Wednesday, April 04, 2018 1:39:44 PM
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This year, like never before, we’ve witnessed the deep complexity of our healthcare system, but the drug development process has historically been slow with its own specific challenges. Moving a drug through FDA approval is a lengthy, expensive and highly-regulated process, and for good reason: we wouldn’t want drugs getting into the market that are not sufficiently tested or potentially harmful. While researchers and scientists are an essential component of getting new drugs approved, CFOs play an integral role as well.
According to a report from Pharmaceutical Research and Manufacturers of America (PhRMA), the drug approval process is becoming more and more difficult and protracted. The report finds that on average, it takes 10 years for a new medicine to complete the journey from initial discovery to the marketplace. In fact, it takes an average of six to seven years for a drug to complete just the clinical trial portion of the process.
There are a number of key players (from researchers to patients) and factors (from patient recruitment to partnerships) that move a drug along the development pipeline. The science and technology are critical components – and perhaps the more glamorous aspects of moving a drug through development – but it’s just as important to consider the company’s finances before and during drug creation. That same PhRMA report finds it takes an average of $2.6 billion to research and develop new drugs. So who is handling all of this money?
The chief financial officer plays a critical role in getting drugs from infancy across the finish line, and should be an active player in every part of the process. Here’s what all CFOs at pharmaceutical and biotechnology companies should know:
1. Ensure Minimal Dollars Spent
Like many other industries, cash is king in the biotech industry. One of the major roles for a CFO in an organization is to ensure minimal dollars are spent in the early phase(s) of development, while balancing data creation at each stage. In biotech, this is especially critical when you don’t yet have a product on the market. We must understand the product’s future probability to ensure there are adequate funds for the later stage assets and further development costs – remembering how long and how much money (mentioned above) a drug takes to develop.
2. Be the Voice of Business
The CFO typically acts as the “voice of business” in product meetings to ensure the teams are considering business and financial impacts when making medical or operational decisions. These financial impacts can include near term spend, competition, impact to timeline, impact on market share and size. Often, the medical team is so focused on and excited about the science that it’s easy to forget the financial impact.
Over the past few years, the CFO role has been shifting to more of a strategic advisor role – especially in small companies where we wear many hats. We must make tough decisions around development, which is especially difficult in an industry where the pace of operation is much faster because lives are on the line.
3. Secure Future Funds
The ability to secure future funds (for pre-revenue companies) is mainly driven by creating value for investors through operational execution, and more importantly, data availability. The CFO must ensure the current available funds bridge the company to the next meaningful inflection points. It’s also critical the CFO work with other members of the executive team to clearly communicate to investors and stakeholders when new data is available, and what it means for the rest of the drug development timeline. The biotech industry is so volatile that CFOs can no longer sit back and react; we must be proactive in assessing and mitigating threats, and anticipating changes in the market.
Ultimately, the biggest difference between a CFO in the healthcare industry and a CFO in another industry is the faster pace and urgency that comes with lives being on the line. We’re creating a product that can help someone’s loved one live to see another milestone. Although that responsibility comes with an enormous amount of pressure, our mission to help people serves as daily motivation to keep product moving through development – on time and on budget.
Sara Bonstein, Chief Financial Officer, Advaxis
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