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Cassava: A Promising Yet Risky Alzheimer’s Pure Play

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Cassava Sciences (SAVA) stock is up by 747% year-to-date. As such, you could be forgiven for thinking you’ve missed the boat on this one.

No need to worry, according to JonesTrading’s Soumit Roy. The 5-star analyst recently initiated coverage of Cassava with a Buy rating and $110 price target. Investors, therefore, could be pocketing gains of 90%, should Roy’s target be met over the next 12 months. (To watch Roy’s track record, click here)

The bull case for Cassava is a simple one, yet fraught with risk. The company is developing simufilam, a treatment for Alzheimer’s disease (AD). Many have ventured down this path before but making it across the finish line and gaining regulatory approval has proved impossible. There are currently no available drugs that can stem the memory-obliterating disease’s progress.

Cassava hopes to change all that, and so far, simufilam appears promising. After releasing encouraging interim data from an open-label clinical trial, which showed that after 6 months of treatment, simufilam improved cognitive functions and patients’ behavior, the drug is now progressing to two Phase 3 studies, the first of which should kick off in Q3.

The potential market is a huge one, which Roy estimates could be worth more than $200 billion over the next 15 years.

“Even a modest 20% probability of success and 15% penetration for simufilam indicates >$20BN in peak sales by our estimates, a large upside to current $2BN in implied valuation,” the analyst said.

In the race to claim as big a piece as possible from this lucrative market, Biogen currently leads the way. The company has a PDUFA date set for June 7th for aducanumab in AD.

Roy believes that despite an internal struggle between the FDA and advisory experts, the treatment will be approved “with or without label restrictions.”

Is this bad for Cassava, then? On the contrary, such an outcome could create “positive momentum.”

Either way, Roy thinks Cassava stands to benefit from a “bullish AD space or solely from their own potentially positive 12- month data in mid-2021.” However, the analyst admits, the company will need to convince investors burnt by past failures in the AD space.

“We understand investor’s weariness around investing in an Alzheimer’s disease pure play given a high Phase 3 failure rate,” the analyst said. “We view Cassava amongst a handful to show cognitive benefits at 6 months in Phase 2 in harder to treat mild to moderate patients, and potentially has a higher probability of success to readout positive at 12-month Phase 2 data update in mid-2021.”

So, that’s Roy's view, what does the rest of the Street make of Cassava’s potential? Like Roy, all 3 other current reviews say Buy, culminating in a Strong Buy consensus rating. The forecast calls for 55% upside over the next 12 months, given the average price target clocks in at $89.75. (See SAVA stock analysis on TipRanks)

To find good ideas for biotech stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a newly launched tool that unites all of TipRanks’ equity insights.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.