Question: Consider the Collaboration Agreement between Theravance, Inc. and Glaxo Group Limited for Development of Long-Acting β2 Adrenoceptor Agonists; Does this contract include any revenue or profit-sharing arrangements?
Answer: Within twenty (20) days after the end of each Calendar Quarter , GSK shall pay Theravance royalty payments based on Net Sales in such Calendar Quarter during the Term as follows:        On total Annual Worldwide Net Sales up to and including U.S. $3 Billion:

  15   %                   On total Annual Worldwide Net Sales greater than U.S. $3 Billion:

  5   %     it being understood that Net Sales of a single agent Collaboration Product will be combined with Net Sales of a LABA/ICS Combination Product for purposes of the foregoing royalty calculation.
The quarterly royalty payments made under this Section 6.3.1 may be based on estimated Net Sales. Within thirty (30) days after the end of each Calendar Quarter, GSK shall calculate the actual amount of Net Sales for the previous Calendar Quarter and either credit or debit the difference between such actual and projected amount on the succeeding Calendar Quarter's royalty payment to Theravance.
The 15% royalty payable on the first U.S. $3 Billion of total annual worldwide Net Sales under this Section 6.3 shall be reduced to 12% if all of the following occur: (i) all Theravance Compounds are discontinued by the collaboration for Technical Failure; (ii) Theravance only contributes one Theravance New Compound to the collaboration within 18 months following the Effective Date; and (iii) the Collaboration Product upon which the royalty is payable contains a LABA that is one of the GSK Initially Pooled Compounds. The 15% royalty payable on the first U.S. $3 Billion of total annual worldwide Net Sales under this Section 6.3 shall be reduced to 10% if all of the following occur: (i) all Theravance Compounds are discontinued by the collaboration for Technical Failure; (ii) Theravance fails to contribute any Theravance New Compound to the collaboration within 18 months following the Effective Date; and (iii) the Collaboration Product upon which the royalty is payable contains a LABA that is one of the GSK Initially Pooled Compounds. Nothing in the foregoing shall affect other royalties owed under this Agreement.
For any Other Collaboration Product launched after the LABA/ICS Combination Product, GSK shall within twenty (20) days after the end of each Calendar Quarter, pay Theravance royalty payments based on Net Sales in such Calendar Quarter during the Term as follows:

Annual Net Sales



Percentage Royalty

                  Up to U.S.$750 Million

  6.5   %                   Additional Net Sales up to U.S.$1.25 Billion

  8.0   %                   Additional Net Sales up to U.S.$2.25 Billion

  9.0   %                   Net Sales exceeding U.S.$2.25 Billion

  10.0   %
If GSK is not selling a LABA/ICS Combination Product, then the royalty set forth in Section 6.3.1 shall apply to the first Other Combination Product launched by GSK, provided such Other Combination Product does not contain a product in-licensed by GSK; if such Other Combination Product contains a product in-licensed by GSK, then the royalty payable to Theravance will be reduced by 50% of any running royalties paid to a Third Party, provided that in no case will the royalty payable to Theravance be less than set forth in this Section 6.3.3.