Manufacturing and Supply Agreement [Amendment] - JPI Pharmaceutica International, Janssen Pharmaceutica Inc. and Alkermes Controlled Therapeutics Inc. II
AMENDMENT TO MANUFACTURING AND SUPPLY AGREEMENT
THIS AMENDMENT (the "Amendment") is made and entered into as of December
22, 2003 to the Manufacturing and Supply Agreement entered into as of August 6,
1997 by and between JPI PHARMACEUTICA INTERNATIONAL, a division of Cilag AG
International Zug ("JPI"), JANSSEN PHARMACEUTICA INC. ("JANSSEN US") and
ALKERMES CONTROLLED THERAPEUTICS INC. II ("ACT II"), as amended (the
"Agreement") (any terms used but not defined herein shall have the meaning set
forth in the Agreement).
RECITALS:
WHEREAS, JPI, JANSSEN US and ACT II have entered into the Agreement; and
WHEREAS, the parties now wish to enter into this Amendment to clarify the
terms for payment of the Manufacturing Fee as set forth in the Agreement by
amending the terms and conditions of the Agreement as set forth below;
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. Article 1.3 of the Agreement shall be deleted in its entirety and
replaced with a new Article 1.3 which shall read as follows:
1.3 "Final Product" shall mean a Presentation Form approved and marketed by
JANSSEN, their Affiliates and licensees, ready for sale to the final
customer.
2. Article 1.5 of the Agreement shall be deleted in its entirety and
replaced with Article 1.5(a) and Article 1.5(b) which shall read as follows:
1.5(a) "U.S. Licensed Net Selling Price" shall mean the * offered by JANSSEN,
its Affiliates or licensees in a given calendar year (or such shorter
period as may be applicable) to independent third parties for each
Presentation Form of the Final Product for sale in the United States, its
territories and possession, less deductions for (i) trade, cash and
ordinary business discounts allowed; (ii) allowances or credits to
customers on account of rejection or return of Final Product; and (iii)
managed care rebates or allowances and mandatory price allowances imposed
by governments.
If JANSSEN, its Affiliates or licensees sell any Presentation Form of the
Final Product in the United States in such a manner that the * of the
same is not readily identifiable then the * shall be whichever is the
higher of (i) the fair market value of such Final Product or (ii) the
proportion of the bundled price attributed to such Final Product by
JANSSEN, its Affiliates or licensees whenever the Final Product is sold
as o part of a package of products or services. For the purpose hereof
"fair market
<PAGE>
value" shall mean, without limitation, the value of such Final Product
sold to similar third parties in similar quantities in the United States.
If the fair market value cannot be determined in the United States, the
fair market value will be negotiated by the parties in good faith.
1.5(b) "ROW Licensed Net Selling Price" shall mean the * offered by JANSSEN, its
Affiliates or licensees in a given calendar year (or such shorter period
as may be applicable) to independent third parties for each Presentation
Form of the Final Product for sale in the Territory (other than the
United States, its territories and possessions), less deductions for (i)
trade, cash and ordinary business discounts allowed; (ii) allowances or
credits to customers on account of rejection or return of Final Product;
and (iii) managed care rebates or allowances and mandatory price
allowances imposed by governments.
If JANSSEN, its Affiliates or licensees sell any Presentation Form of the
Final Product in a country in the Territory (other than the United
States, its territories and possessions) in such a manner that the * of
the same is not readily identifiable then the * for that country shall be
whichever is the higher of (i) the fair market value of such Final
Product or (ii) the proportion of the bundled price attributed to such
Final Product by JANSSEN, its Affiliates or licensees whenever the Final
Product is sold as part of a package of products or services. For the
purpose hereof "fair market value" shall mean, without limitation, the
value of such Final Product sold to similar third parties in similar
quantities. If the fair market value cannot be determined in any given
country, the fair market value will be determined by the value of such
Final Product sold to similar customers in countries with similar pricing
and reimbursement structures and for similar quantities.
3. Article 1.7 of the Agreement shall be deleted in its entirety and
replaced with a new Article 1.7 which shall read as follows:
1.7 "Manufacturing Fee" shall mean the fee to be paid by JPI and JANSSEN US
to ACT II for each Presentation Form of the Product in consideration for
the Manufacture of Products supplied to each of them in accordance with
the terms hereof and which fee will be calculated as a percentage of the
U.S. Licensed Net Selling Price and/or the ROW Licensed Net Selling
Price, as applicable, for each Presentation Form of the Final Product in
accordance with the mechanism set forth in Article 6.
