The whopper deal between Biogen Inc. and Sage Therapeutics Inc. – a global collaboration and licensing deal involving the latter’s zuranolone (also known as SAGE-217) for major depressive disorder (MDD), postpartum depression (PPD) and other psychiatric disorders, as well as SAGE-324 for essential tremor (ET) and neurological disorders – drew mixed reviews from Wall Street. And, for Biogen investors, the would-be Alzheimer’s disease (AD) therapy aducanumab remains front of mind.

From Cambridge, Mass.-based Biogen, Sage, also of Cambridge, is collecting about $1.52 billion in cash, comprising 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. Sage shares (NASDAQ:SAGE) closed at $74.09, down $1.48.

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 and 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. “We are prepared for that,” CEO Michel Vounatsos said during a conference call with investors.

Al Sandrock, the firm’s vice president of R&D, said MDD and PPD “overlap quite significantly. The triggers may be different, but I think downstream, [they involve] very similar pathophysiology,” and the clinical evidence is strong for both. The three-study program, he pointed out, includes a trial called Coral, exploring the use of zuranolone in combination with sertraline in MDD, so that physicians can consider that route. “I suspect that all three are useful trials and very important for approval,” Sandrock said, adding that other indications could include depression in bipolar disorder. “You worry about inducing mania” when attempting to treat the other main symptom of the condition. “I think this drug may have potential there.” Asked about safety – especially with regard to sedation events – he said about 2,500 patients have been on the drug so far, including several hundred on a high dose. “When you have a two-week dosing period, and you take the drug at night, these issues can be mitigated,” he said.

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 the drug 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.”

Backfill bill ‘a pretty penny’

Sage CEO Jeff Jonas said during a conference call that officials at his firm “have a very different view of it. We understand that to a lot of investors that [the phase III trial known as Waterfall, or MDD-301B] is binary, but to Sage, our goal has always been to be an independent brand health company [that] could exploit the value of our programs and monetize our product engine, and this really allowed us to do that.” The present “seems the time is right to do it, vs. waiting for data and at that point deciding what to do.” Michael Cloonan, chief operating officer of Sage, said the situation “isn’t just about waiting for Waterfall” data. Over the last few months, Sage has reported six-month follow-up data from the phase III MDD study called Mountain as well as results from the phase III open-label experiment known as Shoreline, also in MDD.

Wainwright’s 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.

Jefferies’ Michael Yee noted that the key driver for Biogen remains an FDA decision on aducanumab, the anti-amyloid beta monoclonal antibody partnered by the firm with Eisai Co. Ltd., of Tokyo, which in early November was given the hairy eyeball during an advisory panel meeting. “We remain optimistic the FDA could still approve the drug due to the totality of evidence, agreements on a label and risk evaluation and mitigation strategies, and the fact that many of our key opinion leaders said it is reasonable to approve and it would not be surprising” if gatekeepers granted the go-ahead, he said in a report.

Oppenheimer’s Jay Olson, later in November, mulled aducanumab’s odds “ahead of the March 7 PDUFA [date] that many investors have already forgotten about.” He believes aducanumab “may provide a clinical benefit in APOE4 carriers only and may not benefit noncarriers, and any difference in the rate of placebo decline between APOE4 carriers and noncarriers is likely irrelevant,” he wrote in a report. “Biomarkers used to guide aducanumab development and correlate with clinical benefits may not be ideal,” he added, but maintained his outperform reading on the shares.

In any case, BTIG analyst Thomas Shrader said that, “given the lofty prices in the sector and the need for Biogen to do something, this [Biogen] deal looks decent,” acknowledging in a report that “other partners have commented that Biogen is still very good at the regulatory and commercial side of neurology, if not the R&D powerhouse it once was.” Piper Sandler’s Christopher Raymond hailed Biogen’s “backfill efforts,” even if they “cost a pretty penny.”

Covering Sage, Mizuho analyst Vamil Divan reminded investors that his firm “previously expressed our concern with Sage being able to disrupt the large MDD market with zuranolone on their own. Partnering with Biogen should help in that regard, although the terms of the deal lead us to wonder if Sage could have extracted more value for the assets,” he said in a report.

Shares of Biogen (NASDAQ:BIIB) closed at $240.17, down $3.61.

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