[Federal Register Volume 79, Number 250 (Wednesday, December 31, 2014)]
[Notices]
[Pages 78872-78874]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-30686]
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FEDERAL TRADE COMMISSION
[File No. 141 0142]
Eli Lilly and Company and Novartis AG; Analysis of Proposed
Consent Orders To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed consent agreement.
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SUMMARY: The consent agreement in this matter settles alleged
violations of federal law prohibiting unfair methods of competition.
The attached Analysis to Aid Public Comment describes both the
allegations in the draft complaint and the terms of the consent
orders--embodied in the consent agreement--that would settle these
allegations.
DATES: Comments must be received on or before January 21, 2015.
ADDRESSES: Interested parties may file a comment at https://ftcpublic.commentworks.com/ftc/elilillyconsent online or on paper, by
following the instructions in the Request for Comment part of the
SUPPLEMENTARY INFORMATION section below. Write ``Eli Lilly and Company
and Novartis A.G.--Consent Agreement; File No. 141-0142'' on your
comment and file your comment online at https://ftcpublic.commentworks.com/ftc/elilillyconsent by following the
instructions on the web-based form. If you prefer to file your comment
on paper, write ``Eli Lilly and Company and Novartis A.G.--Consent
Agreement; File No. 141-0142'' on your comment and on the envelope, and
mail your comment to the following address: Federal Trade Commission,
Office of the Secretary, 600 Pennsylvania Avenue NW., Suite CC-5610
(Annex D), Washington, DC 20580, or deliver your comment to the
following address: Federal Trade Commission, Office of the Secretary,
Constitution Center, 400 7th Street SW., 5th Floor, Suite 5610 (Annex
D), Washington, DC 20024.
FOR FURTHER INFORMATION CONTACT: Michael Barnett, Bureau of
Competition, (202-326-2362), 600 Pennsylvania Avenue NW., Washington,
DC 20580.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 15 U.S.C. 46(f), and FTC Rule 2.34, 16 CFR 2.34,
notice is hereby given that the above-captioned consent agreement
containing consent orders 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 thirty (30) 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 (for December 22, 2014), on the World Wide Web,
at http://www.ftc.gov/os/actions.shtm.
You can file a comment online or on paper. For the Commission to
consider your comment, we must receive it on or before January 21,
2015. Write ``Eli Lilly and Company and Novartis A.G.--Consent
Agreement; File No. 141-0142'' on your comment. Your comment--including
your name and your state--will be placed on the public record of this
proceeding, including, to the extent practicable, on the public
Commission Web site, at http://www.ftc.gov/os/publiccomments.shtm. As a
matter of discretion, the Commission tries to remove individuals' home
contact information from comments before placing them on the Commission
Web site.
Because your comment will be made public, you are solely
responsible for making sure that your comment does not include any
sensitive personal information, like anyone's Social Security number,
date of birth, driver's license number or other state identification
number or foreign country equivalent, passport number, financial
account number, or credit or debit card number. You are also solely
responsible for making sure that your comment does not include any
sensitive health information, like medical records or other
individually identifiable health information. In addition, do not
include any ``[t]rade secret or any commercial or financial information
which . . . is privileged or confidential,'' as discussed in Section
6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 16 CFR
4.10(a)(2). In particular, do not include competitively sensitive
information such as costs, sales statistics, inventories, formulas,
patterns, devices, manufacturing processes, or customer names.
If you want the Commission to give your comment confidential
treatment, you must file it in paper form, with a request for
confidential treatment, and you have to follow the procedure explained
in FTC Rule 4.9(c), 16 CFR 4.9(c).\1\ Your comment will be kept
confidential only if the FTC General Counsel, in his or her sole
discretion, grants your request in accordance with the law and the
public interest.
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\1\ In particular, the written request for confidential
treatment that accompanies the comment must include the factual and
legal basis for the request, and must identify the specific portions
of the comment to be withheld from the public record. See FTC Rule
4.9(c), 16 CFR 4.9(c).
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Postal mail addressed to the Commission is subject to delay due to
heightened security screening. As a result, we encourage you to submit
your comments online. To make sure that the Commission considers your
online comment, you must file it at https://ftcpublic.commentworks.com/ftc/elilillyconsent by following the instructions on the web-based
form. If this Notice appears at http://www.regulations.gov/#!home, you
also may file a comment through that Web site.
