ACTIVE PHARMACEUTICAL INGREDIENT SUPPLY AGREEMENT
by and between
PENTERRA PHARMACEUTICALS CORP.
("Supplier")
and
MERIDIAN BIO THERAPEUTICS LIMITED
("Purchaser")
Dated as of October 2, 2023
Effective as of October 20, 2023
CONFIDENTIAL — This document contains confidential and proprietary information of Penterra Pharmaceuticals Corp. and Meridian Bio Therapeutics Limited. This document may not be reproduced, distributed, or disclosed to any third party without the prior written consent of both parties, except as expressly permitted herein or in the License Agreement referenced herein.
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ACTIVE PHARMACEUTICAL INGREDIENT SUPPLY AGREEMENT
This Active Pharmaceutical Ingredient Supply Agreement (this "Agreement") is entered into as of October 2, 2023 (the "Execution Date"), by and between:
PENTERRA PHARMACEUTICALS CORP., a corporation organized and existing under the laws of the State of Delaware, with its principal place of business at 400 Pharma Drive, Suite 800, Princeton, New Jersey 08540 (hereinafter referred to as "Supplier" or "Penterra");
and
MERIDIAN BIO THERAPEUTICS LIMITED, a limited company organized and existing under the laws of Hong Kong (Company Registration No. 2847631), with its principal place of business at 18/F, Blossom Tower, 88 Queen's Road Central, Hong Kong SAR (hereinafter referred to as "Purchaser" or "Meridian").
Supplier and Purchaser are each individually referred to herein as a "Party" and collectively as the "Parties."
RECITALS
WHEREAS, Supplier and Purchaser have entered into that certain Exclusive License Agreement dated as of October 2, 2023 (the "License Agreement"), pursuant to which Supplier granted Purchaser an exclusive license to develop, manufacture, and commercialize the compound known as PPC-4187 (proposed International Nonproprietary Name: Penteracitinib) in the Licensed Territory (as defined in the License Agreement);
WHEREAS, PPC-4187 is a selective Janus kinase 1 (JAK1) inhibitor, formulated as an oral once-daily tablet formulation (25 mg and 50 mg film-coated tablets), for the treatment of moderate-to-severe atopic dermatitis in adults, and represents a significant therapeutic advancement in the management of this condition;
WHEREAS, Supplier's active pharmaceutical ingredient for PPC-4187 is currently manufactured by Alkerra Manufacturing Inc., a North Carolina corporation located at 5200 Meridian Parkway, Research Triangle Park, North Carolina 27713 (the "CMO" or "Alkerra"), pursuant to a manufacturing services agreement between Supplier and Alkerra;
WHEREAS, Purchaser requires a reliable supply of the active pharmaceutical ingredient ("API") and reference standard for PPC-4187 in order to conduct clinical development activities and, subject to receipt of applicable regulatory approvals, commercial manufacture and sale of finished drug product in the Licensed Territory during the initial period before completion of technology transfer;
WHEREAS, the Parties have agreed to enter into a separate Technology Transfer Agreement of even date herewith (the "Technology Transfer Agreement"), providing for the transfer of the PPC-4187 API manufacturing process, associated know-how, and analytical methods to Purchaser's designated manufacturer within twenty-four (24) months of the Effective Date (i.e., by October 20, 2025);
WHEREAS, this Agreement is entered into as a condition to closing under the License Agreement, and the Parties wish to set forth the terms and conditions on which Supplier will supply API and reference standard to Purchaser during the Initial Term and any renewal periods; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:
ARTICLE 1 — DEFINITIONS
Section 1.1 — Definitions
As used in this Agreement, the following terms shall have the meanings set forth below:
"Affiliate" shall have the meaning ascribed to such term in the License Agreement. For purposes of this Agreement, the Affiliates of Purchaser include, without limitation, Meridian Pharma (Shanghai) Co., Ltd., Meridian Japan K.K., Meridian Korea Inc., and Meridian Bio Australia Pty Ltd.
"Alkerra" or "CMO" means Alkerra Manufacturing Inc., a corporation organized under the laws of the State of North Carolina, with its principal manufacturing facility located at 5200 Meridian Parkway, Research Triangle Park, North Carolina 27713, which is Penterra's contract manufacturer of the API as of the Effective Date.
"API" means the active pharmaceutical ingredient for PPC-4187 (Penteracitinib), manufactured in accordance with the Specifications and cGMP, and supplied by Supplier to Purchaser under this Agreement.
"Batch" means a defined quantity of API manufactured in a single production run in accordance with the applicable master batch record, as further described in the Specifications set forth in Exhibit A. Each Batch shall be uniquely identified by a Batch number assigned by Supplier or Alkerra.
"Calendar Quarter" means each successive period of three (3) consecutive calendar months ending on March 31, June 30, September 30, and December 31, respectively; provided, however, that the first Calendar Quarter shall commence on the Effective Date and end on December 31, 2023, and the last Calendar Quarter shall end on the last day of the term of this Agreement.
"Certificate of Analysis" or "COA" means a certificate issued by Supplier or Alkerra for each Batch of API, documenting the results of all tests and analyses performed in accordance with the Specifications and confirming compliance therewith.
"Certificate of Compliance" or "COC" means a certificate issued by Supplier or Alkerra for each Batch of API, confirming that such Batch was manufactured in compliance with cGMP and all applicable regulatory requirements.
"cGMP" means current Good Manufacturing Practices as defined by applicable regulatory authorities, including, without limitation, the United States Food and Drug Administration ("FDA"), the National Medical Products Administration of the People's Republic of China ("NMPA"), the Pharmaceuticals and Medical Devices Agency of Japan ("PMDA"), the Ministry of Food and Drug Safety of the Republic of Korea ("MFDS"), and the Therapeutic Goods Administration of Australia ("TGA"), as such standards may be amended, supplemented, or replaced from time to time.
"Clinical Supply" means API supplied under this Agreement for use in clinical trials of PPC-4187 conducted by or on behalf of Purchaser or its Affiliates in the Licensed Territory.
"Commercial Supply" means API supplied under this Agreement for use in the manufacture of finished drug product for commercial sale of PPC-4187 in the Licensed Territory.
"Confidential Information" shall have the meaning ascribed to such term in Article 11, as supplemented by the confidentiality provisions of the License Agreement.
