Sage stock price target cut to $12 by H.C. Wainwright

On Wednesday, H.C. Wainwright analyst Douglas Tsao revised the price target for Sage Therapeutics (NASDAQ:SAGE) to $12.00 from the previous $14.00 while maintaining a Neutral rating on the company’s shares. Tsao’s report followed Sage’s announcement of a weaker-than-expected sales performance for the fourth quarter. The company’s collaboration revenue from Zurzuvae was $11.4 million, a slight increase from the $11 million reported in the third quarter, but below the $14.5 million estimated by H.C. Wainwright and the consensus of $13.7 million. According to InvestingPro data, Sage’s total revenue for the last twelve months stands at $106.4 million, with analysts anticipating a sales decline in the current year.

Zurzuvae, which is partnered with Biogen (NASDAQ:BIIB), saw Sage recording 50% of the product’s gross revenue. Despite approximately 2,500 shipments of Zurzuvae in the fourth quarter, a 21% quarter-over-quarter increase, there was a noted discrepancy between shipment growth and revenue growth. This was attributed to reduced purchases by wholesalers and specialty pharmacies. Even with an optimistic view of the shipments, revenues still did not meet expectations. InvestingPro analysis shows the company maintains strong liquidity with a current ratio of 10.02, though it’s currently experiencing weak gross profit margins and rapid cash burn. For deeper insights into Sage’s financial health and more exclusive ProTips, consider exploring InvestingPro’s comprehensive research report.

Sage’s management highlighted a decrease in the free drug program in the fourth quarter compared to the third quarter, due to an increase in insurance coverage. They expect the percentage of free drug to continue decreasing over time, transitioning into revenue-generating prescriptions. Notably, 80% of the prescribers of Zurzuvae are OBGYNs, and 70% of the patients received it as a first-line treatment. These metrics were positively acknowledged by the analyst, who saw them as ahead of initial expectations for the launch phase.

In response to the product’s performance, Sage has increased investment in sales force expansion, social media influencer campaigns, and disease-state awareness to support better postpartum depression (PPD (NASDAQ:PPD)) screening and diagnosis. The alignment between Sage and Biogen remains a focal point for investors, especially after Biogen’s unsolicited bid for Sage in January. While Sage’s management has not commented on the acquisition proposal, they did note that the company’s board has started a strategic alternatives process, which was announced at the end of the previous month.

Tsao’s revised price target also reflects the removal of SAGE-718 from their model and an increase in the EV/sales multiple from 4x to 8x. Despite the lowered target, the analyst suggests that Biogen’s interest in Sage may provide some support against a decline in the company’s share value for the time being. InvestingPro data indicates the stock has shown strong returns over the past three months despite falling significantly over the last year (-69.83%). Based on InvestingPro’s Fair Value analysis, the stock currently appears to be undervalued, with analyst targets ranging from $5 to $14.

In other recent news, Sage Therapeutics has been the subject of several analyst adjustments. Canaccord Genuity has reduced Sage Therapeutics’ price target to $8.00 while maintaining a Hold rating, after evaluating the company’s position within the home coverage sector. Mizuho (NYSE:MFG) Securities, on the other hand, increased its price target to $9.00 from the previous $6.00, maintaining a Neutral rating, following Biogen’s proposal to acquire Sage.

Sage Therapeutics has also announced the initiation of a strategic review process, rejecting an unsolicited acquisition proposal from Biogen. The review aims to explore strategic alternatives to maximize shareholder value, including potential transactions, business combinations, or a sale.

Piper Sandler has reduced Sage Therapeutics’ stock price target to $9 from the previous $26, maintaining an Overweight rating. The reevaluation comes amid challenges for the company’s key drug, Zurzuvae, particularly in its use for major depressive disorder. Despite setbacks, the analyst remains optimistic about the drug’s potential in post-partum depression.

Lastly, Mizuho Securities has reduced Sage Therapeutics’ price target to $6.00, maintaining a Neutral rating following the recent cessation of development for Sage’s drug, dalzanemdor, after it failed to meet primary and secondary endpoints in a Phase 2 trial. The discontinuation leaves Sage Therapeutics without a late-stage pipeline program, indicating a cautious perspective on the company’s prospects.

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