Valeant Pharmaceuticals International, Inc.; Precision Dermatology, Inc.

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF VALEANT PHARMACEUTICALS INTERNATIONAL, INC.;

AND PRECISION DERMATOLOGY, INC.

CONSENT ORDER, ETC. IN REGARD TO ALLEGED VIOLATIONS OF SECTION 5 OF THE FEDERAL TRADE COMMISSION ACT AND SECTION 7 OF THE CLAYTON ACT Docket No. C-4477; File No. 141 0101 Complaint, July 3, 2014 – Decision, August 20, 2014 This consent order addresses the $500 million acquisition by Valeant Pharmaceuticals International, Inc. of certain assets of Precision Dermatology, Inc. The complaint alleges that the acquisition violates Section 7 of the Clayton Act and Section 5 of the Federal Trade Commission Act by lessening competition in U.S. markets for (1) branded and generic single-agent topical tretinoins for the treatment of acne and (2) generic Retin-A and/or the individual strengths and formulations of generic Retin-A. The consent order requires Valeant to divest all of Precision’s rights and assets related to (1) Tretin-X and (2) generic Retin-A.

Participants For the Commission: Lynda Lao, Steven C. Lavender, and David Von Nirschl.

For the Respondents: Joe Matelis, Eric Queen, and Yvonne Quinn, Sullivan & Cromwell LLP; Lauren Battaglia, Michele Harrington, and Leigh Oliver, Hogan Lovells. COMPLAINT Pursuant to the Clayton Act and the Federal Trade Commission Act, and its authority thereunder, the Federal Trade Commission (“Commission”), having reason to believe that Respondent Valeant Pharmaceuticals International, Inc. (“Valeant”), a corporation subject to the jurisdiction of the Commission, has agreed to acquire Respondent Precision Dermatology, Inc. (“Precision”), a corporation subject to the jurisdiction of the Commission, in violation of Section 5 of the Federal Trade Commission Act (“FTC Act”), as amended, 15 VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 119 Complaint U.S.C. § 45, that such acquisition, if consummated, would violate 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, 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:

I. RESPONDENTS 1. Respondent Valeant is a corporation organized, existing, and doing business under and by virtue of the laws of the Province of British Columbia, Canada, with its headquarters at 2150 St. Elzear Blvd. West, Laval, Quebec, H7L 4A8, Canada. Valeant’s U.S. headquarters is located at 400 Somerset Corporate Boulevard, Bridgewater, New Jersey, 08807. 2. Respondent Precision is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware, with its headquarters at 900 Highland Corporate Drive, Suite #203, Cumberland, Rhode Island, 02864. 3. Each Respondent is, and at all times relevant herein has been, engaged in commerce, as “commerce” is defined in Section 1 of the Clayton Act as amended, 15 U.S.C. § 12, and is a company whose business is in or affects commerce, as “commerce” is defined in Section 4 of the FTC Act, as amended, 15 U.S.C. § 44.

II. THE PROPOSED ACQUISITION 4. Pursuant to an Agreement and Plan of Merger dated January 31, 2014, Valeant proposes to acquire Precision for approximately $475 million, plus an additional $25 million payable upon a sales-based milestone (the “Acquisition”). The Acquisition is subject to Section 7 of the Clayton Act, as amended, 15 U.S.C. § 18.

III. THE RELEVANT MARKETS 5. For the purposes of this Complaint, the relevant lines of commerce in which to analyze the effects of the Acquisition are VOLUME 158 Complaint the development, license, manufacture, marketing, distribution, and sale of the following pharmaceutical products: a. branded and generic single-agent topical tretinoins for the treatment of acne; and b. generic Retin-A and/or the individual strengths and formulations of generic Retin-A.

6. For the purposes of this Complaint, the United States is the relevant geographic area in which to assess the competitive effects of the Acquisition in each of the relevant lines of commerce. IV. THE STRUCTURE OF THE MARKETS 7. Branded and generic single-agent topical tretinoins are used to treat acne vulgaris, commonly known as acne. Valeant currently manufactures and markets the branded single-agent topical tretinoins Retin-A, Retin-A Micro, and Atralin, as well as generic Retin-A and generic Retin-A Micro. Currently, Valeant markets its generic Retin-A through a profit sharing arrangement with Spear Pharmaceuticals (“Spear”). Precision markets the branded single-agent topical tretinoin Tretin-X. In addition, Precision markets generic Retin-A through a profit sharing arrangement with Rouses Point Pharmaceuticals, LLC (“Rouses Point”). The only other suppliers of single-agent topical tretinoins are Mylan with a branded product, Avita, and Actavis, with one strength of generic Retin-A. Currently, Valeant’s branded and generic single-agent topical tretinoin market share is 70%, and Precision’s market share is 12%. Absent a remedy, the merged entity would have a market share in excess of 80% and the transaction will result in a substantial increase in concentration in the already highly concentrated market for branded and generic single-agent topical tretinoins. Specifically, the transaction would increase the Herfindahl-Hirschman Index (“HHI”) by 1680, from 5368 to a post-merger total of 7048.

8. Generic Retin-A is the generic version of Valeant’s branded tretinoin product, Retin-A. The market for generic Retin- A is highly concentrated with only three current suppliers: (1) Precision, which holds an Abbreviated New Drug Application (“ANDA”) for five strengths of generic Retin-A and distributes its VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 121 Complaint products through Rouses Point; (2) Valeant, which holds the New Drug Application (“NDA”) for Retin-A and distributes five strengths of an “authorized” generic through Spear; and (3) Actavis, which markets only one strength of generic Retin-A cream. Absent a remedy, the transaction would result in a monopoly in all but the one strength of generic Retin-A cream for which the number of suppliers would be reduced from three to two.

V. ENTRY CONDITIONS 9. Entry into the relevant markets described in Paragraphs 5 and 6 would not be timely, likely, or sufficient in magnitude, character, and scope to deter or counteract the anticompetitive effects of the Acquisition. De novo entry would not take place in a timely manner because the combination of drug development times and FDA approval requirements would be lengthy. In addition, no other entry is likely to occur such that it would be timely and sufficient to deter or counteract the competitive harm likely to result from the Acquisition. VI. EFFECTS OF THE ACQUISITION 10. The effects of the Acquisition, if consummated, may be to substantially lessen competition and to 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, in the following ways, among others: a. by eliminating actual, direct, and substantial competition between Valeant and Precision and reducing the number of significant competitors in the market for branded and generic single-agent topical tretinoins for the treatment of acne, including the only two meaningful providers of branded products, thereby increasing the likelihood that: (1) Valeant would be able to unilaterally exercise market power in this market; and (2) customers would be forced to pay higher prices; and b. by eliminating actual, direct, and substantial competition between Valeant and Precision and VOLUME 158 Decision and Order reducing the number of significant competitors in the market for generic Retin-A thereby increasing the likelihood that: (1) Valeant would be able to unilaterally exercise market power in this market; and (2) customers would be forced to pay higher prices. VII. VIOLATIONS CHARGED 11. The Agreement and Plan of Merger described in Paragraph 4 constitutes a violation of Section 5 of the FTC Act, as amended, 15 U.S.C. § 45.

12. The Acquisition described in Paragraph 4, if consummated, would constitute a 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.

WHEREFORE, THE PREMISES CONSIDERED, the Federal Trade Commission on this third day of July, 2014 issues its Complaint against said Respondents. By the Commission.

ORDER TO MAINTAIN ASSETS The Federal Trade Commission (“Commission”), having initiated an investigation of the proposed acquisition by Respondent Valeant Pharmaceuticals International, Inc. (“Valeant”) of the voting securities of Respondent Precision Dermatology, Inc. (“Precision”), collectively “Respondents”, and Respondents having been furnished thereafter with a copy of a draft of Complaint that the Bureau of Competition proposed to present 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 VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 123 Order to Maintain Assets Respondents, their attorneys, and counsel for the Commission having thereafter executed an Agreement Containing Consent Orders (“Consent Agreement”), containing an admission by Respondents of all the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the signing of said Consent 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, or that the facts as alleged in such Complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission’s Rules; and The Commission having thereafter considered the matter and having determined to accept the executed Consent Agreement and to place such Consent Agreement on the public record for a period of thirty (30) days for the receipt and consideration of public comments, now in further conformity with the procedure described in Commission Rule 2.34, 16 C.F.R. § 2.34, the Commission hereby issues its Complaint, makes the following jurisdictional findings and issues this Order to Maintain Assets: 1. Respondent Valeant is a corporation organized, existing and doing business under and by virtue of the laws the Province of British Columbia, Canada, with its headquarters address located at 2150 Saint Elzear Blvd. West, Laval, Quebec Canada H7L 4A8. 2. Respondent Precision is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware with its headquarters address located at 900 Highland Corporate Drive #203, Cumberland, Rhode Island 02864.

3. The 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 to Maintain Assets, the following definitions and the definitions used in the VOLUME 158 Decision and Order Consent Agreement and the proposed Decision and Order (and when made final and effective, the Decision and Order), which are incorporated herein by reference and made a part hereof, shall apply:

A. “Valeant” means: Valeant Pharmaceuticals International, Inc., its directors, officers, employees, agents, representatives, successors, and assigns; and its joint ventures, subsidiaries, divisions, groups and affiliates in each case controlled by Valeant Pharmaceuticals International, Inc. (including, without limitation, Highland Merger Corp.), and the respective directors, officers, employees, agents, representatives, successors, and assigns of each. After the Acquisition, Valeant shall include Precision.

B. “Precision” means: Precision Dermatology, Inc., its directors, officers, employees, agents, representatives, successors, and assigns; and its joint ventures, subsidiaries, divisions, groups and affiliates in each case controlled by Precision Dermatology, Inc., and the respective directors, officers, employees, agents, representatives, successors, and assigns of each. C. “Respondents” means Valeant and Precision, individually and collectively.

D. “Commission” means the Federal Trade Commission. E. “Decision and Order” means the: 1. Proposed Decision and Order contained in the Consent Agreement in this matter until the issuance of a final and effective Decision and Order by the Commission; and 2. Final Decision and Order issued by the Commission following the issuance and service of a final Decision and Order by the Commission in this matter.

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 125 Order to Maintain Assets F. “Divestiture Product Business(es)” means the Business of Respondents within the Geographic Territory specified in the Decision and Order related to each of the Divestiture Products to the extent that such Business is owned, controlled, or managed by the Respondents and the assets related to such Business to the extent such assets are owned by, controlled by, managed by, or licensed to, the Respondents. G. “Interim Monitor” means any monitor appointed pursuant to Paragraph III of this Order to Maintain Assets or Paragraph III of the Decision and Order H. “Orders” means the Decision and Order and this Order to Maintain Assets.

II.

IT IS FURTHER ORDERED that from the date this Order to Maintain Assets becomes final and effective: A. Until Respondents fully transfer and deliver each of the respective Divestiture Product Assets to an Acquirer, Respondents shall take such actions as are necessary to maintain the full economic viability, marketability and competitiveness of each of the related Divestiture Product Businesses, to minimize any risk of loss of competitive potential for such Divestiture Product Businesses, and to prevent the destruction, removal, wasting, deterioration, or impairment of such Divestiture Product Assets except for ordinary wear and tear. Respondents shall not sell, transfer, encumber or otherwise impair the Divestiture Product Assets (other than in the manner prescribed in the Decision and Order) nor take any action that lessens the full economic viability, marketability or competitiveness of the related Divestiture Product Businesses.

B. Until Respondents fully transfer and deliver each of the respective Divestiture Product Assets to an Acquirer, Respondents shall maintain the operations of VOLUME 158 Decision and Order the related Divestiture Product Businesses in the regular and ordinary course of business and in accordance with past practice (including regular repair and maintenance of the assets of such Business) and/or as may be necessary to preserve the full economic marketability, viability, and competitiveness of such Divestiture Product Businesses and shall use their best efforts to preserve the existing relationships with the following: manufacturers; suppliers; vendors and distributors; High Volume Accounts; end-use customers; Agencies; employees; and others having business relations with each of the respective Divestiture Product Businesses. Respondents’ responsibilities shall include, but are not limited to, the following:

1. providing each of the respective Divestiture Product Businesses with sufficient working capital to operate at least at current rates of operation, to meet all capital calls with respect to such Business and to carry on, at least at their scheduled pace, all capital projects, business plans and promotional activities for such Divestiture Product Business; 2. continuing, at least at their scheduled pace, any additional expenditures for each of the respective Divestiture Product Businesses authorized prior to the date the Consent Agreement was signed by Respondents including, but not limited to, all research, Development, manufacturing, distribution, marketing and sales expenditures; 3. providing such resources as may be necessary to respond to competition against each of the Divestiture Products and/or to prevent any diminution in sales of each of the Divestiture Products during and after the Acquisition process and prior to the complete transfer and delivery of the related Divestiture Product Assets to an Acquirer;

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 127 Order to Maintain Assets 4. providing such resources as may be necessary to maintain the competitive strength and positioning of each of the Divestiture Products that were marketed or sold by Respondents prior to January 31, 2014, at the related High Volume Accounts; 5. making available for use by each of the respective Divestiture Product Businesses funds sufficient to perform all routine maintenance and all other maintenance as may be necessary to, and all replacements of, the assets related to such Business; and 6. providing such support services to each of the respective Divestiture Product Businesses as were being provided to such Business by Respondents as of the date the Consent Agreement was signed by Respondents.

