PURCHASE AND SUPPLY AGREEMENT

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Exhibit 10.25

         ***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§200.80(b)(4)
and 240.24B-2

PURCHASE AND SUPPLY AGREEMENT

         THIS PURCHASE AND SUPPLY AGREEMENT ( this "Agreement" ) is made and entered into as of January 9, 2004 (the "Effective Date" ), by and between PIERRE FABRE MÉDICAMENT , organized under the laws of France having an address of 45, place Abel-Gance, 92654 Boulogne Cedex, France ( "Pierre Fabre" ), and CYPRESS BIOSCIENCE, INC. , a Delaware corporation having an address of 4350 Executive Drive, Suite 325, San Diego, CA 92121, U.S.A. ( "Cypress" ).

RECITALS

         WHEREAS, Pierre Fabre owns or controls certain patents and valuable know-how related to the compound Milnacipran (as defined below) and the Licensed Product (as defined below);

         WHEREAS, Pierre Fabre and Cypress entered into the Third Restated License Agreement, dated as of the date hereof, as amended (the "Restated License Agreement" ), pursuant to which Pierre Fabre granted to Cypress an exclusive license to develop, register, manufacture from the API (as defined below), use, distribute, sell, offer for sale, have sold and import the Licensed Product in any and all indications in the Licensed Territory (as defined below);

         WHEREAS, Pierre Fabre also granted Cypress a license to certain trademarks pursuant to the First Restated Trademark License Agreement, dated as of the date hereof, as amended, between Cypress and Pierre Fabre; and

         WHEREAS, Pierre Fabre and Cypress desire to enter into this Agreement to set forth the terms upon which Pierre Fabre will supply to Cypress and its sub-licensees, and Cypress and its sub-licensees will purchase from Pierre Fabre, the Bulk API (as defined below) manufactured in compliance with all applicable requirements set forth herein.

         NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1.     DEFINITIONS.

        Capitalized terms used but not otherwise defined in this Agreement will have the meanings given such terms in the Restated License Agreement. Other capitalized terms will have the meanings set forth below.

         1.1    "Action" shall have the meaning set forth in Section 9.2(a).

         1.2    "Affiliate" shall mean any company or entity controlled by, controlling, or under common control with a party hereto. For this purpose, the term "control" shall mean the direct or indirect ownership of at least 50% of the voting stock of that corporation, or in the absence of ownership of at least 50% of the voting stock of that corporation, the power, directly or indirectly to cause the direction of the management and policies of such corporation.

         1.3    "Annual Excess" shall have the meaning set forth in Section 5.1(a)(iii).

         1.4    "API" shall mean the active pharmaceutical ingredient Milnacipran contained in the Licensed Product.

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         1.5    "API Specifications" means those specifications pertaining to the API set forth in the IND for the Licensed Product filed by Cypress with the FDA in the United States (No. 63736), and in the DMF filed by Pierre Fabre with the FDA (N ^o 11501), as described in Exhibit I hereto and made a part hereof, as modified to comply with the NDA for the Licensed Product or otherwise modified from time to time in accordance with Section 8.3.

         1.6    "Buffer Stock" shall have the meaning set forth in Section 8.9(a).

         1.7    "Bulk API" shall mean API in bulk form.

         1.8    "Certificate of Analysis" shall have the meaning set forth in Section 7.3(d).

         1.9    "cGMPs" shall mean the standards established by the FDA for current Good Manufacturing Practices, as specified in the Quality System Regulations set forth at 21 CFR Parts 210 and 211.

         1.10    "Change of Control" shall mean (i) a sale, lease or other disposition of all or substantially all of the assets of Cypress; (ii) a merger or consolidation of Cypress in which the holders of Cypress' outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than 50% of the voting power of Cypress or Cypress' parent or, if Cypress is not the surviving entity, any other entity surviving such transaction or the surviving entity's parent; or (iii) an acquisition by any person, entity or group within the meaning of Section 13(d) or 14(d) of the Exchange Act, or any comparable successor provisions (excluding any employee benefit plan, or related trust, sponsored or maintained by Cypress or any entity controlled by Cypress) of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of securities of Cypress representing at least 50% of the combined voting power entitled to vote in the election of directors; provided, however, that clause (ii) shall not apply to a merger effected exclusively for the purpose of changing the domicile of Cypress or the name of Cypress.

