Can­did Truths From A Biotech IPO


Tak­ing a biotech com­pa­ny pub­lic is a com­pli­cat­ed jour­ney with nu­mer­ous chal­lenges. On the heels of Anap­tys­Bio’s suc­cess­ful IPO ear­li­er this year, John Car­roll asked me to share some can­did truths from the per­spec­tive of a biotech CEO that has lived through the twists and turns of the IPO process. Be­low are my first-hand ob­ser­va­tions, writ­ten as friend­ly ad­vice to any biotech CEO eye­ing the pub­lic mar­kets:

TTWs Are Your Friend
Al­most every pre-IPO biotech is like­ly to fit with­in the emerg­ing growth com­pa­ny de­f­i­n­i­tion of the JOBS Act, which al­lows you to con­fi­den­tial­ly pitch your po­ten­tial fu­ture IPO to po­ten­tial in­vestors that are al­lowed to pro­vide high-lev­el feed­back re­gard­ing their in­ter­est. These con­ver­sa­tions, called Test­ing-The-Wa­ter Meet­ings (TTWs), are the sin­gle great­est tool in your IPO tool­box. TTWs al­low you to de­vel­op re­la­tion­ships with in­vestors, un­der­stand which are like­ly to in­vest in your IPO and how they view you rel­a­tive to com­pa­ra­bles. The biggest mis­take you could make is not to take ad­van­tage of this op­por­tu­ni­ty to ed­u­cate po­ten­tial in­vestors about your val­ue dri­vers, and show them your progress over time to­wards key mile­stones. Know­ing your sto­ry in ad­vance will help in­vestors make an ed­u­cat­ed de­ci­sion dur­ing the lim­it­ed time­frame of the IPO road­show. Be­fore launch­ing our IPO, we at Anap­tys­Bio con­duct­ed ap­prox­i­mate­ly 100 TTWs across 40 dif­fer­ent well-known pub­lic mar­ket biotech in­vestors.

ECM Is The Epi­cen­ter
Ir­re­spec­tive of which in­vest­ment banks you choose to use, the most im­por­tant fac­tor in the ex­e­cu­tion of your IPO will be the Eq­ui­ty Cap­i­tal Mar­kets (ECM) per­son(s) in your syn­di­cate. It is easy to over­look ECM peo­ple be­cause they will not be the most vis­i­ble, bois­ter­ous or well-coiffed mem­bers of the bank­ing team. But make no mis­take, ECM peo­ple are specif­i­cal­ly re­spon­si­ble for in­ter­act­ing with in­vestors, and will there­fore have the best un­der­stand­ing of what the mar­ket thinks of your sto­ry. You need to work with an ECM crew that is dili­gent­ly work­ing on your com­pa­ny’s be­half, is not dis­tract­ed by oth­er pri­or­i­ties and can pro­vide hon­est feed­back with­out sug­ar coat­ing. Keep that in mind as you eval­u­ate in­vest­ment banks.

Cross-Overs Mat­ter
A pre-IPO pri­vate fi­nanc­ing round with heavy par­tic­i­pa­tion from pub­lic mar­ket in­vestors, known as a cross-over round, is a big con­fi­dence boost to any biotech IPO. Da­ta shows that com­pa­nies with a cross-over round built bet­ter IPO or­der books, were more like­ly to suc­cess­ful­ly price with­in their IPO price range and have trad­ed bet­ter once pub­lic. It is dif­fi­cult to know whether it is ac­tu­al­ly the cross-over round that makes the IPO more suc­cess­ful, or that the qual­i­ty of the com­pa­nies able to at­tract a cross-over round would have had bet­ter IPOs any­way – but in ei­ther case a cross-over is high­ly rec­om­mend­ed. The re­al rea­son you want to do a cross-over round is to in­crease the po­ten­tial in­sid­er par­tic­i­pa­tion in your IPO raise – which back­stops your risk of not be­ing able to build an IPO book through the road­show. Think of it as in­sur­ance – you give up some di­lu­tion pri­or to the IPO but dra­mat­i­cal­ly in­crease your chance of get­ting the com­pa­ny pub­lic.

The Win­dow Is Gen­er­al­ly Ajar
You will hear many peo­ple spec­u­late about whether the pub­lic mar­ket is cur­rent­ly “open” or “closed” for IPOs. It is a mis­nomer to be­lieve that that the mar­ket, and specif­i­cal­ly in­vestors in­ter­est­ed in IPOs, are that bi­na­ry. While I agree that cer­tain pe­ri­ods are not a good time to launch an IPO (e.g. Sep­tem­ber/Oc­to­ber 2015 right af­ter Hillary’s fa­mous tweet), in­vestor ap­petite for your new is­suance will be dri­ven far more by the qual­i­ty of your sto­ry than mar­ket tim­ing. Hence the IPO win­dow is gen­er­al­ly “ajar”, mean­ing that in­vestors are al­most al­ways on the look­out for qual­i­ty in­vest­ment op­por­tu­ni­ties ir­re­spec­tive of macro mar­ket noise. Ed­u­cat­ing them in ad­vance through co­pi­ous TTWs (see above), and fo­cus­ing on clin­i­cal da­ta cat­a­lysts (see be­low), can shield your IPO against wob­bly mar­ket con­di­tions.

