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image [aeolusimage1.jpg]

 
Exhibit 10.4

*** Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. §§ 200.80(b)(4)
and 240.24b-2

 
 
 
 

image [aeolusimage2.jpg]

 
 

 

Appendix 2 to the Research and Manufacturing Agreement
 
Between
 
Johnson Matthey Pharma Services and Aeolus Pharmaceuticals
 
Dated:  February 16, 2011
 

 
Proposal #:  AEO-110902-972
 

 
Title:  Impurity Isolation and Process Research and Development for AEOL
 
10150
 

 
Preparation Date:  November 15, 2011
 
 
 
 
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PROJECT PROPOSAL
 

Client:
Aeolus Pharmaceuticals, Inc.
26361 Crown Valley Parkway
Suite 150
Mission Viejo, CA 92691
   
Client Contact:
John McManus, President and CEO
   
Phone:
949-547-2840
Fax:
 
E-mail:
john@aolsrx.com
   

TITLE
 
Impurity Isolation and Process Research and Development for AEOL 10150
 
SUMMARY
 
Aeolus Pharmaceuticals, Inc. (Aeolus) will engage Johnson Matthey Pharma
Services (JMPS) to use reasonable commercial efforts to achieve the following
objectives:
 
1.  
Impurity Isolation

a.  
Isolate key impurities in the API identified as 2318.C (AEOL 10150)

b.  
Obtain analytical data for isolated impurities

2.  
Process Research and Development

a.  
Evaluate current 2318.A to 2318.B process

b.  
Evaluate current 2318.B to 2318.C process and non-isolated intermediates

c.  
Evaluate isolation of 2318.C

d.  
Use of 2318.A material from new process

 
JMPS has considerable experience providing process research and GMP API
manufacture for all development stages including commercial API
supply.  Estimated price and timeline are summarized below:
 
Scope of Work
Service Fee
Est. Direct Expenses
Duration
Task 1 Impurity Isolation - key impurities identified in 2318.C (AEOL 101050) –
[…***…] FTE months
$[…***…]
$[…***…]
[…***…]
Task 2 Process Research and Development - process from 2318.A porphyrin forward
– […***…] FTE months
$[…***…]
$[…***…]
[…***…]
       

BASIS / ASSUMPTIONS
 
This proposal is based on information obtained from previous JMPS manufacture of
AEOL 10150 and current efforts on behalf of Aeolus at JMPS.  This proposal is
based on the following assumptions:
 
 
 
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1.  
Impurity isolation and process development work will be recorded in laboratory
notebooks.

2.  
This proposal assumes that all Intermediates and AEOL 10150 are not potent
(category 2 out of 4 on the SafeBridge scale) and will not require the use of
containment techniques.  If it is later determined that any of the Intermediates
or AEOL 10150 are potent then the costs and timelines may be adjusted.

3.  
All raw materials are commercially available in quantities necessary to complete
this project.

4.  
JMPS will use 200 grams of non-GMP AEOL 10150 for Task 1.

5.  
The quantity of impurities A-E estimated in 200 grams of non-GMP AEOL is based
on area percent ranges of 0.2-0.7% and assumes a similar response factor and
molecular weight to the API.  JMPS will target isolation of up to 500 mg of each
impurity as is feasible based on the actual isolated yields and amount of
available API.

6.  
Additional analytical data will be obtained for information only.  JMPS
anticipates impurity samples (or enriched mixtures) may be sent for outside
testing (mass spectrometry services) as part of the estimate direct expenses for
Task 1 (not to exceed $[…***…]).

7.  
A new process for manufacture of 2318.C (AEOL 10150) is in development and may
or may not result in the generation of impurities A-E in TM-113.258.

8.  
JMPS will not be responsible for any freight charges associated with materials
sent directly by or at the request of customers.

