[***]CERTAIN 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.
Exhibit 10.7
COMMERCIAL SUPPLY AND LICENSE
AGREEMENT
This COMMERCIAL SUPPLY AND LICENSE
AGREEMENT (this “Agreement”), is entered into as of
day of January, 2007
(“Effective Date”) by and between
NeurogesX Inc., a California
corporation with its principal place of business at San Carlos
Business Park, 981F Industrial Road, San Carlos, CA 94070, USA
(“NeurogesX”)
and
LTS Lohmann Therapie-Systeme AG, a
company existing under the laws of Germany and having its head
office at Lohmannstraße 2, D-56626 Andernach, Germany
(“LTS”).
Each of NeurogesX and LTS shall be a
“Party,” and together shall be referred to as the
“Parties.”
RECITALS
WHEREAS, NeurogesX and LTS have
previously entered into a Memorandum of Understanding dated
May 29, 2001 (“MOU”) and a Clinical Supply,
Development and License Agreement dated January 15, 2004
(“Clinical Supply Agreement”), pursuant to which the
Parties cooperated on the development of a Patch (as defined below)
and LTS supplied Patches to NeurogesX for clinical trial
purposes;
WHEREAS, NeurogesX is in the process
of seeking Marketing Approval (as herein defined) for and desires
to commercialize the Patch, by itself or with its
Sublicensees;
WHEREAS, LTS is in the business of,
and possesses the knowledge, technology, expertise and capacity,
for manufacturing commercial supplies of transdermal products,
including, but not limited to the Patch; and
WHEREAS, NeurogesX desires to engage
LTS to exclusively manufacture and supply NeurogesX’s
requirements for the Patch, and LTS desires to exclusively
manufacture and supply such requirements for NeurogesX, in
accordance with the terms and conditions of this
Agreement.
NOW THEREFORE, in consideration of
the mutual agreements and covenants herein contained and intending
to be legally bound thereby, NeurogesX and LTS agree as
follows:
AGREEMENT
ARTICLE 1
DEFINITIONS
As used herein, the following terms
will have the meanings set forth below:
1.1 “Active Ingredient”
means the active pharmaceutical ingredient capsaicin meeting the
Specifications therefor. The specifications for the Active
Ingredient as of the Effective Date are attached as Exhibit D
hereto.
1.2 “Affiliates” of an
entity means the other entities that control, are under common
control or are controlled by the subject entity. For purposes of
this definition, an entity shall be regarded as in control of
another entity if it owns or controls fifty percent (50%) or
more of the shares of the subject entity entitled to vote in the
election of directors (or, in the case of an entity that is not a
corporation, for the election of the corresponding managing
authority).
1.3 “Batch Size” means
the quantity of Patches produced from a [***] production run as
established in accordance with Section 2.4(a).
1.4 “Blocking Patent”
means an issued patent or similar intellectual property right
(e.g., utility model) of a third party, not licensed to either
Party, which would in the reasonable opinion of a Party’s
counsel be infringed by (a) the manufacture or sale of the
Patch by the Parties in accordance with the terms of this
Agreement, or (b) any or all uses of the Patch, in a
particular jurisdiction.
1.5 “Calendar Quarter”
shall mean the calendar quarters of the year beginning first of
January, April, July and October.
1.6 “Commercialization
Patents” means patents anywhere in the world owned or
Controlled by LTS covering or claiming any subject matter which is
incorporated into, or utilized as part of the operation of, the
Patches, any method of use of the Patches, or otherwise which is
necessary for the sale, distribution, marketing and/or
commercialization of the Patches supplied to NeurogesX hereunder,
including but not limited to the patents listed in Exhibit
H.
1.7 “Control” means,
with respect to any patent or other intellectual property right,
the possession at any time during the term of this Agreement of the
right or power of a Party to grant licenses under such patent or
other intellectual property right within the scope set forth herein
without violating the terms of any of such Party’s agreements
with non-Affiliate third parties.
1.8 “Current GMP,” or
“cGMP” means then current Good Manufacturing Practices
promulgated by the United States Food & Drug
Administration (FDA) and its counterpart governmental agencies in
the Territory outside the United States, in the form of laws,
regulations or guidance documents, including those practices and
standards set forth in Current Good Manufacturing Practice
Regulations of the US Code of Federal Regulations Title 21 (21 CFR
§§210 and 211) in relation to the production of
pharmaceutical products and those practices and standards provided
for (as amended from time to time) in the European Community
Directive 91/356/EEC, as interpreted by the ICH Harmonized
Tripartite Guideline, and any arrangements, additions or
clarifications agreed from time to time between the
Parties.
1.9 “Defect” or
“Defective” when applied to Patches means the failure
of such Patches to meet the warranty set forth in
Section 8.2.
1.10 “Ex Works” shall
have the meaning as set forth in the Incoterms 2000.
1.11 “Facility” means
LTS’ cGMP manufacturing facility for the Patches located at
[***]. In the event the Parties qualify a second source for the
Patches pursuant to Section 4.5 below, then the term
“Facility” shall also mean LTS’ cGMP
manufacturing facility for such second source.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-2-
1.12 “Field” has the
meaning as set forth in Section 6.3.
1.13 “Kit” means the
commercial product form sold by NeurogesX, its Affiliates or
Sublicensees of which the Patch(es) is a component.
1.14 “Launch Team” has
the meaning as set forth in Section 4.1.
1.15 “Manufacturing
Cost” shall mean the [***], in each case incurred by LTS
during and allocable to the manufacture of Patches hereunder, and
[***] incurred by LTS in implementing new GMP requirements
requested by NeurogesX hereunder, which are not otherwise paid for
or reimbursed by NeurogesX, all calculated in accordance with
Generally Accepted Accounting Principles in the United States
(“GAAP”) or its equivalent in Germany.
1.16 “Marketing
Approval” means all approvals, registrations or
authorizations of any federal, state or local regulatory agency,
department, bureau or other governmental entity, necessary for the
manufacturing, use, storage, import, transport and sale of Patches
in a regulatory jurisdiction.
