Biotech company Cassava Sciences was sued in the Western District of Texas late last week in connection with their prospective treatment simufilam, designed to counteract the effects of Alzheimer’s disease. The complainant, a stockholder, sued after the company’s stock price increased along with positive news about the efficacy of the drug, but plummeted in response to negative analysis of further announcements.
The complaint explained that Cassava’s simufilam is seen as a potential competitior to another drug, aduhelm, made by the much larger Biogen. According to the plaintiff, simufilam is both more affordable and easier to administer, being a tablet as opposed to an intravenous injection.
According to court documents, the stock price for Cassava reached a peak of $90 per share, from a starting point of $22.99 just two days prior. Responsible for the price, according to the plaintiff, was the company’s February 2 announcement of its analysis of a study on simufilam,”which purportedly demonstrated that patients’ cognition and behavior scores both im proved following six months of simufilam treatment, with no safety issues.” The company allegedly capitalized on these gains with a stock offering resulting in $200 million in proceeds.
The plaintiff recounted a series of positive press releases and price increases throughout the course of the year until July 29. The press release issued that day, entitled “Cassava Sciences Announces Positive Cognition Data With Simufilam in Alzheimer’s Disease,” resulted in a negative market response, with analysts disagreeing with Cassava’s presentation of the latest data. After this, the stock price decreased significantly. These issues were compounded in August when a citizen petition to the Food and Drug Administration urged that simufilam trials be halted.
The plaintiffs argued that Cassava knowingly made false or misleading statements, failing to disclose issues with numerous aspects of the study data. The class action complaint alleges securities violations and seeks compensatory damages for violations of Sections 10(b) and 20(a) of the Exchange Act. The purported class covers those who acquired Cassava stock between September 14, 2020 and August 27, 2021.
The putative class is represented by The Briscoe Law Firm.
