IS THIS THE END FOR SAGE THERAPEUTICS?

By Aidan Asbill, Biotech Analyst

Sage Therapeutics is a biopharmaceutical company committed to developing novel therapies to treat central nervous system disorders. The company made its debut with its drug Zulresso, for the treatment of postpartum depression in adults. The drug was approved in March 2019 becoming the first and only drug approved for postpartum depression. This news propelled stock all the way up to $190 in July 2019 and the company was looking to be at the forefront of treatments for depression. However, this victory was short-lived as the company suffered a failure in its trial for their second drug, SAGE-217. In less than a year the company would plummet all the way to a low of $26 in April 2020. Since then, the company has made great strides to please investors changing its CEO and partnering with Biogen. Even so, with recent lackluster phase 3 results from Zuranonlone, will the company be able to recover to all-time highs, or will it continue to disappoint investors?

In December last year, Sage Therapeutics announced its new CEO, Barry Greene would be taking over while the previous CEO would go into a research role. Greene was a natural fit with over 3 decades of experience in pharmaceutical management and since then the stock increased to a price of $75. However, he will have a very difficult task to take the company back to all-time highs. Sage Therapeutics got off to a strong start with its drug Zulresson, which became the first treatment to get FDA approval for postpartum depression. Zulresson, unlike other depression treatments, is proven to have fast-acting positive effects on its patients. This drug acts fast by utilizing the GABAA receptors in patients, which is the major inhibitory signaling pathway of the brain and central nervous system and contributes significantly to regulating brain function. Despite being the first treatment to earn FDA approval for postpartum depression, the company’s star drug Zulresson hasn’t been nearly as successful as investors hoped. In the first quarter of launch, the drug made an astonishingly low $1.6 million in sales. Since then things haven’t gotten much better with the drug average only about $1.5 million per quarter. Some of this is obviously due to hospitals having to prioritize COVID-19 patients, which may have slowed sales a bit. With that being said, there may still be concerns about the drug’s complicated method of action, which requires patients to stay in the hospital for up to 48-72 hours to be treated. The treatment is also as not as simple as taking a pill. Patients must be infused via CIV injection and monitored until treatment is done. To make matters worse, the drug is very expensive, costing patients without insurance $7,450 per vial for a total of 34,000 for the average treatment. Overall, the drug’s launch has been very underwhelming, but there may still be hope for the company. Postpartum depression affects 400,000 women, which is about 1 in 7 moms in the U.S each year. Sage Therapeutics has only been able to treat a fraction of the massive market for postpartum depression in mothers. Even with the company’s arduous and complicated treatment, if the company works on better implementations in hospitals and potentially lower cost, the drug should continue to slowly grow sales. 

While Zulresson has a long way to go before it impresses investors, the company’s new drug Zuranolone has massive implications for major depressive disorders. Unlike Zulresson, the company’s new drug Zuranolone is a simple pill rather than an injection. Unfortunately, the drug has not gotten off to a great start which has made investors wary to invest in the company. In 2019, the drug failed a phase 3 study investigating the drug’s effectiveness to treat major depressive disorders in patients. This combined with the poor sales from Zulresson became the negative catalyst that caused the massive drop-off in the company’s stock price. This put Sage Therapeutics in a tough spot forcing the company to make the hard decisions of laying off half of its employees. The company was under extreme pressure to create a new successful drug but was burning through cash in the process of creating one. This put Sage on the brink of collapse when Biogen bailed them out with an offer they couldn’t refuse. Sage would get a much-needed upfront payment of $875 million and $650 million equity investments for a total of $1.5 billion investment from Biogen. Biogen in return would get a 50/50 split in U.S. sales of Zuranolone, in addition to royalties on worldwide sales. This deal created a path for the company to recover and relaunch its phase 3 trial of Zuranolone. In May, the company shared a look into the promising results from the phase 3 study of zuranolone. The study found that 80% of patients who received a 50 mg dose and 70% of patients who received 30mg had a positive reaction to the treatment. The drug looked very promising, producing quick positive effects after an average of only 2.2 treatments. However, recently the full study came out which continued to show fast-acting results in the short term, but the drug couldn’t beat the placebo in the long term. Investors were very displeased, questioning the marketability of the drug. This resulted in a sharp 25% sell-off, which may continue as investors have begun to lose faith in the company. While this doesn’t prevent the drug from getting FDA approval, it certainly negatively affects potential sales and the total available market for the drug. Most depression drugs are prescribed for long-term use but after the recent study, Zuranolone seems unlikely to be prescribed for long time use with very underwhelming results. With this news, Sage is once again falling as investors lose faith, but if its pipeline can produce results the company may still have a chance to recover.

