Ciba-Geigy Limited

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IN THE MATTER OF CIBA-GEIGY LIMITED, ET AL.

CONSENT ORDER, ETC., INREGARD TO ALLEGED VIOLATION OF SEC. 7 OF THE CLAYTON ACT AND SEC. 5 OF THE FEDERAL TRADE COMMISSION ACT Docket C-3725. Complaint, March 24, 1997--Decision, March 24, 1997 This consent order requires, among other things, the licensing of specified gene therapy technology and patent rights to Rhone-Poulene Rorer, Inc., to put Rhone-Poulene in a position to compete against the combined firm. The consent order also requires divestiture of the Sandoz U.S. and Canadian com herbicide assets to BASF and its flea control business to Central Garden & Pet Company or another Commission-approved buyer. Appearances For the Commission: William Baer, Howard Morse and Morris Bloom.

For the respondents: Kenneth Prince, Shearman & Sterling, New York, N.Y. and Michael Malina, Kaye, Scholer, Fierman, Hays & Handler, New York, N.Y.

COMPLAINT Pursuant to the provisions of the Federal Trade Commission Act and of the Clayton Act, and by virtue of the authority vested in it by said Acts, the Federal Trade Commission (the Commission), having reason to believe that respondents Ciba-Geigy Ltd., a corporation including its wholly-owned subsidiary, Ciba-Geigy Corporation, (collectively, Ciba), and Sandoz Ltd., a corporation, including its wholly-owned subsidiary, Sandoz Corporation, (collectively, Sandoz), corporations subject to the jurisdiction of the Commission, have agreed to merge into Novartis Ltd. ("Novartis"), a corporation, in violation of 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, and it appearing to the Commission that a proceeding in respect thereof would be in the public interest, hereby issues its complaint, stating its charges as follows:

CIBA-GEIGY LIMITED, ET AL. 843 842 Complaint I. RESPONDENTS 1. Respondent Ciba-Geigy Limited is a corporation organized, existing and doing business under and by virtue of the laws of Switzerland, with its office and principal place of business located at Klybeckstrasse 141, CH-4002 Basel, Switzerland. Ciba operates in the United States through its wholly-owned subsidiary, Ciba-Geigy Corporation, and is engaged in the discovery, development, manufacture and sale of agricultural crop protection chemicals, proprietary and generic pharmaceutical products, and animal health products. Ciba participates in the field of gene therapy in the United States through the Chiron Corporation.

2. Respondent Ciba-Geigy Corporation, a wholly-owned subsidiary of Ciba-Geigy Limited, is a corporation organized, existing, and doing business under and by virtue of the laws of New York with its office and principal place of business located at 520 White Plains Road, Tarrytown, New York.

3. Respondent Sandoz Ltd. is a corporation organized, existing and doing business under and by virtue of the laws of Switzerland, with its office and principal place of business located at Lichtstrasse 35, CH-4002 Basel, Switzerland. Sandoz operates in the United States through its wholly-owned subsidiary, Sandoz Corporation, and is engaged in the discovery, development, manufacture and sale of agricultural crop protection chemicals, proprietary and generic pharmaceutical products, and animal health products. Sandoz participates in the field of gene therapy in the United States through its wholly-owned subsidiary, Sandoz Pharmaceuticals Corporation, headquartered in New Jersey, and through its wholly-owned subsidiary, Genetic Therapy, Inc., headquartered in Maryland. 4. Respondent Sandoz Corporation, a wholly-owned subsidiary of Sandoz Ltd., is a corporation organized, existing, and doing business under and by virtue of the laws of New York with its office and principal place of business located at 608 Fifth Avenue, New York, New York.

5. Respondent Chiron Corporation ("Chiron") is a corporation organized, existing, and doing business under and by virtue of the laws of Delaware with its office and principal place of business located at 4560 Horton Street, Emeryville, California. Ciba-Geigy Limited, together with its subsidiaries, is the largest shareholder of Chiron, holding, not solely for investment, approximately 46.5% of the Chiron capital stock as of September 30, 1996. Chiron is engaged Complaint 123 F.T.C.

in the discovery, development, manufacture and sale of proprietary and generic pharmaceutical products, including gene therapy products. Ciba has agreed to fund research at Chiron and guarantee its debt, and has the right to appoint members of its board of directors and to veto specified actions of the company. 6. Respondent Novartis AG, is a corporation organized, existing, and doing business under and by virtue of the laws of Switzerland with its office and principal place of business located at Centralbahnstrasse 7, CH-4010 Basel, Switzerland. II. JURISDICTION 7. Ciba, Sandoz, Chiron, and Novartis are, and at all times relevant herein have been, engaged in commerce as commerce is defined in Section 1 of the Clayton Act, as amended, 15 U.S.C. 12, and are corporations whose businesses are in or affect commerce as commerce is defined in Section 4 of the Federal Trade Commission Act, as amended, 15 U.S.C. 44.

Ill. THE PROPOSED MERGER 8. On or about March 6, 1996, Ciba and Sandoz signed a merger agreement providing that both companies will merge with Novartis Ltd., a Swiss company jointly formed by Ciba and Sandoz to effectuate the merger of their businesses. 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.

IV. THE RELEVANT MARKETS 9. One relevant line of commerce in which to analyze the effects of the proposed merger is gene therapy technology and research and development of gene therapies, including ex vivo and in vivo gene therapy. Specific gene therapy product markets, in which the effects of the proposed merger may be analyzed include the research, development, manufacture and sale of:

(a) Herpes simplex virus-thymidine kinase ("HSV-tk") gene therapy for the treatment of cancer;

(b) HSV-tk gene therapy for the treatment of graft versus host disease;

CIBA-GEIGY LIMITED, ET AL. 845 842 Complaint (c) Gene therapy for the treatment of hemophilia; and (d) Chemoresistance gene therapy.

Gene therapy is a therapeutic intervention in humans based on modification of the genetic material of living cells. Cells may be modified ex vivo for subsequent administration or altered in vivo by gene therapy products given directly to the patient. 10. While no gene therapy product has yet been approved by the FDA, 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. The first regulatory approvals for commercial sales of gene therapy products, expected by the year 2000, will most likely be in the area of oncology. These oncology gene therapy products are anticipated to have sales exceeding $600 million by 2002 and will likely use the HSV-tk gene with viral vectors, the means of delivering the gene. Sales of all gene therapy products are projected to reach $45 billion by 2010, resulting from approvals for additional gene therapies using the HSV-tk gene and other gene therapies. HSV-tk gene therapy is expected to be used, inter alia, to treat graft versus host disease, an acute, chronic and sometimes fatal complication occurring in approximately 70 percent of all bone marrow transplantations. Gene therapy treatments for hemophilia are likely to be used prophylactically, other than in cases of trauma in which instance 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 that could provide protection to patients' blood systems and allow 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. There are no economic substitutes for gene therapy products.

11. Another relevant line of commerce in which to analyze the effects of the proposed merger is the research, development, manufacture and sale of corn herbicide. Corn herbicides are chemical products designed to kill or control weeds that interfere with corn production. Separate markets for corn herbicides are distinguished by the types of weeds, ie., broadleaf or grass, against which the herbicide is economically effective and the stage of growth of the corn crop or weed, i.e., pre-emergent or post emergent, at which the Complaint 123 F.T.C.

herbicide is both safe for use on the corn crop and economically effective against the weeds to be controlled. Corn herbicides are essential to economic production of corn. There are no economic substitutes for corn herbicide for pre-emergent control of grasses or for corn herbicides for post emergent control of broadleaf weeds. 12. Another relevant line of commerce in which to analyze the effects of the proposed merger is the research, development, manufacture and sale of flea control products. Flea control products are chemical products designed to treat and prevent flea infestation in cats and dogs. Flea control products are sold in various forms including pills, collars, shampoos, sprays, and foggers, and are sold through various channels of distribution including veterinarians, pet specialty stores, lawn and garden centers, mass merchandisers, and grocery stores.There are no economic substitutes for flea control products for the treatment and prevention of flea infestation in cats and dogs.

13. The United States is a relevant geographic area in which to analyze the effects of the merger. U.S. Environmental Protection Agency ("EPA") and Food and Drug Administration ("FDA") regulations impose substantial barriers on the introduction of products which do not meet those agencies' regulations. V. STRUCTURE OF THE MARKETS Gene Therapy 14. The market for the research and development of gene therapy is highly concentrated. Ciba and Chiron together, and Sandoz, are two of only a few entities capable of commercially developing gene therapy products. Only Ciba together with Chiron, and Sandoz control the substantial proprietary rights necessary to commercialize gene therapy products and possess the technological, manufacturing, clinical, regulatory expertise and manufacturing capability to commercially develop gene therapy products. Each is either in clinical development or near clinical development for the treatment of human diseases for which there are large unmet medical needs. 15. Ciba and Chiron together, and Sandoz are the two leading commercial developers of gene therapy technologies and control critical gene therapy proprietary portfolios, including patents, patent applications, and know-how.

CIBA-GEIGY LIMITED, ET AL. 847 842 Complaint 16. The market for the research and development of HSV-tk gene therapy for the treatment of cancer is highly concentrated. Only two companies are capable of commercially developing HSV-tk gene therapy products with viral vectors and are either in clinical development or near clinical development to treat cancer. Sandoz and Chiron are the leading commercial developers of these gene therapy technologies and control critical proprietary intellectual property portfolios, including patents, patent applications, and know-how. 17. The market for the research and development of HSV-tk gene therapy for the treatment of graft versus host disease is also highly concentrated. Only two companies are capable of commercially developing HSV-tk gene therapy products with viral vectors, and are either in clinical development or near clinical development to treat graft versus host disease. Chiron and Sandoz are the leading commercial developers of these gene therapy technologies and/or control critical proprietary intellectual property portfolios, including patents, patent applications, and know-how. 18. The market for the research and development of gene therapy for the treatment of hemophilia is highly concentrated. Only two companies are capable of commercially developing gene therapy products for the treatment of hemophilia using the Factor VIII gene with viral vectors. Chiron and Sandoz are the leading commercial developers of these gene therapy technologies and control critical proprietary intellectual property portfolios, including patents, patent applications, and know-how.

19. The market for the research and development of chemoresistance gene therapy is highly concentrated. Only three companies are capable of commercially developing gene therapy products for the treatment of chemoresistance using the MDR-1 gene and only two companies are capable of commercially developing gene therapy products for the treatment of chemoresistance using the MRP gene. Chiron and Sandoz are the leading commercial developers of these gene therapy technologies and/or control critical proprietary intellectual property portfolios, including patents, patent applications, and know-how.

Corn Herbicides 20. The market for corn herbicide, and the relevant markets _ included therein, herbicide for pre-emergent control of grasses and herbicide for post-emergent control of broadleaf weeds, are each Complaint 123 F.T.C.

highly concentrated, as measured by the Herfindahl-Hirschmann Index ("HHI") and other measures of concentration. Ciba is the leading developer, manufacturer and seller of corn herbicide in the United States with a share of over 35 percent of sales and over 40 percent of treated acres. Sandoz has approximately a 10 percent share by either measure. United States sales of corn herbicide totaled $1.4 billion in 1995. 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. 21. Ciba's metholachlor herbicides, sold under the brands Dual® and Bicep®, are the leading corn herbicides for pre-emergent control of grasses in the United States. Ciba products accounted for over 40 percent of pre-emergent treatment of corn acres for grasses in 1995. In 1996, Sandoz doubled its sales of its recently introduced dimethenamid herbicides, sold under the brands Frontier® and Guardsman®, which accounted for approximately 3 percent of preemergent treatment of corn acres for grasses in 1995. Based on 1995 treated acres, the proposed merger would increase concentration, as measured by the HHI, by approximately 300 points to approximately 3400.

22. Sandoz's dicamba herbicides, sold under the brands Banvel®, Marksman”, and Clarity®, are the leading corn herbicides for postemergent control of broadleaf weeds in the United States. Sandoz products accounted for over 30 percent of post emergent treatment of corn acres for broadleaf weeds in 1995. In 1996, Ciba tripled its sales of its recently introduced sulfonyl urea herbicide, sold under the brand Exceed®, which accounted for approximately 5 percent of post emergent treatment of corn acres for broadleaf weeds in 1995. Based on 1995 post emergent broadleaf treated acres, the proposed merger would increase concentration, as measured by the HHI, by approximately 1900 points to over 4000. Moreover, Ciba and Sandoz recognize that current users of Sandoz's dicamba herbicides are the principal target for expected market share gain by Ciba's Exceed® herbicide.

23. Prior to the merger described in paragraph eight, Ciba and Sandoz each cooperated and coordinated with other producers of com herbicide through supply agreements for corm herbicide active ingredients and through joint development and promotion of corn herbicide formulations. Ciba is the dominant supplier of atrazine, a CIBA-GEIGY LIMITED, ET AL. 849 842 Complaint broadleaf weed control product that is widely used as a component in premixed herbicide formulations, including Marksman®, Guardsman® and Bicep®, as well as in pre-emergent and post-emergent herbicides sold by competitors of Ciba and Sandoz. Supply agreements, joint product development agreements, and joint marketing agreements among producers of corn herbicides increase coordinated interaction and the recognition of mutual interdependence among competitors in each of the relevant markets for corn herbicide. Flea Control Products 24. The flea control products market is very highly concentrated as measured by the HHI and other measures of concentration. Sales of flea control products in the U.S. amounted to approximately $400 million in 1995. Ciba is the leading developer, manufacturer and seller of flea control products with a share of approximately 50 percent. Ciba's Program® has a dominant share of the flea control products market. Sandoz ranks second in flea control products sales from sales of Vetkem® and Zodiac® flea control products and sales of base active methoprene. The proposed merger would increase concentration as measured by the HHI by approximately 3050 points to a level of approximately 6600. Moreover, prior to the merger described in paragraph eight, Sandoz and Ciba were developing additional flea control products, which likely would be direct and substantial competitors.

VI. ENTRY CONDITIONS 25. 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 com 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. Complaint 123 F.T.C.

Gene Therapy 26. Entry into the gene therapy markets requires lengthy clinical trials, data collection and analysis, and expenditures of significant resources over many years to qualify manufacturing facilities with the FDA. Entry into each gene therapy market can extend up to and beyond 10 to 12 years. The most significant barriers to entry include technical, regulatory, patent, clinical and production barriers. The FDA must approve all phases of gene therapy development, including extensive preclinical and clinical work. 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 assurances of freedom to operate; and (4) clinical grade product manufacturing expertise, regulatory approvals and capacity to complete clinical development. The necessary proprietary inputs include genes, vectors and vector manufacturing technology, and cytokines, proteins necessary for many gene therapy applications.

Corn Herbicides 27. 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's leading post emergent broadleaf herbicides.

28. 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, carcinogenic and genetic effects, and incidence of birth defects that may be associated with the product; 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. Once a product is introduced to the market, several years are often required to gain CIBA-GEIGY LIMITED, ET AL. 851 842 Complaint customer acceptance through demonstrated safety, performance and reliability, over a variety of weather conditions. Flea Control Products 29. 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. 30. Despite the expiration of United States patents on methoprene, the base active ingredient used in Sandoz's 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's flea control products. VII. EFFECTS OF THE PROPOSED MERGER 31. The effects of the merger, if consummated, may be substantially to lessen competition or tend to create a monopoly in the relevant markets in violation of 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. Specifically the merger will: a. 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; and increase the level of concentration in the relevant markets; b. Eliminate actual potential and perceived potential competition in the relevant markets;

c. Increase barriers to entry into the relevant markets; Gene Therapy d. Combine alternative technologies, and reduce innovation competition among researchers and developers of gene therapy products, including reduction in, delay of or redirection of research and development tracks;

Complaint 123 F.T.C.

e. Increase the merged firm's ability to exercise market power, either unilaterally or through coordinated interaction with Chiron, in the gene therapy markets, because the merged firm will have both complete ownership of the Sandoz gene therapy research and development and a 46.5% stock ownership interest in Chiron, the only other firm in a position to commercialize work in gene therapy; f. Heighten barriers to entry by combining portfolios of patents and patent applications of uncertain breadth and validity, requiring potential entrants to invent around or declare invalid a greater array of patents;

g. Create a disincentive in the merged firm to license intellectual property rights to or collaborate with other companies as compared to premerger incentives;

Corn Herbicides h. Eliminate the potential for increased actual, direct and substantial price competition and cause consumers to pay higher prices for corn herbicides;

i. 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;

j. Increase the likelihood and degree of coordinated interaction between or among competitors in the market for corn herbicide for pre-emergent control of grasses;

Flea Control Products k. 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;

1, Increase the likelihood and degree of coordinated interaction between or among competitors in the flea control products market; and m. Eliminate the potential for actual, direct and substantial price competition and cause consumers to pay higher prices for flea control products, as well as reduce innovation competition among producers of flea control products by eliminating, delaying or redirecting the introduction of new products under development. CIBA-GEIGY LIMITED, ET AL. 853 842 Decision and Order VIII. VIOLATIONS CHARGED 32. The merger agreement described in paragraph eight constitutes a violation of Section 5 of the FTC Act, 15 U.S.C. 45. 33. The merger, if consummated, would constitute a violation of Section 5 of the FTC Act, 15 U.S.C. 45, and Section 7 of the Clayton Act, 15 U.S.C. 18.

DECISION AND ORDER The Federal Trade Commission having initiated an investigation of the proposed merger between respondent Ciba-Geigy Limited, including its wholly-owned subsidiary Ciba-Geigy Corporation, and respondent Sandoz Ltd., including its wholly-owned subsidiary, Sandoz Corporation, into respondent Novartis AG, and respondents having been furnished thereafter with a copy of a draft of complaint that the Bureau of Competition presented to the Commission for its consideration and which, if issued by the Commission, would charge respondents with violations of 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; and The respondents, their attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by respondents of all the jurisdictional facts set forth in the aforesaid draft of the complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, and waivers and other provisions as required by the Commission's Rules; and The Commission having thereafter considered the matter and having determined that it had reason to believe that respondents have violated the said Acts, and that a complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure prescribed in Section 2.34 of its Rules, the Commission hereby issues its complaint, makes the following jurisdictional findings and enters the following order:

1. Respondent Ciba-Geigy Limited is a corporation organized, existing and doing business under and by virtue of the laws of Decision and Order 123 F.T.C.

Switzerland with its office and principal place of business located at Klybeckstrasse 141, CH-4002 Basel, Switzerland. 2. Respondent Ciba-Geigy Corporation, a wholly-owned subsidiary of Ciba-Geigy Limited, is a corporation organized, existing, and doing business under and by virtue of the laws of New York with its office and principal place of business located at 520 White Plains Road, Tarrytown, New York.

3. Respondent Chiron Corporation, in whom Ciba-Geigy Limited, together with its subsidiaries, is the largest shareholder, holding as of September 30, 1996, not solely as an investment, approximately 46.5% of the Chiron capital stock, is a corporation organized, existing, and doing business under and by virtue of the laws of Delaware with its office and principal place of business located at 4560 Horton Street, Emeryville, California. 4. Respondent Sandoz Ltd. is a corporation organized, existing and doing business under and by virtue of the laws of Switzerland with its office and principal place of business located at Lichtstrasse 35, CH-4002 Basel, Switzerland.

