Biotech Licensing Glossary
31 essential terms for biotech deal professionals
Financial Terms
Upfront Payment
A non-refundable payment made by the licensee to the licensor at the signing of a licensing agreement. Upfront payments compensate the licensor for the value created to date and provide immediate capital.
See in actionMilestone Payment
Contingent payments triggered by the achievement of specific development, regulatory, or commercial events. Milestones align incentives and reduce risk for licensees.
See in actionDevelopment Milestones
Payments triggered by clinical development achievements such as IND filing, Phase 1/2/3 initiation, Phase 2/3 data readout, or successful completion of pivotal trials.
See in actionRegulatory Milestones
Payments triggered by regulatory achievements such as FDA acceptance of BLA/NDA, FDA approval, EMA approval, or approvals in other major markets (Japan, China).
See in actionCommercial Milestones
Payments triggered when cumulative net sales reach specified thresholds (e.g., $500M, $1B, $2B). Also called sales milestones.
See in actionRoyalty Rate
A percentage of net sales paid by the licensee to the licensor for the duration of the royalty term. Typically ranges from low single digits to mid-teens depending on deal stage and modality.
See in actionTiered Royalties
A royalty structure where the percentage increases as cumulative sales reach higher thresholds. For example: 8% on first $500M, 10% on $500M-$1B, 12% above $1B.
See in actionNet Sales
Gross sales minus deductions such as returns, rebates, chargebacks, distribution fees, and taxes. The basis for calculating royalty payments.
See in actionDeal Structures
CVR (Contingent Value Right)
A tradeable security that entitles holders to receive payments upon achievement of specified milestones, often used in M&A transactions to bridge valuation gaps.
See in actionEarnout
Post-closing payments in an M&A transaction contingent on achieving specified targets. Similar to milestones but typically used in acquisition contexts.
See in actionOption Agreement
A contract granting the optionee the right (but not obligation) to acquire a license or purchase an asset by a specified date, typically in exchange for an upfront option fee.
See in actionCo-Development Agreement
A partnership structure where both parties share development costs and responsibilities, typically with shared economics on the back end.
See in actionLicense Types
Exclusive License
A license granting the licensee sole rights to develop and commercialize the asset in the specified territory and field, excluding even the licensor from competing.
See in actionField of Use
The specific therapeutic area, indication, or application covered by a license. Licensors may grant different licenses for different fields to maximize value.
See in actionTerritory
The geographic region(s) covered by a license. Common splits include US-only, ex-US, Greater China, Japan, Europe, and Rest of World.
See in actionModalities
ADC (Antibody-Drug Conjugate)
A therapeutic modality combining a monoclonal antibody with a cytotoxic payload via a chemical linker. ADCs enable targeted delivery of potent drugs to cancer cells.
See in actionCAR-T (Chimeric Antigen Receptor T-cell)
A cell therapy approach where patient T-cells are engineered to express a chimeric antigen receptor targeting specific tumor antigens.
See in actionBispecific Antibody
An engineered antibody that can simultaneously bind two different antigens or epitopes, enabling novel mechanisms like T-cell engagement or dual pathway inhibition.
See in actionPROTAC (Proteolysis Targeting Chimera)
A heterobifunctional molecule that recruits an E3 ubiquitin ligase to a target protein, inducing its degradation via the proteasome.
See in actionGene Therapy
A therapeutic approach that introduces, alters, or replaces genetic material within cells to treat disease. Includes AAV-based approaches and gene editing.
See in actionmRNA Therapeutics
Medicines using messenger RNA to instruct cells to produce therapeutic proteins. Validated by COVID-19 vaccines and expanding into oncology and rare diseases.
See in actionRegulatory
IND (Investigational New Drug)
An FDA application that must be approved before human clinical trials can begin in the US. The IND includes preclinical data, manufacturing information, and clinical protocols.
See in actionBLA (Biologics License Application)
The FDA application required for approval of a biologic product. Equivalent to an NDA for small molecules.
See in actionBreakthrough Therapy Designation
An FDA designation for drugs intended for serious conditions where preliminary evidence shows substantial improvement over existing therapies. Provides intensive FDA guidance and potential expedited review.
See in actionOrphan Drug Designation
A designation for drugs treating rare diseases (affecting <200,000 people in US). Provides tax credits, fee waivers, and 7 years of market exclusivity upon approval.
See in actionClinical Development
Phase 1 Clinical Trial
First-in-human studies primarily assessing safety, tolerability, and pharmacokinetics in a small number of subjects (typically 20-80).
See in actionPhase 2 Clinical Trial
Studies evaluating efficacy and side effects in a larger patient population (typically 100-300). Often provides first proof-of-concept in the target indication.
See in actionPhase 3 Clinical Trial
Large-scale studies (typically 300-3000+ patients) designed to confirm efficacy, monitor side effects, and compare to standard of care. Forms basis for regulatory approval.
See in actionDeal Process
Due Diligence
The comprehensive investigation of a potential partner or acquisition target, including scientific, clinical, regulatory, IP, manufacturing, and commercial assessments.
See in actionTerm Sheet
A non-binding document outlining the key terms of a proposed deal, including financial terms, governance, and key obligations. Precedes definitive agreements.
See in actionData Room
A secure repository (typically virtual) where confidential documents are shared with potential partners or acquirers during due diligence.
See in actionPut These Terms Into Practice
Use our calculator to estimate deal terms based on real market data.
Try the Calculator