Episode 9: The Biotech IPO: What Bankers See That Founders Miss

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Armon: Public is a movie. Yeah. They'll rewind it, they'll rewatch that other part. It's like, you better freaking get it right. Yeah. No, that's all throughout, that's, that's very true. CEOs who I think handle that best and the more experienced CEOs I think have gotten used.

It is in biotech, it's not seen, and you kind of refer to it with how we. Approach the, in the public generally, but it's not seen as a positive to be really promotional. Yeah. It's seen as a positive to be kind of, conservative, ​ 

Coming. I know Bob thing. So backup coffee. Appreciate disclaimer. Sure. Front. Um. These are my views that we'll talk about today. Not necessarily my employer Steeples views. So that is the disclaimer. Mark has the spiciest views. 

Uh, [00:01:00] so I think most people don't actually know what a banker does, uh, or they pretend they do, but they don't actually know you guys do.

So do you wanna describe like what, what you guys do and how did you get into it in the first place? 

so my background, I, um, I work for Stifel as I talked about. I became a investment banker after gonna business school in 1999. I was, I spent five years at JP Morgan in their m and a group.

Mm-hmm. And then five years at Bank of American, their healthcare group before I moved to Thomas Wise, which eventually was bought a couple years later by Stifel. So I've been with Stifel since 2010. Um, and pretty much from the time I moved to B of A back in 2003 until today, I've been a biotech banker.

Before that, I was m&a across a bunch of different industries. so I, I guess your question about what do bankers do? So our, our jobs generally is to build relationships with [00:02:00] companies. Yeah. and investors, but mainly companies on our side of the wall as banks overall are kind of set up. There's a public side and a private side.

Mm-hmm. Right? So the public side is our. Public equity sales force. We have a public debt sales force, and then our research departments who there's debt research and equity research. A lot of biotech companies are obviously more familiar with the equity side. Yes. and so that's the public side. They work just on public knowledge.

They're on one side of the wall, which we call the wall that's in the middle. And then there's the private side, and that's the banking people. Um, and then, uh, other people you've heard equity capital markets, debt, capital markets, m and a product people, they're all kind of on that side of the wall. So as, as a, as a industry banker, my job is to.

Um, build relationships, biotech companies, get to know CEOs, CFOs, board members, and look for opportunities where they need to use our services. And in biotech, obviously a lot of that is equity capital raising. Yeah. Um, but we also do m and a. [00:03:00] Um, we do collaboration, advisory and collaborations and some other generally restructuring and things like that.

But the bulk of, for most biotech bankers out there, the bulk of our business is equity capital markets. And, and so like, I remember when we first met, I was confused about like, wait, why do the bankers wanna talk right now? Like, what is there to talk about? Like, we're not trying to go public. Yeah. So why are we doing this?

Uh, what, what are the reasons that you guys try to start so early? Uh. Now I understand why you were doing that. Right. But at the time I was like, why, why, why are we even talking? Well, it's a good, and you, you should answer your own question there to a certain extent, um, because you saw the difference. Yeah.

I, I think for us, um, building a relationship early helps us to get to know the company better, helps us to get to know the management team better. Yeah. Um, and you know, a lot of this. As an advisory type of relationship. And so it's important that the person that both sides kind of trust each other and get to know each other a little bit.

And so I, I definitely like to [00:04:00] start early. You know, I've, I've taken companies public where I've known management teams for five, six years. I've taken. I've teams, multiple companies, so over 10, 15, 20 years. Um, and that's helpful because then we can have a conversation about the right time. My advice, I think in the management team looks at that advice and kind of says, we know this person.

He's not just, you know, trying to do it. Yeah. 'cause he's trying to push a transaction. He's doing it 'cause he's got real rationale for this advice. Right. Yeah. So they can So it, building that trust I think is the most important thing and that's why starting early I think is more helpful. Well you were one of the unique ones that I feel like through thick and thin, that trustworthy, good advice was always there.

I think some others behaved in different ways sometimes, but I, I think the part that, like I also didn't. Appreciate from those early points, was that related to your guys' like trust and relationship building exercise? You'll actually try to help, like, Hey, we're wondering about this space. You're like, oh, I'll throw my analyst on it and here you go.

I'm like, oh, so [00:05:00] like we don't have to pay consultants like tens of thousands. I mean, these days you would probably just chat GPT it or something. But yeah, a well of the world has definitely changed a lot of ways. Yeah. But yeah, I, I think there's, there's definitely times where we, we help, One of the, uh, questions I think you had is a public private, um, yeah.

