Cassava Sciences, formerly Pain Therapeutics, is another one of those companies, like Anavex, where you just aren’t sure where to begin. But I can tell you, I won’t be focusing too much on the fraud allegations related to their preclinical data for Simufilam (formerly PTI-125). Smarter people than I have delved deeply into those allegations. There is a good summary of those here, and you can read the whole CUNY Investigative Report here. That report concluded:
I also won’t go into the criminal investigation by the DOJ or the investigation by the SEC, other than to highlight the fact that they exist.
Now let’s start with the beginning, Cassava began its life as Pain Therapeutics, which was founded in 1998 by the current CEO, Remi Barbier (he’s really hard to get rid of, like a bad rash). For the first 20 years of its existence, it was a pain company, as the name suggests. In 2002, they licensed Remoxy from Durect, a long-acting abuse resistant oral formulation of oxycodone.
That’s when the fun really started. Pain Therapeutics filed an NDA with the FDA in June of 2008 and received a complete response letter in December 2008. Then King Pharmaceuticals, which licensed the product in 2005, took charge and filed a resubmission in December 2010 and received a complete response letter in June 2011 (after it was bought by Pfizer). Then in October 2014, Pfizer dropped the program, obviously after some frustration. In March 2016, Pain Therapeutics resubmitted again and received ANOTHER complete response letter in September 2016. In February 2018, the Remoxy NDA was submitted for review for the FOURTH time, had an adcomm, which voted it down 14-3 and then they received a complete response letter in August 2018. Here is a nice little summary.
What’s the definition of insanity again? Doing the same thing over and over and expecting different results? You have to hand it to Remi for being persistent although I wonder if that was the best use of investor dollars? It obviously wasn’t good for shareholders, especially if any have held this stock long term.
Anyway, after the Remoxy saga, they changed their name to Cassava Sciences and re-focused on Alzheimer’s, which temporarily helped the share price due to the Alzheimer’s craze of 2021/2022.
Currently, Simufilam is in 2 Phase 3 trials with a total of 1,900 mild-to-moderate Alzheimer’s patients with relatively standard endpoints of ADAC-Cog12 and ADCS-ADL.
The only issue is, there is very little data to support Simufilam’s efficacy, especially in those endpoints. In 2019, they reported some biomarker results from a Phase 2a with just 13 patients. I’ve seen countless “interesting” biomarker results in Alzheimer’s for drugs that ended up failing in larger trials. So, I really don’t put too much stock in it.
Then in 2020, the reported on a 64-patient Phase 2b, which was a biomarker study but ended up failing it’s primary endpoint. Which of course led the company to point to secondary endpoints and post-hoc analysis.
In July of this year they issued a press release titled “Oral Simufilam Slowed Cognitive Decline in a Randomized Withdrawal Trial of Mild-to-Moderate Alzheimer’s Disease” which, based on that heading, one would assume to be a positive study. You would be wrong. Dead wrong. The study was a failure, but you wouldn’t find that out unless you see the five words “not significant for sample sizes” at the end of the third paragraph, in parentheses. They also don’t disclose the actual p-values. They even went so far as to include an ADAS-Cog chart of Simufilam versus placebo without any error bars.
But then in the Clinical Trials on Alzheimer's Disease conference (CTAD) presentation from last week you can kind of see why they did that. At a glance you would have been able to see that this was not a significant result.
How not significant? P=0.476 not significant. Even in the mild subgroup, which they focused on quite a bit in the original press release due to the “>200%” reduction in cognitive decline, failed to reach significance, as it had a p-value of 0.136.
It’s probably important to remind people that the Phase 3 trials include BOTH mild and moderate patients. So, the chances of it actually hitting their primary are minimal. Honestly, I just don’t see how a chart like the below would inspire any confidence at all.
Good news for Cassava shareholders is that they won’t find out the bad news until about Q4 2024 for the RETHINK-ALZ study and about Q2 2025 for the REFOCUS-ALZ study, based on their clinicaltrials.gov entries.
Now on to the finances. The company had $168 million in cash as of June 30, 2023 and burned $33 million over the first six months. However, they are guiding for $40-50 million in burn over the rest of the year, so if you figure that will be the rate for 2024 as well, then they will be burning $120-$150 million over the next year and a half. I’m guessing they have cash until either Q2 or Q3 of 2025. That means they can get through the RETHINK-ALZ study without another raise but would need one prior to REFOCUS-ALZ. And if RETHINK-ALZ is negative, well, you wouldn’t want to be a bagholder then.
One weird item I noticed in the proxy is that Remi Barbier and most of the management team don't get any stock options (outside of initial grants), their compensation is almost all just straight cash. Even bonuses are rare, but when they happen, they are all cash (like the $750,000 bonus Remi Barbier received in 2021, on top of his then $975,000 salary). This is VERY unusual. As we mentioned in our Brainstorm post, in the S&P 500 typically 68% of CEO pay comes from stock and stock options and related instruments. The 0% going to Cassava executives is an extreme outlier and is even worse than what we saw with Brainstorm, where 68% of the CEO’s pay was in cash. Options are used to align management interests with those of shareholders, this is definitely not the case here.
This is an extremely controversial name and their Phase 3 trial results are a while away, but in my opinion, the trials have a very low chance of succeeding based on the data I have seen. The management’s history and compensation just add to all of that.
Please like, share and subscribe!
Stocks mentioned: