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Exhibit 10.4
Confidential Materials
omitted and filed separately with the
Securities and Exchange Commission. Asterisks denote
omissions.
SETTLEMENT AND LICENSE
AGREEMENT
This
SETTLEMENT AND LICENSE AGREEMENT (this " Agreement ") is
made and effective as of April 30, 2008 (the "Effective
Date"), by and between Sepracor Inc., a Delaware corporation
having its principal place of business at 84 Waterford Drive,
Marlborough, MA 10752 (" Sepracor "), and Breath Limited, a
United Kingdom corporation having its registered address at 930
High Road, London, N12 9RT, United Kingdom (" Breath
Limited ") (each a " Party " and collectively, the "
Parties ").
RECITALS
WHEREAS,
Sepracor and Breath Limited are parties to the patent infringement
litigation captioned, Sepracor Inc. v. Breath Limited ,
Civil Action No. 06-10043 filed on January 13, 2006,
pending in the United States District Court for the District of
Massachusetts before the Honorable Douglas P. Woodlock (the "
Litigation ");
WHEREAS,
Sepracor currently manufactures and markets the Xopenex® brand
(levalbuterol hydrochloride) inhalation solutions products (the "
Sepracor Products ");
WHEREAS,
Breath Limited filed Abbreviated New Drug Application
No. 77-756 (the " ANDA ") with the United States Food
and Drug Administration (the " FDA ") containing a
certification pursuant to 21 U.S.C. §355(j)(2)(A)(vii)(IV) ("
Breath's p(IV) certification ") regarding U.S. Patent
Nos. 5,362,755; 5,547,994; 5,760,090; 5,844,002; 6,083,993;
and 6,451,289 owned by Sepracor (the "Patents-in-Suit") and seeking
approval to market generic versions of certain levalbuterol
hydrochloride inhalation solution products (" Breath's ANDA
Product ");
WHEREAS,
Sepracor has alleged that the filing of the ANDA by Breath Limited
containing Breath's p(IV) certification is an act of infringement
of the Sepracor Patents-in-Suit under 35 U.S.C.
§ 271(e)(2)(A);
WHEREAS,
in response to Breath Limited's p(IV) certification, Sepracor
commenced the Litigation;
WHEREAS,
Sepracor has asserted in the Litigation that Breath Limited's ANDA
Product would infringe certain claims of the Sepracor
Patents-in-Suit;
WHEREAS,
the Parties wish to fully and finally settle the Litigation and all
patent issues concerning Breath's ANDA Product, upon the terms and
subject to the conditions set forth below;
WHEREAS,
settlement of the Litigation will help both Sepracor and Breath
Limited avoid the substantial costs, uncertainty and risk involved
with prolonged patent-infringement litigation, trial and
appeal;
WHEREAS,
settlement of the Litigation will permit both Sepracor and Breath
Limited to save substantial litigation costs, as well as adhere to
the judicially recognized public policy favoring the settlement of
litigation whenever possible;
WHEREAS,
settlement of the Litigation will permit the management of both
Sepracor and Breath Limited to refocus on running their respective
companies rather than devoting substantial time and resources to
the Litigation;
WHEREAS,
pursuant to the terms of this Agreement, Breath will have the right
to enter the market for the Sepracor Products in 1.25 mg/ 3 ml,
0.63 mg/ 3 ml, and 0.31 mg/ 3 ml strengths pursuant to the ANDA at
least 8 years prior to the expiration of the last to expire of
the Sepracor Patents-in-Suit in the Territory, thereby benefiting
consumers by permitting generic entry that may not have occurred if
the Litigation were allowed to proceed;
WHEREAS,
the public will benefit significantly from this final settlement as
it saves judicial resources and creates certainty for Sepracor and
Breath Limited that will encourage the development, investment and
marketing of levalbuterol hydrochloride inhalation solution
products and other pharmaceutical products;
WHEREAS,
by reducing litigation expenses, this Agreement allows saved money
to be spent on marketing and further drug development, including
development of Xopenex® (levalbuterol hydrochloride)
inhalation solutions product, allowing the products to reach a
larger group of patients and thus improving lives;
WHEREAS,
money saved by settling the Litigation can now be invested by
Sepracor and Breath Limited into research and development, thereby
benefiting consumers by identifying new uses for current drugs, as
well as furthering the creation of new proprietary medications;
and
WHEREAS,
the Parties are concurrently entering into that certain Supply
Agreement, pursuant to which Sepracor shall supply Breath with
levalbuterol hydrochloride product manufactured pursuant to
Sepracor's NDA No. 02-0837, attached as "Attachment B" (the "
Supply Agreement ").
NOW,
THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the
Parties agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.1.
Certain Defined Terms. The following
terms, when used with initial capital letters shall have the
meanings set forth below:
"
Affiliate " means any entity controlling, controlled by or
under common control with a Party, but only as long as such control
continues, where " control " means: (i) the ownership
of at least fifty percent (50%) of the equity or beneficial
interest of such entity, or the right to vote for or appoint a
majority of the board of directors or other governing body of such
entity; or (ii) the power to directly or indirectly direct or
cause the direction of the management and policies of such entity
by any means whatsoever.
"
Breath " means Breath Limited and its Affiliates, including
but not limited to Cobalt Laboratories Inc.
