Looks like Cassava Sciences (SAVA) shares are kicking off the week the way they ended the previous one – by taking a beating. After swooning by 35% in Friday’s session, at the open of Monday’s trading the stock was down again.
The drop came in reaction to the news a Maryland federal grand jury has indicted CUNY School of Medicine Professor Hoau-Yan Wang on fraud charges.
How is this related to Cassava? Well, Wang was a company paid consultant and researcher and the indictment accuses him of data falsification related to Cassava’s Alzheimer’s drug, simufilam, which he used to apply for NIH grants. The indictment states that Wang’s data led to Cassava receiving $16 million in funding. According to the Department of Justice (DoJ), the $16 million in grants distributed between 2017 and 2021 partially financed Wang’s laboratory work and salary. Wang faces one count of major fraud, two counts of wire fraud, and one count of making false statements.
This is not the first time Cassava and its Alzheimer’s drug are embroiled in controversy. In August 2021, a Citizen’s Petition (CP) was filed with the FDA and posted online, accusing Cassava and its scientific advisers of misconduct. A CP permits any individual or group to highlight safety or efficacy issues regarding drugs under FDA review. In the fall of the same year, CUNY began an internal investigation and later released its findings in a 50-page report published in May 2023.
Following its publication, H.C. Wainwright analyst Vernon Bernardino read the report. “When we took the findings at face value, we believed the main takeaway from CUNY’s report was no finding of data manipulation,” the analyst said. “As a result, we concluded this matter not worthy of further discussion.”
Although Bernardino says he does not have access to the specifics of the findings in the indictment documents and Cassava is not mentioned, he admits there’s no escaping the fact Dr. Wang has been formally charged with making false statements and fraud concerning Phase 1 and Phase 2 study results that were used to support the progression of simufilam into late-stage clinical trials. And that is set to have a big impact on the stock, regardless of the other positive data out there
“While we note that confirmation of simufilam’s mechanism of action has been published in peer-reviewed journals independently of Dr. Wang’s work, and we have previously written that these results are evidence that strongly support simufilam’s biological activity in treating biomarkers of AD, we believe this controversy could be a significant long-term challenge to realizing upside in Cassava stock,” he said.
As such, Bernardino has downgraded his SAVA rating from Buy to Neutral without having a fixed price target in mind. (To watch Bernardino’s track record, click here)
There are only 2 other analysts currently tracking Cassava’s progress; one, like Bernardino, is now on the sidelines, while the other still considers the stock a Buy. (See Cassava stock forecast on TipRanks)
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