MANUFACTURING AND SUPPLY AGREEMENT

Requirements Supplier Agreement

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PATHEON ITALIA S.P.A. | SCICLONE PHARMACEUTICALS INTERNATIONAL LTD.

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Title: MANUFACTURING AND SUPPLY AGREEMENT
Date: 3/15/2004
Industry: Biotechnology and Drugs Sector: Healthcare

MANUFACTURING AND SUPPLY AGREEMENT, Parties: patheon italia s.p.a. , sciclone pharmaceuticals international ltd.

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EXHIBIT 10.26

MANUFACTURING AND SUPPLY AGREEMENT

PATHEON ITALIA S.P.A.

SCICLONE PHARMACEUTICALS INTERNATIONAL LTD.

November 1, 2002

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TABLE OF CONTENTS

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ARTICLE 1

INTERPRETATION

1.1 Definitions............................................................ 1

1.2 [****]................................................................. 5

1.3 Sections and Headings.................................................. 5

1.4 Singular Terms......................................................... 5

1.5 Schedules.............................................................. 5

ARTICLE 2

PURPOSE OF THIS AGREEMENT 6

ARTICLE 3

PATHEON'S OBLIGATIONS

3.1 Technical Transfer Activities.......................................... 6

3.2 Standard of Performance................................................ 7

3.3 Conversion of API and Components ...................................... 7

ARTICLE 4

SCICLONE'S OBLIGATIONS

4.1 Conformation of SciClone's Specifications.............................. 11

4.2 SciClone Supplies...................................................... 11

4.3 Supply Requirements Commitments........................................ 11

4.4 Order Campaigns........................................................ 11

ARTICLE 5

PRICE

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5.1 Price.................................................................. 11

5.2 [****]................................................................. 12

5.3 Adjustments Due to Technical Changes................................... 12

ARTICLE 6

ORDERS, DELIVERY, INVOICING,PAYMENT

AND PRODUCT DEFICIENCIES

6.1 [****]................................................................. 13

6.2 Orders and Forecasts................................................... 13

6.3 Firm Orders............................................................ 14

6.4 Reliance by Patheon.................................................... 14

6.5 [****]................................................................. 14

6.6 Shipments.............................................................. 14

6.7 Invoices and Payment .................................................. 15

6.8 Product Deficiencies................................................... 15

ARTICLE 7

CO-OPERATION

7.1 Quarterly Review....................................................... 16

7.2 Product Recalls and Returns ........................................... 16

7.3 Customer Questions and Complaints...................................... 17

7.4 Governmental Agencies.................................................. 17

7.5 Records and Accounting by Patheon...................................... 17

7.6 Access................................................................. 17

7.7 cGMP compliance and QA Audits.......................................... 18

ARTICLE 8

TERM, RENEWAL AND TERMINATION

8.1 Term................................................................... 18

8.2 Termination for Cause.................................................. 18

8.3 Product Discontinuation ............................................... 19

8.4 Obligations on Termination............................................. 20

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ARTICLE 9

REPRESENTATIONS AND WARRANTIES

9.1 Authority.............................................................. 20

9.2 Non-Infringement ...................................................... 20

9.3 Patheon's Warranty..................................................... 21

9.4 SciClone's Warranty ................................................... 21

9.5 Compliance with Law.................................................... 21

ARTICLE 10

LIABILITY AND INDEMNITY

10.1 Consequential Damages.................................................. 21

10.2 Limitation of Liability ............................................... 21

10.3 Patheon................................................................ 22

10.4 SciClone............................................................... 22

10.5 Reasonable Allocation of Risk.......................................... 23

ARTICLE 11

CONFIDENTIALITY

11.1 Disclosure............................................................. 23

11.2 Use of Information..................................................... 23

11.3 Exceptions............................................................. 23

11.4 Designation of Confidentiality......................................... 23

ARTICLE 12

DISPUTE RESOLUTION

12.1 Disputes............................................................... 24

12.2 Arbitration............................................................ 24

ARTICLE 13

MISCELLANEOUS

13.1 Trademarks............................................................. 24

13.2 Insurance.............................................................. 24

13.3 Independent Contractors................................................ 25

13.4 No Waiver.............................................................. 25

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13.5 Assignment and Subcontract............................................. 25

