Sage Therapeutics crashes after FDA decision on a depression drug

Shares of Sage Therapeutics fell more than 50% on Monday, according to the Food and Drug Administration approved the biotech company’s oral drug zuranolone for postpartum depression, but not for depressiona larger potential market.

Shares of biogenicwho developed the treatment with Sage saw a modest increase.

FDA approval late Friday made zuranolone the first oral medication to treat postpartum depression, a common complication that affects one in eight women during and after pregnancy and affects their ability to function normally.

The two companies too applied for approval of zuranolone for the treatment of major depressive disorder, also known as clinical depression. But the FDA said it hadn’t presented enough evidence to support the drug’s effectiveness in treating the condition, which affects a much larger patient population.

Clinical depression affects about 17.3 million American adultsor about 7% of people aged 18 and over in any given year.

Zuranolone has the potential for peak sales of $1 billion, compared to $250 million to $500 million for postpartum depression, Jefferies analyst Michael Yee said in a research note on Sunday.

He said that clinical depression is “really the biggest upside here” for the companies, while postpartum depression is “much smaller and may not be particularly profitable.”

Wells Fargo analyst Mohit Bansal also said that the clinical depression market contributed 85% of the company’s future sales estimates for zuranolone. But “there may be a silver lining as pricing power may be higher” in postpartum depression, he wrote in a Sunday research note.

Sage and Biogen have not disclosed the price of zuranolone for the treatment of postpartum depression.

The FDA said additional studies may be needed to support approval of the drug for clinical depression.

However, Yee cautioned that Biogen is unlikely to “speedily move forward with another late-stage study” of the clinical depression drug given the company’s focus on cost savings and recent announcements of layoffs.