit to continue the planned research 
and development of 9-AC pending the divestiture required under the 
Order. The Interim Agreement remains in effect until Pharmacia has 
divested its 9-AC Assets pursuant to the Order.
    Under the provisions of the order, Upjohn and Pharmacia are also 
required to provide the Commission a report of compliance with the 
divestiture provisions of the Order within sixty (60) days following 
the date the Order becomes final, and every sixty (60) days thereafter 
until Upjohn and Pharmacia have completed the required divestiture.
    The purpose of this analysis is to facilitate the public comment on 
the proposed Order, and it is not intended to constitute an official 
interpretation of the agreement and proposed Order or to modify in any 
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 95-27552 Filed 11-6-95; 8:45 am]
BILLING CODE 6750-01-M