BIO Praises Senate Passage of the Jumpstart Our Business Startups (JOBS) Act
Washington, DC (March 22, 2012) – The Biotechnology Industry Organization (BIO) applauds the Senate on the passage of H.R. 3606, the Jumpstart Our Business Startups (JOBS) Act. The JOBS Act, which passed the Senate by a vote of 73-26, contains several provisions which would 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 before having to divert funds to costly regulations. Through this legislation, emerging growth companies would 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. An on-ramp would ease certain accounting and disclosure requirements for a company’s first five years. In addition, the legislation would:
- 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 2000 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 supports resolving the differences between the Senate- and House-passed versions of the JOBS Act and encourages lawmakers to work together to enact this important legislation into law.
BIO President and CEO Jim Greenwood made the following statement today:
“BIO applauds passage of the JOBS Act and all efforts to incentivize and encourage capital formation for growing companies. This legislation would make capital formation easier 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 bench to bedside is a long and arduous road, and biotechnology companies are at the forefront of the effort.
"These reforms are especially important to innovative biotechnology companies that do not yet have product revenue and must spend investor dollars on compliance rather than the search for cures and breakthrough medicines," Greenwood explained.
It can take more than a decade to bring a new medicine from discovery, through Phase I, Phase II, and Phase III clinical trials, and on to FDA approval of a product, according to the Tufts Center for the Study of Drug Development. The entire endeavor can cost more than $1.2 billion. Due to this capital-intensive process, biotech companies must cultivate a wide range of public and private investors to finance the early stages of development.
Greenwood went on to note, "In addition to the R&D hurdles that biotechnology companies face on their search for cures and breakthrough medicines, biotech leaders must also deal with the 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, private investors would have greater certainty that the companies they help take public will have the chance to succeed. 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."
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