DEVELOPMENT AND SUPPLY AGREEMENT WITH ABBOTT LABOR

Exhibit 10.39

 

ZYMOGENETICS, INC.

DEVELOPMENT AND SUPPLY AGREEMENT

 

This Agreement is entered into this 1 ^st day of October, 2003 (“Effective Date”) by and between Abbott Laboratories, an Illinois corporation having a principal place of business at 100 Abbott Park Road, Abbott Park, Illinois 60064-3500 (“Abbott”), and ZymoGenetics, Inc. having a principal place of business at 1201 Eastlake Avenue East in Seattle WA, 98102 (“ZymoGenetics”).

 

WHEREAS, ZymoGenetics is the owner of certain technology and patent rights regarding the compound rhThrombin (“Thrombin”), which is used as a drug for blood coagulation for applications in such areas as surgery;

 

WHEREAS, ZymoGenetics will file for approval with the United States Food and Drug Administration (and its foreign equivalents), a Biologics License Application (BLA) (and its foreign equivalents), for certain formulations containing Bulk Drug Substance, as defined below;

 

WHEREAS, ZymoGenetics has certain process information relating to the synthesis of Bulk Drug Substance and desires to have Abbott evaluate such information and to scale-up and adapt the current manufacturing process for the preparation of Bulk Drug Substance at Abbott facilities;

 

WHEREAS, Abbott possesses process engineering capabilities and operates process development facilities, which include small scale bulk drug substance laboratories and pilot plants, as well as large scale facilities for the manufacture of commercial quantities of certain bulk drug substances;

 

WHEREAS, Abbott desires to evaluate ZymoGenetics’ process information and scale-up and adapt the current manufacturing process for the preparation of Bulk Drug Substance at Abbott facilities; and

 

WHEREAS, Abbott desires to manufacture for ZymoGenetics, developmental, clinical and commercial quantities of Bulk Drug Substance, and ZymoGenetics desires to purchase from Abbott such quantities, all subject to the terms and conditions of this Agreement.

 

WHEREAS, the Parties entered into a [ * ] to begin technology transfer and payments directly related to manufacture of Bulk Drug Substance and the Project and which Purchase Order shall be terminated on an even date with the Effective Date of this Agreement.

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the Parties hereto agree as follows:

 

1.	Definitions

 

As used in this Agreement, the following words and phrases shall have the following meanings:

 

1.1 “Abbott Know-How” means all proprietary non-patented technical data, drawings, documentation, analytical and regulatory information and other information, including all improvements thereto, not included in Abbott Patent Rights, as defined below, [ * ] as developed by Abbott for ZymoGenetics during the Project that is either (a) owned by Abbott, or Abbott’s Affiliates, or licensed to Abbott, with the right to sublicense, as of the Effective Date, (b) generated by Abbott during the term of this Agreement, or (c) acquired by Abbott (other than from or on behalf of ZymoGenetics) during the term of this Agreement.

 

1.2 “Abbott Patent Rights” means United States and foreign patents and patent applications, including divisions, continuations, continuations-in-part, additions, renewals, extensions, re-examinations and reissues of all such patents and patent applications, all as are owned by Abbott, or Abbott’s Affiliates, or licensed by Abbott, with the right to sublicense, and to which ZymoGenetics would need a license in order to practice the manufacturing and/or process development operations relating to the manufacture of Bulk Drug Substance as developed by Abbott for ZymoGenetics during the Project.

 

1.3 “Affiliate” of a party hereto means any entity that controls, is controlled by, or is under common control with such party. For purposes of this definition, a party shall be deemed to control another entity if it owns or controls, directly or indirectly, [ * ] of the voting equity of the other entity (or other comparable ownership interest for an entity other than a corporation).

 

1.4 “Assumptions” means as such term is defined in Exhibits C and D.

 

1.5 “BLA” means the Biologics License Application (or its foreign equivalent) filed with the FDA (or foreign Regulatory Authority), seeking authorization to market Product in the United States (or applicable foreign country within the Territory).

 

1.6 “Bulk Drug Substance” means the bulk form of Thrombin, as more fully described in Exhibits A and B, manufactured in accordance with this Agreement and meeting the Bulk Drug Substance Specifications.

 

1.7 “Bulk Drug Substance Specifications” means the written specifications for Bulk Drug Substance set forth in Exhibit B as modified from time to time pursuant to Section 7.5.

 

1.8 “cGMP” means the FDA’s current good manufacturing practices, as specified in the Code of Federal Regulations and FDA’s guidance documents, and all successor regulations and guidance documents thereto, as well as the comparable practices, regulations and documents of any other comparable Regulatory Authorities.

