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.
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.
NEW YORK, NY, July 22, 2026 — Royalty Pharma plc (Nasdaq: RPRX) today announced that it has acquired a portion of Neurimmune’s royalty interest in AstraZeneca’s cliramitug for up to $425 million, including $125 million upfront.
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).
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