exv10w11



 




[ * ] = Certain confidential information contained in this document, marked by brackets,
has been omitted and filed separately with the Securities and Exchange Commission pursuant to Rule
406 of the Securities Act of 1933, as amended.




Exhibit 10.11




October 15,2003




Mr. Wade Hull

Director of Engineering

ZARS, Inc.

1142 West 2320 South, Suite A

Salt Lake City, UT 841 19




Re: Letter of Intent




Dear Wade:



This Letter of Intent (“LOI”) outlines the general terms of a proposed transaction between Corium
International, Inc., a Delaware corporation, with its principal place of business at 2686
Middlefield Road, Suite G, Redwood City, CA 94063 (“Corium”) and ZARS, Inc. a Utah corporation,
with its principal place of business at 1142 West 2320 South, Suite A, Salt Lake City, UT 84119
(the “Company”) with respect to the development and production of Phase II clinical supplies and
the subsequent development, license and supply of an analgesic/heat combination Product for the
treatment of musculoskeletal pain (the “Transaction”). The Product is a transdermal drug patch
that contains the non-steroidal anti-inflammatory drug (NSAID) ketoprofen and incorporates ZARS’
patented controlled heat-aided drug delivery (CHADDTM) technology (the “Product”). The LOI will
facilitate and serve as the basis for a definitive Development, License and Supply Agreement that
will ultimately govern the parties’ legal rights and obligations in connection with a further
Transaction (“Definitive Agreement”). The LOI will also serve as the basis for the development and
supply of Phase II clinical supplies of the Product.



1. Principal Business Terms. The principal terms of the Definitive Agreement are set forth
in Exhibit A attached hereto (“Principal Terms”). In addition to the Principal Terms, the
Definitive Agreement will include legal and commercial terms that are typical for agreements of
this type and such other terms and conditions as may be agreed to in writing by the parties.



2. Negotiation of the Definitive Agreement. The parties mutually agree to set a target
date to negotiate the Definitive Agreement embodying the Principal Terms (the “Definitive Agreement
Target Date”). Such target date will occur at the successful completion of the production and
evaluation of Phase II clinical supplies. The parties will then to use their good faith efforts to
negotiate the Definitive Agreement.



3. Termination. In the event the parties hereto fail to enter into the Definitive
Agreement on or before the Definitive Agreement Target Date, the understandings




 1.









 







contained herein, unless extended by mutual agreement in writing of the parties, shall terminate,
except as for Sections 3 (Termination), 4 (Costs and Expenses), 5 (Confidentiality), 6 (Nonbinding
LOI), 7 (Governing Law), 9 (Relationship of the Parties), and 10 (Entire Agreement).



4. Costs and Expenses. Each party will bear its own costs and expenses in connection with
its activities under this LOI and with regard to negotiating the basic terms for a Definitive
Agreement.



5. Confidentiality. The parties have executed a Nondisclosure Agreement dated July 17,
2003 (the “NDA”). The parties agree to treat this LOI (including, without limitation, the Principal
Terms) as the “Confidential Information” of both parties pursuant to the terms of the NDA.



6. Nonbinding LOI. Except for the parties’ obligations under Sections 4 (Costs and
Expenses), 5 (Confidentiality), 7 (Governing Law), 9 (Relationship of the Parties), 10 (Entire
Agreement), and 7 (Intellectual Property in Exhibit A), this LOI does not constitute a binding
agreement and does not create any legally enforceable rights or obligations between the parties.



7. Governing Law. This LOI will be governed and construed in accordance with the laws of
the State of Utah without regard to or application of its conflicts of laws rules or
principles.



8. Commencement of Performance. Upon execution of this LOI by both parties, each party
will commence performance pursuant to the Principal Terms and will keep the other informed of its
progress. However, such performance will not create any binding obligations (including, but not
limited to, the completion of the proposed Transaction).



9. Relationship of the Parties. The parties will at all times be independent contractors,
and nothing in this LOI or the Definitive Agreement will be construed as creating a joint venture,
partnership or agency relationship between the parties.



10. Entire Agreement. This LOI constitutes the entire and exclusive agreement between the
parties with respect to the subject matter of the LOI and supersedes any prior agreements between
the parties with respect to such subject matter.