 

1.9 “CMC” means the Chemistry, Manufacturing and Controls section of the BLA.

 

1.10 “Confidential Information” means all information, including, but not limited to, ZymoGenetics Know-How and Abbott Know-How disclosed pursuant to this Agreement inwriting (or all information disclosed orally, visually and/or in another intangible form which is

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

summarized in writing as to its general content within thirty (30) days after original disclosure and identified as being confidential), except any portion thereof that:

 

(a) is already known to the recipient upon receipt, as evidenced by its written records;

 

(b) is disclosed to the recipient without restriction after acceptance of this Agreement by a Third Party who has the right to make such disclosure; or

 

(c) is independently developed by or for the recipient without reliance on the Confidential Information, as evidenced by its written records; or

 

(d) becomes available to the general public without fault of the recipient.

 

1.11 “Contract Year” shall mean [ * ] A Contract Year shall end upon the termination of this Agreement regardless of the actual calendar date.

 

1.12 “Dedicated Equipment” means as such term is defined in Section 8.8.

 

1.13 “EMEA” shall mean the European Agency for the Evaluation of Medical Products, or any successor entity thereto.

 

1.14 “FDA” means the United States Food and Drug Administration, or any successor entity thereto.

 

1.15 “Fully Burdened Manufacturing Cost” means the sum of the following costs to the extent allocable to the manufacture of Bulk Drug Substance: [ * ], that the allocation of the foregoing costs shall be made to generally reflect the costs incurred during [ * ], and would not include any costs associated with [ * ]. Fully Burdened Manufacturing Cost shall be calculatedin a manner consistent with Generally Accepted Accounting Principles consistently applied.

 

1.16 “ICH” shall mean the International Convention on Harmonisation and any successor agreements and/or amendments thereto.

 

1.17 “Incurred Fees” means as such term is defined in Section 12.6.

 

1.18 “Launch Date” means the date on which the first commercial sale of Product is made in the Territory by ZymoGenetics or its designee.

 

1.19 “Liability” means as such term is defined in Section 14.1.

 

1.20 “Maximum [ * ] Capacity” means [ * ] Bulk Drug Substance per calendar of each Contract.

 

1.21 “Minimum Purchase Obligation” means as such term is defined [ * ]

 

1.22 “Product” means any pharmaceutical product containing Bulk Drug Substance as its active ingredient.

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

1.23 “Project” means a multi-stage (each a “Stage”) project to adapt and further develop ZymoGenetics’ current process for the manufacture of Bulk Drug Substance to Abbott’s manufacturing facility and develop such process to commercial scale so as to manufacture Bulk Drug Substance in compliance with this Agreement, as set forth in Exhibit C.

 

1.24 “Reassignment Costs” means as such term is defined [ * ]

 

1.25 “Regulatory Authority(ies)” means the FDA, the EMEA, or any comparable national or territorial regulatory entity within the Territory.

 

1.26 “Regulatory Filings” means the governmental filings required to obtain approval to market Product in a given country within the Territory, including, but not limited to, Product registration(s) and marketing approval(s), as applicable, in each such country.

 

1.27 “Research and Development Fee” means as such term is defined in Section 5.1.

 

1.28 “Termination Cap” means [ * ].

 

1.29 “Territory” means the world.

 

1.30 “Third Party” or Third Parties” means any person(s) or entity(ies), as applicable, other than Abbott or ZymoGenetics or any of their employees or agents.

 

1.31 “ZymoGenetics Know-How” means all proprietary non-patented technical data, drawings, documentation, analytical and regulatory information and other information, including all improvements thereto, not included in ZymoGenetics Patent Rights, as defined below, relating to the manufacture, use or sale of Bulk Drug Substance that is either (a) owned by ZymoGenetics (or ZymoGenetics’ Affiliates), or licensed to ZymoGenetics, with the right to sublicense, as of the Effective Date, (b) generated by ZymoGenetics during the term of this Agreement, or (c) acquired by ZymoGenetics (other than from or on behalf of Abbott) during the term of this Agreement.

 

1.32 “ZymoGenetics Patent Rights” means the United States (listed on Exhibit G) and foreign patents and patent applications, including divisions, continuations, continuations-in-part, additions, renewals, extensions, re-examinations and reissues of all such patents and patent applications, all as are owned by ZymoGenetics (or ZymoGenetics’ Affiliates), or licensed to ZymoGenetics, with the right to sublicense, claiming Bulk Drug Substance, or to which Abbott would need a license or sublicense in order to make Bulk Drug Substance.

