In September, three biotechs conducted initial public offerings (IPOs) on the same day, and their filings provide a glimpse into the outcomes experienced by venture capital investors.

Bicara Therapeutics: A Resounding Success

Bicara Therapeutics, a cancer biotech company, raised an impressive $362 million through its IPO, marking the third-largest biotech IPO of the year. This achievement followed the company's Series C financing round, co-led by Braidwell LP and TPG. Notably, Bicara's earlier Series B round, co-led by Red Tree Venture Capital and RA Capital Management, had an effective price per share of $9.47. However, the company's public offering price was set at $18.00 per share, representing a twofold increase in valuation within just one year.

Zenas BioPharma: Navigating Challenging Market Conditions

Zenas BioPharma, an autoimmune drug developer, raised $225 million through its IPO. The company has established partnerships and licensing agreements with notable pharmaceutical companies, including Bristol Myers Squibb and Xencor. Zenas's initial public offering price was set at $17.00 per share. However, during its Series B financing round, the effective price per share was equivalent to $20.65 per common share, indicating a down round. Given the recent challenging market conditions of the last few years, such down rounds are not uncommon.

Additionally, the IPO valuation did not represent a significant uplift from Zenas's recent Series C round, which took place just five months prior in May. This can be attributed to the short timeframe between the two events.

Shifting Trends in Biotech Financing

The biotech financing landscape has witnessed a notable trend towards fewer but larger financing rounds. Investor preferences have shifted toward later, clinical-stage programs, as these more advanced programs offer clearer evidence of clinical differentiation, attracting more substantial VC investments that can fund companies for longer periods.

According to Nature Biotechnology, the average private financing round in 2024 (excluding seed rounds) is almost $90 million, with at least 50 companies raising rounds worth $100 million or more. This "winner-takes-all" landscape is driven by investors' preference for later-stage programs, mirroring big pharma's chase for assets in large, competitive markets like obesity, autoimmune diseases, and neurology.

The biotech financing landscape is undergoing a transformation, with gains becoming more concentrated in a smaller set of late-stage, best-in-class companies. While some VCs are securing substantial returns in a short timeframe, others are grappling with down rounds and IPO prices that barely cover previous valuations.