         1.11    "Collaboration Agreement" shall mean that certain License and Collaboration Agreement between Cypress and Forest, dated as of the Effective Date, a copy of which has been provided to Pierre Fabre, as may be amended, modified or restated from time to time, pursuant to which, among other things, Cypress has granted to Forest a sub-license to the Licensed Technology.

         1.12    "Commercially Reasonable Efforts" shall mean that the parties shall conform to the standards of diligence customary in the pharmaceutical industry, with respect to compounds having commercial potential comparable to Milnacipran, in fulfilling their applicable obligations under this Agreement with regard to manufacturing or otherwise.

         1.13    "Confidential Information" shall mean any confidential information (including, without limitation, Information) furnished to it by the other party pursuant to the Restated License Agreement or this Agreement.

         1.14    "Conform" shall mean that a quality control sample or batch delivery of Bulk API meets the API Specifications and was manufactured in accordance with the requirements of Section 8.1.

         1.15    "Control" shall mean, with respect to any Information or intellectual property right, possession by a party of the ability (whether by ownership, license or otherwise, other than any license granted under this Agreement) to grant access, a license or sub-license to such Information or intellectual property right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party as of the time such party would first be required hereunder to grant the other party such access, license or sublicense, or at any other time during the term of such access, license or sublicense.

         1.16    "Correction Plan" shall have the meaning set forth in Section 8.9(c).

         1.17    "Current Buffer Stock" shall have the meaning set forth in Section 8.9(c).

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         1.18    "Cypress Indemnitees" shall have the meaning set forth in Section 9.2(b).

         1.19    "Date of First Commercial Sale" shall mean the actual date of first commercial sale of a Licensed Product in the Licensed Territory.

         1.20    "Delivery Forecast" shall mean a forecast provided by Cypress and/or its sub-licensees of the quantity of Bulk API required by Cypress and its sub-licensees during the applicable period (including supplies for formulation development, clinical trials and sampling).

         1.21    "DMF" shall have the meaning set forth in Section 8.6.

         1.22    "Effective Date" shall have the meaning set forth in the introductory paragraph.

         1.23    "Estimated Date of First Commercial Sale" shall mean the estimated Date of First Commercial Sale of a Licensed Product in the Licensed Territory, as may be established from time to time by Cypress pursuant to this Agreement.

         1.24    "Exchange Act" shall mean the Securities and Exchange Act of 1934, as amended.

         1.25    "Exercise Date" shall have the meaning set forth in Section 8.11(b).

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

         1.27    "FD&C Act" shall mean the United States Food, Drug and Cosmetic Act.

         1.28    "First Commercial Sale" shall mean the first commercial sale of the first Licensed Product in the first country within the Licensed Territory.

         1.29    "Forest" shall mean Forest Laboratories Ireland Limited, an Irish corporation and a wholly owned subsidiary of Forest Laboratories, Inc., a Delaware corporation.

         1.30    "Generic Product" shall mean Licensed Product commercialized as a generic product by Cypress or any of its sub-licensees or any Third Party.

         1.31    "Generic Supplier" shall have the meaning set forth in Section 8.12.

         1.32    "Indemnified Party" shall have the meaning set forth in Section 9.3(a).

         1.33    "Indemnifying Party" shall have the meaning set forth in Section 9.3(a).

         1.34    "Index" shall have the meaning set forth in Section 5.1(a).

         1.35    "Information" shall mean all tangible and intangible (a) techniques, technology, practices, trade secrets, inventions (whether or not patentable), methods, manufacturing processes, knowledge, know-how, skill, experience, test data and results (including pharmacological, toxicological and clinical test data and results), analytical and quality control data, results or descriptions and software, (b) compounds, compositions of matter, cells, cell lines, assays, and physical, biological or chemical material, and (c) marketing data, including clinical studies designed to support promotional efforts, relating to API or to the Licensed Product in any indication.

         1.36    "Letter Agreement" shall mean the agreement to be entered into among Pierre Fabre, Cypress and Forest as of the Restatement Date, as may be amended.

         1.37    "License Effective Date" shall mean August 1, 2001.

         1.38    "Licensed Product" shall mean any product (including a Cypress Product or product containing a Cypress Formulation or Forest Formulation) containing Milnacipran as an active ingredient, in any formulation and through any mode of administration, that incorporates or uses the Licensed Technology or the manufacture, use or sale of which Licensed Product is otherwise within the scope of any claim of the Pierre Fabre Patents.

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         1.39    "Licensed Technology" shall mean the Pierre Fabre Patents and the Pierre Fabre Know-How.

