Our COO, Matt Hicks was recently interviewed by Don Davis on the Life Science Success podcast. The two discussed Matt’s career and how we at Federal Equipment buy and sell pharmaceutical equipment. Matt recently published an article titled “Reshoring a Nation’s API and Pharmaceutical Production”.
To listen to the podcast, click here or search for “Life Science Success” on your favorite podcast app.
Transcript:
Edited for clarity.
Don Davis PhD, MBA: [00:00:00] So today I’d like to welcome onto the podcast, Matt Hicks, so welcome Matt. And, yeah, I guess, tell me a little bit about, you and your career, what is it that you’re doing today?
Matt Hicks: [00:00:13] Today I’m with Federal Equipment Company. I’ve been there for about 10 years. Prior to that, I was in pharmaceutical manufacturing and contract manufacturing with Boehringer Ingelheim. I had some time with Cardinal Health before that and did a little bit of work with the Department of Defense, to start my career.
Don Davis PhD, MBA: [00:00:30] Yeah. So how does somebody start out in the DOD and kind of work towards pharma? Was there an interest there?
Matt Hicks: [00:00:37] They, the Department of Defense recruited me. So they were looking for a certain type of person that had a certain GPA and, I really, I didn’t have many job offers at the time. It was a time when not too many companies were recruiting, much less recruiting college grads with little to no, experience. But, so I ended up taking this job [00:01:00] and it was, it sounded really exciting. It was buying helicopters for the Army and and then I transferred to the Navy and was doing construction contracts and living in San Diego. And it all sounds really great, but at the same time it was, a very programmed career. And, there wasn’t a lot of opportunity to accelerate on that or to, to really, break the mold if you will. And that’s nothing wrong with the organization or the people that work there. They were, met a lot of great people there, they sent me, on a two week assignment to Columbus, Ohio, which is where I’m from, and I ended up interviewing for a job. I was there and that’s how I ended up at Cardinal Health. That’s how I get into pharmaceuticals. I fell into it if you will.
Don Davis PhD, MBA: [00:01:41] Very nice. And then, so it looked like for the last 10 years you’ve been at Federal Equipment Company. Can you tell us a little bit about Federal Equipment Company and what is it that they do?
Matt Hicks: [00:01:52] We are an equipment dealer. So, we buy and sell used process equipment and packaging equipment. [00:02:00] We tend to focus on pharmaceutical and specialty chemical companies. What we find is that our customers, in terms of who buys the equipment come from a wide range of process industries, but most of our clients or the people who we buy from are pharmaceutical and chemical companies.
Don Davis PhD, MBA: [00:02:20] Okay. And so what would, so I guess what would start that process for a company that would, come to Federal Equipment Company? How would that process start?
Matt Hicks: [00:02:30] Either they are closing a plant, or they have surplus equipment, or in many cases, you have a company that buys another one and then starts down the path of integrating and removing redundant, manufacturing capabilities. That’s how they find us. And then, you have the, the distressed companies that are liquidating or closing. Those are the other avenues. But most of our business comes through as surplus to [00:03:00] ongoing operations, like Pfizer and BASF. They buy equipment. the drug goes generic or they don’t have a need for the equipment anymore because the new drug doesn’t need that equipment.
Don Davis PhD, MBA: [00:03:11] So then what happens on the backend with it? So you acquire the equipment because the pharma company doesn’t need it anymore. What’s sort of the next step? Why? I’m sure you must at some level turn around and sell it as well.
Matt Hicks: [00:03:27] Yeah, it’s how we get. It is really, it really goes across the board. It’s really facility and project dependent. Sometimes we go in and we remove it ourselves, we offer those services. Other times, the client will actually remove it and just put it on trucks that we bring to them. And then in other situations, we will buy out of an auction, either, from a liquidation company or those types of scenarios. But most of the equipment we have are, like I said, are coming from clients who are, either. [00:04:00] just looking to get rid of surplus equipment or they have a facility they just aren’t using any more and they’re closing.
Don Davis PhD, MBA: [00:04:06] And then you who do you sell it to after you have it?
Matt Hicks: [00:04:11] The model used to be, we would acquire from the big companies, big pharma, the bigger chemical companies, and then we would sell it to companies that are competing on price. So, generic manufacturers, over the counter manufacturers, contract manufacturers, the people who are margin sensitive that, can’t always afford the best and the shiniest new piece of equipment, but they still have a need for quality. The equipment in their manufacturing operations to make those products.
