What is Green Innovation?

Posted by Nerac Analysts on Wednesday, February 19th, 2014 @ 6:30 AM

Any development that reduces the input of resources to create a product, or makes production environmentally neutral falls under the umbrella of green innovation. Green innovation, or eco-innovation, includes not only the environmental footprint of the product itself, but also the footprint of any processes involved in production, packaging, transportation, and disposal. An innovation is “green” if it reduces the use of materials, water, and energy, or substitutes a material for one that is more sustainable or easier to recycle.

Are the benefits associated with green innovation exclusive to the environment?

No. Implementing sustainable business can make a product cheaper, better, and faster. The term “green” has mostly negative connotations in business and manufacturing, and understandably so. Lobbyists of the green movement are notorious for attacking corporations with broad accusations, but no solutions. Radicals within the green movement receive a lot of attention from the media, despite having narrow perspectives and failing to represent the real goals of green innovation. The two mains goals of green innovation are shared between corporations and environmentalists: sustainability and efficiency.

Thinking green forces industries to change practices in ways that reduce manufacturing and shipping costs. Green innovations can also increase the value of a product. This is becoming increasingly apparent as consumers demand green products. Many companies have been successful in integrating green technologies, and many have even experienced tangential benefits. The following case studies demonstrate how other businesses have benefited from implementing green innovations.

Benefits and Case Studies:

A valuable patent involving green innovation (Nike)
The demand for green innovations is increasing as more companies try to achieve their corporate green goals. Companies can patent green innovations and profit by licensing their developments to other companies.

Nike focuses a significant portion of R&D on green innovations and developed a novel rubber product that is biodegradable. The new material lowered their overall production costs and slashed toxic emissions by 96 percent. Mountain Equipment Co-op licensed this technology to use for bike tires with inner tubes. Other companies should follow this example. Patenting green innovations can be a double win.

A product made from recycled materials (CleanFlame)
CleanFlame received the Green Innovation award this year for clean-burning logs that burn 86% less creosote and produce 50% more heat than traditional wood logs. The logs are made from recycled waxed cardboard boxes, which are practically free. Instead of slowly degrading in a landfill for fifty years, CleanFlame is turning these boxes into logs that burn longer and create less smoke than other wood alternatives. It is a better product and a cheaper product. This innovation will save the equivalent of 200,000 trees, and the company will turn recyclables into riches.

A smaller logistics footprint and lower shipping costs (Superior Dairy)
Shipping milk from a farm to a store is expensive. A company’s shipping costs depend on the weight of each load, the distance traveled, the number of trips, the packaging materials, and preparation/cleanup on either end. In addition to standard transportation costs, milk requires refrigeration and careful temperature control. The traditional method for shipping milk uses plastic crates to stack the milk bottles to increase the capacity of each truck. It is a good method, which is why it has been the convention since the 1960s, but Superior Dairy figured out how to make it better. The crates themselves take up a lot of space, their weight is not insignificant, and the labor required to sanitize and maintain the crates has a monetary, and environmental cost. Superior dairy re-designed the milk bottle so that it can be stacked without crates. The new rectangular bottles are stacked to the size of a standard pallet and held together with shrink-wrap. This green innovation eliminates the need to ship “dead weight,” allows more bottles to be transported during each trip, and decreases the cost of packaging materials and labor. The result for the company was a 50% reduction in transportation and fuel costs.

A case of ultimate sustainability (Sierra Nevada Brewing Co)
Sierra Nevada is nearly energy-independent and recently shifted from importing raw materials to selling recovered byproducts. Their commitment to efficiency has made them one of the first, and few successful craft breweries. Breweries have high fixed costs because they require a lot of large-scale equipment. Large breweries benefit from economies of scale, but microbreweries must be creative and efficient to have a chance at becoming profitable. Sierra Nevada recognized this challenge from the beginning and devised methods to reduce waste and energy consumption and reuse materials. The brewery roof includes solar panels that provide almost 250,000kWh of electricity each year. Another 678,000kWh come from an on-site fuel cell stack. They are approximately 175,000kWh away from being completely off the grid. The brewery also captures heat from the fuel cells and converts it to steam for the brewing process. Beer is carbonated with carbon dioxide, which is a byproduct of the fermentation process. Traditional recovery methods are not cost effective for smaller breweries, but in 2005 Sierra Nevada commissioned the development of a recovery system that is. They went from being a buyer of CO2 to a supplier!

An inherently better product (Hycrete)
Concrete is sealed with plastic vapor barriers and coatings. Treating concrete adds another step to the manufacturing process, and prevents the end product from being recyclable. Hycrete is a new concrete product that is naturally waterproof and can be made from recycled materials. Its properties are inherently superior, and the technology will be profitable when recycling is cost effective compared to landfilling.

How to Implement Green Innovations

Every industry has different needs, but often the same technologies can be shared across industries, as demonstrated by Nike and Mountain-Equipment Co-Op. If your company is not equipped to invest R&D spending in green innovations, you can hire a third party to search for existing innovations that apply to your business. Government incentives, green mandates, and other pending changes in the market favor sustainable business practices. Research and advisory firms can work with management to identify practices and products with the most potential to benefit from green innovation. The first step involves evaluating your energy, water, and material use and looking for inefficiencies. Next, evaluate the greenness of your patent portfolio. Analysts at Nerac help uncover key business questions and find solutions. Are there substitutes for toxic materials used to create the product? Can the product be made from recycled materials? Can the product be recycled?

Research and advisory firms work with companies developing innovative products and technologies to figure out which patents to focus on and identify the scope of their applications. The Eco-Patent Commons and GreenXchange allow companies to share or license innovative technologies. Aim for a green patent portfolio that is well positioned for a sustainable future. Nerac Analysts can help you identify the patents that are needed to protect green technologies within your portfolio and eliminate those that are outdated.

We invite you to download our article “Innovating Green: How the Beat the Competition in an Uncertain World” to learn more about how to implement green innovation.

Download a free sample report here!

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FDA Approval-Why Were There Fewer Drugs Approved in 2013 Than Previous Years?

Posted by Nerac Analysts on Tuesday, February 11th, 2014 @ 12:00 PM

Why were there fewer drugs approved in 2013 than previous years?

Last year, 2013, saw the fewest new drugs approved by the FDA in the past two years, with only 27 new drugs approved and 32 new drug applications. Contrast that to 2012’s 39 new drugs and 41 applications, 2011’s 35 new drugs and 39 applications. The approval percentage for each of the listed years is all above 80% with 2013 being the lowest at 84%. So the question is, why are fewer drugs being approved?