Question. And it's obvious, I think sometimes a banker's help in the public markets, right? Yeah. 'cause that's all kind of published and, uh, all the deals are announced and the banks are announced, um, in the private, uh, sector, a lot of times, you know, companies need help, even like with early things like building their financial model Yep.

Or talking to, you know, they're doing a private run, so not anything in the public and they're not hiring banks. They need to, in some way justify to their investors. Why do, why do you think this is a right valuation? For a private valuation? Right, right. For your round. even just recently did an exercise for, for a private company here, where we basically looked at who, here's who your comps are, here's when.

If you go public in a year, here's what we kind of think your valuation might be. Yeah. Backing into it. So that kind of helps support a private [00:06:00] round valuation right now. so we do a lot of those other things and like you said, we've got, we have a lot of good resources on the research side of the world.

Yeah. Um, and a lot of information that comes to our Salesforce. Um, and so a lot of those things I think could be helpful to companies and, and these days too, even more so, there's a big change in the world that happened mm-hmm. Since I've been in banking. Right. When I, when I started in banking, you know, there were venture capital private investors.

Yeah. And they were a very distinct group. And then there were the public investors. Yeah. There wasn't a ton of overlap. There were maybe a few we call crossover, like orbed, you know, back then was, but most were very separated. Right. And when private companies. Did their IPOs, their venture capital comp.

Their venture capital investors put up maybe 20%, and then your IPO was to go out and find everybody else. That world of Invert investors has essentially merged now, right? Mm-hmm. The biggest funder of private companies, especially these series A, b, C rounds, are guys like RA Capital and you know, [00:07:00] folks like that, right?

Who are public investors. Yep. Right? And so that crossover has changed significantly. and what that means for private companies is, you know, it's valuable for them. Our. Conference in Newport, Rhode Island in August because you are there with a bunch of public side investors who might be investors in your next round, who might be investors when you go public that you wanna talk to.

the way the banks facilitate the introductions between. Management teams and investors has changed. Yep. But it's still probably one of the most valuable things we do for, you know, everybody who sits in your seat. Yeah. 

when it comes to like private side financing versus public side, I mean public side, obviously people will just go through the banks.

Maybe not obviously the people who haven't been on that side, but yeah, people go through the banks, they're not really. Uh, facilitating the transaction on their own. It would be very strange to try to do it on your own. Yeah. There's a few direct ones every year, but that's very, uh, like it's, it's [00:08:00] the, the vast majority are public right.

Transactions underwritten or agented by public. Exactly, yeah. And then on the other hand, on the private side, it would be considered extremely weird to have a bank help actually do the transaction. Whereas like, I, I think one thing I. Actually really loved about public. I was like, wow, like they just do this for you.

I mean, yeah, there's a percentage being charged, but I'm like, it's so worth it. It's so much faster and simpler from a mechanic standpoint. Why do you think on the private side people have this. Perception that it's a bad thing if you have a bank helping you, because that was essentially the reason most private side people won't do it, is like, it would be viewed as, oh, you're desperate if you're using a bank to do the transaction resident.

Like they make the mechanics so much simpler. Why not? partially it's history. It, yeah. Um, and um, and, and then partially it's economic factors. So from a historical perspective, you know, back when the world was. Very divided between VCs and public side. A lot of the, the, the VC community was [00:09:00] well known to each other.

Yeah. And so essentially they said like, we don't wanna pay banks six, 7%. Yeah. We can all pick up the phone as the person sitting on the board of this private company and call three or four of our other relationships that VCs and like bring enough people together that we can get the next round done ourselves.

Yeah. So we don't really need. So we're, and we're not willing to pay for it. So, that happened in biotech before it happened in other industries? Yeah, in other industries. You know, tech for example, uh, banks continued to do privates in tech for quite a while. And biotech that even early in my career that had kind of finished by the early two thousands, like it just wasn't really something people were willing to pay for.

And the only people who were there was an adverse selection. The only companies who were willing to pay for it were companies where they didn't have any of those prominent VCs on the board and couldn't get to people. And so they needed a bank. And that is where that stigma comes from. Like, oh, if you're using a bank, it's because you can't, you don't have good investors who can just help you get it done.

Right, right. I think so. I think that's the history part I think [00:10:00] today. And then there's the economic part, which the economic part is that private investments are harder to do. Yeah. They take longer. And so the economics for banks are a little more challenging. Mm-hmm. These days though, I would say while we, while you don't see banks announced on, uh, most private transactions, usually.

There's some helping that's going on in the background. Yeah. Right. Um, like we, what we tend to do is, you know, if we have a private company where we know team well, we tend to make introductions. Yeah. And try to get them in front of people. we don't get paid for it. We don't agent, but it's all a part of building that relationship.

