Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Notices 409

development, manufacture and sale of

products for the treatment of Factor VIII

inhibitors in the United States; and in

the market for the research,

development, manufacture and sale of

fibrin sealant in the United States.

The proposed Order would remedy

the alleged violations. In the market for

the research, development, manufacture

and sale of treatments for Factor VIII

inhibitors in the United States, the

proposed Order requires Baxter to divest

its Autoplex product to a Commission

approved buyer within four months.

Baxter’s Autoplex and Immuno’s FEIBA

are the only FDA-approved activated

prothrombin complex concentrates for

the treatment of patients with

hemophilia A who have developed an

immune system response to their

therapy, known as ‘‘inhibitors’’.

Autoplex and FEIBA act to overcome

these patients’ inhibitors so that they

can be treated effectively. The

acquisition would eliminate the

substantial competition between

Autoplex and FEIBA. The proposed

Consent Agreement would remedy the

loss of competition by requiring Baxter

to divest Autoplex to a Commissionapproved buyer within four months of

the date Baxter signed the Consent

Agreement.

In Europe and Japan, fibrin sealants

are used to control bleeding and

promote wound healing in a wide

variety of surgical procedures, and to

treat burn and trauma victims. Baxter

and Immuno are two of only a few

companies developing fibrin sealant for

sale in the United States, and are likely

to be two of the first companies to

receive FDA approval to do so. The

United States market for an FDAapproved fibrin sealants could be as

large as $400 million per year. The

acquisition would eliminate the

significant on-going competition

between Baxter and Immuno in the

research and development, as well as

future competition in the manufacture

and sale, of fibrin sealant in the United

States. The proposed Order remedies

this loss of competition by requiring

Baxter to license Immuno’s product in

development to a Commission-approved

licensee within four months of the date

Baxter signed the Consent Agreement.

The Order also requires Baxter to

provide to the Commission a report of

compliance with the divestiture and

licensing provisions of the Order within

sixty (60) days following the date the

Order becomes final, and every ninety

(90) days thereafter until Baxter has

completed the divestiture and licensing.

The Order also requires Baxter to notify

the Commission at least thirty (30) days

prior to any change in the structure of

Baxter resulting in the emergence of a

successor.

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.

Benjamin I. Berman,

Acting Secretary.

[FR Doc. 97–4 Filed 1–2–97; 8:45 am]

BILLING CODE 6750–01–P

[File No. 961–0055]

Ciba-Geigy Limited, et al.; Analysis to

Aid Public Comment

AGENCY: Federal Trade Commission.

ACTION: Proposed Consent Agreement.

SUMMARY: In settlement of alleged

violations of federal law prohibiting

unfair or deceptive acts or practices and

unfair methods of competition, this

consent agreement, accepted subject to

final Commission approval, would

permit, among other things, the $63

billion merger of Ciba-Geigy Limited

and Sandoz Ltd., two leading

commercial developers of gene therapy

products, so long as the companies carry

out the divestiture, licensing and certain

other requirements. If the divestiture is

not completed on time, the consent

agreement would permit the

Commission to appoint a trustee to

complete the transaction.

DATES: Comments must be received on

or before March 4, 1997.

ADDRESSES: Comments should be

directed to: FTC/Office of the Secretary,

Room 159, 6th St. and Pa. Ave., N.W.,

Washington, D.C. 20580.

FOR FURTHER INFORMATION CONTACT:

William Baer or George Cary, FTC/H–

374, Washington, D.C. 20580. (202) 326–

2932 or 326–3741.

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 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, on the World Wide Web, at

‘‘http://www.ftc.gov/os/actions/htm.’’ A

paper copy can be obtained from the

FTC Public Reference Room, Room H–

130, Sixth Street and Pennsylvania

Avenue, N.W., Washington, D.C. 20580,

either in person or by calling (202) 326–

3627. 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)).

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 (‘‘Order’’) to

resolve anticompetitive concerns raised

by the proposed merger of Ciba-Geigy

Limited (‘‘Ciba’’) and Sandoz Ltd.

(‘‘Sandoz’’) into a new entity, Novartis

AG (‘‘Novartis’’). The agreement is

between the Commission and Ciba,

Sandoz, and Chiron Corporation

(‘‘Chiron’’). Ciba, which owned 46.5%

of Chiron’s voting stock as of September

30, 1996, participates in the field of

gene therapy through Chiron. Under the

proposed Order, the companies have

agreed to license certain Sandoz and

Chiron gene therapy technologies, to

divest Sandoz’ corn herbicide business,

and to divest Sandoz’ United States and

Canadian flea control business. In

addition, the parties have entered into

an Agreement to Hold Separate

Sandoz’s agricultural chemicals

business, including herbicides and other

pesticides, and Sandoz’s flea control

business until the required divestitures

have been accomplished.

