The circumstances surrounding Cassava Sciences read like a nonfiction scientific thriller: a little-known biopharmaceutical company, a groundbreaking new drug candidate for Alzheimer’s disease, and two short sellers—one with ties to Big Pharma—personally vested in driving the company’s stock price down.
By way of background, the saga began when Cassava’s laboratory-based studies for its experimental drug, simufilam, appeared to show beneficial effects in human brains with Alzheimer’s disease, a progressive brain disorder that destroys memory and thinking skills. With its research showing promising results, Cassava secured grants from the National Institutes of Health (NIH) and filed an investigational new drug (IND) application with the Food and Drug Administration (FDA) for simufilam.
In 2017, following FDA acceptance of the IND, Cassava commenced a Phase 1 study to assess the safety of simufilam in 24 healthy adults. In 2019, it moved ahead with Phase 2 clinical studies in patients with Alzheimer’s disease. According to Cassava, the Phase 2 study results showed simufilam not only stabilized but improved cognition in Alzheimer’s patients and had not presented any serious side effects.
Things were progressing well for the company. On July 28, 2021, Cassava’s stock closed at its highest price of $135.30. One month later, the company announced it reached an agreement with the FDA under a special protocol assessment (SPA) for Phase 3 studies of simufilam.
The SPA process enables the FDA to provide input into the design and size of a certain clinical trial or clinical study prior to its initiation “to determine if they adequately address scientific and regulatory requirements for a study that could support marketing approval,” according to the FDA.
Getting the go-ahead from the FDA concerning the scientific and regulatory parameters of the Phase 3 studies of simufilam was a major win for Cassava, as it can help streamline the approvals process down the road. It also meant its Phase 3 studies would be under a rigorous safety and efficacy evaluation, which Cassava continued to plow forward with in November 2021.
The citizen petition
In August 2021, Jordan Thomas, who was then a partner at law firm Labaton Sucharow, filed a “whistleblower submission” through the FDA’s citizen petition (CP) process. In that submission, Thomas expressed on behalf of his anonymous clients concerns about the “accuracy and integrity” of Cassava’s lab-based studies, suggesting Cassava engaged in “scientific misconduct.”
Further addendums filed by Thomas after the original submission described in more detail how Cassava allegedly engaged in data manipulation. Thomas requested Cassava’s clinical trials be halted, pending an FDA audit, and that the FDA report its findings to law enforcement and regulatory authorities.
In the original CP, dated Aug. 18, Thomas certified that “to the best knowledge and belief of the undersigned, this petition includes all information and views on which the petition relies, and that it includes representative data and information known to the petitioner which are unfavorable to the petition.”
Yet, on Aug. 26, Labaton Sucharow issued a press release revealing the new information that Thomas’ clients “also hold short positions in Cassava stock.” Short selling is the practice of investors betting on a company’s stock price falling—a strategy the Department of Justice is currently investigating.
Relevant to Cassava, the individuals who raised allegations against the company had a vested interest in its stock price falling.
The short sellers
Four months prior to the filing of the CP, in April 2021, David Bredt—who was later identified as one of the Cassava short sellers—was appointed an executive partner at biotechnology investment firm MPM Capital, where he was to “take a leading role in helping MPM explore a range of opportunities, including those presented by new developments in the understanding of neurological dysfunction,” MPM stated.
The other short seller was Geoffrey Pitt, a cardiologist and professor at Weill Cornell Medical College. According to an article in The New Yorker published in January 2022, Pitt had never shorted a stock before but decided to do so after Thomas agreed to take their case.
On Nov. 17, 2021, three events of note regarding the Cassava case happened:
- The Wall Street Journal reported the Securities and Exchange Commission (SEC) was investigating claims concerning Cassava’s research, citing “people familiar with the matter.”
- Thomas revealed the short sellers’ identities in a third addendum to the CP, in which he also referenced the WSJ’s report in its entirety.
- MPM announced it had raised $51 million in capital for Protego Biopharma, a preclinical-stage biotechnology company working on a competing Alzheimer’s drug. Protego is a spinoff of Johnson & Johnson, where Bredt worked prior to joining MPM.
Two days prior, on Nov. 15, Cassava stated in a securities filing it had received requests from “certain government agencies” for “corporate information and documents.” In that filing, Cassava said it was not informed of any wrongdoing.
