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Why Cassava Sciences Is Sliding Lower Today

By Cory Renauer – Nov 17, 2021 at 1:14PM

Key Points

  • Cassava Sciences is a pre-commercial stage biotech developing a drug called simufilam for the treatment of Alzheimer's dementia.
  • On Monday, the company disclosed that government agencies are investigating it.
  • A Wall Street Journal article Wednesday reported that the SEC is looking into claims that Cassava manipulated some data from simufilam's clinical trials.

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Allegations of data manipulation that hammered the company -- and its stock price -- this summer won't be easily forgotten.

What happened

Shares of Cassava Sciences (SAVA 2.79%), a clinical-stage biopharmaceutical company, plunged Wednesday after The Wall Street Journal published an article reporting that the Securities and Exchange Commission is investigating allegations about the company that surfaced earlier this year. As of 1:04 p.m. ET, the stock was down by 22.1%.

So what 

In the quarterly report it filed with the SEC on Monday, Cassava Sciences disclosed that it had received information requests from certain government agencies. The company didn't elaborate about which agencies were making requests, nor did it say what information they asked for.

Investor with coffee and a laptop.

Image source: Getty Images.

But on Wednesday morning, The Wall Street Journal reported -- crediting sources familiar with the matter -- that the SEC is investigating claims that Cassava manipulated research results.

Now what

The drug candidate, simufilam, is supposed to improve the function of a protein called filamin A and thereby prevent the progression of Alzheimer's disease. It's the first new drug candidate that targets filamin A to begin a phase 3 trial. Until the results read out, investors can expect this stock to be very susceptible to skepticism. 

Earlier this month, a review conducted by The Journal of Neuroscience found no evidence of data manipulation in a key research paper supporting simufilam as a treatment for Alzheimer's disease.

On Monday, Cassava Sciences told investors to expect significantly higher operating expenses in the fourth quarter and further out. The company anticipates increased legal and professional fees related to ongoing securities class action lawsuits and governmental investigations.

Cory Renauer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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