The House Financial Services Committee met in a marathon session on April 26, working late into the night to consider a package of 15 bills designed to relieve regulatory burdens and facilitate access to needed capital for biotech startups.
Biotech startups that don’t yet have an approved product must fund years of costly R&D by attracting investors. BIO has been working with Members of Congress to enact reforms to reduce costly regulatory burdens and help draw new investment to these cutting-edge innovators.
The bills “represent years of work to strengthen and expand access to our capital markets,” said Committee Chairman Patrick McHenry (R-NC). “Over the last three months, Capital Markets Subcommittee Chair Ann Wagner held four hearings and considered more than 30 bills. We’ve heard from experts across the ideological spectrum. More importantly, we accomplished something that very few Committees on the hill have done this year: we agreed on a lot!”
“Many of the bills we’ll consider today are bipartisan and I look forward to moving those to the floor immediately,” continued Rep. McHenry.
The Biotechnology Innovation Organization (BIO) has worked with Congress and regulators to adopt rules that reflect the differences between public and private markets in a targeted manner that protects investors, preserves the integrity of markets, and facilities robust capital formation.
The JOBS Act of 2012
The JOBS (Jumpstart Our Business Startups) Act of 2012 was a shining example. This legislation ushered in a wave of public market access to small biotechs and biotech startups.
BIO has worked with Congress to improve upon the JOBS Act in order to reflect the realities of running a public biotech company. These improvements include extending the onramp for emerging growth companies and making needed structural changes to market cap thresholds.
The Equal Opportunity for All Investors Act of 2023
BIO has worked to expand the definition of accredited investor to increase the number of angel investors available to bridge the so-called “Valley of Death” for biotech entrepreneurs.
One of the bills approved by the Committee on April 26 was H.R. 2797, the “Equal Opportunity for All Investors Act of 2023.” This bill would enable the creation of a certification exam to qualify as an accredited investor so more qualified investors can participate at these critical early stages.
This legislation would simultaneously expand access to capital to biomedical innovators and democratize access to wealth-generating opportunities for many more Americans.
Many angel investor organizations offer excellent curricula to educate people about the risks involved in angel investing, provide a template for conducting due diligence, and introduce risk mitigation and portfolio management strategies.
“This bill will enable more diverse investors to qualify as accredited investors,” said Rep. Wiley Nickel (D-NC), one of the sponsors. “This is important because underrepresented entrepreneurs often struggle to find capital, and they would benefit from a larger pool of more diverse investors. North Carolina’s Research Triangle Park is an essential economic driver for my district, which is the home to many small biotech companies working on critical life-changing technologies.”
The Small Entity Update Act
BIO supports H.R. 2792, the Small Entity Update Act, which would compel the U.S. Securities and Exchange Commission (SEC) to study and update small company definitions and thresholds, which are the leading cause of falling out of key exemptions granted by the JOBS Act.
The Expanding Access to Capital Act of 2023
BIO also supports Chair McHenry’s H.R. 2799, the Expanding Access to Capital Act of 2023. BIO especially supports Title II, the Helping Startups to Grow Act, which would extend the emerging growth company exemption period of the JOBS Act by another five years.
Taken together, these pieces of legislation, which were also approved by the Financial Services Committee, will save small biotechs millions of dollars a year that could be best used to advance research instead of filing paperwork.