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SEC Misses the JOBS Act Deadline for Rule 506 Rewrite

By Mari Serebrov
Washington Editor

WASHINGTON – Although the SEC told Congress it was doing what it could to amp up the rulemaking process to implement the Jumpstart Our Business Startups (JOBS) Act, it didn't hit its first deadline.

The act, signed into law April 5, gave the SEC 90 days, or until July 4, to release proposed rules to remove the ban against general solicitation and advertising in offerings conducted under Rule 506 of Regulation D and Rule 144A of the Securities Act. (See BioWorld Today, April 9, 2012, and June 27, 2012.)

However, the commission won't even consider staff recommendations for the proposed rules until an Aug. 22 meeting, according to an SEC notice published in Thursday's Federal Register.

It's a change many emerging growth companies are anticipating as it will allow them to be more open about their plans for a private offering. The measure will help biotechs in need of capital to get off the ground, said Megan Gates, a member of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. (See BioWorld Insight, June 4, 2012.)

In a bit of an "I told you so," SEC Chairwoman Mary Schapiro told a House Oversight subcommittee last week that the deadline was unrealistic, as it simply didn't provide adequate time to draft a new rule, prepare an economic analysis, conduct a proper review by the commission and get public input.

During the drafting of the JOBS Act, Schapiro had expressed concern about the feasibility of the rulemaking deadlines.

Revising Rule 506 isn't as straightforward as simply lifting the ban, she testified at last week's hearing. The law also requires issuers to take reasonable steps to verify that the potential purchasers are accredited investors. The SEC has been working on identifying what those verifying steps should be.

While the agency didn't hit its deadline, it has made "significant progress" on recommendations and the economic analysis, Schapiro said.

The JOBS Act also requires the SEC to conduct a number of studies, submit reports to Congress in a specified time frame and issue rules for crowdfunding in December. The SEC had requested 18 months for the crowdfunding provision; it got 270 days.

Schapiro said the agency is doing its best to meet that ambitious deadline for the crowdfunding rules. However, she gave no indication of when the SEC would raise the Regulation A cap to $50 million, as required by the JOBS Act. Since Congress set no deadline for that rule, it could be the last part of the act to be implemented.

Part of the problem is that the SEC is still trying to implement all the provisions of the Dodd-Frank Wall Street Reform Act passed in 2010. The agency has tried to prioritize the rulemaking required by both Dodd-Frank and the JOBS Act based on the congressional deadlines, Schapiro said, noting that the agency has completed 14 of the 20 or so studies it has to do under Dodd-Frank.

To accelerate the process, the SEC will be adding 16 economists in the near future to help with the rule writing, and it has requested funding in fiscal 2012 for 20 more economist positions. More may be needed in the future, Schapiro said.

FDA Moves Ahead on PDUFA V

The FDA isn't waiting for PDUFA V to be signed into law to begin implementing some of its provisions.

The agency is getting ready to award a contract, under the FDA Safety and Improvement Act (FDASIA), for an independent assessment of a new review model for original biologics and drugs that are new molecular entities (NMEs). But first it wants public comment on its conception of that assessment.

As part of its performance commitments in the user fee package, the FDA proposed the new model to improve the efficiency and effectiveness of its first-cycle review process by increasing communication with sponsors before applications are submitted and during the review itself. To accommodate the increased interaction with sponsors, the FDA review clock will not start until after the 60-day administrative filing review period.

The goal of the independent assessment, required in the PDUFA reauthorization bill, is to determine the impact the new model has on the efficiency and effectiveness of the review of NMEs and original biologics over the next five years. Comments on the assessment, which is outlined in a notice published in the Federal Register Friday, are due by Aug. 5.

The new review model will go into effect for all NME new drug applications and original biologic license applications submitted as of Oct. 1, the day FDASIA is supposed to become effective.

But first, the five-year user fee package has to be signed into law. As of Thursday, it was still sitting on the president's desk, awaiting his signature.

The bill, S. 3187, was sent to President Barack Obama June 28, two days after the Senate passed it and more than a week after it had cleared the House. (See BioWorld Today, June 21, 2012, and June 27, 2012.)

FDA Cracks Down on Oxycodone

When it comes to unapproved oxycodone drugs, the FDA will no longer play nice.

The agency is giving drugmakers 45 days to stop making unapproved single-ingredient, immediate-release oxycodone drugs in oral dosage forms, including tablets, capsules and oral solutions. They have 90 days to stop shipping them, according to a notice published in the Federal Register Thursday.

"Since FDA-approved versions of these oral dosage forms are available by prescription, there should be no negative impact on consumers as a result of this action and no disruptions to the drug supply," the agency said.

PTO Goes Regional

As part of the efforts under the America Invents Act to modernize the U.S. patent system, the Patent and Trademark Office (PTO) will open its first satellite office next week in Detroit. Other satellite offices are to be opened, in the future, in Dallas, Denver and somewhere in California's Silicon Valley. The sites were selected based on geographical diversity, regional economic impact, ability to engage the intellectual property community and the potential to recruit and retain employees, according to the PTO.