5. Respondent Sandoz Corporation, a wholly-owned subsidiary of Sandoz Ltd., is-a corporation organized, existing, and doing business under and by virtue of the laws of New York with its office and principal place of business located at 608 Fifth Avenue, New York, New York.

6. Respondent Novartis AG, is a corporation organized, existing, and doing business under and by virtue of the laws of Switzerland with its office and principal place of business located at Centralbahnstrasse 7, CH-4010 Basel, Switzerland. 7. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

ORDER I.

It is ordered, That, as used in this order, the following definitions shall apply:

A. Ciba means Ciba-Geigy Limited, its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, groups and affiliates controlled, CIBA-GEIGY LIMITED, ET AL. 855 842 Decision and Order directly or indirectly, by Ciba-Geigy Limited, including, but not limited to, Ciba-Geigy Corporation, and the respective directors, officers, employees, agents and representatives, successors, and assigns of each.

B. Chiron means Chiron Corporation, its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, groups and affiliates controlled, directly or indirectly, by Chiron, and the respective directors, officers, employees, agents and representatives, successors, and assigns of each.

C. Sandoz means Sandoz Ltd., its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, groups and affiliates controlled, directly or indirectly, by Sandoz Ltd., including, but not limited to, Genetic Therapy, Inc. and Sandoz Corporation, and the respective directors, officers, employees, agents and representatives, successors, -and assigns of each. » 4 D. Novartis means Novartis AG, a company jointly formed by Ciba and Sandoz to effectuate the merger of Ciba and Sandoz through the acquisition of Ciba and Sandoz by Novartis. Novartis includes Ciba and Sandoz; all of Novartis's directors, officers, employees, agents and representatives, predecessors, successors and assigns; its subsidiaries, divisions, groups and affiliates controlled, directly or indirectly, by Novartis AG; and the respective directors, officers, employees, agents and representatives, successors, and assigns of each.

E. BASF means BASF Aktiengesellschaft, a company organized under the laws of Germany with its principal office and principal place of business located at Ludwigshafen, Germany. F, Commission means the Federal Trade Commission. G. EPA means the United States Environmental Protection Agency.

H. FDA means the Food and Drug Administration of the United States Department of Health and Human Services. I. Respondents means Ciba, Sandoz, or Novartis, respectively, and in paragraphs [X.A, [X.B, IX.F, [X.G, X, XIV, XV, XVI, and XVII, Chiron, or any combination thereof. J. Agricultural5 1 3 9 1 3 1081 2933 218 43 96.051575 chemicals 1 3 9 1 4 1320 2937 144 38 96.573601 active5 1 3 9 1 5 1487 2931 277 56 95.701263 ingredient means a chemical that alone or in combination with other chemicals imparts or Decision and Order 123 F.T.C.

demonstrates herbicidal, insecticidal, fungicidal, or other pesticidal properties.

K. Agricultural5 1 3 2 1 3 1135 514 219 45 96.333900 chemicals 1 3 2 1 4 1357 511 326 59 96.218819 formulation means a formulation or pre-mix containing one or more agricultural chemical active ingredients, L. Agricultural5 1 3 3 1 3 1126 722 218 43 96.252258 chemicals 1 3 3 1 4 1359 720 236 56 96.635536 acquirer means the entity or entities to whom respondents shall divest either the Sandoz Corn Herbicide Business or the Sandoz Agricultural Chemical Business required to be divested pursuant to this order.

M. “Agricultural chemical" means any corn herbicides and other herbicides, insecticides, fungicides, and other pesticides developed, manufactured or sold by Sandoz in the United States or Canada or developed by Sandoz outside the United States and Canada for production or sale in the United States or Canada, other than products manufactured and sold by the Sandoz Animal Health Business. N. “Base active flea ingredient" means any final or intermediate form of any chemical, that alone or in combination with other chemicals is registered or under development as a flea control product, including, but not limited to, methoprene. O. Cores 1 3 6 1 3 948 1690 103 44 96.351334 data5 1 3 6 1 4 1060 1690 230 57 93.711586 package means data and information required by regulatory authorities in the United States and Canada to register flea control products, other Dallas products, and ingredients for both. P. Corns 1 3 7 1 3 978 1899 278 44 92.066093 herbicides means all agricultural chemical active ingredients and agricultural chemical formulations used, or suitable for use, on corn crops to control weeds, including, but not limited to, dimethenamid, dicamba, and pyridate.

Q. Cost means the manufacturer's average direct per unit cost of manufacturing exclusive of any overhead expenses. R. Dicamba means technical concentrate of dicamba, chemical name 3,6-dichloro-o-anisic acid, and salts of dicamba, e.g., dimethylamine, diglycolamine, potassium, sodium, isopropylamine, DPL, and APM salts of dicamba, and any agricultural chemical formulation containing dicamba.

S. "Dimethenamid" means technical concentrate of dimethenamid, chemical name 2-chloro-N-[(1-methyl-2methoxy)ethyl]-N-(2,4-dimethyl-thien-3-yl)-acetamide or (IRS, ars)-2-chloro-N-(2,4-dimethyl-3-thienyl)-N-(2-methoxy-1methylethyl)-acetamide, and any agricultural chemical formulation containing dimethenamid.

CIBA-GEIGY LIMITED, ET AL. 857 842 Decision and Order T. FIFRA means the Federal Insecticide, Fungicide, and Rodenticide Act and all statutory amendments, modifications or replacements thereof.

U. Fleas 1 3 2 1 3 876 580 176 43 96.669434 controls 1 3 2 1 4 1059 578 248 58 96.436272 products means all products used or intended to be used to treat or prevent ectoparasitic (flea) infestation in connection with canines or felines and all research and development projects to develop products to be used to treat or control ectoparasitic infestation in connection with canines and felines. V. Merger means the merger of Ciba and Sandoz into Novartis. W. “Methoprene means (S)-Methoprene, chemical name Isopropyl (2E, 48, 7S)-11-methoxy-3,7,11-trimethyl-2,4dodecadienoate, and (RS)-Methoprene, chemical name Isopropyl (E,E)-11-methoxy-3,7,11-trimethyl-2,4-dodecadienoate. X. “Other Dallas products" means products, other than flea control products, that are manufactured or produced at the Sandoz facility located in Dallas, Texas and are sold in the United States or Canada.

Y. Pyridate means technical concentrate of pyridate, chemical name O-(6-chloro-3-phenyl-4-pyridazinyl)-S-octyl-carbonothioate, and includes any agricultural chemical formulation containing pyridate.

Z. Registrations 1 3 7 1 3 1062 1830 135 42 96.046463 data means all data relating to the applicable agricultural chemical active ingredient or agricultural chemical formulation that has been, or will be, submitted to the EPA, under FIFRA, or to any state or foreign regulatory agency for purposes of obtaining or maintaining any registration or authorizations for any product containing such agricultural chemical active ingredient or agricultural chemical formulation.

AA. Sandoz5 1 3 8 1 3 970 2317 118 43 96.014481 Corns 1 3 8 1 4 1101 2315 240 45 96.527313 Herbicides 1 3 8 1 5 1353 2313 235 45 96.559616 Business means all physical assets, properties and business located in the United States or Canada and all goodwill, tangible and intangible assets, used by Sandoz in the research, development, manufacture, formulation, registration, distribution or sale of corn herbicides (other than pyridate) in the United States or Canada, all as specified in the Asset Purchase Agreement dated as of September 26, 1996, between Sandoz and BASF.

BB. Sandoz5 1 3 9 1 3 960 2872 302 55 96.563278 Agricultural5 1 3 9 1 4 1278 2869 225 46 96.474747 Chemicals 1 3 9 1 5 1514 2869 236 43 96.434082 Business means all physical assets, properties and business located in the United States or Canada and all goodwill, tangible and intangible assets, used by Sandoz in the research, development, manufacture, formulation, registration, Decision and Order 123 F.T.C.

distribution or sale of agricultural chemicals.in the United States or Canada, or for production or sale in the United States or Canada, excluding the Sandoz Animal Health Business, including, without limitation, the following:

1. All owned or leased production facilities used in the manufacture of agricultural chemical active ingredients or agricultural chemical formulations, including, but not limited to, the following: (a) The Dimethenamid plant and assets at Beaumont, Texas; and (b) The Dicamba plant and assets at Beaumont, Texas; 2. All EPA, state and foreign registrations and approvals relating to the manufacture or sale of agricultural chemical active ingredients and agricultural chemical formulations in North America, including, but not limited to, EPA registrations 55947-1 (Banvel), 55947-24 (Weedmaster), 55947-28 (Banvel SGF), 55947-39 (Marksman), 55947-46 (Clarity), 55947-47 (dicamba, isopropylamine salt), 55947- 140 (Frontier), 55947-141 (dimethenamid 96% technical), 55947-149 (dicamba, potassium salt), 55947-150 (Guardsman), 55947-155 (dicamba WG/70.0% wettable granule), 55947-159 (Frontier 6.0), 55947-160 (sodium dicambate technical 85% wettable granule), 55947-161 (Tough 3.75 EC), Tough 5 EC (56% EC), 55947-162 (Tough 45% WP), 55947-164 (Banvel 10G), 55947-165 (dicamba, diglycolamine salt), and 55947-166 (66% sodium salt of dicamba + 10% metribuzin);

3. All registration data, submissions and supporting data and documents, including, without limitation, all labels, label extensions, or planned or pending label extensions for any application; 4. All intellectual property located, generated, obtained, or used in the United States and Canada, including, but not limited to, trade secrets, test data, technology and know-how, and all United States and Canadian patents, patent applications, patent rights and licenses; 5. A paid-up, non-exclusive right to develop, manufacture and sell any agricultural chemical active ingredient or agricultural chemical formulation anywhere in the world under all foreign patents, patent applications, licenses, registrations, submissions and approvals and to use all other intellectual property located, generated, obtained, or used outside the United States and Canada, including a copy of all trade secrets, test data, technology and know-how; CIBA-GEIGY LIMITED, ET AL. 859 842 Decision and Order 6. All trademarks and trade names for agricultural chemical active ingredients and agricultural chemical formulations, including, without limitation, exclusive world rights to the trademarks or trade names Frontier, Guardsman, Century, Banvel, Clarity, Marksman, Dycleer, Vanquish, Weedmaster, Tough, Lentagran and Phoenix; 7. All contracts and agreements relating to formulating and packaging, including, without limitation, all toll supply agreements; 8. All owned or leased facilities, equipment, real property and other assets used in research, development, technical support, testing, or product registration in the United States and Canada, including, but not limited to, the Gilroy Research Center, the Palo Alto Research Center, the Greenville Field Station, and facilities at Des Plaines, Illinois;

9. All tangible and intangible assets associated with research and development projects, process improvement projects, production projects, and label extension projects; and all registrations, submissions and approvals, registration data, supporting data and documents, patents, patent applications, and other intellectual property relating to each such project;

10. All owned or leased offices, distribution facilities, real property and other assets used in sales or technical service of Sandoz agricultural chemicals, including, but not limited to, offices and facilities located in Englewood, Colorado, Des Plaines, Illinois and Palo Alto, California;

11. All books, records and files, customer lists, customer records and files, vendor lists, catalogs, sales promotion literature, advertising materials, research materials, technical information, management information systems, software, inventions, specifications, designs, drawings, processes and quality control data; 12. All interest in and to contracts and agreements with customers, joint venturers, suppliers, sales representatives, distributors, agents, personal property lessors, personal property lessees, licensors, licensees, consignors and consignees, and rights under warranties and guarantees, express or implied; and 13. Rights to make or sell pyridate in the United States and Canada and to make or sell, or license others to make or sell, in the United States and Canada, agricultural chemical formulations containing pyridate.

Decision and Order 123 F.T.C.

CC. Sandoz5 1 3 1 1 3 981 327 179 44 96.475914 Animals 1 3 1 1 4 1173 328 164 43 96.475914 Health5 1 3 1 1 5 1353 325 240 46 96.066391 Business means the business units of Sandoz that are engaged in the research, development, manufacture and production of flea control products and other Dallas products at the Sandoz facility in Dallas, Texas which products are distributed and sold in the United States and Canada, excluding the Sandoz Agricultural Chemical Business, and all assets, properties, business and goodwill, tangible and intangible, trademarks and trade names used, in whole or in part, in the research, development, manufacture, and production of flea control products and other Dallas products at the Sandoz facility located in Dallas, Texas which products are distributed and sold in the United States and Canada, including, but not limited to, the following:

1. All machinery, fixtures, equipment, vehicles, transportation facilities, furniture, tools and other tangible personal property; 2. All customer lists, vendor lists, catalogs, sales promotion literature, advertising materials, research materials, technical information, management information systems, software, inventions, trade secrets, intellectual property, patents, technology, know-how, specifications, designs, drawings, processes and quality control data; 3. Inventory and storage capacity;

4. All rights, titles and interests in and to owned or leased real property at the Sandoz facility located at 12200 Denton Drive, Dallas, Texas, together with appurtenances, licenses and permits; 5. All rights, titles and interests in and to the contracts entered into in the ordinary course of business with customers (together with associated bid and performance bonds), suppliers, sales representatives, distributors, agents, personal property lessors, personal property lessees, licensors, licensees, consignors and consignees;

6. All rights, titles and interests in and to development projects; 7. All rights under warranties and guarantees, express or implied, 8. All books, records, and files;

9. All rights, titles and interests in registrations or other governmental approvals for manufacture and sale of any flea control products and other Dallas products or research and development efforts for flea control products and other Dallas products; provided, however, respondents shall retain rights of referral to the core data package for uses outside the United States and Canada; CIBA-GEIGY LIMITED, ET AL. 861.

842 Decision and Order 10. A non-exclusive license to develop, manufacture and sell any flea control products and other Dallas products, including research and development efforts for flea control products and other Dallas products, anywhere in the world under all foreign patents, patent applications, and licenses, and to use all other intellectual property (exclusive of any trademarks and trade names) located, generated, obtained, or used anywhere in the world, including all trade secrets, test data, technology and know-how; and 11. All items of prepaid expense.

Notwithstanding the foregoing, Sandoz Animal Health Business shall exclude the production facility located at Muttenz, Switzerland, operated by Sandoz to produce Methoprene and other materials, flea control products and other Dallas products that are sold outside of the United States and Canada, and assets that were part of Ciba prior to the Merger.

DD. Sandoz5 1 4 2 1 3 954 1427 176 43 95.952278 Animals 1 4 2 1 4 1140 1425 159 44 96.307365 Health5 1 4 2 1 5 1315 1426 211 42 96.307365 Business5 1 4 2 1 6 1538 1422 244 56 95.428177 Acquirer means the entity or entities to whom respondents shall divest the Sandoz Animal Health Business required to be divested pursuant to this order. EE. Sandoz5 1 4 3 1 3 981 1635 100 56 96.050316 fleas 1 4 3 1 4 1119 1633 174 44 96.050316 controls 1 4 3 1 5 1318 1632 251 57 96.018867 products means all flea control products that as of November 22, 1996, are: (1) being manufactured, distributed and sold by Sandoz in the United States and Canada; and (2) all projects in research and development by Sandoz in the United States and Canada that relate to improving existing, or developing new, flea control products or base active flea ingredients therefor. FF. Strategic5 1 4 4 1 3 991 2050 143 58 94.576073 plan means a detailed plan that sets forth inter alia the means by which the Sandoz Animal Health Business Acquirer will begin the manufacture and sale of Methoprene, including dates by which the Sandoz Animal Health Business Acquirer plans to have received necessary governmental approvals to manufacture and sell Methoprene in the United States and Canada. GG. Anderson5 1 4 5 1 3 1042 2469 188 43 92.637619 Patent means US Patent Number 5,399,346 issued March 21, 1995, and any pending divisionals, continuations, continuations in part, extensions or reissues of said original US patent application number 07/365,567.

HH. Anderson5 1 4 6 1 3 1028 2749 160 42 96.774780 Patents 1 4 6 1 4 1203 2746 217 44 83.294228 License means a non-exclusive license obtained by any person under the Anderson Patent for any gene therapy product or process.

II. Anderson5 1 4 7 1 3 982 2958 162 41 96.796974 Patents 1 4 7 1 4 1161 2956 242 44 96.297668 Licensee means a person that obtains an Anderson Patent License.

Decision and Order 123 F.T.C.

JJ. Cytokine5 1 3 1 1 3 985 337 213 43 84.009888 License means, as to each respondent, a nonexclusive license or sublicense under such respondent's Cytokine Patent Rights for use in any Cytokine Licensed Product as follows: (a) as to respondent Chiron, with respect to IL-2, the right to use IL-2 sold: by respondent Chiron in a Cytokine Licensed Product, or if respondent Chiron ceases offering IL-2 for sale, then the right to manufacture and use IL-2 in a Cytokine Licensed Product; and (b) as to respondent Novartis with respect to IL-3 and IL-6, the right to manufacture and use IL-3 and/or IL-6 in a Cytokine Licensed Product.

KK. Cytokine5 1 3 2 1 3 988 1029 215 42 96.814163 Licensed5 1 3 2 1 4 1211 1029 219 43 96.803596 Product means any research protocol or commercial product and/or service incorporating or to be used with cells that have been expanded, mobilized or cultured ex vivo with IL- 2, IL-3 and/or IL-6 proteins.

LL. Cytokine5 1 3 3 1 3 1020 1306 239 44 92.082336 Licensee means each and every person that requests and obtains a Cytokine License.

MM. Cytokine5 1 3 4 1 3 1053 1446 161 42 96.401161 Patents 1 3 4 1 4 1244 1444 182 56 87.494171 Rights means with respect to each respondent, all worldwide patents and patent applications, issued or pending, which, as of the date this order becomes final, are owned or controlled by such respondent or licensed by a third party to such respondent with the right to sublicense, which, in the case of respondent Chiron, are directed to the manufacture, use, or sale of IL- 2 in Cytokine Licensed Products, and, in the case of respondent Novartis, are directed to the manufacture, use, or sale of IL-3 and/or IL-6 in Cytokine Licensed Products. Additionally, at the option of the Cytokine Licensee, the Cytokine Patent Rights shall also include a cross-reference right to the licensing respondent's respective drug regulatory files at the FDA with respect to IL-2 in the case of respondent Chiron, and with respect to IL-3 and/or IL-6 in the case of respondent Novartis. :

NN. Genes 1 3 5 1 3 912 2418 220 56 94.622299 Therapy means a therapeutic intervention in humans based on modification of the genetic material of autologous, allogeneic, or xenogeneic living cells. Cells may be modified ex vivo for subsequent administration or altered in vivo by gene therapy products given directly to the patient.

OO. Genes 1 3 6 1 3 923 2766 197 54 96.763885 Therapy5 1 3 6 1 4 1136 2766 216 44 95.540726 License means any and all of the HSV-tk License, Cytokine License, Anderson Patent License, and Hemophilia License.

PP. Hemophilia5 1 3 7 1 3 1058 2974 215 43 95.204849 License means one (1) non-exclusive license under patents and/or patent applications to which Sandoz held rights, CIBA-GEIGY LIMITED, ET AL. 863 842 Decision and Order as of October 1, 1996, to develop a gene therapy product using the beta-domain deleted Factor VIII gene for the treatment of hemophilia, including, at the option of RPR or the Subsequent Hemophilia Licensee, all technical information, know-how or materials owned or controlled by Sandoz, as of the date on which this order becomes final, necessary for the development and manufacture of such product, including, but not limited to, hemophilia gene therapy vectors.

