The biotech industry is undergoing a period of significant change. While scientific advancements are constant, the funding landscape has shifted, presenting new challenges for companies of all sizes. At Scrubbed, we’ve even seen some biotech clients forced to close their businesses due to lack of funding.
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A Shifting Market and Evolving Needs
Biotech companies face a challenging financial climate. Recent years have seen a decline in venture capital (VC) funding, a critical source of capital for early-stage companies. This, combined with the high upfront costs associated with research and development (R&D), creates constant pressure to secure funding and manage resources effectively.
Compounding this pressure, a recent study by Russell Reynolds revealed that nearly half of all biotech CEOs and CFOs anticipate needing funding within the next six months. This highlights the urgency for companies to develop alternative financial strategies and ensure their financial operations are optimized for efficiency.
The study also revealed that a significant portion (44%) of biotech CFOs are new to the role. While some CFOs may feel confident in their current teams, this lack of experience can present challenges for companies seeking funding. Inexperienced CFOs may face difficulties understanding the nuances of the biotech business model—which can impact forecasting and budgeting accuracy—or presenting a compelling case to investors.
Evolving Needs Demand a Broader Skill Set
The changing landscape demands a broader skill set within biotech finance teams. Traditionally focused on core accounting and compliance functions, finance departments now need expertise in additional areas, including:
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- Business Development: Expertise in business development allows finance teams to identify and pursue strategic partnerships, mergers and acquisitions (M&A) opportunities, and alternative financing options beyond traditional VC.
- Capital Markets: A solid understanding of capital markets is key for choosing between debt financing, public offerings, and secondary offerings. This knowledge empowers finance teams to allocate capital wisely and plan for long-term financial success.
- Investor Relations: Building and maintaining strong relationships with investors is essential for securing funding and ensuring continued investor confidence. Finance teams with expertise in investor relations can communicate the company’s value proposition, financial performance, and future plans more effectively.
- Business Development: Expertise in business development allows finance teams to identify and pursue strategic partnerships, mergers and acquisitions (M&A) opportunities, and alternative financing options beyond traditional VC.
While some CFOs might feel confident in their current teams, a well-rounded finance team with these additional skills can contribute significantly to a company’s success.
The Value of Outsourced Accounting for Biotech Companies
This is where partnering with an outsourced accounting firm can be an invaluable tool for CEOs and CFOs. It provides cost-effective access to a team of professionals with specialized knowledge and experience that may not be readily available within a company, particularly for early-stage firms.
At Scrubbed, for instance, we provide services including:
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- Financial Modeling and Valuation: Our robust financial models go beyond budgeting and forecasting to propel business development efforts. The models can be used to evaluate potential partnerships and mergers & acquisitions (M&A) opportunities or communicate a company’s value proposition to investors.
- Mergers & Acquisitions (M&A) Advisory: M&A is a key strategy for many companies in the current climate. M&A expertise can be invaluable in identifying and evaluating potential partners.
- Investor Relations Support (indirect): We provide crucial support through activities like pitch deck preparation and data visualization that help a company communicate financial performance and value proposition.
- Financial Modeling and Valuation: Our robust financial models go beyond budgeting and forecasting to propel business development efforts. The models can be used to evaluate potential partnerships and mergers & acquisitions (M&A) opportunities or communicate a company’s value proposition to investors.
In addition to core services, outsourced accountancy teams like Scrubbed can also provide access to other solutions to streamline your finance operations, taking pressure off other areas:
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- Tax Compliance and Technical Accounting: Our team ensures your financial statements are accurate and compliant with regulations, which is crucial for public and pre-IPO companies.
- Staff Augmentation: Smaller teams can leverage our support for temporary needs, allowing them to focus on core competencies like R&D and product development.
- SOX Internal Audit: For listed companies, internal audit services can ensure compliance with the Sarbanes-Oxley Act (SOX).
- Tax Compliance and Technical Accounting: Our team ensures your financial statements are accurate and compliant with regulations, which is crucial for public and pre-IPO companies.
Building Bridges with Other Stakeholders
Outsourced accounting partners can play a key role in facilitating communication by providing clear, concise financial reports that help other departments understand the company’s financial health and make informed decisions. In addition, outsourced accounting teams can analyze your financial data and use data visualization to create actionable insights for leadership teams, allowing for better resource allocation and strategic decision-making.
The current market certainly presents challenges, but it also offers incredible opportunities for the biotech industry. By leveraging the expertise of outsourced accounting services, biotech companies can overcome funding hurdles, bridge skill gaps within their finance teams, and achieve their strategic goals.
How Scrubbed Can Help
At Scrubbed, we have specialized knowledge and experience helping biotech companies with the accounting and financial services they need to run efficiently and meet the compliance requirements specific to your industry. We offer expertise in financial modeling, budgeting, forecasting, and technical accounting compliance, critical for both public and pre-IPO companies.
Whether you have a CFO who needs support or prefer to outsource your entire accounting and finance department, we have the team in place to deliver the reporting and advice you require to make informed business decisions.
Ready to learn more? Contact Scrubbed today for a consultation or download our free resource, The Biotech Founder’s Guide to Early-Stage Funding. Together, we can help your company thrive in this dynamic market.
