2023-05-23 17:06:29 ET
Summary
- Cassava stock - incredibly volatile between 2020-2022 - hasn't increased much in value in the last year.
- The company's Alzheimer's candidate Simufilam remains in Phase 3 studies with data likely arriving in 2024.
- The company remains heavily shorted by those who believe Simufilam is not more effective than a placebo and that Cassava may have allegedly misled the market with its early data.
- There are some positives to be taken from some of the data however, while more supporting evidence for the Filamin-A thesis has been uncovered in Europe.
- In this hardest to treat disease, it may be worth waiting for full Phase simufilam data before dismissing this company - especially while doubts over the safety of amyloid targeting drugs remain.
Investment Overview
Remarkably for such a historically volatile stock, Cassava Sciences ( SAVA ) shares trade nearly at the same price today as they did exactly a year ago.
Readers new to the Cassava story may be forgiven for thinking this is a run-of-the-mill biotech startup, patiently waiting for its Phase 3 studies of lead drug candidate - Simufilam, indicated for Alzheimer's Disease ("AD"), to complete, but that would be to ignore the company's turbulent history.
Cassava was founded by CEO Remi Barbier after Barbier finally admitted defeat in his attempt to win approval for Remoxy - an extended release gel formulation of oxycodone rejected four times by the FDA for approval as a pain therapeutic on anti-abuse grounds.
Barbier rebranded his company Pain Therapeutics as Cassava Sciences in 2019, and began working on a new drug candidate, Simufilam, described as follows in Cassava's most recent 10K submission:
Our lead product candidate, simufilam, is a proprietary small molecule (oral) drug. Simufilam targets an altered form of FLNA in the Alzheimer's brain. Published studies have demonstrated that the altered form of FLNA causes neuronal dysfunction, neuronal degeneration and neuroinflammation.
We are currently conducting a Phase 3 program with simufilam in patients with mild-to-moderate Alzheimer's disease dementia. We are currently conducting a Phase 3 program with simufilam in patients with mild-to-moderate Alzheimer's disease dementia.
We believe simufilam improves brain health by reverting altered FLNA back to its native, healthy conformation, thus countering the downstream toxic effects of altered FLNA. We have generated and published experimental and clinical evidence of improved brain health with simufilam.
Importantly, simufilam is not dependent on clearing amyloid from the brain. Since simufilam has a unique mechanism of action, we believe its potential therapeutic effects may be additive or synergistic with those of other therapeutic candidates aiming to treat neurodegeneration.
This is a neat summation of where the company currently stands and what it has achieved to date, although to understand the share price fluctuations it's important to scratch further under the surface and appreciate the market opportunity in play.
A Brief History Of Cassava
Simufilam looked doomed as a potential Alzheimer's therapy back in 2020 when the drug failed a Phase 2b study, missing its primary endpoint of reducing levels of tau protein in cerebrospinal samples and other biomarker assessments.
Cassava blamed the results on an "outside lab with whom we had no prior work experience" (source: company 10-K submission 2022 ), and opted to have its results re-evaluated by a different lab run by a longtime collaborator, Dr. Hoau-Yan Wang, at City University New York ("CUNY") - this time the data were positive, with statistically significant improvements noted across a panel of validated biomarkers.
Next, Cassava initiated a Phase 2 open label study of Simufilam, early data from which seemed to indicate that patient's cognition scores were actually improving - in a press release in Feb 2021 the company announced:
Six months of simufilam treatment improved cognition scores by 1.6 points on ADAS-Cog11, a 10% mean improvement from baseline to month 6. In these same patients, simufilam also improved dementia-related behavior, such as anxiety, delusions and agitation, by 1.3 points on the Neuropsychiatric Inventory, a 29% mean improvement from baseline to month 6.
Shortly after this dataset was announced, Cassava's share price skyrocketed to a price of $57, and shortly after that, to >$120 per share, valuing the company at >$5bn, as the market reacted to data that was apparently better than any produced than any other Alzheimer's drug to date. Given that there are ~6m people in the US alone suffering from the disease, the market opportunity in play - if we use a putative price for a year's course of therapy of $10k - is ~$60bn.
More positive nine-month data followed showing that cognition scores, based on ADAS-Cog 11 scoring, had now risen by three points overall , but Cassava's fortunes swiftly began to change as a Citizen's Petition was filed against the company by the law firm Labaton Sucharow, apparently on behalf of scientists, whistleblowers, and people making large short bets against the company. Cassava discusses it as follows in its Q123 10-Q submission:
In August 2021, an attorney representing anonymous clients submitted a Citizen Petition to the FDA. This Citizen Petition requested that the FDA Commissioner immediately halt the clinical development of simufilam, our drug candidate for Alzheimer's disease.
