Merger of Zeneca and Astra, Two Significant Suppliers of Pharmaceuticals, Cleared with Conditions

The Federal Trade Commission today announced a consent agreement to resolve the competitive concerns arising from the merger of Zeneca Group PLC and Astra AB. According to the agency, the merger of Zeneca and Astra would have violated antitrust laws in the U.S. market for long-acting local anesthetics. Under the settlement agreement, announced today for public comment, Zeneca would be required to transfer and surrender all of its rights and assets relating to levobupivacaine, a long-acting local anesthetic, to Chiroscience Group plc, the developer of levobupivacaine.

"Levobupivacaine, a new long-acting and potentially safer local anesthetic, would have brought increased competition in the U.S. market, leading to lower prices," said William J. Baer, Director of the FTC's Bureau of Competition. "This merger would have eliminated that competition. The settlement remedies our concerns and ensures continued competition in this very important drug market."

Long-acting local anesthetics are products used by physicians to relieve pain during the course of a medical procedure. Local anesthetics have no sedative effect, leaving a patient awake and conscious throughout the procedure.

According to the Commission, the U.S. market for long-acting local anesthetics is highly concentrated. Astra, based in Sweden, is the leading supplier in the United States and worldwide, and is one of only two companies (along with Abbott Laboratories) with Food and Drug Administration approval for the manufacture and sale of long-acting local anesthetics in the United States.

Zeneca, based in London, England, is an international bioscience company. While Zeneca does not currently sell long-acting local anesthetics, it has entered into an agreement with Chiroscience to market and assist in the development of levobupivacaine (known commercially as Chirocaine). Levobupivacaine, which is expected to be introduced in the U.S. market in 1999, represents the only potential new competition in the long-acting local anesthetic market for the foreseeable future, the FTC alleged. Thus, according to the agency, through its agreement with Chiroscience, Zeneca is an actual potential competitor in the U.S. market for long-acting local anesthetics.

The complaint outlining the Commission's charges alleges that there are substantial barriers to entry into the U.S. market for long-acting local anesthetics. A new entrant, the agency alleged, would need to undertake the difficult, expensive and time-consuming process of researching and developing a new product, obtaining FDA approval and gaining customer acceptance. Therefore, the complaint charges that the proposed merger is likely to lead to anticompetitive effects by eliminating Zeneca as the only source of new competition in the long-acting local anesthetics market.

The proposed settlement would remedy the merger's anticompetitive effects by requiring Zeneca to transfer and surrender all of its rights and assets relating to levobupivacaine to Chiroscience. The assets to be transferred to Chiroscience consist principally of intellectual property and know-how and include, among other things, all of the applicable patents, trademarks, copyrights, technical information and market research relating to levobupivacaine. Zeneca also would be required to continue carrying out certain ongoing activities relating to the commercialization of levobupivacaine, including manufacturing, regulatory, clinical, development and marketing activities for a specified period of time.

The proposed consent order also would require Zeneca to divest its approximately three percent investment interest in Chiroscience. Pending divestiture of this investment interest, the order would prohibit Zeneca from seeking to influence the management of Chiroscience; seeking or obtaining representation on the Board of Directors of Chiroscience; exercising any voting rights; seeking or obtaining access to any confidential information; or taking any action in a manner that would be incompatible with the status of Zeneca as a passive investor in Chiroscience.

The proposed consent order also would allow the Commission to appoint an Interim Trustee to facilitate an orderly return of the levobupivacaine assets to Chiroscience, and to ensure that Zeneca carries out its obligations under the consent agreement.

The European Commission also reviewed and acted on this matter. FTC and EC staff worked closely together, sharing their respective analyses of the case to reach a common and expeditious resolution. The parties facilitated the process by waiving their confidentiality rights to permit full communication among FTC and EC staff and the parties. "This case is another example of our close working relationship with the EC and it shows what can be accomplished when merging parties facilitate cooperation among the reviewing agencies," Baer said.

The Commission vote to accept the proposed consent order for public comment was 4-0.

A summary of the proposed consent agreement will be published in the Federal Register shortly. The agreement 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, 600 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 $11,000.

Copies of the complaint, proposed consent order, and an analysis of the proposed consent order to aid public comment are available from the FTC's web site: http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 202-362-2502. Consent agreements subject to public comment also are available by calling 202-326-3627. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. 9910089)