The proposed 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 review the agreement

and the comments received and will

decide whether it should withdraw from

the government or make final the

agreement’s proposed Order.

On March 6, 1996, Ciba and Sandoz

signed a merger agreement providing

that both companies will merge to form

Novartis AG (‘‘Novartis’’). The total

value of the stock involved in the

transaction is in excess of $63 billion.

The merged entity, Novartis, will

control worldwide assets valued at

approximately $80 billion.

The proposed complaint alleges that

the merger violates 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, by lessening

competition or tending to create a
410 Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Notices

monopoly in markets involving three

general areas: (1) gene therapy research

and development; (2) corn herbicides;

and (3) flea control products. According

to the complaint, the merger will

increase the level of concentration and

increase barriers to entry in each of the

relevant markets and eliminate Ciba and

Sandoz as substantial, independent

competitors both for currently marketed

products as well as products that are

under development.

According to the proposed complaint,

entry into the relevant markets would

not be timely, likely, or sufficient in its

magnitude, character, and scope to deter

or counteract anticompetitive effects of

the merger. Regulations by the Food and

Drug Administration (‘‘FDA’’) covering

gene therapy products and systemic flea

control products, and by the

Environmental Protection Agency

(‘‘EPA’’) covering corn herbicides and

externally applied flea control products,

create long lead times for the

introduction of new products.

Additionally, patents and other

intellectual property create large and

potentially insurmountable barriers to

entry.

Gene Therapy Research and

Development

The proposed complaint alleges that

therapy technology and the research and

development of gene therapies

constitute relevant markets in which to

analyze the effects of the proposed

merger. The proposed complaint also

alleges that there are four specific gene

therapy closet to market use retroviral

vectors, the delivery vehicle for genes,

to place an HSV-tk gene into the

cancerous cells and are anticipated to

have sales exceeding $600 million by

2002. HSV-tk gene therapy is also

expected to be used to treat graft versus

host disease, an acute, chronic and

sometimes fatal complication occurring

in a significant percentage of all bone

marrow transplantations. Gene therapy

treatments for hemophilia A are likely

to be used prophylactically for many

sufferers; in cases of trauma, gene

therapy products would likely be used

in combination with recombinant and

purified Factor VIII proteins. Cancer

patients could benefit significantly from

gene therapy for chemoresistance by

providing protection to patients’ blood

systems and allowing higher, more

effective doses of cancer chemotherapy

to be administered. If chemoresistance

gene therapy research is successful,

sales are projected to exceed $1 billion

by 2004.

The complaint alleges that each of the

gene therapy markets is highly

concentrated and that Ciba/Chiron and

Sandoz are two of only a few entities

capable of commercially developing a

broad range of gene therapy products.

Ciba/Chiron and Sandoz control crucial

inputs into the development of gene

therapy products and the merger creates

an unmatchable portfolio of intellectual

property assets that are necessary to

commercialize gene therapy products.

In addition, they both posses the

technological, manufacturing, clinical,

and regulatory expertise and

manufacturing capability to

commercially develop gene therapy

products. A substantial number of other

companies are able to conduct gene

therapy research. Without licenses to

crucial intellectual property held by

Ciba/Chiron and Sandoz, however,

these other researchers would not be

likely to continue development. The

critical intellectual property rights for

gene therapy held by Ciba/Chiron and

Sandoz include a broad patent covering

all ex vivo approaches product markets.

These are the markets for the research,

development, manufacture and sale of:

(1) herpes simplex virus-thymidine

kinase (‘‘HSV-tk’’) gene therapy for the

treatment of cancer; (2) HSV-tk gene

therapy for the treatment of graft versus

host disease; (3) gene therapy for the

treatment of hemophilia A; and (4)

chemoresistance gene therapy. Sandoz

and Ciba/Chiron are two of only a very

small number of entities capable of

commercially developing gene therapy

products. They posses the intellectual

property, the technological,

manufacturing, clinical, and regulatory

expertise, and the manufacturing assets

to commercially develop gene therapy

products.

Gene therapy involves treating

diseases or medical conditions by

modifying genes and then inserting the

modified genes into a patient’s cells.

Patients’ genes may be altered using one

of two broad approaches: ex vivo,

outside the body, for subsequent

administration into the patient; or in

vivo, inside the body, by gene therapy

products that are given directly to the

patients. Gene therapy research today

targets fatal or disabling diseases such

as cancer for which there are no current

effective treatments and for which no

drugs are in advanced development.

