Exhibit 10.5(b)


 


WHENEVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH
OMISSIONS ARE DENOTED BY AN ASTERISK *), SUCH CONFIDENTIAL INFORMATION HAS BEEN
SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.


 


 


SUPPLY AGREEMENT


 


BETWEEN


 


ALKERMES,
INC.


 


AND


 


CEPHALON,
INC.


 





















 


WHENEVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH
OMISSIONS ARE DENOTED BY AN ASTERISK *), SUCH CONFIDENTIAL INFORMATION HAS BEEN
SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A
REQUEST FOR CONFIDENTIAL TREATMENT.


 


SUPPLY
AGREEMENT


 


THIS SUPPLY AGREEMENT (“Agreement”) is made and entered
into, effective as of June 23, 2005 (the “Effective Date”), by and
between Alkermes, Inc., a Pennsylvania corporation, having a principal
place of business at 88 Sidney Street, Cambridge, MA 02139 (“Alkermes”),
and Cephalon, Inc., a Delaware corporation having a principal place of
business at 41 Moores Road, Frazer, Pennsylvania 19355 (“Cephalon”)
(collectively, the “Parties” or individually, a “Party”).


 


RECITALS:


 


WHEREAS, concurrently
with the execution of this Agreement, Alkermes and Cephalon have entered into
the License and Collaboration Agreement (as defined below), pursuant to which
Alkermes granted Cephalon a semi-exclusive license to commercialize and sell
the Product (as defined below) in the Territory (as defined below);


 


WHEREAS, under the
terms of the License and Collaboration Agreement, Alkermes has an obligation to
manufacture and supply the Product to Cephalon for development and commercial
sale; and


 


WHEREAS, Alkermes
hereby agrees to manufacture and supply, and Cephalon hereby agrees to
purchase, the Product on the terms and conditions set forth herein.


 


NOW, THEREFORE, in
consideration of the premises and the mutual covenants and agreements set forth
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties agree as follows:


 


Article 1

DEFINITIONS


 


Capitalized terms used in
this Agreement, whether used in the singular or plural, shall have the meanings
set forth below, unless otherwise specifically indicated herein.  Capitalized terms used in this Agreement and
not defined in this Agreement shall have the meanings ascribed to them in the
License and Collaboration Agreement.  In
the event of a conflict between the definition of a term contained herein and
the definition of such term in the License and Collaboration Agreement, this
Agreement shall control.


 


1.1          “Act” shall mean the United States Food, Drug and
Cosmetic Act, as amended from time to time, and the regulations promulgated
thereunder including the guidelines and guidance issued by the FDA.


 










	
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1.2          “Additional
Components”
shall mean all components supplied together with the Product and the Diluent that are necessary to reconstitute or administer
the Product, or that are necessary for final packaging.


 


1.3          “Affiliates” shall mean with respect to
any Party, shall mean any entity that controls, is controlled by, or is under
common control with such Party, but only for so long as such control shall
continue.  For these purposes, “control”
shall refer to:  (i) the possession,
directly or indirectly, of the power to direct the management or policies of an
entity, whether through ownership of voting securities, by contract or
otherwise, or (ii) the ownership, directly or indirectly, of at least
fifty percent (50%) of the voting securities or other ownership interest of an
entity.


 


1.4          “Alkermes Manufacturing Facility” shall mean the facility
owned and operated by Alkermes or an Affiliate located in Wilmington, Ohio, or
any other manufacturing facility owned and operated by Alkermes or an Affiliate
where the Manufacture of the Product is performed for supply to Cephalon
pursuant to this Agreement; provided, however, an Alkermes Manufacturing
Facility shall not include a manufacturing facility owned and operated by
Alkermes or an Affiliate that is constructed for the Manufacture of the Product
for supply outside the Territory.


 


1.5          “Alkermes Vivitrex Manufacturing
Know-How” shall mean the Alkermes Manufacturing Know-How defined in the License
and Collaboration Agreement that is necessary or directly related to the
Manufacture of the Product.


 


1.6          “Business Day” shall mean a day on which banking institutions in
New York, New York are open for business


 


1.7          “Certificate of Analysis and
Conformity” shall mean the certificate for each batch or lot of Product
delivered hereunder in the form contemplated by Section 3.11 of this
Agreement.


 


1.8          “cGMPs” shall mean the then
current good manufacturing practices promulgated by the FDA under the U.S.
Food, Drug and Cosmetic Act, 21 C.F.R. Section 210-211, as
amended from time to time.


 


1.9          “Clinical Requirements” shall mean the quantities
of the Product, Placebo and Diluent required for the conduct of pre-clinical
studies and/or Clinical Studies of Product in the Field pursuant to a
Development Plan.


 


1.10        “Clinical Studies” shall have the meaning
set forth in the License and Collaboration Agreement.


 










	
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1.11        “Commercial Requirements” shall mean the quantities
of the Product required for (i) for commercial sale by Cephalon and its
Affiliates in the Field in the Territory pursuant to the License and
Collaboration Agreement or (ii) for compassionate use, use in
investigator-sponsored Clinical Studies or post marketing clinical studies in
the Field in the Territory pursuant to the License and Collaboration Agreement.


 


1.12        “Commercialization” (including variations
such as “Commercialize” and the like) shall mean the performance by a Party or
its Affiliates of any and all activities directed to promoting, marketing,
importing, exporting, distributing, selling or offering to sell (including pre-marketing),
sampling, post-marketing clinical trials and post-marketing drug surveillance
of the Product in the Field in the Territory.


 


1.13        “Commercialization Plan” shall have the meaning set
forth in the License and Collaboration Agreement.


 


1.14        “Commercially Reasonable Manufacturing
Efforts” shall mean [**].


 


1.15        “Confidential Information” shall have the meaning
set forth in the License and Collaboration Agreement with respect to information and materials furnished by a
Party to the other Party pursuant to this Agreement.


 


1.16        “CT” shall mean a
commercialization team established pursuant to the License and Collaboration
Agreement.


