Exhibit 10.1
SETTLEMENT AND LICENSE
AGREEMENT
THIS SETTLEMENT AND LICENSE AGREEMENT
(“Agreement”) is entered into effective as of the 2nd
day of August, 2006 (“Effective Date”), by and between
CEPHALON, INC., a corporation organized and existing under the laws
of the State of Delaware, with its principal place of business at
41 Moores Road, Frazer, Pennsylvania (“Cephalon”),
CARLSBAD TECHNOLOGY, INC., a corporation organized and existing
under the laws of the State of California, with its principal place
of business at 5923 Balfour Court, Carlsbad, California
(“Carlsbad”), and WATSON PHARMACEUTICALS, INC., a
corporation organized and existing under the laws of the State of
Nevada, with its principal place of business at 311 Bonnie Circle,
Corona, California (“Watson”). Each of Cephalon,
Carlsbad and Watson are sometimes referred to herein, individually,
as a “Party” and, collectively, as the
“Parties.”
WHEREAS, Cephalon is the owner by assignment of
all right and title in U.S. Reissue Patent No. RE37,516 (the
“Patent in Suit”), issued by the United States Patent
and Trademark Office on January 15, 2002.
WHEREAS, PROVIGIL® (modafinil) is the
commercial formulation of modafinil developed, manufactured and
sold by Cephalon pursuant to FDA approval of Cephalon’s NDA
No. 20-717.
WHEREAS, by letter dated January 10, 2005,
Carlsbad notified Cephalon that Carlsbad had submitted ANDA No.
76-715 to the FDA under Section 505(j) of the Federal Food, Drug
and Cosmetic Act (21 U.S.C. § 355(j)), seeking approval to
engage in the commercial manufacture, use, and sale of tablets
containing 100 mg and 200 mg of modafinil, as a generic version of
PROVIGIL® (modafinil) tablets, before the expiration date of
the Patent in Suit.
**Portions of the Exhibit have been omitted and
have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
WHEREAS, Carlsbad and Watson are parties to a
joint development agreement and a supply agreement pursuant to
which: (i) Carlsbad is obligated to assign the Carlsbad Modafinil ANDA (as defined
below) to Watson upon approval by the FDA; (ii) Watson has the sole
discretion as to whether or not to commercialize the Carlsbad
Generic Modafinil Product (as defined below); (iii) Carlsbad is
obligated to manufacture and supply the Carlsbad Generic Modafinil
Product to Watson exclusively during the term of the agreement; and
(iv) Watson
controls the Action (as defined below) with respect to
Carlsbad.
WHEREAS, Cephalon filed the Action, seeking,
among other things, a declaration that Carlsbad’s making,
using, offering to sell, selling, or importing the tablets
described in ANDA No. 76-715 would infringe the Patent in Suit, an
order providing that the effective date of any approval of
Carlsbad’s ANDA No. 76-715 shall be a date which is not
earlier than the date of the expiration of the Patent in Suit, and
an order permanently enjoining Carlsbad from making, using,
offering to sell, selling, or importing tablets as described in
Carlsbad’s ANDA No. 76-715 until the date of the expiration
of the Patent in Suit.
WHEREAS, Carlsbad answered Cephalon’s
complaint by asserting that Carlsbad’s generic version of
PROVIGIL® (modafinil) tablets described in ANDA No. 76-715
would not infringe the Patent in Suit and affirmative defenses that
the Patent in Suit is invalid and unenforceable, and by filing
counterclaims seeking declaratory judgments of invalidity and
unenforceability.
WHEREAS, Cephalon and Carlsbad have taken
discovery, but no partial or final judgment has entered in the
Action as to any issue in dispute.
WHEREAS, to avoid the time and expense of
further litigation, and in compromise of the disputed claims set
forth above, the Parties now desire to resolve their disputes by
settlement.
**Portions of the Exhibit have been omitted and
have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
NOW, THEREFORE, in consideration of the
foregoing and the mutual covenants and conditions herein set forth,
the receipt and sufficiency of which consideration is hereby
acknowledged, the Parties agree as follows:
1.
