Exhibit 10.18.1
The confidential portions of this
exhibit have been filed separately with the Securities and Exchange
Commission pursuant to a confidential treatment request in
accordance with Rule 24b-2 of the Securities and Exchange Act of
1934 as amended. REDACTED PORTIONS OF THIS EXHIBIT ARE MARKED BY AN
***.
EXECUTION COPY
AMENDMENT
AGREEMENT
This amendment (this “2007
Amendment”) to the Amended and Restated Strategic Alliance
Agreement dated as of April 2, 2002 (the “2002
Agreement”) by and between PENWEST PHARMACEUTICALS CO., a
corporation organized and existing under the laws of the State of
Washington, with its principal place of business at 39 Old
Ridgebury Road, Danbury, Connecticut 06810 (“Penwest”),
and ENDO PHARMACEUTICALS INC., a corporation organized and existing
under the laws of the State of Delaware, with its principal place
of business at 100 Painters Drive, Chadds Ford, Pennsylvania 19317
(“Endo”), is entered into by and between Penwest and
Endo this 7th day of January, 2007.
WHEREAS , pursuant to the
2002 Agreement, Penwest and Endo have developed and commercialized
the Product, (as defined in the 2002 Agreement);
WHEREAS, under the terms of the 2002
Agreement, Endo is required to pay Royalties (as defined in the
2002 Agreement) to Penwest with respect to the Product based on Net
Realization (as defined in the 2002 Agreement) and other factors
set forth in the 2002 Agreement;
WHEREAS, certain disagreements have
arisen between Penwest and Endo regarding the calculation of
Royalties and other matters relating to the parties’
respective rights and obligations under the 2002 Agreement;
and
WHEREAS, in order to resolve their
differences and for other reasons, the parties desire to modify the
2002 Agreement to provide that Royalties be calculated based on net
sales of the Product in the United States and to change certain
related provisions of the 2002 Agreement;
NOW, THEREFORE, in consideration of
the foregoing and the mutual covenants and conditions herein set
forth, the receipt and sufficiency of which consideration are
hereby acknowledged, the parties agree as follows:
Capitalized terms used in this 2007
Amendment and not defined in this 2007 Amendment shall have the
meanings ascribed to them in the 2002 Agreement.
The Definitions Exhibit to the 2002
Agreement is hereby amended by inserting immediately following
Section 1.44 of the Definitions Exhibit to the 2002 Agreement
the following:
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“1.45
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“U.S. Product Net
Sales” shall mean the gross amount invoiced by Endo and its
Affiliates and sublicensees for the sale or other disposition of
the Product to independent third parties in the United States less
the following amounts, in each
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case determined in accordance
with generally accepted accounting principles as consistently
applied to all products of Endo: (i) discounts, including cash
discounts, discounts to managed care or similar organizations or
government organizations, rebates paid, credited, accrued or
actually taken, including government rebates such as Medicaid
chargebacks or rebates, and retroactive price reductions or
allowances actually allowed or granted from the invoiced amount,
and commercially reasonable and customary fees paid to
distributors; (ii) credits or allowances actually granted upon
claims, rejections or returns of such sales of Product, including
recalls, regardless of the party requesting the claim, rejection,
or return; and (iii) provisions for actual uncollectible
accounts.
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1.46
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“2007
Amendment” shall mean that certain Amendment Agreement dated
as of January 7, 2007 by and between Penwest and
Endo.
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1.47
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“2007
Amendment Effective Date” shall mean January 7,
2007.”
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3.1 The 2002 Agreement is hereby
amended by deleting Section 3.5.3 of the 2002 Agreement in its
entirety and inserting the following new Section 3.5.3 in its
place:
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“3.5.3
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In view of
Penwest having elected, as of March 18, 2003, not to
participate further in the U.S. Certification Period,
Section 6.7 shall apply and the other provisions of this
Agreement shall remain in effect in accordance with their terms and
the terms of Section 6.7; provided , however ,
that , as the U.S. Certification Period ended prior to the
2007 Amendment Effective Date and the parties have agreed that the
Certification Excess arising from the U.S. Certification Period
shall be deemed to be $28,000,000 and shall not be subject to
further adjustment, audit or dispute between the parties, and Endo
shall have the right to recoup such Certification Excess solely
through the Royalty reduction mechanism set forth in the
immediately following sentence. Commencing at such time as
cumulative Royalties otherwise (i.e., without giving effect to
Section 4.5.2) payable to Penwest pursuant to
Section 4.5.1 exceed $41,000,000, Endo shall pay Penwest fifty
percent (50%) of the Royalties otherwise due under
Section 4.5.1 until Endo has thereby recouped the $28,000,000
total Certification Excess."
