Will The Rally In Cassava Sciences Stock Continue After A Large 66% Rise In A Month?

The stock price of Cassava Sciences (NASDAQ: SAVA), a clinical stage biotechnology company focused on treatment for Alzheimer’s disease, has seen a massive 66% rise over the last twenty-one trading days, while it is up a whopping 10x year-to-date, rising from levels of around $7 at the beginning of the year to nearly $80 currently. Much of this rally came in the month of February, after the company announced positive end of the phase two meeting with the U.S. FDA for Simufilam, a treatment for Alzheimer’s disease. The company will now advance to phase three trials for Simufilam. This is a big step for the company, and if successful, Simufilam can garner multi-billion dollars in peak sales.

Several pharmaceuticals stocks that have exposure to any Alzheimer’s drug in their pipeline, have seen a rise over the last month or so. This can be attributed to the U.S. FDA’s recently approving Biogen’s Aduhelm for the treatment of Alzheimer’s disease, and now investors are cheering other pharmaceuticals stocks over potential approvals for Alzheimer’s drugs. Note that Biogen’s Aduhelm is the first new drug being approved for Alzheimer’s in the last twenty years. Alzheimer’s is a large market with over 35 million patients worldwide, and with only one approved treatment currently, there is a massive scope for other players.

Cassava will start its phase three trials later this year, and so far it has demonstrated better results compared to some of the other Alzheimer’s drugs in clinical trials, with Simufilam being the only drug to exhibit cognitive benefits at six months, and it could be the first drug to show cognitive benefits at nine months, therefore the rally in SAVA stock to some extent makes sense. Casaava will present its nine months data at the Alzheimer’s Association International Conference later next month.

However, now that SAVA stock has seen a rise of 66% in twenty-one trading days, will it continue its upward trajectory, or is a fall imminent? Going by historical performance, there is a higher chance of a decline in SAVA stock over the next month. Out of 105 instances in the last ten years that Cassava stock saw a twenty-one day rise of 66% or more, 71 of them resulted in SAVA stock falling over the subsequent one month period (twenty-one trading days). This historical pattern reflects 71 out of 105, or about 68% chance of a decline in SAVA stock over the coming month. Also, the stock has seen a large rally in a short period of time, and it may be prudent for long-term investors to wait for a dip to buy SAVA stock. See our analysis on Cassava Sciences Stock Chances of Decline for more details.

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