1.17 “Maximum Capacity”
means NeurogesX’s forecast of the maximum quantities of
Patches that NeurogesX may require be supplied from LTS by
NeurogesX, its Affiliates or Sublicensees, per year of the term of
this Agreement, as set forth on Exhibit G hereto. Such forecast may
be amended from time to time in accordance with
Section 3.4(d). It is understood that the Maximum Capacity is
not a commitment by NeurogesX to purchase such amounts from LTS
hereunder
1.18 “Net Sales” means
the [***] sold by NeurogesX, its Affiliates or Sublicensees to a
non-Affiliate third party in bona-fide, arms-length transactions,
after deducting (to the extent actually incurred and to the extent
not already deducted in the amount invoiced) (a) [***]
determined in accordance with GAAP (as defined in
Section 1.15), consistently applied.
If mutually agreed in writing by the
Parties, some or all such items may be [***] and subsequently
adjusted. The Parties agree that items (b) and (f) above
may be [***] and subsequently adjusted as part of customary
practice in accordance with GAAP. If a Kit is sold for
consideration other than solely cash, the value of such other
consideration attributable to the sale of the Kit shall be included
in calculating Net Sales. In the event Kit is sold among NeurogesX
and its Affiliates or Sublicensees for resale, Net Sales shall
include the amounts invoiced by such entities to third parties on
the resale, but not the amounts invoiced among such entities prior
to the resale. Net Sales shall not include any sales of Kits as
[***] NeurogesX, its Affiliates or Sublicensees.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-3-
1.19 “Patch” or
“Patches” means the TTS containing the Active
Ingredient developed by the Parties under the MOU and the Clinical
Supply Agreement.
1.20 “Patch Regulatory
Information” means any and all information in the possession
of LTS relating to the Patches, as reasonably necessary for
NeurogesX’s, its Affiliates’ and Sublicensees’
efforts to file for, obtain or maintain Marketing Approvals for the
Patch in any regulatory jurisdiction, including without limitation
(a) such information as is required for the Chemistry,
Manufacturing and Controls (CMC) section of an Investigational New
Drug application (IND) or New Drug Application (NDA) for the
Patches, (b) all data regarding stability, storage conditions
and shelf life of Patches, and (c) all data reasonably
required to qualify a manufacturing facility for the Patches under
Regulatory Requirements or demonstrate compliance with
cGMP.
1.21 “Quality Assurance
Agreement” means the then-current quality assurance
procedures as mutually agreed upon by the Parties in writing. The
template of Quality Assurance Agreement as of the Effective Date is
attached as Exhibit E. The Parties agree that the commercial supply
of Patches by LTS hereunder is subject to the Parties entering into
a Quality Assurance Agreement, which the Parties shall use good
faith efforts to conclude at least three (3) months prior to
the first delivery of Patches by LTS hereunder. Thereafter, the
Parties shall update the Quality Assurance Agreement from time to
time to reflect best practice at such time.
1.22 “Raw Materials”
means the Active Ingredient, excipients, components, labels,
primary packaging material and shipping containers, necessary for
the manufacturing, processing and primary packaging of the Patch as
set forth in the master batch record for the Patch.
1.23 “Reasonable Commercial
Efforts” of a Party means [***].
1.24 “Regulatory
Requirements” means all laws, regulations and other legal
requirements applicable to the manufacture of Patches or components
thereof, including without limitation cGMP, FDA regulations, ICH
guidelines, any applicable local laws and regulations in the place
of manufacture, storage and handling, and any requirements set
forth in any IND, NDA, applications for Marketing Approval and
other regulatory filings or approvals for the Patches in the
Territory.
1.25 “Specifications”
means the specifications for the Patch (including the components
thereof) as set forth in the Marketing Approval for the Patch, as
amended, clarified or supplemented from time to time upon mutual
agreement of the Parties in writing. The Specifications for the
Patch as of the Effective Date is attached as Exhibit C. For
clarity, in the event there are different Specifications set forth
in the Marketing Approvals for different countries, the applicable
Specifications shall be as set forth in the Marketing Approval for
the country identified by NeurogesX or its designee on the purchase
order for the Patch.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-4-
1.26 “Sublicensees”
means a non-Affiliate third party to whom NeurogesX has granted
(i) the right to market and sell Patches purchased from LTS
under this Agreement, provided that such third party has [***]
responsibility for and has the right to [***] the marketing and
promotion of such Patches in its distribution territory and the
right to [***] of such Patches for its own account, or
(ii) the right to make (to the extent NeurogesX has the right
to do so pursuant to Section 6.4 below) and sell a Patch, with
respect to Patches that are manufactured and then sold by such
third party pursuant to the license set forth in Section 6.4
below. For the [***], wholesalers, distributors or specialty
distributors, but shall include [***] of NeurogesX for the
Patches
1.27 “Territory” means
the [***]. In addition, the Territory may be extended by NeurogesX
to include additional countries and/or regulatory jurisdictions in
accordance with Section 3.4(c) below.
1.28 “Transfer Price”
has the meaning as set forth in Section 5.1 below.
1.29 “TTS” means
transdermal therapeutic patches, including but not limited to
liquid reservoir patches, microreservoir patches, monolithic layer
patches, or other patch products for delivering drugs
topically.
1.30 “VR1-Ligand” means
any compound that bind to the vanilloid receptor subtype 1, as
further described in Exhibit B. The Parties may amend Exhibit B
from time to time upon mutual written agreement.
ARTICLE 2
SUPPLY OF PATCHES
2.1 Supply of NeurogesX’s
Requirements.