C. Until Respondents fully transfer and deliver each of the respective Divestiture Product Assets to an Acquirer, Respondents shall maintain a work force that is (i) at least as large in size (as measured in full time equivalents) as, and (ii) comparable in training, and expertise to, what has been associated with the Divestiture Products for the relevant Divestiture Product’s last fiscal year.

D. Pending divestiture of the Divestiture Product Assets, Respondents shall:

1. not use, directly or indirectly, any Confidential Business Information related to the Divestiture Product Businesses other than as necessary to comply with the following:

a. the requirements of this Order;

b. Respondents’ obligations to each respective Acquirer under the terms of any related Remedial Agreement; or VOLUME 158 Decision and Order c. applicable Law;

2. not disclose or convey any such Confidential Business Information, directly or indirectly, to any Person except (i) the Acquirer of the particular Divestiture Product Assets, (ii) other Persons specifically authorized by such Acquirer to receive such information, (iii) the Commission, or (iv) the Interim Monitor (if any has been appointed); 3. not provide, disclose or otherwise make available, directly or indirectly, any such Confidential Business Information related to the marketing or sales of the Divestiture Products to the employees associated with the Business related to those Retained Products that are the therapeutic equivalent (as that term is defined by the FDA) of the Divestiture Products; and 4. institute procedures and requirements to ensure that the above-described employees:

a. do not provide, disclose or otherwise make available, directly or indirectly, any Confidential Business Information in contravention of this Order to Maintain Assets; and b. do not solicit, access or use any Confidential Business Information that they are prohibited from receiving for any reason or purpose. E. Not later than thirty (30) days from the earlier of (i) the Closing Date or (ii) the date this Order to Maintain Assets is issued by the Commission, Respondents shall provide written notification of the restrictions on the use and disclosure of the Confidential Business Information related to the Divestiture Products by Respondents’ personnel to all of their employees who (i) may be in possession of such Confidential Business Information or (ii) may have access to such Confidential Business Information.

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 129 Order to Maintain Assets F. Respondents shall give the above-described notification by e-mail with return receipt requested or similar transmission, and keep a file of those receipts for one (1) year after the Closing Date. Respondents shall provide a copy of the notification to the relevant Acquirer. Respondents shall maintain complete records of all such notifications at Respondents’ registered office within the United States and shall provide an officer’s certification to the Commission stating that the acknowledgment program has been implemented and is being complied with. Respondents shall provide the relevant Acquirer with copies of all certifications, notifications and reminders sent to Respondents’ personnel.

G. Respondents shall monitor the implementation by its employees and other personnel of all applicable restrictions with respect to Confidential Business Information, and take corrective actions for the failure of such employees and personnel to comply with such restrictions or to furnish the written agreements and acknowledgments required by this Order to Maintain Assets.

H. The purpose of this Order to Maintain Assets is to maintain the full economic viability, marketability and competitiveness of the Divestiture Product Businesses within the Geographic Territory through their full transfer and delivery to an Acquirer, to minimize any risk of loss of competitive potential for the Divestiture Product Businesses within the Geographic Territory, and to prevent the destruction, removal, wasting, deterioration, or impairment of any of the Divestiture Product Assets except for ordinary wear and tear. III.

IT IS FURTHER ORDERED that:

A. At any time after Respondents sign the Consent Agreement in this matter, the Commission may appoint a monitor (“Interim Monitor”) to assure that VOLUME 158 Decision and Order Respondents expeditiously comply with all of their obligations and perform all of their responsibilities as required by the Orders and the Remedial Agreements. B. The Commission shall select the Interim Monitor, 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 a proposed Interim Monitor within ten (10) days after notice by the staff of the Commission to Respondents of the identity of any proposed Interim Monitor, Respondents shall be deemed to have consented to the selection of the proposed Interim Monitor.

C. Not later than ten (10) days after the appointment of the Interim Monitor, Respondents shall execute an agreement that, subject to the prior approval of the Commission, confers on the Interim Monitor all the rights and powers necessary to permit the Interim Monitor to monitor Respondents’ compliance with the relevant requirements of the Orders in a manner consistent with the purposes of the Orders. D. If an Interim Monitor is appointed, Respondents shall consent to the following terms and conditions regarding the powers, duties, authorities, and responsibilities of the Interim Monitor: 1. The Interim Monitor shall have the power and authority to monitor Respondents’ compliance with the divestiture and asset maintenance obligations and related requirements of the Orders, and shall exercise such power and authority and carry out the duties and responsibilities of the Interim Monitor in a manner consistent with the purposes of the Orders and in consultation with the Commission.

2. The Interim Monitor shall act in a fiduciary capacity for the benefit of the Commission. VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 131 Order to Maintain Assets 3. The Interim Monitor shall serve until the date of completion by the Respondents of the divestiture of all Divestiture Product Assets and the transfer and delivery of the related Product Manufacturing Technology in a manner that fully satisfies the requirements of the Orders;

provided, however, that, with respect to each Divestiture Product, the Interim Monitor’s service shall not exceed five (5) years from the Order Date unless the Commission decides to extend or modify this period as may be necessary or appropriate to accomplish the purposes of the Orders. E. Subject to any demonstrated legally recognized privilege, the Interim Monitor shall have full and complete access to Respondents’ personnel, books, documents, records kept in the ordinary course of business, facilities and technical information, and such other relevant information as the Interim Monitor may reasonably request, related to Respondents’ compliance with its obligations under the Orders, including, but not limited to, its obligations related to the relevant assets. Respondents shall cooperate with any reasonable request of the Interim Monitor and shall take no action to interfere with or impede the Interim Monitor's ability to monitor Respondents’ compliance with the Orders.

F. The Interim Monitor shall serve, without bond or other security, at the expense of Respondents, on such reasonable and customary terms and conditions as the Commission may set. The Interim Monitor shall have authority to employ, at the expense of Respondents, such consultants, accountants, attorneys and other representatives and assistants as are reasonably necessary to carry out the Interim Monitor’s duties and responsibilities.

G. Respondents shall indemnify the Interim Monitor and hold the Interim Monitor harmless against any losses, claims, damages, liabilities, or expenses arising out of, VOLUME 158 Decision and Order or in connection with, the performance of the Interim Monitor’s duties, including all reasonable fees of counsel and other reasonable expenses incurred in connection with the preparations for, or defense of, any claim, whether or not resulting in any liability, except to the extent that such losses, claims, damages, liabilities, or expenses result from gross negligence, willful or wanton acts, or bad faith by the Interim Monitor.

H. Respondents shall report to the Interim Monitor in accordance with the requirements of the Orders and as otherwise provided in any agreement approved by the Commission. The Interim Monitor shall evaluate the reports submitted to the Interim Monitor by Respondents, and any reports submitted by each Acquirer with respect to the performance of Respondents’ obligations under the Orders or the Remedial Agreement(s). Within thirty (30) days from the date the Interim Monitor receives these reports, the Interim Monitor shall report in writing to the Commission concerning performance by Respondents of their obligations under the Orders; provided, however, beginning ninety (90) days after Respondents have filed their final report pursuant to Paragraph VII.B. of the Decision and Order, and ninety (90) days thereafter, the Interim Monitor shall report in writing to the Commission concerning progress by each Acquirer toward obtaining FDA approval to manufacture each Divestiture Product and obtaining the ability to manufacture each Divestiture Product in commercial quantities, in a manner consistent with cGMP, independently of Respondents.

I. Respondents may require the Interim Monitor and each of the Interim Monitor’s consultants, accountants, attorneys and other representatives and assistants to sign a customary confidentiality agreement; provided, however, that such agreement shall not restrict the Interim Monitor from providing any information to the Commission.

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 133 Order to Maintain Assets J. The Commission may, among other things, require the Interim Monitor and each of the Interim Monitor’s consultants, accountants, attorneys and other representatives and assistants to sign an appropriate confidentiality agreement related to Commission materials and information received in connection with the performance of the Interim Monitor’s duties. K. If the Commission determines that the Interim Monitor has ceased to act or failed to act diligently, the Commission may appoint a substitute Interim Monitor in the same manner as provided in this Paragraph. L. The Commission may on its own initiative, or at the request of the Interim Monitor, issue such additional orders or directions as may be necessary or appropriate to assure compliance with the requirements of the Orders.

M. The Interim Monitor appointed pursuant to this Order to Maintain Assets may be the same person appointed as a Divestiture Trustee pursuant to the relevant provisions of the Decision and Order.

IV.

IT IS FURTHER ORDERED that within thirty (30) days after the date this Order to Maintain Assets is issued by the Commission, and every sixty (60) days thereafter until Respondents have fully complied with this Order to Maintain Assets and the Paragraphs that are enumerated in Paragraph VII.B. of the related Decision and Order, Respondents shall 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 the Orders. Respondents shall submit at the same time a copy of their report concerning compliance with the Orders to the Interim Monitor, if any Interim Monitor has been appointed. Respondents shall include in their reports, among other things that are required from time to time, a detailed description of their efforts to comply with the relevant paragraphs of the Orders, including:

VOLUME 158 Decision and Order A. a detailed description of all substantive contacts, negotiations, or recommendations related to (i) the divestiture and transfer of all relevant assets and rights, (ii) transitional services being provided by the Respondents to the relevant Acquirer, and (iii) the agreement(s) to Contract Manufacture; and B. a detailed description of the timing for the completion of such obligations.

provided, however, that, after the Decision and Order in this matter becomes final and effective, the reports due under this Order to Maintain Assets may be consolidated with, and submitted to the Commission at the same time as, the reports required to be submitted by Respondent pursuant to Paragraph VII of the Decision and Order.

V.

IT IS FURTHER ORDERED that Respondents shall notify the Commission at least thirty (30) days prior to: A. any proposed dissolution of a Respondent; B. any proposed acquisition, merger or consolidation of a Respondent; or C. any other change in a Respondent including, but not limited to, assignment and the creation or dissolution of subsidiaries, if such change might affect compliance obligations arising out of the Orders. VI.

IT IS FURTHER ORDERED that, for purposes of determining or securing compliance with this Order, and subject to any legally recognized privilege, and upon written request and upon five (5) days’ notice to any Respondent made to its principal United States offices, registered office of its United States subsidiary, or its headquarters address, that Respondent shall, without restraint or interference, permit any duly authorized representative of the Commission:

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 135 Order to Maintain Assets A. access, during business office hours of the Respondent and in the presence of counsel, to all facilities and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda and all other records and documents in the possession or under the control of the Respondent related to compliance with this Order, which copying services shall be provided by the Respondent at the request of the authorized representative(s) of the Commission and at the expense of the Respondent; and B. to interview officers, directors, or employees of the Respondent, who may have counsel present, regarding such matters.

VII.

IT IS FURTHER ORDERED that this Order to Maintain Assets shall terminate on the later of: A. three (3) days after the Commission withdraws its acceptance of the Consent Agreement pursuant to the provisions of Commission Rule 2.34, 16 C.F.R. § 2.34; or B. the day after the divestiture of all of the Divestiture Product Assets, as required by and described in the Decision and Order, has been completed and the Interim Monitor, in consultation with Commission staff and the Acquirer(s), notifies the Commission that all assignments, conveyances, deliveries, grants, licenses, transactions, transfers and other transitions related to such divestitures are complete, or the Commission otherwise directs that this Order to Maintain Assets is terminated.

By the Commission.

VOLUME 158 Decision and Order DECISION AND ORDER [Public Record Version] The Federal Trade Commission (“Commission”), having initiated an investigation of the proposed acquisition by Respondent Valeant Pharmaceuticals International, Inc. (“Valeant”) of the voting securities of Respondent Precision Dermatology, Inc. (“Precision”), collectively “Respondents”, and Respondents having been furnished thereafter with a copy of a draft of Complaint that the Bureau of Competition proposed to present 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 Respondents, their attorneys, and counsel for the Commission having thereafter executed an Agreement Containing Consent Orders (“Consent Agreement”), containing an admission by Respondents of all the jurisdictional facts set forth in the aforesaid draft of Complaint, a statement that the signing of said Consent 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, or that the facts as alleged in such Complaint, other than jurisdictional facts, are true, 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 issued its Complaint and an Order to Maintain Assets, and having accepted the executed Consent Agreement and placed such Consent Agreement on the public record for a period of thirty (30) days for the receipt and consideration of public comments, now in further conformity with the procedure described in Commission Rule 2.34, 16 C.F.R. § 2.34, the Commission hereby makes the following jurisdictional findings and issues the following Decision and Order (“Order”):

1. Respondent Valeant is a corporation organized, existing and doing business under and by virtue of the VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 137 Decision and Order laws of the Province of British Columbia, Canada, with its headquarters address located at 2150 Saint Elzear Blvd. West, Laval, Quebec Canada H7L 4A8. 2. Respondent Precision is a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware with its headquarters address located at 900 Highland Corporate Drive #203, Cumberland, Rhode Island 02864.

