Since making some big moves last month Cassava Sciences (NASDAQ:SAVA) stock has largely traded sideways.
Yet while SAVA stock has been acting less wild, don’t blame it on a lack of new developments.
As InvestorPlace’s Eddie Pan reported Oct. 13, the biotech firm has announced plans to hold an open-label study for simufilam, its Alzheimer’s treatment candidate.
It’s not entirely surprising that this latest news isn’t having much of an impact on Cassava’s stock price performance.
Data manipulation allegations continue to weigh on shares. As I discussed earlier this month, little has come up to back these allegations, but it remains a factor that’s brought up by the financial press when talking about this stock.
It may take getting simufilam through the pipeline to move beyond the controversy.
However, this may work to your advantage, as this factor makes SAVA stock favorable from a risk/return standpoint.
| SAVA | Cassava Sciences | $36.76 |
The Latest on SAVA Stock
You may agree that the market is too focused on the negatives with Cassava Sciences. Still, you may be questioning why this open-label study news for simufilam is of significant importance. Admittedly, the launch of this study itself isn’t a game-changer.
The results of its ongoing Phase 3 clinical program, which are expected to come out in mid-2024, will be what really makes, or breaks, SAVA stock.
While perhaps not the most needle-moving development, the launch of this study underscores how this clinical-stage biotech firm continues to make progress with its sole drug candidate.
As Cassava itself stated in the press release announcing this study, conducting an open-label is expected to “generate long-term safety and tolerability data” for the treatment.
Success with this study will further increase the chances simufilam ultimately obtains regulatory approval.
Along with the tremendous social benefit that simufilam could one day bring to millions of Americans with Alzheimer’s disease, approval for this drug would undoubtedly move the needle for Cassava Sciences stock in a big way.
The caveat to this potential upside, of course, is the extremely high downside risk at hand with SAVA.
Keep in Mind That Cassava Is a Binary Wager
Not completely out of the woods with regards to the aforementioned allegations, expect them to continue weighing on this stock’s performance.
However, even if this issue clears up completely, there’s still the risk of a near-total loss with SAVA stock. This is due to the binary nature of this investment opportunity.
Cassava Sciences doesn’t have much to fall back on. The company does have another product, Alzheimer’s detection diagnostic SavaDX, in development, but SavaDX’s potential pales in comparison to that of simufilam.
If it becomes “game over” for bringing simufilam to market, SAVA will most likely sink back to the single digits per share.
This high level of risk signals why you shouldn’t make this a big portfolio position. It doesn’t, however, signal that your best move is to stay away.
Saying there’s big upside potential with Cassava isn’t hyperbole. Before dogged by the data-manipulation controversy, SAVA stock traded for as much as $135.30 per share.
If future trial results are favorable, this stock could make it to even loftier price levels. While difficult to pinpoint a specific price target, it is safe to say the possible reward exceeds the risk.
The Verdict
My current view notwithstanding, more cautious investors may want to steer clear of Cassava Sciences. If you’re not a fan of volatility, this stock isn’t for you.
However, if you have an appetite with risky plays, SAVA may be a great opportunity. Assuming, of course, that you size a position that’s appropriate to this stock’s binary nature.
At the very least, aggressive investors should add this stock to their watchlists. Although a worthwhile opportunity today, an additional pullback (for example, from more data-manipulation headlines) could create an even more ideal entry point.
Making progress with what could ultimately be a breakthrough treatment, consider SAVA stock a great speculative buy, whether now, or on further weakness.
SAVA stock earns a B rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.