BIVI - Cassava Sciences: Update Following Leaked CUNY Report Fundamentals Remain Unchanged

2023-10-13 09:00:58 ET

Summary

• A leaked report by The City University of New York was published yesterday alleging research misconduct by neuroscientist Dr. Hoau-Yan Wang involved in several simufilam-related preclinical publications.
• Loss of raw research material (a red flag) has prevented an objective assessment of research fraud allegations. Alleged excuses by Dr Wang have been unconvincing.
• Cassava Sciences denied the allegations and claims the leaked document represents another short attack. Furthermore, recent publications, a couple by independent research groups, have confirmed simufilam's mechanism of action.
• Considering results of phase 2 study, progress in ongoing phase 3 trials and insiders buying, I believe SAVA fundamentals remain unchanged, despite the leaked report.

Overview

To summarize my previous coverage , clinical data from the phase 2 study have showed promising signals of efficacy in mild Alzheimer disease ((AD)) patients. Specifically, simufilam stabilized cognition over 18 months in mild patients, which is unprecedented compared to historical data. However, there are limitations and the bullish thesis is based on indirect comparison to historical data on expected course of AD. Furthermore, there are many red flags, including allegations of research fraud. The "ongoing investigation by academic authorities at The City University of New York" was highlighted in my prior coverage among risks. Yesterday, a report from CUNY was leaked, which sent the stock price up to 40% down in after-hours trading. On the other hand there were several bullish pieces of news since my previous coverage (see "clinical updates and insider buys" section below).

Overall, considering results from phase 2 study, ongoing phase 3 studies and insider buying, the fundamentals of Cassava Sciences (SAVA) remain unchanged in my opinion, despite the leaked report from CUNY.

Cassava Sciences clinical updates and insider buys

Despite setbacks and coordinated short attacks (justified or not) SAVA's clinical development program is progressing very well. Below is a summary of updates following my previous coverage;

• SAVA has announced completion of enrollment of the smaller phase 3 study. Notably, study overenrolled (n=804 patients vs planned n=750) illustrating high interest in participation in the study. Completion of enrollment of the other phase 3 (target enrollment n=1100 patients) is expected in Q4 2023.
• No safety concerns from an interim analysis of ongoing phase 3 studies. Studies continuing as planned as recommended by the Independent Data and Safety Monitoring Board.
• In an updated company presentation there were two pieces of good news; (1) 60-70% of patients enrolled in phase 3 studies have mild AD (which is good because results so far are much more bullish for mild patients). (2) Of 170 patients that have completed the phase 3 studies, 80% continued in the open label extension (it's reassuring that most patients elect to continue the study)

Finally, insiders have been buying recently (Form 4 SEC fillings here ).

All the above is bullish news for SAVA.

The leaked CUNY report

Several allegations (about two years ago) of research fraud have resulted in retraction of simufilam-related publications in PLOS One journal and expression of concern by editors in other journals ( Neurobiology of Aging and Journal of Neuroscience ). This has led to an investigation by academic authorities at The City University of New York, where much of the research has been conducted led by neuroscientist Dr. Hoau-Yan Wang. Yesterday an article was published in Science revealing a leaked report by CUNY. Notably the draft report appears to have been completed in May this years, but CUNY has taken no public steps for five months. The person who leaked the report was not authorized to do so.

To very briefly sum up the report, CUNY believes there is evidence of misconduct, but cannot prove it as underlying raw data has been lost. Below are selected quotes from the report that nicely summarize it;

• "In our draft report we concluded that a preponderance of evidence supported the conclusion of knowing scientific misconduct by Dr. Wang for 14 of the 31 allegations".
• "Already frustrated by the respondent's inability to provide even a single datum or notebook in response to any allegation, the committee decided that it would be most conservative to conclude that the respondent's failure to provide data or records prevented us from making an objective assessment in any case. But to be clear, the committee concludes that Dr. Wang's inability or unwillingness to provide primary research materials to this investigation represents egregious misconduct. This failure, the troubling research practices described in our report, and the clear indications of misconduct in his response to PLOS editorial concerns, is highly suggestive of longstanding and deliberate scientific misconduct by Dr. Wang. However, absent access to primary research materials, it is not possible to make definitive assessments for the 31 specific allegations. This is a source of deep frustration to the committee, which spent the better part of a year actively attempting to provide an objective investigation into these serious charges against Dr. Wang."
• "To summarize the major conclusion of our findings, Dr. Wang's failure to provide underlying raw data or research records has prevented the committee from making definitive conclusions regarding misconduct and the integrity of the data in majority of the allegations remains highly suspect. Dr. Wang's failure to store original data and research records represents a major break from the standards of the scientific community. Based on our examination of the published figures cited in each allegation, we recommend that editorial action be taken in for the publications referenced in allegations 1-5, 7, 10-17, 20, 22-25, 28, 29, and 31."

