exv10w26



 






Exhibit 10.26




Amendment No. 2 to

Amended and Restated Distribution and License Agreement




     This Amendment No. 2, dated December 3, 2004, to the Amended and Restated Distribution and
License Agreement, dated as of November 16, 2001 (the “Supply Agreement”), by and between Pharmion
GmbH, a Swiss limited liability company (“Pharmion”), and Celgene UK Manufacturing II Limited
(formerly, Penn T Limited), a corporation organized under the laws of England and Wales (“CUK”), as
amended by Amendment No. 1 to the Amended and Restated Distribution and License Agreement, dated
March 4, 2003, by and between Pharmion and CUK (“Amendment No. 1”), and as supplemented by the
Supplementary Agreement to the Amended and Restated Distribution and License Agreement, dated June
18, 2003, by and between Pharmion and CUK (the “Supplementary Agreement”).



     WHEREAS, Pharmion desires to reduce its future cost of purchasing Products under the Supply
Agreement and is willing to make a one-time payment to CUK in consideration of such reduction: and



     WHEREAS, in connection with such reduction in cost and one-time payment, Pharmion and CUK
desire to effect certain other changes in their relationship and, accordingly, Pharmion and CUK
wish to amend the Supply Agreement as provided below.



     NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein,
CUK and Pharmion hereby agree as follows:



     1. Definitions. All capitalized terms not otherwise expressly defined in this
Amendment shall have the meanings ascribed to such terms in the Agreement.



     2. Effectiveness. This Amendment shall become effective on the date hereof.



     3. Payment. Concurrently with the execution and delivery of this Amendment, and in
consideration therefor, Pharmion shall pay Seventy Seven Million U.S. Dollars ($77,000,000) to CUK
by wire transfer in immediately available funds (in accordance with written instructions heretofore
provided by CUK).



     4. Termination of Amendment No. 1 and Supplementary Agreement. Amendment No. 1 and
the Supplementary Agreement are hereby terminated and, except for amounts due and owing thereunder
for periods prior to the effective date of this Amendment, shall be of no further force or effect.



     5. Amendments to the Supply Agreement. The Supply Agreement is hereby amended as
follows:



 









 






	(a)  	The heading is amended and restated in its entirety to read as follows: “Product Supply
Agreement”.
	 
	(b)  	All references to “Penn” are deleted and replaced by “CUK”.
	 
	(c)  	The seventh recital paragraph is hereby amended and restated in its entirety to read as
follows:






          “WHEREAS, Pharmion and Celgene Corporation (“Celgene”) have entered into a
License Agreement dated March 7, 2001, pursuant to which Pharmion has acquired a
license to register, distribute, market, use and sell Celgene’s formulation of
Thalidomide in a territory including all countries in the world except the United
States, Canada, Mexico, Japan, and all provinces of China, other than Hong Kong.”




	(d)  	Article I is hereby amended as follows:






     (i) The definition of “Celgene Territory” is hereby amended to provide for the addition
of Korea, Taiwan and Hong Kong and restated in its entirety to read as follows:




          “ ‘Celgene Territory’ shall mean all the countries of the world except
the United States, Canada, Mexico, Japan, and all the provinces of China other than
Hong Kong.”




     (ii) A definition for “Contract Purchase Price” reading as follows is hereby added to
Article I:




          “ ‘Contract Purchase Price’ shall, as to each calendar quarter (or
period of less than a quarter either at inception or termination), be equal to (a)
fifteen and one half percent (15.5%) of Net Sales of Products in the Territory
during such period, less (b) the Initial Invoice Price paid by Pharmion for units of
Products sold during such period (as charged to Pharmion by CUK in accordance with
Section 6.1(a) based upon a “first-in/first-out” accounting of Pharmion’s Products
inventory).”



     (iii) A definition for “Initial Invoice Price” reading as follows is hereby added to
Article I:




          “ ‘Initial Invoice Price’ shall have the meaning set forth in Section
6.1(a).”




     (iv) The definition of “Minimum Royalty” is hereby deleted in its entirety.




     (v) The definition of “Penn Territory” is hereby amended and restated in its entirety
to read as follows:



- 2 -









 






          “ ‘CUK Territory’ shall mean all countries throughout the world, with
the exception of the United States and Canada.”




