Assay Depot Founders Morphed Their Biotech Startup Into e-Commerce Provider of Drug Discovery Services
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services on Assay Depot’s website. That makes it possible, as Lustig puts it, for a scientist to log onto the website and just click to purchase an Ames test ($2,512 and up) or a general toxicology screen ($4,250 and up) the way ordinary folks click to buy a book at Amazon. Asset Depot takes care of the paperwork, including billing.
The website is free to join and, for customers, free to use. Asset Depot says it only gets paid when customers actually place orders for laboratory services—by charging the CRO a 7 percent commission on services they sell through the website. After launching assaydepot.com roughly a year ago, Lustig says it was three months before the company processed the first order. But the company now has roughly 150 CROs registered, and has five full-time employees and three consultants.
Lustig says Asset Depot raised $1.8 million in startup capital entirely through friends, family, and a handful of individual investors, including some Hollywood money invested by comedian/actor Adam Sandler and producer Jack Giarraputo. Lustig anticipates raising an additional $1 million to $2 million in January, but says he hopes to avoid venture investors because Kalypsys “gave away 75 percent of the ownership” in raising its first $170 million.
Assay Depot’s timing also has been ideal. The economic downturn of 2008 and doubts about the VC-based business model for the biotech industry have prompted biotechs everywhere to turn to outsourcing laboratory services as a way to cut costs. “Almost overnight, the core philosophy of [in-house] pharmaceutical research is being abandoned,” says Lustig, who cites one market report that estimates the biotech outsourcing market will double to $14 billion in the next four years.
Assay Depot’s website has drawn substantial interest throughout the biotech industry—and Lustig says one very large pharmaceutical company that he is not at liberty to name has hired Asset Depot to develop a version of the website within the pharmaceutical’s corporate intranet. “We’ve constructed a private marketplace that only the 10,000 researchers of that pharma can access,” Lustig says. The customer would not let Assay Depot charge a 7 percent commission on each transaction, however, so Lustig says it operates on a subscription business model.
Big Pharma companies typically provide 1,000 lab services internally, but Lustig says such firms are also looking for ways to trim costs. A private website provides a central clearinghouse where all of the scientists within one company can go to order laboratory services—whether they are provided internally or through a CRO. In fact, Lustig says Assay Depot has developed a rating system for its private marketplace that enables the pharmaceutical company to assess whether CROs provide better service at lower cost than the company’s internal service providers.
“They might be able to reduce their costs by $100 million a year by asking their scientists to rate the internal lab services (up to a five-star rating) and let them compete against the outside CROs,” Lustig says.