What happened

Shares of Sage Therapeutics (NASDAQ:SAGE) soared more than 20% today after the company announced that the U.S. Food and Drug Administration will allow an expedited development program for one of its most promising drug candidates.

SAGE-217, being evaluated as a potential treatment for various forms of depression and insomnia, will be allowed to run a single 450-patient study for major depressive disorder to support an application for marketing approval. An ongoing trial in postpartum depression will also now be considered a "pivotal trial," and data generated can support an eventual application for approval.

As of 3:29 p.m. EDT, the stock had settled to a 18.8% gain.

Lines capped with arrows rising up, as drawn on a chalkboard.

Image source: Getty Images.

So what

The FDA has been changing things up since the start of 2017 in an effort to get more drugs through clinical trials, faster, which it thinks will help to increase competition in the marketplace and maybe even help to lower drug prices. This is the latest embodiment of the agency's new strategy.

As far as Sage Therapeutics is concerned, the decision will save a lot of time and money for its efforts to develop SAGE-217 and (hopefully) bring it to market. The drug is one of three in the pipeline that target GABA receptors in the brain, a completely new approach to treating depression disorders. In fact, they represent the first new mechanism for treating depression since selective serotonin reuptake inhibitors (SSRIs) hit the market decades ago.

Investors are excited about the parallels to the company's lead drug candidate, brexanalone IV. That GABA drug received the FDA's coveted Breakthrough Therapy Designation, which accelerated its development as a potential treatment for postpartum depression. Sage Therapeutics submitted a new drug application (NDA) -- the company's first -- for the therapy in late April. SAGE-217 appears to be following in those footsteps, as it also received Breakthrough Therapy Designation and now has an expedited path to market for multiple indications.

Now what

Sage Therapeutics will initiate a pivotal phase 3, placebo-controlled trial evaluating SAGE-217 as a potential treatment for major depressive disorder in the second half of 2018. Meanwhile, the FDA told the company that a similar trial currently under way in postpartum depression will now be considered as a "pivotal trial." Results for the ongoing trial are expected in the final three months of 2018, which could provide ample evidence of what's to come. While the trials have to be completed first, investors are excited that the timeline for approval just got moved up quite a bit.

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