The attorney subsequently disclosed that his clients are short sellers, that is, investors who earn a profit from a decline in our stock price. In September 2021, the same attorney filed another Citizen Petition, which requested that the FDA Commissioner immediately rescind previously granted Special Protocol Assessments (SPAs) for our Phase 3 clinical program with simufilam. FDA has not halted the clinical development of simufilam and has not rescinded our SPAs.
The Citizen's petition made a number of accusations against Cassava, including that it had allegedly manipulated data relating to its Investigational New Drug ("IND") application and falsified documents, and that the data reevaluated by Dr. Wang's lab had been falsified. Cassava denied all of the accusations, however, its share price began to slide as more scientists weighed in, questioning the results of the open label study (which had no placebo arm) and the integrity of the research supporting Simufilam's mechanism of action ("MoA").
The FDA responded to the Citizen's Petition, noting that:
We are denying your Petitions to the extent that they request, through the citizen petition process, that FDA initiate an investigation...
...Moreover, issuing a response to your requests would appear to require FDA to publicly disclose information about an investigational new drug that, by law, FDA generally cannot publicly disclose.
By this time, the FDA had agreed protocols with Cassava for 2 Phase 3 clinical studies of simufilam, rethinkALZ and refocusALZ - details below are taken from Cassava's May 2023 investor presentation .
Phase 3 Program Details (Cassava Presentation)
The FDA did not explicitly say that it dismissed the points raised by the petition out of hand, concluding its reply to the law firm Labaton Sucharow, which raised the petition, as follows:
Please note that your Petitions are being denied solely on the grounds that your requests are not the appropriate subject of a citizen petition. This response does not represent a decision by the Agency to take or refrain from taking any action relating to the subject matter of your Petitions.
In the final reckoning, Cassava's initially very promising Phase 2 data that showed patients cognition scores improving was not supported by longer term data, which may have been down to Cassava's decision to treat patients with the mildest form of the disease first. Final data was reported as follows:
One conclusion that may be drawn is that Simufilam may not be the Alzheimer's wonder drug that the market briefly believed it could be back in 2021, but that it could have some benefit, most notably in patients with milder forms of Alzheimer's. It also could work in combination with other therapies, Cassava believes.
With Simufilam having a clean safety profile and showing data somewhere in the range of inconclusive-to-potentially-positive, the 2 Phase 3 studies are not being conducted in vain, however, given that patient enrollment is not expected to be completed until the end of this year, it could be another 12 months before any data is made available from reTHINK or reFOCUS.
Cassava announced its Q123 earnings at the beginning of this month - in the remainder of this post I'll provide an overview of the biotech's current situation, and highlight five areas of interest that may help readers make up their mind on this divisive stock.
1 - Cassava Q123 Earnings Overview
First of all, let's discuss Cassava's financials. According to the company's Q123 earnings release:
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Net loss was $24.3 million, or $0.58 per share, compared to a net loss of $17.5 million, or $0.44 per share, for the same period in 2022. Net cash used in operations was $13.3 million during the first quarter of 2023.
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New guidance for net cash use in the first half of 2023 is expected to be $30 to $40 million, which is revised downward from our previous guidance of $45 to $50 million, due primarily to the timing of certain clinical payment obligations.
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At March 31, 2023, cash and cash equivalents were $187.5 million, with no debt.
The conclusion that could be drawn here is that Cassava has enough funds to complete its two Phase 3 studies - and its Cognition Maintenance Study ("CMS") in 100 AD patients who continue vs discontinue treatment with simufilam over six months after one year of open label treatment - but will almost certainly need to raise more funding, if not this year then certainly next.
Essentially, that places even more emphasis on the results of reTHINK and reFOCUS, as it seems doubtful that Cassava could, or would, run further studies of Simufilam if these two studies do not meet endpoints.
2 - Near Term Data Catalysts Helping Support Cassava's Simufilam Thesis
As I discussed in my intro, nearly all of the volatility that characterized Cassava stock in 2020-2022 - a period in which shares gained nearly 4,000% in value, before falling >85% - has been sucked out of it, most likely due to the focus on Phase 3 data, which it's hoped will establish once and for all if Simufilam is safe and effective as an Alzheimer's therapy. With such an important catalyst in play, there is less room for speculation.
Nevertheless, Cassava continues to share data that may provide hints as to how reTHINK and reFOCUS may play out. First of all, CEO Barbier was quoted in the Q123 earnings press release, discussing the open label data, as follows:
The dataset for this study shows long-term safety for simufilam. Notably, the data also show differences in changes in ADAS-Cog scores in mild and moderate subgroups. We believe this is an encouraging result, as it clearly shows an improvement in ADAS-Cog over 1 year in mild patients taking simufilam that is well outside the expected range of historical placebo decline from numerous other studies.
