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The Pivotal Role the Public Market Plays in Financing R&D

July 10, 2013
Growing innovators are the heart of our industry. Biotech small businesses face a dual struggle – the daily challenge of running a growing company combined with the roadblocks intrinsic to groundbreaking scientific advancement. Innovative companies must overcome capital formation barriers in order to fund their next generation R&D.  The financing challenges that emerging biotechs face are unique, but we have the potential to save lives and treat patients in desperate need of hope.

Today, I am testifying before the House Subcommittee on Capital Markets and Government Sponsored Enterprises to gain support for reducing barriers to capital formation. As President and CEO of Chimerix, a clinical-stage biotechnology company based in Durham, North Carolina, I believe that a healthy public market is key to the success of the industry as growing innovators often turn to an IPO to fund late-stage clinical trials.  

I have spent almost the entirety of my career in the biotechnology industry.  I started working for a small life sciences consulting firm in 1976 and co-founded my first biotech company in 1982.  During my career, I have worked with companies at all stages of the biotech life cycle, from venture-backed start-ups to later-stage public companies conducting costly and lengthy Phase III clinical trials with the hope of earning their first FDA approval.  Chimerix has just 50 employees, which is typical for an industry where 90 percent of companies employ fewer than 100 people.

Chimerix undertook a successful IPO in April 2013 using key provisions in the Jumpstart Our Business Startups (JOBS) Act.  Twenty-seven biotech companies have taken advantage of the JOBS Act to go public, and many more are on file with the U.S. Securities & Exchange Commission. Since capital formation does not end with an IPO, the industry needs a healthy public market bolstered by strong small company liquidity and reasonable regulatory obligations.  Congress should enact market structure reform that addresses these important issues.

At a time when venture capital financing of biotech is at a historic low, the ability to access public capital is increasingly important.  We have seen the clear appetite for capital formation on the public market in the wake of the JOBS Act, and the rise in biotech IPOs in the last year is a clear indication that public fundraising is fundamental in the search for groundbreaking medical advancements.

Allowing tick size flexibility, reducing regulatory burdens, and addressing the broad portfolio of other market structure issues, including off-exchange trading transparency and high-frequency trading, will stimulate both trading and IPO activity and improve the overall health of the public market.

I urge Congress to build on the success of the JOBS Act by enacting market structure reform legislation that will support small company growth and fundraising, leading to groundbreaking treatments and cures for patients who desperately need them.

Below are reforms that we support:

BIO supports the Fostering Innovation Act, sponsored by Rep. Michael Fitzpatrick, which would amend the filing status classifications in SEC Rule 12b-2 to classify companies with a public float below $250 million or revenues below $100 million as non-accelerated filers.

BIO supports the Tick Size Flexibility Act, sponsored by Rep. Sean Duffy, which would institute a pilot program to allow companies that fall below a certain revenue or public float threshold to choose a new tick size for their stock.

BIO supports the Spread Pricing Liquidity Act, sponsored by Rep. David Schweikert, which would allow companies with a public float below $500 million and an average trading volume below 500,000 shares daily to choose a new tick size for their stock.

BIO supports the Audit Integrity and Job Protection Act, sponsored by Reps. Robert Hurt and Gregory Meeks, which would prevent the Public Company Accounting Oversight Board from mandating that public companies periodically rotate their external audit firms.

BIO supports a small issuer exemption from eXtensible Business Reporting Language (XBRL) compliance, which stalls the development process by unnecessarily diverting funds to reporting and away from R&D.

BIO supports effective and expeditious implementation of the JOBS Act, the capital formation impact of which has been blunted by delays at the SEC.

For information on the biotech industry, and emerging companies in particular, please visit

Kenneth I. Moch is President and Chief Executive Officer of Chimerix, Inc. and a member of BIO’s Emerging Companies Section Governing Board.

Chimerix, a biopharmaceutical company based in Durham, NC, is committed to the discovery, development and commercialization of novel, oral antiviral therapeutics designed to transform patient care in areas of high unmet medical need.