By Jonathan Stempel
NEW YORK (Reuters) -The biotechnology company Cassava Sciences failed on Wednesday to end a malicious prosecution lawsuit by doctors and short-sellers who expressed doubts about its experimental, soon-to-be-discontinued Alzheimer’s drug simufilam.
U.S. District Judge Jennifer Rochon in Manhattan said Adrian Heilbut, Jesse Brodkin, Enea Milioris, David Bredt and Geoffrey Pitt could try to prove that Cassava knew or should have known that it could not win its defamation lawsuit against them, which it dismissed in August.
Cassava accused the plaintiffs of trying to hurt its share price by claiming on social media and the cassavafraud.com website that a City University of New York medical professor who consulted for the company fabricated research for simufilam.
The professor, Hoau-Yan Wang, pleaded not guilty in July to federal fraud charges he submitted false data to the National Institutes of Health to obtain public grants. A Maryland judge refused to dismiss the indictment in January.
Short-sellers borrow stock and sell it, hoping that the price will fall so they can repurchase it and replenish lenders.
Rochon found sufficient allegations that Cassava filed the defamation lawsuit with actual malice to “harass and intimidate plaintiffs and to suppress criticism from the scientific community.”
The judge also found plausible allegations that the Austin, Texas-based company knew the challenged scientific claims were uncorroborated, and was aware of alleged research misconduct.
Other defendants include former Cassava Chief Executive Remi Barbier and neuroscience chief Lindsay Burns, whose resignations were announced in July. The plaintiffs are seeking monetary damages.
Isaac Zaur, a lawyer for Heilbut, Brodkin and Milioris, said the decision lets them seek accountability for the defendants’ efforts to “suppress public and scientific dialogue.”
A lawyer for Cassava had no immediate comment. Lawyers for the other parties did not immediately respond to requests for comment.
Cassava shares soared more than 20-fold to above $146 between January and July 2021 on hope for an Alzheimer’s breakthrough. The shares now trade below $2 per share.
Cassava said on Tuesday that it will end its Alzheimer’s program with simufilam by June 30, following disappointing clinical trial results.
The case is Heilbut et al v Cassava Sciences Inc et al, U.S. District Court, Southern District of New York, No. 24-05948.
(Reporting by Jonathan Stempel in New York; Editing by Mark Porter)
