Editor’s Note: This article was updated on Aug. 25, 2021, to add information about the request to the FDA that clinical studies be halted and data audited.
Clinical-stage biopharmaceutical company Cassava Sciences (NASDAQ:SAVA) has a mission. To detect and treat Alzheimer’s disease. The company notes that this work is “complex, risky, labor-intensive, persistent and expensive.” What about SAVA stock? Is it also complex, risky and expensive?
That would depend on your perspective.
Cassava shares have increased in value by over 1,050% in 2021. That kind of explosive growth does smack of risk, and there’s no arguing the fact that SAVA stock is far more expensive than it was at the start of the year.
As for complexity, it really comes down to Simufilam. That’s the company’s Alzheimer’s drug, which will be entering phase 3 trials this fall. There’s also SavaDx, its investigational diagnostic to detect Alzheimer’s — but Simufilam and its potential to treat Alzheimer’s is the real prize.
How Big Is the Alzheimer’s Disease Market?
Cassava is essentially betting the farm on Alzheimer’s disease. Any discussion about the company and its strategy needs to address the potential market.
According to data published by the Alzheimer’s Association, over 6 million Americans are currently living with this disease. That number is expected to more than double to 13 million by 2050. Between 2000 and 2019, Alzheimer’s deaths in the U.S. increased by 145%, while other major causes of death such as heart disease actually declined during the same time period. It’s estimated that in 2021, care for Alzheimer’s and other dementia patients in the U.S. will cost $355 billion. This includes $239 billion in Medicare and Medicaid payments.
These are just U.S. stats, but Alzheimer’s is a global issue. So this is a massive market. At the moment, there is no cure for Alzheimer’s. In June, Aduhelm became the first drug approved by the Food and Drug Administration for Alzheimer’s treatment, but it has been mired in controversy.
SAVA stock has continued to gain in value since Aduhelm’s approval. For one thing, the medical community has been skeptical about the competing drug’s effectiveness. And even if Aduhelm was a rousing success, the Alzheimer’s treatment market is huge. There’s plenty of room for competition.
Simufilam
Simufilam is Cassava’s treatment for Alzheimer’s. You can pretty much track the progress of the drug by the movement of SAVA stock in 2021. This started with a Feb. 2 press release announcing positive cognitive and behavior results in Alzheimer’s patients after 6 months in a clinical study funded by the National Institutes of Health. That news kickstarted SAVA stock, which posted a two-day gain of 283%.
The most recent update came on Aug. 24. Cassava announced that it has reached an agreement with the FDA on study protocols for an upcoming phase 3 clinical trial of Simufilam. The press release also confirmed that phase 3 clinical trials are still on track for this fall. SAVA stock has been on the rise since the announcement.
On Tuesday evening, a “statement of concern” went up asking the FDA to halt studies of Simufalim and audit some of the data that had been released on trials of the drug. The company fired back, refuting many of the allegations, but the stock is still down around 20% today.
Bottom Line on SAVA Stock
When considering a Cassava investment, it really does boil down to Simufilam — and to a lesser extent, SavaDx. The company has no revenue, but it has a promising detection tool and a potential treatment for Alzheimers. That’s a massive market and the reason why Cassava made my recent list of top-rated pharmaceutical companies to invest in. To get there, Cassava has a sizeable war chest, with $278.3 million in cash and equivalents, and no debt.
At the time of publication, SAVA stock earned a B rating in Portfolio Grader. That shows it definitely has long-term growth potential. In addition, the investment analysts polled by the Wall Street Journal rate SAVA as a consensus “Buy” with an average $156.60 price target. If they’re on the money, that’s 89% upside.
At this point, SAVA stock is certainly expensive compared to its price over the past 5 years — assuming its data is all on the up and up. However, it’s well below its 2021 high close of $135.30 in July. If Simufilam lives up to its promise of being an effective treatment for Alzheimer’s disease, today’s price may seem ridiculously cheap in hindsight. The risk, of course, is that the drug doesn’t perform as hoped in phase 3 trials. We’ll have to wait a while yet for the news on that front, but at least the process will soon be underway.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (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 InvestorPlace.com Publishing Guidelines.
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