Sage and Marinus – Not the typical CNS story

CNS is probably the toughest segment in the drug industry with a frustratingly low success rate and a diminishing pipeline. This is best exemplified by the disproportionally low number of CNS programs that received Breakthrough Therapy Designation (BTD). Of almost 70 designations, only three (J&J’s esketamine, Neurocrine’s NBI-98854 and Acadia’s pimavanserin) were for CNS indications and all three are hardly as exciting as other BTD drugs (anti-PD-1, CARs, Harvoni etc.). Not surprisingly, there are very few “hot” CNS-related stocks.

Sage (SAGE) and Marinus (MRNS) are two exceptions, with two of the few exciting CNS projects out there. Sage’s SAGE-547 and Marinus’ ganaxolone, which have the same mode of action (MOA), are developed for the treatment of epileptic seizures. Unlike other CNS projects in late-stage development, SAGE-547 and ganaxolone are significantly de-risked based on a clear clinical proof of concept and understanding of MOA.

Both drugs activate GABA-A receptors, a family of receptors in the brain that reduce neuronal activity. GABA-A activation is a well validated mechanism used by many tranquilizers and anti-anxiety drugs such as Ambien and Valium. SAGE-547 and ganaxolone are distinguished from available GABA-A drugs based on to their ability to activate a wide spectrum of GABA receptors, including those found outside of the synapse (extra-synaptic). This may allow the two agents to overcome resistance to existing drugs and maintain a durable anti-seizure effect.

Despite the similarity between SAGE-547 and ganaxolone, each company is pursuing a different development path. SAGE-547 is an injectable formulation of a naturally occurring substance (allopregnanolone) for the treatment of super-refractory status epilepticus (SRSE), a severe form of uncontrolled seizures. Ganaxolone is an orally bioavailable derivative of allopregnanolone for the treatment of epilepsy.

The most notable difference between Sage and Marinus is valuation. Sage’s $1.33B market cap is 10-fold higher than that of Marinus ($129M). This gap can be ascribed to the different data packages for each drug, as SAGE-547 has a clear advantage in terms of unequivocal efficacy and time to market. Marinus, on the other hand, has positive (albeit not spectacular) results from a randomized phase II in epilepsy and an established safety profile.

Sage – impressive activity in SRSE

SAGE-547’s activity in SRSE is nothing short of remarkable. To date, the company reported clinical experience in 30 patients whose seizures could not be managed with available treatments. These patients are typically put into a medically induced coma with general anesthesia followed by weaning off anesthesia in an attempt to stop seizures.

Of 26 evaluable patients who received SAGE-547 on top of standard of care, 19 (73%) were successfully weaned off their anesthetic agents with successful resolution of seizures. Although the trial had no control arm, this figure compares favorably to historic success rates of 25-30%. Importantly, the effect persisted after discontinuation of SAGE-547. Based on these results, Sage expects to initiate a randomized phase III trial evaluating SAGE-547 as adjunctive therapy to standard of care in the coming months.

Marinus – Awaiting P3 validation in epilepsy  

Marinus’ ganaxolone was originally designed as a chronic anti-seizure treatment. The drug was created as a close derivative of allopregnanolone using a minor chemical modification (see figure below). This modification was introduced in order to solve two issues that prevent allopregnanolone from becoming a chronic drug: It is not orally bioavailable and it can be converted to a steroid in the body. Importantly, the minimal modification enabled ganaxolone to retain significant GABA-A activity.


 Source : Marinus Pharmaceuticals

 P2 data in epilepsy point to a differentiated profile – Ganaxolone’s phase II was conducted in epilepsy patients whose disease was not adequately controlled with standard of care. The drug led to a statistically significant mean reduction in seizure frequency of 19.6%. The difference in median percent reduction in seizure frequency was 15.7%, which did not reach statistical significance. A responder analysis (proportion of patients with 50% decrease in seizures) also demonstrated numerical differences that did not reach statistical significance.

