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Exhibit 4.41
Execution Copy
SUPPLY AGREEMENT
BETWEEN
GLAXOSMITHKLINE INC. (A wholly owned subsidiary of GlaxoSmithKline plc)
AND
DRAXIS PHARMA, INC.
DATED AS OF
DECEMBER 18, 2001
TABLE OF CONTENTS
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EXHIBITS AND SCHEDULES THERETO
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SUPPLY AGREEMENT
THIS SUPPLY AGREEMENT (the “Agreement”) is entered in Ontario, Canada on December 18, 2001 (the “Effective Date”) by and between GLAXOSMITHKLINE INC., a corporation organized under the laws of Canada (“GSK”) and DRAXIS PHARMA, INC., a corporation organized under the laws of Canada (“Draxis”). GSK and Draxis are sometimes referred to herein individually as a “Party” and collectively as “Parties.”
RECITALS
WHEREAS, GSK is a pharmaceutical company engaged in the discovery, development, manufacture and sale of pharmaceuticals;
WHEREAS, Draxis is a company that has developed substantial expertise in manufacturing pharmaceutical products;
WHEREAS, on January 31, 1997, GSK and Draxis entered into a Supply Agreement pursuant to which Draxis currently manufactures certain pharmaceutical products for GSK for distribution in defined geographical areas;
WHEREAS, on May 25, 2001, GSK and Draxis entered into a Technical Transfer Agreement pursuant to which GSK is transferring to Draxis the technology required by Draxis to manufacture additional products for GSK; and
WHEREAS, the Parties desire to enter into a new Supply Agreement pursuant to which Draxis will continue to manufacture existing products and begin to manufacture additional products for GSK, including additional products to be identified after the Effective Date pursuant to Section 2.1 hereto.
NOW, THEREFORE, in consideration of the foregoing recitals, mutual covenants, agreements, representations and warranties contained herein, the Parties hereby agree as follows:
Article I
“Affiliate” shall mean any person or entity that, directly or indirectly, through one or more intermediaries, Owns, is Owned by or is under common Ownership with, a Party, where “Own,” “Owned” or “Ownership” refers to (i) direct or indirect possession of at least fifty percent (50%) of the outstanding voting securities of a corporation or a comparable ownership in any other type of entity; or (ii) the actual ability of an entity, person or group to control and direct the management of the person or entity, whether by contract or otherwise.
“Annual Product Review” shall have the meaning provided in Section 5.14 of this Agreement.
“Certificate of Analysis” shall mean a document identified as such and provided by Draxis to GSK that (i) sets forth the analytical test results for a specified lot of Products shipped to GSK hereunder, (ii) is in conformance with each applicable Drug Application and (iii) states whether such Products are manufactured in accordance with the Specifications and cGMPs.
“Certificate of Conformance” shall mean a document identified as such and provided by Draxis to GSK that states that the specified lot of Products shipped to GSK hereunder are manufactured in accordance with the Specifications and cGMPs.
“Certificate of Manufacture” shall mean a document identified as such and provided by Draxis to GSK which attests that a specific lot of Products has been produced in accordance with the Specifications.
“Change Control Operating Procedure” shall have the meaning provided in Section 4.3 of this Agreement.
“Consent” shall mean any consent, authorization, permit, certificate, license or approval of, exemption by, or filing or registration with, any Governmental Body or other person.
“Current Good Manufacturing Practices” or “cGMPs” shall mean all applicable standards relating to manufacturing practices for fine chemicals, intermediates, bulk products or finished pharmaceutical products (i) promulgated by any Governmental Body having jurisdiction over the manufacture of the Products, in the form of laws or regulations, (ii) promulgated by any Governmental Body having jurisdiction over the manufacture of the Products, in the form of guidance documents (including but not limited to advisory opinions, compliance policy guides and guidelines) which guidance documents are being implemented within the pharmaceutical manufacturing industry for such products or (iii) which Draxis knows or reasonably should have known to be current and shown to be feasible on a commercially reasonable basis and valuable in ensuring drug quality within the pharmaceutical manufacturing industry for such products, in each case as in effect at the Effective Date and as amended, promulgated or accepted from time to time during the term of this Agreement.
“Data” shall have the meaning provided in Section 7.5(a) of this Agreement.
“Days” (whether or not the word is capitalized) shall mean, except where specified otherwise, calendar days.
“Delivery Date” shall mean the date specified by GSK that Draxis shall make the Products available for shipment out of the Facility in accordance with this Agreement.
“Directly Competing Products” shall have the meaning provided in Section 16.1 of this Agreement.
“Draxis Developments” shall have the meaning provided in Section 7.2(d) of this Agreement.
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“Draxis Intellectual Property” shall mean (i) all Intellectual Property owned by Draxis prior to the Effective Date and (ii) all Intellectual Property developed by Draxis independent of Draxis’ performance of its obligations under this Agreement; provided, however, that such Intellectual Property does not relate to the Products, or utilizes or is based on any GSK Intellectual Property.
“Draxis Material Default” shall have the meaning provided in Section 15.2 of this Agreement.
“Drug Application” shall mean any New Drug Submission or any Abbreviated New Drug Submission filed with the appropriate division of Health Canada, and its successor, or any product license or any equivalent drug application or similar pharmaceutical product approval administered by any other Governmental Body, or extension or renewal of any of the foregoing.
“Eligible Annual Margin” shall have the meaning provided in Section 3.3(a) of this Agreement.
“Facility” shall mean Draxis’ manufacturing facility located at Montreal, 16751 Route Transcanadienne, Trans-Canada Road, Kirkland, Quebec, Canada H9H 4J4.
“Firm Zone” shall have the meaning provided in Section 2.2(b) of this Agreement.
“Force Majeure Event” shall have the meaning provided in Article XIV.
“Governmental Body” shall mean any nation or government, any state, province, or other political subdivision thereof or any entity with legal authority to exercise executive, legislative, judicial, regulatory or administrative functions or pertaining to government in a country set forth on Schedule 2.1 to the applicable Specific Product Supplement, as each such Schedule(s) may be amended by GSK pursuant to this Agreement; provided, however, that the addition of new products shall be added on terms mutually agreed to by the Parties.
