Why European Capital Hasn't Captured Pharmaceutical Royalty Streams
European institutional investors collectively manage over €10 trillion in pension assets alone, yet pharmaceutical royalty funds offering 7-15% yields with low correlation to public markets are largely absent from their portfolios.
This pattern reflects the industry's origins: pharmaceutical royalty financing emerged in North America in the early 1990s and has remained concentrated there. The first dedicated funds were founded in Toronto and New York, and the regulatory and market conditions that enabled their growth were specific to North American capital markets.
The 2024-2025 period marked an inflection point. KKR acquired a majority stake in Healthcare Royalty Partners, bringing institutional scale to the mid-market. Partners Group launched the industry's first multi-sector royalty platform from its Swiss base. European biotechs from France, Germany, and Switzerland executed landmark royalty deals totaling hundreds of millions of euros. UK pension reform progressed on paper while execution lagged significantly. EU policy initiatives announced ambitious targets but await deployment. Yet the fundamental question remains: why hasn't a European Royalty Pharma emerged, and could one?
This analysis examines the origins of pharmaceutical royalty financing, the current market structure, what actually happened in 2024-2025, and the factors that continue to shape European participation. It explores how European fund structures could be configured to invest in these royalties, what role development banks and policy initiatives might play, and what conditions would need to change for a European royalty fund ecosystem to emerge.
Executive Summary
| Topic | Key Finding |
|---|---|
| Market origins | North America (Toronto 1989, New York 1996) |
| Current market size | $50+ billion deployed capital |
| 2020-2024 deployment | $29.4 billion (more than double prior 5 years) |
| Market concentration | Top 3 firms control ~71% of deal value |
| European biotech participation | 20%+ of global deals involve European sellers |
| KKR/HCRx acquisition | July 2025 — $3B AUM added to KKR platform |
| Partners Group royalty launch | May 2024 — first major European manager entry |
| European LP participation | Growing via US-managed vehicles (60%+ non-US in recent HCRx funds) |
| EIF life sciences commitment | €2 billion cumulative, €300M annually |
| EIB life sciences portfolio | €3.5 billion across 135 projects |
| BioTechEU initiative | €10 billion target (2026-2027) — announced but not yet deployed |
| EIF royalty fund precedent | None identified |
| UK Mansion House Accord | 10% private markets target vs 0.36% actual allocation |
| Available European structures | Luxembourg AIFs, ELTIF 2.0, Irish ICAVs |
The North American Origins of Pharmaceutical Royalty Financing
Pharmaceutical royalty financing originated in North America during the early 1990s. The industry emerged from a convergence of factors: Canadian mining finance innovation, American legislative change, and the biotech industry boom.
From Mining Royalties to Drug Royalties
The roots of pharmaceutical royalty financing trace to Toronto's mining finance community. Franco-Nevada, founded in 1983 by Seymour Schulich and Pierre Lassonde, demonstrated that royalty ownership could function as a standalone investment strategy in natural resources. This model was subsequently adapted to pharmaceuticals.
| Mining Royalty Pioneer | Founded | Innovation | Relevance to Pharma |
|---|---|---|---|
| Franco-Nevada | 1983 | Pure-play royalty company model | Proved royalty-only strategy viable |
| Wheaton Precious Metals | 2004 | Streaming agreements | Alternative to direct ownership |
| Royal Gold | 1981 | Royalty portfolio diversification | Risk management approach |
Drug Royalty Corporation (now DRI Capital) emerged as the first dedicated pharmaceutical royalty fund, founded in Toronto between 1989 and 1993. The company listed on the Toronto Stock Exchange in 1993, becoming the first publicly traded pharmaceutical royalty company. Key founders included James Webster, who later served as President and CEO, and R. Ian Lennox, previously of Monsanto Canada.
DRI Capital Industry Firsts
| Milestone | Description | Significance |
|---|---|---|
| First public pharma royalty company | TSX listing in 1993 | Created public market benchmark |
| First non-US transaction | Expanded beyond American royalty streams | Demonstrated global applicability |
| First individual inventor transaction | Purchased royalties directly from researchers | Opened new deal source |
| First bundled royalty transaction | Combined multiple royalty streams | Portfolio approach innovation |
| World's oldest healthcare royalty fund | Continuous operation since 1989 | Track record establishment |
Early acquisitions included stakes in blockbuster drug royalties:
| Drug | Therapeutic Area | Peak Annual Sales | DRI Investment Period |
|---|---|---|---|
| Taxol | Oncology | $1.6B | 1990s |
| Neupogen | Supportive care | $1.3B | 1990s |
| ReoPro | Cardiovascular | $400M | 1990s |
| Remicade | Autoimmune | $8.0B | 1990s-2000s |
Royalty Pharma's Emergence
Pablo Legorreta founded Royalty Pharma in New York in 1996 after a decade at Lazard, where he identified an opportunity to help academic institutions and research hospitals monetize their royalty streams. Co-founded with Rory Riggs, the company raised $60 million in initial capital from investors including the Giuliani brothers, Italian billionaires Legorreta met at Milan's airport.
| Royalty Pharma Milestone | Year | Details |
|---|---|---|
| Founded | 1996 | $60M initial capital |
| MSK Neupogen/Neulasta I | 2004 | Part of 80% stake acquisition |
| MSK Neupogen/Neulasta II | 2005 | Completed $405M deal |
| Humira royalty acquisition | 2006 | $700M from Cambridge Antibody Technology |
| CF Foundation Kalydeco | 2014 | $3.3B — largest royalty transaction at time |
| Moved headquarters to Ireland | 2003 | Asset management domicile |
| NASDAQ IPO | 2020 | $2.2B raised — largest US IPO of 2020 |
| Initial market cap | 2020 | $16.7B → $26.5B after first day |
| Cumulative deployment | 2020 | $18B+ in royalty acquisitions |
| Portfolio | 2020 | 45+ FDA-approved therapies, ~$100B annual sales |
Top 10 Royalty Pharma Transactions (by Deal Size)
| Rank | Transaction | Year | Value | Drug(s) |
|---|---|---|---|---|
| 1 | Cystic Fibrosis Foundation | 2014 | $3.3B | Kalydeco franchise |
| 2 | MorphoSys | 2021 | $2.025B | Tremfya |
| 3 | Biohaven | 2022 | $1.2B | Nurtec ODT |
| 4 | Immunomedics | 2020 | $1.15B | Trodelvy |
| 5 | Elan/Biogen | 2013 | $1.0B | Tysabri |
| 6 | Epizyme | 2019 | $1.0B | Tazverik |
| 7 | Humira (CAT) | 2006 | $700M | Humira |
| 8 | Ferring | 2023 | $500M | Undisclosed |
| 9 | MSK combined | 2004-05 | $405M | Neupogen/Neulasta |
| 10 | NIH/Emory | 2005 | $525M | Emtriva |
The Bayh-Dole Act: Creating the Asset Class
The Bayh-Dole Act of 1980 created the asset class that royalty investors would eventually acquire. Before 1980, the U.S. federal government retained patents on federally funded research, resulting in fewer than 5% of 28,000 government-owned patents being commercially licensed.
Pre vs. Post Bayh-Dole Comparison
| Metric | Pre-Bayh-Dole (1980) | Post-Bayh-Dole | Change |
|---|---|---|---|
| University patents annually | ~390 | 3,088 (2009) | 8x increase |
| Technology transfer offices | ~30 | 300+ | 10x increase |
| University spin-off companies | Minimal | 11,000+ | New category |
| Estimated GDP contribution | — | $1.3-1.7 trillion | Substantial |
| Federal patent commercialization | <5% | 50%+ estimated | Fundamental shift |
| Inventor royalty sharing | None standard | 15-50% typical | Aligned incentives |
Key Bayh-Dole Provisions
| Provision | Effect | Impact on Royalty Market |
|---|---|---|
| University patent retention | Institutions own inventions from federal funding | Created sellable assets |
| Inventor sharing requirement | Inventors receive portion of royalties | Motivated disclosure |
| March-in rights | Government can require licensing if not commercialized | Encouraged active licensing |
| Preference for US manufacturers | Exclusive licenses require US manufacturing | Limited some deals |
| Small business preference | Encouraged university-startup partnerships | Created biotech ecosystem |
Landmark University Royalty Examples
| Institution | Patent/Technology | Royalty Revenue | Duration | Buyer (if sold) |
|---|---|---|---|---|
| Stanford/UCSF | Cohen-Boyer recombinant DNA | $250M+ | 1980-1997 | Not sold (licensed) |
| Columbia University | Axel co-transformation patents | $790M | 17 years | Not sold (licensed) |
| Northwestern University | Lyrica (pregabalin) | $700M+ | Through 2018 | Royalty Pharma (partial) |
| Emory University | Emtriva (emtricitabine) | $540M+ | Through 2021 | Royalty Pharma |
| University of Minnesota | Ziagen (abacavir) | $450M+ | Through 2016 | Royalty Pharma |
| NYU | Remicade | $650M+ | Through 2018 | Multiple buyers |
| City of Hope | Herceptin, Rituxan | $500M+ | Multiple terms | Partially sold |
The Cohen-Boyer recombinant DNA patents, issued in December 1980, demonstrated the model's potential: 468 companies licensed the technology before its 1997 expiration. Columbia University's Axel patents produced $790 million over their 17-year term.
R&D Limited Partnerships: The Precursor Model
Before pure royalty acquisition became common, R&D limited partnerships provided a template for royalty-based investing:
| Company | Partnership Year | Structure | Outcome |
|---|---|---|---|
| Genentech | 1980 | R&D LP with tax deductions | $35M IPO (no approved products) |
| Amgen | 1983 | R&D LP | $40M IPO |
| Biogen | Early 1980s | R&D partnerships | European investors participated |
| Centocor | 1980s | Multiple R&D LPs | Funded ReoPro development |
The Tax Reform Act of 1986 curtailed the tax benefits that made R&D partnerships attractive, shifting the model toward direct royalty acquisition. According to MIT's Andrew Lo, key Royalty Pharma team members had established R&D partnerships in the 1980s before transitioning to the acquisition model.
European Technology Transfer Developed Later
European universities developed their technology transfer infrastructure later than their American counterparts, primarily due to different intellectual property traditions.
Professor's Privilege Reform Timeline
| Country | Key Reform | Year | Gap vs. US | Previous System |
|---|---|---|---|---|
| United States | Bayh-Dole Act | 1980 | Baseline | Government retained patents |
| France | Innovation Act | 1999 | 19 years | Professor's privilege |
| Denmark | Act on Inventions at Universities | 2000 | 20 years | Professor's privilege |
| Germany | Abolition of professor's privilege | 2002 | 22 years | Professor's privilege |
| Austria | University Act reform | 2002 | 22 years | Professor's privilege |
| Norway | Employee Invention Act amendment | 2003 | 23 years | Professor's privilege |
| Sweden | Still maintains | Current | Ongoing | Professor's privilege |
| Italy | Partial reform | 2001 | 21 years | Professor's privilege |
Under "professor's privilege" systems, individual academics rather than institutions owned research inventions. This fragmented approach meant European universities had fewer concentrated royalty streams to monetize.
European Technology Transfer Organizations
| Organization | Country | Founded | Cumulative Output | Royalty Sales |
|---|---|---|---|---|
| Max Planck Innovation | Germany | 1970 | 4,860 inventions, 2,935 licenses, €550M revenue | Focus on licensing, not sales |
| LifeArc (formerly MRC Tech) | UK | 1992 | Keytruda royalty (major) | Sold to North American buyers |
| EMBLEM (ETH Zurich) | Switzerland | 1996 | 200+ spin-offs | Traditional licensing |
| Inserm Transfert | France | 2000 | 1,800+ patents | Traditional licensing |
| TU Munich | Germany | 2002 | 100+ spin-offs annually | Traditional licensing |
| KU Leuven Research | Belgium | 1972 | 130+ spin-offs | Traditional licensing |
LifeArc Keytruda Monetization: A Case Study
The UK's LifeArc holds one of Europe's most valuable royalty positions from its humanization of the antibody that became Keytruda (pembrolizumab):
| Transaction | Year | Buyer | Value | Significance |
|---|---|---|---|---|
| Partial sale | 2016 | DRI Capital (Canada) | $150M | First monetization |
| Remaining sale | 2019 | CPPIB (Canada) | $1.297B | Largest European royalty sale |
| Total | — | North American buyers | $1.447B | Europe's biggest royalty went to Canadian capital |
This pattern — European institutions monetizing royalties through North American buyers — illustrates the current market structure.
Current Market Structure
The market for healthcare royalty financing remains concentrated in North America. The dedicated royalty investment sector has grown substantially over three decades.
Market Size Evolution
| Year | Estimated Market Size | Key Development |
|---|---|---|
| 1993 | <$100M | DRI TSX listing |
| 2000 | ~$2B | Early institutional interest |
| 2010 | ~$10B | Post-financial crisis growth |
| 2015 | ~$20B | Mainstream PE interest begins |
| 2020 | ~$35B | Royalty Pharma IPO |
| 2025 | $50B+ | KKR/Healthcare Royalty acquisition |
Key Market Players (Updated 2025)
| Fund/Company | HQ | AUM/Deployed | Founded | Focus | Public/Private |
|---|---|---|---|---|---|
| Royalty Pharma | New York | $25B+ deployed | 1996 | Approved/late-stage | NASDAQ: RPRX |
| Healthcare Royalty Partners | Stamford | $7B+ deployed | 2006 | Approved drug royalties | Private (KKR majority since July 2025) |
| XOMA | California | $1B+ portfolio | 1981 (royalty 2017) | Earlier-stage royalties | NASDAQ: XOMA |
| Blackstone Life Sciences | New York | $4.6B fund | 2018 | Royalties + development | Private |
| DRI Capital | Toronto | $3B+ deployed | 1989 | Approved drug royalties | Private |
| OrbiMed | New York | $17B+ AUM | 1989 | Royalties within healthcare | Private |
| Oberland Capital | New York | $1.8B+ raised | 2013 | Late-stage royalties | Private |
| Partners Group | Zug | $174B firm AUM | 2024 (royalties) | Multi-sector royalties | SIX: PGHN |
| Ligand Pharmaceuticals | San Diego | $1B+ portfolio | 1987 (royalty focus) | Platform royalties | NASDAQ: LGND |
| BioPharma Credit | London (US-managed) | $2B+ | 2017 | Royalty-backed lending | LSE: BPCR |
Ownership Structure: Who Controls the Royalty Market?
The ownership structures of major royalty players reveal where capital originates and where returns flow. Notably, European investors appear as significant shareholders and limited partners across the industry — yet management and control remain firmly North American.
Royalty Pharma (NASDAQ: RPRX) — Top Shareholders
| Shareholder | % Ownership | Domicile | Notes |
|---|---|---|---|
| Pablo Legorreta (Founder & CEO) | 30.72% | USA | Founder's stake (includes Class B shares) |
| Morgan Stanley Investment Mgmt | 10.3% | USA | Institutional asset manager |
| Nogra Group SICAF-SIF S.A. | 9.75% | Luxembourg | European family office |
| R&H Trust Co. (Guernsey) Ltd. | 7.00% | Guernsey | European trust holding |
| FMR LLC (Fidelity) | 6.55% | USA | Institutional investor |
| Capital Research & Management | 6.37% | USA | Capital Group funds |
| General Atlantic LLC | 5.90% | USA | Private equity (pre-IPO investor) |
| BlackRock Advisors | ~4.73% | USA | Index funds |
| Baillie Gifford & Co. | ~4.07% | UK (Scotland) | European institutional investor |
| Swedbank AB | ~2.86% | Sweden | European financial institution |
European investors hold approximately 24% of Royalty Pharma through Nogra Group, R&H Trust, Baillie Gifford, and Swedbank — demonstrating significant European capital participation in the largest royalty company, though management remains US-based.
Healthcare Royalty Partners — Ownership & LP Base
| Shareholder / Investor | Ownership | Domicile | Notes |
|---|---|---|---|
| KKR & Co. | Majority stake | USA | Acquired control July 2025 |
| HCR Management (Clarke Futch, Todd Davis) | Significant minority | USA | Retained equity post-acquisition |
| European Pension Funds | LP investors | Various EU | ~50% of Fund III capital from non-US investors including European pensions |
| US Public Pension Plans | LP investors | USA | Florida SBA, SF City & County, Missouri LAGERS |
| Sovereign Wealth Funds | LP investors | MEA/APAC | Middle East, Asia-Pacific institutions |
HCRx's Fund III ($1.5 billion, 2014) drew approximately 50% of capital from non-US investors, including prominent pension funds from across Europe — a pattern that continued in subsequent funds, with Fund V (2024) reportedly exceeding 60% non-US LP participation.
DRI Capital — Ownership & LP Base
| Shareholder / Investor | Ownership | Domicile | Notes |
|---|---|---|---|
| Persis Holdings (Khosrowshahi family) | Majority stake | Canada | Took DRI private in 2002 |
| San Diego County Employees Retirement | LP investor | USA | Committed to Fund II & III |
| Arizona Public Safety Personnel Retirement | LP investor | USA | Investor in DRI royalty funds |
| Los Angeles Fire & Police Pensions (LAFPP) | LP investor | USA | Investor in DRI funds |
| European Pension Funds | LP investors | Various EU | Several European pensions participated (not disclosed by name) |
Around half of DRI's Fund III ($1.45 billion, 2013) capital came from non-US investors, including prominent pension funds from Europe.
Oberland Capital — Ownership & LP Base
| Shareholder / Investor | Ownership | Domicile | Notes |
|---|---|---|---|
| Andrew Rubinstein (Co-Founder) | GP ownership | USA | Managing Partner |
| Jean-Pierre Naegeli (Co-Founder) | GP ownership | Switzerland | European co-owner |
| European Pension Plans | LP investors | Various EU | Fund II investors included European pension funds |
| US Endowments & Foundations | LP investors | USA | Major institutional commitments |
| Sovereign Wealth Funds | LP investors | MEA/Asia | Global institutional investors |
Oberland's funds have drawn a "diversified and global set of institutional investors, including public and private pension plans, endowments, foundations, sovereign wealth funds and family offices" with Fund II (2018, $800 million) including investors from Europe.
XOMA Royalty Corporation (NASDAQ: XOMA) — Top Shareholders
| Shareholder | % Ownership | Domicile | Notes |
|---|---|---|---|
| Biotechnology Value Fund (BVF) Inc. | 20.9% | USA (San Francisco) | Biotech hedge fund (lead shareholder) |
| Morgan Stanley | 13.3% | USA | Institutional |
| FMR LLC (Fidelity) | ~9-10% | USA | Institutional |
| Vanguard Group | ~5-6% | USA | Index funds |
| BlackRock | ~5% | USA | Index funds |
| Insiders (management/directors) | ~9% | USA | Per proxy |
XOMA's shareholder base is entirely US-based — no European investors among top holders.
Ligand Pharmaceuticals (NASDAQ: LGND) — Top Shareholders
| Shareholder | % Ownership | Domicile | Notes |
|---|---|---|---|
| BlackRock, Inc. | 14.5% | USA | Largest holder |
| Vanguard Group | ~10.3% | USA | Index funds |
| Janus Henderson Group plc | ~7.5% | UK | European institutional investor |
| iShares Core S&P Small-Cap ETF | ~7.0% | USA | BlackRock index ETF |
| Macquarie Group Ltd. | ~4.7% | Australia | Global financial group |
Janus Henderson (UK-headquartered) holds over 7% of Ligand — the only significant European holder.
The Capital Flow Pattern
This ownership data reveals a clear pattern:
| Company Type | European Capital Role | European Management |
|---|---|---|
| Public royalty companies (RPRX, LGND, XOMA) | 5-24% of shareholders | None |
| Private royalty funds (HCRx, DRI, Oberland) | 40-60% of LP capital | One Swiss co-founder (Oberland) |
| Fund management/GP economics | — | Captured by North American managers |
European institutional capital finances a substantial portion of pharmaceutical royalty investment — yet the management fees, carried interest, and strategic control remain firmly in North American hands. This represents the core asymmetry: European LPs are willing participants in the asset class, but no European-managed dedicated pharmaceutical royalty fund exists to capture this demand domestically.
