001 0059

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of
Pfizer Inc., a corporation;
and
Warner-Lambert Company a corporation.

Docket No. C-3957

COMPLAINT

The Federal Trade Commission ("Commission"), having reason to believe that Respondent Pfizer Inc. ("Pfizer"), a corporation subject to the jurisdiction of the Commission, has agreed to merge with Respondent Warner-Lambert Company ("Warner"), a corporation subject to the jurisdiction of the Commission, in violation of 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, and it appearing to the Commission that a proceeding in respect thereof would be in the public interest, hereby issues its Complaint, stating its charges as follows:

I. DEFINITIONS

  1. "Forest" means Forest Laboratories, Inc., a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware, with its offices and principal place of business located at 909 Third Avenue, New York, New York 10022.
  2. "Merger Agreement" means the Agreement and Plan of Merger among Pfizer, through its wholly-owned subsidiary, Seminole Acquisition Sub Corp., and Warner, dated February 6, 2000.
  3. "Commission" means the Federal Trade Commission.
  4. "FDA" means the United States Food and Drug Administration.
  5. "OTC pediculicides" means all over-the-counter products manufactured, developed, or sold for the treatment of lice infestation.
  6. "SSRI" means selective serotonin reuptake inhibitor.
  7. "SNRI" means serotonin norepinephrine reuptake inhibitor.
  8. "SSRI/SNRI drugs for the treatment of depression" means the SSRI/SNRI pharmaceutical preparations approved by the FDA for the treatment of depression.
  9. "Drugs for the treatment of Alzheimer's disease" means any acetylcholinesterase inhibitor pharmaceutical preparation approved by the FDA for the treatment of Alzheimer's disease.
  10. "EGFr-tk inhibitors for the treatment of cancer" means any small molecule pharmaceutical preparation which inhibits the tyrosine kinase activity of the epidermal growth factor receptor in development or approved by the FDA for the treatment of cancer.
  11. "Celexa" means any pharmaceutical preparation containing the drug substance citalopram HBr.
  12. "Zoloft" means any pharmaceutical preparation containing the drug substance sertraline hydrochloride.
  13. "Cognex" means any pharmaceutical preparation containing the drug substance tacrine hydrochloride.
  14. "Aricept" means any pharmaceutical preparation containing the drug substance donepezil hydrochloride.

II. RESPONDENTS

  1. Respondent Pfizer is a corporation organized, existing and doing business under and by virtue of the laws of the state of Delaware, with its office and principal place of business located at 235 East 42nd Street, New York, New York 10017. Pfizer, among other things, is engaged in the research, development, manufacturing and sale of human pharmaceutical products, including OTC pediculicides, SSRI/SNRI drugs for the treatment of depression, drugs for the treatment of Alzheimer's disease, and EGFr-tk inhibitors for the treatment of cancer.
  2. Respondent Warner is a corporation organized, existing and doing business under and by virtue of the laws of the state of Delaware, with its office and principal place of business located at 201 Tabor Road, Morris Plains, New Jersey 07950. Warner, among other things, is engaged in the research, development, manufacturing and sale of human pharmaceutical products, including OTC pediculicides, SSRI/SNRI drugs for the treatment of depression, drugs for the treatment of Alzheimer's disease, and EGFr-tk inhibitors for the treatment of cancer.
  3. Respondents are, and at all times relevant herein have been, engaged in commerce, as "commerce" is defined in Section 1 of the Clayton Act as amended, 15 U.S.C. 12, and are corporations whose business is in, or affects commerce, as "commerce" is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

III. THE PROPOSED MERGER

  1. On February 6, 2000, Pfizer and Warner entered into a Merger Agreement whereby Pfizer agreed to acquire, through its wholly-owned subsidiary, Seminole Acquisition Sub Corp., 100 percent of all issued shares of Warner for approximately $90 billion ("Merger"). Upon completion of the transaction the merged entity will be known as Pfizer.

IV. THE RELEVANT MARKETS

  1. For the purposes of this Complaint, the relevant lines of commerce in which to analyze the effects of the Merger are:
  1. the research, development, manufacture and sale of OTC pediculicides;
  2. the research, development, manufacture and sale of SSRI/SNRI drugs for the treatment of depression;
  3. the research, development, manufacture and sale of drugs for the treatment of Alzheimer's disease; and
  4. the research, development, manufacture and sale of EGFr-tk inhibitors for the treatment of cancer.
  1. For the purposes of this Complaint, the United States is the relevant geographic area in which to analyze the effects of the Merger in the relevant lines of commerce.

