By Christopher Allen, Associate Editor, Pharmaceutical Technology.
Amid one of the most divisive eras in our nation’s political history, one thing we can all pretty much agree on is the fact that our stalled economic engine needs a jumpstart.
According to recent data from the US Bureau of Labor Statistics, the national unemployment rate has been above 8% for more than three straight years (with some estimates above 17% for underemployment, which includes potential workers who are not even and/or no longer counted by labor statistics). A central issue for the 2012 Presidential campaign will rest on candidates’ strategies for dealing with how to stimulate economic growth in order to restore prosperity to levels not realized in this country for seemingly an eternity.
The Jumpstart Our Business Startups (JOBS) Act (H.R. 3606), which aims to ease regulatory barriers for start-up businesses, recently passed in the US House of Representatives by a 380-to-41 vote on Mar. 8, 2012, and the Senate on Mar. 27. According to H.R. 3606’s official summary (obtained from GovTrack.us), the bill “Modifies the application to emerging growth companies of any auditing or other professional standards the Public Company Accounting Oversight Board may establish that were proposed by one or more professional groups of accountants. [The bill also] exempts an emerging growth company from any such rules requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the issuer’s financial statements (auditor discussion and analysis).”
The measure has been hailed by several biopharmaceutical manufacturers as well as the Biotechnology Industry Organization (BIO). In a Mar. 27, 2012 press release, BIO President and CEO Jim Greenwood said, “BIO applauds passage of the JOBS Act and all efforts to incentivize and encourage capital formation for growing companies working to develop breakthrough medicines and cures for devastating diseases. These reforms are especially important to innovative biotechnology companies that must spend investor dollars to address bureaucratic red tape and hurdles rather than the search for cures and breakthrough medicines.”
Additionally, according to the BIO release, the JOBS Act “creates an ‘on-ramp’ to the public market for emerging growth companies, allowing them five years to focus on conducting critical research that can lead to cures for debilitating diseases—such as cancer, HIV/AIDs and Parkinson’s disease—before having to divert funds to address bureaucratic hurdles that cause unnecessary delays. Through this legislation, emerging growth companies will be exempt for their first five years on the public market from the compliance burdens of Sarbanes-Oxley Section 404(b), which the Securities and Exchange Commission (SEC) studies estimate cost companies up to $2 million per year.”
The JOBS Act also aims to:
• Expand the eligibility requirements of SEC Regulation A to include companies conducting direct public offerings of up to $50 million
• Increase the limit that requires private companies to register with the SEC from 500 to 2,000 shareholders
• Require the SEC to revise Rule 506 of Regulation D to permit general solicitation in direct public offerings, broadening the investor base.
In highly regulated industries such as the biotechnology and pharmaceutical manufacturing sectors, any measure to appropriately toss aside bureaucracy in order to foster growth and research certainly opens up doors for potential major breakthroughs. Such breakthroughs can yield the promise for massive dividends, both financially and in terms of saving lives.