Market Concentration Analysis
| Firm | Share of Deal Value | Deal Count (2020-2024) | Notable Transactions |
|---|---|---|---|
| Royalty Pharma | ~36% | 50+ | CF Foundation, MorphoSys, Biohaven |
| Healthcare Royalty Partners | ~19% | 30+ | Vertex, Immunomedics, Theravance |
| Blackstone Life Sciences | ~16% | 15+ | Alnylam, Acceleron, SpringWorks |
| Top 3 Combined | ~71% | — | — |
| DRI Capital | ~8% | 20+ | LifeArc Keytruda, various |
| XOMA | ~3% | 10+ | Earlier-stage focus |
| Other | ~12% | Fragmented | Smaller specialists |
An Edison Group report notes: "Royalty finance originated in Canada in the 1980s in the mining sector and in the 1990s in the pharmaceutical sector... Although royalty finance has grown from its mining and pharmaceutical industry roots to become a US$50bn sector in North America, it is still a new asset class in Europe."
European Companies as Royalty Sellers
European biotech companies increasingly participate in this market as sellers. A 2025 Covington study notes: "One trend that stands out in the most recent data is the growing involvement of European biotech companies. In the past two years alone, more than one in five deals reviewed in the study involved European companies."
| European Company | Country | Transaction | Buyer | Value | Year |
|---|---|---|---|---|---|
| MorphoSys | Germany | Tremfya royalty | Royalty Pharma | $2.025B | 2021 |
| Ferring Pharmaceuticals | Switzerland | Adstiladrin royalty | Royalty Pharma | $500M | 2023 (completed 2025) |
| GENFIT | France | Iqirvo royalty | Healthcare Royalty | €185M | 2025 |
| BRAIN Biotech | Germany | Deucrictibant royalty | Royalty Pharma | €129M | 2024 |
| Heidelberg Pharma | Germany | Zircaix royalty | Healthcare Royalty | $115M | 2024 |
| Nanobiotix | France | NBTXR3 royalty | Healthcare Royalty | $71M | 2025 |
| Almirall | Spain | Dermatology assets | Healthcare Royalty | Undisclosed | 2022 |
| Zealand Pharma | Denmark | GLP-1 royalties | Various | Multiple | 2020-24 |
| Galapagos | Belgium | Filgotinib arrangements | Various | Multiple | 2019-22 |
| Evotec | Germany | Sandoz biosimilars | Sandoz | $650M+ | 2025 |
Synthetic royalty structures — where companies create contractual royalty obligations rather than selling existing ones — have grown particularly in Europe, offering non-dilutive capital without requiring an existing licensing arrangement.
European Efforts to Enter the Market
Several European initiatives have sought to establish pharmaceutical royalty investment capabilities.
Duke Royalty's Pharmaceutical Strategy
Duke Royalty Limited, a Guernsey-based company listed on AIM in 2015, announced an "exclusive pharmaceutical and healthcare royalty financing collaboration" with Oliver Wyman consulting.
| Aspect | Details |
|---|---|
| Listing | AIM (London Stock Exchange) |
| Year | September 2015 |
| Structure | Guernsey-based closed-end |
| Partnership | Oliver Wyman healthcare practice |
| Market positioning | "First royalty company listed on major European exchange" |
Leadership assembled:
| Role | Individual | Background |
|---|---|---|
| Investment Committee | Jim Webster | Former President/CEO, Drug Royalty Corporation (1993-2002) |
| Advisory | Oliver Wyman Health Practice | $2B+ healthcare royalty advisory experience |
| Board | Various | Pharma licensing and BD backgrounds |
Oliver Wyman characterized the European market as "yet-to-be-developed" for royalty financing — three decades after pharmaceutical royalty financing began in North America.
Outcome:
| Phase | Period | Strategy | Result |
|---|---|---|---|
| Launch | 2015 | Pharma royalty focus | Initial capital raised |
| Pivot | 2016-2023 | General business royalties | Security services, generic pharma distribution |
| Rebrand | February 2024 | Duke Capital Limited | Moved away from pharma royalty focus |
BioPharma Credit PLC
BioPharma Credit PLC, London-listed since 2017 and now a FTSE 250 constituent, invests in royalty-backed debt rather than direct royalty acquisition.
| Metric | Details |
|---|---|
| Structure | Closed-end investment company |
| Listing | London Stock Exchange (FTSE 250) |
| Manager | Pharmakon Advisors (Royalty Pharma affiliate) |
| Strategy | Senior secured loans backed by royalty streams |
| Portfolio | $2B+ in life sciences credit investments |
| Dividend yield | 7-8% target |
| Management location | United States |
| Deal sourcing | Via Royalty Pharma network |
BioPharma Credit demonstrates European investor appetite for royalty-adjacent exposure, though management and deal sourcing remain US-based.
The Canadian Comparison
Canada's experience offers perspective on conditions that supported royalty fund development. DRI Healthcare, founded in Toronto in 1989, predates Royalty Pharma by seven years.
Canadian Tax Structure: Income Trusts
Canadian income trusts enjoyed flow-through tax treatment: if 90%+ of net cash flow was distributed, no corporate tax applied.
| Year | Income Trust Market Size | % of TSX | Context |
|---|---|---|---|
| 1995 | ~$10B | ~2% | Early growth |
| 2000 | ~$50B | ~6% | Accelerating |
| 2004 | ~$120B | ~9% | Mainstream |
| 2006 (Oct) | $210B, 245 trusts | 11% | Peak — "Halloween Massacre" announced |
| 2011 | Declining | — | Tax changes effective |
This tax environment created investor familiarity with yield-oriented structures, enabling DRI to raise capital:
| DRI Fund | Year | Size | Structure | Key LPs |
|---|---|---|---|---|
| Drug Royalty I | 2006 | $800M | $240M equity + $560M debt | Canadian institutions |
| Drug Royalty II | 2010 | $926M | Equity + debt | Expanded LP base |
| Drug Royalty III | 2013 | $1.45B | Private equity structure | Global institutions |
| DRI Healthcare Trust | 2021 | TSX listing | Public vehicle | Retail + institutional |
Canadian Pension Fund Infrastructure: The "Maple 8"
The "Maple 8" — Canada's largest pension funds — developed direct alternative investing capabilities starting in the 1990s:
| Fund | AUM (C$) | Alternatives % | Direct Investing | Notable Healthcare |
|---|---|---|---|---|
| CPPIB | $575B+ | ~48% | Pioneered direct | LifeArc Keytruda ($1.3B) |
| Ontario Teachers' | $250B+ | ~40% | Extensive direct | Healthcare portfolio |
| CDPQ | $450B+ | ~45% | Quebec focus + global | Biotech investments |
| OMERS | $130B+ | ~60% | Infrastructure leader | Limited healthcare |
| AIMCo | $170B+ | ~50% | Alberta focus | Energy transition |
| PSP Investments | $245B+ | ~45% | Federal pensions | Diversified |
| BCI | $250B+ | ~40% | BC focus | Growing alternatives |
| HOOPP | $115B+ | ~35% | Healthcare sector focus | Natural alignment |
These funds operate with governance structures that enabled evaluation and co-investment with alternative managers:
| Governance Feature | Canadian Model | Typical European |
|---|---|---|
| Investment staff compensation | Market-competitive | Civil service scales |
| Board composition | Investment professionals | Political appointees often |
| Direct investment authority | Extensive | Limited typically |
| Risk tolerance | Higher for illiquids | More conservative |
| Consultant dependence | Lower | Higher |
CPPIB's direct investment in the LifeArc Keytruda royalty ($1.297B) demonstrates this capability.
Geographic Proximity to US Deal Flow
| Factor | Canadian Advantage | European Challenge |
|---|---|---|
| Time zone overlap | EST matches NYC/Boston | 5-6 hours behind |
| Travel time to Boston | 1.5 hours (Toronto) | 7-8 hours (London) |
| Legal system | Common law (similar) | Civil law (different) |
| Currency | USD exposure normal | Currency hedging needed |
| Professional networks | Integrated with US | Separate ecosystems |
| Talent mobility | Easy US-Canada | Visa requirements |
Factors Shaping European Institutional Participation
Several factors have influenced European institutional investor participation in royalty strategies.
Market and Pricing Dynamics
| Factor | United States | Europe | Impact on Royalty Value |
|---|---|---|---|
| Market size | Single $600B+ market | Fragmented by country | Higher US royalty value |
| Pricing environment | Market-based pricing | Reference pricing, controls | US royalties more valuable |
| Patent enforcement | Strong, unified federal | Varies by jurisdiction | US patents more defensible |
| Market access timing | Often first launch | Delayed negotiations | US revenues come first |
| Payer concentration | Private + Medicare/Medicaid | Single payers per country | Simpler US collection |
| Launch sequencing | US priority for biotechs | Secondary markets | US royalties mature faster |
Drug Pricing Comparison (Selected Therapies)
| Drug | US Annual Cost | Germany | UK | France | US Premium |
|---|---|---|---|---|---|
| Keytruda | $180,000 | €120,000 | £100,000 | €110,000 | 50-80% |
| Humira | $80,000 | €18,000 | £10,000 | €12,000 | 400-700% |
| Sovaldi | $84,000 | €41,000 | £35,000 | €41,000 | 100-140% |
| Spinraza | $750,000 (Y1) | €280,000 | £450,000 | €290,000 | 65-170% |
This pricing differential means a 5% royalty on US sales generates substantially more cash flow than the same royalty rate on European sales.
Tax and Legal Considerations
Cross-border royalty deals involve tax and legal complexity:
| Jurisdiction | US Withholding Rate | Treaty Rate | Treaty Rate (Industrial) | Structuring Notes |
|---|---|---|---|---|
| Default | 30% | — | — | Punitive baseline |
| United Kingdom | — | 0% | 0% | Most favorable |
| Ireland | — | 0% | 0% | Pharma hub |
| Netherlands | — | 0% | 0% | Holding structures |
| Switzerland | — | 0-5% | 0% | Varies by canton |
| Germany | — | 0% | 0% | Administrative |
| Luxembourg | — | 0% | 0% | Fund domicile |
| France | — | 0-5% | 0% | Complex rules |
| Spain | — | 5-10% | 5% | Less favorable |
| Italy | — | 5-8% | 5% | Less favorable |
Legal Considerations:
| Factor | Typical Structure | European Implications |
|---|---|---|
| Governing law | New York | Different legal tradition |
| Dispute resolution | US courts/arbitration | Enforcement complexity |
| UCC filings | US-based | Unfamiliar to EU counsel |
| Bankruptcy priority | US Chapter 11 expertise | Specialized knowledge needed |
| Due diligence | US deal rooms | Remote access challenges |
Sidley Austin and Goodwin have developed specialized practices in this area.
