Cassava Sciences forms internal panel after US probe into two employees

By Christy Santhosh and Pratik Jain

(Reuters) -Cassava Sciences will form a committee to evaluatenew probes by U.S. regulators and investigate two senior employees, it said on Monday, days after a medical professor linked to the company was charged with fraud.

Shares of the Austin, Texas-based pharmaceutical company were down more than 8% in early trade.

They tumbled 35% on Friday after federal prosecutors charged Hoau-Yan Wang, a doctor who collaborated with Cassava, with fraud for allegedly submitting fabricated data to the National Institutes of Health related to an experimental treatment for Alzheimer's disease.

Wang's laboratory conducted the final analysis for the mid-stage study evaluating the company's Alzheimer's drug, simufilam.

The company said on Monday it was engaged with the U.S. Department of Justice (DoJ) and the Securities and Exchange Commission (SEC) on the investigations into the two employees.

The committee, consisting of independent directors, is evaluating information contained in the DOJ indictment of Wang and will oversee disclosures in filings with the SEC regarding matters at issue, said Cassava.

Cassava said it had terminated its consulting relationship with Wang prior to his indictment, adding he did not have any involvement in its ongoing late-stage trials.

However, H.C. Wainwright analyst Vernon Bernardino said it is "inescapable" that Wang is charged with fraud related to early and mid-stage study data that has been used as evidence to support a late-stage trial for simufilam.

"This controversy could be a significant long-term challenge to realizing upside in Cassava stock", Bernardino said.

Doubts concerning the drug emerged three years ago and was followed by an investigation by the SEC in November 2021.

(Reporting by Christy Santhosh and Pratik Jain in Bengaluru; Editing by Shailesh Kuber and Sriraj Kalluvila)