13.6 Force Majeure.......................................................... 25

13.7 Additional Product..................................................... 26

13.8 Notices................................................................ 26

13.9 Entire Agreement....................................................... 26

1310 Execution in Counterparts.............................................. 27

13.11 Governing Law.......................................................... 27

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MANUFACTURING AND SUPPLY AGREEMENT

THIS AGREEMENT made as of the first day of November, 2002 (the

"DATE OF EXECUTION")

B E T W E E N:

PATHEON ITALIA S.P.A.,

a corporation existing under the laws of ITALY,

(hereinafter referred to as "PATHEON"),

- and -

SCICLONE PHARMACEUTICALS INTERNATIONAL LTD.

a corporation existing under the laws of British West

Indies,

(hereinafter referred to as "SCICLONE").

THIS AGREEMENT WITNESSES THAT in consideration of the rights

conferred and the obligations assumed herein, and for other good and valuable

consideration (the receipt and sufficiency of which are acknowledged by each

party), and intending to be legally bound the parties agree as follows:

ARTICLE 1

INTERPRETATION

1.1 DEFINITIONS. The following terms shall, unless the context

otherwise requires, have the respective meanings set out below and grammatical

variations of such terms shall have corresponding meanings:

"ACTIVE PHARMACEUTICAL INGREDIENT" OR "API" is "thymalfasin" or

"thymosin alpha-1" or "TA-1" drug substance and shall mean the compound

as better described in Schedule A (Appendix II), hereto and that is

supplied by SciClone to Patheon for the manufacture of API Vials as

defined below;

"ACTIVE PHARMACEUTICAL INGREDIENT VALUE" OR "API VALUE" means the value

to be attributed to the Active Pharmaceutical Ingredient for certain

purposes of this Agreement, calculated in accordance with Schedule C

hereto;

"ACTIVE PHARMACEUTICAL INGREDIENT BULK SPECIFICATION" OR "API BULK

SPECIFICATION" shall mean the specification for bulk Active

Pharmaceutical Ingredient as set forth in Schedule A hereto;

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"AFFILIATE" means:

(a) any person, firm or corporation which, directly or indirectly,

through one or more intermediaries, controls, is controlled

by, or is under common control with, another party. "Control"

means the legal or beneficial ownership of 50% or more of the

voting or equity interests or the power or right to direct the

management and affairs of the business (including acting as

the general partner of a limited partnership)

(b) a business entity which is owned by a party to this Agreement,

either directly or indirectly, by stock ownership or

otherwise; or

or indirectly common to the majority ownership of a party to

this Agreement;

"BUSINESS DAY" means a day other than a Saturday, Sunday or a day that

is a statutory holiday in either [****], or in California, The United

States of America;

"CGMPS" means current Good Manufacturing Practices published by the

European Commission in the "Guide to good manufacturing practice for

medicinal products"("The rules governing medicinal products for human

use", IV Volume), as specified by the competent Italian authorities;

"COMMENCEMENT DATE" means the date of commencement of the contracted

manufacturing activities by Patheon;

"COMPONENTS" means, collectively all the raw materials, excipients and

ingredients, all primary, secondary and outer packaging components

(including ampoule labels, product inserts and other labelling for the

Products), required to be used in order to produce the Products in

accordance with the Specifications, other than the following two items:

API and API vial labels that shall both be supplied by SciClone;

"CONFIDENTIAL INFORMATION" means a party's technology, data, know-how

or information whether written or oral, technical or non-technical,

including financial statements, reports, pricing, trade secrets, secret

processes, formulas, customer data (including customer lists), and the

like, that is disclosed to the other party;

"DEFICIENCY NOTICE" shall have the meaning ascribed thereto in Section

6.8 (a);