3. The 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 the Order, the following definitions shall apply:

A. “Valeant” means: Valeant Pharmaceuticals International, Inc., its directors, officers, employees, agents, representatives, successors, and assigns; and its joint ventures, subsidiaries, divisions, groups and affiliates in each case controlled by Valeant Pharmaceuticals International, Inc. (including, without limitation, Highland Merger Corp.), and the respective directors, officers, employees, agents, representatives, successors, and assigns of each. After the Acquisition, Valeant shall include Precision.

B. “Precision” means: Precision Dermatology, Inc., its directors, officers, employees, agents, representatives, successors, and assigns; and its joint ventures, subsidiaries, divisions, groups and affiliates in each case controlled by Precision Dermatology, Inc., and the respective directors, officers, employees, agents, representatives, successors, and assigns of each. C. “Respondents” means Valeant and Precision, individually and collectively.

VOLUME 158 Decision and Order D. “Commission” means the Federal Trade Commission. E. “Acquirer(s)” means the following: 1. a Person specified by name in this Order to acquire particular assets or rights that a Respondent(s) is required to assign, grant, license, divest, transfer, deliver, or otherwise convey pursuant to this Order and that has been approved by the Commission to accomplish the requirements of this Order in connection with the Commission’s determination to make this Order final and effective; or 2. a Person approved by the Commission to acquire particular assets or rights that a Respondent(s) is required to assign, grant, license, divest, transfer, deliver, or otherwise convey pursuant to this Order. F. “Acquisition” means Respondent Valeant’s acquisition of fifty percent (50%) or more of the voting securities of Precision. Respondents entered into an Agreement and Plan of Merger on January 31, 2014, to effect the Acquisition, by and among Valeant Pharmaceuticals International (a wholly-owned subsidiary of Valeant Pharmaceuticals International, Inc.), Precision Dermatology, Inc., and Fortis Advisors LLC, that was submitted to the Commission.

G. “Acquisition Date” means the date on which the Acquisition is consummated.

H. “Agency(ies)” means any government regulatory authority or authorities in the world responsible for granting approval(s), clearance(s), qualification(s), license(s), or permit(s) for any aspect of the research, Development, manufacture, marketing, distribution, or sale of a Product. The term “Agency” includes, without limitation, the United States Food and Drug Administration (“FDA”).

I. “Application(s)” means all of the following: “New Drug Application” (“NDA”), “Abbreviated New Drug VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 139 Decision and Order Application” (“ANDA”), “Supplemental New Drug Application” (“SNDA”), or “Marketing Authorization Application” (“MAA”), the applications for a Product filed or to be filed with the FDA pursuant to 21 C.F.R. Part 314 et seq., and all supplements, amendments, and revisions thereto, any preparatory work, registration dossier, drafts and data necessary for the preparation thereof, and all correspondence between the Respondent and the FDA related thereto. The term “Application” also includes an “Investigational New Drug Application” (“IND”) filed or to be filed with the FDA pursuant to 21 C.F.R. Part 312, and all supplements, amendments, and revisions thereto, any preparatory work, registration dossier, drafts and data necessary for the preparation thereof, and all correspondence between the Respondent and the FDA related thereto.

J. “Business” means the research, Development, manufacture, commercialization, distribution, marketing, importation, advertisement and sale of a Product.

K. “Categorized Assets” means the following assets and rights of the specified Respondent (as that Respondent is identified in the definition of the specified Divestiture Product), as such assets and rights are in existence as of the date the Respondent signs the Agreement Containing Consent Orders in this matter and as are maintained by the Respondent in accordance with the Asset Maintenance Order until the Closing Date:

1. all rights to all of the Applications related to the specified Divestiture Product;

2. all Product Intellectual Property related to the specified Divestiture Product that is not Product Licensed Intellectual Property;

3. all Product Approvals related to the specified Divestiture Product;

VOLUME 158 Decision and Order 4. all Product Manufacturing Technology related to the specified Divestiture Product that is not Product Licensed Intellectual Property; 5. all Product Marketing Materials related to the specified Divestiture Product;

6. all Product Scientific and Regulatory Material related to the specified Divestiture Product; 7. all Website(s) related exclusively to the specified Divestiture Product;

8. the content related exclusively to the specified Divestiture Product that is displayed on any Website that is not dedicated exclusively to the specified Divestiture Product;

9. a list of all of the NDC Numbers related to the specified Divestiture Product, and rights, to the extent permitted by Law:

a. to require Respondent to discontinue the use of those NDC Numbers in the sale or marketing of the specified Divestiture Product except for returns, rebates, allowances, and adjustments for such Product sold prior to the Closing Date and except as may be required by applicable Law and except as is necessary to give effect to the transactions contemplated under any applicable Remedial Agreement;

b. to prohibit Respondent from seeking from any customer any type of cross- referencing of those NDC Numbers with any Retained Product(s) except for returns, rebates, allowances, and adjustments for such Product sold prior to the Closing Date and except as may be required by applicable Law;

c. to seek to change any cross-referencing by a customer of those NDC Numbers with a VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 141 Decision and Order Retained Product (including the right to receive notification from the Respondent of any such cross-referencing that is discovered by Respondent);

d. to seek cross-referencing from a customer of the Respondent’s NDC Numbers related to such Divestiture Product with the Acquirer’s NDC Numbers related to such Divestiture Product;

e. to approve the timing of Respondent’s discontinued use of those NDC Numbers in the sale or marketing of such Divestiture Product except for returns, rebates, allowances, and adjustments for such Divestiture Product sold prior to the Closing Date and except as may be required by applicable Law and except as is necessary to give effect to the transactions contemplated under any applicable Remedial Agreement; and f. to approve any notification(s) from Respondent to any customer(s) regarding the use or discontinued use of such NDC numbers by the Respondent prior to such notification(s) being disseminated to the customer(s);

10. all Product Development Reports related to the specified Divestiture Product;

11. at the option of the Acquirer of the specified Divestiture Product, all Product Assumed Contracts related to the specified Divestiture Product (copies to be provided to that Acquirer on or before the Closing Date);

12. all patient registries related to the specified Divestiture Product, and any other systematic active post-marketing surveillance program to collect patient data, laboratory data and identification information required to be VOLUME 158 Decision and Order maintained by the FDA to facilitate the investigation of adverse effects related to the specified Divestiture Product (including, without limitation, any Risk Evaluation Mitigation Strategy as defined by the FDA);

13. for any specified Divestiture Product that has been marketed or sold by a Respondent prior to the Closing Date, a list of all customers and targeted customers for the specified Divestiture Product and a listing of the net sales (in either units or dollars) of the specified Divestiture Product to such customers on either an annual, quarterly, or monthly basis including, but not limited to, a separate list specifying the above-described information for the High Volume Accounts and including the name of the employee(s) for each High Volume Account that is or has been responsible for the purchase of the specified Divestiture Product on behalf of the High Volume Account and his or her business contact information;

14. at the option of the Acquirer of the specified Divestiture Product and to the extent approved by the Commission in the relevant Remedial Agreement, all inventory in existence as of the Closing Date including, but not limited to, raw materials, packaging materials, work-in-process and finished goods related to the specified Divestiture Product;

15. copies of all unfilled customer purchase orders for the specified Divestiture Product as of the Closing Date, to be provided to the Acquirer of the specified Divestiture Product not later than five (5) days after the Closing Date;

16. at the option of the Acquirer of the specified Divestiture Product, all unfilled customer purchase orders for the specified Divestiture Product; and VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 143 Decision and Order 17. all of the Respondent’s books, records, and files directly related to the foregoing;

provided, however, that “Categorized Assets” shall not include: (i) documents relating to any Respondent’s general business strategies or practices relating to the conduct of its Business of marketing pharmaceutical Products, where such documents do not discuss with particularity the specified Divestiture Product; (ii) administrative, financial, and accounting records; (iii) quality control records that are determined not to be material to the manufacture of the specified Divestiture Product by the Interim Monitor or the Acquirer of the specified Divestiture Product; (v) any real estate and the buildings and other permanent structures located on such real estate; and (vi) all Product Licensed Intellectual Property;

provided further, however, that in cases in which documents or other materials included in the assets to be divested contain information: (i) that relates both to the specified Divestiture Product and to Retained Products or Businesses of any Respondent and cannot be segregated in a manner that preserves the usefulness of the information as it relates to the specified Divestiture Product; or (ii) for which any Respondent has a legal obligation to retain the original copies, the specified Respondent shall be required to provide only copies or relevant excerpts of the documents and materials containing this information. In instances where such copies are provided to the Acquirer of the specified Divestiture Product, the specified Respondent shall provide that Acquirer access to original documents under circumstances where copies of documents are insufficient for evidentiary or regulatory purposes. The purpose of this provision is to ensure that the specified Respondent provides the Acquirer with the above-described information without requiring the Respondent completely to divest itself of information that, in content, also relates to Retained Product(s).

VOLUME 158 Decision and Order L. “cGMP” means current Good Manufacturing Practice as set forth in the United States Federal Food, Drug, and Cosmetic Act, as amended, and includes all rules and regulations promulgated by the FDA thereunder. M. “Clinical Trial(s)” means a controlled study in humans of the safety or efficacy of a Product, and includes, without limitation, such clinical trials as are designed to support expanded labeling or to satisfy the requirements of an Agency in connection with any Product Approval and any other human study used in research and Development of a Product. N. “Closing Date” means, as to each Divestiture Product, the date on which a Respondent (or a Divestiture Trustee) consummates a transaction to assign, grant, license, divest, transfer, deliver, or otherwise convey assets related to such Divestiture Product to an Acquirer pursuant to this Order.

O. “Confidential Business Information” means all information owned by, or in the possession or control of, any Respondent that is not in the public domain and that is directly related to the conduct of the Business related to a Divestiture Product(s). The term “Confidential Business Information” excludes the following:

1. information relating to any Respondent’s general business strategies or practices that does not discuss with particularity the Divestiture Products; 2. information specifically excluded from the Divestiture Product Assets conveyed to the Acquirer of the related Divestiture Product(s); 3. information that is contained in documents, records or books of any Respondent that is provided to an Acquirer by a Respondent that is unrelated to the Divestiture Products acquired by that Acquirer or that is exclusively related to Retained Product(s); and VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 145 Decision and Order 4. information that is protected by the attorney work product, attorney-client, joint defense or other privilege prepared in connection with the Acquisition and relating to any United States, state, or foreign antitrust or competition Laws. P. “Development” means all preclinical and clinical drug development activities (including formulation), including test method development and stability testing, toxicology, formulation, process development, manufacturing scale-up, development-stage manufacturing, quality assurance/quality control development, statistical analysis and report writing, conducting Clinical Trials for the purpose of obtaining any and all approvals, licenses, registrations or authorizations from any Agency necessary for the manufacture, use, storage, import, export, transport, promotion, marketing, and sale of a Product (including any government price or reimbursement approvals), Product approval and registration, and regulatory affairs related to the foregoing. “Develop” means to engage in Development.

Q. “Direct Cost” means a cost not to exceed the cost of labor, material, travel and other expenditures to the extent the costs are directly incurred to provide the relevant assistance or service. “Direct Cost” to the Acquirer for its use of any of a Respondent’s employees’ labor shall not exceed the average hourly wage rate for such employee;

provided, however, in each instance where: (i) an agreement to divest relevant assets is specifically referenced and attached to this Order, and (ii) such agreement becomes a Remedial Agreement for a Divestiture Product, “Direct Cost” means such cost as is provided in such Remedial Agreement for that Divestiture Product.

VOLUME 158 Decision and Order R. “Divestiture Product(s)” means the following, individually and collectively:

1. the Tretin-X Products; and, 2. the Tretinoin Products.