Ganaxolone - P2

 Source : Marinus Pharmaceuticals

So far, safety profile appears favorable with a clear differentiation over most approved agents (most common side effects were fatigue and sleepiness). A benign safety profile is crucial in epilepsy as patients take multiple drugs with complementary MOAs. The lack of any signs of reproductive toxicity (predominantly from animal experiments) is particularly relevant for women in childbearing ages.

Effect size appears clinically meaningful – Ganaxolone’s effect size across the different endpoints is at the low range of what has been seen historically with anti-epileptic drugs. Still, a median 15.7% reduction in seizure frequency (if corroborated in phase III) is clinically meaningful and should allow ganaxolone to capture some market share given its favorable safety profile. Vimpat (lacosamide), one of the recently approved anti-epilepsy drugs with annual sales of $500M, demonstrated a similar effect (15-17%) in its two pivotal trials. (see figure below).

Vimpat - P3

Sources: Halász, Epilepsia 2009 and Chung, Epilepsia 2010

Data from ongoing P3 expected in Q1 2016 – Marinus is enrolling a phase III trial with a similar trial design with the goal of replicating the P2 data (Results expected in Q1 2016). If results are positive, Marinus plans to conduct another phase III (Regulators require 2 trials for approval) which is expected to read out in 2018.

Exploring additional indications with ganaxolone – P3 readout next year is by far the most important event for Marinus, but ganaxolone may have value in additional indications, including those pursued by Sage. Marinus is evaluating ganaxolone in two genetic orphan indications characterized by dysregulation of GABA-A signaling.

Fragile X Syndrome is the leading genetic cause of autism and intellectual disability. Decreased GABA-A signaling has been observed in mouse models of the disease and a recently published paper reported a treatment effect with ganaxolone in animal models. Data from a randomized double- blind phase II are expected to be released in the coming months.

PCDH19 female pediatric epilepsy is a recently identified subset of pediatric epilepsy characterized by cluster seizures. The disease, caused by a mutation in the PCDH19 gene, is characterized by low levels of allopregnanolone forming the rationale for evaluating ganaxolone. A 10-patient study was initiated last month with potential preliminary data in Q4 2015. As a single-arm study, the trial will evaluate changes in seizure frequency on ganaxolone vs. baseline seizure frequency.

IV ganaxolone is Marinus’ wild card

Marinus is working on an injectable (IV) formulation of ganaxolone, which is expected to enter the clinic in 2015. Although no concrete plans were disclosed, it is natural to expect Marinus to pursue SRSE or similar conditions characterized by severe uncontrolled seizures in hospitalized patients.

Based on the striking resemblance between ganaxolone and SAGE-547, and the latter’s strong proof of concept, likelihood of success is relatively high, assuming ganaxolone and SAGE-547 are truly interchangeable in their GABA-A modulation. Ganaxolone clearly has significant GABA-A activity but there is always the risk for a slight chemical modification to alter a drug’s biological activity.

Recent comparison data from Sage should be noted but are not a show stopper – Sage is understandably trying to differentiate between SAGE-547 and ganaxolone. Last year, the company presented a poster comparing the two drugs as well as a next-generation drug (SAGE-217). In some models, ganaxolone had comparable (in some cases even superior activity) to that of SAGE-547, but in some settings ganaxolone appeared inferior to SAGE-547 (and both drugs were inferior to SAGE-217). The primary concern stemming for this poster is that ganaxolone has a lower effect on extra-synaptic GABA-A, which is believed to be a crucial property for activity in SRSE. (see figure below)

SAGE vs. ganaxolone

 Source : Robichaud, EILAT XII 2014

On the other hand, some of the differences may be technical artifacts (due to formulation, protocol etc.) and variability, which is always an issue in preclinical experiments, let alone in neurology. Therefore, Sage’s poster creates some uncertainty but given the striking similarity and the large body of scientific evidence for ganaxolone, the drug still has significant potential in SRSE.

