Cassava Sciences: Latest Blow To Simufilam Thesis As Key Former Advisor Indicted (SAVA)

J StudiosInvestment Overview – Fresh Woes, Fresh Lows As Cassava Collaborator Is Indicted Cassava Sciences (NASDAQ:SAVA) stock sank to its lowest level since January 2021, falling 35% on Friday to a price of $12.40, at the end of last week, as it was reported that a key scientific advisor to the company for nearly two decades, Dr. Hoau-Yan Wang, had been indicted for “allegedly defrauding the US National Institutes Of Health (“NIH”)”. As most readers are probably aware, Cassava has developed the drug simufilam, which it is guiding through two fully enrolled, +800 patient Phase 3 clinical trials in patients with mild-to-moderate Alzheimer’s. According to Cassava’s Q1 2024 earnings press release: Our first Phase 3 study, called RETHINK-ALZ, is designed to evaluate the safety and efficacy of simufilam 100 mg tablets twice-daily versus matching placebo over 52 weeks (NCT04994483). Our second Phase 3 study, called REFOCUS-ALZ, is designed to evaluate the safety and efficacy of oral simufilam 100 mg and 50 mg tablets twice-daily versus matching placebo over 76 weeks (NCT05026177). Clinical sites are in the United States, Canada, Puerto Rico, Australia, and South Korea. Premier Research International is the clinical research organization (“CRO”) supporting the conduct of our Phase 3 clinical program. Dr. Wang had been a long-time paid advisor to Cassava, and helped to develop – alongside Cassava’s Senior Vice President of Neuroscience Lindsay Burns, wife of Cassava founder and CEO Remi Barbier – the thesis that Simufilam’s ability to restore the natural shape and function of a protein known as filamin A (“FLNA”) may have a positive effect on some patients with Alzheimer’s. As Cassava puts it in its Q1 2024 quarterly report / 10Q submission: Published studies have demonstrated that the altered form of FLNA causes neuronal dysfunction, neuronal degeneration and neuroinflammation. Specifically, we believe simufilam disrupts amyloid binding to the α7 nicotinic acetylcholine receptor (α7nAChR), which underlies our drug’s primary mechanism of action in Alzheimer’s disease. Many of these published studies were produced by Wang and Burns, and many have now been retracted by the scientific journals that first agreed to publish them, casting doubt on the FLNA-unfolding thesis. A citizen’s petition was also filed with the FDA on behalf of a group of short sellers of Cassava stock, accusing Dr. Wang’s Lab of data falsification, and pointing to a Phase 2 clinical study of Simufilam that was initially reported to have failed, after results were reviewed by an independent lab, before results were re-evaluated by Dr. Wang’s lab, and declared to be positive after all. As such, it has been claimed that both the Investigational New Drug (“IND”) approval (an IND approval is required before in-human studies of a drug may begin) that Cassava secured from the FDA in 2017, and the Phase 2 study win that helped Cassava initiate its Phase 3 studies may be based on falsified data. Complicating matters, however, is the fact that most of the accusations of malpractice directed against Cassava and its long-time collaborator Dr. Wang come from short sellers of Cassava stock, who have a vested interest in seeing Cassava’s share price fall. As Cassava management has put it previously: Beginning August 2021, short sellers executed a brutal, widely publicized “short-and-distort” campaign against Cassava Sciences. Back in August 2021, after reporting results from an open label (no placebo arm) Phase 2 study that seemed to suggest patient’s cognition scores were actually improving after treatment with simufilam – something that no other Alzheimer’s drug has achieved, slowing of cognitive decline being the best results achieved by amyloid-beta targeting drugs such as Biogen (BIIB) / Eisai’s Leqembi, and Eli Lilly’s (LLY) donanemab – Cassava shares traded over $120 per share. We could therefore conclude that the shorts have comprehensively won the battle against the longs, with Cassava shares now down ~90% from August 2021 highs, however the Phase 3 studies remain ongoing, with, according to Cassava, over 435 patients having completed the RETHINK study, and over 300 patients the REFOCUS study. The Data Safety and Monitoring Board (DSMB) has reviewed the study twice – and according to Cassava: Routine, scheduled DSMB meetings were held September 2023 and March 2024. Both DSMB meetings recommended that the Phase 3 studies continue as planned, without