AUSTIN - Cassava Sciences, Inc. (NASDAQ:SAVA), a biopharmaceutical company, disclosed today that a former science advisor and medical professor, Hoau-Yan Wang, has been indicted by a federal grand jury. The indictment alleges that Wang defrauded the U.S. National Institutes of Health (NIH) by making false statements in grant applications, which led to the award of approximately $16 million in grants from 2017 to 2021.
According to the company, the grants in question were related to the early development phases of Cassava Sciences' drug candidate simufilam and a diagnostic test. Simufilam is currently in Phase 3 clinical trials as a potential treatment for Alzheimer's disease. The company has clarified that Dr. Wang and his former employer, a public university medical school where he was a tenured professor, have not been involved in these ongoing clinical trials.
The indictment against Dr. Wang raises concerns about the integrity of the processes through which research funding is obtained and managed. It is not clear from the information provided how this development might affect the ongoing trials or the future of simufilam. Cassava Sciences has not released further details about the case or the extent of Dr. Wang's involvement with the company's earlier research.
The news comes at a critical time for Cassava Sciences, as simufilam is a key asset in its pipeline with the potential to address the significant unmet medical need in Alzheimer's disease treatment. The company has not commented on any potential financial or reputational impact resulting from the indictment.
In other recent news, Cassava Sciences has been the subject of notable developments. The company reported a profitable first quarter with a net income of $25 million, a significant improvement from the $24.3 million net loss reported in the same period last year. The positive financial results were attributed to the change in fair value of warrant liabilities, despite increased costs associated with ongoing clinical trials for its Alzheimer’s disease drug candidate, simufilam.
Cassava Sciences also received a revised price target from H.C. Wainwright, raising the target to $131.00, up from the previous $124.00, following the company's first-quarter financial and operational results. The firm reiterated a Buy rating on the stock and highlighted the importance of ongoing Phase 3 clinical trials for simufilam.
The company is conducting two key studies, RETHINK-ALZ and REFOCUS-ALZ. Top-line results from these trials are expected by the end of 2024 and mid-2025 respectively. These trials are critical milestones for Cassava Sciences as they progress in the development of simufilam.
In addition, Cassava Sciences set the final warrant exercise date for May 6, 2024. The company will only receive cash proceeds from those exercising their warrants, as detailed in the warrant agreement filed with the U.S. Securities and Exchange Commission. The company ended the quarter with $124.2 million in cash and cash equivalents, bolstered by $126.3 million in total gross proceeds from the cash exercise of warrants.
InvestingPro Insights
As Cassava Sciences faces challenges with the legal indictment of a former science advisor, the financial outlook of the company remains an essential consideration for investors. According to InvestingPro data, Cassava Sciences has a market capitalization of approximately $634.72 million as of Q1 2024. Despite the negative press, the company holds more cash than debt on its balance sheet, which could provide some financial stability in turbulent times. However, the company's gross profit margins are weak, with a reported gross profit of -$83.54 million for the last twelve months as of Q1 2024.
Investors should also note that Cassava Sciences' stock price often moves in the opposite direction of the market, which may indicate a degree of resilience or idiosyncratic risk. Additionally, the company is trading at a high Price / Book multiple of 11.57, which might suggest the stock is overvalued relative to its book value of assets. Analysts do not expect the company to be profitable this year, and it has not been profitable over the last twelve months, with an adjusted P/E ratio of -18.98. These financial metrics could impact investor sentiment, especially in light of the recent indictment news.
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