On Tuesday, UBS initiated coverage on Sagimet Biosciences Inc (NASDAQ:SGMT), assigning a Buy rating to the company's stock with a price target of $12.00.
The coverage comes in light of recent Phase 2b data for Sagimet's drug candidate denifisant, a fatty acid synthase (FASN) inhibitor. UBS believes denifisant could be particularly beneficial for patients with more severe F3 fibrosis due to its unique mechanism of action (MOA).
Denifisant has shown lower rates of gastrointestinal adverse events (AEs) compared to similar treatments, which is viewed as a positive by UBS. The drug has exhibited a 10% rate of gastrointestinal AEs, which stands in contrast to the 20-30% range for Rezafidiffra and the 20-40% range for GLP-1s. While there are some AEs to monitor, UBS considers the safety profile of denifisant encouraging.
The analyst from UBS highlighted the potential of denifisant as a Phase 3 ready oral medication in a field dominated by injectable treatments for metabolic-associated steatohepatitis (MASH). Denifisant has been granted Breakthrough Therapy Designation (BTD) and has concluded end-of-Phase 2 discussions. A Phase 3 trial start is anticipated by the end of 2024 or early 2025.
UBS estimates that denifisant could reach a peak risk-adjusted opportunity of approximately $746 million in the MASH market. The current valuation of Sagimet Biosciences, with the stock trading near its cash value ($189 million cash as of the second quarter compared to a market capitalization of approximately $185 million), is seen as undervalued by the firm. Financing, however, remains a question for investors in the near term.
In other recent news, Sagimet Biosciences reported positive results from its Phase 2b FASCINATE-2 trial, evaluating denifanstat's efficacy in treating metabolic-dysfunction associated steatohepatitis (MASH).
The trial found significant improvements in disease activity, MASH resolution, and fibrosis in patients. Sagimet plans to advance denifanstat into Phase 3 development in 2024, following the FDA's Breakthrough Therapy designation granted to the drug.
Leerink Partners maintained their Outperform rating for Sagimet, while TD Cowen also rated the company a Buy. However, Goldman Sachs downgraded Sagimet from "Buy" to "Neutral."
The company initiated a $75 million equity offering in partnership with Cantor Fitzgerald & Co. and expanded its board of directors, appointing Jennifer Jarrett and Dr. Anne Phillips as new members. These are recent developments in Sagimet's ongoing efforts to advance its pharmaceutical programs.
InvestingPro Insights
Sagimet Biosciences Inc (NASDAQ:SGMT) presents an intriguing investment case, as highlighted by recent InvestingPro data and tips. The company's strong recent performance is evident in its impressive stock returns, with a 126.31% price total return over the past year and a remarkable 121.17% return over the last three months. These figures align with UBS's positive outlook on the company's potential.
InvestingPro Tips reveal that Sagimet holds more cash than debt on its balance sheet, which is particularly relevant given UBS's mention of the company's $189 million cash position. This strong liquidity position is further supported by the fact that Sagimet's liquid assets exceed short-term obligations, potentially addressing some of the near-term financing concerns raised in the article.
While the company is not currently profitable, analysts anticipate sales growth in the current year, which could be driven by the potential success of denifisant. It's worth noting that 5 analysts have revised their earnings upwards for the upcoming period, suggesting growing confidence in Sagimet's prospects.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips for Sagimet Biosciences, providing a deeper understanding of the company's financial health and market position.
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