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EXHIBIT 10.31
SUPPLY AGREEMENT
DATED AS OF FEBRUARY 25, 2004
BY AND BETWEEN
NOVEN PHARMACEUTICALS, INC.
AND
ENDO PHARMACEUTICALS INC.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (the "AGREEMENT"), is
hereby entered into as of February
25, 2004 (the "EFFECTIVE DATE"), by and
between Noven Pharmaceuticals, Inc., a
Delaware corporation ("Noven"), and Endo
Pharmaceuticals Inc., a Delaware
corporation ("Endo").
WITNESSETH
WHEREAS, Noven and Endo are
contemporaneously herewith entering into a License
Agreement (the "License Agreement") related
to a fentanyl transdermal patch
product (the "Product" as further defined
herein) developed by Noven;
WHEREAS, Noven desires to manufacture and
supply Endo with its requirements of
Product; and,
WHEREAS, Endo desires to purchase its
requirements of the Product from Noven
pursuant to the terms and conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the
mutual covenants and agreements of the
parties contained herein and for other good
and valuable consideration, the
receipt and sufficiency of which is hereby
acknowledged, the parties hereby
agree as follows:
ARTICLE I DEFINITIONS
Section 1.01. DEFINITIONS. As used herein, the following
capitalized
terms have the following meanings:
"ANDA" means an abbreviated new drug application filed with the
FDA
pursuant to 21 U.S.C. 355(j)
"AFFILIATE" means with respect to a Person, any legally
distinct
corporation, firm, individual or other form
or business organization which is,
directly or indirectly, controlled by,
controlling, or under common control
with, the subject Person hereto. An entity
shall be regarded as being in control
of another entity if such first entity has
the direct or indirect power to order
or cause the direction of the management
and policies of the other entity,
whether through ownership of at least fifty
percent (50%) of the outstanding
voting securities or participating profit
interest of such entity, through other
dominant equity ownership or by contract,
statute, regulation or otherwise.
"API" means the active pharmaceutical ingredient fentanyl base.
"APPLICABLE LAW" means, with respect to any Person, any domestic
or
foreign, federal, state or local statute,
treaty, law, ordinance, rule,
regulation, administrative interpretation,
order, writ, injunction, judicial
decision, decree or other requirement of
any Governmental Authority applicable
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
to such Person or any of such Person's
respective properties, assets, officers,
directors, employees, consultants or agents
(in connection with such officers',
directors', employees', consultants' or
agents' activities on behalf of such
Person).
"BUSINESS DAY" means a day other than a Saturday, Sunday or other
day
on which commercial banks in New York, New
York, USA are authorized or required
by law to close.
"CODE OF FEDERAL REGULATIONS" or "C.F.R." means the codification of
the
general and permanent rules published in
the Federal Register. Title 21 of the
C.F.R. contains the regulations promulgated
by the FDA pursuant to the FDC Act.
"CONFIDENTIAL INFORMATION" means all secret, confidential or
proprietary data, know-how and related
information, including all regulatory
applications and other regulatory filings,
regulatory and clinical materials,
Materials, the content of any unpublished
patent applications, operating methods
and procedures, marketing, manufacturing,
distribution and sales methods and
systems, sales figures, pricing policies
and price lists and other business
information and shall include all
information disclosed or accessed by a party
from the other in connection with this
Agreement.
"DAMAGES" means all liabilities, demands, obligations,
assessments,
judgments, levies, losses, fines,
penalties, damages (including compensatory
damages), costs and expenses, including
reasonable attorneys', accountants',
investigators', and experts' fees and
expenses, reasonably sustained or incurred
in connection with the defense or
investigation of any Proceedings (including
any Proceedings to establish insurance
coverage).
"FDA" means the United States Food and Drug Administration and
any
successor agency thereto.
"FDC ACT" means the United States Federal Food, Drug and Cosmetic
Act,
21 U.S.C.ss.301 et seq., as amended, and
the regulations promulgated there
under, as amended from time to time.