While no gene therapy product has

yet been approved by the FDA for

commercial sale, gene therapy

treatments now in clinical trials offer

patients the prospect of significant

medical improvements or cures for

diseases, particularly in oncology,

transplantation and central nervous

system diseases. Gene therapy may be

useful in treating a wide array of

diseases and conditions. Sales of all

gene therapy products are projected to

reach up to $45 billion by 2010.

The first regulatory approvals for

commercial sales of gene therapy

products, expected by the year 2000,

will most likely be in the area of cancer

treatment of brain tumors. Gene therapy

offers brain cancer patients their first

hope of a real cure. The brain cancer

gene therapy products used in gene

therapy and the use of cytokines, a

protein necessary for many ex vivo gene

therapy applications that is used to

increase the number of cells taken from

a patient. The parties also have vital

intellectual property rights in retroviral

vectors, the only delivery vehicle for

gene therapy that has been proven safe

and relatively effective.

The complaint alleges that only two

companies, Ciba/Chiron and Sandoz,

are capable of commercially developing

HSV-tk gene therapy products with

retroviral vectors and are either in

clinical development or near clinical

development to treat cancer and to treat

graft versus host disease. Similarly,

these two companies are the most

advanced of all companies capable of

commercially developing viral vectors

using the Factor VIII gene for the

treatment of hemophilia A and using the

MDR–1 gene and the MRP gene for the

treatment of chemoresistance. In each

instance, Ciba/Chiron and Sandoz are

either in clinical development or near

clinical development for the treatment

of these diseases, are the leading

commercial developers of these gene

therapy technologies and control critical

proprietary intellectual property

portfolios, including patents, patent

applications, and know-how. For

example, with respect to the HSV-tk

gene therapy products, both Ciba/

Chiron and Sandoz control intellectual

property portfolios sufficient to make it

likely that they could market HSV-tk

gene therapy products in competition

with one another. The merger would

eliminate that competition, and because

of the parties’ patent portfolios, it is

extremely unlikely that any other firm

would be able to enter to replace that

lost competition.

The complaint alleges that entry into

the gene therapy markets requires

lengthy FDA approved clinical trials,

data collection and analysis, and

expenditures of significant resources

over may years. No company may reach

advanced stages of development in the

relevant gene therapy markets without:

(1) clinical gene therapy expertise; (2)

scientific research that requires years to

complete; (3) patent rights to all the

necessary proprietary inputs into the

gene therapy product sufficient to

provide the company with reasonable
Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Notices 411

assurances of freedom to operate; and

(4) clinical grade product manufacturing

expertise, regulatory approvals and

capacity to complete clinical

development. The necessary proprietary

inputs may include genes, vectors and

vector manufacturing technology, and

cytokines.

Ciba/Chiron and Sandoz each possess

virtually all of the gene therapy

intellectual property needed to ensure

their ability to independently perform

gene therapy development. Through the

merger, the companies’ alternative

competing gene therapy technologies

will be combined, reducing innovation

competition. That combination changes

the competitive incentives of the

merged entity. It will likely lead to a

reduction in development of gene

therapy products, as the parties combine

their research and development

pipelines and eliminate or slow down

their parallel development projects.

In addition, Novartis, the merged

firm, will have a disincentive to license

intellectual property rights to or

collaborate with other companies as

compared to the pre-merger incentives

of the independent competitors, Ciba/

Chiron and Sandoz. Although Ciba/

Chiron and Sandoz had substantial

individual intellectual property

portfolios pre-merger, they had the

incentive and did act as rival centers

from which others could obtain needed

intellectual property rights. Ciba/Chiron

and Sandoz would grant limited

intellectual property rights to other

developers and researchers in return for

receiving marketing or other valuable

rights back from them. Consequently, as

the complaint alleges, the merger may

heighten barriers to entry by resulting in

one entity holding so extensive a

portfolio of patents and patent

applications, of uncertain breadth and

validity, as to diminish its incentives to

license, thus impeding the ability of

other gene therapy researchers and

developers to continue developing their

products.

To remedy the alleged competitive

harm, the proposed Order provides for

a set of patent licenses to allow other

companies to replace the competition

otherwise lost due to the merger. The

Commission believes that licensing,

rather than divestiture of assets, is

sufficient because access to certain key

intellectual property rights held by the

merged firm is a crucial component of

successful commercialization of many

potential gene therapy products.

Competitors already have (to varying

degrees) the hard assets, e.g., production

facilities, researchers and scientists,

needed to compete. Rivals and other

scientists confirm that licensing would

enable them to develop gene therapy

products and replace the competition

lost due to the merger. Further, an asset

divestiture might create substantial

disruption in the parties’ research and

development efforts. In this case,

therefore, a licensing remedy appears to

be the preferred approach to restoring

the competition lost by the merger.

