Biodollars, sometimes called biobucks, is a term commonly used in business transactions between large
pharmaceutical
A medication (also called medicament, medicine, pharmaceutical drug, medicinal drug or simply drug) is a drug used to diagnose, cure, treat, or prevent disease. Drug therapy (pharmacotherapy) is an important part of the medical field and re ...
and smaller
biotechnology companies
Biotechnology is the integration of natural sciences and engineering sciences in order to achieve the application of organisms, cells, parts thereof and molecular analogues for products and services. The term ''biotechnology'' was first used b ...
to describe the total possible value of the transaction, excluding royalty payments. While public announcements of these deals often state a single lump-sum figure as a representation of the entire deal-value, often only a small fraction of the amount is certain, while the remaining amount is highly uncertain.
Common transactions in this industry are based on the grant of a
license
A license (or licence) is an official permission or permit to do, use, or own something (as well as the document of that permission or permit).
A license is granted by a party (licensor) to another party (licensee) as an element of an agreeme ...
for products emerging from a
drug discovery
In the fields of medicine, biotechnology and pharmacology, drug discovery is the process by which new candidate medications are discovered.
Historically, drugs were discovered by identifying the active ingredient from traditional remedies or by ...
program or for a candidate drug that is already in
development
Development or developing may refer to:
Arts
*Development hell, when a project is stuck in development
*Filmmaking, development phase, including finance and budgeting
*Development (music), the process thematic material is reshaped
*Photographi ...
in exchange for money. The risk for both parties is managed in the license agreement by spreading the payments over time, and making most of the payment contingent on sales through
royalty payments
A royalty payment is a payment made by one party to another that owns a particular asset, for the right to ongoing use of that asset. Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset o ...
, and on reaching
milestones
A milestone is a marker of distance along roads.
Milestone may also refer to:
Measurements
*Milestone (project management), metaphorically, markers of reaching an identifiable stage in any task or the project
*Software release life cycle state, s ...
such as completion of a
clinical trial phase
The phases of clinical research are the stages in which scientists conduct experiments with a health intervention to obtain sufficient evidence for a process considered effective as a medical treatment. For drug development, the clinical phases ...
, regulatory marketing approval in various jurisdictions, or a reaching some level of sales, through so-called "milestone payments". The licensee may also agree to make payments to the licensor specifically to fund continued work on the licensed product (research funding).
Only the upfront payment and research funding are paid out when the deal is signed; the rest is all contingent and may never be paid or received.
References
{{reflist
Pharmaceutical industry
External links
Valuation and Deal Structuring
Joe Dillon, BIO’s Advanced Business Development Course, June 2015.