Note 2. Revenue from Collaboration Agreement

Collaboration Agreement with Bayer

Nexavar is currently marketed and sold globally for the treatment of unresectable liver cancer and advanced kidney cancer. Nexavar also has regulatory applications pending in other territories internationally. The Company co-promotes Nexavar in the United States with Bayer HealthCare Pharmaceuticals, Inc., or Bayer, under collaboration and co-promotion agreements. In March 2006, the Company and Bayer entered into an agreement to co-promote Nexavar in the United States. This agreement amends the collaboration agreement and generally supersedes the provisions of the collaboration agreement that relate to the co-promotion of Nexavar in the United States. Outside of the United States, the terms of the collaboration agreement continue to govern under which Bayer has exclusive marketing rights and the Company shares equally in the profits or losses, excluding Japan. In the United States, under the terms of the 2006 co-promotion agreement and consistent with the collaboration agreement, the Company and Bayer share equally in the profits or losses of Nexavar, in the United States, subject only to the Company’s continued co-funding of the development costs of Nexavar worldwide, excluding Japan, and the Company’s continued co-promotion of Nexavar in the United States.

The Company’s collaboration agreement with Bayer will terminate when patents expire that were issued in connection with product candidates discovered under the agreement, or at the time when neither the Company nor Bayer are entitled to profit sharing under the agreement, whichever is latest. The Company’s co-promotion agreement with Bayer will terminate upon the earlier of the termination of the Company’s collaboration agreement with Bayer or the date products subject to the co-promotion agreement are no longer sold by either party in the United States due to a permanent product withdrawal or recall or a voluntary decision by the parties to abandon the co-promotion of such products in the United States. Either party may also terminate the co-promotion agreement upon failure to cure a material breach of the agreement within a specified cure period.

In addition, the Company’s collaboration agreement with Bayer provides that if the Company were acquired by another entity by reason of merger, consolidation or sale of all or substantially all of the Company’s assets, or if a single entity other than Bayer or its affiliate acquires ownership of a majority of the Company’s outstanding voting stock, and Bayer does not consent to the transaction, then for 60 days following the transaction, Bayer may elect to terminate the co-development and co-promotion rights under the collaboration agreement and convert the Company’s profit sharing interest under that agreement into a royalty based on any sales of Nexavar and other collaboration products. The applicable royalty rate would be a function of expected profitability of Nexavar for the remaining patent life of Nexavar. Also, either party may terminate the agreement upon 30 days’ notice within 60 days of specified events relating to insolvency of the other party.

Revenue from collaboration agreement was $68.0 million and $135.1 million for the three and six months ended June 30, 2011, respectively, compared to $68.8 million and $131.7 million for the three and six months ended June 30, 2010, respectively, calculated as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
	(In thousands)
Onyx’s share of collaboration commercial profit	$	58,535	$	59,978	$	118,115	$	115,063
Reimbursement of Onyx’s shared marketing expenses		6,687		6,475		11,291		12,299
Royalty revenue		2,734		2,320		5,695		4,314

Revenue from collaboration agreement	$	67,956	$	68,773	$	135,101	$	131,676