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Tom Burton is executive vice-president and president of the Capital Assets Group at Liquidity Services.
Today, there is a global adoption of buying and selling used equipment. This article reviews what organizations should look for when considering the purchase of used equipment.
Due to mergers and acquisitions, laboratory downsizing or upgrading, or outsourcing, many biopharmaceutical companies are opting to sell R&D or manufacturing equipment that they no longer need but are still in good working condition. Mainstream adoption of buying and selling used biopharmaceutical equipment has created an economical way for organizations to make and save money through the resale of surplus assets. In fact, more companies are taking a proactive approach in managing their surplus, causing a consistent year-over-year increase in the volume of inventory available on the secondary marketplace.
Fifteen years ago, however, it was unheard of for pharmaceutical companies to sell surplus equipment on the secondary marketplace. Instead, most equipment would end up sitting idle in a laboratory or would be disposed in a less than environmentally conscious fashion. Even 10 years ago, there would not have been a Fortune 500 biotech company selling a used device on the same platform as another Fortune 500 biotech, or one sourcing equipment from the other. So what has caused the gradual widespread acceptance? A few factors come into play; most notably, budget restrictions and the implementation of efficient business practices (e.g., companies can no longer afford to let assets lie idle or dispose them without additional thought to the process). Another factor is mainstream adoption, which has been a trickle-down effect as Big Pharma adopted polices of buying and selling on the secondary market, mid-size and smaller organizations followed suit, mirrored now by emerging markets. Today, there is a global adoption of buying and selling used equipment. This article reviews what organizations should look for when considering the purchase of used equipment.
Equipment is typically sold “as is” with no refunds; therefore, it is important to buy from a credible source and to understand the condition of the assets. Buyers must ensure that what they purchase has come straight from the working laboratory environment of a reputable company because this is one way to know that the equipment has been calibrated and serviced regularly. It is not advisable to purchase any equipment coming from an unnatural environment, such as a storage warehouse or a non-standard facility, in which the equipment may have lost calibration or been contaminated with dust.
For most purchases, the buyer should also consider the source of the asset as well as the credibility of the sales channel through which the asset is being sold. As long as the seller is reputable and the marketplace provides crucial asset information through written product descriptions, images, and oftentimes, video, the buyer should be able to make an informed purchasing decision without the need for an onsite, physical inspection. However, for very large and high dollar assets that are typically sold through private treaty, it is recommended that the buyer arrange for an inspection either during the preview period or by appointment.
Assessing current needs
Another important thing to consider is whether the device meets the required specifications. A lot of the equipment will be from an older generation; therefore, it is important to ensure that the technology of the device is in line with what the company needs. In most cases, it is possible to get by with an older generation model. A generation 3000 mass spectrometer, for example, can work just as well as a generation 4000 model, depending on the specific needs of a company. If late-model equipment is required, new equipment is often available from successful companies that upgrade their equipment on a regular basis or might purchase an item and then not need it. New equipment also becomes available due to laboratory failures or laboratory acquisition.
There is plenty of used equipment at any given time available for purchase. As a result, buyers should only purchase a device or item that can be put to use immediately. Given the breadth of inventory hitting the secondary market each month, there is no need to make a purchase out of fear that it won’t be available, only to store the equipment for six months to a year.
It is important to be familiar with the different types of platforms for purchasing used equipment through the secondary market. The most common channels nowadays are competitive online auctions and private treaty sales.
Online auctions are typically held for high-demand products such as high-performance liquid chromatography (HPLC) devices and mass spectrometers; bulk lots of general laboratory and processing equipment including microscopes, centrifuges, mixers, and blowers; and facility and laboratory support equipment such as furniture and IT equipment. The benefit of purchasing through an online auction is that the buyer will know exactly what other bidders are offering and can, therefore, make a choice whether to pay more or pull out.
Private treaty sales involve direct negotiation between the buyer and selling agent. Typically, items for sale through a private treaty are big ticket or more unusual items such as nuclear magnetic resonance (NMR) spectroscopy units, and biopharma process and manufacturing equipment such as reactors, mixers, and blenders, that might require more time to sell due to the current market conditions. The benefit of a private treaty negotiation is that the buyer can have the item immediately after coming to an agreement with the seller, compared with having to wait for an online auction to open and close.
Expected savings and hidden fees
The type of equipment a buyer is purchasing and the type of sales channel used will have a direct effect on the anticipated savings. If purchasing through a private treaty sale, a 40-60% savings off original acquisition value can be expected (from Liquidity Services historic data). If purchasing through an online auction, the buyer can expect to save:
• 30-40% on big-ticket equipment less than three years old with an acquisition value of more than $25,000
• 30-50% on everyday laboratory equipment that is less than three years old
• 50-80% savings on all equipment that is more than five years old.
Buyers must be sure to factor in removal and shipping costs for everything they plan to purchase as equipment de-rigging and transportation will be the responsibility of the buyer. The larger the product, the more expensive it will be to transport.
Additionally, buyers must keep in mind that sometimes rooms are built around devices and they may have to knock through an exit wall to remove the equipment (e.g., an NMR spectrometer or a big chemical dryer mixer). Buyers must also take into account the installation costs at their facility.
Some secondary market sellers will recommend or help facilitate the services of specialty riggers or shippers. These sellers will usually have established partnerships, contracts, or negotiated terms with trustworthy removal and transportation companies who offer their services at reduced rates.
Second-hand equipment most commonly bought and sold are general laboratory and analytical equipment, more often from R&D sites closing than manufacturing facilities; therefore, R&D equipment (typically late-model and in good working condition) are more likely to end up on the secondary market. The types of equipment often offered include:
• Analytical equipment: HPLC, gas chromatography, liquid chromatography, mass spectrometry, nuclear magnetic resonance
• General laboratory equipment: centrifuges, balances, microscopes, autoclaves, consumables
• Pharmaceutical processing equipment: tablet press, powder blenders, blowers, mills, mixers, stainless-steel tanks
• Pharmaceutical packaging equipment: packaging and filling lines, sorters, box markers, equipment for wrapping and labeling
• Facility and laboratory support equipment: laboratory furniture, IT equipment, heating, ventilating, air conditioning equipment.
At the moment, the United States is the number one market for buying and selling used biopharmaceutical equipment, with the emerging markets (e.g., China, India, and Brazil) expected to grow 20-30% in the next five years. With more biotech and pharmaceutical companies announcing site closures or consolidations, there will be an increase in the amount of second-hand equipment available. Companies that are not closing or consolidating will likely move from buying new equipment to buying used items as purchasing budgets are cut back. Because of the lower acquisition costs, reduced installation time, ease of purchase, and the breadth of quality products available, buying used equipment, has never been easier to justify and will continue to be a staple in the pharmaceutical and biotech space.
Tom Burton is executive vice-president and president of the Capital Assets Group at