So when the IPO comes, yeah. Hopefully we've got a better seat at the table and, and all our competitors do the same thing. So, so I think while the perception is that we don't help with a private, I think we do, it's just different. Yeah. And it's not as formal maybe. Yeah. And, and, and I guess the math of it, I, I get the emotions behind it, the math of it, that doesn't make sense to me.

Now that I get it, I'm like, yes, it's a five, 7% fee, whatever the number ends up being, but if you got 10% more at a [00:11:00] 10% higher valuation, like it's all paid for, like what's the problem? Uh, and, and I think when you do have a systematic process that kind of crams as much investor excitement into as narrow window as possible.

You are much more likely to get more than 10% improvement on valuation and or, uh, proceeds. it has started to change a little bit. And partially it's because of, again, the, like we talked about, the investor universe changing a little bit, right? The reality is. The, you know, back in, back in the, um, back when it was the VC world was very different from the public investor world.

You know, those VCs actually didn't spend a lot of time even with research analysts, right? Yeah, yeah. 'cause that wasn't their world. Yeah. But now with public investors investing in private companies, they're used to paying fees on pri public deals. So they don't really have nearly as much aversion to that.

They're used to speaking with research analysts. Yeah, so the research analysts back in the day, they, they needed to know only so much about private companies [00:12:00] as, as was relevant for upcoming IPOs. Yeah. If you talk to most of our research analysts now, they're talking to public side investors about private companies as well.

Yeah. As competitors for the things they hold as ideas. You know, one of our research analysts has. Almost a weekly call with the private side of one of the big mutual funds to talk about privates that they're thinking about investing in. Yeah. And does he know them and does, you know where they fit in his space, et cetera.

So for the south side analysts, um, I feel like it's an interesting dynamic as far as the incentives, because on the one hand, like if a bank works with someone and you know, takes them public or does a secondary transaction, they end up covering them. So obviously they have a extremely large, they have a huge reason to say, oh, yes, uh, this is a buy.

So how do investors deal with that when they speak to the sell side analysts? 'cause if you cover them implicitly, they've been paying you. Uh, and so obviously you have to say positive [00:13:00] things, which I mean, I'm sympathetic to the problem, but like, how do the sell side analysts have to balance that to make the investor side trust them when they also know that, hey, I'm covering them because they transacted with us.

Yeah, yeah. Well, it's a good que So if you, if you took an IPO candidate, just because it's probably simpler there to start with. but it, this is true for public companies as well. When we, um, do a transaction, we've already had to go through committee and research has already had to speak. Right. So like we wouldn't, and I don't think any of the other banks would, would actually be on a transaction for a company where research wasn't supportive.

Yeah. Um, so that, that's a start. So we start with research being supportive, but the next milestone was shed. Exactly. And research in their heart might be like, woo. Exactly. But they still gotta say bye. Yes. So I, here's what I, I think if you talk to any public investor mm-hmm. I think they would tell you they don't, um, their discussions with the research analysts, they kind of use them to.

For due diligence. Mm-hmm. They, they use them for [00:14:00] kind of competitive, um, intelligence, if you will, understanding the space a little bit. Uh, they use them to say, to understand what other investors may be saying around this name, what other questions are coming up, things like that. I don't think they really care that much about their.

Target price or their recommendation. Okay. You know what I mean? Like, I, I don't think if you're a public side investor who's spending your time analyzing these companies and thinking about valuation, I, I think it would be a dereliction of your job if you just said, okay, I should pay, you know, Palm ATIs says it's worth $20 a share, and so I should buy it for anything up to, like, I, I don't think they care so much about that.

Yeah. Yeah. I think they care more about using them as sounding boards and getting information outta them. And so I think for the research analysts that the goal is to make sure they stay credible, right? Yeah. With those investors. Uh, and that their voice, right? That, that investors do wanna call them and ask them about the space and what they really think and yeah.

Why they think this company's better than this one or [00:15:00] this has more likely, uh, chance to succeeding and where YX is different y that sort. Yeah. That's a lot of, I think, discussion. do you in general, think biotechs are better off being public or private?

I mean, I know it's a stage dependent thing too, but let's say someone that's in phase one trials, uh, for the therapeutic side and they're on the verge of having a clinical readout, are, do you believe they tend to be better off being public or private in those situations? there's a lot of caveats to this.

I, I would say generally. I think companies are better off being public in biotech. Yeah. and part of that is when you have a data readout in the public markets Yeah. You can actually get rewarded for that, right? Yeah. Your valuation will go up and et cetera. How, having said that though, um, you know, there are.

