Last month, I was a speaker at the Med Tech Monday Conference
in Irvine CA. It was a great conference with speakers covering every
aspect of the medical technology market – from product development to
regulatory approval.
I spoke about how to use licensing
as a strategy to get your medical device technology into the commercial
market. The presentation focused on seven key reasons why licensing is
one of the best go-to-market strategies for the med-tech industry –
especially for startups.
Here are a few summary highlights from the presentation:
High Risk and Development Costs: Medical devices are a convergence of
technologies, mainly based on mechanical/electrical, information and
systems engineering. Many devices are technically complex, requiring
many different technologies often protected by hundreds of patents
covering the structure, function and/or methods of using the device.
Many devices must go through the complex approval processes of the FDA
and other regulatory bodies. Few if any medical device companies,
especially startups, are capable of mastering these capabilities
in-house.
Intense Competition from Big Players: Medical technology is an
intensively competitive industry driven by the large number and variety
of devices and designs with lots of variations in improvements. In
addition to the traditional medical device players such as Johnson and
Johnson, leading tech and consumer electronics companies, such as Apple,
Google, IBM, and Samsung, are spending billions on digital health
initiatives, especially around wearable, life sciences and smartphones.
These players are well-honed in the managing and commercializing IP in
the consumer marketplace, and will use their marketing and sales muscle
aggressively to compete in this fast growing market.
Shortening Technology Lifespan: As a result, the medical devices
industry is becoming a high-volume, consumer electronics market. 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.
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 limited, and getting it into the market
sooner than later is the goal.
Why Big Players Want to License Your IP: Innovation is moving too
quick in the medical technology industry, and many of the largest
companies are moving out of the R&D part of the business. Their
internal systems are too slow, and many lack a structure that supports
the type of fast innovation process that’s needed. Instead they are
setting up incubators and corporate investment funds to partner with
startups and small businesses. In effect, they are outsourcing their
R&D. And that is creating a great licensing opportunity for med
tech startups.
Licensing and Med Tech Value: The closer your medical device
technology is to market ready, the more value it has in terms of
licensing. Or another way of looking at it is as your med tech device
goes through the development process, from concept to market ready, each
stage it goes through reduces market risk. For example, the royalty
rate for just an idea is 0% because its unproven and extremely risky. If
it’s at the prototype stage, its risk is dropping but it’s still high.
At this stage, the royalty rate can range from 2% – 3%. Once your med
device is in the market, it’s at the lowest risk stage, its value is
high, and the royalty rate could be 8% or higher.
Negotiating the Licensing Deal: There are some key business terms to
keep in mind when it comes to licensing your med tech device, such as
exclusivity, field of use, and territories. Before licensing it, you
must understand all the applications for your device technology. Is it a
single market or can it be used in multiple areas of the health care
industry? This is important to consider, otherwise you can wind up
locking up your IP rights with one company and missing revenue
opportunities in other markets. The best licensing agreements
are performance based. That means making sure you and your licensing
partner agree on key milestones, such as development timelines,
marketing dates and royalty payment deadlines. It’s a long-term
partnership and it’s critical to make sure it’s clear about what you
will do during the term of the agreement.
Forming strategic licensing partnerships is a go-to-market strategy
for your med tech startup. The fast changing health care marketplace and
rapid pace of new devices entering the market is shortening the
lifespan of med device technology. And that means you must get your med
device into the market sooner than later. By partnering with bigger
companies through licensing, your device technology gets into the market
faster, than trying to go it alone against these big med device,
high-tech, and consumer electronics competitors.
Get the Video Transcription at www.licensingconsultinggroup.com
