U.S. Securities and Exchange Commission Litigation Release No. 26265, dated March 12, 2025.
The SEC charged three former executives of Allarity Therapeutics with defrauding investors about the prospects of their cancer drug, dovitinib. They allegedly concealed a negative FDA assessment recommending against approval and misled investors about the drug's viability while raising money. The SEC seeks injunctions, disgorgement, penalties, and officer and director bars.
In Plain English
Imagine you have a special medicine that you think will help sick people, but a doctor (like the FDA) says your medicine isn't ready and needs more testing. Instead of telling everyone the doctor's concerns, you tell people the medicine is almost ready and will be approved soon. You do this to get money from them to keep your company going. Eventually, the doctor refuses to even look at your medicine, and the people who gave you money lose out. That's what the SEC says happened here.
Disclaimer: all facts are drawn from the SEC's own filings; the claims described are allegations unless and until a court rules or the parties settle, and some cases end in dismissal.
How the Alleged Scheme Worked
- Receive Bad News from FDA In February 2020, former executives Stefano Carchedi (CEO), Marie Foegh (CMO), and James Cullem (CBO) of Allarity Therapeutics learned that the Food and Drug Administration (FDA) recommended against seeking approval for their cancer drug, dovitinib. The FDA stated that Allarity's data was insufficient and required a new Phase III clinical trial.
- Conceal FDA's Negative Feedback Instead of disclosing the FDA's critical assessment to investors, the defendants allegedly schemed to conceal this information. They knew that dovitinib would likely not be approved without a new trial, which the company had no intention of conducting.
- Issue Misleading Press Releases The executives allegedly created press releases that propagated false and misleading claims about dovitinib's likelihood of FDA approval. These releases were used to attract investors while Allarity was raising money to stay afloat.
- File Deceptive SEC Documents Stefano Carchedi, the CEO, also allegedly signed several documents filed with the SEC or posted on Allarity's website. These documents similarly misled investors about dovitinib's prospects for FDA approval.
- Submit Flawed Application Despite the FDA's recommendation, Allarity submitted its drug application for dovitinib on December 21, 2021, without conducting the required new trial. The press release announcing this submission did not disclose the FDA's prior advice against it.
- Secure Investment Based on False Premise On the same day the application was submitted, Allarity announced its listing on NASDAQ and secured a $20 million investment. This investment was largely premised on the company having a viable drug application, a fact unknown to the investor due to the concealed FDA feedback.
- FDA Refuses to Review Application On February 18, 2022, Allarity revealed that the FDA had refused to even review the drug application, a significant setback. The following trading day, Allarity's share price dropped approximately 31%.
The Enforcement Action
The SEC filed charges against Stefano R. Carchedi, Marie L. Foegh Ramwell, and James G. Cullem, former executives of Allarity Therapeutics, Inc. The SEC alleges they schemed to mislead investors about the approval prospects of the company's cancer drug, dovitinib, by concealing a negative assessment from the FDA. The SEC seeks permanent injunctions, disgorgement with prejudgment interest, civil monetary penalties, and officer and director bars against all defendants.