If you file your comment on paper, write ``Eli Lilly and Company
and Novartis A.G.--Consent Agreement; File No. 141-0142'' on your
comment and on the envelope, and mail your comment to the following
address: Federal Trade Commission, Office of the Secretary, 600
Pennsylvania Avenue NW., Suite CC-5610 (Annex D), Washington, DC 20580,
or deliver your comment to the following address: Federal Trade
Commission, Office of the Secretary, Constitution Center, 400 7th
Street SW., 5th Floor, Suite 5610 (Annex D), Washington, DC 20024. If
[[Page 78873]]
possible, submit your paper comment to the Commission by courier or
overnight service.
Visit the Commission Web site at http://www.ftc.gov to read this
Notice and the news release describing it. The FTC Act and other laws
that the Commission administers permit the collection of public
comments to consider and use in this proceeding as appropriate. The
Commission will consider all timely and responsive public comments that
it receives on or before January 21, 2015. You can find more
information, including routine uses permitted by the Privacy Act, in
the Commission's privacy policy, at http://www.ftc.gov/ftc/privacy.htm.
Analysis of Agreement Containing Consent Orders To Aid Public Comment
I. Introduction
The Federal Trade Commission (``Commission'') has accepted, subject
to final approval, an Agreement Containing Consent Orders (``Consent
Agreement'') from Eli Lilly and Company (``Eli Lilly''), which is
designed to remedy the anticompetitive effects of Eli Lilly's
acquisition of the Novartis Animal Health business (``Novartis Animal
Health'') from Novartis AG (``Novartis'').
The proposed Consent Agreement has been placed on the public record
for thirty days for receipt of comments from interested persons.
Comments received during this period will become part of the public
record. After thirty days, the Commission will again evaluate the
proposed Consent Agreement, along with the comments received, in order
to make a final decision as to whether it should withdraw from the
proposed Consent Agreement, modify it, or make final the Decision and
Order (``Order'').
Pursuant to a Stock and Asset Purchase Agreement dated April 22,
2014, Eli Lilly proposes to acquire Novartis Animal Health for
approximately $5.4 billion (the ``Proposed Acquisition''). Both parties
sell canine heartworm parasiticide products in the United States. The
Commission alleges in its Complaint that the Proposed Acquisition, if
consummated, would violate Section 7 of the Clayton Act, as amended, 15
U.S.C. 18, and Section 5 of the Federal Trade Commission Act, as
amended, 15 U.S.C. 45, by lessening competition in the U.S. market for
canine heartworm parasiticides. The proposed Consent Agreement will
remedy the alleged violations by preserving the competition that would
otherwise be eliminated by the Proposed Acquisition. Specifically,
under the terms of the Consent Agreement, Eli Lilly is required to
divest all of the rights and assets related to Sentinel Spectrum and
Sentinel Flavor Tabs (``the Sentinel products''). Eli Lilly has
proposed Virbac S.A. (``Virbac'') as the buyer of the rights and assets
related to the Sentinel products.
II. The Relevant Product and Structure of the Market
The relevant product market in which to analyze the Proposed
Acquisition is no broader than all canine heartworm parasiticides.
Canine heartworm parasiticides are medications used to treat heartworm
disease in dogs. Heartworm disease is a potentially fatal condition
caused by parasitic worms living in the arteries of a dog's heart and
lungs. Canine heartworm parasiticides primarily target heartworm, but
the various products in the category have different attributes. For
example, some canine heartworm parasiticides also treat other internal
parasites, such as hookworm, roundworm, whipworm and tapeworm, and/or
external parasites, like fleas. Canine parasiticides are offered in
oral, topical, and injectable formulations, with most customers
preferring the oral ones.
The United States is the relevant geographic market in which to
assess the competitive effects of the Proposed Acquisition. Canine
heartworm parasiticides must be approved by the FDA or EPA before being
sold in the United States. Thus, canine heartworm parasiticides sold
outside the United States, but not approved for sale in the United
States, are not alternatives for U.S. consumers.
The market for canine heartworm parasiticides in the United States
is highly concentrated. Eli Lilly, which markets Trifexis, is the
market leader with a share in excess of 35%. Merial Limited, which
sells Heartgard and Heartgard Plus, is the second-leading supplier,
with a share of 30%. Heartgard and Heartgard Plus are oral products but
do not treat fleas. Novartis's Sentinel product line has an 8% market
share. The only other significant supplier is Zoetis Inc., which
supplies Revolution and ProHeart 6. Revolution is a combination product
that requires topical application. ProHeart 6 is an injectable product
that does not impact fleas. Thus, the Acquisition would consolidate the
two closest competitors, would substantially increase concentration,
and would produce a single firm controlling more than 43% of the
relevant market.