As mentioned previously, the open label study may not have been the "slam dunk" it looked like after 6m data was published - AD patients' cognition scores ultimately trended downwards, not upwards - but it does help to show that Simufilam is safe, and to justify the progression into larger scale pivotal studies, given that even the end of study data stands comparison with studies that have resulted in an approved drug.
The next set of data ought to be made available in Q323. According to Cassava, 125 patients had completed the cognition maintenance study as of April 26 and data will be made available next quarter. Presumably, the outcome Cassava is looking for here is patients who move onto placebo seeing their conditions deteriorate faster than those who remain on the drug.
3 - Scientific Updates Provide More Validation For Cassava's Approach
One of the accusations often leveled at Cassava and Simufilam is the lack of other scientists, biotechs, or academics pursuing or supporting the Filamin A misfolding thesis in AD, or indeed in any other disease type. Besides Cassava's work - which is subject to criticism and accusations of fraudulent data usage - there's not much in the way of evidence or research supporting the thesis.
That may be beginning to change. In early May, Cassava reported in a press release :
New data from European researchers that highlight the bioactivity of simufilam on the filamin A protein. Prior research has shown that FLNA is altered in pituitary tumor cells, leading to impaired cell signaling. New in vitro data now show that simufilam can reverse this FLNA alteration in pituitary tumor cells, leading to improved cell signaling. The data also suggest that improved cell signaling may enhance the clinical efficacy of an FDA-approved drug used to manage a type of pituitary tumor.
This news seems to have given Cassava's stock price a small bump, from ~$22 to $28, and it could be important for two reasons. First of all, it shows other researchers have independently reached the conclusion that targeting Filamin A to improve cell signaling is a potentially viable approach to treating certain disease types, and secondly, it opens up a potential new market for Cassava, in oncology.
Although Cassava says it has no immediate plans to evaluate simufilam in cancer treatment, after plowing a lonely furrow with the Filamin A thesis for so long, in the face of fierce criticism, management must be delighted that new, independent data - albeit early stage and not necessarily conclusive (see the press release for full details), seemingly supports Cassava's work.
4 - Strength of Competition - Cassava's Battle To Stay Relevant In Face Of Amyloid Beta Targeting Drugs.
The fact that Alzheimer's has proven such a difficult condition to treat for so many years, and that so many drug candidates targeting the disease have failed mid-to-late stage studies, is largely responsible for the wild fluctuations in Cassava's stock price.
When Biogen ( BIIB ) and Eisai's Alzheimer's anti-amyloid drug Aduhelm was approved by the FDA back in June 2020 - despite the flimsiest of supporting evidence - it created a fierce backlash against the FDA, Biogen, and the amyloid beta thesis in general. It has been well known for a long time that sticky amyloid deposits are found in the brains of Alzheimer's patients, and by approving Aduhelm, the FDA acknowledged its belief that reducing levels of amyloid is a positive biomarker for improving an Alzheimer's patients' condition.
Despite receiving FDA approval, however, Aduhelm's efficacy data was highly questionable, while its safety data showed that cases of brain swelling or oedema were fairly frequent, and that persuaded the Centers for Medicaid and Medicare Services ("CMS") to refuse to provide reimbursement for the drug despite its being FDA approved - such a move by CMS is almost unprecedented.
At the time, Cassava's work with Simufilam - a drug that's not associated with adverse safety findings - may have gained traction with investors simply because it was not Aduhelm, and it was not dangerous.
Last year, however, a "next-generation" version of Aduhelm, known as Lecanemab, was given accelerated approval by the FDA based on data from an 18-month late stage study that showed the drug slowed the rate of cognitive decline by 27%.
Although the incidence of adverse events in that study was 21.3% for those who received lecanemab and 9.3% for those who received a placebo, Leqembi, as the drug will be marketed, is not as strongly associated (although still associated) with brain swelling and could receive the CMS reimbursement nod that Aduhelm did not.
Meanwhile, Eli Lilly recently posted data from a Phase 3 study of its anti-amyloid candidate donanemab showing the drug:
... slowed clinical decline by 35% compared to placebo, and resulted in 40% less decline on the ability to perform activities of daily living.
Donanemab is not free from the same safety concerns that dog Aduhelm and Leqembi, but that has not stopped analysts and the market speculating about double-digit billion sales, and scientists speculating that the amyloid beta reduction thesis has triumphed in the battle against Alzheimer's.
These developments are not necessarily bad news for Cassava - remember that management believes simufilam could become a useful combo therapy, perhaps used alongside these drugs, and there's still a chance simufilam's Phase 3 data could be better than donanemab / leqembi in terms of efficacy as well as safety, which would have a seismic effect on the Alzheimer's treatment industry.
