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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ________ TO ________
COMMISSION FILE NUMBER 0-24424
CIMA LABS INC.
(Exact name of registrant as specified in its charter)
Delaware 41-1569769
- ----------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10000 Valley View Road, Eden Prairie, Minnesota 55344-9361
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(Address of principal executive offices including zip code)
(612) 947-8700
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common Stock, $.01 par value 9,610,394 Shares
---------------------------- ---------------------------------
(Class) (Outstanding at October 30, 1998)
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CIMA LABS INC.
TABLE OF CONTENTS
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PAGE NUMBER
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COVER PAGE 1
TABLE OF CONTENTS 2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
Condensed Balance Sheets as of September 30, 1998
and December 31, 1997 3
Condensed Statements of Operations for the three-
month and nine-month periods ended September 30, 1998
and 1997 4
Condensed Statements of Cash Flows for the nine-month
periods ended September 30, 1998 and 1997 5
Notes to Condensed Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. 7
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS. 13
ITEM 2. CHANGES IN SECURITIES. 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES. 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 13
ITEM 5. OTHER INFORMATION. 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. 13
SIGNATURES 15
EXHIBIT INDEX 16
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CIMA LABS INC.
Condensed Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997(1)
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(Unaudited) (Note)
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ASSETS
Current assets:
Cash and cash equivalents $3,188,295 $1,145,760
Short-term investments - 3,277,300
Accounts receivable:
Net of allowance for doubtful accounts
$64,300-1998; $32,150-1997 1,062,525 1,597,814
Inventories--Note B 638,698 630,619
Prepaid expenses 192,522 146,805
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Total current assets 5,082,040 6,798,298
Property, plant and equipment 14,682,301 14,149,345
Less accumulated depreciation (4,946,149) (3,891,167)
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9,736,152 10,258,178
Other assets:
Lease deposits 40,651 40,651
Patents and trademarks, net of amortization 212,005 230,889
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252,656 271,540
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------------------- ------------------
Total assets $15,070,848 $17,328,016
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------------------- ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $363,961 $128,712
Accrued expenses 863,704 620,580
Advance royalties 576,405 741,405
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Total current liabilities 1,804,070 1,490,697
Long term liabilities:
Equipment financing 196,551 -
Stockholders' equity
Preferred Stock, $.01 par value:
Authorized shares--5,000,000; issued and
outstanding shares--none
Common Stock, $.01 par value:
Authorized shares--20,000,000; issued and
outstanding shares--9,610,394--September 30,
1998; 9,608,394--December 31, 1997 96,104 96,084
Additional paid-in capital 57,274,274 57,268,594
Accumulated losses (44,300,151) (41,527,359)
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Total stockholders' equity 13,070,227 15,837,319
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Total liabilities and stockholders' equity $15,070,848 $17,328,016
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</TABLE>
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(1) The balance sheet at December 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. See notes to condensed financial statements.
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CIMA LABS INC.
Condensed Statements of Income (Unaudited)
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<CAPTION>
Three Months Ended Nine Months Ended
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September 30, September 30,
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1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues:
Net sales $719,695 $825,117 $877,387 $1,657,689
Research and development fees &
licensing revenues 1,587,669 800,884 3,905,594 1,258,996
------------------------------------- ------------------------------------
2,307,364 1,626,001 4,782,981 2,916,685
Costs and expenses:
Cost of goods sold 1,166,857 1,323,096 1,804,379 2,891,202
Research and product development 1,030,371 594,773 3,378,147 2,579,434
Selling, general and administrative 793,869 739,751 2,494,811 2,628,110
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2,991,097 2,657,620 7,677,337 8,098,746
Other income (expense):
Interest income, net 29,471 68,783 121,770 262,487
Other income (expense) (1,086) 1,418 (204) 125,640
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28,385 70,201 121,566 388,127
Net loss: ($655,348) ($961,418) ($2,772,790) ($4,793,934)
------------------------------------- ------------------------------------
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Net loss per share:
Basic and diluted $(0.07) $(0.10) $(0.29) $(0.50)
Weighted average shares outstanding:
Basic and diluted 9,610,394 9,556,054 9,610,006 9,498,266
</TABLE>
See notes to condensed financial statements.
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CIMA LABS INC.
Condensed Statements of Cash Flows (Unaudited)
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<CAPTION>
Nine Months Ended Nine Months Ended
September 30, September 30,
------------------------ -----------------------
1998 1997
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OPERATING ACTIVITIES
Net loss ($2,772,792) ($4,793,934)
Adjustments to reconcile net loss to net cash used
in operating activities:
depreciation and amortization 1,251,746 695,145
gain on sale of property, plant and equipment 4,734 0
Changes in operating assets and liabilities:
accounts receivable 495,001 (1,122,175)
inventories (8,078) (399,051)
other current assets (5,429) (139,026)
accounts payable 235,249 85,422
accrued expenses 208,798 860,635
advance royalties (180,000) 0
------------------------ -----------------------
Net cash used in operating activities (770,771) (4,812,984)
INVESTING ACTIVITIES
Purchase of and deposits on property, plant and equipment (436,113) (588,969)
Purchase of short-term investments 0 (1,257,262)
Proceeds from sale of property, plant & equipment 33,000 0
Proceeds of maturities of short-term investments 3,277,300 5,350,885
Patents and trademarks (66,581) (80,030)
------------------------ -----------------------
Net cash provided by (used in) investing activities 2,807,606 3,424,624
FINANCING ACTIVITIES
Proceeds from issuance of stock:
Common Stock 5,700 562,188
Security deposits on leases 0 250,000
------------------------ -----------------------
Net cash provided by financing activities 5,700 812,188
------------------------ -----------------------
Increase (decrease) in cash and cash equivalents 2,042,535 (576,172)
Cash and cash equivalents at beginning of period 1,145,760 2,666,032
------------------------ -----------------------
Cash and cash equivalents at end of period $3,188,295 $2,089,860
------------------------ -----------------------
------------------------ -----------------------
Supplemental schedule of noncash investing and
financing activities:
Acquisition of equipment pursuant to equipment loan
and capital lease obligation 245,876 --
</TABLE>
See notes to condensed financial statements.
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CIMA LABS INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 (UNAUDITED)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three-month and
nine-month periods ended September 30, 1998 are not necessarily indicative of
the results that may be expected for the year ended December 31, 1998. For
further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1997.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost (first in, first out) or fair
market value.
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
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<S> <C> <C>
Raw materials $638,698 $484,582
Work in process -- --
Finished products -- 146,037
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$638,698 $630,619
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NOTE C - NET LOSS PER SHARE
The Company has adopted Financial Accounting Standards Board Statement No.
128, EARNINGS PER SHARE. This statement replaces previously reported primary
and fully diluted earnings per share with basic and diluted earnings per
share. Unlike primary EPS, basic EPS excludes any dilutive effect of options,
warrants and convertible securities. Diluted earnings per share is very
similar to previously reported fully diluted earnings per share. All earnings
per share amounts for all periods have been presented to conform with
Statement 128 requirements.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE
FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS
AND UNCERTAINTIES. WHEN USED HEREIN, THE WORDS "ANTICIPATE," "BELIEVE,"
"EXPECT," "ESTIMATE" AND SIMILAR EXPRESSIONS AS THEY RELATE TO THE COMPANY OR
ITS MANAGEMENT ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THE
COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE, BUT ARE
NOT LIMITED TO, THE SUCCESS OF THE COMPANY IN MANUFACTURING THE COMPANY'S
TECHNOLOGY, THE AVAILABILITY OF ADEQUATE FUNDS FOR THE COMPANY'S OPERATIONS,
THE SUCCESS OF THE COMPANY IN COMMERCIALIZING ITS NEW DRUG DELIVERY PROGRAMS,
AND THE COMPANY'S RELIANCE ON ITS KEY PERSONNEL AND COLLABORATIVE PARTNERS,
AS WELL AS THOSE DISCUSSED IN "BUSINESS RISKS" BELOW.
GENERAL
CIMA LABS INC. (the "Company"), founded in 1986, is a drug delivery
company focused primarily on the development and manufacture of
pharmaceutical products based upon its patented OraSolv(R) technology for
marketing by multinational pharmaceutical companies. OraSolv is an oral
dosage formulation incorporating microencapsulated active drug ingredients
into a tablet which dissolves quickly in the mouth without chewing or water
and which effectively masks the taste of the medication being delivered.
OraSolv's fast-dissolving capability may enable patients in certain age
groups or those with any of a variety of conditions that limit their ability
to swallow conventional tablets to receive medication in a more convenient
oral dosage form. The Company believes that OraSolv is more convenient than
traditional tablet-based oral dosages as it does not require water to be
ingested, thereby enabling immediate medication at the onset of symptoms. In
addition, OraSolv can provide more accurate administration of doses than
liquid or suspension formulations as no measuring is required. The Company
believes OraSolv's ease of use and effective taste-masking may foster greater
patient compliance with recommended dosage regiments, for both prescription
and over-the-counter ("OTC") products, thereby improving therapeutic outcomes
and reducing costs in the healthcare system.
The Company's business strategy is to commercialize its OraSolv
technology through collaborations with multinational pharmaceutical companies
with emphasis on products that command a large market share, are in large
market segments, or are profitable prescription pharmaceuticals. Product
differentiation and brand name identity are critical to the successful
marketing of pharmaceutical products. The Company believes that OraSolv
affords pharmaceutical companies a means to significantly differentiate their
products in the competitive pharmaceutical marketplace. Because it is a
patented technology, OraSolv affords more enduring product differentiation
than some of the more traditional approaches of changing product flavor or
packaging innovations, which can be easily replicated. The Company has
entered into agreements with a number of pharmaceutical companies for
development, manufacture and commercialization of OraSolv products.
The Company is currently focusing on developing OraSolv products for
selected prescription drug applications. The Company believes that such
prescription OraSolv products should result in improved taste acceptance and
ease of administration, and so enhance patient compliance with the
recommended dosage regimen for such prescription pharmaceuticals. In the
third quarter of 1997, the Company signed its first two pharmaceutical
license option and product development agreements with two multinational
pharmaceutical companies, and is actively working on both of these projects.
The Company is also continuing its ongoing
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arrangements involving OTC products, having moved to a successive phase in
its relationship with Novartis Consumer Health, Inc. ("Novartis"), a
multinational pharmaceutical company, by signing exclusive License and Supply
Agreements with that company on July 1, 1998. The agreements cover full scale
production of three Triaminic(R) products in the Company's OraSolv dosage
form. The Company began commercial production for this product during the
second quarter of 1998, and sales commenced in the third quarter of 1998.
This has been a regional launch, with a full national launch anticipated in
1999. The Company has also initiated the development of new oral drug
delivery technologies. These technologies include a new oral solid delivery
system, DuraSolv(TM); a unique sustained-released delivery system,
OraSolv(R)SR; and an improved efficacy delivery system, OraVescent(TM). One
of the Company's recently signed agreements utilizes the OraSolvSR
technology. The goal of the Company is to focus on drug delivery technologies
that improve efficacy and therefore provide greater value-added benefits.
At September 30, 1998, the Company had accumulated losses of
approximately $44,300,000. The Company recorded its first commercial sales
using the Company's OraSolv technology in the three-month period ended March
31, 1997. The Company's revenues have previously been from sales using the
Company's older AutoLution(R) (a liquid effervescent) technology, license
fees paid by corporate partners in consideration of the transfer of rights
under collaborative agreements, and product research and development fees
paid by corporate partners to fund the Company's research and development
efforts for products developed under such agreements. Approximately 48% of
the Company's total revenues to date have been generated from development
work and sales of AutoLution products. The Company is not currently
manufacturing liquid effervescent products, and has not recognized any
revenues from such products since 1995. Over the last three years
approximately $11,200,000 of revenue has been generated from three major
sources: product development fees (approximately 50% of the total) for work
related to OraSolv products, and to a lesser extent sales (approximately 30%)
of OraSolv products and licensing revenues (approximately 20%) related to
OraSolv products. In addition to revenues from product development,
manufacturing and licensing, the Company has funded operations from private
and public sales of equity securities, realizing net proceeds of
approximately $26,000,000 from private sales of equity securities and
$16,400,000 and $12,000,000 from the Company's July 1994 initial public
offering and May 1996 public offering of its Common Stock, respectively. At
September 30, 1998, the Company had 9,610,394 shares of its Common Stock
outstanding.
The Company's ability to generate revenues is dependent upon its
ability to develop new, innovative drug delivery technologies and to enter
into and be successful in collaborative arrangements with pharmaceutical and
other healthcare companies for the development and manufacture of OraSolv
products and products based on the Company's other new technologies to be
marketed by these corporate partners. The Company is highly dependent upon
the efforts of their corporate partners to successfully market these.
Although the Company believes these partners have, and future partners will
have, an economic motivation to market these products vigorously, the amount
and timing of their resources to be devoted to marketing are not within the
control of the Company. These partners could make independent material
marketing and other commercialization decisions which could adversely affect
the Company's future revenues. Moreover, certain of the Company's products
are seasonal in nature, and the Company's revenues could vary materially from
quarter to quarter depending on which of such products, if any, are then
being marketed.
The Company expects that losses will continue through at least 1998,
even though the Company expects to continue to generate sales revenue from
manufacturing OraSolv products in 1998. Research and development expenses
will increase as the Company continues to investigate new drug delivery
technologies. In addition, the Company is investigating the possibility of
utilizing microencapsulation for the development of sustained-release
systems. Personnel costs for research and development are expected to
increase
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moderately as the efforts expended on new technologies such as this
increases. Personnel costs for administration may decrease slightly as a
result of our effort to reduce corporate overhead. However, as the Company
continues production, additional operations personnel may need to be added to
meet corporate partners' orders. Manufacturing infrastructure costs should
not increase materially in 1998 or 1999 as capacity is expected to meet
short-term production needs.
In recent years, the Company has actively marketed its OraSolv
technology to the pharmaceutical industry. The Company is presently engaged
in product development and manufacturing scale-up efforts with several
different pharmaceutical companies regarding a variety of potential products,
with an emphasis on prescription products. In the first quarter of 1997, the
Company began commercial production for Bristol-Myers Squibb Company
("Bristol-Myers") of the first product in the Company's OraSolv dosage form,
which was officially launched in September 1997. In the second quarter of
1997, the Company expanded its relationship with Bristol-Myers and signed a
global non-exclusive license agreement which covers multiple products. In the
third quarter of 1997, the first two prescription product license option and
development agreements were signed. Each agreement is for a product which is
currently marketed by the Company's partners, Schering Corporation
("Schering-Plough") and Zeneca Pharmaceuticals ("Zeneca"). The product under
development for Zeneca is its new antimigraine compound zolmitriptan
(Zomig-Registered Trademark-). In the third quarter of 1998, the development
and option agreement with Schering-Plough was amended to extend the
previously executed agreement. In October of 1998, the Company and SmithKline
Beecham terminated their License Agreement related to an OTC product, as the
Company continues to focus its efforts on the development of prescription
pharmaceuticals. In the fourth quarter of 1997, the development and license
option agreement was signed with Novartis which has been converted to
exclusive license and supply agreements effective July 1, 1998. In the third
quarter 1998 financial results, sales are recorded to Novartis for shipments
of Triaminic-Registered Trademark- Softchews-Registered Trademark- for a
regional launch. However, there can be no assurance that any of these
activities or discussions will result in the eventual marketing of products
using OraSolv or the Company's other technologies.
