United States: SEC Charges Pharmaceutical Company For Violation Of Regulation FD, Reinforcing Need To Establish Policies For Handling Material Non-Public Information

Key takeaways:

  • On August 20, 2019, pharmaceutical company TherapeuticsMD, Inc. settled an SEC enforcement action brought under Regulation FD. The SEC alleged that ThereapeuticsMD selectively disclosed information about a potential FDA approval of its hormone-replacement drug therapy to sell-side analysts.
  • The action may indicate a renewed SEC focus on Regulation FD, and underscores the need for public companies to implement effective policies, procedures and employee training on handling material, non-public information.
  • Life sciences companies are also advised to develop standard operating procedures to govern disclosures of confidential FDA communications.

On August 20, 2019, pharmaceutical company TherapeuticsMD, Inc. ("TherapeuticsMD" or the "Company") settled charges by the U.S. Securities and Exchange Commission (the "SEC") that the Company had selectively disclosed market-moving information to sell-side analysts regarding potential approval of one of its drugs by the Food and Drug Administration (the "FDA"). This is the first stand-alone Regulation Fair Disclosure ("Regulation FD") action brought by the SEC in over five years.

The action underscores the importance of public companies maintaining policies and procedures for handling material non-public information ("MNPI") in a manner compliant with Regulation FD. Life sciences companies in particular are advised to develop standard operating procedures ("SOPs") based upon best practices governing the disclosure of MNPI arising from confidential FDA communications.

TherapeuticsMD's disclosures to analysts. The settled order alleges that TherapeuticsMD made two selective disclosures concerning TX-004HR, a hormonal drug for the treatment of dyspareunia. The SEC alleged that these disclosures violated Regulation FD, which prohibits public companies from selectively disclosing MNPI to certain enumerated persons (in general, securities market professionals and holders of the issuer's securities who are likely to trade on the basis of the information) without concurrently making widespread public disclosure. Under Regulation FD, an intentional selective disclosure must be accompanied by a simultaneous public disclosure, while an unintentional selective disclosure must be followed "promptly" by a public disclosure.

June 2017 Disclosures. According to the SEC, TherapeuticsMD submitted TX-004HR's initial New Drug Application ("NDA") in July 2016 for approval by the FDA. The following May, however, the FDA expressed concerns regarding the NDA's lack of data on the drug's long-term safety. TherapeuticsMD arranged a meeting with the FDA on June 14, 2017, and filed a Form 8-K stating that the meeting would likely have one of two results: Either the FDA would permit TherapeuticsMD to restart the NDA approval process or TherapeuticsMD would resort to formal dispute resolution with the agency.

The June 14 meeting ended without the FDA providing a clear path forward for TX004HR's approval. Following a meeting of TherapeuticsMD's executives on the next day, the Company sent a series of emails to sell-side research analysts characterizing the FDA meeting as "very positive and productive." TherapeuticsMD's stock price closed up 19.4% the following day, prompting the New York Stock Exchange to contact Company executives about the stock's activity. Instead of making a simultaneous public disclosure about the meeting's outcome, TherapeuticsMD filed a press release and Form 8-K over a month later, on July 17, 2017, after it received formal meeting minutes from the FDA.

July 2017 Disclosures. The Company's July 17, 2017 press release and Form 8-K stated that the FDA meeting had "enabled the company to present new information" to address the FDA's concerns, and disclosed that TX-004HR was not on a formal timeline for approval. In response to this disclosure, the Company's stock price fell 16% in premarket and early trading.

On the same morning, during a pre-scheduled call with sell-side analysts, TherapeuticsMD executives described the "new information" submitted to the FDA as part of the NDA. Following the call, a Company employee emailed analysts three of the new studies submitted to the FDA as part of the NDA, and included a summary of the Company Chief Medical Officer's position on TX-004HR's safety. Each analyst promptly published research notes that detailed the more specific information about the FDA interactions, in several cases repeating the Company's positive conclusions about the studies' safety implications for TX-004HR. The stock rebounded, finishing down only 6.6% by market close. TherapeuticsMD did not publicly disclose the additional data it provided to the FDA for another two weeks.

Charges and Penalties. The SEC charged the Company with violations of Section 13(a) of the Exchange Act and Regulation FD thereunder and imposed a monetary penalty of $200,000. According to the SEC, the penalty took into account the Company's subsequent remedial action, including its implementation of policies and procedures that: (1) require public disclosure of MNPI in connection with Regulation FD, (2) provide "specific examples of types of [MNPI] that might arise in light of TherapeuticMD's business model," and (3) establish review protocols for "all external communications including earnings calls, analyst meetings, and press releases."

The SEC's Renewed Focus on Regulation FD. Following its adoption in 2000, the SEC's enforcement of Regulation FD appeared to reach a peak in 2009 and 2010 with cases brought in the direct aftermath of the financial crisis. In recent years, however, the SEC has only rarely pursued stand-alone actions based on Regulation FD alone. It is likely that the intentional nature of TherapeuticsMD's selective disclosures, as well as the Company's lack of policies and procedures relating to compliance with Regulation FD at the time of the events, influenced the SEC's decision to initiate the action. However, the settled order serves as a reminder that even simple descriptive language, such as characterizing a meeting as "positive" and "productive," can have material impacts in some circumstances.

The TherapeuticsMD action follows the SEC's dissemination last year of interpretive guidance on cybersecurity disclosure obligations. In that guidance, the SEC outlined its expectation that companies implement policies and procedures that ensure disclosures of MNPI related to cybersecurity risks and incidents are compliant with Regulation FD. In light of the SEC's continued interest in enforcing Regulation FD, companies should apply appropriate care when handling MNPI and should ensure adequate policies and procedures are in place to govern disclosures.

Finally, this action reinforces the need for pharmaceutical and other FDA-regulated life sciences companies to develop best practices governing disclosure of confidential FDArelated information. As noted in prior Debevoise publications, the SEC/FDA nexus is rife with complexity as disclosure issues may arise in a variety of contexts, including confidential FDA feedback, inspectional findings, clinical trial developments, and postapproval developments. The FDA meetings during the drug/device development process are particularly sensitive as they may provide key insights into a product's progression toward approval and such information may have the potential to move the market.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions