Biotech Firms Need a Plan B for Hiring CFOs

There are so many companies in the biotech sector now, their chances of finding a finance chief with the preferred profile are low.
David McCannApril 26, 2019

An explosion in the number of publicly traded biotech companies, combined with their strong preference for hiring from within the life sciences industry, has put intense pressure on the biotech CFO market, says recruiting firm Russell Reynolds Associates.

Indeed, it seems as if biotechs looking to go public are practically begging to fail in their quest to hire what they consider to be a suitable finance chief.

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Not only do they want someone with life sciences experience, but they also want a sitting CFO in that field who has IPO experience, according to Russell Reynolds.

Between 1998 and 2008, the number of publicly held U.S. biotech firms valued between $500 million and $10 billion inched from 21 to 24. Over the following decade, the number shot up to 116.

Among biotechs valued at less than $500 million, the number grew over the more recent 10-year period from 291 to 333. (There are now 10 firms worth more than $10 billion, compared with 6 a decade ago.)

The insularity that marks the biotech sector is exemplified by the average 15.4 years of industry experience among its current finance chiefs, Russell Reynolds reports. Among their “comparable peers” at S&P 500 companies, the next-most-insular industry is industrials, where CFOs have an average of 8.3 years of industry experience.

Reality portrays just how unrealistic biotechs’ view of what constitutes an ideal CFO is: 62% of finance chiefs at public companies in the sector were first-time CFOs when they took their current job, according to Russell Reynolds.

That still trails the 75% of non-biotech finance chiefs who were hired into the role with no experience.

When a biotech isn’t able to hire the precise type of CFO it prefers, where else should it turn?

“Targeting senior finance leaders within large pharmaceutical companies known for developing their finance talent can be a good place to look,” the recruiting firm says. “Additionally, prior experience in investor relations, investment banking, or internal leadership roles that require selling ideas to senior executives and boards are strong foundational experiences.”

And while investment banking has long been considered “a fertile hunting ground” for biotech CFOs, the firms “are increasingly open to considering equity research analysts and corporate development officers,” says Russell Reynolds.