(a) Commercial Requirements. Subject
to the terms and conditions of this Agreement, LTS shall
manufacture and supply NeurogesX with all of NeurogesX’s
commercial requirements for Patches worldwide up to the Maximum
Capacity for each year, and shall use [***] to manufacture and
supply NeurogesX with any of NeurogesX’s commercial
requirements exceeding the Maximum Capacity for each year. Subject
to the terms and conditions of this Agreement, NeurogesX shall
purchase all of its commercial requirements for Patches worldwide
from LTS.
(b) Sublicensees. To the extent
NeurogesX authorizes a Sublicensee to purchase directly from LTS,
LTS agrees to supply the commercial requirements for Patches of
such Sublicensee subject to the Maximum Capacity in accordance with
this Agreement, in the manner authorized by NeurogesX.
(c) Clinical Supplies. NeurogesX and
its designees may continue to purchase units of Patches for
clinical trial purposes under the Clinical Supply Agreement,
provided that such units shall be designated as clinical supplies
at the time of order. Unless otherwise designated, all
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-5-
orders for Patches submitted by NeurogesX and
its designees after the First Forecast provided under
Section 2.2 below shall be deemed orders for Patches under
this Agreement. To the extent LTS becomes aware that any Raw
Materials or works-in-progress procured or made under this
Agreement may be used to reduce the cost or price of units of
Patches ordered under the Clinical Supply Agreement, LTS shall
notify NeurogesX and the Parties shall negotiate in good faith to
so use such Raw Materials and works-in-progress and correspondingly
reduce the price to NeurogesX of such units under the Clinical
Supply Agreement. It is understood that this Section 2.1(c) is
not intended to prevent NeurogesX from using any supplies of
Patches in its inventory that may have been purchased under this
Agreement, for clinical trial purposes, provided however, that
NeurogesX shall act in accordance with all applicable laws and
regulations.
2.2 First Forecast NeurogesX will
provide LTS with a written forecast of the number of Patches which
will be required to be delivered during the first year following
the first projected delivery hereunder (the “First
Forecast”), at least [***] prior to the beginning of the
Calendar Quarter in which the first delivery of Patches by LTS is
projected to occur. This First Forecast shall contain an estimate
of the number of Patches required to be delivered, on a monthly
basis, for such Calendar Quarter and the [***] three
(3) Calendar Quarters. It is understood that only the first
Calendar Quarter of the First Forecast shall be binding on the
Parties, and the subsequent Calendar Quarters in the First Forecast
shall be non-binding for both Parties. NeurogesX agrees that the
first Calendar Quarter in the first Rolling Forecast (as defined
below) shall specify the same quantities as specified in the first
Calendar Quarter in the First Forecast.
2.3 Rolling Forecast. Each
subsequent written forecast (each a “Rolling Forecast”)
shall update the prior forecast, and will be provided by NeurogesX
[***] prior to the beginning of each Calendar Quarter in which
Patches are required to be delivered. Each Rolling Forecast shall
include an estimate of requirements on a monthly basis for such
Calendar Quarter and the [***] three (3) Calendar Quarters, so
that estimates for a rolling one (1) year period are always
provided. The Parties agree that only the first Calendar Quarter in
each Rolling Forecast shall be binding on the Parties, as set forth
in Section 2.4 below (quantities set forth in such first
Calendar Quarter, the “Binding Quantities”). The
quantities forecasted for subsequent Calendar Quarters in such
forecasts shall be non-binding for both Parties
2.4 Purchase Orders.
(a) Orders. NeurogesX shall place
orders for quantities of Patches, on a [***] basis, [***] days
before the month in which delivery of such Patches is requested
(the “Delivery Month”). For example, [***]. Each order
shall specify the requested delivery date(s) within the Delivery
Month, the shipping destination(s) and any shipping instructions.
Unless otherwise agreed, the quantities specified in each order
shall be a [***] of the Batch Size. NeurogesX shall ensure that
such orders, aggregated on a Calendar Quarter basis, specify a
quantity of Patches to be delivered in such Calendar Quarter that
is at least [***] of the Binding Quantities for such Calendar
Quarter. The Parties agree to use good faith efforts to establish
the Batch Size by mutual written agreement after manufacture of the
first [***] batches of Product based on actual batch sizes for
production hereunder; provided unfit such time the Batch Size for
purposes of this Agreement shall be deemed to be the Theoretical
Batch Size set forth in Exhibit A.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-6-
(b) Acceptance. LTS shall accept and
fill all orders from NeurogesX for quantities of Product, subject
to the terms and conditions of this Agreement, provided that LTS
shall not be obligated to accept orders to the extent the quantity
for delivery in a particular Calendar Quarter exceeds [***] of the
Binding Quantities for such Calendar Quarter. In addition, the
exact delivery dates within the Delivery Month shall be subject to
acceptance by LTS, which acceptance shall not be unreasonably
withheld. In the event LTS does not accept a delivery date
requested by NeurogesX, the Parties shall mutually agree to a
delivery date which is as close as reasonable to the delivery date
requested by NeurogesX (but not more than [***] weeks before or
after the requested delivery date). Any objection to the delivery
date or the quantities or other aspects of an order must be
submitted by LTS within [***] days of receipt of the order from
NeurogesX, or such order shall be deemed fully accepted. After
acceptance of an order, such order shall be deemed a “Firm
Order,” and the accepted or agreed delivery date, the
“Scheduled Delivery Date”.
(c) Excess Quantities. LTS shall use
[***] to accept and fill orders for any quantities of Patches for
delivery in a Calendar Quarter exceeding [***] of the Binding
Quantities for such Calendar Quarter, on the requested delivery
dates (“Excess Orders”). In the event LTS is unable to
accept or fill any Excess Orders despite using [***], LTS shall
notify NeurogesX as soon as practicable, and such inability shall
not be deemed a material breach of this Agreement entitling
NeurogesX to terminate this Agreement nor a Failure Event under
Section 6.4 below. LTS shall provide NeurogesX a Scheduled
Delivery Date for Excess Orders within [***] days after receiving
an Excess Order.
