Exhibit 10.3

 

*** Text Omitted and Filed Separately to the Commission

Confidential Treatment Requested

 

SECOND AMENDMENT TO LICENSE AGREEMENTS

 

FIFTH AMENDMENT TO MANUFACTURING AND SUPPLY AGREEMENT

 

THIS AMENDMENT (the “Amendment”) is made and entered into as of August 16th,
2012 (the “Amendment Effective Date”) and is:

 

(i) the SECOND AMENDMENT to both (a) the License Agreement (the “US License
Agreement”), dated as of February 13, 1996, as amended, by and between ALKERMES,
INC. (“ALKERMES”) and JANSSEN PHARMACEUTICA, INC. (“JANSSEN US”), and (b) the
License Agreement (the “Ex-US License Agreement”), dated as of February 21,1996,
as amended, by and between ALKERMES and JPI PHARMACEUTICA INTERNATIONAL, a
division of Cilag GmbH International (“JPI”) (JANSSEN US and JPI together,
“JANSSEN,” and the US License Agreement and the Ex-US License Agreement
together, the “License Agreements”); and

 

(ii) the FIFTH AMENDMENT to the Manufacturing and Supply Agreement (the
“Manufacturing Agreement”) dated as of August 6, 1997, as amended, by and
between ALKERMES and JANSSEN

 

(any terms used but not defined herein shall have the meaning set forth in the
License Agreements or the Manufacturing Agreement, as applicable).

 

RECITALS:

 

WHEREAS, ALKERMES and JANSSEN have entered into the License Agreements and the
Manufacturing Agreement; and

 

WHEREAS, ALKERMES and JANSSEN now wish to amend the License Agreements and the
Manufacturing Agreement to conform the definitions of Net Sales, US Licensed Net
Selling Price and ROW Licensed Net Selling Price in these documents and to amend
the provision relating to the Depreciation Credit;

 

NOW, THEREFORE, in consideration of the mutual promises contained herein and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties, intending to be legally bound hereby, agree as
follows:

 

1.             Article 1(g) of the US License Agreement.  Article 1(g) of the US
License Agreement shall be deleted in its entirety and replaced with a new
Article 1(g) which shall read as follows:

 

“1(g)                     “Net Sales” shall mean the gross amounts received from
sales of Products during a calendar quarter to independent third parties by
Janssen US, its Sublicensees or any Affiliate of either, less deductions for: 
(i) applicable sales taxes; (ii) trade,

 

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cash and ordinary business discounts allowed; (iii) allowances or credits to
customers on account of rejection or return of Products; (iv) managed care
rebates or allowances and mandatory price allowances imposed by governments; or
(v) freight, postage and duties paid for Products, to the extent separately
identified on the invoice.  No deduction from the gross sales price shall be
made for any item of cost incurred by the seller in its own operations incident
to the manufacture, sale or shipment of the Product sold.  For purposes hereof,
Net Sales shall not include sales of a Product from Janssen US or an Affiliate
of Janssen US to any Affiliate or Sublicensee of either; it being intended that
Net Sales shall only include sales to unrelated third parties.

 

If Janssen US, its Sublicensees or any Affiliate of either sells any Product in
such a manner that the gross amount received for such Product is not readily
identifiable then such gross amount shall be whichever is the higher of (i) the
fair market value of such Product or (ii) the proportion of the bundled gross
amount received attributed to such Product by Janssen US, its Sublicensees or
any Affiliate of either, as applicable, whenever the Product is sold as part of
a package of products or services.  For the purpose hereof “fair market value”
shall mean, without limitation, the gross amount received for such Product sold
to similar third parties in similar quantities in the United States.  If the
fair market value cannot be determined in the United States, the fair market
value will be negotiated by the parties in good faith.”

 

2.             Article 1(g) of the Ex-US License Agreement.  Article 1(g) of the
Ex-US License Agreement shall be deleted in its entirety and replaced with a new
Article 1(g) which shall read as follows:

 

“1(g)                     “Net Sales” shall mean the gross amounts received from
sales of Products during a calendar quarter to independent third parties by
Janssen, its Sublicensees or any Affiliate of either, less deductions for:  (i)
applicable sales taxes; (ii) trade, cash and ordinary business discounts
allowed; (iii) allowances or credits to customers on account of rejection or
return of Products; (iv) managed care rebates or allowances and mandatory price
allowances imposed by governments; or (v) freight, postage and duties paid for
Products, to the extent separately identified on the invoice.  No deduction from
the gross sales price shall be made for any item of cost incurred by the seller
in its own operations incident to the manufacture, sale or shipment of the
Product sold.  For purposes hereof, Net Sales shall not include sales of a
Product from Janssen or an Affiliate of Janssen to any Affiliate or Sublicensee
of either; it being intended that Net Sales shall only include sales to
unrelated third parties.

 

If Janssen, its Sublicensees or any Affiliate of either sells any Product in a
country in the Territory in such a manner that the gross amount received for
such Product is not readily identifiable then such gross amount shall be
whichever is the higher of (i) the fair market value of such Product or (ii) the
proportion of the bundled gross amount received attributed to such Product by
Janssen, its Sublicensees or

 

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any Affiliate of either, as applicable, whenever the Product is sold as part of
a package of products or services.  For the purpose hereof “fair market value”
shall mean, without limitation, the gross amount received for such Product sold
to similar third parties in similar quantities.  If the fair market value cannot
be determined in any given country, the fair market value will be determined by
the gross amount received for Product sold to similar customers in countries
with similar pricing and reimbursement structures and for similar quantities.”

 

3.             Article 1.5 of the Manufacturing Agreement.  Article 1.5 of the
Manufacturing Agreement shall be deleted in its entirety and replaced with a new
Article 1.5 which shall read as follows:

 

“1.5(a)          “U.S. Licensed Net Selling Price” shall mean the weighted (by
sales volume) average price offered by JANSSEN, its Affiliates or licensees in a
given calendar year (or such shorter period as may be applicable) to independent
third parties for each Presentation Form of the Final Product for sale in the
United States, its territories and possessions, less deductions for:  (i)
applicable sales taxes; (ii) trade, cash and ordinary business discounts
allowed; (iii) allowances or credits to customers on account of rejection or
return of Final Products; (iv) managed care rebates or allowances and mandatory
price allowances imposed by governments; or (v) freight, postage and duties paid
for Final Products, to the extent separately identified on the invoice.  No
deduction from the weighted average price shall be made for any item of cost
incurred by the seller in its own operations incident to the manufacture, sale
or shipment of such Final Product.  For purposes hereof, U.S. Licensed Net
Selling Price shall not include the price of a Final Product offered by JANSSEN,
its Affiliates or licensees to one another; it being intended that U.S. Licensed
Net Selling Price shall only include the price offered to unrelated third
parties.

 

If JANSSEN, its Affiliates or licensees sell any Presentation Form of the Final
Product in the United States in such a manner that the weighted average price of
the same is not readily identifiable then the weighted average price shall be
whichever is the higher of (i) the fair market value of such Final Product or
(ii) the proportion of the bundled price attributed to such Final Product by
JANSSEN, its Affiliates or licensees, as applicable, whenever the Final Product
is sold as part of a package of products or services.  For the purpose hereof
“fair market value” shall mean, without limitation, the value of such Final
Product sold to similar third parties in similar quantities in the United
States.  If the fair market value cannot be determined in the United States, the
fair market value will be negotiated by the parties in good faith.

 

1.5(b)                “ROW Licensed Net Selling Price” shall mean the weighted
(by sales volume) average price offered by JANSSEN, its Affiliates or licensees
in a given calendar year (or such shorter period as may be applicable) to
independent third parties for each Presentation Form of the Final Product for
sale in the Territory (other than the United States, its territories and
possessions), less deductions for:  (i)

 

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applicable sales taxes; (ii) trade, cash and ordinary business discounts
allowed; (iii) allowances or credits to customers on account of rejection or
return of Final Products; (iv) managed care rebates or allowances and mandatory
price allowances imposed by governments; or (v) freight, postage and duties paid
for Final Products, to the extent separately identified on the invoice.  No
deduction from the weighted average price shall be made for any item of cost
incurred by the seller in its own operations incident to the manufacture, sale
or shipment of such Final Product.  For purposes hereof, ROW Licensed Net
Selling Price shall not include the price of a Final Product offered by JANSSEN,
its Affiliates or licensees to one another; it being intended that ROW Licensed
Net Selling Price shall only include the price offered to unrelated third
parties.

 

If JANSSEN, its Affiliates or licensees sell any Presentation Form of the Final
Product in a country in the Territory (other than the United States, its
territories and possessions) in such a manner that the weighted average price of
the same is not readily identifiable then the weighted average price for that
country shall be whichever is the higher of (i) the fair market value of such
Final Product or (ii) the proportion of the bundled price attributed to such
Final Product by JANSSEN, its Affiliates or licensees, as applicable, whenever
the Final Product is sold as part of a package of products or services.  For the
purpose hereof “fair market value” shall mean, without limitation, the value of
such Final Product sold to similar third parties in similar quantities.  If the
fair market value cannot be determined in any given country, the fair market
value will be determined by the value of such Final Product sold to similar
customers in countries with similar pricing and reimbursement structures and for
similar quantities.”

 

4.             Section 12 of the Fourth Amendment to the Manufacturing
Agreement.  Section 12 of the Fourth Amendment to the Manufacturing Agreement,
dated January 10, 2005, shall be deleted in its entirety and replaced with a new
Section 12 which shall read as follows:

 

“12.                         Depreciation Credit.  If ACT II manufactures more
than [***] of the Product on the Third Line during any calendar year, then ACT
II will give JANSSEN a Depreciation Credit in accordance with the terms of this
Section 12 for each batch of Product in excess of [***] that are so
manufactured.  For any calendar year in which more than [***] of the Product
were manufacture on the Third Line, ACT II will grant to JANSSEN within [***] of
the end of such calendar year a credit in the amount of:  (i) the Depreciation
Credit per batch of the Product, multiplied by (ii) the number of batches of the
Product in excess of [***] manufactured on the Third Line in such calendar year,
multiplied by (iii) [***].  JANSSEN shall have the right to apply this credit
until it is exhausted against Manufacturing Fees payable for the Product
supplied by ACT II during the subsequent calendar year.  This Section 12 will
have no further force and effect upon (i) the grant by ACT II to Janssen
pursuant to this Section 12 of credits in a total amount equal to [***] or (ii)
ACT II’s purchase of the Equipment pursuant to Section 11 hereof.”

 

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5.             Consideration.  Within thirty (30) days of the Amendment
Effective Date, in settlement of amounts owed by JANSSEN to ALKERMES pursuant to
Article 6.2 of the Manufacturing Agreement and Article 3(c) of the License
Agreements and in partial consideration of ALKERMES’ agreement to modify the
License Agreements and the Manufacturing Agreement in accordance with the terms
and conditions of this Amendment, JANSSEN shall pay ALKERMES [***] by bank wire
transfer in immediately available funds to such bank account as may be
designated in writing to JANSSEN by ALKERMES.

 

6.             Integration.  Except as expressly provided in this Amendment, all
other terms, conditions and provisions of the License Agreements and the
Manufacturing Agreement shall continue in full force and effect as provided
therein.  This Amendment, the License Agreements and the Manufacturing Agreement
constitute the entire agreement between the parties hereto relating to the
subject matter hereof and thereof and supersede all prior and contemporaneous
negotiations, agreements, representations, understandings and commitments with
respect thereto.

 

[signature page follows]

 

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IN WITNESS WHEREOF, JPI, JANSSEN US and ALKERMES have executed and delivered
this Amendment effective as of the Amendment Effective Date.

 

 

ALKERMES, INC.

 

 

 

By:

/s/ Michael J. Landine

 

Name:

Michael J. Landine

 

Title:

Senior Vice President

 

 

 

JPI PHARMACEUTICA INTERNATIONAL,

 

a division of CILAG GMBH INTERNATIONAL

 

 

 

By:

/s/ Mr. Andrea Ostinelli

 

Name:

Mr. Andrea Ostinelli

 

Title:

Finance Director

 

 

 

By:

/s/ Heinz Schmid

 

Name:

Heinz Schmid

 

Title:

General Manager

 

 

 

JANSSEN PHARMACEUTICA, INC.

 

 

 

By:

/s/ Michael Yang

 

Name:

Michael Yang

 

Title:

President, CNS

 

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