 

2.	Bulk Drug Substance Development Project

 

2.1 The Project . Following the Effective Date and according to the timelines set forth in Exhibit C, Abbott shall undertake the Project. The Project shall consist of research and development activities described in the Project in accordance with Exhibit C. Abbott shall perform its research and development activities hereunder pursuant to the terms of this Agreement and the Project; provided, however, ZymoGenetics understands that, because the Project involves research from which the results are inherently uncertain, Abbott does not make any [ * ] or [ * ] of any kind that the Project will result in a commercially-viable process.

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

2.2 Project Stages . At the completion of each Project Stage, except in the event that this Agreement is otherwise terminated as permitted herein, the Parties shall mutually agree whether to (i) proceed with the Project or (ii) conduct further development work under the then current Stage in addition to those activities described in the Project for the then current Stage. In the event, that the Parties cannot agree on (i) or (ii) above, the Parties shall organize representatives with technical and executive decision making authority, to meet in good faith and attempt to mutually agree on either (i) or (ii) above, or some alternative course of action, prior to entering ADR as outlined in Section 18.2.

 

2.3 [ * ] -Manufacturing Facility [ * ]. Abbott shall -[ * ] requirements, and ZymoGenetics shall agree to pay for [ * ], on the date prior to the initiation of [ * ], based on the then current Project schedule, as may be revised by the Parties (the “[ * ]”). The [ * ] -rate shall be-[ * ] per month for the [ * ] to fulfill [ * ] -obligations (the [ * ] Rate”); provided, however, that the aggregate [ * ] -to complete [ * ], which shall be agreed to by the Parties in writing prior to [ * ] shall not exceed [ * ] -provided further, however, ZymoGenetics shall be relieved of its obligation to pay such portion of the-[ * ] based on the time period for such [ * ]) for each period of time that-[ * ] necessary components, equipment or materials, except to the extent [ * ]. Once any such capacity [ * ] occurs, and the initiation date for [ * ] -has passed, Abbott shall begin to invoice ZymoGenetics monthly according to the Payment Schedule in Exhibit C, regardless of the status of this Agreement (except if the Agreement is terminated pursuant to Section 12.3 or due to Abbott’s breach pursuant to Section 12.4) or the development and manufacturing activities performed therein. In the event that ZymoGenetics [ * ] and Abbott is able to fill such-[ * ] Abbott shall provide ZymoGenetics with a [ * ]-(as elected by ZymoGenetics) in [ * ] Once Abbott commences the manufacture of validation runs of the Bulk Drug Substance, if any such run fails to conform to the Bulk Drug Substance Specifications, Abbott shall [ * ] cost as soon as reasonably possible (but in no event later than [ * ] from the foregoing failure) in order to meet regulatory requirements to validate the manufacturing process.

 

3.	Abbott’s Research and Development Activities

 

3.1 Abbott’s Activities . One of the objectives of the Project shall be for Abbott to develop and manufacture Bulk Drug Substance and to support ZymoGenetics’ Regulatory Filings as appropriate, however, ZymoGenetics shall be responsible forthe preparation and filing of Regulatory filings, and all communications with Regulatory Authorities, with respect to the Bulk Drug Substance. Abbott shall conduct and perform according to the work-plan set forth in Exhibit C as may be amended from time to time by the Parties to achieve such objectives, including, but not limited to, the following:

 

a.

Sourcing raw materials for use in manufacturing Bulk Drug Substance, with the price of such materials included in the price of the Project, excluding the [ * ]

 

b.

Performing pilot scale evaluation of ZymoGenetics’ manufacturing process;

 

c.

Adapting ZymoGenetics’ manufacturing process to Abbott’s equipment and systems. In no event, without ZymoGenetics’ prior written approval and the Parties’ written agreement on licensing terms, will Abbott incorporate any proprietary procedures or processes (whether or not patented and including, without limitation, any Abbott Invention) into the manufacturing process that

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

would require ZymoGenetics’ to obtain a license (from Abbott or any Third Party) in order to practice such manufacture of any Bulk Drug Substance. In the event Abbott incorporates any such proprietary procedures or processes without first obtaining ZymoGenetics’ written consent, Abbott hereby grants to ZymoGenetics a royalty-free, irrevocable, worldwide, nonexclusive license (or sublicense, if applicable) (with the right to sublicense) to practice the proprietary procedures or processes;

 

d.

Developing [ * ] to manufacture Bulk Drug Substance in Abbott’s manufacturing facility;

 

e.

Preparing suitable manufacturing process documentation, including instructions and manufacturing controls for inclusion in Regulatory Filings;

 

f.

