Sage shares slide as RBC downgrades to sell on Investing.com test results

Investing.com — RBC Capital Markets downgraded SAGE Therapeutics Inc (NASDAQ: ) from Sector Perform to Underperform (Sell) due to concerns about the company’s potential drug trial results. The investment bank cut its price target to $4 from $10.

Shares of the biopharmaceutical company fell nearly 8% in premarket trading on Friday.

The downgrade is based primarily on the analysis of Sage’s experimental drug Dalzanemdor and the results of its upcoming Phase II trial for Huntington’s and Alzheimer’s diseases, expected in the fourth quarter of 2024.

The RBC expressed doubt that the drug has clear, clinically significant effects in these conditions.

“Without success for this program, we believe profitability will be difficult to achieve for the very long term and would require significant changes in the company’s cost structure, even if Zurzuvae remains on its current reasonable initial launch trajectory in PPD (NASDAQ:)” RBC analysts they noted.

“As such, we believe the shares are more likely to underperform the group in/throughout the results,” they added.

Zurzuvae is another drug marketed for postpartum depression (PPD).

RBC skepticism is based on mixed early data, lack of confidence in changes in study endpoints, high variability in measurements from previous studies, and the potential for narrow therapeutic windows and serious adverse effects.

Analysts also point out that Sage’s current cost structure is unsustainable for future profitability without more than $900 million in end-user sales of Zurzuvae.

“Even assuming very significant cost-cutting measures starting in 2025 if dalza fails and assuming a reasonable Zurzuvae ramp, combining the likelihood of revenue/opex scenarios yields a combined DCF-based fair value of $4 per share,” they concluded.

Sage stocks are down more than 67% in 2024.