Going public remains a challenging endeavor for biotech companies, even as the market shows signs of improvement. While 2024 saw 24 biotech IPOs, marking a slight increase from previous years, the path to public markets continues to demand extensive preparation and resilience.
Speaking at a recent Biotechnology Innovation Organization panel, three CEOs who successfully led their companies through IPOs in 2024 shared critical insights about the process. Jeffrey Finer of Septerna, which raised $288 million in its October IPO, emphasized that the transition requires careful planning and substantial groundwork.
The executives stressed the importance of timing and preparation, with Septerna beginning its IPO preparations nearly a year in advance. The company conducted a comprehensive financial audit in late 2023 and established its banking relationships approximately four and a half months before going public. According to advisers, the optimal window for an IPO typically falls between the initiation of human trials and six to twelve months before results are expected.
Rand Sutherland, CEO of Upstream Bio, noted that potential investors specifically looked for data releases within a similar timeframe following the IPO. His company engaged with approximately 120 potential investors during their process, which culminated in a $255 million offering.
Legal expertise proves crucial during the IPO journey. Gabriela Morales-Rivera, a partner at Goodwin, recommends companies review their partnership agreements and licensing deals about a year before planning to go public, as these may require specific disclosures during the IPO process. Companies must also navigate SEC regulations carefully, particularly regarding public communications and conference attendance.
The process demands extensive documentation to support investment claims. As Finer noted, every piece of data and every assertion required thorough backing materials, creating a workload nearly equal to the S-1 preparation itself.
Team composition plays a vital role in managing this complex process. Companies often maintain relationships with familiar law firms and banks, leveraging existing trust and knowledge. Actuate Therapeutics, which completed a $22 million IPO in August, worked with its longtime corporate counsel to streamline the process.
The narrative presented to investors proves equally important. Upstream Bio successfully positioned its drug verekitug by
highlighting its connection to Amgen and AstraZeneca’s approved drug Tezspire, while emphasizing its potential applications across various diseases.
Pricing strategy requires careful consideration. Companies typically engage in “testing the water” meetings with potential investors about a month into the formal IPO process to gauge appropriate price ranges. Both Finer and Sutherland expressed a desire for more concrete guidance on pricing during their processes.
The transition to public status brings significant changes in communication practices. Finer described how Septerna’s previous open dialogue with early investors had to shift to more regulated communications post-IPO. Companies must also ensure compliance with exchange requirements, including board composition and independence standards.
Market volatility remains a significant concern for newly public companies. Of the biotechs that went public in 2024, all but two currently trade below their initial offering prices. This underscores the importance of building strong investor relations and human resources departments to manage the pressures of public company status.
The experience of these CEOs demonstrates that while the biotech IPO market shows signs of recovery, companies must approach the process with thorough preparation, strategic timing, and realistic
expectations about the challenges of public company operations.