On Wednesday, BofA Securities reiterated its Underperform rating on shares of Sage Therapeutics (NASDAQ:SAGE) with a steady price target of $14.00. The firm's stance comes after Sage reported preliminary results from its phase 2 SURVEYOR study, which evaluated the efficacy of its drug candidate dalzanemdor (SAGE-718) in patients with Huntington's disease (HD).
The study included 40 HD patients who, at the outset, showed a lower HD cognitive assessment battery (HD-CAB) composite score compared to a control group of 29 healthy volunteers. Participants were then divided to receive either a placebo or the drug dalzanemdor.
After 28 days, those treated with dalzanemdor exhibited a directional improvement in the HD-CAB composite score and some functional assessments relative to the placebo group. However, the study was not designed to establish statistical significance.
BofA Securities highlighted that while the results suggest a positive trend, further clinical validation is required to reduce the investment risk associated with dalzanemdor's potential in treating Huntington's disease. The firm has called for more detailed information on the extent of the drug's effect observed in the SURVEYOR study.
The analyst's comments reflect a cautious approach to the drug's prospects, emphasizing the need for significant clinical validation to support the potential use of dalzanemdor in HD. Despite the initial positive signs, the firm maintains its Underperform rating, indicating skepticism regarding the immediate investment potential of Sage Therapeutics' stock.
InvestingPro Insights
As Sage Therapeutics (NASDAQ:SAGE) continues to navigate the challenging landscape of drug development, particularly for its candidate dalzanemdor, investors are keeping a watchful eye on the company's financial health and market performance. BofA Securities has maintained an Underperform rating with a price target of $14.00, aligning closely with the current InvestingPro Fair Value estimate of $14.47. This valuation reflects a cautious yet realistic perspective on the company's prospects.
According to InvestingPro data, Sage Therapeutics holds a market capitalization of $637.93 million, indicating its size within the biotech sector. However, a critical metric for investors to consider is the company's Price / Book ratio, which, as of the last twelve months leading up to Q1 2024, stands at a relatively low 0.9. This suggests that the company's stock is potentially undervalued relative to its book value, which could attract value investors.
Despite the promise shown in the phase 2 SURVEYOR study, InvestingPro Tips highlight significant challenges the company faces. Analysts have revised their earnings downwards for the upcoming period, and they do not anticipate the company will be profitable this year. Additionally, the company is quickly burning through cash, which may raise concerns about its long-term financial sustainability without successful commercialization of its drug candidates.
For investors seeking a deeper analysis of Sage Therapeutics' potential and risks, InvestingPro provides a comprehensive set of additional tips, including the company's cash position relative to debt and its liquidity status, which could be pivotal in the volatile biotech industry. Subscribers can use the coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, enabling access to these insights and more at https://www.investing.com/pro/SAGE.
With a total of 12 additional InvestingPro Tips available, investors can gain a more nuanced understanding of Sage Therapeutics' investment profile, helping them make informed decisions amidst the uncertainties of drug development and market dynamics.
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