WHENEVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE DENOTED BY AN ASTERISK *), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

 

SUPPLY AGREEMENT

 

THIS SUPPLY AGREEMENT (“ Agreement ”) is made and entered into, effective as of June 23, 2005 (the “ Effective Date ”), by and between Alkermes, Inc., a Pennsylvania corporation, having a principal place of business at 88 Sidney Street, Cambridge, MA 02139 (“ Alkermes ”), and Cephalon, Inc., a Delaware corporation having a principal place of business at 41 Moores Road, Frazer, Pennsylvania 19355 (“ Cephalon ”) (collectively, the “ Parties ” or individually, a “ Party ”).

 

RECITALS :

 

WHEREAS, concurrently with the execution of this Agreement, Alkermes and Cephalon have entered into the License and Collaboration Agreement (as defined below), pursuant to which Alkermes granted Cephalon a semi-exclusive license to commercialize and sell the Product (as defined below) in the Territory (as defined below);

 

WHEREAS, under the terms of the License and Collaboration Agreement, Alkermes has an obligation to manufacture and supply the Product to Cephalon for development and commercial sale; and

 

WHEREAS, Alkermes hereby agrees to manufacture and supply, and Cephalon hereby agrees to purchase, the Product on the terms and conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements set forth herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

 

Article 1
DEFINITIONS

 

Capitalized terms used in this Agreement, whether used in the singular or plural, shall have the meanings set forth below, unless otherwise specifically indicated herein.  Capitalized terms used in this Agreement and not defined in this Agreement shall have the meanings ascribed to them in the License and Collaboration Agreement.  In the event of a conflict between the definition of a term contained herein and the definition of such term in the License and Collaboration Agreement, this Agreement shall control.

 

1.1          “Act” shall mean the United States Food, Drug and Cosmetic Act, as amended from time to time, and the regulations promulgated thereunder including the guidelines and guidance issued by the FDA.

 

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1.2          “Additional Components ” shall mean all components supplied together with the Product and the Diluent that are necessary to reconstitute or administer the Product, or that are necessary for final packaging.

 

1.3          “Affiliates” shall mean with respect to any Party, shall mean any entity that controls, is controlled by, or is under common control with such Party, but only for so long as such control shall continue.  For these purposes, “control” shall refer to:  (i) the possession, directly or indirectly, of the power to direct the management or policies of an entity, whether through ownership of voting securities, by contract or otherwise, or (ii) the ownership, directly or indirectly, of at least fifty percent (50%) of the voting securities or other ownership interest of an entity.

 

1.4          “Alkermes Manufacturing Facility” shall mean the facility owned and operated by Alkermes or an Affiliate located in Wilmington, Ohio, or any other manufacturing facility owned and operated by Alkermes or an Affiliate where the Manufacture of the Product is performed for supply to Cephalon pursuant to this Agreement; provided, however , an Alkermes Manufacturing Facility shall not include a manufacturing facility owned and operated by Alkermes or an Affiliate that is constructed for the Manufacture of the Product for supply outside the Territory.

 

1.5          “Alkermes Vivitrex Manufacturing Know-How” shall mean the Alkermes Manufacturing Know-How defined in the License and Collaboration Agreement that is necessary or directly related to the Manufacture of the Product.

 

1.6          “Business Day” shall mean a day on which banking institutions in New York, New York are open for business

 

1.7          “Certificate of Analysis and Conformity” shall mean the certificate for each batch or lot of Product delivered hereunder in the form contemplated by Section 3.11 of this Agreement.

 

1.8          “cGMPs” shall mean the then current good manufacturing practices promulgated by the FDA under the U.S. Food, Drug and Cosmetic Act, 21 C.F.R. Section 210-211, as amended from time to time.

 

1.9          “Clinical Requirements” shall mean the quantities of the Product, Placebo and Diluent required for the conduct of pre-clinical studies and/or Clinical Studies of Product in the Field pursuant to a Development Plan.

 

1.10        “Clinical Studies” shall have the meaning set forth in the License and Collaboration Agreement.

 

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1.11        “Commercial Requirements” shall mean the quantities of the Product required for (i) for commercial sale by Cephalon and its Affiliates in the Field in the Territory pursuant to the License and Collaboration Agreement or (ii) for compassionate use, use in investigator-sponsored Clinical Studies or post marketing clinical studies in the Field in the Territory pursuant to the License and Collaboration Agreement.

