Manufacturing Services Agreement Patheon Pharmaceuticals, Inc.

Exhibit 10.34

EXECUTION COPY

MANUFACTURING SERVICES AGREEMENT

THIS MANUFACTURING SERVICES AGREEMENT (the " Agreement" ) made as of the 6 th day of April, 2004


BETWEEN:

PATHEON PHARMACEUTICALS INC., a corporation existing under the laws of Delaware (hereinafter referred to as " Patheon" ),

- and - RELIANT PHARMACEUTICALS, INC. a corporation existing under the laws of Delaware, (hereinafter referred to as the " Client" ).


THIS AGREEMENT WITNESSES THAT in consideration of the rights conferred and the obligations assumed herein, and for other good and valuable consideration (the receipt and sufficiency of which are acknowledged by each party), and intending to be legally bound the parties agree as follows:


ARTICLE 1

INTERPRETATION 1.1 Definitions .

The following terms shall, unless the context otherwise requires, have the respective meanings set out below and grammatical variations of such terms shall have corresponding meanings:


" Act" shall mean the Federal Food, Drug and Cosmetics Act, 21 U.S.C. a7301 et seq. as may be amended from time to time and the regulations promulgated thereunder;


" Active Compound" or " API" means Isradipine;

" Affiliate" means, with respect to any party, any person or entity that directly or indirectly through one or more intermediaries' controls, is controlled by, or is under common control with, the person or entity specified. For purposes of this definition, " control" shall mean with respect to an entity the direct or indirect ownership of


(i) greater than fifty percent (50%) or more of the capital stock or share capital entitled to vote for the election of the directors of the entity or (ii) greater than 50% of the equity or voting interest of the entity or (iii) the ability to otherwise direct the management and operations of the entity;

" Alza Technical Information" shall mean know how, trade secrets, inventions, data, technology and information relating to the Drug or Drug Product, or the System which are owned by Alza and sublicensed to Reliant. Technical Information shall include without limitation, processes and analytical methodology used in development, testing, analysis and manufacture and medical, clinical, toxicological or other scientific data;


" Applicable Laws" means all applicable laws, ordinances, rules and regulations of any kind whatsoever of any Authority relating to the Manufacturing Services;


" Authority" means any governmental or regulatory authority, department, body or agency or any court, tribunal, bureau, commission or other similar body, whether federal, state, provincial, county or municipal in the Territory;

" Business Day" means a day other than a Saturday, Sunday on which commercial banks are not authorized to close in the states of New Jersey or Ohio;


" cGMPs" means current good manufacturing practices as described in Parts 210 and 211 of Title 21 of the United States' Code of Federal Regulations, together with the latest FDA guidance documents pertaining to manufacturing and quality control practice, all as updated, amended and revised from time to time;


" Capital Letter" means the agreement between Patheon and the Client relating to the capital expenditures associated with the acquisition of certain equipment and Facility improvements which agreement shall substantially be in the form attached hereto as Schedule H;


" Commencement Date" means the date on which Patheon and/or Client has satisfied all regulatory requirements including those under the Act necessary for Patheon to commence performance of the Manufacturing Services hereunder;

" Components" means, collectively, all packaging components, raw materials and ingredients (including labels, product inserts and other labelling for the Drug Product), required to be used in order to produce the Drug Product in accordance with the Specifications, other than the API or Granulations;


" Components Costs" shall mean the cost of Components as set forth in Section 2.1(c) hereto.


" Confidentiality Agreement" means the agreement relating to the non-disclosure of confidential information between Patheon and the Client dated December 9, 2003;


" Contract Year" means the twelve-month period coinciding with the calendar year. Notwithstanding the foregoing for purposes of this Agreement the first Contract Year


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shall mean the period commencing on the Commencement Date to December 31, 2005. Thereafter each Contract Year shall be from January 1 to December 31 of each calendar year during the Term of this Agreement;


" Conversion Costs" shall mean the cost to convert the Granulations into Drug Product as set forth in Section 4.2(a) hereto.