Geographic Concentration of Deal Flow
| US Biotech Hub | Companies | VC Investment (2024) | Lab Space | Key Institutions |
|---|---|---|---|---|
| Boston/Cambridge | 1,200+ | $7.89B | 40M+ sq ft | Harvard, MIT, MGH, Dana-Farber |
| San Francisco Bay | 800+ | $5B+ | 50.6M sq ft | Stanford, UCSF, Genentech |
| New York/NJ | 500+ | $2B+ | 25M+ sq ft | MSK, Columbia, NYU |
| San Diego | 400+ | $1.5B+ | 15M+ sq ft | Scripps, UCSD, Illumina |
| Research Triangle | 200+ | $800M+ | 10M+ sq ft | Duke, UNC, NC State |
| Seattle | 150+ | $600M+ | 8M+ sq ft | Fred Hutch, UW |
European Biotech Clusters (Comparison):
| European Hub | Companies | VC Investment (2024) | Gap vs. Boston |
|---|---|---|---|
| London/Oxford/Cambridge | 400+ | €2B+ | 4x smaller |
| Basel/Zurich | 250+ | €1B+ | 8x smaller |
| Munich | 150+ | €500M+ | 16x smaller |
| Paris/Ile-de-France | 200+ | €800M+ | 10x smaller |
| Copenhagen/Medicon Valley | 200+ | €600M+ | 13x smaller |
| Amsterdam/Netherlands | 150+ | €400M+ | 20x smaller |
European firms active in US life sciences typically establish Boston or San Francisco offices:
| European Firm | HQ | US Office(s) | Purpose |
|---|---|---|---|
| Novo Holdings | Denmark | Boston, SF | Deal sourcing, board seats |
| HBM Healthcare | Switzerland | Boston | Portfolio management |
| Forbion | Netherlands | Boston | US investments |
| Medicxi | Switzerland | Boston | US-focused strategy |
| Sofinnova | France | SF, Boston | Global presence |
| LSP | Netherlands | US network | Deal flow access |
Investment Consultant Influence
Investment consultants — Mercer, Willis Towers Watson, Aon, Cambridge Associates — advise on roughly two-thirds of institutional assets in Europe.
| Consultant Requirement | Typical Standard | Impact on Royalty Funds |
|---|---|---|
| Track record | 3+ years minimum | New strategies excluded |
| AUM minimum | $500M+ for coverage | Small managers excluded |
| Database inclusion | Performance verification | Limited coverage |
| Sector expertise | Generalist coverage | Specialized knowledge gap |
| Peer comparisons | Standard benchmarks | No established peer group |
| Manager meetings | Annual on-sites | US travel required |
| Reference calls | 3+ institutional LPs | Chicken-and-egg problem |
| ESG requirements | Full framework | Royalty ESG unclear |
Consultant Database Coverage:
| Database | Pharma Royalty Funds Listed | Coverage Depth |
|---|---|---|
| Preqin | 5-10 | Limited |
| PitchBook | 10-15 | Partial |
| Cambridge Associates | 3-5 | Selective |
| Mercer | <5 | Minimal |
| eVestment | <5 | Minimal |
European Pension Fund Alternatives Allocations
| Fund | Country | AUM | Alternatives % | Royalty Exposure | Notes |
|---|---|---|---|---|---|
| APG | Netherlands | €430B+ | ~30% | Opportunity fund includes pharma | Leading alternatives allocator |
| Railpen | UK | £34B | 30-40% illiquidity | Life sciences incl. Oxford Nanopore | "Good assets find a home" |
| ATP | Denmark | DKK 925B | Diversified | No dedicated royalty | Risk parity approach |
| AP6 | Sweden | SEK 75B | PE specialist | No royalty focus | Nordic PE focus |
| PFZW | Netherlands | €250B+ | ~25% | Limited | Healthcare sector pension |
| USS | UK | £90B+ | ~20% | Unknown | University sector |
| Nest | UK | £40B+ | Growing | None | DC scheme, growing |
| PKA | Denmark | DKK 400B+ | ~15% | None | Healthcare/social workers |
APG's opportunity fund holds an eclectic mix including pharmaceutical royalties, music rights, and catastrophe bonds, demonstrating that some European institutions have found pathways to the asset class.
Regulatory Framework: Solvency II
For European insurance companies, Solvency II capital requirements affect investment decisions:
| Asset Class | Standard Formula Charge | Duration/Type Adjustment | Notes |
|---|---|---|---|
| EU Government Bonds (AAA) | 0% | Varies by duration | Risk-free baseline |
| Corporate Bonds (BBB, 5yr) | 9% | Duration-based | Spread risk charge |
| Corporate Bonds (BB, 5yr) | 23% | Duration-based | Higher for sub-IG |
| Listed Equities (EEA) | 39% | Type 1 | Symmetric adjustment |
| Listed Equities (non-EEA) | 49% | Type 2 | Higher charge |
| Unlisted Equities | 49% + adjustment | Type 2 | Illiquidity premium unclear |
| Pharmaceutical Royalties | 49-59% likely | Type 2 probable | No specific treatment |
| Qualifying Infrastructure Equity | 30% | Preferential | Explicit carve-out |
| Qualifying Infrastructure Debt | Reduced spread | Preferential | Explicit carve-out |
| Real Estate | 25% | Property risk | Direct holdings |
| Private Equity (diversified) | 39-49% | Depends on structure | Fund look-through possible |
Recent Solvency II amendments effective January 2026:
| Reform | Effect | Potential Royalty Impact |
|---|---|---|
| Long-term equity treatment | 22% charge for 5+ year holds | Possible reduction if qualifying |
| Matching adjustment expansion | Broader asset eligibility | Royalty streams may qualify |
| Risk margin reduction | Lower overall capital | Indirect benefit |
| Fundamental spread recalculation | More realistic spreads | Neutral |
Pension Fund Quantitative Limits by Country
| Country | Pension Type | Alternatives Limit | Specific Constraints | Royalty Implication |
|---|---|---|---|---|
| Germany | Pensionskassen | 7.5% AIF cap | Additional real estate limits | Binding for small allocations |
| Germany | Pensionsfonds | 35% alternatives | More flexible | Meaningful allocation possible |
| Switzerland | Occupational (BVG) | 15% + 10% infrastructure | Current avg ~10% | Room to grow |
| Netherlands | Occupational | No quantitative limit | Prudent person | Allocation discretion |
| UK | DB schemes | No quantitative limit | Prudent person | Allocation discretion |
| UK | DC schemes | No quantitative limit | Liquidity practical | Daily dealing challenge |
| Sweden | AP buffer funds | 40-50% illiquidity cap | Post-2019 reforms | Meaningful allocation possible |
| Denmark | ATP/labor market | No quantitative limit | Prudent person | Allocation discretion |
| France | PERP/PERCO | Tight restrictions | Insurance-like rules | Limited flexibility |
| Italy | Fondi pensione | 20% alternatives | Developing market | Growing interest |
European Public Institutions as Limited Partners: The EIF and EIB Model
European public institutions have built substantial infrastructure for venture capital and alternative finance investment. Understanding this existing framework provides context for considering how pharmaceutical royalty financing might develop in Europe.
The European Investment Fund: Europe's Largest LP
The European Investment Fund (EIF) stands as Europe's largest institutional limited partner:
| Metric | Value | Period | Source |
|---|---|---|---|
| Total AUM | €143.7 billion | 2024 | EIF reports |
| VC/PE funds backed | ~700 since 1997 | Cumulative | EIF data |
| Active fund partnerships | ~600 | Current | EIF data |
| 2024 financing volume | €14.4 billion | Annual | 2024 |
| 2024 equity investments | €7+ billion | Annual | 2024 |
| New intermediaries (2024) | 96 | Annual | 2024 |
| Capital catalyzed | ~€53 billion | Cumulative with co-investment | Leverage calculation |
| Green investments (2024) | €6.1 billion | 43% of total | EU taxonomy |
EIF Ownership Structure
| Shareholder | Stake | Role |
|---|---|---|
| European Investment Bank | 58.5% | Majority owner |
| European Commission | 29.7% | EU budget channel |
| Financial Institutions | 11.8% | Banks, development institutions |
EIF Recent Large Fund Commitments
| Fund | Manager | EIF Commitment | Total Target | Focus | Year |
|---|---|---|---|---|---|
| Kembara Fund I | Mundi Ventures | €350M | €1B | Deep tech, climate | 2024 |
| European Tech Champions Initiative | EIF-managed | €3.75B initial | €10B mobilized | Late-stage growth | 2023 |
| Indico Capital Partners | Indico | €30M | €125M | Portuguese tech | 2024 |
| PSV Hafnium | PreSeed Ventures | €24.8M | Undisclosed | Danish deep tech | 2024 |
| Sofinnova Industrial Biotech | Sofinnova | €50M+ | €200M+ | Industrial biotech | 2023 |
| Amadeus Capital Partners | Amadeus | €40M+ | €300M+ | Deep tech | 2024 |
EIF Allocation Framework
| Category | Share of Funding | Description | Manager Profile |
|---|---|---|---|
| Market Developer | ~12.5% | Strategic gaps | First-time, emerging |
| Established Funds | ~70% | Proven capability | Partially unrealized track record |
| Best Performers | ~17.5% | Top returns | Top quartile consistently |
EIF Sector Allocation
| Sector | Share of VC Portfolios | Estimated Commitment | Notes |
|---|---|---|---|
| ICT/Technology | ~45% | ~€6B cumulative | Largest allocation |
| Life Sciences | ~22% | ~€2.5B cumulative | Second largest |
| Industrial Tech | ~9% | ~€1B cumulative | Manufacturing, materials |
| Generalist | ~24% | ~€3B cumulative | Multi-sector |
| Green/Climate (2024) | 43% of annual | €6.1B (2024 only) | Growing priority |
EIF Regional Programs
| Program | Countries | Size | Focus | EIF Role |
|---|---|---|---|---|
| ERP-EIF Facility | Germany | €4.6B deployed | 120+ funds, 3,000 SMEs | Cornerstone LP |
| Dutch Venture Initiative | Netherlands | €400M+ | Dutch tech ecosystem | Anchor investor |
| Baltic Innovation Fund | Estonia, Latvia, Lithuania | €200M+ | Baltic startups | Catalyst |
| Portugal Venture Capital Initiative | Portugal | €150M+ | Portuguese tech | Development role |
| Greek EquiFund | Greece | €400M+ | Post-crisis recovery | Rehabilitation |
| Central Europe FoF | CEE region | €300M+ | Regional development | Gap filling |
EIF Life Sciences Investment
EIF holds position as the largest investor in European life sciences venture capital:
| Metric | Value | Notes |
|---|---|---|
| Cumulative life sciences commitments | ~€2 billion | Since 1997 |
| Annual life sciences investment | ~€300 million | Recent years |
| Coverage of European life sciences VC | Nearly 100% of major funds | Comprehensive |
| Life sciences performance | 1.86x average multiple | vs. 1.59x for IT |
| Number of life sciences funds backed | 50+ | Active relationships |
EIF Life Sciences Fund Commitments (Selected)
| Fund | Manager | Size | EIF Role | Vintage |
|---|---|---|---|---|
| Forbion Fund IV | Forbion | €550M | Major LP | 2019 |
| Forbion Fund V | Forbion | €700M+ | Major LP | 2022 |
| Medicxi Growth 1 | Medicxi | $300M | Cornerstone (with Novartis, Verily) | 2017 |
| LSP Health Economics Fund 2 | LSP | €280M | Anchor | 2019 |
| Indaco Bio Fund | Indaco | €95M first close, €150M target | Joint CDP-EIF | 2022 |
| Gilde Healthcare V | Gilde | €400M+ | Major LP | 2021 |
| Kurma Partners III | Kurma | €150M+ | Major LP | 2020 |
| Andera Life Sciences | Andera | €200M+ | Major LP | 2021 |
| Sofinnova Capital | Sofinnova | €500M+ | Long-term partner | Multiple |
The Venture Centre of Excellence launched in 2020 through EIT Health partnership as a pan-European public-private co-investment platform for healthcare VC.
