By Marisa Taylor and Mike Spector
WASHINGTON (Reuters) – The U.S. Justice Department has opened a criminal investigation into Cassava Sciences Inc over whether the biotech company manipulated research results for its experimental Alzheimer’s drug, two people close to the company said. of the investigation.
Department of Justice staff investigating Cassava, based in Austin, Texas, specialize in investigating whether companies or individuals have misled or defrauded investors, government agencies or consumers, according to the sources, who spoke on condition of anonymity. The sources did not provide details on the subject of the investigation and whether the ministry was investigating specific individuals.
As with any Justice Department investigation, this one could lead to criminal charges or be dismissed without charges being laid.
In an emailed statement, Kate Watson Moss, an attorney representing Cassava, neither confirmed nor denied the existence of the Justice Department’s criminal investigation.
“To be clear: Cassava Sciences vehemently denies any allegations of wrongdoing,” said Watson Moss, adding that the company “has never been charged with a crime, and for good reason – Cassava Sciences has not never committed any criminal behavior”.
Watson Moss added that Cassava Sciences had received confidential requests for information from government agencies, but declined to identify those agencies. Watson Moss said “Cassava Sciences has provided information in response to these requests in full satisfaction of its legal obligations.” Watson Moss added that no government agency has accused the company of wrongdoing.
A Justice Department spokesperson declined to comment.
The company was already under intense scrutiny from the U.S. Securities and Exchange Commission and investors after two doctors outside Cassava made allegations last year of data manipulation and false claims involving research underlying the company’s Alzheimer’s drug, called simufilam.
Cassava, a small company with about two dozen employees, in a statement last year called the allegations of data manipulation and misrepresentation “false and misleading.”
Cassava on its website describes simufilam as taking an “entirely new approach to treating Alzheimer’s disease, the most common form of dementia and a progressive brain disorder that affects nearly 6 million Americans.” The oral drug restores the normal form and function of a key protein in the brain, the company said.
A PETITION TO THE FDA
The criminal investigation began, the sources say, sometime after a petition was filed in August 2021 with the US Food and Drug Administration by a lawyer on behalf of two doctors asking the agency to stop the trials. simufilam clinics. The doctors are David Bredt, a neuroscientist formerly at Johnson & Johnson’s Janssen, and Geoffrey Pitt, a cardiologist who is director of the Cardiovascular Research Institute at Weill Cornell Medicine in New York.
The petition filed by Jordan Thomas, a New York-based attorney representing the two doctors, said Cassava’s published studies of clinical trials involving simufilam in various journals contained flawed data and images of experiments that appeared to have been manipulated by photo editing software. The FDA denied the petition and let the trials continue. Bredt and Pitt revealed last November in a Wall Street Journal article that they had shorted Cassava stock, betting the price would drop once investors learned of the alleged manipulation. They later told The New Yorker magazine that they no longer had a short position in Cassava, a claim Reuters could not independently verify.
The short sale represents “a major conflict of interest”, Watson Moss said in his statement to Reuters.
“Cassava Sciences wants to help people with Alzheimer’s disease, it’s not an easy salary,” added Watson Moss.
DROP IN STOCK
Shares of Cassava fell precipitously following Thomas’ FDA filing, providing an opportunity for Bredt and Pitt to profit from their bet against the company.
Thomas declined to comment on the matter.
The FDA said in February that the so-called citizens’ petition filed by the two doctors urging it to launch an investigation into simufilam was not an appropriate avenue for such a request. Requests to the FDA to take enforcement action, meanwhile, are “expressly excluded from the scope of FDA’s citizen petition procedures,” the agency said, adding that it was exercising its own discretion. on these issues.
An FDA spokesperson declined to comment.
Cassava shares have risen on the Nasdaq from around $7 in January 2021 to over $135 in July 2021 as investors hope the company is on the verge of a breakthrough in the treatment of Alzheimer’s disease. . The stock plunged weeks later after the announcement of the petition challenging Cassava’s research results.
Shares of the company closed at $21.72 on Tuesday.
Cassava has received over $20 million from the US National Institutes of Health to support the development of simufilam.
The NIH told Reuters it does not discuss potential cases of research misconduct related to the grants, but officials “take research misconduct very seriously.” Research misconduct can distort NIH funding decisions, the overall integrity of the research we support, and public confidence in science and the results that result.
Cassava is also facing the SEC investigation, the sources said. The Wall Street Journal last November reported on the SEC investigation for the first time, saying the agency was reviewing claims made in the FDA petition. Reuters was unable to determine which specific allegations, if any, came to the agency’s attention.
An SEC spokesperson said the agency “does not comment on the existence or non-existence of a possible investigation.”
(Reporting by Marisa Taylor in Washington and Mike Spector in New York; Editing by Will Dunham and Michele Gershberg)