2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY - BDO USA
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2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY
Table of Contents THE ROAD TO RECOVERY 3 PANDEMIC PIVOTS 4 OPPORTUNITIES ABOUND 8 SUPPLYING THE FUTURE 13 RESPONDENT PROFILE 18
2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY / 3
The Road to Recovery As COVID-19 continues
to disrupt the entire life
It’s been a demanding year for life sciences. sciences ecosystem, the
The pandemic caused sweeping disruption across every industry, leading many pressure to innovate
businesses to take a defensive position. Life sciences companies, on the other hand, is higher than ever
took the field on offense. before. To compete, life
Whether rapidly pivoting the pipeline to aid in the crucial development of tests, sciences leaders must
treatments and vaccines for COVID-19, increasing the production of ventilators reimagine and reinvent
and personal protective equipment (PPE), or ensuring that pandemic-related the ways in which they
restrictions do not hinder access to important drugs and medical devices, life sciences work. Those who further
organizations have been called to act, at speed, during this critical time.
collaboration, build
As the coronavirus-induced recession is expected to continue well into 2021, one greater resilience into
thing is clear: Nothing returns to normal without life sciences. their supply chains and
Tasked with charting a sustainable road to recovery for both the industry and the invest in outcomes-based
global economy at large, life sciences organizations must advance COVID-19 R&D to R&D will be best set up to
the point of commercialization and widespread adoption of a novel vaccine. However, thrive in what’s next.
according to the 2021 BDO Life Sciences CFO Outlook Survey, to truly thrive beyond
the pandemic, companies must also persist in demonstrating value, capitalizing on
new opportunities, and effectively preparing their organizations to succeed in an
TODD BERRY
environment rife with emerging risk and accelerated disruption.
Assurance Partner
and National
Co‑Leader of BDO’s
Life Sciences practice
LIFE SCIENCES CFO OPTIMISM
Life sciences CFOs are the most optimistic headed into 2021. Explore our 2021 BDO Middle Market CFO Outlook Survey to see
how other industries are faring.
NOW ONE YEAR FROM NOW
10% 29% 61% CFOs Identify as 80% 17% 3%
Struggling Surviving Thriving Thriving Surviving Struggling
forecast a forecast a expect an economic
69% revenue increase
81% profitability increase
61% recovery in 2021
4 / 2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY
Pandemic Pivots
DOUBLING DOWN ON R&D
COVID-19 largely altered life sciences leaders’ R&D priorities.
As states and organizations implemented severe restrictions on many operations,
access to clinical trial sites and patients were hindered, and lab capacities were
30%
have rerouted
reduced to essential employees only. The industry faced immediate pressure to pivot
resources to develop and produce therapeutics and vaccines for COVID-19. In this
resources to
environment, life sciences leaders had to be decisive about which research projects COVID‑related
made the most sense to advance. research
While investments in non-COVID-19 areas of R&D slowed over the past year,
life sciences organizations have shown immense agility in reallocating resources
effectively, efficiently and at scale to meet greater pandemic-driven need.
WHERE ARE CFOS INVESTING?
Cell therapy
32% 16% 57%
Gene therapy
36% 17% 47%
Immunotherapies
40% 24% 56%
Diagnostics
49% 39% 51%
Consumables
40% 36% 53%
Wearables
32% 29% 57%
COVID-19 vaccine
36% 45%
COVID-19 therapeutics
31% 43%
In 2019 Currently In 2021
2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY / 5
Headed into 2021, life sciences CFOs are once again doubling down on R&D, with 69% planning to increase investment and
68% citing three to four promising products in their current portfolio for commercialization. While the prioritization of COVID-19
R&D is expected to continue until effective treatments and/or vaccines are commercialized, a significant bounce back of R&D
investments in areas outside of COVID-19 vaccine and therapeutics research is expected in the new year. From immunotherapies
to diagnostics to wearables, the influx of pandemic-related cash, energy and resources is likely to spill over into R&D areas like
antivirals and remote monitoring.
FEDERAL R&D TAX CREDIT ELIGIBILITY
The cost of R&D in life sciences continues to increase—as does the risk—given
public pressure to rein in drug prices and demonstrate value. As expenses rise,
life sciences organizations can claim R&D tax credits to reduce their tax liability
and allow for further investment in innovation.