QQ. HSV-tk5 1 3 2 1 3 952 889 120 44 96.924065 Genes 1 3 2 1 4 1089 888 220 56 96.115166 Therapy means the introduction of the HSVtk gene into a patient by in vivo and/or ex vivo transduction for the treatment of human disease.

RR. HSV-tk5 1 3 3 1 3 950 1095 214 45 95.800537 License means, as to each respondent, the license or sublicense granted to RPR or the HSV-tk Licensee under such respondent's HSV-tk Patent Rights, to make, use, or sell an HSV-tk Licensed Product, including, at the option of RPR or the HSV-tk Licensee, the right to sublicense in fields that are not being developed by RPR or the HSV-tk Licensee.

SS. HSV-tk5 1 3 4 1 3 941 1513 242 44 94.794357 Licensee means a pharmaceutical company, other than RPR, with the demonstrated plan and ability to commercialize the HSV-tk Licensed Product, including vector production facilities and clinical gene therapy experience.

TT. HSV-tk5 1 3 5 1 3 938 1789 214 44 96.400093 Licensed5 1 3 5 1 4 1163 1788 218 44 96.370544 Product means an HSV-tk Gene Therapy product in development or to be developed by RPR or the HSV-tk Licensee. .

UU. HSV-tk5 1 3 6 1 3 959 2001 161 41 96.483772 Patents 1 3 6 1 4 1132 1998 183 56 95.799103 Rights means the following: 1. With respect to respondent Novartis, all claims in issued U.S. and foreign patents and all claims in the pending patent applications, respectively, to make, have made, use and sell HSV-tk Licensed Products, owned by or under the control of respondent Novartis as of the date this order becomes final, including divisionals, continuations, extensions and reissues of such patents or pending patent applications, and including those which respondent Novartis has licensed from a third party as of said date and has a right to sublicense, all to the extent that such patents or patent applications are directed to the use of the HSV-tk gene in the development of any and all HSV-tk Licensed Products. The HSV-tk Patent Rights owned by or under the control of respondent Novartis are referenced in Part 1 of non-public Appendix A. Respondent Novartis HSV-tk Patent Rights shall include any and all rights obtained in the future to the Decision and Order 123 F.T.C.

patents and patent applications listed in Part 3 of non-public Appendix A under exclusive license with the right to sublicense. Respondent Novartis' HSV-tk Patent Rights may also include, at the option of RPR or the HSV-tk Licensee, all technical information, know-how or materials, owned or controlled by respondent Novartis as of the date on which this order becomes final, necessary to enable RPR or the HSV-tk Licensee to adequately and fully research and develop any and all HSV-tk Licensed Products; and 2. With respect to respondent Chiron, all claims in the issued U.S. and foreign patents which are issued from patent applications corresponding to, derived from or equivalent to those United States patent applications listed in Part 2 of non-public Appendix A, and divisionals, continuations, extensions and reissues thereof, which claims are directed specifically to the use of the HSV-tk gene in HSV-tk Gene Therapy, or would otherwise dominate such use of the HSV-tk gene. Respondent Chiron's HSV-tk Patent Rights do not include claims to proprietary manufacturing methods, methods of administration, vector constructs, packaging or producer cells lines, genes, or other compositions, methods or processes that may be useful in making, using, or selling HSV-tk Licensed Products, but which do not dominate the use of the HSV-tk gene in HSV-tk Gene Therapy. Respondent Chiron's HSV-tk Patent Rights also do not include technical information, know-how or materials. Respondent Chiron's HSV-tk Patent Rights shall include any and all rights obtained in the future to the claims in patents and patent applications listed in Part 3 of non-public Appendix A under exclusive license with the right to sublicense, which claims are directed specifically to the use of the HSV-tk gene in HSV-tk Gene Therapy, or would otherwise dominate such use of the HSV-tk gene. VV. HSV-tk5 1 4 1 1 3 1113 2412 243 44 95.398697 Business means all the assets utilized by respondent Sandoz in the research and development of HSV-tk Gene Therapy products, or at the option of all respondents in the event that the requirements of paragraph [X.A have not been satisfied, all the assets utilized by respondent Chiron in the research and development of HSV-tk Gene Therapy products.

WW. HSV-tk5 1 4 2 1 3 1107 2827 315 45 89.211533 Sublicensee means any person that receives a sublicense under the HSV-tk Patent Rights from RPR or the HSV-tk Licensee in fields not being developed by RPR or the HSV-tk Licensee.

© CIBA-GEIGY LIMITED, ET AL. 865 842 Decision and Order XX. “MDR-1I means the multiple drug resistance-1 gene. YY. MRP means the multiple resistance protein gene. ZZ. Nets 1 4 3 1 3 851 472 118 43 96.643982 sales5 1 4 3 1 4 979 472 161 56 93.417229 price means the total amount received from the sale of royalty bearing products and/or services, less transportation charges and insurance, sales taxes, use taxes, excise taxes, value added taxes, customs duties or other imposts, normal and customary quantity and cash discounts, rebates (to the extent actually made) and disallowed reimbursements and allowances and credit on account of rejection or return of royalty bearing products or services. Royalty bearing products or services shall be considered sold when billed out or invoiced. The total amount received by Cytokine Licensee from the sale of Cytokine Licensed Products and/or by Anderson Patent Licensee from the sale of gene therapy products covered by the Anderson Patent Rights may or may not incorporate hospital and/or physician costs relating to the ex vivo gene therapy treatment (e.g., physician charges related to the removal and readministration of cells).

AAA. Others 1 4 4 1 3 954 1513 259 55 96.696449 Cytokines means all cytokines, other than IL-2, IL- 3, and IL-6, including but not limited to, stem cell factors, interferons, colony stimulating factors, tumor necrosis factors and erythropoetins. BBB. Person means any natural person, corporate entity, partnership, association, joint venture, non-profit organization, university, government entity, or trust.

CCC. RPR means Rhone Poulenc Rorer, Inc., 500 Arcola Road, Collegeville, PA.

DDD. Subsequent5 1 4 7 1 3 1123 2067 287 57 96.329308 Hemophilia5 1 4 7 1 4 1437 2065 241 44 96.475197 Licensee means any person, other than RPR, that may obtain a Hemophilia License from Novartis, or from Genetics Institute, Inc. if Novartis converts its exclusive license from Genetics Institute, Inc. to a non-exclusive license. Il.

It is further ordered, That:

A. Respondents shall divest, absolutely and in good faith, as an ongoing business, the Sandoz Corn Herbicide Business to BASF pursuant to the agreement between Sandoz and BASF dated as of September 26, 1996, no later than ten (10) days after the date on which this order becomes final; or, in the event that BASF breaches that agreement, respondents shall divest, absolutely and in good faith, as an ongoing business, the Sandoz Corn Herbicide Business, at no Decision and Order 123 F.T.C.

minimum price, within sixty (60) days of the date on which this order becomes final, to an agricultural chemical acquirer that receives the prior approval of the Commission and in a manner that receives the prior approval of the Commission, and shall also divest such additional ancillary assets and businesses and effect such arrangements as are necessary to assure the marketability and the independence, viability and competitiveness of the Sandoz Com Herbicide Business.

B. The purpose of the divestiture of the Sandoz Corn Herbicide Business is to ensure the continuation of the Sandoz Corn Herbicide Business as an ongoing, viable enterprise engaged in the research, development, manufacture, distribution and sale of corn herbicides independent of Ciba, Sandoz, and Novartis and able to compete with Ciba, Sandoz and Novartis and to remedy the lessening of - competition alleged in the Commission's complaint. C. Pending divestiture of the Sandoz Corn Herbicide Business, respondents shall take such actions as are necessary to maintain the viability and marketability of the Sandoz Corn Herbicide Business and the Sandoz Agricultural Chemical Business and shall not cause or permit the destruction, removal, wasting, deterioration, or impairment of the Sandoz Corn Herbicide Business or of the Sandoz Agricultural Chemical Business, except in the ordinary course of business and except for ordinary wear and tear. Il.

It is further ordered, That:

A. Respondents shall divest, absolutely and in good faith, as an ongoing business, within the time periods specified in paragraph III.B below, the Sandoz Animal Health Business. Respondents shall also enter into, and fulfill the terms of, a Contract Manufacturing Agreement ("CMA"), as specified in paragraph V below, and effect such arrangements as are necessary to assure the marketability, independence, viability and competitiveness of the Sandoz Animal Health Business.

B. Respondents shall divest the Sandoz Animal Health Business to Central Garden and Pet Company and/or its affiliates pursuant to the Asset Purchase Agreement dated as of October 11, 1996, among Sandoz Ltd., Central Garden and Pet Company, and Centic Acquisition Corp., as amended to conform to the terms of this order CIBA-GEIGY LIMITED, ET AL. 867 842 Decision and Order in a manner that receives the prior approval of the Commission, within thirty (30) days of the date on which this order becomes final; or, respondents shall divest the Sandoz Animal Health Business, at no minimum price, within ninety (90) days of the date on which this order becomes final, to a Sandoz Animal Health Business Acquirer that receives the prior approval of the Commission and in a manner that receives the prior approval of the Commission. The purpose of the divestiture of the Sandoz Animal Health Business is to ensure the continued use of the assets of the Sandoz Animal Health Business in the same business in which the assets of the Sandoz Animal Health Business are engaged at the time of the proposed divestiture and to remedy the lessening of competition from the proposed merger of Ciba and Sandoz as alleged in the Commission's complaint. C. Pending divestiture of the Sandoz Animal Health Business, respondents shall take such actions as are necessary to maintain the viability and marketability of the Sandoz Animal Health Business and shall not cause or permit the destruction, removal, wasting, deterioration or impairment of the Sandoz Animal Health Business, except in the ordinary course of business and except for ordinary wear and tear. Respondents shall maintain research and development of all current research and development projects at the levels planned by Sandoz for such projects as of June 4, 1996. D. The contract of divestiture shall provide that, at the option of respondent Novartis, the Sandoz Animal Health Business Acquirer shall enter into a transitional toll manufacturing agreement of up to two year's duration to produce for respondents products currently produced at Dallas, but not subject to the divestiture pursuant to this paragraph, for sale by respondents outside the United States and Canada, all at a price equal to the Sandoz Animal Health Business Acquirer's cost plus twenty percent (20%) mark-up. IV.

It is further ordered, That:

Upon reasonable notice and request to respondents from the Sandoz Animal Health Business Acquirer, respondents shall provide information, assistance and advice with respect to the Sandoz Animal Health Business divested pursuant to this order such that the Sandoz Animal Health Business Acquirer or its designee will be capable of: Decision and Order 123 F.T.C.

(1) Manufacturing all products currently produced by the Sandoz Animal Health Business divested pursuant to this order; and (2) Manufacturing and/or obtaining all necessary ingredients, other than Methoprene, for products of the Sandoz Animal Health Business divested pursuant to this order, in substantially the same manner and quality employed, achieved or planned by the respondents prior to divestiture. Such information, assistance and advice shall include reasonable consultation with knowledgeable employees of respondents for a period of time sufficient to satisfy the Sandoz Animal Health Business Acquirer's management that its personnel are appropriately trained in the research, development, manufacture, distribution and sale of the products and research and development projects of the Sandoz Animal Health Business divested pursuant to this order. Respondents shall convey all know-how necessary to manufacture or have manufactured, distribute, sell and obtain all necessary governmental approvals, including EPA approvals, and licenses to research, develop, manufacture or have manufactured, distribute and sell in the United States and Canada the products of the Sandoz Animal Health Business divested pursuant to this order. Respondents shall provide such information, assistance and advice for one (1) year from the date respondents divest the Sandoz Animal Health Business divested pursuant to this order. Respondents may charge the Sandoz Animal Health Business Acquirer at a rate no greater than respondents' cost for providing such technical assistance.

V.

It is further ordered, That:

Respondents shall enter into a Contract Manufacturing Agreement ("CMA") with the Sandoz Animal Health Business Acquirer to contract manufacture and deliver to the Sandoz Animal Health Business Acquirer, in a timely manner, Methoprene in the volumes requested by the Sandoz Animal Health Business Acquirer. The CMA shall be effective for the shorter of six (6) years from the date respondents divest the Sandoz Animal Health Business or three (3) months after the Sandoz Animal Health Business Acquirer or its designee obtains all EPA or FDA approvals necessary to manufacture CIBA-GEIGY LIMITED, ET AL. 869 842 Decision and Order all Methoprene required for products of the Sandoz Animal Health Business. The CMA shall contain the following provisions: A. Respondents shall make representations and warranties to the Sandoz Animal Health Business Acquirer that the Methoprene manufactured pursuant to the CMA meets all applicable EPA, FDA and other governmental requirements for the United States and Canada, and respondents shall agree to indemnify, defend and hold the Sandoz Animal Health Business Acquirer harmless from any and all suits, claims, actions, demands, liabilities, expenses or losses alleged to result from the failure of Methoprene manufactured pursuant to the CMA to meet such governmental specifications. This obligation shall be contingent upon the Sandoz Animal Health Business Acquirer giving respondents prompt, adequate notice of such claim, cooperating fully in the defense of such claim, and permitting respondents to assume the sole control of all phases of the defense and/or settlement of such claim, including the selection of counsel. This obligation shall not require respondents to be liable for any negligent act or omission of the Sandoz Animal Health Business Acquirer or for any representations and warranties, express or implied, made by the Sandoz Animal Health Business Acquirer that exceed the representations and warranties made by respondents to the Sandoz Animal Health Business Acquirer.

B. Respondents shall agree to package and deliver the Methoprene manufactured pursuant to the CMA in a manner and form and according to a schedule reasonably requested by the Sandoz Animal Health Business Acquirer.

C. The CMA shall require that, for the first three years during which the CMA is effective, the Sandoz Animal Health Business Acquirer shall compensate respondents for all Methoprene supplied pursuant to the CMA at a rate not to exceed respondents' cost of producing such Methoprene during the period from July 1, 1995, through June 30, 1996, which cost may be adjusted for demonstrated input expenditure increases as determined by the trustee appointed pursuant to paragraph VIII of this order. D. The contract of divestiture shall be submitted to and approved by the Commission prior to the divestiture of the Sandoz Animal Health Business required by this order. Respondents' application for approval of the divestiture pursuant to this order shall include: (1) a certification attesting to the good faith intention of the Sandoz Decision and Order 123 F.T.C.

Animal Health Business Acquirer to obtain, or to cause its designee to obtain, in an expeditious manner all FDA, EPA and other governmental approvals required in the United States and Canada to manufacture and sell Methoprene; (2) a strategic plan to obtain all FDA, EPA and other governmental approvals required in the United States and Canada to manufacture or have manufactured, and sell Methoprene; and (3) a CMA pursuant to this paragraph. E. Respondents shall provide information, assistance, and advice to the Sandoz Animal Health Business Acquirer, or its designee, to enable the Sandoz Animal Health Business Acquirer, or its designee, to manufacture and sell Methoprene in the United States or Canada. Respondents shall convey all know-how required to manufacture, sell and obtain all necessary EPA, FDA and other government approvals to manufacture and sell Methoprene in the United States or Canada. Such information, assistance and advice shall include reasonable consultation with knowledgeable employees of respondents and training at either or both the Sandoz Animal Health Business Acquirer's facilities, or those of its designee, and the respondents' facilities for a period of time sufficient to satisfy the Sandoz Animal Health Business Acquirer's management that its personnel, or those of its designee, are appropriately trained in the manufacture of Methoprene. Respondents shall continue to provide such information, assistance and advice until the ninetieth (90th) day following the date on which the Sandoz Animal Health Business Acquirer, or its designee, obtains EPA approval to manufacture and sell Methoprene. Respondents may charge the Sandoz Animal Health Business Acquirer at a rate no greater than respondents’ direct cost for providing such technical assistance.

F. Respondents shall use best efforts to facilitate the Sandoz Animal Health Business Acquirer's ability to obtain adequate supplies of Methoprene starter material, chemical name S-(3,7-Dimethyl-7methoxy-1-octanal) from Takasago Iwata.

VI.

It is further ordered, That for a period of six (6) years from the date on which the Sandoz Animal Health Business is divested, respondents shall not: (1) manufacture and sell, or cause to be manufactured for sale, in the United States and Canada, Methoprene to any entity other than the Sandoz Animal Health Business Acquirer, CIBA-GEIGY LIMITED, ET AL. 871 842 Decision and Order or its designee; and (2) sell any products that contain Methoprene in the United States and Canada.

VIL.

It is further ordered, That for a period of six (6) years from the date this order is placed on the public record for comment, except as required to comply with the terms of this order, respondents shall not provide, disclose or otherwise make available to any other person or to any employee of Novartis, any non-public information relating to any research and development project ongoing as of March 1, 1996, at Sandoz to develop or improve any base active flea ingredient or any Sandoz flea control product, if said person or employee did not have knowledge of such non-public information as of March 1, 1996. VIUIL.

It is further ordered, That:

A. The Commission may appoint a trustee to ensure that respondents and the Sandoz Animal Health Business Acquirer expeditiously perform their responsibilities required under this order with respect to the Sandoz Animal Health Business. The trustee shall also ensure that the provisions of the Agreement to Hold Separate between respondents and the Commission, dated November 26, 1996, are carried out in good faith. Respondents shall consent to the following terms and conditions regarding the trustee's powers, duties, authority, and responsibilities:

1. The Commission shall select the trustee, subject to the consent of respondents, which consent shall not be unreasonably withheld. If respondents have not opposed, in writing, including the reasons for opposing, the selection of any proposed trustee within ten (10) days after notice by the staff of the Commission to respondents of the identity of any proposed trustee, respondents shall be deemed to have consented to the selection of the proposed trustee. 2. The trustee shall have the power and authority to assure respondents' compliance with the terms of this order. 3. Within ten (10) days after appointment of the trustee, respondents shall execute a trust agreement that, subject to the prior approval of the Commission, transfers to the trustee all rights and Decision and Order 123 F.T.C.

powers necessary to permit the trustee to assure respondents’ compliance with the terms of this order relating to the Sandoz Animal Health Business. As part of the trust agreement, the trustee shall execute confidentiality agreement(s) with respondents. 4. The trustee shall serve until the ninetieth (90th) day following the date on which the Sandoz Animal Health Business Acquirer or its designee obtains EPA approval to manufacture and sell Methoprene. If the responsibilities of the trustee are extended pursuant to the provisions of paragraph X, the trustee shall serve until such date as required by that paragraph.

5. The trustee shall have full and complete access to the personnel, books, records and facilities related to the Sandoz Animal Health Business or to any other relevant information, as the trustee may request. Respondents shall develop such financial or other information as such trustee may request and shall cooperate with the trustee. Respondents shall take no action to interfere with or impede the trustee's accomplishment of his or her responsibilities pursuant to this order.

