Exhibit 10.38
Amendment No. 2 to
Amended and Restated Distribution and License Agreement
This Amendment No. 2, dated December 3, 2004, to the Amended and
Restated Distribution and License Agreement, dated as of November 16, 2001 (the
"Supply Agreement"), by and between Pharmion GmbH, a Swiss limited liability
company ("Pharmion"), and Celgene UK Manufacturing II Limited (formerly, Penn T
Limited), a corporation organized under the laws of England and Wales ("CUK"),
as amended by Amendment No. 1 to the Amended and Restated Distribution and
License Agreement, dated March 4, 2003, by and between Pharmion and CUK
("Amendment No. 1"), and as supplemented by the Supplementary Agreement to the
Amended and Restated Distribution and License Agreement, dated June 18, 2003, by
and between Pharmion and CUK (the "Supplementary Agreement").
WHEREAS, Pharmion desires to reduce its future cost of purchasing
Products under the Supply Agreement and is willing to make a one-time payment to
CUK in consideration of such reduction: and
WHEREAS, in connection with such reduction in cost and one-time
payment, Pharmion and CUK desire to effect certain other changes in their
relationship and, accordingly, Pharmion and CUK wish to amend the Supply
Agreement as provided below.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, CUK and Pharmion hereby agree as follows:
1. DEFINITIONS. All capitalized terms not otherwise expressly defined
in this Amendment shall have the meanings ascribed to such terms in the
Agreement.
2. EFFECTIVENESS. This Amendment shall become effective on the date
hereof.
3. PAYMENT. Concurrently with the execution and delivery of this
Amendment, and in consideration therefore, Pharmion shall pay Seventy Seven
Million U.S. Dollars ($77,000,000) to CUK by wire transfer in immediately
available funds (in accordance with written instructions heretofore provided by
CUK).
4. TERMINATION OF AMENDMENT NO. 1 AND SUPPLEMENTARY AGREEMENT.
Amendment No. 1 and the Supplementary Agreement are hereby terminated and,
except for amounts due and owing thereunder for periods prior to the effective
date of this Amendment, shall be of no further force or effect.
5. AMENDMENTS TO THE SUPPLY AGREEMENT. The Supply Agreement is hereby
amended as follows:
(a) The heading is amended and restated in its entirety to read as follows:
"Product Supply Agreement".
(b) All references to "Penn" are deleted and replaced by "CUK".
(c) The seventh recital paragraph is hereby amended and restated in its
entirety to read as follows:
"WHEREAS, Pharmion and Celgene Corporation ("Celgene")
have entered into a License Agreement dated March 7, 2001,
pursuant to which Pharmion has acquired a license to register,
distribute, market, use and sell Celgene's formulation of
Thalidomide in a territory including all countries in the
world except the United States, Canada, Mexico, Japan, and all
provinces of China, other than Hong Kong."
(d) Article I is hereby amended as follows:
(i) The definition of "Celgene Territory" is hereby amended to
provide for the addition of Korea, Taiwan and Hong Kong and restated in
its entirety to read as follows:
" 'CELGENE TERRITORY' shall mean all the countries of
the world except the United States, Canada, Mexico, Japan, and
all the provinces of China other than Hong Kong."
(ii) A definition for "Contract Purchase Price" reading as
follows is hereby added to Article I:
" 'CONTRACT PURCHASE PRICE' shall, as to each calendar
quarter (or period of less than a quarter either at inception
or termination), be equal to (a) fifteen and one half percent
(15.5%) of Net Sales of Products in the Territory during such
period, less (b) the Initial Invoice Price paid by Pharmion
for units of Products sold during such period (as charged to
Pharmion by CUK in accordance with Section 6.1(a) based upon a
"first-in/first-out" accounting of Pharmion's Products
inventory)."
(iii) A definition for "Initial Invoice Price" reading as
follows is hereby added to Article I:
" 'INITIAL INVOICE PRICE' shall have the meaning set
forth in Section 6.1(a)."
(iv) The definition of "Minimum Royalty" is hereby deleted in
its entirety.
(v) The definition of "Penn Territory" is hereby amended and
restated in its entirety to read as follows:
-2-
" 'CUK TERRITORY' shall mean all countries throughout
the world, with the exception of the United States and
Canada."
