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The Royalty Rate Report 2013: A Comprehensive Assessment of Valuation in the Pharmaceutical Sector

Abstract

Key Benefits

  • First hand insight on royalty rates from deal-makers via our PharmaDeals survey
  • Gain opinions and advice from leading industry deal-makers who share their thoughts on royalty rates
  • Receive guidance on the best methodologies to use including benchmarking and expected net present value when calculating royalty rates for vital decision making
  • Understand the differences in perception of value between biotechs and pharmaceutical companies and how that impacts the value of a deal
  • Review actual royalty rate data supported by case histories and be better informed before negotiating your next deal

The report includes:

  • A historical overview of royalties, their relevance to the biopharma industry and the psychology of royalty structures
  • Introduction to methods for calculating useful financial data missing from the public domain - essential for dealmakers in benchmarking and determining value in a deal and its relationship with future royalty streams
  • Thought leadership in determining royalty rates including the concept of effective royalties in the analysis of deal structures; calculating royalty rates in biotechnology deals supported by key opinion leader insight
  • A detailed presentation of key methodologies - benchmarking and expected net present value - used in calculating royalty rates
  • Market data and current trends in royalty rate disclosure by development phase, by indication and by the top 15 pharmaceutical companies
  • Industry perception of royalties including a review of the literature, discussion on tiered royalty rates and critical analysis of the results of the PharmaDeals Royalty Rates Survey
  • A comprehensive appendix includes a listing of all royalty reporting deals from the last seven years and more

Delivery:

  • One year subscription to the report published on the interactive online IMS Syndicated Analytics Library
  • IMS Syndicated Analytics Library offers full searchability including cut and create your own report
  • Export tables, figures and whole chapters into Excel, PowerPoint and Word
  • Nine language automatic translation - choose to view report in French, German, Chinese, Italian, Spanish, Japanese, Portuguese, Korean or Russian

Table of Contents

Foreword

Preface

Acknowledgements

Introduction

1 History

  • 1.1 Royalties: In the Beginning
  • 1.2 Mining and Petroleum
  • 1.3 Royalties: Incentives and Disincentives
  • 1.4 Royalties by Industry Sector

2 Thought Leadership

  • 2.1 Deconstructing Deals - Benchmarks and Effective Royalties: The Benchmarking Challenge
  • 2.2 Benchmarking Effective Royalties
  • 2.3 Developing a New Methodology
  • 2.4 Is the Biotech Industry Different from Mainstream Pharma in its Royalty Requirements?
  • 2.5 Biotech Royalty Stacks
    • 2.5.1 Technology Royalty Stacks
    • 2.5.2 Offset Clauses in Royalty Stacks
  • 2.6 The 25% Rule of Thumb: If Only It Was That Simple!
    • 2.6.1 What is the 25% Rule?
  • 2.7 Overt or Covert
    • 2.7.1 Thoughts on Royalty Revelation

3 Benchmarking and eNPV

  • 3.1 Methods for Calculating Royalties
  • 3.2 Return of Research and Development Costs
  • 3.3 Setting Royalties: The Tools
  • 3.4 Benchmarking
  • 3.5 Deal Benchmarking in Practice
  • 3.6 Transfer Pricing: A Hidden Distortion to Royalties
  • 3.7 Expected Net Present Value (eNPV)
  • 3.8 The Basics of eNPV and NPV Calculation
    • 3.8.1 Cash Flows
    • 3.8.2 Relevant Costs
    • 3.8.3 Real versus Nominal Figures
    • 3.8.4 Opportunity Cost/Time Value
  • 3.9 Risk
    • 3.9.1 Decision Tree Analysis
  • 3.10 A Further Refi nement of the eNPV Model: Sensitivity Analysis
  • 3.11 Development Cash Burn

4 Data and Trends

  • 4.1 Disclosure of Royalties: Why the Big Secret?
  • 4.2 Who Was That Masked Man?
  • 4.3 Big Pharma Global Licensing
  • 4.4 Top 15 Big Pharma Royalty Rate Disclosure Frequency
    • 4.4.1 Pfi zer
    • 4.4.2 GlaxoSmithKline
    • 4.4.3 AstraZeneca
    • 4.4.4 Novartis
    • 4.4.5 Merck & Co.
  • 4.5 Addressing Gaps in Agreements
  • 4.6 Licensing Deals in Japan: Culture and Tax
  • 4.7 Standard Terms: Exceptions to the Rule
  • 4.8 Royalties and Deal Structures
    • 4.8.1 Sales Milestones: A Royalty by Any Other Name
  • 4.8.2 Combining Sales Milestones with Tiered Royalties
  • 4.8.3 Alternative Structures
  • 4.8.4 Tiered Royalties
  • 4.9 How much Value Does the Royalty Component Constitute?
  • 4.10 An Analysis of Rates Used in a Phase III Deal
  • 4.11 Royalties in Early-Stage Technology Deals
  • 4.12 Participation
  • 4.13 Royalties to Fund Development Costs
  • 4.14 Creativity: There's More Than One Way to Skin a Cat
  • 4.15 Upfronts and Milestones: Are There Changes Afoot?
  • 4.16 Royalty Rates by Phase and Indication
  • 4.16.1 Preclinical Deal Royalties
  • 4.16.2 Phase I Deal Royalties
  • 4.16.3 Phase II Deal Royalties
  • 4.16.4 Phase III Deal Royalties
  • 4.16.5 Preregistration/Registered/ Approved Deal Royalties
  • 4.16.6 Launched Product Deal Royalties
  • 4.17 Royalties and Generics: The Beginning of the End?
  • 4.18 Royalties and IP Valuation
  • 4.19 IP Value and Market Cap
  • 4.20 Monetising the Royalty Stream
  • 4.21 The Utility Cost of Cashing In: Jam Today or More Jam Tomorrow
  • 4.22 The Current Economic Climate and its Effect on Royalty Rates

5 Industry Perceptions

  • 5.1 Royalties: A Review of Recent Literature
  • 5.2 Auditing the Pharma Royalty Market: 'Lies, Damned Lies, and Statistics'?
    • 5.2.1 PharmaDeals Survey 2013
    • 5.2.2 PharmaDeals Survey 2011
    • 5.2.3 Licensing Executives Society Addendum
  • A.1 Royalty Rate Deals Chart: 2004 - January 2013
  • A.2 Drug 'X' Utility Cost: eNPV and Discount Rate Calculation
  • A.3 Royalty Monetisers: Key Deals
    • A.3.1 DRI Capital
    • A.3.2 Paul Capital
    • A.3.3 Royalty Pharma
  • A.4 Data from the 2013 PharmaDeals Deal Terms Survey
  • A.5 Great Expectations: The 2011 Survey
    • A.5.1 Introduction to the 2011 Survey
    • A.5.2 Disclosure of Royalty Rates
    • A.5.3 Expected Minimum and Maximum Royalty Rates
    • A.5.4 Types of Licenses
    • A.5.5 Perceptions on Diffi culties of Doing Deals
    • A.5.6 Licensor/licensee - Who is Favoured?
    • A.5.7 Trends for Upfront and Milestone Payments
    • A.5.8 Prevalence of commercial milestones
    • A.5.9 Tiered Royalty Rates
    • A.5.10 Royalties and Creativity
    • A.5.11 Royalties and Total Deal Values

Glossary of Terms

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