“GSK Group Quality Policies” shall mean those policies and procedures titled as such and developed by GSK or GSK Affiliates to assure mandatory controls within production sites, as currently in effect and as amended from time to time, or any successor policies and procedures designated by GSK.
“GSK Intellectual Property” shall mean any and all Intellectual Property relating to the Products or their manufacture by Draxis that was (i) owned by GSK or GSK Affiliates at the Effective Date, (ii) developed or acquired by GSK or GSK Affiliates after the Effective Date, or (iii) developed by Draxis since the Effective Date.
“GSK Material Default” shall have the meaning provided in Section 15.5 of this Agreement.
“GSK Rights” shall have the meaning provided in Section 7.3(a) of this Agreement.
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“Health, Safety and Environmental Guidelines” shall have the meaning provided in Section 4.10(c) of this Agreement.
“Indemnified Party” shall have the meaning provided in Section 11.3 of this Agreement.
“Indemnifying Party” shall have the meaning provided in Section 11.3 of this Agreement.
“Industry Price Index” shall mean the Consumer Price Index for Canada (P11950) as published by the Bank of Canada, or a successor agency, or if this index ceases to be published, the factor provided by any other comparable guide as agreed to by the Parties.
“Intellectual Property” shall mean (i) trademarks, trademark registrations, trademark applications, service marks, service mark registrations, service mark applications, business marks, brand names, trade names, trade dress, names, logos and slogans and all goodwill associated therewith; (ii) patents, patent rights, provisional patent applications, patent applications, designs, registered designs, registered design applications, industrial designs, industrial design applications and industrial design registrations, including any and all divisions, continuations, continuations-in-part, extensions, substitutions, renewals, registrations, revalidations, reexaminations, reissues or additions, including supplementary certificates of protection, of or to any of the foregoing items; (iii) copyrights, copyright registrations, copyright applications, original works of authorship fixed in any tangible medium of expression, including literary works (including all forms and types of computer software, including all source code, object code, firmware, development tools, files, records and data, and all documentation related to any of the foregoing), musical, dramatic, pictorial, graphic and sculptured works; (iv) trade secrets, technology, discoveries and improvements, know-how, proprietary rights, formulae, confidential and proprietary information, technical information, techniques, inventions, designs, drawings, procedures, processes, models, formulations, manuals and systems, whether or not patentable or copyrightable, including all biological, chemical, biochemical, toxicological, pharmacological and metabolic material and information and data relating thereto and formulation, clinical, analytical and stability information and data which have actual or potential commercial value and are not available in the public domain; and (v) all other intellectual property or proprietary rights, in each case whether or not subject to statutory registration or protection.
“Key Concern” shall have the meaning provided in Section 15.8(b) of this Agreement.
“Key Performance Indicators” shall have the meaning provided in Section 2.5 of this Agreement.
“Legal Requirements” shall mean any and all applicable local, municipal, provincial, federal and international laws, statutes, ordinances, rules, regulations or operating procedures now or hereafter enacted or promulgated by any Governmental Body, including the Regulatory Acts.
“Long Lead Time Materials” shall have the meaning provided in Section 4.7(a) of this Agreement.
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“Losses” shall mean, collectively, any and all claims, liabilities, damages, costs, expenses, including reasonable fees and disbursements of counsel (except as herein limited) and any consultants or experts and expenses of investigation, obligations, liens, assessments, judgments, fines and penalties imposed upon or incurred by an Indemnified Party.
“Marks” shall have the meaning provided in Section 7.l(c) of this Agreement.
“Materials” shall mean (i) all raw materials, components and other ingredients required to manufacture the Products and (ii) all packaging materials used in the manufacture, storage and shipment of Products.
“Materials Certification” shall have the meaning provided in Section 4.6(d) of this Agreement.
“Materials Cost” shall have the meaning provided in Section 3.2(a) of this Agreement.
“Materials Zone” shall have the meaning provided in Section 2.2(c) of this Agreement.
“New Products” shall mean the products designated as such on Schedule 2.1 to the applicable Specific Product Supplement.
“Nonconformity” shall have the meaning provided in Section 5.4(b) of this Agreement.
“Obsolete Materials” shall have the meaning provided in Section 4.8(c) of this Agreement.
“Other Costs” shall have the meaning provided in Section 3.2(a) of this Agreement.
“Other Draxis Default” shall have the meaning provided in Section 15.3 of this Agreement.
“Other GSK Default” shall have the meaning provided in Section 15.6 of this Agreement.
“Partial Batch Orders” shall have the meaning provided in Section 2.3(b) of this Agreement.
“Party” and “Parties” shall have the meanings given such terms, respectively, in the first paragraph of this Agreement.
“Patents” shall mean (i) United States or Canadian issued patents, re-examinations, reissues, renewals, extensions patent term restorations, and foreign counterparts of each of the foregoing; and (ii) pending applications for United States or Canadian patents and foreign counterparts thereof, whether issued or not.
“Period of Restriction” shall have the meaning provided in Section 16.2 of this Agreement.
“Person” shall mean any individual or corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.
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“Potential Contaminants” shall have the meaning provided in Section 4.11 of this Agreement.
“Product Developments” shall have the meaning provided in Section 7.2(a) of this Agreement.
“Product Discontinuance” shall have the meaning provided in Section 2.9 of this Agreement.
“Product Price” shall have the meaning provided in Section 3.1 of this Agreement.
“Products” shall mean all those pharmaceutical products produced for those specific markets all as set forth on Schedule 2.1 to the applicable Specific Product Supplement.
“Prohibited Markets” shall have the meaning provided in Section 16.3 of this Agreement.
“Proposed Change in Control Transaction” shall have the meaning provided in Section 15.9 of this Agreement.
“Regulatory Acts” shall mean, as applicable, the Canadian Food and Drug Act, as amended, the rules and regulations thereunder, and any applicable laws and regulations governing the approval, manufacture, sale or licensing of pharmaceutical products or ingredients for inclusion therein of any other jurisdiction named on Schedule 2.1 to the applicable Specific Product Supplement, as each such Schedule is amended from time to time, for which Draxis is then producing Products.
“Regulatory Authorities” shall mean any division of Health Canada and its successor, the Food and Drug Administration (as applicable) and any other applicable counterpart agency that administers the Regulatory Acts of any jurisdiction other than Canada named on Schedule 2.1 to the applicable Specific Product Supplement, as each such Schedule is amended from time to time.
“Reimbursable Materials” shall have the meaning provided in Section 4.8(b) of this Agreement.
“Selected Accounting Firm” shall mean any national independent accounting firm selected from time to time by the joint consent of the Parties.
“Specifications” shall mean, with respect to any Product, all specifications for materials, approved suppliers, formula, manufacturing, analytical and testing procedures, release, packaging, labeling, artwork and other processes contained in any documents relating to Products as identified on Schedule 4.1 to the applicable Specific Product Supplement and incorporated herein by reference, including all master formulas, process flow diagrams and all packaging and filling work orders as may be revised from time to time in accordance with this Agreement.
“Specific Product Supplement” shall have the meaning set forth in Section 2.1 of this Agreement.
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“Technical Terms of Supply” shall have the meaning provided in Section 4.9 of this Agreement.
“Technical Transfer Agreement” shall mean that certain Technical Transfer Agreement by and between GSK and Draxis and dated May 25, 2001.
“Term” shall have the meaning provided in Section 15.1 of this Agreement.
“Third Party” shall mean any person or entity other than the Parties or their respective Affiliates.
Sale And Purchase Of Product
2.1 General .
(a) Specific Product Supplement . From time to time, the parties shall adopt, by mutual agreement, one or more Specific Product Supplement(s) (each, a “Specific Product Supplement”) issued under this Agreement which shall identify pharmaceutical products to be supplied by Draxis to GSK under this Agreement, the applicable Product Price, and such other terms of supply as set forth in this Agreement and in that Specific Product Supplement. Each Specific Product Supplement shall be effective only when executed by the Parties and shall be attached as an exhibit to this Agreement and shall be incorporated herein by reference and be part of this Agreement.
(b) Manufacture of Product . Subject to the terms and conditions of this Agreement, including, without limitation, the applicable Specific Product Supplement, Draxis agrees to manufacture the Products at the Facility for sale to GSK and GSK Affiliates. Draxis may manufacture Products at locations other than the Facility only with the prior written consent of GSK. Draxis shall have only the authority provided under this Agreement with respect to the manufacture, testing, packaging, storing, labeling, release, delivery or sale of Products, and Draxis shall in no manner otherwise deal with the Products.
2.2 Monthly Forecasts .
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2.3 Purchase Orders .
(a) General . GSK shall deliver to Draxis purchase orders (“Purchase Orders”) for the aggregate Product volumes in each Firm Zone. Each Purchase Order shall specify the volumes of Products ordered, the Delivery Date and the destination for delivery of the Products by the carrier or freight forwarder. The Purchase Orders may be delivered electronically or by other means to such location as Draxis shall designate. Draxis shall be obligated to make such Products available on a date within three (3) days prior to the Delivery Date specified by GSK. In the event that Draxis shall not be able to make Products available by the Delivery Date specified in a Purchase Order, Draxis shall notify GSK promptly upon discovery of its inability to comply with the terms of this Section 2.3. In addition, Draxis will take such actions as may be reasonably requested by GSK to minimize the damage to GSK caused by Draxis’ inability to meet this shipping schedule. Except as provided in Section 2.4 below, all Purchase Orders shall be binding on Draxis. GSK shall issue Purchase Orders to Draxis not less than ninety (90) business days prior to the earliest requested Delivery Date for any Products to be shipped pursuant to such Purchase Order.
(b) Partial Batch Orders . In the event that GSK delivers Purchase Orders to Draxis for the aggregate Product volumes in any Firm Zone, which such volumes are less than a full manufacturing lot (each, a “Partial Batch Order”), GSK and Draxis will work in good faith to develop a mutually agreed upon schedule for bundling such Partial Batch Orders so that the aggregate Product volumes of those Partial Batch Orders are equal to a full manufacturing lot. Notwithstanding the preceding sentence, if GSK, in its sole discretion, requires that Products be delivered pursuant to the terms of one or more Partial Batch Orders, such Partial Batch Orders shall be binding on Draxis even if the aggregate Product volumes of those Partial Batch Orders are less than a full manufacturing lot. In this event, Draxis shall use its reasonable commercial efforts to minimize the portion of the applicable manufacturing lot that is not sold to GSK or to a Divestment Party within six (6) months of the date of the applicable Partial Batch Order(s). If any portion of such a manufacturing lot is not sold ***
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2.4 Accommodations . From time to time, due to significant unforeseen circumstances, GSK may deliver to Draxis a Purchase Order for Product volumes in excess of those specified in any Firm Zone. ***
2.5 Key Performance Indicators . GSK and Draxis will use Key Performance Indicators to evaluate Draxis’ performance of its obligations under this Agreement. The Key Performance Indicators will be set forth on Schedule 2.5 to this Agreement. This Schedule 2.5 will be developed jointly, and mutually agreed to, by GSK and Draxis within ninety (90) days of the execution of this Agreement and shall be promptly thereafter attached hereto. In the event that the Parties are not able to mutually upon the Key Performance Indicators within this time period, either Party may refer this matter, by giving notice to the other Party, to Draxis’ President and GSK’s Senior Vice President, North American Supply Network, for resolution. These officers, or their designees, shall meet to develop a mutually agreed upon set of Key Performance Indicators, which such Key Performance Indicators shall be promptly thereafter attached hereto. The Key Performance Indicators will reflect the Parties’ joint understanding as to the standards to be met by Draxis consistent with the GSK Global Manufacturing and Supply Key Performance Indicators. Draxis will use reasonable commercial efforts to achieve to these measures.
2.6 Meetings and Reports . Unless otherwise mutually agreed, the Parties shall meet no less than monthly to discuss the forecasts delivered by GSK pursuant to this Agreement, the Key Performance Indicators (as described in Section 2.5 above) and other matters relevant to the supply of Products hereunder (each such meeting hereinafter referred to as the “Monthly Meeting”). At least two (2) business days prior to each Monthly Meeting, GSK and Draxis shall deliver to personnel designated by the receiving party certain reports. The reports to be delivered pursuant to this Section 2.6 will be set forth on Schedule 2.6 to this Agreement, which Schedule will be developed jointly, and mutually agreed to, by GSK and Draxis within ninety (90) days of the execution of this Agreement and shall be promptly thereafter attached thereto. The reports shall each be in a form mutually agreed by the Parties. The Parties shall also meet annually to discuss strategies for improving the processes related to the manufacture of the Products, to report other developments in the GSK global supply chain and, without relieving any party of or amending any
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obligations under this Agreement, to designate additional persons for communications relating to the performance of this Agreement (each such meeting hereinafter referred to as the “Annual Meeting”). GSK shall attempt, in good faith, to provide to Draxis at the Monthly Meetings and the Annual Meetings all other readily available, appropriate data relating to the Products or GSK’s prospective demands and trends for the Products, including, without limitation, as soon as is reasonably practicable, the details of Products that have Long Lead Time Materials.
2.7 Long-Term Forecasts . ***
2.8 Global Supply Chain . The Parties recognize that Draxis is intended to function as a part of the GSK global supply chain. From time to time, GSK may require its global supply chain affiliates to implement information technology systems enabling improved EDI (Electronic Data Interchange). The Parties agree that systems required of the global supply chain will be adopted by Draxis at GSK’s expense. Draxis shall use its reasonable commercial efforts to implement those systems on the timetable requested by GSK, unless GSK otherwise agrees pursuant to this Section 2.8. Draxis shall provide GSK with its estimate of the costs attributable to any proposed implementation as soon as reasonably practicable following a request by GSK. Within a reasonable time after receipt of Draxis’ estimate, GSK and Draxis shall agree on the amount, timing and any milestones for all Product payments to be made by GSK and on all information and levels of technical or other assistance to be provided by GSK in the implementation of those systems at the Facility. GSK and Draxis hereby recognize that in the future it may be advantageous to implement a VMI (Vendor Managed Inventory) system for the supply of the Products. In that event, the Parties agree to discuss in good faith the possibility of implementing such a VMI System subject to mutual agreement on relevant terms, conditions and costs.
2.9 Product Discontinuance . GSK may give Draxis written notice at any time that it intends to discontinue manufacture of a particular Product (each, a “Product Discontinuance”). Unless GSK and Draxis agree otherwise, Draxis shall complete the manufacture of the Products subject to the Product Discontinuance as necessary to supply the volumes specified in the Firm Zone in effect at the time of notice of that Product’s Discontinuance and such other volumes as the Parties shall mutually agree.
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Prices For Products; Shipment; Payments
3.1 Price . ***
3.2 Annual Price Adjustments .
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3.3 Annual Volume Discount Credits; Adjustment Fees .
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3.4 Creditable Deposit . ***
3.5 Invoices . ***
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3.6 Payment . ***
3.7 Payment Denominations . ***
3.8 Shipment; Title; Transport .
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3.9 Records . Draxis will keep accurate books and accounts of record in connection with the manufacture, use and/or sale by it of Products hereunder in sufficient detail to permit accurate determination of all figures necessary for verification of payment obligations set forth in this Article III. Such records shall be maintained for a period of seven (7) years (or for a particular year upon notice from GSK prior to the end of such seven (7) year period, six (6) years) from the end of each year to which it relates, unless required by GSK to be maintained for a longer period. GSK, at its expense, through a certified accountant, whether a GSK employee or an independent contractor, shall have the right to access such books and records for the sole purpose of verifying the reports regarding the amounts due; such access shall be conducted after reasonable prior notice by GSK during Draxis’ normal business hours and shall not be more frequent than once during each calendar year.
3.10 Taxes .
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3.11 New Presentations .
(a) New Presentations . From time to time, GSK may request Draxis to manufacture any of the Products in any package size or dosage size or for shipment into a country not set forth on the applicable Schedule 2.1 (each, a “New Presentation”). Subject to compliance with the provisions of Section 4.3 and Section 3.11(c) of this Agreement, Draxis shall manufacture New Presentations and the Parties shall negotiate in good faith to establish a timeline for commencing manufacture of any New Presentations at the Facility and a price for the New Presentation.
(b) Model Pricing Formula . ***
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(c) Alternative Pricing Mechanism . If either Party finds that with respect to any particular New Presentation the formulas set forth in Section 3.1 l (b) above will not result in an appropriate Product Price for any reason (including, without limitation, the requirement of an extended period of time for the recoupment of capital expenditures), that Party shall notify the other Party in writing and propose an alternative Product Price and the method used to determine the appropriate Product Price for the New Presentation at issue. The Parties shall then negotiate in good faith regarding the Product Price for the New Presentation; provided, however, if the Parties are unable to agree on the Product Price for the New Presentation, then Draxis shall not be obligated to manufacture such New Presentation.
Article IV
4.1 Specifications . Draxis shall manufacture, test, package, store, label, release and deliver all Products in accordance with the Specifications, cGMPs, GSK Group Quality Policies, and the Technical Terms of Supply as described in Section 4.9 below. Draxis shall produce Products conforming to the Specifications as set forth on Schedule 4.1 to the applicable Specific Product Supplement, as those Specifications are revised from time to time in accordance with the provisions of this Agreement including, without limitation, Section 4.2 below.