The investigation remains ongoing. Regarding both the allegations and the SEC investigation, Cassava Chief Executive Remi Barbier stated, “We intend to vigorously defend ourselves and our stakeholders against false and misleading allegations.”
Bredt and Pitt told The New Yorker they no longer hold a short position in Cassava. However, they potentially still made millions by successfully shorting the stock. The week the allegations came out, Cassava’s valuation declined by more than $2 billion, according to the company.
‘Gaming’ the FDA
The allegations against Cassava have elicited passionate debate among many in the academic and scientific community both in support of and in opposition to Cassava’s research. All are equally adamant their findings are irrefutable and conclusive—albeit, it is difficult to ascertain the independence and integrity of all opinions, including among those cited in the CP.
Strictly from a regulatory compliance standpoint, however, the FDA CP process is not—nor has ever been—the appropriate vehicle through which to file allegations of scientific misconduct. Created in the 1970s, the FDA’s CP process was intended as a vehicle for citizens to raise concerns about food, drugs, and FDA regulations.
Numerous avenues exist in the scientific community specifically to voice concerns about scientific misconduct. These include the Office of Research Integrity under the Department of Health and Human Services and the Committee on Publication Ethics.
In the recent past, the FDA and Federal Trade Commission (FTC) have warned about the prevalence of those in the pharmaceutical industry “gaming” the FDA’s CP process to delay approval of and competition from generic drugs.
“Although some citizen petitions raise genuine issues for scientific consideration, many do not and are denied as lacking merit,” the FTC stated back in 2018. “Answering a petition requires significant FDA resources and time, including careful consideration of the issues by appropriate FDA staff, and preparation, review, and vetting of the response across the FDA.”
Gaming the FDA CP process became so systemic that the agency issued guidance in 2019 describing how it determines whether a petition’s intent was to delay approval of a competing drug. “A key area of focus in the FDA’s Drug Competition Action Plan is our work to deter brand-name drug companies from ‘gaming’ the system by taking advantage of certain rules, or exploiting loopholes, to delay competition,” said then-FDA Acting Commissioner Norman Sharpless in releasing the guidance.
One anticompetitive tactic involves drug companies submitting CPs “to delay FDA action on a generic or other abbreviated application,” Sharpless explained. “While the FDA has rarely delayed specific drug approvals because of citizen petitions, there’s no doubt these shenanigans can burden the drug review process.”
In a 2018 comment letter to the FDA, the FTC shared these concerns and cited past enforcement actions resulting from similar anticompetitive tactics. “Furthermore, we stand ready to work closely with the FDA on citizen petition abuse and other issues that may harm competition,” the FTC said.
The CP against Cassava highlighted how much of a mockery the regulatory process can become when misused. For example, of the 218 public comments submitted in response as of Feb. 9, many are snarky and nonsensical, written in the form of poetry and parodies. One was filed by “Dewey Cheatham & Howe law firm,” a popular gag name.
Several comments in favor of Cassava were submitted by those whose relatives either currently have, or have died from, Alzheimer’s and pleaded to the FDA in support of the company. Only 11 of the 218 comments sided with the shorts, according to analysis conducted by Compliance Week.
Citizen petition denied
Six months following the filing of the allegations against Cassava, the FDA on Feb. 10 denied the short sellers’ petitions on grounds they did not “purport to set forth all relevant factual information,” as required.
“We are denying your petitions to the extent that they request, through the citizen petition process, that FDA initiate an investigation,” the FDA stated. CPs can request the FDA “take or refrain from taking an administrative action,” the agency said, but “an investigation is not an administrative action, and, as your petitions implicitly acknowledge, investigations necessarily require fact finding beyond what is presented in the current administrative record.”
The FDA added its response “does not represent a decision … to take or refrain from taking any action relating to the subject matter.”
As things stand currently, “No government agency has accused us of any wrongdoing, no whistleblower has stepped up to corroborate any of the CP allegations, and the co-authors of the CP have not been able to produce any evidence to support their allegations,” Cassava CEO Barbier told Compliance Week. Cassava’s clinical trials of Alzheimer’s patients continue under the watchful eye of the FTC.
Thomas, who has since departed Labaton Sucharow, declined requests for further comment.
“My clients and I have provided extensive information and materials about Cassava Sciences to federal legislative, law enforcement, and regulatory authorities,” he told Compliance Week. “While these key stakeholders do their important work, which is likely to take more than a year, we don’t anticipate making further public comments about the case.”