CITI TTS Healthcare Consumer & Wellness Client Magazine

13 Supercharging HEALTHCARE In the fast-evolving medtech sector, access to working capital is crucial 47% reduction in the volume of manual payments 50% reduction of idle cash balances freeing up capital for their growth strategy In the healthcare sector, time waits for no one. Ostensibly cutting-edge techniques are swiftly superseded by new technologies. New drugs are brought to market at an astonishing pace. And every year brings another leap forward in medtech, be it software- driven diagnostics or data-collecting wearables. In order to keep pace, healthcare companies must be ready to jump onto supply chain challenges, and wield vast R&D budgets. This means ready access to working capital is paramount. The way to achieve this is through automation-enhanced treasury innovation in collaboration with a progressive partner bank. As Ozgur Akdeniz, Citi’s North American Trade Sales Head, puts it: “Citi offers a number of different working capital solutions that are useful to healthcare companies. We help clients reduce their day sales outstanding, which means they get paid faster, and we help push out their days payable outstanding with financing solutions to bridge the gap; both of which improve their cash conversion cycle.’ One example is the corporate pay solution implemented by Citi to streamline travel expenses for Celltrion Healthcare’s sales force across 12 markets, with a remarkable effect on the company’s bottom line. For French pharmaceutical giant Sanofi, sound working capital management was needed to generate the kind of free cash flow it needed to fund a ambitious “play to win” strategy. Working with Citi, its treasury teams focused on improved digitisation and automation to improve Sanofi’s cash conversion cycle, which was reduced by 10 per cent over 12-18 months, representing huge savings for such a large company. Jackson Xu, Sanofi’s Regional Treasurer in Asia, stresses the central role played by automation: ‘We set out to put business priorities first and adopt a ‘day 1 digital’ strategy. This ensured the full benefits of technology were realised.” In the case of American medical device company Medtronic, its Latin American treasury team were facing challenges owed to the decentralised nature of their business model in the region. Working with Citi, the team centralised the regional treasury team, automating processes and creating a cash pooling structure at a shared service centre in Colombia. This led to a 47 per cent reduction in the volume of manual payments, and a 50 per cent reduction of idle cash balances, freeing up capital for their growth strategy. Working capital is also necessary to help healthcare companies negotiate today’s increasingly turbulent global supply chains. Again, innovative treasury solutions are crucial. As Akdeniz explains: ‘Citi’s supply chain finance programme has been used with great success by the healthcare industry. Implementing it helps our large healthcare clients use their access to capital and lower pricing to support their smaller suppliers. It means a client can push out payment terms to improve their own working capital, while still supporting their suppliers, and giving them access to a cheaper source of funding.’ Implementing an innovative automated supply chain program doesn’t just free up capital, however. One of the major trends of the past few years has been their use in helping companies achieve their ESG targets. Large healthcare companies can use supply chain finance to reward their smaller suppliers for launching sustainability or diversity and inclusion initiatives. As Akdeniz notes: ‘We’ve only scratched the surface. There’s a lot of scope for Citi to support our clients’ ESG based supply chains. I’m excited to see where we go in the next two to five years, let alone the next 10.’ We’ve only scratched the surface. There’s a lot of scope for Citi to support our clients’ ESG based supply chains” Ozgur Akdeniz Citi’s North American Trade Sales Head 12 Healthcare, consumer & wellness