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Figure 1: Has money available to purchase new capital lab equipment (capex budget) changed relative to past three years?


N/A – no budget allocated this year (0% of previous)


Major reduction (<25% of previous) Moderate reduction (<50% of previous) No change (100% of previous)


Increased (>150% of previous) Considerably increased (>200% of previous)


© HTStec 2012 12% 0% 0%


5% 10% 15% 20% 25% 30% % Responding


9% 28%


25% 25%


Figure 2: What impacts respondent’s ability to purchase new lab instruments today


The instrument cost


Cost of instrument related consumables Future service costs


The recession/current economic situation Grant awarding/research funding bodies Lack of lab/bench space


Availability of desired instrument/configuration New instrument validation/trial process


Lack of personnel/trained staff to operate instruments Company reorganisation/lab restructuring Regulatory/GLP requirements


2.02 2.03


1 1.5 2 2.5 3 3.5 4 4.5 5 Mean RATING SCALE 1 to 5, where 1 = no impact and 5 = major (maximum) impact


© HTStec 2012 3.59


3.38 3.44


3.21


2.40 2.43 2.48


2.30 4.46


Opinion on the outright purchase model of instrument acquisition in life sciences may, howev- er, be changing as the current economic downturn bites hard resulting in severe cuts to capex budgets and instrument purchasing across all sectors. Fewer government grants are now available to aca- demic investigators and fewer dollars allocated to support new instrument purchases are awarded. The recent sequestration of US government fund- ing for the NIH, NSF and FDA will significantly impact spending until Congress agrees a budget and layoffs in instrument supplier companies have already been reported. Even pharma and biotech are not without budget caps and freezes, some exacerbated by patent expiration. Many of these labs are restricted in their ability to replace old equipment with new or to buy high-end instru- mentation. In addition, the ability to justify equip- ment purchases is curtailed for what may be rela- tively short-lived projects or for applications requiring highly specialised kit but where the pre- dicted use is relatively limited.


Rental versus lease


So what is the difference between renting and leasing an instrument? In a rental agreement the rental company owns the instrument and amortises (ie writes off) the depreciation of the capital asset. On completion of the agreed rental period the instrument is returned to the rental company. It follows that the rented instrument supplied will not always be brand new, but it is usual for them to be very well main- tained with the latest software etc and for rapid (eg next day) service to be includ- ed in the rental price. In a leasing arrangement it is the leasing company or a bank that initially owns the capital asset by purchasing the instrument outright from the vendor on Day 1. The leasing company (eg GE Capital is active in instrument leasing) takes the depreciation and absorbs this cost, plus adds in the interest on the loan, when calculating the leasing terms and repayments. Typically a lease costs more than a rental agreement, but on receipt of the final or additional payment of a nominal sum the leaser takes full ownership of the capital asset. A service or maintenance contract on a leased instrument is usually an extra cost.


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The industry response to less capex spending has mainly been concentrated around the growing market for lower cost used, surplus or refurbished lab equipment and life sciences instruments. This equipment has become increasingly available fol- lowing the recent closure, reorganisation and con- solidation of many research facilities, with compa- nies such as Atlantic Lab Equipment, Biodirect, BioSurplus, Harlow Scientific, International Equipment Trading, GoIndustry DoveBid and LabX all well established in reselling or auctioning used instruments and trading online. However, acquiring second-hand equipment is not for every- one and is actively discouraged in some universi- ties because of concerns about quality. The NIH responded to the instrument crisis in 2012 by a Shared Instrumentation programme to support the purchase or upgrading of expensive instruments. The programme, run by NIH’s Office of Research Infrastructure Programs, was created to make it possible for institutions to buy expensive research tools that are necessary for NIH-funded biomed- ical science projects but which can only be justi- fied on a shared-use basis, although it is not clear how this might be affected by sequestration. The lab instrument rental alternative has yet to take off to any great extent, which is surprising as one of the greatest benefits of renting is saving capital budget expenditure and freeing up cash flow for the necessary purchase of consumables. Perhaps this has more to do with the fact that few manu- facturers are willing to offer instrument rental or lease as a substitute to outright purchase, than a


Drug Discovery World Spring 2013


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