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| INDUSTRY WHITEPAPERS

Biotech is both a high-growth and high-risk industry. In this field, success strongly relies on the science behind every concept that a company strives to make a reality. One of the main challenges in biotech is that the outcome of any long-term R&D project heavily depends on time-sensitive experiments that can sometimes cost a little fortune each.

A great idea and quality science are essential for success in biotech, but proper management of time and costs can make the difference between a product reaching the market or being abandoned during development. So it’s never too early for a company to start worrying about finance and maximize the possibilities of its ideas coming to life.

In fact, monitoring and controlling R&D expenses can bring benefits from the very early proof-of-concept stage. The high costs, strict regulations and long development periods associated with biotech make a project challenging from the very beginning. Meanwhile, attracting funding that meets the huge demands of research in biology can prove extremely difficult.

Managing the use of limited resources can therefore determine whether a young company can advance through the expensive process of developing a life-changing product. Among the many factors involved in making every step along the way step possible, procurement can have a big influence on the financial health of a company over time.

What are common challenges in biotech procurement?

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What is the role of procurement for biotech companies?

Purchasing is part of the everyday life of R&D staff. Consumables like pipette tips and sterilized containers, as well as a wide array of reagents and cells are used in a daily basis. Having the right compound available at the right time is absolutely necessary to run the experiments that sustain an institution. 

Procurement comprises all the steps involved in a purchase, from the initial selection of items to receiving the final order, updating the inventory and billing the vendor. The process usually involves the integration of multiple orders from different departments and members of staff as well as negotiation with the supplier concerning price and date of delivery.

The purchasing culture of a biotech company determines how purchases are made, which ultimately determines the cost and time of everyday activities. Choosing the right method to monitor and manage purchases can either boost the capabilities of an R&D department or hinder the advance of its project pipeline. The first step towards identifying the best procurement system is knowing what the most pressing challenges in biotech procurement are.

Strong Regulations

Strict guidelines are created to ensure all purchased items comply with the established government regulations. Research departments need to provide detailed reports of their purchase history often, whether for financial audits, government grants or to obtain approval from regulatory agencies.

Since receiving regulatory approval is an indispensable step to launching a product, good management and tracking of the purchase history of a biotech company is absolutely necessary for the success of its projects.

Funding

In biotech, both public and private funding is usually limited, at least in comparison with the extremely high costs associated with R&D. For example, for young companies, the median amount raised in the first financing round of a biotech startups is $10M. As they progress, funding increases; venture capital funds for companies of all stages invest an average $20M in the US and $12M in Europe. Then, there are public grants, which rarely reach the seven digits. As an example, biotech grants from the US Department of Agriculture average $486,385 awarded for a period of 36 months.

At first sight these numbers can look huge, but the reality is that R&D consumes a massive amount of money, time and resources. Developing a drug costs an average of $2.6Bn until its approval, and the probability that a drug entering clinical testing will be approved is only around 10-12%. In the area of medical devices and diagnostics, the cost of bringing a product from concept to the market are much lower. Costs for high risk devices and diagnostic tests can average from $94M and $106M respectively.

It's clear that when developing a drug the optimization of all available resources is an absolute essential.

Lack of visibility of the purchase history

If the numbers and figures that integrate all purchases made, approved and being processed, are not updated, it can be impossible to evaluate how much of the budget has been spent and take measures in time if the costs are running too high. 

When this data is necessary for an audit, this situation turns into spending great amounts of time organizing and processing everything listed in the records. Basically, a company that cannot easily access updated records lacks the knowledge necessary to effectively control purchasing decisions and their outcome. A lack of visibility in procurement can be extremely time-consuming and easily lead to consuming the whole budget before the project is done.

E-Procurement

E-Procurement can significantly reduce the time to process an order from start to end and help keep updated records of everything an organization purchases over time.

The advantages of an e-procurement system are many - but selecting the appropriate tool is key to meeting the specific needs of each company or institution. The wrong system can actually obstruct the purchasing workflow and consume high amounts of time and resources.

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