Sage Plunges as Key Depression Study Fails to Show Benefit

(Bloomberg) -- Sage Therapeutics Inc. lost almost two-thirds of its value after an experimental treatment for major depressive disorder failed to reach its primary target in a key study.

The late-stage trial, dubbed “Mountain,” showed patients receiving SAGE-217 didn't get more relief than those taking a placebo for two weeks, regardless of the dose. The results cast doubt on the future of the drug, which had been a key part of investors' broadly bullish stance on Sage.

The shares tumbled a record 62% to the lowest level in more than two years, wiping out more than $4.6 billion in in market value.

Given past trial results, Wall Street had hoped the medicine would show a benefit at both day 15 and through longer-term follow-up. That wasn't the case. Even when looking only at patients with more severe disease who faithfully took the medicine -- the group most likely to respond to treatment -- the drug didn't significantly ease depression more than placebo after 42 days.

Read more: Sage Depression Drug Data Make Bulls Believers Despite Huge Risk

The study miss “will surprise the entire community” and force the stock to be range-bound between $50 and $90, according to Jefferies analyst Andrew Tsai. “The next steps are bit murky now and creates some near-term stock volatility,” he said in a note.

“It's clear the study didn't meet its primary endpoint, but if you look at the rest of the data points, even from the original analysis, it's pretty clear that the study directionally is very supportive of drug activity,” Sage Chief Executive Officer Jeff Jonas said by phone.

A sub-group analysis conducted after the original review suggested that patients with more severe depression and those who actually took a high dose of the medicine, with measurable amounts of it in their bloodstream, responded to treatment, the company said in a statement. Those getting a lower dose of the drug did no better than those on placebo.

Two patients developed serious adverse events after getting the high dose, including one who attempted suicide and who who developed a bile duct stone. Both patients had suffered from similar struggles before starting the trial.

“Nine percent of the overall population had undetectable drug levels,” Jonas said. “This is a long-acting drug, so low levels like that really indicates they just didn't take the drug.” The challenge of patients not taking the drug was limited to a small number of sites, he said.

A key selling point for SAGE-217 compared to existing medicines has been its rapid activity, which Jonas says was showcased by signs of improvement as early as day three. That, combined with a safety profile that may allow it to try a higher dose, gives the company hope, Jonas said.

The drug likely missed its primary target because of some “very simple technical factors,” Jonas said.

Stifel analyst Paul Matteis was also reluctant to throw in the towel and recommended that clients buy shares after Thursday's plunge.

“These data will inevitably take the ‘halo effect' off SAGE-217 in the eyes of investors,” he wrote in a research note. “But, in our minds, we still think the drug has blockbuster potential, even if that may be delayed.”

The failure marks Sage's first setback with the drug after delivering earlier-stage wins and two pivotal studies showing benefit in major depressive disorder and postpartum depression. Three other large trials of the drug are still underway.

Jonas said the company intends to continue analyzing the results and discuss the findings with U.S. regulators. Additional data are expected to be presented at an upcoming medical congress.

To contact the reporter on this story: Bailey Lipschultz in New York at blipschultz@bloomberg.net

To contact the editors responsible for this story: Catherine Larkin at clarkin4@bloomberg.net, Michelle Fay Cortez

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