While a risky area, there’s a lot of opportunity when it comes to biotech stocks. With the right combination of due diligence and trading agility, you can find investments/trades that can result in incredible returns. But among the scores of clinical-stage names out there, one you should really take a look at is Cassava Sciences (NASDAQ:SAVA) stock.
Admittedly, you’re probably already familiar with Cassava. Even if biotech isn’t one of your main areas of focus. The stock saw a big jump in its popularity. Mostly on the prospects of its flagship drug candidate, Alzheimer’s treatment Simulfilam. Some may say the Reddit “meme stock” community played a role in its big moves last year, but that’s not for certain.
Yet since last August, its performance has been mixed. Starting that month, allegations that it manipulated trial data began to have a negative impact on shares. So far, while the company has been able to fight back about these claims, the uncertainty over its main drug candidate getting approved has prevented the stock (at around $42 per share today) from getting back to near its past high (well in the triple-digits).
However, this could start to clear up. Assuming that further news on Simulfilam is positive. It goes without saying this isn’t a “bet the farm” type of play. Nevertheless, for those with a high risk tolerance, it may be worth a closer look.
SAVA Stock: Right Now, it’s a Bit of a Waiting Game
Since the start of the new year, there’s been little in terms of news out of Cassava Sciences. Late last month, there was news of another medical journal, Neuroscience, supporting its claim that there was no evidence to back up the above-mentioned data manipulation allegations.
But besides that, not much else.
Most importantly, no updates on the latest Phase 3 clinical trial of Simulfilam, which began in November. With this, it’s no surprise SAVA stock has seen minimal movement lately. Expect it to remain a bit of a waiting game, until the next batch of news/updates on its candidate sparks the stock’s next big move.
When I say “big move,” I mean a big move in either direction. Cassava may have more than just Simulfilam in its pipeline. However, that’s not why the company (with zero revenue) sports a market capitalization nearing $1.7 billion. This valuation is built entirely around the potential for its main candidate to make it through the pipeline.
If the trial results are disappointing, the potential for this treatment to get U.S. Food and Drug Administration (FDA) approval could become next to nil. With that, the stock will make a quick trip back to single-digits. On the other hand, you can expect an outsized move to higher prices, which will continue until it gets to approval.
What’s The Potential Upside from Simulfilam’s Approval?
We’ve talked about its high downside risk. Now, let’s talk about its upside potential. How far could SAVA stock jump, once it’s within sight of bringing Simulfilam to market?
Take a look online, and you may see commentary suggesting very high upside potential for Cassava, in the event this treatment makes it to market. For instance, per one commentator, based upon his estimates the Simulfilam will have cumulative sales topping $58 billion, shares could reach a price nearing $500 per share.
I won’t say this has zero chance of happening. At the same time, I wouldn’t buy in with the thought that this stock could make another 10x leap. Based on the initial underwhelming results for a similar Alzheimer’s treatment that’s not available for use, the total addressable market for this drug may end up being much smaller than more bullish forecasts.
Having said all this, approval for this drug may be enough to send it back to its past high of $146.16 per share. In other words, about 3x above where it trades to today. In short, there’s ample upside potential here, but I wouldn’t necessarily count on it jumping another 10x.
The Takeaway With SAVA Stock
Earning a “B” rating in my Portfolio Grader, Cassava Sciences may make for a great speculative play for risk-tolerant investors. If it can get its Alzheimer’s treatment approved by the FDA, shares have a strong chance of making a triple-digit percentage move higher.
Conversely, if the treatment fails to get through the pipeline? You can expect it to fall back to prices well under $10 per share.
Still, weighing risk against potential gains, the odds with SAVA stock may be on your side. If you are active in similar types of plays, consider it one to put on your watchlist.
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.
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