"Defective Product" means any API that (a) does not conform to the Specifications at the time of delivery, or (b) was not manufactured in accordance with cGMP and all applicable regulatory requirements, or (c) is otherwise adulterated, contaminated, misbranded, or not fit for its intended purpose.
"Delivery Point" means FCA (Incoterms® 2020) Alkerra's manufacturing facility at 5200 Meridian Parkway, Research Triangle Park, North Carolina 27713, or such other delivery point as may be agreed upon in writing by the Parties from time to time.
"Effective Date" means October 20, 2023, being the Effective Date as defined in and under the License Agreement.
"Firm Forecast Period" has the meaning set forth in Section 4.1.
"Firm Order" means a binding, irrevocable purchase order placed by Purchaser in accordance with Section 4.2 of this Agreement.
"Forecast" means the rolling eighteen (18)-month forecast of anticipated API requirements submitted by Purchaser to Supplier in accordance with Section 4.1 of this Agreement.
"Initial Term" means the period commencing on the Effective Date and ending on the third (3rd) anniversary thereof, i.e., October 20, 2026, unless earlier terminated or extended in accordance with the provisions of Article 13.
"License Agreement" means that certain Exclusive License Agreement dated as of October 2, 2023, by and between Supplier and Purchaser, as the same may be amended, supplemented, or restated from time to time.
"Licensed Territory" or "Territory" shall have the meaning ascribed to "Licensed Territory" in the License Agreement, which as of the Effective Date includes: the People's Republic of China (including Hong Kong Special Administrative Region and Macau Special Administrative Region), Japan, the Republic of Korea, Australia, New Zealand, Singapore, Thailand, Malaysia, Indonesia, the Philippines, Vietnam, and Taiwan.
"Losses" means any and all damages, losses, liabilities, costs, and expenses (including reasonable attorneys' fees and court costs) incurred by a Party or its Affiliates.
"Net Cost" means Supplier's actual, documented manufacturing cost for the API, calculated in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP") and Supplier's standard cost accounting methodology, consistently applied, and including the following cost categories: (a) direct raw materials and starting materials; (b) direct labor (manufacturing and quality control personnel); (c) manufacturing overhead (including equipment depreciation, facility maintenance, and utilities directly allocable to API production); (d) quality testing and release costs (including analytical testing, stability testing sample costs, and COA/COC preparation); (e) packaging costs (bulk API packaging materials and labor); and (f) a reasonable allocation of Alkerra facility costs based on actual production volumes. Net Cost shall not include any allocation of Supplier's general and administrative expenses, corporate overhead, sales and marketing costs, or research and development costs unrelated to the API manufacturing process.
"Quality Agreement" means that certain Quality Agreement to be entered into between Supplier and Purchaser within sixty (60) days of the Effective Date (i.e., by December 19, 2023), in substantially the form attached to the License Agreement, governing the quality standards, responsibilities, and procedures applicable to the supply of API under this Agreement.
"Reference Standard" means the characterized reference standard material for PPC-4187 API, used for analytical testing, method validation, and quality control purposes in connection with the development, manufacture, and commercialization of PPC-4187 in the Licensed Territory.
"Specifications" means the detailed specifications for the API as set forth in Exhibit A hereto, including, without limitation, specifications for identity, purity, assay, particle size distribution, residual solvents, heavy metals, water content, microbial limits, specific optical rotation, and appearance, as such Specifications may be amended from time to time by mutual written agreement of the Parties or as required by applicable regulatory authorities.
"Supply Price" means the price payable by Purchaser for API and Reference Standard supplied under this Agreement, calculated as Net Cost plus a markup of fifteen percent (15%), as further described in Section 5.1.
"Technology Transfer Agreement" means that certain Technology Transfer Agreement of even date herewith between Supplier and Purchaser, governing the transfer of the PPC-4187 API manufacturing process know-how, analytical methods, and related documentation from Supplier (or Alkerra) to Purchaser's designated manufacturer, with a targeted completion deadline of twenty-four (24) months from the Effective Date (i.e., by October 20, 2025).
Section 1.2 — Interpretation
(a) Any capitalized term used in this Agreement but not defined herein shall have the meaning ascribed to such term in the License Agreement.
(b) The headings of the Articles, Sections, and Exhibits in this Agreement are inserted for convenience of reference only and shall not affect the meaning or interpretation of this Agreement.
(c) As used in this Agreement, the word "including" (and all grammatical variations thereof) means "including without limitation" or "including but not limited to" and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.
(d) References to any Article, Section, or Exhibit are references to the Articles, Sections, and Exhibits of this Agreement, unless otherwise specified.
(e) All references to "days" mean calendar days unless otherwise specified as "business days." As used herein, "business days" means days other than Saturdays, Sundays, and legal holidays in both the State of New York, United States, and Hong Kong SAR.
(f) Words in the singular shall include the plural and vice versa, and words of one gender shall include other genders, as the context requires.
(g) The Exhibits attached hereto are incorporated into and form an integral part of this Agreement.
ARTICLE 2 — SUPPLY OBLIGATIONS
Section 2.1 — Obligation to Supply
During the Initial Term and any renewal period, Supplier shall use commercially reasonable efforts to manufacture (or cause Alkerra to manufacture) and supply to Purchaser the API and Reference Standard in accordance with the Specifications, cGMP, and the terms and conditions of this Agreement. The API shall be supplied for both Clinical Supply and Commercial Supply use by Purchaser and its Affiliates in the Licensed Territory, as identified in each Firm Order. Supplier acknowledges that timely and uninterrupted supply of the API is critical to Purchaser's clinical development timelines and commercialization plans in the Licensed Territory, and Supplier shall prioritize the fulfillment of Purchaser's Firm Orders consistent with its obligations to other customers and its own internal requirements.
Section 2.2 — Reference Standard Supply
Supplier shall supply Reference Standard to Purchaser in quantities reasonably requested by Purchaser for analytical testing, method validation, quality control, and other purposes related to the development, manufacture, and commercialization of PPC-4187 in the Licensed Territory. Reference Standard shall be supplied at the Supply Price (Net Cost plus fifteen percent (15%) markup), consistent with the pricing methodology applicable to the API as set forth in Section 5.1. Minimum order quantities and lead times for Reference Standard shall be as set forth in Exhibit B. Each shipment of Reference Standard shall be accompanied by a certificate of characterization and a COA. Purchaser shall submit requests for Reference Standard in writing, specifying the quantity required and the intended use, and Supplier shall use commercially reasonable efforts to fulfill such requests within the lead times specified in Exhibit B.
