Adjustment to Royalty Rates. 3.2.1 Pfizer shall pay Mitokor a royalty for the sale of each Licensed Product under Section 2.1 as set forth in Section 3.1; provided, however, that if over a calendar year the average cost of goods (determined in the same manner as Pfizer determines its cost of goods for any similar pharmaceutical product for financial reporting purposes in the United States, consistently applying U.S. generally accepted accounting principles, including royalties payable to Mitokor, but not third parties) for a Licensed Product exceeds [ * CON * ] percent ([ * CON * ]%) of Pfizer's direct price (determined in the same manner as Pfizer determines its direct price to customers for any similar pharmaceutical product consistently applying generally accepted accounting principles) for such Licensed Product for such calendar year, the otherwise applicable royalty rate set forth below shall be reduced by [ * CON * ] percent ([ * CON * ]%) of the excess above [ * CON * ] percent ([ * CON * ]%) of the Average Net Sales Price; provided, however, that in no event shall the applicable royalty rates be reduced by an aggregate of more than [ * CON * ]percent ([ * CON * ]%). Notwithstanding the foregoing, the adjustment in this Section 3.2 shall not apply with respect to royalties paid on Net Sales occurring prior to the end of the [ * CON * ] full calendar year after the first
Adjustment to Royalty Rates. With respect to each country in the Territory, on a country-by-country basis, the royalty payable pursuant to Section 6.5(a) (but not Section 6.5(b)) with respect to any Schering Viral Product shall be reduced by [**] percent ([**]%) the first time that Third Party total unit sales of any products having the same Collaboration Compound as that which is contained in such Schering Viral Product in such country exceed [**] percent ([**]%) of the total unit sales of such Schering Viral Product by Schering, its Affiliates and Sublicensees in that country during two consecutive calendar quarters (calculated on an equivalent per kilogram of Collaboration Compound basis). Thereafter, such royalties would be further reduced by an additional [**] percent ([**]%) for each additional [**] percent ([**]%) increase in the unit sales of such products by Third Parties in such country compared to the unit sales of Schering, its Affiliates and Sublicensees, so that upon such Third Party products reaching [**]% of total unit sales such royalty will reach (and be subject to) the [**]% limit set forth in Section 6.8. Notwithstanding the foregoing, this Section 6.5(e) shall not apply with respect to any country in which royalties on Net Sales of a Schering Viral Product are determined under Section 6.6. EXECUTION VERSION
Adjustment to Royalty Rates