The proposed Order includes the

following remedy provisions. First, in

the research, development,

manufacture, and sale of gene therapy,

the proposed Order would require

Sandoz and Chiron to provide to all

gene therapy researchers and developers

non-exclusive licenses or sublicenses to

certain proprietary and patented

technologies essential for the

competitive development and

commercialization of gene therapy

products. In the United States, Chiron

owns the rights to commercialize

cytokine Interleukin 2 (‘‘IL–2’’), and

Sandoz has exclusive rights to the

Anderson ex vivo patent, and claims

arising there-under, and owns the rights

to cytokines Interleukin 3 (‘‘IL–3’’) and

Interleukin 6 (‘‘IL–6’’). Within thirty (30

days of the date the Order becomes

final, the companies are required to

grant to other gene therapy researchers

non-exclusive licenses to each of these

essential gene therapy technologies. In

addition, each licensee must be given

access to drug master files, the data filed

with the FDA establishing the safety and

purity of these cytokines. These

licensing arrangements will remedy the

reduction in competition in research

and development of gene therapy

caused by the merger.

As detailed in the Order, the IL–2, IL–

3 and IL–6 cytokines and the Anderson

ex vivo patent licenses include a right to

a royalty payment at low rates (based

upon net sales with no minimum

amount). In the past, the Commission

has had concerns with royalty payments

in connection with licenses that are

meant to restore competition eliminated

by a merger. This is because continuing

entanglements between the divesting

company and the acquirer might

provide opportunities for information

exchange between competitors and

interfere with their economic incentives

to compete vigorously. These risks are

relatively slight under the terms of the

proposed Order, particularly because of

the low royalties and potential number

of non-exclusive licenses to the industry

required under the proposed Order. In

addition, to minimize further the

financial relationships and the exchange

of competitively sensitive information

among Novartis, Chiron and potential

competitor-licensees, an independent

auditor will be appointed to collect and

aggregate the royalty payments. Sandoz,

Ciba, Chiron, and Novartis will be

prohibited from gaining access to this

confidential sales information. Each

license will also include a binding

arbitration clause to resolve disputes

regarding the royalties or any other

terms, a provision that further insulates

Sandoz, Ciba, Chiron, and Novartis from

interactions with the potential licensees.

Second, the proposed Order provides

for further remedies regarding the

anticompetitive harm alleged with

respect to the HSV-tk product markets.

Both Sandoz and Ciba/Chiron are

developing HSV-tk gene therapies for

cancer and graft versus host disease.

After the merger, Ciba/Chiron and

Sandoz would control dominating

intellectual property portfolios for HSVtk gene therapy. The proposed Order

restores the pe-merger incentives for

research, development, manufacture

and sale of HSV-tk gene therapy

products for cancer and graft versus host

disease by requiring licensing of the

Sandoz’ and Chiron’s worldwide HSVtk patent rights, including rights relating

to vectors. By September 1, 1997,

Sandoz and Chiron each are required to

grant a non-exclusive license to RhoˆnePoulenc Rorer (‘‘RPR’’), with whom

Ciba, Sandoz and Chiron have entered

into a letter of intent for this purpose.

If the agreement between RPR and Ciba,

Sandoz, and Chiron were to fall

through, Ciba, Sandoz and Chiron

would be required to license these

assets to another licensee who has

received Commission approval by

September 1, 1997. Under the terms of

the proposed Order, the license granted

to RPR, or an alternative licensee, must

include the right to sublicense in fields

that are not developed by RPR or the

licensee, as well as a technology transfer

from Sandoz of necessary HSV-tk knowhow, including know-how relating to

vectors, within one year of execution of

the license.

Third, to ensure the continued

research, development, manufacture

and sale of Factor VIII gene therapy

products for the treatment of

hemophilia A, the proposed Order

requires that by September 1, 1997,

Sandoz shall either: (1) convert its

exclusive license for the use in gene

therapy of the partial Factor VIII gene to

a non-exclusive license; or (2) grant to

RPR a sublicense to those gene therapy

Factor VIII rights. At the option of the

sublicensee, Sandoz may be required to

provide technical information and

know-how relating to Factor VIII gene

therapy products.

