Getting FDA approval on a new drug is a momentous occasion for biopharma companies, paving the way for revenue growth and success. It is also very disruptive, completely upending the way life sciences businesses operate if they have never pushed a product to market before. Even organizations that have gone through a commercial launch in the past can encounter challenges in scaling front end and back end operations fast enough to support the growth and added complexity.
After years focused on research and development – it typically takes about 10 years for companies to develop, test and get approval for new drugs – making the transition to commercial operations a high stakes event. In addition to building new capabilities, biopharma companies need to adapt to new finance, accounting and compliance requirements. CFOs making the transition will need to adapt along with the organization and demonstrate that they can adequately support the requirements of both R&D and commercial operations.
Successful CFOs generally scale finance and accounting operations along three phases: build, run and evolve. This framework facilitates effective transformation and leads the way toward product launch and commercial success.
Build the foundation to drive commercial operations
To begin this dramatic transition, finance organizations should conduct a comprehensive discovery and analyze processes to identify where operational gaps lie and understand how to address them. It is important to establish a dedicated team to spearhead this large undertaking and develop a comprehensive roadmap. The goal is to design the future state of the organization and account for every need from a people, process and technology perspective.
Business processes will inevitably change when shifting to a commercial focus, and a thorough review of all relevant procedures should be part of any plan of action. It is critical to define the steps needed to scale operations that support market pricing dynamics, regulatory requirements (i.e. Sunshine Act, Sarbanes-Oxley, etc), accounting policies and drug production workflows.
Prioritize gross-to-net factors
A significant issue that finance and accounting teams face before a new product reaches the market is managing gross-to-net and all the variables that impact it. Finance leaders often find that navigating the complexities of gross-to-net accounting is one of the biggest challenges they face when transitioning to commercialized operations.
How will pricing practices change when working through wholesalers, Medicaid and Medicare? In addition, how will those price variations impact revenue recognition responsibilities? Those are complex problems that can significantly complicate finance operations, and addressing them falls to the finance and accounting team.
Additionally, inventory costing and methodology, commissions and salesforce fleet leasing are among the many other factors that require attention. Finance leaders need to fully understand all of the new areas on their balance sheets and cost centers and design processes, reporting practices and controls to manage them.
Run the transition to commercial
With a full understanding of the company’s needs and a detailed roadmap to commercialization, CFOs can begin implementing changes in earnest. The team assembled to lead this transition should function as an in-house transformation group reporting to the CFO office. Maintaining visibility and hands-on management of this project will help ensure the team meets day-one commercial readiness goals while avoiding costly delays or missteps.
Personnel requirements will undoubtedly change as the product launch date gets closer. For instance, startups that had only a handful of sales representatives, or were previously clinical, will suddenly find themselves needing to hire and train a large sales team to drive revenue. These activities require support from the CFO’s organization including onboarding, payroll management, expense management, etc. and all have an impact on the finance organization. The CFO must take ownership to ensure that these fundamental processes are in place or risk major distractions across the enterprise.
Collaboration across the enterprise will be critical in re-engineering processes, implementing technology and filling staffing gaps. In most cases, pharma companies will decide to leverage third parties to manage pieces of their supply chain enablement and market access operations including rebate and payer mix management to address some of these requirements out of the gate. The need for an immediate collaborative and structured management system is critical to a successful product launch.
Evolve and strive toward continuous improvement
The transformation journey doesn’t end at product launch. CFOs should continuously drive innovation and push for process improvements within the organization to keep up with changing market conditions.
To that end, CFOs should embrace finance transformation and position their departments as a strategic partner to the business. That includes leading the charge on adopting cutting-edge technology like robotic process automation (RPA) and advanced analytics to drive efficiencies wherever possible.
By leveraging the power of their financial planning and analysis (FP&A) teams, CFOs can also help drive the transition from a transactional-focused role to one that drives company strategy. Doing so will help improve decision-making by providing data-driven actionable insights while defining the most relevant KPIs that align with business objectives.
Scale operations and build for the future
Transitioning from life sciences startup to pharma organization can be daunting, but working with an experienced business partner makes the process much easier. CFGI has helped numerous companies make the leap, and can assist at each phase and step including:
- Conducting discovery assessments.
- Identifying pain points and critical issues to address.
- Creating a comprehensive people, process and technology roadmap.
- Providing technical accounting support on matters like gross-to-net and inventory.
- Facilitating personnel recruitment and training.
- Designing new business processes.
- Scaling up capabilities to prepare for commercialization.
With CFGI’s hands-on support and expertise, the CFO can continue to be a key contributor to the future success of the organization.
To learn more about the changing role of the CFO in response to finance transformation, download our latest white paper.
If you’re interested in discovering more about our finance transformation services for the life sciences industry, please contact Andres Garzon, Partner (agarzon@cfgi.com, 617-306-1888) or Robert Winslow, Managing Director (rwinslow@cfgi.com, 203-482-9764).
Acknowledgments
Key Contributors:
Charles Hopper, Senior Manager, Pharma Industry SME (clhopper@cfgi.com, 312-502-0365).
Ryan Dolan, Partner, National Life Sciences Leader (rdolan@cfgi.com, 978-317-9398).