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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:
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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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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***%
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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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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 independent third parties except in
arm’s-length transactions for monetary consideration.
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4.2 The 2002 Agreement is hereby amended by
deleting Section&
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