2.5 Packaging. Patches shall be
shipped packaged in containers in accordance with the Quality
Assurance Agreement, Exhibit E or as otherwise agreed by the
Parties hereto in writing. Each such container shall be
individually labeled with a description of its contents, including
the manufacturer lot number, quantity of Patches, and the date of
manufacture.
2.6 Delivery. Subject to the terms
and conditions of this Agreement, including Section 2.8 below,
LTS shall deliver quantities of Patches [***] on the Scheduled
Delivery Dates. All Patches for delivery will be placed at the
disposal of NeurogesX or its designee at the relevant LTS
manufacturing Facility. Title and risk of loss, delay or damage to
the Patches in transit shall pass to NeurogesX [***]. Unless
NeurogesX requests otherwise, all Patches shall be packed for
shipment and storage fit for the respective way of transportation
and in compliance with any requirements set forth in the Quality
Assurance Agreement. In the event NeurogesX has any special freight
packaging or shipping instructions, it shall notify LTS and LTS
will use [***] to comply with any such instructions. All costs
associated with such instructions shall be borne by [***]. [***]
shall bear all costs of freight, shipping and insurance as well as
indirect taxes, including import, customs, excise and sales taxes
but not income taxes related to the sale and purchase of Patches
hereunder.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-7-
2.7 Refusal to Supply. LTS, after
good faith consultation with NeurogesX for at least [***] days, may
refuse to supply Patches in a particular country, if LTS can
reasonably demonstrate by evidence prepared or corroborated by an
expert (recognized in the industry and having substantial
experience in matters of public safety and toxicollogy) that the
proper sale, distribution and use of the Patch hereunder is likely
to unreasonably endanger the public health.
2.8 Invoicing; Payment. LTS shall
submit an invoice to NeurogesX upon shipment of the Patches ordered
by NeurogesX hereunder. All invoices shall be sent to the address
specified in the purchase order, and each such invoice shall state
the aggregate and unit Transfer Price for Patches in a given
shipment, plus any insurance, taxes or other costs incident to the
purchase or shipment initially paid by LTS but to be borne by
NeurogesX hereunder.
2.9 Late delivery. For purpose of
this Agreement, delivery within [***] business days before or [***]
business days after the Scheduled Delivery Date shall be deemed
meeting such delivery date; provided that it is understood LTS is
only obligated to employ Reasonable Commercial Efforts to meet the
requested delivery dates for Excess Orders. In the event that LTS
does not deliver the ordered Patches within such a seven
(7) business day window (i.e. [***] days before or [***] days
after), then NeurogesX shall, as its sole remedy for LTS being late
with its delivery of Patches within the time periods set forth in
clause (a) and (b) below, have the right to reduce its
payment of the Transfer Price for such Patches by: (a) [***]
if NeurogesX receives the Patches between [***] days and [***] days
after the Scheduled Delivery Date; or (b) [***] if NeurogesX
receives the Patches later than [***] days after the Scheduled
Delivery Date. In the event NeurogesX does not receive the Patches
within [***] days after the Scheduled Delivery Date, then in
addition to reduction of payment of the Transfer Price set forth in
clause (b) above, NeurogesX shall be entitled to deem such
delivery as having been ordered but never made, for purposes of
determining a Failure to Supply under Section 6.4(a) below.
For the purpose of this Section 2.9, a “business
day” shall exclude a weekend day or a public holiday in
Germany or regional legal holiday at the Facility where the Patch
is manufactured and those days where LTS is closed down in the
regular course of business, e.g. between Christmas and New
Year.
2.10 Correct Quantities. In the
event LTS delivers at least [***] of the order and not more than
[***], LTS shall be deemed to have delivered the ordered quantities
of Patches. It is understood that NeurogesX shall however only pay
for the Patches it actually received, but not more than [***] of
the applicable order, and only the actual number of Patches ordered
and received shall be used to determine whether or not LTS has
supplied [***] as the case may be, of the Binding Quantities under
Section 6.4(a)(i)(1) below.
2.11 Letter of Credit. In the event
NeurogesX has not paid the Transfer Price for [***] shipment of
Patches, which payment is not disputed by NeurogesX and is overdue
for [***] or more days, and such failure to pay adds to a total
amount of [***] or more, then upon LTS’ reasonable request,
NeurogesX shall cause to be delivered to LTS a confirmed letter of
credit from an international bank (reasonably acceptable to LTS) at
that point in time to secure its obligations hereunder to pay the
Transfer Price for any subsequent order of Patches, on terms and
conditions reasonable and customary for such arrangements.
NeurogesX shall maintain such letter of credit in effect until it
has paid such outstanding overdue amount for the Transfer
Prices.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-8-
2.12 Cancellation. Subject to the
reimbursement set forth in Sections 2.14(a) and 2.14(b) below, it
is understood and agreed that NeurogesX may cancel an outstanding
order by so notifying LTS in writing, provided LTS receives such
notification at least [***] days prior to the Scheduled Delivery
Date, and provided further that no more than one Firm Order shall
be cancelled by NeurogesX during a consecutive [***] month period
unless otherwise mutually agreed.
2.13 Artwork and Text. The artwork
and text required to be printed on the primary Patch packaging and
reasonably approved by LTS as to technical feasibility shall be
furnished to LTS by NeurogesX or its licensees as soon as
reasonably practicable within [***] months prior to the first
delivery of Patches hereunder, it being understood that LTS shall
not be liable (including but not limited to the remedies foreseen
pursuant to Section 6.4 hereof) for any complications or
delivery failures resulting from delays in the delivery of artwork
and text by NeurogesX (or its designee).
Any change to the artwork and text
of the primary Patch packaging reasonably requested by NeurogesX or
its Sublicensees or required by any regulatory authority shall be
communicated by NeurogesX to LTS in writing together with suitable
samples of the revised artwork or text no later than [***] months
prior to the first delivery of Patches with such new primary Patch
packaging. NeurogesX shall reimburse LTS for any packaging
materials that can no longer be used as a result of any such change
up to a maximum of [***] months inventory of such materials.
