EX-10.66 MASTER CLINICAL AND COMMERCIAL SUPPLY AGREEMENT AMONG GILEAD WORLD MARKETS, LIMITED AND GILEAD SCIENCES, INC. AND PATHEON INC.

Exhibit 10.66

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

MASTER

 

CLINICAL AND COMMERCIAL SUPPLY AGREEMENT

 

AMONG

 

GILEAD WORLD MARKETS, LIMITED

 

AND

 

GILEAD SCIENCES, INC.

 

AND

 

PATHEON INC.

 

 

JANUARY 1, 2003

 

 

MASTER CLINICAL AND COMMERCIAL SUPPLY AGREEMENT

 

THIS MASTER CLINICAL AND COMMERCIAL SUPPLY AGREEMENT (the “ Agreement ”) made as of the 1st day of January, 2003 (the “ Effective Date ”) among, on the one hand, Gilead World Markets, Ltd., a Cayman Company (“ Gilead World ”), whose registered address is Queensgate House, South Church Street, P.O. Box 1234GT, Grand Cayman, Cayman Islands, and Gilead Sciences, Inc., a Delaware corporation (“ Gilead Sciences ”) with its principal office located at 333 Lakeside Drive, Foster City, CA 94404 (Gilead World and Gilead Sciences collectively, “ Gilead ”), and, on the other hand, Patheon Inc., a Canadian corporation (“ Patheon ”) having its principal place of business at 7070 Mississauga Road, Suite 350, Mississauga, Ontario, Canada L5N 7J8. Gilead and Patheon are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties ”.

 

WITNESSETH

 

WHEREAS , Gilead Sciences will require the manufacture and supply of Drug Products (as hereinafter defined) for clinical use and commercial distribution and sale in the Territory and Gilead World will require the manufacture and supply of Drug Products for commercial distribution and sale in the Territory; and

 

WHEREAS , Patheon possesses suitable facilities to manufacture, package and test Drug Products and will process, package and test Drug Products according to the terms and conditions set forth below; and

 

WHEREAS , Patheon is currently carrying out commercial manufacturing of Tenofovir DF Tablets (with the trade name Viread and the generic name tenofovir disoproxil fumarate) pursuant to that certain Commercial Supply Agreement dated August 1, 2001 between Gilead World Markets (which was assigned from Gilead Irish Holdings, Inc. by way of an Assignment of Agreement dated December 31, 2001) and Patheon Inc. (the “ Viread Agreement ”) and;

 

WHEREAS , the Parties now desire that this Agreement shall (i) replace the Viread Agreement such that the Viread Agreement shall be of no further force and effect for the Processing (as defined below) of new batches of tenofovir disoproxil fumarate tablets from and after the Effective Date, and (ii) govern the terms and conditions of clinical and commercial manufacturing of tenofovir disoproxil fumarate tablets and any additional Drug Products as may be agreed to between the Parties in writing from time to time as set forth below.  For clarity, however, the Viread Agreement shall continue to have full force and effect only with respect to Tenofovir DF Tablets Processed between August 1, 2001 and December 31, 2002; and

 

WHEREAS , Gilead and Patheon now desire to contract for such manufacturing on the terms and conditions set forth herein;

 

NOW, THEREFORE , in consideration of the foregoing premises and the mutual covenants which are recited herein, the Parties agree as follows:

 

CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED.

 

 

ARTICLE I

 

DEFINITIONS AND SCHEDULES

 

1.1                                DEFINITIONS

 

In this Agreement, the following capitalized terms shall have the following meanings:

 

“Act” means the United States Food, Drug and Cosmetics Act of 1938 (21 C.F.R. Section 201 et seq.) and any legal requirement of Canada, the European Union or other jurisdiction within the Territory for any Drug Product, together with any regulation promulgated under any of the foregoing, including, without limitation, all Good Manufacturing Practices, in each case as amended from time to time.

 

“Active Pharmaceutical Ingredient” or “API” shall mean, for each Drug Product, the active drug substance of that Drug Product prior to Processing, as listed on Exhibit A of the Product-Specific Appendix hereto for that Drug Product.

 

“Affiliate” shall mean any person, firm or corporation which, directly or indirectly, through one or more intermediaries controls, is controlled by, or is under common control with, a Party to this Agreement.  For purposes of this definition, “control” means the legal or beneficial ownership of fifty percent (50%) or more of the voting or equity interests, or the power or right to direct the management and affairs of the business (including acting as the general partner of a limited partnership).  A Gilead Affiliate is an Affiliate of either or both of Gilead Sciences and Gilead World.

 

“Annual API Cap” shall mean, for each API, the value identified as such in Exhibit C of the applicable Product-Specific Appendix.

 

“API Specifications” shall mean, with respect to a given API, the Specifications for that API as set forth on Exhibit A of the Product-Specific Appendix hereto for the corresponding Drug Product.

 

“Components” shall mean, for each Drug Product, the labels, glue, product inserts and other packaging materials required to be used for the production of that Drug Product in accordance with the applicable Component Specifications.

 

“Component Specifications” shall mean, with respect to the Components for a given Drug Product, the Specifications for Components set forth on Exhibit A of the Product-Specific Appendix for that Drug Product.

 

“Confidential Information” shall have the meaning specified in Section 8.2.

