Exhibit 10.1
Confidential Materials omitted and filed
separately with the
Securities and Exchange Commission. Asterisks
denote omissions.
DISTRIBUTION SERVICES AGREEMENT
This Distribution services Agreement
(“ Agreement ”) is entered into as April 1, 2005
(Execution Date) by and between Collagenex Pharmaceuticals
Corporation, a Delaware corporation with its principal place of
business located at 41 University Drive, Newtown, Pa 18940
(“Customer”), and Cardinal Health * with its principal place of business located at
7000 Cardinal Place, Dublin, Ohio 43017 (“Service
Supplier”).
RECITALS
WHEREAS, Service Supplier provides
services including but not limited to logistics and inventory
management services, administrative services, and financial
services; and, Customer wishes to purchase such services from
Service Supplier; and
WHEREAS, Service Supplier is willing
to provide and Customer desires certain additional services to
Customer as needed and agreed upon by both parties.
WHEREAS, Customer and Service
Supplier desire to assure adequate availability of supply and
inventory management of Products.
NOW THEREFORE, in consideration of
the foregoing, the mutual representations, warranties and covenants
contained in this Agreement, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
ARTICLE 1
Definitions
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1.1.
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“
Products ” means all current and future ethical
pharmaceutical products, bearing Customer’s label and
packaging, which Customer sells to wholesale customers in the
United States. (see current price list).
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1.2 .
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“
Aggregate Inventory ” means, at any given time, the
total of Products in units that Service Supplier as on hand at all
of its storage and/or distribution facilities and that Service
Supplier has on order from Customer
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1.3 .
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“
Confidential Information ” means the confidential
information described in Section 4.2.
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1.4 .
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“
Providers” means the purchaser(s) of Products from
Service Supplier in the United States.
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1.5 .
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“Average Weekly Movement”
means, at any given time, the total
quantity of Products in units (by NDC number) sold by Service
Supplier to Providers over the immediately preceding eight (8)
weeks divided by eight (8).
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1
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1.6.
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“
Execution Date ” means the date of full execution of
this Agreement.
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1.7.
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‘Effective Date”
means April 1, 2005.
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1.8.
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Inventory
and Sales Reports ”
means the reports described in Sections 2.3
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1.9.
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“New
Price” means the
wholesale acquisition cost (“WAC”) charged by Customer
after the effective date and time of a price change instituted by
Customer at any time following the Effective Date of this
Agreement.
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1.10.
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“Old
Price” means the
WAC charged by Customer immediately preceding the institution of a
New Price.
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ARTICLE 2
Services
General – Customer agrees to compensate Service
Supplier for each of the services described below in accordance
with the fee structure contained on Schedule A.
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2.1.
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Base
Distribution Services.
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1.
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Sophisticated
ordering technology
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2.
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Daily
consolidated deliveries to providers
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3.
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Emergency
shipments to providers 24/7/365
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4.
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Consolidated
accounts receivable management
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5.
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Contract and
Chargeback administration
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7.
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Customer
Service support
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8.
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Adequate
working inventories to meet customer needs and service
levels
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9.
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Licensed,
environmentally controlled, PDMA compliant, secure
facilities
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2.2
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Inventory
Management Services.
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1.
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Inventory
Levels . During the term
of this Agreement, Service Supplier will use best efforts to
maintain Aggregate Inventory levels of no less than [**] weeks and
no more than [**] weeks on all Products.
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2.
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Purchase
Limits . Customer agrees
to ship all Service Supplier purchase orders in full. Customer has
the right to question any orders that exceed [**]% of Service
Supplier’s Average Weekly Movement and has the right to
cancel any quantities that Service Supplier is not able to provide
reasonable justifications and/or explanations.
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2
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3.
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Product
Availability . Service
Supplier and Customer will jointly use best efforts to minimize
product shortages and maximize product availability by agreeing to
the following:
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Ÿ
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Service
Supplier will institute an automated balancing system on Customer
Products in order to optimize the use of existing inventories
across the entire Service Supplier network, including
brokerage.
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Ÿ
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During
backorder situations and limited product availability and upon
Customer’s request, Service Supplier will implement more
frequent order and receiving cycles to help reduce inventory
requirements.
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2.3
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Data /
Reporting Services. Service Supplier shall prepare inventory reports
detailing the status of its Aggregate Inventory of Products
(“Inventory Reports”) and movement of Products
(“Sales Reports”) by NDC number for the duration of
this Agreement. Service Supplier shall provide Customer with such
Inventory Reports weekly, or daily upon request, and Sales Reports
monthly. All such Inventory and Sales Reports shall be transmitted
in EDI 852 and EDI 867 formats, respectively and shall include such
information as reasonably requested by Customer, including but not
limited to the following:
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(a)
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On hand
inventory level by distribution center; and
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(b)
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On order
inventory level by distribution center; and
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(c)
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Sales out by
distribution center
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Service
Supplier may, due to contractual requirements, be required to block
certain data in the 867’s that discloses Provider identity.
This may include Provider name and DEA number, and any other data
that would identify a Provider.
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Within thirty
(30) days after entering into this Agreement, the parties shall
examine and test the capability of their respective EDI systems and
complete implementation of a mutually agreeable system whereby
transfers of information can be made effectively on a consistent
basis. In the event that critical internal support systems and
electronic communication links including EDI, are not available for
5 business days, the parties will cooperate to promptly implement
substitute procedures to document the information customarily sent
by EDI and prevent interruptions to each other’s
business.
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2.4
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Service
Level . Service Supplier
agrees to use its best commercial efforts to service provider
orders for Products at a [**]% service level. Service Level will be
calculated according to Service Supplier’s then current,
standard adjusted service level report. In addition, Service
Supplier will allow Customer the opportunity, with advanced written
notice, to add up to [**] additional weeks of inventory beyond the
inventory levels defined in Section 2.2.1 in order to ensure
maximum service levels. Customer will be entitled to this
opportunity one time per quarter.
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3
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2.5
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Provider
Order Monitoring . During
the term of this agreement Service Supplier will implement
processes and procedures to monitor Provider order patterns.
Service Supplier and Customer will agree upon parameters which may
represent speculative buy activity. Any orders that meet the agreed
upon parameters will be investigated by Service Supplier and the
outcome reported to Customer. If it is determined that a Provider
is speculating, additional steps will be implemented to limit
Provider purchases to reasonable levels.
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2.6
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New Product
Launch Support. Service
Supplier will provide guaranteed support for future Customer new
product launches. Support will consist of the following:
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a.
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Stocking each
distribution center with quantities as reasonably determined by
Customer, in no case to exceed [**] days of anticipated
demand.
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b.
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Providing daily
sales out reports for the first [**] days of product
launch
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c.
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Providing
automatic distribution to participating or targeted
pharmacies
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