CONFIDENTIAL TREATMENT MANUFACTURING AND SUPPLY AGREEMENT

 

medium and marked as confidential, or if disclosed orally or displayed, confirmed in writing within [*] days after disclosure, except any portion thereof which:

 

(a)           is known to the receiving party, as evidenced by the receiving party’s written records, before receipt thereof under this Agreement;

 

(b)           is disclosed to the receiving party by a third person who is under no obligation of confidentiality to the disclosing party hereunder with respect to such information and who otherwise has a right to make such disclosure;

 

(c)           is or becomes generally known in the trade through no fault of the receiving party; or

 

(d)           is independently developed by the receiving party without access to such information, as evidenced by the receiving party’s written records.

 

Contract Year means each twelve (12) month period during the term of this Agreement beginning on the Effective Date.

 

Contractor means any manufacturer, packager, or other Product support service provider who performs processing and/or packaging of a Product or any intermediate step of manufacture, or other Product support service.

 

Critical Equipment means any equipment that comes into contact with Product or is essential to the manufacturing process or is designed to assure that Product has the identity, strength, quality and purity that it is represented to possess.

 

Cubist Technology means individually and collectively the:

 

(a)           intellectual property rights embodied or disclosed in:

 

(i)		Cubist patent application(s) and patents,
(ii)		any patent application filed as a continuation, division, or continuation-in-part of the application(s) described in clause (a)(i), patents issuing therefrom and reissues, reexaminations and extensions of such patents; and
(iii)		any foreign counterpart to the application(s) described in clauses (a)(i)-(ii) (including divisions, continuations, confirmations, additions, renewals or continuations-in-part of such patent applications), patents issuing therefrom and extensions thereof, and

 

(b)           all other Confidential Information, discoveries, inventions, know-how, techniques, methodologies, modifications, improvements, works of authorship, designs and data (whether or not protectable under patent, copyright, trade secrecy or similar laws) that are conceived, discovered, developed, created or reduced to practice or tangible medium of expression by consultants (other than those consultants that are also affiliated with ACSD in connection with the transactions contemplated by this Agreement) or employees of Cubist at any time, concurrent with or related to the transactions contemplated by the Development and Facility Construction Timetable, or based on the results of the transactions contemplated by the Timetable and Facility Construction Plan. Cubist Technology specifically includes, but is not limited to, all process development technology developed for Cubist as part of the Materials Transfer & Confidentiality Agreement between Cubist and ACSD dated February 11, 1998.

 

cGMP means Current Good Manufacturing Practices and is further defined in Section 3.1 herein.

 

Daptomycin means the compound daptomycin the chemical structure of which is detailed in Exhibit A or a pharmaceutically acceptable salt thereof or a pharmaceutically acceptable formulation thereof.

 

Deviation means documented evidence of an excursion from operating, manufacturing, testing instructions or procedures. A Deviation does not permanently change an existing procedure, it is intended to be a specific or one time excursion.

 

*Confidential Treatment Requested. Omitted portions filed with the Commission.

 

 

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Drug Master File (DMF) is a submission to the FDA that provides detailed information about the Facility, Process and Materials used in the manufacture of Product, and that is used to support an NDA and other regulatory submissions.

 

Facility means the cGMP drug production facility in Anagni, Italy constructed and equipped by ACSD exclusively for the manufacture of Product.

 

Facility Approval means the FDA approval of the NDA Manufacturing Supplement for the Facility.

 

Facility Approval Target Date is defined in Section 2.1 herein.

 

Facility Completion means the construction, equipment, testing, and qualification of the Facility according to the terms of this Agreement.

 

Facility Completion Target Date is defined in Section 2.1 herein

 

FDA means the United States Food and Drug Administration or any successor entity thereto or any equivalent U.S. or foreign governmental regulatory agency with jurisdiction to grant Product Approvals.

 

Force Majeure means any event beyond the control of the parties, including, but not limited to, fire, earthquakes, flood, riots, epidemics, war, or embargoes.

