EXHIBIT 10.42
*CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED AND FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
PURSUANT TO RULE 406 OF THE SECURITIES ACT OF 1933, AS AMENDED.
April 20, 2000
Xxxxxxx Pharmaceutical, Inc
000 Xxxxxxx Xxxxxxxxx Xxxxx
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000, U.S.A.
Attention: Chief Financial Officer
RE: Collaboration Agreement Dated October 23, 1998 Between Xxxxxxx
Pharmaceutical, Inc. and SmithKline Xxxxxxx Corporation
Dear Sir:
The Collaboration Agreement (the "Agreement"), executed as of October 23,
1998 by and between Xxxxxxx Pharmaceutical, Inc., a company incorporated under
the laws of the State of Delaware, with its principal place of business at 000
Xxxxxxx Xxxxxxxxx, Xxxxx Xxx Xxxxxxxxx, Xxxxxxxxxx 00000-0000, U.S.A.
("Xxxxxxx), and SmithKline Xxxxxxx Corporation, a company incorporated under the
laws of the Commonwealth of Pennsylvania, with its principal place of business
at Xxx Xxxxxxxx Xxxxx, Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000, X.X.X. ("SB"), as
amended to date, is hereby further amended as follows. This Letter Agreement
(the "Letter") is a binding agreement of Xxxxxxx and SB.
All terms used, but not defined, in this Letter shall have the respective
meanings set forth in the Agreement.
A. MANUFACTURE DEVELOPMENT COSTS
Within five (5) days after the date of mutual execution of this Letter (the
"Letter Effective Date"), SB shall pay Xxxxxxx U.S. [*] for out-of-pocket
expenses incurred by Xxxxxxx during the third and fourth quarters of 1999 as
well as U.S. [*] for FTE expenses Xxxxxxx incurred during the fourth quarter of
1998 and for the entire 1999 calendar year. Xxxxxxx agrees that this payment
completely satisfies all of SB's obligations for payment of out-of-pocket
expenses, FTE expenses, and MANUFACTURE DEVELOPMENT COSTS under the Agreement
for the fourth quarter of 1998 as well as for the entire 1999 calendar year.
SB's share of MANUFACTURE DEVELOPMENT COSTS under the Agreement shall be
capped at U.S. [*]. To the extent that aggregate MANUFACTURE DEVELOPMENT COSTS
would otherwise cause SB's share of such costs to exceed U.S. [*], Xxxxxxx shall
bear the [*].
--------
* Confidential Treatment Requested.
B. DETERMINATION AND PAYMENT OF MANUFACTURE DEVELOPMENT COSTS AND DEVELOPMENT
COSTS
Within sixty (60) days following the Letter Effective Date, the JDC shall
determine a mechanism under which the parties will develop timelines to enable
the JOINT MANUFACTURE DEVELOPMENT PLAN and JOINT DEVELOPMENT PLAN and the
associated MANUFACTURE DEVELOPMENT COSTS and DEVELOPMENT COSTS to be approved by
the JDC in accordance with SB's budgeting process for such costs.
Subject to the MANUFACTURE DEVELOPMENT COSTS cap outlined above, SB agrees
that it shall pay Xxxxxxx [*] of SB's share of all invoices received from
Xxxxxxx which are related to approved MANUFACTURE DEVELOPMENT COSTS and
DEVELOPMENT COSTS within the time period provided in the Agreement, even if SB
disputes all or some of the amounts on such invoices, provided that such
invoices are sent to SB with reasonable supporting documentation in a form
agreed upon in advance and acceptable to the JDC, and provided further that once
the parties have resolved such dispute, (a) Xxxxxxx shall promptly refund any
overpayment to SB, together with interest at a rate equal to the prime rate as
reported by the Chase Manhattan Bank, New York calculated on the number of days
between the time SB made such payment and the date that SB receives such refund,
and (b) if SB still owes Xxxxxxx money, all such late payments shall be made
together with interest at a rate equal to the prime rate as reported by the
Chase Manhattan Bank, New York calculated on the number of days such payment
amount is delinquent.