 


1.17        “Development FTE Rate” shall have the meaning
set forth in the License and Collaboration Agreement.


 


1.18        “Development Plan” shall have the meaning
set forth in the License and Collaboration Agreement.


 


1.19        “Diluent”
shall mean any injectable liquid pharmaceutical
formulation required to reconstitute the Product prior to injection, filled in
a primary container.


 


1.20        “Dosage Unit” shall mean a unit of the
Product or the Finished Product determined by the amount of the single dose of
Naltrexone contained therein.


 


1.21        “DT” shall mean a development
team established pursuant to the License and Collaboration Agreement.


 


1.22        “FDA” shall mean the United
States Food and Drug Administration or any successor agency.


 










	
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1.23        “Field” shall mean the treatment,
prevention or diagnosis of any human disease, disorder or condition, including
the treatment and/or prevention of alcohol abuse/dependence.


 


1.24        “Finished Product” shall mean a finished,
packaged, labeled final Dosage Unit of the Product plus Diluent and syringes.


 


1.25        “Firm PO” shall have the meaning set
forth in Section 3.8(a).


 


1.26        “Firm Zone” shall have the meaning set
forth in Section 3.7(d).


 


1.27        “[**] -Year Forecast” shall mean a [**] year annual forecast of the Product Requirements and
Placebo Requirements in each year of such forecast, starting with the next
calendar year (i.e., the calendar year following
the due date of such forecast), provided that the forecast for the first [**] months shall be broken down by month.


 


1.28        “Fully Burdened Manufacturing Cost” shall
mean the costs incurred (i.e., paid or accrued) by a Party, its Affiliates or
agents in the Manufacture of a Product, Placebo or Diluent, as applicable,
which shall be [**].  Fully Burdened Manufacturing Cost
shall exclude [**] that
are required to obtain Regulatory Approval for the Medisorb Product for the
Initial Indication (which costs shall be borne solely by Alkermes).  In addition, for the avoidance of doubt, any
Manufacturing development costs that are included in Shared Expenses as
Development Costs shall not be included as part of the Fully Burdened
Manufacturing Cost.


 


1.29        “FTE” shall have the meaning
set forth in the License and Collaboration Agreement.


 


1.30        “Government Authority” shall mean any court, tribunal, agency, department,
legislative body, commission or other instrumentality of any federal, state,
county, city or other political subdivision in the Territory.


 


1.31        “JSC” shall mean the joint
steering committee established pursuant to the License and Collaboration
Agreement.


 


1.32        “Laws” or “Law” shall
mean all applicable laws, statutes, rules, regulations, ordinances and other
pronouncements having the binding effect of law of any applicable Government
Authority, including the Act.


 










	
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1.33        “License and Collaboration Agreement” shall mean that certain
License and Collaboration Agreement by and between the Parties entered into as
of June 23, 2005, as such agreement may be amended from time to time.


 


1.34        “Manufacturing” (including variations such
as “Manufacture”) shall mean the performance of any and all activities directed
to producing, manufacturing, processing, filling, finishing, packaging, labeling,
quality control, quality assurance, testing and release, shipping and storage
of the Product, Finished Product, Placebo, or Diluent as applicable.


 


1.35        “Naltrexone” shall mean [**].


 


1.36        “NDA” shall mean the New Drug
Application number 21-897 filed with the FDA by Alkermes
on March 31, 2005 with respect to the Product.


 


1.37        “Outbound Costs” shall mean any outbound
costs associated with the delivery of Product or Placebo including costs
related to transport, cold storage shipping containers and external storage (if
required) of Product or Placebo, such costs including freight, duty, insurance
and warehousing.


 


1.38        “Placebo” shall mean an inactive
substitute for the Product that does not contain measurable quantities of
Naltrexone.


 


1.39        “Placebo Requirements” shall means the quantities
of Placebo required for the conduct of pre-clinical studies and/or Clinical
Studies of the Product in the Field pursuant to a Development Plan.


 


1.40        “Procedures” shall mean the procedures
for manufacturing, control and testing the Product as set forth in the NDA, as
such procedures may be amended by amendment to such applications from time to
time.


 


1.41        “Product” shall mean the injectable
pharmaceutical product containing Naltrexone  utilizing Alkermes’ Medisorb® sustained-release technology as described
in the NDA.


 


1.42        “Product Requirements” shall mean Clinical
Requirements plus Commercial Requirements.


 


1.43        “Quality Agreement” shall have the meaning set
forth in Section 3.12.


 










	
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1.44        “Recall” shall mean any action by
Alkermes or Cephalon to recover title to or possession of or to prevent the
distribution, prescription, consumption or release of a Finished Product or
Product sold or shipped to Third Parties. 
The term “Recall” also includes the failure by Alkermes or
Cephalon to sell or ship a Finished Product or Product to Third Parties that
would have been subject to recall if it had been sold or shipped.


 


1.45        “Regulatory Approval” shall mean any approvals
of the FDA necessary for the manufacture, marketing or sale of the Product in
the Territory.


 


1.46        “Rolling Monthly Forecast” shall mean a rolling [**]  month forecast specifying Product Requirements and Placebo
Requirements for each month of such forecast, starting with the calendar month
following the due date of such forecast.


 


1.47        “Seizure” shall mean any action by
the FDA to detain or destroy a Finished Product or Product or prevent the
distribution, prescription, consumption or release of a Finished Product or
Product.


 


1.48        “Shared Expenses” shall have the meaning
set forth in the License and Collaboration Agreement.


 


1.49        “Specifications” shall mean the
specifications for the manufacture, release, storage, handling and packaging of
the Product as set forth in the NDA, as such specifications may be amended from
time to time as provided herein.


 


1.50        “Strategic Forecast” shall mean a reasonable
estimate of the long-range (at least [**]  years)
manufacturing capacity forecast for the Alkermes Manufacturing Facility for
supply to Cephalon pursuant to this Agreement, the current version of which is
attached as Exhibit A.


 


1.51        “Supply Team” shall have the meaning set
forth in Section 2.1.


