What happened
Cassava Sciences (SAVA +4.43%) stock, after closing at $95.34 on Friday, opened at $100.14 on Monday, a jump of 4.8%. Cassava stock actually went as high as $106.39 Monday before coming back to earth a bit at $99.32 at the close, but it was still 4.1% higher than it had been on Friday.
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So what
There were some obvious and some not-so-obvious reasons why the biotech stock rose. The obvious is the stock had a significant drop on Friday, falling 11.4%, and on Monday investors jumped in because they saw a good buying opportunity.
The best explanation for Friday's drop was that the FDA's (Food and Drug Administration) acting head said the agency is asking the Office of the Inspector General to conduct a review regarding the FDA's decision to approve Aduhelm, an Alzheimer's treatment from Biogen (BIIB +1.81%), to see if any interactions between FDA staff and Biogen broke agency rules.
While this doesn't have anything directly to do with Cassava, the company has its own Alzheimer's drug, Simufilam, in a phase 2 trial, and investors may have been concerned the agency would adopt stricter measures regarding other Alzheimer's treatment approvals moving forward.
There are two factors that may have buoyed the stock Monday. First, the company announced it has hired a clinical research organization (CRO) to oversee a phase 3 trial on Simufilam near the end of this year. While that was expected, it shows things are proceeding for the therapy and the company appears confident the drug will do well in its phase 2B trial.
The other news is Cassava will present findings regarding trials for Simufilam and SavaDx, its blood test for Alzheimer's, at the Alzheimer's Association International Conference at the end of this month in Denver.
Now what
At this point, no one really knows what impact the FDA's investigation will have on other Alzheimer's drugs. Part of the reason why Cassava has climbed 1,356% in the past year is the enthusiasm engendered for Alzheimer's medicines by the FDA's approval of Aduhelm, the first new Alzheimer's drug approved in 20 years.
It is reasonable to be concerned the FDA may be more cautious regarding new Alzheimer's drugs, but that remains to be seen.
The next big mover for Cassava will likely be the reaction to the company's findings at the upcoming Alzheimer's conference.
