In a previous post I discussed why some of the estimates that the professional market research organizations make on the size of the medical device coatings market are a bit off. I did not want to throw everything at you at once, so this week I will continue with the topic.
There is one other area where errors are made in estimating market size. Let us take the example of a company that has developed its own antimicrobial coating for its own use. In fact, currently there are several such examples of companies that do this: Edwards Lifesciences, Cook Medical, B. Braun, and Medtronic.
These companies employ their antimicrobial coatings on their own devices and gain revenue from sales. For any one of the examples above, the sales on a given antimicrobial device are in the millions. The mistake made by the market researchers is adding the revenue of these devices into their market size calculation. If Cook Medical's minocycline/rifampin line of catheters sells $100 million per year (a number which I just made up off the top of my head), the market reports will add that $100 million to the market size.
This is incorrect. When a company produces its own antimicrobial coating only for its own devices, it is not licensing out that coating or supplying it to others in any way. However, what if they were? Or, what if instead of using their own coating, they licensed an antimicrobial coating from a coating vendor and paid a royalty on it? The revenue from the licensing and royalties to the coating vendor would be the number added into Market Size for medical device coatings.
So, my proposal is that instead of simply adding the $100 million to the market size, what the researchers should do is pretend that those coatings were licensed from a coating company and then calculate the revenue gained by the theoretical coating vendor for those coatings. This isolates the coatings revenue from the device revenue.
Afterall, we are looking at a coatings market, not a device market, so the revenues should be separated out. Reports that talk about coated device markets might help coated device vendors, but they require all sorts of mental rejiggering to become useful for coating companies.
When you sell house paint, do you look at the selling price of all the houses you are going to paint, or do you look at how many gallons of house paint you are going to use to paint them?