Manufacturing and Supply Agreement [Amendment No. 4] - JPI Pharmaceutica International, Janssen Pharmaceutica Inc. and Alkermes Controlled Therapeutics Inc. IIs
FOURTH AMENDMENT TO MANUFACTURING AND SUPPLY AGREEMENT
THIS FOURTH AMENDMENT (the "Amendment") is made and entered into as of January
10, 2005 (the "Amendment Effective Date") to the Manufacturing and Supply
Agreement entered into as of August 6, 1997, as amended, by and between JPI
PHARMACEUTICA INTERNATIONAL, a division of Cilag AG International Zug ("JPI"),
JANSSEN PHARMACEUTICA INC. ("JANSSEN US" and, together with JPI, "JANSSEN"), on
the one hand, and ALKERMES CONTROLLED THERAPEUTICS INC. II ("ACT II"), on the
other hand (the "Agreement").
RECITALS:
WHEREAS, JANSSEN and ACT II have entered into the Agreement; and
WHEREAS, JANSSEN and ACT II have also entered into an Addendum to the Agreement,
dated as of August 1, 2001 (the "Addendum"), regarding the expansion of ACT II's
manufacturing facilities; and
WHEREAS, the parties now wish to enter into this Amendment regarding the further
expansion of ACT II's manufacturing facilities, and the financial responsibility
of each of the parties in connection with such expansion;
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. DEFINITIONS. Unless provided otherwise, any capitalized terms used in this
Amendment that are not defined herein will have the meaning set forth in the
Agreement or the Addendum. The following terms will have the following meanings:
"Depreciation Credit" means an amount calculated by dividing the Total Third
Line Cost by the divisor of *, representing * for depreciation multiplied by *
of Product per year.
"FTE" means a full-time technical person dedicated by ACT II to perform
technical work on or directly related to the Third Line Plan, or in the case of
less than a full-time dedicated technical person, a full-time equivalent
technical person year, based upon a total of * (i.e., * of technical work on or
directly related to the Third Line Plan.
"FTE Hourly Rate" means the amount of *.
"Total Third Line Cost" means the total amount of the costs incurred by ACT II,
calculated as of the date of Validation Completion, for activities performed
pursuant to the Third Line Plan, including without limitation the purchase of
equipment and the design, engineering, construction and validation activities so
performed. In no event, shall the Total Third Line Cost exceed the overall
budget set forth in the Third Line Plan, unless such excess costs have been
approved by JANSSEN.
2. THIRD LINE. ACT II will design, engineer, construct and validate a third
wet process line at its manufacturing facility located in Wilmington, Ohio (the
"Third Line"). A description of the design, engineering, construction and
validation activities for the Third
<PAGE>
Line, including the equipment to be installed therein and the timeline and
budget for such design, engineering, construction and validation activities
(the "Third Line Plan") will be established by the parties. A draft Third Line
Plan including a project budget and project timeline is set forth in Exhibit A
to this Amendment.
3. APPROVAL OF THIRD LINE PLAN. Within * of the Amendment Effective Date, the
parties will meet to review and finalize the draft Third Line Plan. Any
modifications to the draft Third Line Plan affecting the anticipated timelines,
scope or budget thereof shall only become effective with the consent of both ACT
II and JANSSEN, which consent shall not be unreasonably withheld or delayed. The
final Third Line Plan will be attached to this Amendment as Exhibit A 1.
4. PERFORMANCE OF ACTIVITIES. Upon finalization of the Third Line Plan, ACT
II will begin to perform, and to have performed, the activities set forth
therein. ACT II will be responsible for the management of the design,
engineering, construction and validation of the Third Line. The Global Supply
Team, or a designated Sub-Team thereof, may, however, recommend actions to ACT
II following periodic reviews of the design, engineering, construction and
validation of the Third Line. Periodically ACT II may also notify the Global
Supply Team of proposed amendments to the Third Line Plan. Within * of receipt
of any proposed amendment to the Third Line Plan, the Global Supply Team, or the
designated Sub-Team, will meet to evaluate the amendment to the Third Line Plan
and to recommend actions; provided, however, that the scope, timelines or budget
set forth in the Third Line Plan may only be amended with the consent of both
ACT II and JANSSEN, which consent shall not be unreasonably withheld or delayed.
