Cassava Sciences: Analysts See 300% UpsideDespite Controversies

Cassava Sciences Inc. (NASDAQ: SAVA) is currently a prominent biotech firm focusing on treatments for Alzheimer's disease. The company’s lead drug, simufilam, aims not only to alleviate symptoms but also to change the biology underlying the disease. However, the firm has faced significant controversy surrounding these efforts, notably allegations of data manipulation and fraud.

As of this morning, Cassava Sciences' stock is priced at $26.50, slightly down by 0.02 or 0.08%. Its 52-week trading range has been between $8.79 and $42.20. Despite the controversies, analysts maintain a favorable outlook, with an average price target of $111.50, suggesting a potential upside of around 317%.

The Fraud Allegations Explained

The scrutiny of Cassava Sciences began in 2021 when citizen petitions highlighted allegations of data manipulation in simufilam's Phase 2 clinical trials. These claims attracted the attention of short sellers and ultimately led to an investigation by the U.S. Securities and Exchange Commission (SEC) in August 2021. In 2022, the U.S. Food and Drug Administration (FDA) conducted an inspection and raised concerns about the integrity of the trial data, specifically regarding the advisor Dr. Hoau-Yun Wang from the City University of New York.

The critique focused on faulty sample analyses, improper statistical tests, and equipment calibration issues during the trials conducted in 2020. Consequently, many critics argued that the subsequent Phase III trial should have been halted due to concerns over data reliability.

Additionally, a serious turn of events occurred when the U.S. Department of Justice (DOJ) indicted Dr. Wang on June 27, 2024, for allegations of fabricating data in NIH grant applications. If convicted, he faces up to 95 years in prison for various counts, including fraud and false statements.

SEC Settlement and Future Prospects

The SEC investigation resulted in a $40 million settlement from Cassava Sciences, a resolution reached without any admission of guilt. Furthermore, an interim safety study indicated no significant safety issues with simufilam, allowing the company to continue with its Phase III clinical trial. This trial is crucial as it is based on the initially positive data from Phase II.

As of now, no actions have been taken by the FDA to halt the ongoing Phase III trials, ensuring that the company remains on track for essential results. The interim CEO has replaced the former chief executive, and analysts are also awaiting the top-line results from the Phase III ReTHINK-ALZ and ReFOCUS-ALZ studies expected by the end of 2024 and mid-2025, respectively.

On October 8, 2024, H.C. Wainwright upgraded its rating for Cassava to Buy from Hold, raising its target price to $116.00. Analyst Vernon Bernardino believes the SEC settlement has diminished long-term concerns and emphasizes that the forthcoming study results will be pivotal for the company.

Insight from the CEO Regarding Clinical Trials

In a letter to shareholders dated October 8, 2024, CEO Rick Barry stated that the last patient has finished dosing in the ReTHINK Phase III trial, which involves 805 patients across 77 sites in the U.S., Canada, Puerto Rico, and Australia. The company is now focused on data collection and analysis. The trial's oversight is managed by Premier Research International, and data analysis will be performed by independent biostatisticians at Pentara Corp.

Importantly, Cassava Sciences will not have access to the trial data until the analysis is complete, ensuring unbiased results. The company anticipates announcing the findings before the end of 2024, with additional results for the ReFOCUS trial expected in mid-2025.

Conclusion: Is Cassava a Good Investment?

While analysts currently rate Cassava Sciences as a Buy, it's essential for potential investors to conduct thorough research before considering an investment. Analysts have pointed out that although there is perceived potential in the stock, there are also recommendations for other stocks that may be more favorable at this time. Investing always carries risks, and investors must weigh these according to their financial goals and risk tolerance.

Cassava, Alzheimer's, Stock