Takeaways & Benchmarks - Informa's Bioscience Finance & Accounting

Finance and Accounting leaders from a diverse range of Biotech companies convened this week in Boston at Informa’s annual conference. In case you missed it, here we recap prevailing themes, strategies, peer benchmarks and takeaways.

Considerations:

• There has never been a time of greater innovation, yet many companies are pursuing variations of the same thing
• Capital is going to quality and investors hold the leverage
• The quantum of capital is out there if you can tap into it, yet strong headwinds remain

With investors being more judicious and concentrated in their investments, what can clinical-stage biotech companies do as they effectively compete for the same cash?

Strategies:

• Remember that in the private sector “yesterday’s milestones are not yesterday’s milestones" - What you promised as a milestone in the last round, even if you hit them, may not be enough as the bar continually raises. 
• Finance leaders need to build the bridge between scientific milestones and true value inflection points
• Think creatively around alternative financing and project-based financing (i.e. synthetic royalties, risk-based project deals)
• Get investors “under the hood”
• Don’t worry about dilution – if you execute, dilution will work itself out.
• Persist, plan and execute
• Remember that “a dollar saved is a dollar invested”
• Capital allocation is critical – How you decide which to prioritize is key to bring other programs forward
• Consider bringing in de-risk, late stage assets to fund your pipeline
• Focus on People, Process and Technology
• Tenants of Treasury – Preservation of Capital, Liquidity, Yield – Post SVB ensure that your securities are in your name and not that of the institution. Review agreements closely, look to government bonds, constantly think about future scenarios
  
  

Considerations:

• 43% of the conference audience is currently using NetSuite, followed by QuickBooks and Intacct. 
• Similarly at Auxilius, just over 40% of customers are on NetSuite, along with a range of ERPs that we integrate with, including SAP, D365, Intact and Quickbooks.

Strategies:

• ERP selection must carefully consider Usability, Scalability, Capability
• Companies should ask:
  • “Can we handle it today?"
  • "Will it scale as we grow?"
  • "Can we add functionality in the future?"
  • "Is this provider nuanced and expert in life sciences?”

Considerations:

• R&D expense accruals are common Critical Audit Matters
• Accounting for R&D remains an area of audit scrutiny
• 63% of companies do not currently have a materiality threshold for R&D expenses that is established, documented and controlled 
• Program-level reporting is expected from the SEC
• Restatements can often arise as a result of inaccuracy 

Strategies:

• Companies need to institute best practices, controls, documentation and specificity in accruals, regardless of public or private status 
• Leverage evidence-based data to substantiate the accrual
• Design controls over how R&D accrual is calculated, including assumptions and how underlying data is utilized
• Conduct periodic fluctuation analyses to compare budget vs actual expense incurred (particularly at the site level)
• Assess the risk exposure around your third party vendors, such as CROs

Considerations:

• 95% of companies are experiencing challenges in estimating R&D accruals
• 90% of companies lack confidence in the efficiency of R&D spend and adequacy of cost controls at the trial level
• 100% of companies have experienced multiple change orders in the last 12 months
• 87% of vendor estimates are lagging anywhere from 2-6 months 
• 63% of companies noted that streamlining financial reporting processes was their chief challenge to address via data analytics and automation

Strategies:

• Cultivate close collaboration between Accounting (in charge of clinical accrual), FP&A (in charge of the relevant R&D department), and Clinical Operations (managing the clinical trials)
• Set up a regular, frequent cadence of meetings to support the audit and period close
• Embed CRO reporting expectations into agreements from the start (i.e. data turnaround time, format and consistency)
• Hold vendors to a consistent, monthly estimate at granular level (noting OOS units/costs at the activity level)​
• Update your average per patient spend as site contracts come in
• Understand the “invoiceable” costs in your contract​
• Recalibrate your forecast as enrollment happens 
• Lean into software to automate time consuming processes, free up internal resources and gain visibility into investigator spend

Get in touch with our team to learn more or to schedule a demonstration of automated Clinical Trial Financial Management.