Master Process Development And Supply Agreement

This MASTER PROCESS DEVELOPMENT AND SUPPLY AGREEMENT (the "Agreement") is made this 6th day of September, 1996 (the "Effective Date"), between HOECHST CELANESE CORPORATION, a Delaware corporation with its principal office at 1041 Route 202-206, Box 2500, Somerville, New Jersey, 08876 ("HCC") and PHARMACYCLICS, INC., a Delaware corporation with its principal office at 995 E. Arques Avenue, Sunnyvale, California 94086-4521 ("Pharmacyclics"). HCC and Pharmacyclics are sometimes referred to herein individually as a "Party" and collectively as the "Parties", and references to "HCC" and "Pharmacyclics" shall include their respective Affiliates.


WITNESSETH


WHEREAS, HCC, among other things, manufactures, or is capable of manufacturing, various bulk pharmaceutical substances in accordance with current Good Manufacturing Practices (as such term is defined below); and


WHEREAS, Pharmacyclics desires to have one or more compounds of the general class known as "texaphyrins" manufactured in bulk form by HCC; and


WHEREAS, HCC and Pharmacyclics each wish to commit resources for manufacturing process development and the manufacture of such texaphyrin compounds as may be selected by the Parties from time to time pursuant to the procedures set forth in this Agreement; and


WHEREAS, HCC and Pharmacyclics intend that the terms and conditions of this Agreement shall govern the general manufacturing process development and the manufacture of such texaphyrin compounds and that specific terms relating to each texaphyrin compound to be manufactured hereunder, such as price and specifications with respect to such texaphyrin compound, shall be set forth in appendices to this Agreement, to be added to this Agreement from time to time upon mutual agreement of the Parties.


NOW, THEREFORE, HCC and Pharmacyclics agree as follows:


ARTICLE 1.
DEFINITIONS


As used in this Agreement, the following terms shall have the meanings set forth below:


1.1 "AFFILIATES" shall mean any entity or person which controls, is controlled by or is under common control with either Party. For purposes of this Section 1.1, "control" shall mean (a) in the case of corporate entities, the direct or indirect ownership of at least one-half


1. 2 of the stock or participating shares entitled to vote for the election of directors, and (b) in the case of a partnership, the power to direct the management and policies of such partnership.


1.2 "APPLICABLE FOREIGN JURISDICTION" shall mean, for each Drug Substance, each country or other jurisdiction set forth on the applicable Drug Substance Appendix.


1.3 "CURRENT GOOD MANUFACTURING PRACTICES" or "cGMP" shall mean: (i) the 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 and testing of pharmaceutical materials as applied to bulk pharmaceuticals, and (ii) the corresponding requirements of each Applicable Foreign Jurisdiction.


1.4 "DRUG SUBSTANCE" shall mean a bulk form of a pharmaceutical compound from the family of compounds generally known as "texaphyrins" that is identified as a "Drug Substance" on a Drug Substance Appendix attached to and made part of this Agreement and that is manufactured by HCC under this Agreement.


1.5 "DRUG SUBSTANCE APPENDIX" shall have the meaning set forth in Section 2.1.


1.6 "DRUG SUBSTANCE BATCH" shall mean a production batch of a given Drug Substance manufactured in bulk form hereunder. The applicable batch size(s), in kilograms, for each Drug Substance shall be agreed to by the Parties and set forth on the corresponding Drug Substance Appendix.


1.7 "FDA" shall mean the United States Food and Drug Administration.


1.8 "FD&C ACT" shall mean the United States Federal Food, Drug and Cosmetic Act, as amended.


1.9 "GD-TEX" shall mean the Texaphyrin compound incorporating gadolinium and having the structure and the International Union of Pure and Applied Chemistry ("IUPAC") name shown in Exhibit 1.9.


1.10 "GOVERNMENTAL ENTITY" shall mean the FDA and any other applicable national, supranational (e.g. the European Commission or the Council of the European Union), state or local regulatory agency, department, bureau, commission, council or other governmental entity in the United States or any other Applicable Foreign Jurisdiction.


1.11 [ * ]


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2. 3 [ * ]


1.12 "HCC MANUFACTURE SITE" shall have the meaning set forth in Section 2.7.


1.13 "HCC INVENTORY SITE" shall have the meaning set forth in Article 8.


1.14 "HCC TECHNOLOGY" shall mean any patents covering the manufacture of any Drug Substance and any trade secrets or know-how related thereto for which HCC has or acquires, during the term of this Agreement, ownership, co-ownership or the right to grant a license or sublicense, excluding any licenses granted by Pharmacyclics.


