2024-09-26 SEC Press pdf 302 KB 24,059 chars

"UNRECOVERABLE: Timeout During Enrichment"

Exhibit of SEC Charges Cassava Sciences, Two Former Executives for Misleading Claims About Alzheimer’s Clinical Trial

summary

Dr. Hoau-Yan Wang manipulated the results of Cassava Sciences' Phase 2b clinical trial for PTI-125, leading to false and misleading statements and raising over $260 million in new funding.

paragraph

The SEC charged Dr. Wang, a tenured associate professor at CUNY's School of Medicine, with partially unblinding himself to certain patients, exaggerating the response to the treatment arms, and making false claims. Cassava raised over $260 million based on these manipulated results. The SEC ordered Wang to pay a $50,000 civil penalty and cease violating securities laws.

narrative

The SEC has charged Dr. Hoau-Yan Wang, a tenured associate professor at the City University of New York's School of Medicine, with manipulating the results of Cassava Sciences, Inc.'s Phase 2b clinical trial for its drug candidate PTI-125. Wang partially unblinded himself to certain patients, allowing him to exaggerate the response to the treatment arms, leading to false and misleading statements. This resulted in Cassava raising over $260 million in new funding based on these manipulated results. The SEC has ordered Wang to pay a $50,000 civil penalty and cease violating securities laws. Dr. Wang is a tenured associate professor at CUNY's School of Medicine, and Cassava retained him as a paid consultant through June 2024. Cassava's shares are registered with the Commission and are listed on the Nasdaq Capital Market under the symbol 'SAVA.' The company's drug candidate, PTI-125, is a potential therapeutic for Alzheimer's disease. Clinical trials for PTI-125 proceed through three phases before the FDA will consider a New Drug Application. In 2017, Cassava completed a Phase 1 human safety trial of PTI-125. In 2019, Cassava ran a Phase 2a trial with 13 Alzheimer's patients who all took doses of PTI-125 for 28 days. Cassava's Phase 2b trial included 64 patients separated into three groups—one placebo group, one group taking 50 mg doses of PTI-125, and another group taking 100 mg doses of PTI-125.

Enriched metadata

Scheme: health-care-fraud (100%)
Civil penalty: $50,000

Classified health-care-fraud(confidence 100%). No EDGAR filing fingerprint (criminal/DOJ-side scheme). detection rule →

Extracted insights

Dollar amounts 7

$260.00M $260 million $100M–$1B
$200.00M $200 million $100M–$1B
$190.00M $190 million $100M–$1B
$70.00M $70 million $10M–$100M
$50K $50,000 $10K–$100K
$30K $30,000 $10K–$100K
$5K $5,000 <$10K

Entities 1

person before performing bioanalyses

Triples 8

Commission deems appropriate cease-and-desist proceedings be instituted against Dr. Wang
Respondent submitted Offer of Settlement
Commission determined to accept Offer of Settlement
Dr. Wang conducted analyses announced as final results of Phase 2b
Dr. Wang partially unblinded himself before performing bioanalyses
Cassava raised more than $260 million in new funding
Dr. Wang is tenured associate professor at CUNY School of Medicine
Cassava retained Dr. Wang as a paid consultant through June 2024

PDF

"UNRECOVERABLE: Timeout During Enrichment" · Source

Text layers

Extracted body text (24,059c)

UNITED STATES OF AMERICA

Before the

SECURITIES AND EXCHANGE COMMISSION

SECURITIES ACT OF 1933

Release No. 11311 / September 26, 2024

SECURITIES EXCHANGE ACT OF 1934

Release No. 101201 / September 26, 2024

ADMINISTRATIVE PROCEEDING

File No. 3-22210

In the Matter of

HOAU-YAN WANG,

Respondent.

ORDER INSTITUTING CEASE-

AND-DESIST PROCEEDINGS,

PURSUANT TO SECTION 8A

OF THE SECURITIES ACT OF

1933 AND SECTION 21C OF

THE SECURITIES EXCHANGE

ACT OF 1934, MAKING

FINDINGS, AND IMPOSING A

CEASE-AND-DESIST ORDER

The Securities and Exchange Commission (“Commission”) deems it

appropriate and in the public interest that cease-and-desist proceedings be, and

hereby are, instituted pursuant to Section 8A of the Securities Act of 1933

(“Securities Act”), and 21C of the Securities Exchange Act of 1934 (“Exchange Act”),

against Hoau-Yan Wang (“Dr. Wang” or “Respondent”).

