SecProbe.io

CORRESP
1
filename1.htm

    corresp.htm

        (212)
474-1788

      December
16, 2008

      Omrix Biopharmaceuticals,
Inc.

      Schedule TO-C filed November
24, 2008

      Schedule TO-T filed November
25, 2008

      Schedule TO-T/A filed
December 1, 2008

      Filed by Binder Merger Sub,
Inc. and Johnson & Johnson

      SEC File
No. 5-82558

      Dear Ms.
Griffith:

        On behalf
of Johnson & Johnson (“J&J”) and Binder
Merger Sub, Inc. (“Merger Sub”), this
letter responds to your letter dated December 12, 2008 (the “Comment Letter”)
providing comments to the Schedule TO-C filed with the Securities and Exchange
Commission (the “Commission”) by
J&J and Merger Sub on November 24, 2008 and the Schedule TO-T filed with the
Commission by J&J and Merger Sub on November 25, 2008 (as amended, the
“Schedule
TO”).  For your convenience, each comment from the Comment
Letter has been reproduced below, followed by J&J’s and Merger Sub’s
response to such comment.  Capitalized terms defined in the Schedule
TO and used in the following responses without definition have the meanings
specified in the Schedule TO.

        Schedule
TO-C

                  1.

                  Refer
      to the press release filed November 24, 2008, in your Schedule
      TO-C.  Your press release refers to the safe harbor protections
      for forward-looking statements contained in the Private Securities
      Litigation Reform Act of 1995, which do not apply to statements made in
      connection with a tender offer.  See Section 21E(b)(2)(C) of the
      Securities Exchange Act of 1934.  Please do not refer to the
      safe harbor provisions in future press releases or other communications
      relating to this tender offer.

        J&J
and Merger Sub acknowledge the staff’s comment and will refrain from making such
references in future press releases and other communications relating to this
tender offer.

        Schedule
TO-T

        General

                  2.

                  At
      the commencement of the offer, Johnson & Johnson Development
      Corporation (“JJDC”), a subsidiary of Parent, had a $5 million cash
      investment in Omrix, and Ethicon, Inc., a wholly owned subsidiary of
      Parent, was party to a development agreement to develop certain of Omrix’s
      biosurgery products.  In view of these relationships, and of the
      fact that Johnson & Johnson and Omrix have discussed the possibility
      of Parent’s acquiring Seller in the past, please advise us what
      consideration you have given to the application of Rule 13e-3 to this
      transaction.

        J&J
and Merger Sub considered the application of Rule 13e-3 (including the matters
set forth in the foregoing comment) and determined that this transaction is not
a Rule 13e-3 transaction because neither J&J nor Merger Sub (nor any other
subsidiary of J&J, including JJDC and Ethicon) is an “affiliate” of Omrix as
defined under Rule 13e-3(a)(1); none of J&J or any of its subsidiaries
controls, is controlled by, or is under common control with,
Omrix.  J&J and Merger Sub do not believe that the matters
referred to in the foregoing comment (each of which is addressed separately
below) are, individually or collectively, sufficient to confer “control” within
the meaning of Rule 13e-3(a)(1).

        JJDC, in
connection with its $5 million cash investment in Omrix in July 2004, acquired
435,257 Shares and warrants to acquire an additional 36,364 Shares, which
together represent only approximately 2.58% of the total number of Shares as of
November 20, 2008.1  The Shares and warrants to purchase
Shares held by JJDC neither entitle JJDC to any representation on Omrix’s board
of directors nor otherwise provide JJDC with any ability to influence the
management decisions of Omrix, other than JJDC’s right to vote the Shares held
by it in its capacity as the holder of such Shares.  J&J and
Merger Sub do not believe that, as a general matter, the right to vote 2.58% of
the Shares of Omrix is sufficient to confer “control” within the meaning of Rule
13e-3(a)(1).  This is particularly true in light of the fact that the
Chief Executive Officer of Omrix (together with two entities that are controlled
by him) beneficially owns approximately 16% of the total number of Shares, and
that at least three institutional holders also beneficially own more than 5% of
the total number of Shares (based on publicly available information), thus
materially diluting any influence JJDC’s relatively small shareholdings would
otherwise provide.

                1 As
disclosed on page 1 of the Offer to Purchase, Omrix has advised J&J that, as
of November 20, 2008, 17,130,332 Shares were issued and outstanding, 1,090,909
Shares were reserved for issuance under Omrix’s equity plans, and 38,903 Shares
were reserved for issuance upon the exercise of outstanding warrants, for a
total of 18,260,144 Shares.

