Facebook Twitter LinkedIn Instagram Email Printer Google Plus

Quotable: How Royalty Financing Can Unlock Value in Life Sciences

Partner, Health & Life Sciences, Oliver Wyman
Key Takeaway
The interests of innovator & investor are squarely aligned w/ royalty financing - David Campbell #pharma #biotech

David Campbell, a partner in Oliver Wyman’s Health & Life Sciences practice, is featured as an expert on royalty financing in the article "Healthcare companies leverage royalties, not their balance sheets." The article was published March 18, 2016, by The Deal, a subscription-only transaction information service created to help top law firms, investment banks, private equity firms, hedge funds, and corporations find new business, develop industry relationships, and perform due diligence. More on royalty financing:  

In The Deal article, Campbell describes Oliver Wyman's financing collaboration with Duke Royalty, a Guernsey-based public diversified royalty company. The two have joined to help support innovation through the rapidly developing pharmaceutical and healthcare-related royalty market.

"The collaboration sets itself apart from existing royalty funds in North America largely because of its global footprint,” Campbell told The Deal. "We (Duke Royalty’s CEO Neil Johnson and I) were introduced at a remarkable time. We had been formulating a thesis that there was a demand for a different yield product in the U.K. It was an opportune moment, if only we could find someone who saw the same opportunity and someone who could provide something novel."

Johnson and Campbell provide more background on their collaboration in the Q&A below:

Q: Why is royalty financing better than debt or equity for the pharma industry?

A: Innovation is changing significantly with genomics, personalized medicine, and big data. Allowing stable ownership is essential for long-term success. Unlike debt or equity financing, royalty financing allows the owner to maintain full control and is not focused on immediate repayment of principle nor short-term return horizon. The interests of both the innovator and investor are squarely aligned in that when the discovery begins to yield revenue, both sides benefit.

Q: What role does Oliver Wyman play in royalty financing?

A: Oliver Wyman’s Health & Life Sciences practice brings three distinct advantages: 1) a global footprint that allows deal execution anywhere, 2) a deep “bench” of more scientists, physicians, hospital executives, and payer experts than any comparable financing entity, and 3) exceptional qualifications in forecasting the revenues of new healthcare interventions such as novel therapeutics, evidenced for our clients and for investors over years, due to a proprietary methodology and dataset.

Q: How is Duke Royalty uniquely qualified to support life sciences financing?

A: Duke's executives bring a proven track record in corporate finance and royalty financing. Duke has deep competency in transferring its success in North America to European markets, and now, with Oliver Wyman, an exclusive strategic collaboration that brings proprietary deal flow for investors. Oliver Wyman and Duke have put together an investment committee whose members have advised on over $2 billion healthcare royalty transactions in North America over the last 20 years.

Q: Why is this collaboration unique?

A: It is the first royalty company listed on a major European exchange, allowing public European investors access to royalty investments that have been nearly unattainable. Furthermore, it has a lower cost of capital due to employing a time-tested Guernsey-based corporate structure that is a benefit to both investees and investors.

Q: What are the keys to success in royalty financing?

A: For the investor, it is confidence that the innovator’s balance sheet and revenue stream has been vetted and its drug’s likelihood of success and future market opportunity have been deeply analysed. For the innovator, selecting a partner with deep experience in royalty financing and the confidence that they can maintain control are essential. Ensuring the lowest cost of capital possible is a key to success for both sides.

Insights in your inbox