         1.40    "Licensed Territory" shall mean the United States of America, its territories and possessions and Canada and, if extended pursuant to Section 2.2 of the Restated License Agreement, countries that are members of the European Union and Japan.

         1.41    "Losses" shall have the meaning set forth in Sections 9.2(a).

         1.42    "Manufacturing Know-How" shall mean all data, Information and know-how in the possession of Pierre Fabre prior to the License Effective Date or developed or acquired by or for Pierre Fabre thereafter and relating to the manufacture of API.

         1.43    "Manufacturing Process" shall have the meaning set forth in Section 8.3.

         1.44    "Manufacturing Right" shall have the meaning set forth in Section 8.11(b).

         1.45    "Maximum Time Before Retesting" shall have the meaning set forth in Section 7.1.

         1.46    "Milnacipran" shall mean the substance known as milnacipran (INN), which expressly excludes any analogs, derivatives and enantiomers of milnacipran (INN).

         1.47    "Minimum Buffer Stock" shall have the meaning set forth in Section 8.9(b).

         1.48    "Minimum Time to Retesting" shall have the meaning set forth in Section 7.1.

         1.49    "NDA" shall mean a New Drug Application and all amendments and supplements thereto filed with the FDA (as more fully defined in 21 C.F.R. 314.5 et seq.), or the equivalent application filed with any equivalent agency or governmental authority outside the United States (including any supra-national agency such as in the European Union) requiring such filing, including all documents, data and other information concerning a pharmaceutical product that are necessary for obtaining Regulatory Approval to market and sell such pharmaceutical product.

         1.50    "Other Changes" shall have the meaning set forth in Section 8.3.

         1.51    "Outsourcing Notice " shall have the meaning set forth in Section 8.12.

         1.52    "Patent" shall mean (a) valid and enforceable patents, re-examinations, reissues, renewals, confirmations, extensions (including supplemental protection certificates) and term restorations, and (b) pending applications for patents, including, without limitation, continuations, continuations-in-part, provisionals, divisionals and substitute applications, including, without limitation, inventors' certificates.

         1.53    "Pierre Fabre Indemnitees" shall have the meaning set forth in Section 9.2(a).

         1.54    "Pierre Fabre Know-How" shall mean Information that is Controlled by Pierre Fabre or its Affiliates that is not covered by the Pierre Fabre Patents but is related to the API or the Licensed Product. The Pierre Fabre Know-How includes, without limitation, the Information described on Exhibit A to the Restated License Agreement. Pierre Fabre Know-How shall exclude Manufacturing Know-How.

         1.55    "Pierre Fabre Patents" shall mean all Patents Controlled by Pierre Fabre or any of its Affiliates that are necessary or useful for the development, manufacture or commercialization of Milnacipran and the Licensed Product in the Licensed Territory. The Pierre Fabre Patents include, without limitation, the Patents set forth on Exhibit B to the Restated License Agreement.

         1.56    "Pierre Fabre Suppliers" shall include all Third Parties that supply Raw Materials to Pierre Fabre.

         1.57    "Postponement" shall have the meaning set forth in Section 4.2.

         1.58    "Pre-Approved Changes" shall have the meaning set forth in Section 8.3.

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         1.59    "Purchase Order" shall have the meaning set forth in Section 4.1(b)(i).

         1.60    "Quality Agreement" shall mean an agreement between the parties that describes the parties' quality control, quality assurance and regulatory responsibilities relating to the manufacture and supply of Bulk API.

         1.61    "Raw Materials" shall mean the materials used in manufacturing Bulk API.

         1.62    "Regulatory Approval" shall mean any and all approvals (including price and reimbursement approvals), licenses, registrations, or authorizations of health/regulatory authorities or any country, federal, state or local regulatory agency, department, bureau or other government entity that is legally required or necessary from an economic point of view for the manufacture, use, storage, import, transport and/or sale of a Licensed Product in such jurisdiction.

         1.63    "Restated License Agreement" shall have the meaning set forth in the second recital.

         1.64    "Rest of the World" shall mean the entire world excluding the Licensed Territory.

         1.65    "Samples" shall mean quantities of the Licensed Product given to authorized medical professionals free of charge as part of the marketing, advertising or promotion of the Licensed Product.

         1.66    "Second Source Facility" shall have the meaning set forth in Section 8.10.

         1.67    "Shared Amount" shall have the meaning set forth in Section 5.1(b).

         1.68    "Shortfall" shall have the meaning set forth in Section 8.9(c).