 2.









 







If the terms are acceptable, please sign and return one copy to Corium and keep a copy for your
records. We look forward to finalizing this arrangement and enhancing the relationship between our
respective companies.




	 	 	 	 	 	 	 
	 	 	Sincerely,	 	 
	 
	 	 	 	 	 	 
	 	 	Corium International, Inc.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Gary W. Cleary	 	 
	 

	 	Title:
	 	 

President and CEO
	 	 
	 

	 	Date:
	 	October 15, 2003	 	 






	 	 	 	 	 
	ACCEPTED AND AGREED:

ZARS, Inc.	 	 
	 
	 	 	 	 
	By:

	 	/s/ Larry Rigby	 	 
	Title:

	 	 

President and CEO
	 	 
	Date:

	 	October 15, 2003	 	 






 3.









 






EXHIBIT A




Principal Terms



This LOI will define the principal terms for the Definitive Agreement between Corium and Company
with respect to the development, license and supply of the Product, a transdermal drug patch that
contains the non-steroidal anti-inflammatory drug (NSAID) ketoprofen and incorporates ZARS’
controlled heat-aided drug delivery (CHADD) technology. The LOI will also serve as the basis for
development and supply of Phase II clinical supplies of the Product.





	1)	 	Subject Matter of the Agreement.
	 
	 	 	The background and scope of the project are described in Exhibit 6. The obligations of Corium
and Company are described in the tasks and timeline table set forth in Exhibit C.
	 
	2)	 	The Budget.
	 
	 	 	The preliminary budget covering development and manufacture of Phase II supplies is detailed in
Exhibit D. The budget does not include the cost of clinical trials.
	 
	 	 	The budget may be revised from time to time and shall be discussed for prior approval at the
program status review by the Steering Committee (defined herein).
	 
	3)	 	Costs and Payments.
	 
	 	 	The costs incurred by Corium in connection with the development and production of Phase II
supplies and the Definitive Agreement will be captured in a detailed cost accumulation account
and the cost accumulation detail will be supplied to Company with an invoice for all costs
incurred by Corium on a monthly basis. Company agrees to pay Corium the amounts set forth in
such monthly invoices within twenty (20) days of the invoice date.
	 
	 	 	To commence the Development Program, Company shall pay Corium an advance payment of [ * ] of the
Stage I total estimated budget within 10 days of executing the LOI (the “Prepayment”). To
commence Stage II of the Development Program, an advance payment of [ * ] of the Stage II total
estimated budget is required before commencing work on Stage II activities. The Prepayment will
be credited against costs associated with the Definitive Agreement.
	 
	4)	 	The Development Program (Phase II clinical production).
	 
	 	 	The parties will use reasonable efforts to develop the Product in accordance with the tasks and
timeline table set forth in Exhibit C (the “Development Program”).




 4.









 












(a) Commencement of Development Program. The Development Program shall commence after
Company approves the preliminary budget and Company pays the Prepayment to Corium.




(b) GLP/GMP. All development and production activities shall conform to the required
GLP’s and GMP’s.




(c) The Steering Committee. The Development Program shall be managed by a steering
committee (the “Steering Committee”), which shall consist of at least one member from each
company. This Steering Committee shall meet at least once a month and be responsible for all
aspects of the Development Program. Changes to the estimated Preliminary Budget (Exhibit D)
during the Development Program must be approved by the Steering Committee. If the scope of the
Development Program changes, it is likely that the timeline and estimated Budget will also
change and the Steering Committee will approve all such changes.



5) Development and License of Product.





Corium and Company agree to commence preparation of the Definitive Agreement upon successful
completion of the tasks and timeline describing the production and evaluation of Phase II
clinical supplies. Corium and Company agree to define successful completion criteria within
thirty (30) days of the commencement of the Development Program. The Definitive Agreement will
also include principal terms for Phase Ill clinical supply production and commercialization of
the Product.




(a) License Grant to Company. Corium shall grant Company an exclusive right and license
to use and sell the Product in the Territory, if required.




(b) Territory. The Territory shall be worldwide.



6) Product Supply.





