Assay Depot: ‘Ebay’ for drug discovery services debuts

While other online marketplaces targeting researchers in academia and industry do exist, they focus on laboratory equipment, consumables and other products. Assay Depot​​ is different because it focuses mainly on services, said CEO Kevin Lustig in an interview.

For example, a researcher looking for rodent toxicology services can log into the site, navigate to the relevant section and see a listing of various service providers, with prices and turnaround times. The user can also ask for quotes from Assay Depot’s registered providers, and either send samples directly to the provider, or make use of Assay Depot as an intermediary if anonymity is required.

There is no charge for either the user or the service provider to access and use the site, according to Lustig. “We only get paid if we bring business to the service provider through the website​,” he said.

“We use a revenue-sharing model - like Ebay - that results in a "commission" to us of 1-15 per cent, depending on the price of the service. The revenue share is about 3 per cent on a $100,000 service, about 5 per cent on a $50,000 service and about 12 per cent on a 10K service​.

In return for that commission, Assay Depot finds the customer, hosts the website, takes the order, establishes the legal agreement, facilitates the shipping and data reporting processes, and carries out the bill collections.

“In the industry, we are unique in this regard. It's why we bill ourselves as a full service marketplace​,” said Lustig.

The nature of the business lends itself to organisations such as small biopharmaceutical companies, academic departments or virtual drug discovery firms, which generally have no choice but to outsource research tasks as they have limited resources and capabilities in-house.

But larger pharmaceutical firms have also expressed interest in the marketplace, according to Lustig.

More than 70 providers are already signed up to the service, but Lustig expects that to increase to more than 120 by the close of the year and around 300 by end-2009. The range from smaller players – who benefit from the exposure and back office functions that Assay Depot provides, right through to the big multinationals such as EMD.

“The benefits to the larger providers are different​,” contined Lustig. “For them, we bring together services from often disparate elements of their organisations under one roof, making it easy to track performance and rapidly respond to changes in customer use patterns​.”

Assay Depot can also help them collect what has been called ‘the long tail’ (from Chris Anderson's book of the same name) - the thousands of little customers with small orders that individually are often unprofitable for the service provider but collectively add up to a significant percentage of overall spending.

That’s not to say that the big players are all on board with the idea.

“We have found that some larger providers are afraid of the idea of an open marketplace of research services​,” said Lustig. “The status quo is good to them. They get lots of business and they charge whatever the market will bear.​”

That said, Lustig believes most large providers see that ecommerce is here to stay and that a significant fraction – more than 50 per cent - of pharmaceutical research will be outsourced this way within five to seven years.

Just a few hours after the service went live, Lustig was still waiting for the first transaction, but he considers that unsurprising as so much time has been spent building up a critical mass of providers prior to launch. The emphasis over the coming months will be on reaching out to customers.

Assay Depot hopes to reach profitability in two to three years on revenues in the low tens of millions.

“If we become the ‘Amazon’ of the pharmaceutical services industry, then the sky is the limit​,” said Lustig. “The pharma industry will be spending around $20bn a year on drug discovery research by 2011. We get 8-10 per cent of all revenue that comes through the Assay Depot marketplace.​”

If all goes well the model may also be expanded to include other sectors in pharmaceutical outsourcing. “But first we want to make sure we get it right with drug discovery services​,” concluded Lustig.