By Liz Dunshee
If you’re leading a publicly traded life sciences company, you are likely well aware of the complexities of navigating multiple regulators, with the Securities and Exchange Commission and the Food and Drug Administration playing major roles in the US. Those agencies don’t operate in a vacuum. The SEC and FDA recently entered into a memorandum of understanding (MOU) that establishes a framework for sharing nonpublic information about FDA-regulated products and activities. It’s a useful reminder that regulators may look beyond the four corners of the documents you submit to them – including by considering information you provide to other regulators – when carrying out their compliance and enforcement functions.
My Cooley colleagues Asa Henin, Sonia Nath, Tejal Shah, Luke Cadigan and Elizabeth Skey explain the MOU’s implications in this Securities Litigation + Enforcement alert. Here’s an excerpt:
The MOU is particularly relevant for life sciences companies because it expressly mentions sharing information that bears on securities disclosures. While information sharing between the two agencies is not new, the MOU serves as a reminder that the SEC will use information shared by the FDA to evaluate whether companies may have made false or misleading statements “about the status of FDA review, product approvals, clinical trial results, or other matters within the FDA’s regulatory authority that could affect investors’ decisions,” and that such information could ultimately form the basis for an enforcement action.
The MOU also signals increased enforcement scrutiny on FDA-related disclosures. SEC Enforcement Director David Woodcock recently noted, “From the Division’s perspective, FDA-related disclosures have a significant impact on our markets, and fostering a closer partnership with the FDA goes hand-in-hand with our responsibility to enforce applicable disclosure requirements under the securities laws.”
As described in more detail in the alert, the MOU:
- Creates a formal operational framework for the agencies to share information, so that the process is more routine and efficient.
- Preserves limitations on disclosure of trade secret and confidential commercial or financial information, and contains substantial confidentiality protections.
- Doesn’t create new authority. The alert discusses two enforcement actions that predate the MOU, which involved the SEC using FDA-sourced information to allege inconsistencies between that information and the companies’ FDA-related public disclosures. Rather, the MOU signals increased cooperation between the agencies.
- May narrow the practical scope of the FDA’s informal “intended use” safe harbor, as it could prompt the FDA to more regularly examine investor-facing statements for promotional content, or the SEC to scrutinize whether such statements are consistent with a company’s FDA submissions. Companies should therefore consider the potential dual-audience nature of their public communications and ensure that investor disclosures are drafted with an awareness of both the securities law and FDA regulatory frameworks.
What else should companies do? The alert provides these parting thoughts:
Although framed as a bilateral information-sharing agreement, the MOU appears principally designed to facilitate the SEC’s access to nonpublic FDA information. While publicly traded life sciences companies would have been wise even before the MOU to assume that any nonpublic information in the FDA’s possession would be readily accessible by the SEC (indeed, the SEC has historically received information from the FDA in connection with investigations regarding company disclosures), the MOU emphasizes the SEC’s focus on this disclosure area and increases the likelihood that discrepancies between a company’s securities disclosures and FDA-facing information will be more readily identified and investigated by the SEC.
[SEC Enforcement Director David] Woodcock’s recent statements further signal that the Enforcement Division will focus on FDA-related disclosures given their “significant impact on our markets.” It would therefore be prudent for companies to revisit their disclosure control processes to ensure that information communicated to and received from the FDA is appropriately considered when preparing FDA-related securities disclosures.
For more information, reach out to your Cooley contact – or to Asa, Sonia, Tejal, Luke or Elizabeth.