(a) Exclusive Supply Right. Corium shall have the exclusive right to supply the Product
to the Company.




(b) Transfer Price for Products. A mutually acceptable price range for the Product will
be established within 30 days of the completion of the production of Phase II clinical supplies.




(c) Sales Volumes. To help determine the price range for the Products and to establish
production equipment yield requirements, Company shall provide Corium with estimated Product
sales volumes for the first three years.



7) Intellectual Property Ownership.




Each party shall [ * ] of the intellectual property rights in any invention of which [ * ] and
[ * ] are inventors. Each party [ * ] the intellectual property rights in all inventions of which [ * ] or [ * ] inventors [ * ] Company agrees to grant Corium the [ * ] and [ * ] to [ * ] and
Company [ * ] not to [ * ] an [ * ] Product.



All intellectual property [ * ] that is [ * ] the [ * ] shall be licensed to [ * ] for the [ * ]
the [ * ] as [ * ] the [ * ]. In the event that the parties cannot come to terms on a commercial
supply agreement or that it is in the best interests of the project to [ * ] an [ * ] to [ * ] the
Product, Corium and Company shall [ * ] and [ * ] and [ * ] to [ * ] for a [ * ]. All intellectual
property developed by [ * ] during the Development Program that [ * ] in the Product [ * ] to [ * ]
to the [ * ] for [ * ] to [ * ] and [ * ] the Product granted in the Definitive Agreement [ * ] as
[ * ].



 5.









 






	 
	8)	 	Regulatory Approval.
	 
	 	 	Corium shall provide Company with any assistance reasonably requested in connection with
regulatory submissions.
	 
	9)	 	Term of Agreement. The term of the Definitive Agreement shall be the later of: (a)
[ * ] years from the date of the first commercial sale of a Product in a major country in the
Territory or (b) the last to expire of Corium’s patents related to the Product in the
Territory.
	 
	10)	 	Assignment. Either party may assign the agreement only with the other party’s prior
written consent.




 6.









 











Exhibit B




Project Background and Scope




Background:



ZARS is developing an analgesic/heat combination Product for the treatment of musculoskeletal pain.
The Product is a transdermal drug patch that contains the non-steroidal anti-inflammatory drug
(NSAID) ketoprofen and incorporates ZARS’ controlled heat-aided drug delivery (CHADD) technology.
The CHADD technology produces a controlled level of heat to aid transdermal penetration of certain
drugs. Our preliminary Product configuration incorporates two separate components (i.e., the
transdermal drug patch and the CHADD heating patch), shown in Figure 1 below, which will be
manufactured and packaged separately.




[Figure 1]




     Figure 1. Diagram of CHADD heating patch applied over transdermal ketoprofen drug patch.



Product Descriptions:





	 	•	 	The matrix transdermal ketoprofen patch is designed to achieve an in-vitro flux
through hairless mouse skin of approximately [ * ].
	 
	 	•	 	The drug patch adhesive should provide sufficient flux while ensuring that the patch
remains affixed for at least an [ * ] application time and causing minimal skin
irritation.
	 
	 	•	 	The drug patch should be thin and flexible and ideally somewhat stretchable so that
it can be applied to contoured or curved body sites such as knees and elbows.
	 
	 	•	 	The drug patch size and shape should be conducive for use on a variety of
application sites including knees, elbows, lower back, etc.
	 
	 	•	 	The drug patch should have a shelf life of at least [ * ].




 7.









 











Preliminary Formulation / Product Configuration Option:



The Product description noted below reflects the current prototype developed by ZARS. This
prototype will be described in an IND submission [ * ] and will be used in our first phase 1 study
[ * ]. While we would like to maintain the properties of the matrix patch (i.e., adhesion, wear
time, ketoprofen flux), we will consider proposed changes the matrix components and/or formulation
if better alternatives are known.




Ketoprofen Matrix Components:





	•	 	Ketoprofen content is [ * ] by weight






	•	 	Matrix patch uses a [ * ]. The PSA/ketoprofen mixture is
cast directly onto the release liner [ * ]. After drying,
a [ * ] backing film [ * ] is applied over the
PSA/ketoprofen coating.





