Biogen Inc. and Sage Therapeutics Inc. took Wall Street by surprise with a global tie-up and licensing deal to jointly develop Sage’s late-stage zuranolone (also known as SAGE-217) for major depressive disorder (MDD), postpartum depression (PPD) and other psychiatric disorders. SAGE-324 for essential tremor (ET) and other neurological disorders is included in the pact.

From Cambridge, Mass.-based Biogen, Sage, also of Cambridge, is banking about $1.52 billion in cash, comprised of an up-front payment of $875 million and a $650 million equity investment as well as potential milestone-related rewards, profit sharing and royalties. The equity buy involves about 6.2 million newly issued shares of Sage common stock at a price of $104.14 each, a premium of 40% over the 30-day volume-weighted average share price of $74.39 per share as of Nov. 25, 2020. Sage was trading (NASDAQ:SAGE) this morning at $75.71, up 14 cents.

Under the terms, Biogen gets an exclusive license to develop and commercialize zuranolone and SAGE-324 outside of the U.S., excluding rights to zuranolone in Japan, Taiwan and South Korea. A neuroactive steroid GABAA receptor positive allosteric modulator, zuranolone represents a potential first-in-class, two-week, once-daily oral therapy for MDD and PPD. It’s undergoing phase III development in programs called Landscape and Nest. The compound has won breakthrough therapy designation from the FDA.

With a quick onset of action sustained benefit beyond the period of dosing, zuranolone could provide a paradigm shift for patients, with as-needed therapy in depression, thereby dodging the well-known problems with antidepressants – though Biogen officials conceded that an education push for doctors will likely be necessary.

About 17 million Americans experience symptoms of MDD each year. In September, the Journal of the American Medical Association published findings that depression in the U.S. is more than three times more prevalent during the COVID-19 pandemic than before. PPD is one of the more common medical complications during and after pregnancy. In the U.S., about one of every eight mothers experiences symptoms, which amounts to about 500,000 annual cases.

SAGE-324 is a next-generation positive allosteric modulator of GABAA receptors in the works at the phase II stage for ET, with prospects in conditions such as epilepsy and Parkinson’s disease. A prevalent movement disorder, ET strikes more than 6 million in the U.S., and has been advanced to the study called Kinetic based on positive findings in phase I.

Wainwright analyst Douglas Tsao said those at his firm were “left scratching our heads” by the deal, “considering that the crown jewel of Sage's portfolio is poised for readouts from pivotal studies next year.” He allowed in a report that the terms address Sage’s capital needs, but opined that “most investors would have preferred to see the company retain a greater share of the zuranolone rights, since the asset appeared relatively de-risked after the recent top-line readout from the Shoreline study.”

Tsao deemed Biogen’s credentials in central nervous system disorders “impeccable,” but pointed out that the company has “no commercial or development expertise in psychiatry. While the companies noted that depression is a common co-morbidity in patients with various neurological disorders, and zuranolone's potential for episodic dosing would be attractive for these patients, we think the larger opportunity remains with psychiatrists,” he said.

Shares of Biogen (NASDAQ:BIIB) were trading at $241.60, down $2.18.