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The Federal Trade Commission has accepted a settlement agreement from The Upjohn Company and Pharmacia Aktiebolag that is designed to preserve competition in the market for drugs for the treatment of colorectal cancer. The settlement would resolve antitrust allegations in connection with the parties' proposed $13.9 billion merger. Colorectal cancer is the second most common form of cancer. About 443,000 Americans are diagnosed with the disease every year and, for those patients whose cancer recurs, only 15 percent survive. The product at issue -- topoisomerase I inhibitors -- will be used in conjunction with surgery and other treatments and is expected to increase that survival rate. The FTC said that Upjohn and Pharmacia are two of only a very small number of companies in the advanced stages of developing topoisomerase I inhibitors for colorectal cancer treatment. Pharmacia is formulating its topoisomerase I inhibitor product under a license from the National Cancer Institute, which developed the compound. Sales of all topoisomerase I inhibitors are expected to exceed $100 million by the year 2002.

Upjohn is based in Kalamazoo, Michigan, and Pharmacia is headquartered in Stockholm, Sweden. The merged firm will be the fifth largest pharmaceutical company in the United States.

According to the FTC complaint detailing the charges in this case, Upjohn's product,"CPT-11," is expected to be the first topoisomerase I inhibitor to be approved for colorectal cancer treatment in the United States. Pharmacia plans to seek Food and Drug Administration approval within the next few years for its product,"9-AC." Because other companies would require years of scientific research and significant expenditures to reach this stage of development, the FTC alleged, it is not likely that other firms would constrain the merged firm from terminating development of one of the products or raising prices. Thus, the FTC charged, the merger would violate antitrust laws both by preventing the development of one of the two firms' topoisomerase I inhibitors as a colorectal cancer drug and by eliminating any future price competition between the two firms' topoisomerase I inhibitors once they are approved to treat colorectal cancer in humans.

The proposed consent agreement signed by the firms to settle these charges, announced today for public comment, would require the merged firm to divest Pharmacia's 9-AC assets to a Commission-approved buyer to ensure that research and development will continue. The National Cancer Institute must approve the buyer as well. The settlement would require the divestiture to be completed within 12 months. Further, if the divestiture is not completed within 12 months, the Commission would be permitted to appoint a trustee to divest the 9-AC assets, including an exclusive license to 9-AC in the United States as well as an exclusive or nonexclusive license to market 9-AC in the rest of the world. In addition, the consent agreement would require the merged firm to provide technical assistance and advice to the acquirer toward continuing the research and development of 9-AC.

Under an interim agreement the respondents have signed, they must continue performing and funding the planned research and development of 9-AC pending divestiture.

The settlement also contains various reporting provisions designed to assist the FTC in monitoring compliance.

The Commission vote to accept the proposed consent agreement for public comment was 4-0, with Commissioner Mary L Azcuenaga not participating. It will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000.

Copies of the complaint, proposed consent agreement, and an analysis of the agreement to assist the public in commenting are available from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 202-326- 2502.

(FTC File No. 951 0140)