What is "biodollar"

Biodollar is a term commonly used in business transactions between pharmaceutical or biotechnology companies.

Common transactions in this industry evolve around the grant of a development and / or marketing license for a drug that currently is under development. Under this licensing agreement, usually a large Pharmaceutical industry with relevant marketing capabilities (the licensee) acquires the rights to sell a drug following the marketing-approval by regulatory authorities from a - usually smaller and purely development focused - company (the licensor). In return, the licensee usually offers an upfront payment, payable upon signing of the agreement, and one or several rounds of payments ( milestones) that occur later in time and are bound to certain events (e. g. successful finish of a clinical trial phase, reception of marketing approval).

While public announcements on these licensing deals often state a lump-sum figure as a representation of the entire deal-volume, including upfront payment and all subsequent milestone-payments, only the upfront, an - often small - fraction of these payments, is certain, while the remaining amount is highly uncertain.

To indicate this uncertainty of the later payments, the term biodollars has been coined to indicate that, as impressive the stated figures are, the majority of payments is not yet due and possibly will never be paid.