Despite a significant down day for the S&P 500, shares of Cassava Sciences (NASDAQ:SAVA) closed higher by 35%. That’s because the Securities and Exchange Commission (SEC) has closed its case on Cassava following the initiation of an investigation last November. The investigation began after two physicians accused Cassava of manipulating its research using tools like Photoshop. The physicians filed a public petition to the Food and Health Administration (FDA), asking it to suspend Cassava’s clinical trials of Simufilam, an experimental Alzheimer’s Disease (or AD) drug. Interestingly enough, the physicians disclosed a short position in SAVA stock as well.
CEO Remi Barbier vehemently denied the claims, stating:
There is zero evidence, zero credible evidence, zero proof that I’ve ever engaged in, nor anyone I know, has ever engaged in funny business.
However, Cassava’s legal troubles didn’t end there.
SAVA Stock in the Green Following SEC Update
Following the petition, several acclaimed sources stepped up to express their opinions. Yale professor Marina Picciotto concluded that Cassava’s research showed no signs of manipulation. Still, she voiced that there were duplicated photos that did not affect the conclusion of the study. Meanwhile, image-manipulation consultant Elizabeth Bik said that she found instances of manipulation in the research report. Bik also added that: “The drug might work great,” despite the accusations.
The FDA eventually denied the petition, stating that enforcement actions are “expressly excluded from the scope of the FDA’s citizen petition procedures.” As a result, the FDA allowed trials for Simufilam to continue.
Then, in July, the Department of Justice (DOJ) announced that it had opened an investigation into Cassava, citing manipulation of research. The investigation also sought to figure out whether the company misled its investors and consumers. On the same day, Cassava released a statement denying the accusations. The statement pointed out that it has not received any charges since the SEC began its investigation. Furthermore, it sought to comfort investors by explaining that no officer or director had sold shares in over a decade. Meanwhile, SAVA short sellers had reportedly made over $100 million in profits due to the SEC investigation.
There are currently two ongoing Phase 3 clinical trials for Simufilam, called RethinkALZ and RefocusALZ. Final results from the two trials are expected to be released in mid-2024. While 99% of AD therapies have failed, the end of the SEC investigation offers a beacon of hope for AD patients and SAVA investors.
On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.