Several other companies are developing Alzheimer's drugs - Prothena ( PRTA ), Anavex Life Sciences ( AVXL ), Annovis ( ANVS ), and BioVie ( BIVI ), to name a few - and SA contributor Lane Simonian has presented some interesting analysis of similarities between Anavex' Sigma-1 receptor agonist and Cassava's simufilam, which in fact have a similar MoA.
Of all of these non-amyloid drug developing biotechs, to my mind Cassava's twin Phase 3 studies ought to provide the most comprehensive analysis of whether an alternative MoA besides amyloid reduction can work in AD, given the other companies efforts - like Cassava's early work - have been cast into doubt by e.g. the switching of endpoints, uncertainties around patient enrollment, and study results that pose more questions than they answer.
Theoretically, at least, there ought to be no hiding the truth about whether Simufilam works or not once we have those pivotal study results in 2024.
5 - Legal Matters - Cassava Maintains No Wrongdoing
Finally, it's worth considering if Cassava's finances could be drained - or the company's research discredited - as a result of the court cases Cassava is fighting.
One accusation Cassava has frequently denied is that it's under investigation from the Department of Justice ("DoJ") and the Securities and Exchange Commission ("SEC") as a result of concerns raised in the Citizen's Petition about data manipulation. Cassava reiterates in its Q123 10Q submission that:
On Nov. 15, 2021, we disclosed that certain government agencies had asked us to provide them with corporate information and documents. These were confidential requests. We have been voluntarily cooperating and will continue to cooperate with government authorities. No government agency has informed us that it has found evidence of research misconduct. No government agency has informed us that any wrongdoing has occurred by any party. No government agency has filed any charges against us, or anyone associated with
Nevertheless, the 10Q goes on to reveal that:
Between August 27, 2021, and October 26, 2021, four putative class action lawsuits were filed alleging violations of the federal securities laws by us and certain named officers. The complaints rely on allegations contained in Citizen Petitions that were submitted to FDA and allege that various statements made by the defendants regarding simufilam were rendered materially false and misleading.
These cases have been wrapped into one and remain ongoing, with Cassava commenting that "We are unable to estimate the possible loss or range of loss, if any, associated with these lawsuits."
It's far from unusual for a biotech to have a court case rumbling on, especially one brought by disgruntled former shareholders, and my guess would be that Cassava can successfully fight this case and several others brought by shareholders, that includes claims about attempts to manipulate the stock price and secure substantial bonuses for key management figures - firstly because the claims are so hard to prove, and secondly because the senior management team have not sold any stock. I don't see Cassava's fate being decided in the courts, although there's an interesting moral debate to be had about whether the Phase 3 study results - even if positive - should be discredited if much earlier stage data is found to have been tampered with.
Concluding Thoughts - Cassava's Wish For A Day Of Reckoning Will Arrive In 2024 - Expect Mild Volatility In The Interim
Cassava's fame, and its incredible share price fluctuations - is down to several factors. Firstly, the fact the company is taking on Alzheimer's - traditionally one of the hardest to treat diseases - and although the anti-amyloid brigade are declaring victory against the disease, safety concerns and a lack of truly groundbreaking efficacy means the market remains open to other approaches.
Secondly, the seemingly incredible, groundbreaking data that Cassava generated from its open label study, that we now know must be tempered by the fact patients with the mildest forms of the disease were treated first, and the fact the full data was much less positive than the early data.
Thirdly, the Citizen's Petition and the controversy around whether early stage simufilam data was manipulated in order to secure an IND and begin clinical studies. Fourthly, the volume of short sellers who bought Cassava stock expecting the Filamin A thesis to be disproven and the share price to plummet.
In the end, you could argue that both parties - shorts and longs - have in some ways got what they wanted with the pivotal reTHINK and reFOCUS studies. These ought to provide the definitive proof on simufilam and whether it has any merit as a standalone or adjunctive Alzheimer's Disease therapy.
The game relating to investing in Cassava is still very high stakes, given that Cassava's stock price will either soar on good data, or sink on bad - one side will be vindicated, the other will be apoplectic, and the outcome should be clear.
In the meantime, the cognition maintenance study data will keep investors interested and ought to be shared in Q323, while the emergence of data from Europe providing support for the filamin-A thesis is intriguing and a potentially good sign for bulls.
I have a very tiny holding of shares in Cassava - not significant enough to make me impatient for more news - but I feel a little more optimistic than I did three months ago for Cassava's eventual success with simufilam.
This is a drug that likely has little or no effect on AD patients who have progressed beyond the earliest, mildest from of the disease, but it currently has the best chance - in my view - of upsetting the amyloid beta gravy train in patients with milder forms of the disease, simply because of the apparently clear-cut nature of the Phase 3 study designs.
All Cassava and its CEO Barbier have ever wanted, it could be argued, is their day of reckoning with the FDA, and that day will very likely arrive mid 2024.
For further details see:
Cassava Sciences: State Of Play After Earnings - 5 Things To Note