Supply And Manufacturing Agreement

EXHIBIT 10.1


SUPPLY AND MANUFACTURING AGREEMENT
BY AND BETWEEN
ABBOTT LABORATORIES
AND
TRIANGLE PHARMACEUTICALS, INC.


THIS AGREEMENT is made as of August 3, 1999, by and between Abbott Laboratories, an Illinois corporation having a principal place of business at 100 Abbott Park Road, Abbott Park, Illinois 60064 ("Abbott"), and Triangle Pharmaceuticals, Inc., a corporation organized under the laws of Delaware, having a principal place of business at 4 University Place, 4611 University Drive, Durham, North Carolina 27707 ("Triangle").


WHEREAS, Triangle is developing and seeking regulatory approval for various proprietary drugs for the prevention and treatment of HIV, HBV and any other indications;


WHEREAS, Triangle desires to collaborate with another pharmaceutical company with respect to the clinical development, manufacture, registration, distribution and marketing of such products throughout the world;


WHEREAS, Abbott desires to collaborate with Triangle with respect to such products; and


WHEREAS, Triangle desires to purchase from Abbott, and Abbott desires to supply Triangle's uncommitted requirements of Bulk Drug Substances (as defined below) and Finished Products (as defined below), subject to the terms and conditions set forth herein;


WHEREAS, this Agreement applies to the U.S. Territory (as defined below) and the International Territory (as defined below);


NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto agree as follows:


ARTICLE 1. DEFINITIONS


In addition to the other terms defined elsewhere herein, the following terms and phrases shall have the following meanings when used in this Agreement (and any term defined in the singular shall have the same meaning when used in the singular shall have the same meaning when used in the plural and vice versa, unless stated otherwise). Any terms or phrases used in


this Agreement and not defined herein shall have the same meanings ascribed to them in the Collaboration Agreement.


1.1 "Abbott Patents" means (a) all of Abbott's rights in any patents conceived, developed or owned by or otherwise licensed to or controlled by Abbott *** , during the Term resulting from Abbott's or its Affiliates' work with a Compound or Product and which are practiced or used in the development, manufacture, use or sale of a Compound or Product and (b) all substitutions, extensions, divisionals, continuations, continuations-in-part, reissues, reexaminations, renewals, supplementary protection certificates or foreign counterparts of such patents and patent applications identified in sub-part (a).


1.2 "Abbott Process Cost Improvements" means any cost reductions realized by Abbott in the manufacture of Product or intermediate resulting from the implementation of any process improvement that was funded solely by Abbott. If the Parties agree to jointly fund any process improvements, the Parties shall agree as to what portion of such cost reductions resulting from such improvements shall be considered an Abbott Process Cost Improvement pursuant to Section 1.2 or a Triangle Process Cost Improvement pursuant to Section 1.52.


1.3 "Abbott Technology" means all technical information, inventions, discoveries, trade secrets, information, experience, data, formulas, procedures, processes, know-how and results resulting from Abbott's or its Affiliates' or agents' work with a Compound or Product and which are used in the development, registration, manufacture, use or process development relating to the manufacture of the Compounds or Products and which are owned by or otherwise licensed to or controlled by Abbott *** during the Term.


1.4 "Affiliate" means any corporation or non-corporate business entity which controls, is controlled by, or is under common control with a party. A corporation or non-corporate business entity shall be regarded in control of another corporation if it owns or directly or indirectly controls, at least forty percent (40%) of the voting stock of the other corporation or non-corporate business entity, or (a) in the absence of the ownership of at least forty percent (40%) of the voting stock of a corporation or (b) in the case of a non-corporate business entity, if it possesses, directly or indirectly, the power to direct or cause the direction of the management


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and policies of such corporation or non-corporate business entity, as applicable. For purposes of this Agreement, TAP Holdings Inc. and its subsidiaries, which comprise Abbott's joint venture with Takeda Chemical Industries Ltd., are not Affiliates of Abbott; provided that neither TAP Holdings, Inc. nor any of its subsidiaries may manufacture the Compounds or Products.


1.5 "Bulk Drug Substance" means the bulk form of each Compound suitable for formulating into Finished Product.


1.6 "Bulk Drug Substance Specifications" means the written specifications for each Bulk Drug Substance (including any raw materials or intermediates required to manufacture such Bulk Drug Substance), to be mutually agreed upon in good faith by the Parties hereto, giving due consideration to applicable regulatory requirements and, thereafter, attached hereto as Exhibit 1.6 as modified from time to time or as subsequently agreed to by the Parties.


