This COPROMOTION
AGREEMENT (this “Agreement”) dated as of April, 2nd,
2007 by and among Atley Pharmaceuticals, Inc., having a place of
business at 10511 Old Ridge Road, Ashland, VA 23005
(“Atley”), and Cornerstone BioPharma, Inc., a Delaware
corporation (“Cornerstone”), having a place of business
at 2000 Regency Parkway, Cary, NC 27518.
WHEREAS,
Cornerstone develops, distributes, licenses and sells
pharmaceutical products;
WHEREAS, Atley
also develops, distributes, licenses and sells pharmaceutical
products; and
WHEREAS,
Cornerstone has the exclusive rights in the Territory (defined
herein) to promote the Cornerstone Product (also defined herein);
and
WHEREAS, the
parties desire that Atley provide Representatives who will engage
in Detailing (as hereinafter defined) of the Cornerstone Product as
set forth herein.
NOW, THEREFORE, in
consideration of the premises and intending to be legally bound
hereby, the parties hereto agree as follows:
1.1
Definitions . The following terms when used in this
Agreement shall, except where the context otherwise requires, have
the following meanings:
(a)
“Act” means the Federal Food, Drug and Cosmetic Act, as
amended, and the regulations promulgated thereunder from time to
time.
(b)
“Affiliate” means any corporate or non-corporate
business entity which controls, is controlled by, or is under
common control with a party to this Agreement. A corporation or
non-corporate business entity shall be regarded as in control of
another corporation if it owns or directly or indirectly controls
at least fifty percent (50%) of the voting stock of the other
corporation, or (i) in the absence of the ownership of at
least fifty percent (50%) of the voting stock of a corporation or
(ii) in the case of a non-corporate business entity, if it
possesses directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation or
non-corporate business entity, as applicable.
(c)
“Agency” means any governmental regulatory authority in
the Territory responsible for granting approvals for the sale or
maintaining regulatory oversight of the Cornerstone Product,
including, without limitation, the FDA.
[***]
Confidential portions of the exhibit have been omitted and filed
separately with the Securities and Exchange Commission.
(d)
“Applicable Laws” means all applicable statutes,
ordinances, regulations, rules or orders of any kind whatsoever of
any government authority or court of competent jurisdiction,
including, without limitation, the Federal Food, Drug, and Cosmetic
Act (21 U.S.C. §301 et seq. ), PDMA, Generic Drug
Enforcement Act of 1992 (21 U.S.C. § 335a et seq. ) and
Anti-Kickback Statute (42 U.S.C. §1320a-7b et seq. ),
all as amended from time to time.
(e)
“Commission Base Price” means the Wholesale Acquisition
Cost minus royalties, development costs, discounts and rebates,
shipping and transportation costs, samples and other promotional
materials provided to Atley by Cornerstone at Atley’s
request.
(f)
“Cornerstone Product Labeling” means all labels and
other written, printed, or graphic matter upon (i) any
container or wrapper utilized with the Cornerstone Product, or
(ii) any written material accompanying the Cornerstone
Product, including, without limitation, product package inserts,
all of which shall be provided by Cornerstone.
(g)
“Cornerstone Product Promotional Materials” means all
Cornerstone provided written, printed or graphic material,
including Cornerstone Product Labeling, intended for use by
Representatives during a Detail, including visual aids, file cards,
premium items, clinical studies, reprints, drug information updates
and any other promotional support items that Cornerstone deems
necessary to conduct the Program. Cornerstone Product Promotional
Materials shall include FDA-approved indicated uses, safety,
effectiveness, contraindications, side effects, warnings and other
relevant characteristics of the Cornerstone Product.
(h)
“Cornerstone Product” means the pharmaceutical product
known as Balacet 325 (100mg Propoxyphene/ 325 mg APAP).
(i)
“Cornerstone Product Training Materials” means the
items Cornerstone develops and/or provides to Representatives or to
Atley to train Representatives to Detail the Cornerstone Product
under the Program.
(j)
“Detail” shall mean an interactive, face-to-face visit
by a Representative with a Target Physician or his or her Legally
Empowered Designee in the Territory, during which the following may
be discussed: FDA-approved indicated uses, safety, effectiveness,
contraindications, side effects, warnings and other relevant
characteristics of the Cornerstone Product (as defined herein) by
the Representative in a fair and balanced manner consistent with
the requirements of the Act, and using, as necessary or desirable,
the Cornerstone Product Labeling (as defined herein) or the
Cornerstone Product Promotional Materials (as defined herein). When
used as a verb, “Detail” or “Detailing”
shall mean to engage in a Detail as defined in this Section
l.1(j).
(k)
“FDA” means the United States Food and Drug
Administration and any successor agency having substantially the
same functions.
(l)
“Legally Empowered Designee” means (i) a physician
affiliated with a Target Physician or (ii) a nurse
practitioner or physician’s assistant practicing under
the
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supervision and
control of a Target Physician with legal authority to write
pharmaceutical prescriptions.
(m)
“Managers” mean individuals employed by Atley as
Coaches and the Vice President of Sales.
(n)
“PDMA” means the Prescription Drug Marketing Act of
1987, as amended, and the regulations promulgated thereunder from
time to time.
(o)
“Program” means the program of Detailing to be
conducted by the Representatives under the direction and control of
Atley during the term of this Agreement, unless terminated or
extended as provided for herein.
(p)
“Program Personnel” means the Representatives and
Managers.
(q)
“Representative” means an individual hired by or on
behalf of Atley to conduct Details of the Cornerstone Product in
connection with the Program who shall be an employee of and
compensated by Atley, and whose activities in connection with the
Program and Details shall be under the supervision, direction and
control of Atley.
(r)
“Target Physician” means all physicians in the
Territory except physicians who specialize in obstetrics,
gynecology or both.
(s)
“Territory” means zip codes that are assigned to an
Atley Sales Representative, by Atley and approved by Cornerstone
30 days prior to start of a new quarter.
(t)
“Wholesale Acquisition Cost” means the price paid to
Cornerstone by wholesalers to acquire the Cornerstone Product from
Cornerstone.
ARTICLE II
PROGRAM MANAGEMENT; GENERAL SCOPE OF
ACTIVITIES
2.1 Scope of
Activities . The parties shall perform the following activities
as applicable to each in connection with the Program:
(a) Atley
shall maintain a minimum of forty (40) trained full-time
Representatives to Detail the Cornerstone Product to Target
Physicians. Atley shall be solely responsible for all costs
associated with the Program. Atley shall put a high priority on the
Cornerstone Product with Target Physicians and this priority will
be reflected in the sales compensation opportunity that a
Representative and Manager shall have for the Cornerstone Product
when compared to other products that the Representative will be
Detailing. The cost of new Cornerstone Product Promotional
Materials actually used by Atley shall be deducted from amounts
payable to Atley pursuant to Article III, with any remaining
amounts payable by Atley pursuant to this Section 2.1 at
actual cost. Notwithstanding the foregoing, Cornerstone agrees to
contribute to Atley the Cornerstone Promotional Material Inventory
set forth in Exhibit A attached hereto.
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(b) Cornerstone
shall be responsible solely for the cost of development, the
determination of the content, and the method of distribution of the
Cornerstone Product Promotional Materials. In connection with the
Detailing of the Cornerstone Product, the Representatives shall use
only the Cornerstone Product Labeling and the Cornerstone Product
Promotional Materials provided by Cornerstone; and under no
circumstances shall Atley or the Representatives independently
develop, create or use any other promotional material or literature
for the Detailing of the Cornerstone Product.
(c) All
copyright and other intellectual property rights of the Cornerstone
Product Labeling, the Cornerstone Product Training Materials and
the Cornerstone Product Promotional Materials shall remain vested
in Cornerstone.