 

Formal Investigation means a written report detailing the specifics of an investigation resulting from an exceptional event, and which includes a description of the incident, investigation, conclusions and corrective action or action plan, if applicable.

 

In-Process Specifications mean the chemical, physical, biological and microbial testing methods and results required for the commercial manufacture of Product in accordance with Process, and which are listed in Exhibit B herein, provided that such specifications shall at all times comply with the relevant regulations of the FDA or other regulatory agency in the country of sale, and provided that such specifications may be modified from time to time in accordance with this Agreement.

 

Lot Number means a controlled number used to identify a specific lot or batch of Product or Material.

 

Material means any actives, excipients, or components, which are used in the manufacture of Product.

 

Nonconforming Materials Report means a document used to describe the disposition of Product or Material that fails to meet established specifications.

 

Manufacturing Compliance Report is defined in Section 8.3 herein.

 

Material Review Board (MRB) means a Cubist multidisciplinary committee responsible for the review, evaluation and disposition of non-conforming materials and Product.

 

NDA means a new drug application filed with the FDA to obtain marketing approval for Product in the United States or any comparable application fled with the regulatory authorities of a country other than the United States to obtain marketing approval for Product in that country.

 

NDA Manufacturing Supplement means an application filed with the FDA, or any comparable application filed with the regulatory authorities of a country other than the United States, to obtain approval to manufacture Product at the Facility.

 

Process means the commercial process employing the [*].

 

Product means Daptomycin bulk drug substance that meets Product Specifications and is manufactured for Cubist in accordance with Sections 2 and 3 and Exhibits B, C and D of this Agreement.

 

*Confidential Treatment Requested. Omitted portions filed with the Commission.

 

 

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Product Approval means those regulatory or other approvals required for the manufacture, importation, promotion, pricing, marketing and sale of the Product in any particular country.

 

Product Price Premium is defined in Section 6.2 herein.

 

Product Specifications mean the chemical, physical, biological and microbial testing methods and results required for the release of Product and listed in Exhibit C herein, provided that such specifications shall at all times comply with the relevant regulations of the FDA or other regulatory agency in the country of sale, and provided that such specifications may be modified from time to time in accordance with this Agreement.

 

Purchase Forecast is defined in Section 5.3 herein.

 

Reprocessing means duplication of a step or steps in a manufacturing process in order to bring Product into conformance with Product Specifications without altering the safety, identity, strength, quality, or purity of Product beyond established requirements.

 

RMA means Return Material Authorization and is further defined in Section 6.5(b) herein.

 

SOP means standard operating procedure.

 

Specification Review Committee (SRC) means a Cubist multidisciplinary committee responsible for the review and approval of new specifications and changes to existing specifications as they relate to Product or Process.

 

Stability Review Group (SRG) means a Cubist multidisciplinary committee responsible for the review and approval of new stability protocols and changes to existing stability protocols as they relate to Product. In addition it is responsible for the routine review of stability data and evaluation of any trends that are noted.

 

USD means United States Dollars.

 

Vialed Drug Product means Product that has been filled into single dosage vials, lyophilized, and released according to Cubist’s secondary manufacturing process specifications.

 

2.          CONSTRUCTION OF PRODUCTION FACILITY IN ANAGNI

 

2.1          Facility Construction and Timetable

 

By [ * ] (the Facility Completion Target Date ), ACSD will [*] and make [*] in accordance with current Good Manufacturing Practices. ACSD’s obligations hereunder include, but are not limited to:

 

(a)           construction of [*] to perform the Process in a dedicated Facility;

 

(b)           provision of [*] of Product;

 

(c)           the installation of all [*] and [*]; and

 

(d)           obtaining approval from the [*].

 

Subject to adjustment in accordance with Section 2.2, ACSD will make its best efforts to complete all activities and to meet all dates set forth in this Agreement. The performance of [*] of the Facility is expected no later than [ * ] with all data and reports [*] by [ * ]. The target date for [*] for the ACSD facility (the Facility Approval Target Date ) is [ * ] .

