By Tom McLain
When the Hart-Scott-Rodino Antitrust Improvements Act ("HSR") is mentioned, most people think of it as a requirement that may come into play in a merger transaction or some other type of acquisition transaction. However, there are occasional reminders that other sorts of transactions that cannot be classified as a merger or acquisition can be subject to HSR notification requirements. Just this week, such a reminder came with the announcement of an collaboration and exclusive global license agreement between Merck and Portola Pharmaceuticals. According to news reports, the licensing deal requires Merck to pay Portola a $50 million initial fee, followed by additional payments of up to $420 million upon achievement of certain milestones and also provides for double-digit royalties on worldwide sales of betrixaban, a drug for the prevention of stroke in patients with atrial fibrillation. In its press release, Merck commented that the "effectiveness of the collaboration agreement is subject to the expiration or earlier termination of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act, if applicable."
While it is true that the vast majority of HSR notifications are filed as a result of a transaction involving a merger or acquisition transaction, the formation of a joint venture or other corporation can trigger a requirement to file an HSR notification. More importantly for Merck, the Federal Trade Commission (the "FTC"), through its informal opinions, has explained that certain exclusive licenses will be treated as the transfer of an asset for purposes of the HSR Act. With respect to the Merck/Portola transaction, the underlying collaboration and license agreement will have to be analyzed to determine whether it is sufficiently exclusive for the FTC to consider it to be an transfer of an asset. Assuming that the Merck/Portola arrangement is sufficiently exclusive, then the parties will have to determine whether other reporting threshold tests are met such as the" size of person test" and the "size of transaction test." The FTC's Introductory Guide II provides basic information regarding the reporting thresholds.
Given that, as of the 2009 amendment to the regulations, the daily penalties that can be assessed for a failure to make a required notification filing are $16,000 per day, it is quite important to remember that the HSR Act applies to things beyond mere mergers and acquisitions. Thus, it is important to remember that, whenever two companies come together to form a joint venture, form a corporation or limited liability company, or undertake a collaborative or exclusive arrangement, the implications under the HSR Act should be considered.