S. “Divestiture Product Assets” means: 1. the Tretin-X Product Assets; and, 2. the Tretinoin Product Assets.

T. “Divestiture Product License” means a perpetual, nonexclusive, fully paid-up and royalty-free license(s) under a Remedial Agreement with rights to sublicense to all Product Licensed Intellectual Property and all Product Manufacturing Technology related to general manufacturing know-how that was owned, licensed, or controlled by the specified Respondent (as that Respondent is identified in the definition of the specified Divestiture Product):

1. to research and Develop the specified Divestiture Products for marketing, distribution or sale within the Geographic Territory;

2. to use, make, have made, distribute, offer for sale, promote, advertise, or sell the specified Divestiture Products within the Geographic Territory; 3. to import or export the specified Divestiture Products to or from the Geographic Territory to the extent related to the marketing, distribution or sale of the specified Divestiture Products in the Geographic Territory; and 4. to have the specified Divestiture Products made anywhere in the World for distribution or sale within, or import into the Geographic Territory; VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 147 Decision and Order provided however, that for any Product Licensed Intellectual Property that is the subject of a license from a Third Party entered into by a Respondent prior to the Acquisition, the scope of the rights granted hereunder shall only be required to be equal to the scope of the rights granted by the Third Party to that Respondent.

U. “Divestiture Product Releasee(s)” means the following Persons:

1. the Acquirer for the assets related to a particular Divestiture Product;

2. any Person controlled by or under common control with that Acquirer; and 3. any Manufacturing Designees, licensees, sublicensees, manufacturers, suppliers, distributors, and customers of that Acquirer, or of such Acquirer-affiliated entities.

V. “Divestiture Trustee” means the trustee appointed by the Commission pursuant to Paragraph IV of this Order.

W. “Domain Name” means the domain name(s) (universal resource locators), and registration(s) thereof, issued by any Person or authority that issues and maintains the domain name registration; provided, however, “Domain Name” shall not include any trademark or service mark rights to such domain names other than the rights to the Product Trademarks required to be divested.

X. “Drug Master Files” means the information submitted to the FDA as described in 21 C.F.R. Part 314.420 related to a Product.

Y. “Geographic Territory” shall mean the United States of America, including all of its territories and possessions, unless otherwise specified. VOLUME 158 Decision and Order Z. “Government Entity” means any Federal, state, local or non-U.S. government, or any court, legislature, government agency, or government commission, or any judicial or regulatory authority of any government. AA. “High Volume Account(s)” means any retailer, wholesaler or distributor whose annual or projected annual aggregate purchase amounts (on a companywide level), in units or in dollars, of a Divestiture Product in the United States of America from the Respondent was, or is projected to be among the top twenty highest of such purchase amounts by the Respondent’s U.S. customers on any of the following dates: (i) the end of the last quarter that immediately preceded the date of the public announcement of the proposed Acquisition; (ii) the end of the last quarter that immediately preceded the Acquisition Date; (iii) the end of the last quarter that immediately preceded the Closing Date for the relevant assets; or (iv) the end of the last quarter following the Acquisition or the Closing Date.

BB. “Interim Monitor” means any monitor appointed pursuant to Paragraph III of this Order or Paragraph III of the related Order to Maintain Assets. CC. “Law” means all laws, statutes, rules, regulations, ordinances, and other pronouncements by any Government Entity having the effect of law. DD. “Manufacturing Designee” means any Person other than a Respondent that has been designated by an Acquirer to manufacture a Divestiture Product for that Acquirer.

EE. “Matawan” means Matawan Pharmaceuticals, LLC, a limited liability company existing, and doing business under and by virtue of the laws of the State of Delaware with its headquarters address located at 11 Commerce Drive, First Floor, Cranford, NJ 07016. VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 149 Decision and Order FF. “NDC Number(s)” means the National Drug Code number, including both the labeler code assigned by the FDA and the additional numbers assigned by the labeler as a product code for a specific Product. GG. “Orders” means this Decision and Order and the related Order to Maintain Assets.

HH. “Order Date” means the date on which the final Decision and Order in this matter is issued by the Commission.

II. “Order to Maintain Assets” means the Order to Maintain Assets incorporated into and made a part of the Agreement Containing Consent Orders. JJ. “Patent(s)” means all patents, patent applications, including provisional patent applications, invention disclosures, certificates of invention and applications for certificates of invention and statutory invention registrations, in each case filed, or in existence, on or before the Closing Date (except where this Order specifies a different time), and includes all reissues, additions, divisions, continuations, continuations-inpart, supplementary protection certificates, extensions and reexaminations thereof, all inventions disclosed therein, and all rights therein provided by international treaties and conventions.

KK. “Person” means any individual, partnership, joint venture, firm, corporation, association, trust, unincorporated organization, or other business or Government Entity, and any subsidiaries, divisions, groups or affiliates thereof.

LL. “Product(s)” means any pharmaceutical, biological, or genetic composition containing any formulation or dosage of a compound referenced as its pharmaceutically, biologically, or genetically active ingredient and/or that is the subject of an Application. VOLUME 158 Decision and Order MM. “Product Approval(s)” means any approvals, registrations, permits, licenses, consents, authorizations, and other approvals, and pending applications and requests therefor, required by applicable Agencies related to the research, Development, manufacture, distribution, finishing, packaging, marketing, sale, storage or transport of a Product within the United States of America, and includes, without limitation, all approvals, registrations, licenses or authorizations granted in connection with any Application related to that Product.

NN. “Product Assumed Contracts” means all of the following contracts or agreements (copies of each such contract to be provided to the Acquirer on or before the Closing Date and segregated in a manner that clearly identifies the purpose(s) of each such contract): 1. that make specific reference to the specified Divestiture Product and pursuant to which any Third Party is obligated to purchase, or has the option to purchase without further negotiation of terms, the specified Divestiture Product from the Respondent unless such contract applies generally to the Respondent’s sales of Products to that Third Party;

2. pursuant to which the Respondent had or has as of the Closing Date the ability to independently purchase the active pharmaceutical ingredient(s) or other necessary ingredient(s) or component(s) or had planned to purchase the active pharmaceutical ingredient(s) or other necessary ingredient(s) or component(s) from any Third Party for use in connection with the manufacture of the specified Divestiture Product;

3. relating to any Clinical Trials involving the specified Divestiture Product;

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 151 Decision and Order 4. with universities or other research institutions for the use of the specified Divestiture Product in scientific research;

5. relating to the particularized marketing of the specified Divestiture Product or educational matters relating solely to the specified Divestiture Product(s);

6. pursuant to which a Third Party manufactures the specified Divestiture Product on behalf of the Respondent;

7. pursuant to which a Third Party provides any part of the manufacturing process including, without limitation, the finish, fill, and/or packaging of the specified Divestiture Product on behalf of Respondent;

8. pursuant to which a Third Party provides the Product Manufacturing Technology related to the specified Divestiture Product to the Respondent; 9. pursuant to which a Third Party is licensed by the Respondent to use the Product Manufacturing Technology;

10. constituting confidentiality agreements involving the specified Divestiture Product;

11. involving any royalty, licensing, covenant not to sue, or similar arrangement involving the specified Divestiture Product;

12. pursuant to which a Third Party provides any specialized services necessary to the research, Development, manufacture or distribution of the specified Divestiture Product to the Respondent including, but not limited to, consultation arrangements; and/or VOLUME 158 Decision and Order 13. pursuant to which any Third Party collaborates with the Respondent in the performance of research, Development, marketing, distribution or selling of the specified Divestiture Product or the Business related to such Divestiture Product; provided, however, that where any such contract or agreement also relates to a Retained Product(s), the Respondent shall assign the Acquirer all such rights under the contract or agreement as are related to the specified Divestiture Product, but concurrently may retain similar rights for the purposes of the Retained Product(s).

OO. “Product Copyrights” means rights to all original works of authorship of any kind directly related to a Divestiture Product and any registrations and applications for registrations thereof within the Geographic Territory, including, but not limited to, the following: all such rights with respect to all promotional materials for healthcare providers, all promotional materials for patients, and educational materials for the sales force; copyrights in all preclinical, clinical and process development data and reports relating to the research and Development of that Product or of any materials used in the research, Development, manufacture, marketing or sale of that Product, including all copyrights in raw data relating to Clinical Trials of that Product, all case report forms relating thereto and all statistical programs developed (or modified in a manner material to the use or function thereof (other than through user references)) to analyze clinical data, all market research data, market intelligence reports and statistical programs (if any) used for marketing and sales research; all copyrights in customer information, promotional and marketing materials, that Product’s sales forecasting models, medical education materials, sales training materials, and advertising and display materials; all records relating to employees of a Respondent who accept employment with an Acquirer (excluding any personnel records the transfer of which is prohibited VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 153 Decision and Order by applicable Law); all copyrights in records, including customer lists, sales force call activity reports, vendor lists, sales data, reimbursement data, speaker lists, manufacturing records, manufacturing processes, and supplier lists; all copyrights in data contained in laboratory notebooks relating to that Product or relating to its biology; all copyrights in adverse experience reports and files related thereto (including source documentation) and all copyrights in periodic adverse experience reports and all data contained in electronic databases relating to adverse experience reports and periodic adverse experience reports; all copyrights in analytical and quality control data; and all correspondence with the FDA or any other Agency.

PP. “Product Development Reports” means: 1. Pharmacokinetic study reports related to the specified Divestiture Product;

2. Bioavailability study reports (including reference listed drug information) related to the specified Divestiture Product;

3. Bioequivalence study reports (including reference listed drug information) related to the specified Divestiture Product;

4. all correspondence, submissions, notifications, communications, registrations or other filings made to, received from or otherwise conducted with the FDA relating to the Application(s) related to the specified Divestiture Product;

5. annual and periodic reports related to the abovedescribed Application(s), including any safety update reports;

6. FDA approved Product labeling related to the specified Divestiture Product;

VOLUME 158 Decision and Order 7. currently used or planned product package inserts (including historical change of controls summaries) related to the specified Divestiture Product; 8. FDA approved patient circulars and information related to the specified Divestiture Product; 9. adverse event reports, adverse experience information, descriptions of material events and matters concerning safety or lack of efficacy related to the specified Divestiture Product; 10. summary of Product complaints from physicians related to the specified Divestiture Product; 11. summary of Product complaints from customers related to the specified Divestiture Product; 12. Product recall reports filed with the FDA related to the specified Divestiture Product, and all reports, studies and other documents related to such recalls; 13. investigation reports and other documents related to any out of specification results for any impurities found in the specified Divestiture Product;

14. reports related to the specified Divestiture Product from any consultant or outside contractor engaged to investigate or perform testing for the purposes of resolving any product or process issues, including without limitation, identification and sources of impurities;

15. reports of vendors of the active pharmaceutical ingredients, excipients, packaging components and detergents used to produce the specified Divestiture Product that relate to the specifications, degradation, chemical interactions, testing and historical trends of the production of the specified Divestiture Product;

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 155 Decision and Order 16. analytical methods development records related to the specified Divestiture Product;

17. manufacturing batch records related to the specified Divestiture Product;

18. stability testing records related to the specified Divestiture Product;

19. change in control history related to the specified Divestiture Product; and 20. executed validation and qualification protocols and reports related to the specified Divestiture Product. QQ. “Product Intellectual Property” means all of the following related to a Divestiture Product (other than Product Licensed Intellectual Property): 1. Patents;

2. Product Copyrights;

3. Product Trademarks, Product Trade Dress, trade secrets, know-how, techniques, data, inventions, practices, methods, and other confidential or proprietary technical, business, research, Development and other information; and 4. rights to obtain and file for patents, trademarks, and copyrights and registrations thereof and to bring suit against a Third Party for the past, present or future infringement, misappropriation, dilution, misuse or other violations of any of the foregoing; 5. for any Divestiture Product that is the subject of an NDA, the Drug Master File related to that NDA; provided, however, “Product Intellectual Property” does not include the corporate names or corporate trade dress of “Valeant” or “Precision” or the related corporate logos thereof, or the corporate names or VOLUME 158 Decision and Order corporate trade dress of any other corporations or companies owned or controlled by the Respondent or the related corporate logos thereof, or general registered images or symbols by which Valeant, or Precision can be identified or defined. RR. “Product Licensed Intellectual Property” means the following:

1. Patents that are related to a Divestiture Product that the Respondent can demonstrate have been used, prior to the Acquisition Date, for any Retained Product that is the subject of an active (not discontinued) NDA or ANDA as of the Acquisition Date; and 2. trade secrets, know-how, techniques, data, inventions, practices, methods, and other confidential or proprietary technical, business, research, Development, and other information, and all rights in the Geographic Territory to limit the use or disclosure thereof, that are related to a Divestiture Product and that the Respondent can demonstrate have been used, prior to the Acquisition Date, for any Retained Product that is the subject of an active (not discontinued) NDA or ANDA as of the Acquisition Date.

SS. “Product Manufacturing Technology” means all of the following related to a Divestiture Product: 1. all technology, trade secrets, know-how, formulas, and proprietary information (whether patented, patentable or otherwise) related to the manufacture of that Product, including, but not limited to, the following: all product specifications, processes, analytical methods, product designs, plans, trade secrets, ideas, concepts, manufacturing, engineering, and other manuals and drawings, standard operating procedures, flow diagrams, chemical, safety, quality assurance, quality control, research records, clinical data, compositions, VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 157 Decision and Order annual product reviews, regulatory communications, control history, current and historical information associated with the FDA Application(s) conformance and cGMP compliance, and labeling and all other information related to the manufacturing process, and supplier lists;

2. all ingredients, materials, or components used in the manufacture of that Product including the active pharmaceutical ingredient, excipients or packaging materials; and, 3. for those instances in which the manufacturing equipment is not readily available from a Third Party, at the Acquirer’s option, all such equipment used to manufacture that Product.