Provide the Bulk Drug Substance information directly to ZymoGenetics in support of Regulatory Filings, and assisting ZymoGenetics in responding to questions from Regulatory Authorities concerning the manufacture of Bulk Drug Substance;

 

g.

Conducting material contact and cleaning validation studies, engineering and validation runs, process validation studies, and preparing process justification and validation summary reports, in a mutually agreed upon timely manner, to meet pre-approval and other appropriate inspection requirements of the Regulatory Authorities and to support approval of the manufacture of the Bulk Drug Substance in the Abbott manufacturing facility;

 

h.

Permitting ZymoGenetics to conduct all necessary cGMP and quality assurance reviews of Abbott documentation, including review and receipt of copies of Abbott manufacturing work orders;

 

i.

Permitting ZymoGenetics to access Abbott’s manufacturing data relating to Bulk Drug Substance;

 

j.

Providing ZymoGenetics with acceptable environmental impact statements, if required, for inclusion with Regulatory Filings;

 

k.

Providing ZymoGenetics with appropriate pilot and commercial scale batch record manufacturing documentation for Regulatory Filings;

 

l.

Conducting [ * ] on Bulk Drug Substance as defined in Exhibit C;

 

m.

Preparation for and administration of the pre-approval inspection (and any other necessary inspections) by the Regulatory Authorities; and

 

n.

Subject to Section 2.1, manufacturing development supplies, clinical supplies, stability supplies and process validation batches of Bulk Drug Substance in accordance with current cGMP’s and pursuant to protocols to which the Parties shall mutually agree.

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

4.	ZymoGenetics’ Research and Development Activities

 

4.1 ZymoGenetics’ Activities . ZymoGenetics shall assist Abbott in completing the Project, including, but not limited to ZymoGenetics’ responsibility for the following:

 

a.

Providing Abbott with applicable analytical methods validated to Abbott’s standards for raw materials which standards shall reasonably comport with industry standards, in-process tests and manufacture of Bulk Drug Substance and all available reference materials;

 

b.

Providing Abbott with technical data on Bulk Drug Substance that includes, but is not limited to, the following: (i) material safety data sheets with environmental and safety information, and (ii) additional detailed data, if necessary, to define potential hazards and establish employee exposure levels;

 

c.

Obtaining and providing Abbott with copies of Regulatory Filings as necessary for Abbott to obtain regulatory approval of the pre-approval inspection; and

 

d.

Maintaining a stability program for, and retaining samples of, the marketed Bulk Drug Substance.

 

5.	Payment for Abbott’s Development Efforts

 

5.1 Research and Development Fee . To reimburse Abbott for its participation in the Project in compliance with the activities described therein and in, this Agreement, and in accordance with the Delivery and Payment Schedule set forth in Exhibit C, ZymoGenetics shall pay Abbott a [ * ] (except as set forth in Section 12.6(f)) research and development fee (“Research and Development Fee”), which fee in the aggregate upon completion of the Project may be less than or equal to, but shall not exceed, [ * ], unless revisions occur in the Project scope in accordance with the terms of this Article 5. The Parties understand and agree that the Research and Development Fee is composed of, in part, by the Reservation Rate described in Section 2.3. The Research and Development Fee, shall be paid to Abbott as outlined in the Delivery and Payment Schedule identified in the Project (Exhibit C). Any such modifications agreed upon by the Parties to the scope of the Project shall be incorporated into the Payment Schedule by a written agreement between ZymoGenetics and Abbott.

 

5.2 Changes in Project Scope . If changes occur in the Project or Bulk Drug Substance Specifications, or if technical difficulties require that Abbott perform either additional work or repeat work, and provided such work is unrelated to Abbott’s fault or negligence, in advance of incorporating such changes or performing any work associated therewith, Abbott shall consult with ZymoGenetics and thereafter provide ZymoGenetics with a new or revised written test protocol with cost estimates for such work. If ZymoGenetics approves such costs and protocols, Abbott shall perform such work and ZymoGenetics shall pay Abbott’s costs for such work in the manner and at the time as agreed upon by the Parties in conjunction with the approval of the work.

 

5.3 Additional Filing Costs . ZymoGenetics shall reimburse Abbott for Abbott’s direct costs paid to any Third Party (excluding Affiliates of Abbott, unless otherwise agreed upon by the

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

Parties), which are subject in each case to written pre-approval by ZymoGenetics, associated with any filings with Regulatory Authorities including but not limited to the filing of a CMC or CMC amendment, in support of ZymoGenetics’ Regulatory Filings with respect to Bulk Drug Substance. ZymoGenetics also shall reimburse Abbott for Abbott’s direct costs or those reasonable costs paid to any Third Party (excluding Affiliates of Abbott, unless otherwise agreed upon by the Parties), which are subject in each case to written pre-approval by ZymoGenetics, for any work requested by ZymoGenetics to produce and assemble documentation for Bulk Drug Substance registrations outside the United States.