ACT II will keep the Global Supply Team, or any designated Sub-Team, regularly
informed, and at least on a quarterly basis, of issues and decisions affecting
the design, engineering, construction and validation of the Third Line and will
consult with the Global Supply Team, or any designated Sub-Team, before making
any decisions with respect thereto whenever possible.
5. PAYMENT. JANSSEN US will reimburse ACT II at the * for design,
engineering, construction and validation activities performed by * pursuant to
the Third Line Plan and will also reimburse ACT II for any for any out-of-pocket
costs incurred by ACT II in connection with such activities, including without
limitation costs incurred for equipment, and third-party design, engineering,
construction and validation services. Any costs for design, engineering,
construction and validation activities that exceed the overall budget set forth
in the Third Line Plan will be borne by and will be the responsibility of ACT II
unless such excess costs have been approved by JANSSEN. The parties will
regularly review the status of the budget in the Third Line Plan, in accordance
with the anticipated spending schedule provided for in the Third Line Plan.
Notwithstanding the foregoing, the costs of manufacturing any necessary
development and validation batches of the Product in connection with the
validation of the Third Line will be borne by ACT II, it being understood that
if any such Product is supplied to JANSSEN in accordance with the terms of the
Agreement, ACT II will be paid the Manufacturing Fee for such Product. JANSSEN
will provide Compound for the manufacture of such development and validation
batches of the Product free of charge, and no Compound so supplied will be a
factor in any yield variance calculation, including without limitation any
calculation made pursuant to Section 2.7 of the Agreement.
6. PAYMENT PROCESS. ACT II will invoice JANSSEN US, or such other entity as
JANSSEN US shall direct, on a * for design, engineering and construction
activities based on the payment schedule set forth in Exhibit A.1, and JANSSEN
US, or such
2
<PAGE>
other designated entity, will pay ACT II within *. Upon approval of the process
validation reports for the Third Line ("Validation Completion"), ACT II will
invoice JANSSEN US, or such other entity as JANSSEN US shall direct, for the
costs of all validation activities set forth in the Third Line Plan, and JANSSEN
US, or such other designated entity, will pay ACT II within *. All payments
required to be made hereunder will be made in United States dollars by wire
transfer of immediately available funds to the financial institution, account
number, and account party's name designated in writing from time to time by ACT
II to JANSSEN US as the place of payment.
7. OWNERSHIP OF EQUIPMENT. JANSSEN US will own the pieces of equipment
described in the Third Line Plan (the "Equipment"). To the extent that the
provisions of this Amendment are in conflict with Section 2.2 of the Agreement,
Section 2.2 will be deemed to be amended with respect to the Equipment. To
perfect JANSSEN US's ownership interest in the Equipment, ACT II, at JANSSEN's
request, will file appropriate Uniform Commercial Code financing statements with
respect to the Equipment. ACT II will keep the Equipment free and clear of all
liens and encumbrances, other than those which may result from acts of JANSSEN.
JANSSEN US will be responsible for paying any taxes, including without
limitation personal property and sales taxes, that may accrue with respect to
the Equipment.
8. USE OF EQUIPMENT. ACT II will have the right to use the Equipment during
the term of the Agreement in accordance with the provisions of the Agreement and
this Amendment, without obligation to make any payments to JANSSEN US with
respect to such right of use other than as provided for in Section 11 hereof.
ACT II will maintain each piece of Equipment in good operating order and repair,
normal wear and tear excepted. ACT II agrees, at its own expense, to keep all
Equipment insured in appropriate amounts for damage or loss.
