Magazine Article | May 1, 2019

A Different Path To An IPO

Source: Life Science Leader

By Raymond Tesi & David Moss

Raymond Tesi
Despite the anxiety that comes with becoming a public company, “going public” is the goal of most biotechs for one reason — money. A public offering is not about building insider liquidity. An IPO is a financing strategy that allows a company to raise capital to allow growth. INmune Bio has the unique problem of funding three programs simultaneously — an intimidating task indeed. If successful, the journey is emotionally, scientifically, and financially rewarding.


David Moss
Typically, there are two paths biotechs take when going public. The most common path is to win VC funding, go through several “preferred series” funding rounds as programs mature, and then add a crossover round just before a substantial “big bang” IPO to fund the company through the next series of clinical milestones. The second option is to raise capital with a reverse merger into an already listed, but largely inactive, “shell” company. The “shell” can be a small company needing to up-list or a listed company needing to reinvent itself. Each of these two approaches has its merits — and its disadvantages.

At INmune Bio, we chose a third path. When our company launched, the founders eschewed VC in favor of public-market financing to build the company. Our reasoning was simple — we wanted to keep the capital structure of the company simple and clean. We believe complicated capital structures with preferred rights instruments, warrants, and convertible debt is off-putting to the public-market investor. In our opinion, complicated capitalizations hamstring a company’s ability to raise the growth capital that is essential in this business. Thus, the capital structure of INmune Bio is all common stock.

Our decision to issue common stock only had three consequences. First, eliminating preferred stock and unit deals meant a large portion of the private company capital was not available to us. VC firms often invest in preferred stock. Many crossover funds are biased to investments with special rights or unit deals. To fund the company beyond the founder’s seed round, we chose to raise funds with a “friends-and-family approach” — a process akin to running a political cam-paign on individual donations. The funding was small and required considerable effort per dollar raised. That scarce capital was carefully deployed to reach milestones that demonstrated progress to increase the value of the company.

The second consequence of our unique approach to an IPO was that we had to self-file an S-1 with the SEC to attract a bank that would take the company public — the complete opposite of the typical process. Banks, like investors, look to previous investors for validation, and as a result, without recognizable names in our first round, many doors remained closed.

Finally, with the S-1 filed and the banks on the book, we needed investors. Once again, we paid a price for avoiding the well-trodden paths of biotech financing. Our IPO was largely a retail round with little institutional support, which meant that our IPO was less than a “big bang.”


This more challenging path to an IPO allowed us to follow our vision and attract investors who share that vision. So today, we have the freedom to succeed.

Throughout the process, we held two principles sacred. First, success at the bedside is all that matters. Put another way, if our therapies make patients better, we will succeed. Second, we will do what it takes to reward those investors who had faith in us. In the modern era of biotech financing, we returned to the simple capitalization structure of the past with a plan to use the public markets as a financing strategy.

RAYMOND TESI, M.D., is CEO and cofounder of INmune Bio (NASDAQ: INMB), a clinical-stage biotechnology company developing therapies targeting the innate immune system to fight disease.

DAVID MOSS is CFO and cofounder of INmune Bio.