Morgan Stanley Gets Wise On Sage Therapeutics, Initiates With A Buy

SAGE Therapeutics Inc SAGE has had a laudable 109-percent run in recent months after meeting primary endpoints in multiple trials and securing regulatory approvals.

It found further reason to celebrate Monday with the conversion of a new Street advocate.

The Rating

Morgan Stanley analyst Matthew Harrison initiated coverage on Sage with an Overweight rating and $225 price target.

The Thesis

Sage is developing a pipeline of GABA-receptor agents to treat central nervous system diseases with a mechanism that's potentially faster, more widely applicable and has fewer pronounced side effects than current standards of care.

Brexanolone, Sage’s treatment for postpartum depression to be submitted to the U.S. Food and Drug Administration in the first half of the year, is expected to post peak U.S. sales of $775 million, Harrison said in a Monday note.

“Given the lack of standard treatment and the modest benefit available with generic antidepressants, we believe brexanolone can be a [nearly] $1 billion global drug,” the analyst said.

That compounds Sage’s long-term opportunity in SAGE-217, which is seen to have potential in depression, bipolar disorder and insomnia.

“We see continued derisking of '217 driving SAGE higher,” the analysts wrote, forecasting more than $2.5 billion in peak sales.