Cassava Sciences Is on the Ropes, so Watch for a Dip-Buy Opportunity

Ready to hitch a ride on a wild stallion of a stock? If so, I invite you to check out clinical-stage biotechnology company Cassava Sciences (NASDAQ:SAVA) as the SAVA stock price is capable of making double-digit daily percentage moves.

drug stocks alzheimer's disease with MRI
Source: Atthapon Raksthaput /

So much has happened with Cassava recently, it’s hard to keep track.

Suffice it to say, you’ll definitely want to keep an eye out for new developments with this company.

Whatever you do, please don’t load the boat on SAVA stock. There’s too much volatility risk for a large position in this one. For a small-sized gamble, though, it’s fine for risk-tolerant traders.

If your timing is good and your stomach is strong, the potential for quick gains is there.

A Closer Look at SAVA Stock

So far, this has been an exciting year for SAVA stock investors. The share price started out near $7 in early January but didn’t stay there for long.

Amazingly and unexpectedly, the buyers pushed the stock price up to the $80 level in early February. It’s hard to prove or disprove this, but Reddit meme-stock traders might have been involved in that rally.

Really, though, that was just an appetizer compared to what took place in the summer. In a stunning rally, the bulls catapulted the SAVA stock price up to a 52-week high of $146.16 on July 28.

Chasing stocks after parabolic price moves is generally not my favorite trading strategy. If you’d like to see what this looks like, here’s a textbook example.

After topping out in July, SAVA stock drifted around for a while, but then the floor fell out in late August. We’re talking about multiple days of two-digit percentage drops.

On the afternoon of Aug. 27, the share price hovered near $62 and was flailing aimlessly.

Whether this type of price action is frightening or exciting depends on your perspective – and on your position size, which is the key to surviving any price move.

The Headline Grabber

Back in July, I must admit that I was optimistic about Cassava Sciences. I like the company’s mission, which is to defeat Alzheimer’s disease.

Cassava has two main product candidates. One of them is simufilam, which is designed to treat Alzheimer’s. The other is a blood-based investigational diagnostic known as SavaDx.

While both products are important, let’s be honest. The headline grabber in the financial trading community is simufilam.

I really like fact that simufilam is a relatively non-invasive oral drug candidate. Furthermore, this drug reduces both neuro-degeneration and neuro-inflammation, and it has already yielded positive, placebo-controlled Phase 2b results.

According to InvestorPlace contributor Nick Clarkson, Cassava Sciences reached an agreement with the U.S. Food and Drug Administration (FDA) under a Special Protocol Assessment (SPA) for “both of its pivotal Phase 3 studies of oral simufilam for the treatment of patients with Alzheimer’s disease.”

So far, so good. Right?

A Bombshell (or Two)

Not so fast. Apparently, claims are being made that the company’s trial data lacks “accuracy and integrity.” The accusations extend to the asserted results being “false and misleading.”

citizen petition (apparently originating from a former Securities and Exchange Commission lawyer) was published recommending that the FDA halt the clinical studies of simufilam for a number of reasons. The FDA acknowledged the “statement of concern” and asserted that it will look into the allegations.

Then another bombshell dropped, on Aug. 27. Reportedly, laboratory business Quanterix (NASDAQ:QTRX) claimed that it “did not interpret the test results or prepare the data charts” in regard to a key presentation on simufilam in July.

Cassava Sciences had previously claimed that Quanterix had generated those test results. That was supposed to help confirm the independence of the data. Investors dumped their SAVA stock shares amid this tug-of-war, but there’s no need to panic-sell now.

The citizen petition won’t necessarily lead to any regulatory action, as simufilam appears to be safe.

As Cassava reported, “The safety profile of simufilam in the interim analysis is consistent with prior human studies. There were no drug-related serious adverse events. Adverse events were mild and transient.”

As for the Quanterix quandary, Cassava Sciences Chief Executive Remi Barbier explained, “We both had a job to do, we both did our respective jobs and we co-authored the results in an abstract at a major scientific conference.”

The Bottom Line

Things are certainly getting interesting in this regulatory soap opera.

If SAVA stock goes below $50 one or more times, it may be ripe for a dip-buy. Just be sure to have your stop-loss in place in case the trade goes wrong.

This isn’t an investment, just a trade. Be nimble, stay alert for further developments, and remember: a great biotech company can save lives, but in the world of trading, greed is fatal.

On the date of publication, David Moadel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

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