2016 Global Life Sciences Royalty Rates and Deal Terms Survey Report

Results Offer Exclusive Insights On Deals In The Life Sciences

Valuable benchmarks for royalty rates and deal terms are sought by many in the Life Sciences sector. They can find them in the LES (USA & Canada) & LESI Global Life Sciences Royalty Rate and Deal Terms Survey 2016 Report which provides in-depth data summaries and analyses of transactions in the Life Sciences and Health Care sectors. LES is pleased to present this report exclusively for members worldwide free of charge. 

Brian O’Shaughnessy, President, LES (USA & Canada), noted, “This survey is one of the most significant benefits that LES offers its members. Available to all members for the mere cost of membership. We think the value of the survey is self-explanatory, LES looks upon this as one of the cornerstones of the efforts of our volunteer-driven organization.”

The final survey report provides exclusive industry-specific data and detailed analysis of fixed royalties, tiered royalties, deal terms and valuation methods from all around the world. A robust data set drawing from this and the previous surveys offers the opportunity to individually review deals for therapeutics, diagnostics, and delivery innovations. The information is especially valuable for those seeking a better understanding of the market and to enhance their own deal strategies and negotiations. It’s presented in the form of tables and charts for a graphic picture of the statistics and can be downloaded as a PDF from the LES website. 
“For people who are in the licensing and business development it’s always exciting to dig into this data and content and that’s part of our overall LES educational mission,” said co-chair Jim McCarthy.

Global Participation

The 2016 survey, which builds on highly successful surveys completed in 2008, 2010, 2012 and 2014, was conducted globally by the LES (USA & Canada) Life Sciences Sector in coordination with the Licensing Executives Society International (LESI) Life Sciences Sector. Participants included LES and LESI members in the biotechnology and pharmaceutical industries, representing eight of the 31 LESI member societies around the world.

A total of 117 completed surveys were incorporated into the final Global Life Sciences Survey Report. Of those who responded, 19% were from pharmaceutical companies, 12% were from biotech companies, 22% were from academic institutions, 11% were from government, and 36% were from other organizations.
In terms of the deals themselves, 18% of the submitted deals were completed in 2014, 37% were completed in 2015, and 45% were completed in 2016 through August.

Approximately 64% of the deals were “global” in scope with the remainder covering select regions within North America, Europe, and Asia.
A majority of deals were reported by the licensors (71%). Injectable products made up 51% of the deals and 24% were related to small molecules. Interestingly anti-cancer (oncology), central nervous system (CNS) and infectious disease were the most prevalent therapeutic area types submitted.

The survey covered assets at all stages of development and the Survey Report offers a wealth of information on early stage programs. In all, 70% of all deals submitted were still in the Preclinical stage of development (Discovery, IND Track/Pre-IND, IND Filed, and Pre-IDE).

Fixed and Tiered Royalties

• Of the 117 deals, 73 deals were of the fixed/flat royalty type, 34 were of the tiered royalty type, and 10 did not have any royalty components.
  
• In the majority of deals royalties are paid on Net Sales (89%) followed by Gross Sales (10%) and Units (1%). 
  
• The median fixed royalty rate for the earliest stage products was approximately 4%, increasing to 12.5 % post Proof of Concept (POC).

Valuation

• While “upfront payment” was the most frequent financial component (61%), “sales milestones” displayed the greatest average and median $$ amounts. 
  
• rNPV (31%) and NPV (29%) were the primary valuation methods followed by comparables at 22%. 
  
• While NPV (62%) and Comparables (62%) are the most frequent valuation methods used, Effective Royalty Rates (EFR) (22%) is emerging as a common methodology. 

For more on this or other LES Royalty Rates and Deal Terms surveys and reports, visit www.lesusacanada.org/?page=royaltyrates.