C. TERRITORIES B AND C
Xxxxxxx and SB agree that SB's rights in TERRITORIES B and C will terminate
effective as of June 30, 2000 (the "B/C Termination Effective Date"), without
any further notice obligation by SB.
Xxxxxxx agrees that SB will not be obligated to make Xxxxxxx any payment
under Section 9.10.5 of the Agreement or any other payment related to a EUROPEAN
FACILITY. Xxxxxxx further agrees that SB has no further obligation with respect
to a EUROPEAN FACILITY.
D. ALLOCATION OF SUPPLY.
Article 9.5 of the Agreement is hereby amended to read in full as follows
9.5 ALLOCATION IN THE EVENT OF PRODUCT SHORTAGES.
9.5.1 ALLOCATION OF RADIOLABELED ANTIBODY. In the event of shortages of
RADIOLABELED ANTIBODY, any RADIOLABELED ANTIBODY material produced by Nordion,
Kanata, from the facility in existence as of the Letter Effective Date, shall be
allocated as follows: [*]. If after the Letter Effective Date, SB and Xxxxxxx
jointly fund further expansion at Nordion, Kanata, or build a second site for
TERRITORY A purposes, this expanded capacity shall not be available to Xxxxxxx
for use by Xxxxxxx or its other licensees in the rest of the world unless
Xxxxxxx or its other licensees fund an appropriate part of the costs of the
additional capacity. If such funding is provided by
--------
* Confidential Treatment Requested.
-2-
Xxxxxxx or its other licensees, apportionment of available RADIOLABELED ANTIBODY
for use outside of TERRITORY A shall be limited to the equivalent percentage of
the funding contribution made by Xxxxxxx and its other licensees. Shortages of
RADIOLABELED ANTIBODY which arise from shortages of UNCONJUGATED ANTIBODY rather
than a capacity constraint in connection with radiolabelling shall not be
allocated in accordance with this Section 9.5.1, but rather the available
UNCONJUGATED ANTIBODY shall be radiolabeled for use in TERRITORY A or in the
rest of the world in accordance with the allocation by territory set forth in
Section 9.5.2, unless the Parties then agree differently.
9.5.2 ALLOCATION OF UNCONJUGATED ANTIBODY. Xxxxxxx shall place orders for
UNCONJUGATED ANTIBODY for use in TERRITORY A in consultation with SB, and shall
place orders for use in the rest of the world in its own discretion. Any orders
placed with BI Pharma or any other vendor of UNCONJUGATED ANTIBODY which is a
supplier for use both inside and outside of TERRITORY A (a "Vendor") shall be a
"Vested Order" for purposes of this Section 9.5.2 if it is a firm order which
has been accepted by the Vendor and is scheduled for delivery within twenty-four
(24) months after the date of such order. To the extent that a Vendor is able to
deliver UNCONJUGATED ANTIBODY material in accordance with Vested Orders, such
material shall be purchased by, and the benefits and risks of ownership shall
belong to, the party which was responsible for such Vested Order. Thus, Vested
Orders which had been placed for the purpose of supply in TERRITORY A shall be
allocated solely to TERRITORY A and Vested Orders which had been placed for the
purposes of supply outside of TERRITORY A shall be allocated solely to Xxxxxxx
for use outside of TERRITORY A, in each case except by the mutual consent of the
parties.
In the event of shortages of UNCONJUGATED ANTIBODY, the following rules
shall apply. Attached hereto as Exhibit A is a set of examples demonstrating the
application of the following rules.
(a) If Xxxxxxx seeks to place a Vested Order for UNCONJUGATED ANTIBODY
and is advised by a Vendor that such Vendor will not accept the full amount of
such order, whether such order is for purposes of supply in TERRITORY A or
elsewhere in the world, then Xxxxxxx shall consult with SB regarding the
allocation of available supply. Unless the Parties otherwise agree, all future
Vested Orders shall be allocated [*] so long as such conditions of supply
shortage prevail, with each lot being allocated in such pro rata manner
(b) If a Vendor is unable to deliver the full amount of a Vested
Order, either because the amount delivered is less than the amount ordered or
because some or all of the delivery is not accepted for any reason, including,
without limitation, non-compliance with Specifications, then the available
UNCONJUGATED ANTIBODY in each calendar year in which a shortage of supply
prevails shall be allocated as between TERRITORY A and the rest of the world pro
rata on the basis of the aggregate Vested Orders for delivery in that calendar
year that had been placed for use in TERRITORY A and in the rest of the world.
