manufacturing and supply agreement

EXHIBIT 10.28


CONFIDENTIAL TREATMENT REQUESTED (*) Denotes information for which confidential treatment has been requested. Confidential portions omitted have been filed separately with the Commission.


MANUFACTURING AND SUPPLY AGREEMENT


THIS AGREEMENT, made effective as of October 24, 1996 (the "Effective Date"), is entered into by and between Neurex Corporation, a Delaware corporation ("Neurex") and Mallinckrodt Chemical, Inc., a Delaware corporation ("Mallinckrodt").


RECITAL


WHEREAS, Neurex has developed a proprietary Product called SNX- 111 for analgesia indications and desires Mallinckrodt to manufacture SNX-111 for Neurex;


WHEREAS, Mallinckrodt has developed proprietary manufacturing processes for manufacturing peptide products such as SNX-111 and desires to manufacture SNX-111 for Neurex;


WHEREAS, SNX- 111 is still in the development process but Neurex wants to enter into a supply contract before it knows the amounts or delivery times of Products but wants to assure a source of supply of SNX-111;


WHEREAS, Mallinckrodt has limited capacity to manufacture SNX-111 within given time limits but desires to develop the means to provide continuity of supply to Neurex within its limited manufacturing capacity.


AGREEMENT


NOW, THEREFORE, in consideration of the foregoing and of the mutual promises contained herein, the parties agree as follows:


1. Definitions. As used in this Agreement:


1.1 "Affiliate" shall mean any corporation or other business entity controlling, controlled by or under common control with such party. For purposes of this Section 1.1, "control" shall mean the direct or indirect ownership of fifty percent (50%) or more of the voting or income interest in such corporation or other business entity, or such other relationship as, in fact, constitutes actual control.


1.2 "Batch" shall mean the amount of the Product coming out of a single synthesis.


1.3 "Product" shall mean the bulk form of SNX-111, as more fully described in Schedule A which is attached hereto and made a part hereof.


1.4 "Mallinckrodt Proprietary Technology" shall mean the proprietary process information relating to the manufacture of the Product which is considered to be a trade secret of Mallinckrodt.


1.5"Calendar Half-Year" shall mean each of the six (6) month periods, during the term hereof, beginning with April 1 st and October 1 st.


1.6 "Neurex Patent Rights" or "NPR" shall mean any claim of any unexpired patent owned by or licensed to Neurex or an Affiliate thereof, that has not been declared invalid or unenforceable in an unappealed or unappealable decision of a court of competent jurisdiction.


1.7 "Term" shall mean the duration of this Agreement as determined in accordance with the terms hereof.


1.8 "Yield" shall mean the weight of the net Product obtained divided by the weight of the starting peptide resin to obtain that Product.


2. Manufacture and Supply of Product.


2.1 (a) Subject to the provisions of this Agreement, Mallinckrodt shall manufacture and Neurex shall purchase from Mallinckrodt at least fifty percent (50%) of Neurex's requirements of the Product for the United States market for Neurex's Analgesia indication.


(b) Neurex may order amounts of SNX-111 for other research and development purposes other than the analgesia indication. On each firm order placed by Neurex pursuant to ss.5.2 hereof, Neurex shall indicate which amounts ordered are for analgesia and which amounts ordered are for research and development of other possible indications. Section 6 and 11 shall not apply to any non-analgesia research and development materials. In no event will Neurex order any SNX-111 for commercial production except for Product for analgesia indications. In no event will the amounts ordered exceed the amounts listed in Exhibit D.


2.2 Subject to the provisions of this Agreement, Neurex agrees to purchase Mallinckrodt's current inventory of 45 grams of Product at the price outlined in Schedule B.


3. Manufacturing Fees.


3.1 Neurex shall pay Mallinckrodt for the manufacture of the Product in accordance with the Payment/Yield Schedule attached hereto as Schedule B and made a part hereof.


3.2 Upon shipment of the Product to Neurex, Mallinckrodt shall submit its invoice for its fees for manufacturing the Product shipped according to the applicable Yields for that particular Batch and provide Neurex with each Batch documentation supporting the Yield claimed. Neurex shall pay the full amount of each invoice within forty five (45) days after receipt of invoice.


