Updated from 7:32 a.m. EST

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Biopure

(BPUR)

has received a Wells notice from the

Securities and Exchange Commission

, informing the company that regulators may file civil enforcement proceedings relating to material disclosures made -- and not made -- about its experimental blood substitute, Hemopure.

Tom Moore, Biopure's CEO, also received a Wells notice, as did Howard Richman, former vice president of regulatory affairs, who was fired by the company in October.

Biopure issued a news release at 5:52 p.m. EST Dec. 24 disclosing the SEC action, although the company acknowledged receiving the actual Wells notices Monday. The company's curiously timed statement included its first public acknowledgement that the

Food and Drug Administration

had "safety concerns" about Hemopure back in March, contrasting with Biopure's upbeat public pronouncements.

About one hour into Wednesday's trading session, Biopure shares were down 47 cents, or 16.7%, to $2.35.

The SEC sends a Wells notice to a company or an individual after its staff has completed an investigation and determined that sufficient wrongdoing has occurred to warrant charges to be filed. As permitted under the Wells notice process, Biopure said it will respond to the SEC in writing before the agency's staff formally decides what action, if any, to take.

At the center of the SEC's investigation is whether Biopure executives misled the public about its communications with the FDA. Biopure is seeking Hemopure's approval as an oxygen-carrying blood substitute for use in patients undergoing elective orthopedic surgery. Despite many delays and regulatory setbacks, Biopure's management insisted publicly that Hemopure was close to approval, until begrudgingly admitting otherwise in October. In the interim, Biopure and its executives sold millions of dollars in company stock.

In Wednesday's statement, the company said it believes its disclosures about Hemopure have been accurate, and it plans to cooperate with the SEC.

Biopure executives could not be reached for additional comment.

Biopure's Christmas Eve news release revealed new and troubling information about the company's dealings with the FDA. Some of this information paints a much more negative picture about Hemopure and seems to contradict management's bullish pronouncements about the product's chances for approval.

For the first time, Biopure disclosed Wednesday that in March it sought FDA permission to start a new clinical trial testing Hemopure in hospitalized trauma patients. But the FDA refused to allow the study because of "safety concerns" stemming from the company's Phase III orthopedic surgery trial.

This marks the first time Biopure has admitted safety problems with Hemopure. However,

TheStreet.com

previously reported on serious

safety problems associated with Hemopure for more than 2.5 years, citing data presented at medical meetings but not made widely available to investors, as well as information obtained from people involved in the Hemopure clinical study. These concerns included incidences of Hemopure-treated patients suffering from acute kidney failure, as well as relatively large numbers of deaths in Hemopure patients aged 75 or older.

Also Wednesday, Biopure said it submitted more information to the FDA in May, in an attempt to get the agency to lift the "clinical hold" on the trauma trial. The FDA refused twice, and even asked Biopure to conduct three additional animal studies of Hemopure. The last FDA rejection came July 30, the company said. Biopure has now given up seeking permission for the trauma study, although the company said it is still pursuing a trauma program.

Biopure said Wednesday that it hadn't previously disclosed anything about its trauma study publicly because the company didn't consider the information material, since the study was never started. However, Biopure executives weren't shy about discussing Hemopure when they could put a positive spin on events.

As the FDA was blocking the Hemopure trauma program, Biopure was still trying to get the blood substitute approved for use in orthopedic surgery. On Aug. 1, the FDA told Biopure that the Hemopure review was completed but that the product could not be approved until additional data and information were submitted. At that time, Biopure executives expressed confidence in press releases and a conference call that the FDA was eager to approve Hemopure and that it would happen soon.

Throughout the spring and summer, Biopure management talked repeatedly about how well its communications with the FDA were progressing over Hemopure's eventual approval. This bullish talk helped boost Biopure's stock price. On Aug. 1, the day Biopure disclosed the FDA letter, Biopure's stock jumped 22% to $7.30 on heavy volume. By the end of August, Biopure was trading above $8 per share.

Biopure insiders then sold company stock. The biggest seller, by far, has been Carl Rausch, Biopure's co-founder and former chief executive. During the months of June and August, Rausch, whose current title is chief technology officer, sold company stock worth about $1.5 million.

At the time, current CEO Moore claimed Rausch -- the company's largest individual shareholder -- was simply selling a relatively small portion of his Biopure holdings to meet personal financial needs. (Moore also sold stock during this period, albeit a far smaller amount.)

In late July, Biopure also raised $17.2 million through the private placement sale of its own common stock to unnamed investors.

Eventually, Biopure management couldn't hide the fact that the FDA was nowhere close to approving Hemopure. In October, the company

acknowledged that it would take almost a year for the company to compile and resubmit the information requested by the agency. Biopure's stock sunk below $3 per share. It closed Tuesday at $2.82.

Adam Feuerstein writes regularly for RealMoney.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send

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