Biotech IPOs experienced a surge in 2021, with more than 100 deals raising billions in fresh capital. However, enthusiasm cooled quickly. By 2022, deal volume dropped dramatically, and in 2024, only 24 US biopharma IPOs were completed, the lowest number in more than a decade.
Despite this decline, the year ended with signs of recovery. According to GlobalData, the global biotech IPOs in 2024 raised $8.52 billion across 50 deals, the strongest performance since 2021. Investors, however, are becoming cautious and highly selective, favoring firms with later-stage pipelines and strong financial discipline.
In this climate, financial preparation is the difference between stumbling through an IPO and stepping into the public markets with confidence. Partnering with specialized experts ensures that your firm is ready when opportunity arrives. To facilitate a successful IPO, here are the key steps biotech firms should take to prepare their financials:
1. Start with a Strategic IPO Roadmap
Most biotech firms begin preparing for an IPO 12 to 24 months prior to filing. This lead time is crucial, especially since meeting SEC reporting requirements, obtaining audited financial statements, and implementing system upgrades cannot be done overnight.
A Reuters survey of healthcare executives in late 2024 reflected this cautious reality: while 64% expected more IPOs in 2025, many anticipated only modest growth compared to the historic highs of 2020 – 2021. With market timing still uncertain and investors highly selective, firms that create a structured plan, covering accounting, governance, and reporting milestones, will be in the best position to move quickly when the right window opens.
2. Build Scalable, Compliant Financial Reporting Systems and Processes
One of the biggest challenges for biotech firms preparing for an IPO is upgrading their financial reporting systems and processes to meet public company standards. Many operate with lean finance teams and systems designed for private reporting. However, going public necessitates a significant step up in rigor, speed, and transparency.
Some key elements to focus on include:
- Internal controls that meet Sarbanes-Oxley requirements, particularly SOX 404, which mandates an annual assessment of the effectiveness of internal controls over financial reporting.
- GAAP-compliant accounting policies and processes that address critical and complex areas, such as Revenue Recognition (ASC 606) for collaboration and licensing agreements, R&D Costs (ASC 730), which must be expensed as incurred, the classification of Financial Instruments as debt or equity, and the accounting for Intangible Assets.
- Scalable systems that can manage quarterly SEC reporting and investor communications effectively.
Investing in these systems early can help reduce the risk of costly errors and position finance teams to meet tight deadlines once the firm goes public.
3. Prepare and Audit Historical Financial Statements
The SEC typically requires biotech firms to present at least two years of audited financial statements (sometimes three), along with interim quarterly data. These reports must meet PCAOB standards, which are more stringent than audits for private firms. A key distinction is the requirement for auditors to review and report on the effectiveness of internal controls over financial reporting (ICFR).
This phase can be particularly complex for biotech firms, whose expenses are often R&D-driven and may include licensing deals, milestone payments, and joint venture arrangements.
As EisnerAmper notes, the IPO process is “stressful and lengthy,” and should never be left to the last minute. For biotech firms with limited finance teams, the challenge is even greater. Fortunately, there are several things you can do to reduce delays once the IPO process is underway, such as engaging auditors early, closing historical books cleanly, and addressing technical accounting questions ahead of time.
4. Manage Cap Tables, Valuation, and Forecasts
Biotech firms often have complicated capitalization tables, especially after multiple funding rounds involving preferred stock, convertible notes, or warrants. This complexity can create challenges in analyzing financial instruments for features such as beneficial conversion features or embedded derivatives, which may affect their classification as debt or equity.
Valuation also presents unique challenges. Unlike commercial-stage companies, pre-revenue biotech firms often rely on the potential of their drug pipelines and future market opportunities for their valuations. In today’s environment, investors have become significantly more discerning.
As Wellington Management observed in 2025, biotech IPO investors are focusing on valuation discipline, differentiation, and clinical maturity when assessing new offerings. This indicates that while early-stage science may excite venture investors, the public markets expect more clinical and financial proof points before committing capital.
5. Form the Right IPO Team
An IPO requires a cross-functional team of auditors, attorneys, investment bankers, and investor relations professionals. Within the firm, the finance team plays a crucial role by collaborating with external advisors to draft the S-1, prepare roadshow materials, and respond to due diligence inquiries.
For biotech firms, having a reliable outsourced team adds a layer of financial discipline, providing accounting support, IPO readiness consulting, and CPA-level expertise. This ensures financial accuracy and consistency while freeing up leadership to focus on science, strategy, and investor engagement.
6. Practice Due Diligence and Run IPO Simulations
Investor and regulatory due diligence for biotech IPOs can be particularly intensive. In addition to financial reviews, biotech firms face scrutiny over intellectual property, clinical trial data, and regulatory filings. By conducting mock diligence sessions and IPO “practice periods”, you can identify weaknesses before they become obstacles.
The Financial Times recently highlighted how Boston’s biotech hub, once booming, has been rattled by funding slowdowns and policy uncertainty This has made investors more selective about which firms to back, which shows that practicing IPO routines, from documentation to financial mock runs, is more important than ever.
7. Craft a Compelling IPO Narrative and Communications Plan
That said, numbers alone won’t carry a biotech IPO. Investors seek a clear financial narrative that connects the science to the strategy. A compelling story highlights how capital raised will be utilized, how long current funding will last, and what milestones investors can expect.
And strong financial storytelling requires accurate, timely, and transparent reporting. This is another area where outsourcing can help biotech firms, ensuring the numbers support the narrative and instill confidence in prospective investors.
8. Plan for Post-IPO Sustainability
The IPO is just the beginning. Once public, biotech firms must maintain the following:
- Quarterly and annual SEC reporting
- Sarbanes-Oxley compliance
- Investor relations and financial communications
Conclusion
The biotech IPO market is inherently cyclical, and the last few years have proven just how quickly conditions can change. In a market where investors are cautious and selective, it’s the firms that develop strong financial systems, effectively manage complex cap tables, and communicate a compelling narrative that stands out.
By partnering with trusted experts like Scrubbed, biotech firms can successfully navigate the intricacies of IPO preparation and enter the public markets with confidence. We serve as an extension of your finance team, from preparing audited-ready financial statements and enhancing financial systems to supporting IPO readiness and ongoing compliance.
If your biotech firm is considering an IPO or wants to explore what it would take to get IPO-ready, now is the time to start planning. Schedule a free consultation today and learn how our team of CPAs and financial experts can help you enter the public markets with confidence.