 

“Disposition Package” shall mean, with respect to any shipment of Drug Product, the documentation and records defined pursuant to the relevant Quality Agreement (as defined in Section 2.8), which may include copies of the Certificate of Analysis, Certificate of Compliance, quality control documentation and manufacturing batch records for such shipment; written

 

 

confirmation that such batch records have been reviewed and approved by Patheon quality assurance unit; and any other documentation required by law that is in Patheon’s possession and required by Gilead for the release of the batch or batches of Drug Product in such shipment.

 

“Drug Product” shall mean a product set forth on Exhibit B of any Product-Specific Appendix.

 

“Effective Date” shall mean January 1, 2003.

 

“Excipients” shall mean, for each Drug Product, all materials other than the API and Components described in the Specifications for such Drug Product as a constituent part of such completed Drug Product.

 

“Excipient Specifications” shall mean, with respect to the Excipients for a given Drug Product, the Specifications for such Excipients set forth on Exhibit A of the Product-Specific Appendix hereto for such Drug Product.

 

“Facility” shall mean, for a given Drug Product, any Patheon manufacturing facility identified in Exhibit C of the Product-Specific Appendix for that Drug Product, or any other facility used for the Processing of that Drug Product that has been approved by Gilead, in writing.

 

“FDA” shall mean the United States government agency known as the Food and Drug Administration, or any successor thereto.

 

“Gilead’s Actual Standard API Costs” shall mean, for a given API in a given Year, the amount established in accordance with Section 4.7.

 

“Good Manufacturing Practices” or “cGMPs” shall mean the current Good Manufacturing Practices for manufacturing finished products as set forth in the Act, and any other equivalent laws, rules or regulations or current good manufacturing practices specified by a Regulatory Authority, which are applicable to Patheon.

 

“Intellectual Property” shall mean any intellectual property rights including, without limitation, rights in patents, patent applications, formulae, trade-marks, trade-mark applications, trade secrets, Inventions, copyright, industrial designs and know-how.

 

“Inventions” shall mean any invention, innovation, improvement, development, discovery, computer program, device, trade secret, method, know-how, process, technique or the like, whether or not written or otherwise fixed in any form or medium, regardless of the media on which it is contained and whether or not patentable or copyrightable.

 

“Inventory” shall mean all inventories of Materials and work-in-process produced or held by Patheon in connection with the Processing of Drug Product but, for greater certainty, does not include any API.

 

 

“Master Batch Records” shall mean, for a given Drug Product, the then-current procedures to be followed by Patheon with respect to the Processing, handling and storage of that Drug Product and the corresponding API, as contemplated in Exhibits A and B of the Product-Specific Appendix for that Drug Product.

 

“Materials” shall mean Excipients and Components as they are utilized in Processing.

 

“Patheon Manufacturing Responsibilities”  shall have the meaning outlined in Section 3.2(a).

 

“Processing” shall mean the manufacturing, quality control, quality assurance and stability testing, packaging and related services, as contemplated in this Agreement, required to produce Drug Product from API and Materials.  “Process,” “Processing” and “Processed” shall have analogous meanings.

 

“Product-Specific Appendix” shall have the meaning given such term in Section 2.1(a).

 

“Regulatory Authority” shall mean the FDA and any other governmental authority (whether national, federal, provincial and/or local) in the Territory that is a counterpart to the FDA or otherwise has jurisdiction over the manufacture or approval of any Drug Product.

 

“Regulatory Filing” shall mean any filing with or approval by a Regulatory Authority regarding a Drug Product or its manufacture.

 

“Specifications” shall mean, with respect to a Drug Product, the procedures, test results, requirements, standards and other data and documentation with respect to such Drug Product and the Excipients and Components therefor, as set forth in Exhibits A and B of the Product-Specific Appendix for that Drug Product, as may be revised from time to time in accordance with the terms set forth in Section 4.5 below.

 

“Territory” shall mean the geographical area set forth in Exhibit C of each Product-Specific Appendix hereto for a given Drug Product.

 

“Third Party Rights” shall mean the Intellectual Property of any third party.

 

“Year” shall mean, for each Drug Product, the period between the effective date of the Product-Specific Appendix for that Drug Product (as set forth in Exhibit C of the Product-Specific Appendix for such Drug Product) until December 31 of the year of such effective date, and thereafter, the twelve-month period commencing upon the completion of the immediately preceding Year.

 

“Yearly Minimum Volume” shall mean the yearly minimum volume of each Drug Product to be purchased by Gilead as more particularly set forth in Exhibit C of the applicable Product-Specific Appendix.

 

 

1.2                  SCHEDULES.

 

The following Schedules and Product-Specific Appendices as of the Effective Date are annexed hereto and form part of this Agreement:

 

Schedule A :		Yield Calculation Schedule
Schedule B :		Quality Agreements
Schedule C-1 :		Form of Product Specifications (Exhibit A to Appendix (•) of {Drug Name}
Schedule C-2:		Form of Finished Product Specifications and Testing Requirements (Exhibit B to Appendix (•) of {Drug Name}
Schedule C-3 :		Form of Pricing and API Schedule (Exhibit C to Appendix (•) of {Drug Name}
		APPENDIX 1 -  TENOFOVIR DISOPROXIL FUMARATE
		Exhibit A to Appendix 1 - Tenofovir disoproxil fumarate : Drug Substance, Excipient and Components Specifications
		Exhibit B to Appendix 1 - Tenofovir disoproxil fumarate : Finished Product Specifications and Testing Requirements
		Exhibit C to Appendix 1 - Tenofovir disoproxil fumarate : Pricing and API Schedules
		APPENDIX 2 - ADEFOVIR DIPIVOXIL
		Exhibit A to Appendix 2 – Adefovir dipivoxil : Drug Substance, Excipient and Components Specifications
		Exhibit B to Appendix 2 - Adefovir dipivoxil : Finished Product Specifications and Testing Requirements
		Exhibit C to Appendix 2 - Adefovir dipivoxil : Pricing and API Schedules