TT. “Product Marketing Materials” means all marketing materials used specifically in the marketing or sale of the specified Divestiture Product in the Geographic Territory as of the Closing Date, including, without limitation, all advertising materials, training materials, product data, mailing lists, sales materials (e.g., detailing reports, vendor lists, sales data), marketing information (e.g., competitor information, research data, market intelligence reports, statistical programs (if any) used for marketing and sales research), customer information (including customer net purchase information to be provided on the basis of either dollars and/or units for each month, quarter or year), sales forecasting models, educational materials, and advertising and display materials, speaker lists, promotional and marketing materials, Website content and advertising and display materials, artwork for the production of packaging components, television masters and other similar materials related to the specified Divestiture Product.

UU. “Product Scientific and Regulatory Material” means all technological, scientific, chemical, biological, VOLUME 158 Decision and Order pharmacological, toxicological, regulatory and Clinical Trial materials and information.

VV. “Product Trade Dress” means the current trade dress of a Product, including but not limited to, Product packaging, and the lettering of the Product trade name or brand name.

WW. “Product Trademark(s)” means all proprietary names or designations, trademarks, service marks, trade names, and brand names, including registrations and applications for registration therefor (and all renewals, modifications, and extensions thereof) and all common law rights, and the goodwill symbolized thereby and associated therewith, for a Product.

XX. “Remedial Agreement(s)” means the following: 1. any agreement between a Respondent(s) and an Acquirer that is specifically referenced and attached to this Order, including all amendments, exhibits, attachments, agreements, and schedules thereto, related to the relevant assets or rights to be assigned, granted, licensed, divested, transferred, delivered, or otherwise conveyed, including without limitation, any agreement to supply specified products or components thereof, and that has been approved by the Commission to accomplish the requirements of the Order in connection with the Commission’s determination to make this Order final and effective; 2. any agreement between a Respondent(s) and a Third Party to effect the assignment of assets or rights of that Respondent(s) related to a Divestiture Product to the benefit of an Acquirer that is specifically referenced and attached to this Order, including all amendments, exhibits, attachments, agreements, and schedules thereto, that has been approved by the Commission to accomplish the requirements of the Order in connection with the VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 159 Decision and Order Commission’s determination to make this Order final and effective;

3. any agreement between a Respondent(s) and an Acquirer (or between a Divestiture Trustee and an Acquirer) that has been approved by the Commission to accomplish the requirements of this Order, including all amendments, exhibits, attachments, agreements, and schedules thereto, related to the relevant assets or rights to be assigned, granted, licensed, divested, transferred, delivered, or otherwise conveyed, including without limitation, any agreement by that Respondent(s) to supply specified products or components thereof, and that has been approved by the Commission to accomplish the requirements of this Order; and/or 4. any agreement between a Respondent(s) and a Third Party to effect the assignment of assets or rights of that Respondent(s) related to a Divestiture Product to the benefit of an Acquirer that has been approved by the Commission to accomplish the requirements of this Order, including all amendments, exhibits, attachments, agreements, and schedules thereto.

YY. “Retained Product” means any Product(s) other than a Divestiture Product.

ZZ. “Rouses Point” means:

1. Rouses Point Pharmaceuticals, a limited liability company organized, existing and doing business under and by virtue of the laws of the State of Delaware with its headquarters address located at 24840 S. Tamiami Trail, Suite 1, Bonita Springs, Florida 34134; and 2. Matawan Pharmaceuticals, a limited liability company organized, existing and doing business under and by virtue of the laws of the State of VOLUME 158 Decision and Order Delaware with its headquarters address located at 11 Commerce Drive, Cranford, New Jersey 07016. AAA. “Technology Transfer Standards” means requirements and standards sufficient to ensure that the information and assets required to be delivered to an Acquirer pursuant to this Order are delivered in an organized, comprehensive, complete, useful, timely (i.e., ensuring no unreasonable delays in transmission), and meaningful manner. Such standards and requirements shall include, inter alia, 1. designating employees of the Respondent(s) knowledgeable about the Product Manufacturing Technology (and all related intellectual property) related to each of the Divestiture Products who will be responsible for communicating directly with the Acquirer or its Manufacturing Designee, and the Interim Monitor (if one has been appointed), for the purpose of effecting such delivery; 2. preparing technology transfer protocols and transfer acceptance criteria for both the processes and analytical methods related to the specified Divestiture Product that are acceptable to the Acquirer;

3. preparing and implementing a detailed technological transfer plan that contains, inter alia, the transfer of all relevant information, all appropriate documentation, all other materials, and projected time lines for the delivery of all such Product Manufacturing Technology (including all related intellectual property) to the Acquirer or its Manufacturing Designee; and 4. providing, in a timely manner, assistance and advice to enable the Acquirer or its Manufacturing Designee to:

a. manufacture the specified Divestiture Product in the quality and quantities achieved by the VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 161 Decision and Order specified Respondent (as that Respondent is identified in the definition of the specified Divestiture Product), or the manufacturer and/or developer of such Divestiture Product; b. obtain any Product Approvals necessary for the Acquirer or its Manufacturing Designee, to manufacture, distribute, market, and sell the specified Divestiture Product in commercial quantities and to meet all Agency-approved specifications for such Divestiture Product; and c. receive, integrate, and use all such Product Manufacturing Technology and all such intellectual property related to the specified Divestiture Product.

BBB. “Third Party(ies)” means any non-governmental Person other than the following: the Respondents; or, the Acquirer of particular assets or rights pursuant to this Order.

CCC. “Tretin-X Product(s)” means the following: the Products in Development, manufactured, marketed, sold, owned or controlled by Respondent Precision pursuant to the following ANDAs:

1. ANDA No. 090098;

2. ANDA No. 202209; and, any supplements, amendments, or revisions to the above-described ANDAs.

DDD. “Tretin-X Product Assets” means all rights, title and interest in and to all assets related to the Business within the Geographic Territory of Respondent Precision related to each of the respective Tretin-X Products, to the extent legally transferable, including, without limitation, the Categorized Assets related to the Tretin-X Products.

VOLUME 158 Decision and Order EEE. “Tretin-X Product Divestiture Agreements” means: 1. The Asset Purchase Agreement between Valeant Pharmaceuticals International, (as Seller) and Watson Laboratories, Inc., (as Purchaser) dated as of June 20, 2014; and 2. the Assignment and Assumption Agreement by and between Precision Dermatology, Inc., Onset Dermatologics, LLC and Watson Laboratories, Inc., to be executed on the Closing Date (attached as Exhibit A to the Asset Purchase Agreement) all amendments, exhibits, attachments, agreements, and schedules thereto, related to the Tretin-X Product Assets that have been approved by the Commission to accomplish the requirements of this Order. The Tretin-X Product Divestiture Agreements are contained in Non-Public Appendix I.

FFF. “Tretinoin Product(s)” means the following: the Products in Development, manufactured, marketed, sold, owned or controlled by Respondent Precision pursuant to the following ANDAs:

1. ANDA No. 075213;

2. ANDA No. 075265;

3. ANDA No. 075264;

4. ANDA No. 075529;

5. ANDA No. 075589; and, any supplements, amendments, or revisions to the above-described ANDAs.

GGG. “Tretinoin Product Assets” means all rights, title and interest in and to all assets related to the Business within the Geographic Territory of Respondent VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 163 Decision and Order Precision related to each of the respective Tretinoin Products, to the extent legally transferable, including, without limitation, the Categorized Assets related to the Tretinion Products.

HHH. “Tretinoin Product Divestiture Agreements” means: 1. the Asset Purchase Agreement between Valeant Pharmaceuticals International (as Seller), Matawan Pharmaceuticals, LLC (as Purchaser) and Rouses Point Pharmaceuticals, LLC (as Guarantor), dated as of June 20, 2014;

2. the Assignment and Assumption Agreement by and between Precision Dermatology, Inc., Onset Dermatologics, LLC and Matawan Pharmaceuticals, LLC, to be executed on the Closing Date (attached as Exhibit A to the Asset Purchase Agreement); and all amendments, exhibits, attachments, agreements, and schedules thereto, related to the Tretinoin Product Assets that have been approved by the Commission to accomplish the requirements of this Order. The Tretinoin Product Divestiture Agreements are contained in Non-Public Appendix I.

III. “Watson” means Watson Laboratories, Inc. a corporation organized, existing and doing business under and by virtue of the laws of the State of Delaware with its headquarters address located at Morris Corporate Center III, 400 Interpace Parkway, Parsippany, New Jersey 07054. Watson Laboratories, Inc. is a wholly owned subsidiary of Actavis, Inc. JJJ. “Website” means the content of the Website(s) located at the Domain Names, the Domain Names, and all copyrights in such Website(s), to the extent owned by a Respondent; provided, however, “Website” shall not include the following: (1) content owned by Third Parties and other Product Intellectual Property not VOLUME 158 Decision and Order owned by a Respondent that are incorporated in such Website(s), such as stock photographs used in the Website(s), except to the extent that a Respondent can convey its rights, if any, therein; or (2) content unrelated to any of the Divestiture Products. II.

IT IS FURTHER ORDERED that:

KKK. Not later than the earlier of: (i) ten (10) days after the Acquisition Date or (ii) ten (10) days after the Order Date, Respondents shall divest the Tretin-X Product Assets and grant the related Divestiture Product License, absolutely and in good faith, to Watson pursuant to, and in accordance with, the Tretin-X Product Divestiture Agreement(s) (which agreements shall not limit or contradict, or be construed to limit or contradict, the terms of this Order, it being understood that this Order shall not be construed to reduce any rights or benefits of Watson or to reduce any obligations of Respondents under such agreements), and each such agreement, if it becomes a Remedial Agreement related to the Tretin-X Product Assets is incorporated by reference into this Order and made a part hereof;

provided, however, that if Respondents have divested the Tretin-X Product Assets to Watson prior to the Order Date, and if, at the time the Commission determines to make this Order final and effective, the Commission notifies Respondents that Watson is not an acceptable purchaser of the Divestiture Product Assets, then Respondents shall immediately rescind the transaction with Watson, in whole or in part, as directed by the Commission, and shall divest the Tretin-X Product Assets within one hundred eighty (180) days from the Order Date, absolutely and in good faith, at no minimum price, to an Acquirer that receives the prior approval of the Commission, and only in a manner that receives the prior approval of the Commission;

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 165 Decision and Order provided further, however, that if Respondents have divested the Tretin-X Product Assets to Watson prior to the Order Date, and if, at the time the Commission determines to make this Order final and effective, the Commission notifies Respondents that the manner in which the divestiture was accomplished is not acceptable, the Commission may direct Respondents, or appoint a Divestiture Trustee, to effect such modifications to the manner of divestiture of the Tretin-X Product Assets to Watson (including, but not limited to, entering into additional agreements or arrangements) as the Commission may determine are necessary to satisfy the requirements of this Order. LLL. Not later than the earlier of: (i) ten (10) days after the Acquisition Date or (ii) ten (10) days after the Order Date, Respondents shall divest the Tretinoin Product Assets and grant the related Divestiture Product License, absolutely and in good faith, to Matawan pursuant to, and in accordance with, the Tretinoin Product Divestiture Agreement(s) (which agreements shall not limit or contradict, or be construed to limit or contradict, the terms of this Order, it being understood that this Order shall not be construed to reduce any rights or benefits of Matawan or to reduce any obligations of Respondents under such agreements), and each such agreement, if it becomes a Remedial Agreement related to the Tretinoin Product Assets is incorporated by reference into this Order and made a part hereof;

provided, however, that if Respondents have divested the Tretinoin Product Assets to Matawan prior to the Order Date, and if, at the time the Commission determines to make this Order final and effective, the Commission notifies Respondents that Matawan is not an acceptable purchaser of the Tretinoin Product Assets, then Respondents shall immediately rescind the transaction with Matawan, in whole or in part, as directed by the Commission, and shall divest the Tretinoin Product Assets within one hundred eighty VOLUME 158 Decision and Order (180) days from the Order Date, absolutely and in good faith, at no minimum price, to an Acquirer that receives the prior approval of the Commission, and only in a manner that receives the prior approval of the Commission;

provided further, however, that if Respondents have divested the Tretinoin Product Assets to Matawan prior to the Order Date, and if, at the time the Commission determines to make this Order final and effective, the Commission notifies Respondents that the manner in which the divestiture was accomplished is not acceptable, the Commission may direct Respondents, or appoint a Divestiture Trustee, to effect such modifications to the manner of divestiture of the Tretinoin Product Assets to Matawan (including, but not limited to, entering into additional agreements or arrangements) as the Commission may determine are necessary to satisfy the requirements of this Order. MMM. Prior to the Closing Date, Respondents shall secure all consents and waivers from all Third Parties that are necessary to permit Respondents to divest the assets required to be divested pursuant to this Order to an Acquirer, and to permit the relevant Acquirer to continue the Business of the Divestiture Product(s) being acquired by that Acquirer;

provided, however, Respondents may satisfy this requirement by certifying that the relevant Acquirer for the Divestiture Product has executed all such agreements directly with each of the relevant Third Parties.

