Zhang Xinru speaks during a sharing session of the China CFO Salon. (PROVIDED TO CHINA DAILY)

“The working environment in corporations is vastly different from that in ‘Big Four’,” Zhang Xinru, the speaker of the ninth sharing event of the second season the China CFO Salon, stated. “When I first started working in corporations, I encountered obstacles while my mentor told me that the most important thing to be a financial executive in a corporation is to uphold principles, stick to your heart and professional ethics.”

Zhang strongly agrees.

Zhang believes that an effective senior financial executive of a biotech company should have the following four characteristics: in-depth understanding of the company's business, strong communication skills, excellent team management skills, and efforts to adapt to the ever-changing complex environment

Zhang believes that an effective senior financial executive of a biotech company should have the following four characteristics: in-depth understanding of the company's business, strong communication skills, excellent team management skills, and efforts to adapt to the ever-changing complex environment.

"Financial management in biotech startups seems like a blank canvas, offering me a wide expanse for creativity." Zhang shared her observation based on experiences of working with three leading biotech companies.

Professional Experience

After graduating from college, Zhang joined PricewaterhouseCoopers, where she worked in the assurance department for nearly five years. Her duties at PwC primarily evolved in providing professional services in areas such as audit and internal controls for listed and multinational companies. Her tenure at one of the "Big Four" firms not only honed her professional qualifications but also cultivated excellent work habits. The "Big Four" served as her guiding light upon entering the workforce, laying a solid foundation for her subsequent development. As Zhang entered her fourth year at the "Big Four," she began to contemplate her future career path. She made the choice to transition from accounting firm to the biotechnology industry, embarking on a path of transformation.

Zhang's first role in the biotechnology sector was to work as a financial executive at Boyalife Stem Cell Group, an innovative company specializing in stem cell storage and research applications. Here, she gradually took on responsibilities for various financial tasks, ranging from financial reporting to budget management, cost control to capital market operation, particularly in initial public offerings, financing, and mergers and acquisitions. During her tenure, she managed to complete a significant asset restructuring with an A-share listed company, evolving from a "Big Four" auditor to a CFO of a corporation.

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After leaving Boyalife Stem Cell Group, Zhang sequentially joined biotech startups in the field of cell therapy, gene therapy, and other subdivisions of biopharmaceuticals. These experiences allowed her to further solidify and expand her career transformation and advancement. The fields of cell therapy and gene therapy demand a higher level of understanding from financial management professionals in terms of R&D and clinical operations.

In such biotechnology companies, Zhang found herself interacting with professionals holding doctoral degrees on a regular basis. Communicating across departments with research and development, Clinical, Quality, and others, she encountered a plethora of specialized terminology and jargon. Without an understanding of pipeline layout, process flows, and industry standards, internal collaboration with technical departments would be hindered, and external communication with investors, banks, and government institutions would be challenging.

Zhang Xinru speaks during a sharing session of the China CFO Salon. (PROVIDED TO CHINA DAILY)

During this phase, Zhang's focus shifted from the realm of financial expertise to the business domain. She delved into clinical protocols, production processes, factory construction, and GMP regulations. By broadening her knowledge across industries, she enhanced her comprehensive financial management capabilities, with the focus on the integration of business and finance.

In October 2021, Zhang joined WestVac Biopharma, an innovative biopharmaceutical enterprise integrating vaccine R&D, production and sales. At WestVac, she acted as CFO in charge of the company's financial strategic planning, internal control and compliance, capital operation and tax planning, as well as coordinating the company's IPO preparation, investment and financing. Zhang has entered into the industry of vaccines, a completely fresh area for her, and started a new round of learning and growth, and moved forward steadily on her path of career development.

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Over the past decade of her professional transformation journey, Zhang has gained a wealth of insights. She admits that the working environment in corporations is significantly different from that of accounting firms, and the working style of the "Big Four" is entirely incompatible within a corporate setting. As a result, she encountered numerous obstacles in the early stages of her profession with corporations. However, guidance from a senior industry figure remains etched in her memory to this day: for financial executives in a corporation, the most crucial aspect is to uphold principles, cherishing their integrity and staying true to their initial aspirations. When navigating at ambiguous territories, the professional integrity of financial executives becomes especially paramount.

How to excel in corporate financial management

In the process of transformation for sustainable career advancement, how to excel in corporate financial management? Zhang gives four suggestions.

First and foremost, financial executives must delve deep into the company's operations, especially within biotech companies. Upon entering the company, financial executives can engage in immersive discussions with heads of technical departments such as research and development, clinical, manufacturing, quality control, etc. This allows for an in-depth understanding of the company's operations, including research pipelines, clinical schedules, production processes, and quality systems. Such comprehension will assist financial executives in conducting more effective communication with these technical departments in their day-to-day management.

Secondly, financial executives need to possess strong communication skills. Communication in a corporation takes place at different levels: it involves communicating upwards, horizontally across departments, and extensively within the department itself. Effective communication helps the finance department implement regulations and procedures more smoothly. For instance, in the biopharmaceutical industry, founding teams often comprise of individuals with technical backgrounds, who may initially have limited understanding of formal financial management frameworks. In such cases, financial executives need to engage in thorough communication with superiors to gain their understanding and support. When faced with obstacles in implementing regulations and procedures, financial executives also need to communicate with respective department heads with clear understanding of their difficulties and concerns in order to find solutions.

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Thirdly, financial executives should possess excellent team management skills. It is impossible to accomplish tasks relying solely on individual efforts. As a result, a CFO needs to rely on the entire team to achieve financial management objectives. A CFO should prioritize building a talent pipeline from junior finance staff to mid-level and senior financial managers, providing targeted training for individuals with different traits of the team. In day-to-day operations, a CFO should also empower team members with full authority and trust. Once this trust relationship is established, the entire team can work together efficiently as a team.

Fourthly, financial executives must actively enhance their capabilities and strive to adapt to the constantly changing complex environment. They should maintain strong learning abilities over the long term, acquiring new knowledge based on actual needs of a corporation. Some accumulated knowledge might not find immediate application, but it will undoubtedly prove valuable in the long-term.

Zhang serves as an example. After joining the company, when the company was preparing for an IPO, the choice of listing location could be domestic, in Hong Kong, or in the United States. Relying solely on past knowledge was insufficient to meet the demands. Therefore, after obtaining her Certified Public Accountant license in China, Zhang went on to obtain licenses of AICPA and CPA Australia. By enhancing her professional qualifications, she was better equipped to meet the company's needs.

Zhang believes that financial management in Biotech startups is like a blank canvas, offering her a wide expanse for creativity. On this platform, she can implement her ideas and gradually construct the entire financial management framework. Throughout this process, she has gained a sense of professional accomplishment that is often hard to obtain in large accounting firms.

Question 1: How to rationalize the capital structure of equity and bond financing for early-stage start-up tech companies that have a small scale of short-term operating cash flow but require significant fixed asset investment?

Zhang believes that it’s unnecessary to be too reluctant to introduce debt financing in the early stages of a company's development, since equity financing is more costly than debt financing. Some companies will not only raise capital and form equity through equity, but also actively use banks to provide some capital through debt finance. Early-stage start-ups can leverage both equity finance and debt finance instruments based on specific financing needs and business structure.

Question 2: We are working on a financial transformation project for a listed pharmaceutical company. The project brings a difficult budget control: it has a large scale of various types of drugs, and the current cost is unable to carry out in-process revenue forecasting and department-specific budget control. There are therefore two questions: How can cost accounting be more accurate? How to do the overall budget and process control based on a more scientific and effective forecast?

Zhang shared a case study she had before. A company wanted to control costs, but didn't know how to do so because of the obstacles in revenue prediction. Her team came up with a way: to sign a task agreement with each sales leader at the end of the year to determine the performance targets for every product pipeline for the coming year, rolling to do a quarterly review with the year's revenues as a benchmark. The performance acts as a prerequisite for the next quarter to give the budgeted financial resources, which means that the better the previous performance, the more quota will be available for the next quarter, creating a virtuous cycle by which the team is motivated to create performance while controlling costs. If the performance in the last quarter is not good, while there are activities that must be carried out next month, additional budget application and approval process are required.

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The way of budget management depends on the scale of the company. If the company is not large, offline management could act as a way of efficient management. Group enterprises with large business operations can choose to establish digital management system.

Question 3: Pharmaceutical industry is characterized by rapid development and competition environment. From a financial point of view, what are the key points in establishing effective short-term and medium-term comprehensive capital and financial planning under such environment?

Zhang shared a view that capital planning and budget management should be deliberated jointly. A company's expected future capital needs are identified through annual budget plan. Then the company need to take into account of possible future capital inflows for a preliminary capital planning. It is therefore of great importance for a Biotech Company to prepare annual budget every year.

With the finalized annual budget, monthly and quarterly rolling review is required to monitor the implementation of budget and to analyze the deviation from actual expenditure, which is conducive to identify problems and risks in advance, giving early warning to management for them to respond timely. In such a way, a company can flexibly adjust or refine its financial and capital plan according to changing business environment.