Analysts See Potential 300% upside for Cassava Sciences Despite Controversy

Cassava Sciences Inc. NASDAQ: SAVA, currently priced at $26.50, is attracting attention in the biotech industry as it develops treatments for Alzheimer's disease. Its leading drug, simufilam, aims to not only relieve symptoms but also modify the underlying biology of the disease. However, the company is embroiled in controversy surrounding allegations of data manipulation and fraud, raising significant concerns about the drug's credibility.

Despite these issues, analysts continue to maintain a Buy rating for Cassava Sciences. They assign an average price target of $111.50, which indicates a potential upside of 317% from its current stock price.

Allegations of Fraud and Investigations

The controversies began with allegations of data manipulation linked to simufilam's Phase II clinical trials, reported through citizen petitions in 2021. Short sellers accused the company of fraud, leading to investigations by the United States Security and Exchange Commission (SEC).

In August 2021, the SEC launched an investigation, which prompted a review by the U.S. Food and Drug Administration (FDA). This review criticized Dr. Hoau-Yun Wang, an advisor on the trials, for improper analysis of trial samples and failure to ensure proper calibration of equipment. Concerns were raised about the integrity of the data collected in 2020.

By the end of 2021, while the Phase III trial had begun based on earlier positive results from Phase II, critics argued it should have been halted due to the integrity issues associated with the initial data. In June 2024, the U.S. Department of Justice (DOJ) indicted Dr. Wang for falsifying data on multiple grant applications, which could lead to a maximum of 95 years in prison if convicted.

Settlement Reached with the SEC

The SEC eventually concluded its investigation, resulting in a $40 million settlement from Cassava Sciences without any admission of guilt. An interim safety study also revealed that simufilam did not present significant safety issues. The FDA has allowed Cassava to continue its pivotal Phase III trial, with results expected soon.

As the controversy surrounding the SEC investigation diminishes, Cassava Sciences is eager to share the top-line findings of its ReTHINK-ALZ and ReFOCUS-ALZ trials, scheduled for release by the end of 2024 and mid-2025 respectively. In October 2024, analyst Vernon Bernardino from H.C. Wainwright raised the target price to $116.00, viewing the SEC settlement as a step toward addressing the risks associated with the ongoing trials.

Steps Toward Data Analysis

Cassava CEO Rick Barry informed shareholders that the ReTHINK Phase III trial, involving 805 patients across various countries, has concluded its dosing. The only remaining task is to collect and analyze data. The statistical work will be conducted by independent biostatisticians at Pentara Corp., ensuring that Cassava will not have access to the data until the analysis is complete. Results are expected to be announced before the close of 2024.

Investors are relatedly optimistic amid the prevailing controversies and are patiently waiting for the results to see if the potential upside holds true for Cassava Sciences.

Whether to invest in Cassava Sciences now depends on individual risk tolerance and market outlook. While analysts have given the stock a favorable rating, some may prefer to consider other opportunities before making a decision.

Cassava, Alzheimer's, investigation