 


1.52        “Technology Transfer Agreement” shall have the meaning set
forth in Section 6.3.


 


1.53        “Term” shall have the meaning
set forth in Section 6.1.


 


1.54        “Territory” shall mean the United
States of America, its territories and possessions, including the Commonwealth
of Puerto Rico. 


 


1.55        “Third Party” shall mean any entity
other than the Parties or their


 










	
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respective Affiliates.


 


Where words and phrases
are used herein in the singular, such usage is intended to include the plural
forms where appropriate to the context, and vice versa.  The words “including”, “includes”
and “such as” are used in their non-limiting sense and have the same
meaning as “including without limitation” and “including but not limited to”.  References to Articles, Sections,
subsections, and clauses are to the same with all their subparts as they appear
in this Agreement.  “Herein” means
anywhere in this Agreement.  “Hereunder”
and “hereto” means under or pursuant to any provision of this Agreement.


 


Article 2


SUPPLY TEAM


 


2.1          Establishment of Supply Team.  The JSC shall establish a supply team (the “ST”)
no later than [**]  days after the Effective
Date to coordinate and implement all activities for the Manufacture of the
Product for sale to Cephalon.  One
representative from each Party shall be designated as that Party’s team leader
to act as the primary ST contact for that Party.  The ST shall consist of an equal number of
representatives of each Party as are reasonably necessary to accomplish the
goals of the ST hereunder.  Such
representatives may include individuals with expertise and responsibilities in
the areas of quality
control, quality assurance, operational planning, supply chain management and
regulatory affairs.  Either Party may replace any
or all of its representatives at any time upon notice to the other Party.


 


2.2          Supply Team Responsibilities.  The ST shall be responsible for:


 


(i)            implementing the provisions set forth in this Agreement
in a manner consistent with Alkermes’ Manufacture and supply obligations
hereunder;


 


(ii)           pursuant to Section 3.5, reviewing the Strategic
Forecast and the long range plan for Commercialization of the Product in the
Territory;


 


(iiii)         developing a Manufacturing strategy for
the Product, including an annual Strategic Forecast, for review and approval by
the JSC;


 


(iv)          formulating a plan for Manufacturing development to reduce
Manufacturing cost and enhance Manufacturing output and associated annual
budgets and any substantive amendments thereto for incorporation into the
Development Plans;


 


(v)           reviewing quality issues and ongoing quality
control/quality assurance programs;


 










	
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(vi)          implementing all Manufacturing activities pursuant to the
Development Plans approved by the JSC;


 


(vii)         exchanging information and facilitating cooperation and
coordination between the Parties as they exercise their respective rights and
meet their respective obligations under the Development Plans, the
Commercialization Plans and this Agreement;


 


(viii)        providing status updates and identifying
critical issues to the JSC regarding Manufacturing activities; and


 


(ix)           performing such other functions as appropriate to further
the purposes of this Agreement and the License and Collaboration Agreement as
determined by the Parties.


 


2.3          Supply Team Procedures.  The Alkermes team leader shall serve as the
chairperson of the ST.  The chairperson
shall establish the timing and agenda for all ST meetings and shall send notice
of such meetings, including the agenda therefor, to all ST members; provided,
however, either Party may request that specific items be included in the
agenda and may request that additional meetings be scheduled as needed.  The ST will meet at least once each calendar
month, or as agreed by the ST, for the first [**]
years following the Effective Date, and at least once each calendar quarter, or
as agreed by the ST, thereafter.  The
location of regularly scheduled ST meetings shall alternate between the offices
of the Parties, unless otherwise agreed. 
Meetings may be held telephonically or by videoconference.  A quorum of at least half the ST members
appointed by each Party shall be present at or shall otherwise participate in
each ST meeting.  Alkermes shall appoint
one person (who need not be a member of the ST) to attend the meeting and
record the minutes of the meeting in writing. 
Such minutes shall be circulated to the Parties promptly following the
meeting for review, comment and approval.


 


2.4          Supply Team Decision Making.  As a general principle, the ST will operate by
consensus with each Party collectively having one vote.  In the event that the ST members do not reach
consensus with respect to a matter that is within the purview of the ST within [**] days after they have met and attempted to reach such
consensus, such matter shall be presented to the JSC for resolution; provided,
however, that to the extent any matters are required by Law or by safety
concerns with respect to a Product to be resolved within a shorter period of
time, the periods set forth in this Section 2.4 and in Section 2.1.4
and Article 12 of the License and Collaboration Agreement shall be
shortened as appropriate to permit the resolution of such matters within the
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2.5          Limitation on Supply Team Decision
Making.  Neither the ST nor the JSC
shall, without the consent of Cephalon, have any authority to modify or reduce
Alkermes’ obligation under this Agreement to use Commercially Reasonable
Manufacturing Efforts as set forth in Section 3.15 or to amend any
provision of this Agreement. 
Notwithstanding anything to the contrary in the License and
Collaboration Agreement, Alkermes shall not have any right to resolve any
Reserved Dispute in any manner that modifies or reduces Alkermes’ obligation
under this Agreement to use Commercially Reasonable Manufacturing Efforts as
set forth in Section 3.15 or to amend any provision of this Agreement.


 


Article 3

SUPPLY OF PRODUCTS


 


3.1          Purchase and Sale of Product.  During the Term, and subject to the terms and
conditions hereof, Alkermes agrees to supply to Cephalon, and Cephalon agrees
to purchase exclusively from Alkermes, Cephalon’s Product Requirements.
 During the Term and subject to
applicable Law, Alkermes agrees to use commercially reasonable efforts to limit
the ability of Third Parties to which Alkermes supplies Product for sale and
distribution in the ROW Territory [**].  Alkermes agrees that, if at any
time during the Term Alkermes is unable to fully satisfy worldwide demand for
the Product, [**].


 


3.2          Manufacture of the Product.  Alkermes shall Manufacture the Product for supply to
Cephalon.  Alkermes
shall Manufacture, or have Manufactured by a designated Third Party, the Diluent, the Additional Components, and the Finished
Product (packaging and labeling of the Product) for supply to Cephalon.


