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Biogen stocks up on Sage’s brain drugs in $3B deal

Biogen, the world’s largest biotech focused on brain diseases, is adding two experimental medicines to its arsenal through a collaboration with a fellow Cambridge, Massachusetts-based drugmaker, Sage Therapeutics, that could be worth more than $3 billion.

The deal, which the companies expect to close by January, would give Biogen rights to a treatment for multiple types of depression, called SAGE-217 or zuranolone, as well as a treatment for essential tremor and other neurological disorders, called SAGE-324.

Per the terms of the agreement, Sage will receive over $1.5 billion to start, including an $875 million payment and a $650 million equity investment that gives Biogen a 10.7% stake in the company. Sage may later take home up to $1.6 billion more from its partner, provided the two programs hit certain milestones.

The deal comes as both companies are under pressure to get new drugs to market.

Biogen, in particular, faces a challenging future should its bid to win approval for a controversial Alzheimer’s disease treatment fail, a more likely prospect after a panel of independent experts panned the drug earlier this month. Competition has started eating away at the company’s top-selling medicine as well as its biggest growth product. And on the research side, Wall Street hasn’t found much to be excited about outside of Alzheimer’s in Biogen’s high-risk pipeline of neurology drugs.

Sage, meanwhile, has just one product, Zulresso, which in early 2019 became the first ever drug approved for postpartum depression. Despite the historic approval, Zulresso has been hamstrung by a burdensome administration that involves a 60-hour infusion in a certified healthcare facility. Net revenue from the drug totaled $1.6 million during the third quarter, while Sage recorded a net loss of $105 million over the three-month period.

Partnering could therefore help Biogen and Sage fill out their portfolios faster. The companies have agreed to evenly split the costs for developing zuranolone and SAGE-324. And if all goes according to plan, they’ll also evenly split the profits and losses from commercializing the drugs in the U.S.

“This gives us a real acceleration point,” Mike Cloonan, Sage’s chief operating officer, told BioPharma Dive.

While they tempered their expectations for Zulresso, analysts have predicted a much larger market opportunity for zuranolone. The drug comes as a pill, and has shown some promising effects on multiple types of depression.

Last year, though, zuranolone failed a large study meant to support approval in major depressive disorder, or MDD. Sage subsequently launched three more trials to prove the drug can help in postpartum depression; in MDD as an acute “rapid response” treatment given alongside another antidepressant; and in MDD as an episodic therapy. The studies should complete by mid- to late-2021.

“I suspect all three are very useful trials, and very important for approval,” Biogen’s head scientist, Al Sandrock, said on a Monday morning call with investors.

Biogen argued zuranolone, if approved, would be “highly complementary” to its core areas of research, which include multiple sclerosis, spinal muscular atrophy, and neurodegenerative illnesses like Alzheimer’s, Parkinson’s disease and ALS. The company estimates about 30% of ALS patients, 40% of Alzheimer’s patients and 50% of MS patients experience depression. More broadly, each year millions of people in the U.S. show symptoms of depression.

SAGE-324 may be useful for a large number of patients, too, since research indicates millions of people in the U.S. alone have essential tremor, making it one of the most common movement disorders. A Phase 2 study is currently ongoing.

While analysts acknowledged these potential upsides, they also questioned the timing of the deal. In Biogen’s case, the company was asked whether this new collaboration had anything to with the outlook surrounding that closely watched Alzheimer’s drug, known as aducanumab. The company maintained that it did not.

“A good deal is a good deal,” said Michael McDonnell, Biogen’s chief financial officer. “You should not link it to aducanumab in any way; it stands on its own.”

In Sage’s case, analysts wondered why the company chose to license rights away before its zuranolone trials read out. If successful, the trials could have given Sage more leverage to negotiate better deal terms.

Sage executives explained that doing the deal now not only propels zuranolone and SAGE-324 forward, but also provides the cash needed to spur other pieces of the business. Kimi Iguchi, the biotech’s chief financial officer, told BioPharma Dive the deal could end up helping Sage’s neuropsychiatry franchise, which is led by a drug called SAGE-718 that’s in clinical testing as a treatment for cognitive dysfunction in patients with neurodegenerative disorders.

Sage’s CEO Jeffrey Jonas echoed that selling point, highlighting how SAGE-718 has shown positive signals in early-stage testing of Huntington’s disease patients.

“If we have data like that in, let’s say, Alzheimer’s or ADHD … we are now able to move those products along without having to sustain further dilution or further cash raises. So it will really allow us to monetize our product engine,” Jonas said during a call with investors, which was separate from the Biogen call.

Biogen’s equity investment has it buying roughly 6.2 million newly issued shares of common stock at a price of $104.14 per share, reflecting a 40% premium to Sage’s volume-weighted average share price over the last month.

“This is one of the largest strategic collaborations in the brain health space,” Iguchi told BioPharma Dive. “Now, we have the financial flexibility and the operational flexibility to really think about and invest in those areas.”

Such financial flexibility is needed for Sage, which was forced in April to lay off half of its roughly 650-person workforce as it focused resources on zuranolone.

Shares in Sage fell nearly 9% in holiday-shortened trading on Friday, while Biogen stock rose by nearly 1%. After the calls Monday, Sage was down another 9% in early trading, while Biogen had slipped by about 1%.