FTC Puts Conditions on Eli Lilly’s Proposed Acquisition of Novartis Animal Health

Global pharmaceutical company Eli Lilly and Company has agreed to divest its Sentinel product line of medications for treating heartworm disease in dogs in order to settle FTC charges that its proposed $5.4 billion acquisition of Novartis Animal Health would likely be anticompetitive. Under the proposed settlement, Eli Lilly will divest its Sentinel product line and associated assets to the French pharmaceutical company, Virbac S.A.

Indianapolis-based Eli Lilly, through its Elanco Animal Health division, and Switzerland-based Novartis AG’s Novartis Animal Health business unit both develop and market a wide range of animal health products, including medications to treat diseases and conditions affecting pets and livestock.

The FTC’s complaint challenging the transaction alleges that the proposed acquisition would be anticompetitive and lead to higher prices. Canine heartworm parasiticides are used to treat heartworm disease in dogs and are available in a variety of formulations, some of which are given orally while others are applied to a dog’s skin or injected.

According to the complaint, Eli Lilly’s Trifexis and Novartis Animal Health’s Sentinel products are particularly close substitutes because they are the only two products that are given orally once a month, contain the same active ingredient, and also treat fleas and other internal parasites in dogs.

The complaint alleges that, without the divestitures required by the proposed order, the transaction would have eliminated the close competition between Eli Lilly and Novartis Animal Health and substantially decreased competition in the market for canine heartworm parasiticides. Also, any other company seeking to enter the canine heartworm parasiticide market would face high barriers, because developing new animal health pharmaceutical products -- including those that treat heartworm in dogs -- is difficult and time-consuming, the complaint alleges.

More information about this proposed merger and the FTC’s consent agreement can be found in the analysis to aid public comment.

The Commission vote to accept the complaint and proposed consent order for public comment was 5-0.

The FTC will publish the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through January 21, 2015, after which the Commission will decide whether to make the proposed consent order final. Comments can be filed electronically or in paper form by following the instructions in the “Supplementary Information” section of the Federal Register notice.

NOTE: The Commission issues an administrative complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. 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 up to $16,000 per day.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust{at}ftc{dot}gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave., NW, Room CC-5422, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.