Written by Johnathon Anderson, Ph.D., a research scientist, Associate Professor & Program Officer at the University of California Davis School of Medicine, and CEO of Peptide Systems
Published by: Peptide Systems
Executive Summary
The News: Atlas Venture’s Bruce Booth predicts a surge of Biotech IPOs in 2026 after a two-year drought.
The Risk: A "Zombie Class" of companies will likely go public with strong clinical data but broken manufacturing economics (CMC risk).
The Metric: Investors should evaluate the "Bioavailability-Adjusted PMI" to identify sustainable business models.
The Solution: The winners of 2026 will be companies that solve the "Delivery Layer" using Lipid Nanoparticles (LNPs) and hybrid-phase synthesis to lower Cost of Goods Sold (COGS).
Bruce Booth, Partner at Atlas Venture, recently made a prediction that is circulating in every boardroom in Cambridge and South San Francisco: The biotech IPO window is finally cracking open.
After two "barren" years where the industry was forced to retrench, the macro indicators have turned. The XBI (SPDR S&P Biotech ETF) is up ~28%, clinical-stage valuations are recovering, and Booth predicts 2026 will see a flood of new issuances.
However, in his recent appearance on The Readout LOUD, Booth offered a stark warning about the quality of this incoming class:
"When the market opens... you’re going to see companies flock to those because, frankly, everybody in the ecosystem is incentivized to take those companies public... bankers make 7%, the lawyers make a lot more." -B. Boothe
He warns that we will see a bifurcated market: High-quality companies with durable models, and a "Zombie Class" that goes public simply because the window is open.
As a Program Officer and CEO who has guided dozens of assets through the "Valley of Death," I believe the definition of a "Zombie" has changed. In 2021, a Zombie was a company with no data. In 2026, a Zombie is a company with great data, but broken math.
The Overlooked Threat: CMC Risk and the "30-Step Trap"
In his recent reflection on 20 years in Venture Capital, Booth highlighted the exact bottleneck that kills more late-stage valuations than clinical failure:
"Don't forget about CMC risk [Chemistry, Manufacturing, and Controls], an often overlooked and yet hugely critical element in biotech; a 30-step synthesis that takes 6-9 months to make enough material also adds to the financing risk." -B. Boothe
To a layperson, "30 steps" sounds like a logistical annoyance. To a Process Engineer, it is a mathematical death sentence.
Biotech IPO 2026: The "Industrial Math" of Synthesis
If you are running a standard Solid Phase Peptide Synthesis (SPPS) with a 95% yield per step, which is generous for complex macrocycles, a 30-step synthesis results in a cumulative yield of just ~21% (0.95^30 = 0.21).
You are effectively discarding nearly 80% of your starting material before you even account for purification losses. The "Zombie" companies of 2026 are attempting to launch commercial products using these Research-Scale protocols. They have brute-forced their way to a Phase 2 p-value, but they have no path to Commercial Tonnage.
The New Due Diligence Metric: Bioavailability-Adjusted PMI
When evaluating the S-1 filings for the Class of 2026, especially in the high-growth Oral Peptide sector (e.g., FDA just approved the Wegovy pill) I advise institutional investors to look past the clinical efficacy slides and calculate a specific ratio: the Bioavailability-Adjusted Process Mass Intensity (PMI).
Process Mass Intensity (PMI) measures the total mass of materials (solvents, reagents, water) required to produce 1 kg of active drug. For complex peptides, this number is notoriously high (~3,000–10,000 kg waste per kg of product).
When you combine a high PMI with a "First Generation" oral delivery system (like SNAC) that achieves <1% bioavailability, the economics collapse.
Injectable Delivery: Patient utilizes >90% of the drug.
Oral Delivery (Gen 1): Patient utilizes <1% of the drug.
To match the efficacy of an injection, the Oral Manufacturer must produce 100x the API volume. This effectively multiplies the PMI by a factor of 100.
The Solvent Wall
In a global supply chain already constrained by solvent shortages (specifically acetonitrile) and manufacturing capacity, a business model that requires burning 99% of its output to achieve a therapeutic effect is not sustainable.
These companies risk hitting a "Solvent Wall." They may raise $150M in an IPO, only to discover that scaling their batch size for Phase 3 requires more solvent capacity than exists in the spot market. Their Gross Margins will invert, technically solvent (cash in bank), but operationally insolvent (COGS exceeds reimbursement).
The Solution: Delivery is the New Moat
The winners of the 2026 IPO class will be the companies that have solved the Delivery Layer to fix the unit economics.
These "Quality" issuers will likely deploy two key strategies:
Hybrid-Phase Synthesis: Moving away from pure SPPS to scalable liquid-phase coupling (LPPS), driving yields up and PMI down.
Active Transport Vehicles: Utilizing Lipid Nanoparticles (LNPs) or receptor-mediated transport to raise oral bioavailability from <1% to >10%.
Moving bioavailability from 1% to 10% does not just improve the drug; it decimates the manufacturing requirement, reducing the necessary factory footprint by 90%. This turns a "Zombie" business model into a high-margin fortress.
Key Takeaway for Investors
The IPO window is opening. The bankers are ready. But as you review the S-1s of 2026, I urge you to flip to the "Manufacturing & Supply" section.
Does this drug require a 30-step SPPS campaign?
Is the delivery efficiency in the single digits?
Does the COGS model assume a "magic" drop in solvent costs?
If the answer is yes, you are not looking at the next breakthrough platform. You are looking at a science project about to collide with the reality of Industrial Math.