Ketoprofen Matrix Patch Characteristics:




     Dimensions:




Matrix Drug Patch: 33 cm2 rectangular matrix patches (5.3 cm x 6.3 cm)



     Proposed Application:




An initial Product configuration is designed for application just below the knee cap
and consists of three 33 cm2 matrix drug patches (total area of 99
cm2) will be placed on three areas below the knee cap, and then CHADD
heating patches will be placed over the matrix patches. The knee joint will then be
wrapped with a breathable, elastic ACE-type bandage that covers the drug and CHADD
patches.



     Adhesion Properties:




The adhesive on the matrix drug patch should secure the drug patch to the area below
the knee cap for at least 8 hours and be flexible enough to adhere to the region
below the knee cap.



Summary of Key Properties of the Ketoprofen Matrix Patch




	 	 	 	 	 
	Properties:	 	Typical Values:	 	 
	Ketoprofen Flux*

	 	[ * ]	 	 
	Amt Ketoprofen

	 	[ * ]	 	 
	 
	 	 	 	 
	 	 	 







 




			
	*	 	Ketoprofen flux from the PSA matrix patch. Flux determined in in vitro studies using hairless
mouse skin as model membrane. If formulation is changed, the flux must be comparable or
greater.




 8.









 










Physical/Chemical Properties of Ketoprofen:




[Figure]




Chemical structure of ketoprofen




Sundry Physical Chemical Information:



	 	 	 	 	 
	 	 	 
	pKa

	 	[ * ]	 	 
	Melting Point

	 	[ * ]	 	 
	Molecular Weight

	 	[ * ]	 	 
	Log K (oct/water)

	 	[ * ]	 	 
	 
	 	 	 	 
	 	 	 





 9.









 






Exhibit C




Development Program Tasks and Timeline

(Development and Production of Phase II clinical supplies)




	 	 	 	 	 	 	 	 	 
	Activity
	 	Description	 	Comments & Timing
	Formulation Development
	 	 	[ * ]	 	 	 	[ * ]	 
	Test Method Transfer from ZARS to Corium
	 	 	[ * ]	 	 	 	[ * ]	 
	Manufacture of Clinical Trial Material
(CTM) for Phase II studies
	 	 	[ * ]	 	 	 	[ * ]	 
	Pilot Stability Studies
	 	 	[ * ]	 	 	 	[ * ]	 






 10.









 






Exhibit D




Preliminary Budget





	•	 	It is understood that the results of the tasks performed in the formulation development
stage will be used to make the decision on the preferred option for Phase II development.
Corium and Company will develop mutually agreeable metrics under which a definition and a
measurement of formulation development success will be defined. At that point, the Parties
will enter into Stage II. The estimated budget below covers the formulation development and
preparations for manufacture and supply of Phase II clinical materials. Pilot Phase II
stability costs are included in the budget. Adjustments to the Preliminary Budget in either
direction must be approved in writing by the Steering Committee.





	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	No.	 	No.	 	 
	Budget
Category
	 	FTE’s	 	Months	 	Budget
	Stage I
	 	 	 	 	 	 	 	 	 	 	 	 
	Formulation development*
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Analytical** and QA/QC (Analytical transfer,
product release, and production
documentation)
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Stage I Total Budget
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Stage II
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Engineering & QA/QC preparation for Phase II
clinical production
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Manufacturing of Phase II clinical supplies
(placebo and active)*
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Materials for Phase II clinical production***
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Lab supplies
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Development Materials
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Pilot equipment and tooling
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Pilot stability on Phase II batch****
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Stage II Total Budget
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	TOTAL BUDGET
	 	 	 	 	 	 	 	 	 	 	[ * ]	 








 




			
	*	 	This item to be refined after a detailed work-plan has been developed. It does not include CHADD
Heating Pod development or manufacture

	 
	**	 	Assuming all test methods are developed and validated (as needed) before transfer

	 
	***	 	Assuming reasonable cost of active ingredient
Analytical budget may be subject to change if Corplex adhesive is chosen for Phase II studies and
analytical methods have to be developed
	 
	****	 	3 conditions (active and placebo patches):




[ * ]

[ * ]

[ * ]




 11.









