Right on the Money: More Insights into Alliance Financial Literacy

Is financial literacy, the art of understanding the basics of stock prices, total addressable market (TAM), annual reports, earnings calls, and the like a neglected part of alliance management? According to ASAP’s esteemed senior editorial consultant Michael J. Burke, the answer is a resounding no. Burke learned this firsthand over the course of putting together our Q1 2024 Strategic Alliance Quarterly cover story, “Do the Dollars Make $ense?” His conclusion from those conversations: “It is something that has to be on every alliance professional’s radar.”

Burke made this assertion as he kicked off ASAP’s latest webinar, “Money Matters: Making Sense of Alliance Finances,” earlier this month. The event provided new angles, new issues, and even a new voice that didn’t appear, or was only partially covered, in the Strategic Alliance Quarterly piece and its companion article, “True Detectives,” which appeared in the March 2024 issue of  Strategic Alliance Monthly. 

Strategic Sleuthing: Operational Finance and the Underlying Picture

To set the stage for the discussion, the two subject matter experts taking part in this discussion being moderated by Burke laid out two broad categories of financial aspects alliance managers need to grasp: 1) monitoring whether basic payments are being made, cash flow is fluid, and financial-related contractual obligations are being met—“tactical/operational finance,” as Bob Thompson, vice president of data strategy and channels at saleSEER, put it—and 2) deciphering your partner’s true economic and financial health. 

The latter requires a little sleuthing. The best alliance managers can connect dots born from certain surface-level facts, figures, and developments and come up with a vivid picture of a partner’s underlying monetary standing and viability. Thompson, who wasn’t interviewed for the aforementioned Strategic Alliance Quarterly and Strategic Alliance Monthly features, reiterated some of the well-known clues that were covered in those pieces.

“Are they having an up or down quarter based on publicly available information? Is their stock price going up and down? Are they laying people off? Are they hiring people?” he said. “Are they divesting in some of the types of partner activities? In that case, what’s the rationale behind that? Is it due to financial concerns? Is it across-the-board budgetary issues?”

Creative Nuggets Help Make Connections 

And while one interviewee revealed in “True Detectives” that she made it a practice to gauge partners’ priorities by ascertaining what positions they were hiring for from their websites, Thompson took it one step further. He confessed that he now turns to LinkedIn, in addition to the partner website, for a host of information about the company beyond recruitment trends. “Is [the number of employees] rising? Are they  getting investment from private equity? Are they expanding their market presence [by] announcing new products?”

“Get a little bit creative,” he advised. “You’d be surprised at the nuggets of information you can come up with.” 

Peel Back, Pare Down, and Scale Up

The truth is, the right conclusion isn’t always the most obvious one. Is a press release announcing 1,000 layoffs at the partner organization a harbinger of instability for your partnership? Not necessarily. It could be a gambit to free up additional resources to scale up your partnership.

“You have to learn to peel that back and understand what areas of business that is coming out of. Is there investment being made in the partner organization to expand revenue opportunities while paring down in other parts [of the organization]?” said Thompson. 

Get Out in Front of Your Financial Impact on the Partner…

One topic that came up during the webinar that wasn’t part of the discourse in the print pieces was the impact developments within your own organization might have on your partners. For example, acquisitions by your company “could have financial implications on [the partner’s] stock price and the kinds of questions that [it will] have to answer from analysts,” noted Nancy Griffin, CSAP, principal of Cairn Consulting, a biopharma alliance veteran who was interviewed for the two magazine articles. 

In this instance, it’s imperative that alliance managers “sensitize our leadership” to the effects this transaction can have on the partner, said Griffin. Senior leaders should reach out to the partner counterpart to explain the rationale for the purchase and assure them that it doesn’t affect the company’s commitment to the collaboration. 

“Those are things that you can get out in front of. That goes a long way in establishing trust,” said Griffin. 

… And the Collaboration’s Impact on the Partner’s Balance Sheet

Thompson brought up another new dimension to the conversation. He urged listeners to “become financially literate on your partner.” That means quantifying how much a joint offering will juice their balance sheet as much as your company’s, even if it’s just a ballpark figure. 

“Here are all of the things that you are going to get from a financial perspective if we move forward with this,” said Thompson. “You have to demonstrate that you are interested in their part of the equation, and how that is going to positively affect the partnership and their company overall.”

What’s in a Relationship? Financial Success—or Ruin

An interesting discussion was later sparked by a listener who asked whether a hyper focus on the financial piece might lead the partners to ignore relationship issues that could derail the alliance. Both subject matter experts agreed that the financial and relationship components aren’t necessarily independent of each other.  

“It is all so interconnected,” said Griffin. 

Thompson noted that the operational aspects largely determine the financial contributions of a partner. He said that, among other things, organizations look for “companies that are easier to do business with.”

“It just gets harder if you’re not making an effort to smooth out the operational aspects,” he continued. “Are we getting complaints from field saying, ‘This is too hard’?” If so, this field friction is likely preventing the partners from realizing revenue.   

Weathering Storms: Geopolitical Effects on Your Balance Sheet

Another question from the audience about how government decisions to reduce prices of certain drugs in some countries could impact the finances of a collaboration took the discussion along an interesting path. 

“Government, politics, payors, access [are] all huge aspects of the landscape, and as the landscape changes and evolves, it has a big impact on your partner and ourselves,” said Griffin.  

And while we usually talk about geopolitical strife in the context of risk management, both panelists acknowledged that actions by nation-states—say, Russia’s invasion of the Ukraine, for example—should also be a part of the financial literacy discussion. If a supplier can no longer do business in Eastern Europe, it has different ramifications for smaller and larger companies. Griffin noted that Big Pharma is “able to weather the storms [created by] the fluctuation in the marketplace and the suppliers” thanks to built-in “backup strategies and multiple redundancies,” a luxury emerging companies don’t enjoy. Simply put, “the stakes are higher” for smaller entities who have all of their eggs in that manufacturing basket. 

Griffin and Thompson covered so much more ground during “Money Matters: Making Sense of Alliance Finances.” Retrieve the recording from the ASAP Content Hub to hear how the alliance manager’s understanding of the contract helps guide how to act on clues around the partner’s financial situation, what to do if you suspect a partner will soon be short on funds, and why it’s important to know whether your CEO is more focused on topline revenue or profit margin.