Sentiment can change fast on Wall Street. For evidence, look no further than the recent performance of Cassava Sciences (SAVA) stock. The Alzheimer’s disease focused biotech had been one of 2021’s star performers, accruing massive share gains based on the promising data so far for its AD drug candidate simufilam.
But over three consecutive sessions last week, shares lost 61% of their value. The downturn began after it became known that a citizen petition was logged with the FDA calling for a halt on the drug’s clinical testing, highlighting the fact that the positive data was based on the findings of a single third-party academic laboratory, while also alleging that some of the results displayed signs the data was being manipulated. The slide continued after Quanterix – the aforementioned third-party lab – distanced itself from the company, clarifying that it did not “interpret the test results or prepare the data charts presented by Cassava at the Alzheimer’s Association International Conference (AAIC) in July 2021 or otherwise.”
Cassava also released a press statement addressing most – but not all – of the concerns raised in the report. Of note, says JonesTrading’s analyst Soumit Roy, is the fact that a number of the scientific articles “brought into question” were published in reputed journals with a “rigorous peer review process.”
Furthermore, just days after the filing of the citizen’s petition, the FDA signed off on the Special Protocol Assessment (SPA) for both of simufilam’s pivotal Phase 3 trials.
So, presented with all the info, what’s an investor to do? Well, for one, Roy thinks a “turnaround in the stock” is in the cards, saying that ahead of the anticipated 4Q21 12-month data readout, investors are presented with a “nice entry point.” Following the positive 9-month readout – which showed a 7-point ADAS-Cog improvement over historic placebo data – Roy expects the data to “maintain high degree of clinical benefits.”
In fact, the 5-star analyst says he has not given “any merit to the biomarker data presented so far,” and to reach a “meaningful conclusion” will be looking at the difference in the biomarker levels between 6 and 9 months.
“All biomarkers have failed in conclusively predicting clinical benefits in neurodegenerative diseases and broadly speaking, mechanisms of actions of several well adopted drugs are often not well established,” Roy summed up.
Accordingly, Roy sticks to a Buy rating for SAVA shares, backed by a $215 price target. Following the big selloff, this target puts the upside potential at a whopping 311%. (To watch Roy’s track record, click here)
Most of Roy’s colleagues are also undaunted by the allegations. Based on 4 Buys vs. 1 Hold, the stock boasts a Strong Buy consensus rating. Moreover, the $154.80 average price target presents potential one-year share gains of a handsome 195%. (See SAVA stock analysis on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.