NNN. Respondents shall:

1. submit to each Acquirer, at Respondents’ expense, all Confidential Business Information related to the Divestiture Products being acquired by that Acquirer;

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 167 Decision and Order 2. deliver all Confidential Business Information related to the Divestiture Products being acquired by that Acquirer to that Acquirer:

a. in good faith;

b. in a timely manner, i.e., as soon as practicable, avoiding any delays in transmission of the respective information; and c. in a manner that ensures its completeness and accuracy and that fully preserves its usefulness; 3. pending complete delivery of all such Confidential Business Information to the relevant Acquirer, provide that Acquirer and the Interim Monitor (if any has been appointed) with access to all such Confidential Business Information and employees who possess or are able to locate such information for the purposes of identifying the books, records, and files directly related to the Divestiture Products acquired by that Acquirer that contain such Confidential Business Information and facilitating the delivery in a manner consistent with this Order; 4. not use, directly or indirectly, any such Confidential Business Information related to the Business of the Divestiture Products other than as necessary to comply with the following: a. the requirements of this Order;

b. Respondents’ obligations to each respective Acquirer under the terms of any related Remedial Agreement; or c. applicable Law;

5. not disclose or convey any Confidential Business Information, directly or indirectly, to any Person except (i) the Acquirer of the particular Divestiture Products, (ii) other Persons specifically authorized VOLUME 158 Decision and Order by that Acquirer to receive such information, (iii) the Commission, or (iv) the Interim Monitor (if any has been appointed); and 6. not provide, disclose or otherwise make available, directly or indirectly, any Confidential Business Information related to the marketing or sales of the Divestiture Products to the marketing or sales employees associated with the Business related to those Retained Products that are the therapeutic equivalent (as that term is defined by the FDA) of the Divestiture Products.

OOO. For each Acquirer of a Divestiture Product, Respondents shall provide, or cause to be provided to that Acquirer in a manner consistent with the Technology Transfer Standards the following: 1. all Product Manufacturing Technology (including all related intellectual property) related to the Divestiture Product(s) being acquired by that Acquirer; and 2. all rights to all Product Manufacturing Technology (including all related intellectual property) that is owned by a Third Party and licensed to any Respondent related to the Divestiture Products being acquired by that Acquirer.

Respondents shall obtain any consents from Third Parties required to comply with this provision. No Respondent shall enforce any agreement against a Third Party or an Acquirer to the extent that such agreement may limit or otherwise impair the ability of that Acquirer to use or to acquire from the Third Party the Product Manufacturing Technology (including all related intellectual property) related to the Divestiture Products acquired by that Acquirer. Such agreements include, but are not limited to, agreements with respect to the disclosure of Confidential Business Information related to such Product Manufacturing VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 169 Decision and Order Technology. Not later than ten (10) days after the Closing Date, Respondents shall grant a release to each Third Party that is subject to such agreements that allows the Third Party to provide the relevant Product Manufacturing Technology to that Acquirer. Within five (5) days of the execution of each such release, Respondents shall provide a copy of the release to that Acquirer.

PPP. Respondents shall require, as a condition of continued employment post-divestiture of the assets required to be divested pursuant to this Order, that each employee that has had responsibilities related to the marketing or sales of the Divestiture Products within the one (1) year period prior to the Closing Date and each employee that has responsibilities related to the marketing or sales of those Retained Products that are the therapeutic equivalent (as that term is defined by the FDA) of the Divestiture Products, in each case who have or may have had access to Confidential Business Information, and the direct supervisor(s) of any such employee sign a confidentiality agreement pursuant to which that employee shall be required to maintain all Confidential Business Information related to the Divestiture Products as strictly confidential, including the nondisclosure of that information to all other employees, executives or other personnel of Respondents (other than as necessary to comply with the requirements of this Order).

QQQ. Not later than thirty (30) days after the Closing Date, Respondents shall provide written notification of the restrictions on the use and disclosure of the Confidential Business Information related to the Divestiture Products by Respondents’ personnel to all of their employees who (i) may be in possession of such Confidential Business Information or (ii) may have access to such Confidential Business Information. Respondents shall give the above-described notification by e-mail with return receipt requested or similar transmission, and keep a file of those receipts for one (1) year after the Closing Date. Respondents VOLUME 158 Decision and Order shall provide a copy of the notification to the relevant Acquirer. Respondents shall maintain complete records of all such notifications at Respondents’ principal business office within the United States and shall provide an officer’s certification to the Commission stating that the acknowledgment program has been implemented and is being complied with. Respondents shall provide the relevant Acquirer with copies of all certifications, notifications and reminders sent to Respondents’ personnel.

RRR. Until Respondents complete the divestitures required by this Order and fully provide, or cause to be provided, the Product Manufacturing Technology related to a particular Divestiture Product to the relevant Acquirer, 1. Respondents shall take actions as are necessary to: a. maintain the full economic viability and marketability of the Businesses associated with that Divestiture Product;

b. minimize any risk of loss of competitive potential for that Business;

c. prevent the destruction, removal, wasting, deterioration, or impairment of any of the assets related to that Divestiture Product; d. ensure the assets related to each Divestiture Product are provided to the relevant Acquirer in a manner without disruption, delay, or impairment of the regulatory approval processes related to the Business associated with each Divestiture Product; and e. ensure the completeness of the transfer and delivery of such Product Manufacturing Technology; and VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 171 Decision and Order 2. Respondents shall not sell, transfer, encumber or otherwise impair the assets required to be divested (other than in the manner prescribed in this Order) nor take any action that lessens the full economic viability, marketability, or competitiveness of the Businesses associated with that Divestiture Product.

SSS. From the Closing Date, Respondents shall not join, file, prosecute or maintain any suit, in law or equity, against an Acquirer or the Divestiture Product Releasee(s) of that Acquirer under the following: 1. any Patent owned by or licensed to a Respondent as of the day after the Acquisition Date that claims a method of making, using, or administering, or a composition of matter of a Product, or that claims a device relating to the use thereof;

2. any Patent that was filed or in existence on or before the Acquisition Date that is acquired by or licensed to a Respondent at any time after the Acquisition Date that claims a method of making, using, or administering, or a composition of matter of a Product, or that claims a device relating to the use thereof;

if such suit would have the potential directly to limit or interfere with that Acquirer’s freedom to practice the following: (i) the research, Development, or manufacture anywhere in the World of the Divestiture Product(s) acquired by that Acquirer for the purposes of marketing, sale or offer for sale within the United States of America of such Divestiture Product(s); or (ii) the use within, import into, export from, or the supply, distribution, or sale within, the United States of America of the Divestiture Product(s) acquired by that Acquirer. Each Respondent shall also covenant to that Acquirer that as a condition of any assignment or license from that Respondent to a Third Party of the above-described Patents, the Third Party shall agree to provide a covenant whereby the Third Party covenants VOLUME 158 Decision and Order not to sue that Acquirer or the related Divestiture Product Releasee(s) under such Patents, if the suit would have the potential directly to limit or interfere with that Acquirer’s freedom to practice the following: (i) the research, Development, or manufacture anywhere in the World of the Divestiture Product(s) acquired by that Acquirer for the purposes of marketing, sale or offer for sale within the United States of America of such Divestiture Product(s); or (ii) the use within, import into, export from, or the supply, distribution, or sale or offer for sale within, the United States of America of the Divestiture Product(s) acquired by that Acquirer. The provisions of this Paragraph do not apply to any Patent owned by, acquired by or licensed to or from a Respondent that claims inventions conceived by and reduced to practice after the Acquisition Date.

TTT. Upon reasonable written notice and request from an Acquirer to Respondents, Respondents shall provide, in a timely manner, at no greater than Direct Cost, assistance of knowledgeable employees of Respondents to assist that Acquirer to defend against, respond to, or otherwise participate in any litigation brought by a Third Party related to the Product Intellectual Property related to any of the Divestiture Product(s) acquired by that Acquirer, if such litigation would have the potential to interfere with that Acquirer’s freedom to practice the following: (i) the research, Development, or manufacture anywhere in the World of the Divestiture Product(s) acquired by that Acquirer for the purposes of marketing, sale or offer for sale within the United States of America of such Divestiture Product(s); or (ii) the use within, import into, export from, or the supply, distribution, or sale within, the United States of America of the Divestiture Product(s) acquired by that Acquirer. UUU. For any patent infringement suit filed prior to the Closing Date in which any Respondent is alleged to have infringed a Patent of a Third Party or any potential patent infringement suit from a Third Party VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 173 Decision and Order that any Respondent has prepared or is preparing to defend against as of the Closing Date, and where such a suit would have the potential directly to limit or interfere with the relevant Acquirer’s freedom to practice the following: (i) the research, Development, or manufacture anywhere in the World of the Divestiture Product(s) acquired by that Acquirer for the purposes of marketing, sale or offer for sale within the United States of America of such Divestiture Products; or (ii) the use within, import into, export from, or the supply, distribution, or sale or offer for sale within, the United States of America of such Divestiture Product(s), that Respondent shall: 1. cooperate with that Acquirer and provide any and all necessary technical and legal assistance, documentation and witnesses from that Respondent in connection with obtaining resolution of any pending patent litigation related to that Divestiture Product;

2. waive conflicts of interest, if any, to allow that Respondent’s outside legal counsel to represent that Acquirer in any ongoing patent litigation related to that Divestiture Product; and 3. permit the transfer to that Acquirer of all of the litigation files and any related attorney workproduct in the possession of that Respondent’s outside counsel related to that Divestiture Product. VVV. The purpose of the divestiture of the Divestiture Product Assets and the provision of the related Product Manufacturing Technology and the related obligations imposed on the Respondents by this Order is: 1. to ensure the continued use of such assets for the purposes of the Business associated with each Divestiture Product within the Geographic Territory; and VOLUME 158 Decision and Order 2. to create a viable and effective competitor, that is independent of Respondents in the Business of each Divestiture Product within the Geographic Territory; and, 3. to remedy the lessening of competition resulting from the Acquisition as alleged in the Commission’s Complaint in a timely and sufficient manner.

III.

IT IS FURTHER ORDERED that:

WWW. At any time after the Respondents sign the Consent Agreement in this matter, the Commission may appoint a monitor (“Interim Monitor”) to assure that the Respondents expeditiously comply with all of their obligations and perform all of their responsibilities as required by this Order, the Order to Maintain Assets and the Remedial Agreements.

XXX. The Commission shall select the Interim Monitor, 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 a proposed Interim Monitor within ten (10) days after notice by the staff of the Commission to Respondents of the identity of any proposed Interim Monitor, Respondents shall be deemed to have consented to the selection of the proposed Interim Monitor.

YYY. Not later than ten (10) days after the appointment of the Interim Monitor, Respondents shall execute an agreement that, subject to the prior approval of the Commission, confers on the Interim Monitor all the rights and powers necessary to permit the Interim Monitor to monitor Respondents’ compliance with the relevant requirements of the Order in a manner consistent with the purposes of the Order. VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 175 Decision and Order ZZZ. If an Interim Monitor is appointed, Respondents shall consent to the following terms and conditions regarding the powers, duties, authorities, and responsibilities of the Interim Monitor: 1. The Interim Monitor shall have the power and authority to monitor Respondent’s compliance with the divestiture and asset maintenance obligations and related requirements of the Order, and shall exercise such power and authority and carry out the duties and responsibilities of the Interim Monitor in a manner consistent with the purposes of the Order and in consultation with the Commission.

2. The Interim Monitor shall act in a fiduciary capacity for the benefit of the Commission. 3. The Interim Monitor shall serve until the date of completion by the Respondents of the divestiture of all Divestiture Product Assets and the transfer and delivery of the related Product Manufacturing Technology in a manner that fully satisfies the requirements of the Orders;

provided, however, that, the Interim Monitor’s service shall not exceed five (5) years from the Order Date unless the Commission decides to extend or modify this period as may be necessary or appropriate to accomplish the purposes of the Orders.

