SAGE Therapeutics Inc (NASDAQ:SAGE) stock continued to fall over 4.2% this morning leading to a total decline of 17.3% in the last two days after the company said its brexanolone treatment missed primary and secondary endpoints in a late-stage clinical trial. The true disappointment is that the drug will be able to help patients with the seizure disorder super-refractory status epilepticus (SRSE) and there is currently no U.S. drug approved for the condition. Brexanolone (SAGE-547) is a neuroactive steroid and positive allosteric modulator of both synaptic and extra-synaptic GABAA receptors and it is under investigation as a potential therapy for a rare form of epilepsy called super-refractory status epilepticus (SRSE). The trial in question was a phase 3 study set up to investigate the safety and efficacy of drug called brexanolone (SAGE-547).
The drug did not perform any better than placebo and the slight increase in the side-by-side percentage figures cannot be regarded as statistically significant. A number of secondary endpoints also fell in line with this result, with the drug failing to perform placebo against said metrics. Moreover, SAGE had decided to skip a mid-stage trial in favor of advance direct to pivotal (after meeting with the FDA) based on what it perceived as overwhelmingly positive data from an early-stage investigation. This led many to believe that the drug had a strong chance of success in the pivotal study and attracted a large amount of speculative volume towards the company stock ahead of initiation and during the study itself. The impact of this failure, is therefore magnified as compared to what might’ve happened if the study was a phase 2. Further, the phase 3 studies are far more expensive to conduct than phase 2 studies and there is a valid argument the company should have a phase II investigation (and, in turn, realized that the drug didn’t work) before raising equity and diluting shareholders in order to carry out a large-scale phase 3.
The management is expected to present the data in detail at an upcoming medical meeting but chances are less that the detailed numbers will serve to reverse sentiment surrounding both the asset on the company. As such, it is not expected that the stock will recover near term, and especially not on the back of any advance program in question.
Additionally, Sage’s move did help boost its share price, as investors found its confidence and self-generated M&A speculation attractive.