On Friday, RBC Capital Markets adjusted its stance on Sage Therapeutics (NASDAQ: SAGE), downgrading the stock to Underperform with a new price target of $4.00. The firm's analysis suggests a pessimistic outlook for the company's key drug candidate, dalzanemdor, particularly in its effectiveness against Huntington's and Alzheimer's diseases.
The downgrade stems from RBC Capital's evaluation of the drug's mechanism, endpoints, and previously gathered data. The firm anticipates that the upcoming phase II readouts at the year's end are unlikely to demonstrate significant clinical benefits in treating the mentioned diseases. This assessment casts doubt on the drug's potential success and its contribution to the company's profitability.
RBC Capital expressed concerns about Sage Therapeutics' financial outlook in the absence of positive results for dalzanemdor. The analyst noted that achieving profitability would be a long-term challenge, necessitating substantial adjustments to the company's cost structure. This would be the case even if Zurzuvae, another drug developed by Sage Therapeutics, continues its reasonable initial launch trajectory in Postpartum Depression (PPD (NASDAQ:PPD)).
The firm concluded that, given the current expectations for the drug's performance, Sage Therapeutics' shares are more likely to underperform compared to its peers as the market anticipates the phase II results. The statement from RBC Capital reflects a cautious approach to the stock, taking into account the potential impact of the drug development outcomes on the company's financial health.
In other recent news, pharmaceutical company Sage Therapeutics has terminated its collaboration with Biogen (NASDAQ:BIIB) on the SAGE-324 drug molecule, following negative results from the Phase 2 KINETIC 2 Study. The termination will be effective from February 17, 2025. Despite this, Sage Therapeutics and Biogen continue their partnership on ZURZUVAE, the first and only FDA-approved oral treatment for women with postpartum depression.
Several financial firms have adjusted their outlooks on Sage Therapeutics. Truist Securities has reduced its stock target from $18 to $13, while maintaining a Hold rating. Piper Sandler also revised its outlook, cutting the price target from $70 to $52, and maintaining an Overweight rating. Mizuho Securities and Stifel adjusted their outlooks as well, reducing their price targets to $12 and $15 respectively.
Sage Therapeutics reported $7.4 million in collaboration revenue for Q2 2024, attributed to Zurzurvae. Despite a Q2 net loss of $102.9 million, the company reported having $647 million in cash, projecting funding to last until 2026. Sage plans to expand its sales force in Q4 2024 to boost Zurzuvae sales in 2025. These are recent developments that investors should be aware of.
InvestingPro Insights
The recent downgrade by RBC Capital Markets aligns with several InvestingPro metrics and tips for Sage Therapeutics. The company's market cap stands at $426.74 million, reflecting the market's current valuation. InvestingPro data shows that Sage's stock has taken a significant hit, with a 6-month price total return of -57.84%, trading near its 52-week low at just 24.73% of its 52-week high.
InvestingPro Tips indicate that Sage is quickly burning through cash and is not profitable over the last twelve months, which supports RBC's concerns about the company's path to profitability. The revenue growth of 837.55% over the last twelve months is notable, but the negative gross profit margin of -213.59% suggests significant challenges in cost management.
Two key InvestingPro Tips highlight that analysts have revised their earnings downwards for the upcoming period and anticipate a sales decline in the current year. These insights corroborate RBC's pessimistic outlook on Sage's near-term prospects, particularly regarding the potential performance of dalzanemdor.
For investors seeking a more comprehensive analysis, InvestingPro offers 9 additional tips that could provide further context to Sage Therapeutics' financial situation and market position.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.