The effect clinical trial results can have on a pharma company’s stock are tremendous and can work both ways. Disappoint investors and a sharp descent for the shares is likely. Conversely, release encouraging news, and the sky’s the limit.
It is safe to say that in the case of Cassava Sciences (SAVA), investors were very happy following its latest news release.
Cassava shares are up nearly 210% (at one point, the stock was up over 490%) this week, after the company disclosed encouraging interim data from an open-label study of its Alzheimer’s disease candidate simufilam.
The study, which was funded by the National Institutes of Health (NIH), found that six months after treatment began, 50 Alzheimer’s disease patients exhibited a 10% improvement in their cognitive functions. Furthermore, dementia-related behavior, such as delusions, anxiety, and agitation, also improved by 29%.
The company is now in talks with the FDA about a Phase 3 trial, which is anticipated to kick off in 2H 2021.
Alzheimer’s is a progressive disease, which over time causes sufferers’ cognitive abilities to decline. Therefore, the results are even more eye-catching.
In the U.S. alone, almost 6 million people suffer from the memory-obliterating disease, and there are presently no available drugs that can stem its progress. Accordingly, a successful treatment could be very lucrative.
So, it is no wonder the market’s reaction to the data was so upbeat. However, Cantor analyst Charles Duncan takes a more measured view.
“Although we find these data provocative and encouraging, we interpret the observations with caution, as it is an open-label study that can be confounded by variables, such as expectation bias,” the 5-star analyst said. “With long-term dosing there may be notable dose-dependent differences or, perhaps, a safety signal that may advantage titration with the higher dose.”
However, Duncan summed up, “these results do not alter our fundamental views and thesis, nor do they change the risk we associate with this program.”
Duncan’s “fundamental view” says Cassava is an Overweight (i.e. Buy), and the rating is backed by a $24 price target. That said, the stock’s massive surge means the share price is now ~57% above Duncan’s figure.
Other analysts are in the same boat. While the 2 additional reviews are both Buys, the Strong Buy consensus rating comes with a $19.33 average price target attached. From current levels, it is a sharp ~69% drop. It will be interesting to see whether the analysts upgrade their price targets or downgrade their ratings over the coming months.
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.