Cassava Sciences Inc. (NASDAQ: SAVA) is a biotech developing treatments for Alzheimer's disease. The company has a lot of controversy over its lead drug, simufilam, which attempts to go further than alleviate symptoms but actually modify the underlying biology of the disease. While the concept sounds fascinating, the problems for the medical sector company lie in the credibility and allegations of data manipulation and fraud. Incidentally, analysts still rate the stock as a Buy with a $111.50 average consensus price target, which is 317% higher than where it is currently trading.

How Fraud Allegations Culminated Through 3 Agencies

Data manipulation and misrepresentation allegations over simufilam’s Phase 2 clinical trials were filed via citizen petitions in 2021. Short sellers also raided the stock, claiming fraud. This prompted a United States Security and Exchange Commission (SEC) investigation in August 2021. The U.S. Food and Drug Administration (FDA) performed a lab inspection in 2022 and criticized Phase II clinical trial advisor Dr. Hoau-Yun Wang of the City University of New York (CUNY). The report alleges faulty trial sample analysis, including improper statistical tests and the lack of routine calibration of equipment needed for verification. The report called into question the credibility of the data gathered in 2020.

Keep in mind that the larger Phase III trial was underway in 2021, based on the positive data results from Phase II. Critics argue that Phase III should have been stopped since the data even to commence Phase III was corrupted, bringing efficacy into question.

The U.S. Department of Justice (DOJ) also investigated and indicted Dr. Hoau-Yun Wang for fabricating and falsifying data on June 27, 2024. Wang was accused of fabricating and falsifying data in grant applications to the NIH that occurred from May 2015 to April 2023. Wang was charged with one count of major fraud against the United States, two counts of wire fraud, and one count of false statements. He faces the potential for up to a maximum of 95 years in prison if convicted on all counts.

Cassava Settles With the SEC

The SEC concluded its investigation and negotiated a $40 million settlement from Cassava Sciences without admitting or denying any charges. An interim safety study also found there were no significant safety problems with simufilam. The FDA hasn’t made Cassava halt its Phase III clinical trial, and the initial data is due before the end of the year.

The SEC investigation cloud has been removed. The DOJ indicted the bad players. The FDA hasn't taken any new actions to halt Phase III trials, enabling them to continue. The interim CEO has replaced the CEO. The top-line results for its Phase III ReTHINK-ALZ and ReFOCUS-ALZ are due out before the end of 2024 and in mid-2025. The market awaits the results.

On Oct. 8, 2024, H.C. Wainwright upgraded its rating on SAVA to Buy from Hold and raised its stock target price to $116.00. Analyst Vernon Bernardino cites the SEC settlement as closing the door on the controversy that could pose a long-term challenge. Bernardino points out that the results of the two studies will be the main catalysts moving forward.

CEO Details Steps for Initial Top-Line Analysis of Phase 3 Trials

On Oct. 8, 2024, Cassava CEO Rick Barry released a letter to shareholders. He stated that the last patient completed its ReTHINK Phase III trial, which means all patients have completed dosing.

Barry informed shareholders that the 805-patient study at 77 sites throughout the U.S., Canada, Puerto Rico, and Australia has concluded, and the only remaining task is to collect and analyze the data. Premier Research International manages the trial as its clinical research organization. Once they complete the final review of the procedures regarding accuracy and completeness, the database will be locked, with no changes made afterward.

Independent biostatisticians at Pentara Corp. will perform the statistical analysis. Pentara will notify Cassava when their top-line analysis is completed. Cassava has no access to the data until after Pentara completes its analysis. The company will announce results before the end of 2024. Its second Phase III ReFOCUS Clinical Trial results, with 1,125 patients at 78 sites, will be published in mid-2025.