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Finance, FP&A

Connected planning is the remedy for FP&A issues in pharmaceuticals

It’s not every day that companies get a completely new and ready to purchase global market handed to them on a plate. But that’s what’s just happened to a handful of pharmaceutical companies that have been rushing to get their Covid-19 vaccines through clinical trials, registration, and into the waiting arms of trillions of people around the world. With politicians and regulators oiling the wheels, some companies have compressed a process, that the industry says takes ten years or more and costs $2.6 billion on average, into less than 10 months.

But for most pharmaceutical and biotechnology companies it is a highly risky and long-drawn out process, with many compounds failing to get through to clinical trials, and regulators requesting ever more demanding proof of safety and efficacy before issuing a license. As drugs have only 20 years of patent life, the pressure is then on to build sales as rapidly as possible, optimise manufacturing capacity to meet global demand, and make sure adequate stock is available in countries where the product is selling well and where local pricing agreements offer the best returns. Having to juggle all of these unknowns across multiple time horizons, territories and currencies at a time when most companies in the sector are looking to reduce their cost base makes managing the process from a financial planning and analysis, (FP&A), very challenging.                 

FP&A teams under pressure to do more with less

Cost reduction through shared services programs that focused on transaction-processing activities, such as accounts payable and accounts receivable have already been harvested, so companies are increasingly looking to find additional savings in general accounting, where according to business consultants Deloitte, FP&A functions typically make up approximately 25% of the spend. But before corralling all FP&A activities into shared service centres, that are remote from the businesses they are supposed to be providing with decision support, it makes sense to first invest in technology that will transform today’s laborious FP&A processes. Because doing that will both enable FP&A teams to add considerably more value to the business, while at the same time driving down the overall cost of the finance function.

Financial transformation through ‘Connected Planning’

Today many enterprises are still lumbered with a complex mix of disparate planning systems, often consisting of inflexible legacy systems and siloed data sets, stitched together with a myriad of offline spreadsheets. As a result, people across the same organisation are resigned to working with disconnected tools that preclude being able to work together on business issues; make decisions with full insight of their decisions affect on both other downstream business functions and financial outcomes; or generate the rapid reforecasts needed to constantly realign the business with a sales trajectory outside of previous forecasts. Put simply, they haven’t got the tools for the job. While other parts of the business have used technology to transform their internal business processes, the finance function in pharmaceuticals and life sciences has largely stood still when it comes to enterprise planning.

Connected planning delivers – just like ERP did

Today no company would ever dream of trying to function without an ERP (enterprise resource planning) platform underpinning the entire gamut of business processes from procurement to production, warehousing, sales, customer service and financial management. In many ways a modern connected planning platform, such as that offered by our partner Anaplan, is very similar to an ERP platform in that it joins people from different business functions together with plans and data on a single system, enabling previously disparate planning processes to be unified both with each other, and with financial planning. This gives business managers the deep insight needed to make better informed decisions, with changes made in one domain rippling across the platform in real time, so the business can make a rapid and concerted response to events such as a compound being delayed in clinical trials, or unexpected demand for an already licensed drug due to a localised outbreak of a disease.  

Connected planning in pharmaceuticals

In connected planning, processes are built around external drivers, such as the incidence of a disease, and internal drivers such as productivity ratios, so forecasts can effectively become light-touch and run in real time, rather than batch mode, so that users can iteratively explore how the choices they make impact financial results. That way business managers and FP&A professionals are able to collaborate around a shared set of data, that is always up to date and is held under enterprise level security, so departmental plans can be quickly aligned to address a crisis or exploit an emerging opportunity. What’s more, with Anaplan, FP&A teams can build and amend models themselves, rather than waiting on internal or external IT specialists, so it is imperative that planning platforms are as intuitive and as easy-to-use as consumer apps.

Patient-level forecasting in pharmaceutical FP&A

In the pharmaceutical sector, one of the core drivers that are central to both long-term strategical planning and tactical sales and operational planning, (S&OP), is the number of patients with the therapeutic condition for which a compound is being developed, or is already licensed. Once combined with assumptions about the proportion of available patients that will be prescribed with the drug, the typical dosage regimen and the likely length of treatment, volume forecasts can be generated to feed into demand forecast for manufacturing and supply chain planning. At the same time patient level forecasts can be combined with assumptions about likely pricing agreements to generate both long and short term revenue forecasts, with any changes flowing through connected plans in real-time, so the entire company is working on the very latest data available.

Because plans are underpinned by causal drivers, assumptions can be changed on the fly to explore new scenarios, such as the likely impact that a delay of a major compound gaining registration in a key market has on future cash flow. Or in the short term, a member of the FP&A team who is not necessarily a data scientist could use the powerful analytics built into Anaplan to reshape a forecast uptake curve of a recently launched product, with the system indicating which of a range of different statistical methodologies is the most appropriate to apply.

Numerous pharmaceutical companies around the globe have already connected some of their previously disparate plans and budgets on to Anaplan’s cloud-based planning platform. Next time, we’ll explore exactly how they have benefited, looking in detail at supply chain planning. 

Learn more 

Meanwhile, if you are still grounded in spreadsheets and legacy planning systems, we’ll be happy to talk through your requirements and show you how connected planning on Anaplan’s cloud-based planning platform can be a real tonic for FP&A. 

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Finance FP&A
Francesco D'Aguanno

Francesco D'Aguanno

Co-CEO and responsible for Southern Europe at Profit&. Francesco supports the finance functions of the largest public and private organisation in embracing the digital transformation, by providing a unique mix of managerial accounting skills with the best technologies for Financial Planning and Analysis. After being a Senior Manager for one of the Big Four, Francesco founded Profit& Ltd to promote an organisational culture of profitability and accountability by bringing his experience and achievements to the service of CFOs, Tax Directors and Business Controllers worldwide. He has a MSc in Industrial Management, an MBA and he is a certified Project Management Professional (PMP®).

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