Dive Brief:

• Sage Therapeutics will hand Japanese pharma Shionogi rights to one of its experimental depression drugs in several Asian countries, receiving in return $90 million in upfront cash that will further add to the biotech's sizable warchest.
• Per the deal, Shionogi will develop SAGE-217 for major depressive disorder in Japan, South Korea and Taiwan. If all goes well, Sage stands to earn as much as $485 million in milestone payments, as well as royalties averaging in a range higher than 20% on any potential sales.
• SAGE-217 is one of Sage's top prospects, posting impressive mid-stage clinical results last December that suggest the drug could provide fast relief from depression symptoms. Just this week, the Food and Drug Administration signed off on an expedited clinical development plan, boosting market confidence in the biotech's progress.

Dive Insight:

Sage's momentum is building, earning plaudits from Wall Street as the biotech advances its neuroscience-focused pipeline. Since last June, the biotech's stock has more than doubled on the back of clinical successes from two investigational candidates for the treatment of depression.

Positive results from two studies of brexanolone, a steroid that modulates the GABAA receptor in the brain, led Sage to file the drug for approval in postpartum depression (PPD) earlier this year. A decision from the FDA is expected by mid-December. 

Investor enthusiasm has climbed even higher, however, on positive news for SAGE-217. The drug, which also acts on GABAA receptors, is aimed first at a much larger indication in major depressive disorder (MDD). In a Phase 2 study, people treated with SAGE-217 saw significant improvements in a rating scale used to measure depression symptoms.

On Tuesday, Sage announced that the Food and Drug Administration had agreed to an accelerated clinical development plan that would support submission of the drug for approval in MDD and PPD.

Sage will initiate a placebo-controlled Phase 3 study of SAGE-217 in MDD later this year which will serve as the second pivotal study required by the FDA. In PPD, an ongoing 140-patient study is now considered pivotal and will support a submission in that indication if the MDD study succeeds as well.

All of that planned clinical development will require increased investment, as will a market launch of brexanolone if the FDA grants a green light. Sage has begun hiring a commercial salesforce and plans to bring on 250 representatives in total.

To that end, Sage has built a strong balance sheet, reporting $1.1 billion in cash, equivalents and marketable securities as of the end of the first quarter. The company expects that to adequately fund operations and planned capital expenditures through 2020.

Granting Shionogi rights to SAGE-217 adds $90 million to Sage's capital position and lines up significantly more if the drug is successfully developed in the three Asian countries.

Shionogi is responsible for all clinical development, regulatory filings and potential commercialization of SAGE-217 in the covered territories. Sage, however, will retain "certain rights" to co-promote SAGE-217 in Japan across all future indications.

"Shionogi is a well-regarded commercial leader in mood disorders in the Asian market," said Sage CEO Jeff Jonas in a statement. "By working together, we believe we can expand the global footprint for SAGE-217 alongside our ongoing efforts in the US and EU."