The JOBS Act has contributed to a dramatic acceleration in new biotech IPOs since its passage, with nearly a tripling in the rate of companies going public in the industry. By changing how entrepreneurs can access and communicate with investors earlier in the process, the JOBS Act has fundamentally shifted how CEOs of discovery-driven companies must spend their time dealing with internal versus external priorities.
Yesterday at the 2014 BIO Investor Forum, a panel of biotech CEOs discussed new opportunities they have and surprises they encountered in taking their companies public in a post-JOBS Act environment, with implications for future entrepreneurs and policy experts.
- Paul J. Hastings, Chairman and CEO, OncoMed Pharmaceuticals
- John Orwin, President and CEO, Relypsa
- Effie Toshav, Partner, Fenwick & West LLP
- Robert Ward, CEO, Radius Health
The JOBS Act’s Testing-the-Waters provision has been very beneficial in enabling biotech companies to meet with investors and tell their complex scientific stories in advance of conducting an IPO (previously, companies conducting a public offering could only meet with investors during a series of half hour meetings in the ten days leading up to their IPO).
“I think that was the single most important provision for us,” said John Orwin. “The company had done very little marketing of itself as a private company, and so we were coming out into the public investor and cross-over investor community without a real strong base of awareness… you have to tell the story a few times and give people an opportunity to really do their due diligence. You can’t just start from ground zero and expect people to invest in your company two weeks later.”
How has going public enabled the companies to expand and do further work? Panelists were unanimous in agreeing that going public has given them greater options in choosing how to further their clinical programs, and greater negotiating leverage in potential deals.
“It allowed us to never raise money again,” said Paul Hastings. “Where our life would have been had we not gone public but done these three partnerships [with pharmaceutical companies] is that we would now be thinking about doing a fourth partnership, and then a fifth partnership… without the IPO we probably would be facing having to take some of the newer, unencumbered assets that we have in our pipeline right now and having to partner those. And to be honest I don’t know if I would have been able to retain all of our employees for another ten years had we continued to just partner everything away… it’s good to do that for some programs, but it’s probably good to have some of your own programs.”
Robert Ward agreed that going public had helped make them more independent: “Going public did allow us to undertake a trial that we would not have done absent that… going public has allowed us to remain un-partnered.”
It has also been a great incentive for employees: “From an employee perspective, the ability to participate in the equity of the company is certainly a great incentive for folks realizing that they can directly look at how our contributions are benefiting the company,” said Ward.
John Orwin added that “Being able to do these things ourselves – or at least being viable doing these things ourselves – allows us and the employees and the investors who took the risks to actually benefit, as opposed to have it be something that a big pharma company gets on the cheap in an environment where companies couldn’t get capital.”