Biotech Executive Pushes for Additional Sarbanes-Oxley Exemption
Several business lobbyists say Section 404(b) in the Sarbanes-Oxley Act of 2002 requiring auditors to attest clients’ internal controls create unnecessary expenses to public companies. In response, lobbyists are asking Congress to give additional exemptions for small and medium-sized companies.
Representing the Biotechnology Innovation Organization during a July 18 hearing by the House Financial Services Committee, aTyr Pharma Senior Vice President John Blake testified that biotech companies currently developing drugs do not pose the same risks as bigger companies do with their financial reporting systems. Blake believes minimal benefit is gained from the auditor attestation requirements regarding financial reporting controls.
Per Section 404(b) of the Sarbanes-Oxley Act of 2002, public companies with market capitalization under $75 million are exempt from the auditor attestation provision. Additionally, emerging growth companies with under $1 billion in revenues get a five-year exemption after going public. Blake said aTyr Pharma would still be conducting lab research past the five-year exemption. If the emerging growth companies exemption was extended for another five years, aTyr Pharma could perform additional research. Without the extension, Blake said his company’s audit fee would rise between 50 to 80 percent and its internal control consulting fee would increase by $50,000.
Blake also testified that around 200 biotech companies face similar situations.