Since biotechnology company Cassava Sciences (NASDAQ:SAVA) is working hard to fight Alzheimer’s disease, it might be surprising to know that the company has some harsh critics. There’s a lot of drama going on with Cassava, and SAVA stock traders need to be aware of the latest developments.
Just to give you a primer, Cassava Sciences is developing an Alzheimer’s disease drug called simufilam. This drug is is Phase 3 ready in 2021, according to the company.
More specifically, after an End-of-Phase 2 meeting with Food and Drug Administration, Cassava received two FDA Special Protocol Assessments for future Phase 3 studies with simufilam. So, until the recent drama started, things seemed to be running smoothly for Cassava Sciences.
But, that’s how it goes in the markets sometimes. Today, we’ll try to sift through the rumor mill and extract the facts — and along the way, observe a swift and potent response from Cassava’s CEO.
SAVA Stock at a Glance
Generally speaking, biotechnology stocks are prone to bouts of volatility. When Reddit traders get involved, the volatility can be greatly amplified.
SAVA stock is a perfect example of this. The share price started out near $7 in early January, but it seems that the short-squeeze crowd pushed it up to the $80 level in early February.
After that rally fizzled, the share price retreated to $34 in April. Yet, the buyers were apparently just taking a breather as another run-up was about to commence.
It was quite a memorable summer as SAVA stock rocketed to a 52-week high of $146.16 on July 28. Unfortunately, like the previous rally, this one wasn’t destined to last very long.
Without a doubt, some scathing allegations against Cassava Sciences contributed to the share price’s decline below $50 in September.
So, let’s delve into the back-and-forth between this fascinating biotech firm and its fierce detractors.
A Whistle Is Blown
Surely, it’s not a coincidence that SAVA stock tumbled immediately after a would-be whistle-blower asked federal regulators to halt the clinical trials of simufilam.
This was brought on by Jordan Thomas, a partner and chair of the whistle-blower representation practice at Labaton Sucharow.
Thomas also happens to be a former Securities and Exchange Commission enforcement lawyer.
Reportedly, Thomas’ firm posted a “statement of concern” on a U.S. government website.
In it, the law firm raised “concerns about the quality and integrity of the laboratory-based studies surrounding this drug candidate.”
The firm took issue with how simufilam was tested, claiming “a long-standing pattern of seemingly intentional data manipulation and misrepresentation in scientific papers and corporate disclosures.” Furthermore, the statement alleged that there was a “volume of problematic material uncovered in publicly available sources.”
It even suggested the possibility of “scientific misconduct and data manipulation.”
Short and Distort
A potential rebound of SAVA stock will, to a certain extent, depend on Cassava Science’s ability to respond effectively to these allegations.
The investors should be glad to know that the company’s CEO is standing up and fighting back.
Chairman of the Board, President and CEO Remi Barbier swiftly issued a public statement about the matter.
Barbier called the allegations “false,” but that was just the beginning. The CEO asserted, “Two days after issuing their report, the law firm disclosed that they represent clients who have a short position in Cassava stock.”
In other words, Barbier is pointing out the firm’s alleged vested interest in publishing critical statements about Cassava Sciences.
He called this tactic “short and distort,” and declared that “There is an enormous profit motive at work. As previously noted, after the allegations were made public, which is to say after the damage was done, the law firm issued a press release admitting its anonymous clients ‘hold short positions in Cassava stock.’”
If what Barbier is saying is true, this would cast a dark shadow on the law firm’s motives. It would also call the veracity of the firm’s allegations into question.
As you can see, things are getting interesting with Cassava Sciences. The investors will need to stay tuned to monitor how the drama unfolds.
It’s possible that the worst-case scenario — halting the advancement of simufilam permanently — has already been priced into SAVA stock.
And if that’s the case, then any good news could send the share price higher.
In the meantime, keep your stock positions small, and always check for financial motives whenever you see whistle-blowers blowing whistles.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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