Addendum To Manufacturing Agreement

EXHIBIT 10.19(b)


ADDENDUM TO MANUFACTURING AND SUPPLY AGREEMENT


This Addendum to Manufacturing and Supply Agreement (this "Addendum"), dated as of the 1st day of August, 2001 (the "Effective Date") is by and between JPI PHARMACEUTICA INTERNATIONAL, a division of Cilag AG International Zug, a company duly organized and existing under the laws of Switzerland, having its principal office in CH-6300 Zug, Kollerstrasse 38, Switzerland ("JPI") and JANSSEN PHARMACEUTICA Inc., 1125 Trenton-Harbourton Road, Titusville, NJ 08560, USA ("Janssen US" and, together with JPI, "Janssen") on the one hand and Alkermes Controlled Therapeutics Inc. II, a company organized and existing under the laws of the Commonwealth of Pennsylvania, having its principal office at 64 Sidney Street, Cambridge MA 02139-4136, USA ("ACTII") on the other hand.


WHEREAS, Janssen and ACTII have been collaborating for the development of a Risperidone depot formulation incorporating ACTII's proprietary technology concerning bioabsorbable polymer technologies and have entered into a Development Agreement and two License Agreements related thereto; and


WHEREAS, Janssen and ACTII entered into that certain Manufacturing and Supply Agreement, dated August 6, 1997 (the "Supply Agreement"), with respect to the commercial manufacture and supply of such Risperidone depot formulation to Janssen; and


WHEREAS, Janssen and ACTII desire to enter into this Addendum regarding the expansion of ACTII's manufacturing facilities, and the financial responsibilities of each of the parties in connection with such expansion, in order to support the increased sales forecasts for such Risperidone depot formulation; and


WHEREAS, Janssen and ACTII further desire to enter into this Addendum to formally provide for a collaborative effort to develop the manufacturing facility and commercial supply of Product.


NOW, THEREFORE, in consideration of the mutual covenants and conditions set forth below, and intending to be legally bound hereby, the parties agree as follows:


ARTICLE 1 - DEFINITIONS


Section 1.1. Unless provided otherwise, any capitalized terms used in this Addendum and not defined herein or below, shall have the meaning set forth in the Supply Agreement.


1.1.1. "Regulatory Approval" shall mean either (i) the approval of a New Drug Application, or a comparable application, for the Product by the United States Food and Drug Administration ("FDA"), or (ii) regulatory approval in two (2) of the Major EU Member States (for the purpose hereof, "Major EU Member States" means Germany, UK, France, Spain and


1 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.


Italy), together in each case with satisfaction of any related regulatory and notification requirements of the FDA or such other regulatory authority.


ARTICLE 2 - EXPANSION PROJECT


Section 2.1. The Project. ACTII will retain the services of an engineering firm to develop plans to expand ACTII's manufacturing facility located in Wilmington, Ohio (the "Project"), including detailed timelines for completion of the Project. The Project shall include the following elements:


2.1.1. The expansion to the current facility will be a detached addition on the same campus as the original facility in Wilmington, Ohio (such detached addition, including the equipment to be fitted therein, are referred to herein as the "Expansion");


2.1.2. The Expansion will include the utilities for a second and third wet process line and a second filling line;


2.1.3. Only the equipment for the second wet process line will be installed as part of the Project; and


2.1.4. The Project is expected to be completed by [***] and cost approximately [***], all according to the preliminary budget and timetable set forth on Schedule A attached hereto.


2.1.5. The underlying assumption of the terms agreed in this Addendum is that the Expansion will be dedicated to the manufacturing of the Product. Notwithstanding the above, ACTII shall have the right to manufacture other products in the Expansion, [***]. ACTII shall be entitled to proceed with such intended manufacturing activities, provided that the Global Supply Team is satisfied, in its reasonable judgment, that such activities will not affect the quality (including GMP guidelines), the supply chain or capacity requirements for the Product. In the event that ACTII proceeds with its intended manufacturing activities, ACTII and Janssen will negotiate in good faith the impact (if any) of such activities on the Minimum Revenues and/or the Guarantee provided in this Addendum and modify it accordingly.