         1.69    "Starting Materials" shall mean those materials that are starting materials within the meaning of the guideline for submitting supporting documentation in drug applications for the manufacture of drug substances FDA/CDER 02 1987, as may be amended.

         1.70    "Term" shall have the meaning set forth in Section 10.1.

         1.71    "Third Party" shall mean any entity other than Cypress or Pierre Fabre or an Affiliate of Cypress or Pierre Fabre.

         1.72    "Transfer Price" shall have the meaning set forth in Section 5.1(a).

         1.73    "Working Group" shall have the meaning set forth in Section 3.1.

2.     PURCHASE AND SUPPLY OF API.

        2.1    Supply by Pierre Fabre.     Pierre Fabre agrees that it will manufacture and supply to Cypress and its sub-licensees such quantities of Bulk API as requested by Cypress and/or its sub-licensees pursuant to Section 4 to cover their total market needs for the Licensed Territory.

        2.2    Exclusive Supplier.     

         (a)    During the Term, subject to Sections 8.11 and 8.12, Pierre Fabre will be the exclusive supplier to Cypress and its sub-licensees of Bulk API, and Cypress agrees that it and its sub-licensees shall purchase from Pierre Fabre all of their requirements of Bulk API, for clinical trials, samples and commercial sales of the Licensed Product in the Licensed Territory.

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         (b)    In the event Pierre Fabre is unable to supply to Cypress or its sub-licensee API requested in a Purchase Order, in whole or part, due to a shortage of production capacity or Raw Materials for any reason (except to the extent caused by Cypress or any of its sub-licensees), then, in addition to any other rights that may be available to Cypress under this Agreement, Pierre Fabre shall promptly notify Cypress and/or its sub-licensees, in writing, of such shortage of production capacity or Raw Materials, and, if possible, the date such shortage of production capacity or Raw Materials is expected to end. In such event, without limiting the provisions of Section 6, Pierre Fabre shall allocate its available production capacity and/or Raw Materials for the production of API in a manner proportional to the utilization by all customers (including Pierre Fabre) of such capacity and/or Raw Materials in the previous six month period; provided that in no event shall Cypress and its sub-licensees receive lesser quantities of API or less favorable delivery dates than the quantities and delivery dates then being allocated by Pierre Fabre to its own product(s).

        3.    MANUFACTURING AND SUPPLY WORKING GROUP.     

        3.1    Establish the Working Group.     Within 30 days after the Effective Date, the parties will establish a manufacturing and supply working group (the "Working Group" ). The Working Group shall consist of six members, or such other even number of members as agreed to by the parties, with an equal number of representatives on the Working Group appointed by each of Pierre Fabre and Cypress; provided that Cypress may appoint one or more representatives of its sub-licensees as Cypress' representatives on the Working Group and, so long as Forest is a sub-licensee of Cypress under the Restated License Agreement, one or more of the Cypress representatives on the Working Group shall be an employee of Forest (or of any Affiliate of Forest that is primarily responsible for the activities of Forest under the Collaboration Agreement). Each member of the Working Group shall have experience appropriate for the activities to be conducted by the Working Group.

        3.2    Function of the Working Group.     The responsibilities of the Working Group are detailed on Exhibit II .

        3.3    Meetings.     

         (a)    Prior to the first NDA filing for a Licensed Product, the Working Group shall meet on the dates mutually determined by the Working Group. Following the date on which an NDA is filed for a Licensed Product, the Working Group shall meet at least one time each calendar quarter. Unless otherwise mutually agreed by the parties, the location of the Working Group meetings shall alternate between Pierre Fabre's premises and Cypress' or its sub-licensees' premises or may be held by telephone or video conference if requested by either party; provided that after the first NDA filing for a Licensed Product, the Working Group shall meet in person at least once a year.

         (b)    The Working Group through one representative appointed by Cypress and one representative appointed by Pierre Fabre will report its activities to the Steering Committee on a regular basis.

         (c)    The Working Group may consult with, and receive assistance from each party's employees who are not Working Group members.

        3.4    Decision Making Authority.     Pierre Fabre shall have final decision making authority with respect to those activities identified on Exhibit II as responsibilities of Pierre Fabre and Cypress shall have final decision making authority with respect to those activities identified on Exhibit II as responsibilities of Cypress; provided that no decision by either Pierre Fabre or Cypress shall conflict with applicable laws and regulations of the Licensed Territory, or the terms of the Restated License Agreement or this Agreement; and provided, further , that either party may refer any final decision by the other party to the chief officers of Pierre Fabre and Cypress. Such officers of the parties shall meet

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promptly thereafter and shall negotiate in good faith to resolve such issue within 30 days of commencing such negotiations.