            2

        Ethicon’s
development agreement and distribution and supply agreement with Omrix2, which were entered into in September 2003 and
cover the development and distribution of certain of Omrix’s products, are
commercial arrangements that were entered into by the parties through
arms’-length negotiations.  None of the provisions in the development
agreement or the distribution and supply agreement provide J&J, Ethicon or
any other subsidiary of J&J with power to control or influence the
operations of Omrix beyond the contractual right to enforce the commercial terms
relating to the development and distribution of specified products, and neither
agreement grants or purports to grant Ethicon any rights with respect to the
election of directors of Omrix or the selection or decision-making of Omrix
management.  In addition, the majority of Omrix’s overall business is
derived from product lines that are independent of Omrix’s commercial
arrangements with Ethicon and in which J&J and its subsidiaries have no
involvement; the commercial arrangements between Ethicon and Omrix represented
only approximately 31% of Omrix’s revenue in fiscal year 2007.

        Contractually,
the terms of the agreements do not prohibit Omrix from entering into strategic
transactions with other third parties, and such agreements permit Omrix to
assign such agreements to a company acquiring all or substantially all of
Omrix’s assets or voting stock without Ethicon’s prior consent.  Any
ability Ethicon has to terminate the commercial arrangements does not give rise
to any additional element of control over Omrix.  Such termination by
Ethicon requires a substantial payment to Omrix and would require Ethicon to
abandon the substantial investments it has made in marketing and development
under the existing commercial arrangements, and to forego the profitable
business opportunity.  Such termination also requires six months
notice, thus providing an extended period in which Omrix would have significant
ability to secure another partner (and, in fact, this notice provision was
designed in large part to ensure that Omrix has such an opportunity to seek
another partner in the event of termination).  Because of such
substantial downsides to Ethicon, Ethicon has never considered terminating the
commercial arrangements with Omrix.

        J&J
and Merger Sub do not believe that, as a general matter, prior preliminary
contacts regarding possible acquisition transactions confer “control” within the
meaning of Rule 13e-3(a)(1).  In any event, based on further review
and as noted in the response to staff comment 5 below, J&J and Omrix have
determined that no negotiations or material contacts regarding an acquisition of
Omrix by J&J (other than the present transaction) occurred during the two
years prior to the date of the Schedule TO filing.

        In
addition, the contemplated second-step merger in the transaction (as described
in the Offer to Purchase) will be undertaken in accordance with
Rule
13e-3(g)(1)(i).

        In sum,
for the foregoing reasons, J&J and Merger Sub have determined that they are
not “affiliates” of Omrix within the meaning of Rule 13e-3, and therefore that
this transaction is not subject to Rule 13e-3.

               2 Copies
of the development agreement and the distribution and supply agreement (and
amendments thereto) have been publicly filed by Omrix as Exhibits 10.4, 10.5,
10.6 and 10.7 to Omrix’s registration statement on Form S-1, filed January 18,
2006.

            3

                  3.

                  We
      note that Johnson & Johnson has signed the Schedule TO and is listed
      as a filing person.  Please revise the cover of the Schedule TO
      to clarify that Johnson & Johnson is a bidder and not merely the
      parent of Binder Merger Sub.

        J&J
and Merger Sub acknowledge the staff’s comment and have revised the cover of
their Schedule TO filing in accordance therewith.

        Offer to
Purchase

        Certain Information
Concerning Parent and Purchaser, page 12

                  4.

                  Please explain whether Ethicon
      is contractually obligated to make future payments in respect of research
      and development expenses, milestone and transfer
      payments.  State what impact the tender offer is expected to
      have on these payments.

        Under the
development agreement between Ethicon and Omrix, Ethicon is contractually
obligated to pay Omrix all of the development costs and one-half of the labor
costs relating to the research and development of products covered by the
development agreement, as well as certain milestone payments contingent on the
first sales of products covered by the development agreement or the receipt of
certain regulatory or marketing clearances for such products.  Under
the distribution and supply agreement between Ethicon and Omrix, Ethicon is
contractually obligated to pay Omrix certain additional milestone payments, as
well as periodic transfer payments for the purchase of products by Ethicon from
Omrix.  Under the agreements, Ethicon paid to Omrix approximately
$27.1 million during fiscal year 2007 (including $4.0 million in milestone
payments, $9.9 million in research and development payments and $13.2 million in
transfer payments) and expects to pay approximately $32.7 million during fiscal
year 2008 (including $8.8 million in research and development payments and $23.9
million in transfer payments).  Two contractual milestone payments
totaling $2.75 million related to the fibrin pad program and the product revenue
targets remain under one of the agreements.  Future research and
development payments and transfer payments would be based on the level of
research and development activity and product supply needs,
respectively.  Given the contingent nature of these future payments,
it is not possible to quantify them with certainty, or to determine with
certainty whether and when such payments may ultimately be payable.

