A Step-by-Step Guide to Biotech Funding Through Royalties
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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.
JUPITER, Fla., Sept. 24, 2026 (GLOBE NEWSWIRE) -- Ligand Pharmaceuticals Incorporated (Nasdaq: LGND) today announced that it has entered into a financing agreement with AvenCell Therapeutics, Inc., a clinical-stage cell therapy company developing controllable, allogeneic CAR-T therapies for patients with cancer, for up to $47 million. The investment will help advance AvenCell’s pipeline, including AVC-201 for the treatment of relapsed/refractory acute myeloid leukemia (AML) and AVC-203 for the treatment of B-cell malignancies.
JUPITER, Fla., Sept. 22, 2026 (GLOBE NEWSWIRE) -- Ligand Pharmaceuticals Incorporated (Nasdaq: LGND) today announced it has acquired an ascending tiered royalty interest in Santen Pharmaceutical Co., Ltd.’s (“Santen”) Ryjunea® from Sydnexis, Inc. (“Sydnexis”) for a $23 million upfront payment.
As the FDA mulls whether to approve Takeda and Protagonist Therapeutics’ rusfertide, Zealand Pharma has sold its own rights to the blood cancer drug in return for $100 million.
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