4. A new Article 1.13 shall be added to the Agreement which shall read as
follows:
1.13 "Presentation Form" shall mean a form of the Product or the Final Product
determined by the amount of the single dose (either 25 mg., 37.5 mg. or 50
mg.) of the depot formulation of Risperidone contained therein.
<PAGE>
5. Article 6 of the Agreement shall be deleted in its entirety and replaced
with a new Article 6 which shall read as follows:
6.1 In consideration of the manufacturing activities to be performed by ACT II
hereunder, JPI and JANSSEN US will pay the Manufacturing Fee for the
Products supplied to each of them.
The Manufacturing Fee will be calculated as a certain percentage of the
U.S. Licensed Net Selling Price and/or ROW Licensed Net Selling Price, as
applicable. Subject to the terms and conditions set forth in this
Agreement, the actual percentage that shall apply with respect to a given
calendar year will be determined in accordance with the mechanisms set
forth in this Article 6 and Exhibit D attached hereto.
6.1.1 The Manufacturing Fee for calendar year 2002 has been established
pursuant to Exhibit I hereto.
6.1.2 (a) Determination of Manufacturing Fee. Subject to the terms and
conditions set forth in this Article 6.1.2, the Manufacturing Fees for
calendar year 2003 and any subsequent calendar year will be calculated on
the basis of the (i) U.S. Licensed Net Selling Prices and/or ROW Licensed
Net Selling Prices for such calendar year (expressed in USD at the
exchange rates then applied by JANSSEN in accordance with its normal
accounting procedures), as applicable, for each Presentation Form of the
Final Product and (ii) the total amount of Product expressed in units that
has been Manufactured and shipped pursuant to Article 4 by ACT II for such
calendar year.
(b) Determination of a Provisional Manufacturing Fee. For the sake of
administrative ease, by *, JANSSEN and ACT II will agree in good faith on
the "U.S. Provisional Manufacturing Fee" and the "ROW Provisional
Manufacturing Fee" for each Presentation Form of the Product for the
upcoming calendar year. The "U.S. Provisional Manufacturing Fee" for each
such Presentation Form of the Product shall be calculated by taking the
forecast submitted by JANSSEN in * for the upcoming calendar year in
accordance with Exhibit E (the "* Forecast"), to determine an estimated
total amount of Product to be ordered, then determining the applicable
percentage from Exhibit D to the Agreement (based on the such estimated
total amount of Product) (the "Applicable Percentage") and adding * to
facilitate cash flow (the "Additional Percentage") to such Applicable
Percentage to determine the "Provisional Manufacturing Fee Percentage."
The Provisional Manufacturing Fee Percentage shall then be applied to
JANSSEN's estimated U.S. Licensed Net Selling Price for the upcoming
calendar year (which shall be determined by JANSSEN in good faith and
submitted to ACT II by * of the prior calendar year) to determine the U.S.
Provisional Manufacturing Fee. "ROW Provisional Manufacturing Fee " for
each such Presentation Form of
<PAGE>
the Product shall be calculated by taking (i) the * Forecast; and
(ii) JANSSEN's estimated ROW Licensed Net Selling Price for the upcoming
calendar year (which shall be determined by JANSSEN in good faith and
submitted to ACT II by * of the prior calendar year) and
applying the Provisional Manufacturing Fee Percentage to the estimated ROW
Licensed Selling Price to determine the ROW Provisional Manufacturing
Fee. Subject to the other provisions of this Article 6.1.2, ACT II shall
invoice JANSSEN US for all Product to be shipped to JANSSEN US in the
subsequent calendar year at the U.S. Provisional Manufacturing Fee and
shall invoice JPI for all Product to be shipped to JPI in the subsequent
calendar year at the ROW Provisional Manufacturing Fee. Either the "U.S.
Provisional Manufacturing Fee" and/or the "ROW Provisional Manufacturing
Fee" may also be referred to as the "Provisional Manufacturing Fee."