II.

In anticipation of the institution of these proceedings, Respondent has

submitted an Offer of Settlement (the “Offer”) which the Commission has

determined to accept. Solely for the purpose of these proceedings and any other

proceedings brought by or on behalf of the Commission, or to which the Commission

is a party, and without admitting or denying the findings, except as to the

Commission’s jurisdiction over him and the subject matter of these proceedings,

which are admitted, and except as provided herein in Section V, Respondent

consents to the entry of this Order Instituting Cease-and-Desist Proceedings,

Pursuant to Section 8A of the Securities Act of 1933 and Section 21C of the

Securities Exchange Act of 1934, Making Findings, and Imposing a Cease-and-

Desist Order (“Order”), as set forth below.

III.

On the basis of this Order and Respondent’s Offer, the Commission finds1

that:

Summary

1. This matter involves false and misleading statements about

reported biomarker results from Cassava Sciences, Inc.’s (“Cassava”) Phase 2b

clinical trial for Cassava’s drug candidate PTI-125,2 a potential therapy for the

treatment of Alzheimer’s disease. In filings with the SEC, Cassava claimed that

Phase 2b bioanalyses were conducted under blinded conditions and claimed that

patients taking the drug showed significant improvement across every measured

biomarker for Alzheimer’s disease compared with patients who took a placebo.

Because of the conduct of Dr. Wang described herein, those claims were false.

2. Dr. Wang conducted the analyses that Cassava announced as the

final results of Phase 2b. Respondent used information provided by Cassava to

partially unblind himself before performing those bioanalyses. By partially

unblinding himself, Dr. Wang was able to manipulate the reported results to

show that patients taking the placebo had little change in biomarkers on average

while patients taking PTI-125 showed significant improvement on average.

3. After Cassava reported its Phase 2b trial results, the company

raised more than $260 million in new funding, in part based on false biomarker

results provided by Respondent.

Respondent

4. Dr. Hoau-Yan Wang is a tenured associate professor at the City

University of New York’s (“CUNY”) School of Medicine. Dr. Wang served on

Cassava’s Scientific Advisory Board, and Cassava retained Dr. Wang as a paid

consultant through June 2024. Dr. Wang co-invented PTI-125 along with

Cassava’s Senior Vice President of Neuroscience.

1 The findings herein are made pursuant to Respondent’s Offer of Settlement and are not binding on

any other person or entity in this or any other proceeding.
2 PTI-125 is also known as simufilam.

Other Relevant Persons or Entities

5. Cassava Sciences, Inc. (“Cassava”) is a Delaware corporation

with its principal place of business in Austin, Texas. Cassava is a pharmaceutical

company with one primary drug candidate, PTI-125, a potential therapeutic for

Alzheimer’s disease. Cassava’s shares are registered with the Commission

pursuant to Section 12(b) of the Exchange Act and are listed on the Nasdaq

Capital Market under the symbol “SAVA.”

Cassava’s Initial PTI-125 Trials

6. Clinical trials for a new drug usually proceed through three phases

before the FDA will consider a New Drug Application.

7. In 2017, the FDA cleared Cassava’s Investigational New Drug

application for PTI-125, which allowed Cassava to begin clinical trials of the drug

in humans. That same year, Cassava completed a Phase 1 human safety trial of

PTI-125.

8. In 2019, Cassava ran what it called a Phase 2a trial, consisting of

13 Alzheimer’s patients who all took doses of PTI-125 for 28 days. There was no

placebo group.

9. One key objective of Cassava’s Phase 2a trial was to measure

changes in concentration of biomarkers—substances in cerebrospinal fluid

(“CSF”) believed to correspond with Alzheimer’s disease pathology,

neuroinflammation, and neurodegeneration. To measure changes in biomarkers,

CSF was collected from patients before taking the drug and again after 28 days of

treatment.