6. The trustee shall serve, without bond or other security, at the cost and expense of respondents, on such reasonable and customary terms and conditions as set forth in the trust agreement. The trustee shall have the authority to employ, at the cost and expense of respondents, such consultants, accountants, attorneys, investment bankers, business brokers, appraisers, and other representatives and assistants as are necessary to carry out the trustee's duties and responsibilities. The trustee shall account for all expenses incurred. The Commission shall approve the account of the trustee, including fees for his or her services.

7. Respondents shall indemnify the trustee and hold the trustee harmless against any losses, claims, damages, liabilities, or expenses arising out of, or in connection with, the performance of the trustee's duties, including all reasonable fees of counsel and other expenses incurred in connection with the preparation for, or defense of any claim, whether or not resulting in any liability, except to the extent that such liabilities, losses, damages, claims, or expenses result from misfeasance, gross negligence, willful or wanton acts, or bad faith by the trustee.

8. If the trustee ceases to act or fails to act diligently, a substitute trustee shall be anpointed in the same manner as provided in subparagraph A of this paragraph.

CIBA-GEIGY LIMITED, ET AL. 873 842 Decision and Order 9. The Commission may on its own initiative or at the request of the trustee issue such additional orders or directions as may be necessary or appropriate to assure compliance with the requirements of this order. .

B. The agreement pursuant to which respondents divest the Sandoz Animal Health Business shall require the Sandoz Animal Health Business Acquirer to submit to the trustee appointed pursuant to this paragraph, periodic written reports setting forth in detail the efforts of the Sandoz Animal Health Business Acquirer to obtain all FDA, EPA and other governmental approvals required in the United States and Canada to continue the research, development, manufacture and sale of the products and projects of the Sandoz Animal Health Business. The first report shall be submitted within sixty (60) days after the date on which the Commission approves the Sandoz Animal Health Business Acquirer and every ninety (90) days thereafter until the Sandoz Animal Health Business Acquirer has obtained all FDA, EPA and other governmental approvals required in the United States and Canada to continue the research, development, manufacture and sale of the products and projects of the Sandoz Animal Health Business.

C. Respondents shall comply with all reasonable directives of the trustee regarding respondents' obligations to comply with. this order. IX.

It is further ordered, That:

A.1. On or before September 1, 1997, each respondent shall (i) grant a non-exclusive license to RPR to make, use and sell HSV-tk Licensed Products under such respondent's HSV-tk Patent Rights, in a manner that has received prior Commission approval and, except as provided in this order, is consistent with the Letter of Intent dated November 20, 1996 between RPR and Sandoz Ltd., which contains _ licensing terms concerning Sandoz and Chiron HSV-tk Patent Rights, hemophilia gene rights, and the Anderson Patent; or (ii) grant a nonexclusive license to make, use and sell HSV-tk Licensed Products under such respondent's HSV-tk Patent Rights to an HSV-tk Licensee that receives the prior approval of the Commission and in a manner that receives the prior approval of the Commission, in perpetuity and in good faith, at no minimum price. In consideration for the HSV-tk Decision and Order 123 F.T.C.

License, each respondent may request from the HSV-tk Licensee compensation in the form of royalties and/or an equivalent crosslicense.

2. At the option of RPR or the HSV-tk Licensee, Novartis shall, in good faith, within one (1) year of execution of said HSV-tk License, or within one (1) year of the execution of any sublicense to the HSV-tk Patent Rights by RPR or the HSV-tk Licensee, provide to RPR or the HSV-tk Licensee, or the HSV-tk Sublicensee(s), technical information, know-how or material owned or controlled by Novartis as of the date on which this order become final, as is necessary to develop the HSV-tk Licensed Products. Such technical assistance may include reasonable consultation with knowledgeable employees of Novartis and training at RPR or the HSV-tk Licensee's facilities, or the HSV-tk Sublicensee's facilities, or at such other place ‘as is mutually satisfactory to Novartis and RPR or the HSV-tk Licensee or the HSV-tk Sublicensee(s), such consultation to be for a period of time within the one-year period reasonably sufficient to satisfy RPR or the HSV-tk Licensee or the HSV-tk Sublicensee(s). 3. RPR or the HSV-tk Licensee may sublicense, to any HSV-tk Sublicensee, fields that are not being developed by RPR or said HSVtk Licensee.

4. The purpose for the HSV-tk License is to ensure the continuation of HSV-tk gene therapy research and development for an HSV-tk Gene Therapy product to be approved by the FDA for sale in the United States and to remedy the lessening of competition resulting from the Merger as alleged in the Commission's complaint. 5. Pending licensing of the HSV-tk Patent Rights, each respondent shall take such action as is necessary to maintain the viability and marketability of the HSV-tk Patent Rights and the HSVtk Licensed Products, including, but not limited to, maintaining in the ordinary course the research and development of HSV-tk products. B. For the purpose of ensuring continuation of ex vivo gene therapy research and development, and to ensure the availability of cytokines for Gene Therapy, and to remedy the lessening of competition and research and development of Gene Therapy resulting from the Merger as alleged in the Commission's complaint, commencing within thirty (30) days of the date this order becomes final, respondents shall perform the following obligations: CIBA-GEIGY LIMITED, ET AL. 875 842 Decision and Order 1. Respondent Novartis shall grant to each person who so requests a Cytokine License, in perpetuity and in good faith. In payment for such license, respondent Novartis shall receive a royalty, or its equivalent, of no greater than three percent (3%) of the net sales price of Cytokine Licensed Products, paid from the date of first commercial sale of royalty bearing products or services until a time no later than the expiration of the last to expire patent. Respondent Novartis may also request certain non-exclusive rights to obtain and use safety and efficacy data generated by said Cytokine Licensee to support its own regulatory filings.

2. Respondent Chiron shall grant to each person who so requests a Cytokine License, in perpetuity and in good faith. In payment for such license, respondent Chiron shall receive a royalty, or its equivalent, of no greater than three percent (3%) of the net sales price of Cytokine Licensed Products, paid from the date of first commercial sale of royalty bearing products or services until a time no later than the expiration of the last to expire patent; provided, however, that if respondent Chiron's grant of a Cytokine License includes the right to manufacture, then respondent Chiron shall receive a royalty of no greater than one percent (1%) above the royalty due from respondent Chiron to all third party IL-2 licensors of respondent Chiron. Respondent Chiron may also request certain non-exclusive rights to obtain and use safety and efficacy data generated by said Cytokine Licensee to support its own regulatory filings. 3. In the event that royalties are to be paid by any such Cytokine Licensee under a Cytokine License described in subparagraphs 1 or 2 to a party who is not an affiliate of such Cytokine Licensee for royalty bearing products or services, then the royalties to be paid to respondents shall be reduced by up to one-half of the negotiated royalty rate of said Cytokine License, but in no event shall any royalties under subparagraphs 1 and/or 2 be reduced by more than fifty percent (50%). These stacking provisions shall also apply if at any time in the future it becomes scientifically advantageous to combine IL-2, IL-3, and IL-6, or any combination thereof, into a single Cytokine Licensed Product so that the royalty payable to all respondents shall be no more than three percent (3%). However, if respondent Chiron's grant of a Cytokine License includes the right to manufacture, this subparagraph IX.B.3 shall not apply to reduce the Cytokine Licensee's obligations to pay royalties owed to third party IL-2 licensors of Chiron.

Decision and Order 123 F.T.C.

4. If a person seeking a Cytokine License has patent rights and/or drug regulatory files on other Cytokines for use in ex vivo cell expansion, the licensing respondent may require equivalent cross licenses for such other Cytokines from such person. C. For the purpose of ensuring continuation of ex vivo gene therapy research and development, and to ensure the availability of Anderson Patent Licenses, and to remedy the lessening of competition in research and development of Gene Therapy resulting from the Merger as alleged in the Commission's complaint, commencing within thirty (30) days of the date this order becomes final, respondent Novartis shall grant to each person who requests an Anderson Patent License a non-exclusive license or sub-license under any and all Anderson Patent Rights, in perpetuity and in good faith, in the United States. In payment for such license, respondent Novartis shall be entitled to receive: (i) a one-time payment of Ten Thousand Dollars ($10,000) and (ii) a royalty based on the net sales price of any gene therapy product covered by the Anderson Patent Rights of no greater than one percent (1%) above the royalty due from respondent Novartis to the United States National Institutes of Health. Such royalty shall be paid from the date of first commercial sale of royalty bearing products or services in the United States, provided that the Anderson Patent is valid and enforceable, until the expiration of the last to expire patent.

D. Respondent Novartis shall by no later than September 1, 1997, either (i) convert its exclusive rights to the beta-domain deleted Factor VIII hemophilia gene from Genetics Institute to a nonexclusive license; or (ii) grant a Hemophilia License to RPR in a manner that has received prior Commission approval and in a manner consistent with the Letter of Intent dated November 20, 1996 between RPR and Sandoz Ltd.; or (iii) grant a Hemophilia License to a Subsequent Hemophilia Licensee that receives the prior approval of the Commission and in a manner that receives the prior approval of the Commission, at no minimum amount. In consideration for the Hemophilia License, respondent Novartis may request from RPR or the Subsequent Hemophilia Licensee compensation in the form of royalties and/or an equivalent cross-license. At the option of RPR or the Subsequent Hemophilia Licensee, respondent Novartis shall, in good faith, within one (1) year of the execution of the Hemophilia License provide to RPR or the Subsequent Hemophilia Licensee, CIBA-GEIGY LIMITED, ET AL. 877 842 Decision and Order such technical information, know-how or materials, owned or controlled by Genetic Therapy, Inc. as of the date on which this order become final, necessary for the development of a gene therapy product using the beta~-domain deleted Factor VIII gene for the treatment of hemophilia.

E. Respondent Novartis shall not acquire from Ingenex, Inc. or the United States National Institutes of Health exclusive rights in intellectual property related to the gene sequence for MDR-1 or MRP. F. Respondents shall include in each license granted pursuant to this paragraph a provision that ensures respondents have no access to any Licensee's Net Sales Price information. Respondents shall, in each license granted pursuant to this paragraph, provide for: 1. The appointment of an independent auditor agreed upon among the respective parties who shall: (a) enter into appropriate confidentiality agreements; (b) have full and complete access to the pertinent personnel, books, records, technological information, or any other information as to which the auditor may reasonably require; and (c) be authorized to collect, audit, aggregate and distribute the respective aggregated royalties on an annual basis. Respondents shall notify the Commission of the appointment of any independent auditor.

2. A binding arbitration clause to resolve any and all disputes regarding the royalties or any other License terms. Respondents shall notify the Commission of the institution of any arbitration. G. There will be no limitations upon the rights of any respondent or any licensee or sublicensee hereunder to license or sublicense its own patents or patent applications to other third parties. Nothing in this order requires any respondent to guarantee freedom of operation under any third party patents not included within such respondent's HSV-tk Patent Rights, Cytokine Patent Rights, Anderson Patent Rights or the patent rights subject to the Hemophilia License. X.

It is further ordered, That:

A. If respondent Novartis has not divested, absolutely and in good faith and with the Commission's prior approval, the Sandoz Corn Herbicide Business within the time required by paragraph II of this Decision and Order 123 F.T.C.

order, the Commission may appoint a trustee, or direct the trustee appointed pursuant to paragraph VIII of this order, to divest the Sandoz Agricultural Chemical Business.

B. If respondent Novartis has not divested, absolutely and in good faith and with the Commission's prior approval, the Sandoz Animal Health Business within the time required by paragraph III of this order, the Commission may appoint a trustee, or direct the trustee appointed pursuant to paragraph VIII of this order, to divest the Sandoz Animal Health Business.

C. If respondents have not complied with the requirements of paragraph IX.A of this order within the time required by paragraph IX.A of this order, the Commission may appoint a trustee or direct the trustee appointed pursuant to paragraph VIII of this order to divest the HSV-tk Business to a buyer that receives the prior approval of the Commission, and in a manner that receives the prior approval of the ‘Commission, at no minimum price. If respondent Novartis has not complied with the requirements of paragraph [X.D of this order within the time required by paragraph IX.D of this order, the _Commission may appoint a trustee or direct the trustee appointed pursuant to paragraph VIII of this order to convert respondent Novartis' exclusive rights to the beta-domain deleted Factor VIII gene from Genetics Institute to a non-exclusive license. D. In the event that the Commission or the Attorney General brings an action pursuant to Section 5(l) of the Federal Trade Commission Act, 15 U.S.C. 45(1), or any other statute enforced by the Commission, respondents shall consent to the appointment of a trustee in such action. Neither the appointment or extension of responsibilities of a trustee nor a decision not to appoint or extend the responsibilities of a trustee under this paragraph shall preclude the Commission or the Attorney General from seeking civil penalties or any other relief available to it, including a court-appointed trustee, pursuant to Section 5(l) of the Federal Trade Commission Act, 15 U.S.C. 45(1), or any other statute enforced by the Commission, for any failure by the respondents to comply with this order. E. If a trustee is appointed or directed by the Commission or a court pursuant to subparagraph A of this paragraph to divest the Sandoz Agricultural Chemical Business, or pursuant to subparagraph B of this paragraph to divest the Sandoz Animal Health Business, or pursuant to subparagraph C of this paragraph to divest the HSV-tk Business, respondents shall consent to the following terms and CIBA-GEIGY LIMITED, ET AL. 879 842 Decision and Order conditions regarding the trustee's powers, duties, authority, and responsibilities:

1. The Commission shall select the trustee, subject to the consent of respondents, which consent shall not be unreasonably withheld. The trustee shall be a person with experience and expertise in acquisitions and divestitures. If respondents have not opposed, in writing, including the reasons for opposing the selection of any proposed trustee within ten (10) days after notice by the staff of the Commission to respondents of the identity of any proposed trustee, respondents shall be deemed to have consented to the selection of the proposed trustee.

2. If a trustee is directed under subparagraph A of this paragraph to divest the Sandoz Agricultural Chemical Business, the Commission may extend the authority and responsibilities of the trustee appointed under paragraph VIII of this order to include divesting the Sandoz Agricultural Chemical Business. 3. If a trustee is directed under subparagraph B of this paragraph to divest the Sandoz Animal Health Business, the Commission may extend the authority and responsibilities of the trustee appointed under paragraph VIII of this order to include divesting the Sandoz Animal Health Business.

4. If a trustee is directed under subparagraph C of this paragraph to divest the HSV-tk Business, the Commission may extend the authority and responsibilities of the trustee appointed under paragraph VIII of this order to include divesting the HSV-tk Business. If a trustee is directed under subparagraph C of this paragraph to convert respondent Novartis' exclusive rights to the beta-domain deleted Factor VIII gene from Genetics Institute to a non-exclusive license, the Commission may extend the authority and responsibilities of the trustee appointed under paragraph VIII of this order to include converting respondent Novartis' exclusive rights to the beta-domain deleted Factor VIII gene from Genetics Institute to a non-exclusive license.

5. Subject to the prior approval of the Commission and consistent with paragraphs II through IX, the trustee shall have the exclusive power and authority to divest the assets identified in the Commission's appointment or extension of the trustee's authority and responsibilities.

Decision and Order 123 F.T.C.

6. Within ten (10) days after the appointment of the trustee or the extension of the trustee's authority and responsibilities, respondents shall execute a trust agreement, or shall amend the existing trust agreement in a manner that, subject to the prior approval of the Commission and, in the case of a court-appointed trustee, of the court, transfers to the trustee all rights and powers necessary to permit the trustee to effect the divestiture required by this order. 7. The trustee shall have twelve (12) months from the date the Commission approves the trust agreement or the amended trust agreement, described in subparagraph E of this paragraph, to accomplish the divestiture or divestitures, which shall be subject to the prior approval of the Commission. If, however, at the end of the applicable twelve-month period, the trustee has submitted a plan of divestiture or believes that divestiture can be achieved within a reasonable time, such divestiture period may be extended by the Commission, or, in the case of a court-appointed trustee, by the court; provided, however, the Commission may extend each divestiture period only two (2) times.

8. The trustee shall have full and complete access to the personnel, books, records and facilities related to the Sandoz Agricultural Chemical Business, the Sandoz Animal Health Business, the HSV-tk Business, the license to hemophilia patents and/or patent applications granted to respondent Novartis by Genetics Institute, or to any other relevant information, as the trustee may request. Respondents shall develop such financial or other information as such trustee may request and shall cooperate with the trustee. Respondents shall take no action to interfere with or impede the trustee's accomplishment of the divestitures. Any delays in divestiture caused by respondents shall extend the time for divestiture under this paragraph in an amount equal to the delay, as determined by the Commission or, for a court-appointed trustee, by the court. 9. The trustee shall make every reasonable effort to negotiate the most favorable price and terms available in each contract submitted to the Commission, subject to respondents' absolute and unconditional obligation to divest at no minimum price. The divestiture shall be made in the manner and to the Agricultural Chemica! Acquirer as set out in paragraph II of this order, or to the Animal Health Business Acquirer as set out in paragraph III of this order, or to the acquirer of the HSV-tk Business as set out in paragraph X.C of this order, as applicable; provided, however, if the CIBA-GEIGY LIMITED, ET AL. 881 842 Decision and Order trustee receives bona fide offers from more than one acquiring entity for the Sandoz Agricultural Chemicals Business, or for the Sandoz Animal Health Business, or for the HSV-tk Business, and if the Commission determines to approve more than one such acquiring entity, the trustee shall divest to the acquiring entity or entities selected by respondents from among those approved by the Commission. tas 10. The trustee shall serve, without bond or other security, at the cost and expense of respondents, on such reasonable and customary terms and conditions as the Commission or a court may set. The trustee shall have the authority to employ, at the cost and expense of respondents, such consultants, accountants, attorneys, investment bankers, business brokers, appraisers, and other representatives and assistants as are necessary to carry out the trustee's duties and responsibilities. The trustee shall account for all monies derived from the divestiture and all expenses incurred. After approval by the Commission and, in the case of a court-appointed trustee, by the court, of the account of the trustee, including fees for his or her services, all remaining monies shall be paid at the direction of the respondents, and the trustee's power shall be terminated. The trustee's compensation shall be based at least in significant part on a commission arrangement contingent on the trustee's divesting the Sandoz Agricultural Chemical Business, the Sandoz Animal Health Business, or the HSV-tk Business, as applicable. 11. Respondents shall indemnify the trustee and hold the trustee harmless against any losses, claims, damages, liabilities, or expenses arising out of, or in connection with, the performance of the trustee's duties, including all reasonable fees of counsel and other expenses incurred in connection with the preparation for, or defense of any claim, whether or not resulting in any liability, except to the extent that such liabilities, losses, damages, claims, or expenses result from misfeasance, gross negligence, willful or wanton acts, or bad faith by the trustee.

12. If the trustee ceases to act or fails to act diligently, a substitute trustee shall be appointed in the same manner as provided in paragraph VIII or this paragraph of this order. 13. The Commission or, in the case of a court-appointed trustee, the court, may on its own initiative or at the request of the trustee issue such additional orders or directions as may be necessary or appropriate to accomplish the divestiture required by this order. Decision and Order 123 F.T.C.

14. In the event that the trustee determines that he or she is unable to divest the Sandoz Agricultural Chemical Business, if directed to divest pursuant to subparagraph A of this paragraph, in a manner consistent with the Commission's purpose as described in paragraph II of this order; or in the event that the trustee determines that he or she is unable to divest the Sandoz Animal Health Business, if directed to divest pursuant to subparagraph B of this paragraph, in a manner consistent with the Commission's purpose as described in paragraph II of this order; or in the event that the trustee determines that he or she is unable to divest the HSV-tk Business, if directed to divest pursuant to subparagraph C of this paragraph, in a manner consistent with the Commission's purpose as described in paragraph IX.A.2 of this order, the trustee may divest additional assets ancillary to the Sandoz Agricultural Chemical Business, ancillary to the Sandoz Animal Health Business, or as applicable, ancillary to the HSV-tk Business, and effect such arrangements as are necessary to satisfy the requirements of this order.

15. The trustee shall have no obligation or authority to operate or maintain the Sandoz Agricultural Chemical Business, the Sandoz Animal Health Business, or the HSV-tk Business. 16. The trustee shall report in writing to respondents and the Commission every sixty (60) days concerning the trustee's efforts to accomplish divestiture.

XI.

It is further ordered, That, respondents shall comply with all terms of the Agreement to Hold Separate attached to this order and made a part hereof as Appendix I. The Agreement to Hold Separate shall continue in effect until (a) with respect to the Sandoz Corn Herbicide Business, such time as respondents have divested the Sandoz Corn Herbicide Business and (b) with respect to the Sandoz Animal Health Business, such time as respondents have divested the Sandoz Animal Health Business pursuant to paragraphs II and III of this order; or, if a trustee is appointed or the trustee's authorities and responsibilities have been extended pursuant to paragraph X of this order, the Agreement to Hold Separate shall continue in effect until such time as respondents or the trustee have divested all of the Sandoz Animal Health Business and, as applicable, the Sandoz Corn Herbicide Business or the Sandoz Agricultural Chemical Business pursuant to this order.

CIBA-GEIGY LIMITED, ET AL. 883 842 Decision and Order XI.

It is further ordered, That, for a period of ten (10) years after the date the order becomes final, respondents shall not, without prior notice to the Commission, directly or indirectly, through subsidiaries, partnerships, or otherwise:

A. Acquire more than 5% of any stock, share capital, equity, or other interest in any concern, corporate or non-corporate, engaged in at the time of such acquisition, or within the two years preceding such acquisition, the research, development, manufacture, distribution or sale of flea control products or other products containing Methoprene in the United States; or B. Acquire any assets currently used, or used in the previous two years (and still suitable for use for) for the research, development, manufacture, distribution or sale of flea control products or other products containing Methoprene in the United States. Provided, however, that this paragraph XII shall not apply to the acquisition of equipment, machinery, supplies or facilities constructed, manufactured or developed by or for respondents. The prior notifications required by this paragraph shall be given on the Notification and Report Form set forth in the Appendix to Part 803 of Title 16 of the Code of Federal Regulations, as amended, (hereinafter referred to as thes 1 7 1 4 6 1289 1992 349 54 96.573799 Notification), and shall be prepared and transmitted in accordance with the requirements of that part, except that no filing fee will be required for any such notification, notification shall be filed with the Secretary of the Commission, notification need not be made to the United States Department of Justice, and Notification is required only of respondents and not of any other party to the transaction. Respondents shall provide the Notification to the Commission at least thirty (30) days prior to consummating any such transaction (hereinafter referred to as the firsts 1 7 1 13 2 708 2620 182 55 95.821808 waiting5 1 7 1 13 3 939 2620 212 56 96.235481 period). If, within the first waiting period, representatives of the Commission make a written request for additional information, respondents shall not consummate the transaction until twenty (20) days after substantially complying with such request for additional information. Early termination of the waiting periods in this paragraph may be requested and, where appropriate, granted by letter from the Bureau of Competition. Notwithstanding, prior notification shall not be required by this Decision and Order 123 F.T.C.

paragraph for a transaction for which notification is required to be made, and has been made, pursuant to Section 7A of the Clayton Act, 15 U.S.C. 18a.

XIil.

It is further ordered, That, respondent Ciba and/or respondent Novartis shall not, without prior notice to the Commission, directly or indirectly, through subsidiaries, partnerships, or otherwise acquire common stock of Chiron such as to increase by more than one percent (1%) or more the percentage of Chiron stock that Ciba owns as of the date this order becomes final, until the receipt by the Commission of a certification by RPR, the trustee, or respondents, that respondents have complied with the requirements of paragraphs IX.A and IX.D of this order; provided, however, in no event shall this provision apply later than five (5) years from the date this order becomes final. :

The prior notifications required by this paragraph XIII shall be given on the Notification and Report Form set forth in the Appendix to Part 803 of Title 16 of the Code of Federal Regulations, as amended, (hereinafter referred to as thes 1 5 2 4 7 1558 1761 354 57 93.505806 Notification), and shall be prepared and transmitted in accordance with the requirements of that part, except that no filing fee will be required for any such notification, notification shall be filed with the Secretary of the Commission, notification need not be made to the United States - Department of Justice, and Notification is required only of respondent Novartis and not of any other party to the transaction. Respondents shall provide the Notification to the Commission at least thirty (30) days prior to consummating any such transaction (hereinafter referred to as the firsts 1 5 2 13 5 947 2392 180 55 95.915573 waiting5 1 5 2 13 6 1145 2391 211 57 96.739754 period). If, within the first waiting period, representatives of the Commission make a written request for additional information, respondent Novartis shall not consummate the transaction until twenty (20) days after substantially complying with such request for additional information. Early termination of the waiting periods in this paragraph may be requested and, where appropriate, granted by letter from the Bureau of Competition. Notwithstanding, prior notification shall not be required by this paragraph for a transaction for which notification is required to be made, and has been made, pursuant to Section 7A of the Clayton Act, 15 U.S.C. 18a.

CIBA-GEIGY LIMITED, ET AL. 885 842 Decision and Order XIV.

It is further ordered, That:

A. Within sixty (60) days after the date this order becomes final and every sixty (60) days thereafter until respondents have fully complied with the provisions of paragraphs II, III, and [X.A and IX.D of this order requiring, respectively, divestiture of the Sandoz Corn Herbicide Business, divestiture of the Sandoz Animal Health Business, and granting of the HSV-tk License, respondent Novartis shall submit to the Commission verified written report(s) ("compliance reports") setting forth in detail the manner and form in which they intend to comply, are complying, and have complied with paragraphs II through IX of this order. After completing the divestitures required under paragraphs II, III, the licensing required under paragraph [X.A, and the requirements of paragraph [X.D of this order, and until the termination of the CMA required under paragraph V of this order, respondent Novartis shall submit such compliance reports every one hundred eighty (180) days beginning on the date of the divestiture of the Sandoz Animal Health Business. Following termination of the CMA required under paragraph V of this-order, respondent Novartis shall submit to the Commission annual compliance reports on the anniversary of the date this order became final, until and including the tenth anniversary date of this order. Respondents shall include in their compliance reports, among other things that are required from time to time, a full description of the efforts being made to comply with paragraphs II through IX of the order, including a description of all substantive contacts or negotiations for the divestiture or relating to the Gene Therapy License obligations. Respondents shall include in their compliance reports copies of all written communications to and from such parties, all internal memoranda, and all reports and recommendations concerning divestiture.

B. One year (1) from the date this order becomes final, annually for the next nine (9) years on the anniversary of the date this order becomes final, and at other times as the Commission may require, respondent Novartis shall file a verified written report with the Commission setting forth in detail the manner and form in which they have complied and are complying with paragraphs XII and XIII of this order.

Decision and Order 123 F.T.C.

XV.

It is further ordered, That respondents shall notify the Commission at least thirty (30) days prior to any proposed change in the corporate respondents such as dissolution, assignment, sale resulting in the emergence of a successor corporation, or the creation or dissolution of subsidiaries or any other change in the corporation that may affect compliance obligations arising out of this order. XVI.

It is further ordered, That, for the purpose of determining or securing compliance with this order, upon written request, respondents shall permit any duly authorized representative of the Commission:

A. Access, during office hours and in the presence of counsel, to inspect and copy all books, ledgers, accounts, correspondence, memoranda and other records and documents in the possession or under the control of respondents relating to any matters contained in this order; and B. Upon five days' notice to respondents and without restraint or interference from them, to interview officers, directors, or employees of respondents.

XVIL It is further ordered, That this order shall terminate on March 24, 2007.

APPENDIX I AGREEMENT TO HOLD SEPARATE This Agreement to Hold Separate ("Hold Separate") is by and between Sandoz Ltd. ("Sandoz"), a corporation organized, existing, and doing business under and by virtue of the laws of Switzerland, with its office and principal place of business at Lichtstrasse 35, Basel, Switzerland, 4002; Ciba-Geigy Limited ("Ciba"), a corporation, organized, existing, and doing business under and by virtue of the laws of Switzerland with its principal place of business located at Klybeckstrasse 141, Basel, Switzerland 4002; and the CIBA-GEIGY LIMITED, ET AL. 887 842 Decision and Order Federal Trade Commission (the Commission), an independent agency of the United States Government, established under the Federal Trade Commission Act of 1914, 15 U.S.C. 41, et seg. (collectively, the Parties).

PREMISES Whereas, on March 6, 1996, Ciba and Sandoz entered into an Agreement providing for the merger (hereinafter the Merger) of Ciba and Sandoz into Novartis AG ("Novartis"); and Whereas, Sandoz, through its subsidiary Sandoz Agro, Inc., operates, inter alia, (a) an agricultural chemical business as defined in an Agreement Containing Consent Order ("the consents 1 5 2 3 9 2010 1147 186 55 95.750687 order); and (b) an animal health business as defined in the consent order; and Whereas, Ciba, through its subsidiary Ciba-Geigy Corporation, operates inter alia, (a) an agricultural chemical business, and (b) an animal health business; and Whereas, the Commission is now investigating the Merger to determine whether it would violate any of the statutes enforced by the Commission; and Whereas, if the Commission accepts the consent order, which would require the divestiture of certain assets, the Commission must place the consent order on the public record for a period of at least sixty (60) days and may subsequently withdraw such acceptance pursuant to the provisions of Section 2.34 of the Commission's Rules; and Whereas, the Commission is concerned that if an understanding is not reached, preserving the status quo ante of the Sandoz Agricultural Chemical Business and the Sandoz Animal Health Business as defined in paragraph I of the consent order during the period prior to the final acceptance and issuance of the consent order by the Commission (after the 60-day public comment period), divestiture resulting from any proceeding challenging the legality of the Merger might not be possible, or might be less than an effective remedy; and Whereas, the Commission is concerned that if the Merger is consummated, it will be necessary to preserve the Commission's ability to require the divestiture of the Sandoz Agricultural Chemical Business, as described in paragraph I.BB of the consent order, and the Sandoz Animal Health Business, as described in paragraph I.CC of the consent order, and the Commission's right to have the Sandoz Decision and Order 123 F.T.C.

Agricultural Chemical Business and the Sandoz Animal Health Business continue as viable competitors independent of Ciba, Sandoz and Novartis; and Whereas, even if the Commission determines to finally accept the consent order, it is necessary to hold separate the Sandoz Agricultural Chemical Business and the Sandoz Animal Health Business to protect interim competition pending divestiture or other relief; and Whereas, the purpose of the Hold Separate and the consent order is:

1. To preserve the Sandoz Agricultural Chemical Business and the Sandoz Animal Health Business as viable and competitive, independent businesses pending the divestitures required by the consent order;

2. To remedy any anticompetitive effects of the Merger; and 3. To preserve the Sandoz Agricultural Chemical Business and the Sandoz Animal Health Business as ongoing and competitive entities engaged in the same businesses in which they are presently employed until divestiture is achieved; and Whereas, Sandoz and Ciba's entering into this Hold Separate shall in no way be construed as an admission by Sandoz or Ciba that the Merger is illegal; and Whereas, Sandoz and Ciba understand that no act or transaction contemplated by this Hold Separate shall be deemed immune or exempt from the provisions of the antitrust laws or the Federal Trade Commission Act by reason of anything contained in this Hold Separate, Now, therefore, the respondents, upon understanding that the Commission has not yet determined whether the Merger will be challenged, and in consideration of the Commission's agreement at the time it accepts the consent order for public comment that, unless the Commission determines to reject the consent order, the Commission will not seek a temporary restraining order, preliminary injunction, or permanent injunction to prevent consummation of the Merger, and will grant early termination of the Hart-Scott-Rodino waiting period, the Parties agree as follows: 1. Ciba and Sandoz agree that from the date this Hold Separate is signed by Sandoz and Ciba until the earliest of the dates listed in CIBA-GEIGY LIMITED, ET AL. 889 842 Decision and Order paragraphs 1.a or 1.b they each will comply with the provisions of this Hold Separate:

a. Twenty (20) days after the Commission withdraws its acceptance of the consent order pursuant to the provisions of Section 2.34 of the Commission's Rules; or b. The day after each of the divestitures required by the consent order has been completed.

2. Ciba and Sandoz agree to execute and be bound by the attached consent order and to comply, from the date this Hold Separate is accepted, with the provisions of the consent order as if it were final. 3. The terms capitalized herein shall have the same definitions as in the consent order.

4. To ensure the complete independence and viability of the properties to be divested and to ensure that no competitive information is exchanged between the properties to be divested and Sandoz, Ciba or Novartis, Sandoz and Novartis shall hold the properties to be divested as they are presently constituted separate and apart on the following conditions:

a. The held separate businesses shall be held separate and apart and shall be operated independently of Ciba, Sandoz and Novartis (meaning here and hereinafter, Ciba, Sandoz and Novartis excluding the properties to be divested and excluding all personnel connected with the properties to be divested as of the date this Hold Separate was signed) except to the extent that Ciba, Sandoz or Novartis must exercise direction and control over the held separate businesses to assure compliance with this Hold Separate or the consent order. b. The properties to be divested shall be staffed with sufficient employees to maintain the viability and competitiveness of the properties to be divested. Neither Sandoz, Ciba nor Novartis shall employ, or make offers of employment to, any person employed by Sandoz in connection with the properties to be divested or whose principal duties, during the year prior to the date of the signing of this Hold Separate, related to the management, operation, research, development, regulatory registration, sales or marketing activities of the properties to be divested. Sandoz, Ciba and Novartis shall encourage and facilitate employment by the properties to be divested of Sandoz employees who had line responsibility with respect to the properties to be divested in the year prior to the signing of this Hold Decision and Order 123 F.T.C.

Separate; shall not offer any incentive to such employees to decline employment with the properties to be divested or accept other employment in Sandoz, Ciba or Novartis; and shall remove any impediments that may deter such employees from accepting employment with the properties to be divested, including but not limited to, the payment, or transfer for the account of the employee, of all accrued bonuses, pensions and other accrued benefits to which such employees would otherwise have been entitled had they remained in the employment of Sandoz.

c. Ciba, Sandoz or Novartis personnel connected with the properties to be divested or providing support services to the properties to be divested as of the date of this Hold Separate was signed, may continue, as employees of Sandoz or Novartis, to provide such services as they are currently providing to the held separate businesses. Such Sandoz or Novartis personnel must retain and maintain all material confidential information relating to the held separate businesses on a confidential basis and, except as is permitted by this Hold Separate, such persons shall be prohibited from providing, discussing, exchanging, circulating, or otherwise furnishing any such information to or with any other person whose employment involves any Sandoz or Novartis business. d. Sandoz, Ciba and Novartis shall not exercise direction or control over, or influence directly or indirectly, the properties to be divested, the Management Committee (as defined in subparagraph 4.f), or any of its operations or businesses; provided, however, that Ciba, Sandoz and Novartis may exercise only such direction and control over the properties to be divested as is necessary to assure compliance with this Hold Separate or with the consent order. e. Ciba, Sandoz and Novartis shall maintain the marketability, viability and competitiveness of the properties to be divested and shall not take any action that may cause or permit the destruction, removal, wasting, deterioration or impairment of the properties to be divested, except for ordinary wear and tear, and shall not sell, transfer, encumber (other than in the normal course of business), or otherwise impair the marketability, viability or competitiveness of the properties to be divested. Sandoz shall provide the properties to be divested with sufficient working capital to operate at current rates of operation, including but not limited to, current levels of research and development activities, to perform all necessary routine maintenance to, and replacement of, plant and equipment of the properties to be CIBA-GEIGY LIMITED, ET AL. 891 842 Decision and Order divested, and to maintain the viability and competitiveness of the properties to be divested.

f. Sandoz shall appoint a three-person Management Committee for the properties to be divested (the Management5 1 7 2 2 9 1774 569 321 55 95.381294 Committee), one of whom shall be named chairman of the Management Committee. The Management Committee shall consist of persons who are, and shall remain, independent of Sandoz, Ciba and Novartis and competent to assure the continued viability and competitiveness of the properties to be divested. Sandoz shall not permit any director, officer, employee or agent of Ciba, Sandoz or Novartis also to be a director, officer, employee or agent of the properties to be divested. Each Management Committee member shall enter into a confidentiality agreement agreeing to be bound by the terms and conditions of this Hold Separate.

g. Except as required by law and except to the extent that necessary information is exchanged in the course of evaluating and consummating the Merger, defending investigations or litigation, obtaining legal advice, or complying with this Hold Separate or the consent order (including accomplishing the divestitures), neither Sandoz, Ciba nor Novartis shall receive or have access to, or the use of, any material confidential information of the properties to be divested or the activities of the Management Committee, not in the public domain. Sandoz may receive on a regular basis from the properties to be divested aggregate financial reports, tax returns and personnel reports. Any such information that is obtained pursuant to this subparagraph shall only be used for the purposes set out in this subparagraph. ("Material confidential information," as used in this Hold Separate, means competitively sensitive or proprietary information not independently known to Ciba, Sandoz or Novartis from sources other than the properties to be divested or the Management Committee, as applicable, and includes but is not limited to customer lists, customers, price lists, prices, individual transactions, marketing methods, patents, technologies, processes, or other trade secrets).

h. All material transactions, out of the ordinary course of business and not precluded by paragraph four hereof, shall be subject to a majority vote of the Management Committee (as defined in paragraph 4.f hereof).

i. Sandoz shall not change the composition of the Management Committee unless it is necessary to do so in order to assure Decision and Order 123 F.T.C.

compliance with this Hold Separate or with the consent order. The Chairman of the Management Committee shall have the power to remove members of the Management Committee for cause and to appoint’ replacement members of the Management Committee. Sandoz shall not change the composition of the management of the properties to be divested except that the Management Committee shall have the power to remove management employees for cause. If the Chairman ceases to act or fails to act diligently, a substitute Chairman shall be appointed in the same manner as provided in paragraph 4.f. The Management Committee shall circulate to the management employees of the properties to be divested and appropriately display a notice of this Hold Separate and the consent order at a conspicuous place at all offices and facilities of the properties to be divested.

j. All earnings and profits of the properties to be divested shall be retained separately in the properties to be divested. k. Subject to the direction of the Management Committee, Sandoz and Novartis shall cause the properties to be divested to continue to expend funds for the advertising and trade promotion of such businesses at levels not lower than those budgeted for 1995 and 1996, and shall increase such spending as deemed reasonably necessary in light of competitive conditions. If necessary, Sandoz and Novartis shall provide the held separate businesses with funds necessary to accomplish the foregoing. Sandoz and Novartis shall continue to provide to the properties to be divested such support services as is reasonably necessary and was provided prior to the merger by Sandoz.

