Exhibit 10.17
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***
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CERTAIN
CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT (INDICATED BY
ASTERISKS) HAS BEEN OMITTED AND FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR
CONFIDENTIAL TREATMENT UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
200.83 AND 230.406.
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MANUFACTURING AND
SUPPLY AGREEMENT
T HIS M ANUFACTURING AND S UPPLY A GREEMENT is entered into effective as of June 30, 2002
(“ Effective Date ”), by and between
E NHANCED
D ERM T ECHNOLOGIES , I NC ., a
Delaware corporation (“ EDT ”) and
S KIN
M EDICA , I NC ., a
California corporation (“ SM ”). EDT and SM are
each referred to as a “ Party ” to this
Agreement, and collectively as the “ Parties
.”
BACKGROUND
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A.
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SM desires to
use EDT’s facilities, resources and expertise to manufacture
the Product, as defined below.
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B.
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EDT desires to
act as developer and contract manufacturer of the Product in
accordance with the terms and conditions set forth in this
Agreement.
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C.
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EDT desires to
grant to SM an exclusive license to market and sell the Product for
the purpose of the treatment of diseases in the Field in the
Territory, as both terms are defined below.
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NOW, THEREFORE, in consideration of these
premises and the mutual covenants set forth below, EDT and SM agree
as follows:
AGREEMENT
A RTICLE 1
D
EFINITIONS
For the purposes of this Agreement, the
following capitalized terms shall have the following
meanings:
“Acceptance Notice”
shall have the meaning set forth in
Section 14.1 of this Agreement.
“Affiliate” means any corporation or other business entity
controlled by, controlling or under common control with a Party
hereto. For this purpose “control” shall mean direct or
indirect beneficial ownership of fifty percent (50%) or more of the
voting stock, or a fifty percent (50%) or more interest in the
income of, such corporation or other business entity.
“Arbitrator” shall have the meaning set forth in Section
15.2 of this Agreement.
“Certificate of Analysis”
means a summary of the quality
control testing, as described in the Product Specifications,
performed by the Contract Manufacturer for Finished Product
supplied under this Agreement.
“cGMP” means current Good Manufacturing Practices of
the U.S. Food and Drug Administration, as may be amended from time
to time.
“Claim” shall have the meaning set forth in Section
15.2 of this Agreement.
“Commercially Reasonable
Efforts” means the
effort by EDT or SM to deploy, in light of prevailing circumstances
and taking into account obligations and commitments to third
parties, sufficient resources, capital equipment, material and
labor as might reasonably be expected to achieve in an appropriate
time-scale, the benefits which are anticipated to accrue to EDT and
SM from the commercial exploitation of the Products, and if the
Commercially Reasonable Efforts are to be directed to a specific
goal, then that goal.
“Confidential
Information” shall
have the meaning set forth in Section 8.2.1 of this
Agreement.
“Contract Manufacturer”
shall mean DPT Laboratories, Ltd. or
such other manufacturer of the Product selected by EDT and approved
by SM.
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“DelPouch
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Product” shall have the meaning set forth in Section
14.1 of this Agreement.
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“Effective Date ” shall have the meaning set forth in the
preamble to this Agreement.
“FDA” means the U.S. Food and Drug
Administration.
“Field” means the treatment of pigmentation
disorders.
“Finished Product”
shall mean the Product together with
all Labeling, branding, trade dress and packaging set forth in the
Product Specifications.
“Initial Term”
shall have the meaning set forth in
Section 11.1 of this Agreement.
“Know-How” means unpatented technical and other
information, including without limitation, ideas, concepts,
expertise, designs, inventions, discoveries, data, formulae,
specifications, procedures for experiments, patent and legal data
or descriptions, marketing, sales and manufacturing data, tests and
other protocols and techniques, which is necessary or useful to
make, have made, use, have used, offer for sale, sell and import
the Product in the Field in the Territory.
“Labeling” means the primary container label, secondary
packaging, package insert, shelf pack and shipper label specific to
a Finished Product manufactured in accordance with the Product
Specifications.
“Losses” shall have the meaning set forth in Article
12 of this Agreement.
