What happened
Shares of Sage Therapeutics (SAGE -3.32%) were crashing 51.2% lower as of 11:27 a.m. ET on Monday. The huge sell-off came after the company and its partner, Biogen (BIIB 0.94%), announced following the market close on Friday that the U.S. Food and Drug Administration (FDA) didn't approve Zurzuvae (zuranolone) for major depressive disorder (MDD).
It wasn't all bad news for Sage, though. The FDA did approve Zurzuvae for treating postpartum depression (PPD). However, the company was betting on winning approval in the MDD indication as well.
So what
The big problem for Sage -- and the main reason the biotech stock is plunging -- is that Zurzuvae will have a much smaller market size to target now. Millions of Americans suffer from MDD compared to hundreds of thousands of women who experience PPD.
The FDA stated in its complete response letter (CRL) to Sage and Biogen that it didn't see enough evidence of effectiveness in the MDD indication. As a result, the agency wants another clinical study to be conducted.
Now what
Sage and Biogen are in the process of reviewing the FDA's feedback in the CRL to determine their next steps. The two partners expect to launch Zurzuvae in the PPD indication in the fourth quarter of 2023. The drug must first be scheduled as a controlled substance by the U.S. Drug Enforcement Administration, though.
With the more lucrative MDD market not in the cards for now, Sage plans to take steps to stretch out its cash. The company reported $1 billion of cash, cash equivalents, and marketable securities as of June 30. However, it posted a loss of $160.3 million in the second quarter. Sage Therapeutics CEO Barry Greene said that the company is "evaluating resource allocation, including pipeline prioritization and a workforce reorganization with a goal of extending our cash runway."
