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issue #11 - the one on women’s health, can’t-put-down books, and confidence

July 04, 2020

Mercury is in retrograde. And while it gave me a break early in the week, it’s back to kicking my butt.

This cycle has been bad enough for me to download an astrology app (Co-Star) and actually learn a little more about astrology. I discovered that I’m a Capricorn rising (not Gemini, which I had assumed for years), and that things are just going to be rough for a while.

It sounds hokey, but there’s something comforting in surrendering to the stars. If only the stars could take a few things off my to-do list...

#ThingsILove this week

The Top 5

The Deep Dive

Here’s what we know for sure about Zulresso (this drug) and the company that developed it, Sage Therapeutics:

  • The drug is a 60 hour continuous infusion, with a full course priced at $34,000 (5 vials are required, and each vial is $7.350).

  • Sage Therapeutics has raised over $400M to date to develop this drug and has two other drugs in clinical development, and they’ve built a commercial organization to launch this product.

I’ve gotten a lot of IG DMs about this drug, and specifically why it’s so expensive. Here is my analysis (with zero affiliation with Sage and from what is published in SEC filings and news articles):

  • The drug is a small molecule - not a biologic or immunotherapy. The latter class of drugs are incredibly difficult to manufacture and scale up, whereas small molecules are comparatively inexpensive and easier to scale up. The inactive ingredients in the drug are also rather affordable.

  • It’s safe to assume that Sage has invested in at least $250M in the development of Zulresso and in the establishment of a commercial team.

  • The expected return-on-investment by investors and the market for a product that receives FDA approval is high, given that approved product sales is also expected to recoup the development costs for failed programs.

  • Zulresso is focused on severe postpartum depression cases, of which there are 600,000 a year in the United States. Given the nature of administration (over a number of days, admitted in a hospital or other healthcare center) and the price (the product has just received approval, and will now meet with insurers for reimbursement), it’s safe to assume that it’ll treat 1% of all severe postpartum patients in its first year. That would yield $204M in first year sales (it could easily be higher), and the drug can easily exceed $1B in annual sales if it treats 5% of the population.

  • I think you’ll see insurers cover this drug, albeit with restrictions. I highly doubt any patient will pay the full $34,000 for a course of this drug.

  • Sage is well positioned to achieve this milestone in a few years, as they’ve built a strong commercial team and with the superior results of their clinical trial. They also have an oral version of this drug in Phase III development, which we can see hit the market in a couple of years. This is excellent for the investors, who will likely see a huge ROI on their investment.

  • Sage has standard patent terms on Zulresso, meaning that generics can file 5 years from the approval date. Given that it’s not a complicated product to manufacture, I think you’ll see a number of generic filings against this product, which may lower price significantly.

Now comes the gray area - should a company be able to set a drug price this high?

  • Consider Sage as a business. They’ve hired over 600 people to develop their products in the United States. That comes with a significant cost of doing business.

  • Zulresso is manufactured in the United States, which increases the cost of products 3x than if they manufactured in India or China.

  • The cost of commercializing a product is expensive, from hiring the team (reimbursement, patient response and monitoring, sales and marketing, manufacturing, distribution). Even though the product has been approved with an extremely restricted label, Sage is investing in a full commercial team for this product and their pipeline products as well.

  • Sage Therapeutics is a business - not a nonprofit. They raised hundreds of millions of dollars to bring pharmaceutical products to market, and their investors now expect a return on their investment now that Zulresso earned FDA approval. That’s business.

  • Sage is one of the first companies to focus on developing a standalone treatment for postpartum depression, versus retrofitting existing antidepressant and anti-anxiety medicines for postpartum depression (which has been the MO of industry for the past few decades). They’re the first to identify this both as a therapeutic opportunity, and a business opportunity.

  • First-of-their-kind drugs often come with a huge price tag, because they’re approved with a lot of restrictions and can only be administered in heavily controlled settings with a lot of patient monitoring. As more data is collected and the product is deemed safe, price will come down.

I give Sage a lot of credit for investing time, money, and resources in an area that global biopharma has largely abandoned, and for earning FDA approval. The list price is high, but patients will rarely pay this full amount, and it’s commensurate to Sage’s investment in developing the first standalone treatment to postpartum depression. The fact that they also have an oral version in late-stage development is incredibly promising and will make this product far more accessible.

The Catch Up

Monday

Tuesday

Wednesday

Thursday

Friday

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