4.2 Specification Changes .
(a) GSK Requested Changes . GSK shall be entitled to change the Specifications for a Product from time to time, and Draxis shall make all revisions to the Specifications requested by GSK, in accordance with the Change Control Operating Procedures set forth on Schedule 4.3 to this Agreement. GSK retains the right and responsibility for final approval of the Specifications for the Products. Except to the extent provided in Section 4.2(c)(ii) or Section 4.2(d) below, GSK shall pay Draxis the amounts incurred in implementing a change to the Specifications requested by GSK under this Section 4.2(a), as determined in accordance with the Change Control Operating Procedures and the Schedule of Rates set forth on Schedule 4.2(a) to this Agreement. Schedule 4.2 shall be developed jointly, and mutually agreed to, by GSK and Draxis within ninety (90) days of the execution of this Agreement and shall be promptly thereafter attached hereto. For all changes to the Specifications requested by GSK pursuant to this Section 4.2(a), GSK shall, in its discretion, either (i) perform, or arrange for the performance of, all development work in connection therewith or (ii) have Draxis perform such development work at the Facility. GSK shall reimburse Draxis for its actual costs incurred with GSK’s prior approval in implementing a change to the Specifications requested by GSK under this Section 4.2(a); and Draxis must provide such documentation of its costs as may be reasonably requested by GSK. Draxis agrees to use commercially reasonable efforts to minimize its costs associated
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with any Specification change. At the request of GSK, Draxis shall evaluate the estimated costs and timing of potential revisions to the Specifications.
(b) Draxis Changes . With the exception of compendial changes (i.e., USP/EP/BP). Draxis shall not make any revisions to the Specifications without prior written consent of GSK in accordance with the Change Control Operating Procedure. GSK retains the right and responsibility for final approval of the Specifications for Products. All requests by Draxis for such revisions shall be submitted in writing to GSK on the forms included in the Change Control Operating Procedure. Draxis shall notify GSK, in writing and in reasonable detail, of (i) Draxis’ suggested change; (ii) the reasons for the suggested change; (iii) the perceived benefits of the suggested change to Draxis and GSK, respectively; and (iv) the estimated costs and timing of implementing such change. If the Parties implement a change in the Specifications hereunder, they shall negotiate any changes in any affected Purchase Order to provide reasonable accommodation for changed circumstances. Draxis shall be responsible for documenting all revisions to the Specifications, subject to GSK’s approval, in accordance with the Change Control Operating Procedure, as applicable.
(c) Payment for Certain Changes . Either Party may request a Specifications change intended to maintain high standards or compliance with Regulatory Acts and Legal Requirements or to bring the Specifications into compliance with high standards or Regulatory Acts and Legal Requirements. Subject to Section 4.2(d), payment for changes required for compliance with Regulatory Acts or Legal Requirements will be made per the following standards:
(i) Subject to (iii) below, the costs of revisions requested by either Party in order to maintain the Specifications in conformity with that Product’s Drug Application, applicable cGMPs, applicable Regulatory Acts or Legal Requirements (including with respect to any of the materials used in that Product), and not to the manufacture of pharmaceutical products or types of dosage forms (e.g., sterile vials or blister packs) generally, shall be borne by GSK.
(ii) Subject to (iii) below, the costs of revisions (including any capital expenditure incurred to implement any revision, costs of additional materials and one-time expenditures) requested by either Party to maintain the Specifications in conformity with cGMPs, laws Regulatory Acts or Legal Requirements applicable to the manufacture of pharmaceutical products or applicable dosage form (e.g., sterile vials or tablets in blister packs), shall be borne by Draxis without any increase in the price of that Product if subsequently sold to GSK; provided, however, that the costs related to information technology systems enabling improved EDI, shall be borne by GSK.
(iii) Notwithstanding the individual financial obligations in (i) and (ii) above, if at any time during the Term of the Agreements, GSK interprets and applies cGMPs in a manner that is materially more burdensome to Draxis than the
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interpretation and application followed by Draxis’ other pharmaceutical customers, then the Parties will negotiate in good faith to settle the proportion of the incremental cost to be borne by each of the Parties to implement GSK’s interpretation and application of cGMPs.
(d) Changes in Labeling and Packaging . From time to time GSK may require labeling or packaging changes that will affect the Products. These changes may either be initiated by GSK, pursuant to Section 4.2(a) above, or may be a requirement resulting from cGMPs changes. In either event, if the labeling or packaging change affects all or substantially all of the Products, notwithstanding Section 4.2(c) above, GSK will reimburse Draxis for its costs associated with such a change according to the Schedule of Rates set forth on Schedule 4.2(a) . In the event the labeling or packaging change does not affect all or substantially all of the Products, Draxis shall bear the costs associated with such a change.
4.3 Change Control Operating Procedure .
(a) General . The Change Control Operating Procedure set forth in Schedule 4.3 to this Agreement shall establish the procedure to be followed in the event either GSK or Draxis desires to change any aspect of the manufacturing procedure for Products described in such Change Control Operating Procedure, including but not limited to any change in Specifications as described in Section 4.2(a) above. Neither party shall implement any change in the manufacturing procedure for the Products unless it has complied with the Change Control Operating Procedure, to the extent required.
(b) Amendment of Change Control Procedure. Schedule 4.3 may be modified in accordance with Section 17.9 of this Agreement. In addition, Schedule 4.3 shall be modified to reflect GSK’s Change Control Operating Procedure for contract manufacturers as in effect from time to time, and Draxis agrees to execute any and all documents required under Section 17.9 of this Agreement to amend Schedule 4.3 in that event. Any change under the Change Control Operating Procedure shall be completed under the Change Control Operating Procedure in effect when the request for change was commenced.
(c) Governmental Approval . The Change Control Operating Procedure shall contain a mechanism to assure that all required regulatory filings are made, and applicable Governmental Bodies have approved any changes to the Specifications, to the extent required, and that Draxis has a reasonable time to implement any changes in the Specifications required by any Governmental Authority.
4.4 Storage Obligations . When storing Products or Product-derived wastes, Draxis shall comply with, and shall maintain all storage facilities in compliance with, the Specifications and in accordance with cGMPs, GSK Group Quality Policies and Legal Requirements.
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4.5 Validations and Stability Studies .
(a) General . Subject to initial validation and stability costs related to the Product transfers referenced in Article IV of the Technical Transfer Agreement, Draxis shall perform at no additional cost to GSK on an on-going basis all validations and stability studies required by the Specifications, cGMPs, GSK Group Quality Policies or Legal Requirements in connection with the regular course of manufacturing the Products for commercial supply. Draxis shall also perform commercial validations and stability studies otherwise required for the performance of its obligations under this Agreement at no additional cost to GSK except in those instances under this Agreement that require GSK to compensate Draxis for such services (e.g., changes to Specifications for which GSK bears the costs).
