MANUFACTURE AND SUPPLY AGREEMENT

 

                                                                  EXHIBIT 10.266

 

 

                        MANUFACTURE AND SUPPLY AGREEMENT

 

This Manufacture and Supply Agreement (hereinafter called "Agreement") is made

and entered into as of the date of last signature below and is effective as of

the 1st day of January, 2004 (the "Effective Date"), by and among

 

SERAGEN, INC., a corporation organized and existing under the laws of Delaware

and having its principal place of business at 10275 Science Center Drive, San

Diego, California 92121 (hereinafter called "SERAGEN") and

 

CAMBREX BIO SCIENCE HOPKINTON, INC., a corporation organized and existing under

the laws of Delaware and having a principal place of business at 97 South

Street, Hopkinton, MA 01748 (hereinafter called "CBSH").

 

WHEREAS, SERAGEN has developed a biological entity designated as DAB389IL-2,

prepared as a purified drug substance; and

 

WHEREAS, SERAGEN desires to have CBSH (a) manufacture, store, test and supply

Fermentation Pellets, First Gen PDS and Second Gen PDS (each as defined below),

(b) test First Gen FDP and Second Gen FDP (each as defined below), and (c)

perform stability testing on Fermentation Pellets, First Gen PDS, Second Gen

PDS, First Gen FDP and Second Gen FDP, and (d) perform any and all services as

described in Article II of this Agreement, all in accordance with cGMP; and

 

WHEREAS, SERAGEN may, from time to time, desire to purchase from CBSH additional

services such as, but not limited to, cell line stock storage, supplemental

Fermentation Pellets, First Gen PDS and Second Gen PDS storage and

regulatory/CMC consulting, all in accordance with cGMP; and

 

WHEREAS, CBSH is willing to (a) undertake the manufacture, storage, testing and

supply of Fermentation Pellets, First Gen PDS and Second Gen PDS, (b) test First

Gen FDP and Second Gen FDP, (c) perform stability testing on Fermentation

Pellets, First Gen PDS, Second Gen PDS, First Gen FDP and Second Gen FDP, and

(d) perform services as described above according to the terms, conditions and

covenants hereinafter set forth.

 

NOW, THEREFORE, the parties hereto, in consideration of the promises and the

mutual covenants and agreements contained herein, the sufficiency of which are

hereby acknowledged, agree as follows:

 

                                    ARTICLE I

 

                                   DEFINITIONS

 

1.0 DEFINED TERMS. In addition to terms otherwise defined in this Agreement, the

following terms have the specified meanings for purposes of this Agreement:

 

 

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1.01 "Affiliate" shall mean any corporation, firm, partnership, individual or

other form of business organization which is now or hereafter owned or

controlled by a Party or, any corporation in which a Party owns at least fifty

percent (50%) of the stock entitled to vote for directors or otherwise controls

the election of directors, and any corporation, firm, partnership, individual or

other form of business organization in which a Party has the maximum ownership

interest it is permitted to have in the country where such business organization

exists.

 

1.02 "Batch" shall mean:

 

     For First Gen PDS: the total amount of PDS from the purification of a

single Fermentation Pellet resulting in not less than *** of DAB389IL-2; and

 

     For Second Gen PDS: the total amount of PDS from the purification of ***

Fermentation Pellets resulting in not less than the minimum validated yield for

DAB389IL-2 as shall be set forth on two (2) schedules to be proposed by SERAGEN

and mutually agreed upon by the Parties and thereafter attached to this

Agreement (and made a part thereof); a separate schedule shall be proposed,

agreed and attached for each of (i) clinical and commercial Batches of Second

Gen PDS and (ii) development and validation Batches of Second Gen PDS; and

 

     For Fermentation Pellets: A minimum of *** pellets resulting in not less

than *** grams of total protein per pellet according to validated procedures

then in effect.

 

1.03 "Batch Acceptance Date" shall mean the later of (a) the date set forth on

the applicable purchase order or (b) thirty (30) days after SERAGEN's receipt of

all MRR Documentation, subject to the acceptance and rejection procedures set

forth in Sections 2.14(a) and 2.14(c).

 

1.04 "Certificate of Analysis" means the form listing: the name and CBSH part

number of the applicable Product, SERAGEN's name, all tests performed on such

Product as specified in the current Specifications for such Product, each test

method, each test specification and the reported assay result for each test.

 

1.05 "cGMP" shall mean as of the Effective Date of this Agreement, the current

good manufacturing practices standards required by the FDA, as set forth in

Title 21 C.F.R., Parts 210, 211 and 600 as applicable, in the United States Food

and Drug Act, as amended, the good manufacturing practices required by the EMEA,

as set forth in the European Rules and Guidances for Pharmaceutical

Manufacturers and Distributors and/or the European Good Manufacturing Guidances,

Rules and Directives, or the applicable FDA and EMEA regulations, policies or

guidelines in effect, at the time of manufacture, for the manufacture and

testing of pharmaceutical materials as applied to bulk pharmaceuticals and/or

biologics.

 

1.06 "DAB389IL-2" shall mean a fusion protein developed by SERAGEN and sold in

the United States under the trademark ONTAK(R) comprising the first 389 amino

acids of the A and B fragments of the diphtheria toxin combined with

interleukin-2.

 

1.07 "EMEA" shall mean the European Agency for the Evaluation of Medicinal

Products.

