Basics of a Royalty Monetization Transaction

A Step-by-Step Guide to Biotech Funding Through Royalties

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.
2

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.
3

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.

Lastest posts

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June
10
-
,
2025
- release at
CET
US

MacroGenics and Sagard Healthcare Partners Enter into ZYNYZ® Royalty Purchase Agreement

MacroGenics and Sagard Healthcare Partners Enter into ZYNYZ® Royalty Purchase Agreement

Under the terms of the royalty purchase agreement, MacroGenics received a $70 million upfront payment for the sale of its royalty rights on global net sales of ZYNYZ. Following Sagard’s receipt of aggregate royalty payments totaling $140 million (or 2.0x), MacroGenics will resume collecting all future royalties on global net sales.
June
02
-
,
2025
- release at
CET
US

Theravance hands off the last of its Trelegy royalties to GSK for $225M

Theravance hands off the last of its Trelegy royalties to GSK for $225M

After years of picking up royalties on GSK’s asthma and COPD inhaler Trelegy, Theravance Biopharma is opting to sell its remaining financial interest to GSK in exchange for a cash reward of $225 million.
May
25
-
27
,
2025
- release at
CET
Switzerland

Swiss HLG Conference on May 25–27

Swiss HLG Conference on May 25–27

The Avance team is at Swiss HLG in Montreux, proudly representing Royalty Monetization. Excited for key insights on pharma deal-making and financing.
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