What does it take to get a drug approval?
1) Costs
PhRMA, Pharmaceutical Research and Manufacturers of America, represents most of the largest pharmaceutical companies in America. Accordingly, they have a lot of recent research into the costs of developing new drugs. On average it costs $359 million dollars to develop a drug - this is the total cost, from ideation through approval by the FDA. However, an interesting note is that this average includes all drug companies, from small startups to the big pharma companies. A small startup company is closer to this average, while the big pharma companies state their average development costs are in the billions, close to $5 billion per drug. This is largely due to the larger companies having multiple target/disease areas and also the cost of new science ventures gained through merger and acquisition activities, partnerships or the like. When a company invests that kind of money, they would like to have some assurances that they are going to see a return on their investment. However, that is rarely the case.

2)Time
It takes on average 12 years to develop a new drug from idea to approval. That means that of the 32 applications filed in 2013, some portion of the research was started in 2001, or in some cases earlier. Companies are investing over a decade of time, work, and money to develop one drug. During this time anything can happen that might cause the development process to slow, or even halt.

3) Success Rate
If a company is developing 5000 drugs, only five of them will make it to clinical testing. Of those 5 drugs that make it to clinical testing, only one will actually get approval. That equates to a success rate of .02%. In 2013, 27 drugs were approved, which means that there 135,000 drug APIs (active pharmaceutical ingredients) were developed.. Clearly a high failure/low success rate.

Drug Approvals and the Bottom Line
Drug discovery is a long, difficult process with a significant risk to companies of low returns on their R&D investment. Companies need to select their drug development targets carefully as they have a relatively short time, compared to the life of the drug to make that money back before their profits are cut by generics and patent expiry. The problem is that it is close to impossible to accurately approximate at the start of a research program if the drug will be approved and if it will be a market success.

2013’s Big Shoes to Fill
When comparing 2013 to 2012 and 2011, we must take into account a few things. First, 2012 had the most new drugs approved at 39 since 1996, which had a total of 53 new drug approvals. Second, 2013 had 14 specialty drugs approved out of the 27 total drugs approved. For years analysts have stated that specialty drugs would start to dominate the new drug approvals because a lot of the drugs for things like cardiovascular disease are being taken over by generics. These specialty drugs include two drugs that treat chronic hepatitis C viral infections, a drug to treat a rare type of high cholesterol, two drugs for the treatment of COPD and two drugs for the treatment of type 2 diabetes. So while 2013 did not have nearly as many approvals as 2012 or 2011, it should not be taken as a sign of weakness in the pharmaceutical industry. The 27 approvals in 2013 still exceed the yearly totals from 2005 to 2010.

Need to Monitor Drug Approvals?
Nerac’s Competitive Intelligence Briefings provide thorough, consolidated competitive intelligence on drug pipeline development activity. Here are just some of the ways our CI Briefings can help provide competitive advantage:
• Monitor developments for every competing drug in your current drug development pipeline
• Monitor your drug targets as targets for other drug development
• Organize and deliver a custom Excel database showing new developments for competing drugs in various phases
• Deliver a written monthly or quarterly report on drugs that have moved forward or dropped out of the development process

Our Pharmaceutical Analyst Team combs through hundreds of competitive alerts and consolidates the information into an easy-to-use report that provides critical intel on competitive activities, saving you significant time and resources.

Download a free sample report here!

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The Role of Patents and the Wireless Medical Device Market

Posted by Nerac Analysts on Wednesday, February 4, 2014 @ 4:00 PM

Introduction to Mobile Medical Devices

Wireless mobile devices have the potential to significantly reduce medical costs, which makes the technology valuable to doctors, consumers, and insurers. Consequently, several industries are allocating R&D spending to mobile health (mHealth) technologies. A wireless medical device is defined as a medical device that utilizes Radio Frequency communication. Wireless medical devices can monitor patients in hospitals, collect vitals, monitor physiologic data for patients with chronic conditions, and dispense medication remotely. The benefits of wireless medical devices include more thorough and consistent monitoring, fewer doctor visits, increased efficiency, and reduced health costs.

By 2020, over 160 million Americans with chronic conditions will be monitored and treated remotely. The potential revenues are significant, which explains why so many industries are participating in this technological revolution. The continuing speed and volume of innovation, as well as inter-industry competition, are adding to the already dense patent thicket in the mobile medical device market. There may be some conflict between developers in the mHealth industry due to the rapid evolution of these technologies, number of industries involved, and volume of patent applications. The number of patents filed relating to the wireless aspect of devices, or medical device connectivity, has increased at a much faster rate than other device components, which suggests that there may be overlap in the scope of these claims.

What is the role of Patents in the Wireless Medical Device Market?
The purpose of patents is to protect intellectual property. Patents serve to protect a company’s investment in R&D and the value of IP while a product is being developed, and to prevent others from stealing the idea after the product is released. Patents are particularly important for high-tech companies because the initial investment in research and development is so steep. Until a product comes to market, most of the value of a new tech company lies in IP. IP can still be a company’s greatest asset, even after the R&D phase. Different companies are developing similar ideas concurrently in the mobile medical device industry. These companies are becoming more aggressive about enforcing their IP rights in an attempt to stay afloat. Given the competitive nature of this industry, it is important to understand the IP landscape and how to protect yourself and your product.

The mHealth Patent Landscape

Who owns patents in the wireless medical device market?
There are more industries involved in the development of wireless medical devices than there are for other medical devices. Only around half of the top twenty patent holders in the industry have a primary focus in the healthcare industry. Other industry players include those in communications, computer, and networking. Collaboration between industries is required because mobile medical devices require both FDA and FCC approval. Large companies in these industries hold the majority of patents.

Non-practicing entities make up another large group of patent holders. For example, the Intellectual Ventures (IV) Invention Science Fund owns several hundred patents. IV is a patent aggregator, defined as a non-practicing entity that purchases patent portfolios as an investment (not for the purpose of developing the acquired technologies.) Patent aggregators profit by claiming fees for the use of their acquired IP or selling patents to other parties for enforcement.

What Are the Causes of Increased Contention?
Historically, patent infringement conflicts in the mobile medical device market have been rare because litigation is expensive and the value of IP is not clear in the early stages of development. In 2009, over 9700 patents involving wireless communications and medical device technology had already been issued. The volume of patent litigation in the industry may increase because separately owned rights must be used collectively to develop new technologies, and the number of separately issued and pending patents is only increasing. Since patents from these different industries relate to the same technology, there may be overlap in the scope of their claims even if they evolved separately.

Inter-industry competition and the high value of IP are driving litigious action and patent contention in the industry. IP in the mobile medical device industry has become a market of it’s own. Failed companies with IP rights are immune to patent infringement counterclaims, and as a result, are becoming more aggressive about enforcing their patents in an attempt to recoup investments. Patent aggregators like IV have also created a market for companies to buy and sell rights.

Patent Thicket in the Wireless Medical Device Market
Patent thickets make it difficult to innovate within—or enter— an industry. It is more expensive to acquire licensing rights when multiple organizations own the individual patents to be used collectively. The increased cost to do business in the mHealth industry could be a barrier to entry for smaller companies. The time it takes to process patents could also slow innovation. It generally takes around three years for a patent to be issued after the initial application. Given the current speed of innovation, new technologies may become widely adopted during this time period, and subsequent technologies will develop before the original technology is officially patented. In some cases, the same technology, or the application of one component, may evolve separately. In both cases, the overlap between patent applications makes the entire process more complicated.

It is difficult to navigate the complex web of IP rights and acquire the necessary licenses. When adaptations of existing technologies develop within an industry concurrently, patent infringement is practically inevitable. All companies, big and small, must take measures to decrease risk and secure patent rights.

How to Protect Your IP and Strengthen Patent Rights
File many patents, ASAP: Patenting is the best way to protect your IP. It is well worth the cost. File patents as soon as possible and consider requesting prioritized examination.
Broaden your patent portfolio so that it includes foundational innovations, product differentiations, and subsequent developments or applications. Remember that the patent system now follows the rule: “fist to file,” not first to invent. Once you have something to file, do it. Consult a patent expert to ensure that your claims address the full scope of your innovation. Chances are, other technologies will be built off of every innovation and application. This is a good thing; American capitalism encourages improvement, collaboration, and innovation, but financial incentives drive capitalism. In an over-crowded, competitive market, it is important to protect IP rights.
Watch the patenting activities of your competitors: As mentioned, there is a good chance that you and your competitors will claim similar patents. If your competitor files first, your IP could be discounted. If there is a conflict between your patent and a competitor’s, it can be resolved, but there is a narrow window in which it is possible. Post grant review is possible during the first nine months following the issuance of a patent. Pre-issuance submissions must be made even sooner.
Cross-License Patents: Cross licensing can be beneficial to both parties, and reduces patent infringement risk. Many large companies in the mobile medical device industry hold foundational patents that are necessary for further innovation. Small companies can ‘shop’ to see which companies hold the most relevant patents, and then acquire the necessary licenses for future innovation.

Decrease Patent Infringement Risk
Purchase insurance to protect yourself against patent infringement. Legal costs for defense can easily destroy a small company. Large companies are negatively affected by the controversy that accompanies allegations. Sometimes the most practical way to avoid bad press is to settle. Holding the appropriate amount of insurance limits a company’s financial liability.

As more companies from multiple industries compete in the development of mobile medical devices, the existing patent thicket will become denser. Companies with valuable IP assets can benefit from building out patent portfolios. New players should consult a patent expert such as Nerac to monitor patent infringement and liability. A patent pool could prevent stalled innovation, but at this point, the best thing a company can do is “play it safe.” Get insurance to protect yourself from litigation, and work with Nerac to understand what measures you need to take to protect your own IP.

Interested in learning more about the wireless medical device market? Click the link below to download our free article “Wireless Medical Devices: Security Issues, Market Opportunities and Growth” or contact us directly today!

Click here to download the free article.

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Healthier Menus Create Opportunities for Innovation in the Fast Food Industry

Posted by Nerac Analysts on Wednesday, January 29, 2014 @ 4:00 PM

The most frequently reported obstacle to healthy eating is diners’ time constraints,(Health Canada, 20003a, 5) which equates to an implicit demand for healthier options in the fast food industry. The trend towards healthier menu items in the fast food industry has changed not only what the consumer eats, but also the entire fast food supply chain, from the raw ingredients to the processing, packaging, transportation, storage, preparation, and presentation. Top fast food restaurants are investing in R&D and product development for ingredients, flavor, and packaging materials. Opportunities for innovation exist in every aspect of the fast food industry, particularly opportunities to maintain efficiency and the high profit margins that came with previous processes, but also to address consumers’ newfound demand for tasty, healthy, cheap, and convenient menu items. According to an article in Nutrition Business Journal, healthy food items accounted for over one fifth of sales in the fast food industry in 2006. Sales of health-oriented food items were expected to quadruple between 2012 and 2017 due to increased consumer awareness of nutrition coupled with the growing numbers of people who rely on literal fast food. Trends in fast food industry processes are bound to change at a similar rate.

Opportunities for Culinary Innovators to Develop New Menu Items

Consumers choose fast food for a variety of reasons, but the primary drivers are price and convenience. These factors explain why burgers and fries are top choices for consumers: both provide cheap, tasty calories and can be consumed on the go. Although the traditional burgers/fries/shake meal is often portrayed as fundamentally deleterious to one’s health, food scientists have the opportunity to modify the ancillary ingredients of popular menu items to make them healthier. New formulations of cooking oils are replacing others that contain unpopular trans-fats. Eliminating trans fatty acids from menu items is an improvement, but a french fry that is not necessarily unhealthy may still lack nutritional value.

Children comprise one of the largest groups of fast food consumers and their parents are becoming increasingly aware of these deficits. Food scientists have the potential to formulate a more nutritious beef product by combining the meat with other ingredients that are cheaper and healthier. Kids are notoriously picky, which creates an opening for creativity in the fast food industry. Culinary innovators can create recipes that taste good and appeal to children. Sweet potato fries, dumplings, stir-fry and hummus are examples of imaginative items that appear on new menus. Over 30 top fast food restaurants participate in the NRA’s Kids Live Well initiative and the number of participants is projected to grow.

Agribusiness Industry Growth Drivers

As consumers demand lower fat and calorie options, demand for beef products declines and demand for chicken and refrigerated produce SKUs increases. Fortunately for restaurateurs responding to evolving consumer tastes, poultry prices have historically shown greater stability than beef. Items like the Burger King’s TenderGrill sandwich, and the baked potato from Wendy’s are growing in popularity. Farmers may repurpose their land accordingly and adopt new technologies. FDA regulation is one of the main factors limiting market growth of the agricultural biotech industry, but food biotechnology, including GM crops, could reduce the use of pesticides and herbicides in farming, increase crop productivity, and even produce more nutritious produce.

If consumers demand more unprocessed foods and transportation costs for fresh produce increase, smaller scale local farming could make a comeback. Burgerville and Tender Greens (and most notably Chipotle) are examples of companies that have achieved success with local sourcing.

