What happened

Cassava Sciences (NASDAQ:SAVA), a clinical-stage biotech, certainly had a month to remember in September. Specifically, the biotech's stock gained an eye-popping 273.7% last month, according to data provided by S&P Global Market Intelligence.  

Cassava's shares exploded higher in September for two interrelated reasons:

  1. Around the middle of the month, Cassava announced positive mid-stage results for its experimental Alzheimer's disease (AD) drug known as sumifilam.
  2. In the wake of this compelling mid-stage result, board member Sanford Robertson reportedly made a sizable insider buy of the biotech's stock, according to a Form 4 filed with the Securities and Exchange Commission. 
A businessman drawing a parabolic growth trend with his index finger, with the year 2020 positioned at the apex of the curve.

Image source: Getty Images.

So what

There are no FDA-approved treatments to either slow the progression or reverse the course of this deadly neurological disease. Biotech heavyweight Biogen is attempting to become the first company to breach this untapped drug market with its amyloid plaque-busting monoclonal antibody aducanumab. But this controversial drug faces an uphill battle at its upcoming advisory committee meeting currently set for Nov. 6.

The heart of the matter is that Cassava is staring down a massive commercial opportunity with sumifilam -- especially if Biogen's closely watched AD drug candidate is ultimately rejected. Viewed in this light, it's easy to understand why investors bid up this small-cap biotech stock last month. 

Now what

The bad news is that Cassava doesn't appear to have the financial capacity to advance sumifilam into a costly phase 3 trial. As such, the company will likely have to resort to a licensing deal or a buyout in order to capitalize on the drug's long-term commercial potential. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.