How do you explain your work to your family? A little challenge for professionals in products for research laboratories, also called Life Science tools. They make and sell unusual things. From bovine foetal serum to high-frequency NMR equipment. From Chinese hamster ovary cells to taq polymerase, the enzyme found in geyser bacteria that made CSI investigations possible. Products and solutions that are invisible to the public, but essential to advance in biomedicine, food safety and new materials.
The pioneers
A few years ago, I was attending a conference about scientific entrepreneurship. Dr Santiago Grisolía, one of the most influential scientists of the 20th century in Spain was sitting in the audience. He raised his hand to tell told the following story.
‘Back in 1945, when Sigma founder Dan Broida discussed his plan to manufacture biochemical products for research, Nobel Prize winner Arthur Kornberg was very sceptic about the idea. He said that scientists already know how to synthesise the molecules they need. But today, biochemical research would be unthinkable without Sigma.’
As the young sales manager of Sigma at the time, i found those spontaneous words inspiring. I sought out the professor during the coffee break to thank him for the free promotion. His recognition of Dan Broida as the creator of a new business model seems justified to me.
Founded in 1935, Sigma manufactured chemical products. WWII created a sugar shortage and an interesting market for saccharin. After that, it was time to reorient the business. Broida and his team ventured into the idea of producing ATP and then other products for the biochemical laboratory. Their success was based on making life easier for biochemical researchers by offering wide range, fast servie and solid technical documentation.
On the chemistry side, J.T.Baker (now Avantor) and Fisher Scientific (now Thermo Fisher) had been selling laboratory chemicals for laboratories since the early 20th century, but their focus was on analysis rather than research. Chemical research was largely a search for synthesis routes, requiring access to a large number of different molecules in small quantities. Usually, researchers had to synthesize these molecules themselves.
One of the chemists who felt this pain was Alfred Bader. This jewish austrian chemist had arrived in the US fleeing the Nazi persecution. Eastman dismissed his inquiries by saying, ‘Please don’t bother us for small quantities,’. This inspired him to found Aldrich and began to build an unprecedented catalogue of research chemicals in small quantities. He created a unique value proposition in two sentences: ‘chemists helping chemists’ and ‘please bother us’.
Sigma and Aldrich merged in 1975 creating a corporation dedicated to supporting researchers. Now, Sigma-Aldrich belongs to Merck’s portfolio. (Called Millipore-Sigma in the US, due to an old thrilling legal dispute). Merck, building on a local pharmacy of the 17th century, directed its attention to research also at a very early stage, and expanded from chemistry to a wider life science concetp with the later acquisitions of Millipore and Sigma-Aldrich
Researchers need more than reagents. In 1958, Waters started in a Massachusetts police station’s basement to make analytical instruments. Brucker began in 1960, using new NMR technology for chemical analysis. Perkin Elmer shifted from optics to broader analytical tools.
Since those garage entrepreneurs, the technology behind life science research has got increasingly complex and the companies have evolved with mergers and acquisitions. The acquisition of BD, a classic in biomedical consumables, by Waters is the latest surprise to date.
The market
If we want to analyse and quantify this market, we need some kind of taxonomy. Some common criteria for defining the perimeter or sub-segments. What are we talking about when we talk about ‘life science tools’?
The best model to understand this market is that of my dear colleague Josef Zihlmann, an expert analyst whose market vision is essential to follow. Josef talks about a central core and adjacent markets that influence it.
The core is a market worth around $90 billion, based on an extremely wide range of consumables, equipment and services. The behaviour of this market over the last five years has been very determined by the fight against COVID19. The volumen grew dramatically since Q2 2020, and started decreasing since mid 2021 to the present, in a tough back-to-normal. After correcting for stationality and inflation, it seems the last months might be showing the first signs of returning to a small single digit growth. But this may be hampered by the uncertainty created by the US policy on research.
The adjacent markets show a more favorable pattern. According to this model, the adjacent markets to watch are: drug development, molecular diagnostics, and products and services for manufacturing – which includes pharmaceutical raw materials, reactors and contract synthesis.
