August 27, 2025

How Should a Public Biotech Best Announce the Departure of a C-suite Member?

Any C-suite departure from a biotech has the potential to cause consternation with analysts and investors. The central issue of concern being: what is the true reason the executive is leaving?
As a high-level insider whose remuneration is intrinsically linked to a biotech’s success, a C-suite departure raises many potential red flags:

• Is there a problem with the clinical trial(s)?
• Does a drug candidate have safety issues?
• Is there a problem with commercial execution?
• Has the company been the victim of financial (or otherwise) fraud?
• Is there a fundamental change in strategy or disagreement on disclosure?

Talking points for any and all lines of inquiry should be prepared before any announcement is made. Company spokespeople should also rehearse these prepared comments so that they can deliver them confidently and consistently.

How a biotech messages a departure is critical in maintaining investor and analyst trust. Any attempt to hide a departure, or to mischaracterize it, can cause considerable damage to management’s credibility.

Since the departure of a C-suite executive is typically a reportable event – the news has to be disclosed to the market (via 8K filing with the SEC) within four days.

The best course of action on top of the requisite filing depends on precisely who is leaving and under what circumstances.

The best option

The obvious, best-case scenario when disclosing a departure is to simultaneously announce a replacement. This can happen with amicable separations, where both parties create flexibility for one another by avoiding triggering any disclosure until all moving pieces are in place.

In fact, the optimal title of any accompanying press release should highlight the new appointment, with the departing executive (and his or her contributions) acknowledged later in the release, along with a quote signaling their commitment to a managed transition.

You can then introduce the new executive to analysts, while the one departing can respond to inbound investor inquiries, if appropriate.

The above requires some careful coordination (especially if the executive is moving to a public company, and the signing of their new contract is a disclosable event), but it is possible, and moreover is the ultimate sign of a mutually amicable separation. Analysts’ and investors’ focus will shift to the new appointment, and things can likely carry on as they were before.

Analysts and investors will want to understand the motivation of the departing party, however.

Here, some good options (if they are truthful) include:

• Cultural fit
• An opportunity elsewhere that they couldn’t turn down
• Or for family or personal reasons.

The more logic you can provide, the less people will try to read between the lines.

The second best

The best next alternative is that an executive resigns before a replacement is found but agrees to stay until a replacement is located (or he or she has agreed to continue advising the company as a consultant). This all speaks to continuity and harmony.

A press release should not be issued, with the 8K sufficing as adequate disclosure. Be certain that the company reaches out to analysts and key shareholders alerting them to the filing. Do not try and bury it by filing it post market on a Friday and hoping no one will notice.

And in third place

Failing the above two scenarios, you will need to announce a departure with no replacement and no interim period or consultancy agreement. Usually this involves the appointment of an acting or interim executive. This needn’t appear nefarious if there are good reasons why a more managed transition isn’t possible. Have your talk-track ready and proactively reach out to your analysts and investors once the 8K has been filed (again – do not issue a press release in this instance).

What if they have been fired?

Occasionally, an executive departs a company because he or she is fired for policy violations. Here, you will need to consider what (if any) confidentiality you owe to the individual and/or other employees. Unless egregious offenses have occurred, most misdemeanors are seldom disclosed and are instead the subject of mutually binding non-disclosure agreements.

Let’s look specifically at what issues arise when certain biotechnology executives depart.

CFO

Starting with the easiest. While a CFO is one of the two principal officers for a public biotech, their departure is seldom seen as indicative of an as yet undisclosed problem with the company’s drug development (for non-revenue generating biotechs).

A departing CFO is of more concern if a biotech has an approved drug and is generating revenue. His or her departure then casts doubt on the company’s financial stability and guidance – specifically whether or not any near-term guidance has changed.

Preannouncing financial results does not mitigate this problem – that would be overkill – but reiterating your existing guidance (if it is unchanged) will be welcomed by investors.

When a CFO leaves, it’s best that the company’s CEO leads outreach to the financial community and talks specifically about their plan to fill the position.

CMO/CSO

A CMO departing a clinical stage biotech and a CSO departing a preclinical stage biotech are problematic for the same reasons. Logic dictates that he or she would stay in place if the company’s drug development was going as planned (in terms of efficacy, safety and study execution).

Given the above, consider if there are any additional disclosures you wish to make alongside your CMO or CSO’s departure. Otherwise, be prepared to talk specifics with investors and analysts after the announcement. Reiterating the timing for near term data readouts can help to assuage investor fears.

When a CMO or CSO leaves, it’s best that the company’s CEO leads investor and analyst outreach – especially if he or she is a scientific founder. If not, they should be supplemented by a senior R&D employee (acting CMO, SVP of clinical development, etc.).

Note that when a CSO departs a clinical stage biotech, it can often be because “their work is done” and it’s time for them to move to a fresh opportunity. This is logical (if true) and certainly passes the sniff test with investors.

CEO

CEO departures are, of course, the most consequential, but often also the most expected. Usually when a CEO leaves, it’s by mutual agreement with the board, and follows some kind of drug failure, or period of underwhelming growth/development.

Messaging around a CEOs departure often concerns what’s next for the biotech he or she is leaving.

• Is the company now up for sale or the subject of a reverse merger process?
• Will there be a strategic review of the company’s clinical pipeline?
• If the biotech was revenue generating, who is responsible for sales and commercial operations until a new CEO is found?
• How long will it take to find a replacement and who will be acting as the CEO in the meantime? (Obvious candidates here are a company chairperson and or director, the CFO or COO, if there is one).

When a CEO leaves, it’s best that a company’s Chairperson, alongside the CFO or another leading C-suite member (or otherwise an independent director) leads investor and analyst outreach.