Section 2.3 — Exclusivity of Supply
This Agreement does not grant Purchaser exclusivity as to the source of API for PPC-4187. Purchaser may qualify alternative sources of API supply in the Licensed Territory, subject to applicable regulatory requirements (including any necessary filings with the NMPA, PMDA, MFDS, TGA, and other applicable regulatory authorities) and the terms and conditions of the Technology Transfer Agreement. The Parties acknowledge that the Technology Transfer Agreement contemplates the transfer of the API manufacturing process to Purchaser's designated manufacturer in the Asia-Pacific region, and that following successful completion of such technology transfer and qualification of the alternative manufacturing site, Purchaser's obligation to purchase API exclusively from Supplier under this Agreement shall terminate. Nothing in this Agreement shall be construed to restrict Supplier from manufacturing and selling API for PPC-4187 for use outside the Licensed Territory, subject to the terms of the License Agreement.
Section 2.4 — Manufacturing Site
The API shall be manufactured at Alkerra Manufacturing Inc., 5200 Meridian Parkway, Research Triangle Park, North Carolina 27713, which is the approved and validated manufacturing site as of the Effective Date. Any change in the manufacturing site for the API requires: (a) prior written notice to Purchaser not less than one hundred eighty (180) days before the proposed change; (b) Purchaser's prior written consent, which shall not be unreasonably withheld, conditioned, or delayed; and (c) compliance with all applicable regulatory requirements in all relevant jurisdictions in the Licensed Territory, including, without limitation, the requirements of the NMPA, PMDA, MFDS, and TGA for post-approval changes to manufacturing sites. Supplier shall provide Purchaser with reasonable assistance, at Supplier's cost, in connection with any regulatory filings necessitated by a change in the manufacturing site, including the preparation and submission of supplemental applications, site master files, and other regulatory documentation. Any change in the manufacturing site shall not result in any change to the Specifications or degradation of API quality.
Section 2.5 — Subcontracting
Supplier may subcontract the manufacture of API to Alkerra or to other qualified subcontractors; provided, however, that (a) Supplier shall remain fully responsible for compliance with all of its obligations under this Agreement, including, without limitation, compliance with the Specifications, cGMP, and all applicable regulatory requirements; (b) any such subcontractor shall be bound by obligations of confidentiality and quality at least as protective as those set forth in this Agreement and the Quality Agreement; and (c) Supplier shall notify Purchaser in writing at least ninety (90) days prior to any change of subcontractor, which notice shall include the identity and qualifications of the proposed new subcontractor and the rationale for the change. Purchaser shall have the right to audit any proposed new subcontractor prior to approval, and Purchaser's consent to the use of a new subcontractor (other than Alkerra) shall not be unreasonably withheld, conditioned, or delayed.
ARTICLE 3 — QUALITY
Section 3.1 — Specifications
All API supplied under this Agreement shall conform to the Specifications set forth in Exhibit A hereto. The Specifications include, without limitation, parameters for appearance, identity (by infrared spectroscopy and high-performance liquid chromatography), assay (not less than 99.0% by HPLC), related substances (individual and total impurities), residual solvents (in accordance with ICH Q3C guidelines), heavy metals, water content, particle size distribution (D10, D50, D90), microbial limits (in accordance with USP/EP harmonized methods), specific optical rotation, and melting point/differential scanning calorimetry. All Specifications reference the crystalline Form A polymorph as characterized in United States Patent No. 11,345,678. The Specifications may be updated or amended from time to time by mutual written agreement of the Parties or as required by applicable regulatory authorities. In the event that a regulatory authority in the Licensed Territory requires changes to the Specifications that differ from or are more stringent than the existing Specifications, the Parties shall discuss such changes in good faith and shall implement such changes as promptly as practicable, with any incremental costs resulting from such changes to be allocated as agreed upon by the Parties.
Section 3.2 — Quality Agreement
The Parties shall execute the Quality Agreement within sixty (60) days of the Effective Date (i.e., by December 19, 2023), in substantially the form attached to the License Agreement. The Quality Agreement shall govern: (a) quality standards and acceptance criteria for the API; (b) change control procedures; (c) deviation handling and corrective and preventive action ("CAPA") procedures; (d) out-of-specification investigation procedures; (e) stability testing obligations and data sharing; (f) regulatory inspection obligations and notifications; (g) annual product quality review requirements; (h) complaint handling procedures; and (i) such other quality-related matters as the Parties may agree. In the event of any conflict or inconsistency between the provisions of this Agreement and the Quality Agreement with respect to quality-related matters, the Quality Agreement shall prevail and govern to the extent of such conflict.
Section 3.3 — Certificate of Analysis and Certificate of Compliance
Each shipment of API delivered to Purchaser under this Agreement shall be accompanied by a Certificate of Analysis and a Certificate of Compliance. The COA shall include the results of all tests and analyses required by the Specifications, including the test methods employed, acceptance criteria, and actual results obtained, together with a statement that the Batch meets all applicable Specifications. The COC shall confirm that the Batch was manufactured in compliance with cGMP and all applicable regulatory requirements, and shall identify any deviations or non-conformances observed during manufacturing (together with a summary of any CAPA actions taken). Both the COA and the COC shall be signed by an authorized representative of Supplier or Alkerra's quality assurance department.
Section 3.4 — cGMP Compliance
All API manufactured and supplied under this Agreement shall be manufactured in compliance with cGMP as defined by the FDA, and to the extent applicable to the importation, development, and commercialization of the API in the Licensed Territory, in compliance with the cGMP requirements of the NMPA, PMDA, MFDS, and TGA. Supplier shall maintain (and shall cause Alkerra to maintain) all necessary manufacturing licenses, permits, registrations, and authorizations required for the manufacture of the API at the designated manufacturing site. Supplier shall promptly notify Purchaser of any revocation, suspension, limitation, or material modification of any such license, permit, registration, or authorization. Supplier shall ensure that all personnel involved in the manufacture, testing, and release of the API are appropriately trained and qualified in accordance with cGMP requirements.