Don Davis PhD, MBA: [00:04:43] Okay, yeah. I’m in Colorado and there’s a lot of these smaller, I would call almost biotechs or CROs, not too far from where I’m at. And who knows, maybe that’s one of the places where they got equipment from. [00:05:00] It seems like, COVID is one of the big CapEx that, that I feel like, in a lot of cases, a lot of the interviews I’ve done recently anyway, there’s been some focus on COVID I guess. For your business, what is the impact of COVID? Have you had any sort of impact?
Matt Hicks: [00:05:19] Yes. We’ve obviously been open the whole time and a lot of our workers went remote. Most of them are coming and have come back into the office, in one capacity or another. But, we’re part of that crucial infrastructure in terms of supplying this equipment and obviously the demand for the obvious things. We’re still looking for vial fillers that are in any sort of protective barrier system or any sort of systems that the can put the kits together to do testing. These are things that we saw almost immediate demand for and we continue to see that and, we’re still seeing a lot of people, a lot of companies are still trying to. [00:06:00] figure out, how their products can be manufactured. And one of the success stories we just had, and I’m not going to use the company’s name, cause I don’t know if they would appreciate it. But, they came to us, looking for a very specific style of butterfly valve. And I’m not saying we have them all over the place, but we acquire a lot of stuff when you clean out a facility of surplus equipment. And we had some of these valves that they were looking for. They came to us and they said, “do you have these valves? Nobody is selling them and the manufacturer is giving us a 12 week lead time.” They were on an airplane in 12 hours, going to where they needed to go. And that was for a COVID-19 vaccine project. That’s just one of the things that we’ve been able to do. And there are others, where people have come to us and say, “look, we’re in a pinch and we need this now” that we’ve been, working with them to get them the stuff they need.
Don Davis PhD, MBA: [00:06:54] That is excellent because I, in a past life, I used to support [00:07:00] organizations that needed the stainless steel bed support in the large bioprocess columns. And, that’s, one of the very difficult things in some cases to come up with, at least very quickly. And yeah, I can definitely see that, companies like yours would definitely play a role, whenever there’s a key challenge for us, a shortage. That’s great. Recently, I read an article that you wrote about in Pharma’s Almanac, that was titled Reshoring a Nation’s API and Pharmaceutical Production. Can you give the listeners, some of the background, information about, why did you write the article and why did you feel it was important to right now?
Matt Hicks: [00:07:41] The pandemic, really exposed some weaknesses in our infrastructure in terms of the ability of the supply chain on the whole and we still are experiencing some of that. And the other thing it exposed was, the capacity to manufacture critical medicines domestically. If [00:08:00] you remember early on, hydroxychloroquine was a big product and everybody was scrambling to get it. Fun trivia it’s it’s the synthetic form of quinine, which is the stuff in tonic water that makes it tonic water. Have some with gin and lime and call it happy hour. But anyway, we saw that supply chain get broken pretty quickly. And I think early on, a lot of the API for that product was being made in India. India said, “we’re not exporting this product anymore.” Your supply chain is broken no matter how well it’s setup when the country where it’s being made says you can’t have it, no matter how much there is, you’re not going to get it. They eventually backed off of that, but over the past 20 years or so, the capacity to make the active ingredients and the pharmaceuticals themselves has slowly left the United States. Mainly due to, labor costs, as, pharmaceutical companies looked at their processes, their batch processes. They’re very expensive in terms of [00:09:00] labor. So if you can lower labor costs, it’s worth it to build another GM. And it doesn’t make sense, to the naked eye. But when you really look at it, you can build another GMP facility in another country with a lower labor cost and be able to, number one, drop prices on that drug. If it’s a generic drug, without really changing or updating your process, which is another huge endeavor because of the regulatory scrutiny and all the research and development that has to go into, developing new equipment and new processes, and then getting all that approved for a mature drug that is being manufactured. In some cases, in the pennies per dose, nobody’s going to invest in new technology to make those drugs with that type of regulatory and risk burden. It just isn’t going to happen. So with that knowledge, with the rising labor costs, rising environmental regulations, the production went overseas to the point where I think less than 20% of the [00:10:00] active ingredients of pharmaceuticals for drugs in this country were being made in this country.
And what we found was when the pandemic hit, a lot of those supply chains got broken as countries shut down, and sent workers home and things like that, shortages happened. And, we saw a lot of that early on. and the thing that, is most curious about is the FDA said this was coming, two years ago. They basically said, “look, we have a problem. We don’t have the infrastructure to make drugs in our country anymore. Should an emergency happen and we need to and didn’t really do any in the country as a whole really, we didn’t do anything about it. And that’s not a political statement, it’s just the reality of what happened. And we saw it come to pass. And as the executive orders, came out, you saw a lot of initiatives from agencies like BARDA and some others to where they now have a huge funding to rebuild this infrastructure, [00:11:00] and to develop new technologies, to manufacture mature drugs in a cost-effective way in this country.
