A Portfolio of Income Generating Assets Based on Alternative Financings
To create stockholder value, we previously built a diverse portfolio of alternative investments. These alternative financings fall into one of three categories: royalty monetizations, debt structures and hybrids of the two. Our investments are typically in assets with strong intellectual property protection and are commercial stage or soon-to-be approved. The counterparties in these transactions can be biotechs, pharmas, medtech companies, universities and inventors.
Many companies and universities have licensed their technology or products and are eligible to receive royalties. Public markets typically afford little credit to public companies receiving royalties and such companies may require financial support either to commercialize their product or complete development of a wholly owned product that will drive their share price. Similarly, universities receiving royalties over several years may have immediate revenue needs for operating expenses, capital expansion and the like. PDL can monetize either all or a portion of such royalties making cash either immediately available or in tranches over time as required by the company or academic institution. In situations where the counterparty does not have a royalty, PDL works with it to create a synthetic revenue interest which can then be monetized.
Some companies with predictable revenue streams prefer debt, particularly if the eventual size of their revenues is difficult to forecast. PDL worked with counterparties to construct flexible debt facilities that support the counterparties in the attainment of their business objectives. No two businesses are identical; for that reason, no two of our debt facilities are the same.
Other companies preferred elements of a debt facility and a royalty monetization. In these structures, PDL shares some of the risk in this structure. Typically, the counterparty received a lower interest rate on the debt portion of the structure by giving PDL a modest royalty on the company’s revenues so that PDL can participate in the potential upside.