FDA Decision on Depression Drug Sends Sage Therapeutics Stock Plummeting

Shares of Sage Therapeutics plummeted by more than 50% on Monday following the Food and Drug Administration’s approval of the biotech company’s oral drug, zuranolone, for postpartum depression. However, it was not approved for major depressive disorder, which represents a larger potential market.

Shares of Biogen, the company that co-developed the treatment with Sage, experienced minimal changes in market value.

The FDA’s recent approval of Zuranolone on Friday marks a significant milestone as it becomes the first oral treatment for postpartum depression, a condition that affects one in eight women during and after pregnancy, impairing their daily functioning.

Sage and Biogen also submitted their application for Zuranolone’s approval for major depressive disorder, also known as clinical depression. However, the FDA deemed the evidence provided insufficient to support its effectiveness against this condition, which affects a much larger patient population.

It is estimated that approximately 17.3 million American adults, or around 7% of individuals aged 18 and older, experience clinical depression in a given year.

Based on Jefferies analyst Michael Yee’s research note, Zuranolone had the potential to generate $1 billion in peak sales, compared to a range of $250 million to $500 million for postpartum depression treatment. Yee highlighted that clinical depression held the greatest potential for the companies, whereas postpartum depression is a smaller market with potentially less profitability.

In a separate research note, Wells Fargo analyst Mohit Bansal emphasized that the clinical depression market accounts for 85% of the firm’s future sales estimates for Zuranolone. However, Bansal added that there may be a silver lining in postpartum depression, as pricing power in this market could be stronger.

Neither Sage nor Biogen has disclosed the price of Zuranolone for postpartum depression treatment.

The FDA stated that further studies might be necessary to support the approval of Zuranolone for clinical depression.

Yee mentioned that Biogen is unlikely to initiate another late-stage study on Zuranolone for clinical depression due to cost-saving efforts and recent layoff announcements.