DEVELOPMENT AND MANUFACTURING AGREEMENT

Exhibit 10.16

EXECUTION VERSION

DEVELOPMENT AND MANUFACTURING AGREEMENT

     THIS DEVELOPMENT AND MANUFACTURING AGREEMENT (this “ Agreement ”) is made effective the 27 ^th day of February, 2008, among Cornerstone BioPharma, Inc., a Delaware corporation (“ Company ”), NEOS Therapeutics, L.P., a Texas limited partnership (“ Manufacturer ”) and Coating Place, Inc., a Wisconsin corporation (“ Supplier ”). Manufacturer, Supplier, and Company are sometimes referred to herein individually as a “ Party ” and collectively as the “ Parties .”

RECITALS

      WHEREAS , Manufacturer is in the business of developing, compounding, processing, filling, testing and packaging human pharmaceutical products;

      WHEREAS , Supplier is in the business of supplying Wurster fluid bed coating for encapsulation of solid particulate materials used in the manufacture of human pharmaceutical products and, additionally, owns certain drug resin complex technologies;

      WHEREAS , Company is in the business of research, development, marketing and sales of human pharmaceutical products; and

      WHEREAS , the Parties desire to enter into this Agreement pursuant to which each will contribute its respective expertise and/or technologies with a view towards developing, manufacturing, marketing, and selling a [***] Hydrocodone/[***] suspension [***] (the “ Product ”), subject to obtaining necessary approvals from the United States Food and Drug Administration (“ FDA ”) [***].

      NOW , THEREFORE, in consideration of the premises and the representations, warranties, covenants and agreements set forth hereby and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto have agreed and do hereby agree as follows:

      1. Definitions . In addition to the other terms defined elsewhere herein, the following terms and phrases shall have the following meanings when used in this Agreement.

     [***]

     “ CMC ” means the chemistry, manufacturing and controls section(s) and data in the [***].

     “ Development Work ” means all the activities specified to be performed by Supplier or Manufacturer under this Agreement including without limitation work related to formulation of the Product, developing and documenting the manufacturing process related to the Product, preparing the CMC section of the [***] for the Product, and manufacturing the Product for use in connection with the [***]submission.

     “ DMF ” means, in relation to Supplier’s Drug Resin Complex, the Drug Master File containing all the information on the production and control of the Drug Resin Complex.

     “ Drug Resin Complex ” means the certain drug resin complex technologies that result in products with API ionically bound to an ion resin complex that may be coated for sustained release characteristics, which technologies are the subject of the Supplier Patent Applications (as defined in Section 9.9).

     “ FDCA ” means the federal Food, Drug and Cosmetic Act, as amended, and the regulations promulgated thereunder.

     “ GAAP ” means United States generally accepted accounting principles.

     “ GMP ” or “ cGMP ” means the FDA’s current good manufacturing practices, as specified in Title 21, Code of Federal Regulations, Part 210, and applicable FDA guidance documents, as the same shall be amended from time to time.

     “ Laws ” means any and all federal, state, and local laws, rules, Regulations, orders and requirements applicable to the Parties in performance of this Agreement including without limitation the following: the Prescription Drug Marketing Act of 1987, the Federal Food, Drug and Cosmetic Act, the Federal or State Regulatory Authorities (as defined below), and all regulations and other guidance or requirements of the FDA or any equivalent agency.

     “ Manufacturer Adjusted COGs ” means [***], all calculated in accordance with GAAP.

     “ Manufacturing Site ” means Manufacturer’s facilities where the Product formulation and manufacturing process are developed and where Product samples and quantities of Product for commercial sale are manufactured, stored and handled.

     “ Net Profits ” means [***], all calculated in accordance with GAAP.

     “ Supplier Adjusted COGs ” means [***], all calculated in accordance with GAAP.

     “ Territory ” means the United States of America and Canada (upon approval by the Canadian Regulatory Authority), including each of the states, provinces, territories, possessions and protectorates thereof, the District of Columbia, and the Commonwealth of Puerto Rico.

