5. Manufacturing and commercialization
5.2 Commercial Supply
5.2.1 The Parties will determine a Manufacturing and supply strategy that for each COVID Product creates an efficient and reliable Manufacturing network and supply chain, so that the COVID Products are Manufactured in accordance with the Regulatory Approvals, GMP and Applicable Laws at sufficient volumes in light of the potential demand for such COVID Product. GSK shall have the right to perform prior due diligence on all elements of a proposed Manufacturing network and supply chain, including subjecting CureVac and any CMOs within the overall Manufacturing network of CureVac (subject to the CMOs’ consent and at the sole cost of GSK), and the respective Manufacturing facilities, to an audit to verify the ability to Manufacture sufficient volume of the COVID Products in accordance with the Regulatory Approvals, GMP and Applicable Laws, which audit shall be conducted in accordance with Section 12.12. After having completed such due diligence and audits, GSK shall have the final decision regarding the Manufacturing and supply chain strategy and the composition of the supply chain for a given COVID Product, including to select the facilities within the CureVac Manufacturing network (and that of its CMOs) to supply the COVID Products, or to let GSK, its Affiliate or another Third Party CMO Manufacture the COVID Products (or a part thereof) pursuant to a transfer of the Manufacturing of the COVID Product (or a part thereof) in accordance with Section 5.5, as well as regarding subsequent changes to Manufacturing and supply chain strategy; provided, however, that any such decision must not jeopardize CureVac’s and/or GSK’s performance of the Government and NGO Contracts, unless otherwise agreed with the relevant government, if and to the extent any Government and NGO Contract requires that the Manufacture of COVID Products is performed in a specific territory or by a specific CMO.
5.2.2 Once a Manufacturing and supply strategy for a given COVID Product has been determined as set forth in Section 5.2.1, GSK and CureVac will implement such strategy and will where applicable (i) negotiate and agree in good faith on a Commercial Supply Agreement in respect of that COVID Product, including a Quality Agreement, according to which CureVac or its Affiliates will Manufacture supply to GSK the respective COVID Product at COGS in accordance with the terms and conditions set forth in Exhibit 5.2 or, (ii) if the COVID Product in question is Manufactured in part or in full by a Third Party CMO within CureVac’s Manufacturing network, GSK and CureVac will reasonably facilitate the execution of a bilateral commercial supply agreement between GSK and that CMO in respect of the Manufacture and supply by that CMO of such COVID Product (each, a “Commercial Supply Agreement”). As part of the Manufacturing and supply chain strategy, where CureVac’s Manufacturing network is relied upon, the Parties will discuss and determine: (x) the reservation of Manufacturing capacity in CureVac’s network, and if the Parties approve such reservation, CureVac (or GSK, as of such time as GSK has entered into Commercial Supply Agreements with the CMOs in accordance with Section 5.2.1) will reserve the approved capacity in CureVac’s network, and (y) how to implement such Manufacturing and supply chain strategy, including how to manage critical raw materials, in a way that is fair and reasonable and takes into account potential impacts on cash flow and working capital. The Manufacturing sub-committee for discussing COVID Product related Manufacturing and supply will meet within not more than [*****] of the Effective Date to determine as soon as practicable, for the COVID Products to be Manufactured in [*****], the Manufacturing capacity to be reserved in CureVac’s network, and the type and amount of critical raw materials to be sourced in accordance with the preceding sentence. Each Party shall, and shall procure that its Affiliates shall, act reasonably and in good faith when entering into or accepting any new agreements or commitments for the supply of COVID Products, and in the case of CureVac, the supply of First-Gen COVID Product, taking into account its commitments towards the other Party under, in the case of CureVac, the Commercial Supply Agreements, or, in the case of GSK, the Distribution Agreement, and its expected manufacturing capacity. The Parties acknowledge that the manufacturing capacity available for the Collaboration COVID Vaccine in CureVac’s Manufacturing network (including its CMO) for the calendar year of [*****] is estimated by CureVac at the Effective Date at a maximum of [*****], however the Parties will in good faith and in a timely manner consider means of increasing such capacity if required to meet expected demand. As part of the aforementioned Manufacturing and supply chain strategy, the Parties shall determine forecasting and allocation binding principles, to be endorsed by the JSC, for use by the Parties when a constraint on the availability of raw materials, components, ingredients, or other materials, or of manufacturing capacity (including by an unforeseen reduction of yield or loss of Manufacturing slots), makes it impossible to fulfill all valid and legitimate forecasts and orders of Collaboration COVID Products (across the GSK Territory and the CureVac Territory) and the First-Gen COVID Vaccine Product, so that any allocation of available resources is carried out in a fair, reasonable and non-discriminatory manner.