KERX AEZS: Sales-based royalties are almost always based on in-market sales of the drug in question in the territory in question. In your example, if AEZS is entitled to a 10% royalty on sales and annual in-market sales in the territory in question are $500M, then AEZS gets $50M annually from KERX regardless of how much revenue KERX itself books from these in-market sales.
In many deals, a Big Pharma partner assumes responsibility for paying all or some of the royalties owed by its partner (KERX in this hypothetical case) to a third-party licensor (AEZS).
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