SAGE $70 AUG 2017 Puts SAGE PUTS
June 23, 2017 - 5:16am EST by
2017 2018
Price: 84.94 EPS NM NM
Shares Out. (in M): 37 P/E NM NM
Market Cap (in $M): 3,172 P/FCF NM NM
Net Debt (in $M): -343 EBIT 0 0
TEV (in $M): 2,829 TEV/EBIT NM NM

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We believe SAGE is a short as the current Phase 3 study of SAGE-547 for super refractory status epilepticus (SRSE) is likely to fail.  SAGE entered into a Phase 3 study based on data from a single arm Phase 1/2 study.  The response rate in this small study does not provide clear evidence of drug effect and appears in the range of existing agents.  Furthermore, this drug will have limited impact on actual disease improvement as it is treating the symptoms not the underlying etiology.  With a $3.2B marketcap and $343M, the failure of their lead drug will lead to significant downside.  The August $70 puts offer an attractive risk/reward to play this event.  




SAGE’s lead candidate, SAGE-547, is in a Phase 3 trial for SRSE called STATUS.  The trial is expected to enroll 126 evaluable patients and randomized 1:1 to either treatment or placebo.  The trial is 90% powered assuming a 35% placebo response, and an unspecified treatment response rate.  By our calculations, assuming a 35% response rate in placebo (22 of the 63 patients), the treatment arm would need a 52% response rate (33 out of 63 patients) to hit statistical significance.  On their 1Q17 earnings call SAGE updated the timing of the Phase 3 STATUS from 1H 2017 to 3Q 2017.  


Source: SAGE R&D Day 2016


The Phase 1/2 study was an open-label, single arm study of SAGE-547 in 25 patients.  However, only 22 were deemed evaluable and 17 met the secondary endpoint were able to be weaned off the 3rd line agent.  SAGE highlights this 77% response rate as significantly higher than would be expected by standard of care and thus advanced the agent into Phase 3.  


Source: SAGE R&D Day 2016



Status epilepticus (SE) is when a seizure lasts too long.  There are multiple stages of increasing severity.  Once you have hit refractory status epilepticus (RSE), the goal is actually to put you into a medically induced coma with anesthesia so that the seizures can be stopped.  Super-refractory status epilepticus is when the RSE continues for 24 hours or more despite the anesthesia.  


Source: Shorvon & Ferlisi 2011




There is only one randomized trial for refractory status epilepticus.  This trial showed that while RSE was only controlled in 6/14 (43%) in the propofol arm and 2/9 (22%) in the barbiturates arm.  However, for the “RSE treated subsequently” - effectively SRSE patients the results were 4/8 (50%) and 5/7 (71%).  As the previous figure above demonstrates, those who fail RSE become SRSE.  This means in this small trial, the estimated success rate for SRSE was 9/15 (60%).