Section 3.5 — Regulatory Inspections and Audits
(a) Purchaser Audit Rights. Purchaser shall have the right, upon not less than thirty (30) days' prior written notice, to audit or inspect the manufacturing facility (including Alkerra's facility) for compliance with cGMP, the Specifications, and the Quality Agreement, not more than once per calendar year during the term of this Agreement; provided, however, that in the event of a "for cause" audit (i.e., an audit triggered by a confirmed or reasonably suspected quality issue, a regulatory authority finding, or a product recall), Purchaser may conduct additional audits upon reasonable prior notice. Supplier shall cooperate with and facilitate such audits, including by providing access to relevant manufacturing areas, quality systems, documentation, and personnel. Audits shall be conducted during normal business hours and shall not unreasonably interfere with Supplier's or Alkerra's operations.
(b) Regulatory Authority Inspections. Supplier shall cooperate with and facilitate any inspection of the manufacturing facility by a regulatory authority in the Licensed Territory (including the NMPA, PMDA, MFDS, and TGA) that is relevant to the API supplied under this Agreement. Supplier shall provide Purchaser with reasonable advance notice of any such inspection to the extent permitted by the regulatory authority. Supplier shall promptly provide Purchaser with copies of any inspection reports, observations (including FDA Form 483 observations), warning letters, untitled letters, import alerts, consent decrees, or other enforcement actions issued by any regulatory authority that relate to or may affect the API or the manufacturing facility. Supplier shall promptly develop and implement appropriate corrective and preventive actions in response to any such regulatory findings and shall keep Purchaser informed of the status and progress of such actions.
Section 3.6 — Change Control
No changes shall be made to the API manufacturing process, Specifications, analytical methods, raw material suppliers, starting materials, manufacturing equipment, or facility without prior written notice to Purchaser and compliance with the change control procedures set forth in the Quality Agreement. Supplier shall classify all proposed changes in accordance with the change control procedures and shall obtain Purchaser's prior written approval for any change classified as a "major" change (as defined in the Quality Agreement). Changes required by an applicable regulatory authority shall be implemented promptly and in accordance with the regulatory authority's directive, with concurrent written notice to Purchaser. Supplier shall provide Purchaser with all documentation reasonably necessary for Purchaser to assess the impact of any proposed change on its regulatory filings, product quality, and supply continuity in the Licensed Territory.
Section 3.7 — Stability Testing
Supplier shall maintain ongoing stability programs for the API in accordance with ICH guidelines Q1A (Stability Testing of New Drug Substances and Products) and Q1B (Photostability Testing of New Drug Substances and Products), and such other stability protocols as may be specified in the Quality Agreement. Supplier shall share all stability data with Purchaser on a semi-annual basis, or more frequently if required by the Quality Agreement or if any out-of-specification or out-of-trend result is observed. In the event that stability data indicate any trend toward degradation or failure to meet Specifications, Supplier shall promptly notify Purchaser and the Parties shall cooperate to investigate and address the issue. Purchaser shall have the right to request that Supplier conduct additional stability studies on specific Batches, at Purchaser's cost, for the purpose of supporting regulatory filings in the Licensed Territory.
ARTICLE 4 — FORECASTING AND ORDERING
Section 4.1 — Rolling Forecast
Beginning within thirty (30) days of the Effective Date and continuing on a quarterly basis thereafter, Purchaser shall provide Supplier with a rolling eighteen (18)-month forecast of anticipated API requirements, broken down by Calendar Quarter. Each Forecast shall specify the estimated quantity of API (in kilograms) required for each Calendar Quarter during the forecast period, together with the intended use (Clinical Supply or Commercial Supply) and the intended destination(s) within the Licensed Territory. The Forecast shall be structured as follows:
(a) The first six (6) months of each Forecast (the "Firm Forecast Period") shall be binding on Purchaser, and Purchaser shall be obligated to place Firm Orders for quantities within the Firm Forecast Period in accordance with Section 4.2;
(b) Months seven (7) through twelve (12) of each Forecast shall constitute a good-faith estimate of Purchaser's anticipated requirements, subject to adjustment of up to plus or minus twenty-five percent (+/- 25%) in subsequent Forecast updates; and
(c) Months thirteen (13) through eighteen (18) of each Forecast shall be non-binding and provided for planning and capacity reservation purposes only.
Purchaser shall update the Forecast within fifteen (15) days after the start of each Calendar Quarter. Supplier shall notify Purchaser promptly if any Forecast or updated Forecast indicates quantities that Supplier believes, in good faith, it may be unable to fulfill, and the Parties shall discuss in good faith any adjustments to the Forecast or supply plan.
Section 4.2 — Purchase Orders / Firm Orders
Purchaser shall place Firm Orders for API by submitting written purchase orders to Supplier at least one hundred twenty (120) days prior to the requested delivery date. Each purchase order shall be substantially in the form set forth in Exhibit C and shall specify: (a) the quantity of API ordered (in kilograms); (b) the requested delivery date; (c) shipping instructions and the designated destination address within the Licensed Territory; (d) any applicable Territory-specific regulatory requirements or documentation needed; and (e) whether the API is intended for Clinical Supply or Commercial Supply use.
Supplier shall confirm acceptance of each purchase order, or reject such purchase order with a written explanation of the reasons therefor, within fifteen (15) business days of receipt. Supplier shall not unreasonably reject any purchase order that falls within the quantities specified in the Firm Forecast Period of the most recent Forecast. In the event that Supplier is unable to fulfill a Firm Order in full or in part, Supplier shall promptly notify Purchaser and the Parties shall cooperate in good faith to develop an alternative supply plan. Upon confirmation by Supplier, each purchase order shall constitute a Firm Order and shall be binding on both Parties.
Section 4.3 — Minimum and Maximum Order Quantities
(a) Minimum Order Quantity. The minimum order quantity per Firm Order shall be one (1) Batch, as defined in the Specifications set forth in Exhibit A. Purchase orders for quantities less than one Batch shall require Supplier's prior written consent.