There are definitely, like, you can get caught as a public company in a very small, you know, you have a setback or whatever, or you're in an area where for whatever reason people aren't that interested and you wind up at kind of a smaller cap. [00:16:00] It's hard to finance. That's a difficult situation to be public in.

Right? Yeah. So there are, there are times when being public is not a huge advantage. Yeah. and I think if you have, you know, if you're a long way from any real milestones, that's hard. Like one of the things that happened during COVID. A lot of companies went public at very early stages. Yep. Right. Even here or two before they were even gonna be in the clinic, right?

Yep. And you know, a lot of those companies that there was some euphoria on the investor side, were able to get a lot of those public, those companies public. But then, you know, two years in their stock prices had drifted down because they had, they weren't even in the clinic yet. Yeah, they were still early stage and the market had changed, right?

Yeah. Nothing that the companies had done wrong, but the market had changed significantly and people weren't rewarding early stage companies. And your first milestone was, we filed our I and d and a lot of the investors were like. We would never have paid what we did before if we didn't assume you were gonna do that.

Yeah. So that's not really a milestone, right? Yeah. Safety's not really a milestone, so you gotta like actually get so people were, you know, four or five years from, I think that's a [00:17:00] little hard to be that early. Yeah. Right. As a public company because you don't have the milestones to, to sustain the discussion with investors and keep people interested.

I mean, I agree with the benefits of being public. Why do you think so many private side people are afraid of going public or being public? I think both management teams and boards. Yeah. Well, on the board side, I think most boards it's more about the discussions we tend to have, especially when people get to a point where they could go public.

Yeah. is more about like the timing. Not whether to do it or not, but the timing of doing it. Yeah. I'd argue you're afraid of it if you're gonna over argue the timing of doing it. Yeah. Yeah. I don't think they're afraid. You know, I think sometimes when investors don't wanna go public, it's because they really feel like the company can get sold and they don't want to take the dilution.

Mm-hmm. And I think they can, you know, the, and they're also, I think there's also a, a feeling like we can negotiate a good enough value. We don't need to be public where we're, we're subject to, you know, ups and downs in the market when we negotiate our [00:18:00] valuation for our takeout. I do think there's some of that.

How close is m and a? Yeah. Uh, factoring in and could we keep it all ourselves and sell the company Yeah. And realize that gain. So I, I think there's a, there's always a lot of dynamics going on when you have that conversation. but I think most, you know, most investors who sit on boards of companies that are at least where they're in the clinic, um, or close to significant milestones.

Yeah. Where there's a logical discussion to say, should we be public or should we not? Most of the investors. It's really more debate about timing than anything else. I think for management teams, it's maybe different. I think if you're, if you're a management team and you've been public before, most of those management teams I work with, that's they're not really concerned.

They're used, they're familiar with it. I think if you haven't been public before. You know, that is a little bit, it's a different world you operate in. You know, you're, everything you say on a stage at a conference needs a disclaimer at the start conference. Exactly. Needs a disclaimer and people are watching [00:19:00] it and, you know, that sort of thing.

So I, I do think that's a, that's a, uh, if you, if you're not used to it, yeah. That is a little bit intimidating. Yeah. Well, and I also think some of the process, it's, you know, board and management teams can be a little bit different, but like they're a little scared of it 'cause. They really hate the idea of they go public and then the stock drops.

Like if you could tell, if you could guarantee that the stock will go up, like forget your milestones and everything else. I know, I can promise you that the stock will go up the first week after you're public. I think they'll all be like, oh hell yes. Forget the milestones. Which is funny when you say that about like, because most of those people are locked up for 180 days.

I know, but they don't post Understand. They haven't thought about that. So I can't sell anyway. Even if they want to, even if it went up a hundred percent. Like they're nothing. They do. Well, I think it's also, um, one of my old board members had a good way of putting this. It's like the cocktail party test where if you're a board member, a management team member, and you're like at a random cocktail party and you meet someone.

And they're like, oh, I work at Company X. If Company X is public, [00:20:00] you know, they might be looking up your price Right. And judging you for it. Yes. Uh, for what they know nothing about what you do or anything, but just the stock trend, they're immediately gonna judge you. But when you're private, you can say what the hell you want.

Like, oh, we're all successful even though we're about to die. Smart. And so I think that's the other thing. It's true. You're, you're under much more of a microscope as a public company. Yeah. There's like a public record of your scorecard. Yes. Whether or not that public record you'd argue is accurate or not.

I think people don't like that. So if you can guarantee the scorecard was green. Yes. Every single one of them would do it. I think that's called market manipulation. Yes. Yeah. Oh, I'm not saying you should try. thinking about like the investors that get interested in biotech, uh, why do you think generalists tend to be so weary of biotech?

