0912004 Informal Interpretation

December 4, 2009

James H. Ferkingstad
Premerger Notification Office
Federal Trade Commission
Sixth & Pennsylvania Avenue, N.W.
Washington, D.C. 20580

Dear Mr. Ferkingstad:

Thank you for your timeyesterday and today to discuss the applicability of the Hart-Scott-Rodino (HSR)Act reporting requirements to a particular technology licensing arrangement,which the parties have described in their agreement as "exclusive,"but which we believe, under the facts and circumstances described, should beconsidered "non-exclusive" for purposes of determining reportabilityunder the HSR Act.

My client, a specialtypharmaceutical company (Company A), proposes to enter into a License,Development and Asset Transfer Agreement (the Agreement) with anotherpharmaceutical company (Company B).

Under the proposed Agreement,Company B would grant Company A exclusive rights to market and sell a biologicproduct extracted from bacterial cells approved for sale as a medical device bythe Food and Drug Administration in the United States and by regulatoryauthorities in other jurisdictions, along with a follow-on product underdevelopment which would require less frequent dosing.

Specifically Company B wouldgrant to Company A an exclusive license in certain territories, including theUnited States, under Company B intellectual property, including all patents,patent applications and know-how owned, licensed or controlled by Company Brelating to the product and the product under development, to offer for sale,sell, import, market and promote the product and the product under development,in a particular field of use. In addition, Company B would grant to Company A,an exclusive license to develop, make, have made and use the product and theproduct under development, except that Company B would retain the right(including the right to sublicense) to make and develop the product and theproduct under development in the field to provide manufacturing services toCompany A and to conduct certain specified clinical studies. Company B wouldprovide manufacturing services to Company A to supply furnished orsemi-finished product for an initial 10 year ten, renewable for subsequent fiveyear terms at Company A's option.

At the same time, Company Awill acquire certain other assets from Company B, including trademarks, certainproduct data, product registrations, marketing materials, accounts receivableand inventory, but Company A expects that, and before closing would make a goodfaith determination that, the fair market value of those assets alone would notmeet the size-of-transaction threshold.

The Premerger NotificationPractice Manual, Interpretation 27, advises that the grant of an exclusiveintellectual property license is the transfer of an asset to the licensee,which may be reportable under the HSR Act, and the Premerger NotificationOffice (PNO) has extended that position to partial or limited exclusivity, or"field-of use" exclusivity, so that if a license grants exclusivegeographic territories or exclusivity for specific uses, it may be considered theacquisition of an asset. Premerger Notification Practice Manual Interpretation27 also teaches that to be treated as an acquisition, a license must beexclusive even against the grantor, as the PNO has taken the position that thegrant of a nonexclusive license does not involve the acquisition of an asset,since the grantor retains the right to use the intellectual property.Interpretation 27 also instructs that the grant of marketing and distributionrights, even if exclusive, does not constitute the acquisition of an asset.

You advised us in December2002 that no filing was required where a firm was granted an exclusive right tomarket and sell certain drugs under development, where the licensor retainedthe right to manufacture the products for sale to such firm, which would onlyobtain a right to manufacture in the event of certain future events. Seehttp://www.ftc.gov/opinions/0212016.htrn. The PNO has more recently advisedthat if a company grants an "exclusive" license but retains the rightto manufacture the product covered by the license, then the license is notsufficiently exclusive to be treated as the transfer of an asset for purposesof the HSR Act and would not be reportable. Seehttp://www.ftc.gov/opinions/0803005.htrn.

Based on the above facts andprecedents, you have advised that the intellectual property license describedabove would not be reportable and the value of that license need not beincluded in determining whether the transaction meets the size-of-transactionthreshold.

If this letter does notaccurately summarize your advice, I ask that you contact me promptly. Thank youagain for your guidance and assistance in this matter.