5. Should the Federal Trade Commission seek in any proceeding to compel dissolution of Novartis, to compel Sandoz or Novartis to divest any assets or businesses of Ciba that they may hold, to compel Ciba or Novartis to divest any assets of businesses of Sandoz that they may hold, or to seek any other injunctive or equitable relief, neither Sandoz nor Ciba shall raise any objection based upon the expiration of the applicable Hart-Scott-Rodino Antitrust Improvements Act waiting period or the fact that the Commission has permitted the Merger. Sandoz and Ciba also waive all rights to contest the validity of this Hold Separate. 6. Within twenty-one (21) days after the date this Hold Separate is signed by respondents and every thirty (30) days thereafter, CIBA-GEIGY LIMITED, ET AL. 893 842 Decision and Order respondents shall each submit to the Commission a verified written report setting forth in detail the manner and form in which they intend to comply, are complying, and have complied with this Hold Separate and the consent order. Respondents shall include in their compliance reports, among other things that are required from time to time, a full description of the efforts being made to comply with the terms of the consent order, including a description of all contacts and negotiations for the divestirure and the identity of all parties contacted. Respondents shall include in their compliance reports copies of all written communications to and from such parties, all internal memoranda, and all reports and recommendations concerning the divestitures.

7. For the purpose of determining or securing compliance with this Hold Separate, subject to any legally recognized privilege, and upon written request and five day's notice, Sandoz and Ciba shall permit any duly authorized representative(s) of the Commission: a. Access during the office hours of Sandoz or Ciba and in the presence of counsel to inspect and copy all books, ledgers, accounts, correspondence, memoranda, and other records and documents in the possession or under the control of Sandoz, Ciba or Sandoz Agro relating to compliance with this Hold Separate; b. Without restraint or interference from respondents, to interview Sandoz or Ciba officers, directors or employees, or employees of the properties to be divested, who may have counsel present, regarding any such matters.

8. This Hold Separate shall not be binding until approved by the Commission.

ATTACHMENT A NOTICE OF DIVESTITURE AND REQUIREMENT FOR CONFIDENTIALITY Ciba-Geigy Limited ("Ciba") and Sandoz Ltd. ("Sandoz") have entered into a Agreement Containing Consent Order and Agreement to Hold Separate with the Federal Trade Commission ("Commission") relating to the divestiture of certain Sandoz businesses. Until after the Commission's order becomes final and those businesses are divested, the Sandoz Agricultural Chemical Separate Statement 123 F.T.C.

Business and the Sandoz Animal Health Business must be managed and maintained as separate, ongoing businesses, independent of all other Ciba, Sandoz and Novartis businesses. All competitive information relating to the held separate businesses, must be retained and maintained by the persons involved in these businesses on a confidential basis and such persons shall be prohibited from providing, discussing, exchanging, circulating, or otherwise furnishing any such information to or with any other person whose employment involves any other Ciba, Sandoz or Novartis business. Similarly, all such persons involved in the Ciba, Sandoz or Novartis business. Similarly, all such persons involved in the Ciba, Sandoz or Novartis Agricultural Chemical and Animal Health Business shall be prohibited from providing, discussing, exchanging, circulating or otherwise furnishing competitive information about such business to or with any person whose employment involves the held separate businesses.

Any violation of the Consent Order or the Agreement to Hold Separate, incorporated by reference as part of the Consent Order, may subject Ciba, Sandoz and Novartis to civil penalties and other relief as provided by law.

SEPARATE STATEMENT OF CHAIRMAN ROBERT PITOFSKY AND COMMISSIONERS JANET D. STEIGER, ROSCOE B. STAREK, III AND CHRISTINE A. VARNEY We write to respond to Commissioner Azcuenaga's suggestion that the Commission erred by requiring licensing rather than divestiture in order to remedy competitive problems in the gene therapy markets.

The Commission's complaint in this matter alleges that the merger of Ciba-Geigy Ltd. ("Ciba") and Sandoz Ltd. ("Sandoz") may substantially lessen competition or tend to create a monopoly in several gene therapy markets, including genes 1 5 2 4 7 1689 2518 181 54 96.253448 therapy5 1 5 2 4 8 1887 2514 332 55 95.962814 technologies and research5 1 5 2 5 3 910 2589 84 42 96.771599 ands 1 5 2 5 4 1011 2589 306 56 95.891068 developments 1 5 2 5 5 1334 2589 55 42 95.884384 of5 1 5 2 5 6 1398 2601 109 42 96.787354 genes 1 5 2 5 7 1523 2586 235 56 96.196861 therapies as well as specific gene therapy product markets.' No gene therapy product is currently marketed or even approved by the Food and Drug Administration, and none is expected to obtain regulatory approval until the year 2000. The complaint notes, however, that sales of gene therapy products are projected to reach $45 billion by 2010.’ The complaint Complaint J 9.

1d. 410.

CIBA-GEIGY LIMITED, ET AL. 895 842 Separate Statement emphasizes that patent rights to proprietary inputs sufficient to provide a firm in this industry with reasonable assurances of freedom to operate are necessary for the firm to reach advanced stages of development.’ Moreover, the complaint alleges not only that Ciba and Sandoz ares 1 3 1 5 3 867 624 89 38 96.249344 two5 1 3 1 5 4 981 618 56 44 96.928894 of5 1 3 1 5 5 1053 618 105 54 96.696480 only5 1 3 1 5 6 1182 631 26 29 97.005783 a5 1 3 1 5 7 1233 618 108 42 95.276627 few entities capable of commercially developing gene therapy products, but also that they controls 1 3 1 6 10 2107 681 73 42 96.932243 thea 1 3 1 7 0 546 750 1634 63 -1 5 1 3 1 7 1 546 756 257 45 95.679558 substantial5 1 3 1 7 2 840 757 267 56 95.839119 proprietary5 1 3 1 7 3 1143 756 136 56 96.721107 rights5 1 3 1 7 4 1317 766 235 42 96.176804 necessary5 1 3 1 7 5 1588 758 46 37 96.902832 to5 1 3 1 7 6 1673 750 355 44 96.667747 commercialize5 1 3 1 7 7 2068 763 112 41 96.493896 gene4 1 3 1 8 0 545 819 1636 63 -1 5 1 3 1 8 1 545 828 184 54 96.551163 therapy5 1 3 1 8 2 759 827 227 55 95.712906 products and controls 1 3 1 8 5 1359 822 166 46 96.520554 critical5 1 3 1 8 6 1558 835 111 43 96.811172 genes 1 3 1 8 7 1699 821 183 55 96.657265 therapy5 1 3 1 8 8 1910 819 271 57 96.792084 proprietary4 1 3 1 9 0 545 876 1636 77 -1 5 1 3 1 9 1 545 896 248 57 96.526154 portfolios,5 1 3 1 9 2 816 895 225 56 96.702156 including5 1 3 1 9 3 1058 902 184 50 96.722519 patents,5 1 3 1 9 4 1262 900 148 50 96.839096 patents 1 3 1 9 5 1430 891 304 58 96.982452 applications,5 1 3 1 9 6 1758 890 86 43 96.560349 ands 1 3 1 9 7 1863 876 318 73 0.000000 know-how. We are left with a post-merger picture of potentially life-saving therapies whose competitive development could be hindered by the merged firm's control of substantially all of the proprietary rights necessary to commercialize gene therapy products. Preserving longrun innovation in these circumstances is critical. Commissioner Azcuenaga argues that the Commission should have required the divestiture of Ciba's or Sandoz's gene therapy businesses, rather than licensing, in order to preserves 1 3 2 3 9 2110 1443 74 44 96.158455 thea 1 3 2 4 0 547 1507 1637 72 -1 5 1 3 2 4 1 547 1521 282 56 96.094948 competitions 1 3 2 4 2 843 1521 88 44 97.013962 that5 1 3 2 4 3 947 1521 163 58 96.782463 existed5 1 3 2 4 4 1123 1521 151 43 96.468185 before5 1 3 2 4 5 1288 1519 71 44 97.014503 thes 1 3 2 4 6 1373 1507 223 66 40.805061 merger.” Of course, an injunction or divestiture is often the remedy chosen to resolve competition problems arising from mergers and acquisitions. In this case, however, patent licensing not only alleviated the competitive problems but also avoided divestiture's potentially disruptive effects on the parties' ongoing research.

As the Commission explained in the Analysis to Aid Public Comment that accompanied acceptance of the proposed consent agreement in this case, licensing was as effective in preserving competition as the traditional remedy of divestiture: 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. 3 id. 426.

Id. Tf 14, 15; see also id. J] 16-19.

See Statement of Commissioner Azcuenaga at 1. § Analysis to Aid Public Comment at 7.

Separate Statement 123 F.T-C, Licensing was preferable to divestiture in this case because an asset divestiture might5 1 4 1 2 4 1147 428 144 37 96.642014 creates 1 4 1 2 5 1313 420 262 45 96.989555 substantial5 1 4 1 2 6 1597 419 245 55 97.007957 disruption5 1 4 1 2 7 1863 418 45 43 87.630013 in5 1 4 1 2 8 1928 418 76 43 93.251907 thes 1 4 1 2 9 2022 416 177 56 91.860458 parties'4 1 4 1 3 0 548 483 1651 65 -1 5 1 4 1 3 1 548 491 201 43 96.662521 research5 1 4 1 3 2 780 492 86 42 96.897789 ands 1 4 1 3 3 897 492 311 56 93.290321 developments 1 4 1 3 4 1241 483 214 52 38.161732 efforts.’ Not a single comment was submitted during the public comment period questioning this analysis, despite the invitation in the statement that Commissioner Azcuenaga issued when the Commission accepted the proposed order for public comment.

Commissioner Azcuenaga asks why the Commission could not have ordered a divestiture of Sandoz's wholly-owned Gene Therapy, Inc. ("GTI") subsidiary or Ciba's partially-owned Chiron Corporation subsidiary. It may be appealing to call for divestiture of businesses acquired only two or three years ago -- as both GTI and Chiron were -- particularly when one such business is only partially owned. Ciba and Chiron, however, have numerous joint efforts that would have to be unraveled to separate the two companies. And GTI's U.S. clinical development is being closely coordinated with trials that Sandoz is conducting in Europe. Divestiture in this case would not be simple. To divest a business that would have such extensive continuing entanglements with the merged firm -- its principal competitor -- not only could hamper efficiency but also could be less effective in restoring competition if it led to coordinated interaction or left the divested business at the mercy of the merged firm.” Instead of divestiture, the order requires the merged firm to license gene therapy technology and patent rights to Rhéne-Poulenc Rorer Inc. ("RPR"), so as to put RPR in a position to compete against the combined firm. In this way, RPR will be able to continue its research to develop HSV-tk gene therapy products for cancer and graft versus host disease. Commissioner Azcuenaga suggests that this relief only creates a potential clone that may5 1 4 3 7 9 1805 2291 155 42 96.792183 follows 1 4 3 7 10 1988 2287 209 44 96.289085 identical4 1 4 3 8 0 563 2354 1635 63 -1 5 1 4 3 8 1 563 2362 236 55 93.299500 [research]5 1 4 3 8 2 825 2354 198 52 39.137478 tracks.’ We can not agree. This licensing package will give RPR the intellectual property that it likely could have obtained but for this merger's effect in reducing Novartis' incentive to license, so that RPR may continue to research and develop products on its own. Given RPR's ongoing research efforts, there is no basis for the assertion that this licensing package will turn RPR's efforts into a clone of the merging firms.

Va2 1 7 0 0 0 566 2991 1632 93 -1 3 1 7 1 0 0 566 2991 1632 93 -1 4 1 7 1 1 0 631 2991 1567 43 -1 5 1 7 1 1 1 631 2997 176 29 96.600441 Divestitures 1 7 1 1 2 820 2997 38 29 96.928406 of5 1 7 1 1 3 868 2997 47 29 96.969772 thes 1 7 1 1 4 929 3002 67 32 96.970741 types 1 7 1 1 5 1010 2997 59 29 96.390617 that5 1 7 1 1 6 1082 2998 239 29 93.286194 Commissioners 1 7 1 1 7 1334 2998 178 34 93.000977 Azcuenaga5 1 7 1 1 8 1528 2996 94 29 96.966484 favors5 1 7 1 1 9 1636 2995 61 29 96.984627 also5 1 7 1 1 10 1712 2994 96 37 96.232590 might5 1 7 1 1 11 1820 2994 75 29 96.327179 have5 1 7 1 1 12 1909 2991 154 38 96.826492 disrupted5 1 7 1 1 13 2077 3000 34 20 96.932732 or5 1 7 1 1 14 2124 3000 74 20 96.763336 even4 1 7 1 2 0 566 3045 1240 39 -1 5 1 7 1 2 1 566 3046 97 28 96.937981 ended5 1 7 1 2 2 677 3047 47 28 96.497696 thes 1 7 1 2 3 736 3047 134 37 93.245132 merging5 1 7 1 2 4 884 3047 88 28 87.785881 firms'5 1 7 1 2 5 984 3046 132 37 96.487732 ongoing5 1 7 1 2 6 1128 3048 231 28 93.575775 collaborations5 1 7 1 2 7 1372 3045 70 29 96.830887 with5 1 7 1 2 8 1455 3045 149 29 96.498848 academic5 1 7 1 2 9 1617 3045 189 29 96.850349 researchers.2 1 8 0 0 0 597 3097 755 61 -1 3 1 8 1 0 0 597 3097 755 61 -1 4 1 8 1 1 0 597 3097 407 29 -1 5 1 8 1 1 1 597 3097 17 26 95.687935 95 1 8 1 1 2 958 3121 46 5 6.741753 ee4 1 8 1 2 0 628 3121 724 37 -1 5 1 8 1 2 1 628 3121 159 28 96.622459 Statements 1 8 1 2 2 798 3121 38 29 96.556160 of5 1 8 1 2 3 843 3121 236 29 93.301094 Commissioners 1 8 1 2 4 1090 3122 182 36 92.161057 Azcuenaga5 1 8 1 2 5 1284 3126 28 24 96.869492 at5 1 8 1 2 6 1324 3122 28 27 96.234383 3. CIBA-GEIGY LIMITED, ET AL. 897 842 Separate Statement In addition, the order mandates that the merged firm license specific patents of Ciba and Sandoz to any interested person at a reasonable royalty. The dissent seems to suggest that such relief is illadvised because it is based on some notion of the essentials 1 3 1 4 12 1975 543 224 45 94.788895 facilities”4 1 3 1 5 0 562 615 1641 60 -1 5 1 3 1 5 1 562 618 213 53 96.538994 doctrine,5 1 3 1 5 2 795 618 33 44 93.305511 it5 1 3 1 5 3 843 633 159 42 93.280952 usurps5 1 3 1 5 4 1020 619 72 43 97.017632 thes 1 3 1 5 5 1108 619 94 43 96.095802 roles 1 3 1 5 6 1220 618 55 44 97.006935 of5 1 3 1 5 7 1284 618 72 44 96.792542 thes 1 3 1 5 8 1372 619 153 42 96.625465 Patents 1 3 1 5 9 1543 616 86 43 96.765686 ands 1 3 1 5 10 1646 615 266 44 96.169662 Trademarks 1 3 1 5 11 1929 615 167 51 96.532265 Office,5 1 3 1 5 12 2117 615 86 42 96.558418 anda 1 3 1 6 0 561 684 1643 61 -1 5 1 3 1 6 1 561 690 71 42 96.250816 thes 1 3 1 6 2 649 688 154 55 96.250816 settings 1 3 1 6 3 819 688 56 43 96.154198 of5 1 3 1 6 4 885 702 26 30 96.154198 a5 1 3 1 6 5 924 688 170 56 96.545555 royalty5 1 3 1 6 6 1109 694 90 38 97.001701 rates 1 3 1 6 7 1214 694 99 51 96.952606 puts5 1 3 1 6 8 1330 688 74 43 96.475121 thes 1 3 1 6 9 1422 685 306 46 96.368652 Commissions 1 3 1 6 10 1745 684 48 44 96.704857 in5 1 3 1 6 11 1808 684 73 44 96.927025 thes 1 3 1 6 12 1895 684 200 56 96.786179 positions 1 3 1 6 13 2111 684 57 43 94.042206 of5 1 3 1 6 14 2178 697 26 30 94.042206 a4 1 3 1 7 0 560 757 367 58 -1 5 1 3 1 7 1 560 757 121 58 96.833694 prices 1 3 1 7 2 696 758 231 55 96.924347 regulator.3 1 3 2 0 0 560 822 1646 894 -1 4 1 3 2 1 0 651 822 1551 60 -1 5 1 3 2 1 1 651 827 121 52 96.884674 First,5 1 3 2 1 2 788 826 33 45 96.884674 it5 1 3 2 1 3 836 826 39 44 96.947044 is5 1 3 2 1 4 890 833 78 38 96.947128 not5 1 3 2 1 5 984 833 193 38 96.359344 accurate5 1 3 2 1 6 1192 832 44 38 96.980766 to5 1 3 2 1 7 1253 831 178 51 96.734779 suggests 1 3 2 1 8 1444 826 89 43 96.730545 that5 1 3 2 1 9 1547 824 85 44 96.974510 this5 1 3 2 1 10 1647 825 182 54 96.835167 remedy5 1 3 2 1 11 1847 823 130 44 96.887466 flows5 1 3 2 1 12 1996 823 118 43 96.535378 from5 1 3 2 1 13 2129 822 73 44 96.535378 thea 1 3 2 2 0 562 891 1641 56 -1 5 1 3 2 2 1 562 897 205 44 96.539734 essentials 1 3 2 2 2 800 897 207 42 96.539734 facilities5 1 3 2 2 3 1039 897 208 43 96.473579 doctrine.5 1 3 2 2 4 1281 897 92 42 96.236542 Thes 1 3 2 2 5 1406 894 307 45 96.065392 Commissions 1 3 2 2 6 1743 894 40 42 96.707138 is5 1 3 2 2 7 1815 898 77 38 96.661247 not5 1 3 2 2 8 1924 892 158 55 96.389297 saying5 1 3 2 2 9 2113 891 90 44 95.939217 that4 1 3 2 3 0 563 962 1639 60 -1 5 1 3 2 3 1 563 966 208 45 90.805069 Sandoz's5 1 3 2 3 2 804 981 53 28 96.577217 ex5 1 3 2 3 3 890 969 99 41 96.577217 vivo5 1 3 2 3 4 1021 972 148 50 96.728867 patents 1 3 2 3 5 1203 966 83 42 96.933815 ands 1 3 2 3 6 1318 963 248 45 96.420387 associated5 1 3 2 3 7 1599 962 210 57 96.831612 cytokine5 1 3 2 3 8 1840 966 172 51 96.902641 patents5 1 3 2 3 9 2046 975 72 29 96.238289 ares 1 3 2 3 10 2151 975 51 29 96.586105 so4 1 3 2 4 0 561 1030 1642 61 -1 5 1 3 2 4 1 561 1036 230 55 96.597382 important5 1 3 2 4 2 806 1035 93 44 96.975281 that5 1 3 2 4 3 915 1036 104 55 96.414009 they5 1 3 2 4 4 1036 1035 182 56 96.693649 ought" to be shared with everyone. Instead, the remedy is a response to a merger in which the merging parties possessed competing technologies. Before the merger, if developers of potential gene therapies were unable to reach agreement with Sandoz to license the ex vivo and associated patents, in many instances they could have worked with Ciba and used other technologies that did not infringe the ex vivo patent.'° The merger has eliminated that option. Granting the right to sublicense was necessary to restore access to the critical patents for other developers of many gene therapies.