Food Processing

Most food processing activities occur outside of fast food restaurants. Farms that provide product to the fast food industry are intermediated by large processing facilities that transform potatoes into fries, for example. As consumers demand more fresh food, more processing will occur at or near restaurants. One possible result is an increase in the number of lower volume processing facilities. Mass production enables fast food restaurants to offer low prices. Restaurant chains will need to cut costs somewhere else in order to maintain prices and offer healthy foods despite consumer preferences shifting towards more expensive fresh foods. A qualitative study conducted by the Canadian Office of Consumer Affairs shows that low-income diners claim cost as the main barrier to healthy eating. Here lies another opening for entrepreneurial innovators; innovations in automation technology could allow fast food chains to offer sliced fruits and vegetables at the same price point as fried side dishes. Mantrose Haueser has developed innovative, natural coatings that allow sliced fruit to maintain its appearance and taste long after preparation, meaning that fruit sides can be prepared in centralized processing facilities and shipped to restaurants without meaningful degradation of appearance or taste.

The openness to new ideas is limitless; innovations in nanotechnology have applications for sanitation in food processing facilities. For example, nano-emulsions, which disrupt the cellular walls of certain bacteria and pathogens, could be used for surface sanitation or to disinfect processing equipment

Changes in Fast Food Industry Packaging

The method for packaging food will evolve along with new menus. Biodegradable and recyclable wrappers are slowly displacing the traditional foam container. Corn-based plastics will allow for traditional packaging styles to survive increased environmental regulation. Technologies like antimicrobial plastics additives may be applied to the food packaging industry. New packaging materials require FDA approval; emerging trends in the fast food industry will increase demand for technology companies that develop regulatory compliance software solutions.

Food Transportation

Changes in the fast food industry will impact truck manufacturers and transportation. If fast food restaurants offer more fresh produce, the demand for refrigerated trucks could increase. The number of trips from farm to restaurant could also increase because the shelf life of fresh produce is limited. This would affect both the size and number of trucks that are manufactured, and/or the routes they take from farm to restaurant. Other changes in logistics are likely to arise if restaurants use more local ingredients.

Food Storage

It may seem counterintuitive, but storing butchered, frozen meat in America is actually pretty cheap. Once it is frozen, it lasts a long time. Refrigeration, however, is another story. Although energy costs per hour are lower for bulk refrigeration than freezing, the overall cost of fresh, refrigerated fruit and vegetables are much higher. Have you ever taken a salad out of a freezer and defrosted it? Maybe a genetically engineered lettuce could maintain its form throughout the freezing and thawing process, but at present, commercially available breeds cannot. In the near future, preserved canning seems more likely, but maintaining the taste and texture of fresh products is a challenge. Changing food consumption trends in the fast food industry is one of the key industry growth drivers for commercial refrigerators. Manufacturers are experimenting with alternative cooling technologies that would reduce costs and other technologies to make refrigerators more efficient.

Nanotechnology also translates into food product innovations applied to shelf stability. Nano-cantilevers can be used to detect contaminants in food and could be used to show the microbial quality of an item during its shelf life. Colorimetric lid devices have markers that produce visible colors in the presence of certain organisms. The ability to easily interpret the quality and safety of food allows the potential for incorporation into food packaging systems.

Food Preparation: Concept to Commercialization

Preparing fresh food in-house requires a different kitchen set-up than most fast food restaurants currently have. Manufacturers of commercial kitchen equipment will likely enjoy a temporary boost in sales as fast food chains are forced to adapt their kitchens for newer, healthier menus. One of the changes many restaurants are making is the switch to grilling from frying. Out of the frying pan and into the fire? Not so fast; frying is not even close to being completely phased out. Restaurants with limited kitchen space could benefit from innovative designs for space efficient layouts or more compact cooking equipment required to re-heat pre-prepared food by frying.

Sporks ‘n Straws

Innovations in serve ware manufacturing will be required as the fast and fast casual dining industries evolve. Children in particular respond well to novel packaging. Opportunities exist for cutting-edge innovators to create serve ware that makes eating fun or has unique visual appeal. New, innovative products can make unique menu items easier to eat for traveling consumers, and convenient for people who are under unexpected time pressure. As mentioned earlier, hamburgers are still a popular choice for travelers because they are easy to consume without making a mess and there is no need for utensils. It will be difficult to make other food items as portable, although burritos come close in terms of arriving in their own wrapper. However, packaging a salad is a lot different than packaging a burger. There are more components, and each costs money to manufacture. Even the fork required to eat a salad has a real cost. Entrepreneurial innovators have the opportunity to create serve ware that can accommodate new menu items, reduce or maintain costs, and limit the perceived environmental impact. Most salads include containers within containers for components like dressing and croutons. A single compartmentalized container could significantly cut costs. Experimenting with eco-friendly materials also has potential.

Overall Industry Impact

Current market trends and the need for new, innovative products in the fast food industry are fueling increased spending in fast food industry R&D. Fast food chains are scouting for technologies that will improve efficiency in every step of the production process. Innovation in menu development creates the need for new, innovative products that result from advances in food biotechnology, manufacturing, transportation, nanotechnology, and transportation.

Firms in the fast food industry are as hungry for new ideas as consumers are for healthy foods. The scramble to innovate faster than the competition and meet consumers’ changing demands has lead to increased M&A activity in the fast food industry. Technology scouting is a critical activity in an open innovation paradigm to discover key innovations. Any fast food or fast casual firm could benefit from having a designated technology scout or a scouting program. The following article provides a few best practice tips on setting up an effective technology scouting program.

Click the link below to download the free article, or contact a Nerac analyst today!

Click here to download the free article.

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Pros and Cons of M&A in the Pharma Industry

Posted by Nerac Analysts on Wednesday, January 22, 2014 @ 4:00 PM

Understanding The Business Model for Pharmaceutical Companies

Between 2000 and 2009 there were 1,345 mergers and acquisitions in the pharmaceutical industry totaling $690 billion. According to data collected by Bloomberg, another 676 takeovers of biotech and pharmaceutical companies have occurred over the past three years. These consolidations are driven by a desire to mitigate some of the challenges that confront the pharmaceutical industry, such as rising R&D costs, gaps in development pipelines, patent expirations and generic erosion of compounds, foreign competition, increased scrutiny from regulators, and expensive legal disputes.

