Biogen’s Sage advice amounts to $1.5bn

Sage gets a big endorsement for zuranolone, but the markets say it should have waited until it had a stronger negotiating position.

Deals

Fresh from a pasting at the hands of a US advisory panel over its big Alzheimer’s hope, aducanumab, Biogen has turned to business development, giving Sage $1.5bn on Friday for rights to two neurology projects, zuranolone and SAGE-324.

This marks a remarkable bet on Sage, whose clinical luck was running out, and whose $4bn market cap was starting to look overdone. However, with key pivotal data fast approaching the question Sage investors want answered is why their company did the deal now, and whether this suggests a lack of confidence in zuranolone.

Clearly the markets had been hoping for something better than $1.5bn, and Sage stock closed down 9% on Friday. At an investor call today the company fielded multiple questions from analysts wanting an explanation about the deal’s timing, but did not really give a convincing answer.

Evercore ISI had earlier written that Biogen was effectively getting more than half of zuranolone for about $2.2bn, including possible milestones. This is about half of Sage’s market cap, and compares against zuranolone’s risk-adjusted NPV of $1.7bn, as computed by Evaluate Omnium based on sellside consensus forecasts.

Zuranolone, the deal’s most important asset, flunked the key Mountain study in major depressive disorder last year. But several additional phase III trials, all using the logic that higher dosing should avoid another disappointment, are on the verge of generating data, the most important being the Waterfall trial.

Late-stage studies of zuranolone (SAGE-217)
Therapy area  Trial Details Data?
MDD (Landscape programme) Waterfall 50mg vs placebo, acute treatment Topline H1 2021
Shoreline Open label, 30mg or 50mg, as needed repeat treatment Topline from 50mg cohort 2021
Coral 50mg vs placebo, on top of sertraline, acute rapid response therapy Topline 2021
Mountain 20mg or 30mg vs placebo Failed primary endpoint (chg in HAM-D vs placebo at day 15) at both doses
MDD-201 (ph2) 30mg vs placebo, moderate to severe Succeeded: chg in HAM-D 17.6 vs 10.7 points at day 15 (p<0.0001)
PPD (Nest programme) Skylark 50mg vs placebo, severe Topline 2021
Robin 30mg vs placebo, severe Succeeded: chg in HAM-D 17.8 vs 13.6 points at day 14 (p=0.0029)
MDD=major depressive disorder; PPD=postpartum depression; HAM-D=Hamilton rating scale for depression. Sources: clinicaltrials.gov, EvaluatePharma & company releases.

On today’s call Sage insisted that a deal depended on finding the right partner, and not on timing; the Biogen tie-up is a “deal we’d have been pleased to do at any time”, said its chief executive, Jeff Jonas. He played up the fact that Biogen could enable more efficient launches and faster uptake, and that the up-front cash could immediately be invested in the rest of Sage’s pipeline.

However, before the Mountain study failure Sage’s market cap had stood at $8bn, and success in Waterfall should be expected to send the stock up again. In such a scenario Sage could have counted on raising substantial cash from investors – without giving away any of the economics of zuranolone.

Of course, the other possibility is that Waterfall fails, in which case Sage would look smart by having done the deal early. For this reason the markets assumed that the transaction’s timing reflected Sage’s lack of confidence in the upcoming pivotal readouts.

Essential tremor

SAGE-324, the second asset Biogen picks up, is in development for essential tremor, but does not carry significant sellside forecasts. It is a Gaba-A modulator, a mechanism it shares with zuranolone and with Sage’s Zulresso, a drug approved for postpartum depression.

On today’s call Sage outlined the $1.6bn of future payments it stands to receive, saying $1bn related to commercial milestones for zuranolone and SAGE-324, and up to $300m for each was linked to sales thresholds. Investors will also note that Sage had to give Biogen equity in return for $650m of the up-front fee.

Sage would not say whether it had spoken to any other potential partners. For Biogen this move into psychiatry has come shortly after it paid Denali $1.0bn for a Parkinson’s disease project.

Stifel analysts speculated that the big biotech might now be in the market for other psychiatry companies, and named Karuna, Acadia and Neurocrine as “standouts”. However, none of these stocks moved appreciably on Friday or this morning.

This is an updated version of a story first published on November 27.

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