Question
From:
(Redacted)
Sent:
Wednesday, June 09,201011:19 PM
To:
Verne, B. Michael
Subject: Collaboration and LicenseAgreement
Mike:
I hope all is well. Sorry to bother youbut I have a few questions related to a Collaboration and License Agreement.The agreement is between a pharmaceutical company (Licensor) and a company thatpossess certain patent rights, know-how and technology with respect to certaintherapeutic compounds (Licensee).
Under the terms of the agreement, theLicensor will grant to the Licensee an exclusive worldwide, royalty bearing,license under the licensor's know-how and patents, to research, develop, make,have made, use, gain NDA approval, commercialize, sell, offer for sale, havesold, export and import licensed Compounds and Products in the specifictargeted fields. The Licensor has identified one specific compound for which itwill use the licensor's patents and know-how to develop and hopefullycommercialize a product. The value of the license for this compound as itrelates to the U.S. is well below $63.4 million.
In addition, the licensee has the right underthe agreement to identify up to three additional compounds during the threeyear research period provided for in the agreement. This period may be extendedfor two additional one year periods by agreement of the parties. At this point,the licensee has not identified any additional compounds.
The Licensor is responsible for themanufacture and supply of all therapeutic compounds for use in support of theresearch program. The licensor will transfer to the licensee the manufacturingtechnology upon the filing of the NDA and the licensee will be solelyresponsible for the manufacture of the compound for clinical trials andcommercial supply.
In addition, the licensee has agreed tomake an equity investment of $10 million in the licensor acquiring
preferred voting shares. The licenseeintends to hold the shares solely for the purpose of investment.
My questions concern the effect of thedesignation by the licensee of additional compounds for which it will have anexclusive license to use the licensor's patents and know-how. The value of theexclusive rights as it relates to these additional compounds cannot bedetermined at this time since they have not yet been identified. It also doesnot seem appropriate to include them in the initial HSR analysis because theassets will be transferred at a later time, if at all.
Query should the designation of a eachnew compound be treated and analyzed as a separate asset acquisition? Or shouldthe value of the license as it relates to all of the compounds be aggregatedover the course of the license? Or should only the value of the licenses forcompounds desigaated within 180 days of each other be aggregated under a 801.13theory?
Note -Further complicating the analysisis the fact that the right to manufacture a specific compound does not occuruntil the NDA for the compound has been filed. Consequently, the licensee isnot acquiring asset under existing interpretations until it receives the rightto manufacture the compound in question.