IPO Preview: Sage Therapeutics

| About: Sage Therapeutics (SAGE)

Summary

SAGE is a biopharmaceutical company committed to developing and commercializing novel medicines to treat life-threatening, rare central nervous system disorders.

Clinical trials are just beginning and there is to-date limited feedback from the FDA.

SAGE’s initial product candidates are aimed at treating different stages of status epilepticus, a life-threatening condition in which the brain is in a state of persistent seizure.

Based in Cambridge, MA, Sage Therapeutics (Pending:SAGE) scheduled a $60 million IPO on the Nasdaq with a market capitalization of $359 million at a price range midpoint of $15 for Friday, July 18, 2014. The price range midpoint was recently increased to $17.50.

The full IPO calendar is available at IPOpremium

SEC Documents

Manager, Co-Managers: JPMorgan, Goldman Sachs

Joint Managers: Leerink Partners, Canaccord Genuity

End of lockup (180 days): Wednesday, January 14, 2015

End of 25-day quiet period: Tuesday, August 12, 2014

Summary

SAGE is a biopharmaceutical company committed to developing and commercializing novel medicines to treat life-threatening, rare central nervous system, or CNS, disorders, where there are inadequate or no approved existing therapies.

Clinical trials are just beginning and there is to-date limited feedback from the FDA.

Valuation

Glossary

Valuation Ratios

Mrkt Cap (MM)

Price /Sls

Price /Erngs

Price /BkVlue

Price /TanBV

% offered in IPO

Annualizing Q1 '14 loss

Sage Therapeutics

$360

n/a

-15.5

3.4

3.4

17%

Conclusion
The rating on SAGE is neutral plus.

To put the conclusions and observations in context, the following is reorganized, edited and summarized from the full S-1 referenced above.

Business

SAGE is a biopharmaceutical company committed to developing and commercializing novel medicines to treat life-threatening, rare central nervous system, or CNS, disorders, where there are inadequate or no approved existing therapies.

SAGE is targeting CNS indications where patient populations are easily identified, acute treatment is typically initiated in the hospital setting, clinical endpoints are well-defined, and development pathways are feasible.

This focus allows SAGE to make highly informed decisions when advancing its product candidates through the development process.

SAGE's initial product candidates are aimed at treating different stages of status epilepticus, or SE, a life-threatening condition in which the brain is in a state of persistent seizure.

Clinical trials

SAGE has initiated a Phase 1/2 clinical trial to study safety, tolerability and efficacy of SAGE-547 in patients with SRSE.

If the Phase 1/2 clinical trial of SAGE-547 is successful, SAGE expects that the FDA will require SAGE to complete at least one pivotal trial in order to submit an NDA for SAGE-547 as a treatment for SRSE patients.

However, the FDA may require that SAGE conduct additional pivotal trials before SAGE can submit an NDA for SAGE-547. SAGE has had only limited feedback from the FDA on the design of its ongoing Phase 1/2 clinical trial of SAGE-547 and on what would be required in a pivotal clinical trial of SAGE-547.

SAGE-547

The lead product candidate in SAGE's SE program, SAGE-547, is an intravenous, or IV, agent in Phase 1/2 clinical development as an adjunctive therapy, a therapy combined with current therapeutic approaches, for the treatment of super-refractory SE, or SRSE.

The current standard of care for SRSE is empiric, and there are no therapies at present that have been specifically approved for this indication. SAGE thus believes there is a significant unmet medical need for SAGE-547.

SE is diagnosed when a patient has a seizure lasting longer than five minutes, and is associated with substantial morbidity and mortality.

SAGE estimates that in the United States each year there are up to 150,000 cases of SE, of which 30,000 SE patients die.

SAGE estimates that there are 35,000 patients with SE in the United States that are hospitalized in the intensive care unit, or ICU, each year.

An SE patient is first treated with benzodiazepines, or BDZs, and if no response then treated with other, second-line, anti-seizure drugs.

If the seizure persists after second-line therapy the patient is diagnosed as having refractory SE, or RSE, admitted to the ICU and placed into a medically induced coma.

Currently, there are no therapies that have been specifically approved for refractory SE; however, physicians typically use anesthetic agents to induce the coma and stop the seizure immediately.

After a period of 24 hours, an attempt is made to wean the patient from the anesthetic agents to evaluate whether or not the seizure condition has resolved.

Unfortunately, not all patients respond to weaning attempts, in which case the patient must be maintained in the medically induced coma. At this point, the patient is diagnosed as having SRSE.

Dividend Policy

No dividends are planned.

Intellectual Property

SAGE's patent portfolio includes patent applications in the early stages of prosecution and no patents have, as of yet, issued from its patent application estate.

These patent applications fall into three categories: (1) SAGE-547; (2) GABAA receptor modulators; including genus and species claims to SAGE-689; and (3) NMDA receptor modulators.

Competition

Currently, there are no therapies that have been specifically approved for treatment of RSE or SRSE.

However, many products approved for other indications, for example, general anesthetics and anti-seizure drugs, are used off-label for various stages of SE therapy.

Additionally, though not indicated, acupuncture, hypothermia, and electroconvulsive therapy are sometimes used prior to withdrawal of care for patients with SRSE.

In the field of neuroactive steroids focused on modulation of GABAA or NMDA receptors, SAGE's principal competitor is Marinus Pharmaceuticals, Inc., which SAGE believes is developing a reformulated form of Ganaxolone, a known GABAA positive allosteric modulator neuroactive steroid, for the potential treatment of drug-resistant partial complex seizures and fragile X syndrome.

5% stockholders

  • Third Rock Ventures II, L.P. 58.5%
  • ARCH Venture Fund VII, L.P. 21.3%
  • Entities Affiliated with Fidelity Investment 5.6%
  • Robert T. Nelsen 21.3%

Use of proceeds

SAGE expects to net $56 million from its IPO. Proceeds are allocated as follows:

  • $10 million to fund the costs of its Phase 1/2 clinical development of SAGE-547;
  • $10 million to fund the IND-enabling activities and Phase 1 clinical development of SAGE-689;
  • $7 million to fund the IND-enabling activities for SAGE-217; and
  • the remaining proceeds, if any, to fund new and ongoing research and development activities, working capital and other general corporate purposes, which may include funding for the hiring of additional personnel, capital expenditures and the costs of operating as a public company.

Disclaimer: This SAGE IPO report is based on a reading and analysis of SAGE's S-1 filing, which can be found here, and a separate, independent analysis by IPOdesktop.com. There are no unattributed direct quotes in this article.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

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