Development and License Agreement

DEVELOPMENT AND LICENSE


AGREEMENT


BETWEEN


CIMA LABS INC.


AND


AMERICAN HOME PRODUCTS CORPORATION


ACTING THROUGH ITS DIVISION


ESI LEDERLE


FOR


RAPID DISSOLVING LORATADINE TABLETS


2


DEVELOPMENT AND LICENSE AGREEMENT


THIS AGREEMENT is signed this 14th day of January 2000 between CIMA LABS INC., a corporation organized and existing under the laws of the State of Delaware with offices located at 1000 Valley View Road, Eden Prairie, Minnesota 55344 (hereafter, together with its Affiliates, referred to as ("CIMA"), and American Home Products Corporation (acting through its division, ESI Lederle), a corporation organized and existing under the laws of the State of Delaware with offices located at 130 N. Radnor-Chester Road, St. Davids, Pennsylvania 19087 ("ESI").


ARTICLE I


DEFINITIONS


1.1 ACTIVE INGREDIENT means ethyl 4-(8-chloro-5, 6-dihydro-11H-benzo [5,6] cyclohepta [1,2-b]pyridin-11-ylid-ene)-1-piperidine carboxylate, known as loratadine.


1.2 ADVERSE EXPERIENCE means the definition in the current 21 CFR "Sections 312.32 and 314.80, as in effect from time to time.


1.3 AFFILIATE means (i) any Person which at the time of determination is directly or indirectly controlled by any party hereto; (ii) any Person which at the time of determination directly or indirectly controls any party hereto; or (iii) any Person which is under the direct or


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indirect control of any such Person as described in subparagraphs (i) or (ii). Control in this Section means ownership of greater than fifty percent (50%) of the voting stock or other voting interests in the Person in question. For purposes of this Agreement, Immunex Corporation shall not be considered to be an affiliate of ESI.


1.4 AGENCY means any governmental regulatory authority responsible for granting approvals, including Pricing Approvals, for the sale of the Product in a country in the Territory.


1.5 ANDA means an Abbreviated New Drug Application, as defined in the United States Food, Drug and Cosmetic Act, as amended, and applicable FDA rules and regulations.


1.6 CIMA PATENTS shall mean those Patents and Patent applications owned or Controlled by CIMA during the Term of this Agreement that claim the Product, its manufacture or method of use, including the Patents and Patent applications which are set forth on Exhibit A hereto.


1.7 COMMERCIALLY REASONABLE EFFORTS means efforts and resources normally used by a party for a compound or product owned by it or to which it has rights, which is of similar market potential at a similar stage in its product life, taking into account the competitiveness of the marketplace, the proprietary position of the compound or product, the regulatory structure involved, the profitability of the applicable products, and other relevant factors. It is anticipated that the level of efforts and resources may change at different times during the product life cycle of a compound or product.


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1.8 CONTROL OR CONTROLLED in the context of intellectual property rights means rights to intellectual property sufficient to allow a grant of rights to a party.


1.9 DIRECT COST means the costs for those items specified in Exhibit B, which costs are calculated in accordance with U.S. generally accepted accounting principles consistently applied.


1.10 EFFECTIVE DATE means the date determined in Section 14.10.


1.11 FDA means the United States Food and Drug Administration, or any successor thereto.


1.12 GOOD CLINICAL PRACTICE OR GCP means the then current standards for clinical trials for pharmaceuticals, as set forth in the United States Federal Food, Drug and Cosmetics Act and applicable regulations promulgated thereunder, as amended from time to time, and such standards of good clinical practice as are required by the European Union and other organizations and governmental agencies in countries in which Product is intended to be sold, to the extent such standards are not inconsistent with United States GCP.


1.13 GOOD LABORATORY PRACTICE OR GLP means the then current standards for laboratory activities for pharmaceuticals, as set forth in the United States Federal, Food, Drug and Cosmetics Act and applicable regulations promulgated thereunder, as amended from time to time, and such standards of good laboratory practice as are required by the European Union and other organizations and governmental agencies in countries in which Product is intended to be sold, to the extent such standards are not inconsistent with United States GLP.


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1.14 GOOD MANUFACTURING PRACTICE OR GMP means the current standards for the manufacture of pharmaceuticals, as set forth in the United States Federal, Food, Drug and Cosmetics Act and applicable regulations promulgated thereunder, as amended from time to time, and such standards of good manufacturing practices as are required by the European Union and other organizations and governmental agencies in countries in which Product is intended to be sold, to the extent such standards are not inconsistent with United States GMP.


1.15 GROSS PROFIT means Net Sales less total cost of goods (including Active Ingredient provided to CIMA at ESI's Direct Cost), shipping (including costs of shipping Product from CIMA to ESI), packaging and storage.


1.16 HSR ACT means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.


1.17 LAUNCH DATE means the date of first commercial shipment of the Product by ESI or its Affiliates or their respective subdistributors to Third Parties in a country in the Territory.


1.18 MAJOR COUNTRY means any of the United States, Germany, or the United Kingdom. The foregoing countries may also collectively be referred to as Major Countries.


1.19 NET SALES means the gross invoice price for Product sold by ESI or its Affiliates or sublicensees or subcontractors to a Third Party customer less the reasonable and customary accrual-basis deductions from such gross amounts for: (i) normal and customary trade, cash and other discounts, allowances and credits actually allowed and taken directly with respect to sales of Product, (ii) credits or allowances actually granted for damaged goods, returns or rejections of Product; (iii) sales or similar taxes (including duties or other governmental charges levied on, absorbed or otherwise imposed directly on the sales of Product, including, without limitation, value added taxes or other governmental charges otherwise measured by the billing amount) which are included in billing amount, and excluding any taxes imposed on or measured by the net income or profits of the selling party; (iv) uncollectable accounts; (v) charge back payments and rebates granted to managed health care organizations or to federal, state and local governments, their agencies, and purchasers and reimbursers or to trade customers, including but not limited to, wholesalers and chain and pharmacy buying groups; and (vi) rebates (or equivalents thereof) that are granted to or charged by national, state, provincial or local governmental authorities in countries other than the United States.


Such amounts shall be determined from the books and records of ESI, its Affiliates and their respective sublicensees and subdistributors maintained in accordance with U.S.


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generally accepted accounting principles consistently applied, and such amounts shall be calculated using the same accounting principles used for other ESI products.


Sales between or among ESI, its Affiliates and its sublicensees and subdistributors shall be excluded from the computation of Net Sales if such Affiliates or sublicensees and subdistributors are not end-users, but Net Sales shall include the subsequent final sales to Third Parties by any such Affiliates or sublicensees or subdistributors. Where (i) Product is sold by ESI, its Affiliates or its sublicensees and subdistributors other than in an arms-length sale or as one of a number of items without a separate invoiced price; or (ii) consideration for Product shall include any non-cash element, the Net Sales applicable to any such transaction shall be deemed to be ESI's average Net Sales for the applicable quantity of to the Product at that time.


1.20 PATENTS means all patents and patent applications, and all additions, divisions, continuations, continuations in-part, pipeline protection, substitutions, reissues, extensions, registrations, patent term extensions, supplementary protection certificates and renewals of any of the above.


1.21 PERSON means an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency thereof.


1.22 PRICING APPROVAL means any approval for price or reimbursement as may be necessary or appropriate as a prerequisite for marketing the Product in a particular country of the Territory.


1.23 PRODUCT means rapid dissolving tablets containing 10 milligrams Active Ingredient in any of CIMA's current fast dissolve technologies, which include the DuraSolv(TM) and OraSolv(R)


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technologies. The Product shall be pharmaceutically equivalent and bioequavalent to CLARITIN(R) REDITABS containing 10 milligrams Active Ingredient.


1.24 REGULATORY APPROVAL means the product license or marketing approval necessary as a prerequisite for marketing the Product in a particular country in the Territory.


1.25 REGULATORY DOCUMENTS means all regulatory submissions, Regulatory Approvals, and Pricing Approvals.


1.26 SPECIFICATIONS means the specifications for the Product as set forth in Exhibit C hereto, as may be amended from time to time by the parties in the course of Product development and in accordance with the regulatory submissions and/or Regulatory Approvals, or as otherwise required by regulatory authorities.


1.27 SUPPLY AGREEMENT means the agreement for the exclusive supply of Product by CIMA to ESI between the parties and effective on the Effective Date.


1.28 TECHNICAL INFORMATION means (a) techniques and data, including ideas, inventions (including patentable inventions), practices, methods, knowledge, know-how, trade secrets, skill, experience, documents, apparatus, clinical and regulatory strategies, test data, including pharmacological, toxicological and clinical test data, analytical and quality control data, manufacturing, patent data or descriptions relating to Product, and (b) chemical formulations, compositions of matter, product samples and assays relating to Product.


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1.29 TERM shall have the meaning set forth in Section 10.1.


1.30 TERRITORY means the world.


1.31 THIRD PARTY means any Person other than a party to this Agreement or an Affiliate of a party to this Agreement


1.32 $ means United States dollars.


ARTICLE II


GRANT OF RIGHTS; EXCLUSIVITY


2.1 GRANT OF RIGHTS During the Term of this Agreement, CIMA hereby grants to ESI, an exclusive license under the CIMA Patents and Technical Information, and CIMA's interest in Joint Patent Rights, to market, promote, use, distribute, sell, have sold and to import and export Product within the Territory, provided that CIMA grants only a non-exclusive license under U.S. Patent No. 5,225,197 and corresponding patents throughout the world. In addition to the foregoing, ESI shall have an exclusive license under the CIMA Patents ad Technical Information, and CIMA's interest in the Joint Patent Rights, to make (and to have made) Product in the Territory subject to, and in accordance with, the provisions of Sections 2.4,11.3(b) and the applicable provisions of the Supply Agreement.


2.2 SUBLICENSE RIGHTS The rights granted to ESI hereunder includes the right to sublicense all or part of such rights to ESI Affiliates and/or Third Parties in all or part of the Territory; provided that (a) the terms and conditions of such grant of sublicense rights (i) are consistent with and do not violate the terms and conditions of this Agreement, and (ii) provide ESI with the right and obligation to enforce such terms and


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conditions; (b) ESI remains primarily liable and responsible for the performance of any such Affiliates and Third Parties according to the terms of this Agreement; and (c) if ESI grants a sublicense to a Third Party, then ESI shall promptly notify CIMA of the identify of the Third Party; provided, however that any sublicense of the rights contained in Section 2.4 hereof or Section 2.9 of the Supply Agreement shall be subject to the prior written consent of CIMA, such consent not to be unreasonably withheld or delayed.


2.3 EXCLUSIVITY During the Term of this Agreement, with respect to countries not subject to European Union (EU) competition law, neither party shall develop, manufacture, license, distribute or sell any rapid dissolving solid dosage form containing the Active Ingredient that competes with Product in the Territory ("Competing Product"). With respect to countries of the Territory subject to EU competition law, during the Term of this Agreement, neither party shall manufacture or distribute any Competing Product in the Territory. Notwithstanding anything contained in this Section 2.3, nothing contained herein shall prevent ESI or any Affiliate of ESI from acquiring an interest in a business (the "Acquired Business") which is developing, has developed or is selling any Competing Product in the Territory (the "Competing Operations") where the annual revenues of the Competing Operations do not exceed twenty percent (20%) of the aggregate annual revenues of the Acquired Business.


2.4 ESI RIGHT TO MANUFACTURE At any time after filing of an ANDA for Product in the United States, ESI shall have the right to transfer manufacture of the Product from CIMA to ESI, upon three (3) months' prior written notice to CIMA. Upon receipt of such notice, CIMA shall use Commercially Reasonable Efforts to transfer to ESI the Technical Information relating primarily to the manufacture of Product, including all manufacturing


8 10 know-how, that is reasonably necessary to enable ESI to make and have made Product. In such event, ESI shall pay to CIMA a [***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***] technical transfer fee upon completion of the technology transfer (as indicated by ESI's or its contract manufacturer's completion of validation batches of Product), plus out-of-pocket expenses, incurred by CIMA directly related to such technical assistance.


ARTICLE III


DEVELOPMENT ACTIVITIES


3.1 DEVELOPMENT AND REGISTRATION RESPONSIBILITIES FOR THE PRODUCT Each party agrees to use its Commercially Reasonable Efforts to perform its obligations to develop, be the first person to file an ANDA with Paragraph IV certification, and register the Product to meet the timetable set forth in Exhibit D. Each party shall comply with all applicable GLP, GCP and GMP in the conduct of the development of the Product. CIMA shall (a) be responsible for conducting the ongoing development work for Product; (b) design and conduct all dosage form, formulation, process, and chemistry manufacturing and control (CMC) and related technical studies on Product, including preparation of dosage form CMC regulatory documents, and conduct scale-up activities for the manufacture of Product. ESI shall be responsible for and shall (a) conduct all pivotal biostudies, and (b) file, own and maintain all submissions for Regulatory Approval and Regulatory Approvals of Product in the Territory. CIMA shall be responsible for providing the CMC and related technical components of such submissions, as jointly determined by the parties, and ESI shall be responsible for formatting such documentation for, and submitting such documentation to, the appropriate Agencies in the Territory. The ANDA shall be filed with


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CIMA as approved manufacturer. The parties shall cooperate with, and assist, each other in connection with their activities hereunder including addressing regulatory questions, and preparing updates and supplements to regulatory filings for Product in the Territory. ESI, however, shall be responsible for all communications with the FDA and post-Regulatory Approval regulatory requirements in the Territory, including pharmacovigilance and Adverse Drug Experience reporting, unless otherwise agreed in advance in writing by the parties.


3.2 FUNDING OF PRODUCT DEVELOPMENT


(a) ESI shall make the following non-refundable, non-creditable development payments to CIMA in $:


1. Within three (3) days after the Effective Date: [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.***]


2. Upon successful completion (as determined by ESI) of pivotal
biostudy for the Product.


[***CONFIDENTIAL TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.***]


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3. Upon FDA acceptance of ANDA filing for the Product:


--------------------------------------------------------------------------------
Option A ESI is first Person to file Paragraph [***CONFIDENTIAL
IV certification TREATMENT REQUESTED,
PORTION OMITTED FILED
SEPARATELY WITH THE
SECURITIES AND
EXCHANGE COMMISSION.***]
--------------------------------------------------------------------------------
Option B ESI is not first Person to file [***CONFIDENTIAL
Paragraph IV certification TREATMENT REQUESTED,
PORTION OMITTED FILED
SEPARATELY WITH THE
SECURITIES AND
EXCHANGE COMMISSION.***]
--------------------------------------------------------------------------------


3.2 (b) In addition to the development payments described in Section 3.2(a), ESI shall pay to CIMA, within thirty( 30) days of receipt of CIMA's invoice, development costs on successful completion of the development activities for the Product and in amounts not to exceed the budgeted amounts set forth below. Such development costs shall be invoiced by CIMA at CIMA's Direct Cost.


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--------------------------------------------------------------------------------
Formulation Development [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.***]


--------------------------------------------------------------------------------
Scale-up of Final Formulation [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.***]


--------------------------------------------------------------------------------
Full-Scale GMP Batch
Manufactured for Bioequivalence
Studies [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.***]


--------------------------------------------------------------------------------
CMC Preparation [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.***]
--------------------------------------------------------------------------------


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----------------------------------------------------------------------------------
Validation/Commercialization
(only if CIMA manufactures
launch quantities of Product) [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
OMITTED FILED SEPARATELY WITH THE SECURITIES
AND EXCHANGE COMMISSION.***]
----------------------------------------------------------------------------------
Total $800,000
----------------------------------------------------------------------------------


ESI shall fund all clinical biostudies for the Product.


ARTICLE IV


DILIGENCE OBLIGATIONS


4.1 PERFORMANCE OBLIGATIONS


(a) ESI shall, subject to supply by CIMA of launch quantities of Product, use Commercially Reasonable Efforts to launch Product as soon as commercially reasonable in each Major Country, within three (3) months following the later of Regulatory Approval or if applicable, Pricing Approval, provided the pricing is approved within ESI's global pricing limits. The Product must also be free of all other legal and regulatory encumbrances.


4.2 RECORD KEEPING Each party shall record, to the extent practical and customary in the industry, all Technical Information relating to the Product development in written form, which writing shall be signed, dated and witnessed, consistent with standard


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practices of each party. All such written records of the parties shall be maintained in a form sufficient to satisfy Regulatory Agencies.


4.3 ADVERSE DRUG EXPERIENCES To the extent either party receives any information regarding Adverse Drug Experiences related to the use of the Product, such party shall promptly provide the other party with such information in accordance with the Adverse Event Reporting Procedures set forth in Exhibit E hereto (as may be amended from time to time upon written agreement of the parties).


ARTICLE V


ROYALTY PAYMENTS TO CIMA


5.1 ROYALTIES PAYABLE BY ESI Following the Launch Date of Product in any country in the territory, ESI shall pay to CIMA, on a quarterly basis, a royalty in the amounts set forth below on Gross Profits of the Product during the previous quarter.


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(a) During any period from the Launch Date in which [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
there is no other launched generic to OMITTED FILED SEPARATELY WITH THE SECURITIES AND
CLARITIN(R) REDITABS EXCHANGE COMMISSION.***] of Product Gross Profit
in the Territory, plus a quarterly payment in
the amount of the lesser of [***CONFIDENTIAL
TREATMENT REQUESTED, PORTION OMITTED FILED
SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.***]


During any period from the Launch Date in which [***CONFIDENTIAL TREATMENT REQUESTED, PORTION
there is another launched generic to OMITTED FILED SEPARATELY WITH THE SECURITIES AND
CLARITIN(R) REDITABS EXCHANGE COMMISSION.***] of Product Gross Profit
in the Territory.


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(b) ESI shall either (i) pay to CIMA royalties on Product Gross
Profit sold by any Third party sublicensee, or (ii) provide
in such sublicense that such sublicensee shall pay to ESI
royalties on Product Gross Profit sold by such sublicensee,
in either case at the royalty rate set forth in Section
5.1(a) that would be applicable had such Gross Profits been
made by ESI, and provided that in either case, ESI shall remain
liable for the timely payment of all such royalties.


5.2 ROYALTY REPORTS During the Term of this Agreement following the Launch Date of Product in any country, ESI shall, within forty five (45) days after each calendar quarter for sales of Product in the United States and within sixty (60) days after each calendar quarter for sales of Product outside the United States, furnish to CIMA a written quarterly report showing (i) the gross sales of Product sold by ESI and its Affiliates and sublicensees during the reporting period and the calculation of Net Sales and Gross Profit from such gross sales; (ii) the royalties and other payments which shall have accrued hereunder in respect of such sales; (iii) withholding taxes, if any, required by law to be deducted in respect of such royalty payments; (iv) the Launch Date(s) of Product in any country(ies) during ...