Provided that NeurogesX shall communicate such changes in the
artwork and LTS has given its reasonable consent to such changes
with a lead time of not less than [***] days, such changes shall
not affect or modify the lead times for the supplies pursuant to
Section 2.4.
2.14 Raw Materials. All Raw
Materials, other than the Active Ingredient, to be used in the
manufacture of the Patch shall be purchased by [***] at its own
expense. LTS shall be responsible for testing and releasing all
such Raw Materials in accordance with the Specifications, the
Quality Assurance Agreement and all Regulatory
Requirements.
In the event [***] orders or
purchases appropriate quantities of Raw Materials in order to be
able to supply the Patches as forecasted in the most current [***]
month period in the Rolling Forecast, as defined in
Section 2.3, and has paid or has incurred a non-cancelable
commitment to pay for such Raw Materials, and (A) [***]
(i) cancels such orders pursuant to Section 2.12;
(ii) changes the forecasted quantities subject to the terms of
this Agreement; or (iii) does not place orders in the amounts
forecasted in such [***] month forecast; or (B) the
Specifications or the artwork has changed after the Raw Materials
have been purchased or ordered, then:
(a) such Raw Materials and any
works-in-progress may, in a manner to be reasonably agreed between
LTS and NeurogesX, be kept in storage by LTS for future production
of the Patches hereunder, provided that NeurogesX shall reimburse
LTS for all costs and expenses associated with such storage;
or
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-9-
(b) in the event such storage is not
practicable or such Raw Materials become obsolete or unusable due
to one or more of the events specified under (i) –
(iv) above or the Parties do not agree on the manner or
compensation for such storage, NeurogesX shall reimburse LTS for
all documented out-of-pocket costs and expenses incurred by LTS for
such Raw Materials (other than the Active Ingredient) and those
reasonable costs and expenses incurred by LTS to produce the
works-in-progress, which in each case, cannot be used by LTS for
manufacturing Patches and cannot be used by LTS in the manufacture
of products for its other clients. NeurogesX may then, at its
option upon prior written notice to LTS, take ownership of such Raw
Materials and works-in-progress, it being understood that any costs
and expenses for transport shall be borne by [***]. If NeurogesX
does not exercise such option, LTS will destroy such Raw Materials
and works-in-progress, it being understood that NeurogesX shall pay
any reasonable costs and expenses for destroying such Raw Materials
and works-in- progress.
2.15 Active Ingredient.
Notwithstanding anything herein to the contrary, LTS’
obligations to supply Patches hereunder is subject to and
conditioned upon NeurogesX making available to LTS appropriate
quantities of the Active Ingredient. Accordingly, NeurogesX shall
provide LTS with the amounts of the Active Ingredient that LTS
reasonably (on the basis of the then current First Forecast or
Rolling Forecast) notifies NeurogesX (with a lead time of at least
[***] months) that LTS will require to fulfill its supply
obligations hereunder. LTS shall be responsible for conducting only
identity testing of the Active Ingredient. LTS shall use all
quantities of Active Ingredient provided hereunder for the [***]
purpose of producing Patches ordered by NeurogesX
hereunder.
(a) Wastage. LTS agrees to minimize
the wastage of the Active Ingredient involved in the production of
Patch hereunder and to maximize Patch yields, and will regularly
report to and consult with NeurogesX regarding its Active
Ingredient / Patch yields, and its efforts to improve such yields.
Without limiting the foregoing, promptly after [***] months from
the [***] month in which Patches are delivered hereunder, or after
manufacture of at least * full batches of Patches, [***], the
Parties agree to establish a minimum yield level for Active
Ingredient / Patch based on the yield levels during such [***]
month period, or after manufacture of [***] full batches of
Patches, which ever comes later, (the “Minimum Yield
Level”).
(b) Safety Stock. As requested by
NeurogesX from time to time and at NeurogesX’s cost (in
accordance with a budget agreed upon by the Parties in advance),
LTS shall procure and maintain an additional quantity of Active
Ingredient and other Raw Materials as a safety stock for its
production of Patches hereunder (“Safety Stock”)
subject to LTS’ available storage capacity. LTS shall [***]
report to NeurogesX as requested, regarding the expenses incurred
in procuring and maintaining the Safety Stock (documented and
itemized in accordance with the budget), and the levels of
inventory and use of such safety stock. LTS agrees to manage such
levels of inventory and use of the Safety Stock in accordance with
the reasonable requests of NeurogesX, and in any event LTS shall
use the Safety Stock for the sole purpose of producing Patches for
NeurogesX hereunder and shall use [***] to minimize expenses and
wastage. When any unit of Safety Stock purchased at the expense of
NeurogesX (“NeurogesX Stock”) is used in the production
of Patches hereunder, NeurogesX shall receive a credit, in the
amount of the price paid by NeurogesX for such unit of Safety Stock
excluding the Active Ingredient and excluding any storage costs
incurred by LTS with respect thereto, which may be applied against
(i) the Transfer Price for the Patch or (ii) at
NeurogesX’s option, the costs of procuring replacement
NeurogesX Stock.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-10-
(c) Consignment. NeurogesX shall
retain all right, title and interest in the Active Ingredients
provided hereunder and the NeurogesX Stock. The Active Ingredients
and NeurogesX Stock and shall be (i) clearly marked as
property of NeurogesX, (ii) stored under conditions specified
in the Specifications at the Facility, (iii) kept free of any
liens and encumbrances, and (iv) subject to inspection by
NeurogesX at any time during LTS’ business hours upon
reasonable notice to LTS. LTS shall maintain an accurate inventory
of the Active Ingredients and the NeurogesX Stock. NeurogesX shall
keep the Active Ingredient and NeurogesX Safety Stock adequately
insured during storage at LTS. Upon termination or expiration of
this Agreement (or an earlier request of NeurogesX), LTS will
promptly deliver to NeurogesX or NeurogesX’s designee all
quantities of Active Ingredient and NeurogesX Stock [***] LTS
Facility.