(vi) A definition for "Special Authorizations" reading as
follows is hereby added to Article I:
" 'SPECIAL AUTHORIZATIONS' shall have the meaning set
forth in Section 7.3."
(e) The last sentence of Section 2.1 is hereby amended and restated in its
entirety to read as follows:
"Without limiting the foregoing, during the term of
this Agreement, CUK will not manufacture (or cause to be
manufactured) any formulation of Thalidomide for distribution
or sale by any Person other than Pharmion within the CUK
Territory, provided that, CUK may manufacture formulations of
Thalidomide using the Celgene Technology for distribution or
sale by Celgene (or a distributor or licensee of Celgene)
within Mexico, Japan and all provinces of China other than
Hong Kong."
(f) Section 2.4 is hereby deleted in its entirety.
(g) The last sentence of Section 3.6 is hereby amended and restated in its
entirety to read as follows:
"Correspondingly, CUK shall not actively export any
Products into the Territory except (a) to Pharmion and (b) to
Celgene (or one of its subdistributors or licensees) as
provided in Section 2.1 with respect to Mexico, Japan and all
provinces of China other than Hong Kong."
(h) Sections 11.3, 12.1 and 13.3 are amended to replace, unless the context
otherwise requires, each reference therein to "Pharmion" with "Pharmion
and its Affiliates".
(i) Article VI is hereby amended and restated in its entirety to read as
follows:
"Article VI"
PRODUCT PRICING; PAYMENT
Section 6.1 PURCHASE PRICE. Pharmion shall pay for the purchase of
Products from CUK in the manner described below:
(a) INITIAL INVOICE PRICE. For each shipment of Products, CUK
shall invoice Pharmion and Pharmion shall pay to CUK the then
applicable Minimum Price times the number of units of Product
included in such shipment (the "Initial Invoice Price").
Pharmion shall pay for each shipment of Products at the
Initial Invoice Price within thirty (30) days from the date of
invoice for each shipment, which shall not be earlier than the
date of shipment.
-3-
Such invoicing shall be subject to annual audit by Pharmion,
and adjustment, if appropriate, as provided in Section 15.3.
(b) QUARTERLY PAYMENTS. Pharmion shall pay the Contract Purchase
Price for Products sold by CUK to Pharmion (except as
specifically provided in Section 7.4(b)), based upon
Pharmion's Net Sales of Products, as follows:
(i) QUARTERLY PAYMENTS. Payments in respect of the Contract
Purchase Price shall be calculated and paid to CUK
quarterly, and shall be due as to Net Sales within any of
the United Kingdom, Germany or Australia forty-five (45)
days following the end of each calendar quarter and as to
Net Sales elsewhere within ninety (90) days following the
end of each calendar quarter.
(ii) NET SALES REPORTS. Pharmion shall submit quarterly Net
Sales reports to CUK within forty-five (45) days
following the end of each calendar quarter. Such reports
shall include, but not be limited to:
(1) An accounting of Net Sales within the Territory
during such quarter on a country by country
basis;
(2) An accounting of the purchase price of the units
of Products sold during such quarter; and
(3) An accounting of Net Sales set out in clauses
(1) and (2) above (in U.K. Pounds Sterling) and
the calculation of the Contract Purchase Price
owing to CUK pursuant to this Section 6.1 (in
U.K. Pounds Sterling), including, if applicable,
the exchange rates used in determining the
amount of U.K. Pounds Sterling.
(c) INVOICES FOR CONTRACT PURCHASE PRICE. If required by Pharmion,
CUK shall submit a written invoice addressed to Pharmion for
the quarterly Contract Purchase Price to be paid by Pharmion
under this Agreement. CUK shall submit these written invoices
to Pharmion within a reasonable period following the request
from Pharmion and based upon the last quarterly Net Sales
report from Pharmion provided to CUK in accordance with
Section 6.1(b)(ii).
(d) UNIT PRICE REPORTS. Pharmion shall provide Celgene on a
quarterly basis with a report showing the average price at
which it sold Products on a per unit, country by country basis
within forty-five (45) days following the end of each calendar
quarter.