2
“Manufacturing Standards”
means the specifications for
manufacturing, packaging, labeling and storing the Products set
forth in the Product Specifications, the master batch record,
cGMPs, “material safety data sheets,” and all other
applicable U.S. federal and state laws and regulations.
“Minimum Purchase
Requirements” shall
have the meaning set forth in Section 3.4.1 of this
Agreement.
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“Offer
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Notice” shall have the meaning set forth in Section
14.1 of this Agreement.
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“Party” and “Parties” shall have the
meanings set forth in the preamble to this Agreement.
“Patents” means all patents and patent applications in
which EDT has rights covering the Product and the Field, and any
divisions, provisionals, renewals, continuations,
continuations-in-part, extensions or substitutions thereof,
including those patents set forth on Schedule I .
“Placebo” means a Product adjusted to be formulated
without the active ingredient.
“Product” means the product described on Exhibit A
to this Agreement, as it may be amended from time to time, and
which is incorporated by this reference as though fully set forth
in this paragraph.
“Product Specifications”
means the specifications agreed to
by both Parties for the manufacture of any Product and attached
hereto as Exhibit C .
“Regulatory Authority”
means the FDA or any equivalent or
additional governmental or regulatory agencies having authority
over EDT, EDT’s facilities, or the Products.
“Samples” means the Product size intended for distribution
without charge to medical professionals.
“SM Improvements”
shall have the meaning set forth in
Section 4.4 of this Agreement.
“Term” shall mean the Initial Term and any extensions
or renewals of the Initial Term in accordance with Section
11.1 of this Agreement.
“Territory” means the United States of America, including
its territories, commonwealths and possessions.
“Unique Materials”
shall have the meaning set forth in
Section 3.12 of this Agreement.
A RTICLE 2
M
ANUFACTURE
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2.1
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Exclusive Supply of
Products . EDT shall
supply, or cause to be supplied, and SM shall purchase all of
SM’s Minimum Purchase Requirements of Finished Product,
including
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3
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Samples, for use in the Field in
the Territory on the terms, and subject to the conditions, of this
Agreement. EDT agrees that, during the Term of this Agreement, SM
shall have the exclusive right to purchase the Product from EDT and
its Affiliates for resale in the Field and the Territory until such
time as SM fails to satisfy the Minimum Purchase Requirements
specified in Section 3.4.1 below and forfeits its exclusive
right to purchase the Product in accordance with Section
3.4.3 below.
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2.2
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General
Responsibilities . EDT
will be responsible *** for all scale-up, validation, stability,
formulation, Finished Product testing, and fill and finish work
related to the manufacture of the Product.
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2.3
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Conformance
to Specifications .
During the Term of this Agreement, and subject to the terms and
conditions of this Agreement, EDT shall cause Contract Manufacturer
to formulate, fill and package the Product in accordance with the
Product Specifications and Labeling requirements of SM. The Product
shall conform to the Product Specifications.
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2.4.1
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EDT will label
and package, or cause to be labeled and packaged, the Product in
finished form ( i.e. , Finished Product), pursuant to a firm
purchase order accepted by EDT as described in Section 3.7 ,
provided, however, that SM shall provide all specifications
and artwork for packaging and trade dress for the Labeling and, and
shall be responsible for the accuracy and final approval of
Labeling before manufacture.
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2.4.2
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SM shall
determine the trademarks and trade names owned or licensed by SM to
be used in connection with the Product and which trademarks and
trade names will appear on the labels, labeling, and any
promotional materials for the Products. SM shall advise EDT as to
the trademarks and trade names SM has selected for the Product. EDT
shall use these trademarks and trade names and no other trademarks
and trade names on the labels and labeling for the Product. EDT
shall have no right to use said trademarks and trade names other
than in connection with its manufacturing and packaging Products
for sale to SM under this Agreement. Upon expiration or termination
of this Agreement, EDT shall not use any of these trademarks or
trade names, whether or not said trademarks or trade names have
been registered with the U.S. Patent and Trademark Office. SM shall
have the right to change trademarks and trade names and will
reimburse EDT for any costs incurred for labels or labeling bearing
a trademark or trade name that SM has determined it no longer wants
to use.