 

6.	Pilot Scale and Clinical Supplies

 

6.1 Pilot Scale Supplies . Subject to Section 2.1, as part of completing the Project, Abbott shall manufacture and provide to ZymoGenetics samples that result from up to (as determined by ZymoGenetics) [ * ] pilot scale lots of Bulk Drug Substance.

 

6.2 Registration/Validation Supplies . Subject to Section 2.1, as part of completing the Project, Abbott shall manufacture and provide to ZymoGenetics Bulk Drug Substance supplies that result from approximately [ * ] runs that are scheduled for engineering runs and BLA registration/validation, with the last three runs to be characterized as final “Registration Batches” which will be suitable for commercial distribution and that Abbott warrants in accordance with Section 13.2. ZymoGenetics shall promptly notify Abbott of any alteration of the clinical schedule and Bulk Drug Substance amount.

 

6.3 Revisions to Schedule . No revisions may be made to the pilot scale and clinical development schedule unless mutually agreed upon in writing by ZymoGenetics and Abbott. The Parties shall mutually agree to the revision of a change in costs associated with such agreed upon adjustment to such schedule.

 

6.4 No Warranties . Notwithstanding any terms or conditions to the contrary contained herein, including, without limitation Section 13.2, Abbott makes no warranties, express or implied, with respect to Bulk Drug Substance produced for pilot scale supplies in accordance with this Section 6.4. All warranties, express or implied, including without limitation, the implied warranties of merchantability, fitness for a particular purpose and noninfringement, are hereby disclaimed by Abbott.

 

7.	Manufacture and Commercial Supply of Bulk Drug Substance

 

7.1 Purchase and Sale of Bulk Drug Substance . Abbott shall manufacture and deliver Bulk Drug Substance, in accordance with the terms of this Agreement, [ * ] for the benefit of ZymoGenetics or its designee, and ZymoGenetics shall purchase, in accordance with the terms of this Agreement, its Bulk Drug Substance requirements in the Territory [ * ] from Abbott provided that Abbott is able to supply Bulk Drug Substance in accordance with Article 9. Abbott shall manufacture Bulk Drug Substance in accordance with the Bulk Drug Substance Specifications that the Parties shall mutually develop. The Parties may alter from time to time the Bulk Drug Substance Specifications by mutual written agreement without amending this Agreement in accordance with Section 7.5.

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

7.2 Raw Materials and Components . Abbott shall source all raw materials and components necessary for the manufacture of the Bulk Drug Substance, subject to the limitation on Abbott’s obligation to cover the cost of purchasing PTA as described in Exhibit D (which limitation is based on the cost of the PTA as a cost component of the final manufactured Bulk Drug Substance). Such raw materials and components are included in the price of the Bulk Drug Substance.

 

7.3 Use of Third Parties . Abbott shall not utilize a Third Party to manufacture any portion or all of the Bulk Drug Substance without first obtaining ZymoGenetics’ written consent which consent shall not be unreasonably withheld or delayed. In the event that Abbott is authorized to utilize a Third Party in the manufacture of Bulk Drug Substance, such Third Party shall be approved by Abbott’s Quality Assurance department. Any Third Party contract entered into by Abbott and that Third Party shall contain a provision that allows ZymoGenetics to audit such Third Party’s facilities. Abbott agrees that it shall remain liable for the performance of Abbott’s obligations hereunder in the event that Abbott is authorized to use a Third Party to perform Abbott’s obligations on its behalf.

 

7.4 [ * ]. ZymoGenetics covenants to [ * ] of Bulk Drug Substance for each Contract Year prior to the last to expire of the ZymoGenetics Patent Rights listed on Exhibit G, commencing in the calendar year following the year of the Launch Date. The [ * ] during each such Contract Year shall [ * ] If ZymoGenetics does not purchase th [ * ] during any such Contract Year, then within thirty (30) days after the end of the Contract Year, ZymoGenetics shall pay to Abbott [ * ] from Abbott during the just concluded Contract Year-provided that any failure to [ * ] is not due to [ * ] such quantity of Bulk Drug Substance. Abbott may agree, solely at Abbott’s option, to waive such purchase obligation.

