Recasts paragraph 1, adds background on the company and drug throughout

March 25 (Reuters) - Cassava Sciences SAVA.O said on Tuesday its Alzheimer's drug simufilam, which has been at the center of regulatory scrutiny, failed in a second late-stage study, sending shares of the company down 20% in early trading.

The drug came under close watch after a medical professor linked to its development was charged with fraud last year. Neuroscientist Hoau-Yan Wang allegedly submitted false data to get millions of dollars in public funds for research into the drug.

Late last year, the company had disclosed plans to stop all trials of the drug after it failed in the first late-stage study called ReThink-ALZ. The company said on Tuesday that it will phase out development programs of the drug by the end of the second quarter.

Cassava has said that Wang was not involved in the late-stage trials of simufilam. Previously listed as a co-lead scientist for simufilam on Cassava's website, Wang's name has since been removed.

CEO Rick Barry said the company was disappointed that the results showed no treatment benefit and that the results were "unambiguous."

The results disclosed on Tuesday are from a trial called Refocus-ALZ, in which the drug failed to significantly reduce cognitive decline in patients with mild-to-moderate Alzheimer's disease.

Simufilam was the only drug that Cassava was developing, along with a blood-based diagnostic test, called SavaDx, which is in mid-stage studies for Alzheimer's.

The company reported about $128.6 million in cash and equivalents as of December 31, 2024.

Cassava and two of its former executives were also charged by the U.S. Securities and Exchange Commission for making misleading claims in 2020 about the results from previous studies of the drug. It paid a $40 million penalty to settle the allegations.

(Reporting by Sriparna Roy, Sneha S K and Siddhi Mahatole in Bengaluru; Editing by Savio D'Souza and Shailesh Kuber)

((Sriparna.Roy@thomsonreuters.com;))