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2.5
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Raw
Materials . EDT and/or
Contract Manufacturer shall have the sole responsibility to source
all raw materials used in the manufacture of the
Product.
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2.6
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Batch
Testing; Certificate of Analysis . EDT shall test, or cause to be tested, in
accordance with the Product Specifications, each batch of Product
manufactured pursuant to this Agreement before delivery to SM.
Prior to each shipment of Product, EDT shall
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***
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Portions of
this page have been omitted pursuant to a request for Confidential
Treatment and filed separately with the Commission.
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4
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provide, or cause to be provided,
to SM a Certificate of Analysis in customary form attesting to the
quality of each batch contained within the shipment, including
review and approval by the appropriate quality control unit of all
batch production and control records. EDT shall maintain or cause
to be maintained and provide SM with such batch records and
documentation, including information relating to the manufacturing,
packaging, labeling, and quality control testing and analysis for
each lot of Finished Product produced hereunder as may be required
by the FDA and under all applicable federal, state and local laws
and regulations.
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2.7
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Good
Manufacturing Practices .
EDT shall ensure that Contract Manufacturer and any other
contractors/affiliates shall manufacture, store and prepare all
Product and related raw materials for shipping in accordance with
the cGMPs, in a facility to be agreed upon by EDT and SM. EDT may
not change manufacturing of the Product to an alternate facility
without first obtaining SM’s written approval.
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2.8
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Inspections . EDT authorizes SM to make reasonable
inspections at Contract Manufacturer’s plant on the same
terms as are available to EDT under its agreement with Contract
Manufacturer in order for SM to satisfy itself that the Contract
Manufacturer manufactures and documents the Product according to
current cGMPs. In furtherance of, and not limited by, the
foregoing, SM shall use its Commercially Reasonable Efforts to
cause Contract Manufacturer to permit SM, at any time during the
Term of this Agreement, upon reasonable prior notice and during
reasonable business hours, to inspect the facility where the
Product has been or is being manufactured or stored, or the raw
materials to be incorporated into the Products have been or are
being manufactured or stored. The provisions of this Section
2.8 are subject to the confidentiality provisions of Article
8 . SM shall be responsible for its costs of travel and
accommodation for such inspections.
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2.9
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Changes to
Specifications .
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2.9.1
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The Product
Specifications or manufacturing process shall not be supplemented,
modified or amended in any respect without the prior written
agreement of the Parties. If SM requests a change to a Product
Specification, including the manufacturing process, and EDT agrees
that such change is feasible, such change shall be incorporated
within the Product Specification pursuant to a written amendment to
this Agreement which shall specify the change and resulting
increase in price agreed to by each of the Parties.
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2.9.2
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EDT may provide
additional services in conjunction with the manufacture of the
Products, such as additional formulation, process development or
stability testing, at the request of SM and pursuant to SM’s
purchase order.
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2.10
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Placebos . If required for clinical trial work in the
future, EDT shall also supply all of SM’s needs for Placebos,
on terms to be agreed upon at that time.
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5
A RTICLE 3
P
LANNING
AND
S
UPPLY
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3.1
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Supply of
Product . EDT will
produce, or cause to be produced, Finished Product to meet the
mutually agreed upon forecasts, subject to the provisions of this
Article 3 . EDT shall have the sole responsibility,
financially and otherwise, for manufacturing the Product, either
directly or through Contract Manufacturer or one or more Affiliates
of EDT, receiving and processing orders and shipping the Finished
Product to SM. EDT shall bear all costs of the foregoing
activities, including without limitation ***. EDT may utilize
contractors to carry out its obligations hereunder, including
Affiliates of EDT, only with the prior written consent of SM
(provided that SM is deemed to have hereby consented to the
appointment of the initial Contract Manufacturer). EDT shall
ensure, but cannot guarantee, that sufficient stock of the Product
will be available in its inventory, or set aside by Contract
Manufacturer, to promptly fill orders from the trade based on the
rolling non-binding forecasts provided by SM pursuant to Section
3.5 .
