2023-10-11 09:47:34 ET
Summary
- The Alzheimer's Disease space is highly volatile, with stock prices reacting to positive or negative data from other companies in the sector.
- Cassava Sciences, Inc. experienced a correction after initial gains, highlighting the need for caution in the Alzheimer's space.
- Concerns were raised about the validity of Cassava's phase 2 trial, including participant bias, dropout bias, and the lack of a p-value.
The Alzheimer's Disease ("AD") space is a very difficult and volatile space right now. Here, you will see a large number of sympathetic volatility in stock prices. So, if one company comes out with positive data, other AD companies go up along with it. If another company has a failed trial, other companies fall. Sometimes, the reaction may be opposite; but the space is highly reactive nevertheless.
In my previous coverage of Cassava Sciences, Inc. (SAVA), we saw this phenomenon when SAVA stock went up after positive data from Biogen and Eisai's lecanemab. Yesterday, in my coverage of AVXL, another AD stock, we saw how the stock led a sympathetic spike in a number of other AD stocks after it posted data that may or may not have been positive. Bottom line, the Alzheimer's space is highly volatile, and investors need to be careful about an eventual correction.
We saw such a correction happening with SAVA stock, which has declined over 60% since my (unpublished) November article. It went up originally because of somebody else's achievement, and then, since its own achievements were doubtful, SAVA underwent a correction that is probably still happening.
I noted three reasons which made this phase 2 trial doubtful. First, this was an open label study, and it is my opinion that especially in dementia patients, such open label studies with subjective endpoints like ADAS-COG usually lead to clinical bias. This is what is known as participant bias, where a participant who knows whether they have taken an active drug or placebo may produce subjective responses to questions which conform to what they think their responses should be like. Most people have a desire to be correct, to conform, but in a clinical trial, that is a dangerous trait, which an open label trial encourages.
A related bias is called dropout bias, which is a type of clinical bias where a participant, being aware that they are in a placebo group, may drop out of the trial, considering their time wasted because they are aware that they are not being given the active drug. This is possibly a major reason for the very high 17% discontinuation rate we saw in the trial - which was my second issue with this trial.
The third issue is lack of a p-value provided, which does not help us understand whether whatever treatment effect we saw in the reduction of cognitive decline happened by chance, or due to the drug.
As I noted last time, Cassava has two phase 3 trials running - RETHINK-ALZ and REFOCUS-ALZ, with enrollment targets of 750 and 1000 patients respectively, both trials under Special Protocol Assessments from the FDA. These trials are supposed to complete enrollment this year. They have very standard primary endpoints, ADAS-Cog12 (a cognitive scale) and ADCS-ADL (a functional scale).
Despite all that, this company continues running inconsequential trials and publishing unconvincing data from such trials. So, in July, the company published such data from a small, open label proof of concept study.
According to the data they released from this small, 157 patient study:
…those on simufilam experienced a 0.9-point decline in ADAS-Cog, a clinical measure to assess the extent of Alzheimer's. Meanwhile, those on placebo witnessed a 1.5-point decline in ADAS-Cog.
It is difficult to understand the purpose of this study. The sample size is small, the design calls for open-label 12 months of oral simufilam treatment, followed by 100 mg of simufilam or placebo for six months. This second part does not appear to be open label. Thus, this is slightly more robust than the other trial. But, the trial appears not to have been powered for statistical significance, just a numerical treatment effect. It is impossible to determine whether the treatment effect was small, or large, or even significant, from the data presented, without p-values presented or mean baseline scores for the two cohorts accounted for.
The problem with such trials is that they create a glass half-full-half-empty situation. They make the data interpretation perspective-dependent. So if you are bullish, you can read a lot into the 38% reduction in cognitive decline that was observed between drug and placebo. Compare that, though, to Eli Lilly's donanemab study - a much more rigorous phase 3 study - which saw a 35% reduction in cognitive decline. In this context, here's what Suzanne Hendrix, PhD, CEO of Pentara Corporation which is running parts of the trial, said :
Results for simufilam continue to be noteworthy. The lack of disease progression in cognition, as measured by the ADAS-Cog over 18 months of treatment in mild patients, is well outside the range in historic placebo decline rates from numerous other studies. The placebo group in the CMS has started to decline again but continues to maintain benefit over historical placebo groups.
That last statement is noteworthy and supports a bullish view. The good news is that the two phase 3 studies will produce top line data in 2023, and all these questions raised by these unconvincing trial data will be settled once for all. The smaller of the two phase 3 trials is fully enrolled as of last week, and the larger one will complete enrollment by Q4. So, the wait for data is not going to be long. The two trials have also been safety assessed by a DSMB and found to be safe and ready to continue as is.
Financials
SAVA has a market cap of $786mn and a cash balance of $168mn. R&D expenses were $25mn for the previous quarter, while G&A were $3.8mn. The company, although in existence for over 2 decades, is small, and hence the low G&A. Their R&D expenses are also probably not going to increase because their trials are almost enrolled, where most of the expenses go. Thus, they are set for 6-7 quarters.
Retail ownership is over 65% of the stock, which is not a healthy sign in my opinion. I prefer a 75-25 ratio between smart money and retail investors, because we assume smart money does due diligence better, while retail ownership makes the stock more liquid. So a 75-25 ratio is a good balance in my strategy. While BlackRock, Vanguard and State Street hold key positions, the positions are small in terms of dollar amounts. Insiders do regularly purchase stock.
Bottom Line
Cassava Sciences, Inc., like all Alzheimer's stocks, is a risky bet. There is potential for huge profit given the market enthusiasm. But this is not a stock to bet your everything on. This is a risky stock, so play with it with expendable funds. I am a conservative investor, so I won't be buying, but broadly, SAVA and other AD stocks rise and fall on market enthusiasm, and can be profit makers for savvy and disciplined investors with a trading mentality.
For further details see:
Cassava Sciences: Unconvincing Open Label Studies, Upcoming Phase 3, Risky AD Bet