Exhibit 10.1

 

[*] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY
BRACKETS, HAS BEEN OMITTED BECAUSE THE INFORMATION (I) IS NOT MATERIAL AND (II)
WOULD BE COMPETITIVELY HARMFUL IF PUBLICLY DISCLOSED

 

 

June 16, 2017

 

 

Mr. Anil Dasu

Chief Engineering Officer

AcelRx Pharmaceuticals Inc.

351 Galveston Drive

Redwood City, CA 94063

 

Dear Mr. Dasu,

 

Mallinckrodt LLC (“Mallinckrodt”) is pleased to offer the following agreement
(“Agreement”) to AcelRx Pharmaceuticals, Inc. (“AcelRx”) for Sufentanil Citrate
(codes 0672 and 0678) (hereinafter referred to as “Product”) delivered during
the period beginning on the 1st day of January 2017 (the “Effective Date”) and
ending on December 31, 2019 (the “Initial Term”). This Agreement may be extended
only by written agreement of both Mallinckrodt and AcelRx (any extension,
together with the Initial Term, shall be referred to as the “Term”).

 

For purposes hereof, the first Contract Year will commence on the Effective Date
and end on December 31st of the same year. Thereafter, each subsequent Contract
year will commence on January 1st of such year and end on December 31st of such
year.

 

Mallinckrodt agrees to supply and AcelRx agrees to purchase Product initially at
the prices listed below:

 

Product

Codes

Contract Year Volume

Price per Gram

       

Sufentanil Citrate

0672 & 0678

[*]

[*]

           

[*]

[*]

       

 

 

[*]

[*]

 

The prices above shall be firm through December 31, 2017. Effective January 1,
2018 for the balance of the new Contract Year, and every subsequent January 1
for the balance of the Contract Year then commenced, the price for Product shall
be adjusted to reflect any increases or decreases in the cost to Mallinckrodt of
all raw materials, labor, utilities and regulatory compliance costs associated
directly with the manufacture and supply of such Product hereunder incurred
during the immediately prior Contract Year, provided that the price of Product
shall not increase or decrease by more than [*] percent ([*]%) from the price in
effect for such Product during the immediately previous Contract Year. By
December 1, 2017, and on every subsequent December 1 during the Term of this
Agreement, Mallinckrodt will notify AcelRx in writing of the adjusted prices to
be charged for Product for the following Contract Year.

 

Absent written agreement of the parties, invoices during each Contract Year
shall be based upon the volumes projected in the initial 12-month forecast for
each Contract Year. Within thirty days after the end of each Contract Year,
Mallinckrodt shall provide to AcelRx a reconciliation of the actual pricing
applicable to that Contract Year (the “Annual Pricing Reconciliation”).
Mallinckrodt shall invoice AcelRx for any amount due from AcelRx in accordance
with the Annual Pricing Reconciliation which undisputed payment shall be due
within thirty (30) days from the date thereof. In the event the Annual Pricing
Reconciliation results in a credit due to AcelRx, Mallinckrodt shall issue a
credit to AcelRx to be applied to any open invoices or amounts due from AcelRx
to Mallinckrodt. If AcelRx does not have any open invoices or amounts due to
Mallinckrodt, Mallinckrodt shall refund any credits to AcelRx within thirty (30)
days.

 

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Except as otherwise expressly stated in this Agreement, AcelRx agrees that it
will purchase during every Contract Year during the term of this Agreement at
least [*] percent ([*]%) of its annual requirements for Product for delivery
during such Contract Year, subject to Mallinckrodt’s ability to supply.
Mallinckrodt agrees that, except as specified in the paragraph below, it will
supply all quantities of Product that are ordered by AcelRx by the delivery date
specified in the applicable purchase order. If Mallinckrodt is unable to supply
all quantities of Product meeting the specifications in Exhibit A and the other
requirements of this Agreement by the delivery date specified in orders placed
by AcelRx hereunder, then Mallinckrodt shall provide AcelRx with prompt written
notice of such inability. If Mallinckrodt is unable to supply at least [*]
percent ([*]%) of the quantities of Product meeting the specifications in
Exhibit A and the other requirements of this Agreement within [*] ([*]) days of
the delivery date specified in orders placed by AcelRx hereunder on [*] ([*]) or
more occasions during any Contract Year, AcelRx shall thereafter be relieved of
its obligation under this Agreement to purchase at least [*] percent ([*]%) of
its annual requirements for Product from Mallinckrodt and may purchase unlimited
quantities of Product from other suppliers. For clarity, purchases of Product
will be deemed to occur during the Contract Year in which such Product is to be
delivered for purposes hereof, and thus any purchase orders for Product
submitted by AcelRx at the price in effect for the first Contract Year and
otherwise in accordance with the requirements hereof, prior to the beginning of
the first Contract Year shall be deemed to be purchased by AcelRx during the
first Contract Year hereof.

 

AcelRx agrees to supply Mallinckrodt, on a quarterly basis, a rolling forecast
of its requirements for Product during the next twelve (12) months. The forecast
for the first [*] ([*]) months is considered to be firm and binding, such that
AcelRx is obligated to order, and Mallinckrodt is obligated to supply, the
quantities of Product contained in the first [*] ([*]) month of each forecast.
The forecast for the last [*] ([*]) months of that period is a non-binding,
good-faith estimate of AcelRx’ requirements for that period and will be used by
Mallinckrodt for production planning. If Mallinckrodt is unable to timely
deliver a quantity of any Product ordered by AcelRx, then AcelRx will be
permitted to purchase the same quantity of that Product of like grade and
quality from another supplier and such amount shall be used in determining
whether AcelRx has met its purchase obligations for that Product for any given
Contract Year (i.e., the quantity purchased by AcelRx from another supplier
shall be counted as part of AcelRx’s annual requirements of Product for such
year).

 

Notwithstanding any other provision hereof, Mallinckrodt’s obligation to supply
Product to AcelRx hereunder and AcelRx’s obligation to purchase such Product
from Mallinckrodt hereunder is subject, at any given time, to the availability
of sufficient quota granted by the United States Drug Enforcement Administration
(“DEA”). Mallinckrodt and AcelRx both agree that they shall at all times
cooperate in good faith in the exercise and use of their commercially reasonable
efforts to ensure that there is sufficient quota available to allow both parties
fully to perform their obligations hereunder. If Mallinckrodt has insufficient
quota to satisfy AcelRx’s requirements for any Product as well as its other
customers, Mallinckrodt shall immediately notify AcelRx of same in writing and
shall consult with AcelRx regarding AcelRx’s anticipated orders. Mallinckrodt
shall allocate available Product among all of its customers, including AcelRx,
in as fair and equitable a manner as possible, giving due consideration to
historical purchasing patterns, forecasts, and all other relevant commercial
factors.

 

Mallinckrodt shall provide written notice to AcelRx if it intends to terminate
its manufacture of the Product, which notice shall be provided at least [*]
([*]) months prior to the date on which Mallinckrodt will cease manufacturing
Product.

 

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All sales of Product between AcelRx and Mallinckrodt will be in accordance with
the following terms and conditions:

 

 

●

payment for Products shall be made in US Dollars (“USD”) and, if undisputed, is
due thirty (30) days from the date of invoice. Mallinckrodt shall not issue an
invoice for Products prior to the date on which it has shipped such Products to
AcelRx or AcelRx’s designee,

 

 

●

delivery is Ex Works (Incoterms 2016); and

 

 

●

all Products will be ordered in writing with at least ninety (90) days advance
notice.

 

Mallinckrodt represents and warrants, with respect to all Product supplied to
AcelRx hereunder, that:

 

 

●

Products will be manufactured by Mallinckrodt in accordance with the terms of
the quality agreement to be entered into by the parties promptly after the
execution of this Agreement (the “Quality Agreement”), all applicable laws and
regulations and current Good Manufacturing Practices as determined by the United
States Food and Drug Administration (“FDA”) using the manufacturing process
described in Mallinckrodt’s Drug Master File (“DMF”);

 

 

●

Products will meet the specifications attached as Exhibit A, as well as any
other specifications mutually agreed to in writing by Mallinckrodt and AcelRx;
and

 

 

●

In the event of any conflict or inconsistency between the terms of this
Agreement and the Quality Agreement, this Agreement shall prevail in every case.

 

AcelRx shall have the right, in accordance with the procedures specified in this
paragraph, to reject any volume of any Product supplied to it hereunder if any
such Product fails to meet the specifications attached hereto as Exhibit A.
AcelRx or its designee may inspect Product received by it from Mallinckrodt and
if, within sixty (60) days of the date of receipt of such Product, AcelRx has
not given written notice to Mallinckrodt rejecting any such Product (which
notice will provide a detailed description of the reason for such rejection),
such Product will be deemed to have been accepted for all purposes hereof.
Notwithstanding the foregoing, if at any time after initial acceptance as
provided in the above paragraph, AcelRx discovers that Products supplied by
Mallinckrodt do not meet the applicable specifications and all other applicable
requirements of this Agreement, and the nature of such defect could not have
been reasonably have been discovered or suspected by AcelRx from a review of the
documents regarding such Products provided to it by Mallinckrodt with the
shipment of the applicable Products or from a visual inspection of the Products
performed within sixty (60) days after delivery to the delivery destination,
AcelRx may revoke its acceptance of such Products by providing written notice to
Mallinckrodt of such revocation. Such notice will identify in reasonable detail
the nature of the defect and will be provided within thirty (30) days of the
date on which AcelRx determines the existence of the defect. In the event AcelRx
provides a timely rejection notice or revocation of acceptance to Mallinckrodt
with respect to any given volume of any Product and Mallinckrodt does not give
written notice to AcelRx within twenty (20) days after its receipt of any such
rejection or revocation notice that it disagrees with AcelRx’s rejection or
revocation of acceptance of such Product, any Product that is the subject of
such rejection or revocation notice shall be deemed to have been rejected for
all purposes hereof. If, however, within twenty (20) days of its receipt of any
rejection or revocation notice from AcelRx, Mallinckrodt, reasonably and in good
faith, disagrees that any particular volume of any Product was properly rejected
or that acceptance of such Product was properly revoked by AcelRx, Mallinckrodt
shall provide notice of such disagreement to AcelRx setting forth the reasons
for its disagreement. If, within a reasonable period of time after the date of
any notice of disagreement given by Mallinckrodt (not, in any event, to exceed
thirty (30) days) the parties are unable to resolve any dispute relative to the
rejection of any particular volume of any Product, the matter will be referred
to an independent third party expert acceptable to both parties whose decision
as to whether or not any such Product was properly rejected or acceptance of
such Product was properly revoked shall be final and binding on the parties. If
the independent third party expert determines that the Product in question was
not properly rejected or acceptance of such Product was not properly revoked,
then such Product shall be deemed to have been accepted by AcelRx for all
purposes hereof and the fees and expenses of such independent third party expert
shall be paid by AcelRx. If the independent third party expert determines that
the Product in question was properly rejected or revoked or if the parties have
previously agreed that such Product was properly rejected or revoked, then
Mallinckrodt shall, at the option of AcelRx and as AcelRx’s sole remedies in the
event of properly rejected or revoked Product, either refund or credit AcelRx
for any amounts payable hereunder for such Product or promptly replace the
rejected Product or revoked Product with Product that meets applicable
specifications and all other applicable requirements hereof. Any properly
rejected or properly revoked Product shall, at the option of Mallinckrodt,
either be returned to Mallinckrodt or destroyed by AcelRx in an environmentally
responsible manner, in either event at the sole cost and expense of
Mallinckrodt.

 

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If Mallinckrodt intends to make any material changes in its production, testing
or packaging procedures in the DMF documented process for Product as required by
FDA’s “Guidance for Industry to an approved NDA or ANDA” and Note for Guidance
on the European Drug Master File procedure, CPMP/QWP/227/02, Mallinckrodt will
notify AcelRx in writing and will provide to AcelRx (in accordance with the
pricing and other terms and conditions hereof) sufficient quantities of
validation material of Product made using such changes in production, testing or
packaging procedures (the “Modified Product”) at least twelve (12) months
(unless a lesser time to implement any change is dictated by law) before filling
orders for Product placed by AcelRx with Modified Product. The parties
acknowledge that the purpose of the immediately preceding sentence is to allow
AcelRx a reasonable amount of time to receive appropriate regulatory approval
prior to Mallinckrodt implementing a significant change to its DMF.

 

All information that is provided by or on behalf of AcelRx to Mallinckrodt in
connection with this Agreement including, without limitations, all quantities of
Product forecasted or ordered by AcelRx and all delivery dates and delivery
destinations for such Product shall be AcelRx’s confidential information under
the Non-Disclosure Agreement entered into by Mallinckrodt and AcelRx effective
January 6, 2017 (the “Confidentiality Agreement”). Similarly, all information
that is disclosed to AcelRx by Mallinckrodt in connection this Agreement (except
to the extent that it obtains AcelRx’s confidential information) and all
information observed by AcelRx during any inspection of Mallinckrodt’s
manufacturing operations conducted in accordance with this Agreement will be
deemed to be Mallinckrodt’s confidential information under the Confidentiality
Agreement. Each party acknowledges and agrees that their obligations of
confidentiality and restrictions on use with respect to the other party’s
confidential information shall be governed by the terms of the Confidentiality
Agreement. The terms and obligations of the Confidentiality Agreement are hereby
incorporated into this Agreement and shall bind the Parties as if fully set
forth herein.

 

Except as expressly authorized herein, neither party hereto shall (i) use the
name, insignia, symbol, trademark, trade name, logotype or products (or any
abbreviation or adaptation thereof) of the other party or any affiliate or
employee thereof in any advertising, press release, publicity or promotional
materials, or on any website, without such party’s prior written consent, or
(ii) disclose the terms of this Agreement to any third party.  For clarity, the
existence of this Agreement is not confidential but the terms and conditions
contained therein are confidential. All press releases and other public
announcements relating to this Agreement or the transactions contemplated hereby
will be prepared and issued only with the prior written consent of both Parties.

 

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AcelRx will have the right during normal business hours and upon advance
arrangement with Mallinckrodt to inspect Mallinckrodt’s manufacturing operations
to determine whether or not Mallinckrodt is complying in all respects with its
obligations hereunder. AcelRx warrants that all such inspections and audits
shall be carried out in a manner calculated not to unreasonably interfere with
Mallinckrodt’s conduct of business and to insure the continued confidentiality
of Mallinckrodt’s business and technical information. Further, AcelRx agrees to
comply with all of Mallinckrodt’s safety and security requirements during any
visits to the Mallinckrodt facilities.

 

Mallinckrodt shall indemnify, defend and hold AcelRx, its affiliates and its and
their respective directors, officers, employees, agents, successors and assigns
harmless from and against any damages, liabilities, costs and expenses
(including, without limitation, reasonable attorneys’ fees) incurred in
connection with any claims, suits or actions brought by a third party
(collectively, “Losses”) to the extent resulting from or alleged to result from
(i) any breach of this Agreement by Mallinckrodt, or (ii) any negligence or
willful misconduct of Mallinckrodt. Notwithstanding the preceding sentence, in
no event shall Mallinckrodt be liable to AcelRx for incidental, consequential,
exemplary, special, punitive or any other similar type of damages whether or not
Mallinckrodt has been advised of the possibility of such damages and whether or
not, in any particular set of circumstances, such damages are reasonably
foreseeable.

 

Mallinckrodt hereby disclaims the implied warranties of merchantability and
fitness for a particular purpose and it is understood that the express
warranties (if any) of Mallinckrodt set forth herein are in lieu of all other
warranties, express or implied.

 

AcelRx shall indemnify, defend and hold Mallinckrodt, its affiliates and its and
their respective directors, officers, employees, agents, successors and assigns
(the “Mallinckrodt Indemnitees”) harmless from and against any Losses resulting
from or alleged to result from: (i) the handling, storage, transportation, use,
sale or marketing of any product containing any of the Products supplied
hereunder to AcelRx, (ii) any breach of this Agreement by AcelRx, or (iii) any
negligence or willful misconduct of AcelRx, except to the extent any such Losses
are attributable to Mallinckrodt’s breach of its obligations, representations or
warranties under this Agreement or to any negligence or willful misconduct of
Mallinckrodt. Notwithstanding the preceding sentence, in no event shall AcelRx
be liable to Mallinckrodt for incidental, consequential, exemplary, special,
punitive or any other similar type of damages whether or not AcelRx has been
advised of the possibility of such damages and whether or not, in any particular
set of circumstances, such damages are reasonably foreseeable.

 

Each party’s agreement to indemnify, defend, and hold harmless the other party
and its respective indemnitees is conditioned upon: (a) the indemnified party
providing written notice to the indemnifying party of any claim, demand, or
action arising out of the indemnified activities within thirty (30) days after
the indemnified party has knowledge of such claim, demand or action, provided
that any failure on the part of an indemnified party to notify the indemnifying
party of receipt of notice of a claim will relieve the notified party of its
obligation to indemnify the notifying party for such claim under this Agreement
only to the extent that the notified party has been prejudiced by the lack of
timely and adequate notice, (b) the indemnified party permitting the
indemnifying party to assume full responsibility and authority to investigate,
prepare for, settle and defend against any such claim, demand or action provided
that, the indemnified party shall be allowed to participate and intervene in any
action at its own expense, (c) the indemnified party assisting the indemnifying
party, at the indemnifying party's reasonable expense, in the investigation of,
preparation for and defense of any such claim, demand or action, (d) the
indemnified party not compromising or settling such claim, demand or action
without the indemnifying party’s written consent, and (e) the indemnifying party
not compromising or settling such claim, demand or action (except for any such
settlement or compromises that involves only the payment of money by the
indemnifying party) without the indemnified party’s written consent.

 

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No provision of any purchase order submitted by AcelRx or of any acknowledgment
submitted by Mallinckrodt or of any other document submitted by either party
shall be controlling to the extent it sets forth any terms or conditions that
are additional to, or in conflict or inconsistent with, the terms or conditions
of this Agreement. This Agreement represents the entire understanding of the
parties with respect to its subject matter and supersedes any prior agreements,
other than the Confidentiality Agreement, which shall remain in effect and apply
to disclosures of confidential information made between the parties under this
Agreement. This Agreement shall be governed by the laws of the State of
Delaware, without reference to its conflict of law principles that might apply
the law of another jurisdiction. Those provisions that by their nature are
intended to survive termination or expiration of this Agreement including,
without limitation, confidentiality and indemnity obligations, shall survive the
termination or expiration of this Agreement for any reason,

 

Mallinckrodt hereby represents and warrants that it is not using and it will not
use the services of any person or entity if such a person or entity is, debarred
by the FDA under the Generic Drug Enforcement Act of 1992. If, during the term
of this Agreement, Mallinckrodt or any person or entity whose services are being
used by Mallinckrodt is debarred by the FDA, Mallinckrodt will immediately
notify AcelRx of same.

 

Neither Party shall be entitled to assign this Agreement or its rights under
this Agreement, including by merger or operation of law, without the express
written consent of the other Party hereto, except that Mallinckrodt may assign
this Agreement, in whole or in part: (i) to an Affiliate upon written notice to
the AcelRx; or (ii) to a purchaser who acquires the business or the assets of
Mallinckrodt to which this Agreement relates. Any attempted assignment not in
accordance with the preceding sentence shall be null and void.

 

If a court or other body of competent jurisdiction finds any provision of this
Agreement, or portion thereof, to be invalid or unenforceable, such provision
will be enforced to the maximum extent permissible so as to effect the intent of
the Parties, and the remainder of this Agreement will continue in full force and
effect.

 

Either party may terminate this Agreement upon written notice if the other party
materially breaches this Agreement and fails to cure the breach within thirty
(30) days after receipt of written notice from the non-breaching party
specifying the nature of such breach.

 

All notices permitted or required under this Agreement shall be in writing and
shall be deemed given (a) when received, if hand-delivered or sent by a
reputable express delivery service, or (b) when received, as documented with
confirmation of successful receipt if sent via email. Notices shall be sent to
the addresses identified below:

 

To AcelRx:

AcelRx Pharmaceuticals, Inc.

Attn:

351 Galveston Drive

Redwood City, California 94063

Mandatory copy to: AcelRx Legal Department

 

To Mallinckrodt:

Mallinckrodt LLC

Attn: Jaime Macke CC, Legal Department

675 McDonnel Blvd.

Hazelwood, Missouri 63042

 

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Mallinckrodt appreciates the opportunity to work with AcelRx in supplying the
highest quality bulk narcotics products for AcelRx dosage product production.
Please call your Mallinckrodt Sales Representative, Nick Litzsinger, with any
additional requests.

 

 

Mallinckrodt LLC     Understood and Agreed by           AcelRx Pharmaceuticals,
Inc.                               By: /s/ Karen Lasker (signature)   By: /s/
Anil Dasu (signature)   Karen Lasker        Anil Dasu     V.P. Commercial
Operations       Chief Engineering Officer  

                         

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Exhibit A

 

Mallinckrodt Specification for Sufentanil Citrate Code 0672

 

TEST AND SPECIFICATION LIMITS

 

Appearance

White to almost white powder

Identification A (IR) (USP<197K>) (EP <2.2.24>)

Matches standard

Identification B (UV) (USP <197U>)

Matches standard

Identification C (Citrate) (USP<191>)

Light red color

Identification D (Major Peak) (USP)

Retention matches

Loss On Drying (USP<731>) (EP<2.2.32>)

0.50% max

Heavy Metals (As Pb) (USP<231>Method II)

0.002% max

Assay (HPLC) (Dried Basis) (USP):

 

Sufentanil Citrate

98.0 – 102.0% w/w

Related Substances (HPLC) (VR#480):

 

Step IV Intermediate

0.10% max

Step V Intermediate (EP Impurity C)

0.15% max

Step VI Intermediate (EP Impurity E)

0.15% max

Unknown Related Substances (Each)

0.10% max

Total Related Substances

1.0% max

Assay (Titration) (Dried Basis) (EP)

99.0 – 101.0% w/w

Appearance of Solution (EP<2.2.1 & 2.2.2>Method II):

 

Degree of Clarity

Clear

Degree of Coloration

Colorless

Related Substances (HPLC) (EP<2.2.29>):

 

EP Impurity D

0.5% Area Max.

EP Impurity F

0.5% Area Max.

EP Impurity H

0.5% Area Max.

Other Impurities (Each)

0.10% Area Max.

Total Related Substances

1% Area Max

 

 

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Mallinckrodt Specification for Sufentanil Citrate Code 0678

 

[*]