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JOBS Act Deconstructed: Regulation A

October 8, 2013
More than 40 biotech companies have gone public using provisions made available to emerging growth companies through the JOBS Act.  BIOtechNOW’s JOBS Act Deconstructed series will explore why it has had such an impact on biotech offerings and how emerging companies can leverage the new law to their best advantage.

In a nutshell: The JOBS Act directs the SEC to create a new class of securities modeled after those eligible for the existing exemption under SEC Regulation A, which allows companies to conduct direct public offerings under relaxed registration and disclosure requirements. Companies will now be able to conduct an offering of up to $50 million by taking advantage of the new exemption, called Regulation A+.

Why you should care: BIO believes that the increased offering limit of $50 million – a significant change from the $5 million limit under the existing Regulation A – will provide a valuable fundraising option for capital-intensive biotech companies. The relative ease of conducting a Regulation A+ offering is extremely important to growing biotechs given their need to efficiently use investment capital, and the increased offering limit will better reflect the reality that groundbreaking research is a costly endeavor.

Increased access to funds under Regulation A+ will provide a valuable funding alternative for small biotech startups, giving them access to the market at an earlier stage in their growth cycle and allowing them to raise valuable innovation capital.

Bottom line: The SEC issued a proposed rule on Regulation A+ in December 2013. Companies will not be able to take advantage of the increased exemption until the rule is finalized. BIO supports expeditious and effective implementation of this important JOBS Act reform.