SAGE Therapeutics Inc (NASDAQ: SAGE): Solid Pipeline, Impressive Price Targets

Small-cap biotechnology company SAGE Therapeutics Inc (NASDAQ: SAGE), which suffered a debacle in September 2017 in the late stage trials of its brexanolone (SAGE-547) treatment for experimental super-refractory status epilepticus (SRSE), is back in the reckoning after reporting successful trials for brexanolone in treating postpartum depression (PPD) in October, and yesterday, for its SAGE-217 drug for major depressive disorder (MDD).

Not surprisingly, investors in Sage have experienced a wrenching roller-coaster ride of sorts as the value of the company’s shares sank on the SRSE news, gapped up solidly higher on the postpartum depression trials, and then went stratospheric with an even larger gap on the SAGE-217 announcement.

SAGE Therapeutics Inc (NASDAQ: SAGE): Back-to-back Blockbuster Trials

Sage is a six-year old biotechnology company that focuses on the treatment of central nervous system (CNS) disorders. It had been developing brexanolone, a derivative of a compound found naturally in the brain, for the treatment of SRSE. In September, however, it announced that the drug had failed primary and secondary endpoints in a late stage clinical trial.

In an unexpected turn of events, however, two late-stage trials of brexanolone for treating postpartum depression (PPD) proved successful, and shares vaulted over 50% on the company’s announcement of these results in November. “We believe the data represent an unprecedented opportunity in the development of treatments for PPD, and may serve as the catalyst for a paradigm shift in how the disease is approached and, if approved, may change how PPD is treated,” said Jeff Jonas, M.D., chief executive officer of Sage in a statement.

Sage followed that up with a humdinger – its SAGE-217 anti-depression therapy for patients suffering from moderate-to-severe major depressive disorder (MDD), who showed statistically significant improvement the day after the first dose, and for the following four weeks.  The company said that that 64 percent of patients achieved MDD remission using the SAGE-217 drug in the 15th day of treatment. The study covered 89 patients and the therapy has been accorded a fast-track designation by the FDA. Steve Kanes, M.D., Ph.D., chief medical officer of Sage Therapeutics said, “If successfully developed, SAGE-217 has the potential to offer the first truly new mechanism of action in the pharmacologic treatment of depression in more than 20 years.”

“SAGE-217 is a novel, highly potent and selective, next generation GABAA receptor positive allosteric modulator that is being developed as a once-daily, oral therapy for the treatment of various CNS disorders. SAGE-217 was discovered by Sage, and the Company maintains worldwide rights to the compound.” (From the press release)

SAGE Therapeutics Inc (NASDAQ: SAGE) Market Opportunity

Analysts expect that brexanolone for moderate or severe postpartum depression in women would obtain FDA approval in 2018 and launch in the latter half of that year. According to RBC analyst Brian Abrahams, brexanolone could be worth $ 600 million to Sage, having a probability of success of 90%. SunTrust Robinson Humphrey analyst Edward Nash thinks the drug is a “potential blockbuster,” with the likely patient population size being approximately 700,000 women in the US.

SAGE-217 is another matter, however. According to the National Institute of Mental Health, about 16 million adults had at least one major depressive episode in 2015. So, this is a very large market, and Sage is bringing to it a new mechanism for treatment that works much faster than what is currently available. According to Leerink analyst Paul Matteis, SAGE-217 is a likely game changer in the treatment of depression.

According to Cowen analyst Ritu Baral, SAGE-217 “can potentially become the first line treatment for MDD with the potential for premium pricing to even branded SSRIs” (Selective Serotonin Reuptake Inhibitors) because of its “unique mechanism, superior efficacy, faster onset and good tolerability (as well as potential benefits on sleep.” In Baral’s opinion, the drug could address peak MDD sales of $ 1.5 billion, as well as further sales towards Parkinson’s disease and essential tremor.

SAGE Therapeutics Inc (NASDAQ: SAGE) Stock Assigned Lofty Targets by Analysts

Given the blockbuster opportunity, it’s no surprise that the stock has received substantial re-ratings and very high new price targets by eminent analysts.

  • Leerink $246
  • RBC $280
  • Cowen $202
  • Needham $193
  • Canaccord S191
  • Chardan Cap $225
  • Suntrust $178

At the time of writing, today, SAGE shares are up nearly 10% to $171.87.

Smart investors who subscribed to the company’s $345 million public offering of common stock in November at $85 per share, are laughing to the bank, having doubled their investment in less than a month.

That public issue has also bolstered the cash arsenal of $243 million that Sage held as at end-September. The company is now sufficiently juiced to develop its (rather) substantial drug pipeline.

SAGE Therapeutics Inc (NASDAQ: SAGE) Clinical Milestones

Phase 3 Hummingbird Study (202B) of brexanolone in severe PPD (4Q 2017) ü
Phase 3 Hummingbird Study (202C) of brexanolone in moderate PPD (4Q 2017) ü
Phase 2 trial of SAGE-217 in MDD (4Q 2017) ü
Part C of Phase 2 trial of SAGE-217 in essential tremor (4Q 2017)
Phase 2 trial of SAGE-217 in PPD (1Q 2018)
Phase 1 multiple ascending dose trial of SAGE-718 (2H 2018)

 

From the above it appears that Sage could commercialize a number of drugs in the relatively short period of a few years, and that 2018 could prove to be a watershed year for the company.

Images Source: Sage Therapeutics web site

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