The 10th Anniversary of the Sarbanes-Oxley Act, Jeffrey S. Hatfield, President and Chief Executive Officer, Vitae Pharmaceuticals

Jeffrey S. Hatfield, President and Chief Executive Officer, Vitae Pharmaceuticals

On behalf of the Biotechnology Industry Organization

Before the United States House of Representatives Committee on Financial Services,
Subcommittee on Capital Markets and Government Sponsored Enterprises

“The 10th Anniversary of the Sarbanes-Oxley Act”

Executive Summary

  • Vitae Pharmaceuticals is a clinical-stage biotechnology company based in Fort Washington, Pennsylvania. The Biotechnology Industry Organization (BIO) represents Vitae and more than 1,100 innovative biotechnology companies, along with academic institutions, state biotechnology centers, and related organizations in all 50 states.
  • BIO supports H.R. 6161, the Fostering Innovation Act, which would amend the filing status classifications in SEC Rule 12b-2 to provide a more accurate picture of growing businesses.
    • The bill would raise the minimum public float requirement for accelerated filers to $250 million, allowing non-accelerated filer start-ups to expand and change without fear of impeding their growth with costly regulations.
    • The bill would add a revenue component to the accelerated filer definition, ensuring that companies with revenue below $100 million spend their critical innovation capital on groundbreaking research and development rather than regulatory burdens.
  • It can take more than a decade and over $1 billion to bring a single biotechnology therapy from laboratory bench to hospital bedside.
  • Biotech companies undertake the development process without the benefit of product revenue. Every dollar spent on regulatory compliance is an investment dollar diverted from innovation.
  • Biotech companies have few employees, a simple corporate structure, and investors that are more concerned with clinical milestones than financial reporting. The cost of regulatory compliance often outweighs its benefit.
  • Public company regulatory requirements deter early-stage private investors and prevent later-stage companies from accessing the capital available on the public market.
  • The costs of Sarbanes-Oxley Section 404(b) compliance can be greater than $1 million per year for an average biotech company. These costs are borne at the expense of research and development.
  • The SEC Rule 12b-2 filing status classifications that determine public company regulatory requirements are outdated and do not accurately represent the true nature of smaller companies.