If the shortfall or failure occurs in a batch which is part of a manufacturing
campaign, then the acceptable material manufactured as part of that campaign,
and all future deliveries in that calendar year, shall be allocated between
TERRITORY A and the rest of the world so as to make the aggregate allocation of
material on a year-to-date basis equal, as nearly as practicable, to such pro
rata allocation. (Such allocation on
--------
* Confidential Treatment Requested.
-3-
a campaign basis could require that material already received as part of the
same campaign for use in one territory be redesignated for use in a different
territory, if such redesignation is necessary in order to achieve the specified
pro rata allocation. However, material received as part of previous campaigns
shall not be redesignated except by mutual consent.) As used herein, a
manufacturing campaign shall refer to [*]. The allocation rule set forth in this
Section 9.5.2(b) shall restart for each calendar year, without any carryover of
shortfalls realized for a particular territory in the prior calendar year.
In the event either Party desires to reduce the size of a Vested Order
previously placed, the percentage by which such Vested Order may be reduced
under the contract with the Vendor shall be applied equally to TERRITORY A and
to the rest of the world unless the Parties otherwise agree. By way of example,
if the supply agreement permits a reduction in Vested Orders of up to 25% for
orders with delivery dates at a specified time period in the future, and the
Parties desire to reduce the Vested Order for that time period in TERRITORY A by
35% and the rest of the world by 10%, then the reduction for Territory A shall
be limited to 25% while the order for the rest of the world is reduced by the
full 10%. In that case, by mutual agreement, any further reduction which would
have been available for the order for the rest of the world may be reallocated
to permit a further reduction in the Vested Order for TERRITORY A.
If under the contract with the Vendor Xxxxxxx is obligated to take quantities of
UNCONJUGATED ANTIBODY produced in excess of the amount specified in the original
Vested Order (e.g., as a result of the inherent uncertainty of the quantity of
material produced in each batch or due to minimum batch sizes), then any excess
quantities which Xxxxxxx is obligated to purchase shall be allocated as between
TERRITORY A and the rest of the world pro rata on the basis of the aggregate
Vested Orders for delivery to each territory in that calendar year.
The purpose of the foregoing allocation rules is to permit the Parties
jointly (with respect to TERRITORY A) and Xxxxxxx independently (with respect to
the rest of the world) to make their respective long-term purchase decisions for
UNCONJUGATED ANTIBODY, with the benefits and risks of such purchase decisions to
be allocated to the Parties jointly, or Xxxxxxx independently, as the case may
be.
Xxxxxxx shall have the right to establish an independent capacity for the
manufacture of UNCONJUGATED ANTIBODY and/or RADIOLABELED ANTIBODY for use
outside of TERRITORY A, at its own expense, in which case any capacity arising
from such independent facility may be used by Xxxxxxx in its discretion, free
and clear of the allocation rules set forth in this Section 9.5.2.
E. ALLOCATION OF FACILITIES CHARGES; DETERMINATION OF MATERIALS COST
Under the current contractual arrangements with Nordion, Xxxxxxx is
obligated to pay a facilities charge of approximately [*] per year (payable on a
quarterly basis), in addition to the production fee for individual lots of
RADIOLABELED ANTIBODY. The Parties agree that this facilities charge will be
allocated as between TERRITORY A and the rest of the world pro rata on the basis
of [*]. Any new facilities charges attributable to the production of
UNCONJUGATED ANTIBODY or RADIOLABELED ANTIBODY for facilities which are used for
the production of material for both
--------
* Confidential Treatment Requested.
-0-
XXXXXXXXX A and the rest of the world shall similarly be allocated between such
territories pro rata on the basis of actual production, unless the Parties
otherwise agree.