(b) Maximum Annual Supply Obligation. Supplier's maximum annual supply obligation under this Agreement shall not exceed one hundred fifty percent (150%) of the most recent annual Firm Forecast quantity. Any request by Purchaser for supply in excess of such maximum shall require the mutual agreement of the Parties on feasibility, timeline, and any applicable pricing adjustments to reflect incremental costs.
Section 4.4 — Failure to Order Minimum
If Purchaser does not place Firm Orders for at least seventy-five percent (75%) of the aggregate Firm Forecast quantity in any Calendar Quarter, Supplier may invoice Purchaser for Supplier's documented, incremental costs actually incurred in reasonable reliance on the binding portion of the Forecast, including, without limitation, costs of raw materials procured, production capacity reserved, and work-in-progress. Such invoice shall be accompanied by reasonable supporting documentation. In no event shall the amount invoiced under this Section 4.4 exceed twenty-five percent (25%) of the Supply Price that would have been payable for the shortfall quantity (i.e., the difference between seventy-five percent (75%) of the Firm Forecast quantity and the actual Firm Order quantity placed by Purchaser for such Calendar Quarter). Purchaser shall pay such invoice in accordance with Section 5.4. This Section 4.4 shall constitute Supplier's sole and exclusive remedy for Purchaser's failure to place minimum Firm Orders.
Section 4.5 — Allocation
In the event of a supply shortage or capacity constraint affecting Supplier's or Alkerra's ability to fulfill orders from multiple customers or for Supplier's own requirements, Supplier shall allocate the available supply of API among its own requirements and the requirements of its customers, including Purchaser, on a pro rata basis based on historical purchase volumes during the preceding twelve (12) months. Supplier shall promptly notify Purchaser of any anticipated shortage or allocation event, including the expected duration and the estimated quantity available for allocation to Purchaser. During any period of allocation, Supplier shall use commercially reasonable efforts to increase capacity and to restore full supply to Purchaser as promptly as practicable. Supplier shall not allocate supply in a manner that discriminates against Purchaser relative to Supplier's other customers or its own requirements, except as required by applicable law or governmental order.
ARTICLE 5 — PRICING AND PAYMENT
Section 5.1 — Supply Price
The Supply Price for API supplied under this Agreement shall be calculated as the Net Cost plus a markup of fifteen percent (15%) (the "Cost Plus 15%" methodology). By way of illustration, if the Net Cost per kilogram of API is one hundred thousand United States Dollars ($100,000), the Supply Price per kilogram shall be one hundred fifteen thousand United States Dollars ($115,000). The Supply Price for Reference Standard shall be calculated using the same Cost Plus 15% methodology, applied to the actual Net Cost of producing the Reference Standard.
The Supply Price shall be subject to annual review and adjustment based on changes in actual Net Cost. Within sixty (60) days following the end of each fiscal year of Supplier, Supplier shall provide Purchaser with an updated cost certification, prepared in accordance with U.S. GAAP and Supplier's standard cost accounting methodology (applied on a consistent basis), setting forth the actual Net Cost per kilogram of API for the preceding fiscal year and the projected Net Cost per kilogram for the upcoming fiscal year. Any adjustment to the Supply Price resulting from changes in Net Cost shall be effective as of the first day of the Calendar Quarter following delivery of the updated cost certification and shall apply to all Firm Orders with delivery dates on or after such effective date.
Section 5.2 — Cost Transparency and Audit Rights
Supplier shall maintain complete and accurate books and records of all components of Net Cost, including detailed records of raw material costs, direct labor costs, manufacturing overhead allocations, quality testing costs, packaging costs, and facility cost allocations, in sufficient detail to verify the calculation of the Supply Price in accordance with U.S. GAAP and Supplier's standard cost accounting methodology.
On an annual basis, or upon reasonable request by Purchaser (but in no event more than once per calendar year), Purchaser may engage an independent certified public accountant (which shall be a nationally recognized accounting firm reasonably acceptable to both Parties) to audit Supplier's books and records relating to the calculation of Net Cost for the purpose of verifying the accuracy of the Supply Price. Such audits shall be conducted during normal business hours, upon not less than thirty (30) days' prior written notice, and shall not unreasonably interfere with Supplier's business operations. The independent accountant shall be required to enter into a confidentiality agreement with Supplier prior to conducting the audit.
If an audit conducted pursuant to this Section 5.2 reveals that the Supply Price invoiced during the audited period exceeded the amount that should have been invoiced by more than five percent (5%), Supplier shall promptly reimburse Purchaser for the amount of such overcharge, together with interest calculated at the rate specified in Section 5.4 from the date of each overpayment, and shall reimburse Purchaser for the reasonable costs of the audit. If the audit does not reveal an overcharge exceeding five percent (5%), the costs of the audit shall be borne by Purchaser.
Penterra shall maintain contemporaneous transfer pricing documentation consistent with applicable United States and international transfer pricing regulations, including Section 482 of the Internal Revenue Code and the OECD Transfer Pricing Guidelines. The Cost Plus 15% methodology employed herein shall be supported by a benchmarking analysis demonstrating that the fifteen percent (15%) markup is consistent with arm's-length pricing for comparable transactions. Supplier shall provide Purchaser with a copy of the relevant portions of such benchmarking analysis upon reasonable request, subject to appropriate redaction of information relating to Supplier's transactions with third parties.
Section 5.3 — Invoicing
Supplier shall issue an invoice for each shipment of API upon delivery to the Delivery Point. Each invoice shall be in writing and shall itemize: (a) the quantity of API shipped (in kilograms); (b) the Supply Price per kilogram; (c) the total amount due; (d) the Batch number(s) applicable to the shipment; (e) the applicable COA reference number(s); (f) the purchase order number; and (g) the delivery date. Invoices shall be sent to Purchaser's accounts payable department at the address specified in Section 16.3, or to such other address or electronic mail address as Purchaser may designate from time to time in writing.
Section 5.4 — Payment Terms
Payment of each invoice shall be due within forty-five (45) days of the date of such invoice. All payments shall be made in United States Dollars by wire transfer of immediately available funds to Supplier's designated bank account, as set forth in Exhibit D, or to such other account as Supplier may designate from time to time by written notice to Purchaser. Any amounts not paid when due shall bear interest at the lesser of (a) one and one-half percent (1.5%) per month (eighteen percent (18%) per annum), compounded monthly, or (b) the maximum rate permitted by applicable law, from the date such payment was due until the date of actual payment. The imposition of interest on late payments shall not constitute a waiver of Supplier's rights and remedies with respect to such non-payment, including the right to suspend performance upon written notice if any payment remains outstanding for more than sixty (60) days past due.