These markets are not only customers of the core, but also the natural area of expansion for companies. There are therefore overlaps that we need to take into account when assessing market volume.
Strategies for survival and growth in life science tools tend to swing towards one of two poles. Some players focus on specialisation, such as Illumina or 10x Genomics. Others bet on aggregation, making a wide range available following the Sigma Aldrich business model, such as Thermo Fisher, Danaher or Merck.
For scientific entrepreneurs with disruptive ideas, the path often begins with a highly specialised niche start-up. The end of a successful journey is usually integrating into an aggregator. The path is long and risky. It requires patient capital, realistic expectations, or the offer of a specialised service that generates income. But it is not impossible; the catalogues of the large distributors mentioned above are full of entrepreneurs’ dreams.
The future
As long as there is technical and social progress in the world, the demand for access to quality healthcare and food will increase. This will drive the growth of the technologies that make it possible.
In the short term, the development of personalised medicine will drive the biomedical side of research. New products and services will be developed for genomic diagnostics, gene therapies and drug discovery.
Lab work is shifting from wet to dry. Researchers use less physical samples and more mathematical models and digital tools. This creates new challenges related to the management and interpretation of large amounts of data. The short-term future is increasingly digital, and current players will have to collaborate with artificial intelligence providers. We can expect different alliances and the entry of providers from other fields into the game. The Life Science offer of the giant Nvidia illustrates this trend, as an example. The market includes also interesting small bioinformatics companies.
In Spain, the forecast is uncertain. It is fair to recognise and celebrate that over the last four years, public research budgets have increased strongly and hit a peak in 2023. This is due to Next Generation funds and to some decisions that were necessary to correct years of neglect. However, the country’s research investment is still at a very low 1.5% of GDP. In addition to maintaining growth in the public sector, it is still pending to convert research (mainly academic) into innovation (applied).
Peculiarities to watch
The life science tools business holds surprises for newcomers. If you are an investor, CEOs or professional coming from other industries, including chemical or pharmaceutical, you need to learn soon some secrets to succeed. Here are some of them.
1.- Scientists trust only what they see (and sometimes what their colleagues say).
Scientists are trained to doubt and look for flaws in theories. That is why they will distrust marketing, social media, their own emotions, promises, and you. The only image that can convince them is what they see in their own laboratory, and the only opinion they care abot is that of another scientist they trust, if publised in a peer-reviewed journal. They are educated, interesting, curious customers, and the conversations will be very instructive… but they will make you and your marketing department suffer.
2.- The academic sector is a valley you have to cross
You want to enter the pharmaceutical or biotech industry. That’s where the bigger money is. The public sectors are weighed down by bureaucracy and subject to fund cuts. But you can only get into the industry by going through academia. Industry researchers get their information from the publications of academic opinion leaders. The road is long and hard. Lots of visits, discussions, conferences, price negotiations, samples, public tenders… Al this, to get a small order. How can this road be shortened or simplified? It can’t.
3.- There are no easy big wins
Whether you sell consumables in small-value individual transactions or equipment and services of higher ticket value, don’t expect to save the year by closing a deal over lunch. No matter how good your relationship is with the CEO of a pharmaceutical company, no purchasing decision is made without involving technicians and users and without going through a tender process. Even the head of a department often involves interns in the decision of which technology or product to use. They are clear that the product has to work on the workbench. Every opportunity is complex and every sale is strategic.
Back to basics
Beyond the changes brought about by technological advances, there is a constant demand supplier must meet to be successful. Excellent service.
But service in the 21st century is not just about managing orders, shipments and documents. It is also about managing and understanding data. Today’s lab tools generate huge amounts of data than traditional ones. Interpreting it requires time, skills and training. Customers will demand help and tools to simplify this.
The mission of the Life Science supplier is to make research easier, so scientists can focus on their research strategy. To paraphrase Bader, it is about being scientists helping scientists.