Patents can be an excellent way to demonstrate value, not only showing that a technology is protected but also how promising it can be when it eventually comes to market. Here, William Mansfield of LexisNexis® Intellectual Property Solutions outlines how ‘patent analytics’ can help identify pharma’s top performers today as well as the biotech success stories of the future.
Developing a new pharmaceutical product is a costly and lengthy process, involving extensive research, clinical trials, and regulatory approvals. Thus, patent protection is crucial to the pharmaceutical industry because it incentivizes innovation and investment in the development of new drugs. No wonder companies like Bristol-Myers Squibb, Johnson & Johnson, Merck & Co, Novartis, and Roche can be found in the list of largest global patent holders.
Table 1: The top five companies and the size of their active patent portfolio in pharmaceuticals.
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While huge portfolios underline the positioning of big pharma players, a single patent can be the cornerstone of a business. One patent covering a new drug, or the synthesis of a compound in a new and more effective way, can be its own billion-dollar industry. With such a strong connection between intellectual property and revenue, the need for assessing patents individually, with a keen and knowledgeable eye, is even more evident than in most other industries.
Assessing the potential value of pharmaceutical patents
A patent-protected drug on the market today has an obvious value, but how to assess the potential value of one not yet on the market? With such huge possible revenues resulting from single innovations, there is a massive R&D pipeline of drug discovery and testing. The big players invest enormous sums directly into R&D, but there are also thousands of smaller companies independently innovating, which are often acquired by the big players selectively based on the fruits of their labour.
Measuring and evaluating the potential results of all this innovation is an unthinkably large task and one which needs to be continuously updated to cover new innovations. The extensive market dynamics along with organizational changes, like mergers, acquisitions, and divestitures add an additional layer of complexity to innovation scouting.
The current state of the pharmaceutical patent landscape
Taking this all into account, we see the status of the pharmaceutical industry today in Figure 1, showing the top 20 players measured by the cumulative portfolio strength of their active patents and subsidiaries. On the horizontal is the “Portfolio Size”, or the number of active patent families today, and on the vertical is the “Competitive Impact,” the average quality of these patents. The bubble size is the product of the axis, known as the Patent Asset Index. This scientifically developed and peer-reviewed method[1] is a quality measurement from LexisNexis featured in PatentSight patent analytics and business intelligence platform. It has been widely accepted across industries, used in investor communications and also by the European Commission when assessing M&A, leading directly to some of the rulings in cases like Dow-DuPont[2] and Bayer-Monsanto[3].
Figure 1: Top 20 pharmaceutical patent owners by the cumulative portfolio strength of their active pharma patents
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Roche outperforms Johnson & Johnson in terms of pharmaceutical patent quantity and the Patent Asset Index, solidifying its position as the top player. Although Johnson & Johnson holds an extensive overall portfolio, our current emphasis remains exclusively on pharmaceutical patents. It is also worth noting that while the Merck & Co portfolio is larger than Bristol Myers Squibb’s, Bristol Myers Squibb has a higher quality portfolio, resulting in a larger Patent Asset Index.
Using this method, we can not only identify and assess these top 20, but also apply to the full picture of the industry to detect which players are doing more than their peers, and who might be attractive M&A candidates.
Big Pharma and the long-tail of smaller innovators
As of August 2023, there is a huge pool of companies active in pharmaceuticals owning 5 or more active patents, with about 7000 companies owning almost 140,000 active patents. However, the distribution of the patents across these players is extremely uneven.
Figure 2: The distribution of portfolio size and strength across the ranking segments of pharmaceutical patent owners with 5 or more active patents
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In Figure 2, you see this distribution across the top 20, 21-100, 101-1000, and >1000. The top 20 players make up around 15 percent of the patents in pharmaceuticals while accounting for around 30 percent of the portfolio strength (Patent Asset Index). Conversely, the bottom >1000 make up nearly 50 percent of the patents, but only 20 percent of the Patent Asset Index. While there are certainly extremely valuable innovations, and therefore companies, in this long tail, reliably identifying them through this noise is extremely difficult and time-consuming.
Over the years, the distribution of pharmaceutical patent ownership has not been static. In Figure 3, we can see that the top 20 pharmaceutical players’ portfolio size has been declining for the past 20 years, presently half of what it was 20 years ago.
Figure 3: The change in the volume of patents owned across the ranking segments of pharmaceutical patent owners
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This points to a noticeable shift in the portfolio strategy of these players opting for fewer patents with higher quality. For example, pharmaceutical patent owner Sanofi has gone from nearly 10,000 active families 20 years ago to around 3,000 today. Yet, with this 70 percent reduction in portfolio size, Sanofi had only a 30 percent reduction in portfolio strength, evidence they are clearing out low-value patents.
On the flip side, there is significant growth in the lower ranks beyond 100 and particularly in the below 1000 set. Clearly, there is strong innovation in the long tail of companies in the pharmaceutical industry, with prime acquisition targets for the big players to sustain their positions. But with thousands of players, how can we reliably discover the high-value, potentially billion-dollar industry pharmaceutical patents?
Identifying the rising stars in the long-tail market
Figure 4 is a new view on the same analysis from Figure 1—the size, quality, and strength of the patent owners in the pharmaceutical industry. However, here we include all 7000 owners in the field but limit to those with between 5 and 25 active patent families today. There are thousands of owners in this graphic—a sea of innovation—however, looking to the top we can pinpoint a handful of players jumping above the tide.
Figure 4: Leading pharmaceutical patent owners with only 5-25 active patent families
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Acuitas Therapeutics (blue circle) is the company with the highest average quality—56 times the global average. It might be obvious to find Acuitas Therapeutics on a short list of rising stars given their more recent accolades, such as being awarded LSBC’s 2021 Global Impact Award for the extraordinary leadership and efforts they made in the development of COVID-19 vaccines, winning Life Sciences BC’s (LSBC) 2022 Company of the Year Award, and the co-founders receiving the 2022 Governor General’s Innovation Award.
But patent analytics revealed Acuitas’ innovation power early on. Only two years after they were founded, key players in the pharma industry already started to build on Acuitas’ patent-protected inventions.
Figure 5: Citations to Acuitas Therpeutic’s pharma patents by Patent Asset Index
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The other two examples highlighted in Figure 4 are ImmuneSensor Therapeutics and Regor Therapeutics.
ImmuneSensor Therapeutics is a US-based biotechnology company founded in 2019, which aims to treat autoimmune diseases and cancer by modulating the innate immune system.
Regor Therapeutics, a biotech company based in the US and China, develops medicines for oncology, immunology, and metabolic disorders. They use their own technology platform that combines computational chemistry, structural biology, and machine learning to design novel drug candidates.
These are just the standout candidates. Rather than investigating thousands of players, we can review just 10, or even 100, to highlight numerous high-value targets for potential acquisition. Similarly, for a smaller player looking to be acquired, it can be difficult to stand out in this field. Patents can be an excellent way to demonstrate your value, not only showing your technology is protected but also how promising it can be when it comes to the market.
Discovering the pharma diamonds: The power of patent analytics
In a landscape where demonstrating value is crucial, and innovation moves quickly (as evidenced by the 18 pharmaceutical companies included in the 2023 Innovation Momentum Top 100) patents offer a tangible testament to a company’s innovative prowess and market potential. Whether assessing the strength of one’s own portfolio or scouting for acquisition opportunities, patent analytics illuminates the path forward. As the pharmaceutical industry continues to evolve, patent analytics stands as a powerful tool to uncover high-value targets and navigate the complex landscape of pharmaceutical innovation.
References
[1] http://dx.doi.org/10.1016/j.wpi.2010.08.008 The Patent Asset Index – A new approach to benchmark patent portfolios
[2] https://ec.europa.eu/competition/mergers/cases/decisions/m7932_13668_3.pdf CASE M.7932 – Dow/DuPont
[3] https://ec.europa.eu/competition/mergers/cases1/202150/M_8084_8063752_13335_9.pdf Case M.8084 – BAYER / MONSANTO
