5. MANUFACTURE AND SUPPLY
5.2 Price. In furtherance of the access objective of making Licensed Product for the Territory available at an affordable and sustainable price, the Sublicensee shall sell Licensed Product to Customers at a price equal to the cost of goods to Manufacture Licensed Product plus a maximum agreed profit margin, calculated in accordance with the principles set out in Schedule I hereto. The actual price at which the Sublicensee shall sell Licensed Product to any given Customer shall be negotiated by the Sublicensee in each Supply Agreement, but shall in any case be subject to the maximum price calculated in accordance with the principles set out above.
The Sublicensee shall make all its accounts used to calculate its cost of goods available to GARDP or its agent on an open book basis and shall report these costs to GARDP on a regular basis in accordance with Section 9.1 and make its accounts available for audit in accordance with Section 9.3(a).
SCHEDULE I. Licensed Product Maximum Price
A. Principles applicable to the calculation of cost of goods to Manufacture Licensed Product. For the purposes of the Sublicense Agreement, the Sublicensee’s cost of goods to Manufacture Licensed Product shall consist of the following elements:
- Raw Material Costs
- Packaging Material Costs (glass vial, insert, pallet….)
- Direct Labor Costs
- Quality Control Costs
- Attributable Administrative Overhead Costs
- Investment costs (Depreciation cost for dedicated FDF facility), but only during the agreed depreciation period
- Loan interest for FDF facility investment, but only until the end of the agreed depreciation period
Following the finalization of the Manufacturing process for Licensed Product and Licensed Compound, the Sublicensee shall present to GARDP a calculation of the cost of goods for the Manufacture of Licensed Product based on the above principles, and GARDP shall conduct an audit of the Sublicensee’s accounts relating to such costs. Based on such presentation and audit, the Parties shall discuss the initial cost of goods to be used for the calculation of the price of Licensed Product.
B. Maximum profit margin
Initial maximum profit margin: [Twenty five Percent (25%)]
The Sublicensee shall regularly consider implementing actions that would enable it to reduce its cost of goods for Licensed Product without negatively impacting quality. The benefit of any such reduction in costs achieved by the Sublicensee shall be shared equitably between a reduction in the price charged by the Sublicensee to its customers and an increase in the Sublicensee’s margin.