 

7.5 Modification of Bulk Drug Substance Specifications . Abbott shall not implement any modification, material or otherwise, to the Bulk Drug Substance Specifications without ZymoGenetics’ prior written approval. Abbott shall submit to ZymoGenetics a revised price for either the current or future Stage of development during the Project or the Bulk Drug Substance that reflects such cost increase resulting from any of the following events: (i) the Bulk Drug Substance Specifications are modified by ZymoGenetics, (ii) the Bulk Drug Substance Specifications must be modified by requirement of any Regulatory Authority, or (iii) a process change is required as part of the CMC or other applicable governmental application, and such modification or process change increases Abbott’s cost to manufacture Bulk Drug Substance. Abbott and ZymoGenetics shall mutually agree on the cost allocation of such change. In the event the Parties are unable to agree on such cost allocation, Abbott may (i) refuse to implement the change (in which event, ZymoGenetics may terminate this Agreement) or (ii) terminate this Agreement. If such modification results in the requirement to reprocess and/or retest previously manufactured and otherwise acceptable Bulk Drug Substance, any additional costs incurred by Abbott in such reprocessing and/or retesting shall be paid within the longer of: (i) sixty (60) days of the mutual written agreement of the Parties for Abbott to reprocess and/or retest the Bulk Drug Substance; or (ii) thirty (30) days after receipt of the final report of the results of the retest or reprocessing.

 

7.6 Modification of Bulk Drug Substance Process . Abbott shall not make any process changes with respect to the manufacture of the Bulk Drug Substance without prior written permission from ZymoGenetics. Prior to any such change being made, ZymoGenetics shall be

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

responsible for obtaining (a) all necessary regulatory approvals from Regulatory Authorities and (b) to the extent necessary and under terms to be agreed upon in writing by ZymoGenetics, licensure from Abbott or any Third Party in order to practice such process change for the manufacture of Bulk Drug Substance with respect to such modifications.

 

8.	Manufacture of Bulk Drug Substance

 

8.1 Bulk Drug Substance Title and Shipment . Any Bulk Drug Substance manufactured by Abbott pursuant to this Agreement shall be shipped F.O.B. Abbott’s manufacturing facility using [ * ] shipping methods. Title and risk of loss shall pass to ZymoGenetics upon delivery of Bulk Drug Substance to the carrier. Shipment shall be via a carrier designated by ZymoGenetics.

 

8.2 Bulk Drug Substance Storage. ZymoGenetics shall pay Abbott for any Bulk Drug Substance storage costs per manufacturing lot or part thereof (excepting retained samples) incurred by Abbott at ZymoGenetics’ request for storage after the period ending sixty (60) days after release of post Launch Date Bulk Drug Substance, provided that such Bulk Drug Substance was forecasted by ZymoGenetics according to Article 9. Such costs shall be calculated at a rate of [ * ] per month.

 

8.3 Quality Control. Abbott shall apply its quality control procedures and in-plant quality control checks on the manufacture of Bulk Drug Substance for ZymoGenetics in the same manner as Abbott applies such procedures and checks to bulk drug substance of similar nature manufactured for sale by Abbott. In addition, Abbott will test and release Bulk Drug Substance to ZymoGenetics in accordance with the Bulk Drug Substance Specifications described in Exhibit B.

 

8.4 Quality Assurance. Representatives of the Parties’ Quality Assurance departments shall meet to develop and approve a quality agreement (“Quality Agreement”) outlining the responsibilities and key contacts for quality and compliance-related issues. Items to be contained in the Quality Agreement include, but are not limited to recalls, annual product reviews, returned goods, regulatory audits, compliance with cGMP and compliance with such other quality related concerns as are deemed appropriate by the Parties. The Quality Agreement shall be negotiated in good faith by the parties no later than six (6) months prior to Stage IV cGMP manufacturing and, once executed by both parties, shall be incorporated into and made part of this Agreement by this reference. In the event that any terms in the Quality Agreement conflict with any terms contained in this Agreement, the terms of this Agreement shall control.

 

8.5 Audits . ZymoGenetics shall have the right, upon thirty (30) days’ prior written notice to Abbott, and Abbott’s written approval, which approval shall not be unreasonably withheld, to conduct during normal business hours a quality assurance audit and inspection of Abbott’s records and Bulk Drug Substance facilities relating to the manufacture of Bulk Drug Substance and to perform follow-up audits as reasonably necessary. Prior to Abbott commencing the production of the first batch of commercial Bulk Drug Substance as ordered by ZymoGenetics, such audits and inspections may be conducted from time to time on a reasonable basis. Once Abbott has commenced production of the first batch of commercial Bulk Drug Substance, such audits may only be conducted once each calendar year. The duration of such audits shall not exceed three (3) days and such audits shall be performed by no more than two (2)

