Biotech and Pharma

Sage's oral depression therapy fails in late-stage trial; shares plunge

Key Points
  • Sage Therapeutics said its experimental drug failed to improve the condition of patients with severe depression in a late-stage study.
  • The disappointing news set up the drugmaker to lose about $4 billion in valuation when the market opens.
  • The hotly anticipated data was expected to allow the company to widen its reach in the multibillion-dollar depression market it entered with its first-approved drug, Zulresso, for postpartum depression.
Monika Skolimowska | picture alliance | Getty Images

Sage Therapeutics' experimental drug for severe depression failed a closely watched study, setting up the drugmaker to lose about $4.5 billion in valuation when the market opens.

The trial data shocked investors rooting for the therapy, SAGE-217, that would have allowed the company to widen its share in the multi-billion dollar depression market it entered earlier this year with its postpartum depression drug Zulresso.

The company was testing SAGE-217 for a fixed course of 14 days. Currently available antidepressants are required to be taken for months, even years.

At the 15-day mark, however, the oral therapy did not produce a statistically significant improvement in patients scored across 17 different parameters, including anxiety and insomnia.

"These data will inevitably take the 'halo effect' off SAGE-217 in the eyes of investors," Stifel analyst Paul Matteis said in a note.

However, Matteis remains reluctant to throw in the towel on the potential blockbuster; says the data still showed evidence of effectiveness and that the drug achieved statistical significance at days 3, 8 and 12.

"The failure is a surprise in one sense, but in another sense, not at all unprecedented: even Prozac (had) failed in a number of efficacy studies," he added.

SAGE-217 works by targeting receptors of a neurotransmitter known as GABA, helping restore the normal balance in the brain.

The drug was generally well-tolerated with a safety profile comparable to placebo, the company said.

Shares of the company fell 58% to $62 before the bell.