 

 

***Portions of this page have been omitted pursuant to a request for

Confidential Treatment and filed separately with the Commission.

 

 

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1.08 "Facility" shall mean the testing and manufacturing facility at 97 South

Street, Hopkinton, Massachusetts 01748 and the warehouse facility located at 99

South Street, Hopkinton, Massachusetts 01748.

 

1.09 "FDA" shall mean the United States Food and Drug Administration.

 

1.10 "Fermentation Pellet" shall mean the inclusion body preparation of

unpurified DAB389IL-2 protein produced from the growth and induction of the

DAB389IL-2 working cell bank.

 

1.11 "First Gen FDP" shall mean the final drug product processed and/or packaged

in its final dosage form resulting from formulation and fill of First Gen PDS

and whose samples are received by CBSH under CBSH part #90-204-02.

 

1.12 "First Gen PDS" shall mean DAB389IL-2 prepared as a purified drug substance

and ready for fill/finish by SERAGEN, manufactured by CBSH pursuant to the

applicable Manufacturing and Release Requirements set forth in the Production

Record and in CBSH part #60-104.

 

1.13 "Food and Drug Act" shall mean the Food, Drug and Cosmetic Act, as set

forth in 21 U.S.C. 301-391.

 

1.14 "Intellectual Property" shall mean all know-how, copyrights, designs,

databases, mask works, patents, trademarks, trade names and other proprietary

data and rights, and all registrations and applications therefor.

 

1.15 "Lot" shall mean, as applicable, (i) the total number of vials of First Gen

FDP and Second Gen FDP resulting from a single fill and finishing process or

(ii) the total number of vials qualified as part of a reference standard

qualification or re-qualification.

 

1.16 "Manufacturing and Release Requirements" shall mean any and all

Specifications and release requirements mutually agreed on between the Parties

for Fermentation Pellets, First Gen PDS, or Second Gen PDS as the case may be,

and as to each, its manufacture, including, without limitation, all raw

materials, solvents, reagents, processing, storage, shipping and packaging

specifications and necessary test protocols, release specifications,

Certificates of Analysis and other documentation required to describe, control

and assure the quality manufacture and testing of each in compliance with the

applicable Regulatory Requirements, all as contained in the Production Record or

the MRR Documentation and any SOPs which govern the manufacture, storage,

handling and testing of each.

 

1.17 "MRR Documentation" means all production and release documentation as

described in Exhibit "A".

 

1.18 "Party" or "party" shall mean either SERAGEN or CBSH, and the terms

"Parties" or "parties" shall, as appropriate, mean SERAGEN and CBSH.

 

1.19 "Process Improvements" shall mean any improvement made to the method of

manufacture of Fermentation Pellets, First Gen PDS and/or Second Gen PDS.

 

 

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1.20 "Product" shall mean Fermentation Pellets, First Gen PDS, Second Gen PDS,

First Gen FDP and/or Second Gen FDP.

 

1.21 "Product Intellectual Property" shall mean all Intellectual Property which

is specifically related to the Product and its method of manufacture, including

Process Improvements which are specifically related to the Product. Product

Intellectual Property shall not include Intellectual Property (including Process

Improvements) that relates generally to the development and manufacture of

biopharmaceuticals and that has application to and or value for developing and

manufacturing biopharmaceuticals other than the Product.

 

1.22 "Production Record" means the documentation that contains a detailed

description of the manufacturing process for Fermentation Pellets, First Gen PDS

or Second Gen PDS, as the case may be, and any other instructions to be followed

by CBSH in the production of Fermentation Pellets, First Gen PDS and/or Second

Gen PDS.

 

1.23 "Regulatory Agency" shall mean, as of the Effective Date of this Agreement,

the regulatory agencies with authority over the manufacture, testing and/or

shipment of Product, and as further defined or supplemented pursuant to Exhibit

"D".

 

1.24 "Regulatory Requirements" means the cGMP in effect at the particular time,

issued or required by the Regulatory Agency for the methods to be used in, and

the facilities and controls to be used for, the manufacture, processing,

packaging and storage of the manufactured Product.

 

1.25 "Second Gen FDP" shall mean the final drug product processed and/or

packaged in its final dosage form resulting from formulation and fill of Second

Gen PDS and whose samples are received by CBSH under CBSH part #90-304-02.

 

1.26 "Second Gen PDS" shall mean DAB389IL-2 prepared as a purified drug

substance and ready for formulation, fill and finish by SERAGEN, manufactured by

CBSH pursuant to the applicable Manufacturing and Release Requirements set forth

in the Production Record and in CBSH part #60-304.

 

1.27 "SERAGEN Authorized Personnel" shall mean SERAGEN or Ligand Pharmaceuticals

Incorporated personnel set forth on attached Exhibit "F."

 

1.28 "Shipment Date" shall mean the date designated by SERAGEN in writing upon

which Fermentation Pellets, First Gen PDS and/or Second Gen PDS will be

delivered by CBSH to SERAGEN's designated carrier.

 

1.29 "SOPs" shall mean standard operating procedures related to the Product and

the process of manufacturing the Product, as approved by both SERAGEN and CBSH.

 

1.30 "Specifications" shall mean any and all specifications mutually agreed on

between the Parties for the manufacture of Fermentation Pellets, First Gen PDS

and/or Second Gen PDS, including, without limitation, all raw materials,

solvents, reagents and processing specifications contained within the MRR

Documentation and part of the Manufacturing and Release Requirements.

