477: A Blueprint for Corporate Finance Success | Ching Jaw, CFO, Cytokinetics

Listen to the Episode Below (00:37:09)

Trained as an engineer, Cytokinetics CFO Ching Jaw methodically designed a blueprint for an early-career transition to corporate finance to fulfill his desire to more broadly help businesses. The plan, and his execution of it, worked exceedingly well. A former platoon commander in the Taiwanese Army, Jaw earned an MBA in finance and general management from the University of Chicago before taking on finance management roles in Sanofi and the Roche Group. In 2017, Jaw joined Cytokinetics, a late-stage biopharmaceutical company where he has responsibility for all finance operations as well as information technology (IT). One of his first major undertakings at Cytokinetics involved helping his head of IT revamp the technology function, in part by outsourcing a much larger portion of IT activities. The overhaul has enhanced the security, service, and flexibility that the function delivers to the business.

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Guest: Ching Jaw

Company: Cytokinetics | CYTK (NASDAQ)

Headquarters: South San Francisco, CA

Connect: www.cytokinetics.com

CFOTL: Looking back over your career, is there a finance strategic moment that you can share with us?

Jaw: Early in my career, I was the finance person for a very large and very successful R&D organization. That organization had a very large clinical pipeline. I was in charge of the budgeting process. During one of the budget cycles, we had an R&D committee that was stressed about not having enough budget to fund all the programs which they considered critical for patients suffering from diseases we were trying to address. The prospect of having to trade off one program for another for budget constraint reasons was very upsetting for all of them. And I was tasked to come up with a solution.

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What I did there was to comb through the company’s history of R&D spending. I came to the conclusion that we had not been able to spend more than 90% of the allocated R&D budget for the previous seven years leading up to that point due to a variety of reasons. For example, we might have had late starts to trials. We might have had patient enrollment delays, we might had have drug supply issues or delayed FDA interactions.

Based on that data, I proposed that we overallocate the budget by 10% to enable funding of all those critical programs, and we planned for a 10% … I want to call it a “budget under-run.” But we also put together processes whereby we managed this carefully during the year to ensure that we could trigger course corrections if it looked like the budget was going to go astray. I was confident based on historical data that this approach could work. And it did.

After that year, this technique became a standard budgeting technique. By the way, when I said 10%, the budget at the time was $3 billion. So 10% represents a $300 million additional opportunity for the business to reinvest.