Sage Therapeutics Could Still Become A Leader In Neurology

RBC Capital Markets said in a Thursday note it believes SAGE Therapeutics Inc SAGE can still emerge from near-term catalysts as a mid-cap neuro leader.

Accordingly, the firm initiated coverage of Sage Therapeutics at Outperform, with a $117 price target. At time of writing, shares were down 3 percent to $62.90.

The Failed Trial

The stock has been on a downward spiral since Sept. 12, when it announced top-line results from a late-stage study of brexanolone for the treatment of super-refractory status epilepticus did not meet the primary end point. From $88.52 on Sept. 11, the stock has lost about 27 percent.

Analyst Brian Abrahams believes the negative data may be due to the challenging conduct, a heterogenous population and reliance on open-label prior studies, with limited context.

Strong GABA Platform Rationale

Despite the setback, Abrahams believes GABA platform's mechanistic rationale remains strong, and accordingly, he sees a favorable setup into multiple near-term data readouts.

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The analyst believes SAGE-217, an oral GBAB modulator, could expand the company's market opportunity and life cycle, given more robust patent protection and convenience vs brexanolone.

"We see $2.8B sales opportunity for '217 or other orals if broadly successful," the analyst said.

Significant Opportunity in PPD

Meanwhile, RBC believes brexanolone data in post-partum depression, or PPD, would open up significant opportunity for SAGE, as Phase II data looks compelling for the firm. The firm sees 70 percent likelihood of the upcoming Phase III studies reaffirming its substantial benefits and support approvability.

The firm estimates more than $650 million in peak PPD sales for brexanolone.

Positives & Catalysts

Abrahams sees the strong POC data for brexanolone in PPD, signals of on-target activity reduce risk for 217, potential of neuroactive steroids across a number of indications and multiple shots on goal with indications and compounds as major positives.

As far catalysts, the firm said Phase III brexanolone PPD data due in the second half of 2017 and Phase II ‘217 readouts in PPD, MDD, ET, and PD due in the fourth quarter of 2017 could move the stock.

"With a foundation of strong science in the emerging neurology field, POC data across indications, and many shots on goal, we believe SAGE could emerge as the next high-profile, high-opportunity mid-cap biotech," the firm said.