126 CEO's send open letter to Congress opposing stock option legislation S. 1940 and HR 4075

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Open Letter to Congress:

We are writing to express our opposition to legislation requiring companies expense the value of stock options on their financial statements. The Senate version, S. 1940, sponsored by Sens Levin (D-Mich.) and McCain (R-Ariz.), and its House companion, H.R. 4075, sponsored by Reps. Stark (D-Calif.), Frank (D-Mass.) and Rivers (D-Mich.), would have many harmful effects on biotechnology companies, which utilize options to attract the world's best and brightest scientists and technicians-and to retain those experts through many arduous years of product development.

• Investment in biotechnology R&D would decline.
  
  Because it costs hundreds of millions of dollars over the course of a decade or more to bring a new medication to market, biotech companies rely on a steady influx of capital from investors to fund R&D. As investors weigh competing opportunities, they look to financial statements for clear, accurate information about each company's performance. Biotech companies forced to expense the estimated future value of stock options may well find themselves at a disadvantage versus other types of ventures.

• Biotechnology companies would have difficulty attracting the best scientists, researchers and support personnel.
  
  With no products yet on the market to generate revenues, most biotechnology companies use stock options to leverage tight payroll budgets and attract talent. This legislation would force biotechnology companies to reduce the number of stock options issued to employees in order to maintain growth in reported earnings. At a time when biotechnology is becoming global, it's important to keep our competitive edge for attracting the world's top scientists to the United States.

• This legislation would raise taxes on biotechnology companies.
  
  This legislation would raise taxes on companies that issue employee stock options by limiting the ability of companies to take deductions for exercising stock options. A tax increase tied to employee compensation would harm many biotechnology companies struggling to bring their first products to market.

We understand the desire to reform corporate accounting in the wake of the Enron scandal, but penalizing the companies that are developing products for unmet medical needs, including neurodegenerative diseases, heart disease and cancer, is not the answer. S. 1940 and H.R. 4075 would make financial statements less transparent and could harm the ability of biotechnology companies to attract the capital and talent they need to make the next generation of breakthrough medicines a reality.

Sincerely,

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