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Replies to post #2266 on Filana Therapeutics Inc (FLNA)
09/22/21 12:54 PM
Historic announcements in the next few weeks or months
Partnership with National Institutes of Health (NIH) or Big Pharma - On Cassava's earnings call on August 3, 2021, CEO Remi Barbier said that in the next few weeks or months they will be announcing a "non-dilutive and non-debt" capital inflow. We interpret this to mean that an informed party will be partnering with Cassava. This will take the form of a partnership with a large pharmaceutical company such as Pfizer, Eli Lilly* or a government grant from the NIH or another government agency. The Company indicated on their August 3rd earnings call that this will "result in significant multi-year capital inflows". This will serve to strengthen Cassava's balance sheet, further validate their decade-plus of research, and bring in a partner with complementary expertise such as marketing, manufacturing, and distribution
12-month cognition scores - Even if their 12-month data declined by 90%, which is highly unlikely, Simufilam's data would be the best ever at 12 months (better than Eli Lilly or Biogen). This will move them one step closer to having an approved drug
12-month CSF biomarkers - Lifestyle and biases do not play a role in biomarker data
12-month open-label patients are rolling into a cognitive maintenance study (CMS). According to Jim Kupiec, Chief Clinical Development Officer of Cassava, most of the open-label participants have elected to participate in this 50/50 randomized study which is currently scheduled to last 6 months
On August 6, 2021, Cassava Sciences announced the first of their Phase III trials on the government website clinicaltrials.gov. This is a 12-month long study of 750 patients with mild-to-moderate Alzheimer's disease. The primary objective is to investigate the safety and efficacy of Simufilam using a placebo control group. This study could commence any day. We believe that they will be able to replicate their data in Phase 3
On August 30, 2021, Cassava Sciences announced their 2nd Phase III trial of >1,000 patients over 18 months. This study is designed to evaluate disease-modifying effects
*On 8/17/21, Eli Lilly announced that they were forming a separate neuroscience business unit.
Common sense and years studying this company lead us to conclude
Below are a few takeaways one can discern from following Cassava's historical data:
Stellar safety profile with a <10% dropout rate. There are no safety issues and safety is one of the FDA's major responsibilities and areas of focus
Consistent cognitive improvements, which is a second major area of focus for the FDA regarding Alzheimer's drug candidates
Given the safety and efficacy results thus far, we believe that there is a high probability that this is a disease-modifying drug
The study has always been open-label. Cassava doesn't claim efficacy from the open-label trial and eagerly awaits phase 3 studies. While acknowledging the shortcomings of this open-label study, it is important to note that there is no placebo effect at 12 months and that 50 patients are a statistically significant number. The results of the open-label study serve to de-risk the phase 3 studies
Patients from the open-label study would not volunteer to continue in the CMS study, which is placebo-controlled, if they did not believe that Simufilam was effective (note: 50% will receive a placebo)
Due to the persistency of the small molecule approach, the 12-month ADAS-Cog11 score will be consistent with the 9-month data between 2.5 and 3.5+
Cassava's approach of restoring misfolded proteins could very well apply to other CNS diseases, such as Parkinson's disease, Vascular Dementia, Lewy Body Dementia, Huntington's disease, ALS, Rett's syndrome, and more (see previous write-up)
AAIC is the largest and most influential international conference dedicated to advancing dementia science. On July 29, 2021, Cassava presented the best 9-month cognitive data and the best 6-month biomarker data that has ever been presented in the history of Alzheimer's disease research. Without question, this got the attention of big pharma, who are potential acquirers/partners
Valuation
Please see our last report for a more in-depth review.
At current levels, Cassava Sciences has an enterprise value of ~$1.7 billion. This seems inexpensive for a company with a drug candidate that is entering phase 3 shortly with a stellar safety profile and is the only drug to show improvements in cognition beyond six months in patients with mild-to-moderate Alzheimer's disease. The FDA is principally focused on safety and cognition.
If there was a control group and Cassava was completing phase 3 with results similar to what open-label results have shown thus far, this company would have a $50+ billion valuation. Simufilam has the perfect characteristics one would look for in a blockbuster drug - differentiation, innovation, disruption, and a massive $100 billion+ TAM.
We view the downside as Simufilam replacing Aricept, which with biosimilars generates >$5 billion in worldwide sales annually, as the standard of care. Acetylcholinesterase inhibitors only provide a temporary symptomatic benefit (~6-12 months if one can tolerate the side effects). As a potential disease-modifying drug with no known side effects, Simufilam would be taken for far longer (think multiple years at least) and thus would generate more revenue.
Cassava Sciences also has the following short-term catalysts:
12-month cognition data, which will be independently validated, should be released sometime in September. The company previously had a September release date listed (exact date not given) on their website but recently took it down. Please note that the placebo effect is virtually non-existent at 12 months
The first of their Phase 3 studies will commence shortly. The FDA is primarily concerned about safety and cognition and Simufilam's safety and cognition data are stellar. On August 24, 2021 announced their agreement with the FDA on Special Protocol Assessment (SPA) for both of its pivotal phase 3 studies. Of note, this agreement came after the Citizens' Petition was filed. If the FDA was concerned about issues raised in the Citizen's petition, would they have approved the SPA? Unlikely
Short interest recently increased by ~46% to 7.9 million shares, which is greater than 20% of the float
Conclusion
Cassava Sciences has presented the best pre-phase 3 data that any company has presented in the last 20+ years of Alzheimer's disease research. Simufilam has been shown both safe and effective. Safety and efficacy (cognitive improvements) are the FDA's primary focus when it comes to Alzheimer's disease. While acknowledging the shortcomings of an open-label study, we believe all of this research combined with its disease-modifying characteristics de-risks Cassava's Alzheimer's drug candidate, Simufilam, as they enter phase 3.
Of course, there is no certainty until phase 3 is complete. Investing never involves certainty. It involves probability weighting. If you wait until the end of phase 3, the big returns will have been lost.
Like most pre-revenue life science companies, we anticipate extreme volatility in price, but any concerns around volatility are dwarfed by the incredible disruptive potential offered by their science. This company's stock has been aggressively oversold. At current levels, this is an asymmetric investment opportunity, with 12-month independently validated cognition data being released shortly followed by 12-month biomarker data and the commencement of two phase 3 studies.
09/22/21 3:41 PM
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