Based on a very disturbing new report issued about Cassava (NASDAQ:SAVA), I have sold the vast majority of my shares of SAVA stock. And until the company refutes most or all of the allegations contained in the report, I believe that it’s too risky to hold more than a very small amount of Cassava’s shares.

So while I still believe that, as I stated in a recent column, SAVA stock could theoretically soar over 200 times, I am not currently satisfied with its risk-reward ratio.

The report was issued by Quintessential Capital, which is shorting SAVA stock. But the charges that the firm has levied create a great deal of doubt about the integrity of the data on the company’s main drug candidate, Simufilam. Cassava has said that Simufilam is a potential treatment for Alzheimer’s Disease.

The New Charges Are Very Different From the Old Ones

Cassava has come under scrutiny several times for various accusations. Previously, a lawyer filed a petition to the FDA, with charges against data compiled years ago. However, those allegations, as I’ve pointed out in multiple previous columns, had nothing to do with the impressive cognitive data that has been reported for the patients taking Simufilam.

Conversely, Quintessential’s charges — if true —  would cause me to no longer completely trust that cognitive data.

That’s partly because some of the firm’s allegations directly relate to a number of individuals who were placed in charge of monitoring and conducting the studies. Quintessential also levied charges which, if true, indicate that Cassava improperly influenced the outcomes of studies.

Questionable Supervision of Trials

A co-owner of IMIC Health, which was a site for at least one trial of Simulfilam completed in March 2020, is Aimee Cabo. According to Quintessential, Cabo “claims to be a nurse, yet a record check at the Florida Department of Health has failed to show any license.” She also was allegedly arrested for possession of cocaine and, according to Quintessential, has admitted to “using crack cocaine on multiple occasions.”

Much more ominously, the Principal Investigator for the ongoing Simufilam trial, Dr. Evelyn Lopez-Brignoni, a psychiatrist who specializes in children and adolescents, was accused recently by the FDA of multiple improprieties related to clinical trials, Quintessential alleged.

Quintessential says typically drug makers use an outside company or an unaffiliated individual to supervise drug trials. But “in some cases,” Nadav Friedman, Cassava’s COO, took on that task, the firm stated.

I agree with  Quintessential’s assertion that the filling of the role by Friedman both creates conflicts of interest and raises a red flag because it seems like an unusually mundane task for a COO.

Allegations of Improper Data Management

Multiple charges by Quintessential indicate that Cassava did not properly handle the development of studies and data collection. For example, according to the short-selling firm, the company reportedly “frequently” prohibited potential subjects from joining studies due to “anything that in the opinion of the Investigator would preclude participation in a 2-year study.”

More importantly, the initial cognitive scores, or baseline, of the patients who received Simufilam in studies changed multiple times, the firm alleged. For example, in one study, the baseline was initially 13.6 on a standard cognitive scale in July, and then was altered to 16.6 five months later.

Quintessential hypothesizes that the baseline improved a great deal because new patients with very high cognitive scores were added to the study at some point. And since it’s nearly statistically impossible to randomly add multiple patients who all have extremely high cognitive scores, Cassava must have intentionally added high-scoring patients, Quintessential alleges.

Moreover, earlier this year, Quintessential sent a number of elderly people to IMIC Health, the previously mentioned trial site. These “investigators” (as Quintessential calls them) were told by IMIC “to try to exclude themselves by complaining of benign ‘memory problems,’ typically not associated with Alzheimer’s disease.”

Instead of excluding the “patients” with these relatively innocuous symptoms from the study, Boris Nikolov, the co-owner of IMIC, reportedly tried very hard to persuade them to join the study. He emphasized the attractiveness of Cassava’s study, compared to two other trials, by effusively praising Simufilam. The “investigators” were then offered slots in the trial of Simufilam.

What’s more, Quintessential reported that it learned from the visit that all decisions on whether to retain or remove participants from trials were made directly by Cassava itself. When asked whether he owned SAVA stock, Nikolov refused to answer the question, indicating that yet another conflict of interest may have been present.

The Positive News on Cassava

On Nov. 4, the company reported that the Journal of Neuroscience found “no evidence” that data submitted to it by Cassava’s associates in 2012 had been improperly altered. The data “is  foundational to simufilam,” Cassava reported.

The petition to the FDA, which I mentioned earlier, had alleged that there was evidence that this data had been manipulated.

While the news is somewhat encouraging, it involves only data published nine years ago and does not appear to be directly related to the much more recent, worrisome charges made by Quintessential.

For example, the journal’s statement about the 2012 article does not make me less concerned about the allegations regarding the individuals supervising a portion of the study that concluded in 2020 or the conduct of Nikolov, the co-owner of IMIC Health, in 2021.

The charges levied by Quintessential are clearly separate allegations and relate to events that occurred eight to nine years after the article referenced by the journal was published. Moreover, I consider Quintessential’s allegations to be much more serious, both because they involve events that happened far more recently and because they, unlike the earlier charges, call into question the accuracy of  the superb cognitive data generated by Simufilam.

The Bottom Line on SAVA Stock

Cassava can still refute or deny most or all of these allegations. And the shares could eventually soar tremendously if the allegations prove to be baseless. That’s why I held onto a very small amount of them.

Yet these allegations, leveled by a firm whose charges against at least two other companies have been proven to have significant validity, are quite troublesome. At a minimum, assuming the charges are all true, Cassava has hired multiple, highly questionable associates to handle portions of its data, and at least some of its data is unreliable.

For drug companies, data on their treatments is absolutely critical. Therefore, until these allegations get sorted out, I suggest that even risk-tolerant investors sell the lion’s share of their SAVA stock. There are many other, less risky companies in which to invest.

Finally, I’d like to apologize to our readers for, quite likely, having misjudged Cassava in the past.

On the date of publication, Larry Ramer held a long position in SAVA stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Larry Ramer has conducted research and written articles on U.S. stocks for 13 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015.  Among his highly successful, contrarian picks have been GE, solar stocks, and Snap. You can reach him on StockTwits at @larryramer.