DEFINITIONS
1.1.
“Action” shall mean Cephalon, Inc. v.
Carlsbad Technology, Inc. , Civil Action No. 05-CV-1089 (JCL),
pending in the United States District Court for the District of New
Jersey.
1.2.
“Affiliate” shall mean any corporation, partnership,
joint venture or firm which controls, is controlled by or under
common control with a specified person or entity. For
purposes of this definition, “control” shall mean the
actual power, eithe r directly or indirectly through one or
more intermediaries, to direct the management and policies of a
entity whether by (a) in the case of corporate entities, direct or
indirect ownership of at least fifty percent (50%) of the stock or
shares having the right to vote for the election of directors (it
being understood that the direct or indirect ownership of a lesser
percentage of such stock shall not necessarily preclude the
existence of control) or (b) in the case of non-corporate entities,
direct or indirect ownership of at least fifty percent (50%) of the
equity interest with the power to direct the management and policy
decisions of such non-corporate entities or by contract or
otherwise.
1.3.
“ANDA” shall mean an Abbreviated New Drug Application
filed with the FDA pursuant to 21 U.S.C. 355(j) and 21 C.F.R §
314.3, or any similar or successor statute or
regulation.
1.4.
“API” shall mean an active pharmaceutical
ingredient.
**Portions of the Exhibit have been omitted and
have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
1.5.
“Carlsbad” shall mean CARLSBAD TECHNOLOGY, INC., a
corporation organized and existing under the laws of the State of
California, with its principal place of business at 5923 Balfour
Court, Carlsbad , California, and its directors,
officers, employees, agents and representatives, predecessors,
successors, and assigns; its subsidiaries, divisions, groups, and
the respective directors, officers, employees, agents and
representatives, successors, and assigns of each.
1.6.
“Carlsbad Generic Modafinil Product” shall mean any
Generic Modafinil Product marketed and sold by or on behalf
of Carlsbad and/or Watson and/or their respective
Affiliates or sublicensees in the Territory.
1.7.
“Carlsbad Modafinil ANDA” shall mean ANDA No.
76-715.
1.8.
“Cephalon” shall mean CEPHALON, INC., a corporation
organized and existing under the laws of the State of Delaware,
with its principal place of business at 41 Moores Road, Frazer,
Pennsylvania, and its directors, officers, employees, agents and
representatives, predecessors, successors, and assigns; its
subsidiaries, divisions, groups, and the respective directors,
officers, employees, agents and representatives, successors, and
assigns of each.
1.9.
“Date Certain” shall mean the later of: (a)
October 6, 2011 (three years prior to the expiration of the Patent
In Suit); or (b) in the event that Cephalon obtains a
pediatric extension on the Patent in Suit, April 6, 2012 (three
years prior to the expiration of the pediatric extension, if
obtained).
**Portions of the Exhibit have been omitted and
have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
1.10.
“Dismissal Order” shall mean the Joint
Stipulation for Dismissal with Prejudice to be filed in the Action
pursuant to the terms of this Agreement, as set forth in Exhibit A
attached hereto.
1.11.
“FDA” shall mean the United States Food and Drug
Administration or any successor agency thereof.
1.12.
“Final Court Decision” shall mean a final decision of
any federal court from which no appeal has been or can be taken
(other than a petition to the United States Supreme Court for
a writ of certiorari ).
1.13.
“Generic Modafinil Product” shall mean
[**].
1.14.
“Listed Patents” shall mean [**].
1.15.
“Modafinil Litigation” shall mean any
action filed under 35 U.S.C. §§ 271 and 281
against any Modafinil Paragraph IV ANDA Filing Entity.
1.16.
“Modafinil Paragraph IV ANDA Filing Entity” shall mean
any entity, other than Carlsbad or Watson, that has notified
or subsequently notifies Cephalon that it has filed
an ANDA with a Paragraph IV certification concerning a product
containing modafinil as an API and for which PROVIGIL® is the
reference listed drug.
