SEC Takes Action Against Cassava Sciences and Executives for Deceptive Alzheimer’s Drug Claims

The U.S. Securities and Exchange Commission (SEC) has charged Cassava Sciences, Inc., along with its founder and former CEO Remi Barbier and former Senior Vice President of Neuroscience Dr. Lindsay Burns, for misleading investors about the efficacy of a Phase 2 clinical trial for their Alzheimer’s disease therapeutic. The charges stem from misleading statements made in September 2020, resulting in over $40 million in penalties to settle the allegations.

The SEC's investigation revealed that the charges relate to the misrepresentation of clinical trial results and the manipulation of data. Specifically, the SEC's order states that Dr. Hoau-Yan Wang, a consultant for Cassava and an associate medical professor at the City University of New York, played a critical role in this manipulation. By receiving unblinded data from the trial, Wang was able to select a third of the trial's participants and fabricate results that suggested significant improvements in biomarkers related to Alzheimer's, such as total tau and phosphorylated tau.

In a clinical trial setting, blinding is crucial to avoid bias; neither the participants nor the researchers should know which individuals are receiving the treatment or a placebo. However, Wang's access to unblinded information compromised this integrity, and the resultant data was subsequently presented by Cassava as evidence of their drug's effectiveness. The company claimed that the Phase 2 trial demonstrated considerable improvement in patients’ cognitive abilities, particularly episodic memory. However, the SEC alleges that the full dataset contradicted these claims, revealing no measurable cognitive enhancements.

The SEC's complaint further underscores that both Cassava and its executives failed to disclose Wang's involvement in the clinical trial, which raised significant concerns regarding conflicts of interest, given his financial and professional ties to the therapeutic’s success. The SEC's Associate Director of the Division of Enforcement, Mark Cave, emphasized the importance of maintaining public confidence in the markets and the need for accurate representation of scientific advancements.

The charges filed in the U.S. District Court for the Western District of Texas allege that Cassava, Barbier, and Burns violated antifraud provisions of federal securities laws. In settling the charges, Cassava will pay a total of $40 million, while Barbier and Burns will pay $175,000 and $85,000 respectively, without admitting or denying the SEC's allegations. Barbier and Burns will also face officer-and-director bars for three and five years respectively.

Dr. Wang has also been charged with violating antifraud provisions and aiding Cassava’s reporting violations. He has consented to cease and desist from future violations and will pay a penalty of $50,000.

The settlements are pending court approval, marking a critical step in addressing the implications of misleading clinical trial data on investors and the broader pharmaceutical landscape.

The GRC Report is your premier destination for the latest in governance, risk, and compliance news. As your reliable source for comprehensive coverage, we ensure you stay informed and ready to navigate the dynamic landscape of GRC. Beyond being a news source, the GRC Report represents a thriving community of professionals who, like you, are dedicated to GRC excellence. Explore our insightful articles and breaking news, and actively participate in the conversation to enhance your GRC journey.