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Preserving capital: The Smart Strategy for Diagnostic and Life Science Companies

Preserving capital: The Smart Strategy for Diagnostic and Life Science Companies

Written by Patrick Tuohy
Business Development Manager at SCHOTT MINIFAB

The past 3-4 years have been a roller coaster for everyone. Just when we started to see the light at the end of the tunnel from the global pandemic, we were hit with a cost-of-living crisis which we are still navigating through today. Diagnostic and Life Science companies are no different. While a massive influx of capital investments were the norm during the pandemic, the opposite is now true as venture funding has weakened. While there are more positive signs ahead in 2024, one thing is certain: a company’s capital is more important than ever, and it needs to be used efficiently.

Companies trying to get their product on the market are in a constant tug of war trying to get a product that is high quality, low cost and do this as quickly as possible. In parallel it needs to focus on:

  • Sales & Marketing activities to ensure the product is successful and maximize market reach.
  • R&D to maintain a pipeline of products that leverage the core technology, this can take the form of expanded test menus and/or product enhancements.

Purpose built Capabilities are key

SCHOTT MINIFAB are experts in the development and manufacture of microfluidic and microarray products for life science and diagnostic companies. To put it another way, life science and diagnostic companies can leverage our capabilities to preserve their capital. How?

  • Reduce Investments in Facilities & Capital Equipment: The Pilot Line capability at SCHOTT MINIFAB can be used to produce, assemble, and package our client’s microfluidic device. This avoids the need for companies to invest in building, maintaining, and upgrading production facilities and purchasing the complex manufacturing equipment required to produce a microfluidic device.
  • Reduce Per Capita Cost (both rate of and duration): Our clients product gets on the market sooner by leveraging the validated facilities and equipment at SCHOTT MINIFAB which are in place, and ready to go. SCHOTT MINIFAB have the experience and expertise to integrate complex manufacturing processes to produce our client’s devices: injection molding, bonding, reagent formulation, quality and supply chain (to name a few). These costs are shared across a portfolio of products which reduces costs to our client vs. going it alone, again allowing our clients to save valuable time and resources and to focus on their core technology, sales and marketing activities.
  • Breadth of Scale: SCHOTT MINIFAB have the capabilities to partner with our clients through the entire development and product life cycle, from the first 100 integrated prototypes to support first end to end tests, the first 10,000 products at market launch to the first 1,000,000 products produced on a fully automated line. This avoids the need to change suppliers as our clients navigate from development to manufacturing which reduces complexity and saves both time and money in tech transfer processes.

Benefits of outsourcing vs. in-house approach

This all sounds great right? Sign me up! But as companies compare outsourcing alternative approaches, such as doing it internally, there are some valid counter arguments.

It seems more expensive than if we were to do this internally: This is an easy assumption to make when taking a helicopter view, but when one ‘gets into the weeds’ this assumption quickly comes undone. Some of the key reasons for this are:

  • Capability Development: The time and cost associated with developing a capability is much greater than the time and cost it takes to purchase the equipment (knowledge development, labor, equipment & facilities). SCHOTT MINIFAB has spent decades investing in R&D to perfect processes required to produce high quality microfluidic devices. Developing capabilities in parallel to introducing a product on the market can have big cost and time implications. Piece prices can be very high with lower-than-expected yield and throughput which require excessive quality control processes to accommodate processes with poor capability.
  • Administration Costs: The HR and management costs required to coordinate, train, and sustain a manufacturing team often get overlooked. This can be a lengthy and time-consuming process, especially when operating at the cutting edge of diagnostic and life science consumable manufacturing.
  • Production Flexibility: It is difficult to predict sales forecasts in the early years, the unfortunate reality is it always takes longer than expected to gain a significant market share. Creating a manufacturing line that is misaligned with demand can massively increase piece-price costs due to underutilized labor and exaggerated overheads. SCHOTT MINIFAB affords our clients flexibility when it comes to production volumes enabling our clients to get product on the market with minimal investment and build confidence in sales volumes. This means when investing in expensive high throughput automation equipment, there is high confidence on the return on investment.

The piece-price at low volumes is too high: Piece price at low volumes is going to be higher than at high volumes due to the manual / semi-automated nature of the processes, however the investment needed to produce these parts is significantly lower as our clients are leveraging our Pilot Line capability.

  • This could mean anywhere from the first 100s of thousands of units require less overall investment and take less time. This allows our clients' Sales and Marketing teams to get products in users hands fast and develop robust demand forecasts before larger investments are made to scale up production. This is when piece prices will be more in line with expectations.

Smart investment, partnering with a trusted expert

Business leaders in diagnostic and life science companies are faced with a difficult decision when it comes to deciding how their product gets made. By focusing on core competencies, reducing capital investments, and enjoying production flexibility, businesses can navigate the challenging journey from development to product launch more efficiently by partnering with SCHOTT MINIFAB.

Addressing the initial concerns about costs through a comprehensive understanding of the overall expenditure makes this approach not just financially viable but also a smart investment in the future of the company.

If you are looking for more information about the development and manufacture of microfluidic and microarray products for life science and diagnostics, please feel free to reach out to me. I would enjoy learning more about your business and if SCHOTT MINIFAB can help you achieve your goals.