Takeaways & Benchmarks - Informa's Bioscience Finance & Accounting
by Auxilius on Sep 21, 2023 1:14:56 PM
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.
Capital Markets and Creative Financing
After a record period of IPOs and 2021's high watermark for capital availability, industry CFOs discussed today's market headwinds and creative ways to drive investment and fund future R&D.
- 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?
- 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
BDO discussed key considerations when selecting an ERP that suits your company today and at scale.
- 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.
- 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?”
Mitigating Risk in Reporting on Clinical Trial Accruals
Crowe LLP presented on Accounting Fundamentals with a focus on controls, documentation, SEC comments and audit expectations for R&D expense accruals.
- 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
- 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
Embracing Today's Industry Standard for Clinical Trial Financial Management
Auxilius and Biotech FP&A and Accounting leaders shared real-world examples and best practices for gaining efficiency and accuracy in biotech's largest cost category.
- 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
- 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)
- 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.