Sage Therapeutics Inc.’s chief business officer, Michael Cloonan, said the firm is “not going to give details around the geographies and the number of sites” that will continue to use Zulresso (brexanolone) for postpartum depression (PPD) after the restructuring of the Cambridge, Mass.-based firm. “Our real focus now is [that] we want to continue to be committed to Zulresso, the moms, the physicians and the sites that have been existing and active along the way,” he told investors during a conference call. In a press release, Sage blamed “headwinds we are facing individually and collectively.”

Sage is saying goodbye to more than half of its workforce – about 53%, or 340 people – in a maneuver that’s expected to result in annual savings of about $170 million, with $150 million related to selling, general and administrative expenses. The staff cuts mainly will affect commercial operations for Zulresso, cleared by the FDA in March 2019 for PPD. That approval wasn’t much of a surprise. In November 2018, the compound – which consists of allopregnanolone, a positive, allosteric modulator of synaptic and extrasynaptic GABA type A receptors – gained the blessing of a joint meeting of the FDA's Psychopharmacologic Drugs Advisory Committee and Drug Safety and Risk Management Advisory Committee. Members voted 18-0 in favor with no abstentions. Zulresso, though, is available only through a restricted program and is given as a continuous intravenous infusion over a 60-hour period.

Based on the current operating plan and assumptions, the company said, its balance of cash, cash equivalents, restricted cash and marketable securities of about $1 billion at the end of 2019 will support operations into 2022. The firm will incur a one-time cost of about $31 million, mainly in the second quarter of 2020, as a result of the latest move. Operating expenses for 2020 will be lower than the previous year, but detailed guidance won’t be available until the first-quarter earnings update in May.

“We're very focused on the depression franchise, and we still see [that] this level of commitment with Zulresso will help us take the lessons learned from the launch in PPD and apply some of those lessons to SAGE-217 [zuranolone],” an oral therapy that bears a mechanism of action similar to Zulresso, Cloonan said. “We went through a very rigorous prioritization process. It was not easy to make these decisions, but we think this is going to put Sage in the best position in the short and midterm to continue to thrive.”

Less than a month ago, Sage disclosed the next steps in the Landscape Program, the clinical push testing zuranolone against PPD and major depressive disorder (MDD), following a breakthrough therapy guidance meeting with the FDA. The company identified three potential pathways intended, if successful, to support a possible U.S. filing for approval of zuranolone in two indications – PPD and acute treatment of MDD when co-initiated with a new antidepressant – along with the previously disclosed development plan for the treatment of MDD as an episodic therapy.

Patience, analyst says

Sage said all of the in-progress trials and those planned with zuranolone remain on schedule, and the timing of expected readouts has not been affected. The 30-mg arm of the Shoreline study with zuranolone is still due to yield data in 2020, while the newly added 50-mg arm is expected to start later this year. Shoreline is evaluating 30 mg of zuranolone as open-label treatment, treatment-free intervals, and as-needed retreatment for return of MDD episodes over the course of up to a year. Patients will receive an initial two-week course of zuranolone and will be assessed every eight weeks for potential relapse of depressive symptoms. The three other phase III trials planned for short-term zuranolone use in PPD and MDD are in startup phases and should be completed by the end of 2020.

Wainwright analyst Douglas Tsao said in a report that the changes made by Sage were meant to “right-size the Zulresso commercial organization to better reflect the near-term realities imposed by COVID-19 as well as, in our view, a more realistic assessment of the market opportunity.” He noted that the company withdrew its previous revenue guidance for Zulresso, which called for a pickup in revenue growth in the second half of 2020. “These cuts to the Zulresso franchise make sense in light of the modest revenue growth seen to date,” and the hoped-for uptick in the second half of the year probably won’t come, he said. “COVID-19 makes it hard to envision that occurring, since hospitals are preoccupied addressing that public health crisis, essentially freezing the company’s efforts to bring on new sites until the pandemic subsides, which may take some time.” Active sites are pausing infusions due to a hospital bed shortage. “Even where beds may be available, patients’ willingness to come into a hospital for treatment is likely going to be greatly diminished” until the virus is brought under control, he pointed out.

Jefferies analyst Andrew Tsai sounded upbeat in his report, counseling investor patience. “We continue to the believe risk/reward is skewed to the upside, as we see a fairly high probability of success [PoS] for each of the three pivotal phase III studies with data later in 2021,” he wrote. “For PPD, the study should have a high PoS since it is essentially another re-run of the prior phase III that was positive. For MDD in ‘rapid response therapy,’ we also see a high PoS since a rapid antidepressant effect is a key hallmark of zuranolone (and Zulresso) that has been consistently observed across prior studies. For episodic MDD, the PoS should still be modestly high, as the study will enroll more severe patients (as well as use a higher dose).”

Shares (NASDAQ:SAGE) seemed not much affected by the restructuring news, closing at $30.01, up 98 cents.

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