Manufacturing Services Agreement
Category: Manufacturing, Services
| 2.2 | Manufacturing Services. |
Patheon shall provide the Manufacturing Services for the unit prices as set out in Schedule C and other relevant Schedules attached hereto in order to produce Product for the Client. The Client shall purchase Product for sale in the Territory from Patheon pursuant to the terms of this Agreement. For the sake of clarity, the Client may obtain manufacturing services relating to the Product also from one or more third parties, and Patheon shall, at the Client’s cost and expense, use commercially reasonable efforts to cooperate with the Client to transfer the manufacturing process associated with the Product to the Client during the term of this Agreement, subject to Article 8. In providing the Manufacturing Services, Patheon shall perform each of the following services:
| (a) | Conversion of Active Pharmaceutical Ingredient and Components. Patheon shall convert Active Pharmaceutical Ingredient and Components into the Product. Patheon shall promptly inspect and check the Active Pharmaceutical Ingredient for identity, quantity and the integrity of containers upon delivery thereof at the Facility and shall promptly give the Client written notice of any Active Pharmaceutical Ingredient which are delivered with apparent defects. |
| (b) | Quality Control and Quality Assurance. Patheon shall perform the quality control and quality assurance testing specified in the Quality Agreement. Each time Patheon releases the Product to the Client, pursuant to Section 6.1, it shall provide the Client with a certificate of analysis that sets out the test results for each batch of Product, and that certifies that such batch has been evaluated by Patheon’s Quality Control/Quality Assurance department and that the Product complies with the Specifications and other documents set forth in the Quality Agreement. |
| (c) | Components. Patheon shall purchase and test the Components as set forth in Schedule B, Appendix 3, at Patheon’s expense or as otherwise specified by the Specifications. |
| (d) | Stability Testing. Patheon shall not perform the stability testing on the Product, which shall be conducted by the Client. |
| (e) | Packaging. Patheon shall pack the Product in accordance with the Specifications. The Client shall carry out the secondary packaging of the Product. |
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| (f) | Storage of API and Product. Patheon shall store the Active Pharmaceutical Ingredient and all Product in accordance with the Specifications. Patheon shall store Product for up to [ * ] Business Days after release by the Client at no additional charge. Following the [ * ] day, Client shall be charged at a rate of [ * ] ([ * ]) Euro per day per pallet for cold (2-8 degrees celsius) storage and [ * ] ([ * ]) Euro per pallet per day for ambient temperature storage. |
| 2.3 | Target Yield. |
2.3.1 Within 30 days after the end of each Year, starting from the end of Year 2008, Patheon shall provide the Client with a yearly inventory report and reconciliation of the API held by Patheon, which shall contain the following information for any Year:
Quantity Received: The total quantity of API received at the Facility during the applicable Year that passes Patheon’s inspection described in Section 2.2(a).
Quantity Dispensed: The total quantity of API dispensed at the Facility during the applicable Year. The Quantity Dispensed is calculated by determining (i) the Quantity Received, plus the inventory of API (including both the API not used at such date and the work-in-process API) held by Patheon, at the beginning of the applicable Year, less (ii) the inventory of usable API held at the end of such Year (including both the API not used at such date and the work-in-process API).
Quantity Converted: The total amount of API contained in the Product produced during the applicable Year and delivered by Patheon and not rejected as deficient Product or subject to recall or return pursuant to Sections 6.3 or 6.5, respectively.
After Patheon has produced a minimum of 10 batches (including the validation batches) and following the resolution of the issues set forth in Section 2.3.3 below and for any Product and has produced batches for at least 6 months at the Facility pursuant to this Agreement, the Parties will mutually agree in writing on the permanent target yield in respect of the Product at the Facility (each, a “Target Yield” Thereafter, Patheon shall strive to maintain the actual annual yield (“Actual Annual Yield” or “AAY”) levels for the Product above the applicable Target Yield. The Target Yield shall be calculated as the mean of Quantity Converted divided by Quantity Dispensed for each of the 10 or more batches produced referenced above.
2.3.2 By December 31 of each Year, starting on December 31, 2008, Patheon shall provide to the Client a report (with accompanying calculation) reflecting the AAY at the Facility for such Year. The AAY shall be reflected as a percentage determined by dividing (i) the annual Quantity Converted for the Year by (ii) the annual Quantity Dispensed for the Year.
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Subject to Section 2.3.3, in the event that at the end of each Year the AAY in the relevant Year falls below the Target Yield as agreed pursuant to Section 2.3.1 (the percentage below the Target Yield, as applicable, being the “Shortfall Percentage”), Patheon shall owe an amount to the Client equal to the [ * ]% of the API Value of the API represented by the Shortfall Percentage (the “Shortfall Value”), up to the maximum amount as set out under Section 10.2(a)(iii). For the purposes of this Section 2.3.2, the Target Yield means the minimum average yield to be guaranteed by Patheon for the Product during each Year.
It remains however understood and agreed between the Parties that if at the end of the Year the AAY in the relevant Year exceeds the Target Yield as agreed pursuant to Section 2.3.1 (the percentage above the Target Yield, as applicable, being the “Over Percentage”), any amount due to the Client pursuant to Section 10.2(a)(ii) shall be reduced/offset by the API Value corresponding to the Over Percentage for all Products.
2.3.3 The Parties agree that Patheon shall not be responsible for any loss or damage occurring in the Products, in any combination (e.g. 5,000 IU and 20,000 IU) during the validation activities and/or the manufacture of the Product for its distribution on the market, in case that such loss or damage is due to the “[ * ] issue” and/or the “[ * ] issue” in the first ten (10) lots (combination of 5,000 IU and 20,000IU Products) (“Assessment Lots”) following implementation of the [ * ].
The Client agrees to be invoiced on a per-batch basis for the Assessment Lots at a price detailed in Schedule C. Following the completion of the Assessment Lots, the Parties agree to consult with each other in good faith to reach consensus that the “[ * ] issue” and “[ * ] issue” have been successfully resolved. In the event that the Parties agree that the issues associated with the [ * ] and [ * ] have been resolved, Patheon agrees to charge Client on a per-vial basis (Schedule C). If the issues associated with the [ * ] and [ * ] are not successfully resolved, invoicing will remain on a per-batch basis but Patheon agrees to continue to use reasonable best efforts to resolve the [ * ] and [ * ] issues and achieve the best possible yield.
| 2.4 | Manufacturing Requirements. |
Patheon shall provide the Manufacturing Services in accordance with:
| (a) | the Specifications; |
| (b) | any other terms and conditions provided in the Quality Agreement; and |
| (c) | the conditions provided under the ML, the cGMPs and any other applicable legal requirements as specified by the competent Italian and European Public Authorities, as well as the U.S. FDA. |
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ARTICLE 3
CLIENT’S OBLIGATIONS
| 3.1 | Payment. |
Pursuant to the terms of this Agreement, the Client shall pay Patheon for the provision of the Manufacturing Services according to the prices specified in Schedule C hereto (such prices and fees being subject to adjustment in accordance with the terms hereof).
| 3.2 | Active Pharmaceutical Ingredient. |
The Client shall, at its sole cost and expense, deliver Client released API to Patheon in such quantities and at such times as is otherwise sufficient to facilitate the provision of the Manufacturing Services by Patheon. The API shall be held by Patheon on behalf of the Client on the terms and subject to the conditions herein contained. The Parties acknowledge and agree that title to the API shall at all times belong to and remain the property of the Client. Patheon agrees that any API received by it shall only be used by Patheon to provide the Manufacturing Services.
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