 

*Confidential Treatment Requested. Omitted portions filed with the Commission.

 

 

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2.2          Date Adjustments

 

Cubist and ACSD each agree to perform the tasks assigned to each in this Agreement. Each party acknowledges that delays in performance by either party may cause delays in performance by the other party. If [*] fails to meet its obligations under this Agreement in a timely manner so as to cause a [*] delay in [*] performance, all dependent dates shall be adjusted day-for-day to account for the delay caused by [*]. If [*] failure is due to additional written requirements from [*], then such dates may be adjusted by mutual written agreement.

 

2.3          Inspection

 

Cubist will have the right to observe and inspect the progress of work at the Facility at all reasonable times, both during the construction process and at any time thereafter, and to confer with ACSD regarding compliance with the dates set forth in Section 2.1 above, Product Specifications, In-Process Specifications, cGMP, and other legal, regulatory or contractual requirements.

 

2.4          Change Procedures

 

(a)           ACSD will notify and consult with Cubist immediately concerning any potential delay in completion or validation of the Facility. ACSD acknowledges that time is of the essence for this Agreement, and that significant delays in the completion of the Facility may cause Cubist material harm. Cubist and ACSD will, from time to time during the construction process, confer regarding the quality standards for materials and layout of operations within the Facility. [*]. Cubist may request amendments to the building, equipment, or Process to:

 

(i)		effect [*] in the Facility,
(ii)		to [*], or
(iii)		to accommodate [*].

 

(b)           If Cubist wishes to make a change it shall notify ACSD of the requested change in writing, specifying the change with sufficient details to [*] (each, a Change Order Request ). Within [*] business days following the date of ACSD’s receipt of a Change Order Request, ACSD shall deliver a document that:

 

(i)		assesses the impact of the change on the total cost of the Timetable and Facility Construction Plan, and
(ii)		incorporates a description of the requested change and its proposed cost (a Change Order).

 

If Cubist accepts the Change Order in writing, then the provisions of this Agreement shall be deemed amended to incorporate such Change Order. The cost stated in the Change Order shall be deemed an adjustment to the charges specified in this Agreement.

 

It is the expectation of both parties that the dates and milestones set forth in this Agreement has been defined broadly enough to accomplish both parties’ goals and that no Change Orders will be required.

 

2.5          ACSD Capital Investment

 

Subject to Section 4 below, the [*]. Any increases in capital expenditures required by Cubist will be specified in writing and will be [*].

 

*Confidential Treatment Requested. Omitted portions filed with the Commission.

 

 

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3.          PRODUCTION

 

3.1          Manufacturing Quality

 

ACSD shall manufacture Product for Cubist in accordance with Exhibit D of this Agreement and under Current Good Manufacturing Practices (cGMPs) as required by the FDA and set forth in Title 21 Code of Federal Regulations Parts 210 and 211 (§§210.1-211.204 et. seq.), with particular emphasis on 211.22, 211.25 and 211.28 or the equivalents thereto pertaining to the responsibilities of a quality unit, personnel qualifications and personnel responsibilities respectively.

 

According to the provisions of Exhibit D, ACSD will develop a cGMP-compliant quality unit at the Facility. This quality unit will follow and implement policies and procedures mutually authorized by ACSD and Cubist. Compliance with this Agreement is dependent upon, among other factors, ACSD hiring or training a full-time senior level quality manager reasonably acceptable to Cubist dedicated to, and located at, the Facility, to establish and lead the cGMP-compliant quality unit.

 

ACSD will develop a cGMP compliant quality control test laboratory for the testing and release of Product.

 

3.2          Process Validation

 

ACSD will develop and complete a validation process at the Facility in accordance with Exhibit D herein, and [*]. Validation parameters and limits for the process must span the actual process parameters and limits developed and documented during the manufacture of consistency batches at commercial scale. All post-validation process changes [*]. Cubist will provide test method validation reports and small-scale purification validation studies as such reports become available. ACSD will provide Cubist with a master validation plan for the Facility and Process.