EIB Venture Debt and Life Sciences Programs
The European Investment Bank operates complementary programs focused on direct lending and venture debt.
EIB Venture Debt Program Overview
| Metric | Value | Notes |
|---|---|---|
| Program launch | 2016 | Direct venture debt |
| Ticket size | €5-50 million | €50M+ for larger companies |
| 2024 deployment | €980 million | Across 35 startups |
| Market position | #2 in Europe | After HSBC Innovation Banking |
| Life sciences portfolio | €3.5 billion | Across 135 projects |
| Loan tenor | 5-10 years typical | Longer than commercial |
| Pricing | Below market | Development mandate |
| Equity kickers | Sometimes | Warrants or conversion rights |
European Venture Debt Market Leaders (2024)
| Rank | Lender | Deal Count | Total Volume | Life Sciences Focus |
|---|---|---|---|---|
| 1 | HSBC Innovation Banking | 45+ | €1.2B+ | Significant |
| 2 | EIB | 35 | €980M | Strong |
| 3 | Kreos/BlackRock | 30+ | €800M+ | Moderate |
| 4 | Columbia Lake Partners | 20+ | €400M+ | Limited |
| 5 | Claret Capital | 15+ | €300M+ | Limited |
EIB Life Sciences Loans (Selected)
| Company | Country | Amount | Program | Year | Therapeutic Focus |
|---|---|---|---|---|---|
| BioNTech | Germany | €100M | InnovFin IDFF | 2019 | mRNA/Oncology |
| CureVac | Germany | €75M | InnovFin IDFF | 2019 | mRNA vaccines |
| IO Biotech | Denmark | €57.5M | Venture debt | 2021 | Immuno-oncology |
| Immunic | Germany | €24.5M | InnovFin IDFF | 2020 | Autoimmune |
| ExeVir | Belgium | €25M | InnovFin IDFF | 2021 | Antivirals |
| Leyden Labs | Netherlands | €20M | HERA Invest | 2025 | Pandemic prep |
| Galapagos | Belgium | €60M | Research facility | 2020 | Drug discovery |
| Evotec | Germany | €75M | Platform | 2019 | Drug discovery |
| Zealand Pharma | Denmark | €45M | Development | 2021 | Peptide therapeutics |
| Affimed | Germany | €30M | Development | 2020 | Immuno-oncology |
InnovFin and InvestEU Programs
| Program | Period | EU Contribution | Total Supported | Focus Areas |
|---|---|---|---|---|
| InnovFin | 2014-2020 | ~€2.7B guarantee | ~€24B | R&I financing |
| InnovFin SME Guarantee | 2014-2020 | €500M+ | €8B+ loans | SME lending |
| InnovFin IDFF | 2014-2020 | ~€700M (expanded COVID) | €479.5M deployed | Infectious diseases |
| InvestEU | 2021-2027 | €26.2B guarantee | €372B target | Successor program |
| InvestEU SME Window | 2021-2027 | €6.9B | €94B target | SME access |
| InvestEU Research Window | 2021-2027 | €6.6B | €70B target | R&I investments |
InvestEU Guarantee Structure
| Window | Guarantee Amount | Target Leverage | Investment Focus |
|---|---|---|---|
| Sustainable Infrastructure | €9.9B | 13.7x | Green, digital, transport |
| Research, Innovation, Digitalization | €6.6B | 10.6x | R&D, tech transfer |
| SME | €6.9B | 13.6x | Access to finance |
| Social Investment | €2.8B | 7.9x | Skills, social enterprises |
| Total | €26.2B | 14.2x avg | €372B target |
The BioTechEU Initiative
The BioTechEU initiative launched in December 2025 represents the largest dedicated European public commitment to life sciences financing:
| Metric | Value |
|---|---|
| Mobilization target | €10 billion |
| Timeframe | 2026-2027 |
| Lead institutions | European Commission, EIB Group |
| Focus areas | Gene therapies, mRNA, personalized medicine, AI solutions |
| Instruments | Blended finance, guarantees, equity, debt |
| Private co-investment target | €7B+ (70%) |
| Announced | December 2025 |
BioTechEU Components:
| Component | Institution | Estimated Size | Mechanism |
|---|---|---|---|
| Equity investments | EIF | €1-2B | Fund commitments |
| Venture debt | EIB | €1-2B | Direct lending |
| Guarantees | InvestEU | €2-3B | Risk sharing |
| Grants | Horizon Europe | €1-2B | Non-dilutive |
| National co-investment | Member States | €2-3B | Matching |
National Promotional Banks
National promotional banks operate alongside EIF with substantial complementary capital for venture investment.
KfW Capital (Germany)
| Metric | Value | Notes |
|---|---|---|
| Founded | 2018 | KfW subsidiary |
| Funds backed | 132 | As of December 2024 |
| Total committed | €2.5 billion | Cumulative |
| Annual deployment | €400-500 million | Recent years |
| Life sciences allocation | 22% | ~€550 million |
| Leverage ratio | 4x | Portfolio fund deployment in German cos |
| Team size | 30+ investment professionals | Growing |
KfW Capital Programs:
| Program | Size | Focus | Structure |
|---|---|---|---|
| GFF-EIF Growth Facility | Up to €3.5B | Growth equity | EIF-managed, KfW co-invest |
| Zukunftsfonds | €10B | Government initiative | Coordination role |
| Green Transition Facility | €100M | Climate tech | 7 funds committed |
| Impact Facility | €200M | Impact VC | ESG-focused |
| Scale-up Direkt | €1B | Direct co-investments | Launched Dec 2024 |
| Emerging Manager Facility | €100M+ | Diverse managers | New teams |
| ERP-VC Fund Investment | €500M+ annual | Early-stage | Ongoing program |
KfW Capital Sector Allocation:
| Sector | Allocation % | Estimated Amount | Key Funds |
|---|---|---|---|
| Software/IT | 35% | ~€875M | Various |
| Life Sciences | 22% | ~€550M | Forbion, Wellington, others |
| Industrial Tech | 18% | ~€450M | Climate, manufacturing |
| Fintech | 10% | ~€250M | Payment, insurtech |
| Other | 15% | ~€375M | Diversified |
Bpifrance (France)
| Metric | Value | Notes |
|---|---|---|
| VC fund commitments | €5 billion to 160 funds | 2013-2022 |
| Partner fund leverage | €27B raised | 5.4x multiplier |
| Annual commitments | €900M+ | Recent years |
| HealthTech investment | €5.5B+ | Since 2021 |
| Direct investments | €2B+ annually | Growth equity |
| Team size | 3,000+ | Full organization |
Bpifrance Life Sciences Programs:
| Program | Size | Focus | Key LPs |
|---|---|---|---|
| InnoBio 2 | €203M target | Biotech VC | Sanofi, Boehringer, EIF |
| Biotech/Medtech VC Funds | €150M | Medtech | Bpifrance anchor |
| Rare Diseases Fund | €50M | Orphan drugs | Specialized |
| Large Venture Fund | €1-2.5B | Late-stage | Bpifrance, institutional |
| Digital Venture | €200M+ | Digital health | Cross-sector |
| French Tech Sovereignty | €150M | Strategic tech | Government priority |
Bpifrance Investment Vehicles:
| Vehicle | Type | Size | Focus |
|---|---|---|---|
| Bpifrance Investissement | Direct equity | €15B+ portfolio | Growth, mid-cap |
| Bpifrance Participations | Strategic holdings | €20B+ | National champions |
| Fond de Fonds | LP commitments | €5B+ | VC/PE ecosystem |
| Innovation funds | Thematic | €1B+ | Deep tech, biotech |
British Business Bank
| Metric | Value | Notes |
|---|---|---|
| Equity funds backed | 71+ | Since 2014 |
| Total committed | £1.8 billion | Cumulative |
| ECF Programme | £1.36B deployed | 36 funds, 600+ businesses |
| Life Sciences Investment Programme | £150M committed | 3 specialist growth funds |
| LSIP leverage | £689M private | Exceeded £400M target |
| Future Fund | £1.14B | COVID response |
| Breakthrough fund | £375M | Scale-up focus |
British Business Bank Programs:
| Program | Size | Focus | Structure |
|---|---|---|---|
| Enterprise Capital Funds | £1.36B | Early-stage | 2:1 leverage |
| LSIP | £150M | Life sciences growth | Specialist managers |
| Regional Angels Programme | £100M+ | Angel co-investment | Regional focus |
| Future Fund: Breakthrough | £375M | Scale-up | Direct + fund |
| Northern Powerhouse | £400M+ | Regional | Northern England |
| Midlands Engine | £100M+ | Regional | Midlands |
| Managed Funds | £300M+ | VC access | FoF structure |
Brexit Impact on UK Venture:
| Period | EIF UK Investment | % of UK VC | Notes |
|---|---|---|---|
| 2011-2015 | €2.3B | 37% | Peak EIF involvement |
| 2016-2019 | Declining | <20% | Post-referendum freeze |
| 2020+ | Minimal | <5% | Brexit completed |
| BBB response | +£1B+ capacity | Expansion | Gap filling |
CDP Venture Capital (Italy)
| Program | Size | Focus | Partners |
|---|---|---|---|
| VenturItaly FoF | €400M target | 19 Italian VC funds | CDP anchor |
| VenturItaly II FoF | €475M first close | Second fund of funds | Expanded |
| CDP-EIF Tech Transfer | €260M joint | Deep tech startups | €130M each |
| Indaco Bio Fund | €95M→€150M | First Italian biotech TT fund | Joint EIF |
| Accelerators Fund | €200M | Startup support | Ecosystem |
| Corporate Partners | €500M+ | CVC co-investment | Industrial partners |
National Promotional Bank Comparison
| Institution | Country | VC Committed | Life Sciences % | EIF Coordination |
|---|---|---|---|---|
| KfW Capital | Germany | €2.5B | 22% | GFF-EIF, co-investment |
| Bpifrance | France | €5B+ | 15-20% | InnoBio, InvestEU |
| British Business Bank | UK | £1.8B | 8-10% (LSIP) | Post-Brexit limited |
| CDP Venture Capital | Italy | €1.5B+ | 5-10% | Tech Transfer Partnership |
| CDTI/ICO | Spain | €500M+ | 10% | InvestEU |
| Invest-NL | Netherlands | €400M | 15% | Growing |
| Vaekstfonden | Denmark | DKK 5B+ | 10-15% | Nordic coordination |
| Almi Invest | Sweden | SEK 3B+ | 10% | Nordic coordination |
EIF Precedents for New Asset Classes
