Investing.com — RBC Capital Markets cut its rating on SAGE Therapeutics Inc (NASDAQ:) from Sector Perform to Underperform (Sell), due to concerns about the potential outcomes of the company’s drug trials. The investment bank also lowered its price target to $4 from $10.
Shares in the biopharmaceutical company fell nearly 8% in premarket trading Friday.
The downgrade is primarily based on the analysis of Sage (LON:)’s experimental drug dalzanemdor and its upcoming phase II trial results for Huntington’s and Alzheimer’s diseases, expected in the fourth quarter of 2024.
RBC expressed doubt about the drug showing clear, clinically meaningful effects in these conditions.
“Without success for that program, we believe profitability will be difficult to achieve until the very long term and would require significant changes to the company’s cost structure, even if Zurzuvae remains on its current reasonable initial launch trajectory in PPD (NASDAQ:),” RBC analysts noted.
“As such, we believe shares are more likely to underperform the group into/through results,” they added.
Zurzuvae is another drug marketed for Postpartum Depression (PPD).
RBC’s skepticism is based on mixed early data, the lack of confidence in trial endpoint changes, high variability in measurements from previous trials, and the potential for narrow therapeutic windows and serious adverse effects.
Analysts also highlight that Sage’s current cost structure is unsustainable for future profitability without greater than $900 million in end-user sales of Zurzuvae.
“Even assuming very significant cost-cutting measures starting in 2025 if dalza fails, and assuming reasonable Zurzuvae ramp, probability-blending the revenue/opex scenarios yields a blended DCF-based fair value for shares of $4,” they concluded.
Sage stock fell more than 67% in 2024.
