Chembio Diagnostics settles with SEC as sale to Biosynex nears
Chembio Diagnostics Inc., based in Hauppauge, seeks to close its $17.2 million sale to French test maker Biosynex SA on March 31. Credit: Newsday/John Paraskevas
A manufacturer of rapid diagnostic tests in Hauppauge has paid $500,000 to end an investigation by the U.S. Securities and Exchange Commission, according to a securities filing.
Chembio Diagnostics Inc. said it paid “a one-time civil monetary penalty of $500,000” to the SEC but “neither admitted nor denied the SEC’s findings” in the probe.
The public company also said in Monday’s filing that it agreed “to cease and desist from committing or causing any violations or future violations” of federal securities law.
Chembio didn’t provide details of the SEC investigation in the filing, and a company spokesman didn't respond to a request for comment on Wednesday.
But in the 2021 annual report to shareholders, Chembio said it had received multiple subpoenas from the SEC concerning a stock offering that ended in May 2020 and the U.S. Food and Drug Administration’s decision less than one month later to withdraw Emergency Use Authorization, or EUA, for the company's COVID-19 antibody test, which was found to produce inaccurate results in some instances.
The EUA was issued in April 2020 and Chembio had shifted much of its production to the COVID-19 test in anticipation of increased demand. The stock offering of 2.6 million shares raised $30.8 million, which was to go toward additional test production.
The EUA withdrawal on June 16, 2020, led to a sell-off of Chembio stock, with shares losing 61% of their value two days later. At the time, the FDA’s chief scientist said changes that Chembio proposed in May 2020 for the antibody test didn’t address the agency’s concerns about “the risks to public health from false test results.”
Chembio, in a securities filing last month, said the SEC was investigating “certain statements made by the company during the 2020 public offering in light of the FDA revocation” of the EUA for the COVID-19 test.
SEC spokesman David Ausiello said on Wednesday: "We decline comment beyond the public filings on this matter."
The settlement with the SEC comes as Chembio seeks to finalize a sale of itself to Biosynex SA, a French test maker. The $17.2 million transaction is expected to close on March 31.
Chembio reported a loss of $22.4 million for the nine months ended Sept. 30 on revenue of $39 million, according to its most recent earnings report in November. The company last reported an annual profit — $500,000 — in 2013, according to the S&P Capital IQ database.
Chembio shares closed up less than 1 cent to 44 cents on the Nasdaq composite on Wednesday.
James T. Madore writes about Long Island business news including the economy, development, and the relationship between government and business. He previously served as Albany bureau chief.
