Global patents: innovation leads to growth
Life sciences companies do not do research and development (R&D) like everyone else. With longer innovation cycles, several well-defined layers of regulatory approval and various global hurdles to overcome, patent volumes in the pharmaceutical industry are often dwarfed by those of fast-moving industries such as semiconductors and consumer electronics, which tend to steal the spotlight when it comes to showcasing innovation.
Does that make pharma companies any less innovative? No. In fact, despite the obvious headwinds facing the industry, a growing number of leading pharmaceutical companies have been showing up on Thomson Reuters’ annual Top 100 Global Innovators list.
Measuring innovation
First, some background: each year for the past four years, the Intellectual Property and Science business of Thomson Reuters has conducted a quantitative analysis to identify the top 100 global innovators, based on a series of patent-related metrics.
While there are several ways to do the evaluation—and no shortage of opinions on which is the best way to do it—our peer-reviewed methodology is unique in its unbiased approach, using concrete data to measure the breadth and influence of corporation innovation. We do this by measuring four principal criteria: patent approval success rate, global reach of patent portfolio, influence as measured by patent citations, and overall patent volume.
By analysing corporate patent portfolios in this manner, we are able to identify that sweet spot of innovation where pure R&D meets corporate strategy for protecting IP.
The result is an annual compendium of companies and research organisations that are setting the high water mark for commercial innovation. In addition, by conducting the analysis each year we are able to track trends in innovation among different industries, different regions of the world, and within specific companies.
For example, by digging into the details of the latest list, which was published in November 2014, we found that the year’s crop of top 100 global innovators had nearly double the annual revenue growth rate of the Standard & Poor’s 500 index while increasing their R&D spend by 17% year on year. We also saw—for the first time—that Asia produced more top innovators than any other part of the world.
Pharma expands its innovation footprint
While all of these insights are intriguing, one of the most interesting trends we’ve noted over the last four years conducting this analysis is the growing presence of the pharma industry. As noted above, the Top 100 methodology, by virtue of its criteria, favours fast-moving, hyper-competitive industries such as semiconductors/electronic components, and computer hardware and computer software, where product lifecycles are short and advancements in technology are user-driven. This has historically affected the inclusion of pharma firms, which tend to have longer R&D cycles.
Despite this, for the second year in a row a larger number of companies—Abbott Laboratories, Johnson & Johnson, Novartis and Roche—have cemented their presence on the Top 100 list by virtue of their strong global patent portfolios.
This is up from three pharma firms—Abbott, Johnson & Johnson and Roche—on the 2013 list and just one (Roche) in 2012.
What’s driving the trend?
As we dig deeper into the patent filings of each company represented on the list, we see a few common trends beginning to emerge. First, the pharma industry has continued its evolution away from blockbuster drugs and towards the development of more targeted therapies, personalised medicine and drug repurposing for orphan and other diseases. This focus on developing a wider overall footprint is clearly reflected in pharmaceutical representation on the top 100 innovators list.
In addition, R&D teams around the globe are rapidly compressing their R&D cycles. As we noted in the Thomson Reuters 2014 Pharmaceutical R&D Factbook, the global pharma industry has dramatically overhauled its R&D process over the last few years by focusing on ‘failing fast and cheaply’. In essence, total pipeline volumes and success rates in early clinical development phases have declined as approval rates in the latter stages have improved.
"The pharma industry has continued its evolution away from blockbuster drugs and towards the development of more targeted therapies, personalised medicine and drug repurposing for orphan and other diseases."
By leveraging more robust research capabilities and coordinating efforts globally, pharma companies have developed a laser focus on efficiency to determine which projects get the most funding and, ultimately, which become commercialised.
We are also seeing a nascent trend towards pharmaceutical companies filing patents for non-drug-related technologies. For example, in a Thomson Reuters analysis conducted for one of the world’s leading pharma companies in 2014, we found that among the 245 patents filed over the course of the year, just 98 were drug-related. The rest were devices or methods of development and other related technologies that are helping the company to innovate in ways that transcend individual drug development.
What’s next?
Innovation means different things to different people, but in the context of business growth, it refers specifically to the conversion of good ideas into tangible assets. Innovators create jobs and wealth from creative thinking. And, in the case of the global pharma industry, these innovations bring the added benefit of curing disease, and improving and saving lives.
Are there other ways to measure pharma industry innovation beyond the patent-related metrics developed in the Thomson Reuters Top 100 Global Innovators study? Yes. But by continuing to evaluate the ability of companies to transform abstract thought into practical products that can be commercialised and leveraged around the world, we have created a benchmark for monitoring the continued evolution of the industry.
While the competitive benchmarks will be in constant flux, one thing for the future of pharma industry innovation is certain: converting breakthrough thinking into commercially viable products will be the key to surviving and thriving, no matter what new challenges arise.
The companies featured in the 2014 Thomson Reuters Top 100 Global Innovators list have shown that a significant amount of time and resources invested in innovation are reaping rewards with shareholder value, growing revenue and increased market share.
Equally importantly, the regions in which they operate are playing an essential role—through various government policies, incentive programmes and safety standards—in helping to cultivate innovation to lift the tide of their global economies.
Bob Stembridge is a customer relations manager of the IP Solutions business of Thomson Reuters. He can be contacted at: bob.stembridge@thomsonreuters.com
