Royalty Rates in Biotech: BVR's Guide to Full-Text Licensing Agreements

Royalty Rates in Biotech Guide

June 2010 978-1-935081-36-4 Softcover

BVR (editor)

Business Valuation Resources, LLC

Intellectual property valuations occur in the biotech industry for a number of reasons, including licensing, transfer pricing, mergers and acquitions, collateral and litigation. In order to make an agreement to license intellectual property rights (IPR), either incoming or outgoing, the parties must know as accurately as possible the real value of the IPR. Additionally, some licensing agreements specifically address non-cash, non-equity exchanges, calling for fair market valuations of the assets exchanged. To assist in constructing these agreements, BVR has published the Royalty Rates in Biotech guide, which contains over 500 pages of full text copies of actual licensing agreements in the biotech industry. These hard-to-find agreements provide valuable guidance in setting royalty rates and addressing complex issues in a license agreement.

 

Examples of agreements included are:

  • Washington University and AspenBio Pharma
  • Cytomedix and SafeBlood Technologies
  • Oklahoma Medical Research Foundation and Bridge Therapeutic Products
  • Rigel Pharmaceuticals and Pfizer
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    Categories: intellectual property valuation

    Table of Contents

    Section 1: Introduction

    • Why Value Intellectual Property?
    • Valuation Methods and Royalty Rates
    • Rules of Thumb
    • And Then There Is the Biotech Industry
    • Four Levels of Biotech License Agreements 

    Section 2: License Gross Sales

    • 5% of Gross Sales for License and Sublicensee Sales, 25% of Sublicensee
    • Fees, Minimums, License Fee, Equity, The Washington University and AspenBio
    • Agreement in Full Text
    • 5% of Gross Sales as a Minimum, Sublicense Agreement, Biodelivery Sciences International, Inc. and RetinaPharma, Inc
    • Agreement in Full Text
    • 8-9% of Monthly Gross Sales, with a Fixed Payment, Settlement and License Agreement, Cytomedix, Inc. and SafeBlood® Technologies, Inc
    • Agreement in Full Text
    • Parties
    • Recitals
    • Terms of Agreement
    • EXHIBIT A
    • EXHIBIT B
    • 8% of Gross Sales, Biotech/Agribusiness Industries, Minimum, License Fee, Stock, Trademarks (Right to Privately Label and Distribute), Defined Territory, David R. Mortenson & Associates and Growtex, Inc.
    • Agreement in Full Text
    • EXHIBIT A: TERRITORY
    • EXHIBIT B: Products Included in This Agreement
    • EXHIBIT C: PURCHASE OBLIGATIONS
    • EXHIBIT “D” PAYMENT TERMS
    • EXHIBIT E: CONFIDENTIALITY AGREEMENT
    • EXHIBIT F: SHARE DISTRIBUTION SCHEDULE
    • AMENDMENT NO. 1 TO LICENSE AGREEMENT
    • 5% of Gross Sales (plus), Exclusive License, Limited Field of Use, Sudor Partners and CEO Advisors, Inc
    • Agreement in Full Text
    • Royalty Rates in Biotech: A BVR Guide to Full-Text Licensing iv Agreements Stepped Royalty Rates from 2%-4% of Gross Sales, Minimums, Field of Use, Patents and Trade Secrets, Helix Biomedix., Inc. and Therapeutic Peptides, Inc.
    • Agreement in Full Text
    • EXHIBIT A: Licensed Peptides
    • 2.5% of Adjusted Gross Sales, Field of Use, Michigan State University and Phoenix Biosystems, Inc.
    • Agreement in Full Text

