2023-07-09 10:48:14 ET
Summary
- Cassava Sciences continues to show promising data.
- Cassava Sciences Simufilam shows a 205% improvement compared to placebo in the most recent study.
- Recently approved drugs by Biogen have competitive data with Simufilam by Cassava Sciences.
- Both of the company's phase 3 trials will be enrolled by the end of the year.
I once again give Cassava Sciences (SAVA) a strong buy rating, and as I have previously stated, I think Cassava Sciences is the best risk to reward on the market. I have been covering this stock for three years and have been very bullish on it the whole time. To read my previous articles on Cassava sciences, click on my profile.
My renewed confidence today comes from their much anticipated cognitive maintenance study ((CMS)) which showed promising data that further derisked the phase 3 trials. All data the company has released so far suggest the company will be able to gain approval from a phase three trial if they produce the same data. For this reason, I think the current share price, which leads to a market cap of under $1 billion, is far too low. Simufilam was developed in-house, and for that reason, Cassava Sciences has all the rights to it. It has shown no safety concerns, which cannot be said about the amyloid drugs currently being approved, which have demonstrated removing amyloid goes hand in hand with brain bleeds. Simufilam is a small molecule drug delivered in a pill, making it easier to take and cheaper to produce than any recently approved AD drug. For those reasons alone, if it were approved and had similar or even slightly worse data than the amyloid drugs, it would, in my opinion, likely win the lion's share of the massive AD market. Now, add to the fact that so far, it appears that Simufilam may produce better data than the amyloid drugs after phase 3, and it becomes clear that if this is the case, in my opinion, Simufilam will become the go-to AD drug and most likely the best-selling drug of all time. That is why I think that Cassava Sciences is the best risk to reward investment on the market right now.
Below is Cassava's recent stock price.
Diving further into potential value, an estimated 6.5 million people in the United States alone are affected by Alzheimer's disease. Additionally, this number is expected to double by the year 2050, bringing the total to 13 million. Bloomberg's senior equity research analyst specializing in the biotech sector, Marc Engelsgjerd, said :
If you can develop a small molecule pill for Alzheimer's disease that can definitively improve cognition, that would very likely become the most successful product in pharmaceutical history.
For context, the current best-selling drug of all time is Lipitor from Pfizer ( PFE ), which sold for an incredible $150 Billion. Pfizer acquired Lipitor's original creator, Warner-Lambert, in 2000 for $110 Billion. Humira by AbbVie ( ABBV ) is the second highest of all time, significantly lower at $109 Billion. A company with the potential to have a $100+ billion-dollar drug in less than three years is undervalued at a $1 billion market cap.
It isn't easy to estimate potential share price on approval because of many moving factors such as the effect of other approved drugs, manufacturing costs, cost of the drug, marketing effectiveness, etc. Therefore, no matter how good projections may look, there is still significant risk in any biotech investment. Some recent examples we have are when Biogen (BIIB) announced Accelerated Approval of its Alzheimer's medication which led to a $17 Billion market cap jump. Similarly, the day Eli Lily and Roche (RHBBY) announced their AD medication's FDA Breakthrough Therapy Designation ((BTD)), their market cap increased by $15 billion and $13 billion, respectively. These may not be apt comparisons because there was a lot of market excitement around AD drugs at the time, and in Biogen's case, it was the first approved AD drug in over 15 years.
Data
The CMS trial was highlighted by the main bullet of 205% improvement compared to the placebo.
The CMS is a small proof-of-concept study designed to demonstrate the effects of drug versus placebo in a randomized withdrawal trial design. The study enrolled 157 patients with mild-to-moderate Alzheimer's disease, a more advanced and difficult-to-treat stage of disease. In this double-blind, placebo-controlled, randomized study, all patients first received open-label simufilam 100 mg for 12 months; patients were then randomized (1:1) to receive either simufilam 100 mg or placebo for 6 months. 16 U.S. clinical sites participated. The CMS had one pre-specified cognitive endpoint: mean change in ADAS-Cog11 scores over 6 months, drug versus placebo.
