Question
December 22, 2006
B. Michael Verne
Premerger NotificationOffice
Bureau of Competition, Room303
Federal Trade Commission
600 Pennsylvania Avenue, N.W.
Washington, D.C. 20580
Dear Mr. Verne:
Thankyou very much for speaking with me by telephone yesterday. I write in order toconfirm my understanding of our discussion.
I posed the followingtransaction: Party A is a foreign corporation which owns certain patents,know-how and patent applications (the "IP"). Party B is a U.S. companyengaged in the development of potential pharmaceutical products and themanagement of such potential pharmaceutical products through the U.S. FDAregulatory process.
Party A and Party B willenter into a License Agreement pursuant to which Party A would grant anexclusive license of the IP for a Territory which includes the United States(among other countries) for a field of use for the treatment, prevention anddiagnosis of certain specified indications in human beings. No pharmaceuticalproduct comprising the claims of the patents or other licensed IP has beenapproved by the FDA or by an equivalent regulatory agency in any otherjurisdiction.
The license agreement wouldprovide for Phase H and Phase HI human clinical trials and, if those clinicaltrials are successful, pursuance of a New Drug Application ("NDA")with the FDA. During the period of clinical development Party A willmanufacture or have manufactured by an entity other than Party B suchquantities of the products or active ingredient as may comprise the patents orother IP as are needed for the clinical trials. Party A will supply suchproducts or active ingredient to Party B pursuant to a purchase agreement foruse during the clinical studies.
Under the License AgreementParty A will grant an exclusive license to Party B to develop the compound andthe licensed products and (among other countries) the United States.Under the License Agreement Party A will also grant an exclusive license tomake the patented active ingredient but only for the purpose of makingapproved pharmaceutical products. Such manufacturing right would take effect atsuch time as Party B (or its sublicensee) is to commence commercialmanufacturing of licensed pharmaceutical products, which we anticipate would besignificantly more than one year after the signing of the license agreement andthe purchase agreement.
TheLicense Agreement contemplates a development process running in excess oftwelve months during which Party A would be supplying products and compoundpursuant to the purchase agreement and Party B would not be manufacturing. TheParties anticipate that commercial product launch would occur - - provided theclinical trials come up with a development process and the FDA regulatoryprocess are successful - - approximately five years after signing the licenseagreement.
Duringthe phase of clinical development Party A is simply supplying finished productsto Party B for a price in sufficient quantities to conduct the clinical trialsand complete the regulatory process. This aspect of the transaction istherefore analogous to a distribution agreement and no manufacturing rightswould take effect nor be implemented by the licensee until it begins to preparefor commercial launch of an FDA approved product.
Therefore,it is such exercise of a licensed right to manufacture that would viewed as thesale of an asset for HSR purposes and would, provided that the size of the partiesand the size of the transaction tests then in effect are met, trigger an HSRfiling requirement.
NoHSR filing is required before signing the License Agreement and the PurchaseAgreement (i.e., distribution agreement).
Ibelieve this letter accurately reflects our conversation of December 21, 2006.I would be grateful if you could confirm to me that the signing of this LicenseAgreement and Purchase Agreement is exempt from HSR filing until such time asthe licensee's manufacturing rights may be implemented to produce a commercialproduct.
Sincerely,