 


3.3          Manufacturing Development.  Alkermes shall conduct Manufacturing
development for the Product to reduce Manufacturing cost and enhance Manufacturing
output.  The ST shall submit a plan and
budget for such Manufacturing development to the DT, which in turn shall
incorporate this plan into the Development Plan submitted to the JSC for review
and approval.  Such plan and budget shall
be consistent with, and reasonably calculated to enable Alkermes to perform,
its obligations pursuant to Section 3.15. 
Alkermes shall then conduct Manufacturing development in accordance with the Development Plan and
budget approved by the JSC.


 


3.4          Manufacturing Facility.  Alkermes shall Manufacture the Product at the
Alkermes Manufacturing Facility.  In
accordance with the terms and conditions set forth in the Quality Agreement, Cephalon shall have the right from time to time,
upon reasonable advance notice to Alkermes, to inspect the Alkermes
Manufacturing Facility, to review all records kept by Alkermes relating to the
Manufacture of Product hereunder and to observe Alkermes’ conduct of
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Product.


 


3.5          Strategic
Forecast.  The ST will formulate the initial Strategic
Forecast within [**] days of the Effective Date.  Promptly after the formulation of the
long-range Commercialization plan for the Product pursuant to the License and
Collaboration Agreement, the CT shall forward the long-range Commercialization
plan to the ST.  The ST will review the
Strategic Forecast in light of such long-range Commercialization plan and
promptly notify the CT if the ST believes that the Commercialization Plan does
not reflect good faith projections of demand for the Product or requires
Manufacturing efforts or resources beyond Alkermes’ obligations pursuant to Section 3.15
or the manufacturing capacity as described in the Strategic Forecast.  In such case the ST team leaders, the DT team
leaders and the CT team leaders will promptly discuss appropriate revisions to
the long-range Commercialization plan and/or the Strategic Forecast, including
the development of additional capacity for Manufacture of the Product in
accordance with Section 5.3.


 


3.6          Labeling and Packaging.  At the time of Cephalon’s submission of its forecast pursuant to Section 3.7,
Cephalon also shall provide Alkermes with the images and text developed by
Cephalon that are to be used by Alkermes in producing labeling, inserts and
packaging for the Product.  Dimensions
and other physical attributes of such labeling, inserts and packaging shall be
subject to the approval of Alkermes, which approval shall not be unreasonably
withheld or delayed.  In addition as
holder of the Regulatory Approval for the Product, Alkermes shall have the
right to confirm that labels, inserts and packaging for the Product are in
conformity with the Regulatory Approval and applicable Laws.


 


3.7          Forecasts.


 


(a)           Initial Forecasts. 
Within [**] days of the
Effective Date, the CT shall provide to the ST both a Rolling Monthly Forecast
and a [**]-Year Forecast of
expected Product Requirements and Placebo Requirements.


 


(b)           Forecasts Due Periodically. 
Thereafter during the Term, the CT shall provide to the ST:


 


(i)            a Rolling Monthly Forecast by the end of each calendar
quarter; and


 


(ii)           a [**]-Year
Forecast, on or before August 15th of each year.


 


(c)           Forecast Breakdowns.  All
of the forecasts provided under this Agreement shall specify Placebo
Requirements by the number of units and shall break down Product Requirements
covered by such forecast by Clinical Requirements and


 










	
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Commercial Requirements, and by the number of units and Dosage Units of
the Product.


 


(d)           Firm Zone; Volume Limitations.  [**].  Notwithstanding
the foregoing, Alkermes will not be obligated to
Manufacture volumes of Product or Placebo that are in excess of Alkermes’
manufacturing capacity as established by the Strategic Forecast from time to
time.


 


3.8          Firm Purchase Orders for Product.


 


(a)           Delivery of POs.  Cephalon shall deliver firm purchase orders
(each, a “Firm PO”) for Product Requirements and Placebo
Requirements to Alkermes at least [**] prior to the requested delivery date for Product and Placebo.  Cephalon shall submit on a monthly basis
separate Firm POs for Commercial Requirements, Clinical Requirements and
Placebo Requirements.  The details of a
Firm PO shall be consistent with the volume requirements for Product and
Placebo established by the Firm Zone. 
Cephalon agrees that in the event that a Firm PO for Product or
Placebo differs significantly from the volume requirements established by the
Firm Zone, either by specifying a larger amount of Product or Placebo or an
earlier delivery date, Alkermes may not be able to deliver such Product or
Placebo in accordance with the terms of such Firm PO, but shall use its
Commercially Reasonable Manufacturing Efforts to deliver such Product or
Placebo as soon as possible and shall confer with Cephalon regarding such delivery.


 


(b)           Batch Quantities.  The Parties agree that
notwithstanding the quantities specified in the Firm POs for Product
Requirements and Placebo Requirements, Alkermes
shall be obligated to Manufacture and supply Product only in full batch
quantities and may Manufacture and supply Product in an amount that is greater
or less than the amount specified in a Firm PO as a result of the Manufacture
and supply of such full batch quantities.


 


(c)           Terms.  Each Firm PO shall,
subject to the limitations set forth in Section 3.8(a), specify the (i) quantity
of Product, in number of units of each Dosage Unit, and the number of units of
Placebo; (ii)  month of delivery; (iii) carrier; and (iv) destination
or destinations in the Territory.  The
only terms of a Firm PO that shall be binding on the Parties shall be
those identified in this Section 3.8(c) that are set forth on the
face of such Firm PO.  No
modification or amendment to this Agreement shall be effected by or result from
the receipt, acceptance, signing or acknowledgment of any Party’s purchase
orders, quotations, invoices, shipping documents or other business forms
containing terms or conditions in addition to or different from the terms and
conditions set forth in this Agreement, and the terms of this Agreement shall
supersede any provision in any purchase order, specification or other document
that is in addition to or inconsistent with the terms of this Agreement.


