On Wednesday, JPMorgan (NYSE:JPM) maintained its Overweight rating and $29.00 stock price target for Sage Therapeutics (NASDAQ:SAGE), despite the company's recent announcement that its drug dalzanemdor did not meet the primary endpoint in a study for Parkinson's disease.
Sage Therapeutics disclosed that the drug, intended for Parkinson's treatment, failed to show a statistical difference in the WAIS-IV primary endpoint during the PRECEDENT study.
According to JPMorgan, the market had low expectations for the PRECEDENT study outcome, and the current share price did not reflect any value for dalzanemdor before the announcement. The firm's valuation model suggests that the value of Sage's postpartum depression (PPD (NASDAQ:PPD)) treatments and cash reserves alone are in the high-teens to low-$20s per share.
JPMorgan noted that while there may be some sentiment-based downside risk following the update, the fundamental downside is limited.
JPMorgan also pointed out that Parkinson's disease (PD) and Huntington's disease (HD) are distinct conditions, implying that the PRECEDENT study results should have limited impact on the ongoing dalzanemdor trials for HD, namely the SURVEYOR and DIMENSION studies.
The firm finds encouragement in the lack of major safety concerns in the PRECEDENT study, considering this a de-risking factor for future trial readouts.
Sage Therapeutics is expected to release data from the SURVEYOR trial around mid-2024 and from the DIMENSION trial toward the end of 2024. These timelines remain unchanged. JPMorgan suggests that positive results from these upcoming trials are necessary for the drug to gain recognition and value within the company's program.
In summary, JPMorgan reaffirmed its Overweight rating on Sage Therapeutics shares, emphasizing the long-term potential of the company's Zurzuvae treatment for PPD and the optionality within its pipeline.
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