Each year, however, billions of dollars go unclaimed at the federal and state
levels because companies either aren’t aware of or don’t fully understand
eligibility for R&D tax credits.
At the federal level, life sciences organizations working to develop new or
improved products, processes, software or formulas are eligible for R&D tax
credits—especially if the research is related to treating COVID-19.
Under current IRS guidance, life sciences companies who received COVID-19
relief funding can claim R&D tax credits but only for qualified research
expenditures that:
1. Were not paid for with proceeds from a PPP loan; or
2. Were paid for with proceeds from a PPP loan but only if:
u The PPP loan ultimately wasn’t forgiven;
u The taxpayer doesn’t request forgiveness for the PPP loan; or
u The taxpayer doesn’t reasonably expect that the PPP loan will be forgiven.
If a life sciences company reasonably expects the PPP loans will be forgiven, it
should consider recent IRS guidance and speak to a tax professional in regards
to its R&D tax credit eligibility.
Try our R&D Tax Credit Calculator to see if your organization is missing out or
undercapitalizing on valuable credits.
6 / 2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY
ENABLING TRANSFORMATION AND EXPANSION
To thrive in 2021 and beyond, life sciences CFOs are placing greater emphasis on driving digital transformation initiatives and
downturn-proofing their organizations.
TOP BUSINESS STRATEGY FOR 2021 ECONOMIC OUTLOOK
A prolonged
economic
downturn is
life sciences’ top threat
in 2021
63% Digital
Only
17%
Transformation of CFOs predict a fast
economic recovery
in 2021
TOP 3 BUSINESS PRIORITIES IN 2021
33% 15% 15%
Investing in Technology M&A Integration Managing Through
or Infrastructure Economic Downturn
Expansion is also high on the list for life sciences CFOs, with 41% citing plans to pursue product or service expansion in 2021.
However, as life sciences organizations look to expand their offerings, they must do so with a focus on building a digitally-enabled
workforce and infrastructure to support their growth.
2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY / 7
On a practical level, as life sciences leaders lay the groundwork
for expansion, they need to consider how they can best evolve
their operations and workforce strategies to fit current and DRIVING SUCCESSFUL DIGITAL
future needs. For example:
TRANSFORMATION
u How can they maintain continuity of operations given
sustained disruption to their workforces, R&D, supply To achieve desired ROI, life sciences
chains and manufacturing capacities due to COVID-19? organizations looking to embark on digital
transformation initiatives must do so with a
u Can they shift to conducting clinical trials remotely?
full understanding of:
u Can manufacturing workflows and development schedules
be redesigned to keep essential employees safe and remote How digital
employees connected? transformation
u Can they leverage digital platforms to engage with can best optimize
healthcare professionals? their people,
processes, platforms
u Are there safeguards in place that will allow them to and protections
protect intellectual property and proprietary information
while operating in a remote setting?
Life sciences CFOs must answer these questions and think
through how to engage their workforces when executing on How to properly
these shifts.
execute their digital
Life sciences organizations will also need to rethink how transformation
they manage and incentivize talent in a remote, or partially strategy
remote, setting—especially given 10% of CFOs say recruiting
and retaining top talent is their #1 priority in 2021. As the
life sciences industry continues to grow at a rapid pace and
the pool for skilled employees shrinks, ensuring workforce Life sciences organizations who know how to best
retention, specifically the retention of high performers, will leverage digital enablers—like cloud computing,
be critical. advanced analytics and blockchain—and
embrace digital transformation from a holistic
perspective will be able to move beyond digital
transformation as a disruptor and towards
digital transformation as an enabler of better
business outcomes.
8 / 2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY
Opportunities Abound
While the pandemic’s toll on health and the economy has been massive, disruption can drive positive change. In the last six months,
life sciences CFOs say they have experienced:
42% 41% 40%
New opportunities for product or Faster decision-making Accelerated digital
service innovation transformation
38% 32% 31%
Improved workforce New investment or Enhanced community /
culture and unity expansion opportunities government partnerships
As pandemic pivots continue to spark meaningful change, life
sciences CFOs are seeking collaboration and capital.
2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY / 9
STRATEGIC PARTNERSHIPS & COLLABORATION
In the life sciences space, R&D is always high-cost, high-risk and—if successful—high‑reward.
To lighten the load and hasten outcomes, life sciences leaders are increasingly seeking opportunities to partner and collaborate with
other organizations in the development and commercialization of new drugs, medical devices and technologies.
