Going public is an arduous journey that requires careful planning and unwavering dedication, according to biotech executives who recently navigated successful IPOs. At a recent BIO CEO panel, leaders from three biotechnology companies – Septerna, Upstream Bio, and Actuate Therapeutics – shared their experiences and insights on taking their companies public during challenging market conditions.
The biotech sector has faced significant headwinds in recent years, though signs of recovery emerged in 2024 with 24 companies completing IPOs. However, most of these newly public companies are currently trading below their initial offering prices, highlighting the ongoing challenges in the market.
Jeffrey Finer, CEO of Septerna, which raised $288 million in its October IPO, emphasized the importance of early preparation. His company began laying groundwork nearly a year before going public, conducting comprehensive audits and establishing relationships with financial advisers. The timing of the IPO was strategically planned between the initiation of human trials and anticipated data readouts.
Selecting the right team proved crucial for these executives. Rand Sutherland, CEO of Upstream Bio, stressed the significance of carefully choosing partners who will remain committed throughout the process. His company met with approximately 120 potential investors before successfully raising $255 million in their October IPO.
The process demands extensive documentation and verification. Companies must substantiate every claim and piece of data presented to investors. Legal expertise is particularly vital, with many firms choosing to work with familiar counsel who understand their history and documentation.
Valuation strategy emerged as another critical consideration. Finer revealed that Septerna intentionally maintained conservative valuations during earlier funding rounds to ensure flexibility for the IPO. This approach, while potentially leaving some money on the table initially, proved beneficial during the public offering.
Companies must also carefully balance their existing investor relationships with the need to diversify their shareholder base. Septerna navigated this challenge by expanding their IPO to
accommodate both loyal early investors and new institutional investors focused on long-term holdings.
The transition to operating as a public company brings its own set of challenges. Daniel Schmitt, CEO of Actuate Therapeutics, noted the dramatic shift in communication requirements and stakeholder management. Public company executives must adhere to strict disclosure regulations and maintain equal information flow to all investors.
Gabriela Morales-Rivera, a partner at Goodwin law firm, highlighted the importance of having robust investor relations and human resources departments to manage the increased scrutiny and market volatility that comes with being public. She advised companies to address potential obstacles early, such as ensuring board composition meets exchange requirements and maintaining compliance with securities regulations.
Market conditions can significantly impact the IPO process, with pricing discussions typically beginning about a month into the formal process through “testing the water” meetings. These sessions provide valuable feedback on investor interest and appropriate price ranges, though executives noted the challenge of obtaining precise pricing guidance.
The executives emphasized that success requires extensive preparation, strategic timing, and strong team coordination. While the path to going public remains challenging, these leaders demonstrated that careful planning and execution can lead to successful outcomes, even in difficult market conditions.