 

 

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1.31 "Summary of Testing" shall mean the form that is used to report the results

of testing for which there are no corresponding Specifications or for First Gen

FDP and/or Second Gen FDP which is not released by CBSH; the responsibility for

release of such First Gen FDP and/or Second Gen FDP rests with SERAGEN.

 

                                   ARTICLE II

 

                             MANUFACTURE AND SUPPLY

                    OF FERMENTATION PELLETS, FIRST GEN PDS, AND

                       SECOND GEN PDS AND RELATED SERVICES

 

2.01 MANUFACTURE AND SUPPLY OF FERMENTATION PELLETS, FIRST GEN PDS AND/OR SECOND

GEN PDS. CBSH shall, from time to time, as requested by SERAGEN, manufacture and

supply to SERAGEN Fermentation Pellets, First Gen PDS and/or Second Gen PDS

produced, tested and packaged according to the Manufacturing and Release

Requirements under the terms and conditions of this Agreement, and in accordance

with all Regulatory Requirements.

 

2.02 VALIDATION REQUIREMENTS.

 

     (a)   SECOND GENERATION VALIDATION. CBSH shall provide validation for all

          equipment, manufacturing processes and procedures, cleaning processes

          and procedures, and analytical test methodologies (together "Equipment

          and Procedures") which are used in the manufacture and testing of

          Second Gen PDS and testing of Second Gen FDP, in accordance with a

          mutually agreed-upon validation plan according to the rates set forth

          in Exhibit "C".

 

     (b)   MAINTENANCE OF CURRENT & FUTURE VALIDATIONS. CBSH shall use

          commercially reasonable efforts to maintain the current and all future

          validations for all Equipment and Procedures which are used in the

          manufacture and testing of Fermentation Pellets, First Gen PDS and/or

          Second Gen PDS and testing of First Gen FDP and/or Second Gen FDP.

          CBSH shall use commercially reasonable efforts to maintain such

          validations in accordance with cGMP.

 

     (c)   ADDITIONAL VALIDATIONS. Additional validations that may be requested

          by SERAGEN (i) in connection with the manufacture and testing of

          Fermentation Pellets, First Gen PDS, Second Gen PDS, First Gen FDP

          and/or Second Gen FDP or (ii) to comply with the Regulatory

          Requirements of a Regulatory Agency, will be executed as described in

          the terms and conditions of this Agreement. All such additional

          validations will be performed in accordance with the Additional

          Services rates set forth in Exhibit "B". Any other additional

          validations not covered by this Section 2.02(c) shall be at CBSH's

          cost and expense.

 

2.03 REGULATORY INSPECTIONS. CBSH shall prepare for, submit to and endeavor to

pass all inspections deemed necessary by the Regulatory Agencies, and both

Parties shall cooperate to allow CBSH to promptly correct all deficiencies, and

both Parties shall cooperate, such that CBSH is able to timely manufacture and

supply Fermentation Pellets, First Gen PDS and/or Second Gen PDS for SERAGEN.

Cost for such preparations, inspections and corrective actions

 

 

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for Fermentation Pellets, First Gen PDS, and/or Second Gen PDS-related

inspections will be in accordance with the Additional Services rates set forth

in Exhibit "B".

 

2.04 DEVIATIONS & INVESTIGATIONS. SERAGEN shall be notified in writing of all

process deviations, manufacturing failures, errors/accidents and

out-of-specification results, which are significant in each case, within one (1)

working day of CBSH's knowledge of such. For purposes of this Section 2.04, all

such notifications must be made by facsimile transmission to the current

"Director, Quality Assurance & Compliance" for Ligand Pharmaceuticals

Incorporated ("LIGAND") and LIGAND quality assurance (quality assurance

hereinafter referred to as "QA"), which shall be deemed received upon

confirmation of facsimile transmission, and those notice provisions set forth in

Section 10.01 shall not be applicable. SERAGEN and CBSH shall agree on the scope

and timing of resulting investigations as well as process changes for any

subsequent Batches, all as consistent with cGMP and/or Regulatory Requirements.

 

2.05 RELEASE TESTING. CBSH shall, from time to time as requested by SERAGEN,

perform analytical release testing using validated procedures for First Gen FDP

and Second Gen FDP according to SOPs. CBSH shall perform the work detailed in

all SOPs under cGMP conditions, and shall perform the work as detailed in the

SOPs within the time defined in the SOP, including laboratory testing, QA review

of data and final report. In the event that SERAGEN requests a repeat of a test,

and the request is in accordance with CBSH's retest policy, CBSH shall begin the

work within one (1) week of the request, and complete the work within the time

specified in the SOPs. In the event that analytical results fail to meet

Specifications or acceptance criteria as defined in the SOPs or Manufacturing

and Release Requirements, CBSH will undertake any resulting investigations and

other action required as per cGMP and CBSH internal standard operating

procedures or protocols. Any investigations other than those required by cGMP

and/or CBSH internal standard operating procedures or protocols and if requested

by SERAGEN will be performed in accordance with the Additional Services rates

set forth in "Exhibit B." Although CBSH will be performing First Gen FDP and

Second Gen FDP release testing, SERAGEN is, and at all times will remain,

responsible for final release of the First Gen FDP and Second Gen FDP for sale

and/or use. CBSH assumes no responsibility or liability whatsoever related to

final release of First Gen FDP and Second Gen FDP for sale and/or use.

