The Crowd Has Wisely Soured on Cassava Sciences Stock

  • Hard-hit Cassava Sciences (SAVA) continues to move lower.
  • Based on recent headlines, this move may be justified.
  • As confidence in its flagship drug candidate Simulfilam drops further, avoid SAVA stock.
Cassava Sciences (SAVA) Inc logo visible on display screen
Source: Pavel Kapysh / Shutterstock.com

It’s become a wild ride again with shares in Cassava Sciences (NYSE:SAVA). So far in April, SAVA stock has experienced a massive decline in price. The reason? Blame falling confidence that this clinical-stage biotech company will be able to bring its flagship candidate, Alzheimer’s treatment Simulfilam, to market.

First, recent remarks from CEO Remi Barbier about the status of clinical trials put pressure on shares. Second, and more damaging to the stock, skepticism has again emerged regarding past studies of Simulfilam.

With all this in mind, its latest move to lower prices (around $21.50 per share) is justified. Worse yet, it may have more room to drop from here. Investors who have held onto it since troubles first emerged last year are starting to throw in the towel. While there’s big upside if its candidate prevails, it’s now looking to be too much of a long-shot wager to consider it a buy.

SAVA Cassava Sciences $21.71

SAVA Stock and Recent News

As you may know, Cassava Sciences has seen dramatic swings in market sentiment since 2021. Excitement over the commercial potential of Simulfilam sent shares from penny stock territory to triple-digit prices. However, after the emergence of allegations that it manipulated trial data last August? Its incredible surge in the price came to an abrupt end.

SAVA stock, which traded for as much as $146.16 per share before the controversy, sank to the low-$40s per share by September. However, at the time, it did manage to prevent this from becoming a “game over” moment. Fighting back against the allegations, while it didn’t see a full recovery in price, the stock did manage to minimize further declines, up until the start of this month.

Again, due to two developments. Earlier this month, in a “fireside chat” with investors, Barbier disclosed that Cassava is having trouble finding participants for Simulfilam’s Phase 3 clinical trials. This has heightened fears that the much-awaited results from this trial may be delayed.

More worrisome is the latest news headline about the company. As reported by the New York Times on April 18, scientists and scientific journals are again questioning the accuracy of past Simulfilam studies.

Big Upside, if Cassava Can Beat the Odds

With new challenges now atop existing ones, it may seem like SAVA stock has too many problems to make it a worthwhile investment. Yet to some, the perceived upside may still appear to more than exceed these concerns/red flags. That’s why shares haven’t moved completely back to levels last seen before this catalyst emerged.

If Cassava manages to prevail with getting Simulfilam to market, its fortunes could reverse in a big way. There’s a reason why the market at one point attached such a high valuation to this pre-revenue company.

Taking into account the high demand for an effective treatment for Alzheimer’s, it would likely become a blockbuster drug. That is, generate billions per year in annual revenue. In turn, justifying a move back to its past high, or possibly, to new highs. However, at this point, “managing to prevail” with its flagship candidate is a big “if.”

Besides the aforementioned issues, something else could get in its way of finding success with Simulfilam. Back in March, the company warned investors that the U.S. Food and Drug Administration (FDA) could put a hold on studies of its candidate. Competing candidates for treating Alzheimer’s have received similar holds.

The Verdict: Follow the Crowd’s Lead

While a hold itself may not cause a “game over” moment for the company and Simulfilam, getting one would further signal extremely slim chances of this would-be blockbuster drug making it to market.

At the end of the day, Cassava Sciences is a binary wager. Either Simulfilam gets the go-ahead, or it doesn’t. There’s little else in the pipeline to fall back on. Some may be willing to roll the dice. Risk a complete loss (or near-complete loss), in exchange for the potential to see their investment rise many times over.

For instance, a return to its past high would mean a nearly 7x gain for investors buying today (implying around 14.3% chance it gets approved). But given how things have been playing out? The chances Simulfilam does receive FDA approval may be far less.

Barring evidence suggesting otherwise, it’s best not to fight the trend. As perceptions rise that its flagship drug candidate won’t make it to market, steer clear of SAVA stock.

On the date of publication, Thomas Niel 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.

Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.


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