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On Thursday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Sage Therapeutics (NASDAQ:SAGE) shares, with analyst Vamil Divan increasing the price target to $9.00 from the previous $6.00, while maintaining a Neutral rating on the stock. Currently trading at $7.33, with a market capitalization of $448.4 million, InvestingPro analysis suggests the stock is slightly undervalued. The revision follows Biogen (NASDAQ:BIIB)’s proposal to acquire the company, prompting a reassessment of Sage’s valuation.
Divan’s analysis suggests that a significant portion of Sage’s cash reserves, estimated to be around $500 million at the end of 2024, would remain intact post-acquisition. InvestingPro data shows the company holds more cash than debt, with a strong current ratio of 10.02, though it’s quickly burning through its reserves. This assumption led to the price target being lifted, as the market had previously expected Sage to deplete most or all of its cash before becoming cash flow positive. Prior to Biogen’s offer, Sage’s shares were trading at $5.55, which was below the company’s cash value.
The updated valuation gives more weight to Sage’s cash position, assuming that 65% of the year-end cash estimate would be retained after the deal’s closure. Additionally, Divan estimates that Sage’s 50% stake in the potential sales of their drug Zurzuvae, which is projected to reach peak sales of $528 million, is valued at $4 per share. Combining this with the cash valuation, the total value assigned to Sage’s shares is $9, surpassing Biogen’s offer of $7.22 per share.
However, the analyst also noted that if the acquisition by Biogen does not proceed, Sage’s share price might fall back to approximately $5.55. With this in mind, the Neutral stance reflects a view of balanced risk/reward in the context of the proposed takeover.
In other recent news, Sage Therapeutics has initiated a strategic review process, rejected an acquisition proposal from Biogen, and is exploring alternatives to maximize shareholder value. Goldman Sachs & Co. LLC and Skadden, Arps, Slate, Meagher & Flom LLP are advising Sage during this process. Piper Sandler has reduced the company’s stock price target but maintains an Overweight rating, expressing confidence in the recovery potential of Sage’s post-partum depression (PPD (NASDAQ:PPD)) treatment, Zurzuvae.
Mizuho Securities has also adjusted its outlook on Sage, reducing the price target while maintaining a Neutral rating. This follows the discontinuation of Sage’s drug, dalzanemdor, after unsuccessful trials. Sage has also announced the retirement of board member Dr. Jeffrey M. Jonas, marking a significant change in the company’s governance.
TD Cowen has reduced Sage’s price target and maintained a Hold rating following the failed study of dalzanemdor. Despite these developments, Sage reported a 49% increase in PPD treatment sales, particularly for Zurzuvae, revealing a revenue of $22.1 million in Q3, albeit with a net loss of $93.6 million. These are the recent developments in the company’s operations.
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