Section 5.5 — Taxes
The Supply Price is exclusive of all taxes, duties, tariffs, customs charges, and similar governmental assessments of any kind. Purchaser shall be solely responsible for the payment of all import duties, customs charges, value-added taxes (VAT), goods and services taxes (GST), and any other taxes, fees, or charges applicable to the importation of API into any country or jurisdiction in the Licensed Territory. Any withholding taxes required by applicable law to be deducted or withheld from payments to Supplier under this Agreement shall be for the account of Purchaser. Purchaser shall either (a) gross up the amount of each payment so that the net amount received by Supplier, after deduction of all withholding taxes, equals the full amount that would have been received had no withholding been required, or (b) provide Supplier with proper documentation (including certificates of residence, treaty benefit claims, and other required forms) sufficient to enable Supplier to claim the benefit of any applicable income tax treaty between the United States and the relevant jurisdiction, in which case the withholding tax rate shall be reduced to the applicable treaty rate. Each Party shall cooperate with the other in the filing of all necessary tax returns, documentation, and claims for refund with respect to taxes arising under this Agreement.
Section 5.6 — Currency
All amounts payable under this Agreement shall be denominated and payable in United States Dollars (USD). In the event that any conversion from a local currency to United States Dollars is required for purposes of calculating Net Cost or any other amount under this Agreement, such conversion shall be made using the spot exchange rate published by the Wall Street Journal (or, if not available, by a comparable financial publication) on the last business day of the relevant period.
ARTICLE 6 — DELIVERY AND SHIPPING
Section 6.1 — Delivery Terms
All deliveries of API under this Agreement shall be made FCA (Incoterms® 2020) Alkerra Manufacturing Inc., 5200 Meridian Parkway, Research Triangle Park, North Carolina 27713. Risk of loss of, and damage to, the API, together with title thereto, shall pass from Supplier to Purchaser at the Delivery Point upon delivery to the carrier designated by Purchaser or upon loading of the API at the Delivery Point, whichever occurs first, in accordance with the FCA Incoterms® 2020 rules.
Section 6.2 — Shipping and Transportation
Purchaser shall be solely responsible for arranging and paying for all transportation, freight, insurance (including transit insurance and cargo insurance), and all other shipping costs from the Delivery Point to the final destination(s) in the Licensed Territory. Purchaser shall designate a freight forwarder or carrier and shall provide Supplier with shipping instructions, including the carrier name, pickup schedule, and any special handling requirements, not less than fifteen (15) days prior to the requested delivery date. Supplier shall cooperate with Purchaser and Purchaser's designated carrier in the preparation of all export documentation, regulatory certificates, certificates of origin, and other documentation as may be required for the lawful exportation of the API from the United States and the importation of the API into the applicable country or jurisdiction in the Licensed Territory.
Section 6.3 — Packaging and Labeling
The API shall be packaged in accordance with the Specifications set forth in Exhibit A and in a manner suitable for international transport, including compliance with applicable United Nations packaging requirements for the transport of hazardous materials, if applicable, and any cold chain or temperature-controlled shipping requirements specified in the Specifications. Each container of API shall be clearly labeled with the following information: (a) product name (PPC-4187 API / Penteracitinib); (b) Batch number; (c) net quantity (in kilograms); (d) manufacturing date; (e) retest date or expiry date, as applicable; (f) storage conditions (as specified in the Specifications); and (g) Supplier's name and address. Any additional labeling requirements specified by Purchaser in connection with regulatory requirements in the Licensed Territory shall be communicated to Supplier in writing not less than sixty (60) days prior to the applicable delivery date, and Supplier shall use commercially reasonable efforts to accommodate such requirements.
Section 6.4 — Delivery Schedule
Supplier shall use commercially reasonable efforts to deliver API within the timeframe specified in each accepted purchase order. Supplier acknowledges that timely delivery of API is critical to Purchaser's clinical development and commercialization timelines in the Licensed Territory. If Supplier anticipates a delay of more than fifteen (15) days beyond the delivery date specified in an accepted purchase order, Supplier shall promptly notify Purchaser in writing, specifying the estimated revised delivery date, the root cause of the delay, and the corrective actions being taken to mitigate the delay. In the event of a delay exceeding forty-five (45) days beyond the confirmed delivery date, Purchaser may, at its option and without prejudice to its other remedies, cancel the affected Firm Order by written notice to Supplier, and Supplier shall have no right to invoice Purchaser for the cancelled order.
Section 6.5 — Shortage and Force Majeure Deliveries
In the event of an anticipated shortage of API supply (whether due to raw material constraints, capacity limitations, equipment failure, or any other cause), Supplier shall provide Purchaser with at least sixty (60) days' advance written notice of such anticipated shortage, together with an assessment of the expected duration and impact on Purchaser's orders. The allocation provisions set forth in Section 4.5 shall apply to any shortage event. In the event of a shortage or delivery disruption caused by a Force Majeure Event (as defined in Article 12), the provisions of Article 12 shall apply. Supplier shall use commercially reasonable efforts to minimize the impact of any shortage or delivery disruption on Purchaser's supply requirements and shall keep Purchaser regularly informed of the status of the situation and the expected timeline for resolution.
ARTICLE 7 — ACCEPTANCE AND REJECTION
Section 7.1 — Inspection and Testing
Purchaser shall have thirty (30) days from the date of receipt of each shipment of API at Purchaser's designated facility in the Licensed Territory (or such other location as Purchaser may designate for initial receipt and inspection) to inspect and test the API against the Specifications and the accompanying COA (the "Inspection Period"). During the Inspection Period, Purchaser shall perform such incoming quality control tests as it deems necessary or appropriate to verify conformance of the API with the Specifications. If Purchaser does not provide Supplier with written notice of rejection of all or any portion of a shipment within the Inspection Period, such shipment (or the portion thereof not subject to a rejection notice) shall be deemed accepted by Purchaser.