As I mentioned, those things take a long time to do, you don’t develop a new drug manufacturing process in a month, in two months or three months. This is, this can be years, especially when you’re moving from a batch style manufacturing process to a continuous style process. You really have to have those continuous processes dialed in and somebody who really knows what they’re doing. Or else you lose the whole batch a year or two, you lose all the API, you lose all the product, and you’re out. So it takes a long time to develop that. Then you have to get it approved. My thought process is, we have mothballed facilities. We know of them. My company buys and sells them in this country that use that batch style process. And, at the same time, you can revive some of those, build some of those batch style processes while you’re developing, the new [00:12:00] technology as a kind of a stop gap. And I think you close the gap pretty quickly on being able to rebuild the infrastructure within this country to manufacture drugs and, nothing I’m saying is against the global market or the global supply chain. I think that’s all. I don’t think that’s going to slow down anytime soon, but I think everybody’s aware of weaknesses here that, we really should protect against as a nation. and that’s one that got past the goalie, if you will, and now we’re racing to fix it. And, my message really is that, we have stuff in this country that can be used to plug the hole, if you will, existing facilities, or even expansion of, other facilities that have the capabilities of manufacturing, these APIs, here, while they develop new technology. Because I think the new technology is really exciting to be able to take a process that used to take four or five stories of gravity-fed equipment can be reduced down to a one bedroom size room, and make as much product. So it’s a pretty neat thing.
Don Davis PhD, MBA: Where [00:13:00] my mind, at least races to, is that, whenever we have multiple drug therapies. So there’s the monoclonal antibodies, that are currently being released that are the vaccines that people are working on. There’s all of the things. And oftentimes the, what I’ve seen or heard of in the past is that, a lot of these therapies have to be scaled up over time. There isn’t a magic recipe to make it. Oh, over now in the way that it’s been likened it lens for me is that, if you’re somebody who ever bakes bread, the process of rising, a loaf of bread, or even, fermenting a beer or anything like that, it’s not like you can grow those cultures in a minute. It takes, it does take time. And it’s nice to know that there are other technologies that could do that more rapidly.
Matt Hicks: [00:13:47] Yeah, definitely. And the monoclonal antibodies, that’s relatively new on the scene and, these are big molecules in there. They’re hard to make. I’m not going to lie to you. They’re hard to make this. Drugs in [00:14:00] general are hard to make. There’s a lot of regulatory, scrutiny. There’s the mandate of, they have to be safe. They have to be effective. And, in order to do that, and the underlying thing that nobody really talks about is you have to be able to do it over and over again, safe, effective, same thing over and over again. If the tablet has a line through it, it’s a bifurcated tablet. You have to have an equal amount of API on each side of that tablet. Otherwise, when somebody cuts it in half, all the API is in one side and then the rest is just excipient. So a lot of people don’t realize that and it’s hard to do, and it takes a lot of skill. And it also takes a certain amount of. art to it to get it right. And the monoclonal antibodies, the MABS, if you will, they’re big molecules and they’re hard to make. And the aseptic fill finish to get them into a vial is even harder. I come from that industry and hats off to all the people out there that are doing it. it’s [00:15:00] not an easy thing to do. When you see numbers being thrown around like a hundred million doses of vaccine, I’m just in awe of, being able to do that, at that level of quality over and over again,
Don Davis PhD, MBA: [00:15:10] Yeah. Yeah. It’s the, I oftentimes say, that I feel blessed that, we get to work around some of the most brilliant minds on the planet. Purely, hats off to people who can think about, delivering a payload specifically to something to treat something. And, the fact of being able to make these medicines is an absolute marvel and in a lot of cases and, there, you probably understand a lot more of the mechanics of machinery, and equipment that go into it than I’ll ever know. Yeah, just a great, just a great thing to be a part of. So my next question would be, in terms of, the key things that are going on right now with Federal Equipment Company, what are you most proud of?
Matt Hicks: [00:15:52] What am I most proud of at Federal Equipment Company? That is a good question. It’s being there, being a part of the industry and, we are a leader [00:16:00] in our, in the used equipment industry. But being there to support, the Pfizers and the other companies out there that are making these medicines and developing the vaccines for COVID and we don’t have to have our name in the bright lights, but we’re definitely there in the background doing everything we can to support.
Don Davis PhD, MBA: [00:16:21] That’s great. And, what do you feel is most challenging right now with your company?