    Section 3: License Net Sales Prior to 2001

    • License Net Sales; Biotech Industry; all Agreements
    • License Net Sales; Biotech Industry; Agreements Effective Before Year 2001
    • License Net Sales; Biotech Industry; Agreements Effective After Year 2000
    • 10% of Net Revenues, (50% of Sublicense Revenues), Center for Neurologic Study and IriSys Research & Development, LLC
    • Agreement in Full Text
    • SCHEDULE A: LICENSED PATENTS
    • 5% - 6% of Net Sales plus a Fixed Payment, Annual Minimums, Milestones and Including Equity Transfer, Field of Use, Oklahoma Medical Research Foundation and Bridge Therapeutic Products, Inc.
    • Agreement in Full Text
    • License Agreement Amendment
    • Amendment No. 1 to License Agreement
    • 7% of Net Sales, Fixed Payment, Right to Purchase Stock Warrants, Side Development Deal, Personal Guarantee, INVIRION and AMPERSAND
    • Full Text of Agreement
    • EXHIBIT A: DEVELOPMENT AGREEMENT
    • EXHIBIT B
    • EXHIBIT C
    • EXHIBIT D
    • 2.5% of Net Sales, Limited Field of Use, Non-Exclusive License, Sponsored Research (Milestone) Payments, MAYO FOUNDATION FOR MEDICAL EDUCATION AND RESEARCH and MINDSET, LTD
    • Agreement in Full Text
    • Amendment No. 1
    • Amendment No. 2
    • 1-4% of Net Sales Stepped Royalty Schedule, Fixed Payment, Joint Development Deal with Significant Milestone Payments, Rigel Pharmaceuticals and Pfizer
    • Agreement in Full Text
    • EXHIBIT A: RIGEL PATENT RIGHTS
    • EXHIBIT B
    • Royalty Rates in Biotech: A BVR Guide to Full-Text Licensing Agreements v 2% of Net Sales, Maximum Payment Established, Right to Purchase Stock Warrants, Side Development Deal, Personal Guarantee, MILLIPORE
      CORPORATION and GEOMIC SOLUTIONS, INC.
    • Agreement in Full Text
    • 3.5-7% of Net Sales, Field of Use, THE SCRIPPS RESEARCH INSTTUTE and CYANOTECH
    • Agreement in Full Text
    • EXHIBIT A
    • 2-4% of Licensee Net Sale, 25% of Sublicensee Net Sales, Field of Use, Sponsored Research, STEM CELL SCIENCES, PTY LTD and BIOTRANSPLANT, INC.
    • Agreement in Full Text
    • APPENDIX A
    • APPENDIX B

    Section 4: License Net Sales After 2001

    • 2% of Net Sales, Sublicense Agreement, HOUSTON PHARMACEUTICALS, INC. and CALLISTO PHARMACEUTICALS, INC.
    • Agreement in Full Text
    • 4% of Net Sales, Fixed Payments, Equity Deal, UT-Battelle, LLC and Sense Holdings, Inc.
    • Agreement in Full Text
    • EXHIBIT A: PROPRIETARY RIGHTS
    • EXHIBIT B: FINANCIAL OBLIGATIONS
    • EXHIBIT C: DEVELOPMENT AND COMMERCIALIZATION PLAN
    • 6% of Net Sales, Field of Use, TIAX LLC and U.S. GLOBAL NANOSPACE, INC.
    • Agreement in Full Text
    • 5-7.5% Royalty on Net Sales, Field of Use, Know-How Intellectual Property, Milestone Payments, INDEVUS PHARMACEUTICALS, INC. and NOVEXEL SA
    • Agreement in Full Text
    • EXHIBIT A
    • EXHIBIT B
    • EXHIBIT A
    • EXHIBITS AND SCHEDULES
    • LETTERS OF EXTENSION FOR AVENTIS SUPPLY OF NUCLEUS
    • 3.5% Royalty Rate for Licensed Net Sales, 9% Royalty Rate on Sublicensed Net Sales, Field of Use, OXIGENE INC. and ACTIVE BIOTECH AB
    • Agreement in Full Text
    • Annex 1
    • Agreement to Amend License Agreement
    • Annex 1
    • vi Royalty Rates in Biotech: A BVR Guide to Full-Text Licensing Agreements
    • Stepped Royalty Rate of 2-4% on Licensed Net Sales, 25% Royalty Rate on Sublicensed Net Sales, Joint Development, INMEDICA DEVELOPMENT CORP. and MICROCOR, INC., WESCOR, INC.
    • Agreement in Full Text
    • 4% Royalty Rate for Licensed Net Sales and 15-20% Royalty Rate for Sublicensed Net Sales, License Fee, Milestone Payment, Minimum Annual Royalty, THE BETH ISRAEL DEACONESS MEDICAL CENTER and DNAPRINT GENOMICS, INC.
    • Agreement in Full Text
    • Schedule 1.8 LICENSED FIELD
    • Schedule 1.10 LICENSED PATENTS
    • APPENDIX A: Recombinant Fusion Dimers
    • Schedule 1.12 LICENSED TERRITORY
    • Schedule 3.1(i) LICENSING FEES
    • Schedule 3.1(ii) RUNNING ROYALTIES
    • Schedule 3.1(iii) MINIMUM ROYALTIES
    • Schedule 3.1(v) MILESTONE PAYMENTS
    • Schedule 3.1(vi) SUBLICENSING AND OTHER FEES
    • Schedule 4.1 PATENT PROSECUTION
    • Schedule 5.1 SPECIFIC DUE DILIGENCE OBLIGATIONS

