U.S. Sen. Thom Tillis (R-NC) on Feb. 12 sponsored bipartisan legislation to give emerging growth companies (EGCs) some temporary regulatory relief that could further promote capital formation while preserving investor protections.
The Fostering Innovation Act of 2019, S. 452, which U.S. Sen. Gary Peters (D-MI) helped introduce on Tuesday, would provide regulatory relief specifically for innovative companies in the scientific and medical research fields.
“North Carolina has a rich and diverse biotech landscape and is the home of many companies that are on the cutting edge of scientific and medical research,” Sen. Tillis said. “Unfortunately, some of the expiring JOBS Act exemptions are going to harm the ability of some companies to access capital and continue to grow by diverting critical investments away from science towards compliance.”
Currently, EGCs are exempt from certain regulatory requirements for five years after an initial public offering (IPO), including the 2002 Sarbanes-Oxley (SOX) Act’s Section 404 (b), which requires that public companies get external audits on the effectiveness of their internal controls for financial reporting, according to a summary provided by Sen. Tillis’ office.
If enacted, S. 452 would temporarily extend the SOX Section 404(b) exemption for an additional five years for EGCs with annual revenue of less than $50 million, according to the text of the bill provided by Sen. Tillis’ office.
Sen. Peters noted that in his home state of Michigan, biotechnology startups have supported good-paying jobs for professional who are developing innovative cures.
“In order to advance medicine for patients in need, many of these companies must allocate valuable resources to conduct trials and tests before their products can reach the market,” said Sen. Peters. “This bipartisan legislation is a commonsense measure that allows these cutting-edge small businesses to cut red tape and focus on critical research and development of new life-saving treatments.”
Jim Greenwood, president and CEO of the Biotechnology Innovation Organization (BIO) in Washington, D.C., said more than 300 biotech companies have gone public since the JOBS Act was signed into law and S. 452 could further such success.
BIO represents 1,000 biotechnology companies, academic institutions, state biotechnology centers, and related organizations across the United States and in more than 30 countries worldwide. Greenwood, who previously served Pennsylvania’s 8th Congressional District for six terms in the U.S. House of Representatives, became president and CEO of BIO in 2004.
“Most biotechnology companies remain pre-revenue for a decade or more until they receive their first product approval, long past the original five-year exemption from SOX 404(b) granted by the JOBS Act, causing a damaging diversion of capital from science to compliance,” Greenwood said. “By extending this commonsense exemption of the JOBS Act to qualifying companies, emerging biotechnology innovators will be able to devote more of their limited resources to potentially lifesaving research and development activities.”
S. 452 has been referred to the U.S. Senate Banking, Housing, and Urban Affairs Committee for consideration.
“I am proud to introduce the bipartisan Fostering Innovation Act and I look forward to working with my Senate colleagues to advance this critical fix,” said Sen. Tillis.