     (vi) A definition for “Special Authorizations” reading as follows is hereby added to
Article I:




          “ ‘Special Authorizations’ shall have the meaning set forth in Section
7.3.”




	(e)  	The last sentence of Section 2.1 is hereby amended and restated in its entirety to read as
follows:






          “Without limiting the foregoing, during the term of this Agreement, CUK will
not manufacture (or cause to be manufactured) any formulation of Thalidomide for
distribution or sale by any Person other than Pharmion within the CUK Territory,
provided that, CUK may manufacture formulations of Thalidomide using the
Celgene Technology for distribution or sale by Celgene (or a distributor or licensee
of Celgene) within Mexico, Japan and all provinces of China other than Hong Kong.”




	(f)  	Section 2.4 is hereby deleted in its entirety.
	 
	(g)  	The last sentence of Section 3.6 is hereby amended and restated in its entirety to read as
follows:






          “Correspondingly, CUK shall not actively export any Products into the Territory
except (a) to Pharmion and (b) to Celgene (or one of its subdistributors or
licensees) as provided in Section 2.1 with respect to Mexico, Japan and all
provinces of China other than Hong Kong.”




	(h)  	Sections 11.3, 12.1 and 13.3 are amended to replace, unless the context otherwise requires,
each reference therein to “Pharmion” with “Pharmion and its Affiliates”.
	 
	(i)  	Article VI is hereby amended and restated in its entirety to read as follows:





“Article VI




PRODUCT PRICING; PAYMENT




     Section 6.1 Purchase Price. Pharmion shall pay for the purchase of Products from CUK
in the manner described below:




	 	(a)  	Initial Invoice Price. For each shipment of Products,
CUK shall invoice Pharmion and Pharmion shall pay to CUK the then applicable
Minimum Price times the number of units of Product included in such shipment
(the “Initial Invoice Price”). Pharmion shall pay for each shipment of
Products at the Initial Invoice Price within thirty (30) days from the date of
invoice for each shipment, which shall not be earlier than the date of
shipment.




- 3 -









 






	 	   	Such invoicing shall be subject to annual audit by Pharmion, and adjustment, if
appropriate, as provided in Section 15.3.
	 
	 	(b)  	Quarterly Payments. Pharmion shall pay the Contract
Purchase Price for Products sold by CUK to Pharmion (except as specifically
provided in Section 7.4(b)), based upon Pharmion’s Net Sales of Products, as
follows:






	 	(i)  	Quarterly Payments. Payments in
respect of the Contract Purchase Price shall be calculated and paid to
CUK quarterly, and shall be due as to Net Sales within any of the
United Kingdom, Germany or Australia forty-five (45) days following the
end of each calendar quarter and as to Net Sales elsewhere within
ninety (90) days following the end of each calendar quarter.
	 
	 	(ii)  	Net Sales Reports. Pharmion shall
submit quarterly Net Sales reports to CUK within forty-five (45) days
following the end of each calendar quarter. Such reports shall
include, but not be limited to:






	 	(1)  	An accounting of Net Sales within
the Territory during such quarter on a country by country basis;
	 
	 	(2)  	An accounting of the purchase
price of the units of Products sold during such quarter; and
	 
	 	(3)  	An accounting of Net Sales set
out in clauses (1) and (2) above (in U.K. Pounds Sterling) and
the calculation of the Contract Purchase Price owing to CUK
pursuant to this Section 6.1 (in U.K. Pounds Sterling),
including, if applicable, the exchange rates used in determining
the amount of U.K. Pounds Sterling.






	 	(c)  	Invoices for Contract Purchase Price. If required by
Pharmion, CUK shall submit a written invoice addressed to Pharmion for the
quarterly Contract Purchase Price to be paid by Pharmion under this Agreement.
CUK shall submit these written invoices to Pharmion within a reasonable period
following the request from Pharmion and based upon the last quarterly Net Sales
report from Pharmion provided to CUK in accordance with Section 6.1(b)(ii).
	 
	 	(d)  	Unit Price Reports. Pharmion shall provide Celgene on a
quarterly basis with a report showing the average price at which it sold
Products on a per unit, country by country basis within forty-five (45) days
following the end of each calendar quarter.
	 