" Deficiency Notice" shall have the meaning ascribed thereto in Section 6.1(a);

" Drug" shall mean the pharmaceutical product DynaCircae CR, whose active ingredient is the Active Compound;


" Drug Layer Granulation" shall mean a granulation of [***];


" Drug Product" shall mean the Drug to be produced by Patheon in bulk dosage form (DynaCircae CR tablets 5 mg & 10 mg);


" Facilities" or singularly, " Facility" means the facility owned and operated by Patheon that is located at 2110 East Gaibraith Road, Cincinnati, Ohio;

" FCA" means Free Carrier Multimodal, as that term is defined in INCOTERMS 2000;


" FDA" means the United States government department known as the Food and Drug Administration and any successor agency performing similar functions;

" Firm Orders" has the meaning specified in Section 5.2(b);


" Granulations" shall mean collectively the Drug Layer Granulation and the Osmotic Layer Granulation


" Intellectual Property" includes, without limitation, rights in patents, patent applications, formulae, trade-marks, trade-mark applications, trade-names, Inventions, know how, copyright, industrial designs;


" Invention" means information relating to any innovation, improvement, development, discovery, computer program, device, trade secret, method, know-how, process, technique or the like, whether or not written or otherwise fixed in any form or medium, regardless of the media on which it is contained and whether or not patentable or copyrightable;


" Inventory" means all inventories of Components and work-in-process produced or held by Patheon in connection with the manufacture of the Drug Product but, for greater certainty, does not include Granulations;


" Manufacturing Services" means the manufacturing, compression, coating, laser drilling and over-coating, quality control, quality assurance, bulk packaging and related services, as contemplated in this Agreement, required to produce Drug Product from Granulations and Components;


[***]: Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.


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" Minimum Run Quantity" means the minimum number of batches of the Drug Product to be produced during the same cycle of manufacturing as set forth in Schedule B hereto;


" NDA" means the New Drug Application 20-336 as amended and supplemented for the Drug Product and as approved by the FDA to market the Drug Product and any materials, documents or information referred to or relied upon therein;


" Novartis" shall mean Novartis Consumer Health, Inc.;


" Osmotic Layer Granulation" shall mean a granulate of polyethylene oxide and hydroxypropyl methylcellulose not including Active Compound produced by Novartis on behalf of Reliant and provided to Patheon for use under this Agreement;

" Packaged Drug Product" shall mean finished Drug Product packaged by Novartis Pharmaceutical Corporation;


" Patheon Manufacturing Responsibilities" means Patheon' s responsibilities and obligations with respect to the provision of Manufacturing Services as set forth in Sections 2.1 and 2.2;

" Quality Agreement" means the agreement between the parties hereto setting out the quality assurance standards to be applicable to the Manufacturing Services provided by Patheon which agreement shall substantially be in the form attached hereto as Schedule G;

" Specifications" means the file, for the Drug Product, which is provided by the Client to Patheon and which contains documents relating to the Drug Product, including, without limitation:

(a) specifications for Granulations and Components;

(b) manufacturing specifications;

(c) storage requirements;

(d) all environmental, health and safety information relating to the Drug Product including material safety data sheets; (e) the finished Drug Product specifications, packaging specifications (if applicable) and shipping requirements for the Drug Product, which are attached hereto as Schedule A;


and which comply with the NDA, and all as updated, amended and revised from time to time by the Client in accordance with the terms of this Agreement;

" System" shall mean an oral osmotic system for the controlled administration of drugs.

" Technical Dispute" has the meaning specified in Section 12.2;


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" Term" has the meaning specified in Section 8.1;

" Territory" means in the geographic area of the United States, its territories and possessions including Puerto Rico; and


" Third Party Rights" means the Intellectual Property or any other rights of any third party.

1.2 Currency .

Unless otherwise indicated, all monetary amounts are expressed in this Agreement in the lawful currency of the United States of America. 1.3 Sections and Headings .

The division of this Agreement into Articles, sections, subsections and Schedules and the insertion of headings are for convenience of reference only and shall not affect the interpretation of this Agreement. Unless otherwise indicated, any reference in this Agreement to a Section or Schedule refers to the specified Section or Schedule to this Agreement. In this Agreement, the terms " this Agreement" , " hereof" , " herein" , " hereunder" and similar expressions refer to this Agreement and not to any particular part, Section, Schedule or the provision hereof. 1.4 Singular Terms .

Except as otherwise expressly provided herein or unless the context otherwise requires, all references to the singular shall include the plural and vice versa.

