Exhibit 10.2


 


CERTAIN INFORMATION IN THIS
EXHIBIT HAS BEEN OMITTED AND FILED SEPARATELY WITH THE COMMISSION. CONFIDENTIAL
TREATMENT HAS BEEN REQUESTED WITH RESPECT TO THE OMITTED PORTIONS.


 


	
   

  	
  

  
	
   

  	
  Pharmaceuticals

  



 


David R. Austin


Sr. Vice President and CFO


 


September 5, 2003


 


Howard Weisman


President


ESP Pharma


2035 Lincoln Highway, Suite
2150


Edison, NJ 08817


 


Re:                               Sublicense
and Supply Agreement


 


Dear Howard:


 


This letter, when signed for
ESP and returned to me, will amend the Sublicense and Supply Agreement of
September 1, 1993, (that is under agreement for assignment by American Home
Products Corporation, now Wyeth, to ESP) (the Agreement) on the first day of a
calendar quarter following the assignment of the Agreement to ESP and the
fulfillment of all the conditions for license assignment enumerated in the
letter agreement of April 18, 2002, among Wyeth, ESP and Roche (formerly Syntex
(U.S.A.) LLC), provided that there be no disputes about payments due Roche and
also provided that the Quality Agreement and side letter regarding quality,
both dated June 2003, are signed by all applicable parties (“Amendment Date”).
The licensor in this agreement is now Roche Palo Alto LLC, formerly Syntex
(U.S.A.) Inc.


 


The parties hereby agree to the
following amendments:


 


1.                                       Section
1.2 shall be amended by deleting from that section all of subsection (b),
beginning with “divided by” and continuing through the end of that section. And
the defined term “Average Net Selling Price” shall be replaced throughout the
Agreement with the term “Net Sales.”


 


2.                                       Section
3.4(a) shall be replaced in its entirety by the following:

3.4(a) The initial price of Bulk Product shipped to ESP, or its designated
manufacturer, shall be [*] dollars ($[*]) per kilogram through December 31,
2004.


 


	
  Roche Palo
  Alto LLC 

  	
  5491 Hillview
  Ave.

  	
  Tel.
  850-852-1140

  
	
   

  	
  Palo Alto,

  	
  Fax
  850-254-7645

  
	
   

  	
  California
  94304-1497

  	
  David.Austin@roche.com

  



 





















 


Annually
thereafter, beginning on January 1, 2005, and thereafter beginning on the first
day of the calendar year, the price shall be increased or decreased by the
percentage increase or decrease in the U.S. Producer Price Index for Chemicals
and Allied Products (WPU006) for the immediately preceding calendar year. There
shall be no decrease in price below [*] dollars ($[*]) per kilogram.


 


3.                                       Section
3.4(b) shall be replaced in the entirety by the following:


3.4(b) From
the Amendment Date until December 31, 2003, ESP shall pay to Roche a royalty of
[*] percent ([*]%) of Net Sales. Beginning January 1, 2004, ESP shall pay Roche
a royalty on its Net Sales as follows, calculated on an annual basis using a
calendar year:


 


1)              On
the first $[*] of Net Sales, a royalty equal to [*] percent ([*]%) of Net Sales;


 


2)              On
the next $[*] of Net Sales, a royalty equal to [*] percent ([*]%) of Net Sales;


 


3)              On
Net Sales in excess of $[*], a royalty equal to [*] percent ([*]%) of such
excess;


 


4.                                       Section
3.4(c) shall be replaced in its entirety by the following:


3.4(c) Within
sixty (60) days after the end of each calendar Quarter, ESP shall calculate and
report to Roche for such previous quarter the (i) gross sales of Covered
Product made by ESP or its distributor, (ii) Net Sales (including those sales
to a distributor) of Covered Products, (iii) cumulative annual Net Sales for
the current calendar year, (iv) the amount of Bulk Product (at label strength)
contained in the Covered Products sold by ESP during such covered Quarter, and
(v) the calculation of payments due. With such report, ESP shall remit in U.S.
dollars to Roche the payment due pursuant to Section 3.4(b).


 


5.                                       Section
3.4(d) shall be deleted in its entirety and shall be replaced by the existing
3.4(e).


