Emerging biopharma companies with promising lead candidates in late-stage trials are often faced with a fundamental decision: go-it-alone (self-commercialize) or secure a strategic partner to support development and commercialization. It is a classic strategic choice that elucidates discussion and analysis of the company’s strategy / objectives, management team capabilities, pros / cons, risks / benefits, market trends, anecdotal evidence, etc. *Cue the strategy consulting white papers*. At Locust Walk, we frequently encounter management teams wrestling with this decision. We recognize that every strategic partnering decision should be evaluated on a case-by-case basis and grounded in the company’s strategy as well as transaction options. That being said, for privately held emerging biopharma companies that aspire to go public, one related question to the ‘to partner or not-to-partner’ dilemma is what impact would the strategic choice have on Initial Public Offering (IPO) prospects and performance? So, in this blog, we retrospectively analyze one specific aspect of the impact of strategic partnering: IPO success and performance.

For private biopharma companies with lead assets in late-stage development, an IPO can be an attractive financing vehicle for a variety reasons – access to significant capital, broad investor base, liquidity, etc. The success, amount of capital raised and performance of an IPO, however, is heavily based on the confidence of public investors in the science, commercial prospects and probability of success. At Locust Walk, we often believe one of the best demonstrations of scientific validation and confidence in a technology is the presence of buy-in from a big pharma partner. After all, strategic partners are very sophisticated buyers of technology as they have a unique perspective on market dynamics and tremendous due diligence capabilities and perspectives.

To test if partnering helps IPO performance, Locust Walk examined a dataset of nearly 65 late-stage biopharma companies (in Phase 2 or 3 trials) that have gone public since 2014. We then stratified this dataset into A) companies with a strategic partnership in place pre-IPO and B) companies without a strategic partner pre-IPO. To be clear, ‘strategic partnership’ included any agreement for commercial rights, ranging from regional licenses to worldwide development and commercialization agreements. We found that, on average, companies that secured a strategic partner pre-IPO achieved two things:

1. Higher Amount of Capital Raised
2. Better 1-Year Stock Performance
3. Higher Amount of Capital Raised: The median amount of capital raised by companies pursing an IPO with a strategic partner in place was over 25% higher than unpartnered companies ($90M versus $72M, respectively).