R&D Partnerships and Licensing: A Big Opportunity for Small Med Device Companies

Big medical device companies are facing a significant problem—their buy-to-grow strategy isn’t working anymore. Finding small companies with new medical technology that is not overpriced has become increasingly difficult.

The Current State of the Global Medical Device Market

According to recent industry reports, the global medical device market surpassed $450 billion in 2020 and is projected to exceed $600 billion in 2023. This growth is driven by increased healthcare spending and technological advancements. The COVID-19 pandemic has also accelerated innovation, particularly in telehealth, remote patient monitoring, and diagnostics, leading to a shift in demand for more home-based healthcare solutions.

Challenges Facing Big Med Device Companies

Commoditization and Shrinking Margins

Big medical device companies' sales are slowing because many medical device products quickly become commodities. This commoditization results in shrinking profit margins as prices drop to stay competitive.

Slow Internal R&D

Another significant challenge is the slow internal R&D process. Developing a new product takes time, and innovation in medical devices often involves incremental engineering problem-solving rather than breakthrough technologies. Big medical device companies face numerous constraints, making creating revolutionary products or producing devices at substantially lower costs challenging.

Rapid Market Growth

The global medical device market is proliferating, with some estimates expecting it to reach $642.5 billion by the end of 2023. This rapid growth has led big medical device companies to frantically search for new products to fill their pipelines.

Competitive Landscape

The medical device industry is becoming a high-volume consumer electronics market where a wide variety of devices are designed for use by minimally trained patients. This intensively competitive industry is driven by the large number and variety of devices, which shortens the commercial lifespan of medical device technology to 18-24 months—much shorter than the patent lifespan of 20 years.

The Shift to External R&D Partnerships

To address these challenges, big medical device companies are increasingly looking outside for new R&D. They are creating partnerships with earlier-stage medical device companies. While riskier, this approach is essential for filling their product pipelines. This shift spells significant licensing opportunities for startup and emerging medical device companies.

Successful R&D Partnerships and Licensing Deals

Case Study 1: Johnson & Johnson and Verb Surgical

A partnership between Johnson & Johnson and Verily (a subsidiary of Alphabet) led to the formation of Verb Surgical, which focuses on developing a digital surgery platform. This collaboration merges J&J's medical device expertise with Verily's digital health capabilities, showcasing the successful integration of technology for innovative solutions.

Case Study 2: Medtronic and Nutrino Health

Medtronic's acquisition of Nutrino Health, a personalized nutrition technology company, demonstrates a strategic move to integrate digital health and medical devices. The partnership aims to develop personalized solutions for diabetes management, highlighting the potential of merging healthcare technology for better patient outcomes.

Case Study 3: Boston Scientific and Farapulse

Boston Scientific's investment in Farapulse, specializing in ablation technology for atrial fibrillation, exemplifies a successful licensing and investment deal. This partnership allows Boston Scientific to access Farapulse's innovative technology, enhancing its cardiac rhythm management portfolio and advancing patient treatment options.

Case Study 4: Stryker and Cactus

Stryker's acquisition of Cactus, a company focused on developing a novel surgical guidance system for spinal surgeries, showcases the benefits of integrating advanced navigation technology with medical devices. This collaboration aims to improve surgical outcomes and patient safety in complex spinal procedures, illustrating the value of R&D partnerships in driving innovation.

Case Study 5: Zimmer Biomet and Apple

The collaboration between Zimmer Biomet and Apple to develop the mymobility app and Apple Watch integration for joint replacement patients signifies a successful partnership between a medical device company and a tech giant. This innovative solution enables remote patient monitoring and personalized care, transforming the patient experience.

Tips for Initiating and Managing Licensing Agreements

Partner with Established Companies

Partnering with a larger, more established company is an excellent option if you need more resources and the ability to pursue regulatory approval, complete clinical studies, or develop the technology for other clinical uses.

Understand Royalty Rates

Royalty rates differ depending on how close your med tech is to being market-ready, why you’re licensing it exclusively, how much competition there is, and how vital the IP is to the company. The more core your technology is to their product offerings, the higher the royalties.

Seek Professional

Don’t go at it alone. If you are unfamiliar with the licensing process or don’t want to manage your licensing program, consider using a licensing agent. Working with an agent speeds up the process because they know which companies will be best suited for (and interested in) your IP. Working with a qualified licensing attorney is also important to structure a licensing agreement that keeps you out of trouble.

Conclusion

With growing competition in the medical device market more intense than ever, licensing partnerships are among the best strategies for startups and small medical device companies. Rather than going head-to-head with big medical device companies, use licensing to partner with them. Make licensing part of your short—and long-term goals, and remember that the closer your medical technology is to market-ready, the more interested companies will be in licensing it. Most importantly, confirm your technology in the market before trying to license it.

Are you ready to explore partnering with a larger company to commercialize your MedTech device? Let's schedule a short introduction call to discuss your IP and licensing options.

Stay ahead in innovation with strategic R&D partnerships and smart licensing deals.