What happened
Shares of the brain-health specialist Sage Therapeutics (SAGE 0.81%) are having a tough trading session today. Specifically, the biotech's stock was down by approximately 13% on heavy volume as of 2:38 p.m. ET Wednesday afternoon.
The spark? Yesterday, Biogen (BIIB 3.18%) Chief Executive Officer Christopher Viehbacher barely mentioned the upcoming regulatory decision for zuranolone as a treatment for major depressive disorder (MDD) and postpartum depression (PPD). Biogen and Sage co-developed zuranolone as a fast-acting option for patients with these debilitating forms of depression. The Food and Drug Administration (FDA) is slated to hand down a regulatory decision in these two settings by Aug. 5.
So what
Investors took Viehbacher's silence as a troubling sign that all is not well with zuranolone's regulatory review. Normally, labeling discussions are taking place at this late stage in a drug review. However, Biogen's leader didn't mention anything on the topic, leading some nervous investors to speculate that a regulatory delay, or an outright rejection, was on the way.
Backing this up, Sage's depression medication is forecast to hit nearly $2 billion in annual sales before the decade's end. So, if an approval were indeed imminent, one would think that Biogen's CEO would want to discuss the company's marketing strategy or perhaps its value as a potential growth driver. This silence doesn't mean that a negative regulatory action is a sure thing, but Viehbacher's curtness doesn't exactly inspire confidence, either.
Now what
Is Sage a buy on this dip? That's a hard call. With a positive regulatory nod in MDD and/or PDD, Sage would have a potent growth driver under its roof. If the FDA rejects the drug in these settings or issues a restrictive label, Sage's stock may have further to fall. Zuranolone, after all, is key to the company's near-term outlook. All things considered, this is a high-risk, high-reward pharma stock that is probably best suited for aggressive investors.
