The pharmaceutical industry is an ever-changing landscape. Companies are being acquired, merged with other companies, and divested on a regular basis which makes the business of running a pharmaceutical company very complex. These complexities are commonly experienced in the office of the CFO where the need to maximize shareholder value and drive growth are of utmost importance. For finance executives at fast growing pharmaceutical companies, the need to improve efficiency around strategic planning, budgeting, forecasting and reporting is a top priority. Fortunately, the cloud has paved the way for agile FP&A, making it possible for finance teams to gain the speed and flexibility required to operate in such dynamic environments.
According to a recent FTI Consulting survey (http://www.fticonsulting.com/global2/critical-thinking/fti-journal/2013-life-sciences-investor-survey.aspx), the top 4 critical issues impacting the life sciences sector are: global healthcare reform and pricing pressures, new drug launches, emerging markets growth, and M&A activity. These market dynamics can have an impact on how finance departments organize and produce financial reports.
Additionally, various business scenarios such as the outsourcing of clinical trials, drug delivery delays and the expiration of key patents can all greatly impact decisions around planning, forecasting and budgeting. Having the ability to quickly model the impact of these decisions is critical.
However, many fast growing pharmaceutical companies still rely on spreadsheets for their planning and budgeting. These traditional tools are often times inadequate and can cost a company in terms of time, resources and errors. The most costly mishap would be if the figures and statements produced are wrong! To stay on top of the data collected and to ensure accurate financial reporting, companies can and should automate their planning processes. Some main reasons to automate include:
- Obtaining a “single version of the truth” /central repository of GL data
- Ability to flexibly integrate acquisitions and divestitures
- Ability to operate in a controlled environment with accountability
- Ability to do self-service reporting
- Ability to reduce the risk of incorrect statements
As more companies look to automate their planning they will find themselves confronted with two main deployment options: on-premise and cloud. On-premise solutions are very robust and can help tremendously with the automation of the planning process by providing rich reporting and interactive workflows. However, these solutions can take years to implement and require extra hardware costs in order to keep up with their processing needs.
More recently, the cloud has made it possible for finance teams to keep up with the demands of a multifaceted environment and complex business models while still obtaining all the benefits of on-premise solutions. These cloud solutions generally provide a lower total cost of ownership (TCO) since they are implemented quicker and do not require internal IT hardware or software. Additionally, all upgrades are typically included and are transparent to the users.
Leveraging the cloud has helped many of Cervello’s fast growing pharmaceutical clients manage the dynamics of the industry and the challenges within the finance department. This includes everything from integrating M&A activities, growing product lines, reporting on the necessary statements, and modeling the various scenarios of pricing pressures and R&D investments. Instead of tying multiple excel worksheets across departments together with fragile formulas and inaccurate versions, our clients have been able to standardize processes and aggregate their financials in the cloud. This results in a more robust P&L with integrated effects from modeling various initiatives and “what-if” scenarios.
One such client is Jazz Pharmaceuticals, named the #1 fastest growing company in 2013 according to Fortune Magazine. Using Host Analytics, Jazz Pharmaceuticals has been able to transform its finance processes in the cloud and benefit from agile FP&A.
Jazz Pharmaceuticals’ Director of FP&A, Shawn Mindus, recently joined us for a Webinar where he discussed the companies’ success with Host Analytics and how Cervello was a key partner in helping them to evolve the system. I encourage you to watch the recorded Webinar, Planning for Growth: How Jazz Pharmaceuticals Transformed Accounting and FP&A with the Cloud.
To conclude, cloud-based planning and budgeting solutions such as Host Analytics present a big opportunity for finance teams at fast growing pharmaceutical companies. With the speed and simplicity of the cloud, these teams can easily and quickly adapt to business change for agile FP&A.
POSTED BY: Garvin Chan