2023-04-06 16:43:34 ET
Summary
- Cassava Sciences' Phase 2 open-label safety study of simufilam shows mixed outcomes for treating Alzheimer's disease.
- Encouraging results offset by study limitations, such as non-randomized design and small sample size.
- Concerns raised over "research use only" status of cerebrospinal fluid biomarkers and limited sample size.
- Future clinical prospects for simufilam remain uncertain; investors advised to exercise caution and consider "Strong Sell" rating.
Introduction
Cassava Sciences ( SAVA ), a clinical-stage biotech company focusing on the detection and treatment of neurodegenerative diseases, particularly Alzheimer's disease. Cassava Sciences is developing two primary biopharmaceutical assets: simufilam, the lead therapeutic product candidate for Alzheimer's disease dementia currently in Phase 3 clinical trials, and SavaDx, the lead investigational diagnostic product candidate, which identifies Alzheimer's disease from a small blood sample.
Recent Events: Cassava has disclosed preliminary results from their Phase 2 open-label safety study featuring exploratory efficacy endpoints. The study involved over 200 patients with mild-to-moderate Alzheimer's disease and took more than a year to complete. In the second quarter of 2023, patient dosing for the cognition maintenance study in Alzheimer's disease is expected to be finished. The results of the cognition maintenance study are expected to be announced in the third quarter of 2023. In the fourth quarter of 2023, patient enrollment for phase 3 studies of Simufilam in Alzheimer's disease is expected to be completed.
Following my "Strong Sell" recommendation on Cassava in September 2021, its shares have dropped by 40%, in contrast to the S&P which has decreased by 8%. This analysis will delve into the latest information in more detail and provide an updated investment recommendation.
Financials
A review of Cassava's most recent financial report reveals that the company had $201 million in cash and cash equivalents as of December 31, 2022, a decrease from the $233.4 million reported on December 31, 2021. The year-end cash balance included $47.3 million in net proceeds from selling 1.7 million shares of common stock. In 2022, the company used $77.5 million in net cash for operations, considering reimbursements received from National Institutes of Health (NIH) grant awards. Cassava Sciences expects to use approximately $45 to $50 million in net cash for operations in the first half of 2023, primarily for expenses related to their Alzheimer's disease clinical program. Research and development expenses rose to $68.0 million in 2022, compared to $24.8 million in 2021, due to costs associated with conducting the ongoing Phase 3 clinical program in simufilam, maintenance studies, and clinical trial supply manufacturing, as well as increased pre-clinical study and personnel expenses. Research grant funding reimbursements from NIH were $0.9 million in 2022, compared to $3.9 million in 2021. General and administrative expenses were $12.0 million in 2022, compared to $8.1 million in 2021, due to increased legal fees, personnel costs, insurance costs, and depreciation and amortization expenses.
Historical Challenges in Developing Effective Alzheimer's Disease Treatments
Developing effective treatments for Alzheimer's disease [AD] has historically been challenging due to numerous clinical trials and unsuccessful drug candidates, indicating inadequate efficacy and safety. The complexity of Alzheimer's, including aspects such as neuronal loss, inflammation, and accumulation of tau tangles, makes it difficult to effectively target and intervene. Furthermore, the condition's heterogeneity hinders the identification of a comprehensive solution, leading to multiple past attempts at targeting amyloid-beta plaques, often without significant clinical benefits and with side effects. Late-stage diagnosis presents another challenge, as the disease advances considerably before symptoms emerge, limiting the intervention window. In addition, the inability of drugs to reach intended targets due to the blood-brain barrier complicates the development of effective treatments. Consequently, Alzheimer's multifaceted nature, coupled with the unique challenges of drug delivery and intervention timing, accounts for the historical failures in Alzheimer's drug development.
Recent Alzheimer's Drug Developments
The US FDA has granted accelerated approval to aducanumab, a monoclonal antibody that targets amyloid beta for treating mild AD. Positive results from one of two Phase 3 trials and the drug's ability to reduce amyloid beta plaques in the brain led to this decision. However, the FDA scientific advisory panel's earlier recommendation against it and the uncertain efficacy of the surrogate endpoint have sparked controversy. According to UpToDate recommendations , the use of aducanumab should be limited to patients with mild cognitive impairment or mild dementia who have documented amyloid pathology and no contraindications.
Updated Simufilam Phase 2 AD Results
In January, Cassava released 12-month Phase 2 results for simufilam, which aimed to determine the drug's safety and efficacy in improving cognitive and behavioral outcomes in AD patients. The primary objective of the open-label safety study was to measure changes in ADAS-Cog scores between baseline and the 12-month mark, with additional exploratory endpoints such as the MMSE, NPI10, and GDS.
