Executive Summary/ Key Questions (FAQ)

• Q1. What are the differences between a "business license" and a "product license" regarding succession in an M&A transaction?
  ー A1. The primary difference lies in "whether or not they can be succeeded."
  A "business license," such as a Medical Device Marketing Authorization, cannot be transferred to another company under the current system, even though comprehensive succession methods like mergers or corporate divestitures. Therefore, if the acquirer does not already hold the required business license, they must obtain a new one. On the other hand, "product licenses," such as marketing approvals or certifications for individual products, can be succeeded provided that certain requirements (e.g., the complete transfer of all relevant data and information) are met.
• Q2. When leveraging databases such as the PMDA to understand a target company's licensing status during preliminary research, what precautions should be taken?
  ー Since certain information may not be published in public databases, a comprehensive verification during the due diligence (DD) process is indispensable.
  In the preliminary research stage, it is useful to grasp the overall situation by reviewing package inserts and other licensing-related information via the PMDA's (Pharmaceuticals and Medical Devices Agency) "Medical Device Information Search" or the target company's website. However, home-use medical devices or products manufactured solely under contract may not be listed in these databases. Therefore, final judgments should not be made based on database information alone; instead, thorough, and exhaustive verification must be conducted through the actual DD process.
• Q3. When acquiring an entire business, which M&A scheme is the most straightforward from a licensing perspective?
  ー A3. "Stock acquisition" is the most straightforward, as the legal entity remains completely intact.
  In a stock acquisition there is no need to acquire new business licenses or undergo procedures for product license succession.However, it is important to note that if the trade name (company name) or corporate officers of the marketing authorization holder change because of the acquisition, a "Notification of Change" must be submitted to the regulatory authorities within 30 days of the change.
• Q4. What are the primary considerations in a "carve-out" acquisition, where only a portion of a product business is divested?
  ー A3. Mainly, it is necessary to consider the following points from the perspectives of re-obtaining business licenses, the flexibility of the structure, the physical separation of manufacturing facilities and business offices, and practical transition operations.
  (1) Examination of the acquisition scheme (structure) and schedule based on arrangements for re-obtaining business licenses and other pharmaceutical regulatory licenses:
  For example, to enhance deal certainty, it is necessary to consider a flexible structure, such as adopting a "three-stage method" where the seller establishes a vehicle company (a newly formed subsidiary) and conducts a corporate divestiture, making the completion of obtaining and organizing business licenses a "condition precedent" (CP) for the final closing.
  (2) Succession of product licenses and substantial changes:
  While it is possible to succeed marketing approvals and certifications in connection with universal succession such as a corporate divestiture, if substantial changes occur, such as a change in the manufacturing facility of the target medical device, a separate partial change application will be required, which may affect the acquisition scheme and schedul
  (3) Examination of the separation of human and material resources:
  For instance, when Medical Device Y and Medical Device Z are manufactured at the same "R Factory," the physical separation of the manufacturing facility becomes a major issue. A comprehensive comparative study must be conducted based on the feasibility of separation and its impact on the schedule, considering options such as physically partitioning the facilities, transferring production lines to the buyer's factory, or outsourcing manufacturing back to the seller.
  (4) Identification and legal structuring of items requiring a Transition Service Agreement (TSA):
  For example, when carving out manufacturing and sales departments related to specific products like Medical Device X or Z, arrangements may be required to continue contract manufacturing of Medical Device Z at R Factory, to second/transfer specific sales personnel via secondment arrangements, or to evaluate leases for business department offices. Therefore, based on the structure and schedule examined in ①, it is necessary to exhaustively identify items to be covered under the TSA and determine the appropriate legal framework for each.
• Q5. When succeeding a product license involves a change in manufacturing facilities, how long does the process typically take?
  ー A4. A marketing approval process that involves a change in manufacturing facilities can take approximately one year.
  This is because, in addition to the succession procedure itself, the acquirer is required to complete an application for partial change approval, which includes a QMS (Quality Management System) conformity assessment. If responses to overseas regulatory authorities, such as the US FDA, are required, the process may take even longer. Therefore, it is indispensable to plan the timeline retroactively from the desired closing date.