Navigating the Choppy Waters: Biotech CEOs Share Insights on Going Public

In a challenging market for biotech stocks, initial public offerings (IPOs) continue to serve as crucial lifelines for drug startups. While the number of biotech IPOs has shown a slight uptick, with 24 companies going public last year, the road to public markets remains fraught with challenges. At a recent panel hosted by the Biotechnology Innovation Organization (BIO), three CEOs who successfully led their companies through IPOs shared their experiences and advice, providing valuable insights for others considering this pivotal move.

The IPO Journey: Planning and Preparation

Jeffrey Finer, CEO of Septerna, emphasized the importance of early planning. "It's not for the faint of heart," Finer said, describing the IPO process. Septerna, which raised $288 million in its October IPO, began preparing nearly a year in advance. The company conducted a full audit in late 2023 to "get our financial house in order" and started discussions with financial advisers around the same time.

Timing emerged as a critical factor. For Septerna, advisers suggested the optimal window for going public was between the initiation of human testing for their lead program and six to twelve months before expecting results. This timing aligns with investor expectations, as Rand Sutherland, CEO of Upstream Bio, noted that potential backers were interested in seeing data releases within a similar timeframe post-IPO.

Gabriela Morales-Rivera, partner at law firm Goodwin, recommended that biotechs begin preparing about a year ahead of a planned IPO. This preparation includes reviewing existing partnership and license agreements, as well as navigating SEC "gun-jumping" rules that can restrict certain communications leading up to an IPO.

Crafting the Company Narrative

A well-structured story showcasing a company's unique value proposition is crucial for attracting investors. Upstream Bio, which raised $255 million in its October IPO, leveraged its asset verekitug's connection to the successful drug Tezspire (developed by Amgen and AstraZeneca) to create a compelling narrative.

"What we had to do was try to frame all of this up from a pretty complicated landscape into not only what are we going to do with the capital, but where is it going to take us?" Sutherland explained. He added that investors responded positively to a focused approach, particularly for single-asset companies with multiple potential clinical directions.

The IPO process typically involves extensive investor meetings, with companies presenting to as many as 120 potential backers. These meetings not only help build the investor book but also provide valuable insights into investor interests and long-term commitment potential.

Navigating the Public Markets

The transition from private to public company brings significant changes, particularly in terms of communication and regulatory requirements. Finer noted the shift in investor relations, saying, "I had to basically tell everybody, 'I can't tell you any more than I tell anybody else.'"

Morales-Rivera highlighted the importance of robust investor relations and human resources departments to manage the new pressures of being a public company. She also pointed out potential challenges with board composition, as exchange listing requirements may necessitate changes to the board structure.

As these biotech leaders' experiences demonstrate, successfully navigating an IPO requires meticulous planning, a compelling story, and readiness to adapt to the demands of public markets. While the path may be challenging, for many biotechs, it remains a crucial step in securing the funding needed to advance potentially life-changing therapies.