On the morning of Jan. 20, 2022, Texas-based clinical-stage biotechnology company Cassava Sciences (NASDAQ:SAVA) was trending on financial message board StockTwits as traders were buzzing about this controversial biotechnology company. Whether that’s a blessing or a curse for SAVA stock holders, I’ll let you decide.
“This is a binary stock, either a 1 or a zero. If you like to gamble this is as good as it gets,” one commentator wrote. That’s a concise and spot-on summary, as well as a warning for prospective Cassava investors.
SAVA stock was down several percentage points, even though there wasn’t any company specific news on that particular day. It’s just another day, really, in the volatile, unpredictable world of biotechnology stocks.
If you don’t mind investing in a “binary” stock, then you’re invited to explore the rabbit hole that is Cassava Sciences. After all, it’s not every day that a biotech stock gets mentioned in The New Yorker — clearly, there’s something different about this zero-or-hero company.
A Closer Look at SAVA Stock
It’s amazing to consider that SAVA stock cost around $1 in 2018. Probably due to the influence of social-media traders, the stock zoomed to $146.16 last year.
The problem with Reddit-fueled pumps is that they can lead to drastic capital losses for ill-timed traders. Hopefully, Cassava Sciences will serve as a lesson for folks who may be tempted to chase stocks after vertical price moves.
After topping out during the summer of 2021, SAVA stock went on an insane, back-and-forth-several-times journey.
As of Jan. 20, 2022, the Cassava share price was down to the low $40s. This happens to be a support level from the previous year.
So, for audacious technical traders, there might be a high-risk, high-potential-reward opportunity here, if you dare.
“M” Is for Manipulation
The word “manipulation” evokes strong emotional responses from biotechnology stock traders. It conjures up images of big-money whales pushing share prices this way and that way.
As it may apply to Cassava Sciences, however, the manipulation allegation concerns the research results of the company’s experimental Alzheimer’s disease drug, Simufilam.
According to the Wall Street Journal, the U.S. Securities and Exchange Commission (SEC) is investigating claims that Cassava manipulated research results of Simufilam.
The day after that report was published, Cassava announced its second Phase 3 study of Simufilam for patients with Alzheimer’s disease. Cassava Sciences President and CEO Remi Barber took aim at some of the company’s perceived detractors:
“During these times of outlandish allegations made against us by short sellers, we stand committed to translate what we believe is a promising scientific breakthrough into a potentially meaningful treatment for people with Alzheimer’s disease. The rest is noise.”
The Story That “Killed It”
The Wall Street Journal report certainly didn’t help SAVA stock holders. Yet, it’s possible that another article has had an even greater impact on Cassava Sciences.
Thomas is a whistle-blower. That’s not my opinion: Thomas actually describes himself as a “principal architect of the SEC Whistleblower Program, Jordan established the nation’s first whistleblower practice exclusively focused on federal securities violations.”
Yet, I’d estimate that the first half of the New Yorker article is about Cassava Science’s problems, rather than about Jordan.
The article describes Barbier as someone who “is given to ambitious predictions.” Moreover, it stated that Cassava “didn’t have much of a track record in Alzheimer’s research.”
Meanwhile, Cassava Sciences recently launched a website dedicated to promoting the “visibility” of Simufilam, among other things. Whether this will revive the company’s and the drug’s reputation is anybody’s guess.
The Bottom Line
Before jumping into the trade with SAVA stock, you should ask yourself a question. That question is: Do I really want to participate in this soap-opera-like drama?
Owning shares of Cassava Sciences is truly an all-or-nothing wager. That’s because the company’s success is riding on a single, controversial drug.
This drug could be game-changing, or a complete failure. Therefore, holding SAVA stock could be thrilling — just keep your position small, and be prepared for volatility on a daily basis.
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 InvestorPlace.com Publishing Guidelines.
David Moadel has provided compelling content – and crossed the occasional line – on behalf of Crush the Street, Market Realist, TalkMarkets, Finom Group, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.