According to the leaked report Dr Wang has claimed that research records were thrown away in response to a request from CCNY [City College of New York] to clean the lab during the COVID-19 pandemic. CCNY, however, does not confirm this. I find this excuse (if true) by Dr. Wang unconvincing. There are no official comments on the leaked report by Wang's attorney or Dr. Wang so far.

Cassava's response

I am satisfied with SAVA's PR following the news. As SAVA highlights, and as acknowledged in the CUNY report, lack of access to raw data prevented CUNY from making an objective assessment. Therefore, there is still no proof of misconduct, albeit I admit there are concerning findings, especially the loss of raw data records. SAVA, however, blames CUNY for this ("internal record-keeping failures at CUNY"). However, blaming CUNY for loss of the data is unconvincing, unless other (unrelated to SAVA) researchers from CUNY reveal facing the same issue (which hasn't happened yet to my knowledge).

Also SAVA highlights that the "leak of CUNY report preceded by massive increase in short selling", suggesting just another coordinated short attack (repeating prior history ). Finally, and most importantly, no official concerns have been expressed (yet) about a recent new publication supporting simufilam's mechanism of action. Notably, the research was led by a team of researchers at the Cochin Institute (Paris, France), albeit Wang and Burns (authors of prior publications under investigation) are first and last authors, respectively, in that publication. Other independent reports (by University of Milan and Yale University , albeit both co-authored by Burns) also support simufilam's mechanism of action.

My view on SAVA and implications

In my view, the leaked CUNY report represents just another coordinated short attack against SAVA. People definitely benefited by leaking the CUNY report. Still the following is worrisome;

• The report found evidence of misconduct and is prompting journal editors to take action, which could result in more paper retractions.
• Loss of raw research material (and alleged excuses by Dr. Wang) are red flags.

On the other hand, SAVA has already successfully completed phase 1/2 clinical studies with simufilam and has two ongoing large phase 3 studies. There were no safety concerns from these studies (including data from an interim analysis of ongoing phase 3 studies) and there were several bullish signals of efficacy, predominantly in mild AD patients (see my previous coverage for more details). Furthermore, one of the phase 3 trials has already completed enrollment and announcement of completion of enrollment of the second phase 3 is expected soon.

Risks from CUNY report include the following;

• As explained in my prior coverage, two journals ( Neurobiology of Aging and Journal of Neuroscience ) have expressed concerns pending results of ongoing investigation by CUNY. The leaked CUNY report, prompting editors to take action, could lead to retraction of major papers on the mechanism of action of simufilam which could negatively affect SAVA's stock price short term.
• Some have expressed concerns on a potential clinical hold imposed on ongoing phase 3 trials by the FDA. However, I find this scenario highly unlikely considering no safety concerns, signals of efficacy and advanced progress in ongoing phase 3 trials. Conditions that can result in a clinical hold can be found here . I don't think any of these apply to SAVA based on currently available public information.

Financials

No updates since my last coverage. Enrollment in clinical trials is progressing as expected, therefore cash runway prediction remains unchanged. I still believe that SAVA might elect to raise cash before topline phase 3 results.

Risks

The new risk since my prior coverage is the announcement of retraction of major simufilam papers and the (very unlikely) risk of a clinical hold. Other than that risk factors remain the same as outlined in my previous coverage.

Conclusion

The leaked CUNY report, albeit another red flag, appears to be just another coordinated short attack against SAVA. If I owned a position I would hold. Many might prefer to even add here considering high probability (in my opinion) of a rebound in the stock price, especially those with a long-term perspective and high confidence on simufilam's efficacy. Personally, I would wait for more news (e.g. from journal editors that were awaiting the CUNY report) before buying. I would also prefer to wait topline phase 3 results by BIVI (expected in November/December ). Although I believe probability of negative/suboptimal results is high, better than expected results could drive SAVA's stock price down.

Your feedback is appreciated

Please comment below if you have any feedback (positive or negative), if you spot any mistakes, or if you believe I missed something important.

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