(c) Recalculation of the Provisional Manufacturing Fee. Within *
business days after the end of each calendar quarter JANSSEN shall send to
ACT II a report setting forth for each Presentation Form of the Final
Product (i) its actual U.S. Licensed Net Selling Price for the calendar
year to date; (ii) its actual ROW Licensed Net Selling Price for the
calendar year to date; and (iii) the actual number of units of Product
ordered by JANSSEN pursuant to Exhibit E for the calendar year to date
plus the number of units of Product forecast to be ordered by JANSSEN
during the balance of the calendar year as set forth in the most recent
forecast submitted in accordance with Exhibit E (specifying such units by
Presentation Form and by geographical area (US - ROW)) ("Revised Annual
Total Products"). The parties shall use such Revised Annual Total Products
to recalculate the Applicable Percentage from Exhibit D by substituting
such number for the comparable estimated number used to determine the then
current Provisional Manufacturing Fee Percentage. The parties shall add an
Additional Percentage to this Applicable Percentage to create a new
Provisional Manufacturing Fee Percentage. The parties shall also apply the
Applicable Percentage to the actual year-to-date US Licensed Net Selling
Price and ROW Licensed Net Selling Price to determine an interim US
Provisional Manufacturing Fee and an interim ROW Provisional Manufacturing
Fee to be used for calculation purposes. The parties shall next use such
newly calculated interim Provisional Manufacturing Fees to recalculate the
total amount payable for Product shipped to JANSSEN during the current
calendar year to date to determine if such recalculation would result in
an underpayment or overpayment for such Product (a "Payment Differential")
of more than *. The parties shall also calculate the total amount payable
for Revised Annual Total Products using the newly calculated interim
Provisional Manufacturing Fees as well as the prior Provisional
Manufacturing Fees to determine if these amounts represent more than a *
potential overpayment or underpayment for such Product. In the event that
there is either a underpayment or overpayment of more than * or * as
described above, then the party who has overpaid or who has been underpaid
may request the other party to pay the Payment Differential within * of
the end of such calendar quarter (such payment a "True Up"). In addition,
in the event that there is a
<PAGE>
True Up, the parties shall apply the newly calculated Provisional
Manufacturing Fee Percentage to the actual year-to-date US Licensed Net
Selling Price and ROW Licensed Net Selling Price to determine a revised US
Provisional Manufacturing Fee and ROW Provisional Manufacturing Fee which
shall become the Provisional Manufacturing Fees to be used during the
balance of the calendar year, unless replaced by subsequently recalculated
Provisional Manufacturing Fees in accordance with this paragraph.
(d) Annual Reconciliation. Within * days after the end of each calendar
year, JANSSEN shall send to ACT II a report stating for each Presentation
Form of the Final Product (i) its U.S. Licensed Net Selling Price for such
calendar year; (ii) its ROW Licensed Net Selling Price for such calendar
year; and (iii) the total number of units of Product shipped to JANSSEN
during such calendar year (on a country-by-country basis). Any payment
required by JANSSEN to ACT II or vice versa to compensate for any
difference between the U.S. Provisional Manufacturing Fee and/or the ROW
Provisional Manufacturing Fee (calculated in accordance with paragraphs
(b) and (c) above) and the applicable Manufacturing Fees as determined by
such actual prices and total number of units of Product shipped shall be
made to the appropriate Party no later than * of the year in which the
report is delivered and in accordance with the provisions of Article 6.4.
(e) Calculation of Units During Calendar Years *. In calculating the
total number of units of Product shipped to JANSSEN for each of calendar
years *, whether or not such units of Product are actually shipped, the
parties will deem as shipped (i) all Product ordered by JANSSEN prior to
the end of * of each such calendar year and (ii) all Product ordered
by JANSSEN in the * forecast for each such calendar year (the "*
Forecast") submitted in accordance with the ordering procedures set forth
in Exhibit E. Any Product ordered by JANSSEN other than as set forth
above, even if such Product is shipped, will not, however, be deemed to be
shipped when making such calculation, and will also not be deemed to be
shipped when calculating the total number of units of Product shipped
during any subsequent calendar year. Any units of Product ordered by
JANSSEN as set forth above, but not shipped, shall be invoiced to JANSSEN
when shipped at the Manufacturing Fee for the applicable calendar year,
rather than at the then current Provisional Manufacturing Fee. From the
calendar year * onwards, the Manufacturing Fee will be calculated based on
the total number of units of Product actually shipped to JANSSEN for such
calendar year.
(f) *
<PAGE>
(g) *
(h) Illustrative Examples. Exhibit J hereto provides examples for
illustrative purposes only of calculations made pursuant to
paragraphs (b), (c), (d) and (e) hereof. In the event of any
conflict between Exhibit J and this Agreement, the provisions of
this Agreement shall control.
