Despite the settlement, the Securities and Exchange Commission on Thursday sued Cassava Sciences in the Western District Court of Texas, claiming that the company misled investors regarding the Phase IIb performance of its Alzheimer’s disease drug candidate.
Cassava Sciences on Thursday announced that it reached a settlement with the Securities and Exchange Commission over an investigation into allegations of data manipulation involving the company’s Alzheimer’s drug candidate simufilam.
The biotech agreed to pay a $40 million civil penalty to settle the probe, while maintaining that the settlement comes “without admitting or denying the SEC’s allegations” and that the company “cooperated fully” with the investigation. Cassava has also put in place “remedial measures” to ensure that similar cases of negligence are avoided in the future, according to the announcement.
Despite the $40 million payout, Cassava reiterated its previous estimate that it will have $117 million to $127 million in cash by the end of 2024.
“Cassava is pleased to put this matter behind us,” Richard Barry, newly appointed executive chairman of the biotech’s board, said in a statement. “We can now focus all of our attention on completion of the ongoing Phase III trials of simufilam,” which, if positive, will allow the company to file a regulatory submission for the drug in Alzheimer’s disease, Barry said.
However, the legal clash with the SEC is far from over. On Thursday, the SEC filed a lawsuit against Cassava with the U.S. District Court for the Western District of Texas, which claimed that the company published “misleading” Phase IIb data for simufilam.
In addition to Cassava, the SEC’s lawsuit specifically names former CEO Remi Barbier and former senior vice president of neuroscience Lindsay Burns.
“Defendants negligently stated in SEC filings, press releases, presentations, and verbally that the Phase 2b bioanalyses were conducted under blinded conditions,” claims that were “untrue,” the legal complaint alleges, noting that Burns provided certain data to Hoau-Yan Wang, a scientific consultant to Cassava and who conducted the study’s bioanalyses, which essentially made Wang “at least partially unblinded.”
Shortly after the Phase IIb readout, Cassava was able to secure more than $260 million in new funding, which the SEC contends is in violation of the Securities Act, which makes it illegal to raise money or property by using false statements.
“Defendants misled investors by reporting cognition results that excluded 40% of subjects,” according to the SEC’s legal complaint. The lawsuit also alleges that the biotech failed to disclose the conflicts with Wang’s biomarker analysis, including the results of an internal company audit that found Wang’s laboratory “unacceptable” and temporarily ineligible to perform biomarker experiments and other research services for any future Cassava studies.
“It also made it considerably more difficult for investors to question whether Dr. Wang remained blinded or whether he might have manipulated results to ensure investors perceived his invention as a success,” according to the SEC.
