EXHIBIT 10.40
CYSTADANE AGREEMENT
For good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, Chronimed, Inc., a Minnesota corporation ("Chronimed"),
and Orphan Medical, Inc., a Minnesota corporation ("Orphan Medical"), agree as
of October 11, 1996 (the "Effective Date") as follows:
1. The Marketing and Distribution Agreement, dated June 2, 1994, and
amended December 22, 1995, and further amended June 3, 1996 (collectively the
"Initial Agreement"), between Chronimed and Orphan Medical is amended as
follows:
Betaine (aka Cystadane(TM)) ("Cystadane") is deleted from the
list of "Initial Products" set forth on exhibit A to the Initial
Agreement and, from and after the date of this agreement, shall not be
(i) subject to the Exclusive License granted to Chronimed pursuant to
the Initial Agreement, or (ii) treated as an "Initial Product" or a
"Product" for any purposes of the Initial Agreement.
2. The initial term ("Initial Term") of this agreement shall start on
the Effective Date and continue unless sooner terminated as provided for in
section 18 below, until the second anniversary of the date of Orphan Medical's
invoice for the first commercial sale of Cystadane to Chronimed (the "Cystadane
Domestic Launch Date" or the "CDLD").
3. Orphan Medical hereby appoints Chronimed, and Chronimed hereby
accepts such appointment, as a non-exclusive distributor with respect to the
sale and use of Cystadane within the United States all subject to the terms of
this agreement; provided, however, such distribution rights shall be exclusive
for Cystadane products sold direct to patients for such patients' own use within
the United States. Chronimed may market, sell or distribute Cystadane for use
within the United States to all types of customers or patients, including
patient direct, pharmacies, and wholesalers. Chronimed shall use all reasonable
commercial efforts to promote the distribution of Cystadane within the United
States.
4. Orphan Medical shall establish, and may change from time-to- time,
upon at least thirty (30) days prior notice to Chronimed, the published
wholesale price (the "AWP") for Cystadane. As of the Effective Date of this
agreement the AWP for Cystadane is [REDACTED-CONFIDENTIAL TREATMENT REQUESTED]
per bottle containing 180 grams of Cystadane (a "Bottle"). The parties estimate
that each patient or customer will use one Bottle of Cystadane per month.
5. The price per Bottle of Cystadane payable by Chronimed shall be
[REDACTED-CONFIDENTIAL TREATMENT REQUESTED] of the AWP in effect at the time of
the receipt by Orphan Medical of an order for Cystadane from Chronimed and shall
be paid within thirty (30) days of the date of Orphan Medical's invoice to
Chronimed for the applicable Cystadane order. The parties may review annually
the price payable by Chronimed for Cystadane, but no change in such price shall
be effective unless mutually agreed to in writing by the parties. If any payment
from Chronimed to Orphan Medical shall not have been received by Orphan Medical
within fifteen (15) days after the date such payment is due, then for so long as
such payment is overdue, interest at the rate of one and one-half per cent
(1.5%) per month, or such lower rate as may be the maximum legally permissible
rate, shall automatically become due and payable on such unpaid amount.
6. During the term of this agreement, Orphan Medical shall pay to
Chronimed a royalty on sales of Cystadane for use in the United States directly
made by Orphan Medical or made by Orphan Medical's agents, representatives or
distributors other than Chronimed. No royalty shall be payable for sales of
Cystadane for use outside the United States. The royalty shall be computed and
payable as follows:
(a) The royalty on Cystadane products shall be equal to
[REDACTED-CONFIDENTIAL TREATMENT REQUESTED] of Orphan Medical's net
sales of such products in the United States;
(b) Royalties shall be payable to Chronimed on a quarterly
basis within forty-five (45) days after the end of the calendar quarter
to which they relate, and each royalty payment shall be accompanied by
a written summary of the net sales upon which the royalty payment is
based; and
(c) For purposes of calculating the amount of the royalty
owing to Chronimed, the term "net sales" shall mean accrued gross sales
revenues collected by Orphan Medical during the relevant calendar
quarter, less (i) all returns, allowances and rebates, (ii) bad debts,
(iii) transportation, shipping and insurance charges, and (iv) taxes
and duties.
