JPM24: ReCode CEO Shehnaaz Suliman eyes second half IPO opportunity

As green shoots slowly push from the scorched Earth biotech markets, ReCode Therapeutics CEO Shehnaaz Suliman, M.D., is watching closely, biding her time for a potential second half IPO.

A flurry of biotechs have filed for initial public offerings to start off the year, a sign that a path may finally be reopening for the public markets. Suliman, speaking at Fierce Biotech JPM Week in San Francisco on Jan. 10, said the interest rate environment will impact how these companies do. Her sense is that the second half of the year may be better than the first.

“We're hoping that's the case because we'd like to try and get out based on clinical data in the second half of the year,” Suliman said.

In the pandemic heyday of 2021, when companies were listing and raking in massive proceeds, biotechs could get away with filing before they had validated data. Suliman doesn’t think that’s the case anymore. “It still comes down to the fundamentals of the opportunity,” she said.

Companies need to show some de-risking and validation of the science. They need to have a good team and a clear path to the clinic.

“I think companies are forced to redefine the definition of success. If what you need to do is raise capital and get out and you don't care about how you trade in the aftermarket, and your definition of success is raising $100 million and your shareholders can get behind that, I think that's fine,” Suliman said. “Those companies will get out and they'll live to fight another day.”

Recode, Shehnaaz Suliman
Shehnaaz Suliman, M.D. (ReCode Therapeutics)

She continued: “If what you want is to have a strong IPO with a diversified shareholder base in which you have a great step up and you trade well in the aftermarket, well, I think that's a tall ask. So I think we are all just going to have to be somewhat pragmatic about what is the definition of success if you're trying to get out and take the money and run.”

See the Fierce team's coverage of the 2024 J.P. Morgan Healthcare Conference here

Suliman, like the rest of the biotech industry, was in San Francisco for the J.P. Morgan Healthcare Conference, the largest gathering of life sciences investors and companies of the year. This is the time when deals are made and capital is secured. It’s been a tough year for the industry, defined by layoffs, reprioritizations and slow fundraising. Suliman said the sentiment at the conference has been more positive than 2023.

“If you had to ask me, honestly, I would say last year’s J.P. Morgan felt like a wet blanket. And though we've had some rain this year, it feels like a dry blanket,” Suliman said. “I would say that people are feeling a bit more warm and fuzzy.”

There has been “cautious optimism” around the improving interest rate environment, which could reignite generalist interest in biotech, particularly on the public markets. There’s also been a dramatic uptick in M&A, most notably in areas that have seen great clinical success recently.

“This is a bellwether for further partnering and maybe more M&A to come, which is terrific,” Suliman said. “So I think these are green shoots that suggest that it's certainly going to be a better year than last year.”

But there are still a few externalities to contend with, including a pending U.S. election and continued debates on drug pricing. Suliman is optimistic but careful.

“Will that be sufficient to catalyze a true resurgence and a bull market? I don't know, it remains to be seen,” she said.

As for ReCode, Suliman says it’s a great time to be a biotech working on delivery in genetic medicine.

“The beauty of being in the delivery space is that everyone in genetic medicine has a delivery problem or at least an optimization solution that is being sought,” Suliman said. “I think the future of genetic medicine is going to depend on optimizing both delivery, as well as the cargo side of the equation.”

That means ReCode has plenty of opportunities for partnering. The biotech signed a deal with Bayer gene therapy unit AskBio a year ago to work on precision genetic medicines via full gene insertion by single vector delivery of gene editing and DNA cargoes. ReCode brought its SORT LNP delivery technology to the table while AskBio contributed its synthetic DNA and CRISPR applications.

“I'm hoping that this will be the blueprint for far more technology synergy deals to enable us to make faster progress,” Suliman said of the AskBio partnership.

Suliman called genetic medicine companies “high burn-rate enterprises,” with all the different technology pieces that have to be developed and fit together seamlessly. ReCode is using mRNA and formulating medicines for inhalation, which is another tricky piece, plus manufacturing and so on.

“While my board would love me to get my burn rate down even further, there is just a threshold burn rate for running a genetic medicine company that cannot be avoided,” she said.

Bayer’s VC arm, Leaps By Bayer, also contributed to ReCode’s June 2022 series B extension, which raised $200 million. Another $50 million was added in September 2023 for a series total of $260 million.

ReCode just dosed the first patient in a phase 1 study of the mRNA-based therapy RCT1100, which is being evaluated for the rare disease primary ciliary dyskinesia (PCD), which is caused by mutations in the DNAI1 gene. Suliman acknowledged that most pharmas are eyeing later-stage assets and shying away from riskier bets.

Suliman expects initial data in the second half of the year, which will define ReCode’s next chapter.

“What we found over the last two years is that the market has been, I would say, less permissive for early-stage science and certainly focused more on later-stage clinical opportunities and driving to the clinic,” Suliman said. “What this has meant is that I think biotech CEOs have really had to define a clear value proposition around how translational science goes from basic science to the clinic.

“Without that, I feel like you're dead in the water,” she added.