10. Cassava asked Dr. Wang to analyze the CSF samples collected from

the Phase 2a participants. According to Dr. Wang’s results, all 13 patients

showed directional improvements in multiple biomarkers, suggesting that the

drug may be causing changes in biomarker levels.

11. In public announcements and SEC filings, Cassava disclosed that

Dr. Wang and his lab at CUNY performed the biomarker tests for Phase 2a.

Cassava’s Phase 2b Trial

12. In 2019, Cassava designed and began its Phase 2b clinical trial.

That trial ultimately included 64 patients separated into three groups—one

placebo group, one group taking 50 mg doses of PTI-125, and another group

taking 100 mg doses of PTI-125. Each patient in each group was to take their

respective treatment for 28 days.

13. Phase 2b was to be conducted as a double-blinded clinical trial,

which means neither the patient nor the tester is aware which patient received

which treatment. Blinding is a standard practice in many clinical trials, in part

because it helps reduce the potential impact of bias.

14. Participants in Phase 2b had CSF drawn before treatment began

and again after 28 days of treatment. Pursuant to the testing protocol, Cassava

directed each clinical site to send patient CSF samples to the CUNY laboratory in

New York where Dr. Wang performed research to be stored before laboratory

analysis. Laboratory results were to be sent directly to Cassava’s Senior Vice

President of Neuroscience who then was to forward them to a biostatistics

company hired by Cassava to compile unblinded results.

Phase 2b Round 1 Biomarker Testing

15. Cassava initially hired a laboratory in Europe to test the Phase 2b

CSF samples for nine biomarkers. However, there were two biomarkers that

Cassava wanted tested that the European lab could not measure. Cassava asked

Dr. Wang to test CSF samples for those two biomarkers. All biomarker testing by

the European lab (seven tests) and Dr. Wang (two tests) (collectively, “Round 1”)

were completed by early May 2020. Results were sent to Cassava’s Senior Vice

President of Neuroscience, who forwarded them to the biostatistics company.

16. On May 15, 2020, Cassava filed a Form 8-K with the Commission,

attaching a press release with the headline “Top-line Results from a Phase 2b

Study of PTI-125 in Alzheimer’s Disease Does Not Meet Primary Endpoint.”

17. None of the tests performed by the European lab showed a

meaningful effect of the drug treatment arms compared with the placebo. The

Phase 2b Round 1 results also did not show a drug effect consistent with Dr.

Wang’s Phase 2a results.

Dr. Wang Partially Unblinds Himself to Certain Phase 2b Patients

18. On May 13, 2020, the biostatistics company sent Cassava’s Senior

Vice President of Neuroscience a document summarizing the statistics for each

Round 1 biomarker. The document included, among other things, statistics for the

lowest (min) and highest (max) sample levels in each treatment arm and in the

placebo group for Day 0 (before the trial) and Day 28 (after the trial). The

document also identified the largest and smallest “change from baseline” or

change in biomarker levels in each treatment arm and placebo group.

19. On May 14, 2020, Cassava’s Senior Vice President of Neuroscience

sent this document with min, max, and change from baseline data to Dr. Wang.

20. That document had sufficient information to allow Dr. Wang to

match the test results that he ran in Round 1 with specific reported statistics.

21. Ultimately, using the information he was provided, Dr. Wang was

able to unblind himself to roughly a third of the patients in Phase 2b—eight

patients in the placebo group; seven in the 50 mg group; and eight in the 100 mg

group.

22. Dr. Wang recorded his process for unblinding certain patients in a

set of spreadsheets that matched the individual patient identification numbers

with known biomarker results from Round 1.

Dr. Wang Conducts Phase 2b Round 2 Biomarker Testing

23. On or around June 1, 2020, Cassava directed Dr. Wang to perform a

reanalysis of the Phase 2b clinical samples for the seven biomarkers tested by the

European lab during Round 1 using the CSF samples remaining in Dr. Wang’s

lab. Dr. Wang did not, as part of Round 2, re-run tests for the two biomarkers he

analyzed in Round 1. Dr. Wang also agreed to run additional biomarker tests that

had not been completed in Round 1. These combined tests constituted the Round

2 testing.

24. Dr. Wang was partially unblinded before he began running

bioanalyses for Round 2.

