Taking a biotech company public requires extensive preparation and fortitude, 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 IPO process in 2024. While biotech IPOs showed modest improvement with 24 offerings last year, the path remains difficult as most newly public companies currently trade below their offering prices.
The CEOs emphasized that preparation should begin 6-12 months before the intended IPO date. Septerna CEO Jeffrey Finer described conducting a comprehensive financial audit in late 2023 and assembling their banking team approximately 4.5 months prior to their October IPO that raised $288 million.
Timing emerged as a critical factor, with investors particularly interested in companies that could deliver clinical trial results within 6-12 months post-IPO. The executives stressed the importance of having robust documentation to support all claims and data presented to potential investors.
Building the right team proved essential, according to Upstream Bio CEO Rand Sutherland, whose company secured $255 million in their October IPO. The executives recommended working with trusted legal and banking partners who understand the company’s history. Actuate Therapeutics CEO Daniel Schmitt noted how their longtime corporate counsel’s familiarity with company documents streamlined the process.
Investment bank selection requires careful consideration, as these partners cultivate relationships with potential investors. Companies typically engage 4-5 banks that can complement each other’s strengths. Upstream estimates they met with approximately 120 potential investors during their roadshow.
Developing a clear, compelling narrative emerged as another key success factor. Companies must articulate their unique value proposition and near-term objectives. Upstream highlighted their drug verekitug’s potential advantages over an existing approved therapy, while maintaining focused development plans that resonated with investors.
Pricing strategy proved crucial but challenging. The CEOs recommended avoiding excessive private round valuations that could create problems during the IPO. Septerna intentionally maintained headroom in their Series B financing to facilitate smoother public offering pricing.
The transition to operating as a public company brings significant changes. New requirements include stricter communication protocols with investors and specific board composition rules. Finer noted how his previous open dialogue with early investors had to shift to ensure equal information access for all shareholders.
Septerna encountered an unexpected hurdle when Nasdaq required a CFO be in place before listing, contrary to their legal team’s
understanding. Such technical requirements underscore the complexity of the process.
The executives emphasized the need for strong investor relations and human resources capabilities to manage increased scrutiny and stakeholder communications post-IPO. Market volatility can create particular stress as newly public companies face questions about stock performance.
While the biotech IPO environment shows signs of improvement, companies must carefully prepare for both the offering process and life as a public entity. Success requires extensive advance planning, trusted partners, clear messaging, and robust infrastructure to support the transition. As Finer summarized, “It’s not for the faint of heart.”