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In the high-stakes world of pharmaceuticals, turning a promising molecule into a marketed drug is a marathon of innovation, regulatory hurdles, and jaw-dropping costs—often exceeding $1 billion per drug. For biotech companies, funding this journey is a constant challenge. Enter the synthetic royalty, a financial instrument that’s shaking up how drug developers raise financing by monetizing their assets, and sharing risks with royalty investors. But what exactly is a synthetic royalty, how does it work, and how does it differ from traditional royalty monetization or conventional financing like equity and debt?

In the last years, we have seen that royalty monetization has gained more momentum as an alternative source of funding for biotech and pharma companies (together referred to as “Biotechs”). With an increasing desire by biotech shareholders to dilute as little as possible, it is worthwhile for Biotechs to properly understand and analyse this financing alternative.