"DELIVERY DATE" shall mean the date set forth in the relevant Firm

Order by which Patheon must supply SciClone with Product;

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"DISPUTE" has the meaning specified in Section 12.1;

"FACILITY" means the manufacturing facility of Patheon located at

[****], where manufacturing of the Products under this Agreement shall

take place, as set forth in the GMP Technical Agreement;

"FIRM ORDERS" has the meaning specified in Subsection 6.2(b);

"GMP TECHNICAL AGREEMENT" means the standard agreement required under

the laws of the European Union (Directive 91/356/EEC) to be entered

into between Patheon and SciClone in respect of each Product, each such

agreement to be attached hereto in Schedule A;

"INITIAL TERM" has the meaning specified in Section 8.1

"INVENTORY" means all inventories of Components and Product

work-in-process produced or held by Patheon in connection with the

manufacture of the Products in accordance with the Specifications and,

specifically, excludes API or API vial labels.

"LABELLING" means all manufacturing operations related to the affixing

of labels to Products

"MA" means Marketing Authorization pursuant to Directive 65/65 EEC (as

amended by the following applicable provisions including Directive

2001/83/EU) or any implementation of it under the laws of a relevant

Member State, which for the Products means the authorization referred

to in Schedule A;

"ML" means Manufacturing Licence pursuant to Directive 75/319 EEC (as

amended by the following applicable provisions including Directive

2001/83/EU) or any implementation of it under the laws of a relevant

Member State, which for this Agreement means the authorization referred

to in Schedule A;

"MANUFACTURING REQUIREMENTS" has the meaning specified in Section 3.2;

"PATHEON" shall mean Patheon Italia S.p.A., a corporation existing

under the laws of [****] with its registered office at [****];

"PRODUCTS" shall mean the four types of Product that are to be

considered for this Agreement as better described below:

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- "API VIALS": bulk unlabelled or labelled vials

containing API in its formulation as described in detail in

the relevant Specifications and to be manufactured in

accordance with the cGMPs and any other Manufacturing

Requirements;

- "PLACEBO VIALS": vials NOT containing API as

described in detail in the relevant Specifications and to be

manufactured in accordance with the cGMPs and any other

Manufacturing Requirements;

- "DILUENT WFI AMPOULES": bulk unlabelled or labelled

ampoules filled with water (to be used for reconstitution of

the API vial) as described in detail in the relevant

Specifications and to be manufactured in accordance with the

cGMPs and any other Manufacturing Requirements.

- "PACKED PRODUCT": two labelled API vials packaged

together with two labelled Diluent WFI Ampoules in a thermo

moulded polypropylene tray and, together with a Patient

Information Leaflet, inserted into a carton, as described in

detail in the relevant Specifications and in the cGMPs and any

other Manufacturing Requirements;

"SCICLONE" means SciClone Pharmaceuticals International Ltd., P.O. Box

219GT, Strathvale House, North Church Street, George Town, Grand

Cayman, Cayman Islands, British West Indies;

"SCICLONE'S PRODUCT SPECIFICATIONS" OR "SPECIFICATIONS" means the

Technical Manufacturing, Release and relevant Regulatory files and

information, for each Product which contain documents relating to such

Products, including, without limitation:

(a) a detailed description for each Product, including its

physical and chemical characteristics and stability;

(b) product manufacturing and packaging instructions;

(d) protocols for validating the processes and equipment to

manufacture the Products;

(e) quality control and quality assurance procedures and

analytical test methods for sampling, testing, documenting and

releasing: API, Components, in-process control and finished

Product;

(f) procedures and analytical test methods for testing the

stability of the Product;

(g) procedures and analytical test methods for cleaning of the

Product;

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(h) all environmental, health and safety information relating to

the Product including material safety data sheets, incident

reports, risk analyses, health concerns, preventative measures

and procedures for waste disposal; and

(i) any other technical information necessary to carry out the

contracted operations correctly in accordance with the

Marketing Authorization and any other legal requirements,

all as updated, amended and revised from time to time by SciClone in

accordance with the terms of this Agreement;

"TERRITORY" means [****]

"THIRD PARTY RIGHTS" means the Intellectual Property of any third

party; and

"YEAR" means the twelve-month period commencing, in the case of the

first Year of this Agreement, on the date of execution of this

Agreement, and thereafter commencing upon completion of the immediately

preceding Year.

1.2 [****]

1.3 SECTIONS AND HEADINGS. The division of this Agreement into

Articles, sections, subsections and Schedules and the insertion of headings are

for convenience of reference only and shall not affect the interpretation of

this Agreement. Unless otherwise indicated, any reference in this Agreement to a

Section or Schedule refers to the specified Section or Schedule to this

Agreement. In this Agreement, the terms "THIS AGREEMENT", "HEREOF", "HEREIN",

"HEREUNDER" and similar expressions refer to this Agreement and not to any

particular part, Section, Schedule or the provision hereof.

1.4 SINGULAR TERMS. Except as otherwise expressly provided herein

or unless the context otherwise requires, all references to the singular shall

include the plural and vice versa.

1.5 SCHEDULES. The following Schedules are attached to,

incorporated in and form part of this Agreement:

Schedule A - GMP Technical Agreement

Appendix I Products and Specifications.

Appendix II Component Specifications.

Appendix III Manufacturing Requirements -

All Manufacturing Procedures

and Instructions [****]

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Appendix IV Lot Numbering, Expiration

Dates and Variable Data

System.

Appendix V Quality Control

Specifications and Quality

Control Documentation [****]

Appendix VI Instructions for Packaging

[****] and Shipment

Appendix VII Product Release Protocol and

Retained Sample

Requirements.

Appendix VIII Placebo Specification

Schedule B - Price Lists for Products, Technology Transfer, Capital

Equipment and other Services

Schedule C - Agreed Value of Active Pharmaceutical Ingredient

Schedule D - [****]

Schedule E - [****]

ARTICLE 2

PURPOSE OF THIS AGREEMENT

Patheon shall toll manufacture and supply to SciClone the Products listed in

Schedule A (Appendix I) hereto for sale in the Territory at the Prices as

defined in Section 5.1 below and pursuant to all terms and conditions of this

Agreement. Subject to Section 6.1, SciClone shall purchase and Patheon shall

supply such quantities of Products as may be set forth in Firm Orders placed by

SciClone and accepted by Patheon under this Agreement.

At least 45 days prior to the commencement of the commercial manufacture of the

Product, the Parties shall agree in writing, in an "Addendum" to be attached

hereto, the countries where SciClone intends to sell and distribute the Product.

Accordingly, for the purposes of this Agreement, the Territory referred to in

Section 1.1 shall include the countries as set forth in the said Addendum and

any other countries which shall be agreed in writing between the Parties from

time to time during the term of this Agreement.

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ARTICLE 3

PATHEON'S OBLIGATIONS

3.1 TECHNICAL TRANSFER ACTIVITIES: Prior to the commencement of

commercial manufacture of the Product, Patheon shall perform the technical

transfer activities related to each Product as listed in and according to

Schedule B hereto (the "TECHNICAL TRANSFER ACTIVITIES").

3.2 STANDARD OF PERFORMANCE. Patheon shall manufacture and supply

to SciClone the Products in accordance with (i) the Specifications; (ii) any

other terms and conditions provided in the GMP Technical Agreement; (iii) the

conditions provided under the M.A. and the M.L., the cGMPs and any other

applicable legal requirements as specified by the competent Public Authorities

(hereinafter collectively the "MANUFACTURING REQUIREMENTS").

3.3 CONVERSION OF API AND COMPONENTS. Patheon shall carry out the

following activities:

(a) Patheon shall convert API and Components into Products;

(b) Patheon shall, at its expense, purchase from third party

suppliers all Components (other than those supplied by

SciClone) required for the manufacture of Products, unless

such purchase is expressly requested and prevented to do so by

SciClone. All Components shall meet the relevant

Specifications as described in Schedule A, as amended or

supplemented from time to time. Patheon must test all

Components in accordance with quality assurance procedures

provided by SciClone in the Specifications.