 

SCOPE OF WORK
 
TASK 1:  Impurity Isolation
 
[…***…]  The impurity isolation will include but is not limited to the following
objectives:
 
1.  
JMPS will target the isolation of five key impurities identified as impurities
A-E in TM-113.258.

2.  
The targeted impurities are observed in historical lots using the current
process for manufacture of 2318.C (AEOL 10150).  Isolation of these impurities
will help determine the nature of each impurity as process related or
degradation products.

3.  
JMPS will evaluate whether the impurities can be enriched through
non-chromatographic methods to afford crude mixtures enhanced in the desired
impurities identified above.  These mixtures would then be subjected to
chromatography.

4.  
JMPS will evaluate chromatography with a variety of silicas to achieve impurity
separation under normal or reverse phase conditions.  This may require some
optimization to obtain sufficient separation from other impurities and to obtain
markers of a suitable quality.  Fractions will be analyzed with either LCMS or
GCMS.

5.  
JMPS will perform preparative chromatography using non-GMP AEOL 10150 to afford
a sufficient amount of impurities suitable for analytical analysis with
additional materials retained as markers.  A mixture of two or more impurities
of a known ratio may be used for development purposes if Aeolus and JMPS
mutually agree that further attempts at chromatographic separation would result
in loss of material without added benefit.

6.  
At this time, analysis by HPLC using TM-113.258 will be used to label the
isolated materials as supporting markers for analytical development.

 
Deliverables:
·  
Weekly updates

·  
Brief summary report

 

 
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TASK 2:  Process Research and Development
 
JMPS will undertake process research and development on the formation of 2318.C
(AEOL 10150) starting from isolated 2318.A (porphyrin).  […***…]
 
The process development will include but is not limited to the following
objectives:
 
1.  
Evaluate current 2318.A to 2318.B process

a.  
Evaluation of the reaction temperature

b.  
Evaluation of the reagents for the reaction - specifically the alkylating
reagent

c.  
Evaluation of different salt forms for isolated 2318.B

2.  
Evaluate current 2318.B to 2318.C process chemistry and non-isolated
intermediates

a.  
Evaluate the effect of different reaction solvents

b.  
Evaluate the effect of the oxidation state of the metal salt reagent on the
oxidation state of 2318.C

c.  
Evaluate the effect of using anhydrous tetrabutylammonium chloride for the
introduction of the chloride counter ions

3.  
Evaluate isolation of 2318.C

a.  
Monitor effect of isolation conditions (i.e.  wash solvent, number of washes,
etc.) on impurity formation

b.  
Evaluate different isolation equipment (filtration by pressure filtration and/or
centrifuge)

c.  
Further evaluate final drying conditions

4.  
Evaluate use of different 2318.A lots obtained from new porphyrin formation
process

 
Deliverables:
·  
Weekly updates

·  
Brief summary report

 
STAFFING/COMMUNICATIONS
 
1.  
JMPS will appoint a Project Leader for the work.  The Project Leader will manage
the activities at JMPS, have responsibility to meet the project objectives, and
serve as the primary technical liaison.

2.  
JMPS will provide a technical team to support the project.  The team composition
will be adjusted as needed.

3.  
Project updates will be submitted to Aeolus.  Bi-weekly conference calls will be
arranged to discuss project results and adjust the project plan.  Meetings
between Aeolus and JMPS will be scheduled as needed.

 
PROJECT SCHEDULE
 
1.  
Firm project scheduling will be established at proposal acceptance.  Scheduling
is contingent on prevailing staff and equipment availability.

2.  
Project communication and coordination will be with one Project Leader.

 
 
 
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PRICE & INVOICE SHEDULE
 
TASK 1:  Impurity isolation is offered on a time and materials basis.  The
duration of time to accomplish the scope outlined above is estimated as […***…]
FTE months.  Actual time to accomplish stated goals will depend on research
results.  The FTE rate is $[…***…]per month and will be rounded to the nearest
[…***…] FTE’s for invoicing purposes.  Direct Expenses (raw materials, supplies,
waste, equipment, outside testing and freight) will be charged additionally for
the actual cost incurred plus the […***…]% handling fee.  Outside testing for
mass spectrometry services as part of the estimated Direct Expenses are not to
exceed $[…***…].
 
Scope of Work
Service Fee
Est. Direct Expenses
TASK 1:  Impurity Isolation
$[…***…]
$[…***…]
     

TASK 2:  Process research is offered on a time and materials basis.  The
duration of time to accomplish the scope outlined above is estimated as […***…]
FTE months.  Actual time to accomplish stated goals will depend on research
results.  The FTE rate is $[…***…]per month and will be rounded to the nearest
[…***…] FTE’s for invoicing purposes.  Direct Expenses (raw materials, supplies,
waste, equipment, outside testing and freight) will be charged additionally for
the actual cost incurred plus the […***…]% handling fee.
 
Scope of Work
Service Fee
Est. Direct Expenses
TASK 2:  Process Research and Development
$[…***…]
$[…***…]
     

Upon acceptance of this proposal, Aeolus will be invoiced for labor and project
direct expenses monthly as incurred.  Invoices are payable within thirty (30)
days from the date of issuance.
 
 
GENERAL
 
1.  
This statement of work shall be governed by the terms and conditions of that
certain Master Services Agreement of February 16, 2011, between Aeolus
Pharmaceuticals, Inc. and Johnson Matthey Pharmaceutical Materials, Inc. d/b/a
Johnson Matthey Pharma Services.

2.  
This proposal is based on a specific scope of work that was developed using the
available technical information.  Actual results obtained during project
execution may differ from the anticipated results on which the proposal was
based.  If a significant difference occurs, JMPS will assess the impact on the
scope of work, schedule, and cost, and inform Aeolus.  JMPS and Aeolus will
promptly devise and agree to a modified project plan as warranted to ensure that
project delays are avoided or minimized.  If these changes result in additional
cost, Aeolus must authorize the additional cost in writing prior to
implementation using a Scope Change Order.

3.  
Aeolus consents to release of Aeolus information or material to outside testing
services for the limited purpose of obtaining analytical or other requested
tests during the project.

4.  
All estimates of cost and timelines listed above are based on previous
experience however they may not reflect the actual cost for Aeolus.  Significant
process improvements in yield, purification, or material processing may lower
the overall required manpower.  Similarly, the assumption is made that the
yields, purification, and material processing results from previous campaigns
can be maintained for the outlined scope of work and JMPS may re-evaluate the
cost basis for manufacture at each stage based on the most recent data.

5.  
All work performed is subject to the JMPS Quality System.

6.  
JMPS acknowledges Aeolus right to review relevant JMPS standard operating
procedures (SOPs) and test methods (TMs).

7.  
This proposal is valid for sixty (60) days from the preparation date.

 
 
 
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AUTHORIZATION
 
Appendix 2:  Impurity Isolation and Process Research and Development for AEOL
10150
 
Proposal #:  AEO-110902-972
 
The proposed work may be authorized by returning (via facsimile, PDF by email,
or standard mail services) a signed copy of the Proposal to:
 
[…***…]
Johnson Matthey Pharma Services
70 Flagship Drive
North Andover, MA 01845
 
Phone:                         […***…]
Fax:                              […***…]
E-mail:                         […***…]
 

For:  Johnson Matthey Pharma Services
 
/s/ Jayachandra Reddy, PhD__________________
Date: February 16, 2011
   
Jayachandra Reddy, PhD
General Manager
     

By their signature below, Aeolus Pharmaceuticals authorizes Johnson Matthey
Pharma Services to perform the work detailed in this proposal subject to the
Terms and Conditions of the Research and Manufacturing Agreement.
 
For:  Aeolus Pharmaceuticals, Inc.
     
/s/ John McManus__________________________
Date: February 16, 2011
   
John McManus
President & CEO
     

 
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