1.15 [ * ]


1.16 "INDA" shall mean an Investigational New Drug Application, as defined in FDA regulations, as amended from time to time.


1.17 "INTERMEDIATE" shall mean, for each Drug Substance, any texaphyrin precursor or precursors used in the manufacture of such Drug Substance as identified on the applicable Drug Substance Appendix.


1.18 "LICENSED TECHNOLOGY" shall mean any patents covering the manufacture of any Drug Substance and any trade secrets and know-how related thereto for which Pharmacyclics has or acquires, during the term of this Agreement, ownership, co-ownership or the right to grant a license or sublicense. "Licensed Technology" shall include any rights relating to the


* 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.


3. 4 manufacture of any Drug Substance for which Pharmacyclics has or acquires, during the term of this Agreement, the right to grant a sublicense under certain University of Texas patents and technology, including, but not limited to, those specifically listed on Exhibit 1.18, or any other third party patents and technology.


1.19 "LU-TEX" shall mean the Texaphyrin compound incorporating lutetium and having the structure and the IUPAC name shown in Exhibit 1.19.


1.20 "MOU" shall mean the Memorandum of Understanding, dated as of October 5, 1995, between the Parties.


1.21 "NDA" shall mean a New Drug Application, as defined in the FD&C Act and applicable regulations promulgated thereunder, as amended from time to time.


1.22 "NET PRODUCT SALES" shall mean the gross receipts actually received by Pharmacyclics from sales of the Product to third party customers for commercial use, less the following deductions to the extent actually incurred or paid by Pharmacyclics with respect to such Product:


(a) amounts repaid or credited by reason of rejections,
recalls or returns;


(b) taxes (other than franchise or income taxes on the
income of Pharmacyclics) and custom duties directly related to
such sale;


(c) transportation and delivery charges; and


(d) rebates, samples, reserves, discounts and allowances.


Amounts received by Pharmacyclics or its Affiliates for the sale of the Product among Pharmacyclics or its Affiliates whether for their internal use or for resale or other disposition shall not be included in the computation of Net Product Sales hereunder; provided, however, that all actual sales to third parties, whether made directly by Pharmacyclics or indirectly through an Affiliate, shall be included in the computation of Net Product Sales hereunder.


1.23 "PHASE III" shall mean that phase of clinical development of pharmaceutical products defined as "Phase III" in FDA regulations, as amended from time to time.


1.24 "PRODUCT" shall mean a pharmaceutical product containing a Drug Substance in final dosage form for use in clinical trials or for commercial sale, which has been processed, compounded, formulated, finished, filled, labeled and/or packaged by Pharmacyclics and/or a third party.


1.25 "PRODUCT UNIT" shall mean each unit of Product sold by Pharmacyclics.


4. 5
1.26 "PRODUCT UNIT SALES PRICE" shall be determined for each Product Unit and shall equal the Net Product Sales for all like Product sold during the quarter in which such Product Unit is sold divided by the number of like Product Units sold during such quarter.


1.27 [ * ]


1.28 "SHIPMENT LOT" shall mean each lot of a particular Drug Substance shipped by HCC to Pharmacyclics or a third party at the request of Pharmacyclics.


1.29 "SPECIFICATIONS" shall have the meaning set forth in Section 2.1.


1.30 "TEXAPHYRIN" shall mean a molecule which has as its core structure the structure set forth on Exhibit 1.30.


ARTICLE 2.
GENERAL DEVELOPMENT AND MANUFACTURE OBLIGATIONS


2.1 DRUG SUBSTANCE SELECTION; DRUG SUBSTANCE APPENDICES. Each texaphyrin compound which will be subject to the process development and supply obligations hereunder will be selected by mutual agreement of the Parties from time to time for inclusion in this Agreement. Each such texaphyrin compound will be added to the terms of this Agreement pursuant to an appendix signed by both Parties (each, a "Drug Substance Appendix") and each texaphyrin compound added to this Agreement in the foregoing manner and manufactured by HCC hereunder will be deemed to be a Drug Substance. Each Drug Substance Appendix will contain written specifications for the Drug Substance covered by such appendix, as well as packaging and labeling specifications and storage requirements (collectively, the "Specifications"), the process development and manufacturing activities to be performed by HCC, including the testing programs and a development schedule for such Drug Substance, and each Applicable Foreign Jurisdiction for such Drug Substance. Each Drug Substance Appendix can be modified by mutual agreement of the Parties. In the event Pharmacyclics proposes that a country be added as a new Applicable Foreign Jurisdiction on a Drug Substance Appendix, HCC will agree to such proposal, provided that HCC may invoke Section 2.9 with respect to such country in the event that Section 2.9 is applicable to such situation. To facilitate any modification of a Drug Substance Appendix, as described above, each Party shall designate one of its employees to be the contact person in the event the other party desires to propose such a modification. As of the Effective Date, the contact person at Pharmacyclics is William C. Dow, Ph.D. and the contact person at HCC is Molly J. Clark. In the event either Party decides to change its contact person, it shall provide written notice to the other Party giving the name of the new contact person for such Party. In the event of a conflict between any terms of this Agreement and a Drug Substance Appendix, the terms of the Drug Substance Appendix shall prevail.


2.2 HCC DEVELOPMENT OBLIGATIONS. With respect to each Drug Substance, HCC will perform for Pharmacyclics all process development and manufacturing services set forth on the


* 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.


5. 6 corresponding Drug Substance Appendix. In particular, and without limiting the foregoing, HCC will, with respect to each Drug Substance:


(a) on its own, or jointly with Pharmacyclics, develop the
technical know-how necessary to produce such Drug Substance.


(b) put in place all necessary equipment, personnel, facilities,
supply and/or tolling agreements (subject to Section 2.8) necessary to
produce sufficient quantities of each Drug Substance so as to fulfill:
(i) all of Pharmacyclics' Phase III clinical trial requirements for
such Drug Substance, as set forth on the applicable Drug Substance
Appendix, and (ii) all of Pharmacyclics' commercial supply requirements
for such Drug Substance, subject to the terms of this Agreement.


(c) upon the request of Pharmacyclics, produce quantities of each
Drug Substance in connection with the process development, in amounts
set forth on the applicable Drug Substance Appendix, and deliver to
Pharmacyclics such amount thereof.


2.3 COMPLIANCE WITH LAW; HANDLING OF DRUG SUBSTANCE. While the Drug Substance is in its possession or under its control, HCC shall be responsible for complying with all applicable statutory and regulatory requirements of the United States and of each Governmental Entity regarding the development, manufacture, handling, storage, labeling, packaging, transportation and distribution of each Drug Substance. In carrying out its obligations under this Agreement, HCC shall comply with all applicable environmental and health and safety laws in each Applicable Foreign Jurisdiction, and, except as otherwise set forth in this Agreement, HCC shall be solely responsible for determining how to carry out these obligations. In addition to the foregoing, at all times when HCC has title to and risk of loss for any of the Drug Substances, it will take all reasonable actions necessary to avoid spills and other safety concerns to persons, and damage to property or the environment resulting from the Drug Substance or any intermediates or raw materials thereof.


2.4 TESTING AND DOCUMENTATION. HCC shall certify in writing to Pharmacyclics' reasonable satisfaction, that each Shipment Lot of Drug Substance was produced and tested in compliance with (i) the applicable Drug Substance Appendix, including, but not limited to, the applicable Specifications and testing programs, (ii) cGMP requirements, (iii) the INDA, any amendments or modifications to the INDA mutually agreed to by the Parties or the NDA (whichever is applicable) relevant to such Drug Substance, (iv) corresponding applications, licenses, registrations, authorizations, or approvals relevant to such Drug Substance in each Applicable Foreign Jurisdiction, and (v) all other applicable regulatory documents, in accordance with procedures agreed between Pharmacyclics and HCC.


2.5 EXISTING MEMORANDUM OF UNDERSTANDING. All process development and other activities performed, and related costs incurred, by HCC or Pharmacyclics under the MOU prior to the Effective Date of this Agreement shall be governed by the terms of the MOU. All process development and other activities performed, and related costs incurred, by HCC or Pharmacyclics on or after the Effective Date of this Agreement shall be governed by the terms


6. 7 of this Agreement. Notwithstanding the first sentence of this Section, all intellectual property and confidential information developed under the MOU shall be governed by the terms of this Agreement as if such intellectual property and confidential information were developed during the term of this Agreement.


2.6 FUTURE TEXAPHYRINS. As of the Effective Date, "Drug Substance" includes the Texaphyrins Lu-Tex and Gd-Tex. In the event that Pharmacyclics decides to commercialize any additional Texaphyrins, it shall provide written notice to HCC of such decision. Within [ * ] days of receipt of such notice, HCC shall provide written notice to Pharmacyclics indicating whether HCC is interested in adding such additional Texaphyrin to this Agreement pursuant to a new Drug Substance Appendix. In the event that HCC notifies Pharmacyclics that HCC is interested in doing so (an "Interest Notice"), the Parties shall meet to negotiate, in good faith, the terms for adding such additional Texaphyrin to this Agreement pursuant to a new Drug Substance Appendix, under the procedures set forth in Section 2.1. In the event that (i) HCC notifies Pharmacyclics that it is not interested in adding such additional Texaphyrin to this Agreement or (ii) the Parties are unable to agree on the terms of a new Drug Substance Appendix for such additional Texaphyrin within [ * ] days of Pharmacyclics' receipt of the Interest Notice, Pharmacyclics shall be free to enter into negotiations and an agreement with one or more third parties to manufacture and supply such additional Texaphyrin (a "Declined Additional Texaphyrin"), subject to Section 11.12 hereof.


2.7 SITE OF MANUFACTURE. Each Drug Substance shall be manufactured at the site agreed to by the Parties and set forth in the corresponding Drug Substance Appendix (the "HCC Manufacture Site").


2.8 SUBCONTRACTING. Except as set forth on a Drug Substance Appendix, under no circumstances will HCC contract out to a third party any part of the development, manufacturing or testing of (i) Drug Substance or (ii) any raw materials or Intermediates used in the manufacture of such Drug Substance, without prior written approval from Pharmacyclics, such approval not to be unreasonably withheld.


2.9 [ * ]


(a) [ * ]


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7. 8 [ * ]


(b) [ * ]


ARTICLE 3.
RESEARCH AND DEVELOPMENT COSTS


3.1 [ * ]


3.2 [ * ] Within thirty (30) days after the end of each month, HCC will provide Pharmacyclics with a detailed accounting of the [ * ] incurred by HCC during such month, along with an invoice for such costs. Such invoices will be due and payable within thirty (30) days of receipt.


3.3 ALL OTHER COSTS. Except as set forth in Section 3.1, HCC shall bear all costs associated with the operation of the required manufacturing processes to produce each of the Drug Substances, subject to Pharmacyclics' payment obligations set forth in Article 10.


* 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.


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ARTICLE 4.
AGREEMENT OF PURCHASE AND SALE


4.1 SUPPLY/PURCHASE OBLIGATIONS. During the term of this Agreement and any renewal thereof, HCC shall manufacture and provide Pharmacyclics with a guaranteed, uninterrupted supply of Pharmacyclics' entire worldwide requirements of the Drug Substances, for the purposes of Phase III clinical trials of Product and commercial sale of Product, and, subject to the applicable Drug Substance Appendix, Pharmacyclics shall purchase all of its Phase III clinical trial requirements and commercial requirements of the Drug Substances from HCC. Subject to the foregoing and except as otherwise set forth in Section 6.2, it is understood and agreed that Pharmacyclics has no specific or minimum commitment to purchase any amounts of a particular Drug Substance and that Pharmacyclics has sole discretion whether to continue to develop or commercialize each particular Drug Substance.


4.2 THIRD PARTY MANUFACTURE. Subject to Sections 4.1 and 6.2, in the event HCC makes a good faith determination that it is or will be unable to supply all of Pharmacyclics' requirements of any Drug Substance from the HCC Manufacture Site and/or the HCC Inventory Site, based on either (i) the quarterly forecasts under Section 6.1 or (ii) one of Pharmacyclics' firm purchase orders pursuant to Section 6.3, HCC shall, within [ * ]


* 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.


9. 10 [ * ]


ARTICLE 5.
TERM


The term of this Agreement shall commence on the Effective Date and, unless sooner terminated as provided herein, shall continue up to and including December 31, 2006. No later than twelve (12) months prior to the expiration date of this Agreement, the Parties will meet to discuss whether to extend the term of this Agreement.


ARTICLE 6.
ORDERS AND SHIPMENTS


6.1 FORECAST SCHEDULES.


(a) INITIAL LONG-TERM FORECAST SCHEDULE. Upon execution of each Drug Substance Appendix, Pharmacyclics shall deliver to HCC an initial long-term forecast of Pharmacyclics' expected requirements for the applicable Drug Substance. Such initial long-term forecast shall include quarterly forecasts through the end of the first full calendar year following the execution of the applicable Drug Substance Appendix and annual forecasts thereafter. Such initial long-term forecast shall be non-binding, except that the quarterly forecasts contained on the initial long-term forecast shall be binding within the percentage ranges set forth in Section 6.2.


* 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.


10. 11
(b) UPDATED LONG-TERM FORECAST SCHEDULES. No later than October 1 of each year, Pharmacyclics shall deliver to HCC an updated long-term forecast of Pharmacyclics' expected requirements for each Drug Substance. Such long-term forecast shall include quarterly forecasts for the first full calendar year following the date of such update and annual forecasts thereafter. Such updated long-term forecasts shall be non-binding, except that the quarterly forecasts contained on the updated long-term forecast shall be binding within the percentage ranges set forth in Section 6.2.


6.2 FORECAST VARIANCES. Except as otherwise provided in Section 6.1, all long-term forecasts under this Agreement and updates thereof shall be for the sole purpose of assisting HCC in its planning and will not constitute an obligation of Pharmacyclics to purchase the quantities of Drug Substance indicated; provided, however, (i) until the end of the second full calendar year in which a particular Drug Substance is sold for commercial use, the total quantity of such Drug Substance ordered by Pharmacyclics pursuant to purchase orders for delivery in any calendar quarter shall not exceed [ * ] of the quarterly forecast for such quarter or be less than [ * ] of such quarterly forecast without HCC's prior written consent, which consent shall not be unreasonably withheld and (ii) after the end of the second full calendar year in which a particular Drug Substance is sold for commercial use, the total quantity of such Drug Substance ordered by Pharmacyclics pursuant to purchase orders for delivery in any calendar quarter shall not exceed [ * ] of the quarterly forecast for such quarter or be less than [ * ] of such quarterly forecast without HCC's prior written consent, which consent shall not be unreasonably withheld. HCC shall use commercially reasonable efforts to supply to Pharmacyclics any requirements of any Drug Substance in excess of [ * ] (or [ * ], after the end of the second full calendar year) of any quarter's forecast. In the event Pharmacyclics orders more than [ * ] of the quarterly forecast in any given quarter, then Pharmacyclics agrees to waive the inventory requirement set forth in Article 8 to the extent necessary to allow HCC to supply the Pharmacyclics orders in excess of [ * ] of the quarterly forecast. At such time following such quarter as HCC can reasonably fulfill the inventory requirements set forth in Article 8, Pharmacyclics will no longer be required to waive such requirements. HCC shall use diligent efforts to meet such inventory requirement as soon as practicable.


6.3 FIRM PURCHASE ORDERS. Pharmacyclics will place firm purchase orders, subject to Section 6.2, for each of the Drug Substances at least ninety (90) days before each required delivery date. Both Parties agree to work together to reduce lead time for orders and deliveries.


6.4 AUTHORIZATION TO SHIP DRUG SUBSTANCE. Copies of all documentation and test results, including batch records, a certificate of analysis appropriately signed and an HCC quality assurance release appropriately signed, as are necessary to demonstrate HCC's compliance with Section 2.4 for each Shipment Lot, shall be provided to Pharmacyclics no later than ten (10) business days prior to the expected shipment date for such Shipment Lot from the HCC Manufacture Site or the HCC Inventory Site. No shipment of any Shipment Lot shall take place without the written approval of Pharmacyclics, such approval not to be unreasonably withheld. It is understood by the Parties that, as more fully described on the applicable Drug Substance Appendix, the testing associated with the documentation required by this Section 6.4 will occur at the time of manufacture and, if a given Shipment Lot has been maintained in


* 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.


11. 12 inventory by HCC pursuant to Article 8, may also occur at a subsequent point in time for such Shipment Lot.


6.5 PRODUCTION AND INVENTORY REPORTS. No later than the end of each calendar quarter, HCC shall provide Pharmacyclics with a written report of (i) the production schedule for each Drug Substance; (ii) HCC's actual progress against such production schedule; and (iii) the amounts and locations of inventory of each Drug Substance. In addition, HCC agrees to notify Pharmacyclics as soon as is reasonably possible, but in any event no longer than five (5) days, after discovery of any event that could result in HCC's inability to meet Pharmacyclics' requested delivery dates. Such notice shall indicate the likely effect of such event on HCC's ability to meet Pharmacyclics' requested delivery dates.


ARTICLE 7.
SHIPPING AND CLAIMS


7.1 DELIVERY; SHIPMENT. Each of the Drug Substances supplied under this Agreement will be delivered FOB the HCC Manufacture Site for such Drug Substance or the HCC Inventory Site for such Drug Substance or such other facilities as may be mutually agreed to by the Parties. HCC shall make shipping arrangements with the appropriate carriers designated in writing by Pharmacyclics from the FOB point, under the agreements that Pharmacyclics has with those carriers. Title and risk of loss passes to Pharmacyclics when the Drug Substance is delivered to the carrier at the FOB point.


7.2 TESTING AND ACCEPTANCE. Each Drug Substance Appendix will set forth the identification testing procedures to be conducted by Pharmacyclics or its designee upon receipt of a Shipment Lot of the applicable Drug Substance (the "Identification Testing Procedures"). Pha ...