4.     FORECASTS AND PURCHASE ORDERS.

        4.1    Forecasts.     During the Term, Cypress and its sub-licensees shall follow the following forecast and order procedures.

         (a)    On the first business day of each calendar quarter during the period from the Effective Date until the first day of the 12 ^th calendar month immediately preceding the calendar month during which the Estimated Date of First Commercial Sale is scheduled to occur, Cypress shall submit to Pierre Fabre a Delivery Forecast for the [...***...] period beginning on the first day of the calendar month immediately following the date of submission of such Delivery Forecast. Each Delivery Forecast provided during this period shall provide quarterly forecasts for the applicable [...***...] period. Such Delivery Forecast shall include supplies of Bulk API required for formulation development and clinical trials prior to the Estimated Date of First Commercial Sale. In addition, the Delivery Forecast submitted in January of each year during this period shall also include a non-binding forecast for the [...***...] period immediately following the [...***...] period covered by such Delivery Forecast. Each Delivery Forecast submitted during this period will be a non-binding estimate and shall not obligate Cypress or its sub-licensees to purchase any quantity of Bulk API, except that Cypress or its sub-licensees shall submit to Pierre Fabre a binding purchase order no fewer than four months prior to any delivery date indicated by Cypress or its sub-licensees in a Delivery Forecast during this period.

         (b)    Beginning on the first day of the 12 ^th calendar month immediately preceding the calendar month during which the Estimated Date of First Commercial Sale is scheduled to occur, and on the first day of each calendar month thereafter, Cypress shall submit to Pierre Fabre a rolling Delivery Forecast for the [...***...] period beginning on the first day of the calendar month immediately following the date of submission of such Delivery Forecast (e.g., submission on [...***...] of a Delivery Forecast for the period from [...***...] through [...***...] ). Each Delivery Forecast provided during this period shall provide monthly forecasts for the [...***...] and quarterly forecasts for the [...***...] of the applicable [...***...] period. In addition, the Delivery Forecast submitted in January of each year during this period shall also include a non-binding forecast for the [...***...] period immediately following the [...***...] period covered by such Delivery Forecast. Each Delivery Forecast submitted during this period will be a non-binding estimate and shall not obligate Cypress or its sub-licensees to purchase any quantity of Bulk API, except as expressly provided below (an illustration of the following rules is provided in Exhibit III ):

           (i)   The [...***...] of such Delivery Forecast shall constitute a binding purchase order ( "Purchase Order" ) for both parties, meaning that Cypress and/or its sub-licensees agree to purchase and Pierre Fabre agrees to supply the quantities of Bulk API indicated in the Purchase Order;

          (ii)   The quantities of Bulk API indicated in each of the [...***...] of such Delivery Forecast may reflect an increase or decrease of up to [...***...] compared to the quantity specified for the same calendar month in the immediately preceding Delivery Forecast;

        (iii)   The quantities of Bulk API indicated in each of the [...***...] months of such Delivery Forecast may reflect an increase or decrease of up to [...***...] compared to the quantity specified for the same calendar month in the immediately preceding Delivery Forecast;

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         (iv)   The quantities of Bulk API indicated in the [...***...] of such Delivery Forecast shall equal [...***...] of the aggregate quantities specified for the [...***...] period in the immediately preceding Delivery Forecast, plus or minus [...***...] ; and

          (v)   The quantities of Bulk API indicated in the [...***...] period of such Delivery Forecast shall be non-binding.

        4.2    Postponement.     Prior to the calendar month during which the Estimated Date of First Commercial Sale is scheduled to occur, Cypress may change the Estimated Date of First Commercial Sale, at no cost to Cypress, by notifying Pierre Fabre in writing. Thereafter, Cypress may postpone the Estimated Date of First Commercial Sale one or more additional times (each, a "Postponement" ) upon written notice to Pierre Fabre. In the event of a Postponement, other than due to a delay by Pierre Fabre, Cypress or its sub-licensee shall be responsible for the costs of Bulk API ordered under any Purchase Order (whether such orders have been delivered by Pierre Fabre or not) subject to the conditions set forth in Sections 6 and 7.4, and Cypress and its sub-licensees shall have no other responsibility to Pierre Fabre as a result of such Postponement. Pierre Fabre agrees that there shall be no limit on the number of Postponements or the duration of any Postponement that may be made by Cypress.