7. The term of this agreement shall automatically renew and continue
following the Initial Term until either party gives the other party at least one
hundred twenty (120) days prior written notice of its desire to terminate this
agreement. During such notice period, the parties in their discretion may
negotiate amendments to this agreement including new financial provisions. If
the parties do not mutually agree in writing to amend or extend this agreement,
it shall terminate without any further notice or action one hundred twenty (120)
days after the giving of such notice or such later date as may be provided for
in the notice.
Upon expiration or termination of this agreement, Chronimed shall have
no further distribution, royalty/compensation or other rights with respect to
Cystadane or this agreement, Orphan Medical shall have further no obligations to
Chronimed under this agreement and Orphan Medical may pursue all other methods
of distribution with respect to Cystadane. Sections 16, 19, 21, 23, 25 and 30 of
this agreement shall survive any expiration or termination of this agreement.
8. During the term of this agreement, Orphan Medical shall maintain an
inventory of at least [REDACTED-CONFIDENTIAL TREATMENT REQUESTED] cases of
Cystadane, with each case containing twelve (12) Bottles of Cystadane (a "Case")
and the minimum order for Cystadane from Chronimed shall be
[REDACTED-CONFIDENTIAL TREATMENT REQUESTED] Cases. Chronimed may return
Cystadane products to Orphan Medical in accordance with the Orphan Medical
return policy as in effect at the time of return. Attached hereto marked Exhibit
A is a copy of Orphan Medical's Return Goods Policy for Cystadane which is in
effect as of the Effective Date of this agreement. Such policy may be changed by
Orphan Medical from time-to-time effective as to Chronimed upon Orphan Medical
giving notice to Chronimed. Anything to the contrary notwithstanding in Orphan
Medical's Return Goods Policy for Cystadane now in effect or as it may be
changed by Orphan Medical in the future, Chronimed may return to Orphan Medical,
Cystadane products which are returned by Chronimed's direct patients, and upon
Orphan Medical's receipt of such products, Orphan Medical shall ship a like
quantity of replacement Cystadane products to Chronimed.
9. Orphan Medical shall be responsible for selecting the method of
shipment for Cystadane to Chronimed. Orphan Medical shall be responsible for the
costs of shipping and insurance of Cystadane to Chronimed.
10. During the term of this agreement Orphan Medical shall not sell
Cystadane to any other wholesale entity within the United States on terms or
prices more favorable than those extended to Chronimed.
11. The parties shall jointly develop a "How to Obtain" system with
brochures and other print materials determined by Orphan Medical. Each party
will pay for the costs it incurs in connection with the development or
implementation of such system. Chronimed shall put into outgoing orders
reasonable amounts of additional brochures or other product information of
Orphan Medical at no additional cost to Orphan Medical.
12. Chronimed shall provide storage and warehouse space for Cystadane
in an amount to be mutually agreed on by the parties and subject to applicable
current good manufacturing practices requirements prescribed by the United
States Food and Drug Administration (the "FDA"). Warehousing space provided to
Orphan Medical shall be within the temperature and relative humidity range noted
in the Cystadane product labeling.
13. Chronimed will provide Orphan Medical with distribution services
for the distribution of Cystadane from Chronimed warehouses to customers of
Orphan Medical who are not the customers or patients of Chronimed. These
distribution services will include Orphan Medical's indigent program. The
parties shall negotiate in good faith a mutually agreeable fee payable by Orphan
Medical for distribution services on a per order or per shipment basis.
14. In addition to the obligations of the parties provided for in the
other sections of this agreement, Orphan Medical shall be responsible for the
following matters with respect to Cystadane:
(a) providing a finished and marketable Cystadane product;
(b) labeling the Cystadane product with NDC labeler code;
(c) developing the marketing materials and strategies;
(d) marketing the Cystadane product in such ways as Orphan
Medical may determine, including formulary such as prenotification
coverage with payors, such as Medicaid;
(e) providing annual sales forecast, including anticipated
domestic launch dates for the Cystadane product, and Elliot's B(TM)
Solution, and 4-MethyPyrazole (aka Antizol(TM) ) other than as human
pharmaceutical products;
(f) regulatory issues with respect to the Cystadane product;
(g) designing indigent forms and providing copies to Chronimed
to send to people who request such forms;
(h) evaluating all indigent forms for acceptability;
(i) paying for any Cystadane product given out under the
indigent program;
(j) paying OBRA rebates for Medicaid patients;
(k) answering all questions of a medical nature through
medical services at Orphan Medical;
(l) providing appropriate training to Chronimed customer
service personnel to allow for adequate customer service regarding
product distribution; and
(m) establishing the AWP and listing with appropriate pricing
references.