Matt Hicks: [00:16:27] Gosh, there’s so many challenges out there right now. Obviously, we’re a small family-owned business and there there are a lot of perks to being in a family-owned business. And there’s a lot of perks to being in a big corporation too. But we used to have lunches every other Friday, the whole company, out in the shop area. And, we’re obviously not doing those now. We haven’t done it for months. And you lose touch with a lot of people in the organization in terms of, just. having a lunch, a company lunch. Those are the, I think those are the challenges we face. [00:17:00] I could talk about competition and software taking over equipment, but I’m not going to cause a it’s reality. Right now, it’s just connecting as an organization and making sure that everybody’s safe, but at the same time, you’re still an organization as is the biggest challenge, I think.
Don Davis PhD, MBA: [00:17:18] Connection is a tough thing, in the current environment, for sure. It’s also, in general, just, a struggle to do some things that you would normally do in business. Just being able to have those connections and pass somebody. Get in getting a cup of coffee or whatever, and having a quick conversation just can’t do it anymore.
Matt Hicks: [00:17:36] We don’t have an outward facing sales force. Everybody’s in-house. Trade shows were our lifeblood, in terms of meeting with customers. We could send four or five people to a trade show and meet with over a hundred customers in a couple of days. And. that was our outward sales force, and we lost all that. We developed some different ways to deal with that. One of them was we created our own. We worked with Pharmaceutical Online to [00:18:00] create, our own kind of trade show experience for, equipment manufacturers to present their wares and people to come see what they would normally see at a trade show. But you’re still not getting the cocktail hours and the dinners at the steakhouse. And, we joke about that all the time.
Don Davis PhD, MBA: [00:18:16] It’s absolutely true. I’ve recently attended a couple of online conferences myself, same sort of thing. So three questions that I like to ask every podcast guest, and it starts with, what inspires you?
Matt Hicks: [00:18:30] One of the owners and I talk a lot about creating opportunity from adversity. I find that really inspiring in terms of, how do you take something that is, a challenge and turn it into, an opportunity to do something, to do something good. And it’s something that, I think is important, in life in general is to be able to take a bad situation and see the opportunity that it is and whether it’s just learning from a mistake or really taking the opportunity to [00:19:00] pick yourself up off the floor and recreate yourself.
Don Davis PhD, MBA: [00:19:05] Great. And what concerns you?
Matt Hicks: [00:19:09] It’s a loaded question. Gosh, obviously we have a pandemic going on right now. That’s obvious as when do we get back to doing the things that we love to do. And visiting family and friends, when, when do we get back to that? That’s a concern. And then, as a lawyer, I have to say this as the, the other concern is the, forgive me for being a little political, but the discourse in our country right now is concerning in terms of civility. Just being able to have a conversation with somebody and take their point of view without arguing it and the rule of law and being able to recognize experts for being experts at what they are, those are all big concerns for me.
Don Davis PhD, MBA: [00:19:50] Yeah and I think it’s a fair statement, right? I think, a couple of podcast episodes ago, I interviewed Dorie Clark, who’s an author. [00:20:00] And, that her number one statement was, look, I’m a true fan of democracy, at the same time, what could happen after the election is a concern, so that came up in her answer as well. And I think it somewhat ties to your answer too. So thank you for that answer. Lastly, what excites you?
Matt Hicks: [00:20:19] This is something my kids are learning right now and, I think it’s a really good topic. It’s you know, having a growth mindset, and it’s fun, seeing my kids, who are twin second grade girls, and a kindergartener. So, it’s fun seeing them learn about continuous learning, continuous improvement, overcoming new problems, new challenges. We’re taking the opportunity to all learn a language together. Stuff like that. It’s trying to learn a new language at my age, that would be really hard. Having that growth mindset and the lifelong learning, I think is, and, trying to learn a new language, right now I thought it would be ridiculous, but at the same time, I’m having a lot of fun because my kids are right there learning it with me.
Don Davis PhD, MBA: [00:20:59] No, that’s [00:21:00] great. What language did you choose?
Matt Hicks: Italian.
Don Davis PhD, MBA: Oh, wow. Not something easy, but there you go, nice. So does that mean a trip to Italy is in the future?
Matt Hicks: [00:21:12] I certainly hope so.
Don Davis PhD, MBA: [00:21:14] That’d be great. Thank you so much, Matt Hicks for being on the show. I greatly appreciate it. I greatly appreciated our conversation and I certainly learned a few things about the equipment business in pharmaceuticals. And, thanks so much for the work that you and your company does.
Matt Hicks: [00:21:30] Thank you. Thank you for having me on really appreciate the time.