 

 

ARTICLE II

PURCHASE AND SUPPLY

 

2.1                                Purchase and Supply Agreement .

 

(a)                                            This Agreement including the Schedules and Appendices annexed hereto shall serve as a master commercial supply agreement governing the manufacture, purchase and supply of Drug Products between the Parties.  The Parties have agreed, as of the Effective Date, to product-specific terms governing the purchase and supply of two (2) Drug Products, Gilead’s tenofovir disoproxil fumarate and adefovir dipivoxil products, as reflected in Appendices 1 and 2.  Subject to Section 2.1(b), the Parties may agree to the manufacture, purchase and supply of additional drug products by agreeing to additional product-specific terms, each in the form of a new Appendix to this Agreement signed and delivered by a representative of the applicable Party, annexed hereto and incorporated herein once executed and delivered (each, a “ Product-Specific Appendix ”).  Each Product-Specific Appendix shall be substantially in the form of Schedule C (e.g. C-1, C-2 and C-3) attached hereto, and shall include, at a minimum, the following for the applicable Drug Product:  (a) an Exhibit A setting forth the API, API Specifications, Excipients, Excipient Specifications, Components, Component Specifications, and Disposition Package for the Drug Product covered by such Product-Specific Appendix; (b) an Exhibit B setting forth the finished product Specifications; and (c) an Exhibit C setting forth the pricing terms, Facility(ies), Territory, Yearly Minimum Volume, Drug Product costs and yields, effective date and initial term.

 

(b)                                            Solely Gilead Sciences shall be Patheon’s counterparty to Product-Specific Appendices for the [*] supply of any Drug Product [*] or for any [*] supply of any Drug Product [*] .  Solely Gilead World shall be Patheon’s counterparty to Product-Specific Appendices for the [*] supply of any Drug Product [*] .  Solely Gilead Sciences will have the rights and obligations of Gilead hereunder to the extent pertaining to [*] supply of Drug Products [*] or for any [*] supply of any Drug Product for [*] , in each case for which Gilead Sciences is party to the relevant Product-Specific Appendices. Solely Gilead World will have the rights and obligations of Gilead hereunder to the extent pertaining to [*] supply of Drug Products for [*] for which Gilead World is party to the relevant Product-Specific Appendices.  Gilead World agrees to an obligation to provide to Patheon a written guarantee by Gilead Sciences, as Gilead World’s ultimate parent company, of Gilead World’s performance under this Agreement, and, in satisfaction of such obligation, Gilead Sciences hereby guarantees to Patheon the performance by Gilead World of Gilead World’s obligations under this Agreement.

 

(c)                                            Changes to the Product-Specific Appendices may only be made by prior written agreement of the Parties.  If any Product-Specific Appendix conflicts with the body of this Agreement, the body of this Agreement shall control, except to the extent that such Product-Specific Appendix explicitly references particular Sections of the body of this Agreement that do not apply, or only partially apply, with respect to such Product-Specific Appendix, and describes the extent to which such Sections shall not apply.  In such event, with respect to the subject matter covered by the explicitly referenced Sections of the body of this Agreement as applied to such Product-Specific Appendix, such Product-Specific Appendix and not the body of this Agreement shall control.

 

(d)                                            During the Term (as such term is defined in Section 9.1) of this Agreement, Gilead agrees to buy, and Patheon agrees to supply, such quantities of each Drug Product for sale in the Territory as may be set forth on Firm Orders placed by Gilead in

 

 

accordance with Section 2.4 at the prices set forth in Exhibit C of the applicable Product-Specific Appendices, as may be revised from time to time in accordance with Article IV hereof.

 

(e)                                            Minimum Volumes of Purchases.  Patheon acknowledges that Gilead may obtain a portion of its requirements for any Drug Product from third parties; provided, however, Gilead agrees to purchase from Patheon the Yearly Minimum Volume for each Drug Product as more particularly set forth in Exhibit C of the applicable Product-Specific Appendix.

 

2.2                                Drug Product And Materials Specifications And Testing .  Patheon shall, in Processing a Drug Product, use Excipients and Components that conform to the Excipient Specifications and Component Specifications, respectively, for such Drug Product. Such conformance will be verified in accordance with the testing standards and procedures specified therefor in the applicable Specifications. The Parties acknowledge that such Specifications and testing standards and procedures as set forth in Exhibits A or B of the applicable Product-Specific Appendix may need to be refined and modified with changes that are necessary or appropriate according to applicable Regulatory Authority requirements, or as otherwise requested by Gilead in writing.  If such a change in the Specifications is needed or proposed, Section 4.5 shall apply.

