Sage soars after banking $90M in an up-sized IPO

Sage Therapeutics ($SAGE) rocketed up more than 60% in its first day on Wall Street, bringing in $90 million to bankroll the company's CNS treatments and stirring hopes for a return to bullishness in biotech IPOs.

The Cambridge, MA, biotech priced at the high end of its increased range, moving 5 million shares at $18 apiece. Sage's shares opened at $27.78 on Friday morning, a 54% leap over pricing sure to please book-runners J.P. Morgan and Goldman Sachs, and the drug developer leapt to nearly $30 a by 11 a.m. Eastern. The company set aside another 750,000 shares to cover over-allotments for its underwriters, setting the max deal value at around $103.5 million before discounts.

Sage's success comes amid a tumultuous time for biotechs on Wall Street. After a record-setting first quarter brought in $2.1 billion in initial offerings, the markets have tightened up on drug developers, forcing many hopefuls to delay, discount or call off their debuts. Last month, antibody specialist Ambrx pulled the plug on an $86 million offering due to unfavorable market conditions, and Syndax Pharmaceuticals and GlobeImmune failed to pull off planned offerings that would have totaled nearly $400 million.

Despite the macro contraction, however, biotechs with well-defined technologies and promising assets are still finding their way out of the narrowing IPO window. Kite Pharma ($KITE), an innovator in the emerging field of CAR-T immunotherapies for cancer, banked $128 million in a super-sized debut in June, while Zafgen ($ZAFG) and its well-performing obesity treatment pulled off a $96 million offering, and inflammatory bowel disease drug developer Ardelyx ($ARDX) raised $60 million.

Sage CEO Jeff Jonas

As for Sage, the biotech plans to use $10 million of its proceeds to fund Phase I/II study of SAGE-547, a therapy for super-refractory status epilepticus (SE). Another $10 million will pay for preclinical work on SAGE-689, designed to treat adjunctive SE, with $7 million earmarked for SAGE-217, a pre-IND treatment designed to be a maintenance therapy for the disease, and the rest going toward general corporate costs. SE is a rare, life-threatening seizure condition with no approved treatments, according to the company.

CEO Jeffrey Jonas says the biotech modeled itself in response to the industry's many costly failures in CNS development. Sage sees itself less as a startup with a single promising drug than as a product engine with a valuable platform, he said, and the plan is to test its candidates against aggressive endpoints in studies with rapid readouts, giving it a chance to quickly pivot if any fail.

Sage's big debut should fuel optimism for the many biotechs still queued up to go public, a list headlined by Atara Biotherapeutics, which is seeking $92 million to fund its inflammatory disease work, and Otonomy, a company after $86 million to launch a string of therapies for ear ailments.

- read Sage's statement