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House Passes Reasonable Stock-option Accounting Reform

WASHINGTON, D.C. (July 20, 2004) — Biotechnology Industry Organization (BIO) President Carl B. Feldbaum issued the following statement in response to House passage of “The Stock Option Accounting Reform Act” (H.R. 3574):

 “The House has passed legislation that provides for a more reasonable accounting of a company’s stock options than the mandatory expensing proposed by the Financial Accounting Standards Board (FASB).”

 “Small and mid-size biotechnology companies often do not have products yet available on the market and frequently use stock option plans as a key method for recruiting and retaining the highly skilled employees necessary to bring innovative new medicines through the research and development pipeline to the patients that need them.

 “The mandatory stock option expensing proposed by FASB fails to account for the highly volatile nature of biotech stocks and would do little to provide investors with a clear picture of a company’s financial health. Further, it would create an undue administrative burden on small biotech companies struggling to fund clinical development of new medicines.

 “Fortunately, the House recognized the problems inherent in the FASB proposal and has passed legislation that would require companies to expense the stock options of only the five highest paid company executives. H.R. 3574 also addresses the extreme inaccuracy of several existing stock valuation methods and would exempt small businesses from expensing requirements.

 “BIO thanks the House members for recognizing the flaws in the FASB proposal and for passing measures that would provide more accurate financial information to potential investors. We urge the Senate to do the same.”

BIO represents more than 1,000 biotechnology companies, academic institutions, state biotechnology centers and related organizations in all 50 U.S. states and 33 other nations. BIO members are involved in the research and development of health-care, agricultural, industrial and environmental biotechnology products.

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