III. Entry
Entry into the U.S. market for canine heartworm parasiticides would
not be timely, likely, or sufficient in magnitude, character, and scope
to deter or counteract the anticompetitive effects of the Proposed
Acquisition. Three major obstacles stand in the way of a prospective
canine heartworm parasiticide entrant: Lengthy development timeframes,
FDA and other agency approval requirements, and difficulty of
establishing a brand name and convincing veterinarians to prescribe new
products.
IV. Effects of the Acquisition
Eli Lilly's acquisition of Novartis Animal Health will adversely
affect competition in the market for canine heartworm parasiticides by
eliminating close head-to-head competition between Trifexis and the
Sentinel products. Trifexis and the Sentinel products are each other's
closest competitors because, among other reasons, they are the only
oral heartworm products that impact fleas. Flea prevention combined
with heartworm prevention in one oral treatment is particularly
important as it combines the convenience of a single oral treatment
while avoiding the mess and smell of topical products. In addition,
Trifexis and the Sentinel products are the only oral combination
products that treat whipworm. These attributes provide a scope of
treatment and ease of use not available with other canine heartworm
parasiticides. Absent a remedy, the Proposed Acquisition would likely
result in higher prices for consumers due to the ability of Eli Lilly
to effect a unilateral price increase.
V. The Consent Agreement
The proposed Consent Agreement effectively remedies the Proposed
Acquisition's anticompetitive effects in the canine heartworm
parasiticide market by requiring the parties to divest the rights and
assets related to the Sentinel products to Virbac. This divestiture
will preserve the close competition between the only two oral products
on the market indicated for the treatment of heartworm, other internal
worms, and fleas in dogs.
Virbac is a multinational pharmaceutical company headquartered in
Carros, France with approximately 4,350 employees. In 2013, the company
generated $934 million in global revenues. Companion animal products
comprise 56% of Virbac sales, making it the sixth-largest veterinary
product company in the companion animal products business. Virbac
operates in the United States through its subsidiary, Virbac Corp.,
which focuses on canine, feline, and equine pharmaceutical and hygiene
products. Virbac Corp. has 350 employees, and had $130 million in
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revenue in 2013. Virbac Corp. is well suited to acquire the Sentinel
products because of its current presence in the companion animal health
business, and because it already has experience with canine heartworm
products. Although Virbac currently sells canine heartworm products,
their sales are relatively small and, because they do not contain an
active ingredient to treat fleas, their competitive interaction with
the Sentinel products is limited.
The Order requires Eli Lilly to divest all of its respective rights
and interests in the Sentinel products no later than ten days after the
consummation of the Proposed Acquisition or on the date on which the
Order becomes final, whichever is earlier. The divestiture includes all
regulatory approvals, brand names, marketing materials, and
confidential business information, including customer information,
related to the Sentinel products, and other assets associated with
producing, marketing and selling the Sentinel products. To ensure the
divestiture is successful, the Order requires Eli Lilly and Novartis to
secure all third-party consents and waivers required to permit Virbac
to conduct business with the Sentinel products. The Order also requires
Eli Lilly to divest supply chain assets related to the Sentinel
products. These assets include certain rights and intellectual property
for the active pharmaceutical ingredients in the Sentinel products.
Additionally, Eli Lilly and Virbac must complete a technical transfer
of manufacturing from Novartis to Virbac. The Order calls for an
interim supply agreement of the Sentinel products for up to four years
while Eli Lilly and Virbac complete the technical transfer.
The Commission has agreed to appoint an Interim Monitor to ensure
that Eli Lilly and Novartis comply with all of their obligations
pursuant to the Consent Agreement and to keep the Commission informed
about the status of the transfer of the rights and assets to Virbac.
The Commission's goal in evaluating possible purchasers of divested
rights and assets is to maintain the competitive environment that
existed prior to the Proposed Acquisition. If the Commission determines
that Virbac is not an acceptable acquirer of the divested rights and
assets, or that the manner of the divestitures is not acceptable, the
parties must unwind the sale of rights and assets to Virbac and divest
them to a Commission-approved acquirer within six months of the date
the Order becomes final. In that circumstance, the Commission may
appoint a trustee to divest the rights and assets if the parties fail
to divest them as required.
The purpose of this analysis is to facilitate public comment on the
proposed Consent Agreement, and it is not intended to constitute an
official interpretation of the proposed Order or to modify its terms in
any way.
By direction of the Commission.
Janice Podoll Frankle,
Acting Secretary.
[FR Doc. 2014-30686 Filed 12-30-14; 8:45 am]
BILLING CODE 6750-01-P