6.2 JANSSEN shall keep or cause to be kept accurate records in
sufficient detail to enable the Manufacturing Fees for Products sold
hereunder to be determined. JANSSEN, upon the written request
(including reasonable notice) and at the expense of ACT II, and in
any event not more frequently than once in any calendar year, shall
permit an independent public accountant of national prominence
selected by ACT II, and approved by JANSSEN (with approval not
unreasonably to be withheld), to have access during normal business
hours to those records as may be reasonably necessary to verify the
accuracy of the Manufacturing Fees for Products sold for any
calendar year ending not more man three (3) years prior to the date
of the aforementioned written request. If such accountant determines
that the Manufacturing Fees have been overstated or understated,
then one party shall make a payment to the other party as necessary
to correct the amount of the Manufacturing Fees paid for Product
supplied hereunder, which payment shall be based on the difference
between the actual and the misstated Manufacturing Fees. In
addition, if such accountant reasonably determines that the
Manufacturing Fees have been understated for the audited period by
more than *, then JANSSEN shall pay the reasonable costs of such
audit. ACT II agrees that all information subject to review under
this Article 6.2 shall be deemed JANSSEN's Confidential Information
subject to the terms and conditions of Article 7. ACT II shall
retain and cause its independent accountant to retain all such
information in confidence in accordance with Article 7 and such
information may only be used for purposes germane to this Article
6.2.
6.3 ACT II shall invoice JPI or JANSSEN US for the Provisional
Manufacturing Fee due with respect to each batch of Product supplied
to each of them or their
<PAGE>
respective designee when shipped pursuant to Article 4. JPI and
JANSSEN US shall pay such, invoice within * after the date of the
invoice.
6.4 All payments required to be paid hereunder shall be made in United
States Dollars by wire transfer of immediately available funds to
the financial institution, account number, account party's name and
wire transfer information designated in writing by ACT II to JPI and
JANSSEN US as the place of payment.
6.5 No party shall have the right to reduce, by set off, counterclaim,
adjustment or otherwise, any amount owed by it to the other party
pursuant to this Agreement, unless explicitly provided for
otherwise.
6.6 JANSSEN shall bear all applicable national, federal, provincial,
municipal and other governmental taxes (such as sale, use or similar
taxes), duties, or import charges, except for any tax on profits or
income of ACT II, that ACT II may be required to pay or collect as a
result of the payments of the Manufacturing Fee or the Provisional
Manufacturing Fee.
6.7 Within * after the end of each month, JANSSEN shall deliver to ACT
II a report setting forth the dollar amount and the units of each
Presentation Form of the Final Product sold during the prior month
on a country-by-country basis. In addition, each month JANSSEN shall
provide to ACT II the foreign currency exchange rates used to
calculate the Final Product sales for each country.
6. Exhibit D shall be amended by deleting the words "Licensed Net
Selling Price" and substituting the words "U.S. Licensed Net Selling Price
and/or ROW Licensed Net Selling Price."
7. This Amendment and the Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
conflict of law provisions.
8. Except as expressly provided in this Amendment, all other terms,
conditions and provisions of the Agreement shall continue in full force
and effect as provided therein. This Amendment and the Agreement
constitute the entire agreement between the parties hereto relating to the
subject matter hereof and thereof and supersede all prior and
contemporaneous negotiations, agreements, representations, understandings
and commitments with respect thereto.
[signature page follows]
<PAGE>
IN WITNESS WHEREOF, JPI, JANSSEN US and ACT II have executed and
delivered this Amendment effective as of the date first set forth above.
ALKERMES CONTROLLED JPI PHARMACEUTICA
THERAPEUTICS INC. II INTERNATIONAL represented by
CILAG AG INTERNATIONAL ZUG
By: /s/ Michael Landine By: /s/ Erik Rombouts
--------------------- ----------------------------------
Name: Michael Landine Name: ERIK ROMBOUTS
Title: Vice President Title: VP ALLIANCE MGMT
By: /s/ Heinz Schmid
----------------------------------
Name: HEINZ SCHMID
Title: GENERAL MANAGER
JANSSEN PHARMACEUTICA INC.
By: /s/ Peter Miller
------------------------------------
Name: Peter Miller
Title: President
<PAGE>
EXHIBIT I
[***]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
<PAGE>
EXHIBIT J
[***]
THIS EXHIBIT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS MARKED WITH "*" AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.