      2. General .

     2.1 Project Overview. Supplier, Manufacturer and Company each specialize in separate and distinct processes needed for successful commercialization of the Product, and each Party wishes to contribute its respective expertise and technologies to further that end. Supplier and Manufacturer shall license their respective intellectual property necessary to manufacture and commercialize the Product. Supplier shall supply Manufacturer with the Drug Resin Complex for manufacture of Product. Manufacturer shall develop, formulate, test and package the Product for delivery to Company. Company shall prepare and prosecute any applicable FDA approvals and, upon approval, shall market, sell and distribute the Product in the Territory. In turn, as more specifically set forth in this Agreement, each Party shall share equally in the Net Profits.

     2.2 Federal or State Regulatory Authorities; Regulations. The Parties are regulated by the FDA, the U.S. Drug Enforcement Administration (DEA), the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration (OSHA), the Federal Trade Commission (FTC), as well as other federal agencies and ancillary state authorities (hereinafter referred to individually and collectively as “ Federal or State Regulatory Authorities ”). The Parties further acknowledge that each of these Federal or State Regulatory Authorities has the authority to impose restrictions on their operations that could result in the commercial infeasibility of the objectives of this Agreement. Such restrictions may be the result of statutory or regulatory change, changes in non-regulatory guidances and policies issued by such Federal or State Regulatory Authorities, or enforcement actions, all of which are outside of their control. The regulatory environment under which the Parties operate, including current statutory and regulatory requirements, guidances, and policies, as well as any changes to such statutory and regulatory requirements, guidances, and policies promulgated or otherwise made effective after the date of execution of this Agreement are hereinafter referred to as the “ Regulations .” Each of the Parties shall use reasonable efforts to keep all Parties apprised of statutory or regulatory changes, changes in non-regulatory guidances and policies issued by such agencies (i.e., changes to the Regulations) or enforcement actions that could affect the successful achievement of the objectives of this Agreement.

     2.3 Exclusivity/Non-Competition. During the Term of this Agreement, except as otherwise permitted hereunder (e.g., bankruptcy of Manufacturer), Company agrees not to purchase the Product, or any composition that directly competes with the Product, from any person or entity other than Manufacturer or to designate any other person or entity as a manufacturer of the Product, or any composition that competes with the Product, in supplemental filings with the FDA. During the Term of this Agreement, Manufacturer agrees not to (and not to assist any other person or entity to) develop, formulate, manufacture or supply the Product to any other person or entity, and, except as otherwise permitted hereunder (e.g., bankruptcy of Supplier), agrees not to purchase the Drug Resin Complex from any person or entity other than Supplier. During the Term of this Agreement, Supplier agrees not to supply (or to license any

other person or entity to supply) the Drug Resin Complex related to the Product to any other person or entity.

      3. Formulation and Manufacturing Process Development .

     3.1 Manufacturer’s Site. Manufacturer shall, at its expense, establish the Manufacturing Site as an FDA certified and approved GMP facility by the date specified in the Product Development Plan (as defined below) and promptly shall provide Company with a copy of the written GMP facility approval it receives from the FDA. The Parties acknowledge that Manufacturer is in the process of GMP recertification by the FDA and that it expects such approval prior to commencing the clinical [***] study. However, in the event that Manufacturer has not achieved GMP recertification from the FDA during the development phase, Manufacturer shall provide sufficient technology transfer and personnel to Supplier to transfer the development and manufacture of Product to Supplier’s facility or a third-party facility as agreed by the Parties, such approval not to be unreasonably withheld. If, pursuant to the preceding sentence, Supplier assumes Manufacturer’s manufacturing responsibility, then Supplier shall assume the rights and obligations of Manufacturer under this Agreement with respect to the manufacture of the Product.

     3.2 Product Development Plan. The Parties agree to jointly develop a plan of action and milestones to perform the Development Work (the “ Product Development Plan ”), which will be negotiated in good faith, duly executed by the Parties, and attached hereto as Exhibit A to this Agreement. All development activities shall be performed by Manufacturer in compliance with all applicable Laws. Manufacturer and Supplier shall use commercially reasonable efforts to complete the development of the Product in a timely fashion consistent with the Product Development Plan, and keep Company informed of the progress and status of the development activities. Upon successful completion of the Development Work, the Parties’ mutually agreed specifications for the Product (the “ Specifications ”) will be attached hereto as Exhibit B . Except as set forth in Section 3.4, fees for the development activities for the Product shall be as provided in the Product Development Plan. Supplier shall invoice Manufacturer, and Manufacturer shall invoice Company, for each of its completed steps of the Product Development Plan monthly. Invoices shall contain details regarding the steps completed and the amount being charged for such completed work. Payments of invoices shall be in accordance with Section 7.5(a).

