The Growing Impact of CFOs in Biotech Innovation

Welcome back to CFO Weekly, where we're talking with financial leaders about how to build efficiency in their teams, create time for strategy, and ultimately get results with your host, Megan Weis. Let's jump right in.

Megan - 00:00:32: Today my guest is Ozan Pamir. Ozon is the chief financial officer of 180 Life Sciences, a biotechnology company that is focused on inflammatory conditions. Ozon has played a key role in the formation of 180 life sciences as he oversaw the merger of three companies and three research programs in 2019, which laid the foundation for the company's successful listing on NASDAQ. He has managed both the private and public financing rounds for the company during his tenure. He has also acted as CFO and board member to two early-stage biotech companies, OC Life Sciences, and Unify Pharmaceuticals, both preclinical companies focused on autoimmune diseases. Prior to his experience as a CFO, Ozon had a career in investment banking. Throughout his career, he has specialized in helping companies in defining their corporate strategy and executing corporate transactions such as M&As and IPOs. Ozon was previously VP of Investment Banking at a leading Canadian independent investment bank, where he co-founded the origination department, which focused on small and mid-cap financing and advisory mandates. In this role, he advised private and public companies on M&A deals and was the lead banker on more than 30 financings, raising approximately $400 million for various life sciences, technology, and diversified companies, in addition to advising on M&A deals worth over $700 million. Ozan holds an economics and finance degree from McGill University and is a CFA charter holder. Ozan, thank you very much for joining me on today's episode of CFO Weekly.

Ozan - 00:02:15: Thank you for having me, Megan. I'm excited to be here talking to you.

Megan - 00:02:18: Yeah, today we're going to be discussing the role of CFO and looking at the unique challenges of the role within the biotech industry. And I'm really looking forward to learning more about this. So let's get started.

Ozan - 00:02:31: Sounds great. Yeah, I'm looking forward to sharing any insight I can with your listeners.

Megan - 00:02:35: All right. Well, let's start with you as always. So you started out in investment banking before moving into CFO leadership roles in the biotech industry. So can you tell us more about your career path and the key experiences that have helped shape your approach to finance leadership?