Nav­i­gate to Clin­i­cal Da­ta
Pub­lic mar­ket in­vestors are gen­er­al­ly look­ing for a tan­gi­ble path to post-IPO val­ue in­flec­tion points, which for most biotechs means clin­i­cal da­ta cat­a­lysts. The longer it takes for an in­vestor to un­der­stand what, when and how you will gen­er­ate mean­ing­ful clin­i­cal da­ta, the more like­ly they are to dis­en­gage. The pri­ma­ry fo­cus your IPO pitch ought to be on your most ad­vanced pro­gram(s) and their prox­i­mal clin­i­cal read­outs, where “prox­i­mal” means the next 18 months. A longer hori­zon to clin­i­cal da­ta is like­ly to im­pact your in­vestor ap­peal.

Al­lo­cate For The Long-Term
As you de­vel­op re­la­tion­ships with pub­lic mar­ket in­vestors, you need to un­der­stand who is like­ly a long-term in­vestor that will buy IPO shares and hold them through thick and thin, ver­sus who has a short-term mo­men­tum men­tal­i­ty that will lead to dis­ap­pear with small gains (or loss­es) short­ly post-IPO. While every in­vestor is en­ti­tled to their own strat­e­gy, biotech com­pa­nies are gen­er­al­ly best served by pa­tient cap­i­tal that can help build val­ue over time. The per­for­mance of your stock post-IPO will heav­i­ly de­pend up­on what pro­por­tion of your IPO buy­ers are long-term ver­sus mo­men­tum. IPOs filled with mo­men­tum play­ers are more like­ly to “break is­sue” short­ly af­ter pric­ing and find them­selves in a tough spot for ex­tend­ed pe­ri­ods of time. Fig­ure out which in­vestors are most­ly like to take a long-term view, fo­cus on con­vinc­ing them to par­tic­i­pate in your IPO or­der book and al­lo­cate as many IPO shares to them as pos­si­ble.

The CEO Ref­er­en­dum
While you may have dealt with VCs dur­ing your pre-IPO life, pub­lic in­vestors are a whole new lev­el of scruti­ny. Of course your de­vel­op­ment pro­grams need to be well po­si­tioned, and of course your CMO needs to be cred­i­ble and yes your CFO needs to be ex­pe­ri­enced – but in ad­di­tion to all that YOU as CEO need to be rock sol­id. Pub­lic in­vestors will push you, test you, dili­gence the heck out of you and will on­ly in­vest if they can look you in the eye and see con­vic­tion. Tell them why you be­lieve in the com­pa­ny and show them how you will ex­e­cute. Bot­tom line: IPOs are a very pub­lic ref­er­en­dum about the CEO of a biotech com­pa­ny. Wel­come to the big leagues.


Hamza Suria is the CEO of Anap­tys­Bio, a San Diego-based de­vel­op­er of ther­a­peu­tic an­ti­bod­ies. Biotech Voic­es is a con­tributed col­umn from se­lect End­points News read­ers. Con­tact the pub­lish­er, Ar­salan Arif, for more de­tails.

BiTE® Plat­form and the Evo­lu­tion To­ward Off-The-Shelf Im­muno-On­col­o­gy Ap­proach­es

Despite rapid advances in the field of immuno-oncology that have transformed the cancer treatment landscape, many cancer patients are still left behind.1,2 Not every person has access to innovative therapies designed specifically to treat his or her disease. Many currently available immuno-oncology-based approaches and chemotherapies have brought long-term benefits to some patients — but many patients still need other therapeutic options.3

Pfiz­er’s Doug Gior­dano has $500M — and some ad­vice — to of­fer a cer­tain breed of 'break­through' biotech

So let’s say you’re running a cutting-edge, clinical-stage biotech, probably public, but not necessarily so, which could see some big advantages teaming up with some marquee researchers, picking up say $50 million to $75 million dollars in a non-threatening minority equity investment that could take you to the next level.

Doug Giordano might have some thoughts on how that could work out.

The SVP of business development at the pharma giant has helped forge a new fund called the Pfizer Breakthrough Growth Initiative. And he has $500 million of Pfizer’s money to put behind 7 to 10 — or so — biotech stocks that fit that general description.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 82,100+ biopharma pros reading Endpoints daily — and it's free.

Gilead re­leas­es an­oth­er round of murky remde­sivir re­sults

A month after the NIH declared the first trial on remdesivir in Covid-19 a success, Gilead is out with new results on their antiviral. But although the study met one of its primary endpoints, the data are likely to only add to a growing debate over how effective the drug actually is.

In a Phase III trial, patients given a 5-day dose of remdesivir were 65% more likely to show “clinical improvement” compared to an arm given standard-of-care. The trial, though, gave little indication for whether the drug had an impact on key endpoints such as survival or time-to-recovery. And in a surprising twist, a 10-day dosing arm of remdesivir didn’t lead to a statistically significant improvement over standard of care.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 82,100+ biopharma pros reading Endpoints daily — and it's free.

Ken Frazier, AP Images

Why Mer­ck wait­ed, and what they now bring to the Covid-19 fight

Nicholas Kartsonis had been running clinical infectious disease research at Merck for almost 2 years when, in mid-January, he got a new assignment: searching the pharma giant’s vast libraries for something that could treat the novel coronavirus.

The outbreak was barely two weeks old when Kartsonis and a few dozen others got to work, first in small teams and then in a larger task force that sucked in more and more parts of the sprawling company as Covid-19 infected more and more of the globe. By late February, the group began formally searching for vaccine and antiviral candidates to license. Still, while other companies jumped out to announce their programs and, eventually and sometimes controversially, early glimpses at human data, Merck remained silent. They made only a brief announcement about a data collection partnership in April and mentioned vaguely a vaccine and antiviral search in their April 28 earnings call.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 82,100+ biopharma pros reading Endpoints daily — and it's free.

Mark Genovese (Stanford via Twitter)

Gilead woos fil­go­tinib clin­i­cal in­ves­ti­ga­tor from Stan­ford to lead the charge on NASH, in­flam­ma­to­ry dis­eases

With an FDA OK for the use of filgotinib in rheumatoid arthritis expected to drop any day now, Gilead has recruited a new leader from academia to lead its foray into inflammatory diseases.

Mark Genovese — a longtime Stanford professor and most recently the clinical chief in the division of immunology and rheumatology — was the principal investigator in FINCH 2, one of three studies that supported Gilead’s NDA filing. In his new role as SVP, inflammation, he will oversee the clinical development of the entire portfolio.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 82,100+ biopharma pros reading Endpoints daily — and it's free.

Stephen Isaacs, Aduro president and CEO (Aduro)

Once a high fly­er, a stag­ger­ing Aduro is auc­tion­ing off most of the pipeline as CEO Stephen Isaacs hands off the shell to new own­ers

After a drumbeat of failure, setbacks and reorganizations over the last few years, Aduro CEO Stephen Isaacs is handing over his largely gutted-out shell of a public company to another biotech company and putting up some questionable assets in a going-out-of-business sale.

Isaacs —who forged a string of high-profile Big Pharma deals along the way — has wrapped a 13-year run at the biotech with one program for kidney disease going to the new owners at Chinook Therapeutics. A host of once-heralded assets like their STING agonist program partnered with Novartis (which dumped their work on ADU-S100 after looking over weak clinical results), the Lilly-allied cGAS-STING inhibitor program and the anti-CD27 program out-licensed to Merck will all be posted for auction under a strategic review process.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 82,100+ biopharma pros reading Endpoints daily — and it's free.

Hill­house re­casts spot­light on Chi­na's biotech scene with $160M round for Shang­hai-based an­ti­body mak­er

Almost two years after first buying into Genor Biopharma’s pipeline of cancer and autoimmune therapies, Hillhouse Capital has led a $160 million cash injection to push the late-stage assets over the finish line while continuing to fund both internal R&D and dealmaking.

The Series B has landed right around the time Genor would have listed on the Hong Kong stock exchange, according to plans reported by Bloomberg late last year. Insiders had said that the company was looking to raise about $200 million.

Endpoints News

Keep reading Endpoints with a free subscription

Unlock this story instantly and join 82,100+ biopharma pros reading Endpoints daily — and it's free.

Fangliang Zhang (Imaginechina via AP Images)

The big mon­ey: Poised to make drug R&D his­to­ry, a Chi­na biotech un­veils uni­corn rac­ing am­bi­tions in a bid to raise $350M-plus on Nas­daq

Almost exactly three years after Shanghai-based Legend came out of nowhere to steal the show at ASCO with jaw-dropping data on their BCMA-targeted CAR-T for multiple myeloma, the little player with Big Pharma connections is taking a giant step toward making it big on Wall Street. And this time they want to seal the deal on a global rep after staking out a unicorn valuation in what’s turned out to be a bull market for biotech IPOs — in the middle of a pandemic.

Endpoints Premium

Premium subscription required

Unlock this article along with other benefits by subscribing to one of our paid plans.

No­var­tis chips in $10M for IPO-bound part­ner Pli­ant; Tenax shares soar on heart drug da­ta

Novartis is coming in with $10 million to help support the looming IPO of a partner. Pliant Therapeutics posted a new filing with the SEC showing that Novartis is buying the shares at $15, the mid-point of the range. It’s adding several million shares to the offering, bringing the total to around $135 million. Biotech companies have been enjoying quite a run on virtual Wall Street, with investors boosting new offerings to some big hauls.