modification. We anticipate top-line data readout for our 52-week study (RETHINK-ALZ) approximately year-end 2024. We anticipate top-line data readout for our 76-week study (REFOCUS-ALZ) approximately mid-year 2025. With the first readout of pivotal study data due before the end of this year, is there a chance that Cassava could show a meaningful treatment effect for simufilam, and silence the doubters/short sellers, and reward patient longs? Or is there now a chance that, as the initial Citizen’s Petition initially requested, the studies could be halted altogether? Analysis – Last Week’s Developments, Possibly Most Damning yet For Cassava First of all, let’s consider the statement Cassava has released in response to the news of the indictment of Dr. Wang. The company said it: … has learned today that a federal grand jury returned an indictment charging Hoau-Yan Wang for allegedly defrauding the U.S. National Institutes of Health (NIH). Hoau-Yan Wang was a tenured medical professor at a public university’s medical school as well as a former paid science advisor to Cassava Sciences. According to public court documents, Dr. Wang engaged in illegal behavior to defraud the government through grant applications made to the NIH, resulting in the award of approximately $16 million in grants approximately 2017 to 2021 on behalf of himself and the Company. Wang’s work under these grants was related to the early development phases of the Company’s drug candidate and diagnostic test and how these were intended to work. Dr. Wang and his former public university medical school have had no involvement in the Company’s Phase 3 clinical trials of simufilam. There are a few things to consider here. Dr. Wang has been the subject of other investigations, including one conducted by the City University of New York, which hosts Dr. Wang’s lab, and one conducted by the FDA. As I discussed in a note on Cassava back in March this year, while both reports appeared to be strongly critical of Dr. Wang’s methods, pointing to “reckless” behaviour, and “significant research misconduct”, and noting that key data was no longer available or had been destroyed, neither report seemed to result in action being taken against Dr. Wang, or Cassava. The Department of Justice (“DoJ”), however, has now charged Dr. Wang with “one count of major fraud against the United States, two counts of wire fraud, and one count of false statements”. If convicted, Dr. Wang could face imprisonment. The wording of Cassava’s statements is interesting – the release says that Dr. Wang “was a tenured medical professor at a public university’s medical school”, which may imply he is no longer working at CUNY. The release also refers to Dr. Wang as “a former paid science advisor to Cassava Sciences”, suggesting he is no longer associated with Cassava, and finally, that the Dr. “had no involvement in the Company’s Phase 3 clinical trials of simufilam”. Whilst it may be true that Dr. Wang had no involvement with the Phase 3 studies, the argument could be made that without the help of his lab, and the re-evaluated Phase 2 data, or the published research that helped secure an IND, simufilam would never have made it to the Phase 3 study stage at all. As such, there is an interesting “end justifying the means” moral dilemma in play – if simufilam aces its Phase 3 study, but the data that helped it progress to that stage is found to be falsified, should the drug be permitted to be marketed and sold? Looking Ahead – Likeliest Outcome Looks Somewhat Grim For Longs? It’s important to emphasise that if Dr. Wang is found guilty, it does not necessarily follow that Cassava will be found guilty of wrongdoing also, but nobody seems to dispute that some of the studies and National Institute of Health (“NIH”) grant wins referenced by the DoJ relate to Cassava and simufilam, and the indictment also refers to Dr. Wang as a “consultant to a publicly traded Texas biopharmaceutical company”. Arguably, the FDA tacitly backed Cassava when upholding the Phase 3 clinical trial protocols and allowing the studies to begin in 2021 – the Citizen’s Petition had demanded they be halted. With the first readout of data due this year, however, it seems likely that the agency will permit Cassava to collect and share the results. The company says that: The pre-specified efficacy endpoints are ADAS-Cog12, a cognitive scale, and ADCS-ADL, a functional scale. iADRS is a combination of scores from ADAS-Cog and ADCS-ADL Cassava has frequently made the case that several other academic