 










	
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(d)           Acknowledgement.  If Alkermes has not notified
Cephalon within [**] Business
Days of receiving a Firm PO that the terms of such Firm PO are not in
accordance with the provisions of this Agreement and that Alkermes therefore
rejects such Firm PO, such Firm PO shall be deemed accepted.  In the event that Alkermes rejects a
Firm PO, the Parties will promptly consult with each other to resolve the
underlying issues as promptly as feasible, and such Firm PO will be
modified accordingly.  Once accepted,
Firm POs may neither be canceled nor modified by either Party, except as
expressly provided in this Agreement.


 


3.9          Delivery Dates.  Alkermes shall deliver the Product and Placebo in
accordance with Firm POs, as such Firm POs may have been modified with the
agreement of the Parties, solely in accordance with the provisions of this
Agreement.  If Alkermes reasonably
expects any delay in shipment to Cephalon, it shall promptly inform Cephalon of
such expected delay, shall immediately update the delivery schedule and
shall use its Commercially Reasonable Manufacturing Efforts to minimize the
delay.  [**].


 


3.10        Shipment.


 


(a)           Terms.  Alkermes shall ship the Product
to the destinations specified by Cephalon in the Territory.  Products shall be delivered FCA (Incoterms 2000)
Alkermes’ (or its contract manufacturer’s, if applicable) manufacturing
facility in the applicable month of delivery specified in the
Firm PO.  Alkermes shall arrange for
the delivery of the Product to the carrier specified in the applicable Firm PO.  Title and risk of loss shall pass to
Cephalon upon delivery of each order of Product to such carrier.  Notwithstanding anything to the
contrary, Cephalon shall be responsible, and pay Third Parties directly,
for all Outbound Costs from Alkermes’ (or its contract manufacturer’s, if
applicable) manufacturing facility to any destination or destinations specified
by Cephalon.  Alkermes shall pack and
address the Product in accordance with the Firm POs.


 


(b)           Shipping Documents. 
Alkermes will send with each shipment of the Product a packing list
containing the purchase order number, batch or lot number, manufacturing date,
expiry date, Dosage Unit and total quantity delivered.


 


(c)           Shelf Life of Product at Time of Shipment. 
Unless otherwise agreed by the Parties, once Alkermes is able to
establish a shelf life for the Product of greater than [**] from the date of Manufacture in accordance
with applicable Laws, Alkermes shall ensure that the Product shall have a
minimum of [**] of shelf life
remaining at the time that it is shipped to Cephalon; [**].


 


3.11        Compliance.  Alkermes shall be responsible for the Manufacture of
the


 










	
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Product in accordance with the Procedures, cGMPs and the
Quality Agreement.  Alkermes shall cause
the Finished Product to be Manufactured in accordance with the Procedures,
cGMPs and the Quality Agreement, and shall cause the Diluent and Additional
Components to be Manufactured in accordance with the cGMPs and the Quality
Agreement.  Alkermes shall obtain
representative samples from each batch of the Product produced by
Alkermes.  Alkermes shall assay and
analyze such samples in accordance with the Specifications and shall prepare a
Certificate of Analysis and Conformity that shall be delivered to Cephalon.  The Product supplied
hereunder shall be handled and stored by Cephalon in accordance with the
Specifications prior to any sale or distribution.


 


3.12        Quality Control and Quality Assurance.


 


(a)           Quality Agreement.  As
soon as possible, but in no case later than sixty (60) days following the
Effective Date, the Parties agree to negotiate in good faith and use diligent
efforts to enter into a Quality Agreement (“Quality Agreement”) setting
forth the individual responsibilities of Alkermes and Cephalon with respect to
the Manufacture of the Product.  The
Quality Agreement shall be reviewed annually by the Parties and, upon mutual
agreement, revised and updated as necessary. 
In the event of a conflict between the Quality Agreement and this
Agreement, this Agreement shall govern and control, unless otherwise expressly
provided in the Quality Agreement but in any case consistent with the standards
set forth in Section 3.11.


 


(b)           Alkermes Procedures. 
Alkermes shall number or cause to be numbered each shipment with a
manufacturer lot number that is traceable to all raw materials and/or
Additional Components used to Manufacture such Product.


 


(c)           Cephalon Procedures. 
Cephalon shall identify such Product with a vendor lot number that is
traceable to the shipment purchased from Alkermes.


 


3.13        Recalls or Seizures.  Alkermes shall be responsible for undertaking
any Recall of any Product or Finished Product and the Parties shall consult
with one another with respect to any proposed Recall; provided, however,
that a Recall shall be undertaken in the event that either Party believes a
Recall is necessary or prudent.  Each
Party shall also immediately notify the other Party of any Seizure of any
Product or Finished Product.  Alkermes
shall meet all regulatory requirements related to any such Recall or
Seizure.  Alkermes shall use Commercially
Reasonable Manufacturing Efforts to supply a quantity of Finished Products
sufficient to enable Cephalon to replace all Finished Products subject to the
Recall or Seizure.  Such replacement
Finished Products shall be delivered as soon as reasonably possible.  If the Product or Finished Product defect
causing the Recall or Seizure results primarily from a breach of Alkermes’
Manufacture and supply obligations hereunder, including the storage or
distribution of the Product or Finished Product by Alkermes prior to shipment,
then the


 










	
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cost and expenses of such Recall or Seizure, including the
cost of replacement Finished Products, shall be paid by Alkermes.  If the Product or Finished Product defect
causing the Recall or Seizure results primarily from Cephalon’s acts or
omissions, including the storage or distribution of the Product or Finished
Product after shipment, then the costs and expenses of such Recall or Seizure,
including the cost of replacement Finished Products, shall be paid by
Cephalon.  If the Product or Finished
Product defect causing the Recall or Seizure does not result primarily from the
acts or omissions of either Party or such cause cannot be determined with
reasonable certainty, then the costs and expenses of such Recall or Seizure,
including the cost of replacement Finished Products, shall be Shared
Expenses.  Recalls or Seizures shall
otherwise be conducted in accordance with the provisions of the Quality
Agreement.