Pharmaceutical companies produce profits by selling patented drugs at margins that justify continued R&D spending. The profits fund the company’s three main activities: R&D to develop new drugs, manufacturing to produce approved compounds, and marketing of these new compounds. The high price of brand drugs is a common complaint among consumers, but most consumers fail to realize that it is not just the pills in the bottle you are paying for; you are also paying for the company’s expenditures to bring that drug to market through the FDA and for the development of new drugs that may one day save your life. When a drug goes off patent, generic versions become available and are sold for a fraction of the cost. These drugs are not identical to the original: differences between the binders can affect the bioavailability of the drug by up to 20%. The margin on generic drugs is much lower, sometimes even negative. In order to fund research, large pharmaceutical companies need to generate profits from drugs under patent. When the patent on a blockbuster drug expires, the company that produced it must either replace it with a new drug or cut R&D spending to account for lost revenues. Merging with (or acquiring) a smaller biotech company is often the easiest way to bring a new, patented drug to market.Other reasons firms merge include economies of scale, acquisition of new technologies, transferring assets, eliminating competition, and expanding market reach.Not all mergers are successful, though. Between 50 and 90 percent of acquisitions, and between 50 and 85 percent of mergers, fail to meet financial expectations. The success of M&A’s largely depends on the purpose, as well as the size of the companies involved. Horizontal mergers are usually not successful, but M&A activity is still expected to increase in response to rising R&D costs and the need to fill rapidly shrinking pipelines. There are several potential benefits and consequences associated with this trend:

Potential Negative Impacts
1) Diminished Productivity During Post-Merger Integration:
It is not easy to integrate two large companies. The integration period that follows a merger diverts time and money from R&D. Fewer research programs are launched during this period and data from several large pharmaceutical companies indicate that the momentum of drugs in the development pipeline slows down following M&A activity. When focus returns to R&D, the company will prioritize the drugs that will produce the most profits in the short term to boost the perception that the merger or acquisition was a success and increase shareholder confidence. Focus shifts away from early to mid-stage developments and moves to products that are in Phase III trials—so that the company can begin to reap profits from new drugs under patent protection.

2) R&D Spending Cuts and Stalled Development of New Drugs:
Research shows that R&D is not scalable. As the number of pharmaceutical companies has decreased, so has the number of new drugs that receive approval annually.The pharmaceutical industry invests a large percentage of revenues (18% on average) in R&D compared to about 4% in the manufacturing sector (pharmaceutical researchers and manufacturers of America, 2003). Unfortunately, when a patent expires on a blockbuster drug, revenues fall rapidly and the company must cut costs to stabilize profits. Companies often close research facilities in response to rising R&D costs and expiring patents. This is an effective means of cost cutting, but research sites employ thousands of scientists and closing them decreases demand for the specialized skills of a research scientist. Developing the education and skills required to become a research scientist is a huge investment in terms of time and money. America’s best and brightest will not pursue this career if opportunities deteriorate, diminishing the prestige and expected value of the career. Furthermore, having more companies—and minds—involved in pharmaceutical R&D results in the discovery of novel applications for existing drugs.

3)Focus on Re-Patenting Blockbuster Drugs instead of Developing New Treatments:
In some cases, large pharmaceutical companies may “poach” scientists from a small biotech company through an acquisition. Big pharma companies are constantly scouting for emerging technologies and looking to acquire the best, but not necessarily for the purpose of acquiring their IP and continuing their research. Instead, bigger companies are willing to spend on “acqui-hires” because these acquisitions buy some of the best research scientists. A company may be able to maintain the profitability of a blockbuster drug despite an expiring patent by tweaking the drug and re-patenting it. Large pharmaceutical companies can offer attractive salaries that take innovative scientists away from their research.

4)Neglect to Develop Treatments for Less Common Conditions:
There is increased pressure on companies to prove their success following a merger or acquisition. The need to quickly demonstrate increased shareholder value encourages companies to only invest in R&D for drugs that could be beneficial to broad patientpopulation and discourages research related to less common diseases.

5)Decreased Competition:
The most obvious effect of mergers and acquisitions within the Pharmaceutical industry is that there are fewer competitors. Competition drives excellence and operational efficiency. When a large pharmaceutical company acquires competitive IP, the consumer loses price competition on the supply side, as well as quality contests.

6)Falling behind the rest of the medical industry:
The understanding of medicine has increased substantially over the past decade, but this increased knowledge has not been applied to the extent that it could in the pharmaceutical industry. The number of new compounds approved by the FDA has decreased since 1996, as has the number of new drugs entering clinical trials.

Potential Benefits of Increased M&A’s in the Pharmaceutical Industry
1)Reducing Time to Market for New Innovative Products:
For small biotech companies, the problems described above create financial roadblocks. Without raising adequate capital through a private investment or share sales, emerging biotechs cannot bring new, innovative products to market. In order for a drug to achieve FDA approval, the company must pay for clinical trials. The FDA can only conduct a fixed number of trials, and they are expensive. Large Pharma companies have established reputations and relationships with the FDA, increasing the likelihood that the FDA will agree to conduct a trial. Being involved in the development of a new blockbuster drug reflects well on FDA officials and can often advance their careers. Even if a small biotech had the money to fund a clinical trial, the FDA might refuse or waylay the project. M&A’s can bring new drugs to market faster; however, the full potential of that drug is not always achieved. In many cases, the management team and scientists from the emerging company that developed the drug leave after the acquisition and further studies of the drug’s mechanism and other possible indications are abandoned.

2)Achieving Greater Economies of Scale:
Activities such as production, distribution and marketing are scalable, and by those measures, mergers can increase efficiency.

3)Increased specialization:
Large pharmaceutical companies have been successful due to their marketing capabilities.Synergies can be found when a firm that specializes in efficient manufacturing merges with company with a strong marketing team.

4)Profiting from Generic Sales:
When a patented drug expires, sales of the branded version often fall because insurers incentivize their policyholders to buy the generic. Margins on generics are much smaller, but it can be cost effective to partner with a company that is equipped to manufacture the compound more cheaply.

5)Filling Product Pipelines by Innovation through Acquisition
In order to fill product pipelines, large pharmaceutical companies can save a lot of money by acquiring small biotech companies trading at lower multiples that have already poured their capital into a nascent technology. This way, the large pharma can acquire IP without paying full freight for the R&D, and they can pick among winners for sale at a discount. Unfortunately, the transition in management can disrupt the development of the new drug.There are also discrepancies in assessing intellectual property value on the buy-side and the sell-side. In the early stages, almost all of the value of a biotech company lies in IP. On the buy-side, the value of IP is often undervalued because executives do not understand the range of indications for the product. On the sell-side, companies are willing to risk under-valuation because they are desperate for capital.

6)Diversification:
Diversification of sales can help ease profit losses from branded drug patent expirations.

7)Expanding Sales:
Mergers and acquisitions can help companies expand into untapped markets, particularly oversees.