1.5 Schedules .

The following Schedules are attached to, incorporated in and form part of this Agreement:


Schedule A - Drug Product Specifications

Schedule B - Minimum Run Quantity, Minimum Annual Volume & Fees

Schedule C - Intentionally Deleted

Schedule D - Active Compound and Granulations

Schedule E - Batch Numbering & Expiration Dates

Schedule F - Technical Dispute Resolution

Schedule G - Form of Quality Agreement

Schedule H - Capital Letter


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ARTICLE 2


PATHEON' S MANUFACTURING RESPONSIBILITIES

2.1 Manufacturing Services .

Patheon shall provide the Manufacturing Services for the Territory for the fees specified in Schedules B in order to produce Drug Product for the Client. Subject to Client' s continuing obligation to purchase certain quantities of Packaged Drug Product from Novartis Pharmaceutical Corporation, during the Term and provided that Patheon is not in material default hereunder and is otherwise capable of meeting all of Client' s demand for the Drug Product in accordance with forecasts and Firm Orders set forth in Section 5.2 hereof Client shall purchase all of its other requirements of Drug Product from Patheon. In providing the Manufacturing Services, Patheon shall perform each of the following services:

(a) Conversion of Granulations . Patheon shall convert the Granulations and Components into Drug Product. (b) Quality Control and Quality Assurance . Patheon shall perform the quality control and quality assurance testing specified in the Quality Agreement. Each time Patheon ships Drug Product to the Client or Client' s designee, it shall provide the Client with a certificate of analysis that sets out the test results for each batch of Drug Product, and that certifies that such batch has been evaluated by Patheon' s Quality Control/Quality Assurance department and that the Drug Product complies with the Specifications and a certificate of conformance certifying that the Drug Product was manufactured in accordance with cGMP' s. (c) Components . Patheon shall purchase and test all Components (with the exception of those that are supplied by the Client) at Patheon' s expense (the " Components Costs" ) and as specified by the Specifications.

(d) Bulk Manufacture . Patheon shall manufacture the Drug Product in bulk in accordance with the terms of this Agreement.


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2.2 Standard of Performance .

Patheon shall provide the Manufacturing Services for the Drug Product in accordance with the Specifications, Applicable Laws and cGMPs. Drug Product manufactured hereunder shall not be adulterated or misbranded within the meaning of the Act. In performing the Manufacturing Services, Patheon shall maintain all necessary licenses, permits and other regulatory approvals necessary to comply with its obligations hereunder.


[***]: Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.


6 2.3 Exclusivity .

(a) Patheon agrees that during the Term and [***] Patheon, its Affiliates and any successors thereto shall not manufacture or cause to manufacture for any party in the Territory or for any party outside the Territory for sale inside the Territory other than Client (i) The Drug Product [***].

(b) Patheon further agrees that in the event this Agreement is terminated by Reliant pursuant to Sections 8.2 (a) or 8.2 (b), Patheon shall not manufacture or cause to manufacture for any party in the Territory or for any party outside the Territory for sale inside the Territory for a period from the date of termination through December 31, 2010 (i) the Drug Product or [***]. (c) Notwithstanding section 2.3 (a) above in the event Patheon terminates this Agreement pursuant to sections 8.2(b) or 8.2 (d) hereof, the prohibition set forth in section 2.3(a)(ii) shall not apply.

(d) Patheon agrees that it shall not manufacture and cause its Affiliates and any successors not to manufacture any products that are manufactured using the Alza Technical Information unless such party has a valid and existing license to utilize the Alza Technical Information in the manufacture of the product (s).

(e) Patheon further agrees it shall not at any time use Client Confidential Information for any purpose other than to perform its obligations under this Agreement.


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 fees specified in Schedule B (such fees being subject to adjustment in accordance with the terms hereof).

3.2 Granulations .

The Client shall, at its sole cost and expense, deliver or have delivered the Granulations to Patheon in sufficient quantities and at such times to facilitate the provision of the Manufacturing Services by Patheon, which Granulations 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 Granulations shall at all times belong to and remain the property of the


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Client. Patheon agrees that any Granulations received by it shall only be used by Patheon to provide the Manufacturing Services. Patheon' s liability with respect to any lost or damaged Granulations shall be as set forth in Section 10.2.


ARTICLE 4


CONVERSION FEES AND COMPONENT COSTS

4.1 First Year Pricing .

The fees for the Manufacturing Services (which fees include Conversion costs and Component costs) listed in Schedule B (the " Manufacturing Fees" ) are intended by the parties to be fixed for the first Contract Year of this Agreement, subject to the amendments to such fees provided for in this Article 4. Manufacturing Fees may be referred to herein as the " Fee" or " Fees" .

