The last couple of times I weighed in on Cassava Sciences (NASDAQ: SAVA), I was bullish.
On Aug, 10, I wrote, “Weakness is a great opportunity with this stock,” adding that it could run back to $146.16. At the time, SAVA traded at $102. It would run to a high of $126.51.
Then, I got even more bullish, noting a week later, “it could easily refill its bearish gap around $140.” Shortly after, the SAVA stock would run from about $103 to $123.37.
Then, out of the blue, SAVA crashed to double-bottom support around $74.85. All thanks to accusations of “data manipulation and misrepresentation,” as noted by Investors Business Daily contributor Allison Gatlin.
Questions about the firm’s scientific integrity are harsh. The company’s response to the allegations can be found on the Cassava Sciences’ site.
Despite the chaos, I’m still bullish. I still believe the stock could run back to $146.16. I also believe the accusations won’t hold weight. From a current price of $74.85, I’d use extreme weakness as an opportunity to buy.
SAVA Stock Sinks On ‘Citizen Petition’
SAVA stock plunged last week after a “citizen petition” called into questions the “quality and integrity” of Cassava Sciences’ recent study results, as noted by Bloomberg. In addition, the petitioner also called for the Food and Drug Administration to halt all of Cassava’s clinical trials until there’s further investigation into petitioner claims. You can read the full details here.
It’s pure chaos, in my opinion.
Fighting back against the claims, Cassava Sciences’ CEO and founder, Remi Barbier said, as quoted by Bloomberg, “I’ve never heard of a Citizen’s Petition for a pre-Phase 3 drug, especially on a drug that appears to be as safe as Simufilam. We see the filing of a citizen’s petition as a technique intended to add to the pile of fear and doubt generated by their initial document.”
Even B. Riley analyst Mayank Mamtani seems confused by the petition. In fact, the analyst says it’s a “buy” on weakness, believing there are “numerous inconsistencies” in the petition, as quoted by TheFly.com. “Mamtani reminds investors of a ‘highly favorable’ engagement Cassava has had with the FDA over the course of 2021, including the recent agreement under a special protocol assessment for both of its pivotal Phase III studies.”
In addition, the company is still on course to jump into Phase 3 trials for Alzheimer’s disease this fall. In short, there’s a good deal of positives here.
The Bottom Line on Cassava Sciences Stock
With time, I strongly believe Cassava Sciences stock will recover lost ground.
As I also noted on Aug, 18, “Phase 3 will include two studies with patients that have mild to moderate Alzheimer’s. The first study will test symptomatic improvements, where the company will look for improvements in cognition and daily function. The second study will look at disease-modifying effects of the treatment, where the company wants to see signs of a slower rate of decline in cognition.”
Further progress could send the stock higher, and have the as-of-yet-anonymous ‘citizen petitioner’ eating their words. It could also be a massive game-changer for millions of people struggling with the disease. From a current price of $74.85, I’d like to see the SAVA stock back at $140 a share.
Long-term, if we can substantial success, I’d like to see it closer to $200.
Buy the fear, as Warren Buffett, Sir John Templeton and Baron Rothschild often did. Buy it. Forget about it and check back in a few months.
On the date of publication, Ian Cooper 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.
Ian Cooper, a contributor to InvestorPlace.com, has been analyzing stocks and options for web-based advisories since 1999.