 

3.3          Process Improvements

 

Following Facility Approval, ACSD may continue operating [*] with the [*]. Development undertaken for the purpose of [*] will be [*]. ACSD will [*].  All modifications in raw materials, conditions or processing related to the manufacture of Product will be implemented [*].  The [*] following a successful and complete cGMP change control process outlined in the [*].

 

3.4          Stability Program Batches

 

ACSD will supply Cubist with samples from the first [*] validation batches of Product to be placed on stability as defined by Cubist’s approved stability protocols. In addition, ACSD will supply Cubist with samples from a minimum of [*] commercial batch per year. Cubist will be responsible for conducting all stability testing. ACSD agrees to ship stability samples under defined storage conditions to either Cubist or a site designated by Cubist.

 

4.          CUBIST INVESTMENT

 

According to the provisions of this Section 4, Cubist will contribute to ACSD up to eight million five hundred thousand dollars (USD 8,500,000) in equity, milestones, Product Price Premiums, resin investment, process development, quality systems and facility qualification support as specified below.

 

4.1          Equity Contribution

 

Within thirty (30)* days of execution of this Agreement Cubist will transfer to ACSD shares of Cubist Common Stock with an aggregate value of two million dollars (USD 2,000,000) . This equity contribution will comply with terms and conditions specified in Exhibit E.

 

*Confidential Treatment Requested. Omitted portions filed with the Commission.

 

 

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4.2          Milestones

 

Cubist will pay to ACSD:

 

•     [*] upon [*] and [*]; and

 

•     [*] upon [*].

 

4.3          Product Price Premiums

 

Cubist will pay to ACSD [*] through a [*] specified in Section 6.2.

 

4.4          Resin Investment

 

ACSD expects to spend [*]. In the event that Product is not approved for commercial sale by [*].

 

4.5          Process Development, Quality Systems, Facility Qualification Support

 

Cubist will contribute such expertise, training, and support staff and services, [*], as is reasonably necessary to assist ACSD in the [*].

 

5.          PURCHASE OF PRODUCT

 

5.1          Purchase Commitment

 

Contingent upon the receipt of the necessary Product and Facility Approvals, Cubist will purchase [*] of Product during the term of this Agreement. During the period prior to the receipt of Product Approvals, Cubist may, but is not obligated to, purchase Product produced using commercial Process in accordance with Exhibits B, C and D herein. Any such Product purchases [*] of Product that Cubist is required to purchase. Subject to the conditions of this Agreement, Cubist agrees to make the following yearly purchases:

 

Year		Purchase[*] (kg)
[*]		[*]
[*]		[*]
[*]		[*]
[*]		[*]
[*]		[*]
[*]		[*]
		[*]

 

The above schedule will be extended for any delays caused by ACSD.

 

5.2          Delay in Purchases / Payment of Product Price Premiums

 

In the event that Facility Approval is received, but Cubist does not choose to purchase [*], Cubist may defer the purchase and the payment for Product until the following year, [ *]. Any delays caused by ACSD (including, but not limited to delays in construction, validation, qualification, documentation, regulatory approvals and other ACSD activities under this Agreement) will extend the Cubist purchase commitment schedule, as described in Section 5.1 herein, on a day for day basis to account for such ACSD delays.

 

5.3          Purchase Forecasts

 

During the term of this Agreement, Cubist shall provide to ACSD, within the first [*] business days of each quarter, on a quarterly basis, a rolling forecast for orders of Product with respect to the following [*] quarters (Purchase Forecast) . Cubist shall be [*] of the amount of Product forecast for the [*] of any Purchase Forecast, and shall

 

*Confidential Treatment Requested. Omitted portions filed with the Commission.

 

 

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execute a binding purchase order to that effect. The forecast for the remaining [*] of any Purchase Forecast shall be non-binding.

