On Thursday, Scotiabank adjusted its financial outlook for Sage Therapeutics (NASDAQ:SAGE) shares, reducing the price target on the company's shares to $19.00 from the previous $34.00. Despite the decrease, the firm maintained its Sector Outperform rating for the biopharmaceutical company.
The revision follows the results from Sage Therapeutics' Phase 2 PRECEDENT trial, which evaluated dalzanemdor, a novel NMDA receptor modulator, for the treatment of cognitive impairment associated with Parkinson’s disease. According to the analyst, the trial did not demonstrate improved cognitive performance, casting a shadow over the drug's development program.
The analyst from Scotiabank expressed that while the study was well-executed, the outcomes were definitively negative. However, there remains a slight possibility that dalzanemdor could show better efficacy in patients suffering from Huntington’s disease (HD), given the known biology of the condition.
In light of the recent trial results, Scotiabank has revised its probability of success for dalzanemdor. The probability has been reduced from 20% to 10% for the ongoing HD Phase 2 trials and to 5% for the Alzheimer’s disease (AD) trial that is expected to report results later in the year.
The price target adjustment to $19 reflects the updated success probabilities and the anticipation of future trial outcomes. Nevertheless, the Sector Outperform rating suggests that Scotiabank still sees a favorable risk/reward potential in Sage Therapeutics' broader pipeline of drug candidates.
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