Emerging growth company (EGC)

A company qualifies as an emerging growth company if its annual gross revenue is below the inflation-adjusted threshold, currently $1.235 billion, and it has not issued more than $1 billion of non-convertible debt in three years. Nearly every biotech at IPO qualifies, and status lasts up to five years after the IPO unless the company becomes a large accelerated filer.

The accommodations are meaningful: two years of audited financial statements in the S-1 instead of three, exemption from the SOX 404(b) auditor attestation, reduced executive compensation disclosure, and the option to adopt new accounting standards on the private-company timeline. Companies must disclose their status and whether they have elected the extended transition for new standards.

EGC status does not change the audit standard. The financial statements in the S-1 must be audited under PCAOB standards, which is why the pre-IPO audits are often re-performed or upgraded.