Cassava Sciences is moving forward with Phase III trials after paying $40m to settle an SEC case alleging misleading data from its Phase IIb trial of simufilam.
The US Securities and Exchange Commission (SEC) set out a case against the Texas-based company and two former executives, founder and former CEO, Remi Barbier, and the former Senior Vice President of Neuroscience, Dr. Lindsay Burns.
The SEC raised the charges on 26 September, alleging the company and executives presented misleading data from the trial (NCT04079803) and misled investors about its early clinical results.
In a related order, the SEC also charged Cassava consultant, Dr. Hoau-Yan Wang, an associate medical professor at the City University of New York’s (CUNY) Medical School and the therapeutic’s co-developer, for manipulating the reported clinical trial results. The SEC alleges that Wang violated antifraud provisions of the federal securities laws and that he aided and abetted Cassava’s violations of the reporting provisions.
Without admitting or denying the SEC’s allegations, Cassava Sciences agreed to pay $40m, adding it cooperated with the investigation and has implemented remedial measures. Barbier and Burns also consented to civil injunctions against future violations, agreed to pay $175,000, and $85,000, and agreed to be subject to officer-and-director bars of three and five years, respectively.
Without admitting or denying the violations, Dr. Wang consented to cease and desist from future violations and paid a $50,000 penalty.
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By GlobalDataThis is a relatively standard way cases like these are settled said the co-chair of the Health Care Litigation Area of Focus at Foley & Lardner, Jason Mehta.
Mehta added that the SEC and Department of Justice have recently turned their attention to potential clinical research fraud.
“Oftentimes companies are accused of fabrication or embellishing research findings and pay large settlements. It is common practice in the industry that when civil cases are resolved, they are resolved without any finding of admission or of liability,” Mehta explains.
The company has put all its eggs in one basket having just one candidate in the pipeline. With a market cap of $1.29bn, shareholders will be desperate for positive data from the Phase III trials to secure FDA approval. This could be difficult however with David Slovick, partner at Barnes & Thornburg who served the Commodity Futures Trading Commission (CFTC) and the SEC for nearly a decade, describing the SEC case as ‘debilitating’ for the company.
“Given the company’s primary product is the subject of this lawsuit, in the near term, this is going to be a debilitating public announcement for the company,” Slovick states.
SEC filing
According to the SEC’s order, Wang received information that unblinded him to aspects of the Phase IIb data which he used to identify about a third of the patients enrolled in the trial. By using this information, the SEC claims Wang was able to manipulate the data so it would appear the drug had caused ‘dramatic improvements’ in total tau and phosphorylated tau.
The order also claims that Wang knew Cassava would disclose the manipulated data when announcing the results of the Phase IIb clinical trial. Cassava published the data in a press release and investor deck on 14 September 2020.
“Dr Wang agreed to settle to misconduct that is fraud in a civil capacity. This is the most serious charge you can settle if you’re involved with the SEC,” said Slovick.
The SEC’s civil complaint also alleges that Cassava and Burns misled investors with claims that the Phase IIb trial was conducted in blinded conditions, even though Wang had been unblinded.
The SEC’s complaint further alleges that Cassava misled investors by announcing that the company’s therapeutic significantly improved patient cognition. Cassava claimed that the Phase IIb results showed significant improvement in episodic memory, however, it is alleged that Burns removed around 40% of patients from the trial data where improvement was observed and presented this data.
The SEC states that Cassava failed to disclose that the full set of patient data showed no measurable cognitive improvement in patients’ episodic memory. Cassava and Barbier also failed to disclose Wang’s role in the clinical trial, despite his personal, financial, and professional interest in the therapeutic’s success.
Not the first controversy for Cassava
The recent SEC case is not the first controversy associated with Cassava Sciences as it is pushing ahead with its studies of simufilam.
In August 2021, the US Food and Drug Administration (FDA) received a citizen petition to halt clinical trials and investigate simufilam.
On 3 November 2022, Cassava Sciences filed a defamation lawsuit against defendants Quintessential Capital Management LLC, Dr. David Bredt, Dr. Geoffrey Pitt and other ‘short sellers’.
