SEC Charges Cassava Sciences, Two Former Executives for Misleading Claims About Alzheimer’s Clinical Trial

The Securities and Exchange Commission today announced Cassava Sciences, Inc., its founder and former CEO, Remi Barbier, and its former Senior Vice President of Neuroscience, Dr. Lindsay Burns, will pay more than $40 million to settle charges related to misleading statements made in September 2020 about the results of a Phase 2 clinical trial for the company’s purported therapeutic for the treatment of Alzheimer’s disease.

In a related order, the SEC charged Cassava consultant, Dr. Hoau-Yan Wang, an associate medical professor at the City University of New York’s Medical School and the therapeutic’s co-developer, for manipulating the reported clinical trial results.

According to the SEC’s order, Wang received information that unblinded him to some aspects of the Phase 2 clinical data, which he used to identify about a third of the patients enrolled in the trial. In a blinded clinical trial, to avoid bias in the results, no one involved in the trial knows the treatment assignment of individual patients, including whether the patient received a placebo or an active dose of the therapeutic. Using information that unblinded him to aspects of the trial data, Wang was able to manipulate the data to create the appearance that the drug had caused dramatic improvements in biomarkers associated with Alzheimer’s disease, such as total tau and phosphorylated tau, which are common indicators of neurodegeneration in Alzheimer’s patients. The order also finds that Wang knew Cassava would disclose the manipulated data when announcing the results of its Phase 2 clinical trial, and Cassava did in fact publicize the data in a press release and investor deck issued on September 14, 2020. The SEC’s related civil complaint alleges that Cassava and Burns misled investors with claims that the Phase 2 trial was conducted in blinded conditions, even though Wang had been unblinded.

The SEC’s complaint further alleges that Cassava misled investors by announcing that the company’s therapeutic significantly improved patient cognition. Among other things, Cassava claimed that the Phase 2 results showed significant improvement in episodic memory of the Alzheimer’s patients involved in the clinical trial. In reporting the results, however, Cassava failed to disclose that the full set of patient data – as opposed to the subset of data hand-selected by Burns – showed no measurable cognitive improvement in the patients’ episodic memory. Cassava and Barbier also failed to disclose Wang’s role in the clinical trial, despite his personal, financial, and professional interest in the therapeutic’s success.

“Our capital markets can and should be a powerful engine for innovation in the development of new and potentially life-altering therapeutics,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement. “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.”

The SEC’s complaint, filed in the U.S. District Court for the Western District of Texas, charges Cassava, Barbier, and Burns with violating antifraud provisions of the federal securities laws and charges Cassava with violating reporting provisions of the federal securities laws. Without admitting or denying the allegations, Cassava, Barbier, and Burns consented to civil injunctions against future violations and agreed to pay civil penalties of $40 million, $175,000, and $85,000, respectively. Barbier and Burns agreed to be subject to officer-and-director bars of three and five years, respectively. The settlements are subject to court approval.

The SEC’s order alleges that Wang violated antifraud provisions of the federal securities laws and that he aided and abetted Cassava’s violations of the reporting provisions. Without admitting or denying the violations, Dr. Wang consented to cease and desist from future violations and to pay a $50,000 penalty.

The SEC’s investigation was conducted by Matthew Spitzer, Ernesto Amparo, and Zachary Avallone and was supervised by Sarah Hall, Melissa Armstrong, and Mr. Cave. Eugene Canjels from the Commission’s Division of Economic Risk and Analysis provided assistance.