The biotech industry recently realized its 300th IPO since the Jumpstart Our Business Startups (JOBS) Act was enacted in 2012. This marks an important milestone for our young and quickly growing industry, culminating in $25 billion raised by promising companies developing potentially life-saving medical advances. Over 18 percent of these companies have a lead drug candidate that targets a rare disease, and companies developing novel therapeutics to address cancer, neurology disorders, and infectious diseases make up almost half (46 percent) of these newly public companies. In that sense, the JOBS Act did more than spearhead capital formation for innovative startups—it channeled historic investment volumes into some of the most promising companies developing treatments for some of the most daunting health challenges of our time.
In just six years, the JOBS Act has left a significant imprint on the biotechnology industry by significantly accelerating the pace of biotech IPOs, which is up 270 percent since the same period before its enactment. For emerging growth companies (EGCs), the JOBS Act strikes an important balance between easing the ability of early-stage biotechs to access public capital markets while keeping important investor protections in place.
And I’m happy to say that 2018 so far has been a banner year for EGCs, with 53 companies going public year-to-date – the second-best year for issuances since the law’s passage.
While the JOBS Act has helped pave the path for an unprecedented number of innovative biotechnology companies to go public, additional reforms are necessary to allow these companies to stay public.
One of the most important provisions of the JOBS Act is a temporary five-year exemption for qualifying companies from Sarbanes-Oxley section 404(b) requirements for an auditor attestation of a company’s internal controls over financial reporting. As helpful as the five-year exemption is, the fact remains that the biotech development timeline is a decades-long affair. Many of the biotech companies that have gone public as EGCs under the JOBS Act remain in the lab and clinic when their five-year exemption expires, and they are forced to divert hundreds of thousands of dollars away from research and development toward superfluous financial disclosures that do not benefit their investors. In just two short months, at the dawn of 2019, over 80 emerging biotech companies will lose their EGC status and be forced to siphon off funds from clinical trials and research and development towards an additional audit that often doubles their financial reporting costs without improving investor confidence in their companies.
BIO calls on the Senate to build on this success by passing the bipartisan Fostering Innovation Act (S. 2126/488), which would extend important regulatory relief to JOBS Act companies that maintain a public float below $700 million and average annual revenues below $50 million. Extending this regulatory relief provision would allow growing companies to focus their capital on groundbreaking R&D, rather than one-size-fits-all disclosure requirements.
The road to 300 wasn’t easy, but America’s small business innovators have fought tirelessly to bring medical breakthroughs like gene therapy, immunotherapy and RNAi therapy to the market. By continuing to adopt sensible capital markets reforms like the Fostering Innovation Act, Congress can support the innovation economy, helping patients to benefit from America’s unparalleled biopharmaceutical research ecosystem.