Section 7.2 — Rejection
Purchaser may reject all or any portion of a shipment of API if, upon inspection and testing during the Inspection Period, Purchaser determines that the API does not conform to the Specifications, was not manufactured in accordance with cGMP, or is otherwise Defective Product. Written notice of rejection shall be provided to Supplier within the Inspection Period and shall: (a) identify the Batch number(s) and quantity of API being rejected; (b) specify in reasonable detail the grounds for rejection, including the Specification parameter(s) not met or the nature of the non-conformance; and (c) be accompanied by Purchaser's supporting analytical test data, test reports, and any other relevant documentation. Upon receipt of a valid notice of rejection, Supplier shall promptly investigate the reported non-conformance and provide Purchaser with its written response, including the results of Supplier's own investigation and retesting, within twenty (20) business days.
Section 7.3 — Dispute Resolution on Rejection
In the event that Supplier disputes a rejection under Section 7.2 and the Parties are unable to resolve the dispute within twenty (20) business days of Supplier's receipt of the rejection notice, the Parties shall jointly select and submit a representative sample of the disputed API to an independent testing laboratory mutually agreed upon by the Parties. The independent laboratory shall test the sample against the Specifications using validated analytical methods and shall issue a written report of its findings. The determination of the independent testing laboratory as to whether the API conforms to the Specifications shall be final and binding on both Parties, absent manifest error. The costs of such independent testing (including sample preparation, shipping, and laboratory fees) shall be borne by the Party whose position is not upheld by the independent laboratory's determination. If the independent laboratory determines that the API is non-conforming, the API shall be treated as Defective Product and the provisions of Section 7.4 shall apply.
Section 7.4 — Remedies for Defective Product
For any API that is confirmed to be Defective Product (whether by mutual agreement, Purchaser's testing, or the independent laboratory's determination under Section 7.3), Supplier shall, at Purchaser's election, either:
(a) replace the Defective Product with conforming API at no additional cost to Purchaser, within a commercially reasonable time (not to exceed ninety (90) days from the date of confirmation of the defect); or
(b) issue a credit to Purchaser for the full Supply Price previously paid or invoiced for the Defective Product.
In either case, Supplier shall bear all costs associated with the return, destruction, or disposal of the Defective Product (at Purchaser's direction), as well as all shipping and insurance costs associated with replacement shipments. Purchaser shall not use any API that it has rejected or that has been confirmed as Defective Product. Supplier's obligations under this Section 7.4 are in addition to, and not in limitation of, Supplier's indemnification obligations under Article 10 and the License Agreement.
Section 7.5 — Latent Defects
With respect to any defect in API that is not reasonably discoverable by Purchaser during the Inspection Period through the exercise of commercially reasonable incoming quality control testing (a "Latent Defect"), Purchaser may provide written notice of rejection to Supplier at any time within twelve (12) months following the date of delivery of the applicable shipment, together with supporting evidence of the Latent Defect. Upon receipt of a valid notice of rejection for a Latent Defect, the Parties shall follow the procedures set forth in Sections 7.2 through 7.4, and Purchaser shall be entitled to the same remedies as set forth in Section 7.4. In the event that a Latent Defect is discovered in API that has already been used or incorporated into finished drug product, the Parties shall cooperate in assessing the impact on finished product quality and patient safety, and the provisions of Section 8.3 (Recalls) shall apply if a recall or market withdrawal is warranted.
ARTICLE 8 — REGULATORY MATTERS
Section 8.1 — Regulatory Filings
Supplier shall support Purchaser's regulatory filings in the Licensed Territory, including filings with the NMPA, PMDA, MFDS, TGA, and other applicable regulatory authorities, by providing Purchaser with access to the Drug Master File, Chemistry, Manufacturing, and Controls ("CMC") data, validation reports, stability data, analytical method validation data, and other documentation as reasonably requested by Purchaser. Supplier shall be the holder of the United States Drug Master File for PPC-4187 API and shall, upon Purchaser's written request, issue letters of access (also known as letters of authorization or right of reference) to the applicable regulatory authorities in the Licensed Territory to enable Purchaser to reference the Drug Master File in its regulatory submissions. Supplier shall respond to Purchaser's reasonable requests for regulatory support in a timely manner and shall cooperate with Purchaser in responding to questions, deficiency letters, or requests for additional information from regulatory authorities in the Licensed Territory. Any costs incurred by Supplier in providing regulatory support under this Section 8.1 that are beyond Supplier's ordinary course of business shall be reimbursed by Purchaser at Net Cost, without markup.
Section 8.2 — Regulatory Changes
Supplier shall promptly notify Purchaser in writing of any changes to applicable regulatory requirements (including changes to FDA requirements, ICH guidelines, or pharmacopeial standards) that may affect the manufacture, testing, packaging, labeling, storage, or supply of the API under this Agreement. The Parties shall cooperate in good faith on the implementation of any post-approval changes to the API that may be required by regulatory authorities in the Licensed Territory, including the preparation and submission of supplemental applications, variations, and other regulatory filings. Each Party shall bear its own costs in connection with the preparation and submission of regulatory filings in its respective territory; provided, however, that if a post-approval change is necessitated by Supplier's actions or changes to the manufacturing process initiated by Supplier, the costs of any resulting regulatory filings in the Licensed Territory shall be borne by Supplier.
Section 8.3 — Recalls
In the event that a recall, market withdrawal, or field safety corrective action involving the API or any finished drug product manufactured using the API supplied under this Agreement is initiated by either Party, a regulatory authority, or is otherwise required by applicable law, the Parties shall cooperate in carrying out such recall or withdrawal in accordance with the procedures set forth in the Quality Agreement and the Pharmacovigilance Agreement (if applicable). Each Party shall promptly notify the other Party of any circumstances that may necessitate a recall or market withdrawal. The costs of any recall or market withdrawal (including notification costs, logistics costs, product replacement costs, customer credits, regulatory filing costs, and legal costs) shall be allocated as follows:
(a) If the recall or market withdrawal is attributable to Defective Product (i.e., API that did not conform to the Specifications or was not manufactured in accordance with cGMP), such costs shall be borne by Supplier;
(b) If the recall or market withdrawal is attributable to Purchaser's finished product formulation, handling, storage, distribution, or labeling (and not to any defect in the API), such costs shall be borne by Purchaser; and
(c) If the recall or market withdrawal is attributable to causes for which both Parties share responsibility, the costs shall be allocated between the Parties in proportion to their respective degrees of fault, as mutually agreed or as determined through the dispute resolution procedures set forth in Section 16.2.