The price of each unit of UNCONJUGATED ANTIBODY for TERRITORY A and for the
rest of the world shall be the same for each unit produced in the same campaign.
(In other words, the [*].)
The processing fee for each unit of RADIOLABELED ANTIBODY shall be [*]. If
units of RADIOLABELED ANTIBODY are produced in the same lot for use in both
TERRITORY A and the rest of the world, the processing fee for such lot shall be
allocated pro rata on the bass of the number of units produced for each
territory.
F. MILESTONE PAYMENTS ON BEXXAR.
Section 6.2 of the Agreement is hereby amended and restated to read in full
as follows:
6.2 MILESTONE PAYMENTS ON BEXXAR. In consideration for the rights granted
hereunder with respect to BEXXAR, SB shall pay to Xxxxxxx the following amounts
in cash within [*] days after the following events occur with respect to Bexxar
(in its unconjugated and radiolabeled form) in the applicable territories:
--------------------------------------------------------------------------------
TERRITORY A MILESTONE EVENTS
--------------------------------------------------------------------------------
MILESTONE EVENT AMOUNT
----------------------------------------------------------- --------------------
Acceptance of all BLAS necessary for commercialization of $[*]
BEXXAR [*] in TERRITORY A.
REGULATORY APPROVAL of BEXXAR in TERRITORY A for [*]. $[*]
REGULATORY APPROVAL of BEXXAR in TERRITORY A for [*] $[*]
First calendar year in which NET SALES in TERRITORY A $[*]
exceed U.S. $[*]
First calendar year in which NET SALES in TERRITORY A $[*]
exceed U.S. $[*]
REGULATORY APPROVAL of BEXXAR in TERRITORY A for [*]. $[*]
REGULATORY APPROVAL of BEXXAR in TERRITORY A for [*]. $[*]
Sub-Total for TERRITORY A $[*]
--------------------------------------------------------------------------------
OTHER MILESTONE EVENTS
--------------------------------------------------------------------------------
MILESTONE EVENT AMOUNT
----------------------------------------------------------- --------------------
Initiation of the [*] $[*]
--------
* Confidential Treatment Requested.
-5-
--------------------------------------------------------------------------------
OTHER MILESTONE EVENTS
--------------------------------------------------------------------------------
MILESTONE EVENT AMOUNT
----------------------------------------------------------- --------------------
Initiation of the [*] $[*]
Initiation of the [*] $[*]
Subtotal for DEVELOPMENT Events $[*]
TOTAL BEXXAR MILESTONE PAYMENTS $[*]
No payment shall be owed for a milestone which is not achieved and in no event
shall the milestone payments made by SB to Xxxxxxx upon the occurrence of the
milestone events set forth in the tables above in this Section 6.2 exceed the
amounts set forth opposite the milestone events in such tables. In the event
that REGULATORY APPROVAL of BEXXAR is granted [*] for the [*], then the
applicable milestone payments set forth in this Section 6.2 for REGULATORY
APPROVAL with regard to such [*] shall [*] be due from SB to Xxxxxxx, and shall
[*] be paid within the time frame provided in this Section 6.2 (and the next [*]
for which REGULATORY APPROVAL is granted shall be, and shall trigger the
milestone payment for, the [*]).
6.2.1 DEFINITIONS RELATING TO MILESTONE PAYMENTS.
(a) The payment owed for Acceptance of all BLAs necessary for
commercialization of BEXXAR for the [*] in TERRITORY A shall be in the form of
the purchase by SB of unregistered shares of Xxxxxxx common stock at a [*] to
Share Price. The "Share Price" shall be equal to the average closing price for
Xxxxxxx common stock on the NASDAQ National Market System as reported in the
Wall Street Journal for the [*]. Such purchase of stock shall occur pursuant to
the form of Stock Purchase Agreement attached hereto as Exhibit B, which shall
be executed by the Parties concurrent with the execution of this Letter. SB
confirms that once the milestone of Acceptance of all BLAS necessary for
commercialization of BEXXAR for the [*] in TERRITORY A has been achieved, SB's
purchase obligation shall not be affected, and any stock purchased by SIB as a
result of such milestone shall not become redeemable and its investment shall
not otherwise be refunded, [*].