Encouraging Results from Simufilam Offset by Limitations and Small Sample Size
The results revealed minimal changes in ADAS-Cog11 scores, a slight decrease in MMSE scores, and improvements in NPI10 and GDS scores from the beginning to the 12-month point. In the mild sub-group, ADAS-Cog scores showed improvement, while they worsened in the moderate sub-group. No severe drug-related adverse events were reported.
Although these outcomes appear promising, it is essential to consider the study's limitations due to its open-label, non-randomized design . Additionally, the study's small sample size and the inclusion of patients who had been receiving existing AD-related treatments for at least three months may also influence the results.
The study included an assessment of cerebrospinal fluid [CSF] biomarkers from 25 patients to investigate the effects of a 6-month treatment regimen. The findings demonstrated significant reductions in biomarkers associated with disease pathology, neurodegeneration, and neuroinflammation. Out of the 25 patients, 24 completed a year of treatment with the drug, showing improvement in cognitive function.
Potential concerns may involve the small sample size, the "research use only" status of the biomarkers, and the lack of additional CSF analyses. The limited sample size might restrict the applicability of the results to a broader population. Moreover, the classification of the biomarkers as "non-safety, exploratory" implies that they might not serve as definitive evidence of treatment efficacy or safety. The term "research use only" refers to the fact that these biomarkers are not yet approved for clinical use and have not been adequately validated, which could negate any positive findings. Lastly, the absence of ongoing CSF sample analyses may hinder understanding of the treatment's long-term effects.
My Analysis & Recommendation
Cassava Sciences' recent Phase 2 open-label safety study has yielded mixed outcomes, demonstrating both promise and limitations in its Alzheimer's disease treatment, simufilam. Although the study suggests potential progress in cognitive and behavioral measures, it is crucial to recognize its non-randomized design, small sample size, and the possible impact of pre-existing treatments on the results. Furthermore, concerns regarding the limited sample size and the "research use only" status of the CSF biomarkers utilized in the study should be considered when assessing the potential efficacy of simufilam. In my opinion, Cassava has not yet produced consistently positive data for simufilam in Alzheimer's disease.
Cassava Sciences' financial position appears stable in the short term, with a cash balance of $201 million at the end of 2022 and an anticipated net cash usage of $45-50 million for operations in the first half of 2023. However, the company's increasing R&D expenses and general and administrative costs should not be overlooked, as they may affect the company's long-term financial health.
Given the history of setbacks and inconsistencies (e.g. Phase 2 biomarker failure ) in simufilam's development, as well as the high failure rate of Alzheimer's disease treatments , a cautious approach is essential when investing in Cassava Sciences. While there is potential for significant gains if simufilam proves successful, the risks associated with investing in the company are substantial. Investors are advised to thoroughly evaluate their positions in the stock and to be aware of the potential downside of over 90% if simufilam ultimately fails. I believe that forthcoming data (e.g., Phase 2 data comparing simufilam to placebo, Phase 3 data) will be more reliable and begin to unveil the actual potential of simufilam in Alzheimer's disease. It may be prudent for investors to diversify their portfolios, seek additional information from upcoming Phase 3 trials and Cognition Maintenance Study results, and carefully balance the potential rewards against the inherent risks before making any investment decisions.
In my opinion, Cassava seems overvalued, particularly since simufilam lacks reliably positive Alzheimer's data. Given the unfavorable future clinical prospects for simufilam, I recommend rating Cassava as a "Strong Sell."
Risks to Thesis
Some risks could change my pessimistic stance on Cassava Sciences:
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Positive Phase 3 trial results: If simufilam demonstrates significant efficacy and safety in the ongoing Phase 3 clinical trials, it could alter the perception of the drug's potential, leading to an increase in investor confidence and stock value.
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FDA approval and successful commercialization: If simufilam receives FDA approval and is successfully commercialized, it could generate substantial revenue for Cassava Sciences, improving the company's financial outlook.
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Breakthroughs in Alzheimer's disease research: New findings or advancements in Alzheimer's disease research could lead to improved understanding and treatment methods, potentially benefiting simufilam and other drugs in development by Cassava Sciences.
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Strategic partnerships or acquisitions: If Cassava Sciences enters into strategic partnerships or acquisitions to advance their product pipeline, it could strengthen the company's position in the market and enhance their chances of success.
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Increased demand for Alzheimer's treatments: With an aging global population, the demand for effective Alzheimer's disease treatments is growing. If simufilam or other products developed by Cassava Sciences prove successful, the company could benefit from this increasing demand.
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New sources of funding: Securing additional funding, whether through grants, collaborations, or equity offerings, could provide Cassava Sciences with the necessary resources to continue their research and development efforts, increasing the likelihood of success for simufilam and other products in their pipeline.
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Regulatory changes: Changes in the regulatory environment or the approval process for new Alzheimer's treatments could potentially benefit companies like Cassava Sciences, especially if the changes result in a more favorable environment for drug development and approval.
For further details see:
Cassava Appears Overvalued And Lacks Rigorous Alzheimer's Data