Taking a biotech company public requires extensive preparation and determination, 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 complex IPO process. While biotech IPOs saw a slight uptick in 2024 with 24 offerings, the road remains difficult for drug development startups seeking public funding.
Jeffrey Finer, CEO of Septerna, which raised $288 million in its October IPO, emphasized the importance of early preparation. His company began planning roughly a year in advance, conducting a full financial audit in late 2023 and assembling its banking team about four and a half months before going public.
Timing emerged as a crucial factor. Advisers suggested the optimal window for Septerna’s IPO was between initiating human trials and being 6-12 months away from producing results. Rand Sutherland, CEO of Upstream Bio, noted investors similarly wanted to see data releases within that timeframe after his company’s IPO.
Legal expertise proved essential, with companies often choosing law firms they had existing relationships with. Gabriela Morales-Rivera, partner at Goodwin, recommended companies review partnership agreements and SEC compliance requirements approximately one year before their planned offering.
The process demands extensive documentation to support investment claims. “We needed to back every single thing, every piece of data, every claim we had,” noted Finer, explaining that supporting materials nearly matched the workload of preparing the formal S-1 filing.
Building the right team was emphasized as critical. Companies typically engaged 4-5 investment banks, seeking those with strong analysts and complementary capabilities. Upstream Bio met with approximately 120 potential investors during their process, which culminated in a $255 million IPO in October.
Developing a clear, compelling narrative proved vital for attracting investors. Upstream highlighted how their drug candidate targeted the same pathway as an approved medicine while offering potential advantages in dosing and disease applications. Daniel Schmitt, CEO of Actuate Therapeutics, stressed the importance of working with team members who would remain committed throughout the demanding process.
Valuation strategy required careful consideration. Finer noted Septerna intentionally maintained conservative valuations in earlier funding rounds to preserve flexibility for the IPO. The company ultimately priced shares at $18, above its initial $15-17 range, after receiving support from key potential investors.
The transition to operating as a public company brought significant changes. CEOs noted stricter communication requirements with investors and the need for robust investor relations and human resources capabilities to manage new pressures. Market volatility remains a major concern, as most 2024 biotech IPOs currently trade below their offering prices.
Despite the challenges, successful IPOs provided crucial funding for advancing drug development programs. Septerna anticipated rising costs as research progressed, while Upstream secured capital to advance clinical trials of their promising therapeutic candidate.
The executives emphasized that completing an IPO requires extensive advance planning, strong teams, clear storytelling, and careful attention to timing and valuation. While the process remains daunting, it continues to serve as a vital funding mechanism for biotechnology companies working to develop new medicines.