Robert Hall of Hong Kong-based executive recruitment specialist Ardent Search highlights the key traits and experiences that Asian biotech and medtech firms considering an initial public offering (IPO) should look for in a chief financial officer (CFO).
Hiring an experienced healthtech CFO can be challenging, with demand exceeding supply. How do you overcome this and secure the talent your company needs?
The increase of biotech and medtech companies listing across the globe in recent years and the desire to hire from within the sector has left the CFO talent pool almost dry. With a priority for growing companies to hire a CFO who has previously gone through an IPO with a biotech or medtech company, there are just not enough CFOs’ that fit the bill. Demand is far outstripping supply.
The medtech, and in particular biotech, sectors are quite inward-looking. A CFO from a biotech has amassed, on average, far more years of industry experience than their peers from other industries. Boards in other sectors are much more willing to consider CFO candidates from alternative sectors at the outset of a search. This willingness is why we see more fluid movement between other sectors regarding CFO talent. This fluid movement of talent across industries is a positive thing.
With there simply not being enough CFOs with healthtech sector experience to meet demand, how do you successfully make the critical hire that your organization needs?
The Bigger Role
Seeing who the CFOs are across the sector is the easy part but being attractive enough to get them to join your company is a significant challenge. Plan the search strategy in detail, including how to get the deal across the line.
One angle could be to change the scope of the role. Including oversight of some operational areas or strategic development of the group could be a consideration. CFOs are often looking to broaden their experience, so making a lateral move to a similar CFO role within the sector may not prove that attractive.
A broader role with responsibilities outside of the typical CFO scope should be more attractive and a logical steppingstone to a CEO position.
This type of hire is a succession planning opportunity for the board.
Investment banking has been a reliable hunting ground for hiring CFOs for growing organizations for many years. Equity research is an area that has been turned to by healthcare companies increasingly in recent years with success.
Strong equity research analysts will have the industry expertise and investor relations capability that boards prefer. CFO hires coming from equity research work successfully when they have the right complementary knowledge around them. A robust lead accounting officer and seasoned head of audit will be important considerations to have in place. If the dynamic between these works well, then the new CFO could thrive in the role.
The First Timer
Organizations are ordinarily reluctant to hand the reins to the first-time CFO. Understandably, a company that plans to IPO will want someone who has been through the process in such a critical position.
However, the reality is quite different. Most biotech and medtech companies that list do so with a first time CFO chair and do just fine. Almost 60 percent of the companies listed from these sectors in the last decade did so with a first time CFO.
There are good talent pools where the high calibre first time CFO can be found.
Target established pharma, biotech, or medtech organizations with a strong reputation for developing finance leaders such as Gilead, Celgene, and Stryker. Well-rounded talent, with exposure to investor relations and experience of presenting to boards, looking to make the step-up will work well.
Last year we helped a young immuno-oncology biopharma company search for their CFO. They opted for someone with no prior healthcare industry experience. The person they hired was their first choice, the strongest candidate, and the best fit. The candidate came from a technology manufacturer and has made a significant impact since joining. A year on, it has proven an excellent move for both parties.
The common perception among healthtech boards that prior industry experience is essential in a CFO is wrong. Candidates from outside of healthcare can also be the right option. Focusing purely on biotech or medtech candidates is costing companies time, delaying the process, and they’re missing out on very high caliber talent from outside sectors.
Alternative industries with proven fruitful hunting grounds are ones with significant R&D spend and are used to regulation. TMT (Technology, Media, and Telco) are industries with high R & D spending, though varying levels of regulation.
High technology hardware companies have similarities to healthcare that make this sector’s talent pool worth exploring. CFOs from this sector will be from an environment with some similar attributes to healthtech, high R&D spend, IP (Intellectual Property) issues, and complex supply chains.
Transportation manufacturing is another industry to consider. CFO candidates from this sector will be used to high R&D spend, heavy regulation, and complex supply chains.
Points to Remember
Consider broadening the role – more responsibility may be just the thing that secures your preferred candidate.
Look at first timers, including equity research – with the right structure around them, and they could thrive in the role.
Cast the net wider – the healthtech CFO talent pool has been overfished for years. Consider CFOs from industries with similar traits, high R&D spend, heavily regulated, where IP plays a significant role.