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April 4, 2005
Making a match | Portland firm launches online biotech market
By Taylor Smith
Most members of Maine's biotechnology community have a tried-and-true method for buying the chemicals, antibodies and other scientific paraphernalia needed to keep research moving along: Go direct to the source. From The Jackson Laboratory in Bar Harbor to ImmuCell in Portland, purchasing agents or researchers will pick up the phone or open a Web browser and place an order with a biotech product supplier such as Hampton, N.H.-based Fisher Scientific International.
But if Bill McDonald has his way, people like Edward Bilsky, a professor of pharmacology at the University of New England in Biddeford, will add start shopping for diagnostic kits and lab gear through McDonald's newly launched electronic marketplace, The Biotech Source, which went live in early March.
Like an online classified bulletin board for the lab-coat set, The Biotech Source (www.thebiotechsource.com) allows potential buyers to scroll through dozens of categories, from environmental-related antigens to closeout sales on immunochemicals, and request price quotes from sellers. And if the prices are attractive, the buyer can contract the sale directly from the seller without having to go through a middleman. The Biotech Source will charge sellers for each product listing, but will otherwise make the service available for free. "We look at it as more of a service," says McDonald. "We feature products on our site, but we don't sell the products."
Just a few weeks after the launch, McDonald says the site is doing well. Though the bulk of its categories don't yet have any listings, McDonald says he expects the company's current customer base of roughly 300 sellers to grow significantly. A promotional blitz is planned for early April, when the company will send out 250,000 marketing e-mails to a range of contacts in the industry.
For the 12 months through next March, McDonald expects revenues to reach $350,000, and McDonald says he wouldn't be surprised to eclipse that target. "We're kind of conservative at that, I believe," he says. "There are going to be a lot of listings. We've got one company that wants to list about 500,000 liters of product. And there's more we can do with banner ads and other marketing campaigns" that will raise additional revenue.
The concept of an online business-to-business marketplace is nothing new. The Internet bubble was full of hyperbole about how B2B portals would revolutionize the way businesses bought and sold goods and services. And while the promise was convincing enough to attract loads of venture capital, many B2B companies failed to deliver. Ventro, one of the highest flyers during the B2B boom, saw its stock plummet and its roster of online exchanges shut down one by one ˆ including its flagship life sciences exhange, Chemdex ˆ in eight short months during 2000.
At The Biotech Source, though, the B2B bust is old news. "I think we've been able to create something that's going to be compelling for the entire industry to use," says Ron Stone, vice president of business development at The Biotech Source.
Still, McDonald and Stone will have to convince researchers like UNE's Bilsky and companies such as ImmuCell that The Biotech Source can offer convenience and savings over the traditional method of purchasing biotech products direct from a supplier. What's more, the company faces competition from a handful of other, more established online marketplaces including San Francisco-based BioCompare and Bioresearch Online, a subsidiary of Horsham, Penn.-based VertMarkets.
Getting out of the middle
Some observers are worried that The Biotech Source won't be able to seed its marketplace with enough sellers to attract a healthy population of buyers. That's because, in the e-commerce world, many larger suppliers ˆ whether in the biotech industry or any other ˆ already offer customers a direct online marketplace. What's more, those companies can afford to offer price breaks to their regular customers. Michael Brigham, president and CEO of ImmuCell, says his labs are working to consolidate their purchases with some of the bigger vendors like Fisher Scientific because of those cost savings. "We're not huge, but we're big enough to negotiate a [price] break on things like shipping," he says.
And online marketplaces, says Andrew Bartels, an analyst with Forrester Research in Cambridge, Mass., offer more value to larger companies selling goods and services, because such companies are better able to compete on price. A recent Forrester study found that just 33% of small businesses will sell goods and services over the Internet in 2005, down from 42% last year. "A lot of e-commerce is focused on finding the lowest price," says Bartels. "On the sales side, a lot of smaller companies have been reluctant to participate in electronic commerce because of their belief that they tend to lose."
McDonald admits that the online marketplace business is foreign ground for him. But with more than three decades of experience in Maine biotech, he says he's convinced that purchasing in the industry increasingly will happen via the Internet.
The Biotech Source is the latest in a line of biotech-related businesses that McDonald has launched in Maine. McDonald, a graduate of the University of Maine, in 1975 started Northeast Biomedical in Windham as a manufacturer of chemicals and enzymes for use in the study of infectious diseases. After selling that company in 1981, McDonald founded Reagents International, a reseller of bulk biotech materials. The company sold products through catalogs, which McDonald moved onto the Internet in the late 90s.
Ultimately, he wanted to shift the company away from its role as a middleman. So, in 2003, McDonald began working with Stone and a team of consultants and Web developers to build The Biotech Source's online marketplace. "It's been two years that we've spent developing this site, and we've taken our time," says McDonald, who used revenues from bulk sales and company savings to develop the online marketplace.
UNE's Bilsky says an e-marketplace like The Biotech Source sounds interesting. He places weekly orders for products such as analytical chemicals and pH meters through suppliers such as St. Louis-based Sigma-Aldrich Corp. and Fisher Scientific. Purchasing supplies through a vendor, he says, affords him a high level of confidence that the products will be top quality. "[The Biotech Source] would have to have a good reputation of providing good quality products," says Bilsky. "If they can do that and it's easy to use, it could be useful."
McDonald says The Biotech Source requires sellers to submit references before placing ads on the site, and that most buyers will receive a test sample of a certain chemical or product to make sure it's up to snuff before the company fills a larger order.