1.17.
“NDA” shall mean Cephalon’s NDA No. 20-717 filed
with the FDA, and all supplements and amendments filed
thereto.
1.18.
“Net Profits” shall mean the gross receipts derived in
arms-length transactions from the sale of Carlsbad Generic
Modafinil Product in the Territory by Watson (or by its
**Portions of the Exhibit have been omitted and
have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
Affiliates and/or sublicensees) to independent
third parties in the Territory, less the sum of the following
items:
(a) Import, export, excise and
sales taxes and custom duties paid or allowed by the selling party
and any other governmental charges imposed upon the production,
importation, use or sale of Carlsbad Generic Modafinil Product by
Carlsbad, Watson and/or their Affiliates and/or
sublicensees;
(b) Credit for returns, refunds,
rebates and allowances, or trades to customers for returned or
recalled Carlsbad Generic Modafinil Product;
(c) Trade, quantity and cash
discounts;
(d) Transportation, freight and
insurance allowances;
(e) Rebates (direct or indirect)
actually granted to wholesalers or other customers, rebates or
administrative fees in lieu of rebates paid to managed care,
institutions, government purchasers, Medicaid and other similar
government programs, chargebacks and retroactive price adjustments,
and any other similar allowances which effectively reduce the net
selling price; and
(f) The purchase price paid
to Cephalon for Carlsbad Generic Modafinil Product pursuant to
Section 3.4 and any applicable license and supply agreement among
the Parties, or the costs incurred by Carlsbad or Watson to make
Carlsbad Generic Modafinil Product.
Net
Profits shall be calculated according to US GAAP consistently
applied. Sales or transfers between or among a party to this
Agreement and its Affiliates shall be excluded from the computation
of Net Profits except where such Affiliates are end users, but Net
Profits shall include the subsequent final sales to third parties
by such Affiliates.
**Portions of the Exhibit have been omitted and
have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
Where (i) Carlsbad Generic Modafinil Product is
sold as one of a number of items without a separate price; or (ii)
the consideration for the Carlsbad Generic Modafinil Product shall
include any non-cash element; or (iii) the Carlsbad Generic
Modafinil Product shall be transferred in any manner other than an
invoiced sale, the gross sales applicable to any such transaction
shall be deemed to be the selling party’s average gross sales
for the applicable quantity of Carlsbad Generic Modafinil Product
during the calendar quarter. If there are no independent
gross sales of Carlsbad Generic Modafinil Product in the Territory
at that time, then Watson, Carlsbad and Cephalon shall appoint a
mutually acceptable third party (that is not an Affiliate of either
Watson, Carlsbad or Cephalon) to determine in good faith an
estimate of the gross sales applicable to any such transactions
based on a consideration of all relevant market factors, taking
into account practices and policies customary in the
industry.
In
the event that any discounts, allowances, payments or rebates are
offered for the Carlsbad Generic Modafinil Product where it is sold
to a customer as a grouped set of products, the applicable
discount, allowance, payment or rebate for the Carlsbad Generic
Modafinil Product for purposes of calculating Net Profits under
this Agreement shall be based upon the weighted average discount,
allowance, payment or rebate of such grouped set of products; each
to the extent consistent with Watson’s usual course of
dealing for its products other than the Carlsbad Generic Modafinil
Product.
1.19.
“Orange Book” shall mean the “Approved Drug
Products with Therapeutic Equivalence Evaluations” published,
in written or electronic form, by the FDA, as may be amended from
time to time during the term of this Agreement.
1.20.
“Patent In Suit” shall have the meaning
set forth in the recitals.
**Portions of the Exhibit have been omitted and
have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
1.21.
“Product” shall mean a finished dosage
form.
1.22.
“Territory” shall mean the United States,
its territories, possessions, protectorates and the Commonwealth of
Puerto Rico.
1.23.
“Valid Claim” shall mean an issued and unexpired patent
claim which has not been held to be invalid or unenforceable by a
court of competent jurisdiction in a Final Court
Decision.
1.24.