 

1.12        “Commercialization” (including variations such as “Commercialize” and the like) shall mean the performance by a Party or its Affiliates of any and all activities directed to promoting, marketing, importing, exporting, distributing, selling or offering to sell (including pre-marketing), sampling, post-marketing clinical trials and post-marketing drug surveillance of the Product in the Field in the Territory.

 

1.13        “Commercialization Plan” shall have the meaning set forth in the License and Collaboration Agreement.

 

1.14        “Commercially Reasonable Manufacturing Efforts” shall mean [**].

 

1.15        “Confidential Information” shall have the meaning set forth in the License and Collaboration Agreement with respect to information and materials furnished by a Party to the other Party pursuant to this Agreement.

 

1.16        “ CT ” shall mean a commercialization team established pursuant to the License and Collaboration Agreement.

 

1.17        “Development FTE Rate” shall have the meaning set forth in the License and Collaboration Agreement.

 

1.18        “Development Plan” shall have the meaning set forth in the License and Collaboration Agreement.

 

1.19        “ Diluent ” shall mean any injectable liquid pharmaceutical formulation required to reconstitute the Product prior to injection, filled in a primary container.

 

1.20        “Dosage Unit” shall mean a unit of the Product or the Finished Product determined by the amount of the single dose of Naltrexone contained therein.

 

1.21        “ DT ” shall mean a development team established pursuant to the License and Collaboration Agreement.

 

1.22        “FDA” shall mean the United States Food and Drug Administration or any successor agency.

 

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1.23        “Field” shall mean the treatment, prevention or diagnosis of any human disease, disorder or condition, including the treatment and/or prevention of alcohol abuse/dependence.

 

1.24        “Finished Product” shall mean a finished, packaged, labeled final Dosage Unit of the Product plus Diluent and syringes.

 

1.25        “Firm PO” shall have the meaning set forth in Section 3.8(a).

 

1.26        “Firm Zone” shall have the meaning set forth in Section 3.7(d).

 

1.27        “[**] -Year Forecast ” shall mean a [**] year annual forecast of the Product Requirements and Placebo Requirements in each year of such forecast, starting with the next calendar year ( i.e. , the calendar year following the due date of such forecast), provided that the forecast for the first [**] months shall be broken down by month.

 

1.28        “Fully Burdened Manufacturing Cost” shall mean the costs incurred (i.e., paid or accrued) by a Party, its Affiliates or agents in the Manufacture of a Product, Placebo or Diluent, as applicable, which shall be [**].  Fully Burdened Manufacturing Cost shall exclude [**] that are required to obtain Regulatory Approval for the Medisorb Product for the Initial Indication (which costs shall be borne solely by Alkermes).  In addition, for the avoidance of doubt, any Manufacturing development costs that are included in Shared Expenses as Development Costs shall not be included as part of the Fully Burdened Manufacturing Cost.

 

1.29        “FTE” shall have the meaning set forth in the License and Collaboration Agreement.

 

1.30        “Government Authority” shall mean any court, tribunal, agency, department, legislative body, commission or other instrumentality of any federal, state, county, city or other political subdivision in the Territory.

 

1.31        “JSC” shall mean the joint steering committee established pursuant to the License and Collaboration Agreement.

 

1.32        “Laws” or “Law” shall mean all applicable laws, statutes, rules, regulations, ordinances and other pronouncements having the binding effect of law of any applicable Government Authority, including the Act.

 

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1.33        “License and Collaboration Agreement” shall mean that certain License and Collaboration Agreement by and between the Parties entered into as of June 23, 2005, as such agreement may be amended from time to time.

 

1.34        “Manufacturing” (including variations such as “Manufacture”) shall mean the performance of any and all activities directed to producing, manufacturing, processing, filling, finishing, packaging, labeling, quality control, quality assurance, testing and release, shipping and storage of the Product, Finished Product, Placebo, or Diluent as applicable.

 

1.35        “Naltrexone” shall mean [**].

 

1.36        “NDA” shall mean the New Drug Application number 21-897 filed with the FDA by Alkermes on March 31, 2005 with respect to the Product.

 

1.37        “Outbound Costs ” shall mean any outbound costs associated with the delivery of Product or Placebo including costs related to transport, cold storage shipping containers and external storage (if required) of Product or Placebo, such costs including freight, duty, insurance and warehousing.

 

1.38        “Placebo ” shall mean an inactive substitute for the Product that does not contain measurable quantities of Naltrexone.