1.7 "cGMP" means the FDA's current good manufacturing practices, as specified in 21 CFR ss. 210 and the FDA's guidance documents applicable thereto, and all successor regulations and guidance documents thereto.


1.8 "Collaboration Agreement" means the Collaboration Agreement, dated as of June 2, 1999 by and between Triangle and Abbott.


1.9 "Compounds" means MKC-442, FTC, L-FMAU and DAPD, as well as any new compounds for which Abbott secures rights to manufacture pursuant to Section 2.5 of the Collaboration Agreement.


1.10 "Confidential Information" means Confidential Information as defined in Section 12.1.


1.11 "Contract Quarter" means for each Product, a period of three (3) consecutive calendar months commencing on the first day of each January, April, July and October.


1.12 "Contract Year" means for each Product, a calendar year, except that the initial Contract Year shall commence on the first day of the month in which the initial Launch for such Product occurs in the Territories and shall end on the next December 31st.


1.13 "Contractual Obligations" means any (a) existing contracts or agreements that Triangle has with any Third Party other than Abbott for the manufacture and/or supply of Bulk


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Drug Substance or Finished Product, as disclosed by Triangle on Exhibit 1.13 and (b) any new contracts or agreements which are added to Exhibit 1.13 pursuant to the provisions of Section 3.3 and 3.5. Copies of all Contractual Obligations (including any subsequent amendments) listed on Exhibit 1.13 shall be provided to Abbott.


1.14 "DAPD" means [b]-D-Dioxolanyl purines of the formula set forth in Exhibit 1.16 of the Collaboration Agreement wherein R is OH, Cl, NH2, or H, and X is H, alkyl, acyl, monophosphate, diphosphate or triphosphate, including all 5' and N(6) cyclated and alkylated derivatives, salts, esters, racemic mixtures and purified enantiomers thereof. DAPD is exclusively licensed to Triangle by Emory University and the University of Georgia Research Foundation, Inc., pursuant to a License Agreement dated March 31, 1996 (the "DAPD License Agreement") for use in the prevention and treatment of HIV and HBV throughout the entire world.


1.15 [Intentionally Omitted]


1.16 "Development Project" means a project to design, adapt, improve, scale-up and validate the commercial manufacturing process for the manufacture of any Product.


1.17 "Dollars" and "$" means United States Dollars.


1.18 "Effective Date" shall mean the date upon which this Agreement becomes effective pursuant to the terms set forth in Section 16.1.


1.19 "FDA" means the United States Food and Drug Administration or any successor entity thereto.


1.20 "Field of Use" means the following: (i) for MKC-442, all pharmaceutical uses; (ii) for FTC and DAPD, the prevention and treatment of HIV and HBV; (iii) for L-FMAU, all human antiviral applications and uses; and (iv) any other uses for the Compounds to which Triangle obtains rights from the Triangle Licensors.


1.21 "Finished Product" means any finished pharmaceutical formulation containing one or more of the Compounds as active ingredients and, unless otherwise mutually agreed between the Parties, shall also include (i) Primary Packaging to the extent that Triangle is supplying such finished pharmaceutical formulation to Abbott in its capacity as purchaser under


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the Collaboration Agreement ("Purchasing Abbott"), or (ii) both Primary Packaging and Secondary Packaging to the extent that Abbott in its capacity as manufacturer of finished pharmaceutical product under this Agreement ("Manufacturing Abbott") is supplying such finished pharmaceutical formulation to Purchasing Abbott.


1.22 "Finished Product Specifications" means the written specifications for each Finished Product (including any inactive ingredients used to manufacture such Finished Product), to be mutually agreed upon in good faith by the Parties hereto, giving due consideration to applicable regulatory requirements and, thereafter, attached hereto as Exhibit 1.22.


1.23 "FTC" means (i) the (-) enantiomer with the chemical name: (2R-cis)-4-amino-5-fluoro-1-[2-(hydroxymethyl)-1, 3-oxathiolan-5-yl]-2(1H)-pyrimidinone; (ii) any mixture of the enantiomer described in Subsection 1.23(i) and the (+) enantiomer with the chemical name: (2S-cis)-4-amino-5-fluoro-1-[2-(hydroxymethyl0-1, 3-oxathiolan-5-yl]-2(1H)-pyrimidinone, in which the ratio of such *** equal to or greater than *** to ***; or (iii) any salts, esters and N alkylated derivatives of any of the foregoing. FTC is exclusively licensed to Triangle by Emory University pursuant to a License Agreement dated April 17, 1996, as amended on May 6, 1999 (the "FTC License Agreement") for use in the prevention and treatment of HIV and HBV throughout the world.


1.24 "HIV" means the human immunodeficiency virus.


1.25 "HBV" means the hepatitis B virus.


1.26 "International Territory" means all areas of the world outside the U.S. Territory, except that the International Territory shall exclude Japan for MKC-442 and shall exclude Korea for L-FMAU.


1.27 "Launch Date" means the date upon which the first commercial sale of Finished Product (as evidenced by the date of the invoice for such sale) occurs in the U.S. Territory.


1.28 "Legal Requirements" means any and all federal, state, local, national, supranational laws, regulations, ordinances, orders and requirements applicable to the Parties and their Affiliates in performance of this Agreement, including without limitation, the Securities


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Exchange Act of 1934, as amended, and the Foreign Corrupt Practices Act, as well as such laws, regulations, ordinances, orders and requirements applicable to the sale, marketing, promotion, Detailing, and distribution of the Products, including without limitation, the following within the U.S. Territory: the Prescription Drug Marketing Act of 1987, the Federal Food, Drug and Cosmetic Act, and all regulations and other requirements of the FDA.


1.29 "L-FMAU" means the compound known as L-FMAU, with the chemical name *** thereof. L-FMAU is exclusively licensed to Triangle by Bukwang Pharm. Ind. Co., Ltd. Pursuant to a License Agreement dated February 27, 1998, as amended on April 1, 1999 (the "L-FMAU License Agreement") for all human antiviral applications and uses for the entire world, excluding Korea.


1.30 "Losses" means any liabilities, costs, damages, judgments, settlements and other reasonable out-of-pocket expenses (including legal expenses).


1.31 "MKC-442" means the compound known as MKC-442, with the chemical name 6-Benzyl-1-(ethoxymethyl)-5-isopropyl uracil, including any salts and esters thereof. MKC-442 is exclusively licensed to Triangle by Mitsubishi Chemical Corporation pursuant to a license dated June 17, 1997 (the "MKC-442 License Agreement") for use as a pharmaceutical product in the entire world excluding Japan.


1.32 "NDA" means, in respect of each commercially launched Product, an approved New Drug Application filed by Triangle with the FDA and all subsequent submissions thereto.


1.33 "Primary Packaging" means the manufacturing activities and packaging components which hold the drug product and are in direct contact with the product.


1.34 "Product" means, in respect of a given Compound, any Bulk Drug Substance, Finished Product or both.


1.35 "Product Patents" means (a) the patents and patent applications licensed to Triangle under the Triangle License Agreements; (b) any patents and patent applications owned by or otherwise licensed to or controlled by (to the extent sublicensing is permissible) Triangle during the Term which contain claims covering or potentially covering the development,


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registration, manufacture, use and sale of the Compounds or the Products (including any intermediates or formulations thereof) within the Field of Use; and (c) all substitutions, extensions, divisionals, continuations, continuations-in-part, reissues, reexaminations, renewals, supplementary protection certificates or foreign counterparts of such patents and patent applications identified in sub-parts (a) and (b).


1.36 "Product Technology" means the technical information, inventions, discoveries, trade secrets, information, experience, data, formulas, procedures, processes, know-how and results which (a) are licensed to Triangle under the Triangle License Agreements; or (b) are owned by or otherwise licensed to or controlled by Triangle (to the extent sublicensing is permissible) during the Term which are necessary for the development, registration, manufacture, use or sale of the Compounds or Products within the Field of Use.


1.37 "Purchase Forecast" means the Purchase Forecast as defined in Section 4.1.


1.38 "Raw Material Cost Improvements" means any cost reductions realized by Abbott in the manufacture of Product resulting from the purchase of raw materials at a lower cost than the cost assumed in the calculation of Abbott's Standard Manufacturing Cost. The parties agree that cost improvements that result from a process improvement to the manufacture of an intermediate shall not be considered a Raw Material Cost Improvement but shall be considered an Abbott Process Cost Improvement pursuant to Section 1.2 or a Triangle Process Cost Improvement pursuant to Section 1.52, as the case may be.


1.39 "Reasonable Best Efforts" means a reasonable level of effort which is consistent with that used by other pharmaceutical companies with respect to other pharmaceutical products of comparable commercial value. Each Party shall be entitled to exercise prudent and justified business judgment in fulfilling its obligation to exercise its Reasonable Best Efforts under this Agreement.


1.40 "Secondary Packaging" means the manufacturing activities and packaging materials that do not have direct product contact but are required for product distribution to Purchasing Abbott's end-users, for example, cartons, trays, and shipping containers.


1.41 "Shared Cost Improvements" shall mean any Raw Material Cost Improvements and any *** .


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1.42 "Specifications" means, in respect of a given Product, the Bulk Drug Specifications and/or Finished Product Specifications applicable thereto.


1.43 "Standard Manufacturing Cost" for a Product means *** standard manufacturing cost calculated *** with respect to such Product according to *** and generally accepted accounting principles applied in a consistent manner with respect to all products of Abbott's Chemical and Agricultural Products Division, *** associated with the production of such Product; provided that in calculating Standard Manufacturing Cost for such Product Abbott shall *** of any *** Cost Improvements *** shall *** of any *** Cost Improvements. If the Parties agree to jointly fund any process improvements, the Parties shall agree as to what effect to give to cost reductions resulting from such improvement in the calculation of Standard Manufacturing Cost.


1.44 "Taxes" means any sales or use tax, excise or similar charge (other than that assessed against income), license fee, value added, import or export fees (e.g., custom duties), or other charges lawfully assessed or charged by a governmental authority on the manufacture, sale or transportation of Product.


1.45 "Term" shall have the meaning set forth in Section 16.1.


1.46 "Territories" means the U.S. Territory and the International Territory.


1.47 "Third Party" means any Person that is not a Party or an Affiliate of a Party.


1.48 "Total Price" means the total *** cost *** of manufacturing *** at which Triangle can purchase Product, including the purchase price for *** for such Product and the *** amounts of any *** between the Parties under the Collaboration Agreement.


1.49 "Triangle-Abbott Alliance Agreements" means this Agreement and the following agreements entered into between the Parties as of June 2, 1999: (i) the Co-Promotion Agreement; (ii) the Collaboration Agreement; (iii) the Common Stock Purchase Agreement; and (iv) the Stockholder Rights Agreement.


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1.50 "Triangle License Agreements" means the Triangle License Agreements defined in Section 1.84 of the Collaboration Agreement.


1.51 "Triangle Licensors" means Mitsubishi Chemical Corporation with respect to MKC-442, Emory University with respect to FTC, Emory University and the University of Georgia Research Foundation, Inc. with respect to DAPD, and Bukwang Pharm. Ind. Co., Ltd. with respect to L-FMAU.


1.52 "Triangle Process Cost Improvements" means any cost reductions realized by Abbott in the manufacture of Product or intermediate resulting from the implementation of any process improvement that was solely funded by Triangle. If the Parties agree to jointly fund any process improvements, the Parties shall agree as to what portion of such cost reductions resulting from such improvements shall be considered a Triangle Process Cost Improvement pursuant to Section 1.52 or an Abbott Process Cost Improvement pursuant to Section 1.2.


1.53 "Uncommitted Requirements" means *** of Triangle's and Abbott's commercial requirements of Product in the Territories less any quantities *** .


1.54 "U.S. Territory" means the United States of America, *** .


1.55 "Validation Activities" means those activities to be performed by Abbott or on behalf of Abbott, consistent with then cGMP's and the Validation Protocol, with respect to the validation of the commercial manufacturing procedures used by it with respect to a given Product, including, but not limited to installation qualification, operational qualification and process qualification, analytical testing and validation and the preparation of a validation technical report and cleaning validation.


1.56 "Validation Batches" means three (3) consecutive production batches of Product which are manufactured by Abbott or on behalf of Abbott pursuant to and in accordance with the requirements set forth in Section 9.2.


1.57 "Validation Protocol" means the protocol which has been or will be mutually agreed upon by the Parties hereto, which describes the tests and acceptance criteria used to demonstrate that a process yields a given Product which consistently meets the Specifications. A


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Validation Protocol may be amended from time to time upon mutual agreement by the parties hereto with respect to a Product, giving due consideration to Legal Requirements.


1.58 "Variance" means the amount by which the actual manufacturing cost varies from the Standard Manufacturing Cost for the relevant manufacturing activity for a Product; provided that variances shall not include variances related to (i) Shared Cost Improvements (ii) Abbott Process Cost Improvements and (iii) the utilization of Abbott manufacturing facilities.


ARTICLE 2.


GRANT OF LICENSE


2.1 Triangle Grant. Subject to the terms of this Agreement, Triangle hereby grants Abbott a *** worldwide license (including a sub-license under the Triangle License Agreements) to utilize the Product Patents and the Product Technology to make and have made the Compounds and Products within the Field of Use in the Territories and to otherwise perform any duties and obligations that Abbott is required or permitted to perform under this Agreement in the Territories. Such license shall be exclusive except as to (i) Triangle and its Third Party manufacturers so as to perform any obligations or activities that Triangle is required or permitted to perform under this Agreement, (ii) rights retained by the Triangle Licensors as specified in the Triangle License Agreements and by Glaxo Wellcome pursuant to the GW License Agreement (as defined in the first amendment to the FTC License Agreement), (iii) rights contemplated in Sections 2.6 and 3.6 of the Collaboration Agreement, and (iv) any rights of the U.S. Government described in the Triangle License Agreements.


2.2 Abbott Grant. Abbott hereby grants Triangle, the *** a nonexclusive, royalty free *** worldwide right and license to utilize the Abbott Technology and Abbott Patents to make, have made, import, use, offer to sell and sell the Compounds and Products within the Field of Use. In the case of the ***, such license shall apply only to (i) countries outside of the Territories and (ii) any country in which the applicable Triangle License Agreement is terminated.


2.3 Use of Third Parties. Except as provided in Section 20.2, Abbott shall not have the right to grant sublicenses to the extent necessary to perform its obligations hereunder without


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the prior express consent of Triangle, not to be unreasonably withheld, and, to the extent required, the applicable Triangle Licensor, in which event Triangle shall reasonably cooperate with Abbott in its efforts to obtain the consent of the applicable Triangle Licensor. No sublicense granted by Abbott shall relieve it of any obligation hereunder.


ARTICLE 3.


MANUFACTURE AND SUPPLY OF BULK DRUG SUBSTANCES


AND FINISHED PRODUCTS


3.1 Right to Manufacture. Subject to the terms of this Agreement, it is the intent of the Parties that (i) during the Term, Abbott shall manufacture or cause to have manufactured the Uncommitted Requirements for Bulk Drug Substance and Finished Product in the Territories and (ii) the price at which such Product is supplied or manufactured by or on behalf of Abbott pursuant to this Article 3 shall be market competitive as determined pursuant to Article 8.


3.2 Abbott's Right to Manufacture Absent any Triangle Contractual Obligations. It is understood that (i) if Triangle has no Contractual Obligations with respect to the manufacture of Bulk Drug Substance for a Compound, Abbott shall manufacture or cause to have manufactured *** percent (*** %) of such Bulk Drug Substance and/or (ii) if Triangle has no Contractual Obligations with respect to the manufacture of Finished Product with respect to a Product containing one or more Compounds, Abbott shall manufacture or cause to have manufactured *** percent (*** %) of such Finished Product. The Purchase Price shall be determined pursuant to Section 8.1.


3.3 Abbott's Right to Manufacture Partial Contractual Obligations. If Triangle has one or more Contractual Obligations which require it to purchase a portion of its requirements of Bulk Drug Substance and/or Finished Product for a Compound from a Third Party, Abbott may elect as soon as it capable of doing so to manufacture or cause to have manufactured and supply the Uncommitted Requirements of such Bulk Drug Substance and/or Finished Product. Should Abbott elect to manufacture or cause to be manufactured such Uncommitted Requirements of Product, Abbott shall submit to Triangle a price proposal pursuant to Section 8.2. Should Triangle have reasonable grounds to believe that Abbott is not


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capable of manufacturing or causing to have manufactured such Product in time to meet Product requirements for the proposed initial Launch of the Product, Triangle and Abbott shall meet to discuss such issue in good faith. Following such discussions if Triangle in good faith continues to believe that Abbott cannot provide such Uncommitted Requirements of Product in time for the proposed initial Launch of the Product but that another third party supplier can supply such Uncommitted Requirements of Product such that the proposed initial Launch of such Product shall not be delayed, Triangle may purchase such Uncommitted Requirements of Product from a Third Party. Triangle shall purchase such Uncommitted Requirements from such Third Party *** under this Section 3.3 shall be *** set forth on Exhibit 1.13.


Notwithstanding the foregoing provisions of this Section 3.3, the Parties agree that with respect to the manufacture of both Bulk Drug Substance and Finished Product containing MKC-442, the Third Party manufacturers supplying Product under the Contractual Obligations shall supply ***% of Triangle's and Abbott's requirements for Product for a period ending *** , unless the Parties otherwise agree in writing. Following such *** period, Abbott may elect to assume manufacture of Uncommitted Requirements of MKC-442 pursuant to this Section 3.3. Triangle shall use its Reasonable Best Efforts to *** .


3.4 Abbott's Assumption of Manufacturing. Upon the expiration of any Contractual Obligation, Abbott shall manufacture or cause to have manufactured and supply ***% of the commercial requirements for such Bulk Drug Substance and/or Finished Product, as applicable, which was the subject of such Contractual Obligation, provided that Abbott submits a proposal that is market competitive and is capable of manufacturing or causing to have manufactured such Product in accordance with timelines agreed to by Abbott and Triangle at least *** prior to the expiration of ...