In this episode of The Life Science Rundown, FDA Group CEO Nick Capman welcomes back David Marlin of Metacomet Systems to talk about a topic that rarely sees the spotlight but affects nearly every company working with IP in life sciences: royalties. (We first spoke with David about leadership strategies two years ago.)
Whether you're paying or receiving royalties, the complexity around licensing agreements, territory rules, product stacking, and reporting can quickly spiral out of control.
David unpacks where royalty complexity comes from, what kinds of risks companies face when managing this manually, and how automation is increasingly being used to make royalty compliance manageable, transparent, and scalable.
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Summary, Key Points, and Practical Takeaways
This interview has been edited for clarity and length.
Nick Capman: What are we talking about today?
David Marlin: We’re talking about royalties. As your listeners know, life sciences is very IP-driven. There’s a lot of licensing and monetization of IP. Royalties come up in a few places. One is in biotech—companies making products like reagents or monoclonal antibodies. A lot of those originate in university labs. The labs don’t have the desire or ability to manufacture them at scale, so companies license the IP and commercialize it. They pay royalties back to the source—universities, individuals, sometimes companies.
Pharma is another big one. A small company invents a compound, then licenses it to a bigger company, and eventually it might get licensed to a major pharma company that brings it to market. Each time it changes hands, there's a royalty trail.
Then you’ve got medical devices. For example, my father invented a dental device for root canals in the 70s. It became widely used. A medical device company acquired the patent, and he received royalties for years. He’d improve it every few years, giving them new versions to market and extending the royalty lifespan.
At what point do royalties become hard to manage?
If you’re paying one person once a year, that’s easy. But it gets complicated fast. Say you’re licensing a reagent—it might have different royalty rates depending on how it's used (therapeutic vs. diagnostic vs. research), or based on the territory where it’s sold. Some countries have little or no patent enforcement, so they might command a lower royalty rate.
You might have tiered royalty rates—first $50k at one rate, next $100k at another. Then you get stacked IP—multiple universities or licensors involved in a single product. That’s multiplexing. So now you’re tracking multiple contracts, rates, use cases, and geographies.
At around a dozen agreements, it becomes overwhelming. We see that a lot.
And that’s when Excel starts breaking down?
Exactly. If you enter a rule wrong, it causes a downstream problem. And each time you sit down to work on it, you have to re-read and re-understand the rules. There are so many opportunities for error.
You mentioned both paying and receiving royalties. How do those differ?
The licensee—the company paying royalties—has to do the calculations and ensure they’re correct. The licensor—the university or IP holder—wants to be sure they’re getting paid the right amount, on time, and that the IP’s being used as agreed. They also have audit rights. So both sides care about different things, but they rely on the same core contract.
Anything else in those contracts that makes things harder?
Minimum guarantees or advances. Sometimes licensors require you to pay a guaranteed amount each year—say, $1 million. If you don’t hit that in sales-based royalties, you have to make up the difference. Sometimes you prepay it, and those prepayments have to be tracked across royalty periods. That’s where a lot of errors creep in.
What systems are life science companies using to manage this?
At the extremes, it's either Excel or fully automated systems like ours. In between, there are IP management systems that claim to handle royalties, but usually those modules are basic. You still end up doing a lot of work in Excel. So even with a system, it’s often still semi-manual.
What systems do you need to interface with to make this work?
Five main ones:
Contracts – Often just PDFs in Dropbox or SharePoint. Very little structure.
Sales data – Usually in an ERP like NetSuite, Oracle, or SAP.
Product data – Mapping SKUs to IP sources.
Payments – Usually through AP systems.
Accruals – For financial reporting. These numbers go on the balance sheet.
A dedicated royalty system can flag if something’s missing. If a sale comes in for a SKU and the system doesn’t know what IP that SKU contains or how to pay it, it throws an alert. That’s a huge advantage over Excel.
So, when do people realize they’ve reached the breaking point?
David: Usually when the royalty admin’s boss—controller, CFO, or CEO—starts asking questions. Maybe it was supposed to be a five-hour-per-month task, but now it takes weeks. Or they’re concerned about accuracy. One client told us, “If you mess this up, people stop wanting to license to you.” It’s a trust-based process.
Are there many vendors that do this kind of automation?
Very few. Some general IP systems claim to do it, but most don’t go deep. There are maybe two or three companies that really specialize in royalty payout automation.
What does implementation usually look like?
It’s more standardized than people think. We realized early on that every implementation has the same core steps:
Load agreements
Map products to agreements
Load sales data
Run parallel calculations and compare results
We’ve done emergency implementations in two weeks. Typically, it’s three months. For big companies, maybe six to nine months. If the customer’s data is in good shape, it’s much faster.
Is implementation success mostly about choosing someone experienced?
100%. Experience matters here. We've done hundreds. If a vendor has done only a few, you’re going to run into issues. You want someone who’s seen it all and knows where the traps are.
For folks who aren’t ready to automate, are there resources or communities?
Unfortunately, no centralized industry group. But we’ve put a lot of effort into creating resources at metacomet.com—everything from agreement structure to royalty calculation guides. We also work across industries, so there’s general and life sciences-specific content there. And we’re adding videos too.
This has been a really illuminating conversation—more complex than I expected, but very helpful. Thanks for coming back on, David.
Thanks, Nick. Appreciate the opportunity.
David’s key takeaways:
Royalties are high-stakes. Inaccuracies damage trust and reputation—especially with academic tech transfer offices and licensing partners.
Manual management doesn’t scale. Once you pass a dozen agreements with multiple rules and licensors, Excel breaks down fast.
Automation pays off quickly. Companies have reclaimed up to 95% of the time spent on royalties using a dedicated platform.
Specialized software matters. Most ERP systems and general IP tools can’t handle royalty logic like stacking, tiers, and minimum guarantees.
Clean data is half the battle. Having contracts, SKUs, and sales data mapped early makes for a smoother implementation.
Sales data can be a safety net. Automated systems can flag missing rules or mismatched SKUs before errors go downstream.
Implement with experts. Choose a vendor with dozens of implementations. Experience minimizes risks and surprises.
Educate yourself early. Even if you’re not ready for automation, knowing the pitfalls helps prevent bigger issues later.
David Marlin is the co-founder and CEO of Metacomet Systems, which provides royalty automation software for biotech, pharma, and other industries. He has decades of experience helping companies transition away from spreadsheets and into scalable, compliant systems for managing royalty payments.
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