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CORRESP
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filename1.htm

    October
1, 2009

    VIA
FACSIMILE AND EDGAR

    Mr.
Jeffrey P. Riedler

    Securities
and Exchange Commission

    Division
of Corporation Finance (Mail Stop 4720)

    100 F
Street N.E.

    Washington,
D.C. 20549

                Re:

                Nile
      Therapeutics, Inc. (the “Company”)

                Form
      10-K and 10-K/A for the Year Ended December 31, 2008

                Filed
      March 12, 2009 and April 23, 2009

                File
      No. 001-34058

    Dear Mr.
Riedler:

    As
counsel for the Company and on its behalf, this letter is being submitted in
response to the letter dated September 17, 2009 from the Securities and Exchange
Commission (the “Commission”) in
which the staff of the Commission (the “Staff”)
commented on the Form 10-K and 10-K/A.

    For the
Staff’s convenience, the Staff’s comments have been stated below in their
entirety, with the Company’s responses to a particular comment set out
immediately underneath it. The headings and numbered paragraphs in this letter
correspond to the headings and numbered paragraphs in the comment letter from
the Staff. Capitalized terms used but not defined in this letter are intended to
have the meanings ascribed to such terms in the Form 10-K and
10-K/A.

      Form
10-K

      Item 1.
Business

      Our Product Candidates, page
4

      License Agreements, page
6

                1.

                For
      each of the Mayo License Agreement and the CU-NP Mayo License Agreement,
      please expand your disclosure to include the amount of aggregate potential
      milestone payments you may be required to make, the cash payments made to
      date, the amount of the annual maintenance fee, term and termination
      provisions and the percentage of net sales you must pay for licensed
      products.  Please also file each of these agreements as an
      exhibit to your Form 10-K or provide us with an analysis supporting your
      determination that these agreements are not material to your
      business.

          Jeffrey
P. Riedler

          October
1, 2009

          Page
2

    Although
the Company inadvertently omitted the each of the Mayo License Agreement and the
CU-NP Mayo License Agreement (together, the “License Agreements”) from the
exhibit list in Item 15 of its Form 10-K, each agreement had been previously
filed.  The Company filed the Mayo License Agreement as Exhibit 10.6
to its Current Report on Form 8-K filed with the Commission on September 21,
2007, and it filed the CU-NP Mayo License Agreement as Exhibit 10.1 to its Form
10-Q filed with the Commission on August 14, 2008.  The Company
undertakes to include the License Agreements as exhibits incorporated by
reference in its future filings.

    The
Company acknowledges the Staff’s request for expanded disclosure with respect to
the terms of the License Agreements.  The Company notes, however, that
the Commission has previously issued orders granting the Company’s requests for
confidential treatment under Rule 24b-2 with respect to certain confidential
terms of each License Agreement, including such terms as the annual maintenance
fee, individual contingent milestone payment amounts and the percentage of net
sales the Company must pay for licensed products.  Nonetheless, for
each License Agreement, the Company undertakes, to the extent consistent with
the confidential treatment of the redacted terms, to expand its disclosure in
future filings to address the Staff’s comment.  The Company believes
that this expanded disclosure, together with the Company’s ongoing disclosure
regarding its research and development activities, will provide investors with
all material information regarding the terms of the License Agreements, while at
the same time protecting the Company from the competitive harm that would result
from the disclosure of individual payment amounts. For example, the Company
intends to disclose the aggregate expenses it will have incurred developing the
technologies subject to the License Agreements in a given period, which will
include (but not specify in amount) the payments it will have made to Mayo under
the applicable agreement.  In addition, the Company will disclose
expected aggregate development expenses in a future period, which amounts will
include payments expected to be made to Mayo under a License
Agreement.  In these cases, however, the Company intends to omit the
specific amount of the payments made or expected to be made to Mayo. Such
omissions taken together with the Company’s other disclosures are sufficiently
narrow and allows investors to still understand the fundamental terms, as well
as the Company’s overall capital requirements needed to develop its
technologies.

          Jeffrey
P. Riedler

          October
1, 2009

          Page
3

    Below is
the Company’s proposed expanded disclosure for use in future filings, with
additions to the disclosure in the Form 10-K underlined and in
bold.

    License
Agreements

    CD-NP

    On January 20, 2006, we entered
into an exclusive, worldwide, royalty-bearing license agreement with Mayo, or
the Mayo License Agreement, for the rights to issued patents, patent
applications and know-how relating to CD-NP for all therapeutic uses. The
intellectual property portfolio for CD-NP includes issued and pending United
States, European, and Japanese patents relating to its composition of matter and
method of use in treating heart failure and symptoms associated with heart
failure. Patent applications have been filed in other major markets around the
world. We were
also entitled
had to rights to improvements
to CD-NP  that arose out of the laboratory of Dr. John Burnett, the
co-investor of CD-NP, until January 19, 2009. We intend to continue to expand
our patent portfolio by filing to protect any additional patents covering
expanded uses for this technology.

    Under the terms of the Mayo License
Agreement, we made an up-front cash payment to Mayo and reimbursed it for past
patent expenses. We also issued to
Mayo 1,379,419 shares of Old Nile our
common stock to
Mayo. Additionally, Mayo will receive
performance based we agreed
to make contingent cash payments up to an
aggregate of $31.9 million upon successful
completion of specified
clinical and regulatory milestones relating to CD-NP.  This
aggregate amount is subject to increase upon the receipt of regulatory approval
for each additional indication of CD-NP as well as for additional compounds or
analogues contained in the intellectual property.  In July
2008, we made a milestone payment of $400,000 to Mayo upon the dosing of the
first patient in a Phase II trial. We
also have agreed to pay Mayo substantial milestone payments upon the receipt of
regulatory approval for each additional indication of CD-NP as well as for
additional compounds or analogues contained in the intellectual property.
Pursuant to the Mayo License Agreement, we must also pay Mayo an annual
maintenance fee and a percentage of net sales of licensed products. Under the
terms of the Mayo License Agreement, Dr. Burnett has agreed to serve as
chairman of our Scientific Advisory Board. In addition, we will pay Mayo $50,000
per year for the consulting services of Dr. Burnett while Dr. Burnett
serves as chairperson of our Scientific Advisory Board. The Mayo License
Agreement also contains other customary clauses and terms as are common in
similar agreements in the industry.

    In addition to the potential milestone
payments discussed above, the Mayo License Agreement requires us to issue shares
of common stock to Mayo for an equivalent dollar amount of grants received in
excess of $300,000, but not to exceed $575,000. For the period from
August 1, 2005 (inception) through December 31, 2008, we received
$482,235 in grant income for which we have issued to Mayo 63,478 shares
(representing $182,236) of common stock. Please see the risk factor under
Item 1A, entitled “If
requirements under our license agreements are not met, we could suffer
significant harm, including rights to our products” for a further
discussion of the risks related to this license agreement.

          Jeffrey
P. Riedler

          October
1, 2009

          Page
4

    The Mayo License Agreement,
unless earlier terminated, will continue in full force and effect until January
20, 2026.  However, to the extent any patent covered by the license is
issued with an expiration date beyond January 20, 2026, the term of the
agreement will continue until such expiration date.  Mayo may
terminate the agreement earlier (i) for our material breach of the agreement
that remains uncured after 90 days’ written notice to us, (ii) our insolvency or
bankruptcy, or (iii) if we challenge the validity or enforceability of any of
the patents in any manner.  We may terminate the agreement without
cause upon 90 days’ written notice.

    CU-NP

    Effective as ofOn
June 13, 2008, we entered into an exclusive, worldwide, royalty-bearing license
agreement, or the CU-NP Mayo License Agreement, with Mayo for the rights to
intellectual property and to develop commercially CU-NP for all therapeutic
indications. We also hold the rights to improvements to CU-NP that arise out of
the laboratory of Drs. John Burnett and Candace Lee, the inventors of
CU-NP, until June 12, 2011.

