Cassava Sciences and two of its former executives have reached a resolution with the SEC over charges of “misleading” investors about the strength of data from a mid-stage Alzheimer’s disease study.
The Austin, TX-based biotech will pay a $40 million penalty but has neither admitted nor denied the charges in a company release Thursday.
Two executives who previously worked at the company also settled allegations leveled against them, according to a separate SEC release. Founder and former CEO Remi Barbier will pay $175,000 and former head of neuroscience Lindsay Burns will pay $85,000. Barbier and Burns, who are married, have also been temporarily banned from acting as an officer or director of a public company. The couple left Cassava in July while the federal probe was ongoing.
The SEC charge concerns the reporting of results from a Phase 2b trial of Cassava’s Alzheimer’s drug candidate simufilam. The agency claims in a Thursday filing at the US District Court for the Western District of Texas that Cassava consultant Hoau-Yan Wang received information that unblinded him to some parts of the study and used this information to “create the appearance” of “dramatic improvements” in certain disease biomarkers.
Cassava and Burns then allegedly misled investors by claiming that Phase 2b was blinded. The company also said the data suggested significant improvements in episodic memory based on a subset of patients “hand-selected by Burns” instead of the full patient data, which showed no such improvement, according to the SEC. As for Barbier, he and Cassava failed to disclose Wang’s role in the trial.
After the readout, the company went on to raise more than $260 million in new funding.
As part of a separate but related charge, Wang has agreed to pay a $50,000 penalty. In July, the medical professor was indicted for allegedly defrauding the NIH out of $16 million in funds.
Cassava said it has “cooperated fully” with the investigation and “implemented remedial measures.” It does not expect any criminal charges on this matter from the Department of Justice.
Newly-appointed CEO Rick Barry said in a statement that the company “can now focus all of our attention on completion of the ongoing Phase 3 trials of simufilam.” Both studies are fully enrolled with more than 1,900 patients in total, and the company has completed its interim safety reviews. Topline efficacy data from one trial are anticipated before the end of the year.
The company’s shares $SAVA were down around 11% premarket Friday.