        4.3    Quantity of Orders.     The parties agree that forecasts and orders of Bulk API to be provided by Cypress will be expressed by multiples of ten kilograms of Bulk API.

5.     TRANSFER PRICE.

        5.1    Transfer Price.     

         (a)    Subject to Section 8.12, for Bulk API supplied by Pierre Fabre for commercial purposes, Cypress will pay to Pierre Fabre a transfer price [...***...] per kilogram of Bulk API (as may be adjusted pursuant to Section 5.1, the "Transfer Price"), subject to the terms of this Section 5.1(a), which Transfer Price does not include tax:

           (i)   For Bulk API supplied by Pierre Fabre for formulation development of Licensed Product and all toxicology and pharmacology studies and clinical trials of Licensed Product required for any NDA for Licensed Product, Cypress will pay [...***...] of such Transfer Price;

          (ii)   For Bulk API supplied by Pierre Fabre for Samples, so long as Forest has rights under the Licensed Technology, the following provisions will apply:

         (1)    Pierre Fabre will supply the following quantities of Bulk API for Samples [...***...] to Forest for the [...***...] after the Date of First Commercial Sale: (A) for the first year, [...***...] of the quantity of Bulk API supplied for Licensed Product sold in such first year; (B) for the second year, [...***...] of the quantity of Bulk API supplied for Licensed Product sold in such second year; and (C) for the third year, [...***...] of the quantity of Bulk API supplied for Licensed Product sold in such third year. The foregoing quantities will be based on projected sales of Licensed Product for the applicable period, as reflected in the Sales Forecasts (as defined in the Restated License Agreement) provided pursuant to Section 5.3(a) of the Restated License Agreement, and reconciling payments with respect to Bulk API provided for Samples will be made by as necessary within 60 days after the end of the applicable year to reflect actual sales of Licensed Product in such year.

         (2)    For all quantities of Bulk API supplied by Pierre Fabre for Samples in excess of the quantities supplied under Section 5.1(a)(ii)(1) and throughout the Term, Pierre Fabre will supply such Bulk API at [...***...] of the Transfer Price otherwise payable under this Section 5.1(a), with Forest paying Pierre Fabre [...***...] of the Transfer Price otherwise

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payable under this Section 5.1(a) to supply such Bulk API, and Cypress paying Pierre Fabre [...***...] of the Transfer Price otherwise payable under this Section 5.1(a) to supply such Bulk API.

Forest shall maintain records regarding actual Sample distribution. Forest shall periodically provide to Pierre Fabre summaries of the information contained in such records and shall make such records available to Pierre Fabre, at reasonable times and upon reasonable prior notice, at Pierre Fabre's request.

        (iii)   The Transfer Price described in Section 5.1(a) will be adjusted by Pierre Fabre on January 1 of each year during the Term, beginning on January 1, 2004, according to the last published French index of consumer prices (Indice mensuel des prix à la consommation (base 100—year 1998)—Ensemble des Ménages France entière, as published in "Bulletin INSEE—tableau 23.NE), or any successor thereto, the base index being that of January 2003, i.e.: 106.9 (the "Index" ); provided, however, that in no event shall the Transfer Price decrease or increase by more than [...***...] from the Transfer Price in effect for the prior calendar year. Notwithstanding the foregoing, in the event any annual increase in the Index for a given calendar year exceeds [...***...] , (i) the Transfer Price shall increase by [...***...] for the next calendar year, and (ii) if such [...***...] increase in such calendar year was less than the actual percentage increase in Pierre Fabre's costs of manufacturing Bulk API during that calendar year (as documented by Pierre Fabre to explain, in general terms, the basis for such actual percentage increase in costs of greater than [...***...] ), then Pierre Fabre shall have the right to apply the amount by which the actual percentage increase in Pierre Fabre's costs of manufacturing Bulk API during such calendar year exceeds [...***...] (the " Annual Excess " ), or any portion thereof, to a future adjustment in the Transfer Price for the first year following such establishment of an Annual Excess that any such adjustment does not result in an increase in the Transfer Price in excess of [...***...] from that in effect for the prior year. Any portion of an Annual Excess that is not used in the following year may be carried over to subsequent years, and the unused portion of the Annual Excess for any and all years may be aggregated to be applied in determining an increase in the Transfer Price as provided above. By way of illustration only, if the Index at January 2004 and January 2005 is 115.45 and 117.47, respectively, then (A) the Transfer Price for 2004 will be [...***...] and the Annual Excess is [...***...] if the actual percentage increase in Pierre Fabre's cost of manufacturing Bulk API was not less than the percentage increase in the Index, and (B) the Transfer Price for 2005 will be [...***... ]

         (b)    The Transfer Price is established on the Effective Date when the exchange rate is 1.15 U.S. Dollars to 1.00 Euros. In connection with payment of the Transfer Price, if the exchange rate of U.S. Dollars to Euros, as reported in The Wall Street Journal (absent any error) for the business day immediately preceding the applicable payment date is higher or lower than such exchange rate on the Effective Date by [...***...] or more, then Cypress or its sub-licensee, on the one hand, and Pierre Fabre, on the other hand will share equally the effect of the increase or decrease in such exchange rate to the extent of any increase or decrease of [...***...] or more over the exchange rate on the Effective Date (the "Shared Amount" ), as provided below. The Shared Amount will be determined in respect of each payment of the Transfer Price. For any Shared Amount resulting from an increase in the exchange rate of U.S. Dollars to Euros, Cypress or its sub-licensee shall be entitled to a payment from Pierre Fabre in an amount equal to [...***...] of the Shared Amount. For any Shared Amount resulting from a decrease in the exchange rate of U.S. Dollars to Euros, Pierre Fabre shall be entitled to a payment from Cypress or its sub-licensee in an amount equal to [...***...] of the Shared Amount. Pierre Fabre shall determine and provide reasonable written evidence to Cypress of the net amount of all Shared Amounts for a given calendar year on or before January 31 of the following year, and the party owing such net amount shall promptly pay

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such net amount to the other party, absent manifest error in such information provided by Pierre Fabre.

        5.2    Payment Terms.     Payments pursuant to Section 5.1 will be made by Cypress or its sub-licensee to Pierre Fabre in Euros within 60 days of the date of invoice.

        5.3    Late Payments.     In the event that any payment due hereunder is not made when due, the payment shall accrue interest from the date due at the rate of 1.5% per month; provided, however, that in no event shall such rate exceed the maximum legal annual interest rate; provided further that no such interest shall accrue until the other party has provided written notice of such late payment or during any period that any dispute with respect to a payment is being diligently pursued in good faith by the party from whom such payment is claimed. The payment of such interest shall not limit a party from exercising any other rights it may have as a consequence of the lateness of any payment.

6.      DELIVERY.     Subject to compliance with the forecast and order procedure set forth in Section 4, Pierre Fabre agrees to deliver Bulk API to Cypress or if designated by Cypress, its sub-licensee, in such quantities and on such monthly delivery dates as are specified in Purchase Orders. With respect to orders not submitted in accordance with the forecast and order procedure, Pierre Fabre will use Commercially Reasonable Efforts to supply Cypress or its sub-licensee with the quantities so ordered but shall have no obligation. Deliveries shall be made FCA French Airport (ICC Incoterms 2000) and shall be shipped to Cypress' address set forth in this Agreement, or as otherwise directed by Cypress in writing. Bulk API delivered to Cypress or its sub-licensee shall be appropriately packaged by Pierre Fabre at its expense for export shipment to the Licensed Territory. Delivery of Bulk API will be made by Pierre Fabre in conformity with a shipment protocol to be mutually agreed within the Working Group.

7.     QUALITY ASSURANCE CONTROL—ACCEPTANCE.

        7.1    Minimum Time to Retesting API.     Upon delivery to Cypress or if designated by Cypress, its sub-licensee, API will have a minimum time to retesting (the "Minimum Time to Retesting" ) of [...***...] when the maximum time before retesting of API is required, as authorized by the FDA ( "Maximum Time Before Retesting" ) is [...***...] . In addition, Pierre Fabre agrees to use Commercially Reasonable Efforts, including but not limited to conducting stability studies on API or enabling Cypress or its sub-licensee to conduct such studies, to obtain FDA approval of an increase in the Maximum Time Before Retesting to [...***...] . Pierre Fabre shall provide Cypress with a report of all data that Pierre Fabre obtains in such stability studies conducted by or on behalf of Pierre Fabre. In the event such increase in Maximum Time Before Retesting is approved by the FDA, the Minimum Time to Retesting required upon delivery under this Section 7.1 shall be increased to [...***...] .