(d) Atley
shall instruct the Representatives to limit their statements and
claims regarding the Cornerstone Product, including efficacy and
safety, to those that are consistent with the Cornerstone Product
Labeling, the Cornerstone Product Training Materials and the
Cornerstone Product Promotional Materials. The Representatives
shall not add, delete or modify claims of efficacy or safety in the
Detailing of the Cornerstone Product nor make any changes
(including underlining or otherwise highlighting any language or
adding any notes thereto) in the Cornerstone Product Promotional
Materials. The Representatives shall Detail the Cornerstone Product
in adherence to regulatory and professional requirements, and to
all Applicable Laws, including but not limited to the Act and the
American Medical Association Gifts to Physicians from Industry
Guidelines.
(e) The
Representatives shall remain under the direct authority and control
of the Managers and shall cooperate with the representatives of
Cornerstone.
(f) Atley
shall ensure that the Representatives and Managers will be eligible
for a sales compensation plan in connection with the Program. The
sales compensation plan shall be comparable to that of other high
priority products promoted by Representatives. Representatives
shall receive sales compensation equal to [***] percent ([***]%) of
the Commission Base Price for the Cornerstone Product, which is the
same as they would receive for other products Detailed.
2.2 Orders for
the Cornerstone Product . Cornerstone shall be responsible
exclusively for accepting and filling purchase orders, billing, and
returns with respect to the Cornerstone Product. If Atley or the
Representatives receive orders for the Cornerstone Product, they
shall transmit such orders to Cornerstone for acceptance or
rejection, which acceptance or rejection shall be at
Cornerstone’s sole discretion.
[***]
Confidential portions of the exhibit have been omitted and filed
separately with the Securities and Exchange Commission.
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3.1 Amount;
Time of Payment .
(a) Cornerstone
shall pay to Atley a fee for Detailing the Cornerstone Product
during the term of this Agreement as follows:
(i)
Cornerstone shall pay Atley a Detailing fee of [***] percent
([***]%) of Net Profit, subject to offset as provided in
Section 2.1(a), above, and subject to meeting the requirements
set forth in Section 3.1(a)(ii), below. The Detailing fee
shall be paid quarterly within forty five (45) days of the end
of each calendar month. Payment shall be estimated from monthly
NDC, Wolters Kluwer or equivalent data, provided by Cornerstone,
and shall also be based on Cornerstone’s accruals (rather
than actuals) for rebates, chargebacks, credits and allowances
including those for distributor service agreements, and shipping
and transportation costs. Quarterly payments will be reconciled
with quarterly physician-level audit data provided by Cornerstone.
Any adjustments shall be made with (or deducted from) the next
scheduled quarterly payment from Cornerstone. Within ninety (90)
days after the end of each calendar year during the Term,
Cornerstone shall reconcile the accruals for rebates, chargebacks,
credits and allowances including those for distributor service
agreements used in calculating quarterly payments against the
actual amounts of such costs for such year, and provide Atley with
the reconciliation report. Any adjustments shall be made with (or
deducted from) the next scheduled quarterly payment from
Cornerstone. A sample calculation of the Detailing fee is attached
hereto as Exhibit C .
“Eligible
Product” means Cornerstone Product sales resulting from
prescriptions written by Target Physicians. For clarification,
Eligible Product specifically excludes any Cornerstone Product
sales resulting from prescriptions written by persons other than
Target Physicians.
“Gross
Sales” shall be determined exclusively from NDC, Wolters
Kluwer or equivalent data, provided by Cornerstone. Gross Sales
will be calculated by totaling the number of units written by
Target Physicians within the Territory and then dividing the total
units by the standard unit count per bottle and multiplying by the
Average Sales Price for the applicable quarter. Cornerstone will
provide Atley with monthly prescription and unit data on a zip code
basis so that Atley can ensure that Representatives are fairly
compensated.
“Average
Sales Price” means for any calendar quarter, the total
invoiced Cornerstone Product sales divided by the number of units
sold for the calendar quarter in the United States. An example of
the calculation of the Average Sales Price is attached hereto as
Exhibit D .