RESULTS OF OPERATIONS
THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
The Company's results of operations for the three- and nine-month
periods ended September 30, 1998 reflect the continued emphasis of developing
Orasolv products for its corporate partners and research efforts for the
Company's new technologies. Total revenues increased to $2,307,000 and
$4,783,000 in the three- and nine-month periods ended September 30, 1998,
respectively, from $1,626,000 and $2,917,000 in the three- and nine-month
periods ended September 30, 1997. In 1998, over 80% of the revenue relates to
product development and milestone fees and licensing revenues earned from the
Company's corporate partners. The majority of these revenues were generated
by two prescription product collaborations, one each with each of
Schering-Plough and Zeneca, and an over-the-counter cough cold product,
Triaminic(R) Softchews, with Novartis. Sales were $720,000 for the
three-month period ended September 30, 1998, representing the initial
shipments to Novartis for their regional launch of Triaminic Softchews. Sales
were $825,000 for the same period in 1997. The decrease in sales is caused by
ordering patterns of our corporate partners to support the marketing of their
products. Sales were $877,000 for the nine-month period ended September 30,
1998, as compared to $1,658,000 for the same period in 1997. The decrease in
sales is due to the ordering patterns of our corporate partners, with the
1997 sales representing a national launch for a product, while in 1998, the
majority of the sales are for the regional launch of Triaminic Softchews.
Product development fees and licensing revenues were $1,587,000 and
$3,906,000 for the three- and nine-month periods ended September 30, 1998,
respectively, compared to $801,000 and $1,259,000, respectively, in the
comparable periods of 1997. The increase in 1998 in these fees and revenues
is mainly from the Company's collaborative arrangements with Novartis,
Schering-Plough and Zeneca and represents progress made on these projects. In
1997, the revenues consist principally of the
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license fees for the signing of the Company's two prescription product
agreements in the third quarter of 1997, and product development fees for the
OTC product, Tempra(R); from Bristol-Myers earned in the first half of 1997.
The sales and other revenues reflect the signing of license option and
development agreements with multinational pharmaceutical companies that
provide for licensing fees, milestone payments and manufacturing fees. So
long as the Company has relatively few agreements with corporate partners,
sales, license revenues and product development fees will tend to fluctuate
on a quarter-to-quarter basis.
Cost of goods sold decreased to $1,167,000 and $1,804,000 in the three-
and nine-month periods ended September 30, 1998, respectively, from
$1,323,000 and $2,891,000 in the three- and nine-month periods ended
September 30, 1997. The decrease in 1998 costs is primarily attributable to
decreased production and to certain non-recurring start-up costs that were
incurred in the first quarter of 1997 for the initial commercial production
of a product using OraSolv technology. Research and development expenses
increased to $1,030,000 and $3,378,000 for the three- and nine-month periods
ended September 30, 1998, respectively, from $595,000 and $2,580,000 in the
three- and nine-month periods ended September 30, 1997. The increase is a
direct result of increased research and product development efforts being
performed for the Company's corporate partners. In addition, research
personnel have expended resources to focus on discovery and development of
new technologies. Selling, general and administrative expenses increased to
$794,000 for the three-month period ended September 30, 1998, as compared to
$740,000 for the same period in 1997. This small increase is primarily
attributable to the timing of recording the bonus accrual. On a year-to-date
basis, the total of the accruals in 1997 and 1998 are approximately the same;
however, for the three-month period ended September 30, 1998 there is
approximately $60,000 more accrued than in the comparable period of 1997. On a
year-to-date basis, 1998 selling, general and administrative expenses have
decreased compared to 1997, as there has been a reduction in spending on
consumer marketing research studies conducted to support OraSolv.
Other income decreased to $29,000 and $121,000 in the three- and
nine-month periods ended September 30, 1998, respectively, from $70,000 and
$388,000 for the same periods in 1997, respectively. Other income is
comprised mainly of interest income, which has decreased as it is dependent
on the cash position of the Company. In addition, other income in the
nine-month period ended September 30, 1997 included a $120,000 state sales
and use tax refund for previously purchased fixed assets.
LIQUIDITY AND CAPITAL RESOURCES
The Company has financed its operations to date primarily through
private and public sales of its equity securities and revenues from
manufacturing and supply agreements. Through September 30, 1998, the Company
had received net offering proceeds from such private and public sales of
approximately $57,268,000, had net sales from manufacturing and supply
agreements of approximately $17,257,000, and other revenues that include
licensing fees, product and development and milestone fees of $11,536,000.
Among other things, these funds were used to purchase approximately
$16,100,000 of capital equipment, including approximately $7,500,000 in the
last two quarters of 1994 in connection with completing the Company's
manufacturing facility. Cash, cash equivalents and short-term investments
were approximately $3,188,000 at September 30, 1998.
The Company's long-term capital requirements will depend upon numerous
factors, including the status of the Company's collaborative arrangements
with corporate partners, the progress of the Company's research and
development programs and receipt of revenues from the collaborative
agreements, sales of the Company's products, and the need to expand
production capacity. The Company believes that its currently available funds
together with revenues from operations will meet its anticipated needs
through 1998. Thereafter, or sooner if conditions make it necessary, the
Company will need to raise additional funds through research and development
relationships with suitable potential corporate partners and/or through
public or private financings, including equity financing, which may be
dilutive to stockholders. There can be no assurance that the Company will be
able to raise additional funds if its capital resources are exhausted, or
that funds will be available on terms attractive to the Company.
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The Company has not generated taxable income through September 30, 1998.
At December 31, 1997, the net operating losses available to offset taxable
income were approximately $42,259,000. Because the Company has experienced
ownership changes, pursuant to Internal Revenue Code regulations, future
utilization of the operating loss carryforwards will be limited in any one
fiscal year. The carryforwards expire beginning in 2001. As a result of the
annual limitation, a portion of these carryforwards may expire before
ultimately becoming available to reduce potential federal income tax
liabilities.
BUSINESS RISKS
The Company began commercial production of its first product in the
Company's OraSolv dosage form in the first quarter of 1997 and its second in
the second quarter of 1998. The Company must be evaluated in light of the
uncertainties and complications present for any company that only recently
began to derive product revenues and, in particular, a company in the
pharmaceutical industry. The Company has accumulated aggregate net losses
from inception through September 30, 1998 of $44,300,000. Losses have
resulted principally from costs incurred in research and development of the
Company's technologies, marketing the Company's technologies and from general
and administrative costs. These costs have exceeded the Company's revenues,
which historically had been derived primarily from the manufacturing of
AutoLution and other non-OraSolv products which the Company no longer
manufactures. In more recent years, the Company has received revenue from its
commercial partners for product development and licensing of OraSolv and, to
a lesser extent, commercial production of an OraSolv dosage form product
which commenced in the first quarter of 1997 for Bristol-Myers. The Company
expects to continue to incur additional losses at least through the end of
1998. There can be no assurance that the Company will ever generate
substantial revenues or achieve profitability.
The Company is dependent upon its ability to enter into and perform
under collaborative arrangements with pharmaceutical companies for the
development and commercialization of its products. Failure of these partners
to market the Company's products successfully could have a material adverse
effect on the Company's financial condition and results of operations. The
Company's revenues are also dependent upon ultimate consumer acceptance of
the OraSolv drug delivery system and newly developed technologies as
alternatives to conventional oral dosage forms. The Company expects that
OraSolv products will be priced slightly higher than conventional swallow
tablets. Although the Company has found the results of consumer research it
has conducted to be very encouraging, there can be no assurance that market
acceptance for the Company's OraSolv products will ever develop or be
sustained.
The Company began manufacturing OraSolv products in commercial
quantities in February 1997. To achieve future desired levels of production,
the Company will be required to increase its manufacturing capabilities.
There can be no assurance that manufacturing can be scaled-up in a timely
manner to allow production in sufficient quantities to meet the needs of the
Company's corporate partners. Furthermore, the Company has only one
manufacturing line and one facility capable of manufacturing OraSolv
products. If this production line and/or facility becomes damaged or becomes
incapable of manufacturing products due to natural disaster, governmental
regulatory issues or otherwise, the Company would have no other means of
producing OraSolv products.
The quick dissolve drug delivery field is fairly new and rapidly
evolving and it is expected to continue to undergo improvements and rapid
technological changes. There can be no assurance that current or new
competitors of the Company will not succeed in developing technologies and
products that are more effective than any that are being developed by the
Company or that could render the Company's technology and products
non-competitive, or that any technology developed by the Company will be
preferred by consumers to any existing or newly developed technologies.
The Company intends to increase its research and development
expenditures to enhance its current technologies, to pursue internal
proprietary drug delivery technologies and to pursue new technologies. Even
if
11
<PAGE>
these technologies appear promising during various stages of development,
they may not reach the commercialization stage for a number of reasons,
including the inability to find a partner to market the product, difficulty
in manufacturing the product on a large scale, or inability to render the
product economical to market.
The Company has substantially completed the assessment of the impact
that the Year 2000 date conversion may have on its internal systems and
software, including information technology ("IT") and non-IT, or embedded
technology systems. The Company believes its risks relating to Year 2000
problems in its systems to be very low, as its IT systems are relatively
small and predominantly new and its software consists entirely of "off the
shelf" packages for which Year 2000 compliant upgrades are available and have
largely already been implemented. The Company's engineers also believe that
its non-IT systems will not experience adverse effects from the Year 2000
date conversion.
The Company has designated an individual to oversee Year 2000
compliance, and has implemented a plan to ensure that during 1999 the Company
will have upgraded each of its software packages to versions, or have
converted to a replacement package, that the vendors thereof claim to be free
of Year 2000 problems. The Company plans to replace any hardware that may be
affected by the Year 2000 date conversion, or alter its use to one not
sensitive to Year 2000 issues. The Company has spent approximately $3,000 on
software upgrades and expects the total expenditure for such upgrades to be
less than $10,000. The Company has largely completed its replacement or
reallocation of hardware that may present Year 2000 concerns, and estimates
the total cost of any replacement to be less than $10,000. The Company also
plans to spend approximately $2,000 during the fourth quarter of 1998 to hire
a consultant to review the Company's plans and actions relating to Year 2000
compliance. The Company believes that its risks related to Year 2000
compliance of its internal systems to be immaterial.
The Company has also initiated discussions with its corporate partners
to determine that those parties have appropriate plans to remediate Year 2000
issues. To date, none of the Company's partners has indicated significant
concerns about their ability to do so. However, a substantial negative impact
of Year 2000 issues on one of the Company's few large corporate partners that
significantly affects the partner's ability to do business could have a
material adverse effect on the operations and financial condition of the
Company.
The foregoing risks reflect the Company's stage of development and the
nature of the Company's industry. The Company is also subject to a range of
additional risks, including competition, uncertainties regarding the effects
of healthcare reform on the pharmaceutical industry, including pressures
exerted on the prices charged for pharmaceutical products and uncertainties
regarding protection of patents and proprietary rights, all of which may have
a material adverse effect on the Company's business.
12
<PAGE>
CIMA LABS INC.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company has instituted an opposition proceeding in the European Patent
Office, and has requested that the United States Patent and Trademark
Office declare an interference proceeding, each of which has been reported
in the Company's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1997.
Eurand America, Inc. and Eurand International, S.p.A. (collectively,
"Eurand") have filed a complaint in the United States District Court for
the District of Delaware, but have not served the same upon the Company.
The complaint alleges various causes of action including unfair
competition, misappropriation of trade secrets and conversion, all arising
out of the filing by the Company and Stanford Research Institute ("SRI") of
a patent application relating to coating of active ingredients to
taste-mask them by a process referred to as "coacervation". The Company
has used, and may continue to use coacervation to provide taste-masking.
The specific coacervation technology and active target addressed in the
patent is not expected to be used in the future. The complaint was filed
in the course of continuing negotiations between the Company and Eurand
with regard to rights to the subject matter claimed in such applications.
Those negotiations are continuing, and the Company presently expects to
dispose of the matter through such negotiations without any material
adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
13
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
<TABLE>
<CAPTION>
Item Description
---- -----------
<S> <C>
10.31 License Agreement between Novartis
Consumer Health, Inc. and the
Company, dated July 1, 1998.(1)
10.32 Supply Agreement between Novartis
Consumer Health, Inc., and the Company,
dated July 1, 1998.(1)
27 Financial Data Schedule.
</TABLE>
- ---------------
(1) Confidential treatment has been requested for this exhibit.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
CIMA LABS INC.
Date: November 16, 1998 By: /s/ John M. Siebert
------------------------ -------------------------------------
John M. Siebert
President and Chief Executive Officer
Date: November 16, 1998 By: /s/ Keith P. Salenger
------------------------ -------------------------------------
Keith P. Salenger
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting
Officer)
15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
NO. OF EXHIBIT DESCRIPTION
- -------------- -----------
<S> <C>
10.31 License Agreement between Novartis Consumer Health, Inc.
and the Company, dated July 1, 1998.(1)
10.32 Supply Agreement between Novartis Consumer Health, Inc.,
and the Company, dated July 1, 1998.(1)
27 Financial Data Schedule.
</TABLE>
- -----------------
(1) Confidential treatment has been requested for this exhibit.
16
<PAGE>
***Text Omitted and Filed Separately
Confidential Treatment Requested
Under 17 C.F.R. Sections 200.80(b)(4),
200.83 and 240.24b-2
LICENSE AGREEMENT
BETWEEN
NOVARTIS CONSUMER HEALTH, INC.
AND
CIMA LABS., INC.
