Cassava Sciences (NASDAQ: SAVA) stock price will be in the spotlight on Friday after the shares crumbled by over 38% in the extended hours. The shares crashed by more than 76% from the all-time high and moved to the lowest level since January 2021. Its market cap has plunged to $700 million.
Why is Cassava Sciences plunging?Cassava Sciences has moved from a beloved pharma stock into a fallen angel. Its short interest has jumped to 36%, signaling that many people believe that the shares have more downside.
The current catalyst for the SAVA stock sell-off is a report that accused Professor Hoau-Yan Wang of gross misconduct involving 20 papers. The report found that many images in his research documents were manipulated.
This report was notable since the professor has worked for Cassava Sciences in the past. Also, Linsay Burns, the company’s SVP of Neuroscience was a co-author on many of the professor’s studies. Burns is the wife of Cassava’s CEO, Remi Barbier.
Cassava Sciences has denied any wrongdoing and pointed to the ongoing short-selling by investors. It also noted that the report did not find anything wrong on data manipulation between June 30th and September 29th. The statement added:
“Because CUNY did not interview any employee of Cassava Sciences, the university has no legitimate basis on which to make accusations against the Company or its employees.”
Cassava Sciences stock price has dived in the past few months because of these months mostly because of these claims. A few months ago, the SEC and the Department of Justice threatened to take action against the company.
Is it safe to buy the SAVA stock dip?
For starters, Cassava Sciences is working on a drug known as Simufilav, which it hopes will help patients with Alzheimer’s Disease (AD). AD is a common disease that affects more than 6 million Americans.
Many companies are working on the sector. Biogen launched Leqembi, an antibody that removes sticky deposits pf amyloid beta from the brain. At its launch, the company sold the drug for $56k per year but has now slashed it to $26k.
Other companies like Eli Lilly and Eisai are also working on their own versions. Simuflav is different from Leqembi in that it aims to improve the function of multiple brain receptors and exerts powerful anti-neuroinflammatory effects. The drug is in the third stage of tests.
I believe that companies that will come up with a non-controversial treatment for the disease will do well. For now, however, I suspect that the SAVA stock price will remain under pressure for a while. The downtrend will only end when the company confirms the positive results of its phase 3 trial.
The challenge for shorting Cassava Sciences stock is that it has a high short interest, exposing it to short squeezes.
The post Cassava Sciences: SAVA stock plot thickens, short interest jumps appeared first on Invezz.
