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A small drugmaker's stock tumbles 30% after a lawyer questions its experimental Alzheimer's treatment

Traders work during the closing bell at the New York Stock ExchangeTIMOTHY A. CLARY/AFP via Getty Images

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Shares in Cassava Sciences plunged as much as 30% on Wednesday after a lawyer questioned the integrity of its experimental treatment for patients suffering with Alzheimer's.

Comments regarding the "accuracy and integrity" of clinical studies for Cassava's simufilam drug were posted Monday. They disputed the validity of the results from the 23-year-old Texas-based company, which has no products on the market.

Cassava's stock had rallied nearly 17% over the past three days, spurred by an announcement early Tuesday that it had reached an agreement with the Food and Drug Administration for Phase 3 studies of its simufilam drug.

But its share price turned after Jordan Thomas of law firm Labaton Sucharow alleged that some of Cassava's results appear to show signs of data manipulation.

"There are anomalies in the presentation of the data which again strongly suggest manipulation," a citizen petition from the former Securities and Exchange Commission enforcement lawyer read.

Cassava responded to the allegations on Wednesday, saying that the claims made regarding its scientific integrity are "false and misleading."

"We champion facts that can be evaluated and verified," Remi Barbier, Cassava's CEO, said in a statement. "This helps people make informed choices. It is important for stakeholders to separate fact from fiction, which is why we wish to address allegations head-on."    

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Bearish bets against Cassava have risen from a February low to $576 million, representing about 13% of available shares, Bloomberg reported, citing data from S3 Partners. 

The small drugmaker was a top biotech performer that saw a surge of 910% at one point this year on optimism for its early-stage Alzheimer's drug amid a frenzy of retail trading. In June, it was the third-biggest gainer behind GameStop and AMC in the Russell 2000.

Cassava's stock is up 1,105% so far this year at $88.10 per share.

Read More: Warren Buffett's Berkshire Hathaway is betting on private tech, stands to profit from Biden's $1 trillion infrastructure plan, and could be eyeing Chinese stocks. Veteran investor Darren Pollock explains why.

 

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