On Wednesday, Scotiabank revised its outlook on Sage Therapeutics (NASDAQ:SAGE), lowering its price target to $17 from $19 previously while maintaining a sector outperform rating on the stock.
The decision comes after the company’s recent stock price decline due to the unsuccessful outcome of the KINETIC-2 study, which tested SAGE-324 for the treatment of essential tremor.
The Scotiabank analyst advises investors to consider increasing their holdings in Sage Therapeutics, noting the stock’s approach to what he calls “deep value territory.”
Despite the setback from the KINETIC-2 study, the analyst notes that the company’s shares are currently trading close to its estimated cash balance for the second quarter of 2024, which is approximately $10.37 per share.
This valuation does not fully take into account Sage Therapeutics’ right to 50% of the profits from sales of Zurzuvae, an oral medication recently approved to treat postpartum depression.
Market reactions indicate a high level of enthusiasm for Zurzuvae, despite the notable challenges in terms of getting the payout accepted. Even with Zurzuvae’s conservative sales forecast, the analyst believes the company’s shares have the potential to be valued at around $29 if the company is sold. If Zurzuvae’s sales estimates are overly optimistic by as much as 75%, the shares could still be worth around $13, according to the analyst’s estimate.
Sage Therapeutics also plans to bring more products to market, including the potential use of dalzanemdor, an investigational drug for the treatment of Huntington’s disease and Alzheimer’s disease. Given the current situation and the remaining potential of the company’s portfolio, the analyst set a new price target for Sage Therapeutics at $17.
In other recent news, Sage Therapeutics has seen several analyst adjustments following various trial results and sales performance reviews. Mizuho Securities lowered its price target on Sage Therapeutics to $13 from $16 previously, following disappointing results from the KINETIC-2 Phase 2b trial of SAGE-324. The trial failed to meet its primary objective, leading to the discontinuation of SAGE-324’s development for the treatment of essential tremor.
JPMorgan also downgraded Sage Therapeutics Inc.’s stock to “neutral” from “overweight,” with a price target revised to $12.00. The decision reflects a cautious view of the near-term potential of Sage’s product, Zorzovay, which aims to treat postpartum depression.
In contrast, Scotiabank reiterated its Outperform rating with a $19.00 price target, citing strong appreciation and satisfaction with Zurzuvae. Meanwhile, HC Wainwright maintained its Neutral rating with a $25.00 price target, despite the recent setback in its Parkinson’s disease trial.
InvestingPro Insights
As Scotiabank reviews its position on Sage Therapeutics following the results of the KINETIC-2 study, Professional investment The data and advice provide additional insights into the company’s financial health and stock performance. With a market cap of $624.69 million and a recent closing price of $10.38, Sage Therapeutics is trading near its 52-week low, which is in line with analysts’ view that the stock is entering “deep value territory.” The significant revenue growth over the past twelve months, at an impressive 868.96%, suggests that despite recent challenges, the company has seen significant sales expansion, which could be a positive sign for investors considering Zurzuvae’s potential.
a Advice from InvestingPro The report confirms that Sage maintains more cash than debt on its balance sheet, which provides protection against the company’s rapid cash flow depletion and is in line with the Scotiabank analyst’s reference to the company’s cash balance. Additionally, with the stock having taken a major hit over the past six months, down 60.49%, investors may find the current valuation a good entry point. Sage’s liquid assets also exceed short-term liabilities, a reassuring sign of near-term financial stability.
For investors looking to dig deeper into the financial performance and stock of Sage Therapeutics, Professional investment It offers a wide range of additional tips. There are currently 11 more tips available, which can be accessed through the platform. Interested readers can use the coupon code Pro News 24 Get up to 10% off the Pro Annual Subscription and the Pro+ Annual or Semi-Annual Subscription, providing a comprehensive toolkit for making informed investment decisions.
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