     3.3 CMC. Manufacturer shall, in consultation with Company’s development staff, prepare and provide regulatory data and documentation and draft CMC respecting the manufacture of the Product, all in compliance with applicable Regulations. Company shall critically review and provide corrections to the CMC section in a timely fashion. Manufacturer shall use commercially reasonable efforts to be prepared for any FDA pre-approval inspection of the Manufacturing Site. Manufacturer shall cooperate with Company to respond to any FDA information requests relating to the CMC section that may arise during the [***] submission, Federal or State Authorities Regulatory review and approval processes and, upon Company’s reasonable request, will provide other assistance related to obtaining [***] approval.

     3.4 Retesting; Manufacturer Adjusted COGs; Supplier Adjusted COGs. Company acknowledges and agrees that, because this is a development project, Manufacturer and Supplier may need to repeat certain steps in connection with each FDA approval if testing indicates that additional work is necessary or if additional work is requested by the FDA. In addition, Company acknowledges and agrees that additional work may be required by the FDA after its inspection or review of the documents filed with the FDA. Manufacturer and Supplier will attempt to minimize any deviations from the Product Development Plan; however, if additional steps or work are determined to be necessary by Manufacturer or Supplier or the FDA to be necessary, Manufacturer or Supplier shall inform Company of the nature, extent and expected costs associated with such additional steps or work and Company and Manufacturer or Supplier, as the case may be, shall negotiate in good faith to amend the Product Development Plan to provide for same.

     3.5 Project Coordination. During the development phase, at least one representative of each Party will participate in one weekly telephone conference and one quarterly face-to-face conference at a mutually agreeable location to review, coordinate, and discuss issues and progress regarding Product development. For the avoidance of doubt, such representatives shall have no authority to amend or waive compliance with the terms and conditions of this Agreement, to resolve differences of opinion between the Parties regarding the interpretation of this Agreement or to approve actions of the Parties that are inconsistent with this Agreement.

      4. Manufacture of the Product .

     4.1 General. Following approval [***] by the FDA, and during the Term of this Agreement, Manufacturer agrees to manufacture and supply the Product, the Product of which shall conform to the Specifications, Regulations, and cGMPs. Manufacturer or Supplier shall notify Company if there is any issue with time lines and delivery of Product under this Agreement. The Specifications may be amended from time to time by written agreement of the Parties without the necessity of amending this Agreement.

     4.2 Testing and Documentation. Promptly following each manufacturing run, Manufacturer shall (a) test each lot of finished Product in accordance with Parties’ agreed upon written Product Specifications; and (b) certify within a commercially reasonable period of lot release that: (i) each lot of finished Product shall conform with all Regulations of all applicable Federal or State Regulatory Authorities, (ii) each lot was produced and tested in accordance with the Specifications, (iii) each lot is in compliance with cGMP requirements and other applicable documents including the [***] and DMF for Product, and (iv) each lot complies with any other regulatory documents that contain procedures agreed upon in writing between the Parties. Manufacturer shall retain all relevant records pertaining thereto as may be required by GMP and other applicable Laws.

     4.3 Acceptance of Lots. Company shall have a period of thirty (30) days following receipt of samples and completed batch records for a Product lot from Manufacturer to notify Manufacturer that the Product lot is rejected. Rejection of the Product shall be based on: (a) non-

conformance to Specifications; (b) adulteration or misbranding within the meaning of the FCDA, or (c) Product not having been prepared under compliance with cGMP or other applicable Laws. Along with rejection, Company shall provide an accompanying report of analysis (including the Product sample and lot number from the lot analyzed) conducted in accordance with the testing protocols in the Product Specifications set forth in the [***]. If no such notice of rejection of non-conforming Product is received by Manufacturer in accordance with the procedure and time frame described herein, Company shall be deemed to have accepted such delivery of Product.

     4.4 Remedies for Rejection of a Lot. Manufacturer shall cooperate in good faith to resolve the rejection of a lot. Within thirty (30) days from Manufacturer’s receipt of notice of rejection, Manufacturer shall notify Company whether or not it accepts the basis for Company’s rejection. If Manufacturer’s and Company’s testing data disagrees, each of Manufacturer and Company hereby agree to submit a sample of the rejected Product to a mutually agreed upon third-party laboratory for testing in accordance with the Product Specifications. The fees and expenses for such laboratory testing shall be borne equally by the Parties if the Product is found to be non-conforming and otherwise by Company. Upon rejection of Product, Manufacturer shall use commercially reasonable best efforts to replace such rejected Products.