 

2.06 STABILITY TESTING. CBSH shall, from time to time, as requested by SERAGEN,

perform stability testing using validated procedures for First Gen FDP, Second

Gen FDP, Fermentation Pellets, First Gen PDS and/or Second Gen PDS, according to

SOPs. CBSH shall perform the work detailed in all SOPs or protocols under cGMP

conditions, and shall perform the work as detailed in the SOPs or protocols

within the time defined in the SOP or protocol, including laboratory testing, QA

review of data and final report. In the event that SERAGEN requests a repeat of

a test/SOP or protocol, CBSH shall begin the work within one (1) week of the

request, and complete the work within the time specified in the SOPs or

protocols. In the event that stability test results fail to meet Specifications

or acceptance criteria as defined in the SOPs, protocols, or Manufacturing and

Release Requirements, CBSH will undertake any resulting investigations and other

action required as per cGMP and CBSH internal standard operating procedures or

protocols. Any stability testing or investigations other than those required by

cGMP and/or CBSH internal standard operating procedures or protocols and if

requested by

 

 

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SERAGEN will be performed in accordance with the Additional Services rates set

forth in "Exhibit B."

 

2.07 FORECASTS. SERAGEN will provide CBSH with an initial preliminary

non-binding forecast for production of Fermentation Pellets, First Gen PDS

and/or Second Gen PDS, covering the calendar year 2004, no later than ten (10)

business days following the date of last signature below. Thereafter, on or

before each December 31st (as to July through December of the following calendar

year) and June 30th (as to January through June of the following calendar year)

during the Term of the Agreement, SERAGEN will provide CBSH with a twelve (12)

month preliminary non-binding forecast for production of Fermentation Pellets,

First Gen PDS and/or Second Gen PDS. CBSH shall notify SERAGEN within ten (10)

business days of receipt of each forecast if it anticipates that it will be

unable to meet any or all of the last six (6) months of the forecasted

requirements, provided however, that failure to make such notification will not

obligate CBSH to supply amounts of Fermentation Pellets, First Gen PDS and/or

Second Gen PDS beyond the limitations set forth below in Section 2.08.

 

2.08 PURCHASE ORDERS. SERAGEN will provide CBSH with the initial binding

purchase order for production of Fermentation Pellets, First Gen PDS and/or

Second Gen PDS requirements, covering the first six (6) months of calendar year

2004 and providing CBSH with no less than six (6) months lead time on the first

proposed Batch Acceptance Date, no later than ten (10) business days following

the date of last signature below. Thereafter, on or before each December 31st

(as to July through December of the following calendar year) and June 30th (as

to January through June of the following calendar year) during the Term of the

Agreement, SERAGEN will provide CBSH with a six (6)-month binding purchase order

for production of Fermentation Pellets, First Gen PDS and/or Second Gen PDS

requirements. All binding purchase orders submitted by SERAGEN for manufacture

of Fermentation Pellets, First Gen PDS and/or Second Gen PDS must contain Batch

Acceptance Date(s) for such Fermentation Pellets, First Gen PDS and/or Second

Gen PDS within the relevant time period covered by such purchase order. If CBSH

is unable to meet a Batch Acceptance Date, CBSH shall notify SERAGEN within ten

(10) business days of receipt of a purchase order and CBSH and SERAGEN shall

work together, in good faith, to set an amended Batch Acceptance Date which is

acceptable to both Parties. SERAGEN shall provide CBSH with a binding purchase

order for First Gen FDP and/or Second Gen FDP release/stability testing and/or

Fermentation Pellets, First Gen PDS and/or Second Gen PDS stability testing at

least one (1) month prior to the scheduled initiation of the testing.

 

If SERAGEN requires additional manufacture of Fermentation Pellets, First Gen

PDS and/or Second Gen PDS before or during any period that is over and above the

quantity specified in the binding purchase order for such period, SERAGEN shall

submit additional purchase order(s) for such additional Fermentation Pellets,

First Gen PDS and/or Second Gen PDS. Such additional purchase orders shall be

submitted to CBSH as soon as SERAGEN becomes aware of such additional quantity

needs, but no later than ninety (90) days prior to the Batch Acceptance Date set

forth in a binding purchase order for that additional quantity. CBSH will use

commercially reasonable efforts to fulfill such additional purchase orders, but,

subject to the foregoing, CBSH is under no obligation to accept and/or to

fulfill any additional purchase order(s) for Fermentation Pellets, First Gen PDS

and/or Second Gen PDS to the extent such purchase order(s), (i) when aggregated

with previously received purchase orders for such period, exceeds

 

 

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by more than *** the amounts set forth in the binding portion of the forecast

related to such period and submitted in accordance with Section 2.07, or (ii)

cannot be filled due to circumstances arising under Section 10.10. CBSH shall

notify Seragen in writing within ten (10) business days of receipt of any such

additional purchase order(s) which CBSH rejects and/or will be unable to

fulfill. If such notice is not received by SERAGEN within ten (10) business days

of CBSH's receipt of such additional purchase order(s), the additional purchase

order(s) shall be deemed accepted by CBSH.

 

CBSH shall notify SERAGEN, within ten (10) business days of receipt of a

purchase order, of the scheduled commencement date for manufacture of

Fermentation Pellets, First Gen PDS and/or Second Gen PDS.