Second, although the Commission alleges in its complaint that both Ciba and Sandoz control portfolios of issued patents and patent applications “of uncertain breadth and validity,"'’ the Commission does so not as a patent tribunal but as a body charged with evaluating how market reality -- including firms' perceptions of their own and others' positions -- affects competitive behavior. Ciba and Sandoz each controlled a variety of patents and patent applications, and their merger combined alternative technologies and approaches to research and development. Whereas before the merger third parties might have had the option of licensing one party's patents or challenging the validity of the other's, the Commission was concerned that the merger created a killer patent portfolio so broad as to eliminate that option. As aresult, the merger created a disincentive for Novartis to license ee Analysis to Aid Public Comment at 6 ("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."). Complaint J 31 f.

Statement 123 F.T.C.

third parties.'” Broad licensing of the ex vivo patent and the cytokines resolves these concerns. Simply stated, licensing of these patents preserves the innovation competition that would otherwise be lost as a result of the merger.”

Third, the Commission must always think long and hard before it enters an order which sets a price. But that cautionary rule should not be turned into an absolute. The Commission believes that a compulsory license was a more focused and effective remedy than divestiture. If there is to be a compulsory license, there must be a price, and that price cannot be too high."* In this case the price was set at a level that would not interfere with the restoration of competition, and was commensurate with similar kinds of licenses negotiated in similar situations in the free market.

In short, requiring Novartis to license the key gene therapy patent rights is the best way to maintain competition and preserve the efficiencies gained in this transaction.

STATEMENT OF COMMISSIONER MARY L. AZCUENAGA, CONCURRING IN PART AND DISSENTING IN PART The order in this matter seeks to remedy the alleged anticompetitive effects of the merger of Ciba-Geigy Limited and Sandoz Ltd. in several product markets, corn herbicides, flea control products, and various gene therapy markets. I concur in the requirements of the order that the merged firm, Novartis, divest the corn herbicide business and the flea control product business that belonged to Sandoz. I do not concur with the order in the gene therapy markets, in which the Commission has bypassed the obvious, simple and effective remedy of divestiture in favor of a complex regulatory concoction that promises to be less effective and more costly.

Complaint JJ 15, 31 f, g. See W. Tom and J. Newberg, U.S.5 1 10 1 2 14 1654 2512 206 30 96.112267 Enforcement5 1 10 1 2 15 1873 2511 194 39 96.394852 Approaches5 1 10 1 2 16 2082 2517 29 23 96.883858 to5 1 10 1 2 17 2127 2511 48 29 96.883858 thea 1 10 1 3 0 533 2560 1642 47 -1 5 1 10 1 3 1 533 2569 343 31 92.651489 Antitrust/Intellectual5 1 10 1 3 2 896 2571 136 36 96.979385 Property5 1 10 1 3 3 1051 2569 164 35 87.561394 Interface, in Competition Policy, Intellectual Property Rights, and International Economic Integration.

The dissent appears to suggest that the licensing remedy called into question the decision of NIH to license the ex vivo patent to Sandoz on an exclusive basis. Statement of Commissioner Azcuenaga at 5. That criticism is inapt since NIH's license grants Sandoz the full authority to sublicense the patent. In previous cases the Commission has had concerns with royalty payments in licenses meant to restore competition eliminated by merger. There are two reasons for such a concern: (1) royalties can lead to information exchanges facilitating collusion, and (2) royalties can interfere with firms’ incentives to compete vigorously. The order issued today minimizes the exchange of competitively sensitive information through use of an independent auditor to collect and aggregate royalty payments. Moreover, the relatively low royalty rate is unlikely to affect development of potential blockbuster drugs. See Analysis to Aid Public Comment at 8. CIBA-GEIGY LIMITED, ET AL. 899 842 Statement Given the allegations of the complaint, the obvious remedy in the gene therapy markets is to require the divestiture of the gene therapy business of either Ciba-Geigy or Sandoz. A divestiture of GTI' or of Ciba-Geigy's interest in Chiron’ would eliminate the alleged anticompetitive overlaps in the gene therapy markets’ and preserve the competition that existed before the merger. It is a remedy that would be simple, complete, and easily reviewable. Normally, divestiture would be the remedy of choice, and no persuasive reason for a different remedy has been presented in this case. The order of the Commission instead imposes licensing requirements that do not necessarily preserve the competition that existed before the merger. The only explanation offered for preferring licensing over an asset divestiture is the assertion in the Analysis To Aid Public Comment that a divestiture might5 1 3 2 5 8 1715 1261 143 37 96.883263 creates 1 3 2 5 9 1881 1269 26 29 97.010841 a5 1 3 2 5 10 1929 1253 259 45 96.265694 substantial4 1 3 2 6 0 552 1314 1638 71 -1 5 1 3 2 6 1 552 1329 248 56 96.451134 disruption5 1 3 2 6 2 818 1329 48 43 97.007500 in5 1 3 2 6 3 883 1329 72 43 93.004890 thes 1 3 2 6 4 973 1329 172 56 90.943275 parties'5 1 3 2 6 5 1167 1328 200 45 96.529572 research5 1 3 2 6 6 1388 1327 83 44 96.586014 ands 1 3 2 6 7 1490 1326 311 54 96.356049 developments 1 3 2 6 8 1822 1314 217 53 92.338135 efforts.* What this means is not clear. Any divestiture is likely to involve substantial disruption, and if concerns about disruption were sufficient to avert a divestiture, that remedy would never be used. No doubt the parties prefer the negotiated licensing arrangement, but the preferences of the parties should not define the remedy.

The implication that divestiture in this case somehow would be counterproductive does not ring quite true. This is an industry in which cooperative research and development often is undertaken and in which innovative companies frequently change hands. Indeed, Ciba-Geigy and Sandoz only recently acquired their interests in the gene therapy field.° The gene therapy products at issue require years of research, and the FDA approval process also takes years. If the respective acquisitions by Ciba-Geigy and Sandoz in 1994 and 1995 of gene therapy companies did not hamper ongoing and future R&D Sandoz participated in the gene therapy market through its wholly-owned subsidiary Gene Therapy, Inc. (GTI), a corporation headquartered in Maryland that Sandoz acquired in 1995. Ciba-Geigy participated in the gene therapy market through Chiron Corporation, a company headquartered in California, in which Ciba-Geigy acquired a 46.5% interest in 1994, Chiron acquired Viagene, Inc., a U.S. gene therapy firm, in 1995. See Complaint {fj 31.d through g.

4 Analysis To Aid Public Comment at 7. The Analysis, published with the proposed consent order, states that its purposes 1 8 1 2 5 906 2953 13 50 73.139709 .5 1 8 1 2 6 937 2986 4 6 45.244450 .5 1 8 1 2 7 956 2986 4 5 80.148819 .5 1 8 1 2 8 974 2962 24 30 97.006927 is5 1 8 1 2 9 1010 2967 30 24 96.355759 to5 1 8 1 2 10 1052 2962 138 30 96.355759 facilitates 1 8 1 2 11 1201 2962 98 37 96.609215 public5 1 8 1 2 12 1311 2965 147 26 96.337311 comments 1 8 1 2 13 1468 2970 37 20 96.337311 on5 1 8 1 2 14 1519 2960 47 29 97.011284 thes 1 8 1 2 15 1578 2959 149 38 97.004532 proposed5 1 8 1 2 16 1740 2959 96 34 96.907265 order,5 1 8 1 2 17 1849 2959 57 28 96.910278 ands 1 8 1 2 18 1920 2958 23 29 96.872772 it5 1 8 1 2 19 1956 2958 24 29 96.237106 is5 1 8 1 2 20 1994 2962 53 25 96.237106 not5 1 8 1 2 21 2060 2957 139 30 96.734886 intended4 1 8 1 3 0 553 3004 1647 42 -1 5 1 8 1 3 1 553 3013 29 24 96.987099 to5 1 8 1 3 2 595 3008 158 29 96.954651 constitutes 1 8 1 3 3 766 3016 35 21 96.791573 an5 1 8 1 3 4 816 3007 113 30 96.675735 officials 1 8 1 3 5 946 3007 222 39 96.281082 interpretations 1 8 1 3 6 1182 3009 36 29 96.859879 of5 1 8 1 3 7 1227 3008 47 29 96.760414 thes 1 8 1 3 8 1287 3011 170 34 96.232666 agreements 1 8 1 3 9 1468 3006 56 30 96.232666 ands 1 8 1 3 10 1538 3006 147 38 96.595367 proposed5 1 8 1 3 11 1699 3005 87 29 96.595367 orders 1 8 1 3 12 1797 3013 35 21 96.710846 or5 1 8 1 3 13 1844 3008 30 25 96.710846 to5 1 8 1 3 14 1888 3004 119 37 96.915054 modify5 1 8 1 3 15 2021 3004 28 29 96.222679 in5 1 8 1 3 16 2064 3013 57 28 96.511093 any5 1 8 1 3 17 2134 3013 66 27 96.151054 way4 1 8 1 4 0 553 3054 317 29 -1 5 1 8 1 4 1 553 3054 35 29 96.710548 its5 1 8 1 4 2 601 3054 114 29 89.815437 terms. /d. at 17.

> See notes 1 & 2 supra.

Statement 123 F.T.C.

projects, one must wonder why a divestiture in 1997 of one of those companies would be problematic.

Also, the licensing requirements imposed by the order are somewhat different from what we previously have seen. In the HSVtk gene therapy markets, the complaint on which the order is based alleges that Ciba-Geigy and Sandoz, after the merger, could combine4 1 5 2 5 0 540 738 1635 69 -1 5 1 5 2 5 1 540 751 252 44 95.583534 alternatives 1 5 2 5 2 816 753 318 54 96.750870 technologies,5 1 5 2 5 3 1160 753 85 43 96.998428 ands 1 5 2 5 4 1268 752 157 43 97.003830 reduces 1 5 2 5 5 1449 749 259 45 93.300926 innovations 1 5 2 5 6 1732 738 333 66 28.077652 competition* and that [o]nly5 1 5 2 6 3 863 827 88 37 96.014084 two5 1 5 2 6 4 985 820 256 57 96.014084 companies5 1 5 2 6 5 1276 819 296 57 96.513542 [presumably5 1 5 2 6 6 1605 818 117 45 96.752319 Ciba5 1 5 2 6 7 1754 818 87 43 96.378281 ands 1 5 2 6 8 1874 816 193 54 95.562973 Sandoz]5 1 5 2 6 9 2103 818 71 40 95.562973 area 1 5 2 7 0 539 880 1636 65 -1 5 1 5 2 7 1 539 891 178 54 96.556976 capable5 1 5 2 7 2 735 890 54 43 96.962395 of5 1 5 2 7 3 799 890 332 55 93.297516 commercially5 1 5 2 7 4 1148 880 308 65 86.864365 developing’ the HSV-tk gene therapies at issue.* The order permits Ciba-Geigy and Sandoz to combine their research and development projects in the HSV-tk gene therapy markets and requires them to license their combined intellectual property to an entity approved by the Commission. Instead of preserving the premerger competition between Ciba-Geigy and Sandoz, the order allows the allegedly anticompetitive combination to stand, as long as it clones its intellectual property.’ Novartis remains free to combines 1 5 2 15 5 1152 1444 252 44 96.481949 alternatives 1 5 2 15 6 1421 1441 344 56 95.765526 technologies, as alleged in the complaint. The diversity of research projects is an element of the premerger competition between Sandoz and Ciba-Geigy that is worth preserving, '° but the order does not ensure that it is preserved. The remedy in the market for Factor VIII gene therapy for the treatment of hemophiliacs offers two alternatives for licensing." It is not clear how these alternatives will eventually work out, but neither of them necessarily preserves the competition that existed before the merger. A divestiture of either GTI or of Ciba-Geigy's interest in Chiron would have preserved the diversity of competition that existed before the merger.

The complaint also alleges a market for thes 1 5 4 1 9 1860 2205 203 43 96.441788 research5 1 5 4 1 10 2097 2203 85 44 96.900040 anda 1 5 4 2 0 538 2274 1644 61 -1 5 1 5 4 2 1 538 2280 304 54 96.776131 developments 1 5 4 2 2 858 2280 56 42 96.873650 of5 1 5 4 2 3 924 2293 108 42 96.455688 genes 1 5 4 2 4 1049 2280 215 54 92.523514 therapy, in which Ciba-Geigy and Sandoz are ‘: Complaint ¥ 31.d.

Complaint ff] 16 & 17.

8 , The complaint alleges HSV-tk gene therapy markets for the treatment of cancer and for the treatment of graft versus host disease.

In addition, at the option of the licensee of the intellectual property, Novartis (but not Chiron, see note 2 supra) is required to provide technical5 1 9 1 2 9 1313 2782 200 32 96.697311 information,5 1 9 1 2 10 1526 2781 176 29 96.163406 know-how5 1 9 1 2 11 1714 2789 35 20 96.232758 or5 1 9 1 2 12 1760 2779 150 29 92.722717 materials5 1 9 1 2 13 1925 2803 4 4 91.988068 .5 1 9 1 2 14 1946 2803 4 3 82.783470 .5 1 9 1 2 15 1971 2802 1 4 82.783470 .5 1 9 1 2 16 1985 2787 159 26 96.589394 necessary5 1 9 1 2 17 2157 2781 29 24 96.589394 to4 1 9 1 3 0 538 2826 1306 40 -1 5 1 9 1 3 1 538 2829 120 29 95.733978 enable the licensee to research and develop HSV-tk products. Order 4] [X.A.2. 10 ; F See FTC & DOJ, Antitrust Guidelines for the Licensing of Intellectual Property J] 3.2.3 (1995), reprinted in 4 Trade Reg. Rep. (CCH) § 13,132. 11 : ia Order ¥ IX.D requires Sandoz to convert its exclusive license to the partial Factor VIII hemophilia gene to a nonexclusive one or to license certain of its relevant intellectual property ("Hemophilia License," defined in Order { I.PP).