(b) Duties . In performing its duties under Section 4.5(a) above, Draxis shall perform the following tasks:
(i) prepare and provide to GSK, in the format designated by GSK, the data package for required regulatory submissions;
(ii) pull, store and analyze data and maintain database containing applicable information;
(iii) notify the GSK Canada Director for Quality Assurance, or his designee, promptly, but not less than within three (3) business days, if any batch of Products fails any stability tests; and
(iv) report to the GSK Canada Director for Quality Assurance, or his designee, promptly, but not less than within three (3) business days, any significant atypical results, deviations or adverse trends exhibited during testing.
(c) Reference Standards . GSK shall provide, without charge to Draxis, analytical reference standards for each of the Products. Draxis will comply with GSK policies concerning the ordering and use of GSK supplied reference standards. Draxis will also create and maintain a list of products and services undertaken on behalf of GSK using the reference standards and will provide copies to GSK on request. The reference standards shall be provided in quantities reasonably required for Draxis to perform its obligations relating to the manufacture, stability or other testing, or any other obligation under this Agreement. GSK will provide reasonable technical assistance to enable Draxis to supply and maintain their own reference standards for Divested Products once GSK is no longer obligated to supply those Products to the Divestment Parties, subject to the terms and conditions of the applicable agreement between GSK and the Divestment Party. Draxis will not supply reference standards directly to any third party company, including any Divestment Party.
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4.6 Materials .
(a) General . Draxis will obtain Materials for Products produced under this Agreement only from suppliers named in the Specifications, where applicable, and shall perform all testing of Materials required by the applicable Materials Specifications. Draxis will use its best efforts to obtain the lowest possible prices for Materials consistent with its obligations under this Agreement.
(b) Periodic Audits . Draxis shall be responsible for performing periodic audits of each supplier that provides Materials to be used in the manufacture of the Products as required by cGMPs and GSK Group Quality Policies. To the extent that Draxis has not previously conducted an audit of a supplier, GSK will share its audit results, if any, with Draxis and Draxis agrees to assume responsibility for future audits of such Supplier.
(c) Inventory . Draxis shall manage its inventory of Materials to enable Draxis to produce the Product Volumes specified in a Firm Zone and up to an additional twenty percent (20%) of such Product volumes as provided in Section 2.4 above. Subject to this obligation, Draxis shall also manage its inventory to minimize excess carrying costs and any Long Lead Time, Materials or Reimbursable Materials subject to obsolescence under Section 4.8(c) below.
(d) Materials Certifications . Draxis shall prepare or cause to be prepared by its suppliers, as the case may be, all certifications as to any Materials required by cGMPs, GSK Group Quality Policies, Legal Requirements or Regulatory Acts (each, a “Materials Certification”). Such Materials Certifications shall include, without limitation, all required certifications related to Materials derived from animal products.
(e) Containers and Packaging . Draxis shall distribute the Products to GSK in such containers and packaging and with such container closure systems and labeling as set forth in the Specifications. All such containers, packaging, container closure systems and labeling shall be in compliance with the Legal Requirements. All printed components for the Products shall be produced by Draxis in accordance with the electronic artwork provided to Draxis by GSK.
4.7 Long Lead Time Materials .
(a) Certain Purchases in Excess of Firm Zone . Long Lead Time Materials are those Materials that (i) have lead times in excess of ninety (90) days, (ii) are used in Products produced exclusively for GSK and (iii) are listed on Schedule 4.7 to the applicable Specific Product Supplement. If Draxis purchases or enters into commitments to purchase any Long Lead Time Materials based on the Product volumes in the Materials Zone for a specified month, and the actual volume specified in the applicable Firm Zone for that specified month for Products containing such Long Lead Time Materials is less than 70% of the last Materials Zone volumes for those Products, then Draxis shall immediately notify GSK of the discrepancy and of its prior purchases or purchase commitments for Long Lead Time Materials. Draxis shall take the actions described in Section 4.8(a) below to minimize its quantities of unusable Long Lead Time Materials. ***
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***
(b) Insufficient Quantities of Long Lead Time Materials . *** Draxis’ inability to provide the Product volumes specified in the Firm Zone due to insufficient inventories of Long Lead Time Materials resulting from the changes in the GSK forecast as specified in this Section 4.7(b) shall not constitute a Draxis Material Default to the extent that Draxis has complied with its obligations under this Section 4.7(b).
4.8 Reimbursement for Certain Materials .
(a) General . ***
(b) Reimbursable Materials . ***
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***
(c) Obsolete Materials . ***
(d) Obsolete Materials Reimbursement . ***
4.9 Technical Terms of Supply . The Technical Terms of Supply for the Products are set forth as Schedule 4.9 to the applicable Specific Product Supplement. In the event of a conflict
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between the terms of any Technical Terms of Supply attached to a Specific Product Supplement and the terms of this Agreement, the terms of this Agreement shall control.
4.10 Compliance Standards .
(a) GSK Group Quality Policies. GSK shall provide all relevant GSK Group Quality Policies to Draxis. GSK may change the GSK Group Quality Policies from time to time and shall promptly notify Draxis of any changes in writing. Draxis shall implement any changes in accordance with Section 4.10(b) below following receipt of notification of changes. If Draxis believes that any change to the GSK Group Quality Policies exceed generally accepted industry standard and as a result will require Draxis to incur significant additional costs not otherwise contemplated under this Agreement, Draxis shall notify GSK within thirty (30) days of receipt of the change and the Parties shall negotiate in good faith to determine the appropriate method for GSK to compensate Draxis for such additional significant costs.
