Balancing Opportunity and Risk: Hold Rating on SAGE Therapeutics Amidst High-Stakes Catalysts and Financial Reassessment

SAGE Therapeutics (SAGE – Research Report), the Healthcare sector company, was revisited by a Wall Street analyst yesterday. Analyst Sumant Kulkarni from Canaccord Genuity maintained a Hold rating on the stock and has a $17.00 price target.

Sumant Kulkarni has given his Hold rating due to a combination of factors surrounding SAGE Therapeutics’ upcoming high-stakes catalysts and financial performance. Although the recent quarterly results did not present major surprises, and the performance of Zurzuvae for post-partum depression offers a promising start, the potential high reward of the upcoming catalysts is balanced by their high risk. Kulkarni notes that the company’s pipeline, including treatments for Huntington’s and Alzheimer’s diseases, presents significant opportunities, but also carries substantial uncertainty that warrants caution. Additionally, while there may be opportunities for cost optimization, these are challenging to forecast and hinge on the success of the pipeline’s progress and Zurzuvae’s continued performance.

In revising the company’s financial model post-1Q24 results, Kulkarni has adjusted the price target from $21 to $17, reflecting changes in revenue projections for Zurzuvae and reduced expectations for Zulresso sales. The increase in SG&A estimates to support Zurzuvae is acknowledged, along with the potential for future rationalization of operating expenses. Despite the lowered risk following Zulresso’s U.S. approval, the absence of pipeline assets in the financial model leads to conservative R&D expense projections in the long term. With these financial considerations and the adjusted weighted average cost of capital, Kulkarni maintains a cautious stance with a Hold rating, while recognizing the stock’s growing interest as it approaches key milestones.

In another report released today, Truist Financial also maintained a Hold rating on the stock with a $18.00 price target.

SAGE’s price has also changed moderately for the past six months – from $18.300 to $13.580, which is a -25.79% drop .

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SAGE Therapeutics (SAGE) Company Description:

SAGE Therapeutics, Inc. is a clinical stage biopharmaceutical company, which engages in the development and commercialization of novel medicines to treat life-altering central nervous system. Its programs include brexanolone, which is an acute interventional treatment for postpartum depression; and SAGE-217, an oral therapy for treatment of various CNS disorders. The company was founded by Steven Marc Paul and Douglas Covey in April 2010 and is headquartered in Cambridge, MA.