2.16 Conflicting Terms and
Conditions. The supply of Patches by LTS to NeurogesX and of Active
Ingredient by NeurogesX to LTS shall be solely in accordance with
the terms and conditions of this Agreement. ANY TERMS OR CONDITIONS
OF ANY PURCHASE ORDER OR ACKNOWLEDGMENT GIVEN OR RECEIVED WHICH ARE
ADDITIONAL TO OR INCONSISTENT WITH THIS AGREEMENT SHALL HAVE NO
EFFECT AND SUCH TERMS AND CONDITIONS ARE HEREBY EXCLUDED AND
REJECTED BY EACH PARTY.
2.17 Delegation to LTS Affiliates.
LTS shall have the right to delegate all or any portion of its
obligations under this Agreement to its Affiliates, provided that
such delegation does not affect any Marketing Approvals filed or
obtained by NeurogesX, its Affiliates or Sublicensees or in case
any Marketing Approval would be affected, NeurogesX has given its
prior written consent. Any such Affiliates shall be bound by all of
the terms and conditions set forth herein as if named as a party
hereto, and LTS shall remain responsible for the performance of
such Affiliates under this Agreement.
ARTICLE 3
QUALITY; REGULATORY
ISSUES
3.1 Quality Assurances. LTS shall
comply with each requirement set forth in the Quality Assurance
Agreement with respect to manufacturing and associated support
functions including storage, handling and delivery of Patches to
NeurogesX and its designees hereunder; provided, however, the
provisions concerning LTS responsibility and liability as set forth
in this Agreement shall [***] any provisions that in the event of a
conflict between the terms in the Quality Assurance Agreement or
any amendment thereof and this Agreement, the terms of this
Agreement shall [***].
3.2 Patch Regulatory Information.
LTS shall provide NeurogesX with Patch Regulatory Information upon
NeurogesX’s request. To the extent that portions of the Patch
Regulatory Information constitute specific LTS’ manufacturing
or patch trade secrets not previously disclosed to NeurogesX and
involving confidential information of LTS’ other customers,
LTS may notify NeurogesX and provide a general description thereof,
and if
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-11-
requested by NeurogesX, LTS may, instead of
providing such parts of the Patch Regulatory Information to
NeurogesX, elect to directly provide such parts of the Patch
Regulatory Information to the applicable regulatory authority in
support of the regulatory filings of NeurogesX and its designees
(and if so elected, will diligently do so), and will grant
NeurogesX and its designees rights to reference such filings made
by LTS. Except as set forth in this Section 3.2 or otherwise
required by law, LTS shall not correspond directly with the FDA or
other health regulatory agencies relating to the process of
obtaining Marketing Approvals or any obtained Marketing Approvals
for the Patch, without NeurogesX’s permission. It is
understood and agreed that the license of Section 7.1 of the
Clinical Supply Agreement shall apply with respect to Patch
Regulatory Information disclosed under this Agreement, and that
NeurogesX may disclose any and all Patch Regulatory Information to
regulatory authorities in connection with obtaining and maintaining
Marketing Approval for the Patches worldwide.
3.3 Support of Registration. If
NeurogesX reasonably requests LTS to undertake such activities LTS
shall use its [***] to support NeurogesX’s efforts to obtain
and maintain Marketing Approvals for the Patch, provided, however,
that NeurogesX shall pay for all labor costs of such activities at
the then current man-hour rates of LTS and reimburse LTS for third
party costs incurred with respect thereto, in each case as
requested by NeurogesX.
3.4 Changes.
(a) Specifications. Neither Party
shall make any changes to the Specifications except as mutually
agreed. If such changes result in a material change in the
Manufacturing Cost, the Parties shall agree on an appropriate
adjustment to the Transfer Price of the Product hereunder covering
at least the increased costs]. If such modifications result in a
delay in delivery, the Parties shall negotiate a reasonable
extension of the affected lead times. Notwithstanding the
foregoing, the Parties agree that they shall not withhold approval
for any changes to the Specifications (i) requested by
NeurogesX which are necessary to make them comply with Regulatory
Requirements in any country in which the Patches are being
commercialized by NeurogesX, its Affiliates and/or Sublicensees or
manufactured by LTS, or to address concerns regarding the toxicity,
safety and/or efficacy of the Patch, provided that NeurogesX agrees
to pay LTS for the reasonable, documented, incremental labor and
material costs incurred in connection with implementing such
change, to the extent such costs are not covered by the mechanism
for adjusting the Transfer Price in Section 5.6, or
(ii) requested by LTS as a result of events beyond its
reasonable control (e.g. bankruptcy of its supplier), and such
changes to Specifications as are necessary so that LTS can meet the
Marketing Approval.
(b) Manufacturing Process. Unless
otherwise required by applicable laws or regulations, LTS shall
not, without the prior written consent of NeurogesX, change any
aspect of manufacture, including the facilities, equipment,
processes, vendors, sub-contractors or record keeping procedures,
in any manner (i) which to LTS’ [***] knowledge has the
potential to [***] affect the Patch, including any changes which
may impact its safety or effectiveness, or (ii) which would
delay or otherwise impact any filings for Marketing Approval for
the Patch or would require an affirmative approval of the FDA, or
any other health regulatory authority in the Territory in which the
Patch is being marketed, prior to its implementation. In the event
NeurogesX requests a change or adjustment of any aspect of
manufacture, including
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-12-
the facilities, equipment, processes, vendors,
sub-contractors or record keeping procedures and LTS agrees to
implement such change or adjustment, or if such change or
adjustment is necessary, in case the annual requirements of the
Patch can no longer be supplied according the current manufacturing
process (including but not limited to facilities and equipment),
however subject to the prior written consent of NeurogesX as
foreseen in the preceding sentence, NeurogesX shall pay LTS for the
reasonable, documented, incremental labor and material costs
incurred in connection with implementing such change, to the extent
such costs are not covered by the mechanism for adjusting the
Transfer Price in Section 5.6.
