Capital for Cures
For royalty holders

Turn the royalties you receive into money today

A royalty is a share of sales paid for the use of an invention: a 5% royalty on a product selling $200m a year pays the holder $10m a year. You can sell those future payments or borrow against them to pay for your next trial, launch or acquisition. We find asset managers and royalty funds for your royalty and prepare it for them. They pay you directly at closing.

On this pageWhy royalty financingYour optionsFive worked examplesRoyalty termsHow we work with you

Who we work with

  • Biotech and pharma companies
    With a product licensed to a partner that pays a royalty on its sales.
  • Other life sciences companies
    In vaccines, medtech, animal health, digital health, and crops and seeds.
  • Universities, hospitals and research foundations
    With royalties on inventions they have licensed out.
Why royalty financing

What it offers, and what to weigh

What it offers
  • No new shares
    The money does not come from selling equity, so existing shareholders keep their stake.
  • Control stays with you
    There are no board seats, and usually none of the operating covenants that come with bank loans.
  • You keep the product
    You sell or borrow against the royalty payments, not the product or your licence.
  • Sales risk can pass to the buyer
    In a non-recourse sale, the buyer bears the loss if sales fall short.
  • No fixed repayment schedule
    Payments follow the royalty itself, not a set timetable of principal and interest.
  • Flexible
    You can sell all or part, one region only, payments up to a cap, or take the money in stages.
  • Independent of equity markets
    It can be raised privately, including when share prices are low.
  • Concentrated income turned into cash
    Universities and hospitals can turn a single royalty into money for research or buildings now.
What to weigh
  • Upside
    You give up future payments on the part you sell, including any growth above expectations.
  • Cost
    Royalty financing can cost more than a bank loan.
  • Protections
    Buyers and lenders may ask for security over the royalty, or for repurchase rights if certain events occur.
  • Consents
    The licence must allow the royalty to be sold or pledged, and partners or existing lenders may need to agree.
  • Tax
    Treatment varies, especially when the parties are in different countries.

Sources: L.E.K. Consulting, Debevoise & Plimpton, Bristows.

Your options

Four ways to raise money from royalties

The options can be combined, and each can cover all of a royalty, part of it or a single region.

Option 1

Sell the royalty

You receive a single payment. The buyer takes the royalty payments and bears the loss if sales fall short. It is usually a true sale and non-recourse: you owe nothing if payments fall short.

Often used by companies that want money now with nothing to repay. See Examples 2 and 4.

Option 2

Borrow against it

You keep ownership. A loan or note is secured on the royalty and repaid from its payments. It is often non-recourse: if the royalty falls short, the lender cannot claim the shortfall from you. This is typical when the note is issued through a separate company that holds only the royalty. Repayment is usually capped at a multiple of the amount lent, and the multiple can rise if repayment takes longer than agreed.

Often used by companies that want to keep the royalty once the loan is repaid. See Examples 1 and 3.

Option 3

Raise a synthetic royalty

If you sell a product yourself, you can raise money in return for a small percentage of your own sales, usually until a set multiple of the amount funded has been paid. Covington reports a median of 2.0 times across synthetic royalty financings (source).

Often used by companies launching their own product, often at approval. See Example 1.

Option 4

Bundle a smaller royalty

No royalty is too small. If yours cannot be financed on its own, we group it with others into a portfolio. You keep your own agreement and receive your own payment.

Often used by universities, hospitals and companies with smaller royalties. See Example 5.

Shaping the deal

What you can choose

All of it, or part of it
Sell the whole royalty, a share of it or only the payments up to a cap, after which the royalty comes back to you.
One region only
Sell the royalty on US, European or other sales and keep the rest.
Milestones in or out
Include future milestone payments in the deal, or keep some or all of them.
Paid in stages
Take the funding in instalments tied to trial results or approval: for example, part at signing, part on positive Phase 3 data and the rest after approval, drawn at your option.
Option to buy back
Buy the royalty back early at an agreed price.
Market data
How royalty sales are shaped
Royalty sales of $15m or more by US-listed biotechs, 2019 to 2025, % of deals
0255075100No repayment obligation on the holder96Payments capped at a multiple44Holder buy-back option (capped deals only)38Milestone payments included32Limited to selected countries27% of deals

Median cap in capped royalty sales: 2.13 times the price.