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3.2 The parties hereby agree that
the Certification Excess with respect to the Product and the
Certification Period for the Product in the United States shall
equal $28,000,000; that such amount shall not be subject to further
adjustment, audit or dispute between the parties; that neither of
the parties shall have any obligation under Section 3.7 of the
2002 Agreement, including without limitation, no obligation on the
part of Endo to issue invoices under Section 3.7; and that
Penwest’s sole and exclusive liability with respect to the
Certification Excess with respect to the U.S. Certification Period
and the expenditures, costs and other resources devoted by the
parties to U.S. Certification Tasks during the Certification Period
is the reduction in Royalties payable by Endo to Penwest set forth
in Section 3.5.3 of the 2002 Agreement, as
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amended by this 2007 Amendment; provided
, however , that, for the sake of clarity, the parties
further acknowledge and agree that all amounts previously borne or
paid by Penwest with respect to the U.S. Certification Period shall
not be remitted to or otherwise recoupable by Penwest.
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4.
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ROYALTIES
AND OTHER PAYMENTS
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4.1 The 2002 Agreement is hereby
amended by deleting Section 4.5 in its entirety and inserting
the following new Section 4.5 in its place:
“4.5 Royalties; Recoupment
of Certification Excess .
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4.5.1
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U.S. Product
Net Sales . With respect
to Product sold or otherwise disposed of in the United States in a
calendar year, Endo hereby agrees to pay to Penwest Royalties equal
to the following percentages of such calendar year U.S. Product Net
Sales:
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Calendar Year U.S. Product Net
Sales
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Royalty Rate (as a percentage of
U.S. Product Net Sales)
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Amounts less than $150,000,000
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22%
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Amounts greater than or equal
to
$150,000,000 and less than
$***
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25%
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Amounts greater than or equal
to
$*** and less than $***
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***%
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Amounts greater than or equal
to
$*** and less than $***
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***%
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Amounts greater than or equal
to
$*** and less than
$1,000,000,000
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***%
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Amounts greater than or equal
to
$1,000,000,000
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30%
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4.5.2
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Notwithstanding
Section 4.5.1, the first $41,000,000 in cumulative Royalties
otherwise payable by Endo to Penwest pursuant to Section 4.5.1
(including, for purposes of clarity, Royalties on all U.S. Product
Net Sales commencing with the commercial launch of the Product in
2006) shall not be payable and the corresponding U.S. Product Net
Sales shall be excluded from Endo’s Royalty obligations under
Section 4.5.1; provided, however, that such corresponding U.S.
Product Net Sales shall not be excluded from the calculation of
Calendar Year U.S. Product Net Sales for purposes of calculating
the Royalty rate under Section 4.5.1 or of Calendar Year U.S.
Product Net Sales for purposes of Section 4.10. Any exclusion
pursuant to this Section 4.5.2 shall be reflected in the
statements provided for in
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4.5.3
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With respect to
Product sold or otherwise disposed of in the Territory outside the
United States, Endo hereby agrees to pay to Penwest Royalties equal
to the Applicable Percentage of the relevant Net Realization from
all units of the Product sold by Endo and its distributors and
licensees in the Territory outside the United States;
provided that unless otherwise agreed by the parties,
development and commercialization of the Product in the Territory
outside the United States shall be subject to Section 5.1(c)
of the 2007 Amendment.
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4.5.4
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Bundling;
Certain Other Sales .
Endo, its Affiliates and sublicensees shall be permitted to bundle
the Product together with any other product(s) in any sale or
transfer of the Product; provided however that the revenues from
such product bundles shall be equitably allocated and none of Endo,
its Affiliates or sublicensees shall disproportionately discount
the Product compared to the other product(s) in the bundle. None of
Endo, its Affiliates or sublicensees shall make commercial sales of
the Product to indepen
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