	 	(e)  	Withholding Tax. Any tax that Pharmion is required to
pay or withhold from payments in respect of the Contract Purchase Price to be
paid to CUK under this Agreement shall be deducted from the amount otherwise
due, provided that, in regard to any such deduction, Pharmion shall give




- 4 -









 






	 	   	CUK such assistance as may be reasonably necessary to enable or assist CUK
to claim exemption therefrom or a reduction thereof and shall provide CUK
with an official tax certificate as soon as possible.
	 
	 	(f)  	Currency. All prices for Products shall be quoted by
CUK to Pharmion, and payments by Pharmion to CUK under this Agreement shall be
made, in U.K. Pounds Sterling.”
	 
	 	(g)  	Pricing. CUK has expressed a concern that as a result
of macroeconomic conditions it could, at some point, potentially be at risk of
experiencing increases in its costs that were beyond its control, thereby
causing its fully allocated cost of manufacture of the Product to exceed 3% of
Net Sales (a “Macroeconomic Cost Increase”), and correspondingly reducing CUK’s
net margin on the Contract Purchase Price below 12.5% of Net Sales. Pharmion
hereby acknowledges that it would take such Macroeconomic Cost Increases into
account and would make a reasonable effort to increase its pricing of the
Products to compensate CUK for any such cost increases, to the extent feasible
and after taking into consideration relevant pricing factors which include, but
are not limited to, customer demand, competition, regulatory requirements and
third-party reimbursement. Notwithstanding the foregoing, CUK acknowledges that
Pharmion retains the sole right to make pricing decisions regarding the
Products in the Territory.






	(j)  	Article VII is hereby amended and restated in its entirety to read as follows:





“Article VII




BELGIUM AND FRANCE




     Section 7.1 Current Sales in Belgium and France. Pharmion’s subsidiary, Pharmion
Développement (“Développement”) currently sells in Belgium and France a formulation of Thalidomide
produced by and purchased from its former affiliate Laphal Industrie (“Industrie”). Such purchases
and sales have been made pursuant to previously agreed upon concessions from CUK to Pharmion set
out in Amendment No. 1.



     Section 7.2 Commercially Reasonable Efforts. Pharmion shall continue to use
commercially reasonable efforts (i) to cause the existing ATU (autorisation temporaire
d’utilisation), as well as any other temporary, specials or named-patient authorizations pursuant
to which Développement sells Thalidomide purchased from Industrie in Belgium and France to be
amended to provide for the substitution of a Thalidomide formulation produced by CUK (preferably
the Celgene Product, but otherwise the CUK Product) for the formulation being produced by
Industrie, and (ii) consistent with regulatory constraints, to cause such amendments to be
effective as early as possible, consistent with Pharmion’s non-terminable obligations under the
supply contract between Pharmion and Industrie.



- 5 -









 





     Section 7.3 Purchases From Industrie. Until the earlier of (a) the effectiveness of
the amendments described in Section 7.2 above, and (b) the Approval Date with respect to Belgium
and France, and notwithstanding the contrary provisions of Sections 3.1 and 5.1 of this Agreement,
Développement shall have the right to continue to purchase its requirements of Thalidomide from
Industrie and to distribute Thalidomide under Développement’s ATUs and other temporary, specials or
named-patient authorizations (collectively, “Special Authorizations”) in Belgium and France. From
and after the earlier of such dates, Pharmion shall cause Développement to sell only Products
originally sourced from CUK.



     Section 7.4 Payments. In respect of sales of Thalidomide by Développement in Belgium
and France:




	 	(a)  	Thalidomide Purchased From Industrie. In consideration
of (i) the concession from CUK to allow Pharmion to continue to utilize
Thalidomide purchased from Industrie and (ii) to induce CUK to maintain an
adequate manufacturing capacity to permit the shift contemplated by Section
7.2, Pharmion shall pay to CUK the following amounts in respect of Net Sales of
Thalidomide by Développement in Belgium and France until the earlier of (x) the
effectiveness of the amendments described in Section 7.2 and (y) the Approval
Date with respect to Belgium and France: as to all Net Sales in Belgium or
France for Thalidomide, Pharmion shall pay to CUK the Contract Purchase Price
in a manner consistent with Section 6.1; provided, that, for purposes
of computing the Contract Purchase Price and the Initial Invoice Price
applicable to this Section 7.4(a), the relevant fully allocated cost of product
sold shall be the lesser of (A) Développement’s purchase price of product sold
for the quarter, or (B) one hundred twenty percent (120%) of the equivalent
cost of units sold during the quarter as if such units had been purchased from
CUK, and “Territory” shall mean Belgium and France.
	 
