Sage Therapeutics (NYSE:SAGE) is popped yesterday on FDA approval of its postpartum depression drug — the first of its kind. So far, SAGE stock is up 3%, but this on the back of a more than 70% run up year-to-date in anticipation of the news.
Postpartum depression is a sometimes life-threatening condition that can happen before or after a woman gives birth to a child. In serious cases, she may harm herself or her child as a result. It is estimated that as many as one in nine women who have recently given birth suffer from postpartum depression, but it is a little talked about condition, so up to half of cases go unreported. But now there is a specific treatment. Zulresso was approved as an IV treatment to be administered in a certified healthcare facility over 2.5 days.
With no other drug on the market to treat postpartum depression, Sage has no competition to worry about. And with a market cap of $7.8 billion — lower than the addressable market potential for this treatment — biotech investors cannot afford to ignore SAGE stock.
Efficacy of Zulresso
In two clinical studies where participants received Zulresso or placebo, those who were treated showed an improvement of depressive symptoms compared to the placebo group.
Sage Therapeutics recently raised $500 million through a SAGE stock offering on February 25. This cash infusion will give the company the capital it needs to roll out Zulresso following its approval.
Sage Is Sitting on Plenty of Cash
In its fourth quarter, SAGE lost $3.38 per share on revenue of just $0.28 million. But it ended the period with $922.8 million in cash, cash equivalents and marketable securities. This is up from $518.8 million at the end of 2017. Sage’s management said it has enough cash on hand to fund expenses until the second half of next year (2020).
Sage accelerated its R&D activity, which increased such expenses to $88.8 million, up from $50.9 million. IT spent $282.1 million in R&D for the full year 2018. Sage spent more on discovery efforts associated with identifying new clinical candidates, along with additional indications in its three CNS franchises. After the FDA approved Zulresso, R&D costs associated with Phase 3 clinical development may shift to marketing and G&A spend instead. Ahead of the launch, Sage spent $201.4 million in G&A costs, up sharply from $62.9 million last year.
Sage’s Full Pipeline
Within Sage Therapetics’ pipeline are more promising drugs. For example, SAGE-217 is being tested for efficacy in treating major depressive disorder, postpartum depression, biopolar depression and insomnia. Meanwhile, SAGE-324 has an indication for Parkinson’s Disease, Essential Tremor and Epileptiform Disorders.
The Bottom Line on Sage Stock
Even after Sage stock’s recent rally, 10 analysts who follow the stock have an average12-month target price of $198 — according to Tipranks. That’s more than 25% upside. Biotech investors who are looking for similar stocks could consider Neurocrine Bio (NASDAQ:NBIX) or Zogenix (NASDAQ:ZGNX).
Sage Therapeutics has a promising drug that will not face any competition. Markets already expect strong sales for Zulresso. The company has a strong cash balance and plenty of more drugs in the pipeline. For these reasons, biotech investors should take a serious look at SAGE stock.
Disclosure: As of this writing, the author did not hold a position in any of the aforementioned securities.