 

1.39        “Placebo Requirements” shall means the quantities of Placebo required for the conduct of pre-clinical studies and/or Clinical Studies of the Product in the Field pursuant to a Development Plan.

 

1.40        “Procedures” shall mean the procedures for manufacturing, control and testing the Product as set forth in the NDA, as such procedures may be amended by amendment to such applications from time to time.

 

1.41        “Product” shall mean the injectable pharmaceutical product containing Naltrexone utilizing Alkermes’ Medisorb® sustained-release technology as described in the NDA.

 

1.42        “Product Requirements” shall mean Clinical Requirements plus Commercial Requirements.

 

1.43        “Quality Agreement” shall have the meaning set forth in Section 3.12.

 

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1.44        “Recall” shall mean any action by Alkermes or Cephalon to recover title to or possession of or to prevent the distribution, prescription, consumption or release of a Finished Product or Product sold or shipped to Third Parties.  The term “ Recall ” also includes the failure by Alkermes or Cephalon to sell or ship a Finished Product or Product to Third Parties that would have been subject to recall if it had been sold or shipped.

 

1.45        “Regulatory Approval” shall mean any approvals of the FDA necessary for the manufacture, marketing or sale of the Product in the Territory.

 

1.46        “Rolling Monthly Forecast ” shall mean a rolling [**] month forecast specifying Product Requirements and Placebo Requirements for each month of such forecast, starting with the calendar month following the due date of such forecast.

 

1.47        “Seizure” shall mean any action by the FDA to detain or destroy a Finished Product or Product or prevent the distribution, prescription, consumption or release of a Finished Product or Product.

 

1.48        “Shared Expenses” shall have the meaning set forth in the License and Collaboration Agreement.

 

1.49        “Specifications” shall mean the specifications for the manufacture, release, storage, handling and packaging of the Product as set forth in the NDA, as such specifications may be amended from time to time as provided herein.

 

1.50        “Strategic Forecast” shall mean a reasonable estimate of the long-range (at least [**] years) manufacturing capacity forecast for the Alkermes Manufacturing Facility for supply to Cephalon pursuant to this Agreement, the current version of which is attached as Exhibit A.

 

1.51        “Supply Team” shall have the meaning set forth in Section 2.1.

 

1.52        “Technology Transfer Agreement” shall have the meaning set forth in Section 6.3.

 

1.53        “Term” shall have the meaning set forth in Section 6.1.

 

1.54        “Territory” shall mean the United States of America, its territories and possessions, including the Commonwealth of Puerto Rico.

 

1.55        “Third Party” shall mean any entity other than the Parties or their

 

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respective Affiliates.

 

Where words and phrases are used herein in the singular, such usage is intended to include the plural forms where appropriate to the context, and vice versa.  The words “ including ”, “ includes ” and “ such as ” are used in their non-limiting sense and have the same meaning as “including without limitation” and “including but not limited to”.  References to Articles, Sections, subsections, and clauses are to the same with all their subparts as they appear in this Agreement.  “ Herein ” means anywhere in this Agreement.  “ Hereunder ” and “ hereto ” means under or pursuant to any provision of this Agreement.

 

Article 2

SUPPLY TEAM

 

2.1          Establishment of Supply Team.  The JSC shall establish a supply team (the “ ST ”) no later than [**] days after the Effective Date to coordinate and implement all activities for the Manufacture of the Product for sale to Cephalon.  One representative from each Party shall be designated as that Party’s team leader to act as the primary ST contact for that Party.  The ST shall consist of an equal number of representatives of each Party as are reasonably necessary to accomplish the goals of the ST hereunder.  Such representatives may include individuals with expertise and responsibilities in the areas of quality control, quality assurance, operational planning, supply chain management and regulatory affairs.  Either Party may replace any or all of its representatives at any time upon notice to the other Party.

 

2.2          Supply Team Responsibilities.  The ST shall be responsible for:

 

(i)            implementing the provisions set forth in this Agreement in a manner consistent with Alkermes’ Manufacture and supply obligations hereunder;

 

(ii)           pursuant to Section 3.5, reviewing the Strategic Forecast and the long range plan for Commercialization of the Product in the Territory;

 

(iiii)         developing a Manufacturing strategy for the Product, including an annual Strategic Forecast, for review and approval by the JSC;

 

(iv)          formulating a plan for Manufacturing development to reduce Manufacturing cost and enhance Manufacturing output and associated annual budgets and any substantive amendments thereto for incorporation into the Development Plans;

 

(v)           reviewing quality issues and ongoing quality control/quality assurance programs;

 

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(vi)          implementing all Manufacturing activities pursuant to the Development Plans approved by the JSC;

 

(vii)         exchanging information and facilitating cooperation and coordination between the Parties as they exercise their respective rights and meet their respective obligations under the Development Plans, the Commercialization Plans and this Agreement;

 

(viii)        providing status updates and identifying critical issues to the JSC regarding Manufacturing activities; and

 

(ix)           performing such other functions as appropriate to further the purposes of this Agreement and the License and Collaboration Agreement as determined by the Parties.

