The journey to taking a biotech company public is an intensive process that requires careful planning and strong execution, 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 their experiences navigating the complex transition from private to public companies. 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.
The CEOs emphasized that preparation should begin 6-12 months before the intended IPO date. Jeffrey Finer of Septerna, which raised $288 million in its October IPO, noted that although his company had a strong cash position in mid-2024, they recognized future research costs would escalate significantly. This prompted early IPO planning, including a full financial audit in late 2023 and formation of their banking team about 4.5 months pre-IPO.
Timing proved critical, with advisers suggesting the optimal window falls between initiating human trials and being 6-12 months away from generating clinical results. Companies also need extensive
documentation to support their investment thesis, with Finer noting the volume of backup materials nearly matched the work required for the actual IPO filing.
Assembling the right team emerged as another crucial factor. Rand Sutherland, CEO of Upstream Bio, stressed the importance of carefully selecting partners given the intense collaboration required. Companies often leverage existing relationships with law firms and banks who already understand their business. For instance, Actuate maintained its longtime corporate counsel as legal adviser through its $22 million August IPO.
The banking syndicate plays an especially vital role in cultivating investors. Upstream’s team conducted roughly 120 investor meetings during their process, which culminated in a $255 million offering. Septerna sought banks with complementary strengths across analysis, banking and capital markets.
Having a clear, compelling narrative proved essential for attracting investors. Upstream highlighted how their drug candidate targets the same pathway as an approved medicine while potentially offering advantages in dosing. This helped them secure an upsized $17 per share offering.
Pricing strategy required careful consideration of both current and future valuations. Finer noted Septerna intentionally maintained headroom in earlier private funding rounds to avoid difficulties later. The company also had to balance strong interest from existing investors with the goal of adding new long-term focused mutual funds to their shareholder base.
The transition brings significant operational changes, particularly around communications and governance. Public company executives face strict limitations on sharing information, even with longtime investors. Nasdaq and NYSE listing requirements around board composition and other factors must be addressed early. Strong investor relations and human resources functions help manage new pressures, especially around stock price volatility.
While the IPO process remains challenging, proper preparation and execution can help biotechs successfully access public markets to fund their drug development programs. As Septerna’s Finer noted, “It’s not for the faint of heart,” but careful planning across areas like timing, team building, storytelling and pricing can smooth the path to becoming a public company.