PLANNED PARTNERSHIPS
44% 41% 36% 30%
Data and/or technology Research Commercialization Clinical studies
23% 23% 22% 20%
Licensing agreement Academic institution Artificial intelligence Joint venture
18% 17% 14%
M&A Government contract Private equity
or partnership
10 / 2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY
SPOTLIGHT:
COVID-19 COLLABORATION & INNOVATION IN ACTION
AMGEN AND ADAPTIVE ASTRAZENECA, CEPI ROCHE AND GILEAD
BIOTECHNOLOGIES AND GAVI On May 28, Roche and Gilead
On April 2, Amgen and Adaptive On June 4, AstraZeneca announced announced the initiation of a global
Biotechnologies announced a a $750 million agreement with the Phase III, randomized, double-
collaboration, bringing together Coalition for Epidemic Preparedness blind, multicenter study to evaluate
Adaptive's proprietary immune Innovations (CEPI) and Gavi, the the safety and efficacy of Roche’s
medicine platform for the Vaccine Alliance, to manufacture, Actemra® in combination with
identification of virus-neutralizing procure and distribute 300 million Gilead’s investigational antiviral
antibodies with Amgen's expertise doses of AstraZeneca-Oxford’s Remdesivir, versus placebo plus
in immunology and novel antibody potential COVID-19 vaccine, Remdesivir, in hospitalized patients
therapy development to develop a AZD1222, by the end of 2020. with severe COVID-19 pneumonia.
therapeutic for COVID-19.
Collaborative partnerships are quickly becoming table stakes for accelerated innovation, and life sciences organizations will need to
be strategic about attracting and engaging with the right partner for the right goal. Whether looking for traditional partnerships or
cross-industry partnerships with sectors like healthcare or technology, life sciences leaders should evaluate and consider a variety of
deal structures, as well as tax considerations, with a clear focus on which partnership opportunities will have the greatest impact on
the company’s ability to scale, fund future innovation and further diversify their product and service mix.
Once the right partnership is secured, proper alignment on strategy, objectives and execution will be key to success—especially
when partnering with new entrants who may not have a clear understanding of how the industry operates in a highly
regulated environment.
The industry’s efforts in the battle against COVID-19 have fast-tracked opportunities for collaboration,
innovation and expansion. As we look to the future, a focus on efficient, sustainable and value-based
transformation—and financing—will be key. As organizations seek the scale, scope and speed to level up
in today’s environment, they must do so with a focus on driving digital agility, improving patient outcomes
and fostering transparency to prove efficacy to investors and the public.
LANCE MINOR
Principal and National Co-Leader of BDO’s Life Sciences practice2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY / 11
FINANCING FOR SPACS AS AN EXPRESS
GROWTH TRACK TO IPO
Life sciences funding has spiked in Although the COVID-19 pandemic has
2020 as the industry’s push to produce caused significant economic hardship
COVID-19 treatments continues to for most, Special Purpose Acquisition
attract and intensify both investor Companies, or SPACs, have gained
interest and federal funding. In fact traction in the life sciences space as
as of September 2020, 59% of life an opportunity for organizations to
sciences organizations secured funding quickly access capital and increase
or assistance from government public visibility.
programs in response to COVID-19.
To finance plans for growth, as well For investors, SPAC IPOs are low‑risk
as relieve high R&D and clinical trial as they can recoup finances, and
expenses, life sciences CFOs will look the potential for returns are higher
for opportunities to capitalize on this than ever given the access to capital,
heightened attention in 2021. low interest rates and the ability to
move quickly to close an acquisition.
Yet, to maintain interest from both For target life sciences companies,
investors and the public, life sciences SPAC IPOs provide the potential
organizations will need to prove to access additional capital and
their value. grow exponentially despite the
economic downturn.
2021 FINANCIAL PLANS
FOR GROWTH
25%
plan to pursue PE investment
25%
plan to pursue M&A
24%
of private companies plan to pursue
an IPO, of which 25% are biotechs12 / 2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY
To demonstrate their effectiveness at reducing costs and improving outcomes, the majority of life sciences organizations (78%)
are partaking in some form of outcomes-based contracting. However, while outcomes-based contracts with providers seem to be
increasing in popularity—specifically with biopharmaceuticals, pharmaceuticals and biotechs—outcomes-based contracts with
payers are down slightly from last year.