[***]
Confidential portions of the exhibit have been omitted and filed
separately with the Securities and Exchange Commission.
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“Cost
of Goods Sold” for Cornerstone Product means
Cornerstone’s actual direct cost for the Cornerstone Product.
An example of the calculation of the Cost of Goods Sold is attached
hereto as Exhibit E .
“Net
Profit” means Net Sales of Eligible Product less Cost of
Goods Sold for such Eligible Product, less royalties.
“Net
Sales” means Gross Sales less the following items:
(1) cash discounts and/or quantity discounts actually taken;
(2) actual returns, (3) quantity and other trade
discounts, credits or allowances including those generated as a
result of distributor service agreements actually taken;
(4) actual rebates including bid rebates taken; and (5)
shipping and transportation costs.
(ii)
The foregoing Detailing fee shall be paid by Cornerstone to Atley
for each calendar quarter in which the number of units
(pills) of Eligible Product sold exceeds the Quarterly
Baseline in the “Territory” described in
Exhibit B , attached hereto. The Territory will not be
entitled to a Detailing fee for any quarter in which the number
units (pills) of Eligible Product sold does not exceed the
Quarterly Baseline for that quarter. The Quarterly Baseline will be
based on 1st quarter 2007 total units dispensed in a territory. The
detailing fee payable to Atley will be based on current WAC
starting with the 3rd quarter of 2007 promotion of the Cornerstone
Product. The target for the first quarter of promotion will be
prorated upon Atley’s request, every six (6) months
Cornerstone will review the baseline numbers jointly with Atley. If
the parties, acting in good faith, determine that the Quarterly
Baseline is not attainable using commercially reasonable efforts,
then the Quarterly Baseline will be reduced to an amount that is
attainable using commercially reasonable efforts. If the parties
are unable to agree on a revised Quarterly Baseline, then either
party may terminate the Agreement.
(iii)
If Atley terminates the Agreement pursuant to Section 12.3, or
if Cornerstone terminates this Agreement pursuant to
Section 12.4, or if either party terminates pursuant to the
preceding clause (ii), Cornerstone will pay Atley on a quarterly
basis for six months following termination the average Detailing
fee paid per month, by Cornerstone to Atley during the six months
immediately preceding termination (the “Sunset
Fee”).
(b) All
quarterly payments due hereunder shall be paid by wire transfer to
the account specified in writing by Atley. At the time of payment.
Cornerstone shall issue a written report to Atley showing clearly
in reasonable detail the calculation of Net Sales from Target
Physician Sales and deductions for Cornerstone Product Promotional
Materials used in the Program.
(c) Cornerstone
shall invoice Atley separately at actual cost for all Cornerstone
Product Promotional Materials used in the Program that are in
excess of the amount(s) otherwise payable to Atley pursuant to
Section 3.1(a). Atley shall pay such uncontested invoices in
accordance with Cornerstone’s reasonable instructions within
thirty (30) days of receipt.
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(d) Inspection
Rights. Upon prior written notice and at mutually agreeable times,
Atley shall have the right to inspect all of Cornerstone’s
financial information that is relevant to this Agreement. The
inspections shall be limited to no more than two (2) times
during any calendar year during the Term of this
Agreement.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
ATLEY
4.1 Atley not
Authorized to Bind Cornerstone . Nothing in this Agreement
shall be deemed to authorize Atley to act for, represent, or bind
Cornerstone or any of its Affiliates other than as specifically
provided by this Agreement.
4.2 Other Atley
Activities . Except as specifically set forth herein, nothing
in this Agreement shall in any way restrict or limit the commercial
activities that Atley can undertake during the term of this
Agreement and thereafter.
4.3 Program
. Atley represents and warrants that it employs or will timely
employ a sufficient number of Representatives to Detail the Target
Physicians consistent with Section 2.1(a), and that it will employ
a sufficient number of Managers and an administrative
infrastructure to adequately train and monitor such
Representatives.
4.4 Atley
Corporate Matters . Atley is an entity duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization, with full powers to carry on its business and
activities as currently being conducted. It has the corporate power
and authority to enter into this Agreement and to perform its
obligations hereunder. No other act, approval or proceeding on its
part is or will be required to authorize the execution and delivery
of this Agreement or the consummation of the transaction
contemplated hereby. Its execution and delivery of this Agreement
and its performance of its obligations hereunder (i) do not
conflict with or violate any requirement of applicable laws or
regulations, and (ii) do not conflict with, or constitute a
default under, any contractual or other obligation of
it.
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF
CORNERSTONE
5.1 Training
Materials and Promotional Materials . Cornerstone represents
and warrants to Atley that:
(a) to
the best of its knowledge, the Representatives’ use of the
Cornerstone Product Training Materials or Cornerstone Product
Promotional Materials (as the case may be), and/or their Detailing
of the Cornerstone Product, as contemplated by this Agreement, will
not infringe or misappropriate the intellectual property rights of
any person or entity;
(b) it
has not received, nor been made aware of, any communications
alleging that the Cornerstone Product and/or its use of the
Cornerstone Product Training Materials or Cornerstone Product
Promotional Materials (as the case may be) has infringed
or
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misappropriated
(or that it, or Atley, will infringe or misappropriate in carrying
out this Agreement) the intellectual property rights of any person
or entity;
(c) to
the best of its knowledge, the Cornerstone Product Training
Materials or Cornerstone Product Promotional Materials (as the case
may be) do not violate any Applicable Laws; and
(d) it
has not received, nor been made aware of, any communications from
the FDA alleging that the Cornerstone Product, Cornerstone Product
Training Materials or the Cornerstone Product Promotional Materials
(as the case may be) violate Applicable Laws.
5.2
Litigation . Cornerstone represents and warrants to Atley
that, to the best of its knowledge, as of the date hereof, there is
no litigation, arbitration, government proceeding, or government
investigation involving Cornerstone or a Cornerstone Affiliate or
relating to the Cornerstone Product either pending, or threatened
in writing.
5.3 Cornerstone
Product . Cornerstone represents and warrants to Alley that it
has the right to commercialize the Cornerstone Product in the
Territory and that there are no conditions existing by virtue of a
conflicting contractual relationship or by function of law that
would interfere with Atley’s ability to perform and receive
benefit under this Agreement and that the Cornerstone Product has
been tested and approved for marketing by the Agency in accordance
with all Applicable Laws and regulations.
5.4 Cornerstone
Corporate Matters . Cornerstone is an entity duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its organization, with full powers to carry on its
business and activities as currently being conducted. It has the
corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. No other act, approval or
proceeding on its part is or will be required to authorize the
execution and delivery of this Agreement or the consummation of the
transaction contemplated hereby. Its execution and delivery of this
Agreement and its performance of its obligations hereunder
(i) do not conflict with or violate any requirement of
applicable laws or regulations, and (ii) do not conflict with,
or constitute a default under, any contractual or other obligation
of it.
5.5 Cornerstone
not Authorized to Bind Atley . Nothing in this Agreement shall
be deemed to authorize Cornerstone to act for, represent, or bind
Atley or any of its Affiliates other than as specifically provided
by this Agreement.
5.6 Other Atley
Activities . Except as specifically set forth herein, nothing
in this Agreement shall in any way restrict or limit the commercial
activities that Cornerstone can undertake during the term of this
Agreement and thereafter.
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ARTICLE VI
INDEPENDENCE OF THE PARTIES
6.1 Independent
Contractor . Atley is being retained and shall perform
hereunder strictly as an “independent contractor.”
Employees and Representatives of Atley performing services
hereunder shall not be, and shall not be considered to be,
employees of Cornerstone for any purpose and all Representatives
shall be employees of Atley. Neither party shall have any
responsibility for the hiring, termination, compensation, benefits
or other conditions of employment of the other party’s
employees except as otherwise provided in this
Agreement.
