Goldman On Biotech: Buy Sage, Sell Acorda, Neutral On Dimension

Goldman Sachs’ Salveen Richter maintained a Neutral coverage view on the small- to mid-cap biotech segment, while advocating selectivity “based on positive catalysts, EPS execution & M&A optionality.”

Biotech stocks on average have underperformed year-to-date, with the NBI down 24 percent versus a 0.54 percent gain in the S&P. The pressure has resulted from several factors, including macro concerns, drug pricing pressure caused by political headlines and sector-specific events, such as mixed EPS, limited positive news flow and no large M&A, analyst Salveen Richter said.

Sage: Catalysts Provide Upside

Richter initiated coverage of SAGE Therapeutics Inc SAGE with a Buy rating and a price target of $63. The company is a key player in acute central nervous system [CNS] disorders and has a portfolio of small molecules, including module GABA-A and NMDA receptors.

“Key value driver SAGE-547 for super-refractory status epilepticus (SRSE), sustained seizures (>24 hours) with high mortality (~40%), has shown impressive Phase I/II and IND emergency use data (77%, n=17/22 and 78%, n=7/9 responders) which bodes well for topline pivotal data in 2H16,” the analyst wrote.

Catalysts include SAGE-547 Phase II sPPD data update in 2Q16, SAGE-217 Phase I safety data in healthy volunteers in 2Q16 and top-line pivotal SAGE-547 Phase III SRSE results in 2H16.

Acorda: Uncertain Event Path

Richter initiated coverage of Acorda Therapeutics Inc ACOR with a Sell rating and a price target of $23. The company is a CNS play and its lead product Ampyra for multiple sclerosis [MS] with difficulty walking is close to fully realizing its commercial opportunity.

The analyst noted, however, that the company’s FY16 sales guidance of $475-$485mn implies low single-digit y/y organic growth. He added that physicians had indicated that only few new patients were initiating therapy.

“We believe IP threats are an overhang as five Ampyra patents (expiring 2018-27) have been challenged by generic ANDA filers (ACOR settled with four of the ten for 2027) and four inter partes review (IPR) petitions from the Coalition for Affordable Drugs,” the Goldman Sachs report added.

Dimension: Better Opportunity Elsewhere

Goldman Sachs downgraded the rating for Dimension Therapeutics Inc DMTX from Buy to Neutral, while reducing the price target from $12 to $10. There is “better near-term opportunities elsewhere in our coverage,” Richter commented.

Dimension is an early-stage biotech company developing gene therapies for orphan disorders of the liver. The company’s lead product DTX101 is in Phase I/II data in hemophilia B and is scheduled for an interim data read in 2H16. The analyst estimated global revenue of $426mn in 2026.

Dimension has partnered with Bayer on DTX201, which is a gene therapy for hemophilia A. Richter estimated global royalties of $144mn on sales of $2,042mn in 2026.