The journey to taking a biotech company public is an arduous process that requires extensive preparation and careful planning, according to three CEOs who recently navigated successful IPOs. Speaking at a recent BIO CEO panel, the leaders shared insights from their experiences bringing their companies to the public markets during a challenging period for biotech stocks.
While biotech IPO activity showed modest improvement in 2024 with 24 offerings, going public remains a complex undertaking requiring significant groundwork. Jeffrey Finer, CEO of Septerna, which raised $288 million in its October IPO, emphasized that companies need to begin preparations up to a year in advance.
For Septerna, this meant conducting a comprehensive financial audit in late 2023 and assembling their banking team roughly four and a half months before the October offering. Timing proved crucial – advisers recommended pursuing the IPO after their lead drug candidate entered human trials but before major results were due.
Rand Sutherland, chief executive of Upstream Bio, found investors particularly focused on the timeline for upcoming data releases. His company met with approximately 120 potential investors before securing its $255 million IPO. Meanwhile, Actuate Therapeutics CEO Daniel Schmitt stressed the importance of building the right team, including maintaining existing relationships with legal counsel who already understand the company’s history.
The IPO process demands extensive documentation to support investment theses. Companies must carefully craft their narrative and be prepared to back up every claim with data. Legal experts recommend reviewing all existing agreements and partnerships a year ahead of time, as certain provisions may require disclosure during the IPO process.
Securities and Exchange Commission regulations present another hurdle. “Gun-jumping” rules can restrict companies from certain communications unless they’ve established those activities as regular business practices beforehand. Companies are advised to build these precedents early.
Valuation strategy also proved critical. Finer noted that Septerna intentionally maintained moderate valuations in earlier funding rounds to preserve flexibility for the IPO. The company ultimately priced above its initial range at $18 per share.
The transition to operating as a public company brings additional challenges. CEOs must adapt to stricter communication protocols with investors and comply with exchange requirements around board composition and corporate governance. Septerna encountered an unexpected hurdle when Nasdaq required a CFO to be in place before listing.
Market volatility remains a persistent concern. Of the biotechs that went public in 2024, all but two currently trade below their IPO price. Companies need robust investor relations and human resources departments to manage these pressures.
The executives emphasized that successful IPOs require extensive advance planning across multiple dimensions – from timing and team assembly to valuation strategy and operational readiness. While the biotech IPO market has shown signs of improvement, the process remains demanding and companies must be thoroughly prepared before taking this pivotal step.
For many biotechs, IPOs represent crucial funding lifelines to advance drug development programs that often require hundreds of millions of dollars. While the path to public markets has become more challenging in recent years, careful preparation and assembly of the right team can help companies navigate this complex transition successfully.