V. THE STRUCTURE OF THE MARKETS

  1. The market for OTC pediculicides is highly concentrated as measured by the Herfindahl-Hirschman Index ("HHI"). Pfizer and Warner are the two leading suppliers of OTC pediculicides in the United States. Pfizer and Warner each have approximately 30 percent of the market, and the pre-merger HHI is 2223. As a result of the Merger, Pfizer would have a 60 percent share of the market, and the post-merger HHI would be 4024.
  2. The market for SSRI/SNRI drugs for the treatment of depression is concentrated as measured by the HHI. Pfizer's Zoloft has 23 percent of the market, while Celexa, which Warner co-promotes with Forest, has a 10 percent market share, and the pre-merger HHI is 1834. As a result of the Merger, Pfizer/Forest would have a 33 percent share of the market, and the post-merger HHI would be 2294.
  3. The market for drugs for the treatment of Alzheimer's disease is highly concentrated as measured by the HHI. Pfizer's Aricept has over 98 percent of the market, while Warner's Cognex has about one percent market share, and the pre-merger HHI is 9801. As a result of the Merger, Pfizer would obtain a monopoly position and post-merger HHI would be 10,000.
  4. In the market for EGFr-tk inhibitors for the treatment of cancer, the FDA has yet to approve any product. If approved by the FDA, these products would offer a significant improvement in the treatment of solid tumor cancers. The market for the research, development, manufacture and sale of EGFr-tk inhibitors for the treatment of cancer is highly concentrated; currently only four companies, including Pfizer and Warner, have EGFr-tk inhibitors in human clinical testing. The proposed Merger would reduce the number of companies to three.

VI. ENTRY CONDITIONS

  1. Entry into the market for OTC pediculicides is unlikely and would not occur in a timely manner to deter or counteract the adverse competitive effects described in Paragraph 29, because, among other things, the time and expense necessary to develop a product capable of successful entry are disproportionate to the likely available sales opportunity.
  2. Entry into the market for SSRI/SNRI drugs for the treatment of depression will not occur in a timely manner to deter or counteract the adverse competitive effects described in Paragraph 29, because of, among other things, the time and expense necessary to develop an FDA-approved antidepressant.
  3. Entry into the market for drugs for the treatment of Alzheimer's disease will not occur in a timely manner to deter or counteract the adverse competitive effects described in Paragraph 29, because of, among other things, the time and expense necessary to develop an FDA-approved Alzheimer's disease treatment.
  4. Entry into the market for the research, development, manufacture and sale of EGFr-tk inhibitors for the treatment of cancer will not occur in a timely manner to deter or counteract the adverse competitive effects described in Paragraph 29, because of, among other things, the time and expense necessary to develop an FDA-approved cancer treatment.

VII. EFFECTS OF THE MERGER

  1. The effects of the Merger, if consummated, may be substantially to lessen competition and to tend to create a monopoly in the relevant markets in violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. 45, in the following ways, among others:
  1. by increasing the ability of the merged entity to unilaterally increase prices, and reduce innovation and promotional activities, in the market for OTC pediculicides;
  2. by increasing the likelihood of coordinated interaction in the market for SSRI/SNRI drugs for the treatment of depression;
  3. by increasing the likelihood that the merged entity would unilaterally increase prices and reduce innovation in the market for drugs for the treatment of Alzheimer's disease; and
  4. by increasing the likelihood that the merged entity would unilaterally delay, deter or eliminate competing programs to research and develop EGFr-tk inhibitors for the treatment of cancer, potentially reducing the number of drugs reaching the market and thus resulting in higher prices for consumers.

VIII. VIOLATIONS CHARGED

  1. The Merger Agreement described in Paragraph 18 constitutes a violation of Section 5 of the FTC Act, as amended, 15 U.S.C. 45.
  2. The Merger described in Paragraph 18, if consummated, would constitute a violation of Section 7 of the Clayton Act, as amended, 15 U.S.C. 18, and Section 5 of the FTC Act, as amended, 15 U.S.C. 45.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this nineteenth day of June, 2000, issues its Complaint against said Respondents.

By the Commission.
Donald S. Clark
Secretary
SEAL: