Exhibit 10.3
SECOND AMENDMENT TO CORE DISTRIBUTION AGREEMENT
THIS SECOND AMENDMENT TO CORE DISTRIBUTION AGREEMENT (“Second Amendment”) is
entered into as of October 11, 2006, by and between Connetics Corporation
(“Connetics”) and McKesson Corporation (“McKesson”). Connetics and McKesson
entered into a Core Distribution Agreement dated December 23, 2004 (“Original
Agreement”), as amended by that certain Amendment to Core Distribution Agreement
dated as of December 22, 2005 (“First Amendment”; the Original Agreement
together with the First Amendment shall hereinafter be collectively referred to
as the “Agreement”). Capitalized terms not defined herein shall have the meaning
ascribed to such terms in the Agreement.
AGREEMENT

1.   Section 2.3.1 of the Agreement is hereby deleted and replaced in its
entirety with the following:

2.3.1 Inventory Levels. During the term of this Agreement, McKesson will use its
best efforts to maintain an inventory level of ** inventory level shall be
referred to herein as the “SKU Inventory Level”). The SKU Inventory Level shall
be based on EDI 852 reports. Each SKU Inventory Level shall include Product
located at both the SRC and all other facilities where Product is stored or
warehoused. If at any time the inventory level of a particular SKU exceeds the
SKU Inventory Level **, the Parties shall use best efforts to work together to
maintain the inventory level for such SKU at the SKU Inventory Level.

2.   Section 2.3.2 of the Agreement is hereby deleted and replaced in its
entirety with the following:

2.3.2 Purchase Limits. Connetics agrees to ship any McKesson purchase order in
full with respect to any SKU of Product provided the purchase order is
consistent with the SKU Inventory Level. Connetics has the right to question any
purchase order that exceeds McKesson’s Average Weekly Movement or that is not
consistent with the SKU Inventory Level and has the right to cancel any
quantities for which McKesson is not able to provide reasonable justifications
and/or explanations. Connetics will notify McKesson prior to canceling any
questionable purchase orders. McKesson will have three (3) business days to
provide reasonable justification and/or explanation for such questioned purchase
orders.

3.   Section 2.3.3 of the Agreement is hereby deleted and replaced in its
entirety with the following:

2.3.3 Weekly Purchasing. During the term of this Agreement, McKesson will use
its best efforts to purchase Product weekly from Connetics based on the SKU
Inventory Level. The Parties do not intend that any reduction in inventory shall
be achieved by McKesson’s return of Product to Connetics.

4.   The remaining provisions of the Agreement shall continue in full force and
effect as though fully set forth in this Second Amendment. Any conflict between
the provisions of this Second Amendment and the Agreement shall be resolved in
favor of this Second Amendment.

**   Portions of this exhibit have been omitted and filed separately with the
Commission. Confidential treatment has been requested with respect to the
omitted portions.

 

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The Parties have duly executed this Second Amendment as of the day first written
above.

                    MCKESSON CORPORATION       CONNETICS CORPORATION
 
               
By:
  /s/ Robert V. James       By:   /s/ Greg Vontz
 
               
Name:
  Robert V. James       Name:   Greg Vontz
Title:
  V.P. Brand RX Product Mgmt       Title:   President & COO