Some additional bullet points from the company PR are below:
- Simufilam Slowed Cognitive Decline by 38% Versus Placebo Over 6 months in Patients with Mild-to-Moderate Alzheimer's Disease.
- Drug Effects Favored Mild Alzheimer's Disease.
- In Mild Alzheimer's, Simufilam Improved Cognition Scores Over 6 Months.
- In Mild Alzheimer's, Simufilam Stabilized Cognition Scores Over 18 Months.
- Oral Simufilam Continues to be Safe, Well Tolerated.
Below is an essential comparison of Cassava Sciences results to other critical AD treatments recently approved lecanemab by Eisai (ESAIY) and Biogen, approved aducanumab by Biogen, and likely to be approved donanemab by Eli Lily (LLY).
Cassava Sciences competes with the data of three prominent pharma drugs approved or soon to be. This comparison chart is why investors are so excited about the company.
Finally, the data for the title of this article:
Simufilam treatment for 6 months slowed cognitive decline > 200% compared to placebo in mild Alzheimer's disease. CMS patients with mild Alzheimer's (MMSE 21-26) on placebo declined 0.6 points on ADAS-Cog over 6 months as a group. CMS patients with mild Alzheimer's on simufilam improved 0.6 points over 6 months as a group, a 205% difference in favor of drug (95% CI, - 2.6 to 0.4; not significant for sample sizes).
Upcoming catalysts
The company has two upcoming phase three trials whose data will be what merits approval by the FDA.
Below is the design of the phase 3 trial:
Cassava Sciences appear to be on track to meet its enrollment date of the end of 2023. This sets them up for FDA approval in late 2025 to early 2026. That is the first known significant catalyst of the company. However, a partnership with a big pharma company or Breakthrough Therapy Designation ((BTD)) are all possible events before approval that would skyrocket the stock price. These situations would also validate the company's science from outside, trusted parties.
Additionally, Cassava Sciences has been working on their blood diagnostic test SavaDx which they said an announcement would be made around this time of year. I would not be surprised to hear an update on that soon, as they were testing it during the CMS trial.
Financials
From the company's last quarterly earnings, the company has $187 million in cash, offset by only $8.2 million in current liabilities, while burning $26 million last quarter. The company should have enough money to finish its phase 3 trials and make it to the FDA's desk to see if it will get Simufilam approved. They would need to partner or raise significant cash upon approval to build the manufacturing, advertising, and delivery infrastructure.
Risks
Biotech companies are a precarious investment. They are very volatile and have many twists in their journey that can completely change a stock's outlook. There are no sure things about investing in biotech.
Company-specific risks are mainly centered around phase 3 drug trials. A delay of some sort or poor results would cause a decline in value. On a different avenue, the same reason I proclaim this to be a good investment stating that it is undervalued could be wrong. Valuing such high-risk, high-reward assets as Cassava Sciences is complex and can lead to significant disparities between share price and actual value. Another risk to consider is that the phase three trials have co-primary endpoints going beyond ADAS-Cog scores by also including ADCS-ADl scores. This will give a more thorough understanding of the data, but could also make it more challenging to gain approval.
As mentioned in the financial section, the company will most likely experience dilution in some form before approval via a partnership or a cash raise.
As for macro risks, the overall economy seems to be reasonably robust. If the economy enters a recession, then that will harm the biotech sector, as growth sectors do not perform as well in poor economies.
The final headwind that blows against Cassava Sciences is fraud allegations in the past that I have covered in previous articles. None of these allegations have proven to have merit, and the company even sued the short sellers who made these claims in court. However, if they come to fruition, that would significantly harm the stock's value.
Conclusions
I continue being bullish on Cassava Sciences as I slowly accumulate more shares. I feel very confident about their phase 3 data after it has been further derisked with the CMS data. While Cassava Sciences may not have any known things coming up, always be prepared for the unexpected.
For further details see:
Cassava Sciences: Positive Data Continues To Derisk Ongoing Phase 3 Trials