OUTCOMES-BASED CONTRACTS IN LIFE SCIENCES
Have an outcomes-based Have an outcomes-based contract Do not have
contract with a payer with a provider outcomes-based contracts
33% 30% 53% 57% 14% 22%
2019 2020 2019 2020 2019 2020
A Closer Look at Outcomes-Based Contracts with Healthcare Providers
70% 68% 68%
64%
52%
44%
Biopharmaceutical Pharmaceutical Biotech
2019 2020 2019 2020 2019 2020
Outcomes-based contracts with providers are increasing in the life sciences space as pressure mounts
to demonstrate value to investors, patients and the general public. As life sciences organizations
partner with providers to prove out value in the current environment, they must do so with a
heightened focus on constructing the right value-based payment model to support lower costs,
improve patient outcomes and mitigate disruption. Life sciences leaders who work to identify changes
in their operational landscape and restructure their provider contracts accordingly will be better
prepared to operate in the reimbursement landscape post-pandemic.
JIM WATSON
Principal in The BDO Center for Healthcare Excellence & Innovation2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY / 13
Supplying the Future
In the last year, the life sciences industry has hustled to address pandemic pain points
as efficiently as possible. Today, supply chains have been rerouted, resources have
been reallocated and manufacturing has been ramped up to better meet global need
and aim to mitigate against further disruption.
As COVID-19 continues to impact the supply and manufacturing of essential products, While connecting with
life sciences CFOs are using lessons learned in the early days of the pandemic to vendors, suppliers and
optimize and build more agility into the supply chain of the future—which will be distributors to gauge
crucial to the successful deployment of eventual vaccines and therapeutics. manufacturing capacity is a
good first step, life sciences
CAPACITY CONCERNS organizations should seek to
develop a clear line of sight
To successfully bring products to market, life sciences organizations must have access into the current product
to sufficient manufacturing capacity. market and capacity landscape
as a whole. For example,
However, as directives to produce COVID-19 products at scale compete with the
BDO’s bioTRAK® database
existing manufacturing need for non-COVID products, life sciences manufacturers are
provides life sciences leaders
grappling with how to free up capacity to meet demand.
with detailed information and
As manufacturing plans are disrupted, life sciences CFOs must understand what analysis on biomanufacturing
non-COVID products are also vying for demand and ensure that essential medicines, capacity supply and demand.
devices and technologies have sufficient capacity. Organizations that leverage
data to inform their
understanding of the types of
WHICH LIFE SCIENCES SUBSECTORS ARE STRUGGLING capacity available throughout
MOST WITH PRODUCTION CAPACITY? the biomanufacturing space
will be better able to forecast
what products are competing
for capacity and adjust their
manufacturing strategy
16%
as needed.
25%
Medical equipment and
Biopharmaceuticals
medical supplies
manufacturing
22%
Biotech
19% 18%
Physical, engineering
and life sciences Pharmaceuticals
(except biotech)14 / 2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY
SUPPLY CHAIN SHIFTS
More than one in 10 life sciences CFOs say supply chain disruption is the greatest
threat to their business in 2021, and for good reason. Global supply chains,
international economic shutdowns and the reallocation of resources towards
26%
COVID‑19-related products and projects have led to supply shortages and struggles
across the industry.
As the pandemic continues to highlight vulnerabilities on an international scale, many of CFOs say trade &
organizations are looking to reduce their risk by identifying alternative suppliers,
contemplating a reallocation or reshoring of resources and building more resiliency tariffs is their biggest
and agility into their supply chain in 2021. policy concern in 2021
WHICH OF THE FOLLOWING SUPPLY CHAIN ACTIONS ARE LIFE SCIENCES CFOS UNDERTAKING?
61%
57% 54%
50%
29% 28%
Identifying Conducting a Investing in Bolstering or Relocating to Reshoring to
alternative / supply chain risk supply chain adding redundant another country the U.S.
backup suppliers assessment technology inventory of select (non-U.S.)
drugs or devices
Looking ahead, as life science leaders use lessons learned from the pandemic to reassess their supply chain plans—especially
from a business continuity and resiliency perspective—they must also carefully consider trade and tariff implications.