     5.  Supply of Drug Resin Complex and Materials for Commercial Supply .

     5.1 Drug Resin Complex.

          (a) Following approval [***] by the FDA, and during the Term of this Agreement, Supplier agrees to supply Drug Resin Complex to Manufacturer with all quantities needed to produce Product in any Firm Zone (as defined below) from time to time, which Drug Resin Complex shall conform to and be supplied in accordance with the DMF, Laws, and cGMPs. Supplier shall notify both Manufacturer and Company, if there is any issue with time lines and delivery of Drug Resin Complex to support quantities in any Firm Zone.

          (b) Supplier shall (i) test each lot of Drug Resin Complex in accordance with the Specifications; and (ii) certify that: (A) each lot of Drug Resin Complex shall conform with all Laws, (B) each lot was produced and tested in accordance with the Specifications, (C) each lot is in compliance with cGMP requirements and other applicable documents including the [***] and DMF for Product, and (D) each lot complies with any other regulatory documents that contain procedures agreed upon in writing between the Parties. Supplier shall retain all relevant records pertaining thereto as may be required by GMP and other applicable Laws.

     5.2 Materials. Manufacturer shall source all bulk materials, active ingredients or inactive ingredients and other manufacturing and test materials (other than Drug Resin Complex) in order to manufacture Product in accordance with the Specifications, such items to be in accordance with the United States Pharmacopeia (“ USP ”) and other Laws. Manufacturer shall perform all testing of such Drug Resin Complex required by the applicable Specifications. Supplier shall similarly source all materials needed by it for production of Drug Resin Product.

      6. Regulatory Filings .

     6.1 Filing Fees. Company shall be solely responsible for all costs and expenses directly related to filings required by the FDA, with the exception of the Pharmaceutical Development Utility Fee Act (“ PDUFA ”) fees, which shall be shared equally by the Parties. Upon written demand by Company, each of Manufacturer and Supplier shall within thirty (30) days reimburse Company for its share of the PDUFA fees.

     6.2 Designation as Manufacturer. Manufacturer shall be responsible for providing all documentation necessary for Company to designate Manufacturer as the manufacturer and supplier of the Product [***]. Manufacturer shall be available for any required FDA inspections of its facility or its documentation. Manufacturer shall have no obligation to manufacture the Product unless and until Manufacturer has successfully been designated and approved as a manufacturer [***].

     6.3 [***] DMF References. Supplier shall be responsible for preparing and filing the DMF for the Drug Resin Complex at its sole expense. Supplier promptly thereafter shall issue a letter to FDA Drug Master File Staff granting the Company reference authorization to its DMF for the Drug Resin Complex used in the manufacture of the Product.

     6.4 [***] Submission. After Manufacturer successfully completes the development and manufacture of samples of Product, Company shall have [***] studies performed [***]. Company will, at its sole and exclusive expense, arrange and pay for the performance of the studies that are necessary, if such studies are successful, to satisfy the requirements of the FDA [***] (including contracting with, at its sole and exclusive expense, the contract research organization(s) (“ CRO ”) and approving the protocols and contracts for applicable [***] studies [***]), and subject to successful completion of those studies, for preparing and submitting to the FDA [***] to obtain regulatory approval for the Product. Company shall use commercially reasonable efforts to receive regulatory approval for the Product within [***] after Company submits [***] for the Product to the FDA.

     6.5 Remedial Actions. If the [***] study for the Product fails or if [***] the Product is rejected by the FDA, the Parties will investigate the reasons why the [***] study for the Product failed or Company’s [***] was rejected by the FDA, and the Parties will discuss the results of the investigation and the additional research and development work they believe is necessary for the Product and the anticipated costs to perform the additional research and development work and to have the additional study or studies performed. If Company decides to proceed with such additional work and/or studies, then Manufacturer and Supplier will perform at Company’s request such additional research and development work for the Product, and Company will pay Manufacturer and Supplier for such additional work Manufacturer and Supplier perform for Company based on a new Product Development Plan.

