SEC Case Against Biotech Company Underscores FDA Regulations

On December 3, 2024, the U.S. Securities and Exchange Commission (SEC) made a big announcement about a case involving Kiromic BioPharma, Inc., its former CEO Maurizio Chiriva-Internati, and former CFO Tony Tontat. The SEC found that Kiromic didn’t share important info about two drug applications with the FDA. The SEC didn’t fine Kiromic because they reported the issue themselves and worked with the SEC on fixing things. Chiriva-Internati got a $125,000 penalty, Tontat got $20,000, and Chiriva-Internati is banned from being an officer or director for three years.

This case shows how FDA rules and telling investors the truth are super important. Plus, it’s a good example of how acting fast when an employee raises a concern can help a company fix things before it’s too late.

Here are some key facts from the case:

– The FDA put hold on two of Kiromic’s cancer drug programs in June 2021. Kiromic didn’t tell investors right away.
– Two weeks after the FDA put the hold, Kiromic raised $40 million from investors without mentioning the FDA hold.
– Tontat, the CFO, knew the FDA hold was important info but told the CEO and Chief Strategy Officer to downplay it in a press release.
– After a whistleblower called out the misleading info, an investigation was done by independent directors leading to changes in Kiromic’s leadership and reporting processes.

The takeaway from this case is that honesty is always the best policy, especially when it comes to dealings with the FDA and telling investors what’s really going on. Life sciences companies need to be careful about what they say and when, especially when it comes to FDA matters. It’s better to be upfront and honest rather than trying to hide bad news, as it can have serious consequences for the company and its investors.