AAAA. Subject to any demonstrated legally recognized privilege, the Interim Monitor shall have full and complete access to Respondents’ personnel, books, documents, records kept in the ordinary course of business, facilities and technical information, and such other relevant information as the Interim Monitor may reasonably request, related to Respondents’ compliance with its obligations under the Orders, including, but not limited to, its obligations related to the relevant assets. Respondents shall cooperate with VOLUME 158 Decision and Order any reasonable request of the Interim Monitor and shall take no action to interfere with or impede the Interim Monitor's ability to monitor Respondents’ compliance with the Orders.

BBBB. The Interim Monitor shall serve, without bond or other security, at the expense of Respondents, on such reasonable and customary terms and conditions as the Commission may set. The Interim Monitor shall have authority to employ, at the expense of Respondents, such consultants, accountants, attorneys and other representatives and assistants as are reasonably necessary to carry out the Interim Monitor’s duties and responsibilities.

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

DDDD. Respondents shall report to the Interim Monitor in accordance with the requirements of this Order and as otherwise provided in any agreement approved by the Commission. The Interim Monitor shall evaluate the reports submitted to the Interim Monitor by Respondents, and any reports submitted by each Acquirer with respect to the performance of Respondents’ obligations under the Order or the Remedial Agreement(s). Within thirty (30) days from the date the Interim Monitor receives these reports, the Interim Monitor shall report in writing to the Commission concerning performance by Respondents of their obligations under the Order; provided, however, beginning ninety (90) days after Respondents VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 177 Decision and Order have filed their final report pursuant to Paragraph VII.B., and ninety (90) days thereafter, the Interim Monitor shall report in writing to the Commission concerning progress by each Acquirer toward obtaining FDA approval to manufacture each Divestiture Product and obtaining the ability to manufacture each Divestiture Product in commercial quantities, in a manner consistent with cGMP, independently of Respondents.

EEEE. Respondents may require the Interim Monitor and each of the Interim Monitor’s consultants, accountants, attorneys and other representatives and assistants to sign a customary confidentiality agreement; provided, however, that such agreement shall not restrict the Interim Monitor from providing any information to the Commission.

FFFF. The Commission may, among other things, require the Interim Monitor and each of the Interim Monitor’s consultants, accountants, attorneys and other representatives and assistants to sign an appropriate confidentiality agreement related to Commission materials and information received in connection with the performance of the Interim Monitor’s duties. GGGG. If the Commission determines that the Interim Monitor has ceased to act or failed to act diligently, the Commission may appoint a substitute Interim Monitor in the same manner as provided in this Paragraph. HHHH. The Commission may on its own initiative, or at the request of the Interim Monitor, issue such additional orders or directions as may be necessary or appropriate to assure compliance with the requirements of the Order.

IIII. The Interim Monitor appointed pursuant to this Order may be the same Person appointed as a Divestiture Trustee pursuant to the relevant provisions of this Order.

VOLUME 158 Decision and Order IV.

IT IS FURTHER ORDERED that:

JJJJ. If Respondents have not fully complied with the obligations to assign, grant, license, divest, transfer, deliver or otherwise convey the Divestiture Product Assets as required by this Order, the Commission may appoint a trustee (“Divestiture Trustee”) to assign, grant, license, divest, transfer, deliver or otherwise convey these assets in a manner that satisfies the requirements of this Order. In the event that the Commission or the Attorney General brings an action pursuant to § 5(l) of the Federal Trade Commission Act, 15 U.S.C. § 45(l), or any other statute enforced by the Commission, Respondents shall consent to the appointment of a Divestiture Trustee in such action to assign, grant, license, divest, transfer, deliver or otherwise convey these assets. Neither the appointment of a Divestiture Trustee nor a decision not to appoint a Divestiture 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 Divestiture Trustee, pursuant to § 5(l) of the Federal Trade Commission Act, or any other statute enforced by the Commission, for any failure by Respondents to comply with this Order.

KKKK. The Commission shall select the Divestiture Trustee, subject to the consent of Respondents, which consent shall not be unreasonably withheld. The Divestiture 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 Divestiture Trustee within ten (10) days after notice by the staff of the Commission to Respondents of the identity of any proposed Divestiture Trustee, Respondents shall be deemed to have consented to the selection of the proposed Divestiture Trustee. VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 179 Decision and Order LLLL. Not later than ten (10) days after the appointment of a Divestiture Trustee, Respondent shall execute a trust agreement that, subject to the prior approval of the Commission, transfers to the Divestiture Trustee all rights and powers necessary to permit the Divestiture Trustee to effect the divestiture required by this Order. MMMM. If a Divestiture Trustee is appointed by the Commission or a court pursuant to this Paragraph, Respondent shall consent to the following terms and conditions regarding the Divestiture Trustee’s powers, duties, authority, and responsibilities: 1. Subject to the prior approval of the Commission, the Divestiture Trustee shall have the exclusive power and authority to assign, grant, license, divest, transfer, deliver or otherwise convey the assets that are required by this Order to be assigned, granted, licensed, divested, transferred, delivered or otherwise conveyed.

2. The Divestiture Trustee shall have one (1) year after the date the Commission approves the trust agreement described herein to accomplish the divestiture, which shall be subject to the prior approval of the Commission. If, however, at the end of the one (1) year period, the Divestiture Trustee has submitted a plan of divestiture or the Commission believes that the divestiture can be achieved within a reasonable time, the divestiture period may be extended by the Commission; provided, however, the Commission may extend the divestiture period only two (2) times. 3. Subject to any demonstrated legally recognized privilege, the Divestiture Trustee shall have full and complete access to the personnel, books, records and facilities related to the relevant assets that are required to be assigned, granted, licensed, divested, delivered or otherwise conveyed by this Order and to any other relevant information, as the Divestiture Trustee may request. Respondent shall VOLUME 158 Decision and Order develop such financial or other information as the Divestiture Trustee may request and shall cooperate with the Divestiture Trustee. Respondent shall take no action to interfere with or impede the Divestiture Trustee’s accomplishment of the divestiture. Any delays in divestiture caused by Respondent 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 Divestiture Trustee, by the court. 4. The Divestiture Trustee shall use commercially reasonable efforts to negotiate the most favorable price and terms available in each contract that is submitted to the Commission, subject to Respondent’s absolute and unconditional obligation to divest expeditiously and at no minimum price. The divestiture shall be made in the manner and to an Acquirer as required by this Order; provided, however, if the Divestiture Trustee receives bona fide offers from more than one acquiring Person, and if the Commission determines to approve more than one such acquiring Person, the Divestiture Trustee shall divest to the acquiring Person selected by Respondent from among those approved by the Commission; provided further, however, that Respondent shall select such Person within five (5) days after receiving notification of the Commission’s approval.

5. The Divestiture 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 Divestiture 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 Divestiture Trustee’s duties and responsibilities. The VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 181 Decision and Order Divestiture Trustee shall account for all monies derived from the divestiture and all expenses incurred. After approval by the Commission of the account of the Divestiture Trustee, including fees for the Divestiture Trustee’s services, all remaining monies shall be paid at the direction of Respondents, and the Divestiture Trustee’s power shall be terminated. The compensation of the Divestiture Trustee shall be based at least in significant part on a commission arrangement contingent on the divestiture of all of the relevant assets that are required to be divested by this Order.

6. Respondent shall indemnify the Divestiture Trustee and hold the Divestiture Trustee harmless against any losses, claims, damages, liabilities, or expenses arising out of, or in connection with, the performance of the Divestiture 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 losses, claims, damages, liabilities, or expenses result from gross negligence, willful or wanton acts, or bad faith by the Divestiture Trustee.

7. The Divestiture Trustee shall have no obligation or authority to operate or maintain the relevant assets required to be divested by this Order; provided, however, that the Divestiture Trustee appointed pursuant to this Paragraph may be the same Person appointed as Interim Monitor pursuant to the relevant provisions of this Order or the Order to Maintain Assets in this matter.

8. The Divestiture Trustee shall report in writing to Respondent and to the Commission every sixty (60) days concerning the Divestiture Trustee’s efforts to accomplish the divestiture. VOLUME 158 Decision and Order 9. Respondents may require the Divestiture Trustee and each of the Divestiture Trustee’s consultants, accountants, attorneys and other representatives and assistants to sign a customary confidentiality agreement; provided, however, that such agreement shall not restrict the Divestiture Trustee from providing any information to the Commission. NNNN. The Commission may, among other things, require the Divestiture Trustee and each of the Divestiture Trustee’s consultants, accountants, attorneys and other representatives and assistants to sign an appropriate confidentiality agreement related to Commission materials and information received in connection with the performance of the Divestiture Trustee’s duties. OOOO. If the Commission determines that a Divestiture Trustee has ceased to act or failed to act diligently, the Commission may appoint a substitute Divestiture Trustee in the same manner as provided in this Paragraph.

PPPP. The Commission or, in the case of a court-appointed Divestiture Trustee, the court, may on its own initiative or at the request of the Divestiture Trustee issue such additional orders or directions as may be necessary or appropriate to accomplish the divestiture required by this Order.

V.

IT IS FURTHER ORDERED that, in addition to any other requirements and prohibitions relating to Confidential Business Information in this Order, each Respondent shall assure that its own counsel (including its own in-house counsel under appropriate confidentiality arrangements) shall not retain unredacted copies of documents or other materials provided to an Acquirer or access original documents provided to an Acquirer, except under circumstances where copies of documents are insufficient or otherwise unavailable, and for the following purposes:

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 183 Decision and Order A. To assure such Respondent’s compliance with any Remedial Agreement, this Order, any Law (including, without limitation, any requirement to obtain regulatory licenses or approvals, and rules promulgated by the Commission), any data retention requirement of any applicable Government Entity, or any taxation requirements; or B. To defend against, respond to, or otherwise participate in any litigation, investigation, audit, process, subpoena or other proceeding relating to the divestiture or any other aspect of the Divestiture Products or the assets and Businesses associated with those Divestiture Products;

provided, however, that a Respondent may disclose such information as necessary for the purposes set forth in this Paragraph V pursuant to an appropriate confidentiality order, agreement or arrangement;

provided further, however, that pursuant to this Paragraph V, the Respondent needing such access to original documents shall: (i) require those who view such unredacted documents or other materials to enter into confidentiality agreements with the relevant Acquirer (but shall not be deemed to have violated this requirement if that Acquirer withholds such agreement unreasonably); and (ii) use best efforts to obtain a protective order to protect the confidentiality of such information during any adjudication.

VI.

IT IS FURTHER ORDERED that:

C. Any Remedial Agreement shall be deemed incorporated into this Order.

D. Any failure by a Respondent to comply with any term of such Remedial Agreement shall constitute a failure to comply with this Order.

VOLUME 158 Decision and Order E. Respondents shall include in each Remedial Agreement related to each of the Divestiture Products a specific reference to this Order, the remedial purposes thereof, and provisions to reflect the full scope and breadth of each Respondent’s obligation to the Acquirer pursuant to this Order.

F. No Respondent shall seek, directly or indirectly, pursuant to any dispute resolution mechanism incorporated in any Remedial Agreement, or in any agreement related to any of the Divestiture Products a decision the result of which would be inconsistent with the terms of this Order or the remedial purposes thereof.

G. No Respondent shall modify or amend any of the terms of any Remedial Agreement without the prior approval of the Commission, except as otherwise provided in Rule 2.41(f)(5) of the Commission’s Rules of Practice and Procedure, 16 C.F.R. § 2.41(f)(5). Notwithstanding any term of the Remedial Agreement(s), any modification or amendment of any Remedial Agreement made without the prior approval of the Commission, or as otherwise provided in Rule 2.41(f)(5), shall constitute a failure to comply with this Order.

VII.

IT IS FURTHER ORDERED that:

H. Within five (5) days of the Acquisition, Respondents shall submit to the Commission a letter certifying the date on which the Acquisition occurred. I. Within thirty (30) days after the Order Date, and every sixty (60) days thereafter until Respondents have fully complied with Paragraphs II.A., II.B., II.C., II.D., II.E., and II.H., Respondents shall submit to the Commission a verified written report setting forth in detail the manner and form in which it intends to comply, is complying, and has complied with this VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 185 Decision and Order Order. Respondents shall submit at the same time a copy of its report concerning compliance with this Order to the Interim Monitor, if any Interim Monitor has been appointed. Respondents shall include in their reports, among other things that are required from time to time, a full description of the efforts being made to comply with the relevant paragraphs of the Order, including:

1. a detailed description of all substantive contacts, negotiations, or recommendations related to (i) the divestiture and transfer of all relevant assets and rights, and (ii) transitional services being provided by the Respondents to the relevant Acquirer; and 2. a detailed description of the timing for the completion of such obligations.

J. One (1) year after the Order Date, annually for the next nine (9) years on the anniversary of the Order Date, and at other times as the Commission may require, Respondents shall file a verified written report with the Commission setting forth in detail the manner and form in which it has complied and is complying with the Order.

VIII.