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3.2
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Production . EDT will keep SM informed of all scheduled
production activity for the Products.
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3.3
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Initial
Supply of Product and Samples . EDT shall make available and SM shall purchase
for commercial sale an initial supply of *** units of Product no
later than ***; provided however , that if the expiration
date on Product is less than twenty (20) months, the initial supply
required to be purchased by SM shall be *** units. The expiration
dating shall be calculated as of the date that Product is
manufactured. For the avoidance of any doubt, the definition of
“available” in this Section 3.3 shall mean that
the initial supply of Product must be released from quarantine and
ready for shipping by ***.
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3.4
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Minimum
Purchase Requirements .
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3.4.1
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SM agrees to
purchase a minimum of *** units of the Product per twelve (12)
month period commencing with the first purchase of Product
hereunder (the “ Minimum Purchase Requirements”
). Subject to Section 11.2, any failure of SM to deliver firm
purchases orders meeting the Minimum Purchase Requirements shall
not be deemed to be a breach of this Agreement and shall result
only in the loss by SM of its exclusive right to purchase Product
from EDT as set forth in Section 3.4.3 below.
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3.4.2
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If the FDA
removes (or requires the removal) of the Product from the market,
the Parties shall negotiate in good faith new minimum
quantities.
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3.4.3
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If SM fails to
purchase the Minimum Purchase Requirement in any given twelve (12)
month period, EDT shall notify SM that it has failed to comply with
this Section 3.4 . If within the *** following such notice,
SM fails to order sufficient quantities of Product to bring it into
compliance with Section 3.4.1 ,
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***
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Portions of
this page have been omitted pursuant to a request for Confidential
Treatment and filed separately with the Commission.
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6
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then SM shall be deemed to have
forfeited its exclusive right to purchase the Product hereunder and
EDT may proceed to sell the Product to third parties in the
Territory.
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3.5
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Forecasts . SM shall provide an initial production
forecast for 2002 by July 1, 2002. Thereafter SM shall provide a
twelve (12) month rolling production forecast every three (3)
months. Forecasts shall be submitted in the format set out as
Exhibit D . Forecasts shall include the amounts of each
Product and Samples to be manufactured and supplied by EDT and the
expected timing for the delivery of each shipment during the
forecast period.
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3.6
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Purchase
Orders . SM will place
written purchase orders directly or through its designated
representatives with EDT at least *** prior to requested shipment
date, including the following details: number of units, requested
shipping date, shipping instructions and SM’s order reference
number including the price calculated according to this Agreement.
Each Purchase Order issued pursuant to this Agreement shall be
governed by the terms and conditions of this Agreement.
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3.7
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Acceptance
of Purchase Order by EDT . EDT shall promptly acknowledge its receipt of
purchase orders and inform SM of the anticipated dates of
manufacture and delivery of each Product presentation to SM. EDT
shall respond in writing as to its acceptance of each firm purchase
order within *** of receipt of such order In each twelve (12) month
period commencing after December 20, 2002, EDT must accept each
purchase order from SM until such time as EDT has accepted purchase
orders representing the Minimum Purchase Requirements in such
period. All purchase orders which are accepted by EDT (or required
to be accepted by EDT pursuant to this Section 3.7) shall be deemed
binding on both of the parties.
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3.8
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Shipment;
Delays . EDT shall ship
the Product to SM or the location designated by SM by the delivery
date specified in the accepted purchase order.
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3.9
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Change
Orders . The time of
delivery and quantities specified in a purchase order accepted by
EDT pursuant to Section 3.7 above shall be binding upon the
Parties and may not be changed or canceled.
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3.10
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Increased
Demand . EDT will use
Commercially Reasonable Efforts to accommodate SM’s requests
for units in excess of those forecasted pursuant to Section
3.5 ; provided, however, that EDT shall not be in breach
of this Agreement if EDT, despite its Commercially Reasonable
Efforts, is unable to supply quantities of Product to SM in excess
of *** of the amount forecast for that year pursuant to Section
3.5 .
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***
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Portions of
this page have been omitted pursuant to a request for Confidential
Treatment and filed separately with the Commission.
