Athersys CFO Ivor Macleod draws light on a problem inherent to—but not often directly addressed by—new and emerging biotech organizations.
The Problem: Startup biotechs run on money and science. These two disciplines speak very different languages, but they’re tightly interdependent and requisite to the sustained operations of a new biotech entity. When communication between finance pros and scientists gets lost in translation, cash runways tend to truncate.
The Expertise: The right side of Macleod’s brain is as linear and disciplined as you would expect of an MBA and CPA. The left is as inquisitive and creative as Dr. Gil Van Bokkelen’s, the big-thinker who founded Athersys. Macleod has proven the value of that unique combination of traits by forging a finance leadership career that includes meaningful tenures at Merck, Roche, and Eisai. Now a little past the six month mark in a new role at much smaller Athersys, he’s the finance strategist the company is counting on as it moves its lead candidate through Phase 3 clinical trials. Macleod shares a few common points of failure when the conversation between finances and science get lost in translation.
Cash Versus Accrual: “When I first got involved in pharmaceuticals I realized there was a bit of a disconnect. In the finance world, everything's about the end of the month and the end of the quarter. In the science world, it's milestone to milestone. I realized very early on that business acumen is critical to success in finance. So, I take the time to sit down with scientists and understand their world, and help them understand mine.” Some of that understanding, such as the difference between cash and accrual, might seem simple to finance people. But if the scientists who are dependent on and procuring and consuming drug development and manufacturing resources don’t understand how and when one has to record significant expenditures – and how that aligns with financing status – the ensuing problem might begin with a bit of interdepartmental friction and quickly build into a cash runway crisis that brings risk to the company.
Contract Terms: Outsourcing services presents another potential risk to startup biotechs lacking a full-time financial perspective. Macleod says scientists approach contract negotiations from the perspective of expected scientific outcomes. That’s good, and necessary, but that focus often comes at the expense of clos attention to the contract itself. “If a company wants all the money upfront, maybe that's a blind spot for the scientist,” he says. “A finance person might say, wait a minute, don’t we want at least some of the work before we pay the money?” At Athersys, a small company relative to those where Macleod has spent most of his career, Macleod has found an environment that’s amenable to cross-disciplinary communication. “We all draw outside the lines,” he says. “There aren’t necessarily firm job descriptions, which facilitates our ability to break down the language barriers.”
Clinical Enrollment: In his big pharma experiences, Macleod says the finance office didn’t have very granular insight into the financial aspects of the dozens-to-hundreds of clinical trials taking place simultaneously. “At Athersys, we have two fast-track phase three trials in process. It’s not at all uncommon for our finance department to have conversations with clinicians about whether we’re ahead of budget because we’re behind on enrollment or clinical supply. We talk about it all the time, it helps us learn in a constructive environment.”
The Bigger Picture: Macleod was recruited to Athersys with a purpose. The company’s lead candidate is poised—the biopharma commercialization gods willing—for marketability on the 2-3 year horizon. A financial Sherpa who’s been through the gauntlet otherwise known as the lead-up to commercial approval, the timing of Macleod’s foray into emerging bio is no coincidence. He’s already thinking about the financial implications of things like reimbursement, distribution, pricing, commercial-scale manufacturing, a salesforce, and myriad other accounts payable and accounts receivable issues characteristic of a commercial—not startup—biopharma.
Our conversation about all this, the big pharma experience he brings to the Athersys table, and the joy he’s realizing in the unique responsibilities of smaller-scale finance management (read: raising cash and interacting with investors) make for an insightful episode of The Business Of Biotech: Summer Executive Sessions.