The Securities and Exchange Commission (SEC) has reportedly launched an investigation into Cassava Sciences in response to allegations made against the clinical-stage biopharmaceutical company by a law firm representing anonymous short sellers.
Cassava disclosed in a regulatory filing on Nov. 15 that “certain government agencies have asked us to provide them with corporate information and documents” and that it is cooperating with these requests.
“No government agency has informed us that any wrongdoing has occurred by any party,” the company stated.
Cassava did not disclose which government agencies are investigating it, but the Wall Street Journal reported the SEC is probing allegations that the company manipulated research results of simufilam, its experimental drug for the treatment of Alzheimer’s disease.
According to Cassava, Labaton Sucharow, a law firm representing anonymous clients who have a short position in Cassava stock, submitted a citizen petition to the Food and Drug Administration (FDA) in August alleging, among other things, data manipulation in Western blots in an article published by the Journal of Neuroscience in July 2012. (Western blotting is a complex lab technique used to separate and measure proteins).
In September, Labaton Sucharow filed a supplement to its citizen petition, requesting the FDA commissioner “immediately rescind previously granted Special Protocol Assessments” for the Cassava’s Phase 3 clinical program with simufilam.
In the wake of the WSJ’s report, Labaton Sucharow on Nov. 17 filed a third supplement to its citizen petition.
“Increasingly, evidence suggests that Cassava has doctored its research and clinical trial results, duped peer-reviewed journals, used the tainted science to trick the [National Institute of Health] and FDA into approving grants and clinical trials, misled investors by touting their grants and clinical trials without disclosing their troubling research practices, and withheld material information about the true nature of its drug from vulnerable Alzheimer’s disease patients,” the law firm wrote.
Labaton Sucharow is now requesting the FDA not only immediately halt the simufilam clinical trials but also “conduct a rigorous audit of all the company’s research and clinical trial results and report the agency’s findings to interested law enforcement and regulatory authorities.”
Cassava President and CEO Remi Barbier responded to the claims in a 20-minute video message.
“These allegations are not only false—I also think they are misleading,” he said. “As a science organization, we conduct experiments that generate data. We do not invent stuff out of thin air.”
Barbier argued the short sellers are motivated by profit, because they hold short positions in Cassava stock and would benefit if the stock’s price dropped.
“When done correctly, short selling is legal, but there are some short sellers who make outlandish allegations,” he said. “Then they make a killing when the stock price declines.
“To me, the short attack against Cassava Sciences feels unprecedented in its boldness, its scope, its immediacy, and its intensity. It feels highly organized and well-funded. It feels like whoever is behind this effort wants to make a lot of money quickly at the expense of our science. And, of course, by hiring a law firm to spread allegations online, the holders of the short position don’t have to do the dirty work. In other words, by distancing the monkey from the organ grinder, those behind the scheme are hard to detect.”
In response to the allegations, the Journal of Neuroscience requested raw data, including images of original, uncropped Western blots. Having received that data and completed its review, the Journal of Neuroscience informed Cassava it found “no evidence of data manipulation,” the company announced Nov. 4.
The FDA has up to 180 days to respond to the citizen petition.