There’s a battle being waged over Life Sciences R&D spend. Why should we care?
- It’s a huge market. The global pharmaceutical industry spends about $200 billion annually on R&D and the market grows faster than GDP. About $70 billion of this is spent on supplies.
- Research scientists are expensive employees. As a result, tools that improve their productivity can generate ROI and a better drug pipeline. This means easier selling.
- Major distributors and software companies have been launched by serving this sector. Remember that Jaggaer (which was recently purchased for a rumored $1.5 billion) started as a lab supplies marketplace, Sciquest, in 1999. Ariba also had a sweet spot in catering to pharmaceutical companies (among others) when it started.
The Usual Suspects: Fisher and VWR
The first companies to serve the life sciences R&D spend market were, of course, the vendors of lab equipment, supplies, and chemicals to R&D scientists. They were eventually led by the giant distributors in the market, Thermo Fisher Scientific and Avantor (VWR). Fisher and VWR have expanded their selections and have long been leaders in e-commerce technology. If Thermo Fisher or Avantor wanted to, they could handle third-party items and become true marketplaces. (For all I know, they may already do this.)
As mentioned above, in the late 90s, Sciquest began by offering a lab supplies marketplace. Sciquest morphed into a catalog content solution that co-existed with Ariba (and other e-procurement vendors). Sciquest offered more detailed content that scientific researchers needed, such as MSDS sheets. (This was before Sciquest became a more complete e-procurement system and eventually a full suite vendor.)
The New Wave of Marketplaces in Life Science R&D Spend
Now there is a new wave of marketplaces catering to life sciences R&D spend. As you will see, each has a slightly different business model. Each marketplace is seeking to become the “go-to” spot for life sciences researchers to find and/or procure their supplies.
Zageno is a true industry catalog marketplace that looks a lot like a “new-age” Sciquest. The company offers a freemium model for buyers on the platform and presumably takes a commission from transactions. To the paying buyer, Zageno’s value proposition is workflow, reporting, and integration to e-procurement or ERP. Zageno also provides a “scientific score” for each product which is based on data provided by suppliers, reviews/sales, publications, and more.
The company seems to offer the ability to aggregate POs and invoices across the suppliers and essentially become the supplier of record without holding inventory (That’s a good move!) Finally, Zageno is clear and direct about its ability and desire to co-exist with the e-procurement vendors, including ironically, Jaggaer.
It’s a clear, asset-light business model that makes a lot of sense on paper. Practically speaking, Zageno’s main revenue source will be transactions. Transactions, in turn, are only going to happen if the company attracts enough buyers to the platform. The “chicken and egg” problem will be Zageno’s challenge.
I have written about Quartzy before, though I now understand the company a little better! The company offers a clear inducement to buyers to use their system: free lab management software. Quartzy keeps track of inventory, reporting, and workflow. Quartzy is very clear that it is free for buyers and takes a commission from transactions.
Like Zageno, Quartzy can be a supplier of record consolidating invoicing and payments across vendors. But a key difference is that Quartzy is also a distributor stocking inventory for some of the high volume products. Quartzy also offers light RFQ functionality for sourcing products that are on backorder. Think of Quartzy as a regional, vertical Amazon with some software on the buyer side (inventory and RFQ) to attract them to the marketplace. A fascinating approach, but more asset-intensive than Zageno given the physical distribution system.
Labviva appears to be similar to Zageno. It is a marketplace (powered by Mirakl). Labviva is clearly eager to co-exist with e-procurement and incorporates peer-reviewed research and protocols into its product listing and search features. For an e-procurement customer, think of Labviva as a souped-up catalog management system as Sciquest was. For a non-e-procurement customer, its a marketplace. Labviva looks newer and smaller than Zageno in terms of product selection and maturity. In its emphasis on protocols and research, it looks a bit like our next competitor, Bioz.
Bioz is not a marketplace. It facilitates commerce, but it does not offer a shopping cart. Bioz is a search engine for scientific papers with an emphasis on the products used within them. Zageno and Labviva claim to have elements of this, but for Bioz this research, rather than commerce, is front and center. As the company states:
Bioz is the world’s most comprehensive AI search engine for scientific experimentation. The Bioz search engine offers researchers billions of data-driven product, technique, and protocol recommendations. Bioz taps into the latest advances in Artificial Intelligence (AI) – including Natural Language Processing (NLP) and Machine Learning (ML) – to mine and structure hundreds of millions of pages of complex and unstructured scientific papers.
The company puts a star rating on every product based on its prevalence and recency in the research, as well as search popularity and depth. Bioz is free to academicians and charges a subscription to industry researchers for advanced filtering and image access.
Like any good search engine, Bioz seems to make money primarily from suppliers in the form of advertising. Bioz sells suppliers the ability to display its star ratings and associated content on their own site. Bioz also sells data analytics to suppliers including lead generation–which may mean affiliate-type fees, but certainly means competitive information. Perhaps someday they will sell PPC ads? (The company also mentions selling data to hedge funds and analysts, which some marketplaces do, but they are often more subtle about it!)
Among these four companies, we have four different business models:
|Buyside Model||Supply Side Model||Stock Inventory?||Research/Ratings||# of products|
|Zageno||Freemium ordering to all||Commission||No||Yes||8M|
|Quartzy||Free lab management to all, plus ordering||Commission||Yes||No||8M|
|Labviva||Free ordering to all||Commission||No||Yes||500k|
|Bioz||Free search to academics, freemium industry||Ad model||No||Yes||300M|
Quartzy and Bioz would appear, on the surface, to have the clearest value propositions to buyers, but can they turn these offerings into transactions and ad/data revenue respectively? Zageno and Labviva are taking a content-rich approach to shopping in the category. For a buyer without an e-procurement system, these two companies can be a true marketplace and light procurement system, with better search and selection than Amazon. For the enterprise, they can be a catalog management system that sits on top of e-procurement. Will that be enough of a value-add to succeed as Sciquest did? It worked once, but it is 20 years later!
These are just the marketplaces that are serving the general lab supplies business for life sciences R&D spend. This great article points out that there are many more marketplaces in other aspects of the life sciences R&D spend. There are marketplaces for:
- fine chemicals (e.g., Building Blocks, Fragments, and Screening Compounds): eMolecules, Molport, and Chemspace
- outsourced R&D: Science Exchange and Scientist.com
- crowdsourcing: Innocentive
- even talent marketplaces and more: Clora, Hloop, and iSpecimen
And yes, iSpecimen is exactly what you think it is: “millions of human biospecimens from patients with a variety of medical conditions”. There truly is a marketplace for everything these days. Let’s end on that cheery note!