exv10w4



 






Exhibit 10.4




AMENDMENT TO CORE DISTRIBUTION AGREEMENT



THIS
AMENDMENT TO CORE DISTRIBUTION AGREEMENT
(“Amendment”) is entered into as of December 22, 2005
(the “Effective Date”), by and between Connetics Corporation (“Connetics”) and McKesson Corporation
(“McKesson”). Connetics and McKesson entered into a Core Distribution Agreement dated December 23,
2004 (“Agreement”). Capitalized terms not defined herein shall have the meaning ascribed to such
terms in the Agreement. The Parties desire to amend the Agreement in the manner set forth in this
Amendment.




AGREEMENT





	1.	 	(a)     The following definition in Article 1 of the Agreement is hereby deleted and replaced in
its entirety as follows:






Commitment Period.     “Commitment Period” means January 1, 2006 through and
including December 31, 2006, unless this Agreement is terminated earlier
under the provisions of Article 4.




(b)     The following definition is hereby added to Article 1 of the Agreement:




SRC Program.     “SRC Program” means McKesson’s Strategic Redistribution
Center, combining a centralized, single-shipping point for all Products and
improved inventory management and shipping services.




	2.	 	The following bullet-point is hereby added to Section 2.1 of the Agreement:






• All other SRC Program administrative services.




	3.	 	Subsection (c) is hereby added to Section 2.2 of the Agreement as follows:






(c) All other SRC Program distribution services.




	4.	 	The first sentence of 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 [**] for
each SKU of each Product.




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






2.3.3 Monthly Purchase. McKesson and Connetics will jointly use best
efforts to adjust inventory levels maintained by McKesson to accurately
reflect market conditions. McKesson shall purchase Product from Connetics
monthly and each purchase shall be based upon the inventory





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




 









 






level set forth in Section 2.3.1 and shall be consistent with market
conditions. [**]




	6.	 	The bullet-points in Section 2.5.1 are hereby deleted in their entirety, and a new sentence
is hereby added following the bullet-points, as follows:






	 	•	 	On hand inventory level by distribution center and any other
location and/or facility where Products are stored and/or warehoused
through the SRC Program (including the facility in Aurora, Colorado and
brokerage locations); and
	 
	 	•	 	On order inventory level by distribution center and any other
location and/or facility where Products are stored and/or warehoused
through the SRC Program (including the facility in Aurora, Colorado and
brokerage locations); and
	 
	 	•	 	Sales out by distribution center and any other location and/or
facility where Products are stored and/or warehoused through the SRC
Program (including the facility in Aurora, Colorado and brokerage
locations).






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






3.1     Service Fee.




     (a)     In recognition of McKesson’s performance of the Services, Connetics
will provide McKesson with a fee equal to [**] of McKesson’s
gross purchases of Connetics Products during each calendar quarter of the
Commitment Period (the “Service Fee”). In addition to the Service Fee,
subject to the provisions of this Section, McKesson shall be entitled to
retain the full benefit of any other programs or price concessions that
Connetics offers, including but not limited to price increases, non-launch
discounts, and any other deals and/or incentives that Connetics offers on
Products.




     (b)     McKesson will invoice Connetics within 25 days after the close of
each calendar quarter during the Commitment Period. Connetics shall pay
each invoice no later than 30 days after it receives the invoice.




     (c)     It is the intention of the Parties that, over the Commitment
Period, McKesson shall receive a benefit from this Agreement equal to
[**] of its total gross Product purchases during
the Commitment Period, and that that benefit be derived from a





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



 









 






combination of the Service Fee and the other commercial activities
described in subsection 3.1(a), not including Connetics’
standard [**] prompt
pay discount. [**]




3.2 SRC Program. McKesson shall provide Connetics with all available SRC
Program services and entitlements during the Commitment Period.




	8.	 	The first sentence of Article 4 of the Agreement is hereby deleted and replaced in its
entirety with the following:






This Agreement shall remain in full force from the Effective Date through
December 31, 2006; provided, however, this Agreement shall automatically
renew for additional periods of one (1) year unless either Party provides
written notice to the other Party of its intent to terminate the Agreement
at least thirty (30) days prior to the termination of the initial term or
any one (1) year extension thereof.




	9.	 	Section 5.2.1 of the Agreement is hereby deleted and replaced in its entirety with the
following:






5.2.1 Protection of Confidential Information. During the Term of this
Agreement, each Party, its respective agents, employees and representatives
(collectively, the “receiving party”) may receive or have access to
confidential materials and information of the other Party (the “disclosing
party”). All such materials and information (including, but not limited to
the terms of this Agreement, Product information and demand, the inventory
level set forth in Section 2.3.1, the purchase plan set forth in Section
2.3.3, Inventory Reports, Sales Reports, operations, methods, strategies,
formulas, price lists, discount programs, incentives, rebates, records of
unit movement for Products, shipping and warehousing, and confidential
proprietary information from third parties), are collectively referred to as
“Confidential Information” and constitute the property of the disclosing
party. During the Term of this Agreement and for a period of one (1) year
thereafter the receiving party shall not use or disclose to third persons
(“Third Persons”) any such Confidential Information without the




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




 









 






disclosing party’s prior written consent, excepting (a) disclosures made on
a confidential basis to and use by the directors, officers, employees, and
agents of the receiving party who have a reasonable need to know such
information in connection with the receiving party’s performance of this
Agreement and who are bound to the receiving party by the same obligations
of confidentiality that receiving party is bound under this Agreement;
receiving party shall be responsible for compliance by such directors,
officers, employees, and agents with the terms of this Agreement, (b)
disclosures that are required by law, as reasonably determined by the
receiving party or its legal counsel, or are made on a confidential basis to
the receiving party’s attorneys, accountants, and other professional
advisors in connection with matters relating to this Agreement, and (c)
routine disclosures in the normal course of business, including to IMS/DDD
or similar organizations. The Parties intend “Third Persons” to be defined
and construed in the broadest possible fashion and to specifically include,
but not be limited to, all analysts or other persons in the financial
community.




	10.	 	Exhibit A of the Agreement is hereby deleted in its entirety and replaced with a revised
Exhibit A-1 in the form attached to this Amendment.






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





[Remainder of Page Intentionally Left Blank]




 









 







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




	 	 	 	 	 	 	 	 	 
	MCKESSON CORPORATION	 	 	 	CONNETICS CORPORATION
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/ Martha Torres-Morgan
	 	 	 	By:
	 	/s/ John L. Higgins
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	Martha Torres-Morgan
	 	 	 	Name:
	 	John L. Higgins
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Title:

	 	Director Brand RX
	 	 	 	Title:
	 	Chief Financial Officer
	 

	 	 
	 	 	 	 	 	 
	 

	 	Product Management
	 	 
	 	 
	 	 
	 

	 	 	 	 	 	 	 	 





 









 






Exhibit A-1




	 	 	 	 	 	 	 	 	 
	 	 	Product	 	NDC	 	Size	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	Evoclin

Evoclin

Luxiq

Luxiq

Luxiq

Olux

Olux

Soriatane

Soriatane
	 	63032-0061-50

63032-0061-00

63032-0021-50

63032-0021-00

63032-0021-01

63032-0031-50

63032-0031-00

63032-0090-25

63032-0091-25
	 	50GM

100GM

50GM

100GM

150GM

50GM

100GM

10MG

25MG