1. What are Drug Royalties?  Rights on the sales of different prescriptions drugs

2. Why do companies use them?  Large pharma has been inefficient with respect to their internal research and discovery engines.  Small, specialized biotechnology companies require access to global development and distribution capabilities that they do not have internally  Alternative to financing without diluting equity holders

3. What are the types of investors that invest in drug royalties  Private Equity  Institutional Investors  Family Offices  Ultra HNW

4. What do investors look in royalties?  Diversification benefit  Exposure to healthcare and increase in prescription expenditures  Uncorrelated to stock market or bond market  Hedge against mortality extension risk (pension funds)

5. Who are the sellers?  Universities  Biotech companies  Non for profit institutions

6. How does it work?  Seller gets modest upfront payment, tied to key development successes, and an ongoing percentage of the revenue stream for the approved drug.  Buyer collects yearly royalty payments and takes on a % of the sales of a specific drug not an equity stake in the company  As soon as patent expires, buyer stops collecting income, even as drug company can continue selling the branded drug

7. How large is the market? What are the expected returns  About $2.5B in royalty deals annually  More than $20B in devoted royalty funds space  Important Players: Royalty Pharma, Orbimed Advisors, Healthcare Partners andPDL Bio Pharma  Drug Royalty Investment Managers earn on average 10-12% after fees

8. If it is so good then …  It is not a risk free business!  Revenue collapse from either generics entry or new therapeutic technology  Asset due diligence is key  Side Effects

9. Summary  An additional source of funds for research  Not cheap!  Most investors will nor bear FDA risk  Increased interest in the space from institutional money  Non- dilutive capital  Diligence aspect critical

10. Thanks!!!  Felipe.rojas@emory.edu