Cassava Sciences, Inc. Faces SEC Settlement

Shares of Cassava Sciences, Inc. (NASDAQ:SAVA) fell 11.5% in pre-open trading on Friday after the company announced a $40 million settlement with the U.S. Securities and Exchange Commission (SEC) over claims of negligence in disclosure.

Background of the Charges

The allegations arose from an SEC investigation into the company’s claims regarding the 2020 Phase 2b clinical trial results of simufilam, a potential Alzheimer’s disease treatment.

Settlement Details

Cassava agreed to settle the charges, paying a $40 million penalty without admitting or denying the SEC’s allegations. The company reported full cooperation with the SEC and stated they have implemented remedial measures. This penalty is expected to affect their financial results for the second half of 2024.

Response to DOJ Investigation

In addition to the SEC case, Cassava addressed a separate investigation from the U.S. Department of Justice (DOJ), indicating that they do not anticipate any criminal charges or resolutions from the DOJ’s Criminal Division.

Leadership Changes

In July, Cassava announced leadership changes, appointing Richard Barry as executive chairman and transitioning him to chief executive on September 6. Barry stated, “We can now focus all of our attention on completion of the ongoing Phase 3 trials of simufilam.”

Financial Outlook

Cassava reiterated its financial expectations, projecting cash reserves of $117 to $127 million by the end of 2024. However, the company expects to use between $80 and $90 million in cash during the latter half of the year, which includes the SEC fine.