 

Purchase orders shall be submitted by LIGAND on behalf of SERAGEN in

substantially the form shown on Exhibit "E" hereto. In the event of a conflict

between the terms and conditions listed on the reverse side of the purchase

order and this Agreement, this Agreement shall govern. Unless otherwise noted on

the face of such form, the Batch Acceptance Date shall appear under the title

"Delivery Date".

 

2.09 SUPPLY AND STORAGE OF MATERIALS. CBSH shall be responsible for planning,

ordering and maintaining an adequate supply of components, supplies, raw

materials and reagents meeting the Specifications that are necessary to

manufacture Fermentation Pellets, First Gen PDS and/or Second Gen PDS and to

provide the services as described in this Agreement. Reference standard and

controls qualification, maintenance and storage will be provided by CBSH in

accordance with cGMP and all other Regulatory Requirements. Reference standard

and controls qualifications shall be provided in accordance the applicable rates

set forth in Exhibit "B." Further, CBSH shall provide facilities to adequately

store and maintain all raw materials, reagents, and intermediates in accordance

with Specifications. CBSH shall ensure that appropriate diligence, caution and

management are taken in CBSH's storage and control of key cell lines and other

reagents owned by SERAGEN which are directly related to the testing of First Gen

FDP and/or Second Gen FDP and Fermentation Pellets, First Gen PDS and/or Second

Gen PDS, such as, but not limited to, applicable cell lines and antibodies.

 

2.10 STORAGE OF FERMENTATION PELLETS, FIRST GEN PDS AND/OR SECOND GEN PDS. CBSH

will store Fermentation Pellets if manufactured by CBSH under a purchase order

in accordance with Section 2.08 and up to an amount necessary to manufacture a

twelve (12)-months' supply of First Gen PDS and Second Gen PDS, as determined by

the forecast submitted for such period, plus a *** safety stock. In addition,

CBSH will store First Gen PDS and Second Gen PDS for up to twelve (12) months

following the applicable Batch Acceptance Date. CBSH may store quantities of

Fermentation Pellets, First Gen PDS or Second Gen PDS in excess of those set

forth above and/or may store such for periods of time in excess of those set

forth above at the storage rates set forth in Exhibit "B."

 

2.11 MANUFACTURING PROCESS CHANGES. Manufacturing and Release Requirements

cannot be changed unless agreed to in a dated, written document signed by the

Parties and incorporated into the Production Record. In addition, if any

Regulatory Agency having jurisdiction in any country where SERAGEN is selling

First Gen FDP and/or Second Gen FDP requires any changes to the Fermentation

Pellets, First Gen PDS and/or Second Gen PDS Specifications,

 

 

***Portions of this page have been omitted pursuant to a request for

Confidential Treatment and filed separately with the Commission.

 

 

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CBSH shall make reasonable efforts to make the required changes per section

3.02, so long as such changes do not conflict with cGMP. In the event amendments

or supplements are required to the Specifications for the purpose of complying

with current Regulatory Requirements, the Parties shall mutually agree on

appropriate amendments or supplements and shall incorporate or include such

amendment or supplement in or as part of the Production Record. Such activities

shall be additional services if they are requested by SERAGEN (i) in connection

with the manufacture and testing of Fermentation Pellets, First Gen PDS, Second

Gen PDS, First Gen FDP and/or Second Gen FDP or (ii) to comply with the

Regulatory Requirements of a Regulatory Agency, and will be performed in

accordance with the Additional Services rates set forth in Exhibit "B".

 

2.12 PROCESS IMPROVEMENTS. Each of CBSH and SERAGEN shall have the right to

request changes to implement Process Improvements or to reduce the cost of

manufacturing at the Facility, by written notice delivered to the other party.

CBSH and SERAGEN shall meet as soon as possible after such notification to

discuss such changes, the cost impact of such changes and the continued

provision of Fermentation Pellets, First Gen PDS and/or Second Gen PDS under

this Agreement. No change shall be implemented by CBSH or SERAGEN, whether

requested by either of the parties or requested or required by a Regulatory

Agency and/or a governmental agency, until the Parties have agreed in writing to

such change. Under no circumstances shall this section be construed to require

either Party to agree to changes that do not comply with cGMP. Such activities

shall be additional services if they are requested by SERAGEN (i) in connection

with the manufacture and testing of Fermentation Pellets, First Gen PDS, Second

Gen PDS, First Gen FDP and/or Second Gen FDP or (ii) to comply with the

Regulatory Requirements of a Regulatory Agency, and will be performed in

accordance with the Additional Services rates set forth in Exhibit "B".

 

2.13 QUALITY CONTROL AND QUALITY ASSURANCE. CBSH shall conduct quality control

testing and release of Fermentation Pellets, First Gen PDS and/or Second Gen PDS

(hereafter referred to as "CBSH QA Release") to SERAGEN or SERAGEN's designated

carrier for further processing by SERAGEN in accordance with (a) the methods and

procedures described in the Manufacturing and Release Requirements, and (b)

current Regulatory Requirements. Shipment by SERAGEN's designated carrier of

Fermentation Pellets, First Gen PDS and/or Second Gen PDS shall not occur unless

and until (i) CBSH QA Release of the Fermentation Pellets, First Gen PDS and/or

Second Gen PDS has occurred, (ii) Batch acceptance of such Fermentation Pellets,

First Gen PDS and/or Second Gen PDS has occurred in accordance with Section

2.14(a) and (iii) the occurrence of the designated Shipment Date. Batch

acceptance by SERAGEN will be based solely upon SERAGEN's review of the complete

MRR Documentation supplied by CBSH and SERAGEN's internal standard operating

procedures related to the manufacture of Fermentation Pellets, First Gen PDS

and/or Second Gen PDS or otherwise in accordance with Section 2.14(a). CBSH

shall retain all records pertaining to testing as required by cGMP.

