Going public remains a critical yet challenging path for biotechnology companies seeking to fund their expensive drug development programs. At a recent BIO CEO panel, three biotech executives who successfully completed IPOs in 2023 shared their experiences navigating this complex process.
The leaders emphasized that extensive preparation, often beginning 12 months before the intended offering, is essential. Jeffrey Finer, CEO of Septerna, which raised $288 million in its October IPO, described the process as requiring tremendous fortitude. His company began planning while still maintaining a strong cash position, anticipating rising costs as research programs advanced.
Timing emerged as a crucial factor, with advisers suggesting companies go public between initiating human trials and being 6-12 months away from producing results. Rand Sutherland, CEO of Upstream Bio, noted investors specifically looked for data releases within this timeframe following the IPO.
The executives stressed the importance of assembling the right team, particularly when selecting banking partners. Companies typically engage four to five banks, seeking those with complementary strengths in analysis, banking relationships, and market expertise. Upstream met with approximately 120 potential investors during their process, which culminated in a $255 million IPO.
Legal preparation proved equally important. Gabriela Morales-Rivera, partner at Goodwin, advised companies to review existing agreements and partnerships well in advance, noting SEC regulations are strict and oversights can delay the process by months. Companies must also carefully manage their public communications to comply with
“gun-jumping” rules.
Documentation requirements were substantial. Finer noted that supporting materials nearly matched the volume of the actual IPO filing documents, with every claim requiring thorough verification. Actuate Therapeutics’ CEO Daniel Schmitt emphasized selecting experienced advisers who understand the company’s history.
Developing a clear, compelling narrative proved critical for investor meetings. Upstream successfully positioned its drug verekitug by highlighting its relationship to an already approved medication while emphasizing near-term focus over long-term possibilities. The strategy helped secure an upsized offering of 15 million shares at $17 each.
Price setting required careful consideration of both current and future valuations. 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, balancing existing investor interest with the goal of adding new long-term institutional investors.
The transition to public company status brought significant
operational changes. Executives faced new restrictions on information sharing, even with longtime investors. The shift demanded robust investor relations and human resources capabilities to manage increased scrutiny and market volatility.
While 2024 showed some improvement with 24 biotech IPOs completed, the market remains challenging. Most companies that went public last year currently trade below their offering prices, highlighting the ongoing risks. However, for biotechs requiring substantial capital to advance their research, the public markets continue to offer vital funding opportunities, provided companies carefully prepare and execute their offerings.