Cassava Sciences Shares Plummet on News of Scientific Advisor Indicted on Fraud Allegations

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Written By Dean McHugh

Cassava Sciences experienced a significant drop in share price, hitting its lowest level since January 2021, with shares falling 35% to $12.40 last Friday. This decline followed the news that a key scientific advisor to the company for nearly two decades, Dr. Hoau-Yan Wang, was indicted for allegedly defrauding the US National Institutes Of Health (NIH).

Cassava Sciences Recent Milestons

Credits: DepositPhotos

Cassava Sciences has been developing simufilam, a drug aimed at treating mild-to-moderate Alzheimer’s disease. The drug is currently in two fully enrolled Phase 3 clinical trials, each involving over 800 patients.

According to Cassava’s Q1 2024 earnings press release, the first study, RETHINK-ALZ, evaluates simufilam’s safety and efficacy over 52 weeks, while the second study, REFOCUS-ALZ, extends this evaluation over 76 weeks.

These trials are conducted across various locations, including the United States, Canada, Puerto Rico, Australia, and South Korea, with Premier Research International supporting the clinical program.

Dr. Wang’s Significant Contributions

Dr. Wang, a long-time paid advisor, played a key role in developing the thesis that simufilam’s ability to restore the natural shape and function of the protein filamin A (FLNA) could positively affect Alzheimer’s patients.

Cassava’s research posits that the altered form of FLNA causes neuronal dysfunction, degeneration, and neuroinflammation. Simufilam is believed to disrupt amyloid binding to the α7 nicotinic acetylcholine receptor, which is central to its mechanism of action in Alzheimer’s disease.

However, many of the studies supporting this thesis, co-authored by Wang and Cassava’s Senior Vice President of Neuroscience, Lindsay Burns, have been retracted by scientific journals.

Accusations of data falsification have emerged, particularly following a Phase 2 study of simufilam that initially appeared to fail until re-evaluated by Dr. Wang’s lab, where it was subsequently declared successful.

Ripple Effects of Controversies

These controversies have led to doubts about the legitimacy of the Investigational New Drug (IND) approval Cassava received from the FDA in 2017 and the Phase 2 study results that propelled the drug into Phase 3 trials. However, these accusations primarily come from short sellers who have a vested interest in seeing Cassava’s share price fall. Cassava’s management has referred to this as a “short-and-distort” campaign.

Back in August 2021, Cassava’s shares traded over $120 following promising open-label Phase 2 study results. Now, the shares are down about 90% from those highs. Despite this, the Phase 3 trials are ongoing, with over 435 patients having completed the RETHINK study and over 300 having completed the REFOCUS study.

The Data Safety and Monitoring Board (DSMB) has reviewed the studies twice, recommending they continue as planned without modifications. Top-line data from the 52-week study is expected around year-end 2024, with results from the 76-week study anticipated by mid-2025.

Recent Developments and Their Impact on Cassava

The recent indictment of Dr. Wang presents a significant challenge for Cassava. The company issued a statement acknowledging the indictment, noting that Dr. Wang had been charged with defrauding the NIH for approximately $16 million in grants. Cassava emphasized that Dr. Wang had no involvement in the Phase 3 clinical trials of simufilam.

This situation raises several concerns. Previous investigations by the City University of New York and the FDA criticized Dr. Wang’s methods but did not result in formal actions against him or Cassava. Now, the Department of Justice has charged Dr. Wang with major fraud, wire fraud, and false statements, which could lead to imprisonment if he is convicted.

While Cassava states that Dr. Wang is no longer associated with the company, his past involvement in developing simufilam cannot be overlooked. The question arises: if the early data supporting simufilam’s progression to Phase 3 is proven to be falsified, should the drug be allowed to proceed to market even if the Phase 3 results are positive?

Looking Ahead: Potential Outcomes for Cassava

If Dr. Wang is found guilty, it does not necessarily mean Cassava will be implicated in wrongdoing. However, many of the studies and NIH grants in question are related to simufilam.

The FDA’s initial approval of the Phase 3 trials implies some level of confidence in the drug’s potential. The upcoming readouts from these trials will be crucial. If the trials show positive results, particularly in early-stage Alzheimer’s patients, it could validate simufilam’s efficacy.

However, if the results are negative or inconclusive, it could spell disaster for Cassava, especially given the financial strain the company is under with a significant operating loss and limited cash reserves.

Concluding Thoughts

Credits: DepositPhotos

Cassava’s situation is precarious. The indictment of Dr. Wang casts a shadow over the company and its ongoing trials. While the shorts have had considerable success in driving down Cassava’s stock price, the outcome of the Phase 3 trials remains a critical unknown.

The company’s management is under immense pressure, and the next few months will be pivotal. If the Phase 3 data is positive, it could vindicate the company’s efforts and provide a much-needed boost. However, if the data disappoints, it could lead to severe financial and reputational consequences for Cassava.


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