Pharma Asset Management: Sizing Up the Global Secondary Market
As pharma and biopharma companies deal with turbulent times, they look to a more sophisticated (and even real-time) secondary market to help manage equipment and assets. An industry expert surveys the scene, and provides smart shopping and selling advice.
By Paul Thomas, Senior Editor
The drug industry has been in tumult for many years now, with the recent economic downturn only compounding the problem. With companies downsizing, outsourcing, and generally struggling to find the right global footprint, they’ve been challenged with moving and managing their facilities’ physical assets.
“These activities require companies to make decisions on whether to redeploy assets into growth areas or to sell them from existing businesses into the global marketplace,” says Romie Castelli, Senior VP of North American Sales for GoIndustry DoveBid, which specializes in surplus asset management, direct sales, auctions, and exchanges of pharma and biopharma equipment. Recently, Castelli says, high - quality lab and production equipment has become more available in the secondary market, providing opportunity for companies looking to liquidate or acquire certain types of physical assets. In this interview, we talk with Castelli about what’s happening out there. We also get his tips on smart shopping and selling in secondary equipment.
PhM: Given all the M&A activity and plant closings, there must be a lot of good equipment available on the market. How has this affected equipment prices in general?
R.C.: That is correct. We have seen a major shift throughout the process, as major biotech and pharmaceutical companies look to recoup their return on investment for assets. As well, these same companies are looking to proactively manage their assets’ lifecycle—whether it is redeploying assets internally or selling the assets in the global marketplace.
Companies are looking to establish a strategic partnership that can provide this solution with minimal downtime to their human capital resources. This is where our value comes into play—by providing customized asset management solutions that are tailored to clients’ requirements. For example, utilizing our AssetZone software, clients can now identify and redeploy or sell assets on a real-time basis. This type of technology has helped cause a major influx of biotech and pharmaceutical equipment into the secondary market.
The development of the secondary market has provided buyers a unique opportunity to acquire working condition equipment with service records for less than 50%-70% of the acquisition cost. This has caused a direct ripple effect on new equipment prices. OEM’s and VAR’s now have to directly compete with the secondary market equipment prices. For the past six years, we have seen a trend of mainstream organizations and companies including major university, research institutions, and even global pharmaceutical corporations looking for equipment in the secondary market. They understand the need to have multiple equipment procurement channels. This helps buyers reduce the equipment acquisition lead time—instead of waiting weeks or even months for delivery of a new piece of equipment from the original equipment manufacturer, a used item could be shipped and installed within a matter of a few days.
PhM: What kind of equipment is still moving well, and what isn’t? (Are there specific pieces from specific OEMs that are hot items that you can name?)
R.C.: Analytical equipment such as HPLC’s and mass spectrometers move extremely well. Brand names like Agilent, Waters, and Thermo are highly sought after. Higher-end instrumentation like NMR’s and complex/custom robotics, while very costly to purchase new, tend to move more slowly in the secondary market and take longer to find the most suitable buyer.
PhM: Is it fair to say that biopharma production equipment is in high demand, but there’s low demand for traditional chemical pharmaceutical equipment?
R.C.: We see the demand on process equipment based on age and condition rather than manufacturing type. However, there is high demand for both late model chemical and API equipment, but less demand for the same equipment with more than five years of age. The sale cycle is generally longer to sell older chemical pharmaceutical equipment. These are all factors that the seller must take into account when trying to sell these types of assets.
PhM: You mentioned that the market for R&D, laboratory assets has remained strong despite the down economy. What accounts for this, and are there certain pieces of equipment that are particularly in demand?
R.C.: As you look at the various stages of drug discovery and development for biotech and pharmaceutical companies, you notice that the common types of equipment that have constantly moved from project to project are the R&D and laboratory assets. They are mobile and can fit into multiple applications with minimal enhancements. This has directly benefited the secondary market with large influxes in working-condition equipment.
With this large amount of supply there has been an equal amount of demand for cost-effective equipment procurement channels from small and medium business, to foreign companies and educational institutions. Many of these organizations start off as buyers and become sellers in the future, and vice-versa. In addition, the continuing investment from venture capital firms and new spin-off entities created from M&A activities has provided a consistent supply of buyers and sellers.