Finally, to ensure the continued

research, development, manufacture

and sale of chemoresistance gene
412 Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Notices

therapy products in the United States,

the proposed Order requires that neither

Ciba, Chiron, Sandoz nor Novartis shall

acquire exclusive rights in intellectual

property and technology related to the

MDR–1 and/or MRP genes. With

exclusive rights to the genes necessary

for this treatment area, both parties

would have potentially dominating

intellectual property rights for the use of

the MDR–1 or MRP chemoresistance

genes in gene therapy. The merger

combines the parties’ two competing

chemoresistance gene therapy programs

and potentially concentrates the

important intellectual property rights

for these genes. Thus, the proposed

restriction on exclusive licensing of the

MDR–1 and MRP genes will ensure

access to the chemoresistance genes to

at least one other competing company.

The proposed Order also provides for

the appointment of a trustee if Novartis

and/or Chiron fail to grant any of these

licenses within the appropriate time

period. In that event, the trustee is

authorized to divest either Sandoz’ or

Chiron’s HSV-tk businesses in their

entirety.

Corn Herbicides

According to the Commission’s

proposed complaint, the merger of Ciba

and Sandoz into Novartis, absent relief,

would have adverse effects on various

markets for corn herbicide. United

States sales of corn herbicides—

chemical products designed to kill or

control weeds that interfere with corn

production—totaled $1.4 billion in

1995. According to the proposed

complaint, the markets for corn

herbicide are distinguished by the types

of weeds—broadleaf or grass—against

which the herbicide is chemically

effective as well as by the stage of

growth of the corn crop or weed—preemergent or post-emergent—at which

the herbicide is safe for us on the corn

crop and chemically effective against

the weeds to be controlled.

The Commission’s proposed

complaint alleges that Ciba’s

metolachlor herbicides, sold under the

brands Dual and Bicep, are the

leading corn herbicides for pre-emergent

control of grasses. The complaint alleges

that Sandoz’ recently introduced

dimenthenamid grass herbicides, sold

under the brands Frontier and

Guardsman, are gaining share against

Ciba’s metolachlor grass herbicides.

The complaint also alleges that

Sandoz’ dicamba herbicides, sold under

the brands Banvel, Marksman, and

Clarity, are the leading corn herbicides

for post-emergent control of broadleaf

weeds. According to the complaint

Ciba’s recently introduced sulfonyl urea

broadleaf herbicide, sold under the bran

Exceed, is rapidly gaining share

against Sandoz’ dicamba broadleaf

herbicides, and Ciba and Sandoz

recognize that current users of Sandoz’

dicamba herbicides are the principal

target for expected market share gain by

Ciba’s Exceed herbicide. Ciba is also

the dominant supplier of atrazine, a

broadleaf weed control product that is

widely used as a component in

premixed herbicide formulations sold

by Ciba, Sandoz and their competitors.

According to the complaint, each of

the corn herbicide markets is highly

concentrated, as measured by the

Herfindahl-Hirschman Index (‘‘HHI’’)

and other measures of concentration.

Ciba accounts for over 35 percent of

corn herbicide sales in the United States

and over 40 percent of treated acres,

while Sandoz has approximately a 10

percent share by either measure.

Further, the complaint alleges that the

proposed merger would increase

concentration, as measured by the HHI,

by approximately 700 points for dollar

sales, and by approximately 1000 points

for treated acres, to approximately 3000

for sales and approximately 3300 for

treated acres.

In the market for pre-emergent

treatment of corn acres for grasses, the

complaint alleges that Ciba products

accounted for over 40 percent and that

Sandoz accounted for approximately 3

percent in 1995. The proposed merger

would increase concentration in that

market, as measured by the HHI, by

aprpoximately 300 points to

approximately 3400. In addition, in the

market for post-emergent treatment of

corn acres for broadleaf weeds, the

complaint alleges that Sandoz products

accounted for over 30 percent and that

Ciba’s Exceed brand accounted for

approximately 5 percent in 1995.

Combining Exceed and other Ciba

products with Sandoz’ products, the

proposed merger would increase

concentration in that market, as

measured by the HHI, by approximately

1900 points to over 4000.

The complaint alleges that entry into

the corn herbicide markets requires over

a decade for chemical synthesis;

laboratory and greenhouse testing;

formulation; process development; pilot

production; pilot trials; field trials;

testing for acute, subchronic and

chronic toxicity, possible carcinogenic

and mutagenic effects and effects on

prenatal deformation; environmental

toxicology testing; measurement of

plant, animal, soil, water and air

residues and testing of degradation of

plant, animal, soil, and water

environment; data collection; product

registration and EPA review;

construction of production facilities;

and use optimization. Further,

according to the complaint, once a

product is introduced to the market,

several years are often required to gain

customer acceptance through

demonstrated safety, performance and

reliability, over a variety of weather

conditions.

Additionally, the complaint alleges

that, despite the expiration of United

States patents on dicamba and

metolachlor, post-patent strategies

pursued by Ciba and Sandoz, including

product reformulation, distribution

agreements, purchase and supply

contracts with manufacturers, and joint

product development agreements, have

limited entry of generic competition to

Ciba’s leading pre-emergent grass

herbicides and Sandoz’ leading postemergent broadleaf herbicides.

Further, according to the complaint,

supply agreements, joint product

development agreements, and joint

marketing agreements among producers

of corn herbicide increase coordinated

interaction and the recognition of

mutual interdependence among

competitors in each of the relevant

markets for corn herbicide.

The complaint further alleges that the

proposed merger of Ciba and Sandoz

would eliminate Ciba and Sandoz as

substantial, independent competitors;

eliminate actual, direct, and substantial

competition between Ciba and Sandoz,

including the reduction in, delay of or

redirection of research and development

projects; eliminate the potential for

increased actual, direct and substantial

price competition and cause consumers

to pay higher prices for corn herbicides;

increase barriers to entry; increase the

level of concentration in the corn

herbicide markets; increase the merged

firm’s ability unilaterally to exercise

market power in the market for corn

herbicide for post-emergent control of

broadleaf weeds by combining the two

closest substitutes in the market; and

increase the likelihood and degree of

coordinated interaction between or

among competitors in the market for

corn herbicide for pre-emergent control

of grasses.

The Order accepted for public

comment contains provisions that

would require Sandoz to divest its corn

herbicide business, including Sandoz’

dicamba and dimethenamid plants in

Beaumont, Texas, and United States and

Canadian assets to BASF

Aktiengesellschaft (‘‘BASF’’), no later

than ten days after the Order becomes

final, pursuant to an agreement between

Sandoz and BASF for approximately

$780 million. If, through no fault of

Sandoz, BASF fails to acquire the
Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Notices 413

business, the Order requires Sandoz to

divest its corn herbicide business,

within sixty days after the Order

becomes final, to an alternative acquirer

approved by the Commission and in a

manner that receives the approval of the

Commission, and to divest such

additional ancillary assets and

businesses and effect such arrangements

as are necessary to assure the

marketability, independence, viability

and competiveness of the divested

business. The Order further provides for

appointment of a trustee to divest

Sandoz’ agricultural chemicals business,

including herbicides and other

pesticides, in the event Sandoz is

unable to complete the required corn

herbicide divestiture within the

specified period.

Flea Control Products

According to the proposed complaint,

the proposed merger will have

anticompetitive effects in the market for

the research, development, manufacture

and sale of flea control products in the

United States. Flea control products are

chemical products designed to treat and

prevent flea infestation in cats and dogs.

They are sold in various forms,

including pills, collars, shampoos,

sprays, and foggers and are sold through

various channels of distribution:

veterinarians, pet specialty stores, lawn

and garden centers, mass

merchandisers, and grocery stores. The

complaint alleges that there are no

economic substitutes for flea control

products for the treatment and

prevention of flea infestation in cats and

dogs. The complaint further alleges that the

flea control products market is a very

highly concentrated market that had

sales in the U.S. of approximately $400

million in 1995. Ciba is the leading

developer, manufacturer and seller of

flea control products, and Ciba’s market

share is approximately 50 percent.

Ciba’s Program brand flea control

products have a dominant share of the

flea control products market. Sandoz

ranks second in flea control products

sales from sales of its flea control

products, under the Vetkem and

Zodiac brands, and from sales of the

active ingredient, methoprene, used by

other companies in flea control

products. The complaint also alleges

that, prior to the merger, Sandoz and

Ciba were both developing additional

flea control products, which likely

would be in direct and substantial

competition with each others’ products. The proposed complaint alleges that

entry into the flea control products

market requires over a decade for

chemical synthesis, lengthy clinical

trials, data collection and analysis, and

expenditures of significant resources

over many years as well as qualified

manufacturing facilities in Order to

achieve the required EPA or FDA

approvals for commercial sale of these

products. Once a product is introduced

to the market, extensive sunk costs must

be incurred for advertising and

promotion to gain significant customer

and pet owner acceptance. Despite the

expiration of United States patents on

methoprene, the base active ingredient

used in Sandoz’ second generation flea

control products, the EPA registrations

and proprietary technology involved in

the production of methoprene have

prevented entry of generic competition

to Sandoz’ flea control products. The complaint further alleges that the

proposed merger of Ciba and Sandoz

would increase the merged firm’s ability

unilaterally to exercise market power in

the flea control products market by

combining the two closest substitutes in

the market. According to the complaint,

the proposed merger would increase the

likelihood of coordinated interaction

between or among competitors in the

flea control products market and

eliminate the potential for actual, direct

and substantial price competition

between them. Consumers would then

pay higher prices for flea control

products and would not receive the

benefits of innovation competition

among producers of flea control

products. The proposed Order seeks to remedy

the anticompetitive effects of the

proposed merger by requiring Sandoz to

divest its flea control business for the

United States and Canada. Under the

Order, the Sandoz flea control business

and the Sandoz Dallas facility, which is

largely devoted to production of flea

control products for the United States

and Canada, must be sold to Central

Garden and Pet Supply (‘‘Central

Garden’’) within thirty days after the

Order becomes final pursuant to an

agreement between Central Garden and

Sandoz that will be modified to conform

to the terms of the consent Order.