 

2.3          Supply Team Procedures.  The Alkermes team leader shall serve as the chairperson of the ST.  The chairperson shall establish the timing and agenda for all ST meetings and shall send notice of such meetings, including the agenda therefor, to all ST members; provided, however , either Party may request that specific items be included in the agenda and may request that additional meetings be scheduled as needed.  The ST will meet at least once each calendar month, or as agreed by the ST, for the first [**] years following the Effective Date, and at least once each calendar quarter, or as agreed by the ST, thereafter.  The location of regularly scheduled ST meetings shall alternate between the offices of the Parties, unless otherwise agreed.  Meetings may be held telephonically or by videoconference.  A quorum of at least half the ST members appointed by each Party shall be present at or shall otherwise participate in each ST meeting.  Alkermes shall appoint one person (who need not be a member of the ST) to attend the meeting and record the minutes of the meeting in writing.  Such minutes shall be circulated to the Parties promptly following the meeting for review, comment and approval.

 

2.4          Supply Team Decision Making.  As a general principle, the ST will operate by consensus with each Party collectively having one vote.  In the event that the ST members do not reach consensus with respect to a matter that is within the purview of the ST within [**] days after they have met and attempted to reach such consensus, such matter shall be presented to the JSC for resolution; provided , however , that to the extent any matters are required by Law or by safety concerns with respect to a Product to be resolved within a shorter period of time, the periods set forth in this Section 2.4 and in Section 2.1.4 and Article 12 of the License and Collaboration Agreement shall be shortened as appropriate to permit the resolution of such matters within the required period.

 

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2.5          Limitation on Supply Team Decision Making.  Neither the ST nor the JSC shall, without the consent of Cephalon, have any authority to modify or reduce Alkermes’ obligation under this Agreement to use Commercially Reasonable Manufacturing Efforts as set forth in Section 3.15 or to amend any provision of this Agreement.  Notwithstanding anything to the contrary in the License and Collaboration Agreement, Alkermes shall not have any right to resolve any Reserved Dispute in any manner that modifies or reduces Alkermes’ obligation under this Agreement to use Commercially Reasonable Manufacturing Efforts as set forth in Section 3.15 or to amend any provision of this Agreement.

 

Article 3
SUPPLY OF PRODUCTS

 

3.1          Purchase and Sale of Product.  During the Term, and subject to the terms and conditions hereof, Alkermes agrees to supply to Cephalon, and Cephalon agrees to purchase exclusively from Alkermes, Cephalon’s Product Requirements.  During the Term and subject to applicable Law, Alkermes agrees to use commercially reasonable efforts to limit the ability of Third Parties to which Alkermes supplies Product for sale and distribution in the ROW Territory [**].  Alkermes agrees that, if at any time during the Term Alkermes is unable to fully satisfy worldwide demand for the Product, [**].

 

3.2          Manufacture of the Product.  Alkermes shall Manufacture the Product for supply to Cephalon.  Alkermes shall Manufacture, or have Manufactured by a designated Third Party, the Diluent, the Additional Components, and the Finished Product (packaging and labeling of the Product) for supply to Cephalon.

 

3.3          Manufacturing Development .  Alkermes shall conduct Manufacturing development for the Product to reduce Manufacturing cost and enhance Manufacturing output.  The ST shall submit a plan and budget for such Manufacturing development to the DT, which in turn shall incorporate this plan into the Development Plan submitted to the JSC for review and approval.  Such plan and budget shall be consistent with, and reasonably calculated to enable Alkermes to perform, its obligations pursuant to Section 3.15.  Alkermes shall then conduct Manufacturing development in accordance with the Development Plan and budget approved by the JSC.

 

3.4          Manufacturing Facility.  Alkermes shall Manufacture the Product at the Alkermes Manufacturing Facility.  In accordance with the terms and conditions set forth in the Quality Agreement, Cephalon shall have the right from time to ti