Dated: July 1, 1998
<PAGE>
INDEX
<TABLE>
<CAPTION>
PAGE
<S> <C>
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2. GRANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
3. COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
4. LICENSE FEES, MILESTONE PAYMENTS AND ROYALTIES. . . . . . . . . . . . . . . . .8
5. PAYMENT PROCEDURES, RECORDS, AUDITING . . . . . . . . . . . . . . . . . . . . 10
6. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . 11
7. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8. TERM AND TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
9. PATENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
10. INFRINGEMENT OF CIMA PATENT . . . . . . . . . . . . . . . . . . . . . . . . . 16
11. INFRINGEMENT OF THIRD PARTY RIGHTS. . . . . . . . . . . . . . . . . . . . . . 17
12. CIRCUMSTANCES FOR MANUFACTURE BY NCH. . . . . . . . . . . . . . . . . . . . . 18
13. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
14. FORCE MAJEURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
15. PUBLICITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
16. ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
17. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
18. SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
19. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
20. INDEPENDENT CONTRACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
21. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
22. ENTIRE AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
2
<PAGE>
LICENSE AGREEMENT
This License Agreement (the "License Agreement") is made and entered into as
of this First day of July, 1998 ("Effective Date"), by and between Novartis
Consumer Health, Inc. (hereinafter referred to as "NCH"), a corporation
organized and existing under the laws of the State of Delaware, having an
office at 560 Morris Avenue, Summit, New Jersey 07901-1312, and CIMA LABS.,
Inc. (hereinafter referred to as "CIMA"), a corporation organized and
existing under the laws of the State of Delaware, having an office at 10000
Valley View Road, Eden Prairie, Minnesota 55344-9361.
WITNESSETH:
WHEREAS, CIMA owns or possesses rights to certain patents and know-how (CIMA
Patents and Know-How) and thus has the right to grant licenses with respect
to the technology covered under the patents and know-how; and
WHEREAS, CIMA wishes to grant to NCH a license under the CIMA Patents and
Know-How to make and have made (under specified circumstances), use, offer
for sale and sell Products (as hereinafter defined) in the Field (as
hereinafter defined) and in the Territory (as hereinafter defined); and
WHEREAS, NCH desires to acquire a license under said CIMA Patents and
Know-How, on the terms and subject to the conditions set forth herein; and
WHEREAS, NCH has substantial expertise and experience in the development,
commercialization and marketing of human pharmaceutical products; and
WHEREAS, the parties simultaneously herewith are entering into a Supply
Agreement (the "Supply Agreement") with respect to the supply by CIMA to NCH
of NCH's commercial requirements of Products covered by the terms of this
License Agreement.
NOW, THEREFORE, in consideration of the mutual covenants, agreements and
obligations set forth herein, CIMA and NCH hereby agree as follows:
1. DEFINITIONS
The following terms, as used in this License Agreement, shall have the
meanings set forth in this Article 1:
1.1 "Active Ingredients" shall mean [...***...]
1.2 [...***...]
3
<PAGE>
1.3 "Affiliate" shall mean any corporation or entity which directly or
indirectly owns, is owned by, or is under common ownership with, a party to
this License Agreement, where own or ownership means direct or indirect
possession of at least fifty percent (50%) of the outstanding voting
securities of a corporation or a comparable equity interest in any other type
of entity.
1.4 "Agreement Period" shall mean the period commencing upon the Effective
Date and extending until the end of the Royalty Period (as hereinafter
defined).
1.5 "Date of First Sale" shall mean the date of first commercial sale of
one or more of the Products by NCH or any of its Affiliates.
1.6 "Development Agreement" shall mean the Development and License Option
Agreement, between NCH and CIMA, executed November 18, 1997 and attached
hereto as EXHIBIT A.
1.7 The "Field" shall mean [...***...]
1.8 "Net Sales" shall mean the actual gross sales invoiced by NCH or its
sublicensees or Affiliates from factory sales to parties other than NCH or
its Affiliates, for those Products made, used or sold in the Field and in the
Territory, less, (i) trade, quantity and cash discounts actually allowed and
taken in such amounts as are customary in the trade, if any, (ii) credits or
allowances actually granted to customers, (iii) independent broker or agent
commissions actually allowed and paid, up to [...***...] (iv) customer
returns actually allowed, (v) freight, insurance, handling and transportation
charges and (vi) all taxes other than income taxes on the income of NCH or
its Affiliates.
1.9 "OraSolv Technology" shall mean CIMA's proprietary oral effervescent,
fast-dissolving or chewable, drug-delivery tablet manufacturing and packaging
technology [...***...]
1.10 "Improvements" shall mean any enhancement to the OraSolv Technology or
Products (as hereinafter defined) made during the period as of November 18,
1997 (the Effective Date of the Development Agreement) through the expiration
of the last to expire [...***...] or the earlier termination of this License
Agreement.
1.11 "CIMA Patents" shall mean all patents and patent applications owned,
or controlled, or licensed (with right to sublicense), during the term of
this License Agreement, by or on behalf of CIMA or any of its Affiliates,
which contain a claim covering inventions necessary to the development,
manufacture, packaging, use, offer for sale or sale of Products, including
those patents and patent applications now owned, controlled or licensed by
CIMA listed in EXHIBIT B, attached hereto, which list shall be updated from
time to time as appropriate, but at least once per calendar year, to
incorporate any additional patents and patent applications NOT listed in
EXHIBIT B as of the Effective Date, including patents covering any
Improvements NCH elects to use in connection with the Products pursuant to
Section 3.4 hereof, as well as any continuations, continuations-in-part,
divisions, re-examinations, reissues or extensions to the patents or patent
4
<PAGE>
applications listed in EXHIBIT B. CIMA Patents shall include Exclusive CIMA
Patents, Nonexclusive CIMA Patents, [...***...] (each as hereinafter defined).
1.12 "CIMA Know-How" shall mean all tangible and intangible inventions,
technology, trade secrets, data, processes, methods and any physical or
chemical material, including any replication of any part of such material,
other information that CIMA owns, controls or has a license to with the right
to sublicense, existing as of the Effective Date, which are necessary or
useful to the formulation, development, manufacture, packaging or
commercialization of a Product, and any Improvements made to any of the
foregoing.
1.13 [...***...]
1.14 "Product" shall mean the pharmaceutical products, in any flavor,
dosage or form, that are developed using the OraSolv Technology and that
contain as pharmaceutically active compounds only NCH Active Ingredients, and
includes without limitation those formulations listed in EXHIBIT C attached
hereto and made a part hereof, including Improvements, modifications and
variations thereto made by CIMA or its Affiliates during the term of this
License Agreement.
1.15 "Results" shall mean Product formulations as set forth in EXHIBIT C,
Product prototypes, Product samples and finished Products, including any
additional Product formulations, prototypes, Product samples and unfinished
Product developed pursuant to Section 4.5 hereof, NCH proprietary processes
and analytical methodology used in the validation, stability testing and
other testing or analysis of the Products, [...***...] including information
and data directly relating to any of the foregoing, obtained or developed
from conduct of evaluations, product development, commercialization or
manufacturing of the Products pursuant to this License Agreement or the
Development Agreement; PROVIDED THAT, Results shall not include any tablet
manufacturing or packaging processes or technology which are owned or
otherwise controlled by CIMA and used to obtain, develop, manufacture or
package Product formulations, Product prototypes, Product samples and
finished Products, nor shall Results include information or data directly
relating to such manufacturing or packaging processes or technology or any
knowledge, skill or experience with respect to OraSolv Technology gained by
CIMA personnel in performance of this License Agreement and/or the
Development Agreement.
1.16 "Royalty Computation Period" shall mean a three (3) month calendar
quarter ending on the last day of March, June, September and December of a
given year.
1.17 "Royalty Period" means that period beginning on the Date of First Sale
of the Products in the Field and in the Territory by NCH, and ending on
[...***...]
1.18 "Territory" shall mean [...***...] or as otherwise amended from time
to time as agreed upon in writing by the parties.
1.19 "FDA" shall mean the United States Food and Drug Administration.
5
<PAGE>
1.20 "Exclusive CIMA Patent" shall mean those CIMA Patents to which CIMA
has the right to grant an exclusive license, as listed in EXHIBIT B hereto.
1.21 "Nonexclusive CIMA Patent" shall mean those CIMA Patents to which CIMA
does not have the right to grant an exclusive license, as listed in EXHIBIT B
hereto.
1.22 [..***...]
1.23 [...***...]
1.24 "NCH Active Ingredients" shall mean [...***...]
2. GRANTS
2.1 Subject to the terms of this License Agreement, CIMA hereby grants,
and NCH hereby accepts, an exclusive license under the Exclusive CIMA Patents
and Know-How; and a nonexclusive license under the Nonexclusive CIMA Patents,
all as set forth in EXHIBIT B, including the right to sublicense, to make and
have made (subject to Article 12 hereof), use, market, distribute, offer for
sale and sell the Products in the Field and in the Territory. [...***...]
2.2 CIMA hereby grants, and NCH hereby accepts, an exclusive option to
acquire an exclusive license under the Exclusive CIMA Patents and Know-How;
and a nonexclusive license under the Nonexclusive CIMA Patents, including the
right to sublicense, to make and have made (subject to terms substantially
similar to those set forth in Article 12 hereof), market, distribute, offer
for sale and sell pharmaceutical products in the Field and in the Territory
[...***...] The Option shall be in effect for [...***...] beginning on the
Effective Date (the "Option Period"). In consideration for the Option, NCH
shall pay to CIMA a non-refundable option fee of [...***...] (the "Option
Fee") upon execution of this License Agreement. NCH may exercise the Option
by notifying CIMA in writing at any time during the Option Period of its
decision to do so. NCH and CIMA shall negotiate in good faith mutually
agreed upon terms under which NCH shall acquire the exclusive license
described above in this Section 2.2, which terms shall be no less favorable
to NCH than the terms of this License Agreement. The final agreement
memorializing these terms shall be entered into in the event NCH exercises
the Option, no later than the end of the Option Period. During the Option
Period, CIMA will not enter into discussions with any other party concerning
developing, commercializing or making any product covered by the Option. The
Option Fee shall be fully creditable against any license fees, royalties
and/or milestone payments payable by NCH to CIMA pursuant to any agreement
entered into between NCH and CIMA memorializing the agreed upon terms under
which NCH shall acquire the exclusive license described in this Section 2.2.
2.3 [...***...]
6
<PAGE>
2.4 Upon the expiration (but not the earlier termination) of the Royalty
Period, NCH shall have a nonrevocable, perpetual, paid-up, royalty-free,
non-exclusive license under the CIMA Patents and Know-How, with the right to
sublicense, in the Field and in the Territory, to make and have made (subject
to Article 12 hereof), use, market, distribute, offer for sale and sell
Products in the Field and in the Territory.
3. COVENANTS
3.1 CIMA hereby covenants and agrees that in the event that CIMA enters
into any Option, Development, License or Supply Agreement with a third party
relating to the granting or possible granting of a license under the CIMA
Patents or Know-How to make, have made, market, use, distribute, offer for
sale and/or sell any [...***...] pharmaceutical product using the OraSolv
Technology, which products are used for the treatment of [...***...] and
contain any or all of the NCH Active Ingredients (but not [...***...] alone),
to the extent permissible by law, CIMA shall contractually require of said
third party that all such products, as well as any labels, promotional,
advertising or marketing activities or materials relating to or used in
conjunction with such products, exclude any indication, suggestion or
reference, whether direct or indirect, or expressed, implied or inferred,
regarding [...***...] use of such products.
3.2 CIMA hereby covenants and agrees that it shall use the Results and
Confidential Information belonging to NCH (as to which obligations of
confidentiality apply) solely for the purposes specified in this License
Agreement and for no other purpose.
3.3 NCH hereby covenants and agrees that it shall use the licensed CIMA
Patents and Know-How and Confidential Information belonging to CIMA (as to
which obligations of confidentiality apply) solely for the purposes specified
in this License Agreement and for no other purpose.
3.4 CIMA hereby covenants and agrees to keep NCH fully informed of all
Improvements to the OraSolv Technology, but only to the extent such
Improvements relate to the Products, including but not limited to improved
taste masking. Information initially provided to NCH by CIMA under this
Section 3.4 shall be sufficient to permit NCH to evaluate applicability of
the Improvements to the Products. If NCH elects to use Improvements in
connection with the Products, CIMA shall disclose such information as CIMA
may have concerning such Improvement that is necessary to permit NCH to
utilize the Improvement consistent with the rights granted under this License
Agreement. In the event that NCH requests CIMA to incorporate an
Improvement, NCH shall pay CIMA reasonable incremental costs associated with
incorporating such Improvement that have been preapproved in writing by NCH.
3.5 CIMA hereby covenants and agrees during the term of this License
Agreement, not to (1) commercialize, or cause to be commercialized, or fund,
or provide services, including without limitation, consulting, research,
development and/or manufacturing services, with respect to, the
commercialization of, any chewable and/or fast dissolving, solid, oral dosage
form pharmaceutical products that contain any NCH Active Ingredient in the
Field and in the
7
<PAGE>
Territory, or (2) license, assign or otherwise convey, to any third party,
except as expressly permitted in Article 16 of this License Agreement, any of
the rights or licenses granted to NCH under this License Agreement, and
specifically including any rights or licenses with respect to Sections 2.1,
2.2 and 2.3; [...***...]
4. LICENSE FEES, MILESTONE PAYMENTS AND ROYALTIES
4.1 In consideration of the license granted to NCH under this License
Agreement as stipulated in Article 2 above, NCH shall pay to CIMA the
following non-refundable license and option fees and milestone payments at
the times stated below:
[...***...]
4.1.5 All payments by NCH to CIMA pursuant to Sections 4.1.2 and
4.1.3 and 4.5 will be made within [...***...] of receipt by NCH of
documentation from CIMA verifying successful completion of the relevant
activity. Such documentation shall be in the form of a written final report
of findings for the relevant activity.
4.2 As further consideration for the license granted to NCH under this
License Agreement as stipulated in Article 2 above, NCH shall pay to CIMA a
running non-refundable royalty of [...***...] of Net Sales of all Products in
the Field and in the Territory, in accordance with the provisions of Article
5. The running royalty shall be fully creditable against minimum annual
royalties, as set forth below in Section 4.4.
4.2.1 The obligation to pay running royalties shall expire, on a
country-by-country basis, with the expiration of the Royalty Period, except
as otherwise provided for under this License Agreement.
4.2.2 In the event that all [...***...] expire or all claims of all
[...***...] are held invalid or otherwise unenforceable by a court of
competent jurisdiction prior to [...***...], the running royalty rate in the
relevant country shall be reduced to [...***...] of the then-current running
royalty rate until [...***...] or as otherwise provided for under this
License Agreement.
4.2.3 If, as of the later of (i) [...***...] or (ii) the date on
which the last to expire [...***...] expires, CIMA has obtained or possesses
[...***...], then NCH shall continue to pay CIMA a running royalty equal to
[...***...] of the then-current running royalty rate, and NCH shall continue
to have an exclusive license with respect to such [...***...] until such time
as the [...***...] expire, or all claims thereof which cover [...***...] are
held invalid or otherwise unenforceable by a court of competent jurisdiction,
whichever is sooner, at which time NCH's obligation to pay royalties shall
cease.
8
<PAGE>
4.2.4 In the event that CIMA materially breaches the Supply
Agreement and fails to cure the material breach within [...***....] of being
notified by NCH of the material breach, then the running royalty rate shall
be reduced to [...***...] of the then-current running royalty rate until
the expiration of the Royalty Period or until such time as the breach is
cured, subject to additional adjustments as set forth in this Section 4.2 and
Articles 8, 10 and 11 hereof. Upon cure, the royalty rate shall be increased
to a rate equal to the rate in effect at the time of the breach, subject to
any additional adjustments that have been made, or are later made, pursuant
to this Section 4.2 or Articles 8, 10 or 11 hereof.