25. By unblinding himself to a portion of the Phase 2b patients, Dr.

Wang caused Cassava to make misleading statements that all analyses were

“conducted under blinded conditions to eliminate the possibility of bias.”

26. Dr. Wang manipulated the Phase 2b biomarker data, using the

knowledge he gained through the unblinding process to show an exaggerated

response to the treatment arms as compared to the placebo group.

27. For every biomarker that Dr. Wang tested in Round 2, generally all

patients showed improvements in biomarkers except for those patients who Dr.

Wang had identified through his unblinding process as having taken the placebo.3

Moreover, Dr. Wang reported results for unblinded 50 mg and 100 mg patients

generally that reflected more improvement than patients who Dr. Wang did not

3 Dr. Wang’s spreadsheets that recorded his process of matching individual patient

identification numbers to treatment groups contained two errors. Dr. Wang marked patient

07-002 as placebo when that patient was actually in the 50 mg group. Dr. Wang made this error on

May 15, 2020, before he began any testing for Round 2. Second, Dr. Wang mistakenly identified

patient 13-019 as part of the 100 mg group when that patient actually was in the 50 mg group

because Dr. Wang’s results showed two patients with the same value rounded to the nearest

thousandth.

unblind. This pattern is evidenced in Dr. Wang’s results for two tested

biomarkers, Total Tau and Phosphorylated Tau.

28. The following scatterplots are representative of Dr. Wang’s

manipulation across each of the seven Phase 2b biomarkers tested in Round 2.

These scatterplots portray patient data in the placebo, 50 mg, and 100 mg groups

for Total Tau and Phosphorylated Tau, two neurodegeneration biomarkers. As

seen below, the patients unblinded by Dr. Wang (those marked by red diamonds)

move anomalously to the rest of the blinded subjects (those marked by blue dots).

The plots also illustrate the two incorrectly identified patients.

29. The same general pattern occurred for the remaining biomarkers

that Dr. Wang analyzed in Round 2 of Phase 2b testing.

30. This pattern does not exist in the two biomarkers that Dr. Wang

analyzed in Round 1, prior to his unblinding.

31. When unblinded patients are removed from the analysis of each

Round 2 biomarker, the results no longer show a significant difference between

placebo, 50 mg, and 100 mg.

32. The results from the subjects unblinded by Dr. Wang appear to

drive the Phase 2b Round 2 results reported by Cassava.

33. Dr. Wang knew these manipulated results would be reported to the

market.

Cassava Publicizes Results from Dr. Wang’s Phase 2b Results

34. On September 14, 2020, Cassava publicized Dr. Wang’s results

which showed statistically significant improvement in all biomarkers in the

treatment groups as compared with the placebo group. The company issued a

press release and provided an investor presentation with an accompanying slide

deck, all of which were filed with the Commission under Form 8-K.

35. The September 14, 2020, press release stated that “Bioanalyses

were conducted under blinded conditions to eliminate any possibility of bias. An

academic lab generated final results.” Cassava further announced that

“Alzheimer’s patients treated with 50 mg or 100 mg of [PTI-125] twice-daily for

28 days showed statistically significant (p<0.05) improvements in biomarkers of

disease pathology, neurodegeneration and neuroinflammation, versus

Alzheimer’s patients who took placebo.”

36. Shortly after Cassava’s announcements regarding its Round 2

Phase 2b results, the company’s stock more than doubled, from $3.40 to $8.41 on

September 14, 2020.

Investors Purchase Cassava Shares Based on Phase 2b Results

Manipulated by Dr. Wang

37. On November 16, 2020, Cassava filed an updated prospectus

supplement to sell more than 9 million shares at $8 per share, netting Cassava

around $70 million after underwriting fees. The prospectus incorporated by

reference certain documents, including the Form 8-K filed September 14, 2020.

38. Cassava subsequently filed a new shelf registration statement in

February 2021 to register sales of approximately $200 million, which it executed

on, netting more than $190 million after paying underwriter fees. Cassava

incorporated documents into the shelf registration and subsequent prospectus,

including the Form 8-K filed September 14, 2020.

