Six months ago Cassava Sciences (SAVA) had a problem. A citizen petition was logged with the FDA calling for a halt on the company’s simufilam drug for the treatment of Alzheimer’s Disease. The petition highlighted the fact that the positive data was based on the findings of a single third-party academic laboratory, while also alleging that some of the results displayed signs the data was being manipulated.
While the allegations sounded serious, B. Riley analyst Mayank Mamtani didn’t think investors should worry, and he reiterated his “buy” recommendation on Cassava stock.
Six months later, on Thursday, Cassava announced that the FDA has denied the citizen petition as well as “four supplements to the August 2021 Citizen Petition” and “a September 2021 Citizen Petition, and a supplement,” too.
Mamtani is obviously pleased with this development. In a “flash” report updating investors on the situation, he noted that “trials of simufilam towards key clinical data generation activities planned for the next few months” can now proceed unobstructed, and noted that there’s now “an attractive risk/reward setup from current levels.”
To this end, Mamtani maintained his “buy” rating along with a $72 price target. Investors could be sitting on gains of ~33%, should Mamtani’s forecast play out over the coming months. (To watch Mamtani track record, click here)
That being said, even Mamtani isn’t wearing rose-colored glasses here, and he admits that, “ongoing institutional investigations being conducted by City University of New York (CUNY) on Dr. Wang,” one of the researchers who authored papers supporting Cassava’s Simufilam, “remains a near-term risk.” Should things go sideways, these institutional investigations could result in “(1) paper retractions, (2) lab restrictions, and/or (3) termination,” any of which could turn into negative PR for Cassava.
On the other hand, even such negative outcomes for the Doctor could be positives for Cassava if they put an end to this drama, remove the lingering cloud over the company’s reputation, and permit investors’ focus to shift from Dr. Wang to “clinical development execution in discerning simufilam’s disease-modifying and/or symptomatic benefit in mild-to-moderate Alzheimer’s Disease patients.” There, clinical success would become the best argument in favor of Cassava stock, and Cassava would become the master of its own destiny once again.
The rest of the Street supports Mamtani’s thesis. In fact, the average price target is even more upbeat; at $102, the figure is expected to yield 12-month returns of 88%. The stock boasts a Strong Buy consensus rating, based on a unanimous 4 Buys. (See SAVA stock forecast on TipRanks)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.