15. In addition to the obligations of the parties provided for in the
other sections of this agreement, Chronimed shall be responsible for the
following matters with respect to Cystadane:
(a) purchasing Cystadane product at the prices provided for in
this agreement;
(b) selling Cystadane products for use within the United
States at such prices as Chronimed may determine;
(c) providing all available sales and distribution information
to Orphan Medical; provided however the design, content and frequency
of reports with regard to sales and distribution shall be mutually
agreed to by the parties and shall initially be submitted by Chronimed
to Orphan Medical on a weekly basis;
(d) providing upon Orphan Medical's request, Chronimed's
internal reports with respect to Cystadane product sales, amounts
shipped and inventory on hand;
(e) tracking by lot numbers of all shipments to non-direct
patients, and upon Orphan Medical's request, sales information by payor
type, including direct patients and Medicaid (including any state or
federally funded program) patients;
(f) maintaining a system by which the distribution of each lot
of Cystadane product can be readily determined to facilitate a recall
if necessary and maintaining FIFO shipment procedures and other
internal procedures that shall comply with requirements prescribed by
the FDA;
(g) offering a dedicated 800 number for customers to order the
Cystadane product;
(h) including additional marketing materials in mailed orders,
when requested by Orphan Medical, on a mutually agreed upon basis;
(i) gathering a valid prescription by fax, mail, or telephone
when necessary;
(j) obtaining and receiving a Letter of Medical Necessity from
the prescribing physician when necessary;
(k) receiving an assignment of benefits form for all patients
who have medical insurance coverage when necessary;
(l) filling all prescription orders with:
(i) a form describing how to reorder;
(ii) a package insert; and
(iii) a patient medical profile form to be returned
to Chronimed in order to decrease the possibility of allergies
and drug interactions;
(m) verifying insurance reimbursements, coverage, accepting
assignment of benefits, and collecting all payor and patient payments;
(n) having a pharmacist available for non-medical pharmacy
questions from patients or physicians from 7 a.m. to 7 p.m. CST Monday
through Friday;
(o) reporting any and all adverse events or Cystadane product
complaints to Orphan Medical the same day received;
(p) reporting all issues related for formulary coverage to
Orphan Medical the same day learned, for Orphan Medical to resolve;
(q) providing indigent forms for relevant candidates; and
(r) managing all formulary inquiries as they relate to
individual patient prescriptions, with help and support from Orphan
Medical as reasonably requested by Chronimed.
16. Each party shall perform its obligations under this agreement in
compliance with all applicable laws and regulations, including FDA regulations.
Each party shall indemnify the other party, its officers, employees and agents
harmless from any and all claims, causes of action, damages, liability, costs
and expenses (including reasonable attorney's fees) arising from the actions or
omissions of the indemnifying party or such party's failure to perform its
obligation under this agreement.
17. Orphan medical will warrant Cystadane to Chronimed's direct
patients in accordance with Orphan Medical's warranty as such warranty may be in
effect from time-to-time, and Chronimed shall have no authority to expand or
modify in any way such warranty. The warranty to patients is Orphan Medical's
standard warranty and is in lieu of all other warranties, express or implied,
which are hereby disclaimed and excluded by Orphan Medical, including without
limitation any warranty of merchantability or fitness for a particular purpose
or use.
18. If either party defaults in the performance of any material
provision of this agreement, then the non-defaulting party may give written
notice to the defaulting party and, if the default is not remedied within thirty
(30) days following receipt of such notice, this agreement will be terminated
without any further notice or action. Material breaches of this agreement shall
include, without limitation, failure to timely pay amounts due, insolvency, or
the commencement of bankruptcy or liquidation proceedings.
19. The provisions of section 6.3 (Confidential Information), section
6.4 (Permitted Disclosures) and the definition of "Confidential Information"
contained in section 1.1 of the Initial Agreement are incorporated into and make
a part of this agreement.
20. This agreement constitutes the entire agreement between the parties
with respect to the subject matter and supersedes all prior or contemporaneous
agreements, understandings, negations and discussions, whether written or oral.
