Taking a biotech company public requires extensive preparation and resilience, 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. Despite some improvement in biotech IPO activity with 24 offerings completed last year, the path remains difficult, with most newly public companies currently trading below their initial offering prices.
Septerna CEO Jeffrey Finer emphasized the importance of early preparation, noting his company began planning roughly a year before its $288 million October IPO. This included conducting a full financial audit in late 2023 and carefully selecting banking partners about four and a half months pre-IPO. The timing aligned with what advisers considered optimal – after initiating human trials but before major data readouts.
For Upstream Bio, which raised $255 million in its October IPO, CEO Rand Sutherland highlighted the critical nature of investor outreach. His team met with approximately 120 potential backers, focusing on crafting a clear narrative around their lead drug candidate verekitug and its commercial potential in diseases like asthma and COPD.
The executives stressed the importance of assembling the right support team, particularly regarding legal counsel and investment banks. Actuate Therapeutics CEO Daniel Schmitt noted how valuable it was working with longtime corporate counsel who were already familiar with company documentation.
Establishing appropriate valuation proved crucial. Finer revealed Septerna intentionally maintained conservative valuations during earlier private funding rounds to ensure flexibility for the IPO. The company ultimately priced shares at $18, exceeding its initial $15-17 range, while carefully balancing participation between existing and new investors.
The transition to operating as a public company brings significant changes. CEOs must adapt to stricter communication protocols and broader stakeholder management. Finer described having to limit previously regular discussions with early investors to ensure fair disclosure to all shareholders.
Documentation requirements are extensive, with companies needing to thoroughly support all claims and data. Legal considerations include ensuring board composition meets exchange listing requirements and managing potential complications from crossover investor agreements.
The process demands substantial energy and focus from leadership teams. As Upstream’s Sutherland noted, companies typically face 15 investor meetings daily during crucial phases. Schmitt emphasized the importance of working with trusted partners who will remain committed throughout the demanding journey.
Market volatility remains a key challenge, particularly in biotech. Legal experts recommend having robust investor relations and human resources capabilities to manage increased scrutiny and questions about stock performance post-IPO.
Despite the obstacles, successful IPOs provide critical funding for drug development. Septerna’s Finer noted how costs were set to “skyrocket” as programs advanced to more complex studies, making public financing essential despite having raised substantial private capital previously.
For biotech startups considering going public, the executives’ experiences highlight the need for extensive advance planning, careful team selection, and realistic expectations about the demands of the process. While the biotech IPO market shows signs of improvement, companies must be thoroughly prepared to navigate what Finer described as an endeavor “not for the faint of heart.”