BDO Report: Biotech CFOs, Optimistic for Recovery, Focus on Digital Transformation
Biotech chief financial officers (CFOs), optimistic about economic recovery as COVID-19 vaccines role out, are busy digitally transforming their companies for a post-COVID way of working, according to the 2021 BDO Life Sciences CFO Outlook Survey, released January 11.
“Their enthusiasm for economic recovery was one of the most surprising aspects of the study,” Patti Seymour, managing director of the BioProcess Technology Group at BDO USA, LLP, told BioSpace.
Slightly more than 60% said their companies are thriving today, and 69% predict an increase in revenues this year. A full 80% expect their businesses to be thriving one year from now.
“Part of the recovery process involves people being optimistic that things will get better,” Seymour said. “With the money coming into the industry now, it’s very encouraging.”
To thrive requires more than capital, however. It also requires resiliency. CFOs acknowledged this, citing digital transformation as their main goal. For example, 63% are investing in digital transformation this year and 33% are investing in technology or infrastructure. Achieving transformation necessitates understanding such digital enablers as cloud computing, advanced analytics and blockchain, and taking a holistic perspective.
As Seymour elaborated, “You have to fundamentally understand your process.” Merely transferring an analog process to a digital process risks building in inefficiencies. Instead, she advised stepping back for a holistic view.
“Understand what you’re trying to accomplish and how it should work at a basic level, and then design the digital version,” Seymour said.
Logically, companies will take a modular approach to digitization.
“Digitization is an expensive, time-consuming endeavor,” she said. “So, do it properly by mapping a long-range plan for your digital future and scheduling the project in a way that ensures the modules work together harmoniously.”
If digital transformation is the main objective, ensuring the supply chain is the key challenge.
“One of the big issues across the board is supply chain management,” Seymour said. “There’s high demand across every manufacturing entity just to keep up and make the material.”
Adding COVID-19 demands to the mix puts pressure throughout the supply chain, even down to the suppliers’ suppliers’ suppliers.
What biotech industry execs know, but outsiders often fail to grasp, is how the supply chain is affected by the complexity of the industry.
“The manufacturing process for biopharmaceutics is more complex even than small molecule drugs because manufacturers are working with living organisms,” Seymour explained. “The materials are of extremely high quality and high value, which tends to make the raw materials harder to make. Also, there is a need for aseptic processing, so there are many controls around biomanufacturing that other industries – as well as small molecule drug manufacturers – don’t face.”
To reduce supply chain disruptions, some manufacturers are reshoring manufacturing. This affects mainly small molecule therapeutics, she said, which tend to be manufactured in India and China. In contrast, she said, biopharmaceuticals are manufactured in the U.S., western Europe, Singapore and Korea.
In terms of product focus, COVID-19 vaccines and therapeutics will continue to be hot areas of development in 2021, BDo predicted. Roughly 45% of CFOs reported they will be engaged in those areas this year, up from 36% and 31% (respectively) in 2020.
While non-COVID-19 research slowed in 2020, those areas are bouncing back, with 69% of CFOs planning to increase R&D investments this year as investment dollars flow into the industry. Leading areas of interest include cell therapy (57%), wearables (57%), and immunotherapy (56%). Fewer than 30% of companies – down somewhat from 2019 levels – reported involvement in those areas in 2020.
Collaboration, which increased during the pandemic, is expected to continue along with opportunities and the speed of decision-making. Many of these deals are grounded on outcomes-based contracts, particularly among the biopharmaceutical sector.
Before signing a deal, BDO advised considering a variety of deal structures and their tax implications when determining which will be most beneficial for a company’s ability to scale, fund future innovation, and diversify their product and service offerings. Then, success will be determined by the partners’ alignment on strategy, objectives, and execution – particularly when working with partners new to this highly-regulated environment, the reported noted.
Virtual meetings will continue, too, becoming a mainstay even post-pandemic. After stay-at-home mandates were enacted throughout much of the U.S. and the world, people reported they were meeting with more potential partners faster and easier than ever before.
Many echo Seymour, who told BioSpace, “My ability to meet with clients using video conferencing is as good or better than it has ever been. Although some in-person meetings are still needed, you can have meaningful interactions with Zoom, meeting people in more relaxed environments and getting glimpses into their lives. That’s an unexpected benefit.”
Acceptance of a telework environment is expected to continue for in-house staff, too. “Companies have learned people can work remotely and be productive and engaged,” Seymour pointed out.
That said, “For junior or newly-hired people, the lack of in-person interactions makes it harder for them to become part of the culture,” she continue. Therefore, organizations need to find ways to integrate people into their organization.
As the BDO Life Sciences CFO Outlook Survey summarized, “Nothing returns to normal without life sciences. To truly thrive beyond the pandemic, companies must also persist in demonstrating value, capitalizing on new opportunities, and effectively preparing their organizations to succeed in an environment rife with emerging risk and accelerated disruption.”
Most Read Today