"GAAP" means generally accepted accounting principles in effect in
the
United States from time to time.
"GMP" means the current Good Manufacturing Practices as that term
is
presently or hereafter defined by the FDA
or other applicable Regulatory
Authority.
"GOVERNMENTAL AUTHORITY" means any foreign, domestic, federal,
territorial, state or local governmental
authority, quasi-governmental
authority, instrumentality, court,
government or self-regulatory organization
(including any securities exchange such as
The NASDAQ Stock Market), commission,
tribunal or organization or any regulatory,
administrative or other agency, or
any political or other subdivision,
department or branch of any of the
foregoing.
"LABEL" shall mean any package (primary or secondary container)
labeling designed for use with the Product,
including the package insert; and
any variation of such term, such as
"Labeled" or "Labeling", shall mean the act
of doing the foregoing.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
"MATERIALS" means all ingredients, items or substances (including
those
that may not appear in the Product) used or
required for use by Noven to
manufacture the Product, including the API,
all other active drug ingredients,
excipients, packaging components, printed
materials and manufacturing materials
associated with the Product.
"MANUFACTURING FACILITY" means Noven's facility located at 11960
S.W.
144th Street, Miami, Florida 33186 or such
other FDA-approved facility as Noven
may notify to Endo from time to time.
"PERSON"
means an individual, a corporation, a general partnership, a
limited partnership, a limited liability
company, a limited liability
partnership, an association, a trust or any
other entity or organization,
including a Governmental Authority.
"PROCEEDINGS" means governmental, judicial, administrative or
adversarial proceedings (public or
private), litigation, suits, arbitration,
disputes, claims, causes of action or
investigations.
"PRODUCT" or "PRODUCTS" means the products listed in Exhibit C
which
are the fully packaged, labeled and
released fentanyl transdermal patch product
that is the subject of the Product
ANDA.
"QUALITY AGREEMENT" means the Quality Agreement attached hereto
as
Exhibit B.
"REGULATORY AUTHORITY" means a Governmental Authority that has
the
authority over the manufacture, use,
storage, import, export, clinical testing,
transport, marketing, sale or distribution
of the Product in all or any portion
of the Territory, including the FDA.
"SECURITIES LAWS" means the United States Securities Act of 1933,
as
amended, the United States Securities
Exchange Act of 1934, as amended, and any
other similar law or regulation of a
Governmental Authority, or any successor to
any such laws or regulations, together with
any rules, regulations or listing
standards or agreements of any national or
international securities exchange or
The NASDAQ Stock Market.
"SPECIFICATIONS" means, collectively, the manufacturing, packaging
and
testing procedures and standards for
Product, including all applicable control
procedures and analytical test methods,
each as described in the Product ANDA as
amended, supplemented or otherwise modified
from time to time in accordance with
Applicable Law.
"TERRITORY" shall have the meaning set forth in the License
Agreement
as may be amended from time to time.
"VALIDATION BATCHES" means the batches which Noven elects to
utilize to
satisfy the FDA requirements regarding
validation of its commercial
manufacturing process. ***.
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Section 1.02. OTHER DEFINITIONS. Each of the following terms is
defined
in the section of this Agreement referenced
opposite such term.
TERM.......................................................SECTION
Agreement
................................................Preamble
Collar........................................................4.03
Endo......................................................Preamble
Effective Date
...........................................Preamble
Force Majeure Event
.........................................11.13
Launch Quantities
............................................3.09
License Agreement
........................................Recitals
Noven.....................................................Preamble
Rejection Notice
..........................................3.07(a)
Tech Transfer
Services....................................10.02(e)
Term
........................................................10.01
ARTICLE II COMMITMENT TO SUPPLY AND PURCHASE
Section 2.01. SUPPLY. Subject to the terms and conditions of
this
Agreement and the license rights granted to
Endo in the License Agreement, from
and after the Effective Date: (1) Noven
shall use commercially reasonable
efforts to supply Endo with its
requirements of Product as ordered by Endo
pursuant to the terms of this Agreement;
(2) Noven shall not supply Product to
any third Party for use or sale within the
Territory without the prior written
consent of Endo; (3) Endo shall purchase
Product exclusively from Noven; and,
(4) Endo shall only use and sell Product
within the Territory.
