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Insights into Medical Technology Field in light of planned GE Healthcare IPO

by Andreas Lübbering, on Mar 15, 2019 11:10:00 AM

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Ranked among the top 10 global medical device companies as of revenue, General Electric is now about to file for an IPO to spin out its health-care unit GE Healthcare, as reported by CNBC. With the ongoing jump of Siemens Healthineers shares after their $5 Billion IPO, now GE Healthcare has caught the attention of investors in the medical device market. In this context, PatentSight shed light on the global top 10 medical device companies as of revenue in 2017 from a patent perspective.

In general, the industry experienced a wave of M&A activities in recent years. Medtronic, the top-selling medical devices company, was especially active buying companies like Covidien (2015) and Heartware International (2016) among others. As per end of 2018, Medtronic was reportedly in a deal to buy Mazor Robotics for $1.6 Billion. Especially Covidien and its subsidiaries contributed significantly to the overall portfolio size and strength of Medtronic’s portfolio. GE also conducted some minor acquisitions: Among others U-System (2012) and Biosafe (2016) were bought, but these did not contribute as much to the overall portfolio as Medtronic’s acquisitions did.

In this context, for the correct evaluation of patent portfolios, it is crucial to know the current owner of a patent family, which is quite difficult, e.g. taking all M&A activities into account described above. PatentSight therefore contains company structures including all domestic and foreign subsidiaries, joint ventures and group companies. The harmonized Ultimate Owner also includes former names of the company itself or of any of its subsidiaries.

Patent Asset Index™ and Portfolio Size of top 10 medical device companies in medical technology

Patent Asset Index and Portfolio Size of top 10 medical device companies in medical technology (Dec 18)Patent Asset Index and Portfolio Size of top 10 medical device companies in medical technology as of December 2018.
Source: LexisNexis PatentSight Business Intelligence Platform

Looking at the quantity (as measured in Portfolio Size), Medtronic has the biggest portfolio in medical devices owning 12,375 patent families. Together with Johnson & Johnson and Philips they make up for approximately 60% of the total Portfolio Size of the entire peer group, followed by Siemens (13%) and GE (11%). The Portfolio Size, however, only reflects the peer group’s IP performance in terms of quantity and do not take into consideration the quality of their portfolios. To gain deeper insights into the portfolios of the top 10 companies, PatentSight uses the Patent Asset Index™.

The Patent Asset Index™ is a scientifically proven IP benchmarking instrument and was used among others by the European Commission in the merger case between Dow and DuPont in 2017. Taking into consideration not only the quantity but also the quality of the patents owned by an organization, this indicator allows to accurately measure the overall strength of the organization’s patent portfolio.

In this context, we can see that actually Johnson & Johnson has the strongest portfolio in the field of medical devices, having a portfolio strength (as measured in Patent Asset Index) of 53,295. In combination with the relatively lower Portfolio Size, this indicates a high average quality of patents belonging to the Johnson & Johnson portfolio. In terms of portfolio strength GE has the 6th place in the peer group being almost as strong as Siemens. Going on, the Patent Asset Index can be used to more precisely identify key focusses of companies in terms of technological strategy, by looking at the share in total portfolio strength each company has in specific technology fields such as medical devices.

Total portfolio strength and share of patent strength in medical devices in total portfolio strength (measured in Patent Asset Index) of top 10 medical device companies

Patent Asset Index of top 10 medical device companies (dec 18)Total portfolio strength and share of patent strength in medical devices in total portfolio strength (measured in Patent Asset Index) of top 10 medical device companies as of December 2018 (Sorted by Patent Asset Index in medical devices).
Source: LexisNexis PatentSight Business Intelligence

In contrast to GE, which has the highest overall Patent Asset Index, Medtronic, Stryker, Fresenius Medical Care and Cardinal Health derive a vast majority of their total portfolio strength from this technology field. Today over 90% of their total portfolio strength arise from patents in medical devices, indicating a clear focus of these companies on this field. 81% of Johnson & Johnson’s total portfolio strength, which is the second highest in the peer group, derives from the technology field of medical devices. For Siemens and GE, the contrary is true, this field accounts for less than one fifth of their portfolio strength.

However, although having a minor focus on the technology field, GE’s medical device portfolio is still as strong as the medical device portfolio of some of the highly focused companies such as Strykers. With a sudden jump in share in portfolio strength between 2006 (15%) and 2018 (51%), Philips presents an exemption within the peer group. This expansion in the field of medical devices is in direct alignment with Philip’s recent series of acquisitions of enterprises active in the field of medical technology. Among others, Philips Healthcare has acquired Volcano and PathXL.

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Topics:Mergers and AcquisitionsIP Data QualityPatent ValuationPatent Asset IndexIPO Analyses

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