21. This agreement shall be governed by and interpreted under the laws
of the State of Minnesota, U.S.A., excluding its choice of law rules.
22. All modifications, amendments, and/or waivers to this agreement,
must be in writing and signedby both parties.
23. In no event shall either party be liable to each other or any other
party for loss of profits, indirect, special, consequential or incidental
damages arising out of this agreement, Cystadane or any product even if it has
been advised of the possibility of such potential loss or damage.
24. Neither party may assign, delegate or transfer any of its rights or
obligations, except Orphan Medical may delegate the obligations described under
section 14(g) through (i), under this agreement, without the prior written
consent of the other party. Any attempted assignment, delegation or transfer
without such consent shall be void.
25. If any provision of this agreement is found to be invalid or
unenforceable, such provision shall be deemed stricken from this agreement and
the remainder of this agreement shall continue in full force and effect.
26. This agreement does not make either party the employee, agent or
legal representative of the other for any purpose whatsoever. Neither party is
granted any right or authority to assume or to create any obligation or
responsibility, express or implied, on behalf of or in the name of the other
party. Each party is acting as an independent contractor.
27. Notices permitted or required to be given hereunder shall be deemed
sufficient if given by (a) registered or certified mail, postage prepaid, return
receipt requested, (b) private courier service, or (c) facsimile addressed to
the respective addresses of the parties as contained in the Initial Agreement or
at such other addresses as the respective parties may designate by like notice
from time to time. Notices so given shall be effective upon (1) receipt by the
party to which notice is given, or (2) on the fifth (5th) day following mailing,
whichever occurs first.
28. If the performance of this agreement or any obligation hereunder
(other than the payment of monies due owing hereunder) is prevented, restricted
or interfered with by reason of any event or condition beyond the reasonable
control of such party (including without limitation acts of state or
governmental action, riots, disturbance, war, strikes, lockouts, slowdowns,
prolonged shortage of energy or other supplies, epidemics, fire, flood,
hurricane, typhoon, earthquake, lightning and explosion), the party so affected
shall be excused from such performance, only for so long as and to the extent
that such a force prevents, restricts or interferes with the party's performance
and provided that the party affected gives notice thereof to the other party and
uses diligent efforts to remedy such event or conditions.
29. The timing and content of all public announcements relating to this
agreement or its execution must be approved by both parties prior to the release
of such announcement. Any use by one party of the other party's name or
trademarks in connection with the agreement or any Cystadane product must be
approved in advance by the other party.
30. Any dispute, controversy or claim arising out of or relating to
this agreement, or any breach thereof, including but not limited to any matters
relative to the provisions of section 6 of this agreement, shall be resolved in
accordance with the procedures set forth in section 11 of the Initial Agreement.
IN WITNESS WHEREOF, Chronimed and Orphan Medical have caused this
agreement to be executed by their respective authorized representatives as of
the Effective Date.
CHRONIMED INC.
By /s/ Xxxxxx X. Xxxxx
------------------------------
Its Senior Vice President
-------------------------
ORPHAN MEDICAL, INC.
By /s/ Xxxx Xxxxxx Bullion
------------------------------
Xxxx Xxxxxx Bullion,
Chief Executive Officer
Exhibit A to Cystadane Agreement
Orphan Medical Return Goods Policy: Cystadane(TM)(betaine anhyrous for oral
solution)
The Company's policy shall be as follows:
1. Orphan Medical will accept responsibility for any product shipped to
Chronimed which is damaged during shipping. Renumeration shall be in the
form of replacement product.
2. Orphan Medical will accept responsibility for any product which is not
acceptable from a quality standpoint. This would include product involved
in recall or market withdrawal situations. Renumeration would again be in
the form of replacement product.
3. Orphan Medical will work closely with Chronimed to assist in inventory
management. In the event that product is overstocked by Chronimed, and in
the event that Orphan Medical warehouse space is available to accept the
given product, Orphan Medical will accept returns because of overstock. It
is anticipated that the ability to forecast use based on chronic condition
will be good and that this situation is unlikely to occur.
4. Similarly, Orphan Medical will work closely with Chronimed regarding the
ordering of any short dated product. All attempts will be made to utilize
short dated product for mail order patients vs. wholesale accounts and
outdated merchandise should be minimized using this approach. In event of
outdated product, Orphan Medical will accept responsibility by exception
only (i.e. on a case by case basis).