	 	(b)  	Thalidomide Purchased From CUK. During the period
commencing on the effectiveness of the amendments described in Section 7.2 and
ending on the Approval Date, Pharmion shall pay to CUK in respect of Net Sales
the Contract Purchase Price in a manner consistent with Section 6.1.”






	(k)  	The notice address for Pharmion Corporation contained in Section 15.9 shall be replaced with
the following:




Pharmion Corporation

2525 28th Street

Boulder, CO 80301

Attention: Chief Executive Officer

Fax No.: (720) 564-9191



     6. Additional Provisions. Pharmion and CUK each hereby agree to negotiate in good
faith a further amendment to the Supply Agreement that will provide a greater level of



- 6 -









 




detail with regard to a number of manufacturing, production, capacity and scheduling issues,
including (a) Pharmion’s desire to incorporate the following contractual commitments into the
Agreement: (i) a formal recognition by CUK of the applicable manufacturing standards (including,
but not limited to, ICH, EC Directives and cGMP) for Products sold in the Territory; (ii) an
obligation on the part of CUK to make available a minimum manufacturing capacity for production of
Products under the Agreement, as well as provisions dealing with reasonable allocations among
customers of CUK in the event of shortages of supply; (iii) a formalization of standards for a
minimum remaining shelf life of the Products at the time of delivery to Pharmion; (iv) a
requirement on the part of CUK to maintain a mutually agreed upon level of safety stock of the
active pharmaceutical ingredient, raw materials and components; (v) a process by which CUK will
accept Pharmion purchase orders; (vi) a requirement on the part of CUK to notify Pharmion of the
manufacturing and delivery schedule; (vii) an expansion of Pharmion’s right to secure a second
source of thalidomide in the event of a failure by CUK to supply Products; (viii) clarifications to
the procedures for implementing changes to the manufacturing process and allocation of costs for
required and discretionary changes to such process; (ix) responsibility for environmental, safety
and health aspects of manufacturing thalidomide and (x) obligations of CUK to perform additional
services, such as stability testing programs, management of sample retention and package design;
and (b) CUK’s desire to incorporate the following contractual commitments into the Agreement: (i)
the sourcing of Product by CUK from one or more manufacturers other than PPSL, and (ii) to the
extent permitted by applicable law, a requirement of Pharmion to safeguard that Product supplied to
it by CUK or Industrie is not distributed in the United States, Canada, Mexico, Japan or any of the
provinces of China other than Hong Kong. Notwithstanding the preceding sentence, Pharmion
acknowledges that CUK procures the supply of Products from an unaffiliated entity, PPSL, pursuant
to the terms of a Technical Services Agreement dated October 21, 2004 between CUK and PPSL (the
“TSA”) and that the negotiation of the foregoing contractual commitments are subject to the rights
and obligations of CUK as provided in the TSA. It is the intention of the parties that such
further amendment be entered into no later than six (6) months from the date hereof.




     7. Unmodified Provisions. Except as expressly modified by this Amendment and
Amendment No. 1, all terms and conditions of the Supply Agreement shall remain in full force and
effect.



     8. Governing Law; Choice of Forum. The parties agree that this Agreement shall be
governed by and construed in accordance with the laws of England and Wales.



     9. Captions. All captions herein are for convenience only and shall not be
interpreted as having any substantive meaning.



[Signature page follows.]




- 7 -









 








     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their
authorized representatives, in duplicate on the dates written herein below.



	 	 	 	 	 	 	 
	Pharmion GmbH	 	Celgene UK Manufacturing II, Limited
	 
	 	 	 	 	 	 
	By

	 	/s/ Patrick J. Mahaffy


	 	By
	 	/s/ Sol J. Barer








- 8 -