Cassava Sciences (NASDAQ:SAVA) stock illustrates the promise — and hazards — in biotechnology investing. Casssava management says it has a drug that can effectively treat Alzheimer’s Disease, one of the most destructive diseases known to man. They may have it, or they may not. It’s impossible for a small investor like me to know for sure when it comes to SAVA stock.
Specifically, Cassava launched another Phase 3 trial on its Alzheimer’s compound, Simufilam, back in November. The company also has a website to support the study. According to SAVA, the drug can fix abnormalities in a protein called filamin A, or FLNA. However, according to a recent story in The New Yorker, a better name for the treatment might be Simulated Flim Flam. Some have doubts about this drug, to say the least.
Here’s what you need to know about SAVA stock moving forward.
SAVA Stock: Big Money, Big Promises
Back in November 2020, Cassava priced its public offering at $8 per share. Proceeds of $75 million were meant to support the Phase 3 study. Since then, SAVA stock has traded as high as $146, without a lot of scientific news to support it.
Of course, the company has delivered a steady stream of press releases claiming progress. These include a pharmaceutical supply agreement, clinical datasets and some top-line results. But Cassava has also had to respond to critics who called its data manipulated. The allegation — a Citizens’ Petition to the U.S. Food and Drug Administration (FDA) — is at the heart of a recent New Yorker profile.
Still, the Journal of Neuroscience and Neuroscience have both sent out press releases through Cassava saying its “Western blot” data is not manipulated. The data claims to show progress. Western blots are tough to analyze.
At its highs during the summer, SAVA stock was worth over $5 billion. As of Feb. 8, the stock trades for around $47, or a market capitalization of around $1.9 billion. It’s up 5% over the last one year.
Do They Have It?
The January New Yorker article focused on a law firm aimed at helping whistleblowers benefit from their work. It details some of the hype around Cassava on Reddit and financial websites. While shares of SAVA stock today are nearly where they were a year ago, they have been highly volatile with moves of $40 per share in a single day.
For me, the most damning evidence in the story may be the history of CEO Remi Barbier and the company. Until 2019, Cassava was called Pain Therapeutics and was working on an opioid called Remoxy. The drug was supposed to have “little risk of abuse.” Remoxy never made it to market. Now, Simufilam seems to have emerged just in 2020.
Most drugs have a very long history of rigorous science behind them. The mRNA science of Moderna (NASDAQ:MRNA) emerged over decades, even before it came public. Great drugs simply don’t come out of nowhere. What’s more, rigorous science is filled with failures. Many, many drugs that enter the FDA pipeline fail in clinical trials.
The Bottom Line on Cassava
InvestorPlace’s Louis Navellier recently called Cassava “a biotech-sector runner that can jump at any moment.” But that’s an analyst talking about SAVA stock. Not a scientist.
I’m not a scientist either. However, I have seen many companies like Cassava rise and fall over the years. That leads me to one conclusion about this company.
Regardless of the merits, SAVA stock is a speculation. It’s not an investment. With concerns being thrown around, you just can’t be sure whether Simufilam is a useful compound or a complete fraud. What’s more, this is a one-product company. There are no financial numbers on which I could base an argument for or against it.
So, if you want to bet on it, that’s your choice. But I suspect you’ll have better odds betting on Cincinnati to win the Super Bowl.
On the date of publication, Dana Blankenhorn did not hold (either directy or indirectly) any position in any of the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of Technology’s Big Bang: Yesterday, Today and Tomorrow with Moore’s Law, available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com, tweet him at @danablankenhorn, or subscribe to his Substack.