On Thursday, Scotiabank (TSX:BNS) reaffirmed its Sector Outperform rating on Sage Therapeutics (NASDAQ:SAGE) with a steady price target of $19.00. The endorsement follows a survey of 88 physicians that revealed strong recognition and satisfaction with Zurzuvae, Sage's treatment for postpartum depression (PPD (NASDAQ:PPD)). Despite positive feedback on the drug, the survey highlighted ongoing challenges with insurance approvals.
The analyst noted that the current share price is in line with Scotiabank's second-quarter 2024 estimate of $10.50 per share, suggesting the market may not be fully valuing Zurzuvae or Sage's central nervous system (CNS) pipeline drugs, SAGE-324 and dalzanemdor. The firm believes that even in a scenario requiring significant restructuring, the standalone value of the Zurzuvae franchise combined with the company's cash could warrant a base case value of $30 or $14 if sales projections were to be reduced by up to 75%.
In other recent news, Sage Therapeutics has been the subject of multiple analyst reports following the release of preliminary results from its Phase 2 SURVEYOR study. BofA Securities maintained an Underperform rating with a $14.00 price target, expressing caution with the data from Sage's drug candidate dalzanemdor. Despite some positive trends, the firm called for further clinical validation before reducing investment risk associated with the drug's potential in treating Huntington's disease.
TD (TSX:TD) Cowen reaffirmed a Buy rating on Sage Therapeutics, with a $16.00 price target, noting that the SURVEYOR study did not meet expectations in a Phase 2 study for Parkinson's Disease Mild Cognitive Impairment. However, Sage Therapeutics has indicated these results may not predict the drug's performance in Huntington's disease and Alzheimer's Disease Phase 2 studies.
Citi also reaffirmed its Sell rating on Sage Therapeutics with a price target of $8.00, arguing that the information provided from the SURVEYOR study was insufficient to conclude the drug's effectiveness. Meanwhile, Baird initiated coverage on Sage Therapeutics with a neutral rating and a price target of $15.00, projecting gradual sales growth from the postpartum depression treatment, Zurzuvae.
InvestingPro Insights
Scotiabank's optimistic outlook on Sage Therapeutics is met with mixed signals from the market and analysts. While the company's cash position is stronger than its debt, suggesting financial stability, Sage is experiencing a rapid cash burn. Moreover, analysts have expressed concern, with some revising their earnings expectations downward for the upcoming period and anticipating a sales decline within the current year. This aligns with the challenges highlighted by Scotiabank, such as insurance approval hurdles for Zurzuvae.
From a financial metrics standpoint, Sage's market cap stands at approximately $696.91M, reflecting the scale of the company within the biopharmaceutical industry. However, the company's negative P/E ratio of -1.36 and adjusted P/E ratio of -1.46 for the last twelve months as of Q1 2024 indicate its lack of profitability in recent times. Additionally, the price has significantly retreated from its 52-week high, now at only 19.98% of that peak. This could suggest a potential undervaluation or reflect the market's response to the company's financial performance and outlook.
Investors considering Sage Therapeutics may find it beneficial to explore the 19 additional InvestingPro Tips available, which provide deeper insights into the company's financial health and stock performance. For those looking to gain comprehensive access to these insights, remember to use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With a fair value estimated at $14.47 by InvestingPro, compared to Scotiabank's $19.00 target, investors are equipped with varied perspectives to gauge the potential of Sage's stock.
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