"
Fully Loaded Manufacturing Cost " shall mean, with respect
to each Licensed Product, a Party's internal and external costs,
determined in accordance with International Financial Reporting
Standards, as consistently applied by such Party in accordance with
its past practice and in the ordinary course of its business for
products other than Licensed Products, incurred in manufacturing,
acquiring raw materials, including active pharmaceutical ingredient
("API"), excipients and other materials consumed in the manufacture
of Licensed Products including all taxes related thereto,
packaging, insuring, transporting and/or storing such Licensed
Product (including product testing activities relating to quality
assurance, quality control and regulatory compliance), and
reasonably allocated administrative and overhead expenses
associated with the Licensed Product, in each case to the extent
related and allocable to the Licensed Product.
"
Gross Profit " means Net Sales less Fully Loaded
Manufacturing Cost.
"
Licensed Products " means Breath's ANDA Product approved by
the FDA for sale pursuant to the ANDA, as existing on the Effective
Date.
"
Losses " means all pending and potential claims, demands,
all manner of actions, causes of action, suits, debts, liabilities,
losses, damages, attorneys' fees, costs, expenses, judgments,
settlements, interest,
2
punitive
damages and other damages or costs of whatever nature, whether
known or unknown, pending or future, certain or
contingent.
"
Net Sales " means gross sales of Licensed Products in the
Territory less the following deductions:
(a) sales
and excise taxes, duties, and any other governmental charges
imposed upon the production, importation, use or sale of Licensed
Products, if and to the extent included on the invoice that Breath
provides to its customers;
(b) trade,
quantity, cash and other discounts allowed on Licensed Products to
wholesalers or other Third Parties to whom the Licensed Products
are sold and shipped directly, if and to the extent included on the
invoice that Breath provides to its customers;
(c) provisions
for actual or expected allowances or credits to customers on
account of rejection or return of Licensed Products or on account
of price reductions for a Licensed Products;
(d) rebates,
charge-backs and other price reduction programs for Licensed
Products granted to managed care entities and pharmaceutical
benefit management service entities (if Breath chooses to contract
one or more of the Licensed Products together with another Breath
product with composite rebates or chargebacks, then rebates and or
chargebacks for the affected Licensed Product will be recalculated
based on the then-average rebate or chargeback of the Licensed
Product to the applicable customer category as if such Licensed
Product is contracted independently of any other Breath product);
and
(e) actual
write-offs of uncollectible customer accounts for previously
recorded sales.
in each case
determined and applied consistently in accordance with Breath's
commercial and accounting policies and practices consistently
applied in a manner consistent with GAAP.
"
Person " means any individual, firm, corporation,
partnership, limited liability company, trust, joint venture,
governmental authority, or other entity or organization.
"
Proceeding " means any administrative, judicial or
legislative action, audit, litigation, investigation, suit or other
proceeding in any tribunal.
"
Sepracor Patents " means the "Patents-in-Suit" and
additionally includes any other patent that Sepracor owns or will
own, in whole or in part, that is, or could alleged to be,
infringed by any of Breath's Licensed Products.
"
Territory " means the United States of America and its
territories and possessions, including the Commonwealth of Puerto
Rico and the District of Columbia.
"
Third Party " means any Person other than Sepracor and
Breath.
ARTICLE 2
SETTLEMENT AND RELEASE
Section 2.1.
Mutual Release. Upon the terms and
subject to the conditions of this Agreement, each Party, on behalf
of itself and its Affiliates hereby releases, acquits and forever
discharges the other Party and its Affiliates, and their respective
directors, officers, employees, agents, representatives, heirs,
assigns, predecessors and successors (" Related Parties ")
from any and all Losses arising out of, derived from, predicated
upon or relating to infringement of the Sepracor Patents by the
Licensed Products, and the actions underlying the Litigation.
Notwithstanding the foregoing, nothing in this Agreement shall
prevent or impair the right of either Party to bring a Proceeding
in court or any other forum for breach of this Agreement
(including, without limitation, any claim for infringement of any
intellectual property based upon activities that are not the
subject of the license granted hereunder) or any representation,
warranty or covenant herein.
3
Section 2.2.
Dismissal of Litigation. The Parties
agree to the entry of a Dismissal Without Prejudice of all claims,
counterclaims, and affirmative defenses in the Litigation. To
effectuate this provision, within 3 business days following
execution of this Agreement, the Parties shall cause the Dismissal
Without Prejudice attached hereto as Attachment A (each Party
acknowledging that the approval of the court is required in order
to make such Dismissal Without Prejudice effective) to be filed
with the United States District Court for the District of
Massachusetts and shall take all other necessary actions to obtain
the settlement and dismissal of the Litigation. Each Party shall
bear its own costs and expenses in connection with the
foregoing.
Section 2.3.
Mutual Agreements. Each Party
acknowledges and agrees that:
(a) It
may have sustained Losses that are presently unknown and
unsuspected, and that such Losses might give rise to Losses in the
future. Nevertheless, each Party acknowledges and agrees that this
Agreement has been negotiated and agreed upon, notwithstanding the
existence of such possible Losses, all of which have been hereby
released under Section 2.1 hereof.
(b) If
any fact relating to this Agreement or the Litigation and now
believed to be true is found hereafter to be other than, or
different from, that which is now believed, each Party expressly
assumes the risk of such difference in fact and agrees that this
Agreem