Alternatively, Novartis is required by

the Order to divest the assets to an

alternative acquirer that has received

Commission approval, within ninety

days after the Order is final. The Order

further provides for appointment of a

trustee to divest these assets in the vent

Sandoz is unable to complete the

required divestiture within the specified

period. Ciba, Sandoz, and Novartis have

entered into an agreement to hold these

assets separate from the rest of Ciba,

Sandoz, and Novartis pending

completion of the divestiture. The proposed Order also includes a

technology transfer agreement to enable

the acquirer to produce its own

methoprene, the principal active

ingredient in the products to be sold

pursuant to the Order, as well as a

temporary supply agreement to provide

methoprene to the acquirer until its own

manufacturing capability has achieved

necessary government approvals. Some

products currently produced at the

Dallas facility that are manufactured for

sale outside the United States and

Canada may continue to be

manufactured for Sandoz on behalf of

the acquirer for two years.

To ensure the viability of the flea

products acquirer, Novartis is

prohibited from re-entering the U.S.

market with a methoprene-based flea

control product for six years. In

addition, Novartis is required under the

proposed Order to notify the

Commission if it plans to acquire flea

control assets in the U.S. during the

next ten years.

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 its terms.

Benjamin I. Berman,

Acting Secretary.

Separate Statement of Commissioner

Mary L. Azcuenaga in Ciba Geigy

Limited, File No. 961–0055

The Commission today accepts a

proposed consent order for public

comment to settle allegations that the

planned merger of Ciba Geigy Ltd. and

Sandoz Ltd. would violate Section 7 of

the Clayton Act in certain agricultural

chemical, pet flea control and gene

therapy markets.

There appears to be reason to believe

that the proposed merger would be

unlawful in the corn herbicide and flea

control markets identified in the

complaint and that divestiture in each

market is the appropriate remedy.

Because BASF makes and sells a

specialized corn herbicide, the proposed

divestiture of Sandoz’s corn herbicide

business to BASF would not entirely

restore pre-merger conditions, but

BASF’s product is sufficiently

differentiated from the divested assets

that the minor overlap does not appear

to be significant.

It is premature, in my view, to select

Central Garden and Pet Supply to

acquire Sandoz’s flea control business,

because the Commission has virtually

no information about Central beyond

that contained in the proposed order

and the Analysis To Aid Public

Comment. While the early identification

of a candidate to acquire assets to be
414 Federal Register / Vol. 62, No. 2 / Friday, January 3, 1997 / Notices

divested under an order is to be

preferred in order to restore competition

quickly, the Commission does not yet

have the information to evaluate the

competitive implications of a proposed

divestiture to Central Garden and Pet

Supply.

The alleged gene therapy markets

involve products now in clinical trials

and others that appear to be more

distant in time and perhaps more

speculative. The proposed complaint

also alleges a technology market,

comprising the technology that firms

use to develop gene therapies. The

theory is that the post-merger

combination of Sandoz and Ciba Geigy

will control such a critical mass of

proprietary information that its

incentives to cross license will be

diminished, either deterring entry or

raising the price of it. I would be

interested in public comment on these

allegations.

Assuming a violation, it is not entirely

clear that the proposed licensing relief

is preferable or adequate. A divestiture

is the preferred remedy in a Section 7

case. The proposed order, among other

things, requires a license of the ex vivo

patent, also called the Anderson patent,

which was licensed to Sandoz by the

National Institutes of Health. The

merger does not add to the scope of the

patent monopoly, and I see no basis in

the proposed complaint for this aspect

of the relief. Nor is there any apparent

reason why a divestiture in these

markets could not be accomplished. I

look forward to reviewing the comments

on this issue as well.

[FR Doc. 97–5 Filed 1–2–97; 8:45 am]

BILLING CODE 6750–01–P

GENERAL ACCOUNTING OFFICE

Federal Accounting Standards

Advisory Board

AGENCY: General Accounting Office.

ACTION: Notice of meeting.

