|Yesterday the Senate Health, Education, Labor and Pensions (HELP) Committee passed a Manager's Amendment called the "FDA Safety and Innovation Act" which 1) reauthorizes Prescription Drug User Fee Authorization (PDUFA) and Medical Device User Fee Authorization (MDUFA), 2) creates new user fees for generic drugs and biosimilars and, 3) includes several broad FDA reforms.
We were pleased to see a number of NVCA and MedIC priorities included the marked up bill:
- A patient centered benefit-risk assessment for drugs;
- Expansion of the accelerated approval process for new medical treatments;
- Creation of a new pathway for breakthrough therapies;
- Change to the conflict of interests rules for advisory committees;
- Incentives for the development of new antibiotics;
- Improvements to the DeNovo application process;
- Lift to the profit cap for humanitarian use device exemptions;
- Request to CDRH to withdraw the recent 510(k) submissions guidance
Given the current political environment on the Capitol Hill, we view the markup positively despite the fact that some of these provisions make marginal changes to the FDA law.
We will continue to work hard on our other priorities including a patient centered benefit-risk assessment for medical devices that codifies CDRH's Risk-Benefit guidance, formal time lines for appeals at CDRH, and allowance for the use of foreign data in regulatory decisions. All of these provisions are still on the table and could indeed be included in a final package.
It is likely that the "FDA Safety and Innovation Act" will be debated on the Senate floor sometime in May. The House Energy and Commerce Health Subcommittee is scheduled to mark up its bill on May 8 and the full Committee plans to mark up the Subcommittee draft shortly thereafter. We are hopeful Congress will stay on this fast paced schedule and get a final package to the President this quarter. This will avoid the possibility of using the bill as a vehicle to to repeal provisions of the new healthcare law on which the Supreme Court likely will render its decision this summer. We will keep you informed here at NVCAccess.
Few topics divide our business and political leaders more sharply than the role government should play in our free market system. And no sector of our economy embodies the stakes for getting that role right than clean technology. That’s why NVCA invited three thought leaders with deep experience and diverse expertise in clean tech to discuss the issues and opportunities surrounding the sector in depth at our annual meeting in Santa Clara today. Predictably, our speakers did not agree on everything. But each stressed that public policy will continue to play an outsized role in the U.S. energy sector.
The session began with remarks by Theodore F. Craver, CEO and chairman of Edison International, the parent company of one of the country’s largest investor-owned electric utilities. Mr. Craver described the energy industry as going through a period of transformative change – driven in part by clean tech innovation. He cautioned, however, that the speed of this innovation conflicts with the current business model at electric utilities. Specifically, the capital-intensive nature of investments in legacy energy generation and delivery and the extent of the regulatory apparatus require that utility companies be conservative investors. They are not free to take the same risks as VCs. Mr. Craver, however, did provide VCs with a set of questions that they and their portfolio companies can ask themselves to help them see new technology opportunities through a utility’s eyes: 1) Is it more or less expensive than what it will replace? 2) Is it truly experimental or has it demonstrated success in some form? 3) Does it raise or lower costs the costs of the end product? 4) How does it affect the economic and socio-political environment? If the answers to these questions aren’t largely positive, Mr. Craver suggested that the conversation will probably be a short one. For this reason, the adoption and success of nascent clean energy technologies – and the willingness of utilities to invest in them – will continue to depend on tax breaks and subsidies, of which Mr. Craver questioned the fairness.
Whereas Ted Craver expressed concerns about those instances where public policy conflicted with economics, former Pennsylvania Governor Ed Rendell embraced the need for such conflicts to overcome market barriers to clean technology deployment – especially when those technologies are young and expensive. “Everybody needs to accept that they’re going to take a hit in the short run,” he admitted. But he argued that the long-term benefits to businesses and society would be worth it. Gov. Rendell then asserted that the U.S. could reduce its energy imports to zero if U.S. politicians had the political will to develop a comprehensive energy policy with that as its goal. He said that the development of that policy must be led by the president – whether it is ultimately Barack Obama or Mitt Romney. Gov. Rendell also stressed that there is plenty of room for innovation to help reduce demand and increase energy efficiency, but also plenty of opportunity for flexibility within the current regulatory regime for incumbents that are willing to invest in change.
