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Exhibit 10.10
January 27, 2000
Mr. E. Xxxxxx Xxxxxxxx
Chairman and CEO
Duramed Pharmaceuticals, Inc.
0000 Xxxxxxx Xxxxx
Xxxxxxxxxx, Xxxx 00000
Dear Xxx:
This letter will confirm our agreement, further details of which may be
elaborated in a subsequent agreement or agreements, regarding (i) the loan
guarantee to be provided by Solvay Pharmaceuticals, Inc. to Xxxxxxx Xxxxx
Business Financial Services, Inc. and (ii) the extended and enhanced alliance
with respect to the co-promotion of Cenestin(R). Such agreement(s) shall contain
the following provisions:
1. The Cenestin co-promotion agreement shall have a term of 10
years.
2. Effective January 1, 2000, Solvay Pharmaceuticals will be
responsible for and pay the advertising and sales promotion
("ASP") and agreed-upon expenses related to Cenestin,
including direct selling expenses of Cardinal Market Force.
3. Upon completion of the "Investment Recovery Phase" (as defined
below), the parties shall share equally in the gross profits
from the sales of Cenestin, less ASP expenses incurred by
Solvay Pharmaceuticals, as illustrated in the financial models
[previously presented]. Investment Recovery Phase shall mean
the period of time from 1/1/2000 until the cumulative gross
profit from Cenestin sales exceeds the total of the Solvay
Pharmaceuticals Investment (defined as the cumulative ASP
incurred by Solvay Pharmaceuticals from 1/1/2000 forward) and
the Duramed 1999 Cenestin Investment (defined as $38,000,000).
During the Investment Recovery Phase, the split of gross
profits shall be calculated as follows:
Step 1 Investment Recovery Phase:
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THE BASIC FORMULA
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DRMD 100% Sales
DRMD 15% Cost of product @ standard
Gross profit 85% Gross profit (GP)
Solvay Pharmaceuticals gets 80% of GP to cover ASP from 1-1-2000 and
forward
DRMD gets 20% of GP
Step 2 Investment Recovery Phase:
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When Solvay Pharmaceuticals has recovered all of the on-going ASP costs CENESTIN
will be generating a profit. DRMD will receive 80% of the remaining gross profit
until they have recovered the specified "investments" (38 MUSD).
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THE BASIC FORMULA
--------------------------------------------------------------------------------
Step 1
DRMD 100% Sales
DRMD 15% Cost of Product @ standard
Gross profit 85% Gross profit (GP)
Solvay Pharmaceuticals gets 80% of GP to cover ASP until Cumulative
Breakeven
DRMD gets 20% of GP
Step 2
Remaining Gross Profit 80% Of GP to cover 1999 investment of $38
MUSD
20% Of GP goes to Solvay Pharmaceuticals
4. Solvay Pharmaceuticals will guarantee the loan to Duramed by
Xxxxxxx Xxxxx Business Financial Services, Inc. in the
principal amount of $20,000,000 subject to approval by Solvay
Pharmaceuticals of the required documentation from Xxxxxxx
Xxxxx Business Financial Services, Inc. and the granting of an
exclusive, first position mortgage, to Solvay Pharmaceuticals,
Inc. in the approximately 17 acre tract of land and
improvements comprising Duramed's Cincinnati manufacturing
facility.
5. Duramed shall grant Solvay Pharmaceuticals, or its designee, a
worldwide exclusive license to Cenestin(R)outside the U.S.
These rights will apply to all countries except for Puerto
Rico and the Eastern European countries currently covered by
Duramed's existing commitments to Xxxxxx Xxxxxxx until such
time as those arrangements expire or are terminated. This
license will apply on a country-by-country basis and may be
exercised with respect to any country at any time within ten
months after the date of this letter. During this period,
Solvay Pharmaceuticals will advise Duramed of the countries in
which it wishes to market Cenestin, and the parties will
negotiate in good faith to enter into a mutually agreed
license and supply agreement for each country on commercially
viable terms to Solvay Pharmaceuticals which, amongst other
terms, shall include consideration of the pricing constraints
imposed by foreign countries.
Unless otherwise agreed between Duramed and Solvay
Pharmaceuticals, the term of any such agreement will continue
for the term of the Cenestin co-promotion agreement between
Solvay Pharmaceuticals and Duramed, as the term of that
agreement may be modified by the parties in the future. During
the initial ten months period and for a period of two years
thereafter, if Duramed receives a bona fide written offer from
a third party for Cenestin in a country, Duramed will promptly
notify Solvay Pharmaceuticals of the terms of the offer, and
Solvay Pharmaceuticals will have the right to negotiate an
agreement with Duramed for that country on terms no more
favorable to Duramed than the terms offered by the third
party. If Duramed and Solvay Pharmaceuticals are unable to
agree on the terms of the agreement for a country within two
months of the date Duramed notifies Solvay Pharmaceuticals of
the third party offer, Duramed may proceed with the third
party on the terms previously offered by the third party.
6. Duramed shall grant Solvay Pharmaceuticals, or its designee,
the option to an exclusive worldwide license to Verapamil SR
under a Solvay Pharmaceuticals brand name. This option may be
exercised at any time within one year after the date of this
letter. During this period, at Solvay Pharmaceuticals'
request, Duramed will negotiate, with Solvay Pharmaceuticals a
royalty-free licensing and supply agreement for Verapamil SR
on industry-standard terms and conditions. Under any
agreement, Duramed will agree to manufacture Verapamil SR for
Solvay Pharmaceuticals and sell it to Solvay
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Pharmaceuticals at a price equal to Duramed's standard cost,
plus 15%. If Solvay Pharmaceuticals exercises its right of
first refusal and introduces a brand product, Duramed will
cease marketing Verapamil SR as a generic drug under Duramed's
ANDA.
Both parties agree to diligently pursue the drafting and negotiation of further
documentation incorporating the agreements as set forth above.
If you agree with the foregoing, please sign and return a copy of this letter,
which will then represent the binding agreement of our companies.
Very truly yours,
SOLVAY PHARMACEUTICALS, INC.
By: /s/ Xxxxxx X. Xxxxxxx
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Xxxxxx X. Xxxxxxx, Vice President
Accepted and agreed to this day
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of January, 2000
DURAMED PHARMACEUTICALS, INC.
By: /s/ E. Xxxxxx Xxxxxxxx
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E. Xxxxxx Xxxxxxxx, Chairman and CEO
