A Step-by-Step Guide to Biotech Funding Through Royalties
1
Step 1: License Agreement
The Biotech company develops a drug or technology and licenses it to a Pharma Partner (a bigger pharmaceutical company).
In exchange, the Pharma Partner agrees to pay royalties and milestone payments based on the drug's success or sales.
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Step 2: Royalty Monetization
Instead of waiting for future, uncertain royalties, the Biotech company sells a portion of its future payment rights to a royalty financer.
The royalty financer provides upfront payment (Capital), enabling immediate funding for operations or growth.
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Step 3: Cash Flow to Royalty Financer
As the drug generates sales, the Pharma Partner pays royalties directly to the royalty financer until the agreed portion is fully paid.
This provides non-dilutive funding (no new equity issued) while leveraging future royalties.
Variations
The above schedule outlines the standard royalty monetization concept. However, as with licensing deals, many variations are possible:
Multiple Assets and Licenses
The concept can be applied to baskets of assets and licenses; this makes RM more attractive to RM financers.
No Milestones, Only Royalties
Deals can be structured in such a way that certain milestones are not or only partly included in a RM deal if that fits other stakeholders' interest better.
No License But Revenues
If you do not have license deals but a predictable or growing revenue stream from one or more of your products, these can be monetized as well.
NEW YORK, NY, and VANCOUVER, BC, March 2, 2026 – Royalty Pharma plc (Nasdaq: RPRX) and Zymeworks Inc. (Nasdaq: ZYME) today announced an agreement for $250 million in funding from Royalty Pharma in the form of a non-recourse royalty-backed note with repayments due from 30% of worldwide tiered royalties on Ziihera® (zanidatamab-hrii) owed to Zymeworks from Jazz Pharmaceuticals (Jazz) and BeOne Medicines (BeOne).
NEEDHAM, Mass., Feb. 19, 2026 (GLOBE NEWSWIRE) -- Candel Therapeutics, Inc. (Candel or the Company) (Nasdaq: CADL), a clinical-stage biopharmaceutical company focused on developing multimodal biological immunotherapies to help patients fight cancer, today announced the pricing of an underwritten public offering of 18,348,624 shares of its common stock at a price to the public of $5.45 per share. The gross proceeds to Candel from the offering are expected to be $100 million, before deducting underwriting discounts and commissions and other offering expenses. The offering is expected to close on or about February 23, 2026, subject to customary closing conditions. In addition, Candel has granted the underwriters a 30-day option to purchase up to 2,752,293 additional shares of its common stock at the public offering price, less the underwriting discount.
NEW YORK, NY, and PARSIPPANY, NJ, January 11, 2026 – Royalty Pharma plc (Nasdaq: RPRX) and Teva Pharmaceuticals, a U.S. affiliate of Teva Pharmaceutical Industries Ltd. (NYSE and TASE: TEVA), today announced a funding agreement of up to $500 million to accelerate the clinical development of Teva’s anti-IL-15 antibody, TEV-‘408. IL-15 is a key cytokine involved in multiple immune-mediated disease pathways. Emerging Phase 1b data from the ongoing TEV-‘408 vitiligo study provides preliminary support for IL-15 as a potential therapeutic target to treat a broad variety of autoimmune conditions. Teva anticipates sharing results from TEV-‘408 trials during 2026.
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