“Watson” shall mean WATSON PHARMACEUTICALS, INC., a
corporation organized and existing under the laws of the State of
Nevada, with its principal place of business at 311 Bonnie Circle,
Corona, California, and its directors, officers, employees, agents
and representatives, predecessors, successors, and assigns; its
subsidiaries, divisions, groups, and the respective directors,
officers, employees, agents and representatives, successors, and
assigns of each.
2.
OBLIGATIONS OF THE PARTIES
2.1.
Carlsbad and Watson Warranty .
The
Parties agree that this Agreement includes a settlement which is a
compromise of a disputed claim and that acceptance of the
consideration herein is not to be construed as an admission by
any Party
as to the underlying
merits of the Action. However, as an express inducement to
Cephalon to enter into this settlement, in consideration of the
terms hereof, Carlsbad and Watson each hereby warrant, represent
and agree that Carlsbad and Watson, on behalf of themselves and
their Affiliates, will not make, use, offer to sell, or sell, or
actively induce or assist any other entity to make, use, offer to
sell, or sell any Generic Modafinil Product
**Portions of the Exhibit have been omitted and
have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
within the Territory, or import or cause to be
imported any Generic Modafinil Product into the Territory, except
as otherwise permitted under, and according to the terms of, the
license granted by Cephalon in connection with this
Agreement. The Parties agree that, subject to Section 3.3
of this Agreement, as used in this Section 2.1,
“induce” and “assist” shall include
Carlsbad’s provision of modafinil API to parties it knows or
has reason to know will make, use, offer to sell, sell, import or
cause to be imported a Generic Modafinil Product in the Territory
prior to the Date Certain.
2.2.
Within [**] of the execution by all Parties of this Agreement,
Cephalon shall make a [**] payment to Watson of [**], in
recognition of the savings inuring to Cephalon in terms of the
avoidance of costs, expenditure of time and resources, disruption
and burden associated with prosecuting the Action. Carlsbad
acknowledges and agrees that, as between Watson and Carlsbad, such
payment to Watson is appropriate, since Watson controls the Action
with respect to Carlsbad.
3.
WATSON GENERIC RIGHTS
3.1.
Cephalon grants to Watson the non-exclusive, sublicensable right
and license under the Listed Patents to manufacture, have
manufactured, use, market and sell Carlsbad Generic Modafinil
Product in the Territory (the “License”) according to
the following terms:
3.1.1. The
License shall be effective on or after the Date Certain.
Watson shall pay to Cephalon a royalty equal to [**].
3.1.2.
Notwithstanding Section 3.1.1, in the event that Cephalon licenses
or permits any entity other than Cephalon or its Affiliates to sell
any Generic Modafinil
**Portions of the Exhibit have been omitted and
have been filed separately pursuant to an application for
confidential treatment filed with the Securities and Exchange
Commission pursuant to Rule 24b-2 under the Securities Exchange Act
of 1934, as amended.
Product in the Territory prior to the Date
Certain (other than pursuant to a license granted to a third party,
whether by settlement or otherwise, that is subject to suspension
provisions similar to those set forth in Sections 3.1.3.3 and
3.1.3.6), the License shall be effective on the date on which such
other licensed entity begins selling a Generic Modafinil Product in
the Territory. In the event that the License becomes
effective prior to the Date Certain under the terms of this
Section, Watson shall pay Cephalon a royalty equal to [**]
Carlsbad Generic Modafinil Product sold by the Licensees prior to
the Date Certain.
3.1.3.
Notwithstanding Section 3.1.1, in the event that any Modafinil
Paragraph IV ANDA Filing Entity sells in the Territory any Generic
Modafinil Product prior to the Date Certain, the License shall be
effective at the same time, subject to the following
restrictions:
3.1.3.1. Watson shall pay to
Cephalon a royalty equal to [**] Carlsbad Generic Modafinil
Product sold by the Licensees pursuant to Section 3.1.3.
3.1.3.2. In the event that
Cephalon seeks a temporary restraining order or other relief
against such Modafinil
