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OEM Spells Success for Tool Makers: Genomic Solutions, Eprogen Hook Up to Big Names

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If you’re a small or mid-sized tool provider with a hot proteomics technology, how can you quickly get your products out to a growing user community? One way is to piggyback on a large partner’s distribution network — often through an OEM, or original equipment manufacturer, agreement.

Under an OEM deal, a company sells a product manufactured by another company — often with modifications, or as a module — under its own brand name. The arrangement can be exclusive or non-exclusive, and financial terms may differ widely, sometimes involving a sales minimum promised to the manufacturer. “There is not one OEM agreement,” said John Hobbs, a strategic marketing manager in Beckman Coulter’s systems biology business center.

Earlier this year, Genomic Solutions signed an OEM agreement with PerkinElmer Life and Analytical Sciences, which allows PE to sell Genomic Solutions’ ProPic 2D gel spot picking robot under its own ProXcision brand name, as well as market a modified DNA microarray hybridization station. Though it was still Genomic’s own gel cutter that was exhibited at the PerkinElmer booth at Pittcon earlier this month, the instrument will soon wear the new PerkinElmer colors — a lighter blue — according to Sandra Rasmussen, business leader for proteomics at PE Life and Analytical Sciences.

But it’s not only the packaging that changes, Rasmussen said. Vendors can also add their own features such as, in the case of the gel cutter, PerkinElmer’s software, or it might incorporate a technology completely into its own instrument. PE, for instance, integrated a peak picking algorithm and a database search engine from Genomic Solutions into its new prOTOF 2000 mass spectrometer. Beckman Coulter, on the other hand, sells a kit containing reagents and software from Darien, Ill.-based Eprogen as part of its PF 2D liquid chromatography protein fractionation instrument, launched earlier this year.

Marketing and distribution partnerships make sense for smaller players: “We have pretty broad distribution ourselves, but whenever you are talking about a company the size of PerkinElmer, and [considering] their new thrust into proteomics, they are probably getting customers we don’t get to,” said Jeff Williams, president and CEO of Genomic Solutions, a wholly-owned subsidiary of Harvard Biosciences.

To OEM or not to OEM?

But why should a tool maker opt for an OEM deal, rather than a co-marketing or re-sale agreement? “I think the advantage of the OEM is less channel confusion,” said Williams, as it prevents customers from wondering why they can get the exact same instrument from two different vendors. Prior to the current OEM agreement, he added, PerkinElmer distributed Genomic Solutions’ spot picker, as well as its gel digestion robot, under the Genomic Solutions brand.

In addition, Williams said, the OEM distributor is responsible for supporting and servicing the instrument, a customer-friendly arrangement. Hobbs agreed: “Getting something that comes from two companies, customers feel perhaps they get stuck in the middle if something goes wrong.”

Eprogen and its 10 employees, which started out directly selling kits for fractionating intact proteins by two-step liquid chromatography, had already chosen to focus on research collaborations with industrial and academic customers before signing an exclusive OEM agreement with Beckman last October. “We are not an instrument company, and we felt that partnering with a company who was going to build an instrument based on our technology as a platform was an economical and viable way of moving forward,” said John Taulien, Eprogen’s director for sales and business development. He pointed out that the deal offers not only financial incentives to both companies: Beckman uses Eprogen’s facility to demonstrate the technology to potential customers, and Eprogen may obtain new clients who decide to outsource their analyses rather than buy an instrument.

For the distributor, OEM agreements instead of in-house development of an instrument can reduce the time to market, said Hobbs, allowing them a leg up on competitors readying to launch a similar product. “The downside is that you typically don’t make the margin on an OEM product that you make on your own manufacture,” he said. But often, he added, OEM products are used as an add-on to make a company’s own product more attractive, in which case the margins can be sufficient. Apart from Eprogen, Beckman has an exclusive OEM deal for a fraction collection/injection module that is part of its protein fractionation instrument. Another option, a co-marketing agreement, is attractive but has its own pitfalls, Hobbs said: “You have to be careful that there is no conflict of interest at the sales level, that you are trying to co-market something that might impact the sales of your own products.”

According to Rasmussen, OEM agreements often fill gaps in a company’s own product line. “If there are partners that are recognized in the industry as having high performing and value adding instrumentation, we look to see if we can develop a relationship with them,” she said. For proteomics, PE has OEM deals with Genomic Solutions, Nonlinear Dynamics for gel analysis software, and NextGen Sciences for a protein array workstation. It also has a co-marketing agreement with Millipore for an in-gel digestion reagent kit, she said.

— JK

 

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