Post-Commercialization Milestone Payments

Sales-based milestones are growing in value and in the number of deals that employ them. Licensees like them because they essentially pay for themselves and offset higher royalty fees. For licensers, they boost the headline value of the deal.

Sales-based milestone payments are an increasingly popular means of remuneration in alliances. Licensees pay these flat fees when the licensed product attains a predetermined sales goal. Licensees aren't averse to paying them, as, indeed, they pay for themselves. The licensers' investors, meanwhile, have tangible numbers to associate with a product's commercial success, an already difficult task that's even trickier for early-stage products, as so little can be predicted about the competitive landscape they'll eventually be launched into.

In the table below, we've compiled a list of some of the largest sales-based milestones announced since 2000. Notably, some of the deals' potential sales milestones exceed the total pre-commercialization value. And while most of those listed are for near-term products, sales-based milestone commitments are made at least as frequently in early-stage deals—although those deals' announcements tend to roll up all the deal's possible milestone payments into one eye-popping figure that assumes the licensed product's approval and market success, which, of course, is assuming a lot.