CIBA-GEIGY LIMITED, ET AL. 901 842 Statement two5 1 5 1 1 2 726 345 57 42 96.563507 of5 1 5 1 1 3 790 343 105 55 96.563927 only5 1 5 1 1 4 911 357 25 29 96.587662 a5 1 5 1 1 5 951 343 85 43 96.587662 few5 1 5 1 1 6 1053 342 165 44 96.946800 entities5 1 5 1 1 7 1235 342 180 54 96.602509 capable5 1 5 1 1 8 1431 340 55 44 96.631889 of5 1 5 1 1 9 1494 337 326 56 95.914520 commercially5 1 5 1 1 10 1835 336 268 56 96.466248 developing5 1 5 1 1 11 2120 349 114 41 96.984985 gene4 1 5 1 2 0 599 406 1636 62 -1 5 1 5 1 2 1 599 413 180 55 96.525444 therapy5 1 5 1 2 2 798 412 229 56 96.288002 products and in which they control critical5 1 5 1 2 9 1919 420 112 41 96.251801 genes 1 5 1 2 10 2052 406 183 55 96.923744 therapy4 1 5 1 3 0 597 472 1639 65 -1 5 1 5 1 3 1 597 483 272 54 93.288353 proprietary5 1 5 1 3 2 886 472 306 64 17.570259 portfolios."5 1 5 1 3 3 1211 482 49 41 96.928543 In5 1 5 1 3 4 1277 480 87 43 96.922218 this5 1 5 1 3 5 1383 478 167 44 96.494171 overall5 1 5 1 3 6 1567 477 169 44 96.937233 markets 1 5 1 3 7 1755 476 67 44 96.937233 for5 1 5 1 3 8 1839 477 72 42 96.695549 thes 1 5 1 3 9 1928 475 202 43 96.817719 research5 1 5 1 3 10 2148 474 88 44 96.631668 anda 1 5 1 4 0 599 543 1636 63 -1 5 1 5 1 4 1 599 551 306 55 96.575783 developments 1 5 1 4 2 920 551 54 42 97.006645 of5 1 5 1 4 3 982 564 110 41 97.012253 genes 1 5 1 4 4 1109 550 191 55 96.662277 therapy,5 1 5 1 4 5 1319 550 73 41 96.451279 thes 1 5 1 4 6 1409 560 172 42 96.451279 mergers 1 5 1 4 7 1599 546 219 54 96.613800 allegedly5 1 5 1 4 8 1833 545 151 42 96.588043 would5 1 5 1 4 9 2003 543 232 56 95.895363 heighten barriers to entry by combining portfolios of patents and patent applications of uncertain breadth and validity" and creates 1 5 1 6 9 2211 696 27 28 96.755859 a4 1 5 1 7 0 599 751 1638 60 -1 5 1 5 1 7 1 599 756 292 45 96.211853 disincentive5 1 5 1 7 2 924 757 44 43 96.211853 in5 1 5 1 7 3 999 758 73 42 96.072540 thes 1 5 1 7 4 1104 756 179 55 96.704926 merged5 1 5 1 7 5 1316 754 104 44 96.704926 firms 1 5 1 7 6 1452 759 45 38 96.741470 to5 1 5 1 7 7 1532 753 166 43 96.770386 licenses 1 5 1 7 8 1731 751 266 44 96.665329 intellectual5 1 5 1 7 9 2030 756 207 50 96.777473 property4 1 5 1 8 0 598 817 1638 65 -1 5 1 5 1 8 1 598 817 191 65 17.337326 rights'? to others. The remedy for the alleged violation is to require the licensing of intellectual property rights at a low"*5 1 5 1 9 10 1956 889 172 55 96.987259 royalty5 1 5 1 9 11 2145 894 92 38 96.999733 rate4 1 5 1 10 0 600 955 575 65 -1 5 1 5 1 10 1 600 965 233 55 96.984970 stipulated5 1 5 1 10 2 851 965 46 43 96.990196 in5 1 5 1 10 3 912 966 71 42 96.658737 thes 1 5 1 10 4 1000 955 175 53 17.438736 order.”3 1 5 2 0 0 597 1027 1643 619 -1 4 1 5 2 1 0 689 1027 1548 64 -1 5 1 5 2 1 1 689 1035 232 44 96.894470 Remedies5 1 5 2 1 2 938 1035 86 43 96.974983 that5 1 5 2 1 3 1038 1034 167 57 96.866135 requires 1 5 2 1 4 1220 1034 70 43 96.553299 thes 1 5 2 1 5 1307 1030 305 47 96.553299 Commissions 1 5 2 1 6 1626 1036 45 37 96.533348 to5 1 5 2 1 7 1686 1029 149 57 96.856819 police5 1 5 2 1 8 1850 1028 144 57 96.682106 prices5 1 5 2 1 9 2012 1027 225 56 96.597084 generally4 1 5 2 2 0 600 1097 1636 62 -1 5 1 5 2 2 1 600 1119 69 29 96.599953 ares 1 5 2 2 2 684 1104 250 44 96.599953 disfavored5 1 5 2 2 3 950 1118 46 30 97.001312 as5 1 5 2 2 4 1012 1104 155 55 96.705757 highly5 1 5 2 2 5 1182 1102 263 56 96.964005 regulatory,5 1 5 2 2 6 1463 1099 195 45 96.848518 difficult5 1 5 2 2 7 1675 1104 44 38 97.002319 to5 1 5 2 2 8 1739 1099 176 43 96.759911 enforces 1 5 2 2 9 1933 1098 86 44 96.935646 ands 1 5 2 2 10 2037 1097 138 55 96.472473 likely5 1 5 2 2 11 2190 1102 46 38 97.019333 to4 1 5 2 3 0 600 1167 1638 60 -1 5 1 5 2 3 1 600 1173 151 44 96.831711 distort5 1 5 2 3 2 788 1174 73 43 96.254364 thes 1 5 2 3 3 897 1174 167 43 96.300926 normal5 1 5 2 3 4 1102 1171 277 56 96.125717 functioning5 1 5 2 3 5 1415 1171 56 43 95.636238 of5 1 5 2 3 6 1499 1170 73 43 96.822197 thes 1 5 2 3 7 1607 1168 179 45 96.418701 market.5 1 5 2 3 8 1825 1168 124 55 96.680725 They5 1 5 2 3 9 1984 1167 160 44 96.333549 should5 1 5 2 3 10 2179 1167 59 42 96.533379 be4 1 5 2 4 0 597 1236 1641 63 -1 5 1 5 2 4 1 597 1243 273 56 96.915955 particularly5 1 5 2 4 2 886 1242 245 44 96.715248 disfavored5 1 5 2 4 3 1148 1242 45 44 96.423431 in5 1 5 2 4 4 1210 1255 124 29 96.423431 cases5 1 5 2 4 5 1353 1241 111 43 97.006142 such5 1 5 2 4 6 1481 1253 47 30 97.002747 as5 1 5 2 4 7 1545 1239 87 43 96.669701 this5 1 5 2 4 8 1650 1237 47 44 96.863762 in5 1 5 2 4 9 1712 1237 147 44 96.763077 which5 1 5 2 4 10 1865 1232 24 71 96.533379 a5 1 5 2 4 11 1917 1237 140 50 95.836899 clean,5 1 5 2 4 12 2076 1236 162 55 96.174942 simple4 1 5 2 5 0 599 1305 1641 62 -1 5 1 5 2 5 1 599 1312 248 43 96.354530 divestitures 1 5 2 5 2 864 1312 54 43 95.866119 of5 1 5 2 5 3 927 1326 24 29 95.866119 a5 1 5 2 5 4 967 1326 109 41 96.988426 genes 1 5 2 5 5 1091 1312 179 55 97.016777 therapy5 1 5 2 5 6 1285 1309 206 44 96.434799 business5 1 5 2 5 7 1509 1308 39 44 96.540657 is5 1 5 2 5 8 1564 1306 170 56 96.861153 readily5 1 5 2 5 9 1751 1306 215 43 96.305893 available5 1 5 2 5 10 1984 1306 85 43 96.406303 ands 1 5 2 5 11 2085 1305 155 43 95.916512 would4 1 5 2 6 0 598 1373 1642 64 -1 5 1 5 2 6 1 598 1388 76 37 96.199226 not5 1 5 2 6 2 689 1381 174 56 96.409843 impedes 1 5 2 6 3 879 1381 347 43 96.681129 consummation5 1 5 2 6 4 1241 1380 55 43 96.980270 of5 1 5 2 6 5 1304 1380 73 42 97.014427 thes 1 5 2 6 6 1392 1377 243 45 96.522675 remainder5 1 5 2 6 7 1649 1377 55 42 96.970383 of5 1 5 2 6 8 1711 1377 73 42 96.931328 thes 1 5 2 6 9 1798 1374 274 52 96.535110 transaction,5 1 5 2 6 10 2089 1373 151 44 96.820488 which4 1 5 2 7 0 600 1443 1639 63 -1 5 1 5 2 7 1 600 1450 38 44 96.726379 is5 1 5 2 7 2 668 1450 169 44 96.459435 neutral5 1 5 2 7 3 867 1464 50 29 93.241585 or5 1 5 2 7 4 942 1449 377 57 92.918198 procompetitive.5 1 5 2 7 5 1351 1447 107 44 96.180344 This5 1 5 2 7 6 1490 1459 169 43 96.949051 agency5 1 5 2 7 7 1689 1445 122 43 96.735458 often5 1 5 2 7 8 1839 1444 78 44 96.651909 has5 1 5 2 7 9 1946 1444 115 43 96.532272 been5 1 5 2 7 10 2090 1443 46 44 96.738297 in5 1 5 2 7 11 2165 1443 74 43 96.389725 thea 1 5 2 8 0 600 1512 1639 63 -1 5 1 5 2 8 1 600 1521 214 42 96.473106 forefront5 1 5 2 8 2 833 1519 45 44 96.920349 in5 1 5 2 8 3 898 1519 218 56 96.616478 opposing5 1 5 2 8 4 1137 1523 288 52 96.459053 governments 1 5 2 8 5 1442 1516 122 56 96.665413 prices 1 5 2 8 6 1584 1515 207 51 96.621994 controls,5 1 5 2 8 7 1810 1514 149 44 96.157082 which5 1 5 2 8 8 1977 1513 154 43 96.157082 makes5 1 5 2 8 9 2150 1512 89 44 96.971107 this4 1 5 2 9 0 597 1585 977 61 -1 5 1 5 2 9 1 597 1595 93 51 96.879982 parts 1 5 2 9 2 707 1590 56 43 96.879982 of5 1 5 2 9 3 773 1590 73 42 96.690193 thes 1 5 2 9 4 863 1590 126 43 96.275856 orders 1 5 2 9 5 1001 1588 280 56 96.535507 particularly5 1 5 2 9 6 1296 1585 278 57 96.259323 mystifying.3 1 5 3 0 0 597 1651 1646 409 -1 4 1 5 3 1 0 689 1651 1552 62 -1 5 1 5 3 1 1 689 1659 91 42 96.201218 Thes 1 5 3 1 2 796 1659 280 54 96.823013 compulsory5 1 5 3 1 3 1092 1657 210 55 96.490631 licensing5 1 5 3 1 4 1317 1656 288 56 96.531601 requirements 1 5 3 1 5 1623 1653 164 56 96.638184 applies5 1 5 3 1 6 1803 1659 44 37 96.935516 to5 1 5 3 1 7 1863 1653 72 43 96.744995 thes 1 5 3 1 8 1953 1651 217 44 96.710136 so-called5 1 5 3 1 9 2187 1666 54 28 96.463127 ex4 1 5 3 2 0 599 1718 1641 64 -1 5 1 5 3 2 1 599 1731 99 40 96.262337 vivo5 1 5 3 2 2 726 1741 51 30 96.640831 or5 1 5 3 2 3 800 1728 235 43 93.265106 Anderson5 1 5 3 2 4 1059 1718 197 64 31.974556 patent.'®5 1 5 3 2 5 1281 1726 95 43 96.775322 Thes 1 5 3 2 6 1402 1740 52 28 96.929497 ex5 1 5 3 2 7 1479 1728 99 39 96.505249 vivo5 1 5 3 2 8 1603 1728 161 52 97.005905 patent,5 1 5 3 2 9 1791 1722 150 44 96.830894 issued5 1 5 3 2 10 1967 1721 47 43 96.562477 in5 1 5 3 2 11 2043 1722 129 51 96.518700 1995,5 1 5 3 2 12 2201 1719 39 45 96.944397 is4 1 5 3 3 0 600 1790 1642 62 -1 5 1 5 3 3 1 600 1798 160 43 96.524750 owned5 1 5 3 3 2 782 1797 62 55 95.844673 by5 1 5 3 3 3 866 1797 72 43 96.860001 thes 1 5 3 3 4 957 1797 209 44 96.873619 National5 1 5 3 3 5 1188 1795 221 44 96.408157 Institutes5 1 5 3 3 6 1432 1794 56 43 96.836693 of5 1 5 3 3 7 1502 1793 162 43 96.748047 Health5 1 5 3 3 8 1686 1792 144 55 91.400078 (NIH)5 1 5 3 3 9 1853 1792 85 43 96.645943 ands 1 5 3 3 10 1961 1791 198 43 96.499725 licensed5 1 5 3 3 11 2178 1790 64 54 96.830170 by4 1 5 3 4 0 597 1860 1645 61 -1 5 1 5 3 4 1 597 1867 108 43 95.069160 NIH5 1 5 3 4 2 741 1866 273 55 95.069160 exclusively5 1 5 3 4 3 1050 1872 44 36 96.943390 to5 1 5 3 4 4 1131 1866 187 43 96.779182 Sandoz.5 1 5 3 4 5 1357 1866 66 41 95.664261 To5 1 5 3 4 6 1460 1861 355 45 96.111504 commercialize5 1 5 3 4 7 1851 1875 25 29 96.405685 a5 1 5 3 4 8 1911 1874 112 42 96.405685 genes 1 5 3 4 9 2058 1860 184 54 96.560379 therapy4 1 5 3 5 0 597 1929 1646 62 -1 5 1 5 3 5 1 597 1936 194 55 96.711067 product,5 1 5 3 5 2 809 1950 26 29 96.813820 a5 1 5 3 5 3 849 1936 243 43 96.730164 researchers 1 5 3 5 4 1104 1935 147 43 96.479324 would5 1 5 3 5 5 1266 1933 114 44 96.995193 needs 1 5 3 5 6 1396 1933 138 43 96.737778 either5 1 5 3 5 7 1550 1945 26 29 96.848244 a5 1 5 3 5 8 1593 1930 166 44 96.754105 licenses 1 5 3 5 9 1776 1930 114 43 96.657761 from5 1 5 3 5 10 1909 1930 176 44 95.986687 Sandoz5 1 5 3 5 11 2102 1929 141 43 96.533653 under4 1 5 3 6 0 599 1990 1333 70 -1 5 1 5 3 6 1 599 2005 72 43 95.523590 thes 1 5 3 6 2 688 2020 52 28 95.523590 ex5 1 5 3 6 3 756 2008 99 39 96.984108 vivo5 1 5 3 6 4 873 2009 145 51 96.715294 patents 1 5 3 6 5 1036 2017 50 30 96.310883 or5 1 5 3 6 6 1102 2017 25 30 93.851761 a5 1 5 3 6 7 1143 2004 207 43 93.851761 different5 1 5 3 6 8 1365 2002 135 43 95.555878 modes 1 5 3 6 9 1518 2001 57 43 93.151810 of5 1 5 3 6 10 1584 1990 348 54 37.558155 transduction.” The requirement to license the ex vivo patent does not follow, as in the usual case, from ownership by the merger partner of competing technology. There is no substitute for the ex vivo patent, and Sandoz is the exclusive licensee under the patent. The question, then, is what links the compulsory licensing requirement to the violation alleged 2 Complaint $f 14 & 15.

Complaint Jf] 31.f & g.

ie Analysis To Aid Public Comment, supra note 4, at 8. = Order ff IX.B & C.

iy Order ¥ [X.C. As I understand it, the two modes of delivery (called transduction) for gene therapies are ex vivo and in vivo. Ex vivo delivery involves removing, modifying and replacing the patient's cells and has been used in the majority of gene therapy trials. Jn vivo delivery involves delivery of genetic material directly into the patient. The need to invent around existing, patents can be a significant incentive for invention, To the extent that the compulsory licensing required by the order may reduce this incentive, it may reduce the research and development of alternative means of transduction for gene therapy. Statement 123 F.T.C.

in the complaint. One possibility is that the compulsory licensing requirement reflects a judgment that the ex vivo patent is excessively broad. The complaint alleges that the merger will combin[e]4 1 3 1 4 0 549 548 1647 63 -1 5 1 3 1 4 1 549 553 230 56 96.722191 portfolios5 1 3 1 4 2 795 555 55 42 97.016953 of5 1 3 1 4 3 858 560 164 49 96.909882 patents5 1 3 1 4 4 1039 556 85 42 96.898788 ands 1 3 1 4 5 1138 560 145 51 96.618774 patents 1 3 1 4 6 1299 552 285 56 96.579018 applications5 1 3 1 4 7 1601 550 55 43 97.016403 of5 1 3 1 4 8 1665 549 223 44 96.608795 uncertain5 1 3 1 4 9 1904 549 183 43 96.708481 breadth5 1 3 1 4 10 2104 548 92 43 93.815727 and:4 1 3 1 5 0 552 617 1639 60 -1 5 1 3 1 5 1 552 622 222 55 89.418900 validity. This is a curious allegation for a complaint under Section 7 of the Clayton Act and one that is not explained. Antitrust can provide the basis for challenging the use or combination of patents in some circumstances, but patent law, not antitrust law, customarily applies to assess the breadth and validity of patents. As far as I am aware, we have neither standards nor evidence by which we might conclude that the breadth or validity of the ex vivo patent provides a basis for liability under Section 7 of the Clayton Act. One authority has identified the ex vivo patent as a broad patent that cover[s]5 1 3 2 2 3 917 1260 235 30 95.813255 enormous5 1 3 2 2 4 1181 1260 121 29 96.381920 areas5 1 3 2 2 5 1330 1245 58 43 96.979782 of5 1 3 2 2 6 1407 1242 288 54 94.968781 technology and suggested that compulsory licensing would encourage follow-on invention in the field.'* Others maintain that broad patent protection for inventions 1s necessary to encourage groundbreaking research and disclosure and that compulsory licensing would harm those incentives. These are important public policy issues, but they are not elements of a violation under Section 7 of the Clayton Act. Even if some might think the ex vivo patent is too broad, it was granted to NIH by the U.S. Patent and Trademark Office, also an agency of the U.S. government, and licensed by NIH to Sandoz. It would seem curious for this agency, charged with enforcing Section 7 of the Clayton Act and Section 5 of the FTC Act, to call into question the breadth and validity of a patent granted by the Patent Office to another federal agency. It also would seem curious to call into question the decision of NIH to license the patent on an exclusive basis. To the extent that such a decision entails evaluation of the potential for advancing scientific research in aid of human health, the National Institutes of Health would appear to have qualifications superior to the FTC. The fact that the respondents agreed to this remedy tells us nothing about its competitive implications, We must look elsewhere for an explanation of the requirement to license the ex vivo patent.

- John Barton, Global Hearings Tr. 3409 (Nov. 29, 1995) (suggesting at Tr. 3415 that compulsory licensing for follow-on investors is an5 1 5 1 2 7 1251 3043 159 29 96.253708 anathema5 1 5 1 2 8 1428 3042 29 29 96.373192 in5 1 5 1 2 9 1476 3042 47 28 97.005898 thes 1 5 1 2 10 1543 3039 108 31 96.453194 United5 1 5 1 2 11 1671 3039 135 35 95.758118 States); see FTC Staff Report, Anticipating5 1 5 1 3 2 783 3090 46 29 96.240044 thes 1 5 1 3 3 842 3090 65 29 95.240089 21st5 1 5 1 3 4 916 3091 137 36 97.003395 Century:5 1 5 1 3 5 1066 3088 201 39 96.972023 Competitions 1 5 1 3 6 1280 3088 100 37 96.759888 Policy5 1 5 1 3 7 1395 3088 28 28 96.918381 in5 1 5 1 3 8 1437 3087 46 29 96.591736 thes 1 5 1 3 9 1496 3087 76 29 96.722740 News 1 5 1 3 10 1584 3084 184 38 96.679008 High-Tech,5 1 5 1 3 11 1780 3084 111 29 96.961601 Global5 1 5 1 3 12 1905 3082 236 37 89.774353 Marketplace, Ch. 8, at 13-14 (May 1996).

CIBA-GEIGY LIMITED, ET AL. 903 842 Statement A theme running through the complaint is that the ex vivo patent is essential to commercializing a gene therapy product.’? But the courts and the Commission consistently have held that a patent holder has no obligation to deal and is free to refuse to grant licenses,” even if some believe that the patent is essential to follow-on inventors. There being no apparent basis for the compulsory licensing of the ex vivo patent under Section 7 of the Clayton Act, perhaps the majority selected this remedy in the belief that it serves the public good. The patent was developed with tax dollars, it is owned by a government agency, and access to the patent could be useful to follow-on inventors. Put another way, the majority may believe it is protecting the public health or even saving lives. These are powerful arguments, but Congress heard them and decided instead to encourage the patenting of inventions resulting from government-sponsored research and the licensing of the patents to private industry as an incentive for industry to make the significant investments to bring a product to market."

A divestiture of the gene therapy business of either Ciba-Geigy or Sandoz would resolve the alleged anticompetitive overlap in all the gene therapy markets. It would preserve the competition in research and development that existed before the merger, without compulsory licensing under order, without the mandating by the Commission of reasonable fees, and without creating possible disincentives for innovative research.

I dissent from the order in the gene therapy markets. The “essential facilities" doctrine ordinarily is triggered by a refusal to deal by a monopolist and is not part of an analysis under Section 7 of the Clayton Act. se See Continental Paper Bag Co. v. Eastern Paper Bag Co., 210 U.S. 405, 426-30 (1908); see also Hartford-Empire Co. v. United States, 323 U.S. 386, 432-33, clarified, 324 U.S. 570 (1945); SCM Corp. v. Xerox Corp., 645 F.2d 1195 (2d Cir. 1981), cert. denied, 455 U.S. 1016 (1982); United States v. Westinghouse Elec. Corp., 648 F.2d 642, 647 (9th Cir. 1981); EJ. dupont de Nemours & Co., 96 FTC 705, 748 & n.40 (1980). See also FTC & DOJ, Antitrust Guidelines for the Licensing of Intellectual Property J] 2.2 (1995), reprinted in 4 Trade Reg. Rep. (CCH) {| 13,132 ("The Agencies will not presume that a patent . . . necessarily confers market power upon its owner. . . . Ifa patent . . . does confer market power, that market power does not by itself offend the antitrust laws. . . . Nor does such market power impose on the intellectual property owner an obligation to license the use of that property to others.").

21 , P 35 U.S.C. 200-211; 15 U.S.C. 3701-3714. See Eisenberg, Symposium:5 1 8 1 2 10 1832 3043 27 28 96.028992 A5 1 8 1 2 11 1873 3042 196 35 96.028992 Technology5 1 8 1 2 12 2083 3040 104 37 96.739342 Policy4 1 8 1 3 0 539 3092 1403 41 -1 5 1 8 1 3 1 539 3096 189 37 96.558624 Perspectives 1 8 1 3 2 740 3105 38 20 96.013817 on5 1 8 1 3 3 792 3096 48 29 96.013817 thes 1 8 1 3 4 851 3096 73 29 96.735298 NIH5 1 8 1 3 5 936 3097 84 28 93.209930 Genes 1 8 1 3 6 1034 3096 151 37 91.952393 Patenting5 1 8 1 3 7 1198 3096 227 35 95.061623 Controversy, 55 U. Pitt. L. Rev. 633 (1994).

Complaint 123 F.T.C.