Capital for Cures · royalty intelligenceSource: Covington, Third Annual Royalty Monetization Study, 2026 (54 deals)
Worked examples

Five ways holders can use a royalty

All five examples are constructed. They do not describe actual companies or transactions, the figures are rounded, and real terms depend on the royalty, the product and the market.

Example 1 · Biotech · Borrow, sell and synthetic royalty

How a company can fund its Phase 3 trial and launch from royalties

A listed biotech has its lead drug in Phase 3 and has kept the US rights. It already receives royalties on an older product sold by partners in Europe, and it has licensed the new drug to a partner in Japan for a future royalty. It raises money in three steps, so it needs to sell fewer new shares.

Constructed example.

Illustrative
What the three steps raise, and when
Total raised by the end of each step, $m. The dark bar is the low estimate. The light band shows how far the high estimate goes.
0255075100$10m to $20mSTEP 1TodayBorrow against theexisting royalty$30m to $50m in totalSTEP 2On Phase 3 dataSell half of theroyalty from Japan$60m to $100m in totalSTEP 3At US approvalSynthetic royaltyon US salesCumulative, $mLow estimateRange up to the high estimate

Step 2 is paid only if the Phase 3 data are positive, and Step 3 only if the drug is approved in the US.

Capital for Cures · royalty intelligenceIllustrative
Step 1 · Today
$10m to $20m
Borrow against the royalty it already receives

Repaid over about three years from the partners' royalty payments, which comfortably cover each repayment. Generics are not expected before the loan is repaid. The company keeps ownership of the royalty.

Step 2 · On positive Phase 3 data
$20m to $30m
Sell half of the future royalty from Japan

Paid once the Phase 3 data are positive, before approval. When the drug is launched in Japan, the partner pays the royalty as agreed, and half of it goes to investors.

Step 3 · At US approval
$30m to $50m
Raise launch funding through a synthetic royalty on US sales

Paid at US approval. In return, investors receive a small percentage of the company's own US sales until total payments reach about twice the amount funded.

Total$60m to $100m
Raised alongside a smaller share sale, so existing shareholders keep more of the company.

Why it works in this order

  • Steps 2 and 3 depend on the trial. If it fails, they are not funded and the royalties stay with the company, which still bears its deal costs and any agreed commitment fee.
  • The first two steps use only royalties paid by partners, so the company keeps all of its own US sales until Step 3.
  • The last step covers only what is still needed for the launch.

What to check first

  • Whether existing lenders must consent.
  • How long each royalty lasts, and when generics or patent expiry will cut it.
  • Whether the partner's licence lets the royalty be sold or used as security.
Example 2 · Biotech · Capped sale

Sell a royalty up to a cap

A biotech company receives a royalty from a partner on a product that is still growing. It sells the royalty with a cap: the buyer receives the payments only until it has been paid twice the price. In this example the cap is reached in 2036, the year the patent expires and the royalty falls to a lower rate. The remaining payments return to the company.

Illustrative
What a capped royalty sale looks like
A royalty rising to $12m a year is sold for $50m. Investors collect the payments until they have received $100m, twice what they paid. After that, the payments go back to the holder.
048121620262028203020322034203620382040Patent expiresroyalty falls to a lower rateCap reached: $100m, twice the pricepayments go back to the holderHolder receives $50m in 2026investors take the royaltyuntil they have received $100mPaid to investorsKept by the holderRoyalty received per year, $m

Constructed example.

Capital for Cures · royalty intelligenceIllustrative
Example 3 · Medtech · Borrow against a royalty

Fund a second product without selling shares

A medtech company licensed a surgical device to a larger partner and receives a 5% royalty on about $200m of annual sales. Its patents run to 2035. It wants to build a sales team for its own second product and does not want to sell shares at today's price.

Constructed example.

