On Thursday, Mizuho (NYSE:MFG) Securities adjusted its outlook on Sage Therapeutics (NASDAQ:SAGE), currently trading at $5.89 with a market cap of $361 million, by reducing the biopharmaceutical company's price target to $6.00, a decrease from the previous $10.00 target, while keeping a Neutral rating on the stock.
The stock has declined over 70% year-to-date, according to InvestingPro data. The adjustment follows 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 trial, named DIMENSION, was conducted to assess the effectiveness of dalzanemdor in treating cognitive impairment associated with Huntington's disease.
Despite being well-powered, the drug did not achieve statistical separation from placebo on the primary endpoint, which was evaluated using the Symbol Digit Modalities Test (SDMT) at Day 84, nor on the secondary endpoints. This trial's outcome on November 20, 2024, led to the decision to halt the drug's development.
Dalzanemdor's failure in the DIMENSION trial comes on the heels of similar outcomes in two other Phase 2 trials, LIGHTWAVE and PRECEDENT, which tested the drug's efficacy in Alzheimer's and Parkinson's disease patients, respectively. Neither trial succeeded in demonstrating a positive cognitive improvement signal, prompting the company to discontinue the drug's development.
The discontinuation of dalzanemdor, along with the previously halted development of SAGE-324 for essential tremor, leaves Sage Therapeutics without a late-stage pipeline program. While the company maintains a strong liquidity position with a current ratio of 10.02 and more cash than debt on its balance sheet, InvestingPro analysis indicates the company is quickly burning through cash. The company now faces a lack of meaningful near-term catalysts to drive its growth or stock performance.
The Mizuho analyst's revised model reflects the removal of assumptions for dalzanemdor following the string of unsuccessful trials. The firm's maintained Neutral stance aligns with the broader analyst consensus, as tracked by InvestingPro, which shows mixed sentiment with price targets ranging from $4 to $26.
The company's overall financial health score is rated as 'FAIR', with particular concerns about profitability and price momentum. For deeper insights into SAGE's valuation and financial health, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers.
In other recent news, Sage Therapeutics has been making significant strides in its business operations. The company recently announced the retirement of board member Dr. Jeffrey M. Jonas, marking a notable change in the company's governance. This development comes alongside Sage Therapeutics' decision to halt further development of its drug dalzanemdor, following disappointing results from a Phase 2 study.
Simultaneously, the company has reported a 49% increase in postpartum depression (PPD (NASDAQ:PPD)) treatment sales, particularly for Zurzuvae, with Q3 financial results revealing a revenue of $22.1 million. However, the company reported a net loss of $93.6 million for Q3 2024.
In response to these developments, TD Cowen has reduced the company's price target, maintaining a Hold rating, while RBC Capital has upgraded Sage Therapeutics to a Sector Perform rating.
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