(e) WITHHOLDING TAX. Any tax that Pharmion is required to pay or
withhold from payments in respect of the Contract Purchase
Price to be paid to CUK under this Agreement shall be deducted
from the amount otherwise due, provided that, in regard to any
such deduction, Pharmion shall give
-4-
CUK such assistance as may be reasonably necessary to enable
or assist CUK to claim exemption therefrom or a reduction
thereof and shall provide CUK with an official tax certificate
as soon as possible.
(f) CURRENCY. All prices for Products shall be quoted by CUK to
Pharmion, and payments by Pharmion to CUK under this Agreement
shall be made, in U.K. Pounds Sterling."
(g) PRICING. CUK has expressed a concern that as a result of
macroeconomic conditions it could, at some point, potentially
be at risk of experiencing increases in its costs that were
beyond its control, thereby causing its fully allocated cost
of manufacture of the Product to exceed 3% of Net Sales (a
"Macroeconomic Cost Increase"), and correspondingly reducing
CUK's net margin on the Contract Purchase Price below 12.5% of
Net Sales. Pharmion hereby acknowledges that it would take
such Macroeconomic Cost Increases into account and would make
a reasonable effort to increase its pricing of the Products to
compensate CUK for any such cost increases, to the extent
feasible and after taking into consideration relevant pricing
factors which include, but are not limited to, customer
demand, competition, regulatory requirements and third-party
reimbursement. Notwithstanding the foregoing, CUK acknowledges
that Pharmion retains the sole right to make pricing decisions
regarding the Products in the Territory.
(j) Article VII is hereby amended and restated in its entirety to read as
follows:
"Article VII
BELGIUM AND FRANCE
Section 7.1 CURRENT SALES IN BELGIUM AND FRANCE. Pharmion's subsidiary,
Pharmion Developpement ("Developpement") currently sells in Belgium and France a
formulation of Thalidomide produced by and purchased from its former affiliate
Laphal Industrie ("Industrie"). Such purchases and sales have been made pursuant
to previously agreed upon concessions from CUK to Pharmion set out in Amendment
No. 1.
Section 7.2 COMMERCIALLY REASONABLE EFFORTS. Pharmion shall continue to
use commercially reasonable efforts (i) to cause the existing ATU (AUTORISATION
TEMPORAIRE D'UTILISATION), as well as any other temporary, specials or
named-patient authorizations pursuant to which Developpement sells Thalidomide
purchased from Industrie in Belgium and France to be amended to provide for the
substitution of a Thalidomide formulation produced by CUK (preferably the
Celgene Product, but otherwise the CUK Product) for the formulation being
produced by Industrie, and (ii) consistent with regulatory constraints, to cause
such amendments to be effective as early as possible, consistent with Pharmion's
non-terminable obligations under the supply contract between Pharmion and
Industrie.
-5-
Section 7.3 PURCHASES FROM INDUSTRIE. Until the earlier of (a) the
effectiveness of the amendments described in Section 7.2 above, and (b) the
Approval Date with respect to Belgium and France, and notwithstanding the
contrary provisions of Sections 3.1 and 5.1 of this Agreement, Developpement
shall have the right to continue to purchase its requirements of Thalidomide
from Industrie and to distribute Thalidomide under Developpement's ATUs and
other temporary, specials or named-patient authorizations (collectively,
"Special Authorizations") in Belgium and France. From and after the earlier of
such dates, Pharmion shall cause Developpement to sell only Products originally
sourced from CUK.
Section 7.4 PAYMENTS. In respect of sales of Thalidomide by
Developpement in Belgium and France:
(a) THALIDOMIDE PURCHASED FROM INDUSTRIE. In consideration of (i)
the concession from CUK to allow Pharmion to continue to
utilize Thalidomide purchased from Industrie and (ii) to
induce CUK to maintain an adequate manufacturing capacity to
permit the shift contemplated by Section 7.2, Pharmion shall
pay to CUK the following amounts in respect of Net Sales of
Thalidomide by Developpement in Belgium and France until the
earlier of (x) the effectiveness of the amendments described
in Section 7.2 and (y) the Approval Date with respect to
Belgium and France: as to all Net Sales in Belgium or France
for Thalidomide, Pharmion shall pay to CUK the Contract
Purchase Price in a manner consistent with Section 6.1;
provided, that, for purposes of computing the Contract
Purchase Price and the Initial Invoice Price applicable to
this Section 7.4(a), the relevant fully allocated cost of
product sold shall be the lesser of (A) Developpement's
purchase price of product sold for the quarter, or (B) one
hundred twenty percent (120%) of the equivalent cost of units
sold during the quarter as if such units had been purchased
from CUK, and "Territory" shall mean Belgium and France.
