Biogen is paying $1.5 billion upfront for a stake in Sage Therapeutics’ once-failed depression therapy zuranolone and an earlier-phase asset. The agreement gives Biogen rights to a drug that is closing in on data from three late-phase trials that will shape its future.
Zuranolone, also known as SAGE-217, failed a phase 3 major depression study late last year. Sage saw continued promise in the asset, though, leading it to embark on a three-pronged R&D program that could get zuranolone to market in 2022. Equally, zuranolone could fail the other three trials and be on the scrapheap by the end of next year.
Biogen, with its high stakes aducanumab gamble in the balance, has wagered $1.5 billion that Sage’s drug has a future. The Big Biotech is paying $875 million upfront and making a $650 million equity investment in Sage at a 40% premium to the stock’s recent trading average. Biogen is also on the hook for up to $1.6 billion in milestones.
In return, Biogen has secured 50% of any profits zuranolone generates in the U.S., while also sharing all costs and losses evenly with Sage. Biogen will handle development and commercialization in most ex-U.S. markets and pay Sage tiered royalties. The terms apply to GABA receptor positive allosteric modulator zuranolone and SAGE-324, a next-generation asset with a similar mechanism of action that Sage is assessing in essential tremor patients in a phase 2a clinical trial. Analysts covering Biogen welcomed the deal.
“We like this deal particularly because they paid an upfront and partnered it to bring it in rather than full-out acquiring it in front of very binary data in 2021. Hence – they get the milk without having buy the whole cow,” Jefferies analysts wrote in a note to investors.
Biogen entered into the deal after a long period in which investors have clamored for the company to buy in assets to mitigate threats and weaknesses affecting its core business. Sales of key products Spinraza and Tecfidera are suffering as competition for the spinal muscular atrophy and multiple sclerosis markets intensifies, creating a need for newly authorized treatments that drive growth.
Alzheimer’s disease drug aducanumab may meet that need, but its prospects are uncertain. The FDA’s briefing documents on the data set were relatively positive. Yet, the advisory committee took a more negative view of Biogen’s attempt to win approval on the strength of a re-analysis of trials that were stopped for futility. The panel almost unanimously voted against the drug.
The FDA may still approve aducanumab, though. If that happens, and the zuranolone trials succeed, Biogen could have two new potential blockbusters on the market by 2022. Equally, the FDA could reject aducanumab, forcing Biogen to choose between running a costly, high-risk study or dumping the asset, and zuranolone could fall short in the clinic again.
Sage’s decision to partner before the 2021 zuranolone data drop insulates it somewhat from both the upside and downside scenarios. Shares in Sage fell 9% in response to the Biogen deal, potentially due to doubts about sacrificing the upside for $875 million and the impact of the agreement on the near-term prospects of the biotech being acquired outright. Jefferies analysts were upbeat about the deal, though, pointing to its positive effects on Sage’s ex-U.S. prospects and cash balance.