Ozan - 00:02:53: Yeah, I'd love to talk about my career path and how I got to my current role as the CFO of a public company. And before I do that, I think it's important to take a step back and outline the beginning of my journey to get a clear picture of what shaped the trajectory of my life. And I'm going to go really far back. And, you know, I was born and raised in Turkey. I moved to Canada to study at McGill University, which is one of the top universities in that country. I studied economics, finance, and political economy. And in order to do so, I left my family, my friends, and my connections behind. And when my career journey began, since I was starting from scratch, when it came to connections, frankly, I did not have the easiest time landing my first investment banking job. So I started working on my CFA designation right away. I even missed my graduation ceremony because of it. I moved to Toronto. I joined the boutique investment banking firm where I stayed for about six or seven months. After that experience, I moved on to a really fast-growing boutique investment bank called AcheLong Partners as a second-year analyst. It was so fast-growing, in fact, that when I joined the firm, we were about 25 people. And by the time I left the company at the end of 2018, it had grown to more than 300 people in the approximately five years I was there. And this was a very unique opportunity where my managing directors involved me in their deals very, very early on. I built great relationships with everyone, including the CEO and the president of the firm, who later on also involved me in some of their own acquisitions for the bank itself. So it was truly a great and unique experience, but it wasn't all that easy. At the time, everyone I knew was targeting to work in Balz Brackets and other larger investment banks. And I definitely felt a little bit like the odd one out working at a smaller firm. And I still joke around with my friends who worked at Balz Brackets about how time-consuming it was to align all these logos on pitch decks. And my side of the story was a little bit different. While we were all focused on aligning logos on pitch decks, I was also getting very heavily involved in deals at the very early stages of my career. In fact, one of my managing directors, who first became my mentor and now a good friend, even made me a point person on some of his smaller deals to give me hands-on experience. And I was only 23 years old. And I'm forever grateful for that experience. It was invaluable in the beginning of my career. And it really, truly shaped my approach to finance leadership. Later on, at that firm, Echelon Partners, I was quickly promoted through the ranks and ended up as VP and the staffer. I went on to build the entire analyst associate pool. I hired all the analysts and associates by the time I left and they all ended up becoming very successful. As VP, I partnered with one of the top equity salespeople we had at the desk. And together we created what we call the origination department. And there we focused on small to mid-cap finance things and M&A deals. Smaller deals can usually be harder to complete as they are riskier and require a lot more due diligence and a lot more legwork to get done. But it's exciting nevertheless, and it turned out to be a great endeavor. So by that time, I was running my own deals, managing three to four analysts. I had my own associate. I had built up the investment banking bullpen. I was still working with the managing directors on their files and supporting them. By the end of my banking career, I was the lead banker on over 30 financings and raised over 400 million for a variety of companies. And I was mostly focused on lab clients and tech industries. All in all, I'd say I had a very unique experience than what you may have here elsewhere. I actually have very fond memories of my IB days. Even if I was pulling in 100, 120 hours a week because I had the great fortune of choosing who I worked with, I was able to hire good, very hardworking people. I'm still friends with them and I formed a very effective team and that really stuck with me. And when I look back, I can see how my managers took a huge chance on me. At that very early time in my career, I was given all these big responsibilities and I wanted to pay that forward. So I took chances on my analysts and associates and paid off every single time. What I mean by that is that it made me truly believe that if someone has the ability to gain new skills and if you can mold someone and they're hungry for learning, hungry to gain new skills, it will pay off to take a chance on that person versus hiring someone who may have a better pedigree but isn't necessarily, doesn't have the same decided to drive as the other person. I worked really, really hard during my banking years to do extra work and I was hungry for more and wanted more deal experience and all of that, I think I had one goal in mind and that was the goal of preparing myself for a future opportunity. And whatever that may be for me, that ended up in me becoming a CFO. And when that opportunity presented itself, I was very confident in my abilities. And confident in myself that I could take on the huge role that I have today. So fast forward to 2018, I started working with the founders of One 8 Live Sciences. When I got there, I had to do exactly what I did at Echelon all over again. Just like I built an effective and high-performing team at Echelon, I had to do that at One 8 Live Sciences. Nevertheless, it was a very challenging transition to go from messing with banking to becoming a CFO on the corporate side. Now I was really rolling up my sleeves for one company versus working with companies on a transactional basis. I had a very front-and-center role in a private merger completed back in 2019. We merged three companies together and moved the company from Canada to the US. I hired an entire accounting team in the US and UK. We took the company through its private financing rounds and eventually took the company public companies here in November 2020. After I joined 180 Life Sciences, the main founder of Behavs Mark Feldman, who is credited for discovering the anti-tainment drug class, has also involved me in some of his other ventures as the CFO of those companies. So I helped him set up those companies, establish accounting infrastructure, take them through their first audits, make introductions to the street, and raise seed funding for those companies. And, you know, however, once 180 Life Sciences went public, it took up most of my time and I had to give up those roles. These are some of the highlights of my career that shaped my approach to finance leadership.

Megan - 00:09:39: What an amazing career you've had to date. Can you talk to us a little bit about 180 Life Sciences and the work that they're doing?