3.3 In the event that Yield rates for three (3) consecutive batches are consistently greater than [*], Mallinckrodt acknowledges and agrees to negotiate in good faith a new manufacturing fee schedule consistent with the ratios for price set forth in Schedule B.


4. Specifications.


4.1 Each Batch manufactured and supplied by Mallinckrodt to Neurex hereunder shall conform to the specifications therefor as set forth in Schedule A hereto, as the same may be amended from time to time by written agreement of the parties hereto ("the Specifications"). The Specifications shall be adjusted to meet any new requirements of any changes to applicable law or regulation. Any resulting change in the manufacturing fee will be reflected in accordance with Mallinckrodt's standard cost accounting system.


4.2 Each Batch shall be analyzed in accordance with the methods of analysis specified in Schedule C attached hereto and made a part hereof, as the same may be amended from time to time by written agreement of the parties hereto. Mallinckrodt shall send to Neurex with each Batch a Certificate of Analysis specifying, inter alia, the results of each of the determinations required to show conformance of such Batch with the Specifications therefor. The figures set forth in such Certificate of Analysis shall be accepted as accurate for the purposes of this Agreement unless Neurex within forty five (45) days after the receipt of such Batch not)fies Mallinckrodt in writing that it has analyzed such Batch in accordance with the methods of analysis specified in Schedule C and has determined that all or any portion of such Batch does not conform to the Specifications therefor. If Neurex fails to notify Mallinckrodt within such forty five (45) days then said Batches shall be deemed to be accepted ("Accepted Product"). Those Batches that fail to meet the Specifications as agreed upon by Neurex and Mallinckrodt shall be returned by Neurex to Mallinckrodt, at Mallinckrodt's expense, and Mallinckrodt shall, as soon as reasonably practical, but not more than three (3) months from receipt of the written notice described above, replace such Batch with a new Batch that meets the Specifications. Said replacement of Product by Mallinckrodt shall be Neurex's sole remedy for the failure of any Product hereunder to meet the Specifications.


4.3 If there is a difference of opinion concerning the conformance of the Batch with the Specifications therefor, Neurex and Mallinckrodt agree to consult with each other in order to explain and resolve the discrepancy between each other's determinations. If such consultation does not resolve the discrepancy, Neurex shall furnish representative samples for analysis by a mutually agreed upon independent laboratory, using methods of analysis set forth in Schedule C, and the reasonably resulting determinations shall be binding on Neurex and Mallinckrodt for the purposes hereof. Each party shall have the right to have representatives thereof present, at their own expense, during such independent analysis. If the Product is found to meet the requirements of the Specifications in all material respects, Neurex shall pay the costs of such tests and shall be deemed to have accepted the affected Batch as Accepted Product. If the Product is not found to meet the requirements of the Specifications in all material respects, Mallinckrodt shall pay the costs of such tests and shall promptly credit Neurex's account for the manufacturing fee paid pursuant to Section 3 related to that Batch.


5. Forecasts and Orders.


5.1 Neurex will keep Mallinckrodt reasonably informed of the regulatory development of SNX-111 including the status of clinical trials and filing of the NDA with the FDA so that Mallinckrodt may anticipate when to prepare for commercial production of an FDA approved SNX- 111. Mallinckrodt shall keep all such information confidential.


At the beginning of the Calendar Half-Year starting on April 1, 1997, and at the beginning of each Calendar Half-Year thereafter during the term of this Agreement, Neurex will provide Mallinckrodt with a written twelve (12) month rolling forecast of the quantities of Product that Neurex expects to purchase during each of the next twelve (12) months. The first six (6) months of each forecast shall constitute firm orders deliverable as provided in Section 5.2, except for the period October 1, 1998 to December 31, 1998 for which the order period will be three (3) months. The balance of each twelve month forecast given by Neurex pursuant to this Section 5.1 is not a firm commitment on the part of Neurex to order the quantities of the Product set forth therein, but are given so that Mallinckrodt will have aufficient information upon which to schedule its manufacturing operations so as to be able to meet Neurex's firm orders for the Product that may be placed pursuant to Section 5.2.