    Section 5: License Net Sales; the Licensor is a College or University

    • 5% for Licensee Sales and 30% for Sublicensee Sales Royalty on Net Sales, License Fee, Milestone Payments, Minimum Annual Royalty, Assignment Fee, THE BOARD OF REGENTS OF THE UNIVERSITY OF TEXAS SYSTEM,
      THE UNIVERSITY OF TEXAS M.D. ANDERSON CANCER CENTER and BRIDGETECH HOLDINGS INTERNATIONAL, INC.
    • Agreement in Full Text
    • EXHIBIT I
    • 4% for Licensee Net Sales and 15-20% for Sublicensee Net Sales Royalty, License Fee, Milestone Payments, Minimum Annual Royalty, Stock Options, TUFTS UNIVERSITY and ILLUMINA, INC.
    • Agreement in Full Text
    • Exhibit 1 Patents and Patent Applications
    • Exhibit 2 Founding Capitalization
    • 6% for Licensee Sales and 8% for Sublicensee Sales Royalty on Net Sales, License Fee, Milestone Payment, Equity Transfer with Protection Against Dilution, THE TRUSTEES OF THE UNIVERSITY OF PENNSYLVANIA and ACUITY PHARMACEUTICALS, INC.
    • Agreement in Full Text
    • Royalty Rates in Biotech: A BVR Guide to Full-Text Licensing Agreements vii 2-4% for Licensee Sales and 35% for Sublicensee Sales Royalty on Net Sales, License Fee, Milestone Payment, Minimum Annual Royalty, CALIFORNIA
      INSTITUTE OF TECHNOLOGY and UNIVERSAL DETECTION TECHNOLOGIES
    • Agreement in Full Text
    • EXHIBIT A
    • EXHIBIT 1
    • 2-4% for Licensee Sales and 35% for Sublicensee Sales Royalty on Net Sales, License Fee, Milestone Payment, Minimum Annual Royalty, UNIVERSITY OF ARKANSAS FOR MEDICAL SCIENCES and IMARX THERAPEUTICS, INC.
    • Agreement in Full Text
    • APPENDIX A
    • 1.25-3% for Licensee Sales and 12.5-25% for Sublicensee Sales Royalty on Net Sales, Milestone Payments, THE UNIVERSITY OF NORTH CAROLINA AT CHAPEL HILL, NIIGATA UNIVERSITY OF PHARMACY AND APPLIED LIFE SCIENCES and PANACOS PHARMACEUTICALS, INC.
    • Agreement in Full Text