After a slow recovery in 2024, biotech companies looking to go public in 2025 may face more obstacles. While only 25 biotech companies went public last year, 70 met the requirements to join the Nasdaq Biotech Index—up from 33 the year before. However, market instability, trade threats, regulatory changes, and limited funding could shrink the index again, according to a report by BDO. The current state of the IPO market traces back to the COVID-19 pandemic. Brad Stewart, a market leader at BDO, explains that biotech IPOs surged in 2021 as investors poured money into health solutions. But economic uncertainty later made it harder for companies to recover. “There’s a strong need for capital, whether through IPOs, private funding, or mergers,” Stewart said. “Before, there was urgency to act quickly, but that feeling is gone now.” So far in 2024, only seven biotech companies have gone public, and those that did haven’t seen much success. Many companies are waiting for better valuations before going public, with market uncertainty playing a big role. “Early this year, there was some optimism, but the rest has been turbulent,” Stewart said. “With constant changes in tariffs, taxes, and regulations, along with challenges at the FDA and NIH, planning long-term investments is difficult.” To revive the market, Stewart believes major deals—worth over a billion dollars—are needed. “When a few of these big deals happen, momentum may start to build.” A healthy IPO market would see about 30 to 40 companies going public each year, but recent numbers have fallen short. Many companies entering the market focus on trendy areas like weight-loss drugs or cancer treatments, but even these haven’t guaranteed success. For example, Aardvark Therapeutics raised $98 million for an obesity drug but struggled in the public market. Stewart emphasizes that companies need near-term milestones to keep investors interested. “If your next milestone is years away, it’s not a good experience for investors,” he said. Political and regulatory risks also make planning harder. Stewart advises companies to reassess their strategies to reduce risks and stay flexible. “Think creatively to manage challenges,” he said. If IPO activity picks up, more investors may join, unlocking private capital. “The key is for companies to start filing for IPOs, which will pressure the industry to make deals.”