 

5.4          Product Orders

 

Orders for Product shall be placed by written purchase order and submitted by mail or facsimile, or by other means agreed upon by the parties. Due to the expected variance in Product yield, an exact purchase amount may not be possible and the Cubist purchase orders will accordingly include a [*]. Amounts in excess of the stated [*]. No order shall be binding upon ACSD until it has been accepted by ACSD in writing. ACSD shall accept or reject all orders within [*] days following receipt of same and shall deliver all orders that are accepted within [*] days of the projected delivery date.

 

5.5          Changed Purchase Orders

 

In the event that Cubist cancels, reschedules or otherwise reduces a purchase order less than [*] days in advance of the scheduled batch initiation, Cubist shall [*] of the price of the Product that is [*]. Cubist may not [*] less than [*]days in [*]. Cubist may [*] days in [*].

 

5.6          Obligation to Supply

 

(a)		ACSD shall use best efforts to accept and fill each order for Product submitted by Cubist including orders that exceed the Purchase Forecast by [*], provided that such request is delivered to ACSD [*] days prior to [*]. ACSD shall not be in breach of this Section 5.6 if ACSD’s failure to supply Product is due to a Force Majeure event or if ACSD’s failure is limited to [*]. Delivery dates will be set independently from Product release and invoice dates as described in Section 5.7;
(b)		If ACSD is unable to supply the Product ordered by Cubist in accordance with the terms of this Agreement, then ACSD shall [*], and any such [*]. If ACSD is unable to [*] days after its initial failure to supply, then ACSD shall consult with Cubist and the parties shall work together to remedy the problem. In such an event, Cubist may, at its option, and upon notice to ACSD:
		(i)		[*] and/or

 

*Confidential Treatment Requested. Omitted portions filed with the Commission.

 

 

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		(ii)		in the event that the parties agree that Cubist will [*];
(c)		In order to minimize adverse consequences from any interruption in ACSD’s ability to supply Cubist with Product, ACSD shall maintain a back-up supply of raw materials sufficient to support Cubist’s forecasted production needs for a period of [*] months following any failure of ACSD to timely supply Cubist with Product. The costs of purchasing and maintaining this back-up supply of raw materials will be borne by [*]. Upon removal of any units of raw materials from the back-up supply, [*]*, in accordance with cGMP First-To-Expire-First-Out rules, so that an adequate back-up supply is maintained at all times. The parties shall confer [*] to review their aggregate requirements for raw material and will adjust the size of the back-up supply of raw materials in order to maintain at least [*] month supply of raw material [*] shall also increase the size of the back-up supply from time to time as warranted by commercially prudent risk management practices.

 

5.7          Product Warehousing and Payment Schedule

 

Storage of Product after release by ACSD will be the responsibility of [*] for a quantity amounting to the greater of [*] supply or [*] of Product as [*]. Delivery of Product to finish/fill organizations will be scheduled and mutually agreed upon by Cubist and ACSD. Cubist will be invoiced at the time [*]. The payment for released Product that is warehoused at ACSD or contract freezer warehouse facilities will follow promptly behind the invoicing of material that is ready for shipment provided that a Certificate of Analysis is sent to Cubist, and such Certificate of Analysis is reviewed and accepted by Cubist. In addition, a batch payment becomes due upon review and approval of the Batch Record and batch Certificate of Analysis by Cubist.

 

5.8          Third Party Supply

 

If Cubist notifies ACSD that Cubist will obtain the Product through a third party [*] then Cubist may purchase Product from a [*]. Cubist may continue to exercise [*] and substantiates such claim to Cubist’s reasonable satisfaction. [*], Cubist shall commence purchasing Product from ACSD, provided that:

 

(a)		Cubist shall [*] and
(b)		ACSD shall [*].

 

6.0          TERMS OF SALE

 

6.1          Product Price

 

(a)		Subject to the provisions of Sections 5, 6 and 7, Cubist will purchase Product from ACSD at a price of [*];
(b)		Subject to [*], Cubist and ACSD agree to re-evaluate the cost structure of Product manufacturing [*] days after the [*] anniversary of the Facility