(Bloomberg Opinion) -- You’d think an approval from the Food and Drug Administration would be a high point for fledgling biotech firms. After all, it’s the moment where years of risk and research and development can finally turn into actual sales. But for companies that attempt to launch medicines without a big pharma partner, it can instead be a leading indicator of a share-price nadir, as hopes run into harsh commercial realities.
Sage Therapeutics Inc. — which had its first medicine, Zulresso, a treatment for postpartum depression, approved late Tuesday — hopes to break the solo launch curse and translate its approval into sustained share price gains. It just might have a chance.
There’s a touch of selection bias in the above sea of misery. Many attractive drugs get licensed or purchased before they hit the market. But plenty of firms want to keep all of the upside to themselves and go it alone.
Zulresso has a big advantage that a number of other troubled solo launches have lacked: It’s the first drug to be approved specifically for post-partum depression and works quickly after a single infusion. Most depression drugs take weeks to have an impact. And it has the potential to reach a category of difficult-to-treat patients who don’t have good options right now.
A number of other independently minded biotechs have attempted to enter crowded markets or take share from well-established competitors. That has led to some very tough launches where high spending hasn’t translated to significant sales growth. The resulting depressed share price makes raising money harder, which can add to the problem.
Sage’s unique position with Zulresso may lead to a more successful launch. The firm’s opportunistic fundraising also means that it had a hefty $922 million in cash and equivalents at the end of 2018, which won’t hurt.
Zulresso’s idiosyncrasy could also create issues. Physicians may take time to come around to a novel medicine that is complicated to administer. The medicine has to be given through an IV over the course of 60 hours at a certified facility and patients need to be monitored throughout. Fairly modest sales expectations — the drug is expected to generate about $100 million in sales in its first full year on the market, at a $34,000 list price for a typical course of treatment — seem to take that into account.
Even if things go slowly with Zulresso, Sage has another advantage in that it has an even more promising drug in its pipeline: the depression pill Sage-217, which analysts project could generate $2 billion in sales by 2026. Other solo firms have additional pipeline projects, but few have a medicine with that kind of potential.
Sage-217 recently produced good data in a late-stage trial in postpartum depression, and readouts in bipolar and major depression are due over the next year. The fact that it’s a pill means that it has potential for substantially broader use than Zulresso. And while weak data or a slow approval process for the drug could dent shares, the pill and the potential that it might attract an acquirer represent a big source of potential upside that should insulate shareholders from a sluggish launch.
Selling or shorting independent launches has generally been a good strategy for biotech investors. Sage could be the exception.
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Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.
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