As Cassava Sciences (SAVA) stock slips, is it safe to buy the dip?

By:
on Aug 7, 2023
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  • Cassava Sciences share price made a strong bearish breakdown on Monday.
  • The stock has plunged by more than 63% from the highest point last year.
  • The company lost over $26 million in the last quarter.

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Cassava Sciences (NASDAQ: SAVA) stock price sell-off intensified as the recent momentum faded. SAVA shares plunged to a low of $18.30 on Monday, the lowest level since August 8th of this year. It has dropped by more than 63% from its highest level in September last year.

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Why is Cassava Sciences stock falling?

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Cassava Sciences is a company developing a drug that treats Alzheimer’s disease and other neurodegenerative disorders. This is a major industry that has is estimated to be worth billions of dollars in the next few years. 

Cassava Sciences is competing with several other companies that are developing these products, including Biogen and Eli Lilly, and Annovis Bio among others. Its drug, known as simufilam, has already moved to the third phase of its trial. This signals that the drug will be accepted by the FDA 

The most recent financial results showed that the company made a net loss of $26.4 million in Q2. This is expected since the company is still in the R&D stage. It ended the quarter with over $164 million, meaning that the firm has enough liquidity at its disposal. 

The management expects to spend between $40 million and $50 million in the second half of the year. In its statement, the company’s CEO said:

“In this study simufilam treatment for 6 months slowed cognitive decline by 38% versus placebo over six-month in patients with mild-to-moderate Alzheimer’s disease. In addition, oral simufilam continues to be safe, well-tolerated.”

It is unclear why Cassava stock price is falling in an extremely high-volume environment. A likely reason is that investors are rotating to other high-yielding stocks or that the market is anticipating some news about its business. Most importantly, the performance could be because of the negative sentiment in social media since SAVA is seen as a meme stock.

SAVA stock price forecast

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Cassava Sciences is a high-risk and high-reward company. If the trial of its Alzheimer’s drug goes on well, then the shares will jump sharply and vice versa. Also, SAVA investors should be aware of the volatility and risks involved when investing in these companies.

On the daily chart, we see that the SAVA price made a strong bearish breakout on Monday. As it dropped, it moved below the important support level at $21.04, the lowest level on April 27th. 

SAVA share price dropped below the 25-day and 50-day moving averages while the Relative Strength Index (RSI) has drifted downwards. Therefore, based on trend-following, the shares will likely continue falling as sellers target the key support at $15. However, the stock will likely see volatility in the next few months.

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