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7
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3.11
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Shipment;
Inspection; Rejection
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3.11.1
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Shipment of
Product . EDT shall ship,
or cause to be shipped, at SM’s expense, the Product to SM or
such destination(s) as SM may designate in writing. Product will be
shipped FOB SM’s designated delivery location, and all risk
of loss or damage therein shall pass to SM when each such order of
the Product is delivered to SM’s designated facility. Title
to the Product supplied to SM by EDT pursuant to an applicable
purchase order shall remain in EDT until delivery to the SM’s
designated facility, at which time title shall pass to the SM and
SM shall assume all risk of loss or damage. All invoices and other
shipping documents shall be sent via first class mail or by fax to
SM’s address for notices under this Agreement.
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3.11.2
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Non-Conforming Product . SM may reject any batch of Product that does
not conform to the Manufacturing Standards, subject to the terms of
this Section. Within *** after SM’s receipt of Product and
batch documents, SM shall inspect the Product and notify EDT
whether it will accept or reject the Product. No inspection under
this Section shall relieve EDT of its obligations and warranties
under this Agreement. If SM rejects all or any part of any shipment
of Product, the procedures to be followed are:
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(a)
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SM shall submit
to EDT in writing any claim that Product does not conform with the
Specifications or Manufacturing Standards (including conformance to
cGMPs), accompanied by a report of SM’s analysis (which
analysis shall be conducted in good faith) and a sample of the
Product at issue, explaining in reasonable detail the basis on
which the allegedly nonconforming Product does not meet the
Specifications or Manufacturing Standards. Until any dispute
concerning nonconformance is resolved pursuant to (b) (ii) below,
***. Only those tests listed in the Specifications may be used to
demonstrate nonconformance of Product from the
Specifications.
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(b)
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EDT shall
conduct its own analysis of the Sample in good faith within ***
after the receipt by EDT of the report and Sample from SM, and
provide the results to SM.
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(i)
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If after
EDT’s own analysis of the Sample EDT agrees with the claim of
nonconformity, SM shall promptly inform EDT if SM wishes to have
EDT replace the nonconforming Product with conforming Product. If
SM wishes to receive such replacement Product, EDT shall provide
such replacement as soon as reasonably practicable thereafter, in
which case SM shall be obligated to pay only for such replacement
Product. SM shall not be obligated to pay for the nonconforming
Product, and EDT shall:
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(A)
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credit SM for
the amount paid by SM to EDT for the nonconforming Product if SM
has already paid for such nonconforming Product or
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***
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Portions of
this page have been omitted pursuant to a request for Confidential
Treatment and filed separately with the Commission.
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8
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(B)
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cancel its
invoice to SM for such nonconforming Product if SM has not yet paid
for such nonconforming Product, and SM shall not be obligated to
pay such canceled invoiced amount.
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(ii)
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If, after its
own analysis, EDT does not agree with the claim of nonconformity or
determines that SM is responsible for the nonconformity, such
Product shall be tested for conformance with the applicable
Specifications or Manufacturing Standards by an independent third
party testing laboratory mutually acceptable to both parties. The
independent analysis shall be binding on both Parties solely for
the purpose of determining whether such Product may be rightfully
rejected.
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(c)
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After a final
determination that the Product shipment is nonconforming, and if
EDT is responsible for the nonconformity, SM shall return or
destroy it at EDT’s request and cost in the most cost
effective and environmentally safe and appropriate manner
available, consistent with federal, state and local laws and
regulations.
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3.11.3
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Notwithstanding
the other provisions of this Section 3.11 , SM shall have no
right to reject any Product that fails to conform with the
Manufacturing Standards if the nonconformance is attributable to
(a) events outside of EDT’s control that occurred after
delivery to SM’s designated facility, or (b) processes,
procedures or Product components specified by SM in the
Specifications, provided that EDT followed or used such
processes, procedures and Product components substantially in
accordance with the Specifications and cGMPs.