Trade and tariffs are important tools in managing geopolitical relations, which can directly impact
supply chain stability and access to critical resources and raw materials for life sciences companies—
including active pharmaceutical ingredients (APIs). As international supply chains may be further
disrupted by ongoing or emerging trade and tariff moves at the federal level, life sciences organizations
should consider geographical diversification of their supply chains to minimize regional and country-
specific impacts to their sourcing and production processes. These considerations also impact global
transfer pricing and customs valuation ramifications—which are top enforcement priorities for
governments worldwide. In short, considering the “Global Value Chain” should be a top priority in the
coming year for all life sciences companies.
DAMON V. PIKE
Principal and Customs & International Trade Leader at BDO2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY / 15
COVID-19 VACCINE CHALLENGES
Once a vaccine has been developed and approved for should strive to get ahead of consumer apprehension about
distribution, the road to economic recovery will still be taking a newly approved vaccine by being ultra-transparent
long. If getting a vaccine to commercialization is like scaling and communicative about their research. Vaccines that can
a mountain, supplying the treatment to large, diverse build consumer confidence early through clear, science-
populations will be akin to summiting Mount Everest. backed communication will have a better chance of garnering
acceptance from the general public. In addition, continued
While the efficacy of a vaccine is essential, once proven optimization of supply chain manufacturing process
effective, life sciences CFOs know that consumer confidence engineering will be necessary in order to overcome any
will be crucial to widespread adoption. Life sciences manufacturing and sourcing constraints.
organizations currently working on COVID-19 vaccines
WHAT DO LIFE SCIENCES CFOS EXPECT TO BE THE BIGGEST CHALLENGE
FOR AN APPROVED COVID-19 VACCINE?
8%
Reimbursement
32%
Efficacy
18%
Efficient
deployment
18%
Sourcing and
manufacturing
enough quantity
24%
Consumer
adoption16 / 2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY Pioneers on the road to global recovery, life sciences CFOs are optimistic about the year ahead. But, as increased investment, accelerated transformation and collaborative innovation continue, life sciences organizations must adapt with intention and prepare to thrive beyond the pandemic. As we enter a new year, life sciences organizations must continue to advance COVID-19 vaccines and therapeutics, as well as other areas of R&D, build greater resilience into their supply chains and remain agile in an increasingly digital world. Organizations that can do this and lead with value and transparency will build a strong foundation for future growth. Our research goes beyond life sciences. View the survey results from 600 CFOs across industries in our 2021 BDO Middle Market CFO Outlook Survey.
2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY / 17
18 / 2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY
Respondent Profile
The 2021 BDO Life Sciences CFO Outlook Survey polled 100 CFOs at biopharmaceutical, pharmaceutical, biotech, medical
equipment and supplies manufacturing, and physical, engineering and life sciences subsectors with revenues ranging from
$250 million to $3 billion in September 2020. The survey was conducted by Rabin Research Company, an independent
marketing research firm, using Op4G’s panel of executives.
Average tenure in current CFO role: 5 years
TYPE OF LIFE SCIENCES ORGANIZATION
How the life sciences CFO respondents self-identified their organization:
BIOPHARMACEUTICALS
23%
PHARMACEUTICAL
22%
BIOTECH
22%
MEDICAL EQUIPMENT AND SUPPLIES MANUFACTURING
21%
PHYSICAL, ENGINEERING AND LIFE SCIENCES (EXCEPT BIOTECH)
12%
ANNUAL REVENUE COMPANY TYPE
$250M-$500M 10%
50%
Public
$501M-$750M 35%
$751M-$999M 22%
$1B-$2B 26%
50%
$2B-$3B 7% Private2021 BDO LIFE SCIENCES CFO OUTLOOK SURVEY / 19
ABOUT BDO’S LIFE
SCIENCES PRACTICE
BDO’s Life Sciences Practice provides
the guidance that pharmaceutical,
biotech, and medical device
manufacturers need, when they need it.
From understanding the complexities
of research and development tax
credits and FDA regulations, to
licensing agreements and due diligence,
we help our clients grow.
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Material discussed is meant to provide
general information and should not be
acted on without professional advice
tailored to your needs.Contact Us
For more information on BDO USA’s service offerings in this industry vertical, please contact one of the
regional service leaders below:
TODD BERRY
National Life Sciences Co-Leader
617-239-4125 / tberry@bdo.com
LANCE MINOR
National Life Sciences Co-Leader
301-354-0711 / lminor@bdo.com
ELENI LAGOS
Life Sciences National Tax Leader
212-817-1739 / elagos@bdo.com
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