Cassava alleged that the short sellers had launched a “short and distort” campaign which caused a “decline in Cassava Sciences’ stock price, a multi-billion dollar decline in its market capitalisation, and delayed work in developing simufilam”.
The short sellers were scientists who investigated Cassava’s statements about its simufilam drug, before making claims on social media and the website “cassavafraud.com” that Wang’s research was fabricated. The company later dropped the defamation lawsuit.
In June 2024, Wang was charged on an indictment with one count of major fraud against the United States, two counts of wire fraud, and one count of false statements. The case alleges that Wang defrauded the US National Institutes of Health (NIH) of approximately $16 million in federal grant funds.
Prosecutors did not name the company at the time, but it fits the description of Cassava Sciences. In the federal charges brought by the Department of Justice, Cassava was not accused of wrongdoing.
If convicted, Wang faces a maximum penalty of 10 years in prison for the count of major fraud, 20 years in prison for each count of wire fraud, and five years in prison for the count of false statements.
“In a criminal fraud case brought by the Department of Justice, there is a possibility of jail but that depends on several different things – the egregiousness of the conduct, the length of time the conduct happened and the amount of money at issue. The larger the dollars at issue, the more severe a sanction could be. Depending on how these criminal charges play out, it is possible that Dr Wang could face time in prison,” Slovick added.
Moving forward
As the company looks to be steaming ahead with its Phase III trials, with readouts due before the end of 2024, some questions have been raised about whether these trials should be terminated due to them being based on this potentially fraudulent data.
Dr. George Perry, an Alzheimer’s researcher at the University of Texas at San Antonio, believes that Cassava should consider its position in continuing the Phase III RETHINK-ALZ (NCT04994483) and REFOCUS-ALZ (NCT05026177) trials.
“I think it’s tremendously concerning to run a Phase III trial when the underlying data is being questioned. Subjecting people to a trial where underlying evidence for efficacy is questionable breaks the public trust in the FDA process. I don’t think it’s prudent to continue a trial where there’s questions about the underlying data,” says Perry.
Other experts have also asked why the trials are continuing given the filing, the New York Times reports.
There are also questions about whether the FDA will approve the drug application based on this potentially misleading data.
“The FDA is going to be focused on the veracity of the testing and the efficacy of the drug,” says Slovick. “At the core of the SEC allegations is that the company and the executives were misrepresenting the data. I believe that the FDA is going to be doubly concerned and will look much harder than it might ordinarily at the results of any future testing on this drug. I think they will go into any evaluation being very sceptical about what the company is representing about the efficacy of the drug.”
Perry disagrees, adding if the trial shows efficacy and this has been independently verified, the FDA will likely have to approve the drug.
“The FDA might scrutinise the results of the trial, but if it finds efficacy in the trial, and the results are analysed independently by a data monitoring company with arm’s length analysis, the FDA will have to pay attention to the result,” Perry says.
“Many drugs benefit patients, even though the underlying rationale for them is weak, sometimes working for unknown reasons. That could happen here. Do I think it will happen here? It’s a possibility, but not a probability,” Perry added.
This is not the first controversy in the Alzheimer’s field, with Biogen and Eisai’s Aduhelm (aducanumab) having been at the centre of a dispute after not sharing important safety data. The FDA granted accelerated approval to the drug in 2021 but concerns were later raised about a lack of efficacy and alleged ‘missing data’ on the frequency of serious adverse events including brain oedema, microhaemorrhages, and superficial siderosis. The drug has since been pulled from the market.
For Cassava to really move forward, Mehta said the company must wipe the slate clean if it ever hopes to convince regulatory agencies and bodies that it can be trusted again, with Cassava having already let go of the executives at the centre of the controversy.
“In cases like this where there are allegations and a certain degree of proof that certain individuals have engaged in wrongdoing, the only way for a company like Cassava to move forward is to cleanse itself of those alleged to have engaged in this,” says Mehta. “In some respects, it’s a standard playbook for companies to extricate themselves of the past bad actors. It can sometimes be the only way to turn the page and to move to the next step forward in these clinical trials.”