    Under the terms of the CU-NP Mayo
License Agreement, Nile paid Mayowe
made an up-front cash payment Additionally, Mayo will
receive performance based to Mayo
and agreed to make future contingent cash payments up to an
aggregate of $24.25 million upon successful
completion achievement of clinical and regulatory milestones relating to
CU-NP, including a milestone payment due in connection with the initiation of
the first Phase II clinical trial of a product. Additional
milestone payments will be made upon the occurrence of certain other
events. This
aggregate amount of $24.25 million is subject to increase upon the receipt of
regulatory approval for each additional indication of CU-NP, as well as for
additional compounds or analogues contained in the intellectual
property. Pursuant to the
agreement, Nile
we
must also pay Mayo an annual maintenance fee and a percentage of net sales of
licensed products.

    In addition to thethese
cash payments described above
payable
with respect to the CU-NP Mayo License Agreement, Nile has we
also agreed to issue certain amounts and types
of equity shares of
our common stock and warrants to Mayo. In June 2008, we issued 49,689
shares of common stock to Mayo having a fair market value as of June 13,
2008 equal to $250,000. Additionally, Dr. Burnett has applied for funding
through Mayo’s Discovery-Translation Program. In the event Dr. Burnett is
awarded funding through this program, and the funding is used for the
development of the licensed product based on the patent applications, Nile has we
agreed to grant to Mayo an equivalent dollar value in warrants to purchase Nile’s shares of
our common stock. The number of shares
purchasable under these warrants will be calculated using the
Black-Scholes option-pricing model and the
warrants will include a cashless exercise provision with language to be
negotiated in good faith between the parties.

          Jeffrey
P. Riedler

          October
1, 2009

          Page
5

    The CU-NP Mayo License
Agreement, unless earlier terminated, will continue in full force and effect
until June 13, 2028.  However, to the extent any patent covered by the
license is issued with an expiration date beyond June 13, 2028, the term of the
agreement will continue until such expiration date. Mayo may terminate the
agreement earlier (i) for our material breach of the agreement that remains
uncured after 90 days’ written notice to us, (ii) our insolvency or bankruptcy,
(iii) if we challenge the validity or enforceability of any of the patents in
any manner, or (iv) or upon receipt of notice from the Company that we have
terminated all development efforts under the agreement. We may terminate the
agreement without cause upon 90 days’ written notice.

    Form
10-K/A

    Item 10. Directors,
Executive Officers and Corporate Governance, page 4

    Audit Committee, page
12

              2.

              Please
      include the information required by Item 407(d)(5) of Regulation S-K
      regarding the Audit Committee Financial Expert in your future
      filings.  You are required to disclose whether your board of
      directors has determined that you have at least one audit committee
      financial expert serving on your audit committee.  Identify the
      financial expert and state whether such person is independent, as defined
      by applicable listing standards.  If you do not have an audit
      committee financial expert serving on your audit committee, please
      specifically state that you do not.

    The
Company acknowledges the disclosure required by Item 407(d)(5) of Regulation S-K
and agrees and undertakes to include the required information in its future
filings.

    *   *   *

              On
      behalf of the Company, it hereby acknowledges the
    following:

              ·

              The
      Company is responsible for the adequacy and accuracy of the disclosure in
      the filings;

              ·

              Staff
      comments or changes to disclosure in response to Staff comments do not
      foreclose the Commission from taking any action with respect to the
      filings; and

              ·

              The
      Company may not assert Staff comments as a defense in any proceeding
      initiated by the Commission or any person under the federal securities
      laws of the United States.

          Jeffrey
P. Riedler

          October
1, 2009

          Page
6

    Please
contact the undersigned at (612) 492-7369 if you have any questions with respect
to the responses contained in this letter.

                  Sincerely,

                  /s/ Christopher
      J. Melsha

                  Christopher
      J. Melsha

                  Attorney

                  Direct
      Dial:  612.492.7369

                  Email:  cmelsha@fredlaw.com

              cc:

              Ms.
      Nandini Acharya, Esq., Division of Corporation
  Finance

    Mr. Daron Evans, Chief Financial
Officer, Nile Therapeutics, Inc.