I mean, I know there's times when they come in times they're like, screw this, we're out. but they'll always hang out in tech or whatever. Why do you think biotech is such a controversial one for them? Well, So in biotech, I, I feel like we're lucky. We have [00:21:00] a large universe of healthcare specialist investors, right?

Yeah. 

And you, you know, you met a lot of these, many of 'em are MDs PhDs, right? They, they, um, they really under, they understand science. they're equipped to understand what the clinical risk is, understand what the rationale for why something might work or might not work.

Yeah. Uh, understand the end markets and all that. And, and, and they know FDA regulatory processes, all these things. And so they're, they're in position to.

The, the issue is that biotech is complicated. A lot of 'em are not scientists. Um, and so getting into biotech in a big way is. Challenging, especially smaller mid cap biotech, right? Like, could you buy Gilead or, you know, something Of course, right? Yeah. Uh, vertex, et cetera. But like getting into, you know, a smaller midsize, especially a clinical stage company, they're [00:22:00] not really well.

Understand the scientific, you know, the science and the risk. because the valuations swing on data, not on let's say financials. Exactly. It's not an earning story. You know, as, as you know, like when you're a public company in the development stage, the most important thing you report, report every quarter is just your cash balance.

Right? Yeah. People, you know, your revenue, your not, like, maybe you burn, right? But really it's all about like, how much cash do you have left? Right. generalist investors, that's just harder, right? Because the, the metrics for investing in the company are more scientifically oriented, and that's not their background.

now what, what tends to happen though, right? Is, is with all, um, the, and, and generalists is an interesting, you know, people talk about generalists. The reality is that. In biotech, even the big mutual funds, the Fidelitys, Wellingtons and T roads, they have biotech specific funds. Yeah. You know, run by guys who, again, you know Yeah.

Who are, who are people [00:23:00] who have scientific backgrounds. So that's what they do. And so when, what we tend to see more, when the market gets better and uh, um, and. biotech is outperforming the other sectors. And so the bigger fund families, the generalists and mutual funds are trying to allocate more money to a sector that's performing well.

Um, what we tend to see is that other, we tend to see orders come in from Fidelity, well into t Rowe that are bigger than they used to be. And we, and behind it is that they're not all going into the biotech fund anymore. They're also. They're gonna put stock in the small cap fund or some other more generalist fund if you'll, and, or growth funds, et cetera.

And so that's what, that kind of is the first indication that the, that we're growing the pie a little bit. Yeah. And then we start to see some. Some of the more true generalists like American Century and people like that. Right. It's easy to say a generalist investor, [00:24:00] but that, I think that is kind of a misnomer in some ways.

Yeah, no, that's fair. And because there's a spectrum of them, but yeah. 

Are there things that you think can help structurally shift that positively for the field, such that just the average money allocated over time to biotech goes up relative to other sectors? what's happened over time is we have more and more companies that are getting later stage and commercial. Yeah. And I think that's easier for the more generalist investor, less scientific investor, to be able to invest in companies that are. Commercial. Commercial. And where it does become more about like, okay, what's their end market and how much are they selling this quarter?

What's the growth trajectory? And so I think the more companies we get to those later stages and the more investment opportunities there are there, I think that expands the pool for the, you know, generalist, larger cap investor. I think the small, like, I don't really think, I think the only thing that causes generalist [00:25:00] money to come into smaller cap and more risky stories.

Is when the market starts running away and they feel like they have to participate. Right. And usually that ends poorly. Yes. Two or three years down the road because, exactly. Exactly. And then it goes away for five or six years until those people have forgotten that they did that. as we get more later stage stuff, you will see more of those companies held by more generalist funds, and maybe that does free up money for, you know, the biotech specialists.

I would say though that the bio, the healthcare specialists and special, the biotech specialist funds, they, size of orders that come from those funds now is. Significant, right? Yeah. What we, we always joke about when I started, you know, an order from an RA capital, not to pick an ra, but you know, they've been around for a long time and a great investor and, um, you know, a big order from RA was like three to five.

Yeah. Now, you know, RA has 5,000 million dollars in companies. Easy. so that universe, the amount of capital that they manage has increased significantly and therefore the size of investments that they make Yeah. Has gone up. And, and [00:26:00] that's been a big change as well. I dunno. Pet fear I have is we were, if we were better at capturing the imagination of the average public, uh, I don't mean public investor, just like people, right.

Uh, the public. That might help too, because I think tech type stuff is so accessible to, you know, your grandma, your cousin, whomever. Uh, whereas what we do is so amorphous to them. Yeah. Uh, but they will invest or they will like pick their funds accordingly. And if we were just more accessible to them, then they would divert more in this direction and it would become like a self-reinforcing cycle because then there'd be more of a boost to the zone generalists might find it more interesting.

