On Wednesday, shares of biopharmaceutical company Sage Therapeutics Inc SAGE are falling, down over 15% to $28.20 in midday trading after Kerrisdale Capital issued an 18-page report saying the company's touted experimental product SAGE-547, a drug for super-refractory status epilepticus (SRSE), is likely to fail its current late-stage trial or become a commercial failure.
The firm believes that SAGE-547 is similar to drugs already on the market to treat SRSE, a rare but deadly condition that causes persistent seizures that fail to respond to common therapies, like benzodiazepines, anti-epileptics, and anesthetics.
Kerrisdale also believes that Sage has overestimated the drug's target market by maybe a factor of 6, suggesting SAGE-547, if approved, would only be a minor drug from a revenue stance.
They go one to argue that Sage's stock price should drop about 70% from current levels, since the company's remaining clinical assets are mostly in early development stages. Kerrisdale has basically valued Sage at just over its last-stated cash position of approximately $186 million.
Sage is expected to release the results of SAGE-547's late-stage trial in the second half of 2016.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days . Click to get this free report>>
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report