Obstacles to IPOs faced by life sciences companies

Initial public offerings (IPOs) are often seen as attractive by business owners in the life sciences or biotech field, writes Alan Wovsaniker, a partner with Lowenstein Sandler, in an Expert View column on the topic.

The need for capital in a life sciences business tend to be great, as the cost to develop new drugs, therapies or medical devices is extremely expensive and it takes many years to receive regulatory approval to market and sell such drugs, therapies or medical devices.

A successful IPO not only brings immediate cash to the table, but once a company’s shares are publicly traded after an IPO, subsequent equity capital raises are quicker and easier, facilitating multiple rounds of financing over a period of years as a company’s drugs, therapies or medical devices are developed. If all goes well, those subsequent financings can all be common stock financings, hopefully at higher prices with less and less dilution so that the complexities and cost of capital raising can come down.