4.2 Subsequent Years' Pricing .

For each Contract Year commencing January 1, 2006 the Fees during the Contract Year shall be determined in accordance with the following: (a) Manufacturing Costs . Patheon shall be allowed to adjust the Fees: (i) for costs associated with the conversion of Granulations and Components into Drug Product (the " Conversion Costs" ) in respect of the Drug Product based on the most recently available final Producers' Price Index for Pharmaceutical Product as published by the U.S. Bureau of Labor Statistics or any governmental successor thereto (" PPI" ) using the procedure set forth in Section 4.3 and (ii) for Component Costs to pass on the actual amount of any increase or decrease in such costs without mark-up. For each Contract Year in which Patheon is entitled to adjust the Fees Patheon shall provide Client with written notice of any change in the Fees within 30 days of receipt by Patheon of the Annual Forecast. The Parties agree that the Fees shall not be adjusted more than once per Contract Year, however this limitation shall not include price adjustments under section 4.3 or 4.4. In addition, notwithstanding anything herein to the contrary, Manufacturing Fees associated with Conversion Costs shall not be increased by [***] per annum in any Contract Year during the Term. There shall be no similar limitation in terms of increases in Component Costs which shall be passed on to Client in an amount equal to the actual increase paid by Patheon without markup. (b) Annual Forecast . By July 1st of each Contract Year of this Agreement, the Client shall provide Patheon a yearly volume projection for Drug Product. To the extent that Patheon reasonably determines that the projections contained in that yearly volume forecast necessitate that an adjustment be made to the Fees for such Contract Year, Patheon shall, within 30 days of receipt by Patheon of the yearly forecast, be entitled to request an appropriate price adjustment.


[***]: Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.


8 (c) Pricing Basis . The Client acknowledges that the Fees in any Contract Year are quoted based upon the Minimum Run Quantity and estimated annual volume for the Drug Product specified in Schedule B or thereafter specified in the forecast provided pursuant to Section 4.2(b) for the Contract Year and is subject to change if the specified Minimum Run Quantity and estimated annual volume is not met. For greater certainty, if Patheon and the Client agree that the Minimum Run Quantity of the Drug Product shall be reduced whether as a result of a decrease in estimated annual volume or otherwise and, as a result of such reduction, Patheon' s Fees materially increase on a per unit basis, then subject to the limitation set forth in 4.2(a) above Patheon shall be entitled to an increase in the Fees by an amount sufficient to absorb such increase.

In connection with a Fee adjustment pursuant to Section 4.2(a), Patheon shall deliver to the Client a revised Schedule B and a statement outlining the percentage increase in the PPI upon which such Fee adjustment is based. In connection with all Fee adjustment requests pursuant to this Section 4.2(b) and 4.2(c), Patheon shall deliver to the Client a revised Schedule B and such budgetary pricing information or other documentation reasonably sufficient to demonstrate that a Fee adjustment is justified, provided that Patheon shall have no obligation to provide any supporting documents to the extent such documents are subject to obligations of confidentiality between Patheon and its suppliers.

From the date Patheon submits a written request for a price adjustment as per the terms described above, Patheon shall continue to perform the Manufacturing Services while the parties engage in negotiation of revised Fees. Once a price adjustment has been agreed upon such adjustment shall apply retroactively to the later of the first day of the relevant Contract Year or the date in which the written request is received by Client unless the Parties otherwise agree.

4.3 Adjustments to Pricing .

During any Contract Year of this Agreement, the Fees set out in Schedule B or Schedule C shall be subject to adjustment in accordance with the following:

(a) Volume Reduction . If at any time and from time to time Patheon determines, acting reasonably and based on the forecasts and Firm Orders received from the Client, that the current yearly volumes (including, without limitation, any permanent reductions in volumes) relating to the Drug Product will constitute no more than [***] of the minimum annual volume for the Drug Product specified in Schedule B hereto or, if applicable, any revised minimum annual volume hereinafter agreed to by the parties, then Patheon shall be entitled to request an adjustment to the Fees to reflect the demonstrated material increased costs that Patheon will incur as a result of the reduced volumes.

(b) Extraordinary Increases in Component Costs . If at any time market conditions result in Patheon' s cost of Components being materially greater than normal forecasted increases, then Patheon shall be entitled to request an adjustment to the Fees to compensate it for such demonstrated material increased in Component costs. For the purposes of this Section 4.3(b), changes materially greater than


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normal forecasted increases shall be considered to have occurred if: (i) the cost of a Component increases by [***] of the cost for that Component upon which the fee quote was based; or (ii) the aggregate cost for all Components required to manufacture the Drug Product increases by [***] of the total Component costs for such Drug Product upon which the fee quote was based. To the extent that Component costs have been previously adjusted pursuant to Section 4.2(a) or this Section 4.3(b) to reflect an increase in the cost of one or more Components, the adjustments provided for in (i) and (ii) above shall operate based on the costs attributed to such Component (or Components) at the time the last of such adjustments were made. In the event Component costs decrease so that they are less than the amount forecasted, such cost reductions shall be passed through to Client.


In connection with a Fee adjustment request pursuant to this Section 4.3, Patheon shall deliver to the Client a revised Schedule B or Schedule C and such budgetary pricing information, adjusted Component costs or other documentation reasonably sufficient to demonstrate that a Fee adjustment is justified, provided that Patheon shall have no obligation to provide any supporting documents to the extent such documents are subject to obligations of confidentiality between Patheon and its suppliers. Upon delivery of such a request, each of the Client and Patheon shall forthwith use all reasonable efforts to agree on a revised Fee.


From the date Patheon submits a written request for a price adjustment as per the terms described above, Patheon shall continue to perform the Manufacturing Services while the parties engage in negotiation of revised Fees. Once a price adjustment has been agreed upon such adjustment shall apply retroactively to the later of the first day of relevant Contract Year unless the Parties otherwise agree or the date in which the written request is received by Client.

4.4 Adjustments Due to Technical Changes .

Amendments to the Specifications or the Quality Agreement requested by the Client will only be implemented following a technical and cost review by Patheon and are subject to the Client and Patheon reaching agreement as to revisions, if any, to the Fees specified in Schedules B or C necessitated by any such amendment. If the Client accepts a proposed fee change, the proposed change in the Specifications shall be implemented, and the fee change shall become effective only with respect to those orders of Drug Product that are manufactured in accordance with the revised Specifications. In addition, the Client agrees to purchase, at Patheon' s cost therefor (including all costs incurred by Patheon in connection with the purchase and handling of such Inventory), all Inventory utilized under the " old" Specifications and purchased or maintained by Patheon in order to fill Firm Orders or in accordance with Section 5.3, to the extent that such Inventory can no longer be utilized under the revised Specifications. Open purchase orders for Components no longer required under any revised Specifications that were placed by Patheon with suppliers in order to fill Firm Orders or in accordance with Section 5.3 shall be cancelled where possible, and where such orders are not subject to cancellation without penalty, shall be assigned to and satisfied by the Client.


[***]: Certain information on this page has been omitted and filed separately with the Commission. Confidential treatment has been requested with respect to the omitted portions.


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ARTICLE 5


ORDERS, DELIVERY, INVOICING, PAYMENT

5.1 Market Outlook .

The Client acknowledges that for optimal production planning, Patheon requires an understanding of the Client' s strategic vision for the Drug Product in the market and agrees, to the extent that such information (including, if any, the Client' s five-year market outlook studies) exists, to share such information with Patheon, provided that such information may not be relied upon by Patheon for any purpose and further provided that any information so provided shall be subject to the confidentiality provisions of Article 11.

5.2 Orders and Forecasts .

(a) Rolling Forecasts . No later than ten (10) days of the Commencement Date, the Client shall provide Patheon with a written non-binding 18 month forecast of the volume of the Drug Product that the Client then anticipates will be required to be produced and delivered to the Client during each month of that 18 month period. Such forecast will be updated by the Client monthly on a rolling 18 month basis and updated forthwith upon the Client determining that the volumes contemplated in the most recent of such forecasts has changed by more than 20%. The most recent 18 month forecast shall prevail.

(b) Firm Orders . No later than ten (10) days of the Commencement Date and on or before the 20th day of each calendar month thereafter, the Client shall issue firm written orders (" Firm Orders" ) for the Drug Product to be produced and delivered to the Client on a date not less than 90 days from the first day of the calendar month immediately following the date that the Firm Order is submitted. Such Firm Orders submitted to Patheon shall specify the Client' s purchase order number, quantities of Drug Product, monthly delivery schedule and any other elements necessary to ensure the timely production and delivery of the Drug Product. The quantities of Drug Product ordered in such written orders shall be firm and binding on the Client and shall not be subject to reduction by the Client.


(c) Three Year Forecast . No later than fifteen (15) days of the Commencement Date, and on or before May 1st in each Contract Year thereafter, the Client shall provide Patheon with a written non-binding three-year forecast (broken down by quarters for the second and third years of the forecast) of the volume of the Drug Product the Client then anticipates will be required to be produced and delivered to the Client during the three-year period.

5.3 Reliance by Patheon .

The Client understands and acknowledges that Patheon will rely on the Firm Orders and rolling forecasts s ...