Yeah. Uh, or do you think it's too dangerous to be that much more in the like public eye, the way tech is? I actually think that biotech in some ways doesn't do a good job mm-hmm. Of promoting itself to more to the public. Yeah. Right. And when you hear things in the public about biotech and that, it tends to be pharma pricing [00:27:00] discussions.

Right. Well, we're way too nerdy on the science, so they just tune us out like weirdos. Exactly. like, if you think back about HIV right. That it was gonna kill everybody. Yeah. People were knitting, you know, the, the quilt on the, the lawn in, in Washington DC and now it's, uh, you know, if you have HIV, you're most likely to die from the same thing that you and I while a heart attack or a car accident or something like that.

as an industry, you know, we basically created something that was a death sentence into, yeah, chronic disease that you won't die. I mean, COVID being the recent example, and that's the surge at top is a great example, but, but people and I think hepatitis C and yeah, there, there's a lot of those, uh, areas where, you know, uh, there's certain kinds of cancers where survival rates now are, you know, 90 plus percent, right?

Yeah. We don't do a good job of promoting that. Right. Yeah. Like those success stories. Um, instead, you know, the things that come out about the industry are all about pricing and you know, yeah. We have to hear the cancer, we're just not gonna give it to people. [00:28:00] Exactly. Which like that, that's my grandma makes that no matter how many times I tell her no.

I guess conspiracy theorists are gonna be conspiracy theorists. Exactly. 

So getting back to some of the more people side of things. Yeah. Uh, when people are trying to go public on the management team and board side, what are the things you think they most often need like some education on before going public and are there things that they should be asking but you sense that they're too embarrassed to ask those questions?

Because I definitely saw quite a few of those in our experience. the biggest transition from the private to public, especially if you haven't been on the public side before, is just getting used to the idea that you are in the public spotlight. Yeah. Right. the disclosure that we do for an S one.

Yeah. You've been through that process yourself. Right? You really have to kind of lay it out and rationale and what you're doing and that sort of thing. There's, um. I think a lot of private companies and management teams are not used to disclosing that much. Yeah. [00:29:00] Right. And right now there's, there's even a pull the other way, right.

In that with, there's a lot of concern about biotech companies in China, you know, being very quick to copy Yep. You know, um, and create their own molecules and so. More recently, we've had many companies say like, we don't wanna reveal even our targets. Right? Yeah, yeah. We don't, and we don't wanna put anything out there in case someone, case the company in China decides to copy it.

And so there's kind of, there's this temp, there's this. Feeling on the private side that if, if I could keep things private as long as possible, that's probably good for me. And I'm That's totally understandable in on the public side, you really can't do that. Yeah. Right. And so, and I think that's the biggest trans transition is people getting used to where public companies, we now have a.

That we are to, yeah. Um, for our disclosure for what we say at public speaking engagements, et cetera, et cetera. and, uh, and so I think that's the biggest thing I think most of the companies I work with, we, we get into a, we, we try and set up situations.[00:30:00] 

We can have one-on-ones with management teams and just say like. You know, for example, we just, we were part of an IPO, um, just a month ago. Yeah. And we had a call, um, we weren't the lead bank, um, on it. We were third or fourth in the, the book. but we set up a call the week before the IPO with the management team just said, look, here's.

You know, here's what you should expect. Yeah. From how this, how the next couple days is gonna go, here's what, you know, here's the kind of things the banks will tell you on the update call. Here's kind of the questions you should think about asking. Right. Like, about, why is this investor interested?

Who is he talked to? You know, that sort of thing. Yeah. Um, because one of the things that people I think don't realize is you go through this process. You get an order book, hopefully with, with a, a bunch of investors who wanna buy your deal and usually there's more than enough. And so then you have to decide how to allocate it.

Yeah. The, the banks, as part of any of these process, [00:31:00] IPO following process, they're having discussions with the investors, but they're also. In touch with the research analysts, say like, which investors called you and asked you about this, right? Like, and so we're collecting information. How many, did these, this investor meet you twice on tt Ws called our sales desk and asked about the deal, called our research analysts.

So like they've actually been doing work, right? Yeah. They care here versus someone who. Hasn't done all those things and puts in an order at the end. 'cause they think the deal is going well and they think that there's upside to it. Well, and I think a lot of that mechanics is what the teams don't get.

