Leveraging variable resources and alternative financing options can help you weather a down market
By Barb Carlin, Managing Director
Following record-breaking growth in 2020 and 2021, the capital markets have cooled, forcing the life science sector to adjust to a new paradigm. Without near-term access to the IPO and SPAC markets, companies are now finding themselves forced to do more with less. With our view inside hundreds of such companies, Danforth Advisors understands the challenges and actively engages with management teams to build a blueprint for weathering uncertain times.
Here are some of the ways we’re supporting clients today.
Extending the runway. There are many factors to consider in terms of preserving cash. We are helping clients evaluate discretionary versus non-discretionary spend as well as portfolio prioritization. There are often opportunities to identify near-term operational efficiencies and to consider longer-term decisions, such as delaying or out-licensing assets.
Effective budgeting and forecasting. In planning for financing, it’s critical to have a handle on how much capital is needed and how long it will fund operations. Life sciences expertise is a must, given the cost and complexity of manufacturing and clinical development initiatives and the roles they play in informing future financings. We support clients and their investors by providing meaningful financial analyses to craft strategic imperatives and plans.
Examining clinical contracts. Working with clinical research organizations (CROs) and related vendors brings tremendous expense. Smaller companies typically lack a dedicated internal resource and rely on clinical operations staff, whose primary focus is trial planning and execution – not contract structure and negotiation. Even when a trial is underway, sponsor companies can take a strategic approach to renegotiation. Our Clinical Business Operations team collaborates with clients to both structure contracts and evaluate cost-cutting measures that incentivize CRO performance and ensure accountability.
Weighing all available financing options. While slower paced, companies are raising capital and they are doing so based on validated science and proven leadership teams. We have witnessed the decline in enterprise valuations and the structure of financing rounds becoming heavily tranche based. Diligence efforts by investors are expected to take longer and may be reserved for further advanced clinical programs. Our clients reach out to explore alternative paths of capital, expand investor relationships and evaluate strategic options in the form of license agreements, collaborations or partnerships. For public companies, at-the-market offerings provide a way to raise capital in smaller increments over time. Proven science and platform technologies with expanded application continue to attract reputable investors, entrepreneurs and trusted advisors.
Stage-adjusted people strategy. Competition for talent is intense at companies large and small, even considering continued headcount reductions throughout our industry. Our clients benefit from a right-sized HR function staffed by industry experts who can provide flexible support. This allows them to attract and retain high-caliber performers, manage workforce planning and implement effective processes for onboarding, benefits and payroll administration, among other operational needs. Our HR consultants can supplement clients’ internal staff or establish and manage compliant HR programs on an ongoing basis.