M&A’s have the potential to create a lot of value, but they are difficult to execute and often fail. As large pharmaceutical companies continue scouting for acquisition opportunities, they will become more selective in their pursuits. Small biotech companies can maximize their value as an acquisition target by thoroughly assessing their intellectual property value. Both parties should understand the surrounding landscape to ensure that the deal is a good fit. Hiring a technology advisor who is more detached from the companies can help accurately assess IP value, create realistic goals, and address the end game strategy. Advisors at Nerac have seen acquisitions fail when executives become too attached to the product, or when there is disconnect between the proposal and execution of a merger or acquisition. Outside analysts can help big and small companies form an arrangement that will maximize the market potential for the acquired products and anticipate challenges that may arise following the deal.

Interested in the major forces driving M&A activity in the Pharma industry? Click the link below to download our free article, or contact us directly today!

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What is 3D Printing?

Posted by Nerac Analysts on Tuesday, January 13, 2014 @ 10:00 AM

Imagine your regular home photo printer, but replace the ink cartridge with a chocolate filled cartridge. Close Office, open SolidWorks, and click, “print object” instead of “print image.” Layer by layer, the printer will create a chocolate bar that has the letters M O M carefully engraved on the top. Next you can go back to your CAD application and create a new 3D rendering of a chocolate bar with the letters D A D. This sort of technology now exists outside of Willy Wonka’s Chocolate Factory; it is called 3D printing. The ability to print chocolate bars will probably not revolutionize American manufacturing, but it serves as a good example of the applications of 3D printing. Historically, most products have been produced using the subtractive method, in which an object is defined by removing the material that surrounds it. In the chocolate example, a custom die would have been created for each set of letters to be stamped on the chocolate bar or an artisan would have cut away chocolate from a larger, solid billet to create the embossed lettering.

Benefits of 3D Printing

3D printing is an example of additive manufacturing (AM), in which 3D objects are fabricated from raw materials layer-by-layer through the addition of materials. No dies are required. Additive manufacturing also refers to Rapid Prototyping (RP) and Rapid Manufacturing. The names are indicative of the benefits: speed, cost, customizability, and repeatability. In the case of the chocolate bar, it would not be cost effective to produce dies for every American name because each die has a significant cost. 3-D printers can have cartridges filled with any material that can behave similar to common low temperature plastics. Certain metals and foods are already being 3D printed. One of the main limitations manufacturing is scale. Unless the margin is so great that the profits from just one item can cover the manufacturing cost, businesses will not invest in the materials and technology required to produce a product unless estimates indicate that demand exists to produce and sell the product on a large scale: 3D printing technology lowers this hurdle and makes small productions runs economical.

Applications of 3D Printing

1) Lean product development and prototyping: Companies with limited scale are often unable to produce new innovative products because they cannot afford the tooling and overhead needed to deliver the first production run. 3D printing reduces production costs throughout the entire product development process, from concept modeling to producing functional prototypes to manufacturing end-use parts. Using 3-D printers to create prototypes can optimize R&D spending by enabling companies to create prototypes in-house—and often for less. Lower cost per design enables manufacturers to experiment with multiple iterations before ramping up full-scale production. The increased efficiency in product development flow decreases the time to market for new products.

2) Health and Medical Device Manufacturing: The healthcare industry relies on customizability more than any other industry. Since no two humans are identical, large-scale production of many medical devices and implants is not practicable. Applications for 3-D printing in the healthcare industry include dental implants, prosthetics, hearing aids, bone replacements, and tissue engineering. Advancements in bioengineering could make 3-D printers capable of printing living tissue to create entire organs! The potential applications in the healthcare industry are incredible. The speed and customizability 3-D printers provide allow doctors to build medical devices rapidly, right from a CT scan image. The reproducibility of each device is another bonus in the healthcare industry: if a patient loses or damages a medical device such as a hearing aid, the doctor will have that patient’s design on-hand and can quickly re-print it. Using 3-D printing to create custom surgical instruments can also be cost-effective.

3) Aircraft and Aerospace: AM technology has the potential to produce lighter and stronger multi-material components and assemblies with more integrated electronics and subsystems in the Aerospace industry. 3D printing was used to create the first full scale model of a turboprop aircraft engine. The process had a 97% cost reduction and an 83% time reduction compared to traditional manufacturing processes. Additive Manufacturing processes create one-piece systems without welding. Multi-material AM allows the ability to create complete structures with the required directional strength and stability. Complete wing structures and unmanned aerial vehicles have been printed, and more complex systems are under development. 3D printed aircraft engines and components are also being developed. 3D printing may also be possible in space. Reducing our dependency on Earth-based supply chains, which are hundreds of thousands of miles away, increases our reach and permanent presence in space. You think you have supply line issues?

4) Automotive: The applications for AM technologies in the transportation industry range from the manufacturing of custom parts for vehicle restoration to creating multiple iterations of engine components during product development. Custom motorcycle and automobile companies use AM to make parts for custom bodywork. More of the work in the automotive industry is done by hand than one might think, and when it comes to custom cars and vehicle restoration, custom tools are required. The tools may be only slightly different than what is standard, so using CAD to modify existing designs is relatively easy. AM can create customized jigs and tools for very little cost. Another advantage of AM in the automotive industry is the smooth surface finish it can produce. Very little hand finishing is required for parts made by additive manufacturing.

5) Food: The chocolate bar was not merely used for demonstrative purposes. NASA is funding research for the development of 3-D printed foods. It might seem crazy, but the applications of are not just novelty: astronauts could use 3-D printers to “cook” in space. The machine would use cartridges with “food powder” that would last for 30 years. This technology could reduce waste and solve food shortages around the world. So far, chocolate has been printed. We are still waiting on a pizza, hopefully New York style. The printer would be coded with existing recipes. When a user selects a recipe, the printer would mix the necessary ingredients with water and oil, heat the mixture, and “print” food onto a base, layer by layer. Food scientists could also use this technology to develop new recipes, refine existing ones, or increase manufacturing efficiency.

6) Other Consumer Applications: 3D printers are useful in creating complex, unique designs. One related application is jewelry design. Some schools actually have 3D printers that allow students to fabricate their unique designs. AM is also being used to produce home electronics, computer and mobile device components, replacement parts, and other customizable consumer products.

Current estimates report that there are approximately 30,000 plastic and 500 metal AM machines in service. The sales of AM machines are projected to see double-digit growth over the next five years. Cost–savings in manufacturing and reduced time to market are major benefits, particularly for prototyping, R&D, and product development. Industries that require small-scale manufacturing of customizable parts will continue to use 3D printing technology. The use of AM technology in industries that require small-volume, precision manufacturing is projected to grow to $8.4 billion by 2025, with aerospace, automotive, and medical devices leading the way.