(b) "Filing of a BLA necessary for commercialization of BEXXAR
for the [*] in TERRITORY A" shall be deemed to have occurred upon the filing of
the [*] of all BLAS filed by or on behalf of Xxxxxxx or SB under this Agreement
necessary for commercialization of BEXXAR for the [*] in TERRITORY A.
(c) "Acceptance of all BLAs necessary for commercialization of
BEXXAR for the [*] in TERRITORY A" of a given BLA shall be deemed to have
occurred upon the earlier of (i) written notice of acceptance from the FDA of
all BLAs filed by or on behalf of Xxxxxxx or SB under this Agreement necessary
for commercialization of BEXXAR for the [*] in TERRITORY A or (ii) [*] days
following filing of such BLA with the FDA, assuming the filing Party has not
received a "Notice of Refusal to File" from the FDA with respect to such BLA.
--------
* Confidential Treatment Requested.
-6-
(d) The term "Initiation of [*] shall mean the date that [*],
which study is being performed in accordance with the FD&C ACT and applicable
regulations promulgated thereunder (including without limitation 21 CFR Part
312).
(e) The term "Initiation of [*] shall mean the date that [*],
which [*] study is being performed in accordance with the FD&C ACT and
applicable regulations promulgated thereunder (including without limitation 21
CFR Part 312).
(f) The term "Initiation of [*] shall mean the date that [*],
which [*] study is being performed in accordance with the FD&C ACT and
applicable regulations promulgated thereunder (including without limitation 21
CFR Part 312).
[*]
6.2.2 NON-REFUNDABLE AND NON-CREDITABLE MILESTONE PAYMENTS. All
amounts paid under this Section 6.2 shall be non-refundable and non-creditable,
provided, however, in the event of termination of this Agreement by SB due to
material breach by Xxxxxxx, the foregoing shall not preclude SB from seeking
whatever damages are available at law.
G. COST SHARING BETWEEN THE PARTIES WITH RESPECT TO MANUFACTURING DEVELOPMENT
COSTS
It is agreed that, as of the effective date of the B/C Termination
Effective Date, MANUFACTURE DEVELOPMENT COSTS incurred by either Party
thereafter shall be shared between the Parties as follows:
(i) Any MANUFACTURE DEVELOPMENT COSTS which are incurred by either Party
after the B/C Termination Effective Date with respect to activities related
solely to TERRITORY A shall be borne [*] by Xxxxxxx and [*] by SB.
(ii) Any costs which are incurred by Xxxxxxx after the B/C Termination
Effective Date with respect to manufacture development activities related solely
to outside of TERRITORY A shall be borne [*] by Xxxxxxx.
(iii) Any MANUFACTURE DEVELOPMENT COSTS which are incurred by either Party
after the B/C Termination Effective Date with respect to activities both inside
and outside of TERRITORY A shall be borne [*] by SB and [*] by Xxxxxxx.
H. COST SHARING BETWEEN THE PARTIES WITH RESPECT TO DEVELOPMENT COSTS
Section 3.2.6 of the Agreement is hereby amended and restated to read in
full as follows:
3.2.6 FUNDING OF DEVELOPMENT. Xxxxxxx shall bear the cost of all
DEVELOPMENT work for Territory A Trials (as defined in Section 3.2.3) and
Cross-Territory Trials (as defined in Section 3.2.3) until Xxxxxxx'x aggregate
DEVELOPMENT COSTS (including, without limitation, its FTE expenses and its
OUT-OF-POCKET COSTS related to DEVELOPMENT work in TERRITORY A and the NON-USA
TERRITORY) reach [*], provided that it is understood that no expenses of Xxxxxxx
--------
* Confidential Treatment Requested.
-7-
shall be included within the DEVELOPMENT COSTS used to determine the [*] unless
such work and related expenses are provided for in the then current JOINT
DEVELOPMENT PLAN or are within the category described in Section 1.15(ii).
