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Scientific Consultant Settles Insider Trading Charges

July 7, 2022

File No. 3-20925

July 7, 2022 - The Securities and Exchange today announced settled charges against a scientific consultant for insider trading in advance of a negative news announcement by Catabasis Pharmaceuticals, Inc. relating to the development of a drug to be used in the treatment of muscular dystrophy.

According to the SECs order, Hugh Lee Sweeney of Gainesville, Florida was engaged by Catabasis as a consultant to provide data analysis and scientific consulting services relating to the development of a drug called edasalonexent for the treatment of muscular dystrophy. The order finds that on October 21, 2020, Catabasis provided Sweeney with material non-public information regarding the negative trial results of a blinded study of the drug edasalonexent. On the same day, and in advance of any public announcement of the negative trial results, Sweeney sold 15,000 shares of Catabasis stock. On the next day, also in advance of any public announcement, Sweeney sold his remaining 82 shares of Catabasis stock. After the close of the market on October 26, 2020, Catabasis issued a press release announcing its negative trial results. Catabasis also announced that based on the clinical trial results it would discontinue the development of edasalonexent. In response, Catabasis' stock price decreased 70.9% from $5.36 per share to $1.56 per share.

The SEC order finds that Sweeney violated the antifraud provisions of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Without admitting or denying the SEC's findings, Sweeney consented to a cease-and-desist order, disgorgement of $57,931 representing the losses he avoided trading Catabasis stock ahead of the public announcement of the negative trial results, prejudgment interest of $2,499.71, and a civil money penalty of $57,931.

The investigation was conducted by Andre Zamorano and supervised by Thierry Olivier Desmet and Glenn S. Gordon of the SEC's Miami Regional Office. The SEC appreciates the assistance of the Financial Industry Regulatory Authority.

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