Early in October, I said that Cassava Sciences’ (NASDAQ:SAVA) big gains in late September had investors dreaming of a big payday for SAVA stock in 2022.
I even suggested it might retest $100—a level it hit throughout the summer—by the end of 2021. I was convinced it would go on a roll.
“As I write this, it’s trading above $60 and looks ready to go on a big run in October like it did in May. This stock is so unpredictable; it would not surprise me in the slightest if it were to retest $100 before the end of the year,” I said on Oct. 4.
Like clockwork, it has lost 26% of its value in October with only a couple of trading days left in the month.
What happened to SAVA stock? It went right off the tracks.
While it remains an enigma, I’m sure there are speculative investors still considering buying SAVA. I wouldn’t, but that doesn’t mean you shouldn’t.
Here’s why.
SAVA Stock Hits $100
Except for a brief period after its initial public offering in July 2000, SAVA stock had never traded above $100 until July of this year.
It’s easy to see why the drug development company’s stock took flight earlier this year. After all, it had a promising drug to treat Alzheimer’s—Simufilam—that was in clinical trials. Alzheimer’s is one of those diseases where everyone knows someone who’s been touched by it.
To put the debilitating disease in the rearview mirror, much like cancer, would be a scientific breakthrough of epic proportions. But, alas, nothing’s that simple.
In July, InvestorPlace’s Mark Hake suggested that the company’s two new clinical datasets would blow the roof off Cassava Sciences’ share price. Heck, it could even be worth as much as $900.
As expected, the company reported positive biomarker data from an open-label study of Simufalem on July 29.
“Six months of simufilam treatment robustly improved brain biomarkers,” said Remi Barbier, President & CEO. “In this same study simufilam also improved cognition. These data suggest simufilam has potential to provide durable treatment effects for people living with Alzheimer’s.”
However, SAVA dropped 33% on July 30, the day after Cassava released its findings. One reason for the fall is the adage to “buy on rumor, sell on the news.” The other is that some investors might have found the findings inconclusive, or at least not nearly enough to justify letting the big gains ride.
And, as has become common with this stock, it had regained all of its losses and then some by Aug. 9. Three days later, it was trading over $124. Yet, as I write this, it’s down 64% from its Aug. 12 high of $126.51.
Goodbye, $100?
A Clinical Trial Awaits
InvestorPlace contributor Alex Sirois discussed the reasons why the Food and Drug Administration’s approval of Simufilam is a real possibility.
“On Sept. 22, Cassava Sciences released data related to a 12-month study of Simufilam for treating Alzheimer’s disease,” Sirois wrote on Oct. 6.
“Overall, the results were good. Over the course of the 12-month study, cognition scores improved by 3.2 points on an ADAS-Cog test and over 50% of participants showed no behavioral disorders.”
More importantly, the trial patients that got the placebo saw their cognitive function fall by 5.5 points over 12 months.
Cassava’s Oct. 6 press release indicated that the first Phase 3 study had gotten underway. It’s 52 weeks in length. The second Phase 3 study is expected to start sometime by the end of the year. It will be 78 weeks long and cover 1,000 patients with Alzheimer’s.
Let’s assume the second Phase 3 study starts in mid-November. That puts the study’s conclusion in May 2023. Approval would come sometime after that.
So, if you invest in SAVA, you better be patient and have nerves of steel because the ups and downs between now and then will be greater than any ride Six Flags Magic Mountain—it has 19 roller coasters—can throw at you.
As I said earlier, this isn’t a stock that I could stomach.
That being said, my colleague’s point that statistics from the National Institutes of Health on the success rate of Phase 3 clinical trials suggests making it this far is a significant positive as it moves Simufilam one step closer to a green light.
The Bottom Line on SAVA Stock
In my October article, I concluded by suggesting that investors willing to speculate on Simufilam’s future, buy half of a full position, and wait for proof to surface that exonerates the company from the allegations leveled by short-sellers.
While I don’t believe either side has proven their case beyond the shadow of a doubt, short-sellers managed to make $100 million in August from the doubts about Cassava’s data authenticity.
If you can afford to lose it all, the low $40s or even the high $30s would make an excellent entry point.
SAVA stock is a very speculative buy for aggressive investors only.
On the date of publication, Will Ashworth 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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.
