Compliance as a catalyst: why life sciences CFOs must be SOX ready

For ambitious life sciences start-ups and scale-ups, growth is often measured in funding rounds and clinical milestones. Yet when the next goal is an IPO or acquisition, SOX compliance can determine how credible a company appears to investors and regulators.

Originally introduced to rebuild trust in financial reporting, the Sarbanes–Oxley Act (SOX) has become a global benchmark for governance and transparency in listed businesses. 

For private firms pursuing rapid growth, establishing SOX-level discipline early signals maturity and readiness for scrutiny, reassuring both investors and regulators that growth is controlled and transparent.

Investor scrutiny is rising

Life sciences companies operate at the intersection of innovation and regulation. It is capital-intensive and exposed to strict compliance demands, which puts the onus on scaling companies to have their house in order as the industry is consolidating. 

In 2025, global pharmaceutical groups continued to pursue strategic acquisitions to strengthen pipelines and secure new technologies. Johnson & Johnson’s USD 14.6 billion purchase of Intra-Cellular Therapies and Merck’s USD 10 billion acquisition of Verona Pharma reflect that trend. 

These deals signal opportunity. But they also signal competition. In an active market, robust financial control has become a direct measure of organisational credibility. 

CFOs and boards that invest in audit readiness can act faster, close deals smoothly and secure stronger valuations. 

Ready for the exit ramp

Whether the next milestone is an IPO, a sale or a major investment, success depends on confidence in financial information. Even when SOX compliance is not legally required, it is often the standard investors and acquirers expect.

For IPO candidates, SOX readiness demonstrates maturity to regulators and investors. Strong controls shorten preparation and reduce valuation risk. Institutional investors assess governance alongside growth potential. Well-tested controls signal strong management and discipline.

For companies not yet preparing to list, SOX readiness can still serve as proof of operational maturity, particularly when potential buyers or investors circle. It signals that financial data, systems and governance can withstand inspection, reducing perceived risk and supporting higher valuations.

Every deal carries integration risk. During due diligence, acquirers look beyond innovation to the strength of a target’s controls. Private life sciences businesses that have never been subject to SOX often reveal material weaknesses such as undocumented processes, incomplete audit trails or poor segregation of duties. Such weaknesses delay or devalue deals. 

After completion, integration introduces further risk: merging ERP and accounting systems, reconciling data and preserving audit evidence. Data migration errors, control breakdowns or unclear audit trails can quickly compromise reporting integrity and delay consolidation. Addressing these risks in advance gives acquirers greater assurance and reduces integration costs.

Companies that already align their systems and processes with SOX standards are easier to integrate and inspire greater buyer confidence. Early involvement of internal audit during pre-deal preparation can identify control gaps and streamline due diligence responses, accelerating completion.

How internal audit balances ambition and assurance

Early engagement enables leadership teams to identify weaknesses, design practical fixes and produce evidence that stands up to scrutiny. 

Typical maturity gaps include control design and operation, Information Produced by the Entity (IPE), IT-system validation and segregation of duties. Recognising and addressing these early can prevent issues from surfacing under investor or auditor review.

Strengthen financial control design

Life sciences companies face complex accounting requirements. Clinical trials can involve multiple partners, staggered milestones and large-scale R&D investment. Common challenges include:

• Accruals for R&D expenditure, where inconsistent recognition distorts results.
• Capitalisation of development costs, which affects reported profitability.
• Valuation of intangible assets, such as patents and licences.

Revenue recognition adds further difficulty. Many early-stage businesses depend on licensing and collaboration income, which creates varied recognition points and disclosure needs.

Internal audit helps map these processes, define control ownership and ensure IPE evidence is reliable. The outcome is consistent, defensible reporting and fewer late-stage surprises.

Designing controls is only part of readiness; consistent operation builds credibility. Internal auditors check whether reconciliations occur on time, sign-offs are recorded and system changes are approved. Regular testing proves discipline, while clear ownership embeds accountability.

Enhance IT and systems resilience

Financial integrity depends on secure IT systems. As organisations expand, access permissions multiply and segregation-of-duties conflicts can emerge. Internal audit reviews access governance, change control and data integrity across ERP, finance and clinical-trial systems.

Adopting software-as-a-service (SaaS) platforms can simplify compliance. Such platforms typically include validated environments, automatic updates and documentation. They clarify who can view or modify data—a core SOX requirement.

Automation further improves assurance. Continuous testing and exception alerts flag issues quickly, reduce manual effort and create a clear audit trail. Automated control-testing tools reduce manual workloads and provide real-time exception alerts on access management and other key controls, helping leadership maintain visibility as the business scales.

A 12-month roadmap to readiness

Achieving SOX readiness typically takes around a year. A phased programme helps maintain focus:

• Months 0–2: Assess: conduct a risk-assessment workshop and update the internal audit charter.
• Months 3–5: Design: build proportionate controls prioritised by reporting and operational risk.
• Months 6–8: Test: perform effectiveness testing, log findings and refine documentation.
• Months 9–10: Optimise: remediate weaknesses and train control owners.
• Months 11–12: Ready: run a dry audit with external reviewers and activate continuous monitoring.

How Grant Thornton can help

Life sciences companies need a partner that understands their commercial and regulatory context.

Grant Thornton’s internal-audit and SOX specialists bring deep sector experience, combining technical expertise with practical insight. We have supported life sciences clients worldwide through IPOs, acquisitions and transformations, helping them embed the governance structures investors expect.

Grant Thornton’s SOX compliance approach follows a four-phase model designed for resource-tight scale-ups:

1. Assess – evaluate risks and define the programme scope.
2. Design – develop pragmatic controls aligned with financial-reporting priorities.
3. Test – verify effectiveness and document evidence.
4. Optimise – implement remediation and continuous-improvement actions.

Our SOX compliance framework integrates proven methodology with a complete risk-and-control library, documentation templates and a delivery model tailored to resource-tight scale-ups.

To learn how early SOX readiness can strengthen valuation and accelerate opportunity, contact our internal audit specialists.

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