Section 2.2. The Project Plan. Upon completion of the work by the engineering firm, which is expected to be completed prior to July 31, 2001, Janssen and ACTII shall meet to review the plans, budget and timetable for completion of the Project, determine the actions to be taken by each of the parties and to finalize the plans, budget and timetable for the Project (the "Project Plan"). The Project Plan, including the budget, must be amended by mutual agreement of the parties (after consultation with the Global Supply Team (defined in Section 5.2)) if the change impacts the timeline, capacity or budget with respect to the Product. At any time the parties amend the budget included in the Project Plan, a corresponding amendment to the Guarantee Cap (defined in Section 3.2) shall also be made.


Section 2.3. Contractors and Construction. Upon approval by both parties of the Project Plan, ACTII shall engage the services of any contractors necessary to begin and complete


2 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.


actual construction of the Project and shall oversee such construction. ACTII shall cause the timetable for completion of the Project that is part of the Project Plan to be incorporated into all contracts and agreements with such contractors.


ARTICLE 3 - FINANCIAL RESPONSIBILITY FOR THE PROJECT


Section 3.1. ACTII's Responsibility. ACTII shall be responsible for payment of all costs and expenses related to construction of the Project, including the design of and engineering services related to the Project, subject to the Guarantee and Minimum Revenues (each as defined in Sections 3.2 and 3.4, respectively).


Section 3.2. The Guarantee. In the event that Janssen terminates development of the Product prior to commercial launch or Janssen terminates the Project, Janssen will reimburse ACTII for all cumulative out-of-pocket expenses made or actually and irrevocably committed by ACTII for the Project through the date of ACTII's receipt of written notice of such termination (such reimbursement payment referred to herein as the "Guarantee"). The Guarantee shall not exceed [***] (the "Guarantee Cap"), unless the parties have mutually agreed to amend the budget and the Guarantee Cap pursuant to Section 2.2.


Section 3.3. Refund of the Guarantee. If Janssen pays to ACTII the Guarantee due to Janssen's termination of the Project and if the Expansion is utilized by ACTII for another product with another corporate partner within [***] of Janssen's termination of the Project, then ACTII shall refund that portion of the Guarantee that is proportional to the actual utilization of the Expansion during the [***] period which shall be paid to Janssen in installments over the months remaining in the [***] period and so long as the utilization continues.


Section 3.4. Minimum Revenues. For a period of ten (10) calendar years, Janssen shall guarantee a certain minimum amount of revenues to ACTII from Janssen from the purchase of Product under the Supply Agreement (the "Minimum Revenues"), unless Janssen realizes the cumulative Minimum Revenues prior to the expansion of such 10-year period, all in accordance with this Section 3.4 and the subsections below.


3.4.1. Upon completion of the work by the engineering firm, which is expected to be completed prior to July 31, 2001, Janssen and ACTII shall meet to review the Project cost. If the aggregate Project cost is [***] or more, but less than [***], the Minimum Revenues shall be:


Scenario 1: Detached Plant without filling line
Capital Cost: [***]


Calendar Year Minimum Revenue for Alkermes
of Minimum $ million
Revenues
[***] [***]


3 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.


3.4.2. If the aggregate Project cost is less than [***] or greater than [***], then Janssen and ACTII shall re-calculate the Minimum Revenue amounts based on the Project cost and assumptions and preliminary Minimum Revenue amounts set forth below.


(a) The Minimum Revenues are intended to derive a minimum revenue that drives a net present value of [***] using a [***] discount rate for ACTII's manufacturing facility investment.


(b) For the purpose of calculating the Minimum Revenues under this Section 3.4, the Project cost shall not exceed [***], unless the parties have mutually agreed to amend the budget pursuant to Section 2.2.


(c) The Minimum Revenues under this Section 3.4.2 shall be calculated in substantially the same way as the Minimum Revenues under Section 3.4.1 were calculated as shown on Schedule C.


3.4.3. First Calendar Year. The first calendar year in which Minimum Revenues shall be gua ...