Nerac is a research and advisory firm for companies developing new, innovative products. Our analysts can advise companies on how to use 3D printing to refine products and create functional prototypes as part of a lean product development strategy. Our analysts have expertise and experience in a wide-range of industries, including specific areas of medical devices, engineering, food, and emerging technologies.

Would you like to incorporate 3D printing into your company? Click on the article below about 3D printing in the aerospace industry or contact us directly to get started!

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How to Avoid IP Missteps While Scouting for Innovation

Posted by Nerac Analysts on Tuesday, January 7, 2014 @ 11:00 AM

By definition, innovation scouts search for other people’s ideas. Innovation Scouts either look for new technologies or conceive novel applications for existing technologies. There is a fine line between using and stealing someone’s idea, though. Intellectual Property (IP) issues are common in an Open Innovation (OI) environment, not because innovators are necessarily malicious, but because IP legislation is complicated. Identifying a marketable new idea is the easy part in the process of scouting for innovation; allocating IP rights, determining the most practical licensing or partnership arrangements, and forming mutually beneficial contracts are the more challenging aspects of the technology scouting process. Here is our advice on how to avoid some common IP issues:

1) Understand the Value of Intellectual Property and Respect Confidentiality.
The best advice for managing intangible assets is to play it safe. Always protect your own IP. New ideas are exciting, and you may be eager to implement, but it is important to patent or trademark your idea before proceeding. If you are interested in someone else’s idea, learn how it is protected. Leaking secrets or stealing ideas can result in serious consequences. If you have a trade secret, make sure your prospective partner signs a confidentiality and nondisclosure agreement (CNDA) before you share your ideas. It is generally good practice for both parties to sign a CNDA.

2) Define a structure for your company’s technology scouting program.
Technology scouting should be supported from the top of a company. Allocate resources specifically for technology scouting and designate at least one person to lead the effort. This designee should have a technology and business background or other relevant experience in order to provide entrepreneurial due diligence services. He or she must be creative, be able to visualize how new IP acquisitions might complement your existing technology, and have the interpersonal skills to connect with IP owners. This person needs to be an innovator, but he or she is also playing the role of marketing, so this person must possess business acumen.

3) Credit the Inventors.
From a purely legal perspective, collaborating is not the same as inventing, even if collaboration efforts were pivotal to the realization of a prototype or the current application of the technology. The legal definition of an inventor is: “a person who conceived some or all of the subject matter claimed in a patent application.” There is usually only one inventor, unless multiple parties claimed distinct concepts or designs. Failing to properly credit inventors can have monetary consequences: if inventors are not properly credited, the USPTO can render a patent unenforceable, in which case all parties lose their claim to a potentially valuable IP asset.

4) Specify the respective roles of each party involved, in a contract.
Understanding the roles, responsibilities, and expectations of each party involved is the key to a successful collaboration. These roles should be assigned by contract. For example, one party may provide funding, another research, and another marketing services. Do not listen to a potential partner who claims that assigning such roles on paper restricts each party from participating in other ways. Get it in writing. A contract does limit you or any other partner from pitching in where you can add value outside of your specialty. Relationships can change throughout the process, but it is good practice to start out with defined roles.

5) Determine the most practical method to share or divide rights.
There are several ways to acquire rights from—or share rights with—another party. These include cross licensing, forming joint ventures or innovation partnerships, purchasing rights, and forming sole-source supplier arrangements. The most practical method will depend on the product and the individuals and companies involved. A joint venture seems like the simplest way to share rights, but it usually makes sense only when both parties share similar scale, manpower, access to capital, and tax consequences. A large company, for example, may have legal overhead that a small company cannot afford to absorb or share in proportion to its participation in a JV. Amending the original, contractual arrangement is more difficult if the new venture is set up as a JV. Recently, more joint ventures have come under the scrutiny of antitrust authorities. The most common alternative to a JV is cross-licensing. A cross-licensing agreement allocates the right to produce, use, sell, and import the licensed technology. Cross-licensing agreements can include geographic restrictions or clauses that address multiple applications of the product.

Use common sense, but get expert advice to help understand the complex and evolving legality attached to intellectual property. When technology scouts devise novel applications for an existing technology or discover a new product, all parties ought to benefit. The distribution of rights, risks, and profits should reflect the contribution of each party. Bottom-line: be smart and be fair.

Research and advisory firms like Nerac can advise clients who are developing or refining new technologies, and exploring market growth opportunities. We understand the principles of product development flow and the best practices for managing intellectual assets in collaborations.
Our experts can help you evaluate intellectual property strategies to avoid expensive patenting missteps and maximize ROI of patenting investments.

Interested in open innovation for your company? Before you change your processes, take look at this article which answers the top 5 questions about implementing open innovation. Or contact us directly to get started right away!

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Drugs and Biologics in Cosmetics – Who’s Paying Attention?

Posted by Janet Kwiatkowski, MAE Consulting Group on Thursday, Nov 21, 2013 @ 1:00 PM

According to the Food and Drug Administration’s (FDA) website, “FDA’s legal authority over cosmetics is different from other products regulated by the agency, such as drugs, biologics, and medical devices. Cosmetic products and ingredients are not subject to FDA premarket approval authority, with the exception of color additives. However, FDA may pursue enforcement action against violative products, or against firms or individuals who violate the law.”

FDA’s website states further, “Cosmetic firms are responsible for substantiating the safety of their products and ingredients before marketing.” The FDA does regulate cosmetic labeling under the authority of the Federal Food, Drug and Cosmetic Act (FD&C Act) and the Fair Packaging and Labeling Act.

But what happens when a cosmetic includes a drug or biologic as the active ingredient? What are the regulations? According to the FDA, such products must comply with the requirements for both cosmetics and drugs.

The FD&C Act defines cosmetics by their intended use, as “articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body…for cleansing, beautifying, promoting attractiveness, or altering the appearance” [FD&C Act, sec. 201(i)].

The FD&C Act defines drugs, in part, by their intended use, as “articles intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease” and “articles (other than food) intended to affect the structure or any function of the body of man or other animals” [FD&C Act, sec. 201(g)(1)].

Per FDA regulations, a cosmetic is also a drug when it is intended to cleanse, beautify or promote attractiveness as well as treat or prevent disease or otherwise affect the structure or any function of the human body and “articles intended for use in the … cure, mitigation, treatment, or prevention of disease … and … articles … intended to affect the structure or any function of the body …”(Sec. 201(g) and (i), FD&C Act and Sec. 509, FD&C Act).

This definition is applicable to biologics as well since the FDA considers biological products as a subset of drug and as such both are regulated under provisions of the FDC Act. Therefore, a biologic or drug product must be reviewed/approved by the FDA prior to placing on the market in the US.