Section 2.02. API. In the event that either party is able to secure
a
lower price for the API from a source that
meets Noven's quality requirements,
subject to Noven's contractual commitments
with its suppliers, Noven will work
with Endo in good faith to utilize such API
in place of its own source of API.
Once agreed to by both parties to qualify a
lower price API, Endo and Noven
shall equally share all out of pocket
expenses in qualifying and otherwise
securing such new API source. To the extent
that Noven is able to use such lower
priced API, the lower cost will be
reflected in Noven's manufacturing costs for
the Product. ***. In the period prior to
commercial launch of the Product, to
the extent that Endo supplies Noven with
the API, Endo will invoice Noven for
the portion of the cost of such API for
which Noven is assuming risk pursuant to
Section 3.09 below. All such invoices shall
be due and payable within thirty
days of receipt and shall bear interest at
the rate of 1% per month or the
maximum allowable by law on any overdue
amounts. Noven shall include such API
costs in its manufacturing costs and Endo
shall deduct the API costs not
invoiced to Noven from the next *** payment
otherwise owed Noven under the
License Agreement. After the commercial
launch of the Product, Endo shall deduct
the cost of the API it supplies Noven from
the next *** payment otherwise owed
Noven under the License Agreement.
Section 2.03. COMPLIANCE WITH APPLICABLE LAW. Endo hereby covenants
and
agrees that Endo and its Affiliates shall
store, handle, transport, market,
promote, sell, distribute, use and
otherwise dispose of any Product supplied by
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Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote omissions.
Noven, and any materials used in connection
with such Product, including any
labeling, packaging and advertising, in
accordance with all Applicable Laws.
ARTICLE III FORECASTS, ORDERS, DELIVERY AND ACCEPTANCE
Section 3.01. FORECASTS. Within 30 days of the Effective Date,
Endo
shall provide to Noven a good faith, but
non-binding, forecast of its
requirements for Product for the following
twenty-four (24) months. Beginning
approximately 9 months before the
anticipated commercial launch date of the
Product by Endo and within ten Business
Days after the first day of each
calendar month thereafter during the Term,
Endo will provide Noven with a
non-binding (except as otherwise provided
in Section 3.03), rolling 12-month
forecast of its requirements of Product to
be delivered by Noven. Endo shall use
reasonable commercial efforts to ensure
that its forecasts are as accurate as
possible.
Section 3.02. VALIDATION BATCHES AND INITIAL ORDER. Noven and
Endo
hereby acknowledge and agree that, in order
to address the initial requirements
for the commercial launch of the Product,
the lead times associated with
manufacturing Product and the general
preparation for such commercial launch,
Noven and Endo will consult with each other
in good faith regarding the
anticipated commercial launch date. In
connection with such discussions Endo
will provide a binding initial purchase
order to Noven approximately *** ; the
delivery date for such purchase orders
shall be between one and thirty days
prior to the anticipated commercial launch
date of the Product. The initial
purchase orders shall be for quantities of
the Product sufficient for launch and
for the first month of sales of the
Product; such amount of product shall be no
less than *** and no greater than *** of
Endo's most recent forecasted
requirements for the first month of sales
of the Product; provided, however,
that upon request by Endo, Noven shall
attempt in good faith to supply a
quantity of the Product in excess of *** of
the amount.