39. Dr. Wang owned Cassava stock and unexercised options. He also

qualified to participate in Cassava’s Cash Incentive Plan, which allowed

Cassava’s Board of Directors discretion to authorize cash payments from a pool

based on meeting valuation benchmarks and other triggers. Dr. Wang also was a

long-term consultant for Cassava, for which he received a monthly payment.

Dr. Wang Violated Securities Act Sections 17(a)(1) and (3) and Exchange

Act Section 10(b) and Rules 10b-5(a) and (c)

40. Securities Act Section 17(a)(1) makes it unlawful for any person, in

the offer or sale of a security, to “employ any device, scheme, or artifice to

defraud.” Securities Act Sections 17(a)(2) and 17(a)(3) make it unlawful for any

person, in the offer or sale of a security, to “obtain money or property by means of

any untrue statement of material fact” or a material omission necessary to make

statements made not misleading, or to “engage in any transaction, practice, or

course of business which operates or would operate as a fraud or deceit upon the

purchaser.”

41. Section 10(b) of the Exchange and Rules 10b-5(a) and (c) prohibit, in

connection with the purchase or sale of a security, employing any device, scheme,

or artifice to defraud, and engaging in any transaction, practice, or course of

business which operates or would operate as a fraud or deceit upon any person.

42. Securities Act Section 17(a)(1), Exchange Act Section 10(b), and

Rules 10b-5(a) and (c) require a showing that the defendant acted with scienter.

Reckless conduct generally satisfies the scienter requirement.

43. Dr. Wang retained information provided by Cassava to unblind

himself as to a portion of Phase 2b clinical trial patients. Dr. Wang used his

knowledge about certain unblinded patients to manipulate the results of Phase 2b

biomarker results, which he transmitted to Cassava to be used for public

disclosures about the Phase 2b trial’s purported success.

44. Dr. Wang obtained money or property in the form of stock option

awards from Cassava.

45. As a result of Dr. Wang’s conduct described above, he violated

Securities Act Sections 17(a)(1) and (3) and Exchange Act Section 10(b)(5) and

Rules 10b-5(a) and (c).

Dr. Wang Caused Cassava’s Violations of Securities Act

Sections 17(a)(2) and (3)

46. Securities Act Sections 17(a)(2) and 17(a)(3) make it unlawful for

any person, in the offer or sale of a security, to “obtain money or property by

means of any untrue statement of material fact” or a material omission necessary

to make statements made not misleading, or to “engage in any transaction,

practice, or course of business which operates or would operate as a fraud or

deceit upon the purchaser.”

47. In administrative proceedings, the Commission may impose

sanctions upon any person that is, was, or would be a cause of a violation, due to

an act or omission the person knew or should have known would contribute to

such violation. In order to establish that a person caused a non-scienter based

violation, a showing of negligence will suffice.

48. Cassava falsely disclosed to the public that all its bioanalyses

related to Phase 2b were “conducted under blinded conditions to eliminate the

possibility of bias.” By unblinding himself as to a portion of Cassava’s Phase 2b

patients, Dr. Wang caused Cassava’s violations of Securities Act Sections 17(a)(2)

and (3).

Findings

49. As a result of the conduct described above, the Commission finds

that Respondent violated Section 17(a) of the Securities Act, and Section 10(b)

and Rules 10b-5(a) & (c) of the Exchange Act. Respondent caused Cassava’s

violations of Securities Act Sections 17(a)(2) and 17(3).

IV.

In view of the foregoing, the Commission deems it appropriate, in the public

interest, and for the protection of investors to impose the sanctions agreed to in

Respondent Wang’s Offer.

Accordingly, pursuant to Section 8A of the Securities Act, and 21C of the

Exchange Act, it is hereby ORDERED that:

A. Respondent Wang shall cease and desist from committing or causing

any violations and any future violations of Section 17(a) of the Securities Act,

Section 10(b) of the Exchange Act and Rule 10b-5 thereunder.

B. Respondent Wang shall pay civil penalties of $50,000.00 to the

Securities and Exchange Commission. If timely payment is not made, additional

interest shall accrue pursuant to 31 U.S.C. §3717.