4.2.5 To the extent that CIMA is unable to meet NCH's firm orders
made pursuant to, or any other NCH Product supply requirement in accordance
with, the terms and conditions of the Supply Agreement, and as a direct
result of CIMA's nonperformance with respect thereto, NCH is unable to supply
Product to the Field such that an out-of-stock condition ensues in NCH
warehouses, and NCH receives backorders for the Product, CIMA shall
[...***...] Failure by CIMA to supply Product ordered pursuant to a change
order issued to CIMA pursuant to Article 4 of the Supply Agreement which
increases the order for the related month above NCH's forecast shall not be
considered nonperformance by CIMA for purposes of this Section 4.2.5 and
Section 12.2 of the Supply Agreement.
4.2.6 [...***...]
4.3 Royalties payable by NCH to CIMA under Sections 4.2 and 4.4 hereof
further shall be reduced or otherwise adjusted in accordance with Articles 8,
10 and 11 hereof.
4.4 Commencing in the first calendar year in which NCH launches a Product
on a national scale in [...***...] NCH shall pay to CIMA a minimum annual
royalty, as set forth below, against which running royalties accrued during
the relevant calendar year for which the minimum annual royalty is due are
fully creditable. Should total running royalties accrued in any calendar year
not equal at least the minimum annual royalty due for the relevant calendar
year, concurrent with its submission to CIMA of its statement of Net Sales,
as required under Section 5.2 hereof, for the last Royalty Computation Period
of the calendar year, NCH shall pay to CIMA according to the provisions of
Article 5 hereof, the difference between the minimum annual royalty due and
the total annual running royalty accrued in the relevant calendar year.
4.4.1 The minimum annual royalty shall be equal to [...***...]
per year, and shall be payable as set forth herein until [...***...] or until
all of the [...***...] expire, or all claims of all of the [...***...] which
cover the Products are held invalid or otherwise unenforceable by a court of
competent jurisdiction, whichever is sooner, except as otherwise provided for
in this License Agreement.
4.4.2 In the event all of the [...***...] expire or all claims of
all of the [...***...] which cover the Products are held invalid or otherwise
unenforceable by a court of competent jurisdiction prior to [...***...] and
CIMA has neither obtained nor possesses [...***...] then
9
<PAGE>
the annual minimum royalty due shall be reduced to [...***...] of the
then-current minimum annual royalty until [...***...] at which time the
obligation to pay minimum annual royalties shall cease.
4.4.3 In the event all of the [...***...] expire or all claims
of all of the [...***...] which cover the Products are held invalid or
otherwise unenforceable by a court of competent jurisdiction prior to
[...***...] and CIMA has obtained or possesses [...***...] at least one claim
of which covers [...***...] then the annual minimum royalty due shall be
equal to [...***...] of the then-current minimum annual royalty until such
time as the [...***...] expire, or all claims thereof which cover [...***...]
are held invalid or otherwise unenforceable by a court of competent
jurisdiction, at which time the obligation to pay minimum annual royalties
shall cease.
4.4.4 In the event that CIMA commercializes, or causes to be
commercialized, or funds, or provides services, including without limitation,
consulting, research, development and/or manufacturing services, with respect
to, the commercialization of, any oral chewable and/or fast dissolving,
solid, dosage form pharmaceutical products which contain Active Ingredients
other than NCH Active Ingredients, in the Field and in the Territory, then
the minimum annual royalty due shall be reduced to [...***...] of the
then-current minimum annual royalty, subject to additional adjustments, until
expiration of the Royalty Period, at which time the obligation to pay minimum
annual royalties shall cease; [...***...] This reduction in royalties shall
be NCH's sole remedy for such commercialization.
4.4.5 [...***...]
4.5 As further consideration for the license granted in this License
Agreement, NCH agrees to develop one additional Product formulation, subject
to the provisions and terms of this License Agreement and as set forth on
EXHIBIT D. [...***...]
5. PAYMENT PROCEDURES, RECORDS, AUDITING
5.1 All payments due CIMA pursuant to Article 4 shall be made in U.S.
dollars by wire transfer to such bank in the United States of America as CIMA
shall specify from time to time. For purposes of determining the running
royalty payment due to CIMA, Net Sales shall be converted on a
country-by-country basis to U.S. dollars at the exchange rate prevailing at
the close of the last business day of the relevant Royalty Computation Period
as published the next day in The Wall Street Journal.
5.1.1 Payments hereunder shall be made without deduction other than
such amounts, if any, as NCH is required by law to deduct or withhold. NCH
shall obtain a receipt from the relevant taxing authorities for all
withholding taxes paid and forward such receipts to CIMA to enable CIMA to
claim any and all tax credits for which it may be eligible. NCH shall
reasonably
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assist CIMA in claiming exemption from such deductions or withholdings under
any double taxation or similar agreement or treaty from time to time.
5.2 NCH shall pay to CIMA royalties as set forth in Article 4 within
[...***...] after the end of each Royalty Computation Period. Each payment
of royalties shall be accompanied by a statement, on a country by country
basis of the amount of Net Sales during such quarter, the amount of aggregate
Net Sales in the Territory during such quarter and the amount of royalties or
other payments due on such sales.
5.3 During the Agreement Period, NCH shall keep complete and accurate
books and records setting forth gross sales, net sales, amounts deducted from
gross sales to arrive at Net Sales, calculations of royalty payments owed to
CIMA, and any other information necessary to allow the calculation of
royalties to be paid by NCH to CIMA for each country within the Territory,
for no less than three (3) years after the end of each Royalty Computation
Period. NCH shall permit CIMA, at CIMA's expense, to have said books and
records examined by independent certified public accountants retained by CIMA
and acceptable to NCH, during regular business hours upon reasonable advance
notice but not later than three (3) years following the close of the Royalty
Computation Period in question, and no more than one (1) time per year. Such
accountant shall report to CIMA only those findings required to verify or
contradict the royalty amounts calculated by NCH to be owed to CIMA, and the
amounts of any discrepancy. Any information obtained or reports completed by
said accountants during such examination will be considered Confidential
Information of NCH under Article 7 hereof. If it is determined as a result
of said examination that there was an underpayment of royalties due CIMA, NCH
will pay to CIMA the balance of the royalties due within [...***...]
Similarly, in the event it is determined that there has been an overpayment
of royalties, CIMA will credit such overpaid amount against running royalty
payments owed by NCH at the end of the next Royalty Computation Period, or
subsequent Royalty Computation Periods when required, until such time as such
overpayment has been fully credited against the running royalties; PROVIDED,
HOWEVER, that such credit shall not exceed [...***...] of any royalties due
CIMA in such Royalty Computation Period, and any residual credit shall be
carried over to the next Royalty Computation Period and applied in accordance
with this Section 5.3.
6. REPRESENTATIONS AND WARRANTIES
6.1 CIMA warrants and represents that:
6.1.1 It is a corporation duly organized, existing and in good
standing under the laws of the state of Delaware, with full right, power and
authority to enter into and perform this agreement and to grant all of the
rights, powers and authorities herein granted in Article 2.
6.1.2 The execution, delivery and performance of this License
Agreement do not conflict with, violate or breach any agreement to which CIMA
is a party, or CIMA's Certificate of Incorporation or Bylaws.
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6.1.3 This License Agreement has been duly executed and delivered
by CIMA and is a legal, valid and binding obligation enforceable against CIMA
in accordance with its terms.
6.1.4 CIMA has the right, title and interest in and to the CIMA
Patents and Know-How which are the subject of this License Agreement,
necessary to grant the license granted pursuant to Article 2, and which, to
the best of CIMA's knowledge, are free of any lien or encumbrance or any
rights or claims of any third party in the Territory.
6.1.5 To the best of CIMA's knowledge as of the Effective Date, the
practice of the OraSolv Technology does not infringe any valid patents or
other proprietary rights of third parties, nor do said third parties have any
claim of ownership with respect to the CIMA Patents and Know-How.
6.1.6 To the best of CIMA's knowledge as of the Effective Date, the
CIMA Patents licensed under this License Agreement are neither invalid nor
unenforceable, nor would they be held invalid or unenforceable by a court of
competent jurisdiction. If, during the Agreement Period, CIMA (a) becomes
aware that anyone (including CIMA) has requested a re-examination of any such
CIMA Patents, (b) requests a re-issuance of any such CIMA Patents, or (c)
becomes aware that a declaratory judgment action has been filed to have any
such CIMA Patents declared invalid or unenforceable, CIMA promptly shall
notify NCH of such and specify which CIMA Patents are involved.
6.1.7 During the term of this License Agreement, CIMA shall not
enter into any agreement that is inconsistent with or in derogation of CIMA's
representations and warranties under this License Agreement.
6.1.8 As of the Effective Date, CIMA is not aware of any third
party that is infringing the CIMA Patents licensed to NCH.
6.2 NCH warrants and represents that:
6.2.1 It is a corporation duly organized, existing and in good
standing under the laws of the state of Delaware, with full right, power and
authority to enter into and perform this License Agreement.
6.2.2 The execution, delivery and performance of this License
Agreement do not conflict with, violate or breach any agreement to which NCH
is a party, or NCH's Certificate of Incorporation or Bylaws.
6.2.3 This License Agreement has been duly executed and delivered
by NCH and is a legal, valid and binding obligation enforceable against NCH
in accordance with its terms.
7. CONFIDENTIALITY
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7.1 Both CIMA and NCH agree that subject to the limitations set forth in
Section 7.3, all information disclosed to the other party, whether in oral,
written or graphic form, and identified in writing by the disclosing party as
confidential shall be deemed "Confidential Information" of the disclosing
party. In particular, Confidential Information shall be deemed to include,
but not be limited to Results, including any information or documentation
relating thereto, any patent application or drawing or potential patent
claim, trade secrets, information, ideas, inventions, samples, processes,
procedures, methods, formulations, packaging designs and materials, test
data, future development plans, Product launch date, technological know-how
and engineering, manufacturing, regulatory, marketing, servicing, sales,
financing or human resources matters relating to the disclosing party and its
business.
7.2 Both parties will take precautions as it normally takes with its own
confidential and proprietary information to prevent disclosure to third
parties.
7.3 Both CIMA and NCH agree that, notwithstanding the above, the
obligations of confidentiality shall not be deemed to apply to:
7.3.1 Information which at the time of disclosure is or thereafter
becomes generally known or available to the public, through no wrongful act
or failure to act on the part of the receiving party.
7.3.2 Information that was known by or in the possession of the
receiving party at the time of receiving such information from the disclosing
party as evidenced by written records.
7.3.3 Information obtained by the receiving party from a third
party source who is not breaching a commitment of confidentiality to the
disclosing party by revealing such information to the receiving party.
7.3.4 Information that is independently developed by the receiving
party without use of confidential information of the other party as evidenced
by written records.
7.3.5 Information that is the subject of a granted written
permission to disclose that is issued by the disclosing party to the other
party.
7.3.6 Information that is required to be disclosed pursuant to the
law, but only to the extent required to be disclosed; PROVIDED, THAT, the
disclosing party notifies the other party in writing and gives the other
party reasonable time to comment on the same prior to disclosure.
7.4 During the Agreement Period and for a period of five (5) years after
the end of the Agreement Period (seven (7) years for manufacturing process
information) each party shall maintain all Confidential Information in trust
and confidence and shall not disclose any Confidential Information to any
third party or use any such information for any unauthorized purpose, other
than as authorized in Section 7.3 hereof or as necessary to accomplish the
purpose of this License Agreement subject to an appropriate binder of
confidentiality as set forth in Section 7.5. Each party may use such
Confidential Information only to the extent required to
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accomplish the purposes of this License Agreement. Confidential Information
shall not be used for any purpose or in any manner that is not consistent
with this License Agreement or that would constitute a violation of any laws
or regulations including, without limitation, the export control laws of the
United States. Each party hereby agrees that it will not in any way attempt
to obtain, either directly or indirectly, any information regarding any
Confidential Information from any third party who has been employed by,
provided consulting services to, or received in confidence information from,
the other party.
7.5 Both parties will make diligent efforts to ensure that all employees,
consultants, agents, subcontractors and manufacturing contractors who may
have access to Confidential Information of the other party, and any other
third parties who might have access to Confidential Information, will use
such information in a manner consistent with the terms of this License
Agreement and will be bound by the terms set forth in this Article 7. No
Confidential Information shall be disclosed to any employees, subcontractors,
agents or consultants who do not have a need to receive such information.
7.6 To the extent either party discloses confidential information of the
other party to an employee, consultant, subcontractor or manufacturing
contractor (collectively "Agents") or permits an Agent to have access to such
confidential information, such party shall indemnify the other party for any
claims, damages, losses, liabilities, costs or expenses, including reasonable
attorneys' fees, incurred by the other party as a result of the indemnifying
party's Agent further disclosing or misusing such confidential information.
8. TERM AND TERMINATION
8.1 The term of this License Agreement shall begin as of the Effective
Date and shall remain in effect for the Agreement Period, unless earlier
terminated as provided herein.
8.2 In the event either party commits a material breach or defaults in the
performance or observance of any of the material provisions of this License
Agreement, and such breach or default is not cured within [...***...] days
after the receipt of notice thereof from the other party specifying such
breach or default, the party not in breach or default shall be entitled
(without prejudice to any of its' other rights) to terminate this License
Agreement, without additional penalty, termination fee or cost, by giving
notice to take effect immediately.
8.3 In addition to the provisions specified in Section 8.2, NCH shall have
the right to terminate this License Agreement [...***...]
8.4 In addition to the provisions specified in Section 8.2, NCH shall have
the right to terminate this License Agreement [...***...]
8.5 If NCH, in its sole discretion, chooses not to pursue the remedy
provided for in Section 8.2 hereof in the event CIMA commits a material
breach or defaults in the performance or
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observance of any of the material provisions of this License Agreement, and
such breach or default is not cured within [...***...] or, if such breach is
not reasonably capable of cure within such [...***...] and CIMA reasonably
demonstrates to NCH that it is making good faith efforts to cure such breach,
[...***...] after the receipt of notice thereof from NCH specifying such
breach or default, NCH shall be entitled to [...***...]
8.6 NCH shall have the right to terminate this License Agreement and the
royalty obligations with respect thereto, without cause, effective on, or any
time after, [...***...] by providing CIMA with [...***...] prior written
notice of such termination and payment of a [...***...] termination fee upon
such termination plus such other amounts as have accrued under this License
Agreement and remain unpaid as of the date of termination, including the
amount of the prorated minimum royalty for the year of termination or the
actual earned royalties whichever is greater. [...***...]
8.7 The termination of this License Agreement by either party shall not
release either party from any obligation that matured prior to the effective
date of the termination.
8.8 Termination of this License Agreement by NCH pursuant to Sections 8.2,
8.3, 8.4, 8.5 or 8.6 shall immediately terminate any further minimum annual
royalty obligation as to NCH.
8.9 The confidentiality provisions set forth in Article 7 hereof shall
survive the termination or expiration of this License Agreement as set forth
therein.
8.10 Except as otherwise expressly provided in this License Agreement, upon
termination of this License Agreement:
8.10.1 All licensed rights under the CIMA Patents and Know-How
granted to NCH shall terminate and revert to CIMA, and NCH shall not make any
use whatsoever of said rights, nor sell any Products in the Territory, except
as expressly provided for elsewhere in this License Agreement.
8.10.2 Title and ownership rights in the [...***...] and other
Confidential Information of CIMA shall remain at all times with CIMA and NCH
will have no title thereto as a result of this License Agreement. Upon
written request by CIMA, NCH shall promptly return to CIMA all information
regarding said [...***...] or Confidential Information; PROVIDED THAT, NCH
will be permitted to keep archive copies of such Confidential Information.
8.10.3 Title and Ownership rights in the [...***...] and
Confidential Information of NCH shall remain at all times with NCH and CIMA
will have no title thereto as a result of this License Agreement. Upon
written request by NCH, CIMA shall promptly return to NCH all information
regarding said [...***...] and Confidential Information; PROVIDED THAT,
CIMA will
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be permitted to keep archive copies of said [...***...] for CIMA's internal
use only and CIMA shall be prohibited from disclosing or providing [...***...]
to any third party.
8.10.4 NCH shall have up to [...***...] from the date of termination
of this License Agreement to sell or otherwise dispose of its existing stock
of the Products and to fulfill any outstanding contractual obligations with
respect to the sale or supply of the Products; PROVIDED THAT, CIMA shall
continue to receive royalty payments as stipulated in Article 4 hereof. The
parties acknowledge the seasonal nature of the Products, however, NCH shall
make reasonable commercial efforts to dispose of such existing stock as
expeditiously as reasonably possible.
8.10.5 Except as otherwise set forth herein, termination under this
Article 8 shall be without prejudice to and shall not affect the right of
either party to recover any and all damages to which it may be entitled, or
exercise any other remedies which it may otherwise have under this License
Agreement course and conduct of patent application prosecution matters within
the scope of CIMA Patents licensed under this License.
9. PATENTS
9.1 CIMA shall undertake and shall bear all costs of the prosecution and
maintenance of the Patent Rights in the Territory. CIMA shall employ
reasonable efforts to keep NCH fully and timely informed, at NCH's reasonable
expense, in respect to the course and conduct of the Patent application
prosecution matters within the scope of the CIMA Patents licensed under this
License Agreement and such information (to which the obligation of
confidentiality applies) disclosed pursuant to this Section 9.1 shall be
Confidential Information for purposes of Article 7. (CIMA shall not be
obligated to furnish any information or documents to NCH other than documents
filed in, or received from patent offices in the Territory in respect of the
CIMA Patents.)
9.2 NCH shall mark appropriately all Products with the patent number of
any CIMA patent, at least one claim of which covers the Products and/or
packaging therefor, or processes for making or packaging the Products.
10. INFRINGEMENT OF CIMA PATENT
10.1 If either party shall become aware of any infringement of any CIMA
Patent in the Territory and in the Field, then the party having such
knowledge shall give notice to the other within ten (10) days of becoming
aware of such infringement and the basis therefor.
10.2 Subject to Section 10.3 hereof, CIMA shall have the sole right to take
such action, as it deems appropriate and reasonable, whether by action, suit,
proceeding or otherwise, at its own expense, to prevent or eliminate the
infringement of the CIMA Patents by others and to collect damages. NCH
agrees to cooperate with CIMA in any reasonable manner in an action brought
by CIMA. CIMA agrees to pay all reasonable out-of-pocket expense incurred by
NCH as a result of NCH's cooperation in the prosecution of any such action,
suit or proceeding for
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infringement. CIMA shall be entitled to retain any damages recovered by
bringing the action for patent infringement.
10.3 Within [...***...] of receipt of notice by CIMA of the infringement of
any Exclusive CIMA Patents by commercial sale or offer for commercial sale
through more than one (1) sales outlet within one (1) or more countries of
the Territory, or by commercial use of the products in the Field, or
contributing to, or inducement of, any of the foregoing, CIMA shall commence
reasonable action to terminate such infringement. Should CIMA take such
reasonable action within [...***...] of receipt of such notice and
nevertheless fails to terminate the infringement within [...***...] of
receipt of notice of such infringement, CIMA shall bring formal suit against
the infringer in a court of competent jurisdiction to terminate such
infringement. Should CIMA fail to take reasonable action to terminate such
infringement within said [...***...] or to terminate such infringement within
said [...***...] then, (i) if the infringed CIMA Patents include one or more
[...***...] or (ii) if the Exclusive CIMA Patents in such country consist
solely of [...***...] the running royalty for Products sold in such country
shall be immediately reduced to [...***...] of the then-current running
royalty rate, whereas if the infringed Exclusive CIMA Patents consist solely
of [...***...] but one or more [...***...] are in force in such country at
the time such infringement commences, the running royalty rate for Products
sold in such country shall be reduced to [...***...] of the then-current
royalty rate. The reduced rate shall remain in effect until expiration of
the Royalty Period, or until such time as the infringement terminates, the
infringed Exclusive CIMA Patents expire (as discussed in Sections 4.4.2 and
4.4.3), or as otherwise provided for in Article 4 of this License Agreement.
11. INFRINGEMENT OF THIRD PARTY RIGHTS
11.1 If either party to this License Agreement shall become aware of any
action, or suit, or threat of action or suit, by a third party alleging that
the manufacture, use, marketing, distribution, offer for sale or sale of any
Product infringes a patent, or violates any other proprietary rights of any
third party, the party aware of same shall notify the other party of the same
and fully disclose the basis therefor within ten (10) days of becoming aware
of such action, or suit, or threat of such action or suit.
11.2 CIMA shall have the right, but not the obligation, (a) to secure a
license, at CIMA's expense, with the right to sublicense, which would obviate
the alleged infringement and CIMA shall grant to NCH, at no additional cost,
a sublicense under such license; or (b) to develop at CIMA's expense one or
more substitute Products which are substantially equivalent in performance to
the then-existing Products but which are free of the alleged infringement.
NCH shall cooperate at NCH's reasonable expense in such development, and in
negotiations for such license, as CIMA may reasonably request.
11.3 In the event CIMA elects not to exercise its rights under Section 11.2
within [...***...] of receiving notice of such claim, or otherwise
notifies NCH within such [...***...] that it does not intend to exercise
such right, NCH shall have the right to defend any such claim at its own
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expense and sole discretion as to the control, conduct and prosecution of
such defense. If, by the terms of any settlement or if by a judgment, decree
or decision of a court, tribunal or other authority of competent jurisdiction
emanating from NCH's defense of such claim, NCH is required to obtain a
license from a third party in order to make, have made, use, offer for sale,
sell or import Product (hereinafter "Third Party License") and/or to
compensate or pay damages to such third party, and/or pay royalties under
such license, and/or incur cost or expense in the defense of such claim,
then, if such claim arises from the use of any OraSolv Technology or any
Improvement thereto, NCH shall have the right to credit [...***...] of any
such compensation, damages, royalties and reasonable out-of-pocket cost and
expense against running royalties owed to CIMA until such time as any
allowable credit is fully taken; PROVIDED THAT, CIMA shall have the right to
approve any credits resulting from settlement (other than by judgment, decree
or decision of a court, tribunal or other authority of competent
jurisdiction) by NCH and the third party of any claim or action, which
approval shall not be unreasonably withheld, and the dollar amount of any
credit taken in any one Royalty Computation Period shall not exceed
[...***...] of the dollar amount of royalty payments due CIMA in the relevant
Royalty Computation Period.
11.4 Nothing in this Article 11, or in Article 10, shall be construed as a
waiver or cure of any breach of any warranties set forth in Article 6, or any
release of any claim by NCH as may be appropriate relating thereto.
12. CIRCUMSTANCES FOR MANUFACTURE BY NCH
12.1 NCH shall have the right to make the Product, or have the Product made
by a third party supplier (reasonably acceptable to CIMA), only under the
following circumstances:
[...***...]
12.2 In the event NCH begins to make the Product, or have a third party
supplier make the Product, in accordance with Section 12.1 hereof and/or
Article 12 of the Supply Agreement, CIMA shall cooperate fully with NCH and
the third party supplier, if any, and shall use commercially reasonable best
efforts to enable NCH and/or the third party supplier to qualify and validate
the Novartis Manufacturing Facility (as defined in the Supply Agreement) or
the third party supplier's facilities, as the case may be, and to manufacture
and package the Product. CIMA shall give NCH and any third party supplier
prompt and unrestricted access to, or, if requested, CIMA immediately shall
provide to NCH and any third party supplier, all Technical Information (as
defined in the Supply Agreement). Any disclosure or use of Technical
Information will be subject to the confidentiality restrictions set forth in
Article 7 of this License Agreement. NCH and any third party supplier shall
have the right to observe the operation of any laboratory and manufacturing
and/or packaging facility of CIMA (subject to CIMA's obligations of
confidentiality to third parties) and to have a reasonable number of
employees or other representatives of CIMA visit the Novartis Manufacturing
Facility or the third party supplier's facilities, at NCH's option and in
accordance with a mutually agreed time table, to demonstrate and explain any
of the Technical Information and the manufacturing and packaging processes.
In the event that NCH manufactures and/or packages the Product, or has a
third party
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supplier manufacture and/or package Product pursuant to Section 12.1(ii) or
(iii) above, [...***...]
13. NOTICES
All notices required or permitted hereunder shall be given in writing
and sent by facsimile transmission, or mailed postage prepaid by first class
certified or registered mail, or sent by a nationally recognized express
courier service, or hand delivered at the following addresses:
Novartis Consumer Health, Inc.
560 Morris Avenue
Summit, New Jersey 07901
Attention: Office of the Vice President, Marketing
With a copy to: General Counsel
CIMA LABS, Inc.
10000 Valley View Road
Eden Prairie, Minnesota 55344-9361
Attention: Vice President Business Development
Any notice, if mailed properly addressed, postage prepaid, shall be
deemed made three (3) days after the date of mailing as indicated on the
certified or registered mail receipt, or on the next business day if sent by
express courier service or on the date of delivery or transmission if hand
delivered or sent by facsimile transmission.
14. FORCE MAJEURE
Neither party shall be responsible or liable to the other hereunder
for failure or delay in performance of this License Agreement due to any war,
fire, flood, accident or other casualty, or any labor disturbance or act of
God or the public enemy, or any other contingency beyond such party's
reasonable control. In addition, in the event of the applicability of this
Article, the party affected by such force majeure shall use reasonable
efforts, consistent with good business judgment, to eliminate, cure and
overcome any of such causes and resume performance of its obligations.
15. PUBLICITY
CIMA and NCH agree not to issue any press release or other public
statement disclosing the existence of or relating to this License Agreement
without prior written consent of the other party; PROVIDED, HOWEVER, that
neither CIMA nor NCH shall be prevented from complying with any duty of
disclosure it may have pursuant to law subject to notifying the other party
in writing and giving such other party reasonable time to comment on the same
prior to disclosure. Notwithstanding the foregoing, NCH and CIMA each shall
have the right to disclose information regarding this License Agreement to
potential investors and its financial advisors (including
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allowing such investors and financial advisors to review this License
Agreement itself); PROVIDED THAT, the disclosing party has obtained a
commercially reasonable confidentiality agreement from each such investor and
financial advisor. CIMA and NCH agree that the Press Releases attached
hereto as EXHIBIT E are approved for release to the public immediately upon
the execution of this License Agreement.
16. ASSIGNMENT
This License Agreement and all rights and obligations hereunder are
personal to the parties hereto and may not be assigned without the express
prior written consent of the other party. Any assignment or attempt at same
in the absence of such prior written consent shall be void and without
effect; PROVIDED THAT, either party may assign this License Agreement to an
Affiliate or any successor by merger or sale of all or substantially all of
its business units to which this License Agreement relates without such
consent. This License Agreement shall be binding upon the successors and
permitted assigns of the parties and the name of a party appearing herein
will be deemed to include the names of such party's successors and permitted
assigns to the extent necessary to carry out the intent of this License
Agreement.
17. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Delaware as though made and to be fully performed in
said State.
18. SEVERABILITY
If any one or more of the provisions of this License Agreement shall
be held to be invalid, illegal or unenforceable, the validity, legality or
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby. In the event any provision shall be held
invalid, illegal or unenforceable the parties shall use commercially
reasonable efforts to substitute a valid, legal and enforceable provision
which, insofar as possible, implements the purposes hereof.
19. MISCELLANEOUS
19.1 CIMA must inform NCH in writing of CIMA's intention to file a
voluntary petition in bankruptcy, or of another's intention to file an
involuntary petition in bankruptcy in respect to CIMA at least thirty (30)
days prior to the filing of such a petition; PROVIDED, THAT, if CIMA is not
aware of another's intention to file an involuntary petition in bankruptcy in
respect of CIMA thirty (30) days prior to the filing of such petition, CIMA
shall inform NCH in writing of such other party's intention to file as soon
as reasonably possible after CIMA becomes aware of it. Upon receipt of such
notice, NCH in its sole discretion shall have the option of terminating this
License Agreement upon sixty (60) days written notice to CIMA, unless CIMA
refrains from
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filing its petition, withdraws its petition, prevents the other party from
filing its involuntary petition or obtains dismissal of the petition, as the
case may be, during this sixty (60) period. The filing of such petition
without conforming to this requirement shall be deemed a material,
pre-petition incurable breach of this License Agreement.
19.2 The failure of any party hereto at any time or times to require
performance of any provisions hereof shall in no manner affect its rights to
enforce such provision at a later time.
19.3 Nothing in this License Agreement shall prevent NCH from labeling the
Products with [...***...]
19.4 For the period beginning the Effective Date and ending on or about
[...***...] NCH shall have the right to limit commercial sale of the
Products to a regional market within the Territory. By no later than
[...***...] NCH shall notify CIMA whether it intends to (i) launch the
Products on a national scale or (ii) terminate this License Agreement
pursuant to either Section 8.3 or 8.4 hereof, as appropriate. If NCH elects
to proceed under clause (i) of this Section 19.4, it shall so launch by no
later than [...***...] unless it is prevented from doing so due to CIMA's
failure to produce sufficient Product pursuant to the Supply Agreement.
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20. INDEPENDENT CONTRACTORS
The parties shall perform their obligations under this License Agreement as
independent contractors and nothing contained in this License Agreement shall
be construed to be inconsistent with such relationship or status. This
License Agreement shall not constitute, create or in any way be interpreted
as a joint venture or partnership of any kind.
