May 25, 2019
This proposal is beautiful. The resource commitments, both capital and personnel, the current rules place on the issuers who will meet the new NAF criteria are enormous. For biotech or other pre-revenue companies, the focus of capital should be on developing long term benefits for the community at large. The highest level of risk with biotech companies is not with the financial statements but with data and the tone at the top. Current 404(a) requirements and the level of internal control testwork performed by auditors as part of their audit are sufficient to provide investors an appropriate level of confidence in the financial statements of these companies. A 404(b) opinion for a biotech outside the post-IPO EGC transition period has little utility to an investor.
This is exciting and appears to be emphasizing the focus on value. The value lies in the ability of these highly talented scientists and clinicians to bring help to those with unmet medical needs. These are passionate people who want to make a difference in the world. Internal controls are incredibly important and being able to instill public confidence in the financial statements is imperative, but the value proposition is not consistent in the current structure. This will hopefully inspire more capital raising for science with a focus on helping people and creating jobs vs focusing on meeting stringent regulations.