The US Department of Justice has opened a criminal investigation into Cassava Sciences Inc (SAVAO) into whether the biotech company tampered with research results for its experimental Alzheimer’s drug, two people familiar with the investigation said.
Justice Department employees conducting the investigation in Cassava, based in Austin, Texas, specialize in examining whether companies or individuals have misled or defrauded investors, government agencies or consumers, according to sources who spoke on the condition of anonymity. The sources did not provide details about the focus of the investigation and whether the department is investigating any specific individuals.
As in any Department of Justice investigation, this can result in criminal charges being filed or closed without any charges being brought.
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In an emailed statement, attorney Kate Watson Moss, who represents Cassava, neither confirmed nor denied the existence of a criminal investigation at the Department of Justice.
“To be clear: Cassava Sciences vigorously denies any and all allegations of wrongdoing,” Watson-Moss said, adding that the company “has never been charged with a crime, and with good reason – Cassava Sciences has never engaged in any criminal conduct.”
Watson Moss added that Cassava Sciences received confidential requests for information from government agencies, but declined to identify those agencies. “Casava Sciences has provided information in response to these requests in full fulfillment of its legal obligations,” Watson-Moss said. Watson-Moss added that no government agency had accused the company of wrongdoing.
A spokesman for the Ministry of Justice declined to comment.
The company was already facing scrutiny from the US Securities and Exchange Commission and investors after two cassava doctors last year made allegations of data manipulation and data misrepresentation involving research supporting the company’s Alzheimer’s drug, called simufilam.
Cassava, a small company with about two dozen employees, described in a statement last year the allegations of data manipulation and misrepresentation as “false and misleading.”
On its website, cassava describes simufilam as taking an “entirely new approach” to treating Alzheimer’s disease, the most common form of dementia, a progressive brain disorder that affects nearly 6 million Americans. The company said the oral drug restores the normal shape and function of a key protein in the brain.
Petition to the Food and Drug Administration
The criminal investigation, according to the sources, began sometime after a petition was filed in August 2021 to the U.S. Food and Drug Administration by an attorney on behalf of two physicians asking the agency to halt clinical trials of simufilam. The doctors are David Breidt, a neuroscientist formerly at Johnson & Johnson Janssen, and Jeffrey Peet, a cardiologist who serves as director of the Cardiovascular Research Institute at Weill Cornell Medicine in New York.
The petition, filed by Jordan Thomas, a New York-based attorney who represents both doctors, said Cassava’s studies published about clinical trials involving simufilam in various journals contain data misrepresentation and images of trials that appear to have been manipulated by image-editing software. The US Food and Drug Administration rejected the petition and allowed the trials to proceed.
Breidt and Pete revealed last November in a Wall Street Journal article that they had sold Cassava shares, betting that the price would drop once investors learned of the manipulation they claimed. They later told The New Yorker that they no longer held a short position in cassava, a claim that Reuters could not independently verify.
In her statement to Reuters, Watson Moss said the short selling represented a “significant conflict of interest.”
“Casava science is interested in helping people with Alzheimer’s disease, and that’s no easy feat,” Watson-Moss added.
Cassava’s stock fell sharply after Thomas’ petition to the FDA, which presented an opportunity for Bredt and Pitt to profit from their bet against the company.
Thomas declined to comment on the matter.
The Food and Drug Administration said in February that a so-called citizen petition filed by the two doctors urging it to launch an investigation into simufilam was not an appropriate vehicle for such a request. Meanwhile, the FDA’s requests to initiate enforcement action are “explicitly excluded from the scope of the FDA’s citizen petition procedures,” the agency said, adding that it exercises its discretion in such matters.
A spokesperson for the Food and Drug Administration declined to comment.
Cassava shares on the Nasdaq have risen from about $7 in January 2021 to more than $135 in July 2021 with investors hoping the company is on the cusp of a breakthrough in treating Alzheimer’s disease. The stock fell weeks later after word was received from a petition questioning the results of the cassava research.
Shares of the company closed at $21.72 on Tuesday.
Cassava has received more than $20 million from the US National Institutes of Health to support the development of simofilam.
The National Institutes of Health told Reuters that it does not discuss potential cases of grant-related research misconduct but that officials “take research misconduct seriously. Research misconduct may distort NIH funding decisions, the public integrity of the research we support and the public’s trust in the science and what is produced.” About. Results.”
Cassava is also facing a Securities and Exchange Commission investigation, the sources said. The Wall Street Journal last November first reported on the SEC’s investigation, saying the agency was studying the allegations in the FDA’s petition. Reuters was unable to identify the specific allegations, if any, that prompted the agency’s scrutiny.
A spokesman for the Securities and Exchange Commission said the agency “does not comment on the presence or absence of a potential investigation.”
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(Reporting by Marisa Taylor in Washington and Mike Spector in New York; Editing by Will Dunham and Michelle Gershberg
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