21. COUNTERPARTS
This License Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, and all of which together shall constitute
one and the same instrument.
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22. ENTIRE AGREEMENT
This License Agreement together with the Supply Agreement constitute
the entire understanding between the parties relating to the subject matter
thereof, and no amendment or modification to this License Agreement shall be
valid or binding upon the parties unless made in writing and signed by the
representatives of such parties.
IN WITNESS WHEREOF, the parties hereto have caused this License Agreement to
be executed as of the date first written above by their duly authorized
officers.
NOVARTIS CONSUMER HEALTH, INC. CIMA LABS., INC
560 Morris Avenue 10000 Valley Road
Building F Eden Prairie, Minnesota 55344
Summit, New Jersey (612) 947-8700
(908) 598-7614
By: /s/ [...***...] By: /s/ Jack Khattar
------------------------------- ------------------------------------
[...***...] Name: Jack Khattar
Vice President & CFO -----------------------------------
Title: Vice President
----------------------------------
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***TEXT OMITTED AND FILED SEPARATELY
CONFIDENTIAL TREATMENT REQUESTED
UNDER 17 C.F.R. SECTIONS 200.80(B)(4),
200.83 AND 240.24B-2
SUPPLY AGREEMENT
BETWEEN
NOVARTIS CONSUMER HEALTH, INC.
AND
CIMA LABS., INC.
Dated: July 1, 1998
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TABLE OF CONTENTS
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SECTION PAGE
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Dated: July 1, 1998. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
2. Purchase and Sale; Product Specifications. . . . . . . . . . . . . . . . . . .3
3. Price; Payment; Miscellaneous Terms and Conditions of Sale . . . . . . . . . .4
4. Forecasts; Shipments; Orders . . . . . . . . . . . . . . . . . . . . . . . . .4
5. Inspection of Shipments. . . . . . . . . . . . . . . . . . . . . . . . . . . .6
6. Trade Secrets and Confidentiality. . . . . . . . . . . . . . . . . . . . . . .7
7. Safety and Health--Responsible Care. . . . . . . . . . . . . . . . . . . . . .9
8. Quality of the Product; Certain Regulatory Matters . . . . . . . . . . . . . .9
9. Changes in CIMA's Manufacturing Processes. . . . . . . . . . . . . . . . . . 11
10. Indemnification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11. Term and Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
12. Meeting Product Supply Demands; Back-Up Supplier;
Right to Manufacture . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
13. Packaging and Labeling . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
14. Recalls. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
15. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
16. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
17. Force Majeure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
18. Assignability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
19. Waiver; Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
20. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
21. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
22. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
23. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
24. Parties' Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
25. Novartis Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
26. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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SUPPLY AGREEMENT
This Supply Agreement, including all attached Annexes which are incorporated
and made a part hereof, dated this First day of July, 1998 (the "Effective
Date"), by and between NOVARTIS CONSUMER HEALTH, INC., a Delaware
corporation, with offices at 560 MORRIS AVENUE, SUMMIT, NJ 07901-1312
("Novartis"), and & CIMA LABS., INC., a Delaware corporation, with offices at
10000 Valley View Road, Eden Prairie, MN 55344-9361 ("CIMA"), sets forth the
terms and conditions for the commercial supply of the Product (as defined in
the License Agreement);
WHEREAS, Novartis and CIMA have simultaneously entered into the License
Agreement, that establishes all terms and conditions relating to the license
exclusivity of the Product, and both parties desire to proceed to
commercialization of the Product; and
WHEREAS, CIMA owns or has rights to certain patents and know-how applicable
to the Product; and
WHEREAS, CIMA has the requisite experience and facilities to manufacture and
package the Product; and
WHEREAS, Novartis and its Affiliates wish to purchase commercial quantities
of the Product from CIMA, and CIMA is willing to supply the Product
exclusively to Novartis and its Affiliates for use in the Field and in the
Territory, in each case, upon the terms and conditions set forth herein;
NOW, THEREFORE, the parties hereto agree as follows:
1. DEFINITIONS
The following terms shall have the meanings set forth below, or where
indicated, for purposes of this Agreement. Defined terms used, but not
defined, herein shall have the meaning assigned to them in the License
Agreement.
"ACT" means the U.S. Food, Drug and Cosmetic Act and the regulations
promulgated thereunder, as amended from time to time and all other applicable
laws and regulations in any other Territory.
"BACK-UP SUPPLIER" shall have the meaning given thereto in Section 12.1
hereof.
"CGMP" means current good manufacturing practices as required by the Act.
"CIMA INDEMNIFIED PARTIES" shall have the meaning given thereto in Section
10.2 hereof.
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"COMMERCIAL QUANTITIES" means quantities of the Product sufficient for launch
and on-going market supply in the Territory consistent with the forecasting
mechanism set forth in Article 4 of this Agreement.
"CONFIDENTIAL INFORMATION" shall have the meaning given thereto in Section
6.1 hereof.
"FDA" means the United States Food and Drug Administration.
"INITIAL TERM" shall have the meaning given thereto in Section 11.1 hereof.
"LICENSE AGREEMENT" means the License Agreement, between CIMA and Novartis,
entered into simultaneously herewith.
"MANUFACTURING PROCESS" means the processes, means and procedures for the
manufacture and production of the Product that CIMA developed for Novartis.
"NOVARTIS INDEMNIFIED PARTIES" shall have the meaning given thereto in
Section 10.1 hereof.
"NOVARTIS MANUFACTURING FACILITY" shall mean a manufacturing and/or packaging
facility of Novartis or a Novartis Affiliate.
"ORDER DATE" shall have the meaning given thereto in Section 4.1(b) hereof.
"QUALITY ASSURANCE AGREEMENT" shall mean the Quality Assurance Agreement,
between CIMA and Novartis, dated as of June 25, 1998, and attached hereto as
ANNEX A.
"RELEASE DATE" shall have the meaning given thereto in Section 4.2(b) hereto.
"TECHNICAL INFORMATION" means all know how, trade secrets, inventions, data,
technology and other information now owned or licensed by CIMA or hereafter
acquired or licensed by CIMA during the term of this Agreement, including
that related to the OraSolv Technology which are necessary or useful to the
manufacture, packaging, use or sale of Products including, but not limited
to, (i) medical, chemical and other scientific data, (ii) processes and
analytic methodology used in the validation, stability testing and other
testing or analysis of such Products and (iii) packaging and manufacturing
data and processes.
"THIRD PARTY SUPPLIER" shall have the meaning given thereto in Section 12.3
hereof.
2. PURCHASE AND SALE; PRODUCT SPECIFICATIONS
2.1 (a) Except as otherwise specifically permitted in this Agreement,
during the term of this Agreement, and subject to the provisions hereof,
CIMA agrees to manufacture, package, and supply the Product exclusively to
Novartis and its Affiliates in sufficient quantities to meet the total
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requirements, consistent with the forecasting mechanism set forth in Article
4 of this Agreement, of Novartis and its Affiliates for use in the Territory,
and Novartis agrees to purchase from CIMA all of its requirements for the
Product.
(b) Product shall be supplied as finished product suitably packed
for shipment to Novartis' distribution centers.
(c) Except as otherwise specifically permitted in Article 12 of this
Agreement, CIMA shall manufacture, package and supply the Product exclusively
for Novartis for the term of this Agreement, including all renewal periods.
(d) All orders for the Product shall be made pursuant to written
purchase orders delivered to CIMA in accordance with ANNEX B and Article 4
hereof. Such purchase orders shall reference this Agreement and shall be
governed exclusively by the terms of this Agreement. Any term or condition
in any purchase order, confirmation, invoice or other document furnished by
CIMA or Novartis that is in any way inconsistent with these terms and
conditions is hereby expressly rejected.
(e) Novartis agrees to use reasonable good faith efforts consistent
with prudent business judgment to pursue commercialization of the Product in
the Territory; [...***...].
2.2 (a) CIMA shall manufacture and package the Product supplied to
Novartis in accordance with the specifications set forth on the attached
ANNEX A. No change in the specifications, methods, processes and/or
procedures set forth in ANNEX A may be made unless (i) Novartis agrees in
writing thereto or (ii) such change is required by (1) any regulatory agency
which has jurisdiction over Novartis, CIMA and/or the Product or (2) by the
U.S. Pharmacopoeia; PROVIDED, THAT, CIMA shall notify Novartis in writing
prior to making any such required change. Any such change must also be made
in compliance with Article 9 hereof. To the extent Novartis does not agree
to a change necessary to incorporate an Improvement (as defined in the
License Agreement), CIMA shall not be obligated to incorporate such
Improvement in the Product; PROVIDED, HOWEVER, that CIMA shall remain
otherwise obligated under the terms of this Agreement.
3. PRICE; PAYMENT; MISCELLANEOUS TERMS AND CONDITIONS OF SALE
Pricing for commercial quantities of the Product shall be in accordance with
the financial terms set forth in the Financial Agreement, ANNEX C, attached
hereto and made part hereof, as developed and agreed to by Novartis and CIMA.
4. FORECASTS; SHIPMENTS; ORDERS
4.1 (a) In order to assist CIMA in planning its production, Novartis
shall provide CIMA with a twelve (12) month rolling forecast of the
quantities of Product required by Novartis, by month, for the following
twelve (12) months. The first three (3) months of such projections shall
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constitute a binding commitment to order the quantity of Products forecast
for such period, subject to Section 4.1 hereof. Projections for months four
(4) through twelve (12) shall be made in good faith and shall constitute
Novartis' best estimates of future orders, but shall not be binding on
Novartis. Novartis shall provide its first twelve (12) month forecast upon
the Effective Date and each subsequent update will be provided no later than
five (5) business days prior to the beginning of the next monthly period.
Additionally, Novartis shall provide quarterly estimates for year two (2) of
the forecast horizon, which quarterly estimates shall be made in good faith
and shall constitute Novartis' best estimates of future orders, but which
shall not be binding on Novartis. CIMA shall, no later than fifteen (15)
business days after receipt of each such forecast, notify Novartis in writing
of any prospective problems of which CIMA is aware that might prevent CIMA
from meeting Novartis' forecasted order quantities or estimated delivery
dates. Except as provided elsewhere in this Agreement and unless CIMA has
previously identified to Novartis potential problems in meeting Novartis'
forecasted requirements, CIMA shall be obligated to deliver during any month,
pursuant to purchase orders provided under Section 4.1(b) hereof, up to
[...***...] of Novartis' estimated purchases for such month. In addition,
CIMA will make a good faith attempt to deliver all Product ordered in excess
of [...***...] of Novartis' estimated requirements for the relevant month.
(b) Novartis shall provide CIMA with its firm purchase orders for
the Product in accordance with the lead-times and batch size increments
specified in ANNEX B, however Novartis shall have the right, up to the date
of manufacture, to issue binding change orders to increase or decrease such
purchase orders by amounts of up to [...***...] of total SKUs ordered in such
purchase order. To facilitate CIMA's responsiveness to changes in Novartis'
requirements, while minimizing exposure to obsolescence, CIMA is authorized
to procure necessary materials based upon the forecast plus an amount equal
to [...***...] of the forecast. Manufacturing and procurement lead times,
and the authorized procurement horizon are delineated in ANNEX B, attached
hereto and made part hereof, as may be amended from time to time by mutual
agreement of both parties. Novartis agrees to accept partial shipments of
Product should, for any reason, it become necessary to ship in advance of
order completion. CIMA shall make all commercially reasonable efforts to
comply with any revisions to purchase order requirements consistent with the
provisions of Section 4.1(a) and this Section 4.1(b). CIMA, within ten (10)
business days after the date that a purchase order is deemed placed with it
(the "Order Date"), shall acknowledge receipt of Novartis' order and confirm
in writing that the order can be supplied. For purposes hereof, the Order
Date shall be the earlier of (i) the date that CIMA receives the purchase
order via mail and (ii) the date of receipt of the telecopied purchase order.
(c) Novartis agrees to be held liable for all obsolescence of
materials resulting from changes in Product or purchase order requirements,
provided CIMA has ordered in accordance with the authorized procurement
horizons specified in ANNEX B and/or standard container sizes and/or minimum
order quantities. CIMA will use all reasonable commercial efforts to
mitigate obsolescence potential. CIMA shall submit supporting documentation
on all claims of obsolescence and requests for reimbursement thereof.
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4.2 (a) Each purchase order shall specify the quantity of Product
ordered and the required delivery date; PROVIDED THAT, such purchase order
shall not specify a delivery date sooner than the lead times set forth in
ANNEX B would permit calculated from the Order Date; PROVIDED FURTHER THAT,
CIMA shall use commercially reasonable efforts to accommodate "Rush" orders
from Novartis. Transportation details will be coordinated between Novartis
and CIMA.
(b) When all appropriate validation and quality control release
criteria for a particular shipment of Product, as set forth in the Quality
Assurance Agreement, have been met (the "Release Date"), CIMA shall notify
Novartis in writing of the expected delivery dates (including details of
destination, date and time) to enable delivery and receipt to be coordinated.
CIMA shall deliver all orders on a business day to Novartis F.O.B. CIMA,
within two (2) weeks of the Release Date. Title and risk of loss to all
Product shall pass to Novartis upon delivery of the Product by CIMA to the
carrier.
4.3 If for any reason CIMA experiences a shortage of materials required to
manufacture products in an OraSolv-Registered Trademark- formulation
("OraSolv-Registered Trademark- products") and CIMA is therefore unable to
supply Novartis with the full quantity of Products ordered by it and accepted
by CIMA, Novartis shall be entitled to receive that quantity of Products
which bears the same proportion to the total quantity of available
OraSolv-Registered Trademark- products as the quantity of Products purchased
by Novartis from CIMA in the twelve (12) months preceding the supply shortage
bears to all orders received by CIMA from other customers for
OraSolv-Registered Trademark-products.
4.4 CIMA agrees to use commercially reasonable best efforts to maintain
available manufacturing and packaging capacities dedicated to Novartis
equivalent to [...***...] above Novartis' then current forecasted production
requirements.
4.5 If CIMA fails to deliver the Product in the quantities requested by
Novartis within ten (10) business days of the date of delivery as specified
in a purchase order, then Novartis shall have the right to cancel the amount
of the purchase order which is unfulfilled. Said right shall apply only to
the extent that such purchase order is unfulfilled.
4.6 The Product shall be delivered to Novartis as packed finished goods.
In addition, Novartis shall have the right to require any special or varied
packing that it believes is reasonably necessary to meet the customs and
regulatory requirements within the Territory. Incremental costs that can be
shown to result directly from any packing changes required by Novartis will
be borne by Novartis.
