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22nd January 2019

Medtech – where patents are a matter of life and death

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Where are the ideas?

There is a curious fact at the heart of MedTech. Against a backdrop of ageing populations, people living longer and a growing middle class (China in particular), the sector’s future is undoubtedly bright.

But for an industry reliant on inventing new devices to fix our bodies, growth in R&D has been declining since 2002. After dropping to 0.9% in 2017, sector-wide R&D is expected to grow to heights of around 4% where analysts predict it will remain for the next five years.

In a market worth an estimated $379bn, that’s still a lot of research, but given industry, revenues have remained in single digits for a decade, such tepid innovation makes the major players vulnerable to disruption by innovative start-ups and the tech industry.

Top 20 Medtech companies’ patent portfolios

Top 20 Medtech companies patents

Race to file patents

MedTech’s sluggish R&D is at odds with its patent activity. The big players are patenting hard, and in 2017 the sector was home to the most patent applications at the European Patent Office, up 6.2% on the previous year.
So where are all the applications coming from?

“They are growing for many reasons,” explains Maaike van Velzen, Head of IP Portfolio Management at Philips.

“The innovation that new technologies make in the MedTech domain is increasing, and the parties want to protect it through patents, for example.

“[IP] awareness at universities, start-ups medical professionals and research institutes has increased over the years. Also, the ecosystem is such that companies team up with new partners and bring innovations to market that have a foundation in, for example, a start-up.”

“The need for those parties to be more active in their IP protection is there, leading to an increase in IP activity in the domain in general.”

Van Velzen does not recognise the sector-wide R&D figures. Philips spends around 10% of its revenue on research, a high figure among its peers.

Buying innovation

Other MedTech companies have taken a more traditional approach to the innovation gap – buy your way out of trouble.

Adding bolt-ons to fill gaps in your product offering or avoid costly R&D spend appears, like in big pharma, to be a fixture in this industry and 2017 was a standout year for M&A.

Acquisitions totalled $99bn (only eclipsed by 2015’s hectic deals figure of $128bn) and included Becton Dickinson’s $24bn purchase of CR Bard and Abbott’s $25bn consolidation with St Jude Medical Inc.

Size of patent portfolios in recent Medtech acquisitions

Size of patent portfolios - Medtech acquisitions

Digital digs in

The digital wave engulfing the industry has two standout drivers: connected devices and big data. On the one hand, some wearables and sensors monitor a user’s health, putting the consumer – not the companies – at the heart of the market.
On the other, richer data and advances in data analysis are prompting software-expert entrants to chip away at the established players.

The question is whether huge, multi-national corporations can pivot to provide consumer-centric products while adding the necessary IT resources to cope with big data, machine learning and artificial intelligence.
If not, they will accede market share of this fast-growing area to a heavily-backed Cambridge or MIT start-up with big plans.

In this respect, Philips has a head start. Its heritage as a mass consumer company greatly helps when concepts like ‘consumer-first’ are already built into the company.
Also, being a consumer electronics company shifting millions of products means the infrastructure to perform data mining and analysis is already there, albeit not entirely from a healthcare perspective.

“It helps us tremendously to have a background in research covering many of these topics before they became part of the trend. We have a lot of people in-house to help us with these developments and in addition, have the right partnerships,” says Maaike.

New, IT smart players that launch with a consumer first model are generating millions in funding from excited investors (see below), but this pales in comparison to the financial clout of the world’s largest tech companies, who see healthcare as the next step for their watches, smartphones and data-driven business models.

Plugging the gap with bolt-ons is one way to compete. Collaborating with these tech companies is another.

Philips sees start-ups as potential partners and under its HealthWorks scheme offers an incubator programme. It has also signed partnerships with Cambridge University and MIT.

Maaike explains, “We want to enable certain parties to take our technology further. I see it as a very dynamic ecosystem developing in the future.”

AI/Big Data software patents owned by top 10 Medtech

AI big data software patent owners

Ripe for blockchain disruption

With access to trillions of confidential data points, healthcare providers are investing in new ways of analysing, processing and storing patient information.

In this, blockchain may have found its true calling. Distributed ledger systems fit the sector like a surgical glove, providing a secure, trackable home for medical records in particular.
To avoid being left behind, big MedTech must engage with this developing tech.

Worldwide top 10 blockchain patent owners

Blockchain patent owners

3D printing grows and grows

From prosthetics and hearing aids to corneas made from ‘bio-ink’, 3D printing has revolutionised the sector. In January 2018, surgeons in Belfast even used created a 3D-printed kidney, constructed from CT scans of a real patient’s organ, to help them prepare for a complex operation.

With a wealth of applications to be found, big players are joining university research hospitals and start-ups in the race to create devices that cannot be made any other way.
The results are cheaper, more bespoke products and better outcomes for patients.

But only out of the top 20 MedTech companies only nine have active 3D printing patents families.

3D printing / Additive manufacturing patents owned by Medtech

3D printing Medtech patents

Start-ups are hot property

In 2017, MedTech was generating massive interest from VC investors. Spurred on by start-ups disrupting the established order and the promise of takeovers down the line.

The industry saw cash flow into orthopaedics, imaging, diagnostics, and cardiology.
Leading the way is Grail, backed by Bill Gates and Jeff Bezos, which is developing DNA-based blood tests for the early detection of cancer.

Patent portfolio of start-up grail

Grail patent portfolio pie chart

 

Endnotes

https://www.ey.com/en_gl/life-sciences/how-medtechs-will-create-value-in-the-new-health-ecosystem

See Page 11, https://www.healthtechhta.com/uploads/1/0/4/9/104973819/study_id18123_medical-technology-industry–statista-dossier.pdf

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