Sage therapeutics pipeline includes SAGE-718, a phase 2 neuropsychiatry treatment for Parkinson’s, Alzheimer’s, and Huntington’s disease, as well as several other early development treatments for GABA hypofunction. In the company’s phase 2 study, SAGE-718 showed performance improvements from baseline for cognitive function in its patients. The company will initiate a placebo-controlled phase 2 trial later this year to further evaluate the drug’s potential. While SAGE-718 is still very early in development, the most interesting candidate in the company’s pipeline is SAGE-324, a compound that is in Phase II clinical trial to treat essential tremors, as well as has completed Phase I clinical trial for epilepsy and Parkinson’s diseases. In April, Sage reported topline results from their Phase 2 study of SAGE-324. The drug had very promising results, demonstrating a 36% reduction in upper limb tremor amplitude after 30 days of more treatment. In patients with more severe symptoms, SAGE-324 demonstrated a 41% reduction in upper limb tremor amplitude compared to the starting baseline. These positive results are very encouraging and promising to treat patients suffering from essential tremors, which can be debilitating in many cases. An estimated 6.4 million people suffer from tremors in the United States alone. If SAGE-324 is approved it would be the first medicine approved for the treatment of tremors in over 50 years. Current medicines that treat tremors were made to treat other conditions and just happened to ease symptoms of tremors. However, SAGE-324 is looking to treat the tremors directly with the drugs modern approach that can be groundbreaking in new methods to treat tremors. If successful, the drug may offer the potential for new treatment options for tremor management, as more than 50% of people with ET do not respond optimally to the current standard of care. 

Competitors

Sage is not the only company with a compelling drug to treat the major depressive disorder. The company’s initial failure of their phase 3 trial of SAGE-217 in 2019, allowed Axsome Therapeutics to take the lead in the race to make a drug for major depressive disorder. Shortly after the announcement of the failure of SAGE-217, Axsome announced their clinical phase 3 trial for AXS-05, a direct competitor to SAGE-217. AXS-05 like SAGE-217 is a simple pill, but they utilize different technologies to treat their patients. AXS-05 combines bupropion and dextromethorphan, which when combined help act as an inhibitor of serotonin and dopamine reuptake inhibitor. On the other hand, Zuranolone is a fast-acting oral neuroactive steroid that activates the GABAA receptor positive allosteric modulator. Unfortunately, things only get worse for Sage with the recent reports that show SAGE-217 underwhelming long-term benefits, while AXS-05 has been granted priority review by the FDA to get onto the market. With AXS-05 FDA approval seeming inevitable, the total available market is much better for AXS-05. While Sage is firmly behind Axsome, if approved it can still compete with market demand for major depressive disorder treatments. According to the Anxiety and Depression Association of America, 16.1 million Americans suffer from major depressive orders. Sage also believes that its current pipeline has an addressable market worldwide of 450 million people. While Zuranolone won’t be able to compete with AXS-05 for long-term use it, patients, it could very beneficial for patients suffering from major depression and may be suicidal who need a fast-acting drug to alleviate their suffering. Things look even more interesting when you take into account Sage’s partnership with Biogen. Biogen has recently gotten the first modern FDA-approved Alzheimer’s drug, which skyrocketed the stock 50% on the day of the announcement. Biogen estimates that approximately half of Parkinson’s disease patients, half of the sclerosis patients, and about 40 percent of patients with Alzheimer’s experience depression. With Biogen commercializing Zuranolone, the drug will be paired with Alzheimer’s, Sclerosis, and Parkinson’s disease patients. While Sage will not be the powerhouse depression company that investors hoped it would be, its key partnership with Biogen gives the drug a chance to be marketable in patients needing immediate alleviation from their depression.

Sage therapeutics has continued to make good decisions by changing its CEOs and partnering with Biogen. The company has slowly recovered from its catastrophic fall. While Zuranolone’s mediocre results don’t prevent it from getting FDA approval, it doesn’t bode well for sales. The company ended 2020 with more than $2 billion in cash which should help the company ride out yet another fall in the stock price. Investors should continue to be very hesitant to invest until the company can produce compelling results from the drugs in its pipeline. Sage therapeutics partnership with Biogen may save Zuranolone from being a complete disaster, but the drug’s long-term use in patients seems very unlikely. With marketing from Biogen and the company’s future pipeline, this may not be the end for Sage Therapeutics, after all.  However, the future for Sage is not the one investors had previously imagine. The company has a long way to go until it can impress investors again. Ultimately it will be up to investors to decide if Sage Therapeutics can make an impact on the ongoing crisis in brain health or if they will continue to disappoint.

Disclosure: The Sick Economist owns shares in $SAGE