Brain health-focused biotech Sage Therapeutics (SAGE 1.77%) has been on a wild ride over the past five years. Long-term investors saw its share price rise from $31 in July 2016 to an eye-popping $190 in July 2019 -- only to witness a subsequent crash to an April 2020 low of $26. It has since recovered to a current share price of around $75; is now a good time to reconsider Sage Therapeutics as an investment?

Different medications are pictured in an organizer.

Image Source: Getty Images.

Multiple shots on goal

While Sage Therapeutics surged in part thanks to U.S. Food and Drug Administration approval of its first drug, brexanolone, which in March 2019 became the first and only drug approved for postpartum depression, the company crashed later that year in part because its second drug, SAGE-217, missed the mark in a trial for major depressive disorder.

But while failing a trial can (and should) be seen as a negative, the company has refused to lay down. Sage Therapeutics is expecting data from 10 trials this year, five of which are for SAGE-217, as well as phase 2 trial data regarding essential tremors from a drug dubbed SAGE-324, and phase 2 data about a drug called SAGE-718 for trials in Alzheimer's disease and Parkinson's disease.

I appreciate a company with a handful of shots on goal, especially when they've all got a similar focus -- in this case, "brain health" (i.e., neurology). With so many late-stage trials, 2021 looks to be a busy year for the company's investor relations team -- and that's hopefully a good thing.

Well funded, well connected

Sage Therapeutics wouldn't be able to have so many trials if it weren't so flush with cash. The company ended 2020 with a whopping $2.1 billion in its coffers. A large portion of this came from a development deal with Biogen (BIIB 1.82%) in November 2020, in which the two companies agreed to a 50/50 split in U.S. sales on SAGE-217, the aforementioned major depressive disease candidate. Sage Therapeutics would additionally receive tiered royalties on worldwide sales. Sage Therapeutics received an up-front payment of $875 million and a $650 million equity investment, as well as up to $1.6 billion in potential milestone payments.

Biogen, meanwhile, netted $8.7 billion in fiscal 2020 (ended Dec. 31) from sales of its multiple sclerosis drugs, and an FDA decision is pending on its drug aducanumab for Alzheimer's disease in 2021. In other words, Biogen is about as good a partner as it gets in the neurology space -- and while Biogen may seem to be taking a big slice of the pie away from Sage Therapeutics, the former's worldwide reach and expertise would be difficult to match if Sage Therapeutics attempted it alone.

Huge opportunity ahead

Sage Therapeutics believes there are 18 million people in the U.S. suffering from postpartum depression and major depressive disorder, and management also believes that their current pipeline has an addressable market worldwide of 450 million people. Biogen estimates that approximately half of Parkinson's disease patients, half of multiple sclerosis patients, and about 40 percent of patients with Alzheimer's experience depression. These three diseases are well within the Biogen wheelhouse. Clearly, there is a lot of potential -- and perhaps a multibillion-dollar opportunity -- in this collaboration.

But here's the catch

When a company is seemingly sitting on a pile of cash, with tons of data coming out, and has just secured arguably the best partner it could ask for ... one has to wonder why on earth the COO would depart? Yet Mike Cloonan announced his departure March 16, effective May 3 While Cloonan did spend four years at Sage Therapeutics, it's tough for me to understand why they would leave now with so much (in theory) going for the company, especially given that he spent 14 years before joining Sage Therapeutics with -- gasp -- Biogen. While executives leave for a variety of reasons, this particular departure "to pursue other opportunities" makes little sense to me. Could it be that Cloonan felt SAGE-217 will continue to flop? After examining 79 executive departures prior to the release of clinical trial data, on Citigroup (C 0.20%) analyst found that 70% of the time it meant the study wasn't successful. SAGE-217 has failed once already for major depression, and positive Alzheimer's disease trials are few and far between. 

Joyous times or major depression ahead?

There is a lot to like about Sage Therapeutics and the company's $4.4 billion market cap, but I'm having difficulty looking past the large red flag waving at me from their ex-COO. Fortunately, there are multiple data readouts in 2021 that can change my mind. My fellow healthcare investors may want to see more data first or else risk major share price depression.