Alzheimer’s drug developer Cassava Sciences Inc (NASDAQ:SAVA), its founder Remi Barbier, and former Senior VP of Neuroscience Lindsay Burns have agreed to pay over $40 million to resolve SEC charges over misleading statements related to a Phase 2 trial of the company’s controversial Alzheimer’s drug, simufilam.

The SEC also charged Hoau-Yan Wang, a consultant and co-developer of the drug, with manipulating trial results.

The SEC’s investigation found that in September 2020, Cassava disclosed manipulated data from the trial, which falsely suggested dramatic improvements in Alzheimer’s biomarkers like total tau and phosphorylated tau.

According to the SEC, Dr. Wang, who was unblinded to certain trial data, used this knowledge to select a subset of patients, creating an illusion of significant efficacy.

Cassava later published this manipulated data in a press release and investor deck.

Further allegations highlight that Cassava and its executives, including Barbier and Burns, misled investors by promoting the drug’s ability to improve cognition in Alzheimer’s patients significantly.

The SEC claims the company cherry-picked patient data, failing to disclose that the full dataset showed no measurable cognitive benefit.

Moreover, Wang’s role in the trial, and his vested interest in its success, was not made transparent to investors.

As part of the settlement, Cassava, Barbier, and Burns have agreed to pay penalties of $40 million, $175,000, and $85,000, respectively. Barbier and Burns will also be banned from serving as officers or directors for three and five years, respectively.

Wang, while neither admitting nor denying the charges, agreed to cease future violations and pay a $50,000 fine.

In July, CEO Rick Barry wrote a letter to shareholders and employees, saying that the company is in the final stages of testing simufilam and has significant financial and emotional stakes.

Most recently, Cassava Sciences reported the completion of its third interim safety review for simufilam.

The Data and Safety Monitoring Board (DSMB) reviewed patient safety data from Cassava’s Phase 3 trials but did not assess the drug’s efficacy. The DSMB recommended both trials continue without any changes.

Price Action: SAVA stock is down 10.90% at $28.40 during the premarket session at last check Friday.

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