Going public as a biotech company is an intense undertaking that requires extensive preparation and resilience, according to three CEOs who recently led their companies through initial public offerings (IPOs). Speaking at a recent BIO CEO panel, the leaders of Septerna, Upstream Bio, and Actuate Therapeutics shared insights from their experiences navigating the challenging public markets.
The biotech sector has faced significant headwinds in recent years, though signs of recovery emerged in 2024 with 24 companies completing IPOs. However, the path remains difficult, with most newly public biotechs trading below their offering prices.
Proper timing and thorough advance planning are crucial elements for success. Septerna CEO Jeffrey Finer, whose company raised $288 million in its October IPO, emphasized starting preparations nearly a year ahead. Despite having a strong cash position from previous private funding rounds, Septerna recognized the need to secure additional capital before research costs escalated.
The process demands extensive documentation and verification. Companies must meticulously support every claim and data point in their regulatory filings. Building the right team is also essential, particularly when selecting investment banks that will help attract investors. Upstream Bio, which secured $255 million in its October IPO, met with approximately 120 potential investors during its roadshow.
Legal compliance adds another layer of complexity. Companies must navigate SEC regulations regarding public communications and disclosures. Gabriela Morales-Rivera, a partner at law firm Goodwin, noted that failing to address regulatory requirements early can delay an IPO by six months or more.
Developing a compelling narrative is critical for attracting investors. Upstream Bio highlighted how its drug candidate verekitug could compete with an already approved treatment while offering potential advantages in dosing frequency. The company focused its story on near-term objectives rather than long-term possibilities.
The transition from private to public operations brings significant changes in how companies communicate with stakeholders. Leaders must adjust to strict limitations on information sharing, even with longtime investors. Septerna’s Finer described having to curtail regular discussions with early backers to ensure all investors received equal access to information.
Valuation strategy requires careful consideration throughout the process. Companies need to balance maximizing current fundraising with maintaining room for future growth. Septerna deliberately maintained moderate valuations in earlier funding rounds to avoid complications during the IPO.
Market volatility remains a persistent challenge for newly public biotechs. Building strong investor relations and human resources capabilities helps companies manage increased scrutiny and stakeholder concerns about stock performance.
The IPO journey also involves unexpected hurdles. Septerna encountered a last-minute requirement from Nasdaq to have a CFO in place before listing. Exchange rules around board composition can also create complications, particularly for companies with large boards resulting from multiple private funding rounds.
Despite the challenges, successful IPOs provide crucial funding for advancing drug development programs. However, as Actuate Therapeutics CEO Daniel Schmitt noted, the process represents “stepping into a different world” that requires extensive preparation and adaptability. Companies must be ready to operate under increased public scrutiny while maintaining focus on their core mission of developing new treatments for patients.