9. DELIVERY OF EQUIPMENT UPON TERMINATION. Subject to ACT II's purchase
rights as set forth in Section 11, upon termination or expiration of the
Agreement, JANSSEN US may request that ACT II deliver to any destination in the
United States any Equipment that is not permanently fixed to ACT II's facilities
in Wilmington, Ohio and that can be removed from such facilities without
destroying any portion thereof or significantly disrupting the operation
thereof, as reasonably determined by ACT II. ACT II will promptly crate and ship
such Equipment to such destination at JANSSEN US's cost and expense.
10. USE OF THIRD LINE. The parties agree that after the first and second wet
process lines at ACT II's Wilmington, Ohio facility have been utilized to their
appropriate capacity for the manufacture of the Product, as determined by the
Global Supply Team taking into account the forecasts for the Product provided by
JANSSEN in good faith pursuant to the Agreement, manufacture of the Product will
be given priority on the Third Line. Subject to the foregoing limitation, ACT II
will have the right at any time to manufacture products other than the Product
using the Third Line, provided that (i) ACT II has provided * prior notice of
such intended manufacturing activities to JANSSEN (the "Manufacturing Notice")
and discussed such intended manufacturing activities with the Global Supply
Team, and (ii) the Global Supply Team, using its reasonable judgment in good
faith, has approved such use following review of a facility master plan to be
provided by ACT II specifying the proposed production campaigns on the Third
Line. Any such discussion with the Global Supply Team will be subject to ACT
II's obligations of confidentiality (if any) to its collaborative partner for
the products to be manufactured using the Third Line. Unless the Global Supply
Team notifies ACT II within * of
3
<PAGE>
receipt of the Manufacturing Notice that it does not approve the intended
manufacturing activities, ACT II will have the right to manufacture products
other than the Product using the Third Line, and ACT II will purchase the
Equipment in accordance with the provisions of Section 11 hereof at the latest *
prior to the date of manufacturing the first commercial batch of any such
product on the Third Line.
11. PURCHASE OF EQUIPMENT. In addition to its purchase obligations under
Section 10 above, at any time, upon thirty (30) days prior written notice to
JANSSEN, ACT II will have the right to purchase the Equipment. Any purchase by
ACT II of the Equipment will be made at its then current book value, as set
forth in JANSSEN US's financial statements, which book value will be determined
by depreciating the Equipment and the related installation and validation costs
set forth in the Third Line Plan in accordance with United States generally
accepted accounting principles (US GAAP) consistently applied; provided,
however, that if ACT II exercises its purchase right following the receipt of
notice from JANSSEN of termination of the Agreement pursuant to Section 10.2.4
thereof, then ACT II will have the right to purchase the Equipment for
consideration of Ten U.S. Dollars (US $10.00). JANSSEN US will depreciate the
Equipment and the related costs on a straight- line basis over a period of *.
Within * of receipt of the Manufacturing Notice or a notice from ACT II of
intended purchase of the Equipment, JANSSEN will provide ACT II with notice of
the Equipment's then current book value. ACT II will have the right to request
an audit of JANSSEN US' determination of book value of the Equipment, which
shall be conducted by an independent public accountant of national prominence at
ACT II's expense. Such accountant will treat all information subject to audit
under this Section 11 as confidential and will provide a report to ACT II and
JANSSEN US regarding only the accuracy or inaccuracy of the book value
determination. Following receipt of JANSSEN's notice regarding the book value of
the Equipment (and any audit conducted by ACT II), JANSSEN US and ACT II will
promptly execute and deliver appropriate bills of sale and other documents for
the purchase of the Equipment. Upon the execution and delivery of such
documents, this Amendment will be automatically amended to delete Sections 7
through 10 hereof, and JANSSEN will promptly file amendments terminating any
Uniform Commercial Code financing statements that have been filed with respect
to the Equipment.
12. DEPRECIATION CREDIT. If ACT II manufactures more than * of the Product on
the Third Line during any calendar year, then ACT II will give JANSSEN a
Depreciation Credit in accordance with the terms of this Section 12 for each
batch of Product in excess of * that are so manufactured. For any calendar year
in which more than * of the Product were manufactured on the Third Line, ACT II
will grant to JANSSEN within * of the end of such calendar year a credit in the
amount of: (i) the Depreciation Credit per batch of the Product, multiplied by
(ii) the number of batches of the Product in excess of * manufactured on the
Third Line in such calendar year. JANSSEN shall have the right to apply this
credit until it is exhausted against Manufacturing Fees payable for the Product
supplied by ACT II during the subsequent calendar year.
