Thursday, Raymond James resumed coverage on shares of Sage Therapeutics (NASDAQ:SAGE) with a Market Perform rating. The firm highlighted concerns about the company's profitability and the potential of its product pipeline. The analyst from Raymond James noted that the prospects for Zurzuvae, intended for postpartum depression (PPD (NASDAQ:PPD)), are seen as relatively modest. Given the shared economics of the drug, the path to profitability for Sage Therapeutics appears challenging.
Sage Therapeutics' pipeline has recently encountered significant obstacles, particularly with its drugs SAGE-324 for essential tremor (ET) and SAGE-718 for Parkinson's disease (PD) and Alzheimer's disease (AD), both experiencing setbacks. These developments have thinned the company's pipeline of future products, which is crucial for its growth and sustainability in the competitive pharmaceutical industry.
The analyst's commentary pointed out that following the failure of SAGE-718 in studies for PD and AD, the company's remaining growth opportunity hinges on the success of the same drug for Huntington's disease (HD). The performance of SAGE-718 in this indication is now under close watch, as it becomes a critical factor for the company's future.
The resumed coverage and the Market Perform rating indicate a neutral stance on the stock, suggesting that the analyst believes the company's stock is likely to perform in line with the broader equity market. This position reflects the mix of potential and challenges currently facing Sage Therapeutics.
Investors and market watchers will be keeping an eye on Sage Therapeutics as it navigates these challenges and seeks to capitalize on the remaining opportunities within its drug development pipeline. The outcome of SAGE-718's trials in the HD indication will be particularly significant for the company's trajectory.
In other recent news, Sage Therapeutics reported a net loss of $102.9 million for Q2 2024, despite generating $7.4 million in collaboration revenue from Zurzuvae. The company, holding $647 million in cash, anticipates its funding to sustain until 2026. In light of recent developments, Sage Therapeutics announced plans to expand its sales force in Q4 2024 to boost Zurzuvae sales in 2025.
Sage Therapeutics recently experienced a setback with its experimental drug, dalzanemdor, which failed to meet the primary endpoint in the Phase 2 LIGHTWAVE study for Alzheimer's Disease. Despite this, the company continues its focus on brain health, conducting the Phase 2 DIMENSION study, which is evaluating the effects of dalzanemdor on Huntington's Disease.
In response to these developments, several analyst firms, including Scotiabank, Baird, Oppenheimer, and RBC Capital Markets, have adjusted their outlooks on Sage Therapeutics. Scotiabank reiterated its Sector Outperform rating with a steady price target of $17.00, while Baird and Oppenheimer reduced their price targets to $9.00. RBC Capital Markets downgraded the stock to Underperform with a new price target of $4.00.
Sage Therapeutics also announced the termination of its collaboration with Biogen (NASDAQ:BIIB) on the SAGE-324 drug molecule, after negative results from the Phase 2 KINETIC 2 Study. However, the partnership remains intact for ZURZUVAE®, a treatment for postpartum depression. These are recent developments that investors should be aware of.
InvestingPro Insights
Recent InvestingPro data aligns with Raymond James' cautious stance on Sage Therapeutics. The company's market cap stands at $396.22 million, reflecting the market's current valuation of its prospects. Sage's financial health presents a mixed picture, with InvestingPro Tips highlighting that the company "holds more cash than debt on its balance sheet" and "liquid assets exceed short term obligations," which could provide some financial flexibility as it navigates its challenges.
However, the company faces significant headwinds. An InvestingPro Tip warns that Sage is "quickly burning through cash," which is particularly concerning given the analyst's comments about the challenging path to profitability. This is further underscored by the fact that Sage is "not profitable over the last twelve months" and "analysts do not anticipate the company will be profitable this year."
The market's skepticism is reflected in Sage's stock performance, with InvestingPro data showing a steep 41.16% decline over the past three months and a 60.55% drop over six months. These figures corroborate the InvestingPro Tip that the "stock has taken a big hit over the last six months."
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Sage Therapeutics, providing a deeper understanding of the company's financial position and market outlook.
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