Despite Overhangs, the Risk-Reward Looks Appealing, Says Analyst

It’s been a miserable week for investors in clinical-stage biotechnology company Cassava Sciences (SAVA). The stock tumbled over 20% following a fireside chat, where CEO Remi Barbier outlined the progress being made in bringing simufilam, Cassava’s controversial Alzheimer’s drug candidate, to fruition.

Investors have had a love/hate affair with simufilam, sending shares stratospheric last year after the drug appeared to be hitting landmarks no other Alzheimer’s candidate had reached before. But the story soured as Cassava’s data gathering methods were called into question. Now, it looks like the company is struggling to enroll enough patients for two late-stage trials.

The two Phase 3 studies kicked off in October and November last year with the aim of recruiting ~750 and ~1000 mild-to-moderate Alzheimer’s sufferers, respectively. However, only 60 participants have been enrolled and dosed so far with another ~170 patients on screening.

Presently, the company has 105 open clinical sites across the globe with the target of reaching 175 open sites by the end of the year. This suggests to B. Riley analyst Mayank Mamtani that a “significant uptick in enrollment is anticipated in coming months.”

“The prevailing view of slower than anticipated Ph. III enrollment to date, i.e., ~3.5% within first two quarters of program initiation, doesn’t come as a surprise to us,” added the analyst, “particularly as (1) trial sites recover from omicron-related slowdown in winter months and (2) SAVA’s tarnished image rebuilds with principal investigator community on heels of FDA’s Citizen Petition denial.”

There’s also the ongoing investigation into the work of scientific collaborator Dr. Wang to consider, with recent retractions of some of his work also providing a “near-term overhang.”

That said, while still uncertain regarding the “potential near-term downside,” with anticipated 2H data readouts concerning simufilam’s treatment effect on cognition and other simufilam readouts expected in 1H23, Mamtani “continues to like the risk-reward.”

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As such, the analyst reiterated a Buy rating, backed up by a $72 price target. This makes room for ~157% growth in the year ahead. (To watch Mamtani’s track record, click here)

Mamtani’s outsized expectations are no anomaly. The Street’s $98.80 average price target is even more bullish, suggesting shares could rise by ~252% over the coming months. Overall, the stock claims a Moderate Buy consensus rating based on 4 Buys vs. 1 Sell. (See Cassava stock forecast 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.