13. LONG TERM CAPACITY. ACT II and JANSSEN agree that if, and only if, the
Global Supply Team agrees in good faith, taking into account the forecasts for
the Product provided by JANSSEN in good faith pursuant to the Agreement, that
the volumes of the Product so ordered by JANSSEN will exceed the combined
capacity of the first, second and third wet process lines and the existing
filling lines at ACT II's Wilmington, Ohio facilities, then JANSSEN will have
the option to establish its own manufacturing facility for the
4
<PAGE>
manufacture of the Product by JANSSEN or any of its Affiliates. If the Global
Supply Team so agrees, both parties will discuss in good faith the timing and
specific conditions for the establishment of any such additional manufacturing
facility with a view to maximizing the chances for an expedient and successful
validation of such facility. Among other conditions to be negotiated by the
parties in good faith and agreed upon in writing, ACT II will provide, if
necessary and at the expense of JANSSEN, commercially reasonable training and
support including the transfer of all necessary data and instructions to achieve
such objectives. The parties agree that commercial manufacturing at such
facility will not begin unless and until ACT II and JANSSEN have negotiated in
good faith and agreed in writing upon appropriate economic mechanisms to
preserve ACT II's net economic benefit under the current agreements between the
parties with respect to the Product, including without limitation the Agreement,
the Addendum, and the Agreement between the parties dated December 21, 2002, as
amended. For the purpose of determining the net economic benefit referred to
above, the parties will also consider a reasonable utilization percentage of the
first, second and third wet process lines and the existing filling lines at ACT
II's Wilmington, Ohio facilities. At the Effective Date of this Amendment, the
parties contemplate such reasonable percentage to be * of the capacity thereof,
unless the parties agree otherwise when negotiating such economic mechanisms
referred to above. The parties furthermore agree that such percentage may vary
as a result of *. The terms and conditions of this Section 13 will supersede the
terms and conditions of Section 9 of the Agreement between the parties dated
December 21, 2002, as amended.
14. OPERATING COSTS. Following the Validation Completion, ACT II will be
responsible for the ongoing operating costs of the Third Line in accordance with
the provisions of the Agreement.
15. PRESS RELEASE. Neither party will originate any written publicity, news
release or public announcement, written or oral, relating to this Amendment,
other than such announcements or filings that are required to be made by
applicable law, rules or regulations (or the applicable rules of any securities
exchange or market on which a party's or its affiliates' securities are listed
or traded) or that are otherwise agreed by the parties or expressly permitted
under this Amendment. An approved press release announcing this Amendment is
attached hereto as Exhibit B. If in the reasonable opinion of a party's legal
counsel, a public announcement is required to be made by applicable laws, rules
or regulations (or the applicable rules of any securities exchange or market on
which a party's or its affiliates' securities are listed or traded), then the
disclosing party will provide the other party notice reasonable under the
circumstances of such intended announcement and, to the extent feasible under
circumstances, will consult with the other party with respect to the nature and
scope of such intended announcement. Routine references to this Amendment and
the arrangements hereunder will be allowed in the usual course of a party's
business. Once information has been approved for disclosure or publication under
this Section 15, either party may use such approved information in written
publicity, news releases, public announcements and other future communications
with third parties.
16. GOVERNING LAW. This Amendment will be governed by and construed in
accordance with the laws of the State of New York without regard to its conflict
of law provisions.
5
<PAGE>
17. INTEGRATION. Except as expressly provided in this Amendment, all other
terms, conditions and provisions of the Agreement will continue in full force
and effect as provided therein. This Amendment, the Agreement and the Addendum
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. In the event of a conflict between the terms and conditions of
the Agreement or the Addendum and the terms and conditions of this Amendment,
the terms and conditions of this Amendment shall control.