The royalty
$10m a year
5% of about $200m in sales
The loan
$25m
About half of what the royalty is worth
Repayment cap
$32.5m
1.3 times the loan, paid from the royalty

How it works

The partner pays the royalty to the lender until the lender has received $32.5m. At current sales, that takes just over three years. The loan is structured as non-recourse: if sales fall, repayment takes longer, but the lender cannot ask the company for the shortfall.

What the holder keeps

Ownership of the royalty, and all of the payments once the cap is reached, for the remaining years of patent protection.

Example 4 · Animal health · Sell part of a royalty, one region only

Raise money for an acquisition from half of the US royalty

An animal health company licensed a treatment for dogs to a global partner and receives an 8% royalty on about $250m of annual sales, or $20m a year. The US makes up 60% of sales, and the patents run to 2034. The company wants money to buy a smaller business.

Constructed example.

The royalty
$20m a year
$12m of it from US sales
What it sells
Half the US royalty
About $6m a year
The price
$30m to $35m
Paid at closing, with an option to buy it back

How it works

The buyer receives half of the US royalty until the patents expire. Nothing changes for the partner, which keeps paying as before. The company can buy that share back after three years at an agreed price.

What the holder keeps

The other half of the US royalty and all of the royalty from the rest of the world: about $14m of the $20m a year.

Example 5 · Hospital · Bundle a smaller royalty

Finance a royalty that is too small on its own

A university hospital receives a 2% royalty on a diagnostic device with about $100m of annual sales, or $2m a year, for about eight more years. On its own, the royalty is too small for most asset managers and royalty funds.

Constructed example.

The royalty
$2m a year
2% of about $100m in sales
The portfolio
About $10m a year
Five royalties from five holders
The hospital receives
$8m to $10m
Its own price, under its own agreement

How it works

We group the royalty with four others of a similar size, from medtech and animal health, into one portfolio. Asset managers or royalty funds buy the portfolio as one deal of about $40m to $50m. Each holder signs its own agreement and is paid for its own royalty. The hospital shares the proceeds with its inventors under its own policy.

What the holder keeps

Its patents and its licence with the company that sells the device.

The basics

Royalty terms in plain words

Royalty rate
The percentage of sales paid to the holder, for example 5%.
Net sales
Sales after discounts, rebates and returns. The rate is applied to this figure.
Tiers
Different rates for different levels of annual sales, for example 5% on annual sales up to $500m and 7% on sales above that.
Territory
The countries the royalty covers. A royalty can be split and financed by region.
Royalty term
How long the royalty is paid. Usually set country by country, ending at the later of the expiry of the last valid patent claim, the end of regulatory exclusivity, or a set number of years after launch.
Step-down
A contractual cut in the rate, usually country by country, when no valid patent covers the product there or generics take a set share of sales.
Milestones
One-off payments when a product reaches a set point, such as approval or a sales target.
Cap
The total that the buyer or lender can receive, usually a multiple of the amount paid or lent, such as twice that amount. The multiple can rise if the cap is reached late. After the cap, the payments return to the holder, or a smaller tail continues.
True sale
The royalty passes to the buyer in law, so the holder's creditors cannot claim it if the holder becomes insolvent. The accounting can differ: many sellers still record the proceeds as a liability.
Non-recourse
If the royalty pays less than expected, the holder does not have to make up the shortfall.
Synthetic royalty
A royalty a company creates on its own sales and sells to raise money, often at approval.
Process

How we work with you

  1. 01
    First conversation

    You tell us about the royalty and what the money is for. We give you our view on whether it can be financed and in what form.

  2. 02
    Review

    We review the licence, the payment history and the outlook for sales, and flag anything a buyer or lender will ask about.

  3. 03
    Prepare

    We write a summary for investors covering the product, the terms and the risks.

  4. 04
    Introduce

    We introduce you to asset managers and royalty funds. They agree terms with you directly and pay you at closing.

What to have ready

  • The licence agreement and any amendments
  • Royalty statements and the payments received
  • Sales forecasts from you or your partner, if you have them
  • Any existing loans or security over the royalty

A first conversation needs none of this. We sign a confidentiality agreement before you share documents.

Related

Talk to us about a royalty or a portfolio

contact@capitalforcures.com
Capital for Cures AG · Schoffelgasse 3 · 8001 Zürich · Switzerland