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Navigating the Financial Terrain: Four Challenges for Biotech CFOs in 2024

by Kevin Sarney, Life Sciences Practice Leader

Biotech

Chief Financial Officers (CFOs) in the biotech industry find themselves at the forefront of a complex financial landscape. Their roles encompass far more than traditional financial management – they must navigate many challenges, from securing capital to dealing with regulatory uncertainties, managing financial risks, cyber risks and evolving market dynamics.


#1 Capital Raising in an Evolving Investment Climate


One of the most significant challenges for biotech CFOs is raising capital in an ever-changing investment climate. The need for funding to support research, development, and commercialization efforts is incessant in the biotech industry. Biotech capital needs could mean several fundings to ensure a runway to the next valuation point. From an idea to forming a drug to getting approvals to drug testing until proof of concept could be a 5-year or more window. How do you bridge that timeline? CFOs must rely on traditional financing options like venture capital and public offerings and explore innovative avenues such as partnerships, collaborations, grant funding and alternative financing models. Adapting to investment climate shifts, regulatory changes, and global economic uncertainties is paramount.


#2 Managing Financial Risks


CFOs in biotech also grapple with high levels of financial risk due to the uncertain nature of drug development. The challenge is threefold – funding research and development initiatives while maintaining fiscal responsibility and risk management over investments to ensure they are available when needed. Managing this delicate balance requires strategic financial decisions that mitigate inherent risks, such as clinical trial failures and regulatory setbacks, while aligning with the company's long-term objectives.


#3 Navigating Regulatory Uncertainties


Regulatory uncertainties add another layer of complexity. Biotech CFOs must stay ahead of changing regulations impacting product approvals, pricing, and reimbursement domestically and internationally. Adapting financial strategies to these changes is crucial for mitigating compliance risks and maintaining investor confidence.


#4 Cyber Risk Mitigation


Cyber risk has become more complex. It used to be that cyber insurance was an add-on, relatively inexpensive, easy-to-get insurance, "a nice to have policy." As the frequency and impact of cyber attacks have increased, mitigation has become more expensive and demanding. CFOs plan for and document the controls in place to mitigate the risk. For example:


  • "Are all systems required to use multi-factor authorization or MFA?"

  • "Do you have a plan to get your business up and running if a cyber-attack impacts a vendor you rely upon?"

  • "What redundancy safeguards are in place?"

  • "What training and monitoring systems are implemented for all staff?"


Recently, the SEC's Proposed Rule 10 would require covered entities, including public corporations, to provide immediate written notice to the SEC of any significant cybersecurity incident. Are you prepared to implement an appropriate cyber risk strategy as a public company (or a firm thinking about going public)? Do you have a plan? Are employees trained? How is "significant" defined for your firm, industry or size? Do you know the best practices for cybersecurity, and are they implemented? Even if you are a small, private firm, demonstrating that you are following these best practices will provide a firmer foundation in case of legal action.


 

Would your firm benefit from the CFO Services provided by Charles River CFO?


Charles River CFO, Inc. provides exceptional financial leaders who deliver customer-focused solutions. We are smart, nimble, and flexible.


If you'd like to discuss how your company can benefit from our trusted biotech financial leaders, don't hesitate to get in touch with us at (781) 431-0420 or email us.

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