Question
Via E-Mailand U.S. Mail
July 9, 2007
Mr. Michael Verne
Premerger Notification Office
Bureau of Competition
Federal Trade Commission
7th Street & Pennsylvania Avenue, N.W.
Washington, DC 20580
RE:Reportability of Licensing Arrangement For Combination Product
DearMike:
I am writing to confirm myunderstanding of our telephone conversation on July 9, 2007, concerning whether the transactiondescribed below is exempt from the requirements of the Hart-Scott-RodinoAntitrust Improvements Act of 1976, as amended ("HSR Act").
CompanyX and Company Y propose to enter into a combination product development andcommercialization agreement. For the purpose of this letter, assume that thelicense that Company X will receive to "manufacture" the combinationproduct is exclusive and that the parties satisfy all of the jurisdictionaltests under the HSR Act.
Underthe proposed transaction, Company X and Company Y have retained the sole rightto manufacture and will separately provide all quantities of their respectiveproducts needed to produce the combination product. Each of these separateproducts is already on the market and sold by the companies. In order toproduce a combination product, both companies will provide their pharmaceuticalcompound in bulk form which has not been formulated for administration to apatient and has not been filled into vials or other delivery devices.
The"manufacturing" that is being undertaken by Company X is that it willtake these bulk products and formulate them for stability and most likely fillthem into dual chamber cartridges (one chamber for each drug) for delivery to patients.(It is possible that the drugs will be "mixed" into one formulationfor delivery to patients, but it is unlikely as stability is much harder toachieve for such a mix.)
Under previous informal advice given by the PremergerNotification Office, it appears that the steps being taken by Company X tocreate the combination drug do not constitute "manufacture" and thatthe license grant enabling Company X to produce the combined product istherefore not reportable under the HSR Act, given that insufficient rightshave been granted to constitute the transfer of beneficial ownership of theunderlying intellectual property (see, e.g.,http:/lwww.ftc.govlbc/hsr/informallopinions/O205013.htm).
As we discussedduring our call today, you agreed that the above-described arrangement is notreportable under the HSR Act. If you disagree, or would like to discussfurther, please do let us know.
Sincerely,