Section 3.03. FUTURE ORDERS. For anticipated sales of Product by
Endo
in the second month following commercial
launch of the Product and thereafter
during the Term Endo shall submit purchase
orders to Noven for such Product on a
monthly basis. Each purchase order shall be
submitted at least ninety (90) days
prior to the expected respective sales
month. Each purchase order shall specify
an amount of Product that is at least ***
and no greater than *** of Endo's most
recent previous forecast for the applicable
month; provided, however, that upon
request by Endo, Noven shall attempt in
good faith to supply a quantity of the
Product in excess of *** of the amount
previously forecasted by Endo for any
such month. Each purchase order shall be
binding, and shall specify a delivery
date that is no sooner than ninety days
after submission of the purchase order
to Noven. In the event that the terms and
conditions of any purchase order are
inconsistent with or conflict with the
terms and conditions of this Agreement,
the terms and conditions of this Agreement
shall govern.
Section 3.04. ORDER SIZE. All purchase orders for Product placed
by
Endo shall be for amounts of product equal
to a full manufacturing batch or
multiples thereof with the amount ordered
based on the estimated actual yields.
An estimate of the number of units per
batch is attached hereto as Exhibit A.
The actual number of units delivered
pursuant to any purchase order for Product
shall be equal to the number of units
produced in each batch thereof, subject to
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Securities and Exchange Commission. Asterisks denote omissions.
reduction of the number of units produced
in any batch by the number of units
not suitable for release or otherwise
retained pursuant to the provisions of the
Quality Agreement. In the event that Noven
shall deliver less than *** of the
units ordered by Endo pursuant to any
purchase order (which number shall be
determined with reference to the number of
units estimated to be yielded by each
batch ordered by Endo as reflected on
Exhibit A), Noven shall notify Endo in
writing of the amount of such shortfall
upon discovery of the shortfall of the
Product. Endo shall, within 30 days of
receipt of such delivery, either (a)
accept such delivery in full satisfaction
of the purchase order (as to quantity
only and not in waiver of Endo's
opportunity to reject under pursuant to Section
3.07), or (b) issue a replacement purchase
order for an additional batch of the
Product, and Noven shall use reasonable
commercial efforts to deliver such
Product within 60 days of the date of such
replacement purchase order; provided,
that in either case Endo shall accept and
pay to Noven the price for the units
of Product delivered. Endo's failure to
issue a replacement purchase order
within such 30-day period shall be deemed
as an acceptance of such delivery
pursuant to subsection (a) above. Any
replacement Purchase order submitted by
Endo to Noven pursuant to this Section 3.04
shall be subject to the same terms
and conditions of this Agreement as
purchase orders submitted pursuant to
section 3.03.
Section 3.05. DELIVERY. Product shall be delivered to Endo by Noven
Ex
Works (Incoterms 2000) Noven's
Manufacturing Facility. All Products shall be
properly prepared for safe and lawful
shipment by Noven, shall be shipped to
Endo's distribution center in Memphis,
Tennessee or other location designated by
Endo, via the common carrier selected by
Endo, and shall be accompanied by
appropriate transportation and other agreed
upon documentation including,
without limitation, DEA form 222. Noven
shall ensure that the common carrier
vehicles onto which the Product is loaded
are environmentally controlled
vehicles. Noven shall make all arrangements
for shipping via the common carrier
at Endo's expense. No product of any other
party shall be shipped with the
Products. Shipping cost actually prepaid by
Noven will be billed to Endo monthly
by Noven on separate invoices.
Section 3.06. ACTIVE INGREDIENT QUOTA. On April 1 of each
calendar
year, Endo shall deliver to Noven a
forecast of its requirements of the Product
for the following calendar year, for the
purpose of assisting Noven in
projecting its demand for the Active
Ingredient for such calendar year for
submission to and approval by the DEA.
Section 3.07. ACCEPTANCE AND REJECTION OF THE PRODUCT.