 







[ * ]



Test methods: Ketoprofen assay, drug release rate, peel force, adhesive strength, package
integrity




 12.









 








Revision to “Letter of Intent” dated April 20, 2004




Wade Hull

Director of Engineering

ZARS, Inc.

1142 West 2320 South, Suite A

Salt Lake City, UT 84119




Dear Wade,



As discussed with Bobby, the following revised budget for Ketoprofen is below. Please note that
this is an estimated budget for Corplex development leading to animal studies and Phase I trials.
This budget is outlined at the very bottom of this memo. To avoid confusion, we have outlined the
chronology of the preceding budgets in order to clarify the new, revised Corplex budget.



Below is the original budget from the LOI dated October 15, 2003. It contemplates formulation
development and analytical work to determine which platform will be used.



Please note that the only things that you have been billed from this original budget are from Stage
I.




	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	No.	 	No.	 	 
	Budget
Category
	 	FTE’s	 	Months	 	Budget
	Stage I
	 	 	 	 	 	 	 	 	 	 	 	 
	Formulation development*
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Analytical** and QA/QC (Analytical transfer,
product release, and production documentation)
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Stage I Total Budget
	 	 	 	 	 	 	 	 	 	 	[ * ]	 
	Stage II
	 	 	 	 	 	 	 	 	 	 	[ * ]	 
	Engineering & QA/QC preparation for Phase II clinical
production
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Manufacturing of Phase II clinical supplies (placebo
and active)*
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Materials for Phase II clinical production***
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Lab supplies
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Development Materials
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Pilot equipment and tooling
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Pilot stability on Phase II batch****
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Stage II Total Budget
	 	 	 	 	 	 	 	 	 	 	[ * ]	 
	TOTAL BUDGET
	 	 	 	 	 	 	 	 	 	 	[ * ]	 








 




			
	*	 	This item to be refined after a detailed wok-plan has been
developed. It does not include CHADD Heating Pod development or manufacture
	 
	**	 	Assuming all test methods are developed and validated (as
needed) before transfer
	 
	***	 	Assuming reasonable cost of active ingredient
Analytical budget may be subject to change if Corplex adhesive is chosen
for Phase II studies and analytical methods have to be developed
	 
	****	 	3 conditions (active and placebo patches):




[ * ]

[ * ]

[ * ]




 









 







The following is the amended budget for silicone development work that was added as an exhibit
on February 23, 2004. Please note that the [ * ] dollars was intended to be an addition to the
original Stage I budget from above.



Project Scope: Analytical method development and mini-validation for Phase I clinical
release of ketoprofen dermal patches (using ZARS current silicone formulation).

Perform limited stability study (determine assay at zero time and at completion of Phase I clinical
study).




Project activities and timing:




	 	 	 	 	 	 	 	 	 	 	 	 	 
	Analytical Method	 	Development	 	Validation	 	Timeline*
	ID
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Content Uniformity (CU)
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Assay
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Release Rate
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Peel Strength
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Adhesion
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Pouch Integrity
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 





All methods will require test method, validation protocol and validation report writing, review and
formal sign off.




Estimated budget:

Labor: [ * ]

Material and Supplies: [ * ]

Total budget: [ * ]




 




*   Assuming patches (active and placebo) availability



You have been billed a total to date of [ * ] for the work relating to the above two budgets.
Currently, there is a balance outstanding of [ * ] on the amount that has been billed.



Finally, the budget below is the revised budget for Corplex for the development of a Transdermal
Ketoprofen Delivery System. This budget is in addition to the budgets above. Please note that
Stage II (Phase II Clinicals) from the original budget is NOT reflected in this new budget. You
will receive a credit of [ * ] on this budget only after you have paid the outstanding invoice
relating to the previous two budgets. This credit will be applied in equal installments over the
life of this newly amended project.




 









 









Ketoprofen Transdermal Delivery System (In Thousands)




The following is an estimated budget for Corplex development leading to animal studies and Phase I
trials. Upon approval by signature below, it will be added as an amendment to Exhibit D of the LOI
dated October 15, 2003.