SciClone, or by an agent of SciClone, in accordance

with the required Specifications as set down below

within 60 days following receipt at the Facility. In

the event that any API does not meet the API

Specification after testing in accordance with the

relevant Specifications, SciClone shall duly deliver

replacement API to Patheon at no additional cost to

Patheon. Upon receipt of API at Patheon, Patheon

shall analyze a sample of the API for:

(A) Identity [****];

(B) Purity [****]; and

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(ii) If the API sample fails to meet the Specifications,

Patheon shall not use the corresponding batch of API

but will immediately report the result to SciClone.

Patheon and SciClone shall promptly confer to discuss

the discrepancy and determine whether the material

shall be retested or replaced or what other action to

take.

(iii) After SciClone and Patheon have determined that API

meets the API Bulk Specification pursuant to the

relevant Specifications, Patheon shall bear the risks

of loss for the API to a maximum of [****] of any API

batch loss as calculated using the [****], including

without limitation loss due to improper Processing,

inadequate storage and theft. In any event, such API

loss coverage by Patheon shall be capped at a maximum

of [****] per Year.

(d) For the manufacture of API Vials, Patheon shall use API

supplied by SciClone. The quantity of API shall be 1.68 mg per

ml in formulation.

(e) Patheon will be responsible for proper storage and handling of

API, Components, work in process and Products in accordance

with the relevant Specifications set forth in Schedule A.

(f) Active Material Yield.

Patheon shall provide SciClone with a [****] inventory report

and reconciliation of the API held by Patheon, which shall

contain the following information for any [****]:

QUANTITY RECEIVED: The total quantity of API received at the

Facility during [****].

QUANTITY DISPENSED: The total quantity of API dispensed at the

Facility during [****]. The Quantity Dispensed is calculated

as [****].

QUANTITY CONVERTED: The total amount of API contained in the

Products produced with the Quantity Dispensed, delivered by

Patheon, and not rejected as deficient Product pursuant to

Section 6.8(c) or 7.2(c).

At the end of any Year, the "ACTUAL ANNUAL YIELD" or "AAY" at

the Facility in such Year is [****] and which is calculated as

follows:

[****]

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After Patheon has produced a minimum of [****] of Product and

has produced batches for at least [****] at the Facility

pursuant to this Agreement, the Parties will mutually agree on

the target yield in respect of such Product at the Facility

(each, a "TARGET YIELD"). Thereafter, Patheon shall strive to

maintain Actual Annual Yield levels for each Product above the

applicable Target Yield. If the Actual Annual Yield falls more

than [****] below the respective Target Yield in a Year,

Patheon shall reimburse SciClone for the cost of the shortfall

based on the following calculation:

[****]

In any event, in accordance with Section 10.2 below, such

reimbursement from Patheon to SciClone shall not exceed a

yearly amount of [****] of the overall API Value for Product

damaged and/or lost.

(g) Patheon shall [****].

(h) Quality Control and Quality Assurance. Patheon shall perform

the quality control and quality assurance testing as specified

in the GMP Technical Agreement and, in any event, as required

by any applicable laws to ensure that Patheon has manufactured

the Products in accordance with Manufacturing Requirements and

Specifications. Each time Patheon ships Products to SciClone,

it shall provide SciClone with a certificate of analysis that

sets out the test results for each batch of Products and that

certifies that such batch has been evaluated by Patheon's

Quality Control/Quality Assurance department and that the

Products comply with the Manufacturing Requirements and

Specifications;

(i) Product Specifications, Testing and Release:

(A) SciClone and Patheon acknowledge that the

Specifications and testing procedures set

forth in Schedule A may need to be changed

as the Parties gain experience with the

manufacture and testing of Product. Any such

changes must be agreed by the Parties in

writing.