Payment shall be made in the following installments:

• Within 30 days of the entry of the Order, Respondent shall pay

$30,000;

• Respondent shall make a second payment of $5,000 within 120 days of

the entry of the Order;

• Respondent shall make a third payment of $5,000 within 210 days of

the entry of the Order;

• Respondent shall make a fourth payment of $5,000 within 300 days of

the entry of the Order; and

• Respondent shall make a final payment within 364 days of the entry of

the Order.

Prior to making the final payment set forth herein, Respondent shall contact

the staff of the Commission for the amount due. Payments shall be applied first to

post order interest, which accrues pursuant to pursuant to 31 U.S.C. 3717. If

Respondent fails to make any payment by the date agreed and/or in the amount

agreed according to the schedule set forth above, all outstanding payments under

this Order, including post-order interest, minus any payments made, shall become

due and payable immediately at the discretion of the staff of the Commission

without further application to the Commission.

Payment must be made in one of the following ways:

(1) Respondent may transmit payment electronically to the Commission,

which will provide detailed ACH transfer/Fedwire instructions upon request;

(2) Respondent may make direct payment from a bank account via

Pay.gov through the SEC website at http://www.sec.gov/about/offices/ofm.htm; or

(3) Respondent may pay by certified check, bank cashier’s check, or United

States postal money order, made payable to the Securities and Exchange

Commission and hand-delivered or mailed to:

Enterprise Services Center

Accounts Receivable Branch

HQ Bldg., Room 181, AMZ-341

6500 South MacArthur Boulevard

Oklahoma City, OK 73169

Payments by check or money order must be accompanied by a cover letter

identifying Hoau-Yan Wang as a Respondent in these proceedings, and the file

number of these proceedings; a copy of the cover letter and check or money order

must be sent to Mark Cave, Division of Enforcement, Securities and Exchange

Commission, 100 F St., NE, Washington, DC 20549.

C. Pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002, a Fair

Fund is created for penalties referenced in paragraphs IV.B. above. Amounts ordered

to be paid as civil money penalties pursuant to this Order shall be treated as

penalties paid to the government for all purposes, including all tax purposes. To

preserve the deterrent effect of the civil penalty, Respondent agrees that in any

Related Investor Action, he shall not argue that he is entitled to, nor shall he

benefit by, offset or reduction of any award of compensatory damages by the amount

of any part of Respondent’s payment of a civil penalty in this action (“Penalty

Offset”). If the court in any Related Investor Action grants such a Penalty Offset,

Respondent agrees that he shall, within 30 days after entry of a final order granting

the Penalty Offset, notify the Commission's counsel in this action and pay the

amount of the Penalty Offset to the Securities and Exchange Commission. Such a

payment shall not be deemed an additional civil penalty and shall not be deemed to

change the amount of the civil penalty imposed in this proceeding. For purposes of

this paragraph, a “Related Investor Action” means a private damages action

brought against Respondent by or on behalf of one or more investors based on

substantially the same facts as alleged in the Order instituted by the Commission

in this proceeding.

It is further Ordered that, solely for purposes of exceptions to discharge set

forth in Section 523 of the Bankruptcy Code, 11 U.S.C. §523, the findings in this

Order are true and admitted by Respondent, and further, any debt for

disgorgement, prejudgment interest, civil penalty or other amounts due by

Respondent under this Order or any other judgment, order, consent order, decree or

http://www.sec.gov/about/offices/ofm.htm

settlement agreement entered in connection with this proceeding, is a debt for the

violation by Respondent of the federal securities laws or any regulation or order

issued under such laws, as set forth in Section 523(a)(19) of the Bankruptcy Code,

11 U.S.C. §523(a)(19).

By the Commission.

Vanessa A. Countryman

Secretary

I.
II.
III.
Summary
Respondent
Other Relevant Persons or Entities
Cassava’s Initial PTI-125 Trials
Cassava’s Phase 2b Trial
Phase 2b Round 1 Biomarker Testing
Dr. Wang Partially Unblinds Himself to Certain Phase 2b Patients
Dr. Wang Conducts Phase 2b Round 2 Biomarker Testing
Cassava Publicizes Results from Dr. Wang’s Phase 2b Results
Investors Purchase Cassava Shares Based on Phase 2b Results Manipulated by Dr. Wang
Findings

IV.
V.

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