(b) Compliance with cGMPs, GSK Group Quality Polices, Legal Requirements or Regulatory Acts . Draxis shall be responsible for identifying and implementing, in accordance with its obligations under Section 4.1, any actions required to bring Draxis into compliance with cGMPs, GSK Group Quality Policies, Legal Requirements or Regulatory Acts. In connection with Draxis’ obligations set forth in the preceding sentence, GSK will provide Draxis with appropriate guidance and assistance related to GSK Group Quality Policies. Draxis shall have the sole responsibility, however, for reviewing cGMPs, Legal Requirements and Regulatory Acts in order to identify and implement any actions required for compliance therewith. Draxis shall implement any such changes as promptly as practicable after the changes are adopted (even if, in the case of cGMPs and Regulatory Acts, if a later effective date is specified), unless the effective date falls after a termination of this Agreement for which notice has been previously given. Draxis shall comply with Legal Requirements of all countries and nationalities listed on Schedule 2.1 to the applicable Specific Product Supplement or subsequently identified pursuant to this Agreement, and Draxis’ obligation shall commence at the time any Product is designated for shipment into that country or nationality.
(c) Compliance with Health, Safety and Environmental Guidelines . Draxis shall comply with the health, safety and environmental guidelines set forth on Schedule 4.10(c) to this Agreement (the “Healthy, Safety and Environmental Guidelines”). Draxis is solely responsible for the safety and health of its employees, consultants and visitors and compliance with all Legal Requirements and Regulatory Acts related to health, safety and the environment, including, without limitation, providing its employees, consultants and visitors with all required information and training concerning any potential hazards involved in the manufacture, packaging, storage and supply of the Products and taking any precautionary measures to protect its employees from any such hazards.
4.11 Certain Prohibitions . ***
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***
Article V
5.1 Quality Assurance; Quality Control . Draxis shall implement and perform operating procedures and controls for sampling, stability and other testing of Materials and Products, and for validation, documentation and release of the Products and such other quality assurance and quality control procedures consistent with the Specifications, cGMPs and the GSK Group Quality Policies.
5.2 Testing of Product .
(a) General . Prior to release of the Products to finished goods inventory, Draxis shall test the Products ordered by GSK in accordance with the testing procedures described in the Specifications, and shall provide GSK with a Certificate of Manufacture, Certificate of Analysis, a Certificate of Conformance and/or any other certificate required by the applicable Regulatory Authorities for release of Product (collectively, the “Certificates”) for each batch of each of the Products certifying, warranting, and reflecting that such lot of the Products was produced and tested in compliance with: (i) the Specifications; (ii) cGMPs; (iii) GSK Group Quality Policies; and (iv) all other applicable regulatory documents, in accordance with procedures agreed to between GSK and Draxis, all as more particularly set forth in the applicable Technical Terms of Supply. GSK retains the right (but not the obligation) to test the Products at GSK’s discretion, but generally intends to accept or reject Products on the basis of the Certificates. GSK shall be under no obligation to accept any shipment of Product without the accompanying Certificates.
(b) Testing by GSK . If GSK reasonably believes that the Certificates are not reliable, based on repeated irregularity or any significant noncompliance with any of Draxis’ obligations under this Article V of this Agreement that could reasonably be expected to affect the quality of Products, then for so long thereafter as GSK may reasonably believe the Certificates are not reliable, GSK may test any or all Products on the receipt thereof. For so long as testing is reasonably believed to be warranted, Draxis shall
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reimburse GSK by credit on payments otherwise due from GSK for any additional testing conducted under this Section 5.2(b).
5.3 GSK Holds and Rejections .
(a) General . GSK shall notify Draxis of GSK’s placing any Products on hold for further investigation of a Nonconformity or a Deviation Report (as described below), or of GSK’s rejection of any batch (or part thereof) of any Product within sixty (60) days after receipt of such Products by GSK or GSK’s designee that received such Product. GSK’s notice shall state the basis for the hold or rejection. Failure to give notice within this sixty (60) day period shall constitute acceptance of any Product delivered; provided, however, that Draxis shall continue to be liable for (i) the failure of any Products to conform to Specifications, unless the failure to conform is due to Force Majeure Event, occurrences affecting or altering the Products after they are delivered to the carrier or freight forwarder, actions taken or failed to be taken after the Products were shipped, (ii) Draxis’ failure to comply with the Specifications, cGMPs and GSK Group Quality Policies in the manufacture of those Products in accordance with the provisions of this Agreement, or (iii) the failure of Draxis to comply with all Legal Requirements and the Regulatory Acts.
(b) Independent Testing . If the Parties disagree as to whether Products subject to hold or rejected meet the Specifications, Draxis’ President and GSK’s Head of Quality, Manufacturing and Strategic Alliances, or such other persons as they may designate in writing, shall confer to review samples and/or batch records, as appropriate. If the disagreement is not resolved, then samples, batch records and other data relating to the batch in dispute shall promptly be submitted for testing and evaluation to an independent third party (including a testing laboratory) approved in writing by both Parties. *** In the absence of any agreement, GSK shall have the right, with reasonable evidence of a Nonconformity (as defined below), to reject any affected quantities of Products.
(c) Notice . In the event that after the release of the Products, either Party becomes aware that any batch of the Products is nonconforming, despite any testing and quality assurance activities, such Party shall immediately notify the other Party.
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5.4 Deviation Report; Nonconformity .
(a) Deviation Reports . If during the manufacture or other handling of a Product by Draxis (i) the process or analytical limits vary from typical or established report ranges, release guidelines or release limits, (ii) there is reasonable evidence that Specifications, cGMPs or GSK Group Quality Polices were not followed in production of the Products, (iii) there is reasonable evidence that the Products fail to conform to Specifications, (iv) other events or conditions occur which could reasonably be expected to adversely affect the quality of the Products or otherwise are unusual or not expected, or (v) any physical characteristic or attribute of the Products is recognizable at any time during the manufacturing process to be unusual, atypical or irregular by a person with appropriate technical knowledge and experience exercising his best professional judgment, then Draxis shall prepare as soon as practicable following the discovery of such deviation a written report detailing such deviation (a “Deviation Report”) and promptly send such Deviation Report, along with all supporting documentation, to GSK. Draxis shall include in its Deviation Report its analysis and recommendation for Product disposition. The Deviation Report shall be attached to, and shall accompany, copies of all relevant batch records.