(b) THALIDOMIDE PURCHASED FROM CUK. During the period commencing
on the effectiveness of the amendments described in Section
7.2 and ending on the Approval Date, Pharmion shall pay to CUK
in respect of Net Sales the Contract Purchase Price in a
manner consistent with Section 6.1."
(k) The notice address for Pharmion Corporation contained in Section 15.9
shall be replaced with the following:
Pharmion Corporation
0000 00xx Xxxxxx
Xxxxxxx, XX 00000
Attention: Chief Executive Officer
Fax No.: (000) 000-0000
6. ADDITIONAL PROVISIONS. Pharmion and CUK each hereby agree to
negotiate in good faith a further amendment to the Supply Agreement that will
provide a greater level of
-6-
detail with regard to a number of manufacturing, production, capacity and
scheduling issues, including (a) Pharmion's desire to incorporate the following
contractual commitments into the Agreement: (i) a formal recognition by CUK of
the applicable manufacturing standards (including, but not limited to, ICH, EC
Directives and cGMP) for Products sold in the Territory; (ii) an obligation on
the part of CUK to make available a minimum manufacturing capacity for
production of Products under the Agreement, as well as provisions dealing with
reasonable allocations among customers of CUK in the event of shortages of
supply; (iii) a formalization of standards for a minimum remaining shelf life of
the Products at the time of delivery to Pharmion; (iv) a requirement on the part
of CUK to maintain a mutually agreed upon level of safety stock of the active
pharmaceutical ingredient, raw materials and components; (v) a process by which
CUK will accept Pharmion purchase orders; (vi) a requirement on the part of CUK
to notify Pharmion of the manufacturing and delivery schedule; (vii) an
expansion of Pharmion's right to secure a second source of thalidomide in the
event of a failure by CUK to supply Products; (viii) clarifications to the
procedures for implementing changes to the manufacturing process and allocation
of costs for required and discretionary changes to such process; (ix)
responsibility for environmental, safety and health aspects of manufacturing
thalidomide and (x) obligations of CUK to perform additional services, such as
stability testing programs, management of sample retention and package design;
and (b) CUK's desire to incorporate the following contractual commitments into
the Agreement: (i) the sourcing of Product by CUK from one or more manufacturers
other than PPSL, and (ii) to the extent permitted by applicable law, a
requirement of Pharmion to safeguard that Product supplied to it by CUK or
Industrie is not distributed in the United States, Canada, Mexico, Japan or any
of the provinces of China other than Hong Kong. Notwithstanding the preceding
sentence, Pharmion acknowledges that CUK procures the supply of Products from an
unaffiliated entity, PPSL, pursuant to the terms of a Technical Services
Agreement dated October 21, 2004 between CUK and PPSL (the "TSA") and that the
negotiation of the foregoing contractual commitments are subject to the rights
and obligations of CUK as provided in the TSA. It is the intention of the
parties that such further amendment be entered into no later than six (6) months
from the date hereof.
7. UNMODIFIED PROVISIONS. Except as expressly modified by this
Amendment and Amendment No. 1, all terms and conditions of the Supply Agreement
shall remain in full force and effect.
8. GOVERNING LAW; CHOICE OF FORUM. The parties agree that this
Agreement shall be governed by and construed in accordance with the laws of
England and Wales.
9. CAPTIONS. All captions herein are for convenience only and shall not
be interpreted as having any substantive meaning.
[Signature page follows.]
-7-
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed by their authorized representatives, in duplicate on the dates
written herein below.
Pharmion GmbH Celgene UK Manufacturing II, Limited
By Xxxxxxx X. Xxxxxxx By Xxx X. Xxxxx
--------------------------------- ---------------------------------
-8-
