Ardent Partners’ analysts recently took a briefing with executives from Science Exchange, a leading R&D Services Management company. Through its marketplace, Science Exchange brings together research scientists in several industries including agri-science, bio-pharmaceutical, food science, medical device, and other research-intensive industries with service providers that offer outsourced R&D services.
On the call from Science Exchange were Dan Knox, co-founder and COO, Rob Mihalko, vice president of marketing (who led a majority of the call for Science Exchange), Shaun O’Connor, director of business development, and James Brennan, market strategy manager.
Company Background
Science Exchange was founded in 2011 by Elizabeth Iorns, Ryan Abbott, and Dan Knox, and today is backed by venture capital from Norwest VP, Maverick, Union Square Ventures, and Andreessen Horowitz. The company is headquartered in Palo Alto and has offices in Boston, Serbia, the United Kingdom and New Zealand; at year end 2018, the company had approximately 75 employees but has entered high growth mode.
Science Exchange began as an online open marketplace that attracted and welcomed participants from all walks of life in the R&D research space. Over the company’s initial years, there was success but the executive team soon realized that an extraordinary and largely untapped opportunity existed at the enterprise level. As a result, in 2015, the company started focusing on developing (and positioning) its marketplace for enterprise users. “This business sits at an interesting intersection of traditional procurement and collaborative business processes and the world of R&D and scientific research,” said Rob. And it is this unique focus that differentiates Science Exchange from many of the other broad-based B2B networks/marketplaces (similar to how VMS and MSPs focus on their specific spend category – the contingent workforce).
R&D Outsourcing a Growing Market Opportunity
According to Science Exchange’s estimates, the bio-pharma industry alone spends a quarter of trillion dollars ($250 billion) annually on their R&D. Additionally, Science Exchange estimates that roughly 40% of that total spend (or $100 billion) is outsourced today and predicts that this volume will increase over the next few years. As a result, the executive team at Science Exchange believes that there is a massive opportunity to streamline the procurement and management of outsourced R&D services, increase efficiency, and enable more savings for its enterprise clients.
Today, the industry as a whole is largely driven by manual processes with a majority of enterprises utilizing manual tools and processes to source, award, contract, and manage their R&D service providers. One result is that while many companies in R&D heavy businesses spend huge dollar amounts in the market, there tends to be limited visibility into the R&D spend and few opportunities to easily aggregate spend across a smaller subset of the existing supply base. Not surprisingly, research operations and key supplier management areas also suffer due to low levels of visibility and automation.
These issues are particularly troublesome for companies in industries (like biotech and pharma) where R&D is or can be a competitive differentiator; industries where speed to market for new products can literally make or break a company. Other challenges exacerbated by poor visibility and low levels of process automation include difficulties in managing risks associated with intellectual property, confidentiality, and compliance; benchmarking the fair cost of projects; accessing the latest, most innovative suppliers, technologies, and services; and identifying the best external R&D opportunities.
Seizing Market Opportunities, Managing R&D Spend
Science Exchange attacks these challenges by providing a single platform with an end-to-end solution that enables multiple parties (buyers and providers) to connect, transact, and collaborate with one another. Its primary offering, the Science Exchange Marketplace, brings many unique, collaborative capabilities that are tailored specifically to R&D environments. As the number of participants and volume of transactions continues to grow, Science Exchange has also become a platform that can support broader R&D processes, enabling users to analyze, search, request and provide quotes, manage contracts, process payments, and conduct analysis and reporting for continuous improvement.
Science Exchange provides a highly-specialized, collaborative interface between research scientists (buyers) and providers. It also features a security layer that is HIPAA compliant, a significant feature for companies operating in biotech, pharma, and medical related industries. On the buyer’s side, the Marketplace provides capabilities for individuals to collaborate across the company and share and store institutional knowledge, like preferred or trusted vendors. The platform can also be used to deliver study results, share logistics information (like study samples). Users also use the Marketplace to manage projects, archive results, and capture supplier- and project-related information.
The company says its marketplace can integrate with all the leading eProcurement systems, so Science Exchange customers can continue to use their standard P2P tools for purchase approvals.
Some of Science Exchange’s featured services include: solution deployment, customer adoption, and strategic sourcing (led by a team of Ph.D.-level scientists who advise and support individual sourcing projects, including the sourcing project design and vendor selection). It also has experts that can support regulatory compliance and supplier identification and qualification.
The Science Exchange Marketplace operates using primarily a buyer-funded model, which means that buyers pay Science Exchange a fee based upon the amount of contracted business supported on the platform. In exchange, it ensures that participating providers are qualified to deliver their services. Once qualified, a provider will execute a contract with Science Exchange that aligns with the contract buy-side customers have with Science Exchange. Its role as intermediary helps to eliminate the need for a new contract for every new provider relationship (in general R&D contracts are extremely complex and difficult to negotiate) while placing due diligence responsibility on Science Exchange. It also supports the invoice and payment part of the process.
Today, Science Exchange offers buyers and providers each two “versions” of its service offering. Buyers can start with a walk-up version and then migrate to an enterprise offering that features additional capabilities for analytics, configurations, workflows, integration with P2P tools, and innovation discovery. The Science Exchange Marketplace is free to use for providers but there are add-on features like rapid payment that cost an additional fee. Additionally, large providers can utilize the eCommerce offering to develop a their own branded website.
Looking Ahead to 2019 and Beyond
Science Exchange continues to position itself around the market space for R&D Services Management, including managing both the tail of smaller providers as well as recurring spend with larger, incumbent R&D providers. To this end, it introduced an eCommerce offering to providers earlier this year.
With strong coverage in its core industries, the Science Exchange executive team sees high growth potential in aerospace and defense, agri-science, chemicals, medical devices, and higher education. The goal, said Rob, was for the company to be the R&D services management platform for all of these industries.
Science Exchange also is looking to extend its R&D services platform to third parties through partnerships within several industries this year, like its partnership with Thermo Fisher Scientific, which was just announced this week.
Rob summed up the value proposition of Science Exchange by saying that “Increased productivity ultimately results in increased probability of market success through innovation. In these really competitive industries, time-to-market is really valuable for new products being deployed.” It is tough to disagree with Rob, because in the age of intelligence, innovation and R&D are and will continue to be primary strategies for success. And in an age of specialization, businesses will be increasingly reliant on third parties to drive innovation.
Keep an eye out for Science Exchange in 2019 — they are breaking new ground in R&D and in procurement.
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