Second Annual Synthetic Royalty and Drug Development Financing Study

As highlighted in the preamble to our inaugural study published last year, the cost for research and development of new drugs has continued its exponential climb since the 1950s. To address these growing costs, in addition to more conventional equity, debt and out-licensing transactions, life sciences companies now also turn to the market for “synthetic royalty” and drug development financings.

With equity markets in 2023 virtually grinding to a halt, rising interest rates tempering debt markets, and biotech bankruptcies at an all-time high, last year was challenging. Synthetic royalty and drug development financings were also affected, with the number of transactions down, and completed transactions smaller in size.

In addition, all deals were secured by collateral, including intellectual property and other product assets. This follows the December 2022 Mallinckrodt bankruptcy decision, which as explained in our client alert, exposed the risk in relying on unsecured rights to receive future royalty payments.

With the IPO market beginning to open up, we will see what 2024 brings, but the year got off to a big start with a $500 million synthetic royalty financing in early January, just a few days past the end date for this study.

In the following pages, we present our updated study, which covers the period from January 1, 2019 to December 31, 2023 for transactions involving at least $25 million entered into by public biotech companies.

Although commercially sensitive information was redacted from some publicly filed documents, sufficient information was available to provide a good sense of market terms. 

If you would like to learn more details about our study and this growing market, please feel free to reach out to our team.