BIO Applauds Congress for Passage of the Jumpstart Our Business Startups (JOBS) Act
The Biotechnology Industry Organization (BIO) praises the House and Senate for passage of H.R. 3606, the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act, which is now headed to the White House for President Obama’s signature, will make the pathway to capital formation more attainable for small biotechnology companies, clearing the way for American innovation and ingenuity by removing bureaucratic hurdles and red tape to speed cures and medical breakthroughs to patients.
The JOBS Act creates an “on-ramp” to the public market for emerging growth companies, allowing them five years to focus on conducting critical research that can lead to cures for debilitating diseases - such as cancer, HIV/AIDs and Parkinson’s disease - before having to divert funds to address bureaucratic hurdles that cause unnecessary delays. Through this legislation, emerging growth companies will be exempt for their first five years on the public market from the compliance burdens of Sarbanes-Oxley (SOX) Section 404(b), which SEC studies estimate cost companies up to $2 million per year. In addition, the legislation will:
- Expand the eligibility requirements of SEC Regulation A to include companies conducting direct public offerings of up to $50 million;
- Increase the limit that requires private companies to register with the SEC from 500 to 2,000 shareholders; and
- Require the SEC to revise Rule 506 of Regulation D to permit general solicitation in direct public offerings, broadening the investor base.
BIO President and CEO Jim Greenwood issued the following statement today:
“BIO applauds passage of the JOBS Act and all efforts to incentivize and encourage capital formation for growing companies working to develop breakthrough medicines and cures for devastating diseases. These reforms are especially important to innovative biotechnology companies that must spend investor dollars to address bureaucratic red tape and hurdles rather than the search for cures and breakthrough medicines.
“This legislation incentivizes and encourages capital formation for small, emerging biotechnology companies, speeding the development of new cures and treatments for patients living with debilitating diseases such as cancer, diabetes, Parkinson’s, and HIV/AIDS. Bringing such groundbreaking cures and treatments from research bench to bedside is a long and arduous road, and biotechnology companies are at the forefront of the effort.
“In addition to the R&D hurdles that biotechnology companies face, there are day-to-day challenges of running a small business with the hopes of one day entering the public market. Of great import in the biotechnology industry is the constant struggle to find working capital.
“If burdens on public financing were removed, thereby leveling the playing field, private investors would have greater certainty that the companies they help take public will have the chance to succeed in the search for cures and breakthrough medicines. This confidence hopefully will lead to increased investments in promising science that could lead to treatments and cures for some of the most debilitating and life-threatening diseases."
A recent survey conducted by the National Venture Capital Association (NVCA) found that 41 percent of venture capital firms have decreased their investments in the biopharmaceutical sector in the past three years. Additionally, 40 percent of venture capitalists reported that they expect to further decrease their biopharmaceutical investments over the next three years. Promising research to cure and improve the quality of life for millions of Americans living with debilitating diseases will be hit by this change in investment strategy, including research in cardiovascular disease, diabetes, and cancer.
For additional data and analysis on the U.S. biotechnology industry, please visit www.bio.org.