(b) Nonconformity . If either party becomes aware or has a reasonable basis to believe that any batch or shipment of Products may have a Nonconformity, at any time regardless of the status of Draxis’ testing and quality assurance activities or of GSK’s acceptance under Section 5.3 above, such party shall notify the other party within twenty-four (24) hours of becoming aware of a Nonconformity. “Nonconformity” means a product characteristic, or potential for existence of product characteristic, that (i) may reasonably be attributable to Draxis’ failure to manufacture, test, package, store, label, release or deliver any Product in accordance with the Specifications, cGMPs or GSK Group Quality Policies, (ii) causes any Product to fail to conform to the Specifications, or (iii) could reasonably be expected to lead to a recall or withdrawal of a Product. In the event of a Nonconformity, the Parties shall immediately conduct an investigation in accordance with Section 5.8 below and, until resolution of the investigation, handle the Products as provided in Section 5.4(c) below.
(c) Products Subject to Nonconformity or Deviation Report . Any batch or shipment of Product that is the subject of a Nonconformity or of a Deviation Report shall be handled as follows:
(i) Products held in inventory at Draxis shall not be shipped to GSK or its Affiliates, unless directed otherwise by GSK;
(ii) Any Products shipped to GSK and held in stock by GSK shall maintain a “Hold” or “Unpassed” status, and shall not be released into passed inventory of GSK, until GSK has completed any investigations pursuant to Section 5.8 and approved the disposition of the Product subject to the Nonconformity or the Deviation Report; and
(iii) Payment for such Products whether shipped or unshipped shall not be due from GSK until GSK has completed any investigations pursuant to Section 5.8
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and approved the disposition of the Product subject to the Nonconformity or Deviation Report.
Upon learning of a Nonconformity, GSK shall have the right to suspend production of the affected Products at the Facility until the Parties mutually agree that the cause of such Nonconformity has been remedied or addressed. During the period of suspended production, GSK shall be relieved of all financial obligations associated with any Firm Zone or portion thereof that is not produced as a direct consequence of the suspension, and Draxis shall be relieved of its potential obligations under Section 15.8(a) for a period of suspension of up to five (5) business days and (ii) for any longer period of suspension requested by GSK if Draxis is ultimately found to have been following applicable Specifications, cGMPs and GSK Group Quality Policies in the affected Products and the affected Products are found to conform to cGMPs.
5.5 Quantitative Deficiencies . GSK shall inform Draxis of any claim relating to quantitative deficiencies in any shipment of Products within forty-five (45) days following receipt of any shipment. In the event GSK determines there is a quantitative deficiency in any shipment, GSK shall, at its option: (i) only pay for actual quantities delivered; or (ii) require Draxis to rectify any such deficiency by promptly shipping the appropriate quantities of any relevant Product to or as directed by GSK or a GSK Affiliate, in which case GSK shall be obligated to pay for any such quantities pursuant to the terms and conditions of this Agreement. Notwithstanding the foregoing, quantities actually shipped pursuant to a Purchase Order may vary within the parameters established for each of the Products set forth on Schedule 5.5 to the applicable Specific Product Supplement and still be deemed to be in compliance with such Purchase Order.
5.6 Product Complaints . Any and all complaints of which Draxis becomes aware relating to any Product shall promptly be forwarded to the GSK Canada Product Complaints Department, or his designee. GSK shall promptly inform Draxis of any and all complaints that GSK receives which implicate Draxis’ manufacturing or other processes at the Facility. Notification shall be given by telephone, with a facsimile confirmation immediately following.
5.7 Adverse Events . For the purposes of this Agreement, “Adverse Event” shall mean any adverse event associated with the use of any Product in humans, whether or not considered drug-related. The definition includes an adverse event occurring in the course of the use of a Product in professional practice, in studies, in investigations or in tests. The definition also includes an adverse event occurring from Product overdose (whether accidental or intentional), from Product abuse, or from Product withdrawal, as well as any toxicity, sensitivity, failure of expected pharmacological action, or laboratory abnormality which is or is thought by the reporter to be serious or associated with relevant clinical signs or symptoms. For the purposes of this Agreement, “Serious Adverse Event” shall mean an Adverse Event that is fatal, life-threatening, permanently disabling or incapacitating, results in new or prolonged in-patient hospitalization, is a congenital anomaly, cancer or an overdose. With respect to any Product, Draxis shall notify the GSK Canada Product Complaints Department, or any successor department specified by GSK, as soon as possible, but (i) no later than twenty-four (24) hours following its receipt of information concerning a possible Serious Adverse Event and (ii) no later than forty-eight (48) hours following its receipt of information of a possible Adverse Event that is not a Serious Adverse Event. Notification shall
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be given by telephone, with a facsimile confirmation immediately following. Draxis shall provide to GSK all the information Draxis has available concerning the Adverse Event and shall cooperate fully with any investigation conducted or directed by GSK as set forth in Section 5.8 below. To the extent an Adverse Event of which GSK becomes aware implicates Draxis’ manufacturing or other processes at the Facility, GSK shall inform Draxis of such Adverse Event and shall disclose to Draxis any information GSK has regarding that Adverse Event which implicates Draxis’ manufacturing or other processes at the Facility. Notification shall be given by telephone, with a facsimile confirmation immediately following.
5.8 Investigations; Draxis’ Obligations .
(a) General . The Parties shall investigate all reports of Nonconformity, Product complaints and Adverse Events in order to assure the conformity of Products to Specifications and cGMPs and the safety and efficacy of the Products. The Parties shall act promptly and shall cooperate fully in such investigations.
(b) Direction . GSK shall have the sole right, in its discretion to control and direct any or all aspects of an investigation conducted under this Section 5.8. GSK shall advise Draxis from time to time throughout such investigation of GSK’s intentions regarding control and direction of the investigation of which Draxis has been notified.
(c) Draxis’ Assistance . Upon written request by GSK, Draxis shall provide all reasonably requested testing, assistance and information to GSK in connection with an investigation of any Nonconformity, Product complaint or Adverse Event, including chemical/microbial analysis of complaint samples (if available), analysis of retained samples and review of batch documentation. Draxis shall have the right to conduct at its own expense any further tests it deems appropriate regarding such investigation provided that it shall share the results with GSK.
(d) Reporting . Draxis shall provide to GSK (i) a written report of its det | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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