Cassava Sciences Drama Coming To A Head (NASDAQ:SAVA)

On Dec. 06, Cassava Sciences (NASDAQ:SAVA), a large ($1.4 billion market cap) clinical-stage biotechnology company focused on neurodegenerative diseases such as Alzheimer’s disease (or AD), completed drug administration in an open-label study of simufilam. Simufilam (sim-uh-FILL-am) is a small molecule that is said to restore the normal shape and function of altered filamin A (or FLNA) protein in the brain. After due analysis by independent biostatisticians with specific expertise in AD, Cassava may be able to announce results approximately year-end 2022. Since this clinical trial measures cognitive changes using the ADAS-cog scale over 12 months in approximately 200 patients with mild-to-moderate AD, the data may inform outcomes from two ongoing Phase 3 RETHINKALZ and REFOCUS-ALZ studies. Investors following the AD space may want to pay attention, in light of SAVA prices appearing to being artificially suppressed by outside market forces. This is aside from the 4% dilution from the secondary offering which closed on November 22.

On November 3, Cassava filed a federal lawsuit against David Bredt, Geoffrey Pitt, Adrian Heilbut, Jesse Brodkin, Enea Milioris, Patrick Markey, and Quintessential Capital Management (QCM), who allegedly executed a “short and distort” campaign against the company. Heilbut, Brodkin, Milioris, and Markey are referred to collectively as the dot-com Defendants”. All except QCM are scientists, and all had public short positions in SAVA. Those familiar with the saga may skip to the last part.

Choosing Sides

In 2021, after securing short positions in Cassava’s stock, Bredt and Pitt took their first salvo when they authorized a law firm to send a citizen’s petition on August 18, a second letter on August 30, and a third letter on September 9, to convey to the Food and Drug Administration (FDA) that Cassava was misleading investors and the public because its drug simufilam was predicated on manipulated science and Cassava had manipulated the testing associated with the drug. Bredt and Pitt also publicized the freely accessible government website hosting the documents, so those would be read by potential investors and shorts. Cassava countered with 3 press releases on August 25 and 27, and September 3, 2021 that it had not submitted doctored information to the FDA and that none of the scientific studies underlying simufilam had been manipulated and none of the testing results of simufilam had been manipulated, but the damage was done. On August 17, 2021, SAVA closed at $104.62; by September 9, 2021, shares cratered to less than half, closing at $49.72.

In November 2021, the others took their turns. The dot-com Defendants posted a letter they also sent to the FDA on November 2, and a 36-page report on November 3 on their websites cassavafraud.com and simuflimflam.com, repeating the main themes from the citizen’s petition letters. QCM also published its own report on November 3. On November 17, Bredt and Pitt authorized another letter to the FDA. On the same day, the Wall Street Journal published an article that disclosed, for the first time, Bredt and Pitt as the authors of the various letters to the FDA and held short positions in SAVA. The coordinated attacks and negative media exposure worked against the stock price. SAVA shares had rallied to a high of $100 on November 4 when Cassava was cleared by the Journal of Neuroscience of data manipulation in a 2012 article, then shares plunged again by half to close at $47.07 on November 17, including a 24% drop from the previous day.

Consolidating

Subsequently, more letters, reports, and publications from the dot-com Defendants were posted on their websites, although as of January 17, Bredt and Pitt no longer had short positions. Meanwhile, the journals Neuroscience, Neurobiology of Aging, and Journal of Prevention of Alzheimer’s Disease all found no data manipulation in their respective articles, and unsurprisingly, the FDA denied the citizen petition and all its supplements. But the market grew weary of the circus. Indeed, since January 24, when the U.S. warned its citizens to leave Ukraine, SAVA has more or less been tracking the SPDR S&P Pharmaceuticals ETF (XPH), which has the most SAVA exposure at 4.5%; both are at -0.59% as of the close of December 6.

Clinical Trials on Alzheimer’s Disease conference sideshow

Most recently, both Cassava and the dot-com Defendants presented at CTAD. Cassava seems to have validated (see abstact P111) a plasma pTau181 single molecule array assay on and using it to screen mild-to-moderate AD patients for inclusion into RETHINKALZ and REFOCUS-ALZ. As an aside, one of QCM’s allegations on page 24 was on inclusion criteria:

On the other hand, in the recent Cassava 64-person study inclusion criteria specify “diagnosis of dementia due to possible or probable Alzheimer’s Disease” and allow MMSE cognitive scores as high as 26, which is defined as “normal cognition”. With such inadequate enrollment criteria, it is almost certain that there will be patients in the study who do not have Alzheimer’s disease (some may have non-Alzheimer’s dementia or simple, agerelated [sic] memory loss). This presents a major problem in the study as any sample of these patients is likely to show better symptoms progression if compared with studies which included exclusively people with certain Alzheimer’s.

Perhaps QCM has more expertise than Eisai (OTCPK:ESALY) and Biogen (BIIB)? As mentioned in a previous article, their Clarity AD trial was published on November 29th in the New England Journal of Medicine, and they didn’t stop at the Mini mental state examination (MMSE) 26 cutoff. Inclusion criteria for all participants of this study was MMSE score ≥22 and ≤30 at both Screening and Baseline.

In another corner was the poster LP105A- RIGOR AND REPLICATION IN ALZHEIMER’S THERAPEUTIC DEVELOPMENT: A CASE STUDY. Using isothermal titration calorimetry (or ITC), the Defendants saw no evidence for binding of either naloxone or simufilam to a previously reported high affinity target, the VAKGL pentapeptide, which was a biochemical basis for simufilam as a drug targeting FLNA. They observed no difference between ITC thermograms of simufilam was mixed with VAKGL or VAAGL peptide, a negative control. And for the positive control, the scientists tested naloxone and its known interaction with 2-hydroxypropyl β-CD. Wait… no, they did not. Instead, they picked carbonic anhydrase II and acetazolamide. Maybe they didn’t know how to buy cyclodextrin from Germany? But somehow, they found a supply of simufilam, which isn’t sold anywhere. Also, ITC was not utilized in previous pre-clinical simufilam studies, so there was no actual attempt at ‘replication.’

In the interest of getting everyone’s current viewpoint, this author has reached out to Drs. Bredt and Pitt for comment.

Show us the data

Simufilam is Cassava’s lone drug candidate. If it fails any of the upcoming trials, that could essentially spell ‘game over’ for the company, even if they have $174.7 million in cash, no debt, and a Q3 loss of only $20.3 million. On the other hand, in the interim analysis of the open-label study was conducted on the first 100 evaluable subjects who completed at least 12 months of treatment with simufilam 100 mg twice daily, overall ADAS-Cog11 scores improved an average of 1.5 points (P<0.05). In the 63% of patients who did show improvement, the bump was a mean of 5.6 points (S.D. ± 3.8). So success is more likely than not on the full 200 patient set, even (or especially) for the cynical who suspect the company has been fudging the numbers all along.

As an alternative to trading in the stock itself, options might present a more conservative strategy. The January 20, 2023 chain is favoring the $40 call strike, a modest premium on the current $33.62 price.