Targanta Therapeutics Corporation

Headnote

Dual Application for relief from the prospectus and registration requirements in connection with first trades -- Non-reporting issuer - Section 2.14 of National Instrument 45-102 respecting Resale of Securities is not available as Canadian residents hold more than 10% of outstanding Common Shares -- No market for the securities of the issuer in Canada - exemption conditional on resale occurring over NASDAQ or outside of Canada.

Applicable Legislative Provisions

Securities Act (Ontario) ss. 74(1), 53(1).

National Instrument 45-102 Resale of Securities, s. 2.14.

TRANSLATION

September 5, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

QUÉBEC AND ONTARIO

(THE "JURISDICTIONS")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

TARGANTA THERAPEUTICS CORPORATION

("TARGANTA US" OR THE "FILER")

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions ("Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdictions ("Legislation") for the exemption from the obligations to prepare a prospectus and to register as a dealer for the resale of Targanta US' common shares ("Common Shares") by the Canadian Shareholders (as defined below) and, upon the exercise of options, by the Optionees (as defined below) through the facilities of The NASDAQ Global Market ("NASDAQ") ("Requested Exemptive Relief").

In Québec, the exemption sought is being requested pursuant to Section 263 of the Securities Act (Québec) ("Québec Act") and in Ontario, pursuant to Section 74(1) of the Securities Act (Ontario) ("Ontario Act").

The requirements for which the exemptions are being sought are set forth in the following sections of the Legislation:

a) the obligation to prepare a prospectus for the resale of the Common Shares is prescribed by Section 11 of the Québec Act and Section 53 of the Ontario Act; and

b) the obligation to register as a dealer for the resale of the Common Shares is prescribed by Section 148 of the Québec Act and Section 25 of the Ontario Act.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

a) the Autorité des marchés financiers is the principal regulator for this application; and

b) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and Regulation 11-102 respecting Passport System, elsewhere referred to as Multilateral Instrument 11-102 Passport System, have the same meaning if used in this decision, unless otherwise defined.

Representations

This Order is based upon the following representations by the Filer:

1.1 Background

(i) Targanta US was incorporated under the laws of the State of Delaware. The principal executive offices of Targanta US are located at 222 Third Avenue, Suite 2300, Cambridge, Massachusetts.

(ii) Targanta US is not a reporting issuer or its equivalent in any jurisdiction of Canada and has no present intention of becoming a reporting issuer or its equivalent in any jurisdiction of Canada.

(iii) Targanta US is a registrant with the SEC and is subject to the requirements of the 1934 Act and the rules and regulations of NASDAQ.

(iv) To the knowledge of Targanta US, Targanta US is not in default of the Legislation or securities legislation in the United States of America.

(v) On October 15, 2007, Targanta US completed an initial public offering ("IPO") of its Common Shares in the United States under an amended Form S-1 Registration Statement filed with the SEC, which became effective October 9, 2007.

(vi) The Common Shares trade on NASDAQ under the symbol "TARG".

(vii) Targanta US has two Canadian subsidiaries:

A. Targanta Therapeutics Inc. ("Targanta Québec"), a corporation incorporated under the Canada Business Corporations Act ("CBCA") on May 20, 1997 with a head office in St-Laurent, Québec; and

B. Targanta Therapeutics (Ontario) Inc. ("Targanta Ontario"), a corporation incorporated under the CBCA on December 22, 2005 with a head office in Toronto, Ontario (Targanta Ontario and Targanta Québec are collectively referred to as the "Subsidiaries" and together with Targanta US as the "Targanta Group").

(viii) Neither of the Subsidiaries is a reporting issuer or its equivalent in any jurisdiction of Canada and neither has any intention of becoming a reporting issuer or its equivalent in any jurisdiction of Canada.

(ix) Each of the Subsidiaries is a "private issuer" and Targanta US was, until the closing of the IPO, a "private issuer" within the meaning of Section 2.4 of Regulation 45-106 respecting prospectus and registration exemptions ("Regulation 45-106").

