SEC investigating Cassava Sciences, developer of experimental Alzheimer’s drug
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6 min read . Updated: 17 Nov 2021, 09:23 PM IST - Cassava, one of best-performing U.S. stocks this year, denies claims that it manipulated research results
The Securities and Exchange Commission is investigating claims that Cassava Sciences Inc., the sixth-best performing U.S. stock this year, manipulated research results of its experimental Alzheimer’s drug, according to people familiar with the matter.
Cassava disclosed Monday in a securities filing that it is cooperating with government investigations, without naming any agency. Cassava said an investigation isn’t a sign that wrongdoing occurred.
An SEC spokeswoman declined to comment.
The National Institutes of Health, which awarded $20 million in grants to Cassava and its academic collaborators since 2015 for drug development, is also examining the claims, according to the company’s chief executive officer.
The accusations appeared in a public petition filed in August to the Food and Drug Administration asking it to suspend Cassava’s clinical trials. The petition’s authors are two physicians who said they came to doubt Cassava’s research and have shorted its stock, betting the share price would fall once investors recognized the problems they found, they said. David Bredt, a biotech entrepreneur and former neuroscience research chief at Johnson & Johnson and Eli Lilly & Co., and Geoffrey Pitt, a cardiologist and professor at Weill Cornell Medicine, wrote that Cassava’s research, published in several different scientific journals, include images of experiments that appear to have been manipulated using software such as Photoshop.
Cassava Chief Executive Remi Barbier denied the doctors’ claims. He said short sellers have abused the FDA’s petition process, which allows people to raise public-health concerns with the government.
“There is zero evidence, zero credible evidence, zero proof that I’ve ever engaged in, nor anyone I know, has ever engaged in funny business," Mr. Barbier said last month. Short sellers have lodged “outlandish accusations" against his company, he wrote this week in an email response to questions. “Under these conditions you would hope that someone in a position of authority is looking into the legitimacy of the allegations," Mr. Barbier wrote.
Cassava’s experimental drug, called Simufilam, aims to restore a protein, filamin A, that its scientists say is misshaped in the brains and blood of Alzheimer’s patients. In its contorted state, according to Cassava, the protein triggers a toxic process that leads to the buildup in the brain of another protein called amyloid, which is a hallmark of Alzheimer’s disease.
Cassava’s journal articles, all co-authored with a professor at the City University of New York School of Medicine, include pictures of experiments that support Cassava’s theory for what causes Alzheimer’s and how its drug addresses the culprit.
An Austin-based biotech company with 25 employees, Cassava shot from obscurity to become a favored stock among individual investors drawn by the prospects for its treatment for Alzheimer’s, a form of dementia that affects six million Americans.
Its stock surged over the summer to as high as $126, when the company’s market value eclipsed $5 billion, on the prospects of its drug becoming a new Alzheimer’s treatment. It has no commercial drugs and hasn’t reported any product revenue since 2013.
The shares fell to as low as $42 after the public petition was filed to the FDA, which posted it on a website in late August. The stock rose again in recent weeks after Cassava said that the Journal of Neuroscience, which published one of its papers, had reviewed the images and found no evidence of data manipulation. It closed at $61.69 on Tuesday.
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Marina R. Picciotto, editor in chief of the Journal of Neuroscience and a professor at the Yale School of Medicine, confirmed in an email that the journal had found no proof of data manipulation in the papers after requesting the original source data from the authors. The journal did find an instance of duplicate images in the paper, Dr. Picciotto said. A correction was issued on Nov. 10, which said the error didn’t affect the article’s conclusions.
Several other scientists interviewed by The Wall Street Journal said some images in the articles depicting experimental results appear to have been copied and pasted from other sources. The images show western blots, a common laboratory technique for detecting proteins in samples of tissue or blood. Samples are run through gel and then transferred to a film that displays “bands" of proteins separated by their molecular weights.
Elisabeth Bik, a microbiologist and image-manipulation consultant who has identified inappropriately duplicated images in hundreds of other scientific papers, said she concurred with many of the claims in the petition. Dr. Bik said she found other potentially manipulated images in papers describing how Simufilam works. She doesn’t have a position in Cassava’s stock, she said.
Mike Rossner, a former managing editor of the Journal of Cell Biology and president of Image Data Integrity Inc., a consulting firm that works with universities and other institutions to evaluate claims of image manipulation, said many of the accusations merited further investigation. He also said he had no stake in Cassava.
Mr. Barbier said the way critics have examined his company’s research isn’t proper. “In order to make allegations on the scale that they have, in order for those allegations to be credible, you’ve got to look at the originals," he said. “Blowing up western blots and, you know, looking for funny faces or funny shapes or whatever…it doesn’t have legitimacy."
It is possible that Simufilam is effective against Alzheimer’s disease even if the accusations of data manipulation are correct, according to Dr. Bik and other scientists. “The drug might work great," Dr. Bik said.
The doctors’ petition refers to articles co-authored by Hoau-Yan Wang, a Cassava adviser and CUNY associate medical professor, and Cassava Senior Vice President Lindsay Burns. Drs. Burns and Wang, who sits on Cassava’s scientific advisory board, didn’t respond to calls and emails requesting comment.
The accusations have prompted inquiries by the NIH and CUNY, according to Mr. Barbier.
A CUNY spokeswoman said, “The College takes accusations of research misconduct very seriously," and would follow university rules for looking into such allegations. An NIH spokeswoman declined to comment.
An FDA spokeswoman said the agency was reviewing the doctors’ petition and would respond directly to them.
Aside from any gains made from shorting the stock, Drs. Bredt and Pitt could profit from a whistleblower tip they filed with the SEC, according to their lawyer, Jordan Thomas of Labaton Sucharow LLP. The SEC enforces laws that require public companies to speak truthfully to the market and can reward people who provide credible information leading to an enforcement action.
Cassava pays Dr. Wang as a consultant, and he is eligible to receive cash bonuses tied to the growth of Cassava’s market value, said Mr. Barbier. Under the bonus plan, which also applies to Cassava’s officers, Mr. Barbier could receive as much as $108 million if all valuation milestones are met, according to securities filings.
Last year, Cassava said its drug had failed in a mid-stage study, causing its shares to plummet nearly 75%. Months later, the company backtracked and said the data was reanalyzed by an outside lab that found the trial had succeeded. That news caused the stock price to more than double.
Mr. Barbier said the outside lab work was done by Dr. Wang, whose role wasn’t disclosed in Cassava’s filings to investors. Drs. Bredt and Pitt, in their petition, said it was misleading to refer to Dr. Wang as running an “outside lab" because he is a longtime paid consultant to the company.
Mr. Barbier said he considered Dr. Wang’s lab to be separate from the company because he isn’t an employee.
Drs. Bredt and Pitt said they continue to hold short positions in Cassava’s stock. They said they intervened because they worry that patients enrolled in Cassava’s clinical trials are taking a drug whose scientific rationale is unsound.
This story has been published from a wire agency feed without modifications to the text
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