(B) SciClone shall qualify Patheon for Product

Release to market according to SciClone's

protocol as set forth in Schedule A

-(Appendix VII).

the testing of Product must be investigated

and documented by Patheon. Patheon will

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notify SciClone immediately of such results

and investigations and both Patheon and

SciClone will confer and agree as to what is

the best course of action to take.

(D) For each batch of Product shipped Patheon

shall supply to SciClone a copy of the

[****]. All courier costs associated with

sending of such documents shall be on the

account of [****].

(E) Future modifications may be made to [****]

by [****]. SciClone and Patheon shall

negotiate the cost and or implications of

implementing any such modifications.

(l) Patheon shall supply to SciClone a [****]. Such [****] shall

be obtained by [****] from the normal local regulatory

authorities and costs associated with obtaining and sending

such documents will be at [****] expense.

(m) [****] Testing. [****].

(n) Dedicated Equipment: All dedicated processing equipment [****]

as indicated in Schedule B, purchased at [****] cost, shall be

dedicated, for [****], to the manufacture of Product for

SciClone and shall be maintained (ordinary maintenance) by

Patheon in good working order for its intended use, at [****]

responsibility. In case that any extraordinary maintenance is

required, the Parties shall discuss in good faith the most

appropriate course of action. All such dedicated equipment

shall remain the property of SciClone and shall be returned to

SciClone upon termination of this Agreement.

(o) Packaging. Patheon shall supply approximately [****] of the

Products as [****] to SciClone and Patheon shall also carry

out the packaging of the remaining [****] of the Products for

the market of [****] as set out in the Specifications. In

addition, Patheon shall make arrangements for and implement

[****]. [****] shall be affixed on the Products and on the

shipping carton of each Product as outlined in the

Specifications and as required by the cGMPs. The SciClone

requirements to be used by Patheon for [****] is detailed in

Schedule A (Appendix IV) hereto. Subject to Section 5.3 below,

[****] make changes to labels, product inserts and other

packaging for the Products, which changes shall be submitted

[****] to all applicable governmental agencies and other third

parties responsible for the approval of the Products. [****]

shall not appear on the label nor anywhere else on the

packaging, inserts or on Products unless required by a

governmental authority or applicable laws or regulations

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(p) Packaging Artwork: Where Patheon is required to originate or

change artwork for the supply of any printed packaging

components such artwork shall be supplied by SciClone to

Patheon in an agreed format and the cost associated with the

set up and origination [****] Patheon costs as set forth in

Schedule B.

(q) During the term of this Agreement, the Parties may decide to

that it is in each Party's best interest to extend the

Territory to include [****]. In such case, the Parties shall

determine in good faith the consequences of the manufacture of

the Product for [****]; they shall negotiate in good faith all

relevant terms of the Agreement with due consideration to the

effect of such expansion of the Territory; and they shall

initiate the necessary steps to [****].

ARTICLE 4

SCICLONE'S OBLIGATIONS

4.1 CONFORMATION OF SCICLONE'S SPECIFICATIONS: On Patheon's

completion of the Technical Transfer Activities and subject to the provisions of

Section 5.3, SciClone will update and confirm SciClone's Specifications with

respect to the particular Product, to the extent required to reflect changes to

manufacturing and validation methods.

4.2 SCICLONE SUPPLIES. In order to facilitate the manufacture of

the Products by Patheon, SciClone shall, at its sole cost and expense, deliver

the API and the API vial labels to Patheon in the quantities specified on

Schedule A (Appendix I) hereto, which API shall be held by Patheon on behalf of

SciClone on the terms and conditions herein contained. All materials delivered

by SciClone in anticipation of Product production must arrive at the Facility by

at least the same date as the receipt of any related Firm Orders for Product.

The parties acknowledge and agree that title to the API shall at all times

belong to and remain the property of SciClone. Patheon agrees that any API

received by it shall only be used by Patheon to manufacture and test the

Products of SciClone.

4.3 [****]

4.4 [****]

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