 

2.3                                Orders and Forecasts .  Gilead shall provide Patheon with the following:

 

(a)                                            concurrent with the execution of this Agreement for the first two (2) Drug Products and concurrent with the execution of any Product-Specific Appendix for an additional Drug Product, a written non-binding [*] month forecast of the volume of each Drug Product that Gilead then anticipates will be required to be produced and delivered to Gilead during the following [*] month period.  Such forecast will be updated by Gilead monthly on a rolling [*] month basis and updated forthwith upon Gilead determining that the volumes for the first [*] months contemplated in the most recent of such forecasts has changed by more than [*] ; and,

 

(b)                                            on or before the [*] day of each calendar month, firm written orders (“ Firm Orders ”) covering the supply for each Drug Product on the basis of [*] units, to be produced and delivered to Gilead on a date not less than [*] from the first day of the calendar month immediately following the date that the Firm Order is submitted.

 

(c)                                            on or before [*] , in each Year, a written non-binding [*] forecast (broken down by calendar quarters for the [*] of the forecast) of the volume for each Drug Product that Gilead anticipates will be required to be produced and delivered to Gilead during such [*] period.

 

2.4                                Firm Orders .  The Firm Orders submitted to Patheon pursuant to Section 2.3 shall specify Gilead’s purchase order number, quantities, monthly delivery schedule and any other elements necessary to identify what must be delivered to fill such Firm Order.  Unless mutually agreed upon by both Parties, the quantities of Drug Product ordered in such written orders shall be firm and binding on Gilead and shall not be subject to reduction, and shall only be subject to cancellation as set forth in Section 2.10.

 

 

2.5                                Materials Ordering and Stockpiles .

 

(a)                                            Reliance by Patheon .  Gilead understands and acknowledges that Patheon will rely on the Firm Orders submitted pursuant to Section 2.3(b) in ordering the Materials required to meet such Firm Orders.  In addition, Gilead understands that to ensure an orderly supply of such Materials and to achieve economies of scale in the costs therefor, it may be desirable for Patheon to purchase such Materials in sufficient volumes to meet the production requirements for each Drug Product during part or all of the forecasted periods referred to in Section 2.3(a), or such longer period as Patheon and Gilead may agree to.  Accordingly, Gilead agrees that purchases may be made by Patheon in respect of the Materials for a given Drug Product to satisfy the production requirements for such Drug Product for the first [*] months of the forecasted period, or such different period as may be identified opposite such Materials in the applicable Product-Specific Appendix or agreed in writing by the Parties.  If any Materials ordered by Patheon in accordance with the foregoing sentence are not included in finished Drug Product purchased by Gilead within [*] months after the forecasted month in respect of which such purchases have been made (or such longer period as the Parties may agree in writing), Gilead will pay to Patheon its actual costs to acquire such unused Materials and, in the event such Materials are incorporated into the Drug Product subsequently purchased by Gilead, Gilead will receive credit for any costs of such Materials previously paid to Patheon by Gilead.

 

(b)                                            Minimum Stockpiles .  Without limiting Patheon’s ability to purchase and hold Materials as set forth in Section 2.5(a), Patheon shall at all times maintain an inventory of each Material sufficient to manufacture the relevant Drug Products to fill Gilead’s Firm Orders and forecasts in the following [*] months, or such different period of time as may be set forth for such Material in the applicable Product-Specific Appendix or otherwise agreed in writing by the Parties.

 

2.6                                Minimum Orders .  Each Drug Product to be Processed by Patheon may only be ordered in the minimum order quantities set out in Exhibit C of the Product-Specific Appendix for such Drug Product.  As the Parties gain additional experience with the Processing of each Drug Product, they shall negotiate in good faith, upon request by Gilead, to revise the minimum order quantities in the applicable Exhibit C from time to time.  If the Parties reach written agreement, following any necessary technical and cost review by Patheon in accordance with Section 4.5, they shall update the applicable Exhibit C to reflect the revised minimum order quantities.

 

2.7                                Excipients and Components .  All Materials shall be purchased (with the exception of those which are supplied by Gilead, which exceptions shall be identified in the applicable Product-Specific Appendix) and tested by Patheon at Patheon’s expense in accordance with the applicable Specifications.

 

2.8                                Quality Agreements . Each Party shall allocate, use and expend the resources necessary to perform the division of pharmaceutical responsibilities assigned to such Party as defined in the Quality Agreement(s) as set forth in Schedule B of this Agreement, to which such Party is a party, the terms of which, for clarity, are a part of this Agreement.  Without limiting the generality of the foregoing sentence, the Parties’ responsibilities relating to product

 

 

complaints shall, at a minimum, include the following: (a) Patheon shall, as promptly as practicable after it becomes aware (but in any event, no later than [*] business days thereafter), forward to Gilead or its designee, by phone and in writing, any and all complaints or problems relating to any Drug Product, and any information in its possession pertaining to such complaint or problem, including but not limited to: (i) Drug Product or its labeling may have been mistaken for or applied to another product; (ii) Drug Product may be affected by bacteriological contamination, significant chemical, physical or other change or deterioration or stability failures; (iii) Drug Product is the subject of a complaint by a Third Party, a Regulatory Authority or a customer relating to the quality of the Drug Product; (iv) a unit or batch of Drug Product supplied to or as directed by Gilead may not be in conformance with the applicable Specifications; or (v) a unit or batch of Drug Product supplied to or as directed by Gilead has not been Processed in accordance with the Patheon Manufacturing Responsibilities; (b) Gilead shall promptly inform Patheon, by phone and in writing, of any and all complaints that Gilead receives which implicate Patheon’s Processing of Drug Product at the Facility; and (c) Patheon shall respond promptly to, and cooperate fully with Gilead regarding, any reasonable request by Gilead for assistance in resolving any and all complaints, in each case on a time frame sufficient to permit Gilead to comply with applicable laws, rules and regulations, as notified by Gilead. The Parties agree to negotiate in good faith to modify the Quality Agreement(s) to which they are respective parties, pursuant to Section 4.5, from time to time as necessary or appropriate in light of FDA or other regulatory requirements, or at Gilead’s request.  For clarity, either [*] , or Gilead Sciences may be party in place of Gilead World to a Quality Agreement relating to supply of Drug Product(s) to Gilead World.

 

2.9                                Technology Transfer .  Patheon shall facilitate, at Gilead’s expense, any technology transfer to Gilead, its Affiliate or a third party in relation to the Processing of Drug Product(s) to the extent reasonably requested by Gilead.

 

2.10                         Cancellations .  Gilead may cancel any Firm Order previously accepted by Patheon by providing Patheon with prior written notice (the “ Notice ”); provided that if Gilead cancels any Firm Order and the Notice is received [*] days or less prior to any scheduled delivery of Drug Product covered by such Firm Order, then Gilead shall reimburse Patheon for a percentage of the price that Patheon would have charged Gilead for the Firm Order, which amounts shall be calculated as follows:

 

(a)                                   if Notice is received by Patheon less than [*] days prior to any scheduled delivery of Drug Product covered by such Firm Order, then Gilead shall pay Patheon [*] percent ( [*] %) of the price that Patheon would have charged Gilead for the Firm Order if it had not been cancelled;

 

(b)                                   if Notice is received by Patheon between [*] to [*] days prior to any scheduled delivery of Drug Product covered by such Firm Order, then Gilead shall pay Patheon [*] percent ( [*] %) of the price that Patheon would have charged Gilead for the Firm Order if it had not been cancelled; or

 

(c)                                   if Notice is received by Patheon between [*] to [*] days prior to any scheduled delivery of Drug Product covered by such Firm Order, then Gilead shall pay Patheon

 

 

[*] percent ( [*] %) of the price that Patheon would have charged Gilead for the Firm Order if it had not be cancelled.

 

This Section 2.10 shall not apply to mutually agreed changes in production or delivery schedules, or any cancellation for which alternative terms are mutually agreed upon by both Parties.

 

2.11                         Equipment .  If Gilead or a third party with a right to purchase Drug Product from Gilead supplies any equipment to Patheon for use in Processing any Drug Product:

 

(a)                                   The Parties, or Patheon and such third party, as applicable, shall prepare a written inventory of such equipment, which inventory shall be signed by a representative of each Party, or a representative of Patheon and such third party, as applicable.

 

(b)                                   Such inventory shall set forth where and under what conditions Patheon will locate and use such equipment.  Gilead or such third party, as applicable, shall be responsible for validation of such equipment.  In addition, Gilead or such third party, as applicable, shall be responsible for any costs for transportation, installation and training necessary to use such equipment.

 

(c)                                   Such inventory shall set forth the routine preventative maintenance of such equipment that Patheon must perform, and Patheon shall perform such routine preventative maintenance in accordance with the terms and conditions of a separate agreement to be entered into by the Parties, or between Patheon and such third party, as applicable.  For clarity, Patheon shall not be responsible to conduct major repairs to such equipment.

 

(d)                                   Gilead or such third party will retain ownership of such equipment unless otherwise agreed to in writing by the Parties, or by Patheon and such third party, as applicable.  Gilead or such third party, as applicable, will be responsible to maintain any insurance as to such equipment; provided, however, that if Gilead or such third party is unable to procure insurance to cover such equipment in Patheon’s possession and requests Patheon to obtain such insurance, Patheon will use reasonable efforts to obtain such insurance at Gilead’s or such third party’s expense, as applicable.

 

ARTICLE III

SUPPLY AND PROCESSING OF DRUG PRODUCT

 

3.1                                Supply Of API And Materials .

 

(a)                                            For each Firm Order of Drug Product, Gilead, at its expense, shall deliver or cause to be delivered to the Facility, the number of kilograms of the applicable API(s) necessary for Patheon to Process the Drug Product(s) set forth on the relevant Firm Order.

 

(b)                                            Patheon shall use commercially reasonable efforts to make the Facility and appropriate personnel available in order to complete the Processing of the relevant Drug

 

 

Product(s) and make such Drug Product(s) available for delivery on the date specified in the relevant Firm Order.  Within [*] business days after Patheon’s receipt of each Firm Order, Patheon shall notify Gilead in writing via electronic mail (in accordance with Section 10.5) whether Patheon accepts such Firm Order on the delivery schedule set forth therein.  Patheon shall use commercially reasonable efforts to accept all Firm Orders on the delivery schedules that they specify, and in any event shall accept all Firm Orders to the extent not exceeding [*] percent ( [*] %) of the quantity of each Drug Product forecast in the applicable Last Forecasts (defined below) for the time period covered by the Firm Order, subject to reasonable scheduling of each delivery within the calendar month in which Gilead requests delivery in order to accommodate the specific timing of each applicable facility and Patheon personnel availability.  For purposes of such [*] percent ( [*] %) limit, if [*] percent ( [*] %) of the quantity of a given Drug Product specified in a Last Forecast equals a fractional number of batches, then the minimum number of batches that Patheon must accept in a Firm Order shall be the next whole number of batches above the fractional number of batches that is equal to [*] percent ( [*] %).  For example, [*] . As used in this Section, “ Last Forecast ” shall mean the forecast provided under Section 2.3(a) no later than [*] months prior to the time that Gilead requests delivery in its Firm Order.