The presentations concluded with a presentation by Andrew Shapiro, chairman of GO ventures and the founder of GreenOrder. Mr. Shapiro focuses on the opportunity to solve major global consumption problems that clean tech innovation presents. The proliferation of innovative new solutions and the steady stream of funding they are garnering are causes for optimism. But, he said, we are not scaling up these technologies fast enough. Echoing Mr. Craver, he pointed to public policy failures and the prevailing economics in the energy sector – particularly the emergence of cheap and plentiful natural gas. In a nod to the entrenched business-regulatory axis, Mr. Shapiro lamented that, “Two guys in a garage can’t disrupt today’s energy industries,” the way innovators in the IT space can. Here, however, he suggested that more collaboration between corporate venture sources and startups (through "open innovation") could help bridge the “valley of death” – citing the recent efforts of GE's Ecomagination effort (with VCs) and other efforts as an example. In this way, startups, corporations and policymakers could overcome the hurdles posed by market inefficiency and develop new strategies and platforms to accelerate deployment of market-ready solutions - creating a win for all parties and society as a whole.
Throughout their remarks and the panel discussion that followed, Mr. Craver, Mr. Shapiro and Gov. Rendell seemed to agree that the lack of a comprehensive U.S. energy policy is impeding the adoption and deployment of innovative clean technologies They also agreed that continued funding of basic research by the U.S. government through agencies like ARPA-E will be crucial to the development of the clean tech sector.
Whether you work in business or politics, it’s always the same: Success brings no rest. Indeed, it appears that our reward for a productive 12 months of venture capital engagement in Washington D.C. is merely a new set of challenges to tackle – including a presidential election in November. I had the opportunity to discuss these challenges and the implications of the successes that preceded them with NVCA Chair Paul Maeder at the opening general session of our NVCA Annual Meeting in Santa Clara, Calif., earlier today.
I expect the election to play a large role in framing and driving our agenda in the coming year – beginning with the campaign. When Mitt Romney wins the Republican nomination, for example, we will face the age-old challenge of educating the media and the public about the differences between venture capital, private equity (where Mr. Romney mostly made his name) and hedge funds. Fortunately, we now have a definition of venture capital straight from the SEC to aid us with this effort.
The campaign will also throw a spotlight on critical issues like tax fairness and reform. Some are already calling into question the value of the capital gains rate, and we expect conversation to intensify. Tax law regarding partnerships may also get a closer look. These conversations will require us to redouble our efforts in communicating the benefits of smart tax policy in encouraging investment, capital formation, and the jobs that both generate. Again, we’re fortunate that these messages should be fresh in the wake of our successful effort to get the JOBS Act passed.
We also expect the Obama and Romney campaigns to spar continuously over the role government should play in our economy. This will unfold across a number of fronts. For example, policymakers on both sides will continue to wrangle over government’s role in upholding citizens’ online privacy. This pas t year, we were able to help defeat the SOPA and PIPA bills because of the negative effects they would have on innovation, but the underlying issues are far from dead. That’s why the growth of the coalition we’re building among of technology members couldn’t come at a better time.
In life sciences, we’ve made significant progress in our dialogue with the FDA regarding more efficient and predictable approval processes for new drugs and medical devices. We’ll need to build on that progress as we push for renewed PDUFA and MDUFA funding. And in clean tech, where we saw Congress renew funding for ARPA-E in the past year, we’ll have to work hard to ensure that funding for basic research remains strong while our portfolio companies, industry incumbents and regulators work on how best to bridge the “valley of death” between inspiration and commercialization.
Across all of these priorities, one thing is clear: NVCA and the venture community we support must retain the role of positive, proactive problem solvers. Being “for” something specific always seems to open more doors on Capitol Hill than being “against” things in general. We learned that with so many of our accomplishments in the past year – from JOBS to our SEC exemption to the FDA. Armed with that perspective, we set to work on a fresh set of challenges. Success never brings rest.
