The FDA Doesn’t Show Signs of Slowing Down – How Can Pre-Revenue Life Sciences Companies Keep Up?
Contributed Commentary by Chris Manchester and William Tamulynas
June 2, 2021 | Despite the COVID-19 pandemic, the FDA’s drug approval rate has remained high. As the end of 2020, the FDA had approved 53 new drugs, surpassing the 48 new drugs approved in 2019. With the FDA working at this record pace, the process of bringing a drug to market has accelerated– changing the game for several aspects of launch strategy, such as team structure, procurement, and research and development.
Pre-revenue life sciences companies—often lean with few in-house resources—increasingly look to outsource processes to partners such as clinal research organizations (CROs) and large labs. While outsourcing helps companies move through the R&D cycle quicker, it also complicates financial tracking, a critical process for pre-revenue life sciences companies.
So, how can life sciences companies keep pace and effectively move through the drug development life cycle? Answer: A robust technology solution that enables granular tracking of spending and scale as the as the company rapidly grows and moves through the four main stages of drug development – start-up, IPO, clinical trials, and commercialization.
Start-Up
Life sciences companies in the start-up phase face a unique set of challenges. They are typically fast-paced and equity-backed, with lean teams of individuals who wear many different hats. These companies often need tech systems and processes to track the same elements of big companies, including ERP, FP&A, analysis, reporting, procurement, and approvals. As a result, they often have multiple disparate technology systems and manual processes that lack automation and efficiency. And companies with a fast-paced start-up mentality experience rapid changes to their infrastructure and require scalable systems that will grow with them from 3 to 300 people.
With a single, robust technology system, start-up phase life sciences companies can build more sophistication into their processes to enable better data tracking and financial reporting. By eliminating disparate systems, these companies will be better prepared to go public or participate in another equity-event.
IPO
As life sciences companies grow, they may start to raise capital through equity events like series A-funding rounds and eventually file an initial public offering. Companies going through an IPO will experience a big transition in terms of financials and reporting, so private equity firms want to ensure companies are prepared and operating like an IPO before it happens.
Financial teams need a sophisticated technology solution to closely monitor their burn rates, support complex IPO-level transactions, and ensure compliance against the increased level of SEC scrutiny via quarterly audits and strict filing deadlines. It is also not uncommon to see a 5-person firm grow to 100-person firm in less than a year. Rapid team growth can often strain tech systems, so it is imperative to have a flexible and scalable solution.
Clinical Trials
At the clinical trial stage, there are many more people involved in the drug development process who rely on technology and data than in previous stages, including scientists, buyers, accountants, and operations teams. With all these different teams tracking data manually on separate platforms, companies are more likely to experience inconsistencies and inefficiencies. Companies need to combine all their data and financials into one streamlined platform to reduce errors, communicate relevant information and results to internal and external stakeholders, and ensure each team is tracking on budget.
Commercialization
Here comes the wild card. Life sciences companies at the commercialization stage have several different paths to choose when looking at their next steps.
While some companies may have a very specific exit strategy with the goal of getting acquired by big pharma, that’s not always the case. Other companies need to determine their path forward. Will they manufacture the drug in-house or utilize a contract manufacturer? How will they manage inventory? Will they bring on an in-house sales force or chief sales officer, or outsource the sales team?
When determining its path, a life sciences company needs to utilize a tech solution that can efficiently manage operations, as well as track financials, accounting, compliance, agreements and more to be successful.
From start-up to commercialization, a sophisticated technology infrastructure will allow life sciences companies to implement detailed tracking of financials and budget, scale as the they rapidly expand in size, communicate results and data to the appropriate stakeholders, coordinate manufacturing and operations, and more. Companies that implement an effective solution from the start will navigate more easily the stages of drug development. As pre-revenue companies look to take advantage of today’s breakneck speed of bringing a product to market, a custom technology solution will enable success at each stage of the process and ultimately drive commercial success.
Chris Manchester and Billy Tamulynas are managing consultants on Sikich’s technology team. They can be reached at christopher.manchester@sikich.com and william.tamulynas@sikich.com.