Resolving Anticompetitive Concerns, FTC Clears $16 Billion Acquisition of Immunex Corp. By Amgen Inc.

Under the terms of a proposed consent agreement announced today, the Federal Trade Commission would allow Amgen Inc.'s (Amgen) proposed $16 billion acquisition of Immunex Corporation (Immunex) to proceed, provided the companies divest certain assets and license certain intellectual property rights in three biopharmaceutical markets. In its complaint against Amgen and Immunex, the FTC alleged that the transaction, as originally structured, would violate the Clayton Act and the Federal Trade Commission Act in the markets for: 1) neutrophil (white blood cell) regeneration factors; 2) tumor necrosis factor (TNF) inhibitors; and 3) interleukin-1 (IL-1) inhibitors. The proposed consent order would require the companies to sell all of Immunex's assets related to Leukine - a neutrophil regeneration factor - to Schering AG (Schering). The order also would require the companies to grant a license to certain intellectual property rights related to TNF inhibitors to Serono S.A. (Serono) and to certain intellectual property rights related to IL-1 inhibitors to Regeneron Pharmaceuticals Inc. (Regeneron).

"Amgen and Immunex are two of the nation's leading biotechnology firms, and compete head-to-head in the billion-dollar neutrophil regeneration market," said Joseph J. Simons, Director of the FTC's Bureau of Competition. "The proposed order announced today not only will remedy competition lost immediately in that market as a result of Amgen's acquisition of Immunex, but also will encourage competition in the future by limiting the companies' ability to block entry in other emerging biopharmaceutical markets within the United States."

The companies announced the proposed transaction in December 2001. Under its terms, Amgen will acquire all of the issued and outstanding shares of Immunex, with the newly formed company to be called Amgen.

Parties to the Transaction

Amgen, headquartered in Thousand Oaks, California, is the most successful biotechnology company in the world, with $4 billion in revenues in 2001. Amgen researches, develops, manufactures, and markets biopharmaceuticals, including Neupogen and Neulasta, which are neutrophil regeneration products; Epogen; and Kineret, an IL-1 inhibitor that recently was approved by the U.S. Food and Drug Administration (FDA) for the treatment of rheumatoid arthritis. In 2001, Amgen's sales of Neupogen were $1.35 billion, $1.05 billion of which was in the United States. Since its launch in November 2001, Kineret sales have exceeded $2.4 million.

Immunex, based in Seattle, Washington, is a leading biopharmaceutical company with a strong presence in pharmaceuticals used to treat inflammation. The company originally was founded in 1981 and was acquired by American Cyanamid Corporation in 1992. In 1994, American Home Products (now known as Wyeth) acquired American Cyanamid, becoming the largest shareholder in Immunex. In 2001, Immunex had worldwide sales of approximately $960 million, $762 million of which was generated in the United States and Canada through the sale of Enbrel, a TNF inhibitor approved for the treatment of rheumatoid arthritis and psoriatic arthritis. Immunex also produces Leukine, a neutrophil regeneration factor, which had U.S. sales of $109 million in 2001.

The Proposed Consent Order

After investigating Amgen's proposed purchase of Immunex, the FTC determined that the transaction, as originally structured, likely would violate federal antitrust laws - specifically Section 7 of the Clayton Act and Section 5 of the FTC Act - in the markets for: 1) neutrophil regeneration factors; 2) TNF inhibitors; and 3) IL-1 inhibitors. Under the terms of the proposed consent order, the companies would be required to divest all of Immunex's assets related to Leukine, its neutrophil regeneration product, and grant licenses to certain intellectual property rights in two biopharmaceutical markets involving products being developed to treat rheumatoid arthritis to alleviate these anticompetitive concerns. Each of these markets, and the remedies required by the proposed order, are described below.

Neutrophil Regeneration Factors. Neutrophil regeneration factors stimulate the production of granulocytes and macrophages (two types of neutrophils) and are used to treat neutropenia, a dangerously low white blood cell count that often results from chemotherapy. These products speed neutrophil recovery in chemotherapy patients, which increases their resistance to infection and enables them to tolerate stronger doses of chemotherapy. Annual sales of all neutrophil regeneration factors in the United States total $1.2 billion, with Amgen marketing Neupogen and Neulasta, and Immunex marketing Leukine.

