| Item 1.01 | Entry Into a Material Definitive Agreement. |
On February 8, 2019, Recro Pharma, Inc., through its wholly-owned subsidiary, Recro Gainesville LLC (collectively, the “Company”) entered into a new Manufacturing and Supply Agreement (the “Agreement”) with Novartis Pharma AG (“Novartis”), effective as of January 1, 2019, pursuant to which the Company will continue to be the exclusive global supplier to Novartis of Ritalin LA and Focalin XR capsules (together, the “Products”) through 2023.
The Company and Novartis were previously parties to two separate manufacturing and supply agreements, one for the exclusive supply of Ritalin LA capsules and one for the exclusive supply of Focalin XR capsules (the “Prior Agreements”), which were set to expire in late 2019 andmid-2020, respectively. The Agreement terminates and replaces the Prior Agreements. Under the terms of the Agreement, subject to exceptions for the Company’s failure to timely supply Novartis’ requirements and bankruptcy, the Company will produce and supply the Products exclusively for, and to, Novartis, and Novartis will exclusively purchase its requirements for the Products from the Company, until December 31, 2023. Pursuant to the terms of the Agreement, the Company has granted Novartis a worldwide, exclusive, royalty-free sublicensable license to the intellectual property owned and controlled by the Company relating to the Products.
The Agreement expires December 31, 2023 (the “Initial Term”) and will renew automatically thereafter for successiveone-year periods unless terminated by either party at least twenty-four (24) months prior to the end of the Initial Term or any subsequentone-year term after the Initial Term. Novartis may terminate the Agreement immediately if (i) any governmental regulatory authority prevents Novartis from supplying the active pharmaceutical ingredients in the Products and/or exporting, purchasing or selling the Products in its bulk or packaged form; (ii) any Product or pharmaceutical product contained therein cannot be reasonably commercialized for medical, scientific or legal reasons; or (iii) the Company fails to comply with certain health, safety and environmental protection requirements. After the Initial Term, Novartis may terminate the Agreement upon 12 months’ written notice in the event of any sale or divestment by the Company of its business or assets relating to the Products. Either party may terminate the Agreement for material, uncured breaches or in the event of the other party’s bankruptcy.
The Agreement also contains customary representations, warranties, mutual indemnities, limitations of liability and confidentiality provisions.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the Agreement, a copy of which will be filed with the Company’s Quarterly Report on Form10-Q for the quarter ending March 31, 2019, which is incorporated herein by reference.
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