June 10, 2026

When Do Public Biotechs Take on Debt Financing?

This article follows on from our prior blog “Which Biotechs Issue Convertible Bonds, When Do They Issue Them, and Who are The Leading Convertible Bond Banks?”

Around the same derisked, late-stage time in their development that public biotechs think about issuing convertible notes, many will also consider some form of outright debt. The two that I plan on covering here are tranched term loans (or credit facilities) and structured debt/royalty-backed financing.

Both offer non-dilutive financing to biotechs when it might be unpalatable (or unwise) to issue additional equity. I’ll spend more time on typical biotech credit facilities, and less time on royalty-backed financings, since the latter tends to be used by biotechs who have existing debt in place and could be facing covenant pressure.

Note: this blog will not cover the smaller venture loans of $5-10M advanced by the likes of SVB (now part of First Citizens Bank) and others.

Dilution and cash cost comparison

Fundraising Instrument	Dilution	Cash Cost
Equity	Highest	N/A
Convertible notes	Second Highest	Lowest
Tranched term loans/credit facilities	Non-dilutive	Second highest
Structured debt/royalty-backed financing	Non-dilutive	Highest

Source: New Street Investor Relations

First, let’s highlight the cash cost of both alternatives relative to equity and convertible notes. While both tranched term loans and structured debt are non-dilutive forms of financing, the cash cost of both is considerably higher than equity and convertible notes – with structured debt having the highest cash cost of all.

Tranched term loans/credit facilities

These types of debt deals are common for late stage biotechs and are usually provided by specialized lenders.

Typical lenders include:

• Hercules Capital
• Oxford Finance
• Oaktree Capital Management
• Runway Growth Capital
• Pharmakon Advisors

Typical structures include:

• Biotechs usually receive an initial amount on closing.
• Additional tranches are then available at the borrower’s discretion, subject usually to the achievement of certain clinical, regulatory or commercial milestones.
• A final amount that can be borrowed, at the lender’s discretion.
• Fees and interest.

What follows are seven examples of tranched term loans (from 2022-26), a few summary characteristics of which are:

• The total amount of credit secured ranged from $75M-$500M.
• Six deals had a floating rate of interest, while only one bore a fixed rate of interest.
• The term of the loans ranged from 3 to ~5 years, with most being 5 years in duration.  

Select public biotech debt deals:

Company	Date	Details
Mustang Bio   (Nasdaq – MBIO)	3/8/22	Runway Growth Capital: $75M due 2027, floating interest rate. – $30M available at closing. – $45M available contingent on certain milestones. – Mustang also issued warrants to Runway.
Kura Oncology   (Nasdaq – KURA)	11/3/22	Hercules Capital: Up to $125M due 2027, floating interest rate. – Initial term loan $25M. – Two additional tranches of $35M and $40M respectively, subject to conditions. – Final tranche of $25M subject to lender’s discretion.
Verona Pharma   (Nasdaq – VRNA)	1/2/24	Oxford Finance and Hercules Capital: Up to $400M due 2028, floating interest rate. – Term A loan of $50M at closing. – Term B loan of $100M subject to conditions. – Term C loan of $75M subject to conditions. – Term D loan of $75M subject to conditions. – Term E loan of $100M subject to discretion of lender.
Fortress Biotech   (Nasdaq: FBIO)	7/25/24	Oaktree Capital Management: Up to $50M due 2027, floating interest rate. – Initial tranche of $35M at closing. – Eligible for another $15M at Oaktree’s discretion.
Vera Therapeutics   (Nasdaq – VERA)	6/3/25	Oxford Finance: Up to $500M due 2030-31, floating interest rate. – $75M available on closing. – $50M available in 2026. – $175M available over three tranches dependent on milestones. – $200M final tranche at lender’s discretion.
Dyne Therapeutics   (Nasdaq – DYN)	6/30/25	Hercules Capital: Up to $275M due 2030, floating interest rate. – Initial term loan of $100M at closing. – Three additional tranches totaling up to $115M, subject to milestones. – Final tranche of up to $60M, subject to lender’s approval.
UroGen Pharma   (Nasdaq: URGN)	3/2/26	Pharmakon Advisors: Up to $250M due 2031, fixed interest rate of 8.25%. – $200M funded at closing (to refinance existing $125M loan facility and provide additional capital). – $50M available at company’s discretion.

Source: Company 8-Ks

Structured debt/royalty-backed financing

As previously mentioned, biotechs typically only enter into structured debt/royalty deals when they already have existing debt (and could be looking to refinance it).

Highlights of the two examples listed below are:

• Single-digit royalty payments on net sales of company products.
• Both were signed before the FDA had approved each biotech’s lead drug, with commercial launch forming a big part of each company’s use of proceeds.

Generally speaking, structured debt/royalty-backed financing deals tend to be more expensive than tranched term loans/credit facilities (when calculated in terms of cash flows given away relative to capital received).

Select public biotech structured debt/royalty-backed financing deals:

Company	Year	Details
ImmunityBio   (Nasdaq – IBRX)	1/2/24	Oberland Capital: Up to $300M, initially tiered single-digit royalty payments on net sales of the Company’s products, which are capped at a multiple of the investment. – $200M funded at closing. – $100M funded contingent on FDA approval of Anktiva in combination with BCG for NMIBC (PDUFA date – 4/23/24). – Included up to $20M equity investment as well.
Biohaven   (NYSE – BHVN)	4/28/25	Oberland Capital: Up to $600M, tiered single-digit royalty payments on global net sales of troriluzole for up to 10 years, and a regulatory approval milestone payment. – $250M at closing. – $150M upon FDA approval of troriluzole. – Up to $200M for permitted strategic acquisitions by mutual agreement.

Source: Company 8-Ks