EIF has expanded into new asset classes throughout its history, demonstrating institutional capacity for product development:
| Initiative | Launch | Initial Size | Current Scale | Innovation Type |
|---|---|---|---|---|
| Social Impact Accelerator | 2013 | €60M | €243M by 2014 | First pan-European social impact FoF |
| Social Impact Bonds | 2015 | Pilot | €26M+ deployed | Outcome-based financing |
| Secondaries Program | 2016 | Pilot | 14+ transactions | LP-led and GP-led |
| Infrastructure Debt Funds | 2018 | Pilot | €405M committed | Private debt for infra |
| Defence Equity Facility | 2024 | €175M | Active | Security/defence tech |
| Green Private Credit FoF | 2025 | €200M target | Launching | First private debt FoF for climate |
| ESCALAR | 2020 | €300M | Active | Scale-up co-investment |
Asset Class Development Pattern:
| Phase | Activities | Duration | Example |
|---|---|---|---|
| 1. Policy priority identification | EU strategic agenda alignment | 1-2 years | Defence recognized as priority |
| 2. Market gap analysis | Feasibility study, consultations | 6-12 months | Defence VC gap documented |
| 3. Mandate design | Commission/Member State negotiation | 12-18 months | InvestEU window allocation |
| 4. Pilot program | EIF own funds, limited scale | 2-3 years | Initial €175M |
| 5. Scale-up | EU guarantee backing, expansion | Ongoing | Potential expansion |
The ETCI Model for New Initiatives
The European Tech Champions Initiative demonstrates how new programs can mobilize substantial resources:
| Contributor | Commitment | Announcement |
|---|---|---|
| France | €1 billion | January 2022 |
| Germany | €1 billion | January 2022 |
| Spain | €1.3 billion | December 2022 |
| Italy | €150 million | 2023 |
| Belgium | €100 million | 2023 |
| EIF | €200 million | 2023 |
| Total Initial | €3.75 billion | — |
| Total Mobilized | €10 billion | Including private |
This model — assembling willing Member State coalitions around strategic priorities — could potentially apply to other asset class initiatives.
EIB Green Bond Precedent
EIB pioneered the green bond market with Climate Awareness Bonds in 2007:
| Milestone | Year | Significance |
|---|---|---|
| First Climate Awareness Bond | 2007 | Market creation |
| Green bond principles development | 2014 | Standardization |
| EIB CAB cumulative | 2024 | €50B+ issued |
| Global GSS market | 2024 | €2.2 trillion |
How European Fund Structures Could Work for Royalty Investment
European fund structures can be configured to invest in biopharma royalty streams. Several frameworks are available.
Available Fund Structures Comparison
| Structure | Jurisdiction | Investor Access | Regulatory Approval | Key Features |
|---|---|---|---|---|
| RAIF | Luxembourg | Professional only | No CSSF approval | AIFM-managed, fast setup |
| SIF | Luxembourg | Professional only | CSSF-regulated | Flexible, established |
| SCSp | Luxembourg | Professional only | Partnership | Tax transparent |
| ELTIF 2.0 | EU-wide | Retail + institutional | EU passport | IP explicitly eligible |
| QIAIF | Ireland | Professional only | Central Bank | Flexible strategies |
| ICAV | Ireland | Varies by sub-fund | Umbrella | Used by Royalty Pharma |
| PAIF | UK | Professional + retail | FCA authorized | UK distribution |
| REIT (UK) | UK | Public + institutional | HMRC approval | Tax efficient |
ELTIF 2.0 Opportunity for Royalty Funds
The ELTIF framework, reformed in 2024, explicitly cites intellectual property (patents, etc.) as a form of real asset:
| ELTIF 2.0 Feature | Specification | Royalty Fund Relevance |
|---|---|---|
| IP as eligible real asset | Article 11(1)(f) | Direct royalty investment permitted |
| Retail investor access | With safeguards | Democratized distribution |
| EU marketing passport | Full | Cross-border fundraising |
| Eligible asset minimum | 55% (down from 70%) | Portfolio construction flexibility |
| Diversification requirements | Reduced | Concentrated portfolios possible |
| Minimum investment | €1,000 retail (down from €10,000) | Accessibility |
| Redemption rights | Semi-liquid options | Investor liquidity |
| Life insurance wrapper | Permitted | Tax-efficient access |
Potential ELTIF Royalty Fund Structure:
| Component | Specification |
|---|---|
| Domicile | Luxembourg |
| Manager | AIFM-authorized |
| Target size | €500M - €1B |
| Investor base | Institutional + qualified retail |
| Asset allocation | 60% pharma royalties, 40% other IP |
| Distribution | EU-wide via passport |
| Liquidity | Quarterly with gates |
| EIF anchor | Potential cornerstone |
Royalty Pharma's European Structure
Royalty Pharma uses European structures for efficiency:
| Entity | Structure | Jurisdiction | Purpose |
|---|---|---|---|
| Royalty Pharma plc | PLC | England/Wales | Listed holding company |
| RP Holdings | LP | Delaware | US structure |
| Royalty Pharma Investments 2019 ICAV | ICAV | Ireland | Royalty asset pool |
| Operating subsidiaries | Various | Multiple | Asset acquisition |
Key Structural Features:
| Feature | Benefit | Mechanism |
|---|---|---|
| English incorporation | NASDAQ listing | First "UP-C" structure |
| Irish ICAV | Tax efficiency | EU treaty network |
| Delaware LP | US operations | Domestic structure |
| PFIC treatment | US investor access | Elective |
| ICA Exception | Regulatory relief | Investment company exemption |
The 2020 IPO was the first-ever "UP-C" listing of an English company on NASDAQ, raising $2.2 billion.
Potential Role for Development Banks in Royalty Financing
Given EIF and EIB track records in building new alternative asset class capabilities, questions arise about whether similar approaches could apply to pharmaceutical royalty financing.
Current Program Scope vs. Royalty Financing
| Characteristic | Current EIF/EIB Focus | Pharmaceutical Royalty Funds | Gap |
|---|---|---|---|
| Investment type | Equity/debt in operating companies | Purchase of income streams | Different |
| Final recipients | SMEs, mid-caps | Often larger institutions | Misaligned |
| Capital use | Growth, R&D, expansion | Monetization of existing IP | Different purpose |
| Impact metrics | Jobs, companies financed | Less direct measurement | Harder to quantify |
| Mandate alignment | Core to mission | Indirect relationship | Requires framing |
| Deal flow | European companies | US-concentrated | Geographic gap |
Potential Alignment Arguments
| Argument | Rationale | Precedent |
|---|---|---|
| European biotech competitiveness | Retain royalty value in EU capital markets | Defence Equity Facility |
| Non-dilutive financing options | Expand choices beyond US investors | Various SME programs |
| Research reinvestment | Monetization funds continued research | LifeArc model |
| Financial sector development | Build EU expertise in specialized finance | ETCI for growth equity |
| Strategic autonomy | Reduce US financial dependence | Defence, semiconductors |
| Innovation ecosystem | Complete funding lifecycle | Venture debt expansion |
Potential Development Bank Mechanisms
| Mechanism | How It Could Work | Precedent | Estimated Scale |
|---|---|---|---|
| Anchor commitments | €200-500M cornerstone in royalty fund | ETCI, life sciences VC | €200-500M |
| First-loss tranches | InvestEU guarantee on junior piece | EFSI private credit | €100-200M guarantee |
| Co-investment facilities | Direct participation in larger deals | Scale-up Direkt | €100-300M |
| Technical assistance | Royalty expertise development | InvestEU Advisory Hub | €5-10M |
| Guarantee structures | Risk sharing with commercial LPs | InnovFin model | €200-500M capacity |
| National coordination | Member State coalition building | ETCI model | €500M-1B combined |
Precedent Pathway: Following Defence Equity Facility Model
| Phase | Defence Facility | Hypothetical Royalty Facility |
|---|---|---|
| Policy trigger | EU strategic autonomy agenda | Competitiveness/innovation agenda |
| Gap identification | No EU defence VC ecosystem | No EU royalty investor base |
| Mandate creation | InvestEU allocation | InvestEU review or next MFF |
| First-time manager support | Explicitly included | Would need similar |
| Size | €175M initial | €200-500M potential |
| Structure | VC, PE, private debt funds | Royalty-focused funds |
Current Gap Assessment
| Asset Class | EIF/EIB Support | Current Status |
|---|---|---|
| Venture capital | Extensive | €2B+ life sciences |
| Venture debt | Growing | €3.5B life sciences |
| Growth equity | Expanding | ETCI €10B |
| Infrastructure debt | Established | €405M committed |
| Social impact | Established | €26M+ SIBs |
| Secondaries | Active | 14+ transactions |
| Defence tech | New | €175M |
| Royalty financing | None | Gap identified |
2024-2025: What Actually Happened
The 2024-2025 period produced significant market developments that shifted the landscape — though not in the direction of European fund management emergence. Instead, US market dominance consolidated further while European capital participation grew through American-managed vehicles.
