An industry analysis by Grant Moss of Adapt IP Ventures and reported in IAM online magazine, suggests that IP valuation within the medical device industry appear to be declining. The analysis based on a study of identified licensing transactions and royalty rates, suggests that increasing IP values will face continuing challenges in the coming year.
The report noted that significant potential benefits from changes in regulatory and tax policies under the Trump administration, in tandem with a Republican-led Congress can be expected in 2017 and beyond. However, market uncertainty with regard to replacement of the Affordable Care Act and other health policies are likely to mute those benefits.
The report found that the number of publicly available IP license transactions related to medical devices and corresponding royalty rates have declined by about 3 percent since 2010, due in part to regulatory, tax and market uncertainty. These factors are directly related to IP values and are critical to consider when negotiating IP valuation transactions.
Some of the report’s key points:
- The process of repealing and replacing the Affordable Care Act will continue to produce market uncertainty around regulatory burdens, pricing and patient coverage.
- An environment of declining royalty rates will drive more complex deal structures to ensure partners strike the appropriate balance of risk to return.
- Licensors who can strike multiple license agreements generally can command above average royalty rates.