They don't understand. Exactly. Yeah. Because I remember like, you know, people's requested allocations, like maybe it'll say 10 million, but you're like, no, really that's more like two, or really, that's probably not even real. I'm like, wait, how does this thing even work? Yeah. Well, and that's part of the goal for the banks is to make sure that when we do a transaction, obviously.

That transaction does trade well, right? Yeah. The last thing any of us want is that we price a transaction. It's down 20% on the first day. Like we're all gonna hear about that as well. Yeah. Yeah. And [00:32:00] so like an IPO that happened on Thursday, Friday? Uh, yeah. Last week you guys were not that one. We, we, we were not part of it.

all of us want to put the stock in the hands of. Investors who really wanna own it and are believers. Yeah. their goal is to cut everybody back a little bit so that they buy some in the public market to, to support the price, right? Yeah. Um, so there's, there's part of that.

to avoid kind of fast money, if you will, where's just gonna turn over, right? And so there's work being done on our side as well as the companies as they go through the process. They should make sure they're thinking about which investors do we want. Yeah. You know, one of the things, and, and you know this because you've been through it, most of a transaction for a public company.

In a good market still 60% of that is on average coming from existing investors. People already own the stock. Yeah. In a bad market like 90, like we had early last year in, in 24. Like 90 plus percent is coming from your existing investors, right? Right. They're saving money to keep funding the companies they believe in [00:33:00] so that that group of investors who gets into your transaction, whether it be on a follow on or whether it be in your IPO, like that's a very important group of investors.

'cause they could be your foundation for many years, right? Yeah. Like every time. You report something good, the stock goes up, you go back to raise some more money and those investors participate again. Right? Yeah. So they're kind of your foundation. So it's very important to get that part right for the long term.

Right. Yeah, no, that makes sense. And are there traits you've seen in C levels that made them successful on the private side, but we're liability on the public side.

good leaders on the private side, uh, can be very good leaders on the public side as well. I think what tends to happen for a lot of companies if they're successful is once you get on the public side, if you're successful, valuations go up, you're able to raise capital and, and your growth starts to really increase.

Yeah. And so, you know, I think for a lot of management teams, it's managing that growth. If you have success is probably the biggest challenge that that [00:34:00] comes. sometimes one of the challenges. Which relates to some of the other differences from private to public is that people that may have been a little over exuberant with how they would describe things, they can get away with it.

On the private side. Yes. Uh, but on the public side, there'll be consequences because I feel like, I dunno, like for some of my friends, I'd describe it as private side. Like you're being judged by a series of snapshots, like. You're raising, people are looking at you when you're not raising, they're not really looking at you, and then they'll look at you again.

Right. Public is a movie. Yeah. They'll rewind it, they'll rewatch that other part. It's like, you better freaking get it right. Yeah. No, that's all throughout, that's, that's very true. CEOs who I think handle that best and the more experienced CEOs I think have gotten used.

It is in biotech, it's not seen, and you kind of refer to it with how we. Approach the, in the public generally, but it's not seen as a positive to be really promotional. Yeah. It's seen as a positive to be kind [00:35:00] of, conservative, if you will, and, and practical. Right. Yeah. We ran this trial, we, we did this trial.

Here's what we learned, here's what we still have to answer. Right? Like, yeah. That, that kind of mentality. Uh, rather than we ran this trial, it was great, like everything was great and blah, blah, blah. Like cancer's cur. Yeah, exactly. Investors look at that and you know, and you see it, right? When companies have trials where the trial wasn't actually successful, but the top line says, you know, successfully completed whatever, and then the investors look at it like, you missed your P value.

You're like, right, like right. but I think you learn that over time. Yeah. That's hard for private to public because your, your analogy was, was spot on, I think, right? Yeah. It's very public CEOs, especially public CEOs who are approaching, um, a data event, right.

Will tell you, right. They, they sit, they go to, you know, there's lots of investor conferences and so they go. Investor conferences three weeks in a row. Yeah. And the same investor signs up for a meeting at all three [00:36:00] and ask the same questions and just wants to see if they react any differently. Like if they blink when they ask a question or look away or like, and they're reading into all sorts of things.

So like it's just, it's very different. No. Yeah. I feel like some of the public investors are basically like human lie detector, like that's all they're doing. Yeah. Is you said you dunno, but I know it's open label, so you know more than I do. I'm waiting to see the underlying reaction. Right. And the other thing is, and is, you know, as you know that, that public investors are not shy about telling you what they think.

Right? Yeah. So if they, they'll tell you how you think. Some of them, not all. Yeah. Yeah. But some of 'em will tell you like, we think you should report this way. We think you, you should, you know, you should talk about this. We think you should talk about that. And so I think you have to have a little bit thick skin as a public biotech ceo.