Despite the challenges, McDonald has been encouraged by the amount of input he's received from customers. That feedback has helped the company decide to prioritize its diagnostic kit and test systems section, because McDonald says there are no comprehensive listings of such systems in the biotech marketplace. But McDonald also knows that the recent launch of The Biotech Source as an online marketplace means his previous experience in the industry can't prepare him for everything that's coming next. "It's all new territory," says McDonald. "We have no idea what kind of reaction we're going to get."
But if Bill McDonald has his way, people like Edward Bilsky, a professor of pharmacology at the University of New England in Biddeford, will add start shopping for diagnostic kits and lab gear through McDonald's newly launched electronic marketplace, The Biotech Source, which went live in early March.
Like an online classified bulletin board for the lab-coat set, The Biotech Source (www.thebiotechsource.com) allows potential buyers to scroll through dozens of categories, from environmental-related antigens to closeout sales on immunochemicals, and request price quotes from sellers. And if the prices are attractive, the buyer can contract the sale directly from the seller without having to go through a middleman. The Biotech Source will charge sellers for each product listing, but will otherwise make the service available for free. "We look at it as more of a service," says McDonald. "We feature products on our site, but we don't sell the products."
Just a few weeks after the launch, McDonald says the site is doing well. Though the bulk of its categories don't yet have any listings, McDonald says he expects the company's current customer base of roughly 300 sellers to grow significantly. A promotional blitz is planned for early April, when the company will send out 250,000 marketing e-mails to a range of contacts in the industry.
For the 12 months through next March, McDonald expects revenues to reach $350,000, and McDonald says he wouldn't be surprised to eclipse that target. "We're kind of conservative at that, I believe," he says. "There are going to be a lot of listings. We've got one company that wants to list about 500,000 liters of product. And there's more we can do with banner ads and other marketing campaigns" that will raise additional revenue.
The concept of an online business-to-business marketplace is nothing new. The Internet bubble was full of hyperbole about how B2B portals would revolutionize the way businesses bought and sold goods and services. And while the promise was convincing enough to attract loads of venture capital, many B2B companies failed to deliver. Ventro, one of the highest flyers during the B2B boom, saw its stock plummet and its roster of online exchanges shut down one by one ˆ including its flagship life sciences exhange, Chemdex ˆ in eight short months during 2000.
At The Biotech Source, though, the B2B bust is old news. "I think we've been able to create something that's going to be compelling for the entire industry to use," says Ron Stone, vice president of business development at The Biotech Source.
Still, McDonald and Stone will have to convince researchers like UNE's Bilsky and companies such as ImmuCell that The Biotech Source can offer convenience and savings over the traditional method of purchasing biotech products direct from a supplier. What's more, the company faces competition from a handful of other, more established online marketplaces including San Francisco-based BioCompare and Bioresearch Online, a subsidiary of Horsham, Penn.-based VertMarkets.
Getting out of the middle
Some observers are worried that The Biotech Source won't be able to seed its marketplace with enough sellers to attract a healthy population of buyers. That's because, in the e-commerce world, many larger suppliers ˆ whether in the biotech industry or any other ˆ already offer customers a direct online marketplace. What's more, those companies can afford to offer price breaks to their regular customers. Michael Brigham, president and CEO of ImmuCell, says his labs are working to consolidate their purchases with some of the bigger vendors like Fisher Scientific because of those cost savings. "We're not huge, but we're big enough to negotiate a [price] break on things like shipping," he says.
And online marketplaces, says Andrew Bartels, an analyst with Forrester Research in Cambridge, Mass., offer more value to larger companies selling goods and services, because such companies are better able to compete on price. A recent Forrester study found that just 33% of small businesses will sell goods and services over the Internet in 2005, down from 42% last year. "A lot of e-commerce is focused on finding the lowest price," says Bartels. "On the sales side, a lot of smaller companies have been reluctant to participate in electronic commerce because of their belief that they tend to lose."
McDonald admits that the online marketplace business is foreign ground for him. But with more than three decades of experience in Maine biotech, he says he's convinced that purchasing in the industry increasingly will happen via the Internet.
The Biotech Source is the latest in a line of biotech-related businesses that McDonald has launched in Maine. McDonald, a graduate of the University of Maine, in 1975 started Northeast Biomedical in Windham as a manufacturer of chemicals and enzymes for use in the study of infectious diseases. After selling that company in 1981, McDonald founded Reagents International, a reseller of bulk biotech materials. The company sold products through catalogs, which McDonald moved onto the Internet in the late 90s.
Ultimately, he wanted to shift the company away from its role as a middleman. So, in 2003, McDonald began working with Stone and a team of consultants and Web developers to build The Biotech Source's online marketplace. "It's been two years that we've spent developing this site, and we've taken our time," says McDonald, who used revenues from bulk sales and company savings to develop the online marketplace.
UNE's Bilsky says an e-marketplace like The Biotech Source sounds interesting. He places weekly orders for products such as analytical chemicals and pH meters through suppliers such as St. Louis-based Sigma-Aldrich Corp. and Fisher Scientific. Purchasing supplies through a vendor, he says, affords him a high level of confidence that the products will be top quality. "[The Biotech Source] would have to have a good reputation of providing good quality products," says Bilsky. "If they can do that and it's easy to use, it could be useful."
McDonald says The Biotech Source requires sellers to submit references before placing ads on the site, and that most buyers will receive a test sample of a certain chemical or product to make sure it's up to snuff before the company fills a larger order.
Despite the challenges, McDonald has been encouraged by the amount of input he's received from customers. That feedback has helped the company decide to prioritize its diagnostic kit and test systems section, because McDonald says there are no comprehensive listings of such systems in the biotech marketplace. But McDonald also knows that the recent launch of The Biotech Source as an online marketplace means his previous experience in the industry can't prepare him for everything that's coming next. "It's all new territory," says McDonald. "We have no idea what kind of reaction we're going to get."
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