How does a chief financial officer (CFO) attract funding to continue medical research and later, sufficient capital to commercialise the discovery, when its scientists experience their Eureka moment? While the challenge can be overcome, as a number of experts in the field explain, the process can be a lengthy one.
“The journey from the Eureka moment to commercialising the results of that research can be very, very long,” says Ralph Mitchell, the CFO and Chief Operating Officer (COO) at the Children’s Medical Research Institute (CMRI). “You have to prove up whatever target it is you are looking at. You have to potentially test it in animals. You’ve got to get through clinical trials. Each step along the way involves an element of risk and cost for somebody.”
One of the challenges for CFOs in research-based organisations is balancing the competing needs of highly-educated and experienced researchers who are focussed on making the discovery that will be written up in prestigious journals, with the commercial demands of the institution.
“The CFO’s role is critical because they are the custodians of the funding,” says Mark Calvetti, a director in William Buck’s corporate advisory team. “They are ensuring that the institution remains viable, that they have adequate funding.”
Calvetti, is also a member of the firm’s Healthcare group which is working with research-based medical and health organisations to commercialise their research and development (R&D). While he’s aware government money is increasingly limited, forcing institutes to partner with the commercial sector, he observes that CFOs have to bridge professional differences.
“The biggest factor is taking the researchers on a journey which is a win-win. They get the kudos from their work, and the organisation gets the funding that allows them to continue their R&D,” Calvetti says.
A former co-founder of a biotech company and now chief operating officer at the Sydney Partnership for Health Education, Research and Enterprise (SPHERE), Karen Joyner has a similar view of financial/research divide.
“The researchers think they’ve got a fantastic idea but they can’t necessarily describe what the market will be,” she says. The challenge for CFOs, she sees, is getting enough information from researchers about the value of what they are developing.
“There is a definite gap that is not funded by any funding body,” she says. For example, often institutions do not have an economist who is fully paid to help calculate the value of a proposal for the organisation. The CFO then has to find the money within the organisation to undertake the task.
“So when you are trying to pitch to people to fund things that economic evaluation is an impact gap. It is a hot topic around the world. The Federal Government is looking to find ways of incentivising researchers to describe more of the impact,” Joyner says.
The use of extra specialist skills to support funding will depend on the program, says CMRI’s Mitchell. In trying to get grants from various large organisations for two large scale projects, CMRI has retained consultants to do economic evaluations to identify the potential benefits
“A lot of venture capitalists (VCs) and pharmaceutical companies want to see more work done to de-risk your discovery,” he says. CMRI also plans to appoint a head of commercialisation with a scientific background to report to the CFO and complement his financial management skills.
Mitchell says he must be across all deals – 4 or 5 are being negotiated – to provide the best outcome for CMRI. For example, a few deals potentially could pay a royalty of two per cent. Should another similar deal be received where an investor is offering just one per cent, Mitchell is in a position to show the relevant researcher that accepting that first offer would be premature.
As he says, “the important part of the CFO role is to get the balance correct between having a deal done and having the best possible deal done.”