Sage Therapeutics' Stock Plummets 49% Following FDA Decision

August 07, 2023: Sage Therapeutics Inc. faced a significant setback as its stock price plummeted by 49% after the U.S. Food and Drug Administration (FDA) approved quinolone treatment for postpartum depression but rejected its use for major depressive disorder (MDD), a more common condition. This decline in stock value represents the second-largest drop since the company went public in July 2014.

The FDA’s decision dealt a blow to Sage’s hopes of expanding the use of zuranolone to treat MDD, which would have presented a far more excellent market opportunity. The FDA issued a complete response letter (CRL) for the new drug application for MDD, stating that the evidence provided did not support zuranolone’s approval for MDD treatment and that additional studies would be required.

As a result of the disappointing news, several financial firms took action. Oppenheimer and Wedbush downgraded Sage’s stock, and Truist put its rating and stock price target under review. Trust expressed caution over another Sage drug, SAGE-718, which is being evaluated for cognitive decline related to Huntington’s, Parkinson’s, and Alzheimer’s diseases.

Sage Therapeutics’ CEO, Barry Greene, responded that the company is reviewing the FDA’s feedback and evaluating its next steps. He emphasized the importance of resource allocation, pipeline prioritization, and workforce reorganization to extend their cash runway. The company plans to provide further details and next steps before the end of the third quarter.

The FDA’s decision impacts Sage Therapeutics’ financial standing and raises questions about the company’s overall valuation. Analysts from Oppenheimer and Truist highlighted that zuranolone’s lack of efficacy for MDD was unexpected and has significant implications for the company’s future.

Practical Takeaways:

• Investors should closely monitor Sage Therapeutics’ actions in response to the FDA’s decision and strategic plans.
• The rejection of zuranolone for MDD treatment may impact the company’s valuation and future investment decisions.
• Sage’s focus on developing other drugs, like SAGE-718, will be critical for its future growth and success in the pharmaceutical market.

In conclusion, Sage Therapeutics faces a challenging period following the FDA’s decision, with its stock value taking a significant hit. The rejection of zuranolone for MDD has prompted the company to reassess its plans and resources to navigate the road ahead successfully. Investors and stakeholders will closely watch Sage’s actions and strategic decisions in the coming months.