According to the FTC's complaint, the market for neutrophil regeneration products in the United States is highly concentrated, with Amgen and Immunex as the only companies competing in that market. Entry into the market is difficult, requiring lengthy preclinical and clinical trials, data collection and analysis, and the expenditure of significant resources to ensure that manufacturing facilities meet FDA standards. The FDA also must approve all phases of development. Finally, there are significant barriers to entry by new firms, including technical, regulatory, patent, clinical, and production hurdles.

The FTC alleges that the proposed merger of Amgen and Immunex would result in a monopoly in the U.S. market for neutrophil regeneration products, which could cause higher prices and fewer product choices for consumers. To remedy these significant anticompetitive effects, the proposed order would require Immunex to sell its Leukine business to Schering, allowing the latter to continue to compete with Amgen, as well as to continue research and development of Leukine to ensure competition in the future.

TNF Inhibitors. TNF is a cytokine that promotes the inflammation of human tissues. TNF inhibitors can be used to prevent TNF cytokines from binding to TNF receptors, thus blocking the TNF-mediated processes that trigger inflammation. Primarily used to treat rheumatoid arthritis, Crohn's disease, and psoriatic arthritis, TNF inhibitors have total U.S. sales of approximately $1.4 billion per year.

The FTC alleges that the market for TNF inhibitors is highly concentrated. Immunex, which makes Enbrel, and Johnson & Johnson Company, which makes Remicade, are the only companies with TNF inhibitors on the market. In 2001, Immunex sold over $760 million of Enbrel in the U.S. and Canada, while Remicade accounted for the rest of the market in the U.S. There are only three other companies with TNF inhibitors in clinical development in the United States. Amgen has a TNF inhibitor similar to Enbrel in clinical development that it expects to launch in 2005. Abbott Laboratories recently submitted a Biologic License Application to the FDA for its D2E7 product. Pharmacia Corporation and Celltech plc are jointly in Phase II trials for their TNF inhibitor, CDP870.

Additionally, Serono, a Swiss biotechnology company, is developing a TNF inhibitor for use in Europe, but it does not possess the patent rights necessary to market its product in the United States.

According to the FTC, new entry into the research, development, production, and sale of TNF inhibitors is difficult, expensive, and time-consuming. New entry - which likely would take eight to ten years - would not be timely enough to counteract the alleged anticompetitive impacts of the proposed merger in this market.

The proposed merger of Amgen and Immunex allegedly would eliminate competition from Amgen's TNF inhibitor in development. To remedy the potential anticompetitive effects in the TNF inhibitor market, Amgen would be required to license certain patent rights to Serono. This license would give Serono the ability to market its TNF inhibitor product in the United States, while allowing Amgen to continue the development of its own TNF inhibitor.

IL-1 Inhibitors. IL-1 is another cytokine that promotes the inflammation of human tissues. IL-1 inhibitors can be used to prevent IL-1 cytokines from binding to the IL-1 receptors, thus blocking the IL-1-mediated processes that trigger inflammation. Amgen's Kineret is the only IL-1 inhibitor currently approved for sale in the United States for the treatment of rheumatoid arthritis. Immunex and Regeneron are the only other companies that have IL-1 inhibitor products in clinical trials in the United States, but due to the patent position of Amgen and Immunex, Regeneron likely would be unable to bring its IL-1 inhibitor to the market.

The FTC alleges that the market for IL-1 inhibitors is highly concentrated, and that new entry into the research, development, and manufacture of such products is difficult, expensive and time-consuming. It is estimated that due to the FDA approvals required and other factors, entry by a new firm would take between six and ten years and would cost more than $200 million. According to the FTC, such entry would not be timely enough to deter or counteract the anticompetitive effects of the proposed merger in the IL-1 market, including the elimination of Immunex as Amgen's only potential competitor, as the combined company could use its patents to block Regeneron from marketing its own IL-1 inhibitor in the United States. Accordingly, the proposed consent order would require

Amgen to license certain patent rights to Regeneron. This license would ensure that Regeneron will be able to market its IL-1 inhibitor in the United States and compete against Amgen, while allowing Amgen to continue development of its own IL-1 inhibitor products.

Order to Maintain Assets

Finally, the proposed consent agreement contains an order to maintain assets to ensure that Amgen and Immunex maintain the viability, marketability, and competitiveness of the Leukine Assets pending their divestiture to Schering.

The Commission vote to accept the proposed consent order and place a copy on the public record was 5-0. The proposed consent order will be subject to public comment for 30 days, until August, 12, 2002, after which the Commission will determine whether to make it final. Comments should be sent to: FTC, Office of the Secretary, 600 Pennsylvania Ave., 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 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: antitrust@ftc.gov; 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.: 021-0059)