Sage, Despite Industry-Wide Pullback, Scores $90M in Upsized IPO

Xconomy Boston — 

Federal Reserve Chairwoman Janet Yellen managed to sink much of biotech this week when she called the sector overvalued in front of Congress. Yet Sage Therapeutics managed to float very well indeed, making its market debut with a better-than-expected initial public offering.

Cambridge, MA-based Sage priced its IPO Thursday at $18 per share, at the top of its projected $17 to $18 per share range. The company has sold 5 million shares, raising a total of $90 million before discounts due to underwriters. That’s more than $30 million above the target Sage had set just last week. On July 8, Sage expected to sell 4 million shares at $14 to $16 apiece. Big demand pushed those numbers higher earlier today. Sage’s underwriters also have the option to buy another 750,000 at the IPO price, which could boost the company’s total haul from the offering.

Sage will begin trading on the Nasdaq on Friday under the ticker symbol “SAGE.” JP Morgan Securities, Goldman Sachs, Leerink Partners, and Canaccord Genuity are underwriting the IPO.

Third Rock Ventures started Sage in 2010 and still owned 58.5 percent of the company’s stock before the IPO. Arch Venture Partners, which jumped into Sage’s Series B round last year, held a 21.3 percent stake prior to the offering. Entities associated with Fidelity Investments owned 5.6 percent of Sage, which has raised north of $91 million since its inception, according to the IPO prospectus.

Sage has managed to blow past expectations during a rough week for biotech. Since Yellen made her statements to Congress on Tuesday, biotech indices are down some 6 percent. A couple companies stumbled through their IPOs as well: Brisbane, CA-based heart diagnostics company CareDx (NASDAQ: CDNA) cut its offering more than 20 percent before pricing. And Warren, NJ-based Roka Bioscience (NASDAQ: ROKA) priced at $12 per share, below its projected $14-$16 range.

Investors are clearly buying into Sage’s plan to go after rare neurological disorders, and use difficult, early endpoints in its studies to quickly make go or no go decisions on those programs.

Sage is developing a platform of “allosteric receptor modulators”—drugs designed to create an equilibrium among the neurotransmitters in the brain—primarily for rare, or specialty CNS disorders, such as a life-threatening form of epilepsy known as status epilepticus. The idea is that Sage can develop such drugs at a low cost and on accelerated timelines by qualifying for breakthrough or orphan designations from the FDA. Sage also aims to use its platform to forge partnerships with companies to develop drugs for other CNS indications, according to the IPO filing.

Sage has already begun enrolling patients in a Phase 1/2 clinical trial for its first drug candidate, SAGE-547, in status epilepticus. It’ll use $10 million of IPO cash for that trial, and another $17 million to prepare its next two drugs, SAGE-689 and SAGE-217, for clinical trials. The company plans to file applications to enter the clinic for those drugs  later this year and next year, respectively. They are each for treating different stages of status epilepticus. Sage indicated that other molecules in its portfolio could be tested in other CNS diseases like Fragile X syndrome.

Sage expects to report data from the SAGE-547 study later this year. It’s been given an orphan drug designation from the FDA.

The company’s CEO is Jeffrey Jonas, the former head of Shire’s regenerative medicine unit.