Actions of Cassava Science (NASDAQ:SAVA) Cassava shares fell 5.3% as of 11:05 a.m. ET Monday, after plunging 19% earlier in the morning. The decline follows the federal indictment Friday of Hoau-Yan Wang, a former Cassava consultant.
Wang was charged with fraud related to grant applications filed with the U.S. National Institutes of Health (NIH) for work on the experimental drug simufilam, which is derived from cassava. Those grants led to about $16 million in NIH awards between 2017 and 2021 for Wang and Cassava.
What does this mean for Cassava Sciences?
Cassava has disclosed that some government agencies have requested information and documents. The company has cooperated with those investigations. Cassava has not been accused of any wrongdoing at this point, though the biotech company acknowledged in its most recent 10-K filing: “We cannot predict the outcome or impact of these pending matters, including whether any government agency may bring an enforcement action against us or others.”
In a public statement on Wang’s indictment, Cassava did not reveal whether other contacts had taken place with government agencies. However, the company emphasized in that statement that Wang and the medical school where he previously worked “had no involvement in the company’s Phase 3 clinical trials of simufilam.”
Is Cassava Sciences stock a bad buy?
I think investors would be wise to steer clear of Cassava Sciences. Even without the uncertainty associated with Wang’s recent indictment, there are plenty of other biotech stocks that offer better risk-reward propositions.
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Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
Why Cassava Sciences Stock Is Down Today was originally published by The Motley Fool