 

2.14 NON-CONFORMING MANUFACTURED PRODUCT.

 

     (a)   REJECTION BY SERAGEN. CBSH shall provide SERAGEN's QA and Compliance

          department with copies of completed MRR Documentation listed in

          Exhibit "A", and shall endeavor to do so within ten (10) business days

          of CBSH QA Release of Fermentation Pellets, First Gen PDS and/or

          Second Gen PDS.

 

 

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          Within thirty (30) days after SERAGEN's receipt of all MRR

          Documentation, SERAGEN shall determine by review of the MRR

          Documentation whether or not, in SERAGEN's sole opinion, the given

          Batch of Fermentation Pellets, First Gen PDS and/or Second Gen PDS

          conforms to the Manufacturing and Release Requirements, and was

          manufactured in accordance with cGMP; provided that CBSH provides

          timely answers to information requests and resolution of issues

          arising from SERAGEN's review of MRR Documentation. If within the

          thirty (30) day period, SERAGEN QA makes a determination that SERAGEN

          believes the Batch to be nonconforming, SERAGEN shall have the right

          to reject the Batch in its entirety and shall notify CBSH in writing

          within the thirty (30) day period. If SERAGEN does not submit written

          notice of rejection within such thirty (30) day period, the Batch will

          be deemed accepted by SERAGEN. In the event that SERAGEN desires to

          accept the Batch prior to the end of the thirty (30) day period,

          SERAGEN will fax a signed Batch acceptance form specifying the new

          Batch Acceptance Date(s) to CBSH's Director of QA. Any dispute between

          CBSH and SERAGEN as to whether or not a Batch that has been rejected

           by SERAGEN is nonconforming will be resolved in accordance with the

          procedures set forth in Section 2.14(c). Replacement of a

          non-conforming Batch shall be in accordance with Section 2.14(d).

 

     (b)   REJECTION BY CBSH. CBSH shall notify SERAGEN promptly of rejection of

          a Batch by CBSH QA or any delay or irregularity encountered during

          manufacture which could lead to a rejection per SOPs. Any dispute

          between CBSH and SERAGEN as to whether or not a Batch that been

          rejected by CBSH is nonconforming will be resolved in accordance with

          the procedures set forth in Section 2.14(c). Replacement of a

          non-conforming Batch shall be in accordance with Section 2.14(d).

 

     (c)   RESOLUTION OF DISPUTES. In the event of a dispute between the Parties

          over the validity of a Batch rejection for non-conformance of

          Fermentation Pellets, First Gen PDS and/or Second Gen PDS pursuant to

          Section 2.14(a), the Parties agree to submit a representative sample

          of the rejected Batch to a qualified independent cGMP test facility to

          be agreed upon by the Parties, and to accept the results of the

          testing performed by that facility as binding with regard to that

          Batch. The testing procedures utilized must be formally transferred

          and qualified and/or validated at the independent test facility prior

          to the independent testing facilities commencement of the testing. In

           the event that the independent test facility confirms that a Batch was

          improperly rejected, all expenses related to such testing shall be

          borne by SERAGEN. In the event that the independent testing facility

          confirms that a Batch was properly rejected, all expenses related to

          such testing shall be borne by the Party deemed responsible for such

          non-conformance per Section 2.14(d). The Parties agree to make good

          faith efforts to resolve disputes regarding non-conformance of

          Fermentation Pellets, First Gen PDS and/or Second Gen PDS, including

          disputes regarding the source of or cause of any non-conformance,

          within sixty (60) days of initiation of the dispute.

 

           In the event that the Parties cannot resolve a dispute regarding

          (i) the cause of a

 

 

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          Batch's non-conformance with Fermentation Pellet, First Gen PDS

          and/or Second Gen PDS Specifications and/or failure to meet the

          Manufacturing and Release Requirements, (ii) conformance of a Batch

          with cGMP, or (iii) conformance of a Batch with the required MRR

          Documentation, the Parties shall submit the issue to a mutually agreed

          upon arbitrator. Such arbitrator, employing the Commercial Arbitration

          rules of the American Arbitration Association, will determine whether

          the Batch was produced in conformity with cGMP and/or whether CBSH

          personnel followed and executed the Production Record and required MRR

          Documentation as written and approved by both Parties. The findings of

          the arbitrator shall be binding on the Parties. CBSH shall bear such

           expenses of the arbitration proceeding if and only if the findings of

          the arbitrator confirm the Fermentation Pellets' First Gen PDS's

          and/or Second Gen PDS's nonconformity with cGMP and/or a failure of

          CBSH personnel to follow and execute the Production Record and

          required MRR Documentation as written and approved by both Parties,

          and SERAGEN shall bear such expenses if the findings of the arbitrator

          confirm that the Fermentation Pellets, First Gen PDS and/or Second Gen

          PDS were manufactured in accordance with cGMP and/or that CBSH

          personnel followed and executed the Production Record and required MRR

          Documentation as written and approved by both Parties.

