Sage puts job cuts and pipeline trims on the table after FDA rejects its pill for major depression

Sage Therapeutics announced plans for a “pipeline prioritization and a workforce reorganization” on Monday morning after the FDA rejected its experimental pill for major depressive disorder in a surprise move on Friday evening.

The company’s stock was down 50% in trading on Monday morning, putting its market capitalization close to the company’s cash levels.

Executives at the Cambridge, MA-based company appeared blindsided by the FDA’s decision in remarks made during the second-quarter earnings call on Monday. “We found out late in the review cycle about the FDA’s view on the approval ability of MDD,” Sage CEO Barry Greene said.

Some experts thought the data from Sage’s studies in MDD were murky, and the FDA wasn’t convinced of the drug’s effectiveness in major depression. But the agency did approve the drug, known as zuranolone and now marketed as Zurzuvae, for postpartum depression, making it the first-ever pill for a frequently overlooked condition that affects an estimated 500,000 women each year.

Yet Sage and its development and commercialization partner Biogen were banking on an approval in the far more prevalent form of depression in order to turn Zurzuvae into psychiatry’s next blockbuster product. “We are extremely disappointed for patients, and we don’t agree with the FDA’s view,” Greene said.

During the call, analysts peppered Sage with questions about the future of Zurzuvae. Would Biogen remain committed to the smaller postpartum depression market? What will resource allocation look like between the two companies? Is Sage committed to doing another study in major depression if that’s what it takes to get an FDA approval?

Barry Greene

Greene wouldn’t directly answer those questions, and he instead repeated his disagreement with the FDA and disappointment for patients. “We’re reviewing the feedback and evaluating next steps, and we really can’t comment further,” he said in a typical response.

Sage also wouldn’t share Zurzuvae’s price. Greene said that because the company planned on launching the drug in both postpartum depression and major depression at the same time, it will have to go back and “re-engage payers.”

Kimi Iguchi

Details about potential job cuts and pipeline trims, which were first announced in a news release on Monday, were also scant. “We expect our evaluation of our resource allocation will incorporate the feedback from the FDA,” CFO Kimi Iguchi said, adding that Sage plans to provide additional information by the end of the third quarter.

The company had been planning or evaluating the potential of zuranolone for treatment resistant depression, generalized anxiety disorder and bipolar depression, though the future of those programs is now unclear. It’s also developing other drugs, including one for several neurodegenerative diseases including Alzheimer’s, Parkinson’s, and Huntington’s diseases. “The data we’ve seen today is exciting in terms of cognitive improvements,” Greene said.

While Zurzuvae’s approval for postpartum depression alone may not be enough to satisfy investors, the drug is a major win for women’s health. But exactly how many doctors will prescribe it and how many patients will take it is an open question.

The treatment is a two-week course of pills taken once a day, which should make it much more accessible to patients than Sage’s previous postpartum depression drug Zulresso, which is administered as an infusion during a three-day hospital stay. It requires constant monitoring due to side effects that can cause loss of consciousness.

Laura Gault

Zurzuvae can also cause sedation and comes with its own boxed warning noting that people should not drive or engage in other potentially dangerous activities for 12 hours after taking each pill. CMO Laura Gault told investors that the label was “not surprising,” and that the clear instructions should make it easier for doctors to give guidance to patients.

The FDA’s label also noted that Zurzuvae has potential for abuse. That warning complicates Sage’s efforts to differentiate its drug from benzodiazepines, which include medications like Valium and Xanax that are well known for their addiction potential. Gault said that the 30 mg and 60 mg doses — within the range recommended by the FDA — have less abuse potential than benzodiazepines, but a 90 mg dose had similar potential.

Sage expects Zurzuvae to be commercially available in the fourth quarter this year after it undergoes scheduling at the Drug Enforcement Administration, a process that typically takes 90 days. The first commercial sales of the drug could earn Sage a $75 million milestone payment from Biogen.

Sage’s market capitalization dropped to $1.09 billion, close to the $1.0 billion in cash, cash equivalents, and marketable securities that it had as of the end of June. Those assets, plus anticipated funds from collaborations and drug sales, could sustain the company into 2025. Sage said that pipeline trims and job cuts may also extend its runway.

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