News Release Provided By Senator Gary Peters
WASHINGTON, DC – U.S. Senators Gary Peters (D-MI), Thom Tillis (R-NC), David Perdue (R-GA), and Kyrsten Sinema (D-AZ) this week introduced the Fostering Innovation Act of 2019,bipartisan legislation that would extend regulatory relief for certain small businesses and startups, including many bio-tech innovators. This industry faces additional burdens when complying with federal regulations due to the nature of the resource-intensive research and development costs associated with providing new scientific and medical developments to consumers.“Across Michigan, bio-technology startups are helping create good-paying jobs and 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 Senator 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.”
“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. 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,” said Senator Tillis. “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.”
“Georgia is the number one state in the country in which to do business. Our state has also become a hotbed for fintech, biotech, and other emerging technology companies,” said Senator Perdue. “As a former Fortune 500 CEO, I’ve seen the negative impact that one-size-fits-all regulations have on businesses. This bipartisan action removes one of the most onerous requirements off of these technology startups and will allow Georgia’s industries to compete in public markets and on the global stage.”
“We must continue cutting red tape so that Arizona’s state-of-the-art businesses can develop critical innovations and move our country forward,” said Senator Sinema.
“I commend Sens. Tillis, Sinema, Peters and Perdue for championing the Fostering Innovation Act. Over 300 biotechnology companies have gone public since the JOBS Act was enacted, and this important legislation will further promote capital formation while preserving investor protections,”said Jim Greenwood, President & CEO of BIO. “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. 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.”
Startup businesses are currently granted a five-year grace period from mandatory financial compliance reporting for publicly traded companies. However, bioscience startups typically need to allocate large amounts of capital into years of research and human clinical testing before they can send their product to market. As a result, many bioscience companies choose to pursue an initial public offering (IPO) during the early stages of clinical testing, which signals the beginning of the five year grace period. These companies’ resources are regularly placed under long term strain, however, because most do not earn a profit on their product until well after the five year period had expired.
The Fostering Innovation Act temporarily extends the current exemption for an additional five years for small startups with annual average revenues of less than $50 million and less than $700 million held in stock owned by public investors. In doing so, the legislation will cut red tape for small startups that have not fully realized their earnings or recouped their research and development costs. Peters and Tillis previously introduced this legislation in 2017.
A copy of the bill text is available here.