The asset types that have the greatest market activity are general laboratory and analytical equipment. These lab assets tend to be more generic in nature, have a broad appeal, and are cost effective to ship globally.
The key types of equipment often offered in the secondary market include:
- General laboratory equipment such as centrifuges, microscopes, autoclaves, etc.
- Analytical equipment including HPLC, NMR, and mass spectrometry
- Pharmaceutical processing that includes presses, blenders and blowers
- Packaging and support equipment
PhM: What are manufacturers doing with the assets that they can’t sell off? Are they getting savvier about redeploying them?
R.C.: As redeployment is a new tool for many companies, there are still costs associated with redeploying large assets from one location to another. A business decision needs to be made at this point. Many companies understand that some assets are just not worth redeploying, or relocating due to cost. Rather than sit on these assets for a long period of time, these companies are now coming to us for solutions to assist them in making good business decisions; avoiding cost, storage fees, and taking up potential space, etc.
For example, our AssetZone allows manufacturing companies to manage their asset lifecycle to make best use of their capabilities globally. It lets companies identify underperforming or idle assets and make value based decisions to redeploy them around the world or sell them in the secondary market. It also helps them catalogue and manage ownership records for active assets and source new requirements cost effectively in the secondary marketplace. We provide solutions for even the unsellable assets. We like to call these transactions “cost avoidance to the seller.”
PhM: Your business has moved more from single-company auctions to industry-focused exchanges. What’s driving this trend?
R.C.: We as a company are focused on providing best-in-class solutions that includes having effective sales channels that fit the needs of our clients. Thus, we can sell our clients’ assets via a single-company auction, private (one-to-one) sales, or via the exchange program. We have found that the best way to help companies sell their assets is by creating a project plan that encompasses the latest e-commerce technology tools, industry intelligence, and a proven sales methodology.
The exchange program is a great example of that—it provides companies the flexibility to sell their assets quickly and easily within a proven format. Exchanges are regularly scheduled events that companies can consign a few or large quantity of similar assets to a repetitive buyer base who know when these sales will be taking place. The buyers are able to plan their budgets, what type of equipment is being sold, so they can find the right fit for their companies needs. The GoIndustry DoveBid BioPharma Exchange provides the global equipment marketplace for the Biotech R&D, Medical and Pharmaceutical industries. This includes processing, manufacturing, and lab equipment such as NMRs, LCs / GCs, HPLCs, MRI systems, mass spectrometers, tablet presses, capsule fillers, coating equipment, ultrasound machines, isolation chambers, liquid handling systems, and general lab equipment. This vibrant online market place is used by more than half of the top global BioPharma companies to dispose of surplus equipment as part of their ongoing asset management solution.
PhM: Finally, can you offer some suggestions for manufacturers who have equipment they need to shed? What are some mistakes to avoid?
PhM: And how about a few “smart shopping” tips for those manufacturers looking to get some quality equipment for good prices? R.C.:
- If possible sell the assets from their natural environment prior to decommissioning. If not, make sure that photos or videos are taken of the equipment in that state.
- Provide good descriptions, including make, model, year of manufacture, serial numbers, components, etc.
- Understand that net book value does not equate to current market value prior to making a business decisions about selling assets.
- Offer assets internally within the company for redeployment prior to selling the assets.
- Select a method of sale that will facilitate a competitive bidding environment.
- Engage a service provider that has a global presence and familiarity with your equipment.
- Know the seller—is it a corporate seller? And who is the selling agent?
- Identify your needs up front. People tend to get lost in a large catalog. Ask your questions in advance.
- Look for detailed descriptions when purchasing secondary assets.
- Know that secondary market assets may not include software or license agreements.
- Understand the assets and the environment where they were previously used to avoid purchasing assets that could conflict with current needs and health and safety issues.
- Understand removal and rigging costs prior to bidding on assets. GoIndustry DoveBid has contract agreements in place with riggers and movers who can provide these services and costs to buyers prior to them making a purchase.
- Know your budget, including all costs when purchasing assets on your wish list, including the purchase price, rigging/removal, and installation.