Sage advice takes Marinus higher

Apparently the way for investors to play yesterday’s release of results from a tiny study of Sage Therapeutics’ SAGE-547 was to build a position in Marinus Pharmaceuticals, another US biotech working on a similarly acting molecule.

While Sage closed up 15% yesterday Marinus enjoyed a 29% stock surge. Looking beyond the obvious conclusion that this is all a symptom of biotech bubble mania – Sage’s data came from a single-arm, four-patient trial in a CNS indication – the markets will now want to know whether there is anything to justify Marinus having a valuation of just $175m at a time when Sage is worth $2.5bn.

One obvious fact is that the Marinus compound in question, ganaxolone, has been knocking around since the 1990s when it was being studied by CoCensys; that biotech was later sold to Purdue Pharma, and in 2003 Purdue licensed ganaxolone to Marinus.

Both SAGE-547 and ganaxolone are GABA-A modulators, a mechanism that has been used in CNS disorders for decades for sedation and treating conditions such as anxiety. Both also use a formulation called Captisol, licensed from Ligand Pharmaceuticals.

But until now neither had actually been in formal development for postnatal depression – the subject of the four-patient trial that read out yesterday. SAGE-547 is in phase III studies for super-refractory status epilepticus (SRSE), while ganaxolone’s lead indications are epilepsy and fragile X syndrome (Novartis exit leaves Fragile X pipeline in an even more frail state, May 1, 2014).

Exploratory

Sage called the postnatal depression trial exploratory, and reported a mean 24.7-point improvement in the Hamilton Rating Scale for Depression score, a secondary endpoint, with no serious adverse events over 30 days’ follow-up. The study was to enrol 10 patients, but was stopped when SAGE-547 induced remissions in the first four.

Now, interesting though the response might be, it is surely a stretch to equate it to Sage’s $328m market cap uplift. For a start CNS disorders are notoriously tough in a randomised clinical study, with high placebo responses scuppering many trials; of course the Sage study had no placebo group.

Leerink analysts, however, felt sufficiently confident to add an extra $790m of peak sales, subsequently cut by 80% to account for risk of failure, into their Sage model. They expect SRSE to bring in $1.9bn at peak, adjusted by a 70% success probability; Sage said it would study postnatal depression in a placebo-controlled setting.

So how serious is the read-across to Marinus’s ganaxolone? The two compounds are actually remarkably similar: SAGE-547 is a formulation of the steroid allopregnanolone, while ganaxolone is a synthetic analogue, comprising allopregnanolone with an extra methyl group to prevent conversion back to an active steroid and eliminate unwanted hormonal effects, Marinus says.

Both Sage and Marinus floated on Nasdaq last year. Clearly, given the generic status of allopregnanolone and the long development time of ganaxolone, both will likely have to rely on formulation patents.

And the two biotechs are not alone. La Jolla Pharmaceutical’s LJPC-0712 is another formulation of allopregnanolone, in preclinical development for Niemann-Pick disease; numerous companies are working on other GABA-A modulators, including Concert Pharmaceuticals, another 2014 Nasdaq entrant, with the muscle relaxant CTP-354.

Considering the caveats around the IP, study design and risk of pursuing CNS indications it is clear that Sage has been the beneficiary of biotech bull market sentiment. Marinus being less overvalued than Sage does not make a very compelling investment proposition, but at these levels the former is surely a safer bet.

To contact the writer of this story email Jacob Plieth in London at [email protected] or follow @JacobPlieth on Twitter