5. INSPECTION OF SHIPMENTS
Novartis will have the right to inspect the Products and verify their
conformity to the order. If Novartis determines that the Products do not
conform to the applicable specifications or there are other delivery errors,
Novartis shall notify CIMA in writing of all nonconformities that existed at
the time of delivery of the Products. Such notification shall be made as
soon as reasonably possible after discovery of the nonconformity, but not
later than thirty (30) days after delivery of the
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Product. Such notice shall specify the reasons for rejection. If Novartis
does not reject the Product within thirty (30) days after delivery, Novartis
will be deemed to have accepted the Products. After Novartis accepts a
Product, or is deemed to have accepted a Product, it shall have no recourse
against CIMA except as set forth in Section 8.2 hereof. After notice of
rejection is received by CIMA, Novartis shall cooperate with CIMA in
determining whether rejection is necessary or justified. CIMA shall notify
Novartis as soon as reasonably possible, but not later than thirty (30) days
after receipt of the notice from Novartis, whether it accepts Novartis' basis
for rejection. If CIMA accepts Novartis' determination that the Products are
nonconforming, CIMA shall replace such Products or credit Novartis' account,
at Novartis' discretion, as further set forth in Section 8.2. If CIMA does
not accept Novartis' determination that the Products are nonconforming,
Novartis and CIMA jointly shall select an independent third party expert to
test the Products and determine whether they conform to the applicable
specifications. The parties agree that such third party's determination
shall be final. The party against whom the third party rules shall bear the
reasonable costs of the third party testing. If the third party rules that
the Product conforms to the specifications, Novartis shall purchase the
Products at the agreed upon price. If the third party rules that the Product
is nonconforming, CIMA shall replace the Products or credit Novartis'
account, at Novartis' sole discretion.
6. TRADE SECRETS AND CONFIDENTIALITY
6.1 Both CIMA and NCH agree that subject to the limitations set forth in
Section 6.3, all information disclosed to the other party, whether in oral,
written or graphic form, and identified in writing by the disclosing party as
confidential shall be deemed "Confidential Information" of the disclosing
party. In particular, Confidential Information shall be deemed to include,
but not be limited to Results, including any information or documentation
relating thereto, any patent application or drawing or potential patent
claim, trade secrets, information, ideas, inventions, samples, processes,
procedures, methods, formulations, packaging designs and materials, test
data, future development plans, Product launch date, technological know-how
and engineering, manufacturing, regulatory, marketing, servicing, sales,
financing or human resources matters relating to the disclosing party and its
business.
6.2 Both parties will take precautions as it normally takes with its own
confidential and proprietary information to prevent disclosure to third
parties.
6.3 Both CIMA and Novartis agree that, notwithstanding the above, the
obligations of confidentiality shall not be deemed to apply to:
6.3.1 Information which at the time of disclosure is or thereafter
becomes generally known or available to the public, through no wrongful act
or failure to act on the part of the receiving party.
6.3.2 Information that was known by or in the possession of the
receiving party at the time of receiving such information from the disclosing
party as evidenced by written records.
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6.3.3 Information obtained by the receiving party from a third-party
source who is not breaching a commitment of confidentiality to the disclosing
party by revealing such information to the receiving party.
6.3.4 Information that is independently developed by the receiving
party without use of confidential information of the other party as evidenced
by written records.
6.3.5 Information that is the subject of a granted written permission
to disclose that is issued by the disclosing party to the other party.
6.3.6 Information that is required to be disclosed pursuant to the
law, but only to the extent required to be disclosed; PROVIDED, THAT, the
disclosing party notifies the other party in writing and gives the other
party reasonable time to comment on the same prior to disclosure.
6.4 During the term of this Agreement and for a period of five (5) years
after the expiration or termination of this Agreement (seven (7) years for
manufacturing process information) each party shall maintain all Confidential
Information in trust and confidence and shall not disclose any Confidential
Information to any third party or use any such information for any
unauthorized purpose, other than as authorized in Section 6.3 or as necessary
to accomplish the purpose of this Agreement subject to an appropriate binder
of confidentiality as set forth in Section 6.5. Each party may use such
Confidential Information only to the extent required to accomplish the
purposes of this Agreement. Confidential Information shall not be used for
any purpose or in any manner that is not consistent with this Agreement or
that would constitute a violation of any laws or regulations including,
without limitation, the export control laws of the United States. Each party
hereby agrees that it will not in any way attempt to obtain, either directly
or indirectly, any information regarding any Confidential Information from
any third party who has been employed by, provided consulting services to, or
received in confidence information from, the other party.
6.5 Both parties will make diligent efforts to ensure that all employees,
consultants, agents, subcontractors and manufacturing contractors who may
have access to Confidential Information of the other party, and any other
third parties who might have access to Confidential Information, will use
such information in a manner consistent with the terms of this Agreement and
will be bound by the terms set forth in this Article 6. No Confidential
Information shall be disclosed to any employees, subcontractors, agents or
consultants who do not have a need to receive such information.
6.6 To the extent either party discloses confidential information of the
other party to an employee, consultant, subcontractor or manufacturing
contractor (collectively "Agents") or permits an Agent to have access to such
confidential information, such party shall indemnify the other party for any
claims, damages, losses, liabilities, costs or expenses, including reasonable
attorneys' fees, incurred by the other party as a result of the indemnifying
party's Agent further disclosing or misusing such confidential information.
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7. SAFETY AND HEALTH-RESPONSIBLE CARE
7.1 From time to time CIMA may provide Novartis with safety and health
information, including, without limitation, warnings, material safety data
sheets, precautionary safety measures, and instructions on proper care, use
and handling, storage, and disposal of the Product. Novartis agrees to
observe all precautions and instructions provided by CIMA and to communicate
all such environmental, safety and health information to its employees.
7.2 Novartis shall follow safe handling, storage, transportation, use, and
disposal practices with respect to the Product, including, but not limited
to, those required by U.S. federal, state, and local laws, regulations, and
ordinances.
7.3 CIMA shall follow safe handling, processing, storage, transportation,
use and disposal practices with respect to the Product, including, but not
limited to, those required by U.S. federal, state, and local laws,
regulations, and ordinances.
8. QUALITY OF THE PRODUCT; CERTAIN REGULATORY MATTERS
8.1 CIMA hereby represents and warrants that:
(a) the Product shall be manufactured, packaged and delivered in
compliance with the provisions of the Act and FDA's CGMP and the other
applicable rules and regulations promulgated under the Act relating to the
manufacture and packaging of OTC pharmaceutical products;
(b) no Product constituting any shipment to Novartis shall be at the
time of shipment (i) adulterated or misbranded within the meaning of the Act,
or the rules and regulations promulgated thereunder, as such law, rule or
regulation is constituted and in effect at the time of any such shipment or
(ii) an article which may not, under the provisions of Sections 404, 505 or
512 of the Act, be introduced into interstate commerce;
(c) the Product shall be manufactured, packaged and delivered in
compliance with the terms and conditions of the Quality Assurance Agreement;
(d) it has complied with, and during the term of this Agreement will
continue to comply with, the laws, rules and regulations which affect the
ability of CIMA to manufacture and package the Product in commercial
quantities for use and sale in the Territory;
(e) its manufacturing and packaging facilities shall remain in
compliance with the FDA's CGMP at all times during the term of this Agreement
to the extent applicable to the manufacture and packaging of the Product; and
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(f) it shall obtain and maintain all necessary permits,
registrations and licenses required to manufacture, package and supply the
Products and it shall produce the Products and dispose of all waste in
compliance with all applicable environmental laws, regulations, and
standards. CIMA makes no representations with respect to the waste disposal
practices of its suppliers.
The foregoing warranties are the only warranties made by CIMA with respect to
the Product delivered hereunder, and may only be modified or amended by a
written instrument signed by a duly authorized officer of CIMA and a duly
authorized officer/employee of Novartis. THE EXPRESS WARRANTIES CONTAINED IN
THIS ARTICLE 8 ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR IMPLIED.
8.2 Any Products delivered to Novartis by CIMA which do not conform to the
specifications and are rejected within thirty (30) days after delivery as set
forth in Article 5, or which are otherwise not in compliance with the
warranty made in Section 8.1, shall be replaced, or Novartis' account may be
credited, at Novartis' election. The remedy of replacement or credit is
available only if such nonconformance was not caused by Novartis' misuse,
unauthorized modifications, neglect, improper testing or improper storage,
including without limitation storage at inappropriate temperatures,
transportation, use beyond any dating provided, by accident, fire or other
hazard. THE EXPRESS OBLIGATIONS STATED IN THIS SECTION 8.2 AND IN ARTICLES 5
and 10 ARE IN LIEU OF ALL OTHER LIABILITIES OR OBLIGATIONS OF CIMA FOR
DAMAGES, INCLUDING BUT NOT LIMITED TO DIRECT OR CONSEQUENTIAL DAMAGES,
ARISING OUT OF OR IN CONNECTION WITH THE DELIVERY, USE OR PERFORMANCE OF
CIMA'S PRODUCTS.
8.3 If requested in writing by Novartis, CIMA shall supply at Novartis'
reasonable expense Technical Information and methods of manufacture and
packaging to Novartis to enable Novartis to fulfill its obligations under
this Agreement or to the extent that such information, in Novartis' judgment,
is necessary to enable it to comply with any statutory or regulatory
requirements, or with a request by any governmental or regulatory authority.
8.4 (a) If requested in writing by Novartis, CIMA shall permit Novartis
to inspect, once per year, during normal business hours and hours during
which CIMA is manufacturing Products, CIMA's facilities and records to the
extent Novartis deems reasonably necessary to enable Novartis to verify
compliance by CIMA with its obligations under this Agreement in relation to
the Product and to verify compliance with any statutory or regulatory
requirements to which Novartis is subject and which are applicable to the
manufacture and/or packaging of the Product. Notwithstanding the foregoing,
Novartis shall have the right to inspect CIMA's facilities and records at any
time, in the event that there is a quality or regulatory problem with Product.
(b) If, as a result of any such inspection, Novartis concludes that
CIMA is not in compliance with any of the foregoing obligations or
requirements, it shall so notify CIMA in writing, specifying such areas of
noncompliance in reasonable detail and CIMA shall use its commercially
reasonable best efforts to remedy the problems identified.
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9. CHANGES IN CIMA'S MANUFACTURING PROCESSES
9.1 Subject to Section 2.2(a)(ii) hereof and the Quality Assurance
Agreement, unless Novartis agrees otherwise in writing, CIMA shall not modify
any method or process in the manufacture or packaging of the Product. Any
change requires Novartis' prior written consent which consent shall not be
unreasonably withheld. CIMA shall comply with all requirements of the Act
and CGMP with respect to such modification or change, including providing
written notice to Novartis of such modification or change.
9.2 CIMA hereby covenants that, to the best of its knowledge as of the
Effective Date, its process for manufacturing and packaging the Product does
not infringe any process patent in effect in the Territory. CIMA shall not
modify the Product or any process for manufacturing and packaging the Product
in any manner that would give rise to any patent infringement liability. If
Novartis determines that the change may give rise to patent infringement
liability, it shall be permitted to object thereto. If Novartis does so
object, CIMA either shall refrain from introducing such change or,
notwithstanding any other provision of this Agreement, shall, indemnify and
hold Novartis harmless with respect to the potential infringement liability
pursuant to Article 11 of the License Agreement.
10. INDEMNIFICATION
10.1 CIMA agrees to and hereby does indemnify, defend and hold Novartis,
Novartis' Affiliates, its officers, directors and shareholders, and its
successors and assigns (collectively the "Novartis Indemnified Parties")
harmless from and against all claims, liabilities, suits and proceedings, and
all damages (other than consequential, incidental, special or indirect
damages), losses, costs, recoveries and expenses, including reasonable legal
expenses and costs (including attorney's fees) which the Novartis Indemnified
Parties may incur, arising out of any third party claim of property damage or
personal injury or death arising from (i) CIMA's negligent or willful
misconduct in its performance under this Agreement or (ii) CIMA's breach of
warranty hereunder.
10.2 Novartis agrees to and hereby does indemnify, defend and hold CIMA,
CIMA's Affiliates, its officers, directors and shareholders, and its
successors and assigns (collectively the "CIMA Indemnified Parties") harmless
from and against all claims, liabilities, suits and proceedings, and all
damages (other than consequential, incidental, special or indirect damages),
losses, costs, recoveries and expenses, including reasonable legal expenses
and costs (including attorneys' fees) which the CIMA Indemnified Party may
incur, arising our of any third party claim of property damage or personal
injury or death arising from (i) Novartis' negligent or willful misconduct in
its performance under this Agreement or (ii) any representations made by
Novartis or its distributors or agents with respect to the Products.
10.3 The foregoing indemnification obligations of Novartis and CIMA are
subject to the following: (a) the indemnifying party must be notified by or
on behalf of the indemnified party in
11
<PAGE>
writing promptly after a claim is made, a suit is filed or an action or
investigation is initiated (each, a "Proceeding") against the indemnified
party; (b) the indemnifying party shall be permitted, at its own cost, to
defend, control, conduct and prosecute, in the indemnifying party's sole
discretion and by counsel of the indemnifying party's choosing, the defense
of such Proceeding brought against the indemnified party; (c) except as may
otherwise be required by law, the indemnified party shall not compromise the
position of the indemnifying party by admission, statements, disclosure or
conduct (collectively, "Disclosure") in a way that could prejudice the
defense, control, conduct or prosecution of said cause of action (it being
understood that no indemnified party shall be deemed to have violated this
provision so long as such party has acted in good faith to fulfill its
obligations under this provision); and (d) the indemnified party shall
cooperate with the indemnifying party in the defense, conduct, prosecution or
termination of the Proceeding, including the furnishing of information and
the assistance from employees of the indemnified party at the indemnifying
party's reasonable request and at no charge to the indemnifying party. With
respect to clause (c) above, the indemnified party will provide the
indemnifying party with prompt written notice in advance of any such
Disclosure being made to permit the indemnifying party to seek an appropriate
protective order, restriction on response or withdrawal of the request for
Disclosure. If, however, any such request for relief by the indemnifying
party is denied or is otherwise unavailable, the relevant indemnified party
may make the disclosure without any liability to the indemnifying party.
11. TERM AND TERMINATION
11.1 This Agreement shall commence on the date hereof and shall continue in
effect for a term of [...***...] from the date that this Agreement is signed
("Initial Term") and, thereafter, shall be automatically renewed for
successive periods of [...***...]; PROVIDED, HOWEVER, that Novartis may
terminate this Agreement, effective not earlier than the end of the Initial
Term or, thereafter, at the conclusion of any [...***...] renewal term, by
giving CIMA at least [...***...] prior written notice of such termination.
11.2 Novartis shall have the right to terminate this Agreement at no cost,
pursuant to Section 12.1 hereof, in the event that CIMA fails to supply
conforming Product in accordance with Novartis' firm orders for [...***...].