 


3.14        Product Complaints and Adverse Event
Reporting.  The procedures for handling
Product complaints and reporting adverse events shall be set forth in the
Quality Agreement and the safety data exchange agreement executed pursuant to
the License and Collaboration Agreement.


 


3.15        Commercially
Reasonable Manufacturing Efforts.  Alkermes shall use
Commercially Reasonable Manufacturing Efforts to Manufacture and supply Product
in a timely and cost-effective manner and in sufficient quantities to enable
the Parties to carry out the Development Plans and the Commercialization Plans,
in each case to the extent that such plans reflect good faith projections of
the demand for the Product consistent with the long-range Commercialization
Plan.


 


3.16        Representations and
Warranties of Alkermes.  Alkermes hereby represents and
warrants that:


 


(a)           Alkermes shall perform its obligations under this
Agreement in a competent, professional and workmanlike manner;


 


(b)           all Product and Finished
Product shall have been Manufactured in accordance with the Procedures, cGMPs,
the Quality Agreement, and shall, as of the date delivered to the common
carrier, meet the Specifications; and


 


(c)           no Product or Finished
Product shall, as of the date delivered to the common carrier, be adulterated
or misbranded, within the meanings ascribed to such terms under the Act.


 


In addition, (i) the
representation and warranty of Alkermes made in Section 10.3(v) of
the License and Collaboration Agreement to the extent applicable to the
manufacture of the Product is incorporated herein by reference, and (ii) the
provisions of Section 7.7 of the License and Collaboration Agreement shall
apply in the event that either Party


 










	
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believes that it is necessary or
desirable to obtain a patent license from a Third Party [**].


 


3.17        No Implied Representations, Warranties
or Conditions.    EXCEPT AS OTHERWISE EXPRESSLY HEREIN
PROVIDED, ALKERMES MAKES NO REPRESENTATIONS OR WARRANTIES AND THERE ARE NO
CONDITIONS, EXPRESS OR IMPLIED, STATUTORY OR OTHERWISE, WITH RESPECT TO THE
PRODUCTS SUPPLIED HEREUNDER, INCLUDING ANY SUCH REPRESENTATIONS, WARRANTIES OR
CONDITIONS WITH RESPECT TO THE NON-INFRINGEMENT OF THIRD PARTY RIGHTS,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF SUCH PRODUCT.


 


Article 4

PAYMENTS


 


4.1          Payment for Product
Requirements and Placebo Requirements.  For each
Dosage Unit of Product and each unit of Placebo produced by Alkermes pursuant
to a Firm Order and shipped to Cephalon hereunder, Cephalon shall pay Alkermes  the Fully Burdened
Manufacturing Cost of such Dosage Unit of Product or unit of Placebo.


 


4.2          Invoices and Method of Payment of
Amounts Due to Alkermes.  Alkermes shall invoice Cephalon in
U.S. Dollars for each shipment of Product and Placebo, and Cephalon shall
pay all such invoices within [**] days of the invoice date, such date not to
precede the shipment date as stated on the bill of lading or the air
waybill.  Cephalon shall make such
payments in U.S. Dollars.  Cephalon
shall make all payments hereunder by bank wire transfer in immediately
available funds to such bank account as Alkermes shall designate from time to
time.  Alkermes shall endeavor to notify
Cephalon as to the date and amount of any such wire transfer to Alkermes at
least [**] Business Days prior to such transfer, but in no event later than the
Business Day of such transfer.  Without
limitation on other available rights or remedies, all amounts payable under
this Agreement will bear interest at the rate of [**]  per calendar month from the date due until paid.


 


4.3          Records and
Reporting; Audits.  Section 9.7
of the License and Collaboration Agreement shall apply to all Fully Burdened
Manufacturing Costs charged for Product or Placebo delivered hereunder,
including all underlying costs included by Alkermes in such Fully Burdened
Manufacturing Costs.


 


4.4          Manufacturing Development Activities.  Subject to Section 5.1 below, all
Manufacturing development activities performed hereunder shall be charged by
Alkermes as Development Costs pursuant to the License and Collaboration
Agreement with the activities performed by the Alkermes FTEs billed at the
Development FTE Rate.


 










	
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Article 5

SCALE UP, BACK-UP SUPPLY AND CAPITAL EXPENSES


 


5.1          Scale-up to [**]Scale.  [**]. All expenses incurred by Alkermes in
performing such activities that are required to obtain Regulatory Approval for
the Product for the alcohol abuse/dependence indication shall be borne solely
by Alkermes.  Any other costs incurred by
Alkermes in performing Manufacturing development activities pursuant to a
Development Plan shall be charged as Development Costs pursuant to the License and
Collaboration Agreement with the activities performed by the Alkermes FTEs
billed at [**].


 


5.2          [**].  A dedicated joint taskforce to be appointed by the
ST and the ST itself will oversee a timely execution of the agreed plan.  [**].
The cost of all such activities to scale-up
Product Manufacture or to otherwise reduce cost and enhance production output
for the Product for the Territory will be deemed to be Development Costs.


 


5.3          Back-Up or Second Source Supply.  If Cephalon believes that it is desirable or
necessary to qualify and/or engage a back-up or second source supplier of the
Product for the Territory, Cephalon shall notify Alkermes.  The Parties shall discuss such matter in good
faith.  If the Parties do not agree on a
course of action with respect to qualifying and/or engaging a back-up or second
source supplier, the Parties shall resolve such dispute through agreement of
the Parties’ Chief Executive Officers pursuant to the terms of Section 12.1.2
of the License and Collaboration Agreement. 
Such dispute shall not be considered a Reserved Dispute subject to Section 12.2
of the License and Collaboration Agreement.


 


5.4          Capital Expenses.  If Alkermes is required to expand the Alkermes Manufacturing Facility
or build an additional facility for the Manufacture and supply of Product for Cephalon pursuant to
this Agreement, [**].


 


Article 6

TERM; TERMINATION


 


6.1          Term. 
This Agreement shall
commence as of the Effective Date and, unless sooner terminated as provided in
this Article 6, shall continue in effect until the expiration or termination of the License
and Collaboration Agreement and thereafter for any period after expiration or
termination specified in the License and Collaboration Agreement during which
Alkermes has agreed to continue supplying Product to Cephalon for the Territory
(such period, the “Term”).


 










	
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6.2          Termination upon Material Breach.  If either Party shall commit a material breach with respect to any
material provision of this Agreement and the other Party shall have given the
breaching Party written notice of such breach, the breaching Party shall have [**]
days to cure such breach.  If such breach
is not cured in all material respects within such [**] day period, the
non-breaching Party shall have the right, upon notice to the breaching Party
and without prejudice to any other rights the non-breaching Party may have, to
terminate this Agreement, unless the breaching Party is in the process of
attempting in good faith to cure such breach, in which case the [**] day cure
period shall be extended by an additional [**] days.


 


6.3          Alkermes Failure to Supply


 


(a)         Failure to Supply.  In
the event that Alkermes fails to supply the market for the Finished Product in
the Territory for a consecutive [**] day period, in lieu of terminating this Agreement pursuant to Section 6.2,
Cephalon may exercise the license grant made by Alkermes of Alkermes
Manufacturing Patents and Alkermes Manufacturing Know-How pursuant to the
License and Collaboration Agreement, and Alkermes shall transfer to Cephalon
the Alkermes Vivitrex Manufacturing Know-How to enable Cephalon or its
designated contract manufacturer to Manufacture the Product.  The Parties shall enter into a Technology
Transfer Agreement (“Technology Transfer Agreement”) to address
logistical issues relating to the transfer by Alkermes of the Alkermes Vivitrex
Manufacturing Know-How.  Alkermes shall
have no obligation to transfer or otherwise provide any equipment to Cephalon
under the Technology Transfer Agreement.


 


(b)         Technology Transfer Agreement.  The
Technology Transfer Agreement shall include the following terms and conditions,
together with such other customary representations, warranties, covenants and
conditions satisfactory in form and substance to the Parties and their legal
advisors as are necessary or appropriate for transactions of this type:


 


(i)            Alkermes
shall [**]; and


 


(ii)           Cephalon
shall pay Alkermes the Development FTE Rate for all work performed by Alkermes
FTEs in [**].


 


Cephalon acknowledges and agrees that the Alkermes Vivitrex
Manufacturing Know-How is the Confidential Information of Alkermes.  Accordingly the Technology Transfer Agreement
shall also provide appropriate protections to ensure the nondisclosure of the
Alkermes Vivitrex Manufacturing Know-How and to restrict its use by Cephalon or
its designated contract manufacturer solely to the Manufacture of the Product
for the Territory.


 










	
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6.4          Effects of Termination or Expiration.


 


(a)           Product. 
Upon expiration or termination of this Agreement, Alkermes shall
Manufacture and ship to Cephalon and Cephalon shall purchase in accordance with
the provisions hereof all Product ordered pursuant to Firm POs issued hereunder
prior to the date on which notice of such termination was given, or prior to
the expiration date of the Agreement, as applicable.


 


(b)           Accrued Rights and Obligations; Survival.  Termination of this Agreement for any reason
or expiration of this Agreement shall not release either Party from any
obligation arising prior to the date of termination.  The rights and obligations under
Sections 3.13, 3.16(b), 3.16(c), 3.17, 6.3 and this 6.4 and Articles 7 and
8, in each case only in the event and
to the extent applicable and
subject to the terms and conditions stated therein, shall survive any
termination or expiration of this Agreement. 
In addition, any other provision
required to interpret and enforce the Parties’ rights and obligations under
this Agreement shall also survive, but only to the extent required for the full
performance of this Agreement.  Except
as otherwise set forth herein, any right to terminate this Agreement shall be
in addition to and not in lieu of all other rights or remedies that the Party
giving notice of termination may have at Law or in equity or otherwise.


 










	
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Article 7

MATTERS GOVERNED BY THE LICENSE AND COLLABORATION AGREMENT


 


7.1          Disputes.  Except as otherwise specified herein, in the event
that a dispute arises under this Agreement, the dispute resolution provisions
of Article 12 of the License and Collaboration Agreement shall apply
to such dispute mutatis mutandis.


 


7.2          Limitations on Liability;
Indemnification; Insurance.  Except as otherwise specified
herein, the limitations on liability, indemnification and insurance provisions
of Article 11 of the License and Collaboration Agreement shall apply to
this Agreement mutatis mutandis.


 


7.3          Confidentiality.  Except as otherwise specified herein, the confidentiality
provisions of Article 8 of the License and Collaboration Agreement
shall apply to any Confidential Information obtained by a Party under this
Agreement mutatis mutandis.


 


7.4          Publicity.  Except as otherwise specified herein, the publicity
provisions of Section 14.7 of the License and Collaboration Agreement
shall apply to this Agreement mutatis mutandis.


 


Article 8

GENERAL PROVISIONS


 


8.1          Notices.  All notices, reports, requests or demands required
or permitted under this Agreement shall be sent by air courier or by facsimile,
with confirmed transmission, properly addressed to the respective Parties as
follows:


 


If to Alkermes:


Alkermes, Inc.


88 Sidney Street


Cambridge,
Massachusetts 02139


Attn:  Chief Executive Officer


Facsimile:  [**]


 


If to Alkermes:


Alkermes, Inc.


88 Sidney Street


Cambridge,
Massachusetts 02139


Attn:  General Counsel


 










	
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Facsimile: 
[**]


 










	
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If to Cephalon:


Cephalon, Inc.


41 Moores Road


Frazer, Pennsylvania 19355


Attention: 
Chief Executive Officer


Facsimile:  [**]


 


If to Cephalon:


Cephalon, Inc.


41 Moores Road


Frazer, Pennsylvania 19355


Attention:  General
Counsel


Facsimile:  [**]


 


or
to such addresses or addresses as the Parties hereto may designate for such
purposes during the Term.  Notices shall
be deemed to have been sufficiently given or made: (i) if by facsimile
with confirmed transmission, when performed, and (ii) if by air courier
upon receipt by the Party.