ARTICLE 9 — INTELLECTUAL PROPERTY
Section 9.1 — Ownership
All intellectual property rights related to the API, including, without limitation, patents, trade secrets, know-how, and proprietary information relating to the manufacturing process, analytical methods, and Specifications, shall remain the sole and exclusive property of Supplier, as set forth in the License Agreement. Purchaser's right to use the API is limited to the development, manufacture, and commercialization of the Licensed Products in the Licensed Territory, solely as permitted under and in accordance with the License Agreement. Nothing in this Agreement shall be construed to grant Purchaser any ownership interest in, or license to, any intellectual property of Supplier except as expressly set forth in the License Agreement.
Section 9.2 — Improvements
Any improvements, modifications, or enhancements to the API manufacturing process, analytical methods, or Specifications developed by or on behalf of Supplier during the term of this Agreement shall be subject to the technology transfer and licensing provisions of the License Agreement and the Technology Transfer Agreement. Supplier shall promptly disclose any such improvements to Purchaser in accordance with the terms of the License Agreement. Any improvements, modifications, or enhancements to the API manufacturing process or analytical methods developed by or on behalf of Purchaser during the term of this Agreement shall be governed by the improvement provisions set forth in the License Agreement. The Parties acknowledge that the allocation of ownership and licensing rights with respect to improvements is fully addressed in the License Agreement, and the provisions of the License Agreement shall control in the event of any conflict with this Section 9.2.
Section 9.3 — Confidentiality
The Supply Price details, Net Cost information, manufacturing process know-how, Specifications, and all other technical and commercial information exchanged between the Parties in connection with this Agreement are Confidential Information of the disclosing Party, subject to the confidentiality obligations set forth in Article 11 of this Agreement and the corresponding provisions of the License Agreement.
ARTICLE 10 — INDEMNIFICATION AND LIABILITY
Section 10.1 — Supplier Indemnification
Supplier shall indemnify, defend, and hold harmless Purchaser and its Affiliates, and their respective directors, officers, employees, agents, and representatives (collectively, "Purchaser Indemnified Parties"), from and against any and all Losses incurred by any Purchaser Indemnified Party arising out of or resulting from:
(a) any breach by Supplier of its representations, warranties, covenants, or obligations under this Agreement, including, without limitation, the supply of Defective Product;
(b) the negligence or willful misconduct of Supplier, its employees, agents, or subcontractors (including Alkerra) in connection with the manufacture, testing, packaging, storage, or supply of the API;
(c) any violation by Supplier of cGMP or any applicable law, rule, or regulation in connection with the manufacture, testing, or supply of the API; and
(d) any claim by a third party alleging that the API manufacturing process, as existing on the Effective Date, infringes, misappropriates, or otherwise violates any patent, trade secret, or other intellectual property right of such third party.
Supplier's aggregate liability for indemnification under this Section 10.1 shall be subject to the overall indemnification cap set forth in the License Agreement, which provides for a cap equal to two hundred percent (200%) of the total payments received by Supplier under the License Agreement and this Agreement; provided, however, that such cap shall not be less than thirty-six million United States Dollars ($36,000,000), based on the eighteen million United States Dollar ($18,000,000) upfront payment under the License Agreement. Notwithstanding the foregoing, no cap shall apply to Losses arising from Supplier's fraud, willful misconduct, or the intellectual property infringement indemnity set forth in clause (d) above.
Section 10.2 — Purchaser Indemnification
Purchaser shall indemnify, defend, and hold harmless Supplier and its Affiliates, and their respective directors, officers, employees, agents, and representatives (collectively, "Supplier Indemnified Parties"), from and against any and all Losses incurred by any Supplier Indemnified Party arising out of or resulting from:
(a) any breach by Purchaser of its representations, warranties, covenants, or obligations under this Agreement;
(b) Purchaser's use, handling, storage, processing, or distribution of API after delivery at the Delivery Point, except to the extent that such Losses are attributable to Defective Product;
(c) the negligence or willful misconduct of Purchaser, its employees, agents, or subcontractors in connection with the development, manufacture, or commercialization of PPC-4187 in the Licensed Territory; and
(d) any product liability claims, personal injury claims, or wrongful death claims asserted by third parties arising out of or relating to finished drug products manufactured, sold, or distributed by Purchaser or its Affiliates using the API, except to the extent that such claims are attributable to Defective Product.
Purchaser's aggregate liability for indemnification under this Section 10.2 shall be subject to the overall indemnification cap set forth in the License Agreement.
Section 10.3 — Limitation of Liability
EXCEPT IN CASES OF FRAUD, WILLFUL MISCONDUCT, OR BREACH OF THE CONFIDENTIALITY OBLIGATIONS SET FORTH IN ARTICLE 11, NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, EXEMPLARY, OR PUNITIVE DAMAGES ARISING OUT OF OR RELATED TO THIS AGREEMENT, WHETHER BASED ON CONTRACT, TORT, STRICT LIABILITY, OR ANY OTHER LEGAL OR EQUITABLE THEORY, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. The indemnification obligations of each Party under this Article 10 are subject to the following thresholds established in the License Agreement: (a) a de minimis threshold of one hundred fifty thousand United States Dollars ($150,000) per individual claim, below which no indemnification obligation shall arise; and (b) an aggregate deductible basket of seven hundred fifty thousand United States Dollars ($750,000), meaning that no indemnification payments shall be owed until the aggregate amount of all qualifying Losses exceeds seven hundred fifty thousand United States Dollars ($750,000), at which point the indemnifying Party shall be liable for all qualifying Losses in excess of such deductible amount. The foregoing thresholds shall not apply to Losses arising from fraud, willful misconduct, or breach of intellectual property covenants.
Section 10.4 — Insurance
(a) Purchaser Insurance. Purchaser shall obtain and maintain, or cause to be obtained and maintained, during the term of this Agreement and for a period of not less than three (3) years following expiration or termination, product liability ins