 

     (d)   REPLACEMENT OF NONCONFORMING PRODUCT. Fermentation Pellets, First Gen

          PDS and/or Second Gen PDS. In the event that SERAGEN and CBSH mutually

          agree or an arbitrator determines, pursuant to Section 2.14(c), that a

          Batch of Fermentation Pellets, First Gen PDS and/or Second Gen PDS is

          non-conforming due to (i) the failure of CBSH personnel or

          subcontractors to follow cGMP, (ii) the failure of CBSH personnel or

          subcontractors to follow and execute the Production Record and

          required MRR documentation as written and approved by both Parties,

          (iii) the failure of the Facility equipment or utilities, (iv) the

          failure or non-conformance of the raw materials with SOPs or

           Specifications, (v) the breach of CBSH's obligations, representations

          or warranties hereunder or (vi) the acts or omissions of CBSH's

          subcontractors, CBSH shall replace all such Batches at its expense,

          reimburse SERAGEN for the cost of the Fermentation Pellets used in the

          manufacture of the nonconforming First Gen PDS and/or Second Gen PDS

          at the cost paid by SERAGEN for such pellets, and shall reimburse

          SERAGEN for any reasonable charges incurred by SERAGEN for shipping or

          storage, if applicable, of the nonconforming Batch. SERAGEN and CBSH

          shall promptly and mutually agree upon new dates for the initiation

          and completion, by CBSH, of the manufacture of a replacement Batch of

          Fermentation Pellets, First Gen PDS and/or Second Gen PDS, if required

          to meet any outstanding purchase order(s). Notwithstanding the

          foregoing, CBSH shall have no obligation to manufacture a replacement

          Batch, and shall have no liability to SERAGEN whatsoever, unless it is

          determined in accordance with the procedures set forth in Section

          2.14(c) that any one of any combination of events set forth in

          subsections (i) through (vi) of this Section 2.14(d) have resulted in

          the Batch of Fermentation Pellets, First Gen PDS and/or Second PDS

          being non-conforming. SERAGEN acknowledges and agrees that, except for

          the indemnifications provided in Article VII hereunder, its sole

          remedy with respect to nonconforming Fermentation Pellets, First Gen

          PDS

 

 

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          and/or Second Gen PDS is as set forth in this Section 2.14, and

          in furtherance thereof, SERAGEN hereby waives all other remedies at

          law or in equity regarding the foregoing claims.

 

          In the event that a replacement Batch is commenced prior to a

          final determination, in accordance with Section 2.14(c), as to the

          cause of a non-conforming Batch, and the Parties subsequently

          determine that the replacement Batch is not required, SERAGEN will

          bear the costs associated with the manufacture of the replacement, up

           to the time of such determination. SERAGEN and CBSH will negotiate in

          good faith, terms for the continuance or discontinuation of the

          manufacture of any such replacement Batch.

 

     (e)   DESTRUCTION OF NONCONFORMING PRODUCT. Fermentation Pellets, First Gen

          PDS and/or Second Gen PDS. CBSH shall destroy, after thorough

          investigation and upon determination that no further action can be

          taken, all Fermentation Pellets, First Gen PDS and/or Second Gen PDS

           in CBSH's possession, which is deemed to be nonconforming in

          accordance with Section 2.14(c) and upon written authorization from

          SERAGEN Destruction shall be in accordance with all applicable laws

          and regulations (including without limitation, environmental laws and

          regulations) and in a manner to which SERAGEN has given its prior

          written approval. Such Fermentation Pellets, First Gen PDS and/or

          Second Gen PDS shall not be sold, reprocessed, salvaged, reclaimed or

          otherwise reused in any manner by CBSH. SERAGEN, or its designees,

          shall return all non-conforming Batches to CBSH, whose non-conformance

          is attributable to CBSH in accordance with Sections 2.14 (c & d), for

          destruction at CBSH's expense. The cost and expense of the destruction

          of Batches determined to be nonconforming in accordance with Sections

          2.14 (c & d), whose nonconformance is not attributable to CBSH, shall

          be the sole responsibility of SERAGEN. Representatives of SERAGEN

          shall be permitted to witness the destruction of nonconforming

          Fermentation Pellets, First Gen PDS and/or Second Gen PDS under this

          section, and shall receive from CBSH proof of such destruction, upon

          written request.

 

2.15 ADDITIONAL SERVICES; PROJECT SCOPE CHANGE ORDER PROCESS. Services in

addition to those described elsewhere in Article II (such as but not limited to:

cell line stock storage and regulatory/CMC consulting) may be requested of CBSH

from time to time by SERAGEN. All additional services requested by SERAGEN in

accordance with this Agreement will be provided by CBSH in accordance with cGMP

and all other Regulatory Requirements as applicable. Requests for such

additional services must be submitted in writing by SERAGEN to CBSH, and,

specifications, procedures, processes and other related activities must be

mutually agreed upon by both Parties prior to commencement of those services by

CBSH. Pricing for such services shall be billed at the applicable rates set

forth in Exhibit "B". In addition, any project scope change orders or requests

for additional services shall be mutually agreed to by the Parties, and

implemented pursuant to a Manufacturing Services Agreement: Additional Services

Quotation attached to this Agreement as Exhibit "H". In addition, if the project

scope change or additional services will cause additional costs to CBSH, LIGAND,

on behalf of SERAGEN, will submit a purchase order for such in the form attached

to this Agreement as Exhibit "E".

