Growing complexity in new royalty models
Traditionally, R&R agreements in Life Sciences were upfront negotiations. When commercialization of the product came to fruition, the royalties were defined and no additional compensation was distributed due to commercial success of the product. This model is evolving into a more complex agreement process with final compensation taking multiple different paths.
Instead of upfront set compensation, payout is linked to the commercialization success of the product. If the product is successful both partners win. If the product fails, both partners share the financial loss and mitigate their risk.
With complexities in R&R agreements comes complex management issues. For rights, the patent agreement may have different dimensions:
Geographic limitation such as product usage in certain regions
Time limitation since a pharma patent is valid for 7 years
Scope limitation such as limited use for specific illness or therapeutic usage
In this way, companies can go one step beyond in their margin
management and mitigate risks by tying costs to the success of the
commercialization of the product