	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Stage 1	 	 	 	 	 	Stage II	 	 
	 	 	budget (in	 	 	 	 	 	budget (in	 	 
	 	 	thousands)	 	Activities	 	thousands)	 	Timelines
	Development
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	 	 	 	 	[ * ]	 
	Analytical
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	 	 	 	 	[ * ]	 
	 
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	 	 	 	 	 	 
	 
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	 	 	 	 	 	 
	 
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	 	 	 	 	 	 
	 
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	 	 	 	 	 	 
	 
	 	 	[ * ]	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	Total	 	 	 	 	 	 	 	 	 	 	 	 
	Lab-scale process
development
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	 	 	 	 	 	 
	Materials &
Supplies
	 	 	[ * ]	 	 	 	 	 	 	 	 	 	 	 	 	 
	Manufacture
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	Clinical
Supplies
	 	(animal supplies)	 	 	 	 	 	(Phase I supplies)	 	 	 	 
	Clinical
material release
	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 	 	 	[ * ]	 
	and short-term
	 	 	 	 	 	 	 	 	 	 	 	 	 	(Product
	stability
	 	 	 	 	 	 	 	 	 	 	 	 	 	Release)
	Contingency
	 	 	[ * ]	 	 	 	 	 	 	 	[ * ]	 	 	 	 	 
	Total
	 	 	[ * ]	 	 	 	 	 	 	 	[ * ]	 	 	 	 	 







 









 





Description of Stages:





	 	•	 	Stage I—Prototype Development & Pre-Clinical Evaluation
	 
	 	•	 	Stage II—Phase I Supplies




By signing below, you agree to the new budget and it will be added as an amendment to the LOI dated
October 15, 2003.



We would appreciate your help in resolving the outstanding invoice as quickly as possible.



Please don’t hesitate to call if you have any questions.




Best Regards,




Christina Dickerson

Corporate Development and Planning

Corium International, Inc.

650.298.8257




	 	 	 
	/s/ Christina Dickerson

	 	/s/ Wade Hull
	 

	 	 
	Corium International, Inc.

	 	ZARS, Inc.
	 
	 	 
	Date: 4/20/04

	 	Date: 4/16/04






 









 






Addendum to “Letter of Intent for Transdermal Ketoprofen Product” dated June 28, 2006




Between



ZARS, Inc. (“ZARS”)

1142 West 2320 South

Salt Lake City, UT 84119




And



Corium International, Inc. (“Corium”)

2686 Middlefield Road, Suite G

Redwood City, CA 94063




     WHEREAS, ZARS and Corium are working under a Letter of Intent (“LOI”) dated October 15, 2003
and revisions to the scope and Budget of such LOI dated February 23, 2004 and April 2, 2005, which
provide, among other things, for the development and manufacture of Phase 2 clinical supplies and
terms related to the further development and commercial supply of a transdermal patch containing
ketoprofen and ZARS’ CHADD technology (the “Product”).



     WHEREAS, ZARS would like Corium to manufacture Phase 3 clinical supplies for Product and
Corium has agreed to manufacture such supplies.



     WHEREAS, the Parties have agreed that the Principal Terms of the LOI will govern the
activities in connection with the manufacture of the Phase 3 clinical supplies except for the
Development Program and Budget which will be part of this Addendum.



     NOW, THERFORE, in consideration of the premises and covenants contained in the documents
mentioned above, the parties agree as follows:



     1. Definitions:




	 	a.	 	“Addendum” shall mean this addendum.
	 
	 	b.	 	“Effective Date” shall mean the later of the execution dates appearing
below the parties’ signature lines at the end of this Addendum.
	 
	 	c.	 	“Development Program” shall mean the activities to be performed by
Corium as listed in Exhibit 1.
	 
	 	d.	 	“Budget” shall mean the budget associated with the activities in the
Development Program as listed in Exhibit 1.