6.2 No Joint
Venture; Non-exclusive . Nothing contained in this Agreement
shall be construed as making the parties joint venturers or, except
as otherwise provided herein, as granting to either party the
authority to bind or contract any obligations in the name of or on
the account of the other party or to make any guarantees or
warranties on behalf of the other party. Nothing in this Agreement
shall restrict Cornerstone from promoting or marketing the
Cornerstone Product in any lawful manner it deems appropriate,
directly or through third parties.
7.1.
Cornerstone Training Program . Atley shall conduct under its
exclusive direction and control home and/or classroom training for
all Representatives and Managers on the Program. Such training
shall include such medical and technical information and
Cornerstone Product Training Materials and Cornerstone Product
Promotional Materials about the Cornerstone Product that shall be
provided by Cornerstone. Cornerstone shall reasonably assist Atley
with such training program and Cornerstone shall provide Atley a
trainer and other pertinent expert for such training
program.
7.2 Continuing
Education . The parties together agree to develop appropriate
action plans to ensure that Representatives are kept continuously
informed of all changes in the Cornerstone Product Promotional
Materials.
ARTICLE VIII
COMMUNICATIONS
8.1
Communications from Third Parties . Atley and its
Representatives shall communicate to Cornerstone all comments,
statements, requests and inquiries of the medical profession or any
other third parties relating to the Cornerstone Product that are
out of the ordinary, of not covered by Cornerstone Product
Labeling, of which Atley becomes aware. All responses to the
medical profession or such other third parties shall be handled
solely by Cornerstone. Atley shall provide reasonable assistance to
Cornerstone to the extent requested by Cornerstone, and at
Cornerstone’s sole cost and expense, to respond fully to such
communications.
8.2 Government
Agencies . All responses to government agencies concerning the
Cornerstone Product shall be the sole responsibility of
Cornerstone. Atley shall assist
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Cornerstone
with respect to communications from government agencies to the
extent requested by Cornerstone, at Cornerstone’s sole cost
and expense. Atley shall use commercially reasonable efforts to
assist Cornerstone to respond fully to such communications and be
able to provide any and all forms, documents and related records to
Cornerstone within seventy-two (72) hours. Atley shall respond to
any governmental agency subpoena directed to it concerning the
Cornerstone Product, and shall be reimbursed by Cornerstone for all
reasonable costs and expenses incurred, including, but not limited
to, reasonable attorneys’ fees.
8.3 Review of
Results . The parties shall meet periodically, but at least
once per calendar quarter (in person or by telephone), to review
and discuss the actual results compared to the marketing plans for
Detailing of the Cornerstone Product. Cornerstone shall share
regularly and promptly with Atley all relevant reports, audits and
other data it develops relative to the Program.
9.1 Atley
Insurance Coverage Required . During the Term of this
Agreement, and with respect to liability hereunder for any post
termination period during which a claim could be asserted against
Atley, up to 5 years after termination, Atley shall maintain
at its sole expense Commercial General Liability insurance with a
combined single limit of $1,000,000, minimum liability of
$1,000,000 for each occurrence, and $1,000,000 in the aggregate.
Such insurance shall be maintained with a responsible carrier and
its terms of coverage shall be evidenced by a certificate of
insurance to be furnished by Atley to Cornerstone within thirty
(30) days of the date of this Agreement. Such certificate of
insurance shall provide that at least thirty (30) days’
written notice shall be given to Cornerstone prior to cancellation
or modification of any of the material terms of coverage of such
policy.
9.2 Cornerstone
Insurance Coverage Required . Cornerstone shall maintain, at
its sole expense, insurance coverage during the term of this
Agreement, and with respect to liability hereunder for any post
termination period during which a claim could be asserted against
Atley, up to 5 years after termination, as follows: Product
liability insurance with respect to the Cornerstone Product with
coverage limits of not less than $5 million per occurrence and
$5 million in the aggregate; and Commercial General Liability
insurance wit
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