WASHINGTON, July 27 (Reuters) – The U.S. Justice Department has opened a criminal investigation into Cassava Sciences Inc over whether the biotech company rigged research results for its experimental Alzheimer’s drug, two people familiar with the matter said. the investigation.
The Justice Department staff conducting the Cassava investigation, based in Austin, Texas, specialize in examining whether companies or individuals have misled or defrauded investors, government agencies or consumers, according to the sources, who spoke on condition of anonymity. The sources did not provide details about the focus of the investigation and whether the department was investigating specific people.
As with any Justice Department investigation, this one could lead to criminal charges or be closed without charges being filed.
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In an emailed statement, Kate Watson Moss, an attorney representing Cassava, neither confirmed nor denied the existence of the Justice Department’s criminal investigation.
“To be clear: Cassava Sciences vehemently denies any and all allegations of wrongdoing,” Watson Moss said, adding that the company “has never been charged with a crime, and for good reason: Cassava Sciences has never engaged in criminal conduct.”
Watson Moss added that Cassava Sciences has received confidential requests for information from government agencies, but declined to identify those agencies. Watson Moss said that “Cassava Sciences has provided information in response to these requests in full satisfaction of its legal obligations.” Watson Moss added that no government agency has accused the company of wrongdoing.
A Justice Department spokesman declined to comment.
The company was already facing scrutiny from the US Securities and Exchange Commission and from investors after two doctors outside Cassava last year made accusations of data manipulation and misrepresentations related to research underpinning the drug. company’s Alzheimer’s drug, called simufilam.
Cassava, a small company with about two dozen employees, in a statement last year called the allegations of data manipulation and misrepresentation “false and misleading.”
On its website, Cassava describes simufilam as a “completely new approach” to treating Alzheimer’s, the most common form of dementia and a progressive brain disorder that affects nearly 6 million Americans. The oral drug restores the normal form and function of a key protein in the brain, the company said.
A PETITION TO THE FDA
The criminal investigation began, sources say, sometime after a lawyer on behalf of two doctors filed a petition in August 2021 with the US Food and Drug Administration asking the agency to stop the trials. simufilam clinical The doctors are David Bredt, a neuroscientist formerly with Janssen of Johnson & Johnson, and Geoffrey Pitt, 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 representing both doctors, says that studies published by Cassava on clinical trials with simufilam in various journals contained misrepresented data and images of experiments that appeared to have been doctored. a photo editing software. The FDA denied the request and allowed the trials to continue.
Bredt and Pitt revealed last November in an article published by The Wall Street Journal that they shorted shares of Cassava, betting the price would drop once investors learned of the alleged manipulation. They later told The New Yorker magazine that they no longer short Cassava, a claim Reuters could not independently verify.
The short sale represents “a huge conflict of interest,” Watson Moss said in his statement to Reuters.
“Cassava Sciences is interested in helping people with Alzheimer’s disease, which is not an easy payday,” added Watson Moss.
DOWNLOAD OF STOCKS
Cassava shares fell precipitously following Thomas’ FDA petition, presenting an opportunity for Bredt and Pitt to profit from their bet against the company.
Thomas declined to comment on the matter.
In February, the FDA said that a so-called citizen petition filed by the two doctors urging them to launch an investigation of simufilam was not an appropriate avenue for such a request. Meanwhile, requests for FDA to initiate enforcement action are “expressly excluded from the scope of FDA’s citizen submission procedures,” the agency said, adding that it exercises its own discretion in such matters.
An FDA spokesman declined to comment.
Cassava shares rose on Nasdaq from around $7 in January 2021 to more than $135 in July 2021 on investors’ hopes that the company was on the verge of a breakthrough in treating Alzheimer’s. The stock plummeted weeks later after news of the petition questioning the results of the Cassava investigation.
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 simufilam.
The NIH told Reuters that it does not review potential cases of research misconduct related to grants, but that officials “take research misconduct very seriously. Research misconduct can distort research decisions.” NIH funding, the overall integrity of the research we support, and public confidence in science and results.”
Cassava also faces investigation by the SEC, the sources said. The Wall Street Journal last November first reported on the SEC investigation, saying the agency was examining the claims made in the FDA petition. Reuters was unable to determine what specific claims, if any, drew the agency’s scrutiny.
An SEC spokesman said the agency “does not comment on the existence or nonexistence of a possible investigation.”
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Reporting by Marisa Taylor in Washington and Mike Spector in New York; Edited by Will Dunham and Michele Gershberg
Our standards: the Thomson Reuters Trust Principles.