Cassava Sciences shares fall after onetime advisor indicted on fraud charges

By Bill Peters

DOJ says researcher Hoau-Yan Wang is charged with defrauding the National Institutes of Health of roughly $16 million in federal grant funds

Shares of biotech company Cassava Sciences Inc. plummeted on Friday after a federal grand jury indicted a onetime science advisor to Cassava and charged him with falsifying data to obtain millions of dollars in government funds - the latest drama for a company that has faced questions over its efforts to develop an experimental Alzheimer's disease drug.

The Justice Department on Friday said that the researcher, Hoau-Yan Wang, had been charged with defrauding the National Institutes of Health out of roughly $16 million in federal grant funds.

Wang, a neuroscientist and a faculty member at the City College of New York, did not immediately respond to a request for comment. The Justice Department said a grand jury in Maryland returned the indictment on Thursday.

Cassava (SAVA), in a statement commenting on the charges, said: "Wang's work under these grants was related to the early development phases of the company's drug candidate and diagnostic test and how these were intended to work.

"Dr. Wang and his former public university medical school have had no involvement in the Company's Phase 3 clinical trials of simufilam," the statement continued. Simufilam is the Austin, Texas-based company's drug candidate for Alzheimer's treatment.

Cassava's stock finished 34.8% lower on Friday, though shares were rebounding 7.3% after hours.

In October, the publication Science reported that an investigation by the City University of New York had accused Wang of "scientific misconduct" across multiple research papers - many of which, it said, "provided key support" for the Alzheimer's drug.

Cassava, in response, said at the time that the alleged "misconduct" was related only to record-keeping issues at the university, and tried to link the matter to short sellers.

The Justice Department's announcement on Friday didn't mention Cassava, the university or the drug directly. It said Wang was "a tenured medical professor at a public university's medical school, as well as a paid advisor and consultant to a publicly traded Texas biopharmaceutical company."

The department said Wang was charged with one count of major fraud, two counts of wire fraud and one count of false statements. If convicted, the agency said, he faces a maximum of 10 years in prison for major fraud charge, 20 years in prison for each count of wire fraud, and five years for the false statements.

"From approximately May 2015 through approximately April 2023, Wang allegedly engaged in a scheme to fabricate and falsify scientific data in grant applications made to the NIH on behalf of himself and the biopharmaceutical company," the Justice Department said in a statement.

"As alleged, the fraudulent grant applications to the NIH sought funding for scientific research of a potential treatment and diagnostic test for Alzheimer's disease and resulted in the award of approximately $16 million in grants from approximately 2017 to 2021, part of which funded Wang's laboratory work and salary," that statement continued.

The indictment further alleged that Wang's work under the grants was related to early development and testing of the drug. The alleged falsification, the department said, related to how the drug and test were supposed to work and "the improvement of certain indicators associated with Alzheimer's disease after treatment with the proposed drug."

Shares of Cassava have fallen 45% so far this year.

-Bill Peters

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06-28-24 2041ET

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