Investor Trust and Market Timing Shape the New IPO Playbook

At the 2025 BIO International Convention, the panel “Preparing for an IPO: Best Practices for Success” brought together leaders from across the biotech investment and advisory landscape to share practical guidance for companies eyeing the public markets. Speakers included Jakob Dupont, Executive Partner at Sofinnova Investments; Jennifer Fang, Partner at Wilson Sonsini; Andrew Lam, Managing Director and Head of Biotech Private Equity at Ally Bridge Group; Jordan Saxe, Head of Healthcare Listings at NASDAQ; and Chirag Surti, Executive Director of Global Capital Markets at Morgan Stanley. Together, they outlined how biotech and medtech companies must now approach IPOs as strategic funding tools rather than fast exits, amid market conditions that resemble the more measured cycles of 2014–2016 rather than the surge of 2021.

Biotech Companies Must Justify Public Listings Amid Stricter Market Expectations

Panelists emphasized that IPO preparation begins 24 to 36 months in advance, with heightened expectations around data readiness, team strength, and clinical clarity. NASDAQ’s Saxe and Morgan Stanley’s Surti both noted the shift in framing, from “Should we go public?” to “Why should we go public?”, highlighting the importance of preserving strategic flexibility. Building investor trust through a compelling narrative and demonstrating long-term potential were cited as key pillars of success. Across the board, the speakers agreed that in today’s climate, companies must earn their place in the public markets through rigorous planning and execution.

Panelists emphasized that IPO success in today’s market depends on strong clinical evidence, realistic valuations, and clear visibility on upcoming milestones. Jakob Dupont, highlighted the importance of disciplined capital use, stating, “We’re telling companies to focus their capital on priority programs and be excellent stewards of what cash they have.” Speakers agreed that investors now favor lean, focused pipelines over broad, capital-intensive R&D strategies.

Success is no longer defined by a stock’s performance on IPO day. Instead, the ability to raise capital and advance clinical programs determines whether a biotech IPO is truly impactful. A retrospective look at IPOs between 2020 and 2025 reveals that only three companies continue to trade above issue price, all of them in Phase III clinical development, with two in oncology and one addressing obesity.

Setting a realistic valuation is essential for a successful IPO, and companies must be willing to “take the medicine” early. Andrew Lam, cautioned that an inflated valuation will eventually correct, either in private markets or once a company goes public. “But one way or another, you take the medicine,” he said. Lam stressed the importance of sweating the fundamentals: refining the company’s story, demonstrating clinical differentiation, and designing a pipeline with clear, value-driving milestones. He also advised management teams to start investor engagement early, as today’s market demands far more time and preparation than in past IPO cycles.

China Emerges as a Licensing Powerhouse in Biotech, but Geopolitical Barriers Persist

Jakob highlighted the growing influence of China in the global biotech licensing landscape, noting that “47% of the current licensing deals are coming in from China right now.” He emphasized how China has become a central topic in industry discussions, stating, “Maybe one year every panel is talking about AI. This year every panel is talking about China pretty much.” According to Jakob, this reflects the significant innovation emerging from China, with numerous Chinese researchers presenting at major conferences such as ASCO, alongside ongoing advancements in the US and Europe.

Jakob discussed the strategic considerations required to effectively leverage innovation across global markets, especially given the complex geopolitical environment. He remarked, “We have to be aware of the geopolitical environment as well, and I know there have been policies like the American first investment policy, so we have to navigate through an awareness of these policies.” He pointed out that many US and European companies are in-licensing Chinese assets to enrich their portfolios, which can lead to impactful new drugs and companies. However, he also acknowledged challenges, such as “can Chinese companies actually get to list on NASDAQ,” indicating ongoing uncertainties in cross-border investment and market access.

Regarding clinical development and regulatory pathways, Jakob said, “With the China questions… is the idea that these drugs can then go through US FDA approvals.” He confirmed this as “definitely a big possibility,” noting that “you can do the development in the US and Europe and so forth,” highlighting the importance of leveraging the US market’s sophisticated capital pools and commercialization potential. Jakob also raised concerns about rising costs and competition, explaining that “NHP studies are costing four times as much as it does in Asia,” and that the industry must become more efficient in both capital and time management to stay competitive globally.

Crossover Investor Support Is Critical for IPO Success

Companies approaching an IPO often falter due to insufficient support from crossover investors, which can jeopardize the offering’s timing and success. “Ideally, your crossover investors should have fully covered the IPO,” explained Andrew. Without that foundation, companies are forced to seek new demand in real time, a strategy that becomes especially risky in fragile markets. He noted that disagreements on valuation are another common obstacle. “Sometimes it’s not that they don’t understand the story, it’s that they disagree on valuation,” he said, adding that management must remain responsive to investor feedback rather than overly fixated on perfecting their narrative.

Another challenge emerges during testing-the-waters meetings, where investor interactions can expose weaknesses in the leadership team. “It’s really testing out the team, who’s going to be telling the story and how,” said Andrew. In some cases, executives who thrive in private settings may lack the presence or communication skills required for the public markets. He stressed that companies only get one chance to make a strong first impression, and mispricing an IPO could lead to a valuation reset later, when runway is shorter and investor interest harder to regain.

Timing also plays a critical role in IPO planning. “An IPO process takes about five to six months, so companies need to ask: What will our cash position look like in Q1 2026?” Andrew said. He urged companies in strong positions today to begin preparing early and consider contingency plans in case the market window doesn’t open. Despite macroeconomic uncertainty, he remained cautiously optimistic, citing recent positive interactions with the FDA as a sign of improving regulatory clarity. “Executive teams must continuously evaluate all options, IPO, strategic partnerships, private financing, to ensure long-term sustainability,” he concluded.

Image source: GeneOnline

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Denisse Sandoval