On December 3, the U.S. Securities and Exchange Commission settled charges against biotherapeutics company Kiromic BioPharma, Inc., its former CEO, and its former CFO for failing to disclose material information about Kiromic’s two cancer-fighting drug candidates in connection with a July 2021 follow-on public offering for $40 million.

This is the third SEC enforcement action against a life science company about material misstatements or omissions regarding clinical trials and product pipelines in the past six months. 

According to the SEC's order, the Food and Drug Administration (FDA) notified Kiromic that it had placed its two cancer-fighting drug candidates on clinical hold. The SEC alleges that the company failed to disclose the FDA clinical holds in its SEC filings, investor roadshow calls, or during due diligence calls leading up to its July 2021 follow-on offering—despite the fact that Kiromic disclosed the hypothetical risk of a clinical hold and the potential negative consequences on Kiromic’s business. 

The SEC's complaint against Kiromic's former CEO and CFO alleges that, despite knowing that the FDA clinal holds were material and warranted disclosure, both officers signed and certified SEC reports that that failed to disclose this information. In addition, the former CEO participated in roadshow calls with investors and did not correct misstatements by another officer about the status of the FDA review by disclosing the FDA’s clinical holds.

Kiromic was not ordered to pay a civil penalty in light of its self-reporting, cooperation, and remediation, and the former CEO and CFO agreed to pay civil penalties of $125,000 and $20,000, respectively, to settle the SEC’s charges.