Ozan - 00:09:48: We are a biotech company that's focused on inflammatory conditions. We have three programs, each addressing different inflammatory diseases. First is the anti-TNET platform, which houses our main indication for a disease called Dupu-trans. This is a condition where a nodule forms in the palm of the hand and starts contracting your fingers together slowly. It's also referred to as fibrosis of the hand. Most people have never heard of this disease, but it's so prevalent. I had not heard of this disease until I met one of the life sciences. It affects a shocking 5% of the population of the US in a year. It's a debilitating disease. You can imagine how terrible it would be if you got this fibrotic tissue in the palm of your hand. You can no longer type on your phone, or you can no longer flatten your clothes, or you can't lift weights when you're working out because you can no longer hold the weights. So we did a phase 2b clinical trial on this with some promising results. There are currently no other available treatments in the market for early-stage disease. We also have another clinical trial we're looking to launch soon in a condition called postoperative delirium. This is a condition that many of us may have experienced with a loved one. When an elderly patient goes through an intense surgical procedure, such as a hip replacement or cabbage procedure, they sometimes come out of it not fully mentally there, and it's really awful to see. Initially, everyone thought that this was caused by anesthesia. However, based on our research, we found out that the body produces TNF proteins during intense surgery, and the anti-TNF therapy we have may be used to prevent this awful condition. We have a second platform that is focused on synthetic cannabinoid analogs, however, we will look at utilizing the anti-inflammatory properties of unique CBD compounds. We're about to launch a study on this to test the viability of CBD in a unique patented pill form, which we think may be significantly more bioavailable than the plant-based CBD that's currently on the market. Within the CBD platform, we're going to look at pain, inflammation, weight loss, and obesity. We have some other pre-clinical stage indications that are in the robots pipeline, we don't need to get into that now, but I also want to highlight some of the unique characteristics of our company so the listeners can get a better understanding of who we are. So first, I think I may have mentioned earlier, one of our founders, Chris is our founder and our leadership team, and one of our founders is the scientist who discovered anti-TNF therapy. So this is a drug class that is the largest in the world, that makes about $40 billion a year, it has some blockbuster drugs you may have heard of, like Remicade and Humira, but this kind of expertise in-house, it gives us a very good competitive advantage. The second one is that the clinical trials under our anti-TNF platform have been primarily funded by grants to date. This has created a very cash-efficient organization, and that's one of your life sciences in a nutshell.

Megan - 00:12:58: Thank you for that. It sounds like you guys are doing some very important work. So what is it that you specifically enjoy about working within the biotech industry?

Ozan - 00:13:08: That's a good question. What I have always loved about the biotech industry is that I always love to surround myself with people who are smarter than me. And when you're dealing with scientists who have incredible pedigrees and they're trying to bring very helpful therapies to market for unmet medical needs being a part of that and being surrounded by people with such pride has been the main motivator for me.

Megan - 00:13:37: I can imagine there's quite a bit of brain power at 180 Life Sciences. Yeah. So as CFO, are there challenges that you feel are specific to the biotech industry?

Ozan - 00:13:49: Yeah, there's definitely a few. One challenge that we're facing is that there are more biotech companies than ever in the market. There has been a flood of biotech companies in the last 10 years, perhaps. And we are all competing to garner the attention of the same investors. This has created an incredibly competitive fundraising landscape, particularly for small-cap companies. As a small-cap company, as is typical for small-cap biotech companies, we are pre-revenue and dependent on outside capital. So to maneuver this challenge, as the CFO, I have to actively explore diverse funding sources, ranging from traditional equity financing to grants to strategic partnerships and tax credits. The second unique challenge we face is that the whole industry is subject to a very long and difficult path to getting a drug commercialized. And it's astonishing how long it is between all of the clinical trials that a company needs to run and getting regulatory approvals in different markets. It can take over 10 years for a drug to go from phase one to commercialization. There's no other industry that I know of that has to face this kind of dynamic of being free revenue depending on outside capital for that long. And 10-plus years is a very, very long cycle.

Megan - 00:15:08: You're supposed to be a very good storyteller. So when you started at 180 Life Sciences, how did you immerse yourself in the business to really get a feeling for what the story was?

Ozan - 00:15:24: That's a good question because I think it's very important to immerse yourself in the business that you're in. The first thing that I did was ask the leadership team to present to me the way they would present to investors. And when you do that, you kind of get a very good understanding of how the story is being told and what can be improved. Coming from an investment banking background, all I did was do due diligence on companies and see where the gaps in the story were, see what could be improved, and see what works and put that in a cohesive package for anyone outside looking in could understand. So doing that kind of due diligence, just you've got to get people to repeat the information to you as many times as you possibly can to get it really right in your head.

