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Company ‘democratizes science’ with cloud-based research exchanges

Startup offers easy, convenient supply chain management

Locally based Assay Depot is offering the scientific industry a one-stop shop to find vendors and request bids, as well as software to manage the process. In essence, it provides supply chain management that the manufacturing industry has had access to for well over a decade but which is still fairly new for scientists at pharmaceutical and medical device industries.

Kevin Lustig, the founder and CEO, is a biochemist who understands the complicated process of finding the missing link or a crucial piece of the puzzle in drug discovery and development by searching for contract research organizations that can not only fill the gap, but also comply with requirements and meet budget restrictions.

He set out to simplify that process when he founded Assay Depot in 2007.

“We wanted to level the playing field, so any scientist could find any service they needed. I called it ‘democratizing science,’” Lustig said.

In the ‘90s, some contract research organizations and exchanges did pop up, but there was neither consolidation nor an easy way to search for services.

So Lustig and his team set out to build a public marketplace modeled on the best consumer markets such as Amazon.com, Yelp and eBay.

They put together a database of 5,000 vendors globally and sent invitations to them to join the public exchange and display catalogs with their services and capabilities. Vendors can list fixed price services for standard procedures and products and also offer custom services after discussions.

So far the company’s exchanges have processed 10,000 requests, and more than 700 vendors from 56 countries have registered.

When scientists place requests for information or quotes, they can also select the vendors they want to hear from and if certain vendors are not in the exchange, the company will inform them and invite them to join so they can participate in the bid process.

“So it’s a self-vetting process where the scientists select the type of vendors they want, based on several categories,” Lustig said.

What started out as a public research exchange has now expanded to include several private exchanges that Assay Depot has built for big pharmaceuticals like Pfizer.

Pharmaceutical executives approached the company to ask for help managing internal research, which at the major firms can involve hundreds, or even thousands, of people spread across many labs and offices.

Assay Depot inked a deal with Pfizer (NYSE: PFE) two years ago to host a private exchange. It has also signed new agreements with other pharma majors that are not public yet.

“The pharmaceuticals use our system differently – for compliance, for a tiered vendor system with preferred vendors, tier 1 and tier 2 vendors. The private exchanges are behind firewalls with gatekeepers who vet access for each vendor,” said Lustig, explaining that the system is designed to be very secure.

He compared it with what a search site like Kayak.com or Expedia.com has done for the travel industry.

Revenues are growing for this seven-employee company which has no office or fixed costs — everyone works remotely. In 2010, sales were at $250,000 and they doubled in 2011. Lustig expects to bring in $1.5 million to $2 million this year.

Revenue comes in three ways — from agreements with major clients, for integrating the exchange with the big clients’ internal systems and via subscription fees for vendors.

He explained why he thinks his company offers value and vital services for the pharmaceutical industry.

“They have a lot of patents expiring and they’re going to be losing billions in revenue. So they’re looking to cut costs, but right now costs are going up and the success rate is decreasing and they need to reverse this trend. Our tools can help them reach that goal,” Lustig said.

In the private exchanges, when a scientist needs a service, he or she logs into the exchange, chooses the type of vendors, requests specific information and the system contacts the vendors, who then go to the back office. Here they can communicate with the scientist, send quotes and service information and when they reach an agreement, give a final quote and the scientist can place the order.

The private systems also show the scientists or purchase managers whether there is a master services agreement in place with the vendor: if they are compliant and how they fare on the ratings system. This allows them to either place orders directly or submit them for further approval.

“If you’re looking for protein purification, you can ask colleagues about a particular vendor they used, compare notes, check feedback through ratings – a lot like Amazon’s seller feedback,” Lustig explained.

From the contract research organization’s perspective, Assay Depot enables even small vendors in far flung locations to potentially have access and exposure to a big pharmaceutical company, where before they would have had to attend biotech conferences, spend money on expensive booths and hope to connect with big clients.

Assay Depot charges $600 a year for vendors to display basic information and a maximum of $2,400 a year for detailed, multipage catalogs in the public marketplace.

Vendors can also register in the private exchanges the company builds for big clients, if they fork up $1,788 for basic information or up to $4,800 annually for elaborate catalogs.

A Japanese pharmaceutical firm based in Carlsbad was interested in synthesizing a compound for a drug discovery research process. It used the exchange to identify vendors from around the world, choosing 20 different vendors each time.

“In our system, it takes the same amount of time to cast a wide net as it does to cast a small net,” Lustig pointed out.

The Carlsbad firm found that the bulk of vendors come through with similarly priced bids, but every request sent brought in one or two low bids because the vendors had the expertise to do it cheaper. Lustig said this helped reduce the client’s costs by nearly 80 percent, which led the firm to squeeze in a third project within the same budget.

The main competitors for Assay Depot are the homegrown information technology solutions cobbled together internally by most of the top pharma companies, according to Lustig.

“That’s our real competition. Other contract research exchanges don’t offer what we do with our ease of use,” he said.

He has consciously kept his company small, because he did not want to lose control or ownership of the startup. It has funding of $3.5 million and he toyed with the idea of raising more but decided against it.

Lustig was previously with Kalypses, where he and his co-founder reaised $170 million in venture capital funding. The investors brought in new management and he left when the firm changed direction.

“If I do raise more money, it will be to scale up marketing and software development,” he said.

While his concept is not new in manufacturing, it is still a new way to source in science.

“Our biggest challenge is changing the culture of how things are done.”

-Nagappan is a San Diego-based freelance writer.

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