(a) Endo shall, (i) in the case of defects which are discovered
during
incoming inspection by Endo, within 30 days
after Endo receives delivery of
shipment of the Product, or (ii) in the
case of latent defect, within 30 days
from the date that Endo discovered such
defect, notify Noven, in writing, of any
rejection of any such Product ("REJECTION
NOTICE"), on the basis of (A) any
non-compliance with the Specifications or
(B) failure of any such shipment to
conform with any product warranty set forth
in this Agreement. Failure to
provide Rejection Notice to Noven within
the applicable 30-day period shall
constitute acceptance by Endo of the
shipment. Any such possible Rejection
Notice shall state in reasonable detail
(sufficient to enable Noven to identify
the nature of the problem for tests or
studies to be conducted by or on its
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Securities and Exchange Commission. Asterisks denote omissions.
behalf or to dispute the same) the reason
why Endo believes the Product may not
be acceptable to Endo. Endo shall, within
five business days of its receipt of a
request by Noven for samples of rejected
Product, provide samples of the Product
being rejected, if appropriate, and copies
of written reports relating to tests,
studies or investigations performed to date
by or on behalf of Endo on the
Product being rejected.
(b) Endo's test results or basis for rejection shall be
conclusive
unless Noven notifies Endo, within 30 days
of receipt by Noven of the Rejection
Notice, that it disagrees with such test
results or basis for rejection. If Endo
and Noven fail to agree within 10 days
after Noven's notice to Endo as to
whether any Product identified in the
Rejection Notice (i) deviates from the
Specifications to any extent, or (ii)
breaches a representation or warranty in
this Agreement to an extent that the
Product is not saleable, representative
samples of the batch of the Product in
question shall be submitted to a mutually
acceptable independent laboratory or
consultant (if not a laboratory analysis
issue) for analysis or review. If such
laboratory needs to be qualified, then
Endo and Noven will equally share the cost
and expense of the qualification. The
results of such evaluation shall be binding
upon the parties. If Noven and Endo
determine by agreement or if such
evaluation certifies that the Product was
properly rejected by Endo, Endo may reject
the Product in the manner
contemplated by Section 3.07(c). The party
that is determined to have been
incorrect in its determination of whether
the Product should be rejected shall
pay the costs of any such evaluation.
Should the fees associated with the work
conducted by the independent laboratory or
consultant be due up front, Endo and
Noven shall each pay 50% of such upfront
fees; PROVIDED, that if it is
determined by the independent laboratory or
consultant that either party shall
have been incorrect in its determination,
such party shall reimburse the other
party for such 50% of fees.
(c) In the event an order or partial order is rejected by Endo
pursuant
to the provisions of this Section 3.07,
Endo shall return to Noven (or, at the
election of Noven, destroy and provide
evidence of such destruction to Noven)
any units of such rejected Product. Noven
shall, at Endo's election, either (i)
credit the original invoice in respect of
the rejected Product and re-invoice
Endo for the units that were not rejected
and credit Endo any reasonable
expenses incurred by it related to the
shipping of the rejected Product to Endo
and the return or destruction of the
rejected Product against other amounts then
due Noven hereunder or (ii) at Noven's cost
and expense, replace such rejected
Product with conforming Product as soon as
practicable. Noven shall have no
obligation to Endo with regard to any
defective Product if it is determined that
any such defect is attributable to the
failure by any Person to properly store,
transport or care for such Product after
such Product leaves Noven's possession.
(d) Notwithstanding any other provision of this Agreement to
the
contrary (except Section 3.09 below), in
the event that Endo receives Product in
violation of the Product dating warranty
set forth at Section 5.01(d), Endo will
attempt to mitigate the damages caused by
such breach by using commercially
reasonable efforts to sell such Product
with twelve (12) or more months of
dating, provided, however, that Noven shall
remain responsible for its breach of
Section 5.01(d) in the event that Endo is
unsuccessful in its efforts to sell
such Products or its results result in the
Product being sold at a reduced
price.
Section 3.08. NOTICES REGARDING SUPPLY. If at anytime during the
Term
of this Agreement Noven determines that its
ability to supply Endo's
requirements of Product may be hindered,
Noven shall promptly notify Endo.
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