Since last week, pharmaceutical company and Reddit retail trader favorite Cassava Sciences’ stock has plunged from a high of $122.69 to $53.26 when markets closed Monday afternoon, a stunning loss of 56.69 percent in just five days.
The catalyst lies with a citizen petition posted on August 23 by an undisclosed short seller, which is an entity that is betting on a particular company’s stock going down in price. The petition raised questions about the legitimacy of research data behind simufilam—Cassava’s main product, an experimental Alzheimer’s drug. Previously, Cassava had publicized data that was hailed as representing a “breakthrough” in treating Alzheimer’s and led to a Wall Street stock rally. The news of the petition alone drove the company’s share price down more than 30 percent, to around $85.
The petition raised “grave concerns about the quality and integrity of the laboratory-based studies surrounding this drug candidate and supporting the claims for its efficacy.” Among other claims, the petition alleges that a pair of studies underwriting the clinical trials “involve extensive use of Western blot analyses,” which upon examination “shows a series of anomalies that are suggestive of systematic data manipulation and misrepresentation.” The petition also states that the studies performed experiments on dead human brain tissue, which the petition says “defies logic, and the data presented again have hallmarks of manipulation.”
Therefore, the short seller requested that clinical studies stop and the FDA perform an audit of the data and publications that Cassava used to support the claims underwriting its experimental drug. Some scientists have raised concerns in the past, such as Stanford microbiologist and scientific integrity investigator Elisabeth Bik who in 2012 questioned research data generated by a team including researcher Hoau-Yan Wang, whose work Cassava leans heavily on to justify its drug's results.
In response to the petition, the company on Wednesday issued a rebuttal to the petitioner's allegations of data manipulation and omission, as well as image manipulation.
“As a science company, we champion facts that can be evaluated and verified,” said Remi Barbier, President & CEO, in that rebuttal. “This helps people make informed choices. It is important for stakeholders to separate fact from fiction, which is why we wish to address allegations head-on.”
According to Cassava, the blot bands highlighted in the allegations are control bands, which are supposed to look similar and “show clear differences” when “expanded.” Also, it noted, bands are supposed to look “sharp,” and if they were instead smudged then it would be a sign of inexperience. It also added that post-mortem brain tissue was taken six hours after death, flash-frozen, and stored at -80 degrees Celsius, claiming that this is “a standard procedure for pathologists.”
“Cassava Sciences response to (legit) allegations that Western blot bands look similar or spliced raises even more concerns. Variations of this sentence are used remarkably often as a response to image concerns,” Bik tweeted on August 25. “I hope that the company or the lab in which the experiments were performed can provide high resolution scans of these Western blots, to take away any concerns.”
Another claim that Cassava addressed is that it was taking a novel approach that no other lab had confirmed the viability of (focusing on a specific protein instead of clearing brain plaque typically associated with dementia). Cassava pointed to Quanterix—a digital health company that specializes in biomarker analysis—as a lab that helped prepare some relevant data affirming that approach at an Alzheimer's Association International Conference in July 2021.
On Friday Quanterix quickly responded that it had only generated data, not analyzed or prepared it.
“Cassava previously engaged Quanterix’ Accelerator laboratory to perform sample testing based on blinded samples provided by Cassava,” a statement issued by the company read. ”Quanterix or its employees did not interpret the test results or prepare the data charts presented by Cassava at the Alzheimer’s Association International Conference (AAIC) in July 2021 or otherwise.”
That revelation sent the stock sliding even further by well over 20 percent to around $54, where on Monday it again slid after an analyst suspended his neutral rating of the stock and warning the company's main product posed a "diligence challenge." Short sellers are estimated to have made over $100 million from the company losing more than $2 billion in value.
Over the past few months, retail traders like those at r/WallStreetBets have piled onto SAVA thanks to promise of easy gains once its Alzheimer's drug was shown to be successful. Over the past three months, users have posted millions of dollars worth of equity positions and options contracts as well as dedicated massive write-ups to the "biggest blockbuster in pharmaceutical history" and the "holy grail of pharmaceutical research."
In the days since the citizen petition and analyst downgrade, however, its loudest advocates have been eerily silent on the subreddit and there have been no new posts about the stock or its epic tumble.
The petition itself is nothing to sneeze at. Representing the filer is Jordan A. Thomas, a former Securities and Exchange Commission lawyer who was a “principal architect” of its SEC Whistleblower Program in 2011 before going on to create Labaton Sucharow, self-described as “the nation’s first whistleblower practice exclusively focused on violations of the federal securities laws.”
“Cassava Sciences vigorously and categorically denies allegations of scientific impropriety,” said Remi Barbier, President and CEO of Cassava Sciences, in a statement to Motherboard.