Houston Biopharma misled investors in $40 million offering

Kiromic Biopharma, based in the Medical Center, has fired its CEO for misconduct and also admitted it misled investors during a $40 million public stock offering in 2021.

The company is developing immuno-oncology therapeutics for the treatment of blood cancers and solid tumors. It went public in October 2020, raising $15 million at $12 per share. It raised a further $40 million in July 2021 at $5 per share. The shares now trade at $1.

On August 17 and 23. 2021, then CFO and Board member Tony Tontat submitted substantially identical reports through the company’s complaint hotline. The complaints pertain to the company’s public disclosures with the SEC regarding the anticipated timing of the US Food and Drug Administration (FDA) authorization of its drug applications and the anticipated timing of human clinical trials.

The complaints were passed to the Audit Committee of the Board. In turn, the Audit Committee recommended the Board form a Special Committee to investigate. After engaging outside counsel (Sidley Austin) and AlixPartner, the Special Committee reported on its findings to the Board on February 2, 2022

FDA Clinical Hold

In short, the company received communications from the FDA  on June 16 and June 17, 2021 that the FDA was placing two new potential drugs on clinical hold. A clinical hold means the company has to suspend ongoing clinical work. The formal clinical hold letters were received from the FDA on July 13, 2021.

On July 16, 2021, the company issued a press release disclosing it had received comments from the FDA but did not mention the term ‘clinical hold’. It was only on August 13, 2021 that the company disclosed this fact.

These dates are important as the company filed its S-1 Registration Statement on June 25 without mentioning the correspondence from the FDA on the clinical holds. It closed its IPO on July 2, 2021. That lack of disclosure will trigger even more shareholder lawsuits.

Disclosure Committee

The SEC filing doesn’t explicit state who in the company knew what and when. The Special Committee did recommend the formation of a Disclosure Committee comprising the CEO, CFO, General Counsel, the Corporate Controller and any Executive in charge of FDA submissions. Their role is to ensure timely and accurate disclosure of relevant information to investors and the SEC.

CFO lied about his education

For good measure, the Special Committee also found that Mr. Tontat lied to the company about his educational background. Instead of a BA in Economics from Harvard University, he received a Bachelor of Liberal Arts, a degree conferred by the Harvard Extension School.

Mr. Tontat resigned as CFO in October 2021, with Dan Clark, VP of Finance, promoted to interim CFO. The SEC filing announcing Mr. Tontat’s resignation stated that it was due to personal reasons and did not relate to any disagreement with the operations, policies or practices of the Company on any matters.

CEO fired

CEO Maurizio Chiriva-Internati was terminated for cause on January 27, 2022 after the Special Committee found ‘evidence of conduct that the Board believe was inconsistent with the Company’s policies.’

Pietro Bersani, a current member of the Board, has been appointed interim CEO while the company searches for a permanent CEO.

SEC filing – Kiromic Biopharma fires CEO


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