11.3 In the event either party commits a material breach or defaults in the
performance or observance of any of the material provisions of this
Agreement, and such breach is not cured within sixty (60) days after the
receipt of written notice thereof from the other party specifying such breach
or default, the party not in breach or default shall be entitled (without
prejudice to its other rights) to terminate this Agreement without additional
penalty, termination fee or cost by giving notice to take effect immediately.
In addition, in the event that CIMA commits a material breach of this
Agreement, and fails to cure such breach within sixty (60) days of receipt of
written notice from Novartis of such breach, Novartis may exercise the remedy
set forth in Section 4.2.4 of the License Agreement, which shall be Novartis'
sole remedy.
12
<PAGE>
11.4 Either party may terminate this Agreement upon sixty (60) days written
notice to the other party in the event of insolvency, assignment for the
benefit of creditors, or bankruptcy proceedings by or against the other party
unless the other party (a) refrains from filing, or withdraws, any voluntary
petition in bankruptcy, (b) prevents the filing, or obtains a dismissal, of
any third party involuntary petition in bankruptcy against such party or (c)
in some other way resolves its insolvency situation. In the event of
termination pursuant to this Section 11.4, Novartis acknowledges and agrees
that CIMA shall be entitled to cancel any purchase order accepted prior to
the date notice of termination is given and shall not be obligated to ship
any Product ordered by Novartis pursuant to such purchase order.
11.5 The termination of this Agreement shall not release Novartis from the
obligation to pay any sum that may be owed to CIMA or operate to discharge
any liability that had been incurred by any party prior to any such
termination, including sums incurred in connection with the manufacture of
Products in process at the time of the termination. The termination of this
Agreement shall be without prejudice to and shall not affect the right of
either party to recover any and all damages to which it may be entitled, or
to exercise any other remedies which it might otherwise have under this
Agreement.
11.6 Notwithstanding any termination of this Agreement, the provisions of
Articles 6, 8, 10, 12, 14, and 15 shall remain in effect.
12. MEETING PRODUCT SUPPLY DEMANDS; BACK-UP SUPPLIER; RIGHT TO MANUFACTURE
12.1 In the event CIMA is unable to supply conforming Product sufficient to
meet Novartis' firm orders made consistent with Section 4.1, Novartis shall
have the immediate right to manufacture and package Product with a supplier
other than CIMA ("Back-Up Supplier"). Novartis shall act as Back-Up
Supplier, utilizing the Novartis Manufacturing Facility, unless Novartis
determines, in its sole discretion, that an interruption of Product supply
could result if the Novartis Manufacturing Facility is used, in which event,
Novartis shall have the right to have a third party supplier of Novartis'
choice (and reasonably acceptable to CIMA) act as Back-Up Supplier. CIMA
shall cooperate fully with Novartis and the Back-Up Supplier, and shall use
commercially reasonable best efforts to enable Back-Up Supplier to qualify
and validate the Back-Up Supplier's facilities and to manufacture and package
the Product. CIMA shall give Back-Up Supplier prompt and unrestricted access
to, or, if requested, CIMA immediately shall provide to Back-Up Supplier, all
Technical Information. Any disclosure or use of Technical Information will be
subject to the confidentiality restrictions set forth in Article 6 of this
Agreement. Back-Up Supplier shall have the right to observe the operation of
any laboratory and manufacturing and/or packaging facility of CIMA (subject
to CIMA's obligations of confidentiality to third parties) and to have a
reasonable number of employees or other representatives of CIMA visit the
Back-Up Suppliers' facilities, at Novartis' option and in accordance with a
mutually agreed time table, to demonstrate and explain any of the Technical
Information and the manufacturing and packaging processes. In the event that
Novartis has the Back-Up Supplier manufacture and/or package Product pursuant
to this Section 12.1, CIMA shall reimburse Novartis for all costs and related
out-of-pocket expenses incurred by
13
<PAGE>
Novartis in validating the manufacture and packaging of the Products at the
Back-Up Supplier's facilities.
If CIMA fails to supply conforming Product in accordance with Novartis' firm
orders made consistent with Section 4.1 hereof for [...***...], for reasons
other than force majeure, Novartis shall have the right to terminate this
Agreement at no cost and have the Back-Up Supplier and/or Novartis, if
Novartis is not the Back-Up Supplier, manufacture and package all of
Novartis' commercial requirements of the Product from that time on.
12.2 If CIMA is unable to supply conforming Product in accordance with
Novartis' firm orders made pursuant to and in accordance with the terms and
conditions of this Agreement, and as a direct result of CIMA's
nonperformance, (i) Novartis is unable to supply Product to the Market Place,
(ii) an out-of-stock condition ensues at the Novartis warehouse and (iii)
Novartis receives backorders for the Product, then Novartis shall have the
remedy set forth in Section 4.2.5 of the License Agreement. Failure by CIMA
to supply Product ordered pursuant to a change order issued to CIMA pursuant
to Article 4 hereof which increased the order for the related month above
Novartis' forecast shall not be considered nonperformance by CIMA for
purposes of this Section 12.2.
12.3 [...***...]
Notwithstanding the foregoing, if the license granted to Novartis under the
License Agreement has been converted to a fully paid-up, royalty-free,
irrevocable, nonexclusive license under the CIMA Patents and Know-How
pursuant to Section 8.5 of the License Agreement and, therefore, Novartis has
rights to the Technical Information pursuant to that Section 8.5, Novartis
shall not be required to make any payments to CIMA under this Section 12.3
[...***...].
13. PACKAGING AND LABELING
Packaging and labeling content for Products shall be determined by Novartis
in its sole discretion. A representative sample or proof of all packaging
materials and labels will be submitted to Novartis for approval prior to
initial use. If Novartis wishes to institute changes in artwork, both
parties will develop a mutually acceptable implementation schedule and such
changes will be at Novartis' expense. CIMA shall purchase labeling and
packaging components in accordance with Novartis artwork. CIMA shall not
alter, change or in any way modify Novartis supplied artwork for any reason,
without prior written consent from Novartis.
14. RECALLS
Product recalls shall be handled in accordance with the Quality Assurance
Agreement.
14
<PAGE>
15. INSURANCE
CIMA shall obtain and maintain an insurance policy of at least [...***...] in
aggregate which covers any and all potential claims, suits, losses expenses
or damages arising out of CIMA's manufacturing and packaging obligations
under this Agreement. The insurance policy shall name Novartis as an
additional insured. Upon Novartis' request, CIMA shall furnish Novartis with
certification of insurance evidencing the foregoing, and shall provide at
least thirty (30) days prior written notice to Novartis of cancellation or
modification.
16. PUBLICITY
CIMA and Novartis agree not to issue any press release or other public
statement disclosing the existence of or relating to this Agreement without
prior written consent of the other party; PROVIDED, HOWEVER, that neither
CIMA nor Novartis shall be prevented from complying with any duty of
disclosure it may have pursuant to law subject to notifying the other party
in writing and giving such other party reasonable time to comment on the same
prior to disclosure. Notwithstanding the foregoing, Novartis and CIMA each
shall have the right to disclose information regarding this Agreement to
potential investors and its financial advisors (including allowing such
investors and financial advisors to review this Agreement itself); PROVIDED,
THAT, the disclosing party has obtained a commercially reasonable
confidentiality agreement from each such investor and financial advisor.
CIMA and Novartis agree that the Press Releases attached to the License
Agreement as EXHIBIT D are approved for release to the public immediately
upon the execution of the License Agreement.
17. FORCE MAJEURE
17.1 Neither party shall be liable for any failure to deliver or receive, or
delay in delivery or receipt of, any shipment when such failure or delay
shall be caused (directly or indirectly) by fire; flood; accident; explosion;
sabotage; civil commotions; riots; invasions; wars (present or future); acts,
restraints, requisitions, regulations, or directions of any governmental
authority; compliance by a party with any request of any governmental
authority, or any officer, department, agency, or committee thereof;
compliance by a party with any request for material represented to be for
purposes of (directly or indirectly) producing articles for national defense
or national defense facilities; shortage of labor, fuel, power or raw
materials; inability to obtain supplies; failures of normal sources of
supplies; inability to obtain or delays of transportation facilities; any act
of God; or any cause (whether similar or dissimilar to the foregoing) beyond
the reasonable control of a party.
17.2 Except as provided below, if a force majeure event occurs, then the
affected party's performance shall be excused and the time for performance
shall be extended for the period of delay or inability to perform due to such
occurrence. If, however, any such event shall delay any shipment hereunder
or the receipt thereof for more than thirty (30) days beyond the scheduled
delivery date, then (a) if such event is suffered by Novartis and not also by
CIMA, CIMA shall have the right, at its option, to cancel such shipment
without incurring any liability to Novartis with
15
<PAGE>
respect thereto, and (b) if such event is suffered by CIMA and not also by
Novartis, Novartis shall have the right to cancel its order and to purchase
from a third party the amount of Product ordered without incurring any
liability to CIMA with respect thereto until such time as CIMA is able to
perform its obligations hereunder. If any such disability exists for more
than ninety (90) days, the party not under such disability may terminate this
contract without liability to the other party or parties by giving such other
party or parties thirty (30) days' prior written notice of termination, and
this Agreement shall terminate on such thirtieth (30th) day unless prior
thereto the force majeure event ceases to exist and performance under this
Agreement resumes and the party or parties giving the notice of termination
is/are so notified in writing.
18. ASSIGNABILITY
Neither party hereto shall assign or otherwise transfer any of its rights or
obligations under this Agreement, in whole or in part, without the prior
written consent of the other party, except that either party may, without the
necessity for such consent, assign this Agreement or any interest herein or
any right hereunder, to any of its Affiliates or successors by merger or sale
of all or substantially all of its business unit to which this Agreement
relates. This Agreement shall be binding upon any permitted Assignee or
successor of either party. Any assignment that is not in accordance with
this Article 18 will be void.
19. WAIVER; SEVERABILITY
19.1 Each party acknowledges and agrees that any party's failure to enforce
at any time any of the provisions of this Agreement shall not be deemed to be
a waiver of such provisions or of the right of such other party or parties
thereafter to enforce each and every such provision.
19.2 The rights and remedies set forth herein shall be the exclusive rights
and remedies of the parties, except that nothing herein shall limit the right
of CIMA to be paid for Product delivered to, and deemed accepted by, Novartis.
19.3 If and to the extent that any provision of this Agreement is determined
by any legislature, court or administrative agency to be in whole or in part
invalid or unenforceable, such provision or part thereof shall be deemed to
be surplusage and, to the extent not so determined to be invalid or
unenforceable, each provision hereof shall remain in full force and effect
unless the purposes of this Agreement cannot be achieved. In the event any
provisions shall be held invalid, illegal or unenforceable the parties shall
use commercially reasonable efforts to substitute a valid, legal and
enforceable provision which insofar as practical implements the purposes
hereof.
20. GOVERNING LAW
This Agreement shall be governed by, and construed in accordance with, the
internal laws of the State of Delaware as though made and to be fully
performed in said State.
16
<PAGE>
21. NOTICES
All notices required or permitted hereunder shall be given in writing and
sent by facsimile transmission, or mailed postage prepaid by first class
certified or registered mail, or hand delivered to the following addresses:
Novartis: Novartis Consumer Health, Inc.
P.O. Box 83288
Lincoln, Nebraska 68501
Attention: [...***...]
Fax No. 402/467-8606
Copy to: Novartis Consumer Health, Inc.
General Counsel
560 Morris Avenue
Summit, NJ 07901
CIMA: CIMA LABS., Inc.
10000 Valley View Road
Eden Prairie, MN 55344-9361
Attention: Mr. Jack Khattar
Fax No. (612) 947-8770
Copy to: Cooley Godward, LLP
5 Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306
Attention: Barbara Kosacz, Esq.
or to such other addresses as the parties may hereafter advise each other in
writing. Any notice, if sent properly addressed, postage prepaid, shall be
deemed made seven (7) days after the date of mailing as indicated on the
certified or registered mail receipt, or on the next business day if sent by
express courier service or if hand delivered or sent by facsimile
transmission.
22. HEADINGS
The headings of each section in this Agreement are intended for guidance only
and shall not be considered part of this written understanding between the
parties hereto.
17
<PAGE>
23. ENTIRE AGREEMENT
This Agreement, including all Annexes attached hereto together with the
License Agreement, represent and incorporate the entire understanding among
the parties hereto with respect to the subject matter of this Agreement, and
each party acknowledges that there are no warranties, representations,
covenants or understandings of any kind, nature or description whatsoever
made by any party to the other or others, except such as are expressly herein
above set forth.
23.2 Except with respect to the Annexes attached hereto, which may be
amended as provided elsewhere in this Agreement, this Agreement shall not be
subject to change or modification unless specifically agreed to in writing by
both parties.
23.3 The parties recognize that, during the term of this Agreement, a
purchase order, acknowledgment form or similar routine document (collectively
"Forms") may be used to implement or administer provisions of this Agreement.
Therefore, the parties agree that the terms of this Agreement prevail in the
event of any conflict between this Agreement and the printed provisions of
such Forms, or typed provisions of Forms that add to, vary, modify or are at
conflict with the provisions of this Agreement.
24. PARTIES' RELATIONSHIP
Nothing in this Agreement shall create among the parties a partnership, joint
venture or principal-agent relationship and, for the avoidance of doubt, both
parties now confirm they are independent contractors trading for and on their
own behalf.
25. NOVARTIS AFFILIATES
This Agreement is understood and accepted by CIMA as a general Novartis
Agreement that facilitates application to all Novartis Affiliates in the
world. Due to Affiliate-specific requirements relating to product supply, it
is further recognized and agreed that each Novartis Affiliate will finalize
their specific supply details, including Annexes if the Affiliate so elects,
separately with CIMA; PROVIDED, HOWEVER, that CIMA agrees [...***...].
18
<PAGE>
26. COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be deemed
an original, and all of which taken together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
NOVARTIS CONSUMER HEALTH, INC. CIMA LABS., INC.
By: /s/ [...***...] By: /s/ Jack Khattar
-------------------------------- -------------------------------------
[...***...] Name: Jack Khattar
Vice President Product Supply, -----------------------------------
North America Title: Vice President
----------------------------------
Date: Date:
----------------------------- -----------------------------------
19
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 3,188,295
<SECURITIES> 0
<RECEIVABLES> 1,062,525
<ALLOWANCES> 64,300
<INVENTORY> 638,698
<CURRENT-ASSETS> 5,082,040
<PP&E> 14,682,301
<DEPRECIATION> 4,496,149
<TOTAL-ASSETS> 15,070,848
<CURRENT-LIABILITIES> 1,804,070
<BONDS> 0
0
0
<COMMON> 96,104
<OTHER-SE> 57,274,274
<TOTAL-LIABILITY-AND-EQUITY> 15,070,848
<SALES> 877,387
<TOTAL-REVENUES> 4,782,981
<CGS> 1,804,379
<TOTAL-COSTS> 5,872,958
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,772,790)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,772,790)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