2. Responsibilities of Corium and ZARS





	 	a.	 	Corium shall perform the activities listed in the Development Program.
	 
	 	b.	 	Corium agrees to use reasonable efforts to conduct the activities
specified in the Development Program within the Budget, but shall not be required
to perform activities outside of the scope of the Development Program.
	 
	 	c.	 	Should ZARS request activities that are outside the scope of the
Development Program, the Parties shall agree in writing to the associated changes
to the Budget.
	 
	 	d.	 	The payment terms for the Development Program are as follows:




 









 












	 	i.	 	To commence the Development Program, ZARS shall pay
Corium a non-refundable advanced payment of [ * ] within 10 days of
Effective Date (i.e., [ * ] of the total budget for labor).
	 
	 	ii.	 	Thereafter, Corium shall invoice ZARS the balance
of the labor expense ([ * ]) in twelve (12) monthly installments of [ * ]
and ZARS agrees to pay Corium the amounts set forth in such monthly
invoices within twenty (20) days of the invoice date.
	 
	 	iii.	 	Materials and supplies shall be invoiced on a
monthly basis at cost plus [ * ] and ZARS agrees to pay Corium the amounts set forth in such monthly
invoices within twenty (20) days of the invoice date.
	 
	 	iv.	 	Equipment, equipment shipping, installation and
shipping insurance and any requested travel shall be invoiced on a
monthly basis at cost and ZARS agrees to pay Corium the amounts set forth
in such monthly invoices within twenty (20) days of the invoice date.
	 
	 	v.	 	The cost of the Phase III stability study ([ * ])
shall be invoiced separately in the installments below and ZARS agrees to
pay Corium the amounts set forth in such invoices within twenty (20) days
of the invoice date. If campaign 2 is not placed on stability, Zars will
not be billed for such expenses at milestone intervals below.





	 	 	 	 	 
	Placebo and Campaign 1	 	 
	1.
	 	Initiation of stability study	 	[ * ]
	2.
	 	3 month stability report	 	[ * ]
	3.
	 	12 month stability report	 	[ * ]
	4.
	 	24 month stability report	 	[ * ]
	 
	 	TOTAL:	 	[ * ]
	 
	Campaign 2	 	 
	1.
	 	Initiation of stability study	 	[ * ]
	2.
	 	3 month stability report for Campaign 2	 	[ * ]
	3.
	 	12 month stability report for Campaign 2	 	[ * ]
	4.
	 	24 month stability report for Campaign 2	 	[ * ]
	 
	 	TOTAL:	 	[ * ]





IN WITNESS WHEREOF, and intending to be legally bound, the parties hereto have caused this
Addendum to be executed by their duly authorized representatives as of the Effective Date.




	 	 	 	 	 	 	 	 	 	 	 
	ZARS, Inc.	 	 	 	Corium International, Inc	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Robert Lippert
	 	 	 	By:
	 	/s/ Steve Klemm	 	 
	 
	Its:

	 	President & CEO
	 	 	 	Its:
	 	COO	 	 
	 
	Date:

	 	June 28, 2006
	 	 	 	Date:
	 	June 28, 2006	 	 






 









 






Exhibit 1




Development Program and Budget




	 	 	 
	Mfg PD	 	 
	Analytical Validation	 	 
	Ph III Clinical Mfg	 	Budget
	Project Management
	 	[ * ]
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	 
	 	 
	Phase III Process Development and Materials Optimization
	 	[ * ]
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	 
	 	 
	Engineering Support & Equipment Qualification
	 	[ * ]
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	 
	 	 
	Manufacture and Release Phase III Supplies
	 	[ * ]
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	[ * ]
	 	 
	[ * ]
	 	 
	 
	 	 
	GMP Document Development/Approval & Regulatory/QA
	 	[ * ]
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	 
	 	 
	Phase III Stability
	 	[ * ]
	§ [ * ]
	 	 
	[ * ]
	 	 
	 
	 	 
	Analytical Method Development/Validation/Transfer
	 	[ * ]
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	 
	 	 
	Equipment
	 	[ * ]
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 






 









 






	 	 	 
	Mfg PD	 	 
	Analytical Validation	 	 
	Ph III Clinical Mfg	 	Budget
	Materials & Supplies
	 	[ * ]
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]
	 	 
	§ [ * ]

	 	 
	 
	 	 
	Total

	 	Labor = [ * ]
	 

	 	Ded Equip = [ * ]
	 

	 	M&S = [ * ]
	 	 	Stability = [ * ]






 









 






Assumptions



§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]

§   [ * ]