By Luc Cohen
NEW YORK (Reuters) – Cassava Sciences ended its defamation lawsuit against four short sellers who expressed doubts about its experimental Alzheimer’s drug after a medical professor whose research underpinned the treatment was charged with fraud.
The biotechnology company sued in 2022 after the short sellers, who were also scientists who investigated Cassava’s statements about its simufilam drug, claimed on social media and the website “cassavafraud.com” that Hoau-Yan Wang’s research for simufilam was fabricated.
Cassava dropped the lawsuit in a Friday evening filing in federal court in Manhattan.
U.S. District Judge Gregory Woods had dismissed much of the case against Adrian Heilbut, Jesse Brodkin, Enea Milioris and Patrick Markey in March, but Cassava sued them again in April.
Short sellers borrow stock and sell it, hoping the price will fall so they can buy it back and replenish their lenders.
Wang, a professor at the City University of New York’s School of Medicine, was charged with fraud on June 28 for submitting false data to the National Institutes of Health to earn millions of dollars in grants. He has pleaded not guilty.
Cassava announced on July 17 that Chief Executive Remi Barbier and neuroscience chief Lindsay Burns would resign.
In a statement on Sunday, a Cassava spokesperson said: “New management determined that pursuing this defamation lawsuit is an unnecessary distraction from our mission of developing a treatment for Alzheimer’s disease.”
Cassava shares rose more than 20-fold between January 2021 and July 2021 on investor hopes of a breakthrough in treating Alzheimer’s.
The stock gave up many gains after physicians David Bredt and Geoffrey Pitt urged the U.S. Food and Drug Administration to halt clinical trials of simufilam, citing alleged data misrepresentation and manipulated images of experiments.
Bredt and Pitt later disclosed they had also shorted Cassava’s stock. The Austin, Texas-baesd company also sued them for defamation, but Woods dismissed those claims in March.
(Reporting by Luc Cohen in New York; editing by Jonathan Oatis)
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