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

auditors, unless ZymoGenetics reasonably believes that a longer audit or additional personnel are necessary and provides its reasons for such belief to Abbott in writing. If ZymoGenetics wishes to perform audits more often than once per year or over a period in excess of three (3) days, ZymoGenetics shall pay Abbott [ * ] per additional audit day. Notwithstanding the foregoing, in the event that an audit is required by ZymoGenetics due to quality issues that arise, per the terms of 8.6 and/or 9.8 or associated with any ineffective corrective action, as demonstrated by subsequent Bulk Drug Substance lot(s) containing comparable deviations, during any Contract Year, ZymoGenetics shall be entitled to conduct such audit [ * ]. If more than two (2) auditors perform the audit, ZymoGenetics shall pay Abbott [ * ] per additional auditor. In addition, ZymoGenetics licensees shall have the right at any time during the term of this Agreement, upon five (5) business days prior written notice to Abbott, to conduct any audits specifically mandated by any Regulatory Authority or to respond to specific questions from any such Regulatory Authority. Notwithstanding anything to the contrary contained in this Agreement, any audits conducted on Abbott’s property shall be subject to Abbott’s rules and regulations regarding security and confidentiality and shall be conducted in the presence of Abbott’s employees. In addition, Abbott shall promptly provide ZymoGenetics a written response to any such audit report received by Abbott.

 

Visits by ZymoGenetics to Abbott’s Bulk Drug Substance facilities may involve the transfer of Confidential Information, and any such Confidential Information shall be subject to the terms of Article 11 hereof. The results of such audits and inspections shall be considered Confidential Information under Article 11 and shall not be disclosed to Third Parties, including but not limited to any Regulatory Authority, unless required by law and upon prior written notice to Abbott. If ZymoGenetics utilizes auditors that are not employees of ZymoGenetics, each of such auditors shall execute a non-disclosure agreement with confidentiality terms at least as stringent as those set forth herein.

 

Abbott shall be responsible for inspections of its manufacturing facilities by any Regulatory Authorities and shall promptly notify ZymoGenetics if such inspections are directly related to the manufacture of ZymoGenetics’ Bulk Drug Substance or if the results of a non-related inspection could materially impair Abbott’s ability to perform in accordance with this Agreement. With respect to inspections directly related to the manufacture of Bulk Drug Substance, Abbott shall (a) provide ZymoGenetics with copies of all documents, reports or communications received from or given to any Regulatory Authority associated therewith, (b) permit ZymoGenetics’ representatives to be present on site and participate, at Abbott’s discretion, as appropriate, based on questions or requests specific to ZymoGenetics and as permitted by Regulatory Authorities, in such inspections, and (c) allow ZymoGenetics to provide comments to Abbott, and Abbott shall draft any such correspondence to Regulatory Authorities in connection therewith.

 

ZymoGenetics shall promptly notify Abbott regarding any inspection on ZymoGenetics property related to the manufacture of Bulk Drug Substance.

 

8.6 Recalls . Product recalls and contacts with any Regulatory Authorities relating to the recall of Product shall be the responsibility of, and under the control of, ZymoGenetics. In the event that Abbott has reason to believe that any Products should be recalled or withdrawn from distribution, it shall promptly inform ZymoGenetics in writing of such belief.

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

ZymoGenetics shall notify the appropriate Regulatory Authorities of any recall and shall be responsible for coordinating all necessary activities regarding the action taken. Abbott and ZymoGenetics shall fully cooperate to complete the recall, and shall thereafter resolve any allocation of liability as may be appropriate in accordance with the terms of this Agreement. The costs and expenses of conducting any recall shall be treated as follows:

 

(a) If any Product is recalled as a result of the supply by Abbott of Bulk Drug Substance that was not manufactured in compliance with the terms of this Agreement, then Abbott shall reimburse ZymoGenetics for all reasonable expenses actually incurred as a result of such recall. If ZymoGenetics elects to utilize a Third Party to conduct a recall, ZymoGenetics shall notify Abbott of the identity of such Third Party;

 

(b) If each party contributes to the cause for a recall, the expenses actually incurred as a result of such recall will be shared in proportion to each party’s responsibility; and

 

(c) All recalls of Product other than those described in clauses (a) or (b) shall be at ZymoGenetics’ sole expense. ZymoGenetics shall give Abbott prompt written notice of any Product recalls that ZymoGenetics believes were caused or may have been caused by Abbott’s failure to comply with this Agreement.

 

8.7 Payment Terms.

 

(a) Price and Payment . For (a) work performed in conducting the Project in accordance with this Agreement, (b) Deliverables to ZymoGenetics as specified in Exhibit C, and (c) Bulk Drug Substance that is manufactured and delivered in accordance with this Agreement and meets the Bulk Drug Substance Specifications, Abbott shall invoice ZymoGenetics according to the Payment Schedule in Exhibit C and Bulk Drug Pricing in Exhibit D. ZymoGenetics shall make payment of all undisputed amounts net thirty (30) days from the date of receipt of Abbott’s invoice. All payments due under this Agreement shall be paid in U.S. Dollars by wire transfer (ZymoGenetics will endeavor but is not obligated to provide twenty four (24) hours advance notice of each wire transfer to the bank account identified below or such other bank accounts as Abbott shall designate) or by such other means agreed to by the Parties, for value, in each case at the expense of the payor:

 

Account Name:         [ * ]

Account Number:

Bank:

ABA Number:

 

(b) Taxes . Any federal, state, county or municipal sales or use tax, excise, customs charges, duties or similar charge, or any other tax assessment (other than that assessed against income), license, fee or other charge lawfully assessed or charged on the manufacture, sale or transportation of Bulk Drug Substance sold pursuant to this Agreement shall be paid by ZymoGenetics.

 

8.8 Dedicated Equipment. ZymoGenetics shall pay the cost of additional equipment purchased by Abbott (“Dedicated Equipment”), which is required for Abbott to manufacture

 

 

[ * ] designated portions of this document have been omitted pursuant to a request for confidential treatment filed separately with the Commission.

Bulk Drug Substance for ZymoGenetics (subject to the approval conditions stated below). Abbott shall advise ZymoGenetics of any Dedicated Equipment required and the estimated costs associated with the purchase, installation and validation of such Dedicated Equipment. Such DedicatedEquipment shall be used exclusively for manufacturing of Bulk Drug Substance hereunder, unless otherwise permitted in advance by ZymoGenetics in writing. [ * ] Abbott shall bill ZymoGenetics for the reasonable installation and equipment validation costs after Abbott installs the Dedicated Equipment. This Section 8.8 shall not apply to any replacement equipment purchased by Abbott because of obsolescence (technical or otherwise). Dedicated Equipment, as estimated on or around the Effective Date, is outlined in Exhibit F. Any requirements that vary from Exhibit F herein shall be communicated to ZymoGenetics and approved in writing (letter, e-mail or facsimile) by an authorized ZymoGenetics representative prior to the purchase of any such Dedicated Equipment. ZymoGenetics shall own any Dedicated Equipment upon the date it makes full payment to Abbott for said Dedicated Equipment. In the event this Agreement is terminated, Abbott and ZymoGenetics shall in good faith agree on the commercially reasonable procedures and costs related to the return of the Dedicated Equipment to ZymoGenetics. Upon such termination, if Abbott wishes to retain any such Dedicated Equipment, and ZymoGenetics approves of such retention in writing, Abbott shall [ * ] In addition to Exhibit F, Abbott shall submit quarterly to ZymoGenetics, an updated estimate of Dedicated Equipment costs for the entire Project. Abbott shall purchase such Dedicated Equipment and promptly bill ZymoGenetics. Abbott must receive written approval from ZymoGenetics prior to any such purchase if (a) the purchase is for an amount greater than [ * ] of (b) if the aggregate of such purchases during a particular calendar quarter are for an amount greater than [ * ].

 

Title to, and risk of loss of, all Dedicated Equipment shall be retained by ZymoGenetics; provided, however, that Abbott shall be responsible for replacing any ZymoGenetics Owned Dedicated Equipment that is destroyed due to Abbott’s negligence, willful misconduct, unauthorized use or unauthorized use with other products. All Dedicated Equipment shall remain at Abbott’s manufacturing facilities.

 

Abbott shall be responsible for maintaining and servicing the Dedicated Equipment. ZymoGenetics, however, shall be responsible for the cost of non-routine maintenance and servicing of the Dedicated Equipment (such as major repairs and material parts replacement), except to the extent caused by Abbott’s negligence, willful misconduct, unauthorized use or use with other products in which case Abbott shall be responsible. Abbott shall notify ZymoGenetics prior to the performance of any non-routine maintenance or servicing, and ZymoGenetics shall reimburse Abbott at cost for such maintenance or servicing costs that ZymoGenetics has authorized to be incurred and for which it is responsible.

 

9.	Orders and Forecasts

 

9.1 First Year Estimate . ZymoGenetics shall, within [ * ] days after filing its BLA for Bulk Drug Substance, provide Abbott with a written estimate of ZymoGenetics’ monthly requirements of Bulk Drug Substance to be supplied by Abbott for the first Contract Year; provided, however, the Parties acknowledge that most if not all requirements of Bulk Drug Substance for the first Contract Year may be obtained through th