 

(c)                                            Patheon shall, at its expense, purchase from a third party designated by Gilead from Patheon’s preferred supplier list, or a supplier designated by Gilead, all Excipients to be used in the Processing of the Drug Product.  Gilead may designate an Excipient supplier not on Patheon’s preferred supplier list by written notice to Patheon, provided that Gilead shall pay for any increase in costs for such Excipients resulting from such purchase from a supplier not on Patheon’s preferred supplier list.  Each such notice shall specify either that (a) an audit of such supplier is not required by Gilead in which case Gilead will provide Patheon with all documentation required to support Gilead’s qualification of such supplier; or (b) Gilead shall conduct an audit of such supplier at its own expense.  All Excipients shall be tested in accordance with procedures specified by Gilead in the Excipient Specifications.  If a particular supplier (from Patheon’s preferred supplier list or as so designated by Gilead) is specified for a given Excipient in the applicable Specifications, then Patheon shall obtain such Excipient from such supplier.  In addition, the Parties may provide in the relevant Product-Specific Appendix for Gilead to procure the required quantities of any of the Excipients for the relevant Drug Product.

 

(d)                                            Patheon shall, at its expense, purchase all Components necessary to complete the Processing of Drug Products.  All Components shall meet the applicable Component Specifications as described in Exhibit A of the Product-Specific Appendix for a given Drug Product, as amended or supplemented from time to time under the terms and conditions hereunder.  In addition, the Parties may provide in the relevant Product-Specific Appendix for Gilead to procure the required quantities of any of the Component for the relevant Drug Product.

 

3.2                                Processing Of Drug Product .

 

(a)                                            Patheon will Process each Drug Product in accordance with the applicable Master Batch Records and Specifications, the Quality Agreement and any applicable federal, provincial and local laws and regulations, including without limitation cGMPs (hereinafter collectively the “ Patheon Manufacturing Responsibilities ”).  Before, during and after each

 

 

Processing of a Drug Product, Patheon shall monitor such Processing and the Processing environment and keep such records of the foregoing as are required by the applicable Master Batch Records and Specifications, and in accordance with cGMPs.  In accordance with cGMPs and during the Term of this Agreement and as part of the Patheon Manufacturing Responsibilities, Patheon shall (i) take all commercially reasonable steps necessary to ensure that any Drug Product that may be Processed by it pursuant to this Agreement shall be free of cross-contamination from any fermentation, other manufacturing or similar activities and (ii) be responsible for the performance of validated cleaning and changeover procedures prior to Processing any Drug Product for Gilead.

 

(b)                                            Patheon shall not manufacture or store any [*] product (for example but without limitation, [*] ) at, or otherwise introduce any of the foregoing to, any Facility where any API, Component, Excipient, or Drug Product is Processed or stored without Gilead’s advance written consent.  Gilead may withhold such consent in its sole discretion.

 

(c)                                            Both Parties shall promptly notify each other of any new material instructions or specifications required by the Act and of other applicable laws, rules and regulations, and shall confer with each other with respect to the best means to comply with such requirements.  The Parties shall allocate any costs of implementing such changes on an equitable basis in accordance with, and subject to the procedures set forth in, Section 4.5.  If the proposed new instruction or specification policy relates to the production of a Drug Product solely, then any additional costs incurred by Patheon to produce such Drug Product shall be passed on to Gilead in accordance with, and subject to the procedures set forth in, Section 4.5.

 

(d)                                            Upon prior written request, Patheon will permit duly authorized representatives of Gilead and Gilead’s licensee(s) or distributor(s) for any Drug Product to observe the Processing of such Drug Product and to have access to any relevant records in connection with such Processing as more fully provided in Section 3.4 below; provided that representatives from Gilead’s licensee(s) or distributor(s) for any Drug Product shall be granted access to Patheon’s Facility at the same time and to the same extent as Gilead’s representatives.  Such representatives shall be bound by an obligation of confidentiality (comparable to that of Article VIII) with respect to information that such representatives may obtain during such visit to observe the Processing of Drug Product and will comply with all Patheon standard operating policies and procedures while within the Facility or other Patheon premises.

 

(e)                                            Patheon shall supply Gilead with copies of Processing records, including batch records, as they relate to each Drug Product, for the purposes of assuring product quality and compliance with agreed-upon Processing procedures.

 

(f)                                              All Processing of each Drug Product to be performed by Patheon under this Agreement shall be performed at the Facility(ies) for such Drug Product specified in the applicable Product-Specific Appendix.

 

 

3.3                                FDA And Regulatory Support .

 

(a)                                            Patheon agrees to maintain a Site Master File (“ SMF ”) in accordance with the requirements of the FDA, if any, as well as any comparable files required by other Regulatory Authorities, and to provide Gilead with letters of access to such SMF (to the extent that they are required by the FDA or other related regulatory bodies) and comparable files and to further provide Gilead with all documents regarding the Processing of such Drug Product.  Gilead shall be responsible for all other filings necessary for approval and export of each Drug Product.  At Gilead’s reasonable cost, Patheon further agrees to assist Gilead, acting reasonably, in obtaining any government or agency approval which may be required for the marketing of any Drug Product in any country other than the United States.  Gilead shall provide written notice of any additional regulatory requirements of countries, in accordance with Section 4.6.

