What happened

Shares of Sage Therapeutics (NASDAQ:SAGE) are being beaten down today in response to an important clinical trial readout for a potential new depression drug, zuranolone. Investors unhappy with lackluster results for the drug pushed the biotech stock 17% lower as of 12:38 p.m. EDT on Tuesday.

So what 

Today, Sage Therapeutics announced top-line results from the Waterfall study with zuranolone, a potential new drug for major depressive disorder that the company is developing in partnership with Biogen (NASDAQ:BIIB).

Treatment with zuranolone significantly improved patients' scores on the HAMD-17 test, a common method for measuring depression severity. Unfortunately, an improvement that was just 1.7 points less than the placebo group on a test with more than 50 possible points isn't going to impress psychiatrists who are clamoring for improvements to drugs like Zoloft.

Scientist looking at a report.

Image source: Getty Images.

Investors were also disappointed by the lack of a significant improvement to patients' CGI-S scores. This important secondary measurement is another common way physicians measure depression.

Finally, results from the Waterfall study suggest zuranolone isn't capable of reliably providing long-term benefits. While there was a quick separation in HAMD-17 scores just three days after beginning treatment, those differences waned with time.

Now what

Sage badly needed a strong result today because its first drug, Zulresso, isn't going to pay the bills. In the first quarter, sales of that post-partum depression treatment reached just $1.6 million.

Today's results for zuranolone suggest its chances of earning accelerated approval from the Food and Drug Administration are slim. That's a problem because Zulresso's launch, which began in 2019, probably won't contribute much to the company's top line in the years ahead. Zulresso requires a 60-hour infusion by a certified healthcare provider, which isn't a viable option for most new mothers.

Sage Therapeutics finished March with a little over $2 billion in cash, after burning through $96 million in the first quarter. That's a large cash cushion, but it probably won't last long enough for an earlier-stage new drug candidate like zuranolone to reach commercialization.

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