        Upon the
completion of the tender offer and the subsequent merger, both Ethicon and Omrix
will be wholly owned subsidiaries of J&J, and the development agreement and
the distribution and supply agreement will become intercompany arrangements
within the consolidated J&J organization.  J&J will therefore
have the ability to unilaterally determine, after the completion of the tender
offer and the subsequent merger, whether to terminate or amend such agreements
or maintain such agreements in place, based on tax and other considerations
relevant to the J&J organization.  While no final determination in
this regard has yet been made, it is currently contemplated that such agreements
will remain in force through the respective terms of the contracts.

        J&J
and Merger Sub have revised the disclosure on page 13 of the Offer to Purchase
to clarify the information describe above.

            4

        Background of the Offer,
page 14

                  5.

                  Describe
      in greater detail the nature and timing of the general preliminary
      discussions between Seller and Parent regarding the possibility of an
      acquisition (see Item 1005(b) and (c) of Regulation M-A), and identify the
      person or persons who initiated each discussion (see also the Instruction
      to paragraphs (b) and (c) of Item
1005).

        Based on
further review, J&J and Merger Sub have determined that, during the two
years prior to the date of the Schedule TO filing, Omrix and J&J did not in
fact engage in any negotiations or material contacts regarding an acquisition of
Omrix by J&J or any other transaction that is required to be disclosed by
Item 1005(b) or (c) of Regulation M-A, other than with respect to the present
transaction (all of which negotiations and material contacts in connection with
the present transaction are currently disclosed in the “Background of the Offer”
section of the Offer to Purchase).  Nonetheless, J&J and Merger
Sub have revised the disclosure on page 14 of the Offer to Purchase to note that
in 2005 there were preliminary discussions concerning a possible acquisition of
Omrix by another subsidiary of J&J (Ethicon), which discussions did not
result in an acquisition offer being made by J&J or any of its
subsidiaries.

                  6.

                  Provide
      further detail concerning the price that Purchaser offered for the
      securities.  We note that on August 26, 2008, you proposed a
      price of $25.00 per share, which you subsequently raised to $29.00 per
      share, and then revised back to $25.00 after the market
      break.  Please disclose the reasons for the revised offer
      price.

        Given the
competitive bidding process, J&J raised its proposed price for Omrix to
$29.00 per share on September 8, 2008 based on information that was then
available to J&J, as well as more Omrix-favorable assumptions made with
respect to information that had not yet been made available by Omrix,
recognizing that (and communicating to Omrix through its financial advisor that)
the increased offer price would be subject to the validation of J&J’s
assumptions in further due diligence, including with respect to information
included in a data room to which J&J had not yet been provided
access.  The assumptions made by J&J included those with respect
to Omrix’s capital expansion plans and the period of overcapacity likely to
result from such plans, the manufacturing process and relationships between
Omrix’s product lines in terms of Omrix’s total cost structure, the level of
investment required to upgrade Omrix’s information, infrastructure and control
systems to integrate such systems with J&J’s and the overall risks relating
to the business integration and the immunotherapy product line.  After
completing its further due diligence, J&J determined that those more
favorable assumptions underlying its September 8, 2008 proposal could not be
supported, and therefore reduced its proposed price for Omrix to $25.00 per
share on October 22, 2008.  J&J and Merger Sub have revised the
disclosure on pages 16 and 17 of the Offer to Purchase to further clarify the
basis and limitations of its $29.00 per share proposal as described above,
including by adding additional detail regarding the underlying
assumptions.

            5

        Throughout
the negotiation process, J&J determined its proposed offer prices for Omrix
using its own internal financial modeling based on a variety of assumptions
(including those described above) that were subject to verification through its
diligence review.  There was no specific document or piece of
information (including any confidential information made available in the data
room referred to above) that was material to J&J’s determination of its
proposed offer prices.  In particular, J&J never received a copy
of the internal projections of Omrix that were used by Omrix’s financial advisor
in connection with the fairness opinion delivered to Omrix, and the preliminary
forecast