 

(b)                                            Patheon agrees to cooperate with any inspection by the FDA or other Regulatory Authority.  Patheon specifically agrees to meet and confer with Gilead representatives in advance of the pre-approval inspections for any Drug Product and, at Gilead’s request, any other inspection of the Facility concerning any Drug Product, provided that Patheon receives advance notice of such inspection, and will provide Gilead with all necessary support in connection with each such inspection as may be reasonably required.

 

(c)                                            Each Party shall notify the other Party immediately in writing in the event a Party learns of any action that has been or will be taken by the FDA or other Regulatory Authority which relates to the Facility and the Processing of any Drug Product, or which may delay or impair the ability to Process any Drug Product in accordance with this Agreement.

 

3.4                                cGMP Compliance and QA Audits .  Upon prior written request, Gilead shall have the right [*] per Year to have its representatives and representatives from its licensee(s) and distributor(s) for any Drug Product visit the Facility during normal business hours on business days to audit Patheon’s manufacturing process, assess Patheon’s compliance with cGMPs and quality assurance standards, review records relating to the Processing of such Drug Product and discuss any related issues with manufacturing and management personnel as it relates to such Drug Product (such activities collectively, a “ cGMP/QA Audit ”).  Notwithstanding the foregoing, if Gilead’s representatives and/or representatives from its licensee(s) and distributor(s) for any Drug Product require cGMP/QA Audits in addition to [*] per Year, then they shall have the right to conduct such additional cGMP/QA Audits, in the presence of a Gilead representative, provided Gilead or such licensee(s) or distributor(s) shall pay Patheon’s reasonable costs for the conduct of such cGMP/QA Audits.  Gilead’s representatives and representatives from its licensee(s) and distributor(s) for any Drug Product shall be bound by an obligation of confidentiality with respect to information that such representatives may obtain during such visit to inspect and audit Patheon’s manufacturing process and the Processing of Drug Product and will comply with all standard operating policies and procedures while within the Facility or other Patheon premises. Notwithstanding the foregoing, Gilead (and its licensee(s) and distributor(s) for any Drug Product)  shall have the right to conduct a “For Cause” audit at any time, when requested as a reasonable response to a FDA or other regulatory agency audit notice or inquiry regarding a Drug Product, an unresolved deviation in Processing of Drug Product by Patheon, or customer complaints or adverse events regarding a Drug Product, and Gilead (or such licensees or distributors) shall bear Patheon’s expenses therefore unless as a

 

 

result of such “For Cause” audit it is determined that there was non-compliance with the warranties in Section 6.2.

 

3.5                                Change in Manufacturing Process .  Patheon shall notify Gilead if Patheon wishes to make, and obtain Gilead’s prior written approval before Patheon implements, any of the following:  (a) a major change (as defined in applicable regulations) including without limitation, major or regulatory changes relating to (i) the Facility that would constitute a change under cGMPs, would impact the validation status of the process, or would constitute noncompliance with the Patheon Manufacturing Responsibilities, (ii) the Materials, (iii) the Specifications, (iv) any quantitative formulae and any other aspect of Drug Product Processing, or (v) testing methods with respect to the Drug Product; and (b) changes that require regulatory submission, relating to the Materials, Specifications, Facility, equipment, process, testing methods or other procedures used to Process any Drug Product.  Gilead’s consent with respect to such changes shall not be unreasonably withheld, or unduly delayed; provided, however, that with respect to such changes affecting a particular Drug Product, Patheon acknowledges that Gilead may be required to obtain its licensee’s consent to such changes prior to providing consent to Patheon.

 

3.6                  Compliance with Laws .  Patheon shall materially comply with all applicable orders, regulations, requirements and laws of any and all Regulatory Authorities including, without limitation, all laws and regulations applicable to (a) the transportation, storage, use, handling and disposal of hazardous materials, (b) the Processing of Drug Products and (c) Patheon’s performance of its obligations under this Agreement.  Patheon specifically represents and warrants that it does not and will not use, in any capacity, the services of any person that is debarred under the provisions of the United States Generic Drug Diversion Act or applicable FDA regulations.  Patheon represents and warrants to Gilead that it has and will maintain during the Term of this Agreement, all government permits, including without limitation, health, safety and environmental permits, legally required for the conduct of the actions and procedures that it undertakes pursuant to this Agreement.  Unless otherwise provided in the Product-Specific Appendix for a given Drug Product, the Parties agree that Patheon shall be the quality representative for purposes of [*] release of all Drug Products.

