Royalty recipients include inventors, universities, research institutes, hospitals and biotechnology and pharmaceutical companies. Royalty recipients in each category have their own unique reasons for considering selling their royalty streams.
No firm has worked directly with individual inventors more than DRI Capital. In fact, DRI Capital believes it has completed more royalty transactions with individual inventors than all other royalty monetization firms combined. Inventors are often in the unusual position that their royalty entitlement comprises the majority of their individual net worth. When evaluating a potential royalty monetization transaction, inventors often consider whether they are comfortable having a significant portion of their net worth derived from a single asset over which they have no control and whether they are diversified against risk or downside scenarios. Further, royalty monetization should be seriously considered alongside any tax planning or estate planning strategy.
While each institution has its own unique reasons for monetizing its royalty stream, there are some common benefits that often drive institutions to complete royalty monetizations. Those institutions that have monetized larger royalty streams have often used the proceeds from their transactions to fund large capital projects or bolster their endowments. Where transaction sizes have been smaller, the use of proceeds has been directed towards funding early stage research or translational research, establishing a seed fund for innovative investments or recruiting best-in-field talent. Regardless of the particular reason for monetization, all monetization transactions have the expected benefit of lowering the academic institutes’ risk exposure while allowing them to reinvest the transaction proceeds in furtherance of their goals.
Companies are increasingly viewing royalty monetization as an attractive financing alternative that allows them to unlock the future value of their royalties. DRI Capital offers a competitive cost of capital and through its flexible transaction structures is able to complete mutually beneficial royalty monetization transactions that allow companies to meet their financial needs. For some life sciences products, DRI Capital may offer to purchase the royalty for more than the value that investors assign to the royalty. For others, with the appropriate structuring, companies are able to convert a passive financial asset over which they have no control into proceeds that can be used to drive research and development or sales and marketing of products that are core to the company’s long-term success. Proceeds from royalty monetization may be recognized as income in the period the payment is received, offset expenses from additional investment in R&D or commercialization, and result in a favorable financial impact. Royalty monetization transactions have the additional expected benefits of lowering a company’s exposure to the under performance of the product and to any unexpected volatility in the royalty.
At DRI Capital, we are proud of our pioneering and growing contribution to the life sciences industry.