How Do You Get New Analytical Instrumentation When You Need It?

Every scientist in every pharmaceutical/biotech organization is in a race to compete. The company he or she works for is endeavoring to get to the finish line and produce the next blockbuster drug. The scientists themselves are competing internally for the financial resources that will make their groups successful.

Historically, instruments were purchased and depreciated over a long period of time – not unreasonable when their useful life was up to 15 years. Innovation in analytical instrumentation like Mass Spectrometry and Chromatography, however, has erupted in the last 10 years. Now the technology race is changing the utility of older instruments at a faster rate than ever before. The scientist’s ability to get in and out of the right technology is now challenged by a whole new cost structure. Not only must the cost of a new instrument be justified, but potentially writing off the book value of the Scientist’s current instrument can greatly impact an annual budget, needless to say, the bottom line.

Other industries experiencing the same impact of hi-tech evolution have come to grips with the problem, meeting the needs of both user and corporation. McKinley Scientific has drawn upon its experience in these other markets to bring a similar and expanded approach to pharmaceutical, biotech and contract research organizations that are using analytical instrumentation. Our vendor independence provides access to leasing of a broad range of OEM instrumentation.

The instrument or “asset” management approach is simple. The scientist must be objective in an assessment of how long a new instrument will be used for. This includes an analysis of when the next available of technology might be available, or a defined project scope, or other criteria.

Once this is defined, the instrument acquisition will fall into one of two categories:

• Outright purchase: where the use is defined in excess of 5 years
• Lease: where the use is defined as less than 5 years

What is a lease?

You can lease an instrument anywhere from 6 to 48 months at the end of which, you return the instrument no strings attached. Because the instrument has value at the end of the lease, the scientist or “lessee” does not pay the full purchase price over the period of the lease. No time and effort are expended trying to sell off an instrument at the end of use, and there are no depreciation schedules to battle with. Usually, the use of the instrument is treated as an operating expense.

Those who lease, over time, become accustomed to the cycle of paying monthly or quarterly as an operational expense, and of the cycle of decision-making becomes more driven by the flexibility of the lease end date. With the cost of instrumentation coming down while innovation is on the rise, at the end of the lease, the scientist may is better poised for a choice to replace the instrument and to slot it into an operational expense spreadsheet to replace the old one.

McKinley Scientific recognized the need to be involved at a consultative level to understand the scientists’ needs to make sure the correct strategy was employed. Rather than take a “capital company” approach to leasing, McKinley Scientific have taken the time and investment to understand the technology and user perceptions. This dovetails into the lease cost to the scientist. McKinley Scientific can accurately predict the market value of an instrument 2, 3 or 4 years out. This results in the most competitive costs for leasing instrumentation.

Alternatively, you can buy an instrument and you can spread the payments out over time, typically 60 months. At the end of 60 months you own the instrument outright but until it is fully paid up, including interest, you don’t have title.

This should not be confused with a lease.

Not all needs are the same…

A large pharmaceutical company was trying to make a decision on the acquisition of an instrument. The client had a huge concern about the project risk and if it was a “no-go”, they knew their ability to redeploy the instrument would be very limited. Because the instrument had a high end-of-lease or “residual” value, McKinley Scientific had a lease option to satisfy a project “Go” or “No-Go”. This option enables a scientist to use the instrument for a defined period of time, in this case, defined by the project length. At the end of the lease if the project had a green light the user could buy the instrument at a pre-determined value, or, if the project was closed down the user could return the instrument and share in some of the upside when the instrument was sold in the secondary market by McKinley Scientific.

An East coast contract research organization spent $3,000,000 to acquire instruments to support its entry into a new field of discovery. As part of the acquisition process both the scientists and the finance people estimated the instrumentation’s useful life. The scientists estimated the value to them to be a maximum of 36 months or less. The finance people, on the other hand, assumed a longer useful life as part of their financial analysis and concluded that a purchase was most economical. After taking delivery, the finance people re-modeled the deal based on the scientists input and realized a lease was the best option. To address this new need, McKinley Scientific proposed a sale-leaseback which would refund the CRO the $3,000,000 expenditure, make a low monthly payment, use the equipment for the intended project, and transfer the technology risk to McKinley Scientific.

McKinley Scientific provides instrumentation expertise that allows scientists and researchers to maximize the value of instrumentation, in use or in market, at inception or at disposition.

We can help you finance to own, or lease to use equipment for a specified period of time. Full pay-out, or fixed and fair market value purchase options, capped and guaranteed buy-back option structures.

Pre-owned instrumentation

In addition, McKinley Scientific is a leading provider of pre-owned instrumentation. An integral part of the overall management strategy, the pre-owned market can stand by itself and McKinley is a viable resource for high-end instruments. Not only do we consistently have instruments being replaced at lease end and available for sale, we also take surplus instrumentation in on outright purchase for our own inventory, or as a trade-in against new instrument leases.

McKinley Scientifics’ Sparta, NJ facility includes a test laboratory, where instrumentation is tested and refurbished, and calibrated to meet manufacturer’s installation specifications. Our back room team is responsible for the quality of the pre-owned product, crating, shipping, installation and warranty.

Arrangements can be made for a potential buyer to visit the facility and run test samples or mixes on the instrument prior to taking delivery. We do everything we can to make the buying experience enjoyable and risk-free.

Some customers prefer to choose our consignment program to dispose of surplus instruments. McKinley Scientific funds the transaction by covering the out-of-pocket expenses to test, remove and ship the instruments to our climate controlled warehouse. McKinley Scientific is responsible for re-marketing, finding a buyer and concluding the transaction through to the final payment and title change. Once this is finalized, McKinley take an agreed upon fee and recover the expenses with the lion’s share of the proceeds remitted back to the original owner. The process allows you to recover more value than selling it to a broker/dealer or auctioning the instrument.

Instrument disposal management

As unfortunate as it is, the reality of our industry is that some change is not good and organizations need to find a method of turning instruments into cash on a large scale. Often with time pressures to close locations, the instruments need to be out by a certain date and the auction process seems to be the only satisfactory strategy.

McKinley Scientific has a better process.

In our experience the top 20% of instruments in a lab return 80% of the value. That’s where our consignment program outperforms an auction. If cash is needed quickly we can also buy outright or do a combination consignment/purchase.

The other 80% can be offered locally on a walk-in, and through a customized web-site for a defined period of time before the remaining items are sent to auction

By combining our purchasing power, consignment program and understanding the auction model McKinley Scientific can deliver a better return than a sole auction approach.

McKinley Scientific offers an all-round management approach to instrumentation to provide for the most efficient and cost-effective acquisition to the most efficient and value-effective disposition. Get a head start in the race by contacting us to see what we might be able to achieve together.

Leasing Contact:

Paul Corcoran x11
E: paul.corcoran@mckscientific.com
T: 973.579.4144

Pre-Owned Contact:

Martin Steel x 12
E: martin.steel@mckscuientific.com