Sanofi Required to Divest Arixtra, Campto Studies, and Royalty Rights to Sepracors Estorra
Under the terms of a consent agreement announced today, the Federal Trade Commission would allow France’s Sanofi-Synthélabo’s (Sanofi) $64 billion acquisition of Aventis, provided the companies divest certain assets and royalty rights in the overlapping markets for factor Xa inhibitors used as anticoagulants, cytotoxic drugs for the treatment of colorectal cancer, and prescription drugs used to treat insomnia. The consent agreement will be subject to public comment for 30 days.
Specifically, the order requires that Sanofi: 1) divest its Arixtra factor Xa inhibitor and related assets to GlaxoSmithKline, plc (Glaxo); 2) divest to Pfizer, Inc. (Pfizer) key clinical studies for the Campto® cytotoxic colorectal cancer treatment that Aventis is currently conducting, along with certain U.S. patents and other assets related to areas where Pfizer markets Camptosar®; and 3) divest Aventis’ contractual rights to the Estorra insomnia drug either to Sepracor, Inc. or another Commission-approved buyer within 90 days. Sanofi’s acquisition of Aventis, which was announced in January of this year, will result in the third-largest pharmaceutical company in the world, behind Pfizer and Glaxo.
“In a merger of this size and complexity, there are likely to be significant overlaps that must be addressed to ensure that consumers are protected from potentially anticompetitive effects,” said Susan A. Creighton, Director of the FTC’s Bureau of Competition. “This order adequately addresses each of the areas of concern identified by the Commission, and will preserve competition in the markets for these important pharmaceutic products.”
Parties to the Transaction
Headquartered in Paris, France, Sanofi was created in 1999 by the merger of French pharmaceutical companies Sanofi and Synthélabo. Sanofi ranks among the world’s top 20
drug manufacturers, with 2003 sales of more than $10.1 billion. Its core therapeutic
areas are Cardiovascular/Thrombosis, Central Nervous System, Oncology, and Internal
Medicine. The company has an active research and development program, with 56 compounds currently under development, 25 of which are in either Phase II or III clinical trials.
Aventis, headquartered in Strasbourg, France, was created by the 1999 merger of Hoechst AG’s and Rhone-Poulenc’s pharmaceutical and agricultural businesses. It ranks seventh among the world’s pharmaceutical companies, with 2003 sales of more than $21 billion. Aventis’s core therapeutic areas are Respiratory/Allergy, Cardiology/Thrombosis, Oncology, Central Nervous System, and Metabolic/Diabetes. In 2003, Aventis invested more than $3.5 billion in research and development, and has more than 80 compounds currently in various stages of clinical trials.
The FTC’s Complaint/Relevant Markets
According to the FTC’s complaint, Sanofi’s acquisition of Aventis as originally proposed would be anticompetitive and in violation of Section 5 of the FTC Act and Section 7 of the Clayton Act. The relevant markets in which the Commission has identified potentially anticompetitive overlaps are detailed below.
Factor Xa Inhibitors. Factor Xa inhibitors are anticoagulant products used to treat and prevent venous thromboembolism and other conditions related to excessive blood clot formation. Annual U.S. sales of factor Xa inhibitors totaled $1.35 billion in 2003. Aventis’ market-leading Lovenox® currently accounts for more than 90 percent of factor Xa inhibitor sales in the United States. Sanofi markets Arixtra, a more recent entrant whose competitive significance is likely to expand in the future. According to the FTC, while there are other factor Xa inhibitors available in the United States, they have not been successful competitors, and the proposed acquisition would eliminate actual, direct, and substantial competition between Sanofi and Aventis in this market.
Cytotoxic Colorectal Cancer Drugs. Cytotoxic drugs are used to treat colorectal cancer, the second-leading cause of cancer related deaths in the United States, with approximately 147,000 new cases diagnosed each year. The U.S. market for such drug therapies is about $1 billion per year. According to the FTC, the two major cytotoxic treatments currently available to treat colorectal cancer are Sanofi’s Eloxatin® and Camptosar® (irinotecan) which was developed by Yakult Honsha (Yakult) and is marketed in the U.S. by Pfizer. Combined, the two products account for more than 80 percent of the U.S. market for such drugs.
