The Securities and Exchange Commission (SEC) has adopted regulatory changes providing small public companies with a temporary exemption from Sarbanes-Oxley 404(b) compliance—which is welcome relief from burdensome requirements for small biotechs in particular.
Section 404(b) of the Sarbanes-Oxley Act of 2002 requires public companies to report on the internal controls they have in place over their financial reporting.
It’s well intended—but it’s been proven to reduce company market values, increase audit fees, force companies to exit public markets, and reduce R&D investments in pre-revenue startups, and thus, lead to less innovation.
But now, some small, public companies are exempt—specifically, companies with public float of less than $700 million and annual revenues less than $100 million.
BIO supports the amendments, and we submitted comments urging the SEC to adopt them last year.
And numerous BIO members joined the chorus in support of the exemptions, too, including innovators Sutro Biopharma, GlycoMimetics, Ardelyx, and many other BIO member representatives presenting to the SEC and congressional committees several times in the last few years.
Congressional support, bipartisan U.S. Senators and Representatives have sponsored a bill that would extend the exemption for qualifying public companies for five years, which we support, too.
Jim’s Judgment: Biotech companies across the country conduct their research without the certainty of a return on their investment, so they highly value resource efficiency. Cost burdens like 404(b) can slow a company’s progress in the lab and lengthen the amount of time it takes to deliver treatments for patients in need. I applaud the SEC for adopting a commonsense approach to ensuring less capital is going into unnecessary compliance and instead into lifesaving science. – BIO CEO Jim Greenwood
More background:
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