 

 

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                                  ARTICLE III

 

                       PROVISION OF MANUFACTURING SERVICES

 

3.01 FACILITIES, STAFFING, MATERIALS, EQUIPMENT. CBSH shall perform all

manufacturing, storage, handling, packaging and testing of First Gen FDP, Second

Gen FDP Fermentation Pellets , First Gen PDS and /or Second Gen PDS at the

Facility or other testing facility as agreed to by the Parties. CBSH shall use

commercially reasonable efforts to maintain at all times such staffing,

supplies, equipment, facilities and expertise as are sufficient to ensure it has

the ability to supply Fermentation Pellets, First Gen PDS and/or Second Gen PDS

and to perform services in accordance with the terms of this Agreement.

 

3.02 PRODUCT CHANGE ORDER PROCEDURE. Both parties shall provide one another with

thirty (30) days prior written notice, and receive SERAGEN's prior written

consent before making any changes in the raw materials, process, procedures,

suppliers, facilities, equipment, testing, packaging and labeling Specifications

or other significant changes. If the Parties agree that such changes do not have

a Regulatory Requirement impact, they may thereafter be implemented. If,

however, such changes have a Regulatory Requirement impact, not only must both

Parties agree to the proposed change prior to implementation, in addition, all

necessary approvals of applicable Regulatory Agencies must be received prior to

implementation.

 

3.03 MAINTENANCE OF SUPPLIER QUALIFICATION. At CBSH's cost and expense, CBSH

shall maintain current supplier qualification of raw materials, reagents,

solvents, and packaging components used in the manufacture of Fermentation

Pellets, First Gen PDS and/or Second Gen PDS according to CBSH's written

procedures consistent with cGMPs. A list of current critical suppliers, as of

the Effective Date, has been attached to this Agreement as Exhibit "G1". CBSH

shall receive SERAGEN's written consent prior to using any new critical supplier

of raw materials, reagents, solvents, or packaging components used in the

manufacture of Fermentation Pellets, First Gen PDS and/or Second Gen PDS.

Pursuant to cGMPs, only suppliers qualified according to CBSH's supplier

qualification program shall be used in the manufacture of Fermentation Pellets,

First Gen PDS and/or Second Gen PDS.

 

3.04 SUBCONTRACTING. CBSH shall receive SERAGEN's written consent prior to

entering into any new subcontract with any third party for the provision of

services under this Agreement, including the manufacture, storage, handling,

packaging and testing of Fermentation Pellets, First Gen PDS , Second Gen PDS ,

First Gen FDP and Second Gen FDP. A list of subcontractors, as of the Effective

Date, has been attached to this Agreement as Exhibit "G2". Any third party or

contract laboratory used for the testing of Fermentation Pellets, First Gen PDS,

Second Gen PDS, First Gen FDP and/or Second Gen FDP or intermediates must (i) be

approved by SERAGEN in advance, (ii) have signed a confidentiality agreement

with CBSH, substantially in the form previously approved in writing by SERAGEN,

(iii) have completed a successful qualification/validation by CBSH or SERAGEN,

or a SERAGEN designated contractor, which qualification/validation by SERAGEN or

a SERAGEN designated contractor shall be at SERAGEN's cost and (iv) have agreed

to provide access to CBSH such that SERAGEN shall have access to the records of

such subcontractor to permit SERAGEN to conduct routine annual cGMP audits. A

copy of the qualification/validation and procedures and

 

 

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results must be submitted by CBSH to SERAGEN for SERAGEN's approval prior to

CBSH's use of the contractor for the designated purposes.

 

3.05 AUDITS, INVESTIGATIONS, ACCESS.

 

     (a)   SERAGEN shall be allowed to conduct Audits of CBSH facilities. SERAGEN

          shall send a request to schedule an Audit with CBSH at least sixty

          (60) days prior to the proposed Audit date. SERAGEN shall be permitted

          to conduct one (1) Audit per calendar year at no expense to SERAGEN;

          any additional Audits shall be in accordance with the Additional

          Services rates set forth in Exhibit "B." For purposes of this Section

          3.05 "Audits" shall mean cGMP audits involving the audit and

          inspection of all elements and systems of the Product manufacturing

          processes, starting with material receipt, inspection and CBSH QA

          Release through and including First Gen PDS and/or Second Gen PDS, as

          applicable.

 

     (b)   In addition, with at least five (5) days advance notice, SERAGEN shall

          be permitted to investigate/audit CBSH facilities and records in the

          event of any failure of any Batch to meet Specifications, any major

          deviation from Specifications, Batch failure(s) or any regulatory

          actions, violations or complaints relevant to this Agreement.

 

     (c)   With at least five (5) days advance notice, SERAGEN's authorized

          representative(s) shall be allowed during regular business hours to

          monitor activities and procedures related to the manufacture of

          Fermentation Pellets, First Gen PDS and/or Second Gen PDS under this

          Agreement. SERAGEN's authorized representatives shall be allowed,

          during regular business hours, to examine and inspect that portion of

          the Facility required for the manufacture of Fermentation Pellets,

          First Gen PDS and/or Second Gen PDS under this Agreement, including

          inspections relating to the manufacture, testing, handling, storage,

          packaging and labeling of Fermentation Pellets, First Gen PDS and/or

          Second Gen PDS, and to inspect and request copies of all MRR

          Documentation following CBSH QA audit of such MRR D