Following the time at which the [*] has been reached.
(a) SB's FTEs who support DEVELOPMENT work after the [*] has been
reached shall be included in DEVELOPMENT COSTS and handled as set forth in
Section 3.2.6(b); and
(b) SB will bear the SB Share of Development Costs (as defined below)
and Xxxxxxx will bear the Xxxxxxx Share of Development Costs (as defined below).
To the extent that one Pang has borne more of such DEVELOPMENT COSTS than it is
obligated to bear under this Section 3.2.6(b), the other Party shall reimburse
the first Party pursuant to Section 3.2.6(d) No expenses of a Party shall be
included within Development Costs except as provided in Section 1.15.
(c) The Parties agree that:
(i) "Xxxxxxx Share of Development Costs" shall equal A + B +
C, where
A = [*]; and
B = [*]; and
C = [*].
(ii) "SB Share of Development Costs" shall equal D + E + F,
where
D = [*]; and
E = [*]; and
F = [*].
(iii) Notwithstanding the foregoing, in the event that the
JDC uses data from a Non-USA Territory Trial to support a regulatory filing to
demonstrate the efficacy of the PRODUCT regarding a previously unapproved
indication for purposes of label expansion in TERRITORY A, then upon the date of
filing for such label expansion in TERRITORY A, SB shall reimburse to Xxxxxxx
[*]; provided, however, that if all or a portion of the cost of the Non-USA
Territory Trial is paid by another licensee of Xxxxxxx, then the portion of the
total cost reimbursed by SB shall be [*]. SB shall not have any obligation to
pay any reimbursement under this clause (3) prior to the point at which Xxxxxxx
has incurred aggregate DEVELOPMENT COSTS equal to the [*], but in such case the
amount that SB would have been obligated to reimburse under this clause (3)
shall be treated as a DEVELOPMENT COST incurred by Xxxxxxx and credited against
the [*].
--------
* Confidential Treatment Requested.
-8-
(d) No later than thirty (30) days after the end of each calendar
quarter, each Party shall submit to the FINANCE SUBTEAM an accounting of all
DEVELOPMENT COSTS incurred by such Party during such quarter. The FINANCE
SUBTEAM shall promptly calculate whether any payments are due from one Party to
the other Party under this Section. In the event such payment is due, the Party
which owes the payment shall make such payment to the other Party within thirty
(30) days after it has received such a determination, in writing, from the
FINANCE SUBTEAM. The Party receiving the payment shall issue an invoice to the
Party making the payment which invoice shall be in the amount to be paid.
I. INTEREST ON LATE PAYMENTS.
Any late payments under the Agreement by either Party shall bear interest
at a rate equal to [*], calculated on the number of days such payment amount is
delinquent.
J. LOAN
SB agrees that it will promptly fund the loan as required by the terms of
the LOAN AGREEMENT, [*].
K. OTHER PROVISIONS OF THE AGREEMENT
All other terms and conditions of the Agreement shall remain in full force
and effect. The parties shall promptly endeavor to produce an amended and
restated Agreement that shall incorporate the terms and conditions of this
Letter, as well as any remaining effect of SB's termination of its rights in
TERRITORIES B AND C.
If Xxxxxxx agrees with the terms and conditions of this Letter, please have
an appropriate representative of Xxxxxxx sign and date the duplicate xxxxx of
this Letter below and return one such fully executed copy to SB.
Very truly yours,
SMITHKLINE XXXXXXX CORPORATION
By: /s/ Xxxxxx-Xxxxxx Xxxxxxx
-------------------------------------
Title: Xxxxxx-Xxxxxx Xxxxxxx
----------------------------------
Date: CEO-Elect
-----------------------------------
AGREED TO AND ACCEPTED:
XXXXXXX PHARMACEUTICAL
By: /s/ Xxxxxxx X. Xxxxxx
----------------------------------
Xxxxxxx Xxxxxx
----------------------------------
Title: President and CEO
------------------------------
Date: April 21, 2000
-------------------------------
--------
* Confidential Treatment Requested.
-9-