SUMMARY: Pursuant to section 10(a)(2) of

the Federal Advisory Committee Act

(Pub. L. 92–463), as amended, notice is

hereby given that the Federal

Accounting Standards Advisory Board

will meet on Friday, January 17, 1997,

from 9:00 A.M. to 4:00 P.M. in room

7C13 of the General Accounting Office

building, 441 G St., N.W., Washington,

D.C.

The purpose of the meeting is to

discuss (1) comments received on the

Cost of Capital document, (2) social

insurance, (3) Interpretation follow-up,

and (4) future agenda items. Also, three

new members will be introduced, who

will be replacing three retiring

members.

Any interested person may attend the

meeting is an observer. Board

discussions and reviews are open to the

public.

FOR FURTHER INFORMATION CONTACT:

Wendy Comes, Acting Executive

Director, 750 First St., N.E., Room 1001,

Washington, D.C. 20002, or call (202)

512–7350.

Authority: Federal Advisory Committee

Act. Pub. L. No. 92–463, Section 10(a)(2), 86

Stat. 770, 774 (1972) (current version at 5

U.S.C. app. section 10(a)(2) (1988); 41 CFR

101–6.1015 (1990).

Dated: December 30, 1996.

Wendy M. Comes,

Acting Executive Director.

[FR Doc. 97–71 Filed 1–2–97; 8:45 am]

BILLING CODE 1610–01–M

DEPARTMENT OF HEALTH AND

HUMAN SERVICES

Food and Drug Administration

[Docket No. 96S–0285]

Establishment of a Public Docket for

Documents and Other Information

Pertaining to Exports and Import-forExport of Certain FDA-Regulated

Products Under the FDA Export

Reform and Enhancement Act of 1996

AGENCY: Food and Drug Administration,

HHS.

ACTION: Notice.

SUMMARY: The Food and Drug

Administration (FDA) is announcing the

establishment of a public docket for

documents and other information

pertaining to the export and the importfor-export of certain FDA-regulated

products (such as drugs, biologics, and

devices) under the FDA Export Reform

and Enhancement Act of 1996. This

action will ensure that this information

is equally available to all interested

persons on a timely basis.

ADDRESSES: The public docket is

available under the docket number

found in brackets in the heading of this

notice and is located in the Dockets

Management Branch (HFA–305), Food

and Drug Administration, 12420

Parklawn Dr., rm. 1–23, Rockville, MD

20857. The public docket may be

reviewed between 9 a.m. and 4 p.m.,

Monday through Friday.

FOR FURTHER INFORMATION CONTACT:

Philip L. Chao, Office of Policy (HF–23),

Food and Drug Administration, 5600

Fishers Lane, Rockville, MD 20857,

301–827–3380.

SUPPLEMENTARY INFORMATION: On April

26, 1996, the President signed the FDA

Export Reform and Enhancement Act of

1996 (Pub. L. 104–134) into law. This

law significantly alters the statutory

requirements for the export of

unapproved drugs (including biologics

and animal drugs) and devices. The law

also permits the importation of

components of drugs and devices and

food additives, color additives, and

dietary supplements into the United

States if those components are

incorporated into articles (‘‘import-forexport’’) that are exported in accordance

with the Federal Food, Drug, and

Cosmetic Act, as amended.

On August 6, 1996, the President

signed Pub. L. 104–180, which

included, in section 603, minor

technical amendments. The public may

obtain a document that sets forth the

current statutory provisions (combining

the pre-existing law with the

amendments made in April and August

1996) on FDA’s home page on the

Internet (www.FDA.gov).

FDA employees, in the usual

discharge of their responsibilities and in

response to inquiries and requests from

companies, firms, and trade

associations, often provide information

on FDA’s export and import activities.

The information provided often

addresses historical and current

information on statutory or regulatory

requirements and on current FDA

export and import policies and

programs.

To help make information regarding

FDA’s interpretation and

implementation of the FDA Export

Reform and Enhancement Act of 1996

available to all interested persons, FDA

has developed a mechanism for

providing public access to relevant

documents and other information

created by FDA employees. Specifically,

FDA has created a public docket where

documents, such as letters on the export

of unapproved drugs for investigational

use and sent by FDA to various

companies and trade associations and

guidance to field personnel concerning

procedures for articles imported for

manufacturing and subsequent export,

will be maintained. The documents

placed in the public docket are not

intended to create or confer any rights

for or on any person and do not operate

to bind or otherwise obligate or commit

FDA or the public to the views

expressed. Instead, the documents

represent either the agency’s current

thinking on a particular issue at the time

the document was created or at best the

best advice of that employee at that time

on the issue. (See 21 CFR 10.85(k)).