5.2 At the beginning of each Calendar Half-Year, Neurex shall submit the six (6) month firm orders in writing for the quantity of the Product desired by Neurex at least six (6) months prior to the delivery date, except for the period October 1, 1998 to December 31, 1998 for which the order period will be three (3) months, and Mallinckrodt shall supply such quantities of the Product in accordance with Schedule D attached hereto and made a part hereof.


5.3 Mallinckrodt shall ship the Product in a container closure system described in Schedule E attached hereto and made a part hereof at Neurex's expense in accordance with Neurex's instructions, FOB Mallinckrodt's plant. For purposes of this Agreement, delivery of Product by Mallinckrodt to Neurex shall be deemed to have taken place upon acceptance of delivery by a Neurex-designated carrier at Mallinckrodt's plant.


5.4 Title to all finished Product shall pass to Neurex on delivery.


5.5 Manufacturing Contingencies. Mallinckrodt may, at its discretion, manufacture Product in anticipation of Neurex's orders. In such case, Neurex agrees that before or upon termination of this Agreement, it will purchase Mallinckrodt's inventory of Product up to a maximum of 150 grams.


6. Failure to Deliver.
6.1 If at any time during the Term of this Agreement Mallinckrodt fails to deliver:
(a) the six (6) month firm order on the delivery date and up to thirty (30) days after the delivery date, Mallinckrodt shall pay Neurex a late delivery fee equal [*] of the purchase price per day of each gram of Product that Mallinckrodt has failed to deliver after the delivery date to Neurex within such time frame, up to a maximum of [*] per gram of the Product;


(b) the six (6) month firm order on the delivery date by more than thirty (30) days, then in addition to the late delivery fee provided in 66.1(a) above, Neurex may in its discretion manufacture or have manufactured the amount of Product covered by the next following six (6) month firm order, and Neurex shall no longer be required to purchase at least 50% of its Product from Mallinckrodt;


(c) the six (6) month firm order on the delivery date by more than one hundred eighty (180) days or if Mallinckrodt not)fies Neurex in writing that it is unable or unwilling to provide Product meeting the Specifications on a consistent ongoing basis and is willing to license its technology, or has filed against it a petition in bankruptcy which is not dismissed within ninety (90) days notice to Mallinckrodt, then subject to the provisions of Section 14 the parties shall negotiate in good faith in order to reach agreement on a nonexclusive license to Neurex or Neurex's designee which is acceptable to Mallinckrodt but in no event to a competitor of Mallinckrodt's peptide business of Mallinckrodt's technology and know-how involved in the manufacture of the Product. The license will provide, among other things, that Mallinckrodt shall provide reasonable technical assistance necessary to start the manufacture by or for Neurex of the Product with no delay if so requested by Neurex. The license shall also provide without limitation for the payment of a reasonable royalty to Mallinckrodt based on the full value of the technology and know-how. The license will be limited solely to the Product for Analgesic indications and not for any other peptides or other use. In no event shall the failure of the parties to reach a mutually satisfactory license agreement nor any specific terms of such license agreement be subject to arbitration notwithstanding Article 16.2. Neurex shall reimburse Mallinckrodt for the actual cost to Mallinckrodt of any technical assistance provided pursuant to this Agreement and/or the license.


7. Records and Audits.


7.1 During the term of this Agreement and for three (3) years after the expiration date of any particular Product Batches manufactured by Mallinckrodt, or such time as may be required by applicable regulations, whichever is greater, Mallinckrodt shall maintain records and samples relating to such Batch(es) aufficient to substantiate and verify its duties and obligations hereunder, including but not limited to, records of orders received, Product manufactured, work in progress, Product analysis and quality control tests and the like.


7.2 Mallinckrodt shall allow Neurex employees or representatives of an independent third party auditor selected by Neurex and agreed upon by Mallinckrodt upon reasonable notice and at reasonable intervals during normal business hours, to enter Mallinckrodt's ...