Volatility has made a dramatic come back on Wall Street, but it is merely child’s play for Cassava Sciences (SAVA). This small-cap biotech company has recently enacted one of 2020’s most impressive rebounds.
To recap: Back in May, SAVA shares cratered by a miserable 74% after the release of disappointing results in a Phase 2b study evaluating Cassava's lead investigational drug, sumifilam (formerly PTI-125) in Alzheimer's disease (AD). The candidate had failed to achieve the primary endpoint of exhibiting meaningful improvement in several AD biomarkers in patients, when compared to placebo.
However, earlier this month, Cassava released the final results from the study, which invalidated the previous outcome. The final analysis showed sumifilam produced statistically meaningful improvements in a range of AD-related biomarkers in the study’s patients. The response rate for patients who exhibited an improvement was 98% and the treatment was safe and well tolerated.
As expected, the effect on the share price has been huge. Over the past month, SAVA shares have surged by 255%. Yet, according to H.C. Wainwright analyst Vernon Bernardino, the stock has a long way to run yet.
In fact, the 5-star analyst upgraded SAVA from Neutral to Buy and set a $20 price target on the shares. Investors could be looking at additional upside of 79%, should Bernardino’s thesis play out. (To watch Bernardino’s track record, click here)
“We believe results from the first analysis were wholly uninterpretable, which was borne out in a post-hoc analysis that showed significant anomalies in placebo patient data... We believe the final analysis is strong confirmation of the significant BM reductions observed in Phase 2a study... We look for Cassava to conduct an End-of-Phase 2 meeting with the FDA that we expect to be a positive catalyst at year-end 2020 or early 2021,” Bernardino commented.
Furthermore, Bernardino expects Cassava to sign a lucrative licensing agreement, which could be worth between $50 million to $200 million in initial licensing and milestone payments. The analyst expects the treatment’s global commercialization rights “to be a 2021 catalyst” and thinks that by 2030, sumifilam can achieve annual worldwide sales of $4 billion.
Overall, only one other analyst currently has a review of Cassava’s prospects. The extra Buy rating results in a Moderate Buy consensus rating, while the $17 average price target implies a 52% upside potential over the next 12 months. (See Cassava stock analysis on TipRanks)
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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.