 


8.2          Governing Law.  This Agreement shall be governed by and construed in
accordance with the Laws of the State of Delaware (other than its choice of law
principles).


 


8.3          Entire Agreement; Amendment.  This Agreement and the License and Collaboration
Agreement, including all consideration and the rights and obligations of the
Parties under such agreements, represents the entire agreement between the
Parties regarding the subject matter hereof and thereof, and there are no prior
or contemporaneous written or oral promises or representations relating to this
subject not incorporated herein.  No
amendment or modification of the terms and conditions of this Agreement shall
be binding on either Party unless reduced to writing referencing this Agreement
and signed by an authorized officer of the Party to be bound.  In the event of a conflict between the
provisions of this Agreement and those of the License and Collaboration
Agreement, the provisions of this Agreement shall control.


 


8.4          Binding Effect and Assignment.  This Agreement shall be binding upon and inure to
the benefit of the Parties hereto and their respective permitted successors and
assigns.  This Agreement shall not be
assignable by either Party without the other’s prior written consent; provided,
however, that either Party may assign this Agreement, without the other
Party’s written consent but after providing thirty (30) days prior notice to
the other Party, to an Affiliate or to any successor to which the License and


 










	
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Collaboration Agreement is assigned pursuant to the terms
and conditions of that Agreement.


 


8.5          Waiver.  A waiver by either Party of any of the terms and
conditions of this Agreement in any instance shall not be deemed or construed
to be a waiver of such term or condition for the future, or of any other term
or condition hereof.  All rights, remedies,
undertakings, obligations and agreements contained in this Agreement shall be
cumulative and none of them shall be in limitation of any other remedy, right,
undertaking, obligation or agreement of either Party.


 


8.6          Severability.  If any part of this Agreement shall be found to be
invalid or unenforceable under applicable Law in any jurisdiction, such part
shall be ineffective only to the extent of such invalidity or unenforceability
in such jurisdiction, without in any way affecting the remaining parts of this
Agreement in that jurisdiction or the validity or enforceability of the
Agreement as a whole in any other jurisdiction. 
In addition, the part that is ineffective shall be reformed in a
mutually agreeable manner so as to as nearly approximate the intent of the
Parties as possible.


 


8.7          Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original for all purposes, but
all of which together shall constitute one and the same instrument.


 


8.8          Force Majeure.  Neither Party shall be held liable or responsible to
the other Party or be deemed to have breached or defaulted under this Agreement
for failure or delay in performing its obligations hereunder (except for
payment of money) to the extent, and as long as, such failure or delay is
caused by or results from causes beyond the reasonable control of the affected
Party (a “Force Majeure Delay”), including fire, floods, embargoes, war,
insurrections, riots, civil commotions, terrorism, strikes, lockouts or other
labor disturbances, sabotage, acts of God, failure or delay of transportation,
prevention from or hindrance in obtaining energy or other utilities, omissions
or delays in acting by any governmental authority, acts of a government or
agency thereof or judicial orders or decrees. 
In the event of a Force Majeure Delay, the affected Party shall give
prompt notice thereof to the other Party, shall use commercially reasonable
efforts to mitigate the adverse consequences thereof and shall resume
performance hereunder with dispatch whenever the consequences of the Force
Majeure Delay have been mitigated provided, however, in no event shall a
Party be required to settle any labor dispute or disturbance.


 


8.9          Ambiguities.  Ambiguities, if any, in this Agreement shall not be
construed against any Party, irrespective of which Party may be deemed to have
authorized the ambiguous provision.


 










	
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8.10        Headings.  Headings are for the convenience of reference only
and shall not control the construction or interpretation of any of the
provisions of this Agreement.


 


8.11        No Partnership.  Nothing in this Agreement is intended or shall be
deemed to constitute a partnership, agency, or joint venture relationship between
the Parties.  Notwithstanding any of the
provisions of this Agreement, neither Party shall at any time enter into,
incur, or hold itself out to Third Parties as having authority to enter into or
incur, on behalf of the other Party, any commitment, expense, or liability
whatsoever.


 


8.12        Use of Names, Trade Names and
Trademarks.  Except as expressly
provided in this Agreement or the License and Collaboration Agreement neither
Party shall have the right to use in advertising, publicity or other
promotional activities any name, trade name, trademark or other designation of
the other Party hereto or its Affiliates or sublicensees, including any
contraction or abbreviation of any of the foregoing, unless the express written
permission of such other Party has been obtained.


 


8.13        Performance by an Affiliate.  Each of Cephalon and Alkermes acknowledge that
obligations under this Agreement may be performed by Affiliates of Cephalon and
Alkermes.  Each of Cephalon and Alkermes
guarantee performance of this Agreement by its Affiliates, notwithstanding any
assignment to Affiliates in accordance with Section 8.4 of this Agreement.


 


8.14        Non-Solicitation of Employees.  During the [**] period following the
Effective Date, neither Party shall, directly or indirectly, recruit or solicit
any employee of the other Party or any of such other Party’s Affiliates if such
employee has been materially involved in the performance of this Agreement or
the License and Collaboration Agreement, except pursuant to general
solicitations not targeted at such employees.


 


[Signature page follows]


 










	
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be
executed and delivered by its duly authorized representatives to be effective
as of the date set forth above.


 


	
  ALKERMES, INC.

  	
  CEPHALON, INC.

  
	
   

  	
   

  
	
  By:

  	
  /s/ Michael J. Landine

  	
   

  	
  By:

  	
   /s/ J. Kevin Buchi

  	
   

  
	
  Name: Michael J.
  Landine

  	
  Name: J. Kevin Buchi

  
	
  Title: 

  	
  Vice
  President, Corporate

  Development

  	
  Title:

  	
  Senior Vice President
  and Chief

  Financial Officer

  
								



 










	
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Exhibit A


 


INITIAL STRATEGIC FORECAST


 


[**]


 


[**]


 


[**]


 


[**]


 


[**]


 


	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  
	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  	
   

  	
  [**]

  



 










	
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