CFO Studio Magazine - CFO Innovation Award Winners

42 WWW.CFOSTUDIO.COM 2nd QUARTER 2015 Funding Biotech and Pharma Companies F inance opportunities — including initial public offerings (IPOs), convertible debt issuance, private equity, and venture capital — continue to be available to biotech and pharmaceutical companies, but the challenge is that investors and other capital sources want to see evidence of innovation and value before they open their coffers. “Going from concept to marketing approval can take more than a decade, with a price tag of about $2.6 billion, according to a study by the Tufts Center for the Study of Drug Development,” says Glenn Sblendorio, president and CFO of The Medicines Company, a Parsippany, NJ–based global corporation that provides solutions in three care classes: acute cardiovascular, surgery and perioperative care, and serious infectious disease. But increasedmarket demand for new and innovative treatments helps ensure a steady flow of financing for companies focused on segments that include oncology, Hepatitis C, and cholesterol, Sblendorio adds. “Even after a drug is approved for distribution, a company has to demonstrate it’s able to execute on the promise,” he notes. “And that’s getting more difficult as private and government payors put pressure on profits. However, biotech and pharmaceutical companies that have a well-targeted research and development program and compelling business plans have a good chance of securing financing, even in a challenging economy.” C F inance executives looking to invest in or acquire a startup should be looking for companies that offer what Greg Kammerer, vice president of capital markets at MLG Capital, calls “one plus one equals three” — and that does not just mean extra revenue. In many cases, revenue is not what gives the young company value. “There may be a significant amount of users that can be tapped into, that a more experienced company can monetize with its existing infrastructure or within its established brand or platform,” says Kammerer, host of the CFO Innovation Conference “Piranha Tank” event, which gave financial execs and investors a chance to hear from startups looking for growth capital. “It’s a question of what extra value can be extracted from an acquisition.” An acquisition that does not meet a buyer’s revenue requirements could nevertheless make sense based on the startup’s technology offerings. Even if the acquiring company could develop the technology itself with a few years and significant capital resources, the CFO might come up with an acquisition method that for a fraction of the cost or resources boosts its technology capability. A smart startup acquisition will benefit both sides. Kammerer gives the example of a startup that might generate $2 per user in revenue annually, but the more robust acquiring company, with a broader inventory of products or more established infrastructure, could increase the revenue generated per user several times over. In other words, “one plus one equals three.” C Finding Pearls in the Piranha Tank THE CFO MIGHT COME UP WITH AN ACQUISITION METHOD THAT FOR A FRACTION OF THE COST BOOSTS ITS CAPABILITY KNOWLEDGE TRANSFER KEY TOPICS FROM THE CFO INNOVATION CONFERENCE & AWARDS