researchers have established a connection between simufilam and the potentially effective treatment of Alzheimer’s, referencing The Cochin Institute, Paris, France, Researchers at the University of Milan, Italy, and researchers at Yale University in an October 2023 press release. Nevertheless, without Dr. Wang and the contribution of his lab, a case can certainly be made that the simufilam studies would not have progressed this far. The way that Cassava has opted to collect and share data, and structure its studies, prior to the Phase 3 studies at least, has also, arguably, been somewhat misleading. For example, the positive data from the Phase 2 study showing cognitive decline being reversed reported data from the mildest patients first. After the full results were released, the conclusion could be drawn that simufilam was entirely ineffective against patients with more advanced disease. When we therefore consider the best-case scenario for Cassava when it releases its first Phase 3 study results, hopefully this year, it seems highly unlikely the study will show a positive effect on most patients, but it may be possible there will be a treatment effect noticeable in patients with the earliest form of the disease. Cassava CEO Barbier has suggested in the past that simufilam could be used in combination with other Alzheimer’s drugs, which are associated with more dangerous side effects than simufilam, which has a good safety profile – although detractors would argue that is because it is essentially a placebo drug. In a worst-case scenario, early data from the Phase 3 study could show no treatment effect, and the study could potentially be halted early if a futility analysis concludes the study is unlikely to generate any positive data – this happened to Biogen’s alzheimer’s drug aducanumab, although the drug still ends up securing an unlikely approval. If that is what happens, with only an Alzheimer’s diagnostic test left in its pipeline, and with funds close to exhaustion – the company reported an operating loss of $(20m) in Q1 2024, and cash and equivalents of $124m – things would look grim for Cassava, and its management team, and it may be possible the company’s management team could be investigated or indicted itself. Concluding Thoughts – Another Body Blow For Cassava To Add To Fear, Uncertainty, And Doubt Riding high when announcing its “miraculous” Phase 2 open label data in August 2021, Cassava’s fall from grace has been similarly jaw-dropping, and arguably, the fate of the Phase 3 study that could yet save Cassava’s blushes and send its stock price skyrocketing yet again, is now uncertain. A key question is whether the FDA decides that simufilam’s Phase 3 studies should be halted if the data that supported the study’s initiation was proven to be false in the courts? We are possibly not at that stage yet – we do not even know if Dr. Wang will be found guilty of any wrongdoing, after all, and that process will likely take years to come to any conclusion – but we can probably conclude that the outlook for Cassava and its shareholder’s is as bleak as at any time over the past few years as a key advisor to the company now faces potential prosecution. It is still not over for either the shorts or the longs, however – the one hope that longs can still cling to is that much of the evidence of wrongdoing and accusations that the simufilam thesis is fundamentally flawed is being produced by a group that intends to profit form falls in Cassava’s share price rather than from an independent source. According to MarketBeat, 26% of Cassava’s share float was held short as of June 15th. What we can conclude based on the last couple of years is that the shorts have landed blow after blow on Cassava, and the company has struggled to distance itself from the more negative developments. The one saving grace for longs is the Phase 3 clinical studies and readouts due, but now, with even these results potentially tainted by the work that went before them, the FUD is intensifying. Only the bravest longs will remain confident of vindication, and the approval of simufilam. I speculatively invested just over one hundred dollars in Cassava stock in 2021, and personally am not confident of recouping much of that investment. The longs may still be confident, but the outlook materially worsened last week, in my view, and the share price losses reflect a difficult state of affairs for Cassava the company, and its management. We await the next developments.

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