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CFO Magazine: On the IPO On-Ramp

September 19, 2014
CFO Magazine highlighted the impact of the Jumpstart Our Business Startups (JOBS) Act on smaller companies aiming to obtain access to capital and the benefits of the JOBS Act by highlighting case studies from companies that went public using it.

“Nearly everyone agrees that the JOBS Act has significantly affected the way IPOs are done,” writes Edward Teach. Teach talked to five companies to discuss their experiences, and not surprisingly, ‘all had strong opinions about the effectiveness of the IPO on-ramp.’ One of the companies they profiled – GlycoMimetics – is a clinical-stage biotech company that launched its IPO in January 2014 becoming the first company to go public on the NASDAQ this year.

Brian Hahn, GlycoMimetics’ CFO, says the ability to test the waters and defer compliance with SOX 404(b) with investors was crucial to the success of the company’s IPO.

“We’ve got good internal controls—we put in a SOX-like framework—but I don’t have to grow my staff as much on the corporate compliance side,” says Hahn. At this stage in a biotech company’s lifecycle, investors like to see money put in research and development rather than general and administrative expenses, he says. Currently, the company’s total payroll is $4 million, and “our cash burn is going to increase $1.5 million a year just to be a public company,” says Hahn, citing the added burdens and reporting requirements involved.

In April, Hahn testified before a House of Representatives subcommittee on behalf of BIO, noting that dozens of biotech companies had taken advantage of the JOBS Act to go public, with many more on file with the SEC. There have been numerous IPOs since Hahn’s testimony, and the count has reached over 110 in the biotech industry alone. “Because these R&D-focused innovators do not fund the billion-dollar biotech research process through product revenue, they depend almost entirely on external investors for innovation capital,” he said. The IPO on-ramp, he said, “has led to a sea change in how growing biotechs approach the public market.”

For the full story, check out this link.