Genetic Engineering & Biotechnology News (GEN) is the world's most widely read biotech publication. It provides the R&D; community with critical information on the tools, technologies, and trends that drive the biotech industry.
Issue link: http://gen.epubxp.com/i/83770
Biobusiness Todd Wyche and Robert E. Hoffman Executives with emerg- ing life science compa- nies face some of the most significant transi- tions in any industry. As companies prog- ress with their product development, management must maneuver for the first time through a wide range of regula- tory requirements, the need for expanded and complex infrastructure, financial statements of increasing complexity, relationships with larger industry partners, and other factors. Meanwhile, all of these items increase in prevalence against a backdrop of dwindling financial reserves in what continues to be chal- lenging financing environment. At this point, management can't focus solely on growth; it must place a sharp focus on how to lead the company from a prudent financial perspective. This requires significant advance financial and strategic planning on an annual basis along with the flexibility to adapt as needs and operating environment factors shift. It is important to start early by initiating your financial and strategic planning for the following year in the third quarter of the pre- ceding year. Start by drafting the company's goals for the next year as well as the initial budget estimates to accomplish those goals. All CFOs should look at the upcoming year and consider whether significant events or tran- sitions, such as clinical trial success or failure, funding, partnering, a product launch, restruc- turing, or acquisition, are likely to occur. Important capital projects facing life sci- ence companies, such as a laboratory build-out or the purchase of expensive scientific equip- ment, are additional planning considerations. All require significant management time and Todd Wyche (wyche@ brinsonpatrick.com) is CEO at Brinson Patrick. Robert E. Hoffman serves as senior vp, finance, and CFO at Arena Pharmaceuticals. resources and all must be incorporated into the planning and budgeting exercise. Other activities for the following year, even though they may not be a high-budget or capital item, must be contemplated to reflect the evolv- ing state of the company and the external envi- ronment. The reporting of a company's financial statements needs to reflect the changing opera- tions of the company as an important activity. Finally, nonfinancial considerations for life science companies, such as a change in the regu- latory landscape or significant FDA action (PD- UFA date), are critical in the planning process. It is extremely important that these activi- ties and plans be communicated to and dis- cussed with the rest of the executive team. A consensus will be needed, not only on which activities deserve higher priority but also on the amount of capital required to accomplish these activities. Often, companies will have more projects than human or financial capital resources to complete them. Discussions among the man- agement team and scientific project team are key in determining project priority. Review Everything A second area of focus is the annual re- view and testing of internal controls (Sar- banes-Oxley compliance). Life science com- panies continue to evolve, and it is important that related internal controls are appropriate for the complexity of your company and, if NEWS Products & Services > Sigma-Aldrich agreed to distribute worldwide AB Sciex' portfolio of mass spectrometry-based tagging chemis- tries. The consumables, sold as SCIEX iChemistry™ Solutions, are intended for proteomics applications in basic re- search and applied markets. According to Sigma-Aldrich, the OEM agreement strengthens its mass spec- trometry reagent business, reflects the company's commitment to expanding its mass spec applications for the life sci- ences, and lays groundwork for a part- nership with AB Sciex that will provide the basis for future joint development of mass spec consumables. The accord makes available all con- sumables for quantitative proteomics and small molecule metabolite quantita- tion through Sigma-Aldrich. necessary, revised and updated. Considerations for revising internal con- trols include: adding new divisions, such as sales and marketing, or manufacturing; in- stallation of new accounting software; sig- nificant changes in the number of employees; prominence of a single financial statement line item such as inventory; and entering into a collaborative agreement. CFOs should challenge internal controls each year to ensure they are keeping up with the company. An early review and testing of updated internal controls with your auditors will help identify and remedy any deficiencies so that they can be retested later in the year. An exercise that can be valuable to any public company CFO is the review of as- sumptions of covering analysts. Understand- ing the assumptions underlying their financial models, including revenue and expense pro- jections, market penetration, or competitive advantages or