The SEC had settled charges against Houston-based biotherapeutics company Kiromic BioPharma, Inc., its former CEO, Maurizio Chiriva-Internati, and its former chief financial officer, Tony Tontat, for failing to disclose material information about Kiromic’s two cancer-fighting-drug candidates before, during, and after a July 2021 follow-on public offering that raised $40 million.
According to the SEC’s order against Kiromic, the company raised $40 million in a public offering on July 2, 2021, for the purpose of funding the prospective clinical trials for its two cancer fighting drug candidates, the ALEXIS-PRO-1 and the ALEXIS-ISO-1.
However, the SEC’s order found that two weeks before the public offering, the Food and Drug Administration (FDA) notified Kiromic that it had placed the drug candidates on clinical hold—an FDA order to delay the proposed clinical investigations. The SEC’s order also found that Kiromic did not disclose the FDA clinical holds in its SEC filings, investor roadshow calls, or during due diligence calls leading up to the offering, despite the fact that Kiromic disclosed the hypothetical risk of a clinical hold and the potential negative consequences on Kiromic’s business.
Kiromic and Tontat have agreed to settle the SEC’s charges in separate administrative proceedings and Chiriva has agreed to settle the charges in federal district court.
Kiromic was not ordered to pay a civil penalty in light of its self-reporting, cooperation, and remediation, and Chiriva and Tontat agreed to pay civil penalties of $125,000 and $20,000, respectively, to settle the SEC’s charges.
Kendrick Lewis of the SEC’s Fort Worth Regional Office conducted the investigation, which Samantha S. Martin and B supervised. David Fraser. Jennifer Reece will lead the SEC’s litigation, which will be supervised by Keefe Bernstein.
Kiromic raised $40 million through a stock offering in July to advance its clinical trials program. Despite being aware two weeks prior, the company failed to disclose in its SEC filings and investor communications that the FDA had placed clinical holds on its ALEXIS investigational new drugs.
The company’s subsequent communications mentioned FDA feedback on the drug candidates but omitted the term “clinical hold” until an August 13 press release, which stated their intention to meet with regulators regarding the matter.
Following two anonymous internal complaints in August 2021, the board initiated a special committee investigation into the FDA hold disclosures. This led to the CEO’s termination for cause, appointment of new independent directors, and establishment of a disclosure committee.
Pietro Bersani, who served five months as interim CEO, was appointed chief executive in May 2022. As of June 30, the pre-revenue company reported an accumulated deficit of $136 million and issued a “going concern” notice to investors.