(x) As a result of a financing round completed December 23, 2005 and a concurrent reorganisation of the Targanta Group, the shareholders resident in Quebec only held, prior to the IPO, shares of one or more series or classes of exchangeable shares of Targanta Québec, the shareholders resident in Ontario only held preferred classes or series of exchangeable shares of Targanta Ontario and Targanta US held all of the common shares of Targanta Québec and Targanta Ontario.

(xi) Immediately prior to the closing of the IPO, Targanta US exercised its right to purchase all of the exchangeable shares of Targanta Québec and Targanta Ontario so that all of the Canadian Shareholders (as defined below) received Common Shares.

(xii) The holders of Common Shares resident in Quebec ("Quebec Shareholders") and resident in Ontario ("Ontario Shareholders") who obtained Common Shares before the completion of the IPO all belong to a category of investors set forth in section 2.4(2) of Regulation 45-106 (the Quebec Shareholders and Ontario Shareholders collectively referred to as "Canadian Shareholders").

(xiii) Pursuant to Rule 144 promulgated under the 1933 Act, the statutory holding period which applied to the Common Shares held by the Canadian Shareholders expired on April 11, 2008.

1.2 Specific Representations relating to the Canadian Shareholders

(i) The Canadian Shareholders wish to have the option of selling their Common Shares through the facilities of NASDAQ.

(ii) The Québec Shareholders collectively own 1,880,160 Common Shares representing in the aggregate 8.97% of Targanta US' outstanding 20,971,834 Common Shares as of June 30, 2008.

(iii) Over 99% of the Common Shares owned by the Québec Shareholders are owned by five institutional shareholders which are accredited investors within the meaning of Regulation 45-106. The other Québec Shareholders are fourteen individuals composed of founders and former or current directors, officers or employees of Targanta Québec and other persons listed in Section 2.4(2) of Regulation 45-106.

(iv) The Ontario Shareholders, three Ontario labour sponsored investment funds, own collectively 2,607,036 Common Shares representing 12.43% of Targanta US' 20,971,834 Common Shares outstanding on June 30, 2008.

(v) As of June 30, 2008, the Canadian Shareholders collectively owned 4,487,196 Common Shares representing 21.4% of the Common Shares.

(vi) A geographical survey of beneficial holders of Common Shares dated as of April 4, 2008, the date of Targanta US' most recent annual general meeting, lists eight beneficial holders of Common Shares other than the Canadian Shareholders (the "Additional Canadian Holders") located in three Canadian provinces holding in the aggregate 7,135 Common Shares (0.034% of the 20,971,834 outstanding shares as of June 30, 2008) or a de minimis amount.

(vii) To the knowledge of Targanta US, the Additional Canadian Holders acquired their Common Shares on the secondary market through the facilities of NASDAQ.

1.3 Specific Representations relating to the Optionees

(i) The group comprising holders of options to purchase Common Shares resident in Canada ("Optionees") is comprised of the following persons:

A. Holders of options to purchase Common Shares granted under the Stock Option Plans (as defined below) resident in Quebec ("Quebec Optionees") and resident in Ontario ("Ontario Optionee"); and

B. Holders of options to purchase Common Shares to be granted in the future under the 2007 Plan (as defined below).

(ii) The Ontario Optionee is a former member of the scientific advisory board of Targanta Québec.

(iii) The Ontario Optionee may in the future receive Common Shares upon the exercise of his options granted under the Targanta Québec Plan (as defined below).

(iv) The Québec Optionees are comprised of founders and former or current directors, officers and employees of Targanta Québec.

(v) Optionees may in the future receive Common Shares upon the exercise of their options granted under any of the following three stock option plans:

A. The Targanta Québec Re-Amended and Restated Stock Option Plan ("Targanta Québec Plan"):

B. The Targanta US 2005 Stock Option Plan, adopted on December 23, 2005, as amended ("2005 Plan"):

C. The Targanta US 2007 Stock Option and Incentive Plan, as amended ("2007 Plan"):

(The Targanta Québec Plan, the 2005 Plan and the 2007 Plan are referred to collectively as the "Stock Option Plans")

(vi) The Targanta Quebec Plan and 2005 Plan were each closed at the time of the restructuring and IPO while the 2007 Plan is still in force and options to purchase Common Shares will continue to be granted in the future to directors, officers and employees of Targanta Quebec.