disadvantages is essential. One goal of this activity is for the CFO and the company to determine if its current com- munications approach with the investment community can be improved so that there is a better understanding of strategy and goals. This is particularly important if your company is undergoing a significant transition that re- sults in your company being valued differently by investors than it had been in the past. A very important item for all life science companies is an understanding of your com- pany's financial status and your expectations of the future funding environment. Plan- ning for future financing activities is critical and demonstrates the proactive thinking of a company's CFO. Raising capital should not be a "do it when we need it" activity. It should be strategic and controlled. All CFOs should assess their capital needs for the next 18 to 24 months in conjunction with annual budgeting activities and on an ongoing basis. Preparation for a financing should start about 12 months ahead so that an evaluation of the potential investment bankers and the type of financing that you wish to employ are appropriately evaluated. There are a variety of options such as a traditional common stock offering, PIPE, ATM, registered direct, and convertible debt offering, to name a few. Each type of financing has pros and cons based on ownership dilution, management time, warrant coverage, and timing of capi- tal-raising. Understanding the market environment is also critical. Although no CFO has control over it and predicting how it will unfold is difficult at best, it is essential to understand what is happening in the life sciences and overall marketplace. In the life science indus- try, there continues to be a special situations environment, i.e., companies with good data, especially in cancer, and those hitting major milestones are able to access capital. Compa- nies without these attributes face greater chal- lenges in raising capital. As in every year, there is a lot to do to pre- pare for the next year, so start early. Those in the life science industry have particular chal- lenges due to the significant transitions that companies in this sector face. CFOs should plan budgeting early and generate consensus about company priori- ties. Internal controls should be reviewed on an annual basis, and times of expected tran- sition deserve particular attention. Review what the analysts are writing and modeling. Smart CFOs take a proactive view of their company's financial condition and op- erations. Continually review financial needs over the short and long term and evaluate a number of capital-raising options under- standing the pros and cons of each. In short, plan ahead and be prepared. WALL STREET BIOBEAT Advice to Biofirms: Be Prepared, Plan Ahead > Life Technologies and China's Sino Biological signed a worldwide product distribution and development agree- ment, through which Life will distribute its new partner's portfolio of recom- binant proteins, antibodies, and ELISA kits worldwide, including over 2,000 re- combinant proteins and 3,000 antibody products. The two firms will also work together to develop new proteomics products for applications in areas includ- ing flow cytometry and imaging. > Astellas Pharma will use Abbott's RealTime cytomegalovirus (CMV) assay to monitor viral load in patients enrolled in a Phase III trial evaluating use of the DNA vaccine ASP0113 (TransVax™) in the prevention of cytomegalovirus reactiva- tion in transplant patients. ASP0113 is an investigational vaccine licensed by Astel- las from Vical. Under terms of the deal Abbott's Re- alTime CMV assay, carried out on the Ab- bott m2000 system, will be used to assess vaccine efficacy in terms of viral load. > RayBiotech launched a new GLP- compliant laboratory that will be dedi- cated exclusively to offering ELISA and antibody array biomarker analysis ser- vices. The company also reported that it has established formal GMP and GLP compliance. > QPS, a Newark, DE-based CRO, ac- quired JSW Life Sciences, an Austrian CRO that will now be known as QPS JSW. According to Ben Chien, CEO of QPS, the acquisition will broaden QPS' preclinical and Phase II-IV capabilities and increase its Central and East European presence. > Bluechiip, which has developed 18 | October 1, 2012 | genengnews.com | Genetic Engineering & Biotechnology News a temperature sensing and tracking system for cryogenic sample manage- ment in the healthcare and life science industry, signed a strategic partnership deal with Gentris. Gentris officials say the bluechiip technology will allow the company to track the temperature of in- dividual samples stored in biobanks and biorepositories from the time of collec- tion to analysis. > CLC bio acquired Molegro, a soft- ware company focusing on molecular docking, including prediction and analysis of protein-ligand interactions, screening of compound databases for activities against a receptor, and determination of molecule similarity. The acquisition is expected to support CLC bio's strategy of expanding its bioinformatics offerings, particularly be- yond next-gen sequencing. Q