Megan - 00:16:16: And what qualities do you think are necessary for a successful CFO? And what does the profile of a modern CFO look like?

Ozan - 00:16:25: So the CFO role traditionally in the past was focused a lot more on finance and accounting, but it has evolved to include strategic leadership, effective communication and collaboration skills, and having the ability to synthesize and utilize data. So the success of the CFO in my mind is measured both in internal facing and external facing matters. After all, you are in charge of all accounting and finance functions internally, but you also now have to be an upspoken representative of the company externally. Having the financial expertise and the ability to understand complex financial data and analyze trends is key to the CFO role. The modern CFO I think also is a strategic partner to the company. You contribute to the business on a continuous basis. CFOs are now key decision makers in any financial and strategic move the company makes, whether that's a licensing deal in the case of biotech to mergers and acquisitions, or any kind of financing efforts. In many instances, as it is with me, the CFO is also in charge of many other functions. In my case, I'm in charge of HR, IT, PR, and IR functions, especially smaller companies. The CFO ends up wearing multiple hats and has very broad responsibilities. So you have to have these skills to manage these various departments. And I think you also because especially speaking for biotech, since it's a very capital-intensive industry, as a CFO, you also need to stay on top of capital markets at all times. You need to build strong relationships with Wall Street, work with equity research analysts, and always explore potential opportunities. And it's also key to have relationships with multiple banks throughout to help the company in its growth trajectory. What that means is that for every market cap of a company, there's a corresponding investment bank and an investor type. And you're going to want to move up the food chain as you're growing the company and expand your institutional shareholder base and get better institutional shareholders as you move forward as well.

Megan - 00:18:37: And when you're hiring for your own team, what qualities are important to you in general, and then specifically to thrive within biotech?

Ozan - 00:18:47: I look for a few things. As I mentioned before, the drive that people have is, I think, of utmost importance. I mean, you need to have people who are hungry to learn, and who want to take on more responsibility as they move forward. They obviously need to have a good education. But you know, that cultural fit of accountability is the most important thing. And doing background checks on people, and getting references is very, very important in that process as well to get a real understanding of who this person really is. Obviously, they need to have a good pedigree and education as well and pass, you know, relevant experience.

Megan - 00:19:30: And as a CFO, how closely do you get to work with the scientific teams?

Ozan - 00:19:35: The short answer is that we are in complete sync. I work extremely closely with our scientific team. The current environment requires us to be very mindful of our cash burn and requires a significant amount of collaboration between the scientific team and the finance team. Not every member of the team may be aware of the financial restrictions that the company is facing. And there are competing needs between different scientific programs as well. So we try to have a very collaborative environment throughout the company. For example, you know, we, during our annual budget process and the following periodic reviews, the scientific team gets heavily involved as it's crucial for, I think, the finance team to have a clear and in-depth understanding of science while we are also ensuring the needs of the scientific team are met. And I think also the involvement of the scientific team in these strategic planning sessions demonstrates that their contributions are incredibly important. And, you know, people, their needs are being heard.

Megan - 00:20:39: How do you create a culture that promotes creativity and innovation, which I'm certain is very important within biotech, and also an environment in which people feel safe to try new things and fail?

Ozan - 00:20:54: It's really good because it really reminds me of, I'm not sure if you've heard, I think it's Reed Hastings, Netflix culture. I have really been inspired by that book and I recommend everyone to read that. It's called No Rules Rules. Failing and having that culture of appreciating that things may not go the way you want is very important, especially in an industry like ours, because whether that be in science or somewhere else, we're going to have instances where we may not get it right 100 percent of the time and that's OK. And you just have to have backup plans and you have to have contingency plans and you have to have good communication of the situation. In our case, we're a public company, so you have to have good communication of everything that's happening in the company on a timely basis to your shareholders. And I think communicating, you know, all of those things that I mentioned, that's okay for that to happen is very important in fostering that kind of creative culture.

Megan - 00:21:58: And can you share some of your experiences of equity deals, raising capital, and managing investor relations and some of the lessons that you've learned along the way?

Ozan - 00:22:09: Yeah, for sure. That has been my whole career pretty much. I don't have an accounting background like many of my peer CFOs, but at the investment banking firm that I worked at, in my career, I was part of a vastly diverse set of deals. These ranged from San Diego Digit Equity Financing to $50 million raises. I raised capital using any structure you can think of under the sun and even came up with some of the structures. We raised plain equity, preferred equity, convertible debt, and different kinds of debt facilities. One of the more memorable deals that I worked on at that firm was a private company financing for a tech company with proprietary technology and they had really good market clients. We raised about $12 million for the company privately and our goal was to get the company funded to hit some milestones. And then we want to lead their IPO. Because we were a smaller and more of an up-and-coming bank, they decided to go with one of our larger, more established competitors for their IPO, even though we had already lined up their investors. Against all our advice they're going to hand with our competitor, they eventually had to pull the plug on their IPO, and they had a failed IPO. And that really stuck with me because I think it's always important for companies to consider the question, you know, do I want to work with the A team at the smaller, more specialized bank or the B or the C team at the larger bank? And in my mind, the answer is almost always the former. And that's when it occurred to me how important it is to have a finance leader who is able to execute these kinds of transactions swiftly. And I talked to myself, you know, I've done so many of these transactions and I know what works and what doesn't work. And if I were that company's CFO, I would have done things a little differently and realized that, you know, maybe one day I should and here we are. At 180 Life Sciences, we went through a private merger in 2019, where three companies and research programs combined under one umbrella. It was a very complex transaction and we merged companies and we merged a company in the UK with a US company, with an Israeli company, and it was a very complex transaction and while there were many factors important to the success of that merger, I found that the investor relations and getting the support of key investors we had behind the deal were crucial. In that process, I led the communications for this and, you know, with both the old and the new investors throughout the merger process, and I found that, you know, clear and transparent communications with those investors was vital to get their support and be very able to raise capital in connection with that merger. And that goes to show how important it is to get the message out there.

Megan - 00:24:54: Sounds like you've learned some really great lessons. So what advice can you offer for other CFOs out there on how to prepare for and manage during difficult economic times?

Ozan - 00:25:07: First of all, I think you need to have a long enough runway to whether to start. That's number one. We're going through one of the hardest cycles right now. We don't know how long it's going to last for. Make sure you have contingency plans in place. In case you need to cut costs, you need to develop a financial model with multiple scenarios and you've got to stress test them. Second is keeping lines of communication open with your investors and your lenders, providing them updates on the organization's financial health and plans. In the meantime, explore potential credit lines or other financing options to ensure access to capital if you need it. And I find that cash flow management is key in its forward split to the forefront of everyone's mind. You know, you need to review and revise your budgets as you go forward, can review capital expenditures as needed, and just wait for things to actually get worse. And, you know, as mentioned before, wearing multiple hats, I think, is very important. Most CFOs can learn the skills and take on additional roles practically to have, you know, IT, HR, and other functions reported to them. You can also see this as an opportunity. Companies are always going to have some challenging times, and the economy is always going to go through some downturns. And it's these moments where you need skillful and resilient executives and team members. And, you know, for fellow biotech CFOs, you need to work closely with the scientific team to help get an understanding of their needs and align it with the broader business. So you need to be, you know, in full sync with your priorities and milestones.

Megan - 00:26:45: And you're no stranger to periods of high growth. So how can a CFO ensure that the finance function is agile and adaptable?

