Cassava Sciences SAVA has agreed to pay a $40 million fine to settle charges from the U.S. Securities and Exchange Commission (SEC) over allegedly misleading statements about the results of its 2020 mid-stage study of simufilam for Alzheimer’s disease. Despite settling, the company did not admit to or deny the SEC’s allegations.

The SEC also brought charges against two former senior executives, including founder and ex-CEO Remi Barbier and former senior vice president of Neuroscience, Dr. Lindsay Burns. They were accused of negligence in their disclosures regarding the study of simufilam and agreed to pay fines of $175,000 and $85,000, respectively, to resolve the claims.

In a related action, the SEC charged Dr. Hoau-Yan Wang, a consultant for Cassava and associate medical professor at City University of New York’s Medical School, for allegedly manipulating the reported results of the phase II study of simufilam. Wang is also a co-developer of the Alzheimer's drug under investigation.Without admitting or denying the violations, Dr. Wang consented to cease and desist from future violations and pay a $50,000 penalty.

Shares of Cassava lost 10.6% following the settlement news. Regarding the previously disclosed investigation by the Department of Justice (DOJ), SAVA stated that it currently does not expect the DOJ's Criminal Division to file charges against or pursue a settlement with the company.

Year to date, shares of Cassava have risen 26.5% against the industry’s 1.3% decline. 

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Allegations Brought Against SAVA by the SEC

Per the SEC, Dr. Hoau-Yan Wang received information that unblinded him to certain aspects of the phase II study data of simufilam for Alzheimer’s disease. This allowed him to identify about a third of the patients and manipulate the data to make it appear that the drug had significantly improved Alzheimer’s biomarkers, such as total tau and phosphorylated tau, which are common indicators of neurodegeneration in Alzheimer’s patients.

Despite knowing the data was altered, Wang was aware that Cassava would use it in public announcements. On Sept. 14, 2020, Cassava released the manipulated study results in a press release and investor presentation, misleading investors by claiming the study was blinded, even though Wang had been unblinded.

The SEC's complaint also claims that Cassava misled investors by announcing that its therapeutic significantly improved patient cognition, particularly episodic memory in Alzheimer’s patients. However, the company did not reveal that the full set of patient data, as opposed to the subset chosen by Dr. Burns, showed no measurable improvement in memory. Additionally, Cassava and its former CEO, Remi Barbier, failed to disclose Dr. Wang's involvement in the study, despite his personal and financial interest in simufilam’s success.

SAVA’s Development Path Forward for Alzheimer’s Drug

In July, Cassava appointed Richard (Rick) Barry as the executive chairman of the board and outlined several initiatives aimed at improving corporate governance, transparency and accountability, in line with the company's commitment to ethical business practices. Barry officially took on the role of CEO on Sept. 6, 2024. Simufilam, administered orally, is currently being evaluated in two late-stage studies to treat patients with mild-to-moderate Alzheimer’s disease dementia.

The first phase III study (RETHINK-ALZ) is evaluating the safety and efficacy of simufilam 100 mg tablets compared with placebo over 52 weeks. The top-line 52-week data readout is expected by the end of 2024. On the other hand, the second phase III study (REFOCUS-ALZ) is evaluating the safety and efficacy of oral simufilam 100 mg and 50 mg tablets compared with placebo over 76 weeks. Cassava anticipates the 76-week top-line data readout around the middle of 2025.

Cassava Sciences, Inc. Price and Consensus

Cassava Sciences, Inc. price-consensus-chart | Cassava Sciences, Inc. Quote

Recent Regulatory Updates on SAVA’s Alzheimer’s Drug

Last week, Cassava announced that it had completed the third interim safety review of simufilam in ongoing late-stage studies for Alzheimer’s disease patients. Following a routine scheduled meeting, the Data and Safety Monitoring Board (DSMB) recommended that both phase III Alzheimer’s studies of the candidate continue as planned without modification. Management stated that the latest DSMB safety review was the last before the expected top-line readout for the RETHINK-ALZ study.

However, Cassava clarified that the DSMB focuses solely on evaluating patient safety and does not assess the candidate's effectiveness.

The September 2024 update follows the interim safety MRI data from October 2023, which indicated that simufilam is not linked to amyloid-related imaging abnormalities. Additionally, in the two prior meetings held in September 2023 and March 2024, the DSMB recommended that both phase III studies on simufilam proceed without any changes. Final safety data will be available at the end of the late-stage program.

Apart from simufilam, Cassava is also currently evaluating its lead investigational diagnostic product candidate, SavaDx, in an early-stage study. The company believes that SavaDx has the potential to become a novel way of detecting the presence of Alzheimer’s disease from a small sample of blood.

Zacks Rank & Stocks to Consider

Cassava currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the biotech sector are ANI Pharmaceuticals ANIP, Krystal Biotech, Inc. KRYS and Fulcrum Therapeutics FULC, each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

In the past 60 days, estimates for ANI Pharmaceuticals’ 2024 earnings per share have moved up from $4.53 to $4.81. Earnings per share estimates for 2025 have improved from $5.38 to $5.86. Year to date, shares of ANIP have gained 6.6%.

ANIP’s earnings beat estimates in each of the trailing four quarters, with the average surprise being 31.32%.

In the past 60 days, estimates for Krystal Biotech’s 2024 EPS have increased from $1.91 to $2.38. The consensus estimate for 2025 earnings has improved from $4.33 to $7.31. Year to date, shares of KRYS have jumped 42.8%.

KRYS’ earnings beat estimates in three of the trailing four quarters while missing on the remaining occasion, the average surprise being 45.95%.

In the past 60 days, estimates for Fulcrum Therapeutics’ 2024 loss per share have narrowed from $1.33 to 28 cents. The consensus estimate for 2025 loss per share has narrowed from $1.71 to $1.14. Year to date, shares of FULC have plunged 44.1%.

FULC’s earnings beat estimates in each of the trailing four quarters, the average surprise being 393.18%.

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