      7. Price; Sales .

     7.1 Compensation. Compensation for Parties shall be as follows: (a) Two Hundred Fifty Thousand Dollars ($250,000) to be paid by Company to Manufacturer upon execution of

this Agreement, (b) Two Hundred Fifty Thousand Dollars ($250,000) to be paid by Company to Supplier upon execution of this Agreement, and (c) after Product is launched, the Parties shall share Net Profits in equal parts.

     7.2 Cost Determination. [***]

     7.3 Selling Price Determination. Selling price, changes in selling price, or pricing strategy related to selling price shall be determined by the Company in its sole discretion (a) following a consultation with Supplier and Manufacturer and (b) using a commercially reasonable methodology.

     7.4 Production Forecasts.

          (a) Manufacturer shall use commercially reasonable efforts to manufacture and supply sufficient quantities of the Product to fulfill Company’s anticipated requirements as indicated by actual purchase orders submitted by Company from time to time during the Term; provided, that Manufacturer shall have at least three (3) months after receipt of a purchase order to deliver the Product and that Company shall have continued to provide Manufacturer three (3) months in advance with a noncancellable, firm three (3) month purchase order (the “ Firm Zone ”) and a non-binding rolling six (6) month forecast of anticipated orders outside the Firm Zone. In the event that the Company at any time fails to provide the Manufacturer with such purchase order and/or forecast, the Manufacturer shall have no obligation to produce any quantities of Products in excess of the quantities set forth in the last non-binding forecast received by Manufacturer from the Company.

          (b) From time to time, due to significant unforeseen circumstances, Company may deliver to Manufacturer a Purchase Order for Product volumes in excess of those specified in any forecast. In the event that Company delivers a purchase order requesting that Manufacturer provide Product volumes in excess of the last non-binding forecast received by Manufacturer from the Company, Manufacturer shall use commercially reasonable efforts to provide Company with such excess Product volumes.

          (c) Promptly following Manufacturer’s receipt of each purchase order and rolling forecast, Manufacturer shall place counterpart purchase orders and non-binding forecasts with Supplier regarding its requirements for Drug Resin Complex.

     7.5 Invoicing; Payments; Audit.

          (a) Supplier and Manufacturer will render invoices in connection with their shipments of Drug Resin Complex and Product hereunder, which invoices shall be due and payable by Manufacturer or Company as the case may be within thirty (30) days after receipt.

          (b) After Product is launched, a third of Net Profits shall be paid by Company to Supplier and a third of the Net Profits shall be paid by Company to Manufacturer, which payments shall be accompanied by a report detailing the calculation of such Net Profits and paid within thirty (30) days after the end of (i) each of the first six (6) full calendar months following commercial launch, and (ii) each calendar quarter thereafter.

          (c) In determining the direct costs that any of the Parties attributes to the Product (“ Product Direct Costs ”) for purposes of calculating Manufacturer Adjusted COGS, Supplier Adjusted COGS or Net Profits, as the case may be, the Parties shall not include any costs or expenses to the extent arising out of or relating to (i) any contract or agreement entered into prior to the date of this Agreement, or (ii) any event or occurrence happening prior to the date of this Agreement.

          (d) In the event of a dispute regarding Product Direct Costs, the Parties shall attempt to resolve the discrepancy in good faith by providing such financial information as may be required, which information shall be Confidential Information under Section 10. If the Parties are unable to resolve the dispute informally, each of the Parties shall have the right, at its own expense and at any reasonable time or times, to cause a third party independent auditor not engaged on a contingency basis and approved by the audited Party (not to be unreasonably withheld) to inspect and audit the books and records of the other Party solely to verify Product Direct Costs attributed to their respective contribution for a period of two (2) years from and after the period in which such Product Direct Costs were incurred; provided, however, that once Product Direct Costs have been audited with respect to any period, such Product Direct Costs for such period shall not again be subject to audit. Any such audit (i) shall be conducted after reasonable prior notice, during normal business hours and at the location(s) where such books and records are normally kept and (ii) may not be conducted more than once in any given twelve (12) month period. The auditor shall only report to the Parties the amount, if any, of any correction (each a “ Correction Amount ”) and shall not disclose to the Parties either the detailed or underlying information supporting such conclusion or any of such auditor’s work papers. The results of the Audit shall be Confidential Information, shall be shared concurrently with all the Pa