Top 4 Tips you need to prepare for Biotech IPO

Biotech companies have fared well recently in the IPO market in both the US and the UK. New legislation in the US has eased access to public markets and the AIM market in London continues to be attractive for emerging biotech companies.

If you’re considering an IPO to raise capital for your biotech company, here are the 4 top tips on how to prepare for your big lauch. 

This post was co-written by James Shaw, Co-founder, JAG Shaw Baker and Karen Shike, Associate, Corporate, JAG Shaw Baker

James Shaw, Co-Founder, JAG Shaw Baker is a leading transactional venture capital lawyer, advising entrepreneurs, companies and investors through the funding life-cycle. Since qualifying as a lawyer in 2000, James has helped entrepreneurs, high-growth technology based companies and investors navigate their way through multiple rounds of financing, growth, scale-up and ultimately exit/liquidity event. Over the years, James has also been one of the most prolific University spin-out lawyers to life sciences companies and continues to advise on spin-out activity.

Karen Shike, Associate, Corporate, JAG Shaw Baker is a US corporate and securities lawyer with a focus on the life sciences and technology markets. She has extensive experience advising on cross-border M&A and securities transactions, focusing on the life sciences and technology sectors. Karen qualified to the New York bar in 2006 and practised as a private equity and M&A lawyer at Weil, Gotshal & Manges in New York and London. She has practiced in London since 2007 and joined JAG Shaw Baker from the in-house legal team at BlackRock in London where she advised on European financial regulations

1. Intellectual property is key

Wrap up any and all Intellectual Property (IP) issues before kicking off an IPO process. Most advisors and investors are not as IP savvy as you and the key people in your company and will be spooked by the hint of any IP issues.

Wrinkles in IP licenses, outstanding options to acquire rights or potential threats to your IP from third parties are just a few of the issues that need to be bottomed out before the IPO. If not, you should have at least a crystal clear and lay explanation on hand to garner confidence among your advisors, solidify your valuation and most importantly, secure investors.

2. Set the structure

Early on in the process, ensure you line up tax and legal advisors you’re comfortable with and who cover all the global jurisdictions touched by both the IPO and by any share schemes.

It’s critical the tax advisors and legal advisors are aligned on the structure of your IPO framework including:

  • In what jurisdiction will the listing company be based?
  • Is a reorganization of the company’s structure required for tax efficiency and (crucially) how long will the legal steps of any such re-organization take?

Having an IPO structure that’s well considered from both a tax and legal perspective and complete (or near complete) in the early stages of an IPO should help avoid expensive and frustrating delays in the process.

3. Get the legal house in order

As in any exit transaction, substantial due diligence will be conducted on your company prior to an IPO. Ensure all your corporate documents and corporate secretarial matters are in order to smooth the process. Key individuals at the company should be available to assist in refining due diligence reviews and answer questions related to due diligence.

4. Keep management onside

Don’t underestimate the amount of work involved in an IPO. This can be hugely time-consuming and is often a new full time job for management, in addition to the work required for the successful operation of the business.

Have a dedicated IPO team within the Company – appoint key contacts for advisors and ensure consistent management participation in advisor meetings. Despite the huge range of characters you’ll have advising you on your IPO, from PR executives to lawyers to bankers, company management is key for driving the process. Regular insight and responsiveness from management ensures that your legal and other advisors can operate at top efficiency.

So, here are the key takeaways to prep for your biotech IPO:

  • Be prepared – get the house in order and leave no stone unturned. If you don’t turn it, someone else will!
  • Speak to advisers early - Pick the team and ensure you explore all structuring angles early.
  • Be financially prepared – an IPO is a costly exercise.
  • Have a dedicated internal team and ensure the business can function.
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