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3.12
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Unique
Materials . SM shall
reimburse EDT for *** of “ Unique Materials ” (
i.e., artwork, printed materials, labels, and cartons)
purchased by EDT expressly to meet its performance obligations
under this Agreement in reliance upon a firm Purchase Order
accepted pursuant to Section 3.7 and which later are made
obsolete, or to the extent that such Unique Materials remain on
hand at the expiration or termination of this Agreement as provided
under Article 11 unless terminated (i) by SM for breach by
EDT or (ii) by EDT pursuant to Section 11.5 . For purposes
of this Section 3.12 , material is obsolete if it cannot be
incorporated into the Product due to changes mandated by a
Regulatory Authority, changes directed by SM, or SM-mandated
cancellation or postponement. EDT may invoice SM for *** of Unique
Materials after they are made obsolete. EDT’s invoices shall
identify the material in question and shall be accompanied by a
statement of the cause of such obsolescence and a certification
that EDT has disposed of such materials in accordance with the
terms of this Agreement.
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***
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Portions of
this page have been omitted pursuant to a request for Confidential
Treatment and filed separately with the Commission.
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9
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3.13
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Insurance . EDT and SM shall at their own expense obtain
and maintain workers’ compensation and comprehensive general
liability insurance with respect to performance under this
Agreement, in the amount of ***.
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A RTICLE 4
P
ROMOTION
& P
RODUCT
DEVELOPMENT
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4.1
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Promotional
Materials . SM shall
create and develop at SM’s own expense, promotional materials
relating to the Product for distribution to independent third
parties. SM will establish the copy platform for all promotional
materials and develop tactical programs.
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4.2
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Training
Materials . SM shall bear
the expenses associated with training its sales force. SM shall
develop programs to monitor, test and otherwise ensure that the
SM’s sales force is sufficiently knowledgeable about the
Product and other information contained in SM’s training
materials.
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4.3
|
Clinical
Studies . EDT shall
provide SM with full access to all data generated by EDT on the
Product, including clinical, regulatory and marketing data. In
addition, SM, at its expense, shall have the right to conduct
pre-clinical or clinical studies with the Product for regulatory
and commercial purposes. SM will own all data and results from such
studies which have been paid for in full by SM; provided, however,
that EDT shall have the right to access such data/results for the
purpose of making external presentations, with SM’s prior
written consent.
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4.4
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Product
Improvements . Product
improvements, including but not limited to formulations
improvements, identified, initiated or made by SM (“ SM
Improvements ”) shall be the property of SM. SM
Improvements may not be used by EDT or any of its Affiliates
without the prior written consent of SM, except with Products sold
to SM hereunder. SM Improvements will be incorporated in the
Product, covered under this Agreement only by mutual and written
agreement by both EDT and SM.
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A RTICLE 5
P
RICE
AND
P
AYMENT
T
ERMS
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5.1
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Development
Fee . SM shall pay EDT
*** upon execution of this Agreement. SM shall pay EDT an
additional *** prior to June 30, 2002.
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5.2
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Price for
Products . SM shall pay
EDT for Products the amounts for each Product and for each size or
formulation set forth in Exhibit B to this Agreement, which
Exhibit may be amended from time to time by the mutual written
agreement of the Parties. Prices for Products may be increased by
EDT, not more than once each year, in order to reflect increases in
*** for the relevant period.
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***
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Portions of
this page have been omitted pursuant to a request for Confidential
Treatment and filed separately with the Commission.
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10
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5.3
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Invoices . EDT shall submit to SM an invoice with each
shipment of Product. SM shall pay each invoice within *** of the
date of each accurate invoice. SM shall not be obligated to pay for
any non-conforming shipment of Product.
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A RTICLE 6
W
ARRANTIES
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6.1
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Quality . To facilitate quality control inspections by
the Parties, EDT shall identify each Product shipment with a vendor
lot number that is traceable to raw materials and/or components
used to manufacture such Product.
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6.2
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Representations and Warranties
.
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6.2.1
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Product . EDT warrants that Product delivered to SM
pursuant to this Agreement shall, at the time of
delivery:
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(a)
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have been
manufactured, filled, packaged and stored in accordance with all
applicable laws, rules, regulations or requirements, including
without limitation all FDA regulations;
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(b)
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have been
manufactured, filled, packaged and stored in acco
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