Ozan - 00:26:54: Yeah, that's very crucial for every organization that finds its function to remain agile and adaptable. The first thing that comes to my mind is that you have to invest in robust digital infrastructure, which means modern financial reporting systems, data analytics tools, and automating tasks that you can automate within reason. And I know the cost of automation can also sometimes get out of control. There are so many different software out there and implementing software is not cheap. But, you know, just focus on the pain points of the finance function and address those first and see what you can achieve in that way. This will help you stay ahead of the game. And there's been a real push in this area, especially after the COVID pandemic, and everyone has been focusing on this. Secondly, going back to one of the previous points I made, fostering collaboration between the finance and other departments to share insights is key. I find that having regular meetings with teams outside the finance function is very important. And, you know, similar to what I mentioned before, the budget process, we involve scientific teams in that every year and keep them updated at regular intervals. This transparency allows for the scientific team to have a good understanding of the company's finances and at the same time, you know, their priorities may change. So we need to be reflecting all of those changes in the financial forecasts. And, you know, these forecasts do need to be, I think, rolling forecasts. You've got updated on real-time information and changing circumstances as you go forward.

Megan - 00:28:29: And what advice would you give to a CFO just starting out in their career?

Ozan - 00:28:34: This goes back to one of the points you mentioned, you need to learn the business you're working with inside and out, take the time to understand the industry, general business, unique trends, customers, and in our case, the patients and your competitors. Getting to know the people you're working with at your company as well is very important. All of these will allow you to be an outspoken representative and an advocate for the company, both inside and outside. Additionally, the adage of you are who you surround yourself with is true in your role as a CFO too. You need to form a very high-performing team around you, which is only going to make your organization better in your life easier. You know, this sometimes may result in hard decisions as you may need to let some people go, but I can't stress enough how important it is to have a capable and motivated team. In addition to that, you know, in your personal life too, I find that surrounding yourself with people who have achieved the CFO title and other peer CFOs, announcing ideas off of those communities is very, very important. And there are some out there that I belong to and I find it incredibly useful.

Megan - 00:29:46: And what about a CFO who's thinking about making a move specifically into life sciences? Any advice for them?

Ozan - 00:29:54: Assuming that you're a seasoned CFO, you have some CFO experience already, you have very, just keep in mind, that you have a very transferable skill set. Even if you're coming from outside the life science industry, your expertise and financial leadership experience are very valuable. On the other hand, you have to keep in mind that this industry requires a completely different mindset. While in many industries, other industries, the product development cycles can be relatively quick. In life sciences, it takes years and years to realize ROI. You need to really focus on long-term value creation and be patient. And the other thing to focus on is getting familiar with the regulatory framework in the life sciences, which is very different than others. Developing a strong understanding of FDA regulations or the processes of other regulatory bodies is key to understanding the business you're in so that you can speak the same language as everyone else. Lastly, life sciences is a very capital-intensive industry, so you need to develop really strong relationships with Wall Street, as you're going to be constantly in capital-raising mode.

Megan - 00:31:02: And last question for you, what is keeping you up at night these days as you think about the future?

Ozan - 00:31:10: There's a lot there. One of the challenges we're facing right now is, I think, related to the economic developments around the world. As you know, the story in the last couple of years has been that the central banks fight against inflation and we're coming off of a high inflationary environment which resulted in higher interest rates. This ended up hammering our valuations, valuations of innovative companies, and more kind of on the speculative side of the economy, especially in the United States. The United States has seen the impact of biotech have been depressed significantly. You know, many of the public companies are trading below their cash balance, which is crazy. I worry about how long this environment will last, and what the short-term and long-term impact of it will be on the innovative side of the economy. It seems like there's sunlight at the end of the tunnel, but the timing, we just don't know. This is a problem that both tech and biotech companies are facing, I think.

Megan - 00:32:07: Ozan, thank you so much for being my guest today.

Ozan - 00:32:11: Thank you so much, Megan, for having me.

Megan - 00:32:13: I really enjoyed speaking with you and thanks for finding the time to be here with us today to share your experience and knowledge.

Ozan - 00:32:21: Likewise, thank you so much.

Megan - 00:32:23: I wish you and 180 Life Sciences all the best and to all of our listeners. Please tune in next week and until then take care.

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