(vii) The Common Shares issuable under the 2005 Plan and 2007 Plan have been registered by Targanta US with the SEC on a Form S-8 registration statement under the 1933 Act.

(viii) All employees in the Targanta Group may obtain via the corporate internet an information document containing the content prescribed by the 1933 Act in respect of the 2005 Plan and the plan administrator will deliver, together with the 2007 Plan documents and stock option plan agreements, an information document containing the content prescribed by the 1933 Act in respect of the 2007 Plan to all future Optionees in accordance with the 1933 Act. In addition, all employees in the Targanta Group may obtain via the corporate intranet the information document in respect of the 2007 Plan.

(ix) The Stock Option Plans were and are adhered to on a voluntary basis.

(x) As of June 30, 2008, options had been granted and were outstanding to purchase a total of 3,685,391 Common Shares pursuant to the Stock Option Plans representing 17.57% of the 20,971,834 outstanding Common Shares as of June 30, 2008 of which 353,319 options to purchase Common Shares representing 1.7% of the outstanding Common Shares were held by Québec and Ontario residents.

(xi) Targanta Québec currently has 32 employees residing in Québec who are eligible for option awards under the 2007 Plan. No resident of Québec will be induced to participate in the 2007 Plan by expectation of employment or continued employment.

(xii) The Targanta Group does not have any employees residing in Ontario.

1.4. Additional Representations

(i) The Filer sends to Canadian residents holding Common Shares all continuous disclosure documents required to be sent to holders of Common Shares under the 1933 Act.

(ii) Any resale of the Common Shares by the Canadian Shareholders and, upon the exercise of options, by the Optionees shall be made through the facilities of NASDAQ as there is no market for the Common Shares in Canada and none is expected to develop.

(iii) The Filer is under no obligation to file a prospectus. The Common Shares held by Canadian residents or which will be obtained upon the exercise of options by the Optionees are or will be subject to resale restrictions that may never expire. Preventing the Canadian Shareholders and Optionees who will obtain Common Shares upon the exercise of options from reselling the Common Shares unless a prospectus is filed is prejudicial to them and does not protect the integrity of the Canadian capital markets.

(iv) To the knowledge of Targanta US, the Filer meets all eligibility criteria for the resale exemption available for holders of securities of issuers, which are not reporting issuers under the Legislation, provided under Section 2.14 of Regulation 45-102 respecting Resale of Securities, except that residents of Canada hold more than 10% of outstanding Common Shares.

Decision

Each of the Decision Makers is satisfied that the exemptive relief application meets the test set out in the Legislation for the Decision Maker to make the decision. The decision of the Decision Makers under the Legislation is that the Requested Exemptive Relief is granted provided that:

1. The Filer is not a reporting issuer in any jurisdiction of Canada at the date of the trade; and

2. The trade is made through an exchange or market outside of Canada or to a person or company outside of Canada.

With respect only to the resale of Common Shares obtained by the exercise of options by Optionees under the 2007 Plan, the decision of the Decision Makers under the Legislation is that the Requested Exemptive Relief is granted provided that:

1. The Filer is not a reporting issuer in any jurisdiction of Canada at the date of the trade;

2. The trade is made through an exchange or market outside of Canada or to a person or company outside of Canada;

3. Residents of Canada do not, at the trade date, own directly or indirectly more than 10% of the outstanding Common Shares (excluding Common Shares obtained prior to Targanta US' IPO or Common Shares which may be obtained pursuant to convertible securities issued prior to the completion of Targanta US' IPO); and

4. The number of residents of Canada do not, at the trade date, represent more than 10% of the total number of direct or indirect owners of Common Shares (excluding Common Shares obtained prior to Targanta US' IPO or Common Shares which may be obtained pursuant to convertible securities issued prior to the completion of Targanta US' IPO) .