(c) Territory. NeurogesX shall have
the right to elect from time to time to commercialize Patches in
countries or regulatory jurisdictions outside the Territory upon
written notice to LTS, with a reasonable lead time. In the event
NeurogesX’s decision to add any country or regulatory
jurisdiction to the Territory will cause LTS to (i) incur
additional costs, as a result of specific Regulatory Requirements
of such country or regulatory jurisdiction
(“Territory-specific Costs”), and/or (ii) impose
requirements beyond LTS’ standard manufacturing practice, LTS
shall in due time notify and discuss with NeurogesX such costs and
such additional requirements. Upon such mutual agreement of the
Territory-specific Costs and ways of accommodating such additional
requirements, NeurogesX shall have the option to either
(1) modify or limit such addition to the Territory, or
(2) include such countries or regulatory jurisdiction within
the Territory and reimburse LTS for the Territory-specific Costs.
It is understood that LTS shall use [***] to mitigate any
Territory-specific Costs and accommodate such reasonable
requirements.
(d) Maximum Capacity. NeurogesX
shall update the Maximum Capacity - if necessary - to cover the
whole term of the Agreement and shall have the right to elect from
time to time to [***] the Maximum Capacity under this Agreement,
upon written notice to LTS with a reasonable lead time, provided,
however, that any increase of the Maximum Capacity exceeding [***]
Patches per year is subject to LTS prior written agreement, not to
be unreasonably withheld.
3.5 Facility. All Patches supplied
by LTS hereunder shall be manufactured at the Facility. The
Facility (and any other facility that is involved in the
manufacture of Patches by or under authority of LTS) is and shall
continue to be in compliance with cGMP and Regulatory Requirements
and shall be available for governmental inspection if any competent
governmental authority or governmental organization so requests.
LTS shall promptly provide to NeurogesX any cGMP certificate issued
by any such competent governmental authority or
organization.
3.6 Regulatory Issues. LTS will
notify NeurogesX in due time (and no later than [***] days after
LTS obtaining notice thereof) of any inspections, written notice of
findings and/or actions by regulatory agencies or other enforcement
bodies of LTS facilities and/or processes which will directly
affect the Patch or the manufacture thereof. Where reasonably
possible, LTS shall afford NeurogesX the opportunity to be present
at any such inspections. LTS shall consult with NeurogesX in
responding to any such inspections, written notice of findings
and/or actions that directly affect the manufacture of the Patch,
including by providing NeurogesX copies of any responses thereto
for NeurogesX’s review and comment in advance of their
submission to the regulatory agency, and using [***] to incorporate
therein NeurogesX’s comments as appropriate.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-13-
3.7 Audits. NeurogesX, its
Affiliates and its Sublicensees shall have the right to audit LTS,
its Affiliates and any sub-contractors and vendors of LTS with
respect to the Patches, as shall other third parties designated by
NeurogesX and approved by LTS in written form (which approval shall
not be unreasonably withheld) for compliance with this Agreement,
at [***]; provided that to the extent that a particular vendor does
not allow audits by LTS customers, LTS shall use [***] to
(i) receive the consent of its vendor to have such audit
conducted by a third party or (ii) to the extent it has the
right to do so, perform such audit on NeurogesX’s behalf at
NeurogesX’s expense. To the extent LTS is required under the
“Arzneimittelgesetz” (German pharmaceutical law) to
audit the other sub-contractors or vendors of NeurogesX with
respect to the Patches LTS shall have the right to do so at [***],
subject to audit procedures to be reasonably agreed between the
Parties and the particular sub-contractor or vendor.
3.8 Reporting Safety and Toxicity
Problems. Each Party shall promptly advise the other Party of any
safety or toxicity problems of which it becomes aware regarding the
Patches or Raw Materials used in the manufacture of the
Patches.
3.9 Recalls. To the extent
(i) any governmental or regulatory authority issues a request,
directive or order that the Patches be recalled or withdrawn, or
(ii) a court of competent jurisdiction orders a recall or
withdrawal of Patches, or (iii) either Party determines after
consultation with the other Party, that the Patches should be
recalled or withdrawn due to safety issues, the Parties shall
recall or withdraw the Patches as set forth in this
Section 3.9.
(a) Control of Recall Activities. As
between the Parties, NeurogesX shall control and coordinate all
activities, including making all contacts with regulatory
authorities, it deems necessary in connection with such recall or
withdrawal.
(b) Initial Allocation of Recall
Expenses. The Parties shall initially allocate all expenses
(including out-of-pocket expenses) [***] related to the execution
of any recall or withdrawal of the Patches (“Logistic
Costs”) [***] between the Parties, provided that in the case
of Section 3.9(iii) above, if the Parties do not mutually
agree on having the Patches recalled or withdrawn, then the Party
requesting the recall or withdrawal [***], in each case subject to
the final allocation between the Parties as set forth in
Section 3.9(c).
(c) Final Allocation of Recall
Expenses. All Logistic Costs shall be borne by the Party which is
[***]. The responsibility of a Party shall be determined in
accordance with the principles of Article 9. For example, [***].
Notwithstanding the foregoing, LTS’ total liability under
this Section 3.9(c) for Logistic Costs shall be limited to an
amount equal to [***] plus any additional amounts covered by
LTS’ insurance coverage, except in the case of LTS’
gross negligence or willful misconduct. In case of LTS’
[***], LTS’ liability for Logistic Costs shall not be so
limited.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-14-
3.10 Stability Testing. LTS shall
use [***] to perform the stability testing of the Patches as set
forth in Exhibit I; provided that NeurogesX may terminate the
activities under this Section 3.10 at any time by providing at
least [***] days’ prior written notice referencing this
Section 3.10. NeurogesX shall pay for those activities
initiated prior to any termination pursuant to this
Section 3.10, the compensation as set forth in Exhibit I with
respect thereto.
