SEC offers some relief for small biotechs

The Securities and Exchange Commission (SEC) has adopted regulatory changes providing small public companies with a temporary exemption from Sarbanes-Oxley 404(b) compliance—which is welcome relief from burdensome requirements for small biotechs in particular.

Section 404(b) of the Sarbanes-Oxley Act of 2002 requires public companies to report on the internal controls they have in place over their financial reporting.

It’s well intended—but it’s been proven to reduce company market values, increase audit fees, force companies to exit public markets, and reduce R&D investments in pre-revenue startups, and thus, lead to less innovation. 

But now, some small, public companies are exempt—specifically, companies with public float of less than $700 million and annual revenues less than $100 million.

BIO supports the amendments, and we submitted comments urging the SEC to adopt them last year. 

And numerous BIO members joined the chorus in support of the exemptions, too, including innovators Sutro Biopharma, GlycoMimetics, Ardelyx, and many other BIO member representatives presenting to the SEC and congressional committees several times in the last few years. 

Congressional support, bipartisan U.S. Senators and Representatives have sponsored a bill that would extend the exemption for qualifying public companies for five years, which we support, too. 

Jim’s Judgment: Biotech companies across the country conduct their research without the certainty of a return on their investment, so they highly value resource efficiency. Cost burdens like 404(b) can slow a company’s progress in the lab and lengthen the amount of time it takes to deliver treatments for patients in need. I applaud the SEC for adopting a commonsense approach to ensuring less capital is going into unnecessary compliance and instead into lifesaving science. – BIO CEO Jim Greenwood

More background:

• Science or Compliance: Will Section 404(b) Compliance Impede Innovation by Emerging Growth Companies in the Biotech Industry?
• BIO’s Comments on 404(b)

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The Senate Agriculture Committee held a hearing yesterday on ag innovation and regulations on biotech, including animal biotech, which faces an overly burdensome regulatory environment in the United States. Here are some highlights and our thoughts.

The U.S. Senate Committee on Agriculture, Nutrition, & Forestry held a full-committee hearing on Thursday, March 12, Agriculture Innovation and the Federal Biotechnology Regulatory Framework.

Ranking Member Debbie Stabenow (D-MI) did not mince words in her opening statement: “Innovation is the foundation of American agriculture,” she said.

She stressed the importance of transparency and establishing consumer trust—so biotech innovations, such as gene-edited crops resistant to disease and climate change, can be accepted by the public.

The hearing also touched on animal biotech—with Sen. Deb Fischer (R-NE) criticizing the Food and Drug Administration (FDA) regulating “animal DNA” as “animal drugs,” and the “extremely long and cumbersome” regulatory approach that’s led to just one animal biotech product approval in 20 years. (Watch the exchange at around 1:08:00.) 

This hurts small biotechs and farmers in particular. “When you have overly burdensome regulation, generally, it’s the small companies, the startups, the smaller farmers that get stuck on the outside looking in because they won’t have access to it. My farm doesn’t have the resources to go through an approval process such as FDA currently has laid out,” farmer Dr. Michael Paustian, President of the Iowa Pork Producers Association, explained. “We run the risk of not only slowing down adoption of the technology, but concentrating the benefits of the technology among the few who are able to navigate the maze of red tape.” 

We agree. As we look ahead to final rulings from the U.S. Department of Agriculture on some ag biotech products, we continue to push for a regulatory system that’s science-based, provides transparency, and works to build consumer trust. BIO is committed to building the diverse coalitions needed to foster greater public confidence and bring new agricultural solutions to the market.

Read more about the hearing.