'cause. Because you're out there publicly and because people are invested in you, a lot of people are gonna have opinions about what you should be doing. Oh, yeah. And so I think you have to Yeah. Have quite a [00:37:00] dedication to like, and a belief in what you're doing and an understanding of what, what you want your message to be.

Yeah. And sticking on that message. Right? Yeah. the Mark scoring card, what do you think are the best correlates that people are gonna do well versus people whose, uh, situation's gonna crash and burn down the line? Data. Data, okay. data saves everything.

Like there are there. I've worked with so many. People, I think are really good management teams, and unfortunately their data hasn't worked out. And so sometimes, you know, bad things happen to good people, right? Yeah. E even though all the rationale, like at the end of the day, biotech companies are running, you know, experiments.

We call 'em clinical trials, but they're experiments. Right? You're trying to prove something, but you don't know otherwise, if you knew you wouldn't have to run the trial. Right? Right, right. And so. Sometimes bad things happen to really good people. And, and the flip side of that is true too. Some, sometimes, like, you know, like someone you met and you're like, wow, that's man, I really don't like them, but, and data on their stock for zooms and, you know, good for them, but like, it's not, you know, so I, I [00:38:00] think it, it can go both ways and obviously all the management teams are trying really hard to.

Work on good science and set up clinical trials that are likely to prove what they're trying to prove. Yeah. But you know, there's always things that are unexpected. Yeah. And if you could, you know, wave a magic wand and change something about our ecosystem, what would be the thing you would wanna change?

Anything about Maybe I could have fewer competitors. No, I, um, your guys is, I, I mean, I feel like bankers don't often get as much sympathy, but I will say like, you guys work a lot and it's insanely competitive and it's so, it seems so perception based too. It's like certain brands, if they like come knocking your board, it's like, oh, yes, yes.

They, they can have the ip. I'm like, but they've done nothing. This other group did everything. They're like, Nope. Doesn't matter their name. Yes. Uh, just do it. And, because I also think when like things go down, because your guys' world is so based on transactions happening, right? Like that's the only way you guys [00:39:00] get paid essentially.

When the, when all that dries up, you're like, oh, okay. And, but like no one's thinking about that. all of us are trying to find ways to be helpful to our clients. Yeah. Right. And so, you know, in, even in more difficult times and we, we, um, I had to work on a couple of, um, bankruptcies in 2023 'cause we have a very good restructuring group.

That's not something you ever really wanted to as a banker. Yeah. Then none of those companies wanted to be in that situation. that was the situation they were in, and so we, we found a way to help. Right? Yeah. I think the biotech world is, is a fabulous place.

I think that, um, over time, um, the tools and, uh, such that, that you all use, I think have improved the quality of science and the quality of. The clinical trials and you know, much, I, I think the regulatory situation is very difficult right now, and investors are trying to get their arms around. I'm sure companies are as well.

Uh, with all [00:40:00] the changes that FDA, I think that would probably be the biggest thing. If I could change one thing about the ecosystem, it would be, you know, having the, the FDA be, you know, not a walk over, but, but being more as I feel like they were maybe even five years ago, partnering with companies to try to figure out like, okay, this is an important disease.

How do we help get this to the finish line and help prove that this works and justify approving it. and I feel like that's, that some of that has gone away. Yeah. Right. No, that's a good one. All right, last question. Uh, what is something about, what's a belief about bankers in biotech that you feel like people really misunderstand?

And if you could change that, you would. I don't, it's, I think it's a little bit like you said, right? Like we're, we're all human beings, like Yeah. You know, like everybody who's, who's at a, that situation, who's the CEO of a biotech company or CFO. Wife and kids, or significant other and kids. And like, so I I, [00:41:00] and also like a lot of the other bankers at the other banks, I, I like, I get along with really well.

Yeah. Like I ride the, like, so we're competitors per se, but, and a lot of times in biotech especially, we're on the same financing transactions together. Yeah. And we're working together to get something done for a client. So there's a lot of, you know, while we compete at the beginning to, to get our roles on transactions.

Once the, once it's agreed on, then we're all working together. Yeah. And that's the part I actually like much more than the, the piece before it. Um, and all the economic negotiations, which is probably the worst part of my job. Honestly. That is the worst thing. It's the worst part. I didn't get most, wouldn't understand it.

That's, and we don't need to go into it, but yeah. That's the worst part of my job by far. Yep. Um, but, um, but yeah, I think, uh, I, I think there's a lot of good people out there doing what I do, who are trustworthy and, and who, who can help companies. Yeah. Awesome. Well, thanks again for joining. Definitely appreciate it.

Thank you for having me. All right. Cheers. [00:42:00] Cheers.