While Aventis does not market cytotoxic colorectal cancer drugs in the U.S., there are significant entanglements between Aventis and Pfizer that affect the U.S. market, and these entanglements – which include Aventis conducting key clinical trials for Pfizer – allow Aventis to impact the Camptosar business. Specifically, Aventis licenses irinotecan (under the brand name Campto) from Yakult for sale in other territories. As such, the FTC contends, the proposed acquisition creates an overlap in the U.S. market between Sanofi’s Eloxatin and Aventis’s contractual ties to Camptosar, and would lead to significant anticompetitive harm in the U.S. market for the development and sale of these drugs.
Prescription Insomnia Treatments. More than 50 million people in the United States suffer from insomnia, the perception or complaint of inadequate sleep, with the U.S. market insomnia treatments totaling $1.65 billion in 2003 sales and expected to increase to $3.36 billion
by 2010. According to the FTC, the acquisition would create an overlap between Sanofi’s Ambien® and Aventis’s royalty rights to a drug called Estorra, which is currently being developed by Sepracor. Estorra likely will become a significant competitor of Ambien after Estorra’s expected launch in 2005. While Aventis does not currently market a prescription drug in the United States, there are financial and informational entanglements between Aventis and Sepracor related to Estorra. Therefore, the FTC contends, the proposed acquisition would create anticompetitive effects in this market by diluting competition between Sanofi and Sepracor.
In each of these highly concentrated markets, the FTC contends that entry by a third party would be difficult, time-consuming, and costly, negating its ability to alleviate the alleged anticompetitive impacts of the acquisition. In addition, there are no efficiencies that would effectively remedy the anticompetitive impacts that will result in these markets.
The Consent Order
The consent order requires Sanofi to divest certain products and royalty rights in the relevant overlapping markets to alleviate the anticompetitive impacts of its acquisition of Aventis. The terms of the order relevant to each of these markets are detailed below.
Factor Xa Inhibitors. To ensure that competition in the market for factor Xa inhibitors is maintained post-acquisition, the order contains seven key requirements: 1) that Sanofi divest Arixtra to Glaxo; 2) that Sanofi transfer the manufacturing facilities it uses to produce Arixtra in its final form to Glaxo; 3) that Sanofi contract manufacture the active ingredient and certain intermediate step ingredients until Glaxo obtains the necessary regulatory approvals and supply sources to make these products itself; 4) that Sanofi help Glaxo complete three clinical trials; 5) that Sanofi provide incentives for key personnel to continue in their jobs until the divestiture is completed; 6) that after the assets are divested, Sanofi enable Glaxo to hire employees with experience related to Arixtra; and 7) that Sanofi work to maintain the confidentiality of relevant information related to Arixtra.
Cytotoxic Colorectal Cancer Drugs. To address the potentially anticompetitive overlaps in this market, the order requires the parties to: 1) divest to Pfizer key clinical studies for Campto that Aventis is currently conducting, along with certain U.S. patents and other assets related to areas where Pfizer markets Camptosar; 2) provide Pfizer with the ability to enter into employment contracts with certain workers involved in these key clinical trials; 3) deliver to Pfizer all confidential business information related to Camptosar that Aventis owns; and 4) commit to maintain the assets to be divested in a way that preserves their integrity, viability, and value until the divestiture is completed.
Prescription Insomnia Treatments. The order requires the parties to divest their contractual rights to Estorra within 90 days of the order becoming final. It further requires that the assets be divested in a manner approved by the Commission, either to Sepracor or to a third party approved by the FTC.
Interim Monitor Provision
Finally, the consent agreement contains a provision under which Francis J. Civille will be appointed as interim monitor to oversee the asset transfers and to ensure Sanofi and Aventis comply with the provisions of the consent agreement. The monitor will ensure that the FTC remains informed about the status of the proposed divestitures and asset transfers.
The Commission vote to accept the consent order and place a copy on the public record was 4-0-1, with Commissioner Pamela Jones Harbour recused. The order will be subject to public comment for 30 days, until August 26, 2004, after which the Commission will decide whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 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 $11,000.
The European Commission (EC) also reviewed this proposed merger. Throughout the course of their respective investigations, the FTC and the EC Competition Directorate’s staff consulted and cooperated with each other under the terms of their 1991 cooperation agreement and 2002 Best Practices on Cooperation in Merger Investigations.
Copies of the complaint, consent order, and an analysis to aid public comment are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: firstname.lastname@example.org; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.
(FTC File No.: 041-0031)
Copies of the closing letters are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: email@example.com; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.
(FTC File No. 041-0031)
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