[signature page follows]
6
<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/ Heinz Schmid
___________________________ _____________________________
Name: Michael Landine Name: Heinz Schmid
_________________________ ___________________________
Title: Vice President Title: General Manager
________________________ __________________________
By: /s/ Gilber Eyer
_____________________________
Name: Gilber Eyer
___________________________
Title: Finance Director
__________________________
JANSSEN PHARMACEUTICA INC.
By: /s/ Janet Vergis
____________________________
Name: Janet Vergis
__________________________
Title: President
_________________________
7
<PAGE>
EXHIBIT A
[***]
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 B
PRESS RELEASE
[To be approved by the parties]
Contact:
Barbara Yates
Alkermes, Inc.
(617)583-6321
DRAFT - NOT FOR RELEASE
ALKERMES TO EXPAND PRODUCTION CAPACITY FOR
RISPERDAL(R) CONSTA(R)
CAMBRIDGE, MA, JANUARY 11, 2005 -- Alkermes, Inc. (Nasdaq: ALKS) today announced
that the Company will expand production capacity for Risperdal(R) Consta(R)
[(risperidone) long-acting injection], an atypical antipsychotic medication
approved for the treatment of schizophrenia. This expansion at Alkermes'
Wilmington, Ohio, facility is designed to meet anticipated future demand for
Risperdal Consta. Alkermes' partner, Janssen-Cilag, a wholly owned division of
Johnson & Johnson, will help fund the building of the new manufacturing line.
Under the terms of the agreement, Alkermes will be responsible for managing the
design, engineering, construction, validation and all other aspects of the
project based upon a mutually-developed project plan.
"The decision to expand our manufacturing capabilities highlights the success of
Risperdal Consta," commented Richard Pops, Chief Executive Officer of Alkermes.
"We are excited to build this third manufacturing line to support the plans to
continue to meet the market needs for Risperdal Consta as an important product
for patients."
About Alkermes, Inc.
Alkermes, Inc. is a pharmaceutical company that develops products based on
sophisticated drug delivery technologies to enhance therapeutic outcomes in
major diseases. The Company's lead commercial product, Risperdal Consta
[(risperidone) long-acting injection], is the first and only long-acting
atypical antipsychotic medication approved for use in schizophrenia, and is
marketed worldwide by Janssen-Cilag ("Janssen"), a wholly owned subsidiary of
Johnson & Johnson. The Company's lead proprietary product candidate, Vivitrex(R)
[(naltrexone) long-acting injection], is a once-a-month injection for the
treatment
12
<PAGE>
of alcohol dependence. The Company has a pipeline of extended-release injectable
products and pulmonary drug products based on its proprietary technology and
expertise. Alkermes' product development strategy is twofold: the Company
partners its proprietary technology systems and drug delivery expertise with
several of the world's finest pharmaceutical companies and it also develops
novel, proprietary drug candidates for its own account. The Company's
headquarters are in Cambridge, Massachusetts, and it operates research and
manufacturing facilities in Massachusetts and Ohio.
This press release may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act. There can be no assurance that
actual results will not differ materially from the forward-looking statements
discussed in this press release. These forward-looking statements include risks
and uncertainties that the third manufacturing line will be built on budget or
will be validated on time, risks and uncertainties inherent in the collaboration
with and dependence upon Johnson & Johnson, and risks and uncertainties
regarding the drug discovery and development process. These statements reflect
Alkermes' current beliefs; however, as with any pharmaceutical product, there
remain substantial risks and uncertainties related to market acceptance. There
are no guarantees regarding what the actual demand for Risperdal Consta may be
nor whether Alkermes can manufacture Risperdal Consta on a commercial scale or
economically. These and additional risks and uncertainties are described more
fully in Alkermes' filings with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, such as its Annual Report on Form 10-K for the
fiscal year ended December 31, 2003 under the heading "Risk Factors Related to
Our Business" and its subsequently filed Quarterly Reports on Form 10-Q.
Alkermes undertakes no duty to update forward-looking statements.
13