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Neuroscience-focused biopharmaceutical company Cassava Sciences Inc. and two former executives have agreed to pay over $40 million to resolve U.S. Securities and Exchange Commission (SEC) allegations of misleading statements regarding a clinical trial for an Alzheimer's disease drug, the SEC announced Thursday.

SEC Fines Cassava $40M  : SEC Claims Against Cassava

The SEC's complaint, filed in Texas federal court, alleges that Cassava Sciences misled investors about the results of a Phase 2 clinical trial for its drug simufilam (formerly PTI-125). The SEC claims Cassava falsely stated that bioanalyses were conducted under blinded conditions, which should have prevented bias. However, the SEC alleges Dr. Lindsay Burns, Cassava’s former Senior Vice President of Neuroscience, negligently provided information that allowed Dr. Hoau-Yan Wang, a co-developer and consultant, to unblind himself while running the bioanalyses.

The SEC's Thursday announcement confirmed that Cassava, without admitting or denying the charges, agreed to pay a $40 million civil penalty. Additionally, former CEO Remi Barbier will pay $175,000, and Burns will pay $85,000. Both Barbier and Burns have also agreed to bans on serving as officers or directors, with Barbier facing a three-year ban and Burns a five-year ban. The settlements are still pending court approval.

Related Allegations Against Dr. Wang

The SEC also issued a separate order against Dr. Wang, who is a professor at the City University of New York's Medical School. Wang is accused of manipulating clinical trial data, using the information that unblinded him to falsely indicate that the drug caused significant improvements in Alzheimer's-related biomarkers. According to the SEC, these manipulated results were subsequently promoted by Cassava in investor presentations and press releases.

In addition to the SEC charges, Wang faces criminal charges from a Department of Justice (DOJ) indictment in June for allegedly falsifying scientific data in grant applications to the National Institutes of Health (NIH). Wang has agreed to a $50,000 civil penalty and to cease and desist from future violations of securities laws, without admitting or denying the allegations.

SEC Fines Cassava $40M  : SEC’s Commitment to Market Integrity

"Today's actions — which include charges against senior executives and significant monetary relief against Cassava — reflect our commitment to upholding public confidence in the market's ability to accelerate legitimate scientific advances," said Mark Cave, associate director of the SEC’s Division of Enforcement.

The SEC complaint also points to misleading statements by Cassava, including claims that simufilam improved cognition in Alzheimer’s patients, despite excluding 40% of the participants from the analysis. The SEC further alleges that Cassava failed to disclose Wang’s role in the trials, thereby concealing his conflict of interest due to his financial and professional ties to the company.

Cassava’s Response and Ongoing Trials

Cassava Sciences issued a statement noting that they are "pleased to put this matter behind us" and emphasizing their focus on completing Phase 3 trials of simufilam. Richard Barry, who was appointed executive chairman in July, stated the company remains hopeful that simufilam will eventually gain approval from the U.S. Food and Drug Administration (FDA) and help those suffering from Alzheimer's.

A shareholder class action filed earlier this year against Cassava, Barbier, and CFO Eric J. Schoen alleges the company denied manipulating data, but that its shares dropped by 15% when the City University of New York (CUNY) found evidence of potential scientific misconduct by Wang. Wang is not a defendant in that case.

SEC Fines Cassava $40M  : Legal Representation

Barbier and Burns are represented by attorneys from Jacobson Lopez LLP and BakerHostetler. Cassava is represented by Gibson Dunn & Crutcher LLP. Wang’s legal representation was not immediately available.