AMENDED AND RESTATED STRATEGIC ALLIANCE AGREEMENT

Strategic Alliance Agreement

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100 Painters Drive, Chadds Ford | ENDO PHARMACEUTICALS INC | PENWEST PHARMACEUTICALS CO

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Title: AMENDED AND RESTATED STRATEGIC ALLIANCE AGREEMENT
Governing Law: New York Date: 1/11/2007
Industry: BIOTRX Sector: HEALTH

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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:

1.	DEFINITIONS

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.

2.	NET SALES DEFINITION

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:

"1.45

"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.

1.46

"2007 Amendment" shall mean that certain Amendment Agreement dated as of January 7, 2007 by and between Penwest and Endo.

1.47

"2007 Amendment Effective Date" shall mean January 7, 2007."

3.	CERTIFICATION EXCESS

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:

"3.5.3

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."

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.

4.	ROYALTIES AND OTHER PAYMENTS

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 .

4.5.1

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:


Calendar Year U.S. Product Net Sales		Royalty Rate (as a percentage of U.S. Product Net Sales)
Amounts less than $150,000,000		22%
Amounts greater than or equal to $150,000,000 and less than $***		25%
Amounts greater than or equal to $* and less than $*		***%
Amounts greater than or equal to $* and less than $*		***%
Amounts greater than or equal to $*** and less than $1,000,000,000		***%
Amounts greater than or equal to $1,000,000,000		30%

4.5.2

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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Section 4.7.

4.5.3

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.

4.5.4

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 independent third parties except in arm’s-length transactions for monetary consideration.

4.2 The 2002 Agreement is hereby amended by deleting Section&