KKR Acquires Healthcare Royalty Partners: Reshaping the Competitive Landscape
On July 30, 2025, KKR announced the completion of its majority stake acquisition in Healthcare Royalty Partners, adding approximately $3 billion in assets under management to the private equity giant's asset-based finance portfolio. The transaction brought HCRx into KKR's fold as its 19th origination platform, alongside aviation finance (Altavair), equipment leasing (Dawsongroup), and music royalties (HarbourView).
| Aspect | Details |
|---|---|
| Buyer | KKR |
| Target | Healthcare Royalty Partners (majority stake) |
| HCRx AUM | ~$3 billion added to KKR |
| HCRx deployed since inception | $7+ billion |
| Products financed | 110+ across 10 therapeutic areas |
| KKR healthcare AUM | $20B+ post-transaction |
| Market rationale | Could "double or triple in 3-5 years" |
| Team continuity | CEO Clarke Futch retained with substantial minority stake |
| European presence | London office since September 2017 |
HCRx, founded in 2006 and headquartered in Stamford, Connecticut, occupies the mid-market segment, typically executing deals in the $20-200 million range — positioning it differently from Royalty Pharma's blockbuster focus.
The strategic rationale centers on three synergies. First, royalty and royalty-related debt financing represents less than 5% of total biopharma capital needs, indicating significant growth opportunity. Second, integration with KKR's Global Atlantic insurance platform provides access to lower-cost capital for competitive deal-making. Third, HCRx origination will feed KKR's recently closed $6.5 billion Asset-Based Finance Partners II fund.
Post-acquisition deal activity:
| Deal | Date | Value | Target |
|---|---|---|---|
| Nanobiotix | October 2025 | $71M | NBTXR3 royalty |
| BridgeBio European royalty | July 2025 | $300M (with Blue Owl) | BEYONTTRA European royalty (60%) |
The KKR backing could accelerate European expansion by enabling HCRx to compete more aggressively with Royalty Pharma and Blackstone on larger transactions. Managing Director Paul Hadden leads European operations from London, serving both deal sourcing and investor relations.
Partners Group Launches Multi-Sector Royalty Platform
Partners Group unveiled private markets royalties as its fifth asset class in May 2024, positioning itself as creator of "the industry's first dedicated, scalable multi-sector royalty strategy." Unlike pure-play healthcare royalty funds, Partners Group's approach spans pharmaceuticals, entertainment, energy transition, sports, and brands.
| Metric | Details |
|---|---|
| Firm AUM | $174 billion (June 2025) |
| Asset class designation | Fifth (alongside PE, infrastructure, RE, credit) |
| Strategy description | "First dedicated, scalable multi-sector royalty strategy" |
| Target return | 10% net |
| Portfolio composition | 30 investments |
| Sectors | Entertainment, pharmaceuticals, energy, sports, brands |
| Track record inception | Q4 2020 via PG3 AG (founders' family office) |
Stephen Otter leads the strategy. Early results show a gold royalty portfolio acquired in 2022 and sold in 2024 delivering 43% gross IRR, 38% net IRR, and 1.8x gross TVPI.
Partners Group Royalty Timeline:
| Date | Development | Significance |
|---|---|---|
| May 2024 | Royalties launched as 5th asset class | First major European entrant |
| July 2024 | 30 investments transferred from PG3 AG | Initial portfolio |
| January 2025 | Institutional evergreen for Europe/ME/Asia | Institutional distribution |
| May 2025 | Private wealth fund | $10K minimum, 10% target return |
| September 2025 | US launch via Lincoln Financial | 60,000+ adviser distribution |
Partners Group describes royalties as "a portfolio diversifier, bridging the benefits of private equity and private credit investments, that can provide stable and attractive yields with an embedded inflation hedge and low correlation to other markets."
This represents the first major European alternative asset manager entering dedicated royalty investment — though the multi-sector approach differs significantly from pure-play pharmaceutical royalty funds like Royalty Pharma or HCRx.
European LP Participation Trends
Healthcare Royalty Partners fundraising demonstrates increasing European participation:
| Fund | Vintage | Non-US LP Share | Regions |
|---|---|---|---|
| Fund II | ~2011 | ~35% | Initial non-US |
| Fund III | 2014 | ~50% | Significant increase |
| Fund IV | 2020 | ~55% | Continued growth ($1.83B total) |
| Fund V | 2024 | 60%+ | Europe, ME, Asia Pacific |
HCRx describes Fund V participants as including "prominent pension funds, sovereign wealth funds and financial institutions" from Europe, Middle East, and Asia Pacific.
European LP Types Participating:
| LP Type | Examples | Typical Commitment |
|---|---|---|
| Sovereign wealth | GIC, ADIA, Mubadala | $100M+ |
| Large pensions | APG, PFZW | $50-100M |
| Insurance | Allianz, AXA | $25-75M |
| Family offices | Various | $10-50M |
| Fund of funds | Pantheon, HarbourVest | $25-50M |
UK Pension Reform: Commitments vs. Reality
The gap between UK pension reform commitments and actual execution illustrates the challenge of moving European capital into alternative asset classes — and explains why European royalty financing exposure remains limited.
The Mansion House Accord
The Mansion House Accord, signed May 13, 2025, expanded the previous year's Compact to 17 pension providers representing £252 billion in assets — approximately 90% of active defined contribution savers.
| Aspect | Details |
|---|---|
| Signatories | 17 pension providers (Aegon UK, Aviva, Legal & General, NEST, USS, etc.) |
| Assets represented | £252 billion (~90% of active DC savers) |
| Commitment | 10% to private markets by 2030 |
| UK allocation | At least 5% to UK assets |
| Mechanism | Voluntary with government "reserve power" |
| Mid-point review | 2027 |
The Execution Gap
| Metric | Target | Actual (Feb 2024) | Gap |
|---|---|---|---|
| Private markets allocation | 10% | 0.36% | 27x shortfall |
| Unlisted equities invested | — | £793 million | — |
| % of relevant assets | 10% | 0.36% | — |
As of February 2024, only £793 million (0.36%) of Compact signatories' relevant assets were invested in unlisted equities — far below the 10% target.
LGPS Consolidation Progress
Local Government Pension Scheme consolidation has progressed more concretely:
| Metric | Status |
|---|---|
| Original pools | 8 |
| Pools after March 2026 | 6 |
| Pools dispersed | ACCESS, Brunel |
| LGPS Central growth | £50B → £100B |
| Total LGPS assets | £402.3 billion (March 2025) |
| Assets pooled | 45% (£178B of £392B) |
| Further forced consolidation | Ruled out by minister |
UK Pension Healthcare Royalty Allocations (Identified)
Despite the execution gap at aggregate level, specific UK pension funds have made healthcare royalty allocations:
| Fund | Allocation | Strategy |
|---|---|---|
| Railpen | $1 billion (~3% of growth fund) | Exited music 2021, healthcare focus |
| Cumbria Pension Fund | $75 million | HCRx funds |
| Strathclyde | Confirmed | HCRx strategies |
| Scottish Borders | Confirmed | HCRx strategies |
| East Riding | Confirmed | HCRx strategies |
| Westmoreland and Furness | Confirmed | HCRx strategies |
Railpen's Craig Heron noted the firm has "additional headroom" for increased exposure but "not markedly so" — suggesting measured expansion rather than aggressive allocation growth.
British Business Bank Life Sciences Activity
The British Business Bank has been more directly active:
| Metric | Value |
|---|---|
| Life Sciences Investment Programme | £150M committed to 3 specialist growth funds |
| LSIP leverage | £689M private capital (exceeded £400M target) |
| Total life sciences commitments | £560M across 15 funds |
| SV8 Biotech commitment | $100M (December 2025) — largest single fund commitment |
EU Policy Initiatives: Ambitious Announcements, Limited Deployment
European Union policy has announced significant life sciences financing ambitions, but actual deployment into royalty-adjacent strategies remains absent.
The BioTechEU Initiative
The BioTechEU initiative, announced June 2025 by the European Commission and EIB Group, represents the largest dedicated European public commitment to life sciences financing:
| Metric | Value |
|---|---|
| Mobilization target | €10 billion |
| Timeframe | 2026-2027 |
| Lead institutions | European Commission, EIB Group |
| Focus areas | Gene therapies, mRNA, personalized medicine, AI solutions |
| Instruments | Blended finance, guarantees, equity, debt |
| Private co-investment target | €7B+ (70%) |
| Current status (Jan 2026) | Announced but not yet deployed |
Health Commissioner Olivér Várhelyi acknowledged that "under-investment is a major stumbling block for Europe's biotech companies." The EU Council has called for a life sciences investment fund, recognizing the funding gap versus US counterparts.
However, no financing has been deployed under the BioTechEU label as of January 2026, and notably, royalty financing structures remain absent from announced mechanisms.