 


6.                                       Section
3.4(f) shall be renumbered to become Section 3.4(e).


 


7.                                       Sections
3.5(a), (b) and (c) and all of Section 3.6 shall be replaced in their entirety
by the following:


3.5(a) Roche
shall provide free Bulk Product to ESP on a quarterly basis at the rate of [*]
percent ([*]%) of the number of grams at label strength contained in the
Covered Product sold by ESP during the last Quarter for which ESP reported
sales pursuant to Section 3.4(c). Such free Bulk Product shall be added to
shipments of Bulk Product ordered by ESP, and if no such shipment is made
during any Quarter, the free Bulk Product shall be added to the next shipment made,
if there is one. Such free Bulk Product shall be all the material supplied by
Roche for samples, yield losses, overfill or other manufacturing issues; the
only exception shall be replacement pursuant to Section 3.2 for Bulk Product
that does not meet specifications set forth in Schedule A.


 


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8.                                       The
transition from the old agreement pricing to the pricing above will be
accomplished in the following manner, which is exemplified in the model
attached as Exhibit A. Baxter (for inventory only) and ESP shall verify a
calculation of the Transitional Royalty Credit (as defined below) substantially
in the form of Exhibit A attached hereto which is provided as an example of how
such calculation is made.


 


8.1                                 ESP
and Baxter shall verify the amount of unsold inventory of Bulk Product, work in
process (“W-I-P”) and Covered Product on the day prior to the Amendment Date
(“Audit Date”) and determine the Total Grams of Bulk Product and Invoiced Grams
of Bulk Product as described herein.


 


(a)          The
grams of Bulk Product contained in the W-I-P and Covered Product on the Audit
Date shall be calculated by taking the number of individual ampoules in the
W-I-P and Covered Product multiplied by 0.025 grams (the “Raw Material Equivalent”).


 


The Raw Material Equivalent shall be added to the grams of Bulk Product
on hand as of the Audit date to determine the “Total Grams of Bulk Product.”


 


(b)         ESP
shall calculate a percentage (the “Invoiced Grams Percentage”) by taking 100%
minus (i) [*]% for Bulk Product acquired before September 1st, 2003, and (ii)
[*]% for Bulk Product acquired after September 1st, 2003.


 


(c)          ESP
shall multiply the Total Grams of Bulk Product by the applicable Invoiced Grams
Percentage to determine the total Invoiced Grams of Bulk Product.


 


These results
shall be reported to Roche within ten (10) days after the Audit Date. ESP shall
keep accurate records of such inventory and Roche shall have the option of
auditing such records and corresponding batch records.


 


8.2                                 The
parties agree to use [*] ($[*]) as the weighted average price for the previous
three quarters to be used for this calculation, provided that if the Average
Net Selling Price Per Gram for Q3 2003 varies from $[*], the actual Average Net
Selling Price Per gram for Q3 shall be used to calculate the weighted average
price according to the method in Exhibit A.


 


8.3                                 Multiply
the Invoiced Grams of Bulk Product by the weighted average price calculated in
accordance with 8.2 above.


 


8.4                                 Roche
shall credit the resulting number in 8.3 against the first payments due Roche
from ESP.


 


8.5                                 ESP
shall pay Roche $[*] times the Total Grams of Bulk Product from 8.1 as payment
for those grams ten (10) days after the Audit Date.


 


9.                                       Beginning
with the date of the signing of this letter and continuing until the earlier of
(i) the Amendment Date or (ii) December 31, 2003, Roche shall grant ESP on a
per Bulk Product shipment basis an additional [*] percent ([*]%) credit for
free goods, for a total


 


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of [*] percent
([*]%) when added to the [*] percent ([*]%) now given pursuant to Section
3.6(a). This shall be the total of free goods available to ESP and ESP agrees
not to make any claim against Roche under Section 3.4(d) of the License and
Supply Agreement.


 


All other terms of the
Agreement remain in full force and effect.


 


	
  Sincerely,

  
	
   

  
	
  /s/ David R.
  Austin

  	
   

  
	
  David R.
  Austin

  
	
   

  
	
   

  
	
  AGREED

  
	
  ESP PHARMA,
  INC.

  
	
   

  
	
   

  
	
  By 

  	
  /s/ Howard
  Weisman

  	
   

  
	
  Name

  	
  Howard
  Weisman

  	
   

  
	
  Date

  	
  9-8-03

  	
   

  
					



 


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EXHIBIT A


 


Example of Transition Arrangement
ESP Contract Change