Big Med Device companies are facing a big problem – their buy to grow strategy isn’t working anymore. They can’t find enough small companies with new med tech in the market that aren’t extremely overpriced.
According to the WSJ, big med device companies’ sales are slowing because many med device products are quickly becoming “commodities”. The result is shrinking profit margins as prices drop to stay competitive.
A third problem is they can’t respond fast enough because their internal R&D time to develop a new product is too long. Innovation in medical devices is often engineering problem solving by people or small firms. And it’s usually incremental and not a breakthrough technology. Big medical device companies face many constraints making it difficult to create revolutionary products, or even create devices at a substantially less expensive price.
And finally, the global medical device market is rapidly growing (some estimates expect it to exceed $500 billion in 2021) and the result is big med device companies are now frantically searching for new products to fill their product pipelines.
The medical devices industry is fast becoming a high-volume, consumer electronics market for where the rapidly increasing number and types of medical devices are designed for use by untrained or minimally trained patients.
It’s an intensively competitive industry driven by the large number and variety of devices and designs with lots of variations in improvements. This, in turn, is shortening the commercial lifespan for med device technology to 18-24 months, much shorter than the patent lifespan of 20 years.
Now, these big med device companies are looking outside for new R&D. They are creating partnerships with earlier stage med device companies. Although it’s riskier, it’s the only way they can fill their big product pipelines. And that spells big licensing opportunities for startup and emerging med device companies.
Today licensing must be part of every small med device company. Succeeding in this market requires the strategic use of your med tech IP. Especially when it comes to patent technology, where both the patent and technology lifespan is shrinking, and getting your technology to market sooner than later is the goal.
So here are a few licensing tips to get you pointed in the right direction:
Partnering with a larger more established company is a great option if you need more resources and the ability to pursue regulatory approval, complete clinical studies, or to develop the technology for other clinical uses or applications.
Royalty rates differ depending on how close your med tech is to being market-ready, whether you’re licensing it exclusively, how much competition there is, and how important the IP is to the company (the more its core to their products, the higher the royalties).
Don’t go at it alone. If you are not familiar with the licensing process or you don’t want to manage your own licensing program, then consider using a licensing agent (such as myself). Working with an agent speeds the process because they will know which companies will be best suited for(and interested in) your IP. It’s also important to work with a qualified licensing attorney to structure a licensing agreement that keeps you out of trouble.
With growing competition in the medical device market more intense than ever, licensing partnerships are one of the best strategies for startups and small medical device companies. When you think of licensing don’t think of it as something separate from your core business strategy. Make it part of your short and long-term goals. Rather than going head to head with the big med device companies, use licensing to partner with them. Keep in mind, the closer your med tech is to market-ready, the more interested they’ll be in licensing it. Most important, confirm your technology in the market before trying to license it.
Rand Brenner is an IP professional whose passion is helping inventors, startups, and businesses of all sizes use licensing to turn their IP into income-producing products, services, and technologies. His decades of experience run the gamut from medical devices to food technology to consumer products. He’s licensed some of the biggest Hollywood entertainment blockbusters including the Batman Movies (1 and 2), and the number one kid’s action TV show, the Mighty Morphin Power Rangers. Rand speaks about licensing and is a featured speaker at investment conferences, trade shows, colleges, and startup events. He’s a published writer with articles appearing in several prestigious trade magazine including The Licensing Journal, Intellectual Property Magazine, and License India. Rand also mentors at the Cal State Fullerton School of Business and Economics and is a judge for their startup business plan competitions.