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Stock SAVA: Crowd wisely soured on cassava science

  • Hard blow Cassava Science (SAVA) continues to decline.
  • Based on recent headlines, this move may be warranted.
  • As confidence in its lead drug candidate Simulfilam continues to decline, avoid SAVA stocks.

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It’s become a mad rush again with actions in Cassava Science (NYSE:SAVA). So far in April, SAVA stock has seen a massive drop in price. The reason? Blame it on the loss of confidence that this clinical-stage biotechnology company will be able to bring its lead candidate, Simulfilam, a treatment for Alzheimer’s disease, to market.

First, recent remarks from CEO Rémi Barbier on the state of clinical trials have put pressure on stocks. Second, and more damaging to the stock, skepticism has again emerged regarding previous Simulfilam studies.

With all of that in mind, its latest move to cut prices (around $21.50 per share) is justified. Worse still, he may have more room to fall from here. Investors who have clung to it since the onset of unrest last year are beginning to throw in the towel. While there’s a big upside if its candidate wins, it now seems like too much of a long-term gamble to consider it a buy.

SAVA Cassava Science $21.71

SAVA stock and recent news

As you may know, Cassava Sciences has seen dramatic swings in market sentiment since 2021. Excitement over Simulfilam’s trading potential has sent shares into penny stock territory at triple-digit prices. However, after allegations emerged that he manipulated trial data last August? Its incredible price spike came to an abrupt end.

SAVA stock, which traded as high as $146.16 per share before the controversy, fell to $40 per share in September. However, at the time, he was able to prevent it from becoming a “game over” moment. Fighting the allegations, despite not seeing a full rally in price, the stock managed to minimize further declines, until earlier this month.

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

More disturbing is the latest news headline about the company. As The New York Times reported on April 18, scientists and scientific journals are once again question the accuracy past Simulfilam studies.

Big Upside, if cassava can beat the odds

With new challenges now on top of existing ones, it may seem like SAVA stock is in too much trouble to make it a worthwhile investment. Yet for some, the perceived benefits may still seem to outweigh these concerns/red flags. This is why stocks have not fully recovered to the levels last seen before this catalyst emerged.

If Cassava manages to prevail with the marketing of Simulfilam, its fortunes could be reversed considerably. There’s a reason the market at one point attached such a high valuation to this pre-income company.

Given the high demand for an effective treatment for Alzheimer’s disease, it would likely become a blockbuster drug. In other words, generating billions a year in annual revenue. In turn, warranting a return to its past high, or possibly, to new highs. However, at this point, “getting to win” with its star contender is a big “if”.

Besides the aforementioned issues, something else could be preventing him from succeeding with Simulfilam. In March, the company warned investors that the U.S. Food and Drug Administration (FDA) could suspend the candidate’s studies. Competing candidates for the treatment of Alzheimer’s disease received similar deductions.

The Verdict: Follow the Crowd’s Lead

While a take itself does not cause an “endgame” moment for the company and Simulfilam, getting one would additionally signal extremely slim chances of this potential blockbuster drug ever hitting the market.

Ultimately, Cassava Sciences is a binary bet. Either Simulfilam gets the green light, or not. There’s not much else in the pipeline to fall back on. Some may be ready to roll the dice. Risking a complete loss (or near-complete loss), in exchange for the possibility of seeing their investment grow many times over.

For example, a return to its past high would mean a nearly 7x gain for investors buying today (implying about a 14.3% chance of it being approved). But given the way things turned out? The chances of Simulfilam receiving FDA approval may be much lower.

Unless there is evidence to suggest otherwise, it’s best not to fight the trend. As perception grows that its lead drug candidate won’t make it to market, steer clear of SAVA stock.

At the date of publication, Thomas Niel had no position (directly or indirectly) in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.

InvestorPlace.com contributor Thomas Niel has been writing individual stock analysis for online publications since 2016.