RoseRyan Helps Biotech Companies Smooth the IPO Process
September 12, 2008
Despite the absence of U.S. initial public offerings in the second quarter of 2008, some emerging biotechnology companies in Silicon Valley are preparing for their next opportunity.
Companies are taking advantage of this down time, industry experts say, to get their their accounting and finance infrastructure in place that will support IPOs down the road.
One way to do this is by using consultants who can help startup companies find funding and make sure they don’t overspend, among other things.
“We’ve noted an increase in our clients who want to have a scalable plan and a foundation in place, so they can easily move into an IPO mode, and in the interim are well prepared to take advantage of pre-IPO funding and mergers-and-acquisitions opportunities,” said Carole-Lynn Glass of RoseRyan Inc., an accounting and finance consulting firm based in Newark with offices in San Diego and Orange County.
Glass said key players remember the last time the market heated up and they weren’t prepared. Such mistakes can be not only embarrassing but also costly, said Bruce Jenett, co-chair of the global life sciences sector with DLA Piper’s Palo Alto office.
Executives at Palo Alto-based Bayhill Therapeutics Inc. say they want to get the timing right so they don’t miss their next IPO window. The privately held, clinical-stage biotech company focuses on autoimmune diseases. It posted an S-1 filing in January, hoping to raise as much as $86.25 million. But the registration was pulled at the end of June, with the company citing unfavorable market conditions as the reason.
Bayhill’s intention is the same as many others. It wanted funds for ongoing operations, upcoming clinical product development and clinical trials, Chief Financial Officer Fred Kurland said.
The work on its IPO wasn’t wasted, Kurland said. It’s helped Bayhill prepare for its options when the market improves while realizing the benefits of consultants like RoseRyan.
RoseRyan helped the company tap into areas of expertise it didn’t possess in house, he said. Kurland said borrowing talent in positions such as a stock compensation expert saved the company about $100,000. He added that he anticipates continuing to use consulting services for stock compensation and Sarbanes-Oxley compliance issues even after the company goes public.
Glass, RoseRyan’s director of emerging growth services, said the firm provides a team of consultants with top-tier finance and accounting expertise on an interim or project basis, as well as offering on-site CFO capacities. Glass has seen how South Bay biotech companies often don’t have a plan for their IPO processes or the infrastructure needed to grow. She’s watched companies decide to hold off on annual audits and then try to do multiyear audits that uncover material issues.
Other mistakes include trying to do everything — such as changing auditors, installing a new accounting system, hiring internal staff and drafting the S-1 — all at once. Given the opportunity to do it again, she said, companies are putting plans in place to understand where they are today and where they need to be tomorrow. They are also gaining better understanding of the risks associated with decisions on accounting and finance infrastructure.
“Those that missed the window in the past are staying the course on a smaller, slower scale by continuing to build infrastructure over time,” she said. “Some are implementing Sarbanes-Oxley one or two processes at a time by documentation, so they are that much more ahead of the curve and they don’t have to do it all at the last minute.”
Her advice: Don’t wait for the IPO (or other funding) bell to ring before you start getting your house in order. Prepare in advance, address technical issues early, implement a cost-efficient equity administration and track system, make sure auditing is done annually, and do your homework when looking for service providers such as auditors, bankers, accounting and finance support.