The FDA is issuing Warning Letters to cosmetic companies that are making drug/biologic claims. Below is a link to the FDA website providing a list of all Warning Letters issued since 2002. Notice the increase in 2012; from 2002 to 2011 there have been thirteen Warning Letters issued spanning nine years whereas, in 2012 eleven letters were issued to companies such as Lancôme and Avon.

To see the Warning letters associated with drug and biologic claims made for products marketed as cosmetics click here.

Some excerpts from the Warning Letters where the FDA concluded the products are intended to affect the structure or function of the body based on claims include:

1. “Formulated to boost shock-absorbing proteins to help strengthen skin’s support layers.”
2. “Improve fine & deep wrinkles up to 50%. Immediately plumps out wrinkles and fine lines. Within 48 hours begins boosting collagen production.”
3. “[B]oosts the activity of genes and stimulates the production of youth proteins.”
4. “A powerful combination of unique ingredients – Reconstruction Complex and Pro-Xylane™, a patented scientific innovation– has been shown to improve the condition around the stem cells and stimulate cell regeneration to reconstruct skin to a denser quality.”
5. “Immediate lifting, lasting repositioning. Inspired by eye-lifting surgical techniques . . . helps recreate a younger, lifted look in the delicate eye area.”
6. “Blemish Free Skin in Just 3 Days!”
7. “Organic Plant Stem Cells … reactivate your body’s own dormant and weak skin stem cells, pushing them to regenerate.”
8. “[T]riggers your body’s own skin regeneration activators”
9. “[R]epairs sun damaged tissues at the cellular level”
10. “Long-term repair - 5% each of two additional peptides with anti-oxidants stimulate production of collagen and elastin… helping to repair structural damage to deeper layers of the skin.

I understand the balance between revenue, risk and compliance faced by corporations. However, when a drug or biologic is added to a cosmetic it makes the threshold of safety that much more critical. We are not talking about a one-time application of a cosmetic; we are talking about decades and decades of application of creams, foundation, lipstick, eyeliner, etc with little to no scientific evidence demonstrating the safety and effectiveness of the active ingredient(s). Not only do consumers deserve to know that the products they are using are safe but they also have the right to know the products they are using actually comply with US laws.

After what appears to be a lull of enforcement activity in 2013, it is uncertain if the FDA will refocus its attention on cosmetic companies en masse or if they will continue to enforce a particular company through website trolling, but either way if your company happens receive a letter in the mail, the negative impact on revenue and company reputation will be felt immediately. That, quite clearly, is the down side of business risk.

For more information, please contact us here.

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Five Common Mistakes When Obtaining CE Marks!

Posted by Nerac Analysts on Monday, Nov 18, 2013 @ 12:00 PM

The European Commission is currently working on a new regulatory framework that will be released in the next year or two containing sweeping changes that will dramatically impact the CE Mark approval and recertification process. It is estimated that these new rules will be in place as early as 2014 and there will likely be no grace period if manufacturers are not in compliance once implemented.

Here are the five most common mistakes that we see within our medical device clientele:
1. Not being prepared. Notified Bodies will be making unannounced visits to make sure you are in compliance and to recertify your certified devices. Being ready for these unannounced visits will make sure audits go smoothly and result in an expedient approval.
2. Expecting prior inspections to be a predictor of inspections in the future. Don’t expect to have the same auditor every year, as they will be changing assignments every few years. They will also be regularly audited. As a result, auditors will be much more critical going forward in their inspection, so it’s imperative that you keep your clinical literature evaluations and updates current.
3. Expecting internal personnel to have the time, skills and resources to complete the clinical literature reviews. Most often, clients reach out to Nerac when they are in a bind or have been audited and need to complete their clinical literature reviews under a tight timeline. Don’t wait until the last moment. We can help ensure your internal people are set up for success.
4. Not dedicating resources to doing it right the first time. The initial investment pays for itself when the audit and approvals go smoothly.
5. Not keeping up with regulatory changes. More changes are expected in 2014 and beyond – is your company ready? Is there a plan in place to be in compliance?

With so much change on the horizon, it’s easy to become overwhelmed. Our teams of analysts have many years of experience with thoroughly searching and critically evaluating clinical literature for a variety of medical devices. Our third-party, objective reports provide a non-biased opinion of safety and performance and are viewed as both high quality and credible by Notified Body Auditors.

Don’t be caught off guard!! We invite you to download our free report “Clinical Literature Evaluations via an Objective Third Party Reviewer: Maintaining Compliance with the EU Medical Directives and Beyond” to learn more about how we can help. Or contact us directly to get started right away!

Click here to download the free report.

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What are the Benefits of a Technology Scouting Program?

Posted by Nerac Analysts on Tuesday, Nov 12, 2013 @ 3:50 PM

Companies today are continually faced with the emergence of increased competition, technological complexities, and faster markets. Innovation is progressively becoming more relied upon as a solution to help surmount these challenges. It is crucial for businesses to recognize the importance of technological innovation for growth and maintaining a competitive advantage. Innovation is beneficial to companies for a number of reasons.

Some of these reasons include:

• A better understanding of what opportunities are available now and in the future
• Improved efficiency
• Increased productivity
• Diversified products and services
• Increased economic growth

In order to discover such innovation, many companies implement technology scouting programs; these programs are established with the intention of identifying the latest advancements or perhaps a new way in which an existing technology can be applied. Technology scouts may be an employee of the company or come from an external source. Effective technology scouts know how to leverage their networks and branch outside of them, evaluate worthwhile opportunities, link a potential technology to the company strategy, and more. Companies who seek innovative technologies and solutions help place themselves ahead of their competitors.

Technology scouting programs help companies to:

• Achieve growth objectives
• Increase the speed of product development
• Gain additional expertise and perspective from outside the company
• Minimize the limitations of internal resources

Technology scouting programs can only be successful if implemented strategically. Merely having a program or designating an employee to take on the role of a technology scout is not sufficient enough to produce the desired results and progress.

Companies that run into problems with their technology scouting programs often:

• Fail to determine the role in which technology will play
• Fail to establish a process for locating and implementing the technology
• Have too broad or too narrow objectives
• Do not have a clearly defined end goal

Nerac is a research and advisory firm with a long history of working with companies on innovative products and technologies. We have been in business for over 40 years, and our analysts combine intellectual property, business and technology expertise in a multi-disciplinary research methodology to provide data-driven solutions. Let our analysts help you drive product innovation, identify emerging technologies and stay on the cutting edge of scientific advances by delivering custom solutions for your business.

We invite you to download our free article “Six Tips for Effective Technology Scouting” to learn more about implementing a technology scouting program and how Nerac can help. Or contact us directly to get started right away!

Click here to download the article.

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