Biotech Accounting Software for Royalty Management 

Frequently Asked Questions About Biotech Royalties and Accounting Software 

What are royalties in biotechnology? 

Biotech companies often license intellectual property (IP) from other firms, universities, or individuals who own the rights or patent to reagents, antibodies, or other IP. In return, the licensee pays the IP owner a percentage of revenue generated from sales of the resulting product, and/or a flat fee. These payments are called royalties and are established in a contractual agreement between the parties involved. 

What is a typical biotech royalty rate? 

According to TechPipeline, the most frequently contracted biotech royalty rate is 5% of net sales, while 50% of deals involve royalty rates of 6% or less, and 90% involve royalty rates of 20% or less. Biotech royalty rates can range from 0.5% to 50% in extreme circumstances. The negotiated rates will vary depending on the type of IP involved, what stage it is in terms of market-readiness, whether or not the license is exclusive, and other factors. 

How is biotech accounting different from accounting in other industries? 

Biotechnology is one of the most highly regulated industries, for good reason. The financial stakes involved are immense. There are strict reporting and disclosure requirements for publicly listed companies, and a need for rigorous financial data security. Time-consuming financial audits are more frequent and urgent than in many other industries. Risk mitigation is critical. 

How are royalties in biotech different from royalties in other industries? 

There are some unique and complicated royalty models in biotech licensing and finance, which necessitate a specialized yet flexible royalty management system. Multiplex assays and kits require complex calculations. Deals with distributors and affiliates may affect royalty processing and payments, as can specialized, collaborative arrangements in development and marketing.  

What are examples of biotech royalty accounting requirements that are similar to those of other industries? 

Other aspects of biotech royalties are shared with industries like publishing and brand licensing. Distribution throughout numerous global territories creates complexity in agreements and the need to accurately account for multiple currencies. Contracts in many different industries may also include payments tied to milestones, tiered royalty structures, deductions for returns, varied discounts, sublicensing terms, and minimum payments or advances. Royalty accounting software in any industry will also need to be integrated with a company’s ERP and other accounting software.  

Speed and accuracy are core requirements for royalty processing tools in any industry. They’re necessary not only for maintaining efficient internal operations, but also for maintaining a strong reputation and solid connections with business partners. Nothing can damage a relationship like missed deadlines and incorrect payments.

At MetaComet, we’ve also found that for finance departments in biotech and all other kinds of companies, royalty accounting is a frequent source of annoyance, frustration, and stress. That’s what drives us to provide a better solution. 

What biotech accounting software is used for royalty management? 

The biotech industry has advanced far beyond using spreadsheets or one-size-fits-all software for royalty accounting. Products like MetaComet’s Royalty Tracker are specifically designed to make it easy to manage the intricate requirements of high stakes royalty processing, payments, and reporting, in addition to handling profit sharing and revenue sharing arrangements. 

Is it time to implement a better royalty management solution? 

→ Connect with us to see our biotech royalty accounting software in action.