Cassava Sciences (NASDAQ: SAVA) stock price has become a fallen angel. Once a high popular stock, it has crashed by over 45% this year and by more than 90% from its all-time high, giving it a market cap of over $530 million. At its peak, the company had a valuation of over $7.4 billion.
Fall from grace continues
Cassava Sciences, a leading company in Alzheimer’s research, was one of the hottest companies among traders. Its popularity soared in 2021 as most investors focused on Alzheimer after the FDA approved Biogen’s aducanumab, which it started selling at $26,500 per year.
Recently, however, while the Alzheimer’s industry is still robust, there are signs that its complexity has made many investors to pull back. Earlier this year, Biogen announced that it would reprioritise its resources in the industry by discontinuing the development and commercialisation of ADUHELM.
Cassava Sciences is hoping to become a major player in the industry, thanks to its drug, which is known as Simufilam. The company hopes that the drug will ultimately receive authorisation by the FDA.
Alzheimer’s is a big industry considering that it affects over 5 million people in the United States and around the world.
However, the company has come under intense pressure in the past few years, which has contributed to the stock’s collapse. While simufilam is in the third phase of trial, there have been concerns about its data integrity.
Hoau-Yan Wang problems continue
These concerns accelerated on Friday when Hoau-Yan Wang, a former scientific advisor was accused of defauding the National Institutes of Health (NIH). Authorities alleged that he defrauded the government by sending grant applications and receiving $16 million in grants between 2017 and 2018. He took these grants on his behalf and that of Cassava Sciences.
Wang has been in the spotlight for a long time. In this New York Times report, an investigation into his work showed that he was reckless for failing to keep or provide original data.
The new filing means that the company and its trial will likely get into more scrutiny in the coming months. Besides, Alzheimer’s is one of the toughest diseases to treat, as evidenced by the many failed tests.
Also, there have been allegations of data mismanagement and the lack of raw data in the company. Some analysts also question whether the company’s drug is effective after all, with some noting that Wang had manipulated the results.
The most recent financial results showed that Cassava Sciences’ business had an operating loss of $19.9 million. Most of these funds went to researcg and development. Its net profit came in at over $25 million, thanks to the gain in fair value of warrant liabilities.
The company also has a strong balance sheet that gives it room to operate without the need to raise cash. It had over $12 million in cash and equivalents. This means that the company will likely need to raise cash in 2025 or 2026.
Still, I believe that Cassava Sciences is a high-risk company whose simufilam drug faces substantial risks ahead.
Cassava Sciences stock price analysis
The weekly chart shows that the SAVA share price has been in a freefall in the past few years. On Friday, the stock moved below the key support at $12.33, its lowest swing in October 2023 and July 2022.
Cassava Sciences’ share price has remained below the 50-week and 100-week Exponential Moving Averages (EMA). Therefore, the stock will likely continue falling as sellers target the key support at $10. This means that it could crash by about 20% from the current level. A drop below that point could drop to the key point at $6.40.
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