 

3.7                  Documentation .  Patheon shall keep complete, accurate and authentic accounts, notes, data and records of the Processing services performed under this Agreement including but not limited to all relevant information and records relating to the Processing of Drug Products under this Agreement which may be required from time to time to be provided to any Regulatory Authority pursuant to applicable laws and regulations, and all Process development information relating to the Drug Product (to the extent such information is in Patheon’s possession) (“ Documentation ”).  Each Party shall maintain complete and adequate records in accordance with and to the full extent required by cGMP and the applicable Specifications pertaining to the methods and the Facility used for the Processing, holding and distribution of Drug Product.  Upon written request by Gilead with reasonable notice, Patheon will provide to representatives of Gilead or its licensee(s) or distributor(s) for Drug Products, during normal business hours, reasonable access to Documentation, where such access is necessary or reasonably useful to permit Gilead or such distributor(s) or licensee(s) to comply with applicable laws, rules or

 

 

regulations; subject to Section 3.4, the expense of such access shall be at the expense of Gilead or such licensee(s) or distributor(s).  Patheon shall maintain Documentation until the later of (a) when such Documentation is no longer required by applicable law, rule or obligation to be maintained by Gilead or Patheon, or (b) for Drug Product supplied for (i) clinical trial supplies, the approval or withdrawal of all applications for approval included within Regulatory Filings for such Drug Product, or (ii) commercial supplies, one (1) year after expiration of the shelf life for the applicable batch.

 

3.8                  Reprocess and Rework .  Patheon shall not conduct any rework (meaning redressing or relabeling of Drug Product) or reprocessing (meaning repetition of any step in the manufacture of unlabeled Drug Product from API and Excipients) activities with respect to any Drug Product without prior written permission from Gilead. Patheon shall document appropriately all rework and reprocessing activities conducted under this Agreement.

 

3.9                  Variances .  Patheon shall notify Gilead within [*] business days after its discovery of any Drug Product lot failure, or significant deviation from or variance in manufacturing procedures or standard operating procedures for such Drug Product.  The Parties shall promptly discuss and mutually agree how to address any such deviation or variance.  The Quality Agreement shall include a requirement that any deviation or variance be resolved within [*] days after discovery or such longer period of time as may be agreed to between the Parties.

 

3.10           Storage and Handling .  Patheon shall store and handle API and Materials as set forth in the applicable Master Batch Records and Specifications, and in accordance with cGMP, and shall conform to established safety practices and procedures set forth in Gilead’s then-current material safety data sheet.  In addition, Patheon shall take such actions as are reasonably necessary to protect API and Materials from damage and deterioration. If requested by Gilead in writing, Patheon shall return or destroy, at Gilead cost and expense, any unused API in accordance with Gilead’s written instructions.

 

3.11           Labels .  Unless otherwise agreed, Gilead, or a third party approved by Gilead, shall supply in a timely manner all necessary copy and art work to allow Patheon to procure Components for a Drug Product in accordance with the applicable Component Specifications. Patheon shall use such copy and art work to procure all necessary Components in accordance with the applicable Component Specifications and Gilead’s written instructions, and in compliance with applicable regulatory requirements.  Such Components shall be the only Components used for such Drug Product.

 

3.12           Performance Indicators.   Within [*] months after the Effective Date, the Parties shall confer to set a timeline for the development of a commercially reasonable system of performance indicators to evaluate the performance of Patheon in carrying out its obligations under this Agreement. Once the system of performance indicators is developed, the Parties shall evaluate the Processing of Drug Products by Patheon on a quarterly basis against such performance indicators.

 

 

ARTICLE IV

PRICES AND PAYMENT

 

4.1                  Price .  Prices for each Drug Product shall be as set forth on Exhibit C of the Product-Specific Appendix for such Drug Product.  Gilead shall be responsible for the payment of any sales and use taxes on Drug Product delivered by Patheon to Gilead or on API furnished by Gilead to Patheon.  The fees listed on Exhibit C of each Product-Specific Appendix shall not be subject to change until the end of the first Year after the effective date of such Product-Specific Appendix, subject to the amendments to such fees provided for in Sections 4.3, 4.5 and 4.6.  The prices for each Drug Product during each additional Year that this Agreement remains in force shall be agreed to between the Parties prior to the commencement of each such Year, in accordance with Section 4.4.

 

4.2                  Payment Terms .  All payments due hereunder to Patheon shall be paid not later than [*] days following the date of the applicable invoice submitted by Patheon in accordance with Section 5.2(a); provided that if such invoice is received by Gilead more than [*] business days after such date, Patheon will make reasonable allowances for any payments that are late due to such delay provided that Gilead uses commercially reasonable efforts to pay such invoice by the end of such [*] days.

 

4.3                  Adjustments to Current Year’s Pricing .  During any Year of this Agreement, the fees set out in Exhibit C of each Product-Specific Appendix shall be subject to adjustment in accordance with the following:

 

(a)                                            Minimum Order Quantity .  If at any time a Firm Order is for less than the minimum order quantity of any Drug Product specified in Exhibit C of the applicable Product-Specific Appendix (i.e., the smallest campaign size so specified, as either by batch size or a minimum number of batches or a combination of both of batch size and minimum number of batches) then Patheon shall be entitled to request an adjustment to the fee for Processing in respect of that Drug Product delivered under that Firm Order to reflect the increased costs that Patheon will incur as a result of manufacturing the lesser volume ordered by Gilead relative to the minimum order quantity for that Drug Product.  For clarity, the minimum order quantity relates to the size of the manufacturing runs that Patheon will undertake to fill Gilead’s orders, and not to overall or annual volume.

 

(b)                                            Materials and Component Costs .  If at any time market conditions result in Patheon’s cost of Materials being greater than normal forecasted increases, then Patheon shall be entitled to request an adjustment to the fee for Processing in respect of any affected Drug Product to compensate it for such increased Materials costs.  For the purposes of this Section 4.3(b), changes greater than normal foreca