If market performance represented the only reflection of a biotechnology company’s worth, then Cassava Sciences (NASDAQ:SAVA) would be a mesmerizing deal. Since the start of the year, SAVA stock has gained a blistering 1,360%. Better yet, with enthusiasm brewing for its underlying Alzheimer’s disease therapeutic candidate, many analysts believe that Cassava shares still has room to run.
That’s a remarkable concept considering that at time of writing, SAVA stock is the top billing among shares traded on U.S. exchanges against a year-to-date framework. Just for clarification, while the over-the-counter market has produced some unfathomable gains that make cryptocurrencies look like boring blue-chip dividend stocks, the pink sheets are not exchanges, but rather transactions conducted over broker-dealer networks.
But it’s not just the intensity of the moment that makes SAVA stock so intriguing. So far, the underlying company has been able to impress stakeholders and prospective buyers with clinical progress of its experimental drug simufilam.
According to Alzheimer’s disease resource Beingpatient.com, data on simufilam found that it was “not only safe, but modified disease biomarkers at six months, and improved cognition at nine months.” Further, the website offered a detailed explanation of Cassava’s proposed solution:
“Simufilam’s mechanism of function is different from other approved drugs already on the market, in that it doesn’t target the acetylcholine neurotransmitter system as ACh inhibitors like galantamine (Reminyl) do, nor does it target the deposition of beta-amyloid like the newly approved Aduhelm and donanemab which is currently being tested in clinical trials, do. Instead, simufilam is a small molecule that enters the brain and helps a certain protein — filamin A (FLNA), which, when it isn’t working right, might lead to beta-amyloid build-up and cause inflammation — fold and function properly.”
While deeply encouraging — hence SAVA’s market performance — prospective investors will want to consider all angles.
SAVA Stock Trades in a Heavily Contested Underlying Segment
But looking at both sides of the argument is not the easiest thing in the world for SAVA stock. First, you have significant interest in the equity unit on various social media forums. More importantly, Cassava Sciences benefits from favorable comparisons.
One of the biotech firm’s rivals is Annovis Bio (NYSEAMERICAN:ANVS), which had heading into the tail end of last month a much-hyped Alzheimer’s treatment candidate. However, as Investor’s Business Daily contributor Allison Gatlin noted, the therapeutic “failed to significantly outperform a placebo in a midstage test,” leading to an implosion of ANVS shares.
Although the experimental drug showed some positive trends, the harsh reality was that the results weren’t statistically significant. Nevertheless, the failure of one rival may not be a clear winner for SAVA stock.
Statnews.com’s Adam Feuerstein, a longtime critic of Cassava, stated in October of last year that CEO Remi Barbier “has a reputation for profiting personally even while his company suffered multiple setbacks.” Late last month, Feuerstein reported that Alzheimer’s scientists critiqued Cassava’s recent study results as “overblown, inappropriate, uninterpretable.”
Now, I’m not about to dive into this minefield with an unqualified opinion. But what I can say is that biotech — particularly companies plying their trade in the experimental spectrum — are always one clinical report away from either ecstasy or devastation. There’s really not much room for non-binary reactions, as you can tell from either SAVA stock or ANVS.
Further, Alzheimer’s is a minefield all on its own. Another article from Beingpatient.com bluntly stated the facts: drug trials in this arena have a 99% failure rate. To be fair, the positive spin is that multiple biotech firms have forwarded more than a hundred candidates in the broader pipeline.
Still, the odds of any one company finding the right formula are not good.
Market Volatility Tells You All You Need to Know
For me, it’s quite telling that SAVA stock has been all over the map since mid-July of this year. Traders can’t seem to make up their mind whether the underlying company’s clinical studies are truly positive or not. Ordinarily, I’d get off on the train just based on the wild and unpredictable technical posture.
If you happened to be one of the lucky ones that gained a massive profit from SAVA stock, you might want to consider taking some funds off the table. Realistically, the odds are stacked against Cassava. And with shares having gone so high, they need to put up a truly blistering performance to keep possibly jaded stakeholders interested.
On the date of publication, Josh Enomoto 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 InvestorPlace.com Publishing Guidelines.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.