Clinical Manufacture And Supply Agreement

CLINICAL MANUFACTURE AND SUPPLY AGREEMENT


THIS AGREEMENT (the "Agreement") is entered into on February 21, 2000 by and between International Isotopes Inc., a Texas corporation, with its principal place of business at 3100 Jim Christal Road, Denton, Texas 76207 ("I3"), and NeoRx Corporation, a Washington corporation, with its principal place of business at 410 West Harrison Street, Seattle, Washington 98119-4007 ("NeoRx").


WITNESSETH


WHEREAS, NeoRx has obtained an exclusive license under certain patents and the right to use certain technology and processes to make, use, sell and distribute the Product (as hereafter defined), which is a radiopharmaceutical product, for clinical and commercial purposes; and


WHEREAS, I3 is in the business of manufacturing a full range of radiochemicals and radiopharmaceuticals, and is the sole owner of a radiopharmaceutical manufacturing facility located in Denton, Texas (the "Building"); and


WHEREAS, NeoRx and I3 have entered into that certain Design Phase Agreement, through which I3 has agreed to design the Clinical Manufacturing Facility and Process for the benefit of NeoRx, and NeoRx has agreed to pay I3 for such services; and


WHEREAS, the parties desire to set forth the terms under which I3 will install and qualify the Clinical Manufacturing Facility and Process within the Building to be used for Processing the Product for use in Clinical Trials;


WHEREAS, NeoRx desires that I3 manufacture and supply to and on behalf of NeoRx certain quantities of the Product for use in Clinical Trials, and I3 is willing to perform such services to and on behalf of NeoRx, all in accordance with the terms and conditions set forth in this Agreement;


NOW THEREFORE, in consideration of the foregoing promises and agreements set forth herein, the parties agree as follows:


ARTICLE I - DEFINITIONS


1.1 "Affiliate" of a Party means any corporation or other business entity controlled by, controlling or under common control with such Party. For this purpose, "control" means direct or indirect beneficial ownership of thirty-five percent (35%) or more of the voting and income interest in such corporation or other business entity.


1.2 "Building" means the entire 25,000 square foot radiopharmaceutical manufacturing facility owned by I3 and located in Denton, Texas.


1.3 "Calibration Time" is 12:00 noon Central Time on the day following the manufacturing date of a particular Batch of Product.


[ * ] DESIGNATES PORTIONS OF THIS DOCUMENT THAT HAVE BEEN OMITTED PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE COMMISSION.


1.4 "Certificate of Analysis" means a written certificate produced by I3 verifying that a particular dose of Product meets all Product Specifications, and that the methodology used to Process the Product met all Requirements, cGMP and all other applicable laws and regulations.


1.5 "Change Control" means a procedure, governed by I3's Standard Operating Procedures, for assessing the potential impact on the regulatory status, validation status, and safety of any proposed change to a Validated Process or the validated equipment and utilities associated with that Process prior to implementation of that change.


1.6 "Clinical Batch" means a production batch of the Product intended to have uniform character and quality that is Processed by I3 in accordance with the terms and conditions of this Agreement. [ * ]


1.7 "Clinical Facility Information" means all written information given to the FDA to support the approval of the Clinical Manufacturing Facility as being qualified and Validated to manufacture the Product for Clinical Trials.


1.8 "Clinical Facility Qualification Plan" has the meaning as set forth in Section 2.1(b).


1.9 "Clinical Facility Qualification Report" has the meaning as set forth in Section 2.4(a).


1.10 "Clinical Facility Validation Plan" has the meaning as set forth in Section 2.1(c).


1.11 "Clinical Facility Validation Report" has the meaning as set forth in Section 2.4(b).


1.12 "Clinical Manufacturing Facility" means that portion of the Building that will be designed and constructed in accordance with the Construction Specifications for use as a radiopharmaceutical manufacturing facility, and which is to be dedicated to the clinical manufacture of the Product.


1.13 "Clinical Trials" means any trials for clinical development of pharmaceutical products defined as "Phase I," "Phase II," "Phase III," or "Treatment IND" in FDA regulations, as amended from time to time.


1.14 "Construction Specifications" means the specifications for the construction, characteristics and operations of the Clinical Manufacturing Facility and the Process as set forth in the Construction Design Plans attached hereto as Exhibit A, which may be amended from time to time by written agreement of the parties.


1.15 "Construction Fee" has the meaning as set forth in Section 2.2.


1.16 "cGMP" means the current good manufacturing practices required by the FDA and set forth in the FD&C Act or FDA regulations, policies, or guidelines in effect at a particular time for the manufacture, testing and quality control of pharmaceutical materials as applied to


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drugs except to the extent that another jurisdiction within the North American Market imposes standards for the manufacture, testing and quality control of pharmaceutical materials as applied to drugs are higher or more stringent than those required by the FDA, in which case such standards will apply.


1.17 "Dedicated Moveable Equipment" means all equipment except hot cells and glove boxes purchased by NeoRx for exclusive use in Processing the Product.


1.18 "Dedicated Fixed Equipment" means hot cells and glove boxes purchased by NeoRx for exclusive use in Processing the Product.


1.19 [ * ]


1.20 "Effective Date" means the date this Agreement is entered into, as indicated in the first paragraph of this Agreement.


1.21 "Facility Master File" or "FMF" means the Facility Master File dossier prepared by I3 and filed with the FDA, which provides the FDA with specific (and proprietary) chemistry, manufacturing and controls information for the Building.


1.22 "FDA" means the United States Federal Food and Drug Administration.


1.23 "FD&C Act" means the United States Federal Food, Drug and Cosmetic Act, as amended.


1.24 "IND" means an Investigational New Drug application and any supplements thereto, as defined in FDA regulations, as amended from time to time.


1.25 "Installation Qualification" means the program employed by I3 by which it is established that the equipment and systems used in the Process are capable of consistently operating within established limits and tolerance for purposes of Processing the Product for use in Clinical Trials.


1.26 "Inventions" has the same meaning as set forth in Section 11.2(a).


1.27 "Master Batch Record" means the document which sets forth the methodology and formulae for Processing each Batch. I3 may amend the Master Batch Record from time to time; provided, however, that I3 shall make such amendment only in accordance with its written Standard Operating Procedures governing Change Control for a validated process, and shall notify the FDA Master File dossier and NeoRx of such amendment prior to the implementation thereof.


1.28 "Milestones" means the Milestones as set forth on Exhibit B, which reflect the timeline during which I3 will complete the construction, qualification and validation of the Clinical Manufacturing Facility, as such construction, qualification and validation are further described in Article II.


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1.29 "New Drug Application" or "NDA" means the application for marketing a new drug product filed by NeoRx with the FDA.


1.30 "Operation Qualification" means the program employed by I3 by which it is established that the equipment and systems used in the Process are capable of Processing Product that consistently meets the Requirements.


1.31 "Performance Qualification" means the program by which it is established that the Process, and all equipment and systems associated therewith, are effective and reproducible.


1.32 "PHS Act" means the United States Public Health Service Act, as amended.


1.33 "Primary Completion Date" has the meaning as set forth in Section 2.1.


1.34 "Processing," "Process," and "Processed" shall have comparable meanings and mean the act of manufacturing, handling, storing, analyzing, packaging in dosage form, inspecting and labeling Product in accordance with the Master Batch Record, Product Specifications, the Requirements, cGMP and all other applicable federal, state and local laws and regulations for the manufacture of the Product for use in Clinical Trials.


1.35 "Process Qualification" means a defined set of procedures, materials and controls by which three (3) consecutive Clinical Batches are produced according to the Master Batch Record procedures and the resulting Diagnostic and Therapeutic Doses meet all Product Specifications.


1.36 "Process Validation" means the defined set of procedures, materials, and controls as set forth in the Clinical Facility Information, by which documented evidence provides a high degree of assurance that the Process will consistently produce the Product that meets all Product Specifications and other quality criteria and attributes as mutually agreed upon by the parties and as set forth in the applicable I3 process validation protocol.


1.37 "Product" means a [ * ]


1.38 "Product Specifications" means the composition of the Product, along with the set of analytical tests, methods, and acceptance criteria for Product attributes which must be met in order to prove that the Product meets the standards of quality, purity, identity and strength accepted by the FDA for this substance. Product Specifications are a critical part of the Requirements and are filed with the FDA as part of an FMF, NDA, IND or otherwise and set forth in the Clinical Facility Information. All Product Specifications are set forth on Exhibit C, which may be amended from time to time by written agreement of the parties and as dictated by the FDA and applicable laws and regulations.


1.39 "Proprietary Information" means all information concerning a party (the "Disclosing Party") which is furnished to or created by (such as notes, analysis, compilations, studies, interpretations or other documents) the other party or its directors, officers, employees,


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agents, advisors or Affiliates (collectively, the "Receiving Party") as a result of entering into this Agreement and in furtherance hereof.


1.40 "Purchase Order" means the written or electronic document sent by NeoRx from time to time to I3 that sets forth the number of Diagnostic and/or Therapy Doses ordered and the expected delivery dates.


1.41 "Quality Control Tests" means the analytical testing of Product attributes performed by I3 according to the test methods specified by the Requirements, to determine whether a given dose meets its Product Specifications.


1.42 "Requirements" means those Product Specifications, Process parameters, cGMP and other governmental requirements relating to the Product, as set forth in Exhibit D, which may be revised from time to time upon written agreement of the parties and as dictated by the FDA and applicable laws and regulations. Upon such revision, I3 shall immediately implement any modified documents and/or procedures pertinent to the revised Requirements. Should the revision to the Requirements have a material effect on the cost of Processing the Product, the parties agree to meet and negotiate in good faith any price changes for the purchase of the Product.


1.43 "Standard Operating Procedures" ("SOPs") means I3's internal written standard operating procedures, controlled by I3's quality assurance unit, governing all aspects of manufacturing and testing Product under cGMP.


1.44 [ * ]


1.45 "Validated" means the condition of having passed standards for Installation Qualification, Operation Qualification and Performance Qualification, as well as meeting all Construction Specifications, all Process Validation requirements, and validation of the analytical methods.


1.46 "Validation Completion Date" has the meaning as set forth in Section 2.1.


1.47 "Waste" means all (a) rejected or unusable Product, (b) Product not purchased by NeoRx for whatever reason, and (c) waste relating to I3's Processing of Product.


ARTICLE II - CONSTRUCTION OF MANUFACTURING
FACILITY AND PROCESS


2.1 CONSTRUCTION OF CLINICAL MANUFACTURING FACILITY


(a) CONSTRUCTION. I3 will construct the Clinical Manufacturing Facility and Process in accordance with the Construction Specifications and the Milestones. [ * ]


(b) QUALIFICATION. I3 will prepare and NeoRx will approve a qualification plan for the Clinical Manufacturing Facility and Process (the "Clinical Facility Qualification Plan"), which will set forth the steps to be followed by I3 in causing the Clinical Manufacturing Facility and


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Process to be qualified for use in clinical trials. I3 shall prepare and execute, and deliver to NeoRx no later than thirty (30) days after the Primary Completion Date, a final Clinical Facility Qualification Report indicating that the construction of the Clinical Manufacturing Facility and the Process are complete and qualified and that I3 has satisfied all aspects of the Clinical Facility Qualification Plan. I3 acknowledges that any or all data included in the final Clinical Facility Qualification Report may be used by NeoRx for purposes of completing the CMC section of the IND.


(c) VALIDATION. I3 will prepare and NeoRx will approve a validation plan for the Clinical Manufacturing Facility and Process (the "Clinical Facility Validation Plan"), which will set forth the steps to be followed by I3 in causing the Clinical Manufacturing Facility, analytical methods and Process to be Validated. [ * ] I3 acknowledges that any or all data included in the final Clinical Facility Validation Report may be used by NeoRx for purposes of completing the CMC section of the NDA.


(d) COSTS. I3 shall be solely responsible for the payment of all costs in connection with the construction of the Clinical Manufacturing Facility and Process and obtaining all equipment associated therewith other than Dedicated Moveable Equipment and Dedicated Fixed Equipment; provided, however, that if, upon the prior written consent of NeoRx, I3 writes specifications for and purchases the Dedicated Moveable Equipment and Dedicated Fixed Equipment on behalf of NeoRx, then NeoRx shall reimburse I3 for the cost of such Dedicated Equipment plus a 10% markup.


(e) DEDICATED EQUIPMENT. NeoRx shall be solely responsible for the cost of Dedicated Moveable Equipment and Dedicated Fixed Equipment (collectively, the "Dedicated Equipment"), whether such equipment is purchased or leased by NeoRx or I3. NeoRx shall remain the sole owner of all Dedicated Equipment that is purchased, and will maintain UCC filings documenting NeoRx's ownership therein during the Term of this Agreement. Upon the expiration of this Agreement, I3 shall promptly return at NeoRx's sole expense all Dedicated Equipment to NeoRx in good working condition less reasonable wear and tear; provided, however, that if NeoRx indicates in writing to I3 that NeoRx intends to sell the Dedicated Fixed Equipment at any time within sixty (60) days of the expiration or termination of this Agreement (the "Sales Notice"), I3 shall have the right to purchase the Dedicated Fixed Equipment from NeoRx at a rate equal to the original book value minus 10% for each year the Dedicated Fixed Equipment has been in service; provided, further, that I3 must exercise its right, if any, to purchase the Dedicated Fixed Equipment within thirty (30) days of NeoRx sending the Sales Notice to I3.


2.2 CONSTRUCTION FEE


In consideration of I3's construction of the Clinical Manufacturing Facility, NeoRx shall pay to I3 a flat fee of [ * ] (the "Construction Fee"). NeoRx shall pay the Construction Fee to I3 in the following four installments: (a) [ * ] upon full execution of this Agreement; (b) [ * ] upon completion and execution of the Clinical Facility Qualification Plan, as described in Section 2.1(b); (c) [ * ] upon completion and execution of the final Clinical Facility Validation Report, as described in Section 2.1(b); and (d) [ * ] upon filing the NDA package associated


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with the Product. NeoRx's obligation to pay each installment is conditioned upon its receipt of an invoice from I3 for the payment of each installment; provided, however, that NeoRx's obligation to pay the final installment of the Construction Fee is conditioned on NeoRx's acceptance of a final NDA package associated with the Product.


2.3 PERFORMANCE CHARACTERISTICS


I3 will construct the Clinical Manufacturing Facility so that it shall have the capacity to Process Product (a) in accordance with the Product Specifications, the Requirements, cGMP and all applicable federal, state and local laws, regulations, rules and orders and (b) in the amounts set forth in Section 3.3. The Clinical Manufacturing Facility shall be built according to the development documents created in the Design Phase Services Agreement that was executed between the parties on September 20, 1999.


2.4 CLINICAL FACILITY REPORTS


(a) QUALIFICATION. At such times as are set forth in the Clinical Facility Qualification Plan, I3 shall prepare and submit to NeoRx a report (the "Clinical Facility Qualification Report") summarizing the activities performed pursuant to the Clinical Facility Qualification Plan, including but not limited to facility qualifications that are needed to begin producing Product for Phase III Clinical Trials. I3 shall also prepare and submit to NeoRx a final Clinical Facility Qualification Report, as described in Section 2.1(b), at such time as the Clinical Manufacturing Facility and Process are Qualified, but no later than thirty (30) days after the Primary Completion Date.


(b) VALIDATION. At such times as are set forth in the Clinical Facility Validation Plan, I3 shall prepare and submit to NeoRx a report (the "Clinical Facility Validation Report") summarizing the activities performed pursuant to the Clinical Facility Validation Plan. I3 shall also prepare and submit to NeoRx a final Clinical Facility Validation Report, as described in Section 2.1(c), at such time as the Clinical Manufacturing Facility and Process are Validated, but no later than six (6) months after the Primary Completion Date.


2.5 FACILITY EXCLUSIVITY


During the Term, I3 may not use the Clinical Manufacturing Facility for any purpose other than Producing Product pursuant to this Agreement or for conducting such additional activities as instructed by NeoRx and agreed upon by the parties.


2.6 REPAIRS AND MAINTENANCE


I3 shall perform all maintenance required to maintain the Clinical Manufacturing Facility and Process in good operating condition as required by the Construction Specifications, Requirements, cGMP and all other applicable federal, state and local laws, regulations, rules or orders. In the event of any conflict between the applicable laws, regulations, rules or orders of any jurisdictions, I3 will notify NeoRx of such conflict and the parties shall act in good faith to resolve such conflict or to determine which laws, regulations, rules or orders take precedence;


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provided, however, that at all times the Parties shall comply with the requirements of cGMP. The cost of all repairs and maintenance to the Clinical Manufacturing Facility and/or Process, and the replacement of any equipment other than Dedicated Equipment, shall be borne by I3. NeoRx will bear all expenses for repairs to or replacement of the Dedicated Equipment provided that I3 has been operating the Dedicated Equipment under normal operating procedures and conditions.


2.7 MODIFICATIONS


If, at any time during the Term of this Agreement after the Clinical Manufacturing Facility and Process are Validated, the parties determine that modifications to the Clinical Manufacturing Facility or Process are required as a result of errors committed by I3 in carrying out the Clinical Facility Qualification Plan, then I3 shall make such modifications and bear all costs and expenses associated therewith. The costs for all other modifications to the Clinical Manufacturing Facility or Process as determined, or agreed to, by NeoRx, including those needed to meet agreed upon changes in the Requirements or complete agreed upon additional construction, shall be borne solely by NeoRx, subject to NeoRx's prior written authorization.


2.8 DEDICATED PERSONNEL


During the Term of this Agreement, I3 shall dedicate the personnel listed on Exhibit E to the (a) construction, qualification and Validation of the Clinical Manufacturing Facility, the Commercial Manufacturing Facility (as described in the Commercial Manufacturing and Supply Agreement) and the Process, and (b) the Processing of the Product. If any person listed on Exhibit E terminates his or her employment with I3 during the Term of this Agreement, I3 shall replace that individual within two (2) months with someone of the same level of experience.


ARTICLE III- MANUFACTURE & SUPPLY; OTHER SERVICES


3.1 NEORX'S SOURCE OF PRODUCT


(a) NORTH AMERICA. During the Term of this Agreement, NeoRx will obtain from I3 at least [ * ] of its requirements of the Product for use in Clinical Trials performed in North America that are associated with the use of the Product for treatment of multiple myeloma; provided, [ * ] Accordingly, NeoRx may, from time to time during the Term, obtain from third party manufacturers up to twenty percent (20%) of its requirements of the Product for use in multiple myeloma related Clinical Trials performed in North America.


(b) OTHER. [ * ] I3 shall have no obligation or right to Process Product that is to be used for such purposes.


3.2 PROCESS AND SUPPLY OF PRODUCT


(a) GENERAL. I3 shall (a) Process the Product in strict conformity with the Requirements, cGMP requirements and all other applicable laws, rules and regulations, (b) maintain all documentation and quality control records regarding the Products as described


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herein, and (c) supply the Product to the appropriate party in accordance with the terms of this Agreement. I3 shall have no right to use, test or distribute the Product for any reason other than as expressly provided in this Agreement.


(b) PROCESS AND SUPPLY. During the Term, I3 will Process and supply to NeoRx such doses of the Product as NeoRx may order from I3 pursuant to Purchase Orders. To fulfill the Purchase Orders, each week during the Term of this Agreement I3 shall Process such Batches, or partial Batches, as is necessary to produce only the number of doses of the Product ordered and scheduled for delivery during such week.


(c) SITE OF PROCESSING; SUBCONTRACTING. I3 will Process all of the Product at the Clinical Manufacturing Facility. Under no circumstances will I3 Process any Product at any other location or subcontract out to a third party all or any part of the Processing or testing of the Product without NeoRx's prior written consent.


(d) APPROVAL FOR MANUFACTURING CHANGES. I3 agrees that no changes will be made to any materials, Requirements, equipment, Processing or Quality Control Tests without NeoRx's prior written approval. Subsequent to such approval from NeoRx, I3 may then make such approved changes, so long as, in any event, (i) such changes are permitted by applicable governmental regulations and the terms of any licenses, registrations, authorizations or approvals previously granted by the applicable governmental entity with respect to the Product and (ii) NeoRx receives copies of all documentation relating to such approved changes. If the changes require the additional license, registration, authorization, or approval of any applicable governmental entity, I3 may not implement the changes until it receives written notice from NeoRx that the governmental entity has authorized or approved the change. I3 shall cooperate fully with NeoRx in preparing, and will provide all necessary data and information for, a submission requesting authorization or approval of a change in materials, Requirements, equipment, Processing or Quality Control Tests.


3.3 I3'S PROCESS CAPABILITIES


During the Term of this Agreement I3 will be capable of Processing and shipping up to [ * ] The parties acknowledge and agree that during the Term of the Agreement, the actual number of Clinical Batches I3 will Process and ship per week will be dependant on the Purchase Orders I3 receives from NeoRx.


3.4 SCHEDULED FACILITY SHUTDOWN


The parties agree that during the final two weeks of December of each year, I3 will cease production of the Product to conduct maintenance to the Clinical Manufacturing Facility and Process.


3.5 ORDERS AND FULFILLMENT


(a) PURCHASE ORDERS. NeoRx shall deliver to I3 (i) by the close of business on Monday of each week during the Term of this Agreement, a written or electronic Purchase Order


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for the number of batches, and delivery dates, that NeoRx desires to purchase for delivery during the following calendar week and (ii) by the close of business on Thursday of each week during the Term of this Agreement, an amendment to the Purchase Order described in clause (i) that specifies the number of each fill size of Diagnostic Doses and/or Therapy Doses that NeoRx desires to purchase for delivery during the following calendar week. Each dose shall be shipped in such manner, and to such location, as directed by NeoRx.


(b) ADDITIONAL PROVISIONS IN PURCHASE ORDERS. To the extent any Purchase Order, invoice or acknowledgement form contains any provisions additional or contrary to the provisions of this Agreement, such additional or contrary provision shall have no force or effect and the terms of this Agreement shall control.


(c) NOTICE OF INABILITY TO FULFILL. I3 shall notify NeoRx by telephone and in writing immediately if I3 acquires any information that it will not be able to fulfill the then most recent Purchase Orders. I3 shall promptly notify NeoRx by telephone and in writing of any other production issues (including any proposed or potential shutdown of the Clinical Manufacturing Facility for any reason) or other information of which I3 becomes aware which may affect the regulatory status of the Product or the ability of I3 to supply Product in accordance with this Agreement and the Purchase Orders.


3.6 PROJECTED PURCHASES


Within thirty (30) days after the Effective Date, NeoRx shall provide a twelve (12) month forecast (each, a "Forecast") to I3 that shows the projected monthly number of Clinical Batches to be purchased. This Forecast shall be maintained as a twelve (12) month rolling schedule and shall be updated at least quarterly or more often if significant changes in demand are forecast. In addition, NeoRx shall prepare a schedule of projected weekly purchases (each a "Weekly Purchase Schedule") of Clinical Batches for the first three (3) months following the Effective Date. This Weekly Purchase Schedule shall be maintained as a three (3) month rolling schedule and will be updated at least monthly. The parties acknowledge that any projectio ...