The Securities and Exchange Commission (SEC) has appointed NVCA retiring director Stephen Holmes to its new Investor Advisory Committee. Established by the Dodd-Frank Act, the committee will advise the Commission on regulatory priorities, the regulation of securities products, trading strategies, fee structures, the effectiveness of disclosure, and on initiatives to protect investor interests and to promote investor confidence and the integrity of the securities marketplace.
Stephen Holmes, COO and general partner, at InterWest Partners, is a founding member of NVCA’s CFO Task Force in May, 2003. He has been active in NVCA’s efforts to constructively engage with the Financial Accounting Standards Board (FASB), and its parent organization, the Financial Accounting Foundation (FAF). This has resulted in a number of changes to proposed accounting rules as they affect venture capital fund reporting and private portfolio companies.
"The SEC’s new Investor Advisory Committee is made up of individuals with a broad range of backgrounds and experiences," said SEC Chairman Mary Schapiro. "I look forward to their insight and recommendations as to how we can further the SEC’s critical investor protection mission."
The official announcement is here.
|Today, I will join NVCA Board Chairs Past and Present, members of the NVCA staff, CEOs of venture-backed companies, members of the IPO Task Force as well as members of Congress and the Administration in the Rose Garden at the White House as President Obama signs the 2012 JOBS Act into law. A great deal of work went into advocating for the passage of this bill – specifically the IPO On-Ramp provisions that will help smooth the path to the capital markets for our emerging growth companies. We are heartened by the bipartisan, bicameral recognition of the importance of these companies to the US economy and hope that today is a harbinger of favorable policies for entrepreneurship, innovation and capital formation in the coming years.
Please join us in thanking and congratulating those Members of Congress who supported our efforts. The NVCA posted an official thank you this morning which lists the Congressional members who voted in favor of the JOBS Act. We encourage you to drop them a note in the coming weeks, letting them know that you appreciate their efforts on behalf of the venture capital industry and the start-up economy.
And to that end, we would like to once again thank all NVCA members and supporters for their efforts in making today a reality.
|Often the term "perfect storm" is used to describe a series of conditions that occur simultaneously to effect some event. Such is the case with the venture-backed IPO market as we enter the second quarter of 2012 – yet only in the most positive sense. After several years of market and regulatory conditions that have weighed heavily on companies considering an IPO, the clouds appear to be lifting -- at least for now -- and the right conditions are forming for a brighter future for our exit environment and our capital markets system.
Today, NVCA and Thomson Reuters released the first quarter Exit Poll report which provides IPO and M&A data for venture-backed companies. Driven by the stable market and a pipeline of strong companies in registration, the IPO volume was at its highest level since 2007 at 19 offerings. M&A volume was also stable at 86 transactions, but more importantly, the quality of deals remained strong with more than half of the disclosed transactions bringing in more than 4 times the venture investment.
The strong quarter comes on the heels of last week's passage of the JOBS Act which will provide temporary but meaningful regulatory relief for emerging growth companies that are pursuing an IPO. Once the President signs the bill on Thursday, the IPO process will become less daunting for a critical class of companies that has struggled in the last decade with the burdens of going public.
Adding to this positive legislative development, we have two U.S. exchanges that are healthy and hungry for business. This quarter's 19 IPOs were split almost equally between the NASDAQ and NYSE (at 10 and 9 respectively). The competition means good choices for our companies who can now select the exchange that best meets their needs.
Clearly, we benefitted from a more stable market in Q1 – and we can only hope that this continues. No legislation or venture capital firm or outstanding company can offset a market that suffers from 600 point swings on a daily basis. With a pipeline of 50 strong venture-backed companies waiting to price, we believe that conditions are favorable to begin to see the issues flow.
A healthy IPO market can only help the acquisitions market. If buyers believe that a company has only one choice, it compromises the target's ability to negotiate a fair price for their company. With the U.S. capital markets system open for business, there are more options to consider and better deals to be made
Do we expect this "perfect storm" to flood the market with hundreds of IPOs this year? No. But it looks as if we are in the process of slowly turning a trend that had been hurting our companies for a decade. And we are optimistic for smoother sailing ahead.