SEC comment letter trends for middle-market and pre-IPO life sciences companies

By understanding the nature of SEC comments and taking the appropriate steps to comply, life sciences companies have an opportunity to significantly reduce initial public offering (IPO) filing delays.

In our report, Under the Microscope: An Analysis of SEC Comment Letter Trends Among Middle-Market and Pre-IPO Life Sciences Companies, we looked at S-1, 10-K, 10-Q, and 20-F filings made by life sciences companies during a 12-month review period in 2017 and 2018.* Comments were analyzed by frequency as a way of identifying the most prominent topics under SEC scrutiny.

Comments relating to R&D clinical trials saw the most growth in 2017–2018. Comments relating to entity-related disclosures and management’s discussion and analysis (MD&A) also saw an increase in focus, while comments targeting reporting guidelines and information on material contracts dipped slightly.

Initial findings

Comment categories

R&D remained the most prominent category to receive SEC comments — with the majority directed toward companies’ clinical trials — followed by comments relating to process compliance, disclosures on entity backgrounds, the IPO, MD&A, and any current or anticipated risks related to the business.

Information around shareholders’ equity, licensing agreements, patents, and proxy disclosures on company directors and officers collectively constituted a large percentage of SEC scrutiny.

The following infographic depicts a breakdown of 1,401 total SEC comments, according to category and frequency.

Significant changes

The below topics showcased a positive or negative variance, measured as a ratio to the total number of comments. This includes categories such as R&D, process compliance, entity background, MD&A, and material contracts.