The Commission has brought few actions against issuers for selective disclosure under Reg. FD in recent years. Indeed, the last such action may have been the 2013 NetFlix proceeding. Nevertheless, the Regulation remains an important safeguard against selective disclosures, ensuring that if material non-public information is disclosed to persons outside the company it become available not just to the few but to the public. This week, however, the agency brought an action against a company that violated the Regulation not just once but twice in a short period of time. In the Matter of TherapeuticsMD, Inc., Civil Action No. 3-19362 (August 20, 2019).
The Florida based firm conducts research and develops and commercializes pharmaceutical drugs for women’s health issues. In the last several years the company has been developing TX-004HR, a hormone drug therapy. A new drug application was submitted to the FDA in early July 2016. The agency notified TherapeuticsMD that it would complete a review by early May 2017. While the firm was developing two products in this area, only TX- 004HR had progressed to this stage.
The company expected to begin communicating with the FDA on proposed labeling and post-marketing requirements shortly before the review was completed. The FDA, however, sent the firm a letter noting that unspecified deficiencies precluded conversations.
In early May the FDA sent TherapeuticsMD a second letter that identified one deficiency: the lack of long-term safety data. After disclosing the contents of the letter in a press release and Form 8-K filing, the company requested and received a meeting date with the FDA. TherapeuticsMD also disclosed the meeting, noting possible outcomes.
On June 14, 2017 the firm met with the FDA and reviewed the pertinent data. The meeting ended with a clear path forward identified by the agency. Subsequently, emails described the meeting as very positive, noting that the firm was waiting the meeting minutes to assess the path forward. Three analysts followed-up on an offer in the email to discuss the matter further. Following the discussions, the firm’s share price increased significantly. There were no public disclosures regarding the meeting.
When the meeting notes were received in early July 2017, TherapeuticsMD filed a Form 8-K and press release updating the public. Later that day, firm executives held a pre-scheduled conference call with analysts during which the meeting with the FDA was reviewed. New information that had been submitted to the agency was identified. During the call three studies that had been submitted to the agency were emailed to the analysts on the phone along with other information from the company about TX-004HR. Following the publication of reports by certain analysts the stock price, which had declined, rebounded. During these events TherapeuticsMD did not have policies or procedures relating to compliance with Regulation FD. The Order alleges violations of Exchange Act Section 13(a) and Regulation FD.
To resolve the proceedings Respondent consented to the entry of a cease and desist order based on the section and regulation cited in the Order. The firm also agreed to pay a penalty of $200,000.