IT IS FURTHER ORDERED that Respondents shall notify the Commission at least thirty (30) days prior to: K. any proposed dissolution of a Respondent; L. any proposed acquisition, merger or consolidation of a Respondent; or M. any other change in a Respondent including, but not limited to, assignment and the creation or dissolution of subsidiaries, if such change might affect compliance obligations arising out of this Order. VOLUME 158 Decision and Order IX.

IT IS FURTHER ORDERED that, for purposes of determining or securing compliance with this Order, and subject to any legally recognized privilege, and upon written request and upon five (5) days’ notice to any Respondent made to its principal United States offices, registered office of its United States subsidiary, or its headquarters address, that Respondent shall, without restraint or interference, permit any duly authorized representative of the Commission:

N. access, during business office hours of the Respondent and in the presence of counsel, to all facilities and access to inspect and copy all books, ledgers, accounts, correspondence, memoranda and all other records and documents in the possession or under the control of the Respondent related to compliance with this Order, which copying services shall be provided by the Respondent at the request of the authorized representative(s) of the Commission and at the expense of the Respondent; and O. to interview officers, directors, or employees of the Respondent, who may have counsel present, regarding such matters.

X.

IT IS FURTHER ORDERED that this Order shall terminate on August 20, 2024.

By the Commission.

VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 187 Analysis to Aid Public Comment NON-PUBLIC APPENDIX I AGREEMENTS RELATED TO THE DIVESTITURES [Redacted From the Public Record Version, But Incorporated By Reference] ANALYSIS OF CONSENT ORDER TO AID PUBLIC COMMENT I. Introduction The Federal Trade Commission (“Commission”) has accepted, subject to final approval, an Agreement Containing Consent Orders (“Consent Agreement”) from Valeant Pharmaceuticals International, Inc. (“Valeant”), which is designed to remedy the anticompetitive effects of Valeant’s acquisition of Precision Dermatology, Inc. (“Precision”). The proposed Consent Agreement has been placed on the public record for thirty days for receipt of comments from interested persons. Comments received during this period will become part of the public record. After thirty days, the Commission will again evaluate the proposed Consent Agreement, along with the comments received, in order to make a final decision as to whether it should withdraw from the proposed Consent Agreement, modify it, or make final the Decision and Order (“Order”).

Pursuant to an Agreement and Plan of Merger dated January 31, 2014, Valeant plans to acquire Precision for approximately $475 million in cash, plus an additional $25 million milestone payment upon the achievement of certain sales targets (the “Proposed Acquisition”). Both parties sell topical pharmaceutical products in the United States. The Commission alleges in its Complaint that the Proposed Acquisition, if consummated, would violate Section 7 of the Clayton Act, as VOLUME 158 Analysis to Aid Public Comment amended, 15 U.S.C. § 18, and Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C. § 45, by lessening competition in U.S. markets for (1) branded and generic singleagent topical tretinoins for the treatment of acne and (2) generic Retin-A and/or the individual strengths and formulations of generic Retin-A. The proposed Consent Agreement will remedy the alleged violations by preserving the competition that would otherwise be eliminated by the Proposed Acquisition. Specifically, under the terms of the Consent Agreement, Valeant would be required to divest all of Precision’s rights and assets related to (1) Tretin-X and (2) generic Retin-A. Valeant has proposed Actavis, Inc. (“Actavis”) as the buyer of the Tretin-X assets and Matawan Pharmaceuticals, LLC (“Matawan Pharmaceuticals”) as the buyer of the generic Retin-A assets. II. The Products and Structure of the Markets A. Branded and Generic Single-Agent Topical Tretinoins Valeant’s proposed acquisition of Precision would significantly increase concentration in the single-agent topical tretinoin market. Single-agent topical tretinoins are one of three kinds of retinoids, a class of chemical compounds used to treat acne vulgaris, commonly known as acne. Single-agent topical tretinoins are not reasonably interchangeable with the other two kinds of retinoids, adapalene and tazarotene, because they are used to treat patients with a different severity of acne. Tretinoins are viewed as more efficacious but more abrasive than adapalenes and less abrasive but less efficacious than tazarotenes.

The branded and generic single-agent topical tretinoin market includes both branded and generic tretinoins. Unlike pharmaceutical markets in which the branded product no longer competes with generics once multiple generics enter, branded versions of single-agent topical tretinoins continue to compete with each other and their generic versions. Although generics contain the same molecule as the brands, many dermatologists believe that prescribing a branded product allows them to know precisely which delivery vehicles their patients are using, and hence what might be the cause of any skin irritation that may arise. As a result, even years after generic entry into this market, VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 189 Analysis to Aid Public Comment many dermatologists still prescribe branded tretinoins, and Valeant and Precision continue to invest in promotion and marketing of their branded products.

Valeant currently manufactures and markets branded Retin- A, Retin-A Micro, and Atralin, as well as generic Retin-A and Retin-A Micro. Currently, Valeant markets its generic Retin-A through a profit sharing arrangement with Spear Pharmaceuticals (“Spear”). Precision markets Tretin-X, as well as generic Retin- A through a profit sharing arrangement with Rouses Point Pharmaceuticals, LLC (“Rouses Point”). The only other suppliers of single-agent topical tretinoins are Mylan, with its branded product, Avita, and Actavis, with one strength of generic Retin-A. Currently, Valeant accounts for approximately 70% of single-agent topical tretinoin sales, and Precision has a share of approximately 12%. Spear, Rouses Point, Mylan and Actavis account for the remaining 18% of the market. Unremedied, the Proposed Acquisition will consolidate the two most significant suppliers of single-agent topical tretinoins, and would increase the Herfindahl-Hirschman Index concentration (“HHI”) by 1680, from 5368 to a post-merger total of 7048. Valeant’s postacquisition market share in the single-agent topical tretinoin market would grow to over 80%.

B. Generic Retin-A In addition, Valeant’s proposed acquisition of Precision would consolidate two leading suppliers of generic Retin-A. Although generic Retin-A products are part of the single-agent topical tretinoin market, generic Retin-A products compete particularly closely with each other and, therefore, also comprise a separate relevant market. Generic Retin-A is offered in a variety of strengths and formulations. Three suppliers currently offer generic Retin-A products: (1) Precision, which holds an Abbreviated New Drug Application (“ANDA”) for generic Retin-A and distributes five strengths and formulations of its generic Retin-A products through Rouses Point; (2) Valeant, which holds the New Drug Application (“NDA”) for Retin-A and distributes through an “authorized” generic arrangement with Spear the same strengths and formulations as Precision’s generic Retin-A; and (3) Actavis, which markets one of the five formulations of generic Retin-A currently on the market. Since VOLUME 158 Analysis to Aid Public Comment retail pharmacies typically carry each of these strengths and formulations in order to be able to fill the full range of requested prescriptions, each strength and formulation may constitute a distinct product market. Absent a remedy, the Proposed Acquisition will result in a monopoly for four of the five strengths of generic Retin-A, and a duopoly for the only other formulation (the 0.025% cream), for which the post-acquisition market share would increase to nearly 80% and the HHI would rise from 3534 to 6568.

III. Entry Entry into the manufacture and sale of both branded and generic single-agent topical tretinoins and generic Retin-A generally or for any given strength/formulation would not be timely, likely, or sufficient in magnitude, character, and scope to deter or counteract the anticompetitive effects of the acquisition. The combination of drug development times and regulatory requirements, including U.S. Food and Drug Administration (“FDA”) approval, is costly and lengthy. Industry participants also note that expertise and facilities associated with manufacturing topical products are sufficiently specialized that a relatively small number of firms participate in such markets. IV. Effects The Proposed Acquisition would likely cause significant anticompetitive harm to consumers for the manufacture and sale of both branded and generic single-agent topical tretinoins and generic Retin-A and/or the individual strengths and formulations of generic Retin-A by eliminating actual, direct, and substantial competition between Valeant and Precision in these markets. With respect to branded and generic single-agent topical tretinoins, the Proposed Acquisition would likely result in unilateral anticompetitive effects. Evidence gathered during the course of the investigation demonstrates that there is close competition between Valeant’s and Precision’s branded tretinoin products in terms of pricing and promotional activities. Although generic tretinoins provide some competitive constraint on branded tretinoin pricing, there is a sufficient degree of direct competition between Valeant’s and Precision’s branded products that Valeant will likely have an incentive to increase the price of VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 191 Analysis to Aid Public Comment branded single-agent topical tretinoins if the Proposed Acquisition takes place. Since many managed care organizations incentivize the use of generic tretinoin over branded tretinoin, the competition between Precision’s and Valeant’s branded products has benefitted consumers primarily in the form of promotional couponing. The Proposed Acquisition would likely allow Valeant to raise prices by reducing its couponing and other promotional activity for Tretin-X.

For the generic Retin-A products, the Proposed Acquisition would give Valeant a monopoly in four of five strengths and formulations of generic Retin-A, a duopoly for the only other strength, and would combine the two largest suppliers of generic Retin-A overall. In generic pharmaceuticals markets, price is heavily influenced by the number of participants with sufficient supply. Market participants consistently characterize generic drug markets as commodity markets in which the number of generic suppliers has a direct impact on pricing. Customers and competitors alike have confirmed that the prices of the generic pharmaceutical products at issue continue to decrease with new entry even after a number of suppliers have entered these generic markets. Further, customers generally believe that having at least four suppliers in a generic pharmaceutical market produces more competitive prices than if fewer suppliers are available to them. The evidence shows that anticompetitive effects are likely to result from the Proposed Acquisition, due to a decrease in the number of independent competitors in the markets at issue. The combination of these products at Valeant results in even greater concentration in already highly concentrated markets and would likely result in significantly higher prices for all strengths of generic Retin-A.

V. The Consent Agreement The proposed Consent Agreement effectively remedies the Proposed Acquisition’s anticompetitive effects in each of the relevant product markets. Pursuant to the Consent Agreement, the parties are required to divest Precision’s rights and assets related to Tretin-X to Actavis, and its rights and assets related to generic Retin-A to Matawan Pharmaceuticals. Further, the proposed Consent Agreement requires Precision to assign to Actavis and Matawan Pharmaceuticals its contract VOLUME 158 Analysis to Aid Public Comment manufacturing agreement with DPT Laboratories Ltd. (“DPT”) for the divested assets. The parties must accomplish these divestitures and relinquish their rights no later than ten days after the Proposed Acquisition is consummated. Actavis is well-suited to acquire Tretin-X because of its current presence in the dermatology field, and the fact that it already markets a branded antibiotic, Doryx, that is also used to treat acne vulgaris. Actavis is a multinational pharmaceutical company headquartered in Ireland that employs approximately 19,200 individuals. In 2013, the company generated $8.7 billion in worldwide revenue. Actavis develops, manufactures, markets, sells, and distributes branded, generic, branded generic, biosimilar, and over-the-counter pharmaceutical products. Currently, Actavis offers forty-five branded pharmaceutical products and approximately 250 generic pharmaceutical product lines in the United States. Actavis employs a significant dermatology sales force.

Since Actavis will step into Precision’s existing contract manufacturing relationship with DPT for the production of Tretin-X, no transfer of manufacturing will be necessary for the proposed divestiture and Actavis will be able to compete immediately following the acquisition in the single-agent topical tretinoin market.

Matawan Pharmaceuticals is an acceptable purchaser of the generic Retin-A assets and will be able to replicate Precision’s role in that market. Under the proposed divestiture, Matawan Pharmaceuticals will purchase the generic Retin-A assets, but little else will change as the products will continue to be manufactured by DPT and marketed by Rouses Point. Since Matawan Pharmaceuticals will use Precision’s already-existing contract manufacturing relationship with DPT for the production of generic Retin-A, no transfer of manufacturing will be necessary.

The Commission’s goal in evaluating possible purchasers of divested assets is to maintain the competitive environment that existed prior to the Proposed Acquisition. If the Commission determines that Actavis and Matawan Pharmaceuticals are not acceptable acquirers of the divested assets, or that the manner of VALEANT PHARMACEUTICALS INTERNATIONAL, INC. 193 Analysis to Aid Public Comment the divestitures is not acceptable, the parties must unwind the sale of rights to Actavis and Matawan Pharmaceuticals, and divest the Tretin-X and generic Retin-A assets to Commissionapproved acquirers within six months of the date the Order becomes final. In that circumstance, the Commission may appoint a trustee to divest the Products if the parties fail to divest them as required.

The proposed Consent Agreement contains several provisions to help ensure that the divestitures are successful. The Order requires Valeant and Precision to take all action to maintain the economic viability, marketability, and competitiveness of the products to be divested until such time that they are transferred to Commission-approved acquirers. The Order also requires that Valeant and Precision transfer all confidential business information, including customer information related to the divestiture products, to Actavis and Matawan Pharmaceuticals.

The purpose of this analysis is to facilitate public comment on the proposed Consent Agreement, and it is not intended to constitute an official interpretation of the proposed Order or to modify its terms in any way.

VOLUME 158 Complaint