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SAGE Announces Massive Restructuring To Focus On Failed Depression Drug

Sage Therapeutics (SAGE) has announced a massive restructuring that appears to abandon the launch of post-partum depression drug Zulresso. “Zulresso is a hospital-based treatment, so we are in competition for beds with COVID-19,” Mike Cloonan, Sage’s chief business officer, told analysts on a conference call.

The move will also enable SAGE to reallocate resources to zuaronolone, a once-daily, two-week therapy in development for the treatment of major depressive disorder (MDD) and postpartum depression (PPD), following the failure of its pivotal Phase 3 Mountain study.

According to the company’s statement, the resulting cost savings are comprised of a reduction in the workforce of approximately 53%, in addition to an expected decrease in external expenses that together are anticipated to result in annualized savings of approximately $170 million, of which $150 million is related to SG&A (selling, general and admin expenses).

“The headwinds we are facing individually and collectively, along with a recognition of our need to move forward as a company, have led to this difficult decision. We believe this cost reduction and reallocation of resources will help Sage advance our portfolio in a way that is consistent with our mission,” explained Jeff Jonas, CEO of Sage Therapeutics. 

TipRanks reveals that the stock has a Moderate Buy analyst consensus based on ratings published over the last three months. With shares down 60% year-to-date, the $65 average analyst price target indicates over 120% upside potential from the current share price. (See SAGE stock analysis on TipRanks)

Following the news Oppenheimer analyst Jay Olson lowered his SAGE price target to $50. “We are disappointed by this restructuring but consider it necessary for SAGE to prioritize focus on zuranolone and pipeline assets” he commented, adding that SAGE predicts the cash balance of $1B at year-end 2019 provides runway into 2022.

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Harriet Lefton
Harriet Lefton, originally from the UK, began her career as a journalist specialising in the niche world of metal markets. She graduated from the University of Cambridge before becoming a qualified UK lawyer. Now she has turned her attention to the world of financial blogging, covering US stocks, analysts and all manner of things finance-related.

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