        7.2    Quality Agreement.     Within 90 days from the Effective Date, Cypress and Pierre Fabre will enter into a Quality Agreement; provided that, if Cypress requests of Pierre Fabre in writing, Forest (or any Affiliate of Forest that is primarily responsible for the activities of Forest under the Collaboration Agreement) may be added as a party to the Quality Agreement. Cypress and Pierre Fabre (and, if applicable, Forest or any Affiliate of Forest that is primarily responsible for the activities of Forest under the Collaboration Agreement) shall amend the Quality Agreement from time to time as the parties deem necessary. The Quality Agreement will include, at a minimum, the subject matter listed in Exhibit IV .

        7.3    Specifications; Testing.     

         (a)      Batch Testing.     Pierre Fabre will perform standard analytical testing of each manufactured batch to be delivered to Cypress hereunder to verify that it Conforms according to the procedure described in the corresponding documentation or as required by applicable laws, regulation and authorities prior to shipment of each batch of Bulk API.

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         (b)      Quality Control Sample.     Prior to delivery of any batch of Bulk API, Pierre Fabre shall provide Cypress or its sub-licensee with (i) a quality control sample of such batch for the purpose of confirming that such batch Conforms, and (ii) written confirmation that the corresponding batch record has been reviewed and approved by Pierre Fabre's Quality Assurance Department.

         (c)      Quality Control Problem.     In addition, in the event Cypress, its sub-licensee or Pierre Fabre identifies a quality problem with respect to a quality control sample or any batch sample of API, then, if requested by Cypress or its sub-licensee in writing, Pierre Fabre shall authorize Cypress or its sub-licensee to consult at Pierre Fabre's facilities the full batch records corresponding to the applicable quality control sample or applicable batch.

         (d)      Certificate of Analysis.     Pierre Fabre shall also provide a certificate of analysis (the "Certificate of Analysis" ) to Cypress or its sub-licensee with each shipment of Bulk API supplied hereunder. Such Certificate of Analysis shall certify with respect to each shipment and batch (identified by batch number) (i) the quantity of the shipment, and (ii) that the Bulk API delivered Conforms, as well as any further information required by the relevant regulatory authorities that Cypress may have previously notified Pierre Fabre is necessary. Cypress or its sub-licensee shall be under no obligation to accept any shipment of Bulk API without an accompanying Certificate of Analysis.

        7.4    Acceptance and Rejection.     

         (a)      Acceptance of Quality Control Sample.     No delivery of Bulk API shall be made until Cypress or its sub-licensee accepts or is deemed to have accepted the quality control sample of Bulk API, as provided in Section 7.4(c) below. Notwithstanding the above, the parties agree that if the delivery of one batch of Bulk API is made in several shipments and if Cypress or its sub-licensee has accepted the quality control sample of such batch sent by Pierre Fabre before delivery of the first shipment, then Pierre Fabre shall not have any obligation to send a quality control sample of the same batch of Bulk API before delivery of the shipments of the same batch.

         (b)      Rejection.     Cypress or its sub-licensee may reject any quality control sample or batch delivery that does not Conform.

         (c)      Quality Control Sample Testing.     Within 15 days after receipt of the applicable quality control sample, Cypress or its sub-licensee shall perform such samplings and tests that are designed, in accordance with the methods of analysis and API specifications approved by the FDA, to determine whether the quality control sample Conforms. If Cypress or its sub-licensee rejects the quality control sample, Cypress or its sub-licensee shall, within such 15 day period, inform Pierre Fabre of its refusal to accept the quality control sample, and the reasons therefore; otherwise, Cypress or its sub-licensee shall be deemed to have accepted the quality control sample and Pierre Fabre shall be entitled to deliver the corresponding batch (or portion thereof) of Bulk API to Cypress or its sub-licensee.

         (d)      Replacement of Quality Control Sample.     Upon rejection by Cypress or its sub-licensee of a quality control sample, within 10 business days of notice of such rejection, Pierre Fabre shall send a new quality control sample from a different API lot.

         (e)      Bulk API Testing.     Within 30 days of receipt of any batch (or portion thereof) delivery of Bulk API at Cypress' facilities or such other destination as may be designated by Cypress, Cypress or its sub-licensee shall perform such samplings and tests that are designed, in accordance with the methods of analysis and API specifications approved by the FDA, to determine whether the Bulk API Conforms. If Cypress or its sub-licensee rejects any shipment of Bulk API, Cypress shall within such 30 day period inform Pierre Fabre of its refusal to accept such shipment, and the reasons therefor; otherwise, Cypress or its sub-licensee shall be deemed to have accepted said shipment; provided that such acceptance shall not preclude a subsequent rejection of any shipment

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of Bulk API by Cypress or its sub-licensee following discovery of latent defects in such Bulk API (includi