Recent EIB Life Sciences Activity
EIB continues deploying through existing mechanisms:
| Company | Country | Amount | Date | Focus |
|---|---|---|---|---|
| MaaT Pharma | France | €37.5M | July 2025 | Microbiome biotech |
| Angelini JV | Italy | €150M (€75M EIB) | December 2024 | 7-10 biotech/medtech startups |
| Leyden Labs | Netherlands | €20M | 2025 | Pandemic preparedness |
The EIB Group set a record €89 billion in financing signed in 2024, with targets of €95 billion for 2025 and €100 billion for 2026.
EIF Life Sciences Investment
The European Investment Fund invested €757 million in life sciences and health in 2023, part of €3.1 billion in innovation overall. However, this flows through traditional venture capital equity and guarantees — not royalty arrangements.
| EIF Life Sciences Metric | Value |
|---|---|
| 2023 life sciences investment | €757M |
| Cumulative life sciences VC | ~€2 billion since 1997 |
| Coverage of European life sciences VC | Nearly 100% of major funds |
| Royalty fund commitments | None |
ELTIF 2.0 Adoption
ELTIF 2.0 adoption has been strong:
| Metric | Value |
|---|---|
| New ELTIFs in 2024 | 55 (more than double previous high) |
| Total authorized funds | 159 |
| Retail-accessible funds | 84 |
| Market volume | ~€20 billion |
| Luxembourg domiciled | 98 of 150 |
| Dedicated life sciences royalty ELTIFs | 0 |
The structure has been used primarily for private equity, infrastructure, and real estate. Despite ELTIF 2.0 explicitly citing intellectual property as eligible real assets (Article 11(1)(f)), no dedicated pharmaceutical royalty ELTIF has emerged.
European Institutional Investors: Cautious Approach to Royalty Strategies
European institutional investors demonstrate growing interest in royalty strategies but approach allocations cautiously, with most exposure flowing through US-managed vehicles rather than direct European fund launches.
Dutch Pension Giants
Dutch pension giants APG (€500+ billion) and PFZW (€248 billion) have not publicly disclosed commitments to dedicated pharmaceutical royalty funds, despite significant alternative asset allocations. Dutch funds tend to invest in listed securities including Royalty Pharma stock rather than private royalty funds.
APG's opportunity fund holds an eclectic mix including pharmaceutical royalties, music rights, and catastrophe bonds — demonstrating that some European institutions have found pathways to the asset class, though via broad mandates rather than dedicated royalty allocations.
Nordic Sovereign Wealth
Norges Bank Investment Management, managing the $1.9 trillion Government Pension Fund Global, does not invest in private equity per its mandate — precluding royalty fund participation entirely.
The Investment Thesis for European LPs
| Attraction | Description |
|---|---|
| Uncorrelated returns | Low correlation to public markets |
| Predictable income | From medically necessary approved drugs |
| Defensive characteristics | Through economic cycles |
| Inflation protection | Potential hedge |
| Liability matching | Suitable for pension obligations |
Barriers to European LP Participation
| Barrier | Impact |
|---|---|
| Solvency II capital charges | 49-59% for royalties (Type 2) vs 0% government bonds |
| Consultant coverage | Limited (Preqin <15 funds listed) |
| Track record requirements | 3+ years minimum, no EU-managed funds qualify |
| Deal sourcing concentration | US-based, requiring Boston/NY presence |
| Expertise gap | Limited analyst/deal professional pool in Europe |
Public Market Exposure
Royalty Pharma (NASDAQ: RPRX) provides an alternative pathway:
| Metric | Value |
|---|---|
| Institutional shareholders | 928 |
| Institutional ownership | 70% |
| European holders | Baillie Gifford & Co, Swedbank AB |
| Primary exposure route | Passive index inclusion (BlackRock, Vanguard) |
Conditions for Market Development
For pharmaceutical royalty investment to expand in Europe, several developments would be relevant:
| Condition | Current Status | Required Development | Pathway |
|---|---|---|---|
| Consultant coverage | Limited | Database inclusion, research | Partners Group vehicle may catalyze |
| Track record | No EU-managed funds | 3+ year performance | Partnership or recruitment |
| Deal sourcing | US-concentrated | Boston/NY presence | Office establishment |
| Policy engagement | No EIF mandate | InvestEU review | Advocacy, coalition |
| Regulatory treatment | Solvency II Type 2 | Clarification or carve-out | Industry engagement |
| Institutional allocation | Via US managers | Direct EU fund launches | Manager emergence |
| Talent pool | Limited | Analyst/deal professional development | Training, recruitment |
| Legal expertise | US-focused | EU law firm capabilities | Practice development |
Timeline Scenarios
| Scenario | Probability | Key Developments | Timeframe |
|---|---|---|---|
| Continued US dominance | 60% | EU capital via US managers | Status quo |
| Partners Group scaled success | 25% | EU manager establishes category | 3-5 years |
| EIF pilot program | 10% | Development bank entry | 5-7 years |
| EU royalty fund ecosystem | 5% | Multiple EU managers | 7-10 years |
Conclusion: Why No European Royalty Pharma — And What Would Need to Change
Pharmaceutical royalty financing developed in North America and has remained concentrated there for reasons that became clearer in 2024-2025. The Bayh-Dole Act created concentrated university royalty streams. Canadian tax structures enabled early fund formation. US biotech ecosystem growth provided deal flow. And critically, the infrastructure gaps identified in this analysis remain largely unaddressed.
The 2024-2025 Reality Check
The developments of 2024-2025 answer the question of what actually happened versus what policy frameworks proposed:
| What Was Proposed | What Actually Happened |
|---|---|
| UK 10% private markets by 2030 | 0.36% actual allocation |
| BioTechEU €10B mobilization | Announced but not deployed |
| European royalty fund emergence | Partners Group multi-sector only |
| ELTIF 2.0 for royalties | 55 new ELTIFs, zero royalty-specific |
| EIF/EIB royalty mandate | No movement |
Key Statistics Summary
| Metric | Value |
|---|---|
| Global pharma royalty market | $50B+ |
| 2020-2024 deployment | $29.4B |
| European biotech deal participation | 20%+ of global transactions |
| Top 3 firm market share | ~71% |
| EIF total AUM | €143.7B |
| EIF life sciences VC | €2B cumulative |
| EIB life sciences debt | €3.5B portfolio |
| BioTechEU target | €10B (2026-2027) — not yet deployed |
| EIF royalty fund commitments | None |
| UK Mansion House target vs. actual | 10% vs 0.36% |
| Partners Group royalty strategy | Launched May 2024 |
| KKR/HCRx acquisition | July 2025 |
The Fundamental Asymmetry Persists
The 2024-2025 period brought significant developments — but not in the direction of European fund management emergence:
- KKR's acquisition of Healthcare Royalty Partners consolidated US market dominance with institutional scale
- Partners Group's multi-sector platform represents the first major European manager entry, though its diversified approach differs from dedicated pharmaceutical royalty funds
- European biotechs increasingly participate as royalty sellers (GENFIT €185M, BRAIN €129M, Heidelberg $115M, Nanobiotix $71M) — yet American managers provide the capital
European institutional capital is beginning to access the asset class through US-managed vehicles — HCRx Fund V exceeded 60% non-US LP participation. But the value creation and management fees flow to North American managers.
Three Developments to Watch
1. KKR-HCRx Integration creates a formidable competitor with insurance capital backing and expanded European presence — likely to increase deal competition and potentially compress returns. The combination may enable HCRx to pursue larger transactions that were previously out of reach.
2. BioTechEU Deployment in 2026-2027 could introduce European public capital into life sciences financing — though royalty structures remain notably absent from announced mechanisms. Whether the €10 billion target leads to royalty-adjacent innovation depends on policy design.
3. UK Pension Reform Execution will determine whether the Mansion House Accord's 10% target materializes or remains aspirational. The 2027 mid-point review and government's "reserve power" to mandate allocations represent potential catalysts.
What Would Need to Change
For a European Royalty Pharma to emerge, the following conditions would need to align:
| Condition | Current Status | Required Development |
|---|---|---|
| Consultant coverage | Limited | Database inclusion, research coverage |
| Track record | No EU-managed funds | 3+ year performance record |
| Deal sourcing | US-concentrated | Boston/NY presence |
| Policy engagement | No EIF mandate | InvestEU review or next MFF |
| Regulatory treatment | Solvency II Type 2 (49-59%) | Clarification or carve-out |
| Talent pool | Limited | Analyst/deal professional development |
| Legal expertise | US-focused | EU law firm capability building |
The EIF and EIB have demonstrated capacity to develop new asset classes including social impact bonds, infrastructure debt, secondaries, and defence technology funds. The precedent exists. Whether similar approaches could apply to pharmaceutical royalty financing would depend on reframing royalty investment as supporting European biotech competitiveness rather than simply financing, and securing mandate alignment under InvestEU or the next Multi-annual Financial Framework.
Timeline Scenarios
| Scenario | Probability | Key Developments | Timeframe |
|---|---|---|---|
| Continued US dominance | 65% | EU capital via US managers, no EU fund emergence | Status quo |
| Partners Group scaled success | 20% | EU manager establishes multi-sector category | 3-5 years |
| EIF pilot program | 10% | Development bank entry via Defence Equity Facility model | 5-7 years |
| EU royalty fund ecosystem | 5% | Multiple EU managers, dedicated pharma focus | 7-10 years |
The probability of continued US dominance increased from 60% to 65% based on 2024-2025 developments — KKR's consolidation move and the lack of European policy execution make the status quo more entrenched.
European fund structures — Luxembourg AIFs, ELTIFs, Irish vehicles — provide legal frameworks that could accommodate royalty investment strategies. The question is whether sufficient demand, expertise, and deal access would develop to support dedicated European royalty funds. The most likely near-term pathway remains European capital flowing to US managers, with Partners Group's multi-sector platform as the primary European-based entry point into the asset class — but not the dedicated pharmaceutical royalty fund that would constitute a "European Royalty Pharma."
Disclaimer: The author is not a lawyer or financial adviser. This article is for informational purposes only and does not constitute investment advice, legal advice, or a recommendation to buy or sell any securities. Readers should consult qualified professionals before making investment decisions.
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