Part I – Presenting Your Idea
Anywhere during the product development cycle, it may make sense to discuss your medical device with potential acquirers. Licensing implies that you will still control the company that the technology was developed under and ONLY the intellectual property is transferred to the acquirer. A license can be exclusive (1 company) or non-exclusive (you can license the same idea to multiple companies, sometimes limited in number). When reading this article, you can replace “license” for “sell” if you plan to sell the entire company that owns the technology. The terms technology, device, idea, Intellectual Property (IP) are used interchangeably. They can mean a patent, an FDA clearance, a good working design, or just an idea.
Some projects are started with the intent to license or a plan to commercialize a device before licensing. As I mentioned in an earlier article, no matter what your end goal, the further you can take your idea in the development process (mitigating risk) the better return you should expect.
TIP: Always get an NDA in place before providing confidential information. For information on NDAs checkout the link below.
This 3-Part Series of short articles will cover, Presenting Your Idea, what to look for in a Term Sheet and finally, Things to Ask For in Your Licensing Agreement.
Want to get a company interested? Get your ducks in a row.
Often times, great ideas fail to be acquired because they are simply not presented well. To generate interest in your IP you need to demonstrate its credibility and value in a clear and concise manner. Here are the things you need to do:
1. Make a clinical case for your IP – Better surgical outcomes, saves time in surgery, user testimonials, etc.
2. Make a financial case for your IP – Lower cost, new market, etc.
3. At a minimum, have working prototypes – It is better to have production quality functional parts. Even better to have an FDA cleared device with multiple surgeries completed.
4. At a minimum, try to have provisional patents filed – It is better to have an issued patent with strong claims.
5. Address your regulatory path – A 510(k) cleared device will require a much smaller investment by the acquirer. Other clearance types like a PMA (PreMarket Approval) will require a larger investment and a longer time to market but can create an additional barrier to entry for competitors.
6. Understand the current reimbursement situation – With bundled payments and continued downward pressure on physician compensation it is important to address reimbursement if that information is known. If there are codes for the procedure or similar devices, know what they are. This matters to a company because without a code it will be harder to get user adoption. If the procedure falls outside of existing codes, new codes can be created but it is not easy to do.
7. Build a team of professionals – The team should be made up of professionals that lend credibility to the idea. They may have equity in the idea or be compensated hourly. They could be independent consultants, advisers, friends, colleagues or company representatives. Depending on your specific device you may want to cover the following areas: Physician, Engineer, Sales, Biologist, Manufacturing, Regulatory, Reimbursement, Patents. It is fine if you have an individual cover multiple areas. It is most important to have representation for areas that you are lacking in expertise.
This information can be compiled into a simple, short (6-7 slides) presentation (or animation) showing how your device functions. It will be similar to a pitch deck, but since raising capital is not the intent, the approach is less focused on the finances and more on the overall story.
The next step is to identify and begin discussions with target companies. There are multiple ways to do this, aside from a soft introduction, sometimes cold calling is the only way. Otherwise you can engage professionals to assist with getting in front of the decision makers.
TIPS FOR PRESENTING YOUR IP:
1. The best way you can sell the idea is to make it as easy as possible to incorporate it into existing product portfolios. It may be an improvement on an existing technology, a complementary device or a device that warrants a new technique. Be prepared to discuss specifics on why your device is a good fit for a particular company.
2. Technologies that require extensive surgeon training (such as new techniques or surgical approaches) are costly to implement and carry a lot of risk for a company. A large reward has certainly proven to be there for many of these types of technologies. Be prepared to explain why it will be worth the investment.
3. Companies don’t like change. Even if your idea is better than their current technology you may want to find a way to complement or improve upon their existing products first.
4. Unless it’s a perfect fit, the biggest company may not be the best company to approach.
Part II will cover what to look for in a Term Sheet. Thanks for reading. Please share with someone if you think this information will be helpful.
Binder Biomedical, Inc. is a full service product development firm with specific expertise in developing orthopedic / spinal implants and complete instrument systems. We can take a project from a sketch to commercialization and everywhere in between.
This information is for reference only and not to be considered legal advice. We recommend that you work with one of our partner attorneys or your own when making important legal decisions.