TherapeuticsMD settles Reg FD action

Aug 26, 2019
SEC says pharmaceutical company disclosed material, non-public information only to analysts

Boca Raton, Florida-based TherapeuticsMD has agreed to pay a $200,000 penalty to settle allegations it violated Regulation Fair Disclosure (Reg FD) by sharing material, non-public information with analysts without also publicly disclosing the same information.

Specifically, the SEC alleges in its administrative proceeding that TherapeuticsMD made selective disclosures of material non-public information on two separate occasions in 2017 to sell-side research analysts who covered the company. Both disclosures related to the company’s interactions with the Food and Drug Administration (FDA) concerning potential approval of a TherapeuticsMD drug, TX-004HR, which was at the time one of only two drugs in the company’s development pipeline, according to the SEC.

TherapeuticsMD consented to the SEC’s order without admitting or denying wrongdoing.

The first alleged selective disclosure followed a June 14, 2017 meeting with the FDA, which an unnamed TherapeuticsMD executive communicated about with ‘at least’ six sell-side analysts over the following two days, the commission alleges.

According to the SEC, the company’s stock price rose sharply on June 16 and closed up 19.4 percent, which caused the NYSE to inquire whether a disclosure of material information might be affecting the stock. TherapeuticsMD did not publicly disclose information about the June 14 meeting that had been shared with the analysts, the SEC says.

The second alleged selective disclosure occurred on July 17, 2017, after the company’s early-morning release of a Form 8K stating that it received the FDA meeting minutes and had submitted new information to the FDA in support of its application for approval, according to the SEC.

The Form 8K contained little detail about the status of approval for TX-004HR and the company’s stock fell 16 percent in early trading, the agency says. But less than an hour later, TherapeuticsMD executives held a call with analysts and disclosed specific details about the discussions at the FDA meeting and the new information submitted in support of TX-004HR’s approval, the SEC alleges.

The analysts published notes that afternoon and evening containing details from the call, and TherapeuticsMD’s stock recovered to close down just 6.6 percent by market close, according to the regulator’s filing. But the SEC alleges that the company did not publicly disclose the specific details about the FDA meeting that had been shared with analysts, or the new information relevant to TX-004HR’s approval, until its earnings call on August 3, 2017.

Reg FD prohibits public companies, or people acting on their behalf, from selectively disclosing material, non-public information to certain people outside the company, including institutional investors, securities analysts and other securities professionals – without also releasing that information to the public.

As a result of this alleged conduct, TherapeuticsMD violated Reg FD by providing material, non-public information regarding TX-004HR’s approval prospects to its sell-side analysts and by failing to simultaneously or promptly publicly disclose that information, the SEC says.

TherapeuticsMD’s failure to simultaneously publicly disseminate the material information in accordance with Reg FD caused the investing public to be at a disadvantage relative to the analysts and their subscribers who were privy to the selective disclosures, according to the agency.

Reg FD came into effect in October 2000. The requirements caused consternation among some investment managers and issuers at the time but has since become a core part of corporate compliance efforts, including those involving directors’ communications. The SEC has brought a number of enforcements regarding alleged violations of the rules, although industry professionals have at times remarked that they might have expected to see more such actions.

‘Information about a pharmaceutical company’s interactions with the FDA can be critical to investors. It is essential that when companies disseminate material, non-public information, they do so fairly and appropriately to all investors and not just a select few analysts,’ says Carolyn Welshhans, associate director of the SEC’s division of enforcement, in a statement.

In deciding to accept the settlement, the commission says it took into account the company’s remedial acts and co-operation with SEC officials.

A TherapeuticsMD official says in a statement: ‘We are pleased to have resolved the matter. As the order notes, we have revised our policies and procedures related to the public disclosure of information and have enhanced training in this area. With the settlement behind us, we look forward to continuing our mission of advancing the health of women and championing awareness of their healthcare issues.’

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