ARTICLE 4
COORDINATION
4.1 Launch Team. Shortly before
NeurogesX provides the First Forecast under Section 2.2 above,
the Parties will form a team (the “Launch Team”) to
facilitate communications and decision making by the Parties
regarding the activities to be carried out pursuant to this
Agreement during the initial phase of commercial supply starting
[***] months prior to first manufacturing of Patches and ending one
year after launch of the Patch. The Launch Team’s
responsibilities shall include, but not be limited to: overseeing
the ramp up to commercial production and addressing manufacturing
or quality problems.
4.2 Composition. The Launch Team
shall consist of [***] representatives from each Party, one of
which shall be a designated project leader for such Party (the
“Project Leader”). Each Party shall provide the other
Party written notice of, and contact information for, its
representatives on the Launch Team. In the event that a member of
the Launch Team resigns, or a Party desires to replace one of its
members, such Party will provide the other Party written notice of
such event and the name of the member’s
replacement
4.3 Meetings. The Launch Team will
conduct formal meetings via teleconference or in person on at least
a quarterly basis until [***] after the first Calendar Quarter in
which Patches were delivered hereunder, and thereafter from time to
time as mutually agreed between the Parties and will issue minutes
of those meetings within [***] days to the management of each
respective company.
4.4 Decisions. All decisions made by
the Launch Team shall be based on the [***] agreement of the
Project Leaders. Each Project Leader shall have the authority to
fully represent the position of his company and the decision of his
company management, except with respect to any aspects of [***]. In
case the Project Leaders do not agree, the [***] of NeurogesX and
LTS or their designees shall try to resolve the dispute.
Notwithstanding the foregoing, no action, inaction, decision or
inability to reach a decision by or of the Launch Team shall vary
the terms and conditions of this Agreement, or the rights and
obligations of the Parties hereunder.
4.5 Qualifying a Second Site. LTS
shall use Reasonable Commercial Efforts to implement
NeurogesX’s requests, if any, to qualify LTS’ GMP
facility in [***] as a second site for the manufacture of Patches
under this Agreement. It is understood that NeurogesX shall pay for
the cost of such qualification; provided that the total cost, along
with any other relevant terms and conditions such as a project
plan, timeline, budget, etc., shall be mutually agreed to in
writing by the Parties in advance. Upon the request of NeurogesX,
the Parties shall negotiate in good faith the total cost and any
other relevant terms and conditions based on the proposal provided
by LTS in its letter to NeurogesX dated [***].
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-15-
ARTICLE 5
PAYMENT
5.1 Transfer Price. NeurogesX shall
pay LTS the price set forth in Exhibit A (the “Transfer
Price”) for each Patch ordered by NeurogesX and delivered by
LTS hereunder. All payments hereunder shall be made in [***], by
direct bank transfer to an account as designated in LTS’
invoice. Such payments shall be made by NeurogesX within [***] days
after the later of (a) receipt of an invoice, or (b) the
end of the Acceptance Period (as defined in Section 8.2(a)
below) for the respective Patches. In addition, in the event
NeurogesX has rejected, in accordance with Section 8.2(a), the
Patches prior to the time payment of the Transfer Price is due and
LTS is required to deliver replacement Patches in accordance with
Section 8.2(b), then the Transfer Price shall not be due until
replacements therefore have been received in accordance with
Section 8.2(b). In the event LTS disagrees that Patches
rejected were Defective, then NeurogesX shall pay [***] of the
Transfer Price until a laboratory has determined whether such
Patches were Defective in accordance with Section 8.2(c). In
case the laboratory determines that Patches were Defective, then
such payment shall be [***]. In case the laboratory determines that
Patches were not Defective, NeurogesX shall immediately pay the
remaining [***] of the Transfer Price. NeurogesX shall pay interest
at an annual rate of [***] above [***] for any payments of Transfer
Price which LTS did not receive on the date payment is due under
this Section 5.1.
5.2 Royalties.
(a) As further consideration for the
supply of Patches and the other rights and licenses granted
hereunder, NeurogesX shall pay LTS royalties at the rate of [***]
on the Net Sales of Kits sold by NeurogesX, its Affiliates or
Sublicensees, containing Patch(es) purchased from LTS under this
Agreement.
(b) Notwithstanding
Section 5.2(a) above, NeurogesX has the option to pay LTS
royalties at the rate of [***] rather than [***] on the Net Sales
of Kits sold by NeurogesX, its Affiliates or Sublicensees,
containing Patch(es) purchased from LTS under this Agreement, in
certain jurisdictions selected by NeurogesX as follows. NeurogesX
shall exercise such option with respect to a jurisdiction within
[***] days after the first commercial sale of a Kit in such
jurisdiction. In the event NeurogesX exercises such option with
respect to a jurisdiction, NeurogesX shall be entitled to a [***]
share of recoveries from an Infringement as set forth in Sections
7.3(a)(ii) and 7.3(b)(ii) below.
(c) For the avoidance of doubt, if
NeurogesX elects to exercise the option set forth in
Section 5.2 (b), the royalty set forth in Section 5.2
(b) shall not be additional to those in Section 5.2 (a),
NeurogesX shall in this case only pay the royalty set forth in
Section 5.2 (b) with respect to the selected
jurisdiction.
***Certain information on this page has been
omitted and filed separately with the Commission. Confidential
treatment has been requested with respect to the omitted
portions.
-16-
5.3 Reporting and
Records.
(a) Reporting. The royalties set
forth in Section 5.2 and Section 6.4 shall be computed
for each applicable [***] ([***]), and shall be due and payable
within [***] days after such [***] period. For purposes of
computing royalties, each Kit will be considered sold when paid
for. NeurogesX shall report to LTS, within [***] days after the end
of each such [***] period during the term of this Agreement, and
thereafter until all dispositions made pursuant to this Agreement
have been accounted for, any and all royalties under
Section&nb
