Taking a biotech company public requires extensive preparation and careful planning, according to three CEOs who recently completed initial public offerings (IPOs) in a challenging market environment.
Speaking at a recent BIO CEO panel, executives from Septerna, Upstream Bio and Actuate Therapeutics shared insights from their experiences navigating the complex IPO process. While biotech IPO activity showed modest improvement in 2024 with 24 offerings completed, the path remains difficult with most newly public companies trading below their offering prices.
Jeffrey Finer, CEO of Septerna, which raised $288 million in its October IPO, emphasized the importance of early preparation. Despite having a strong cash position in mid-2024, Septerna began laying groundwork for going public in late 2023, conducting full financial audits and engaging advisers approximately 4.5 months before the offering.
Timing emerged as a critical factor, with companies aiming to go public after initiating human trials but before major data readouts. Upstream Bio CEO Rand Sutherland noted investors wanted to see results within 6-12 months post-IPO. Legal experts recommend companies begin preparations about a year ahead to address regulatory requirements and potential obstacles.
The process demands extensive documentation and verification. “We needed to back every single thing, every piece of data, every claim we had,” noted Finer, describing the substantial supporting materials required.
Assembling the right team proved crucial for managing the workload. Companies often selected law firms and banks with existing
relationships, valuing established trust. The banking syndicate plays a particularly vital role in cultivating investors, with companies typically engaging 4-5 banks. Upstream met with approximately 120 potential investors during its process.
Developing a clear, compelling narrative was essential for attracting investors. Upstream highlighted its drug verekitug’s relationship to an already-approved therapy while emphasizing its unique advantages. The company successfully raised $255 million in its October IPO, pricing shares at $17 each.
Pricing strategy required careful consideration of various factors. Companies held numerous “testing the water” meetings with prospective investors to gauge interest levels and appropriate price ranges. Septerna deliberately maintained conservative valuations in earlier funding rounds to preserve flexibility for the IPO.
The transition to operating as a public company brought significant changes. Finer described having to limit communications with early investors to maintain fair disclosure practices. Companies needed robust investor relations and human resources capabilities to manage new pressures and stakeholder expectations.
Daniel Schmitt, CEO of Actuate Therapeutics, emphasized the importance of selecting partners who will provide sustained support throughout the demanding process. “Find people you know you will be able to work with and will stick with you,” he advised.
Market volatility remains a major concern for newly public biotechs. Legal adviser Gabriela Morales-Rivera noted this creates particular challenges in managing relationships with investors, board members and employees when stock prices fluctuate post-IPO.
The executives agreed that while going public provides crucial funding for drug development, the process requires extensive preparation, strong teams, and careful attention to timing and pricing. Success depends on building compelling investment cases while establishing infrastructure to operate effectively as a public company.