IV ganaxolone could narrow the SAGE/MRNS valuation gap SRSE alone represents a $~2B global opportunity (assuming 70,000 cases per year and a $30,000 treatment cost), so even a 15-20% market share represents a significant commercial opportunity. Using a 50% likelihood of technical success (i.e. that ganaxolone and SAGE-547 are equally effective) can support a $170 valuation excluding all other chronic (epilepsy, fragile X, PCDH19) and acute care settings for ganaxolone. Therefore, SRSE and similar indications could become meaningful value drivers for Marinus even before actual clinical results (H2 2016).


I intend to hold both Sage and Marinus. Sage is significantly de-risked based on its early clinical data in SRSE and a high likelihood of success but this is already priced in. Potential upside may come from expansion to other indications as well as next-generation GABA-A modulators that are expected to start entering the clinic in Q4 2015 (targeting earlier stage status epilepticus). Marinus, on the other hand, is a high risk bet with a lower likelihood of success but the company has a lot of catalysts in the coming year, starting from early data in orphan indications by year-end 2015 followed by epilepsy P3 readout in Q1 2016. IV ganaxolone could add significant optionality value when clinical testing begins and concrete development plans are disclosed.

Portfolio holdings – April 12, 2015

portfolio - 12-4-2015

biotech etfs - 12-4-2015

88 thoughts on “Sage and Marinus – Not the typical CNS story

  1. hi Ohad

    Innate Pharma entered an impressive agrrement with AZ last week (250 EUR upfront etc.)

    you are still on the skeptical side I assume, what are actually your concerns?



  2. Dan (TROV) – Haven’t had a chance to take a look. This is not an area I am familiar with at all.

    steve (ADRO) – They are way overvalued imo as I don’t think their vaccines have a high likelihood of success. Data is from a small underpowered study in an indication nothing truly works. Same goes for HALO.

    Christian (IPH) – Impressive deal, good for them! Yes I am still skeptic about their NK targeting antibodies which have not generated any signal of efficacy to date. The NKG2A has data only in healthy volunteers.



  3. Hi Ohad,

    any thoughts on AQXP? Phase II data for AQX-1125 (COPD, “SHIP-trials”) is expected this summer. Pfizer and J&J are major shareholders. AQXP says to have PoC already. Market cap $80M.

    You make an outstanding work!! Thanks a lot!



  4. Hi Ohad,

    Do you think IMDZ has any chances to shine in the IO space? They seem to offer an off the shelf approach that may be more attractive and they appear to have a pretty diverse pipeline.

    The lead drug targets ny-eso similar to ADAP.




  5. Hi, Ohad

    Halo’s PEGPH20 could be a blockbuster or not? people worry about the data can be mainipulated, if patients can not test HA level before the treatment. here is the link and

    what you think Ohad?

    Thank you


  6. Marc (AQXP) – I am not too familiar with the story so my input should be taken with a grain of salt. I think the company should be commended for the indications they pursue and the robustness of the studies in COPD and IC. I am struggling with their proposed MOA both in terms of relevance to these diseases and differentiation from PI3K inhibitors. Bottom line, I am not optimistic.

    richard (IMDZ) – NY-ESO is a validated target but I have doubts about IMDZ’s approach and its ability to generate a clinically meaningful immune response. So far, cancer vaccines failed to generate benefit even in targets that today we know are good targets (NY-ESO, gp100 ETC.).

    steve (HALO) – I would like to see a more substantiated data set, what they have is simply not robus enough imo.



  7. test123 on April 30, 2015 at 2:16 pm said:

    Any feeling about MGNX at these levels. Wonder when the biotech sell-off will finally end


    well one can wonder when it will finally start 😉

    my guess is same correction as end of Feb to middle April last year, but who knows….


  8. Hi Ohad,

    Any thoughts on CLDX – your previously owned company? THey seem to have some near term catalysts. Cash balance of 350 million enough into 2017.
    ReACT study of Rintega will be presented along with data from the METRIC study of glemba at the ASCO in late May. Alos, a possible meeting with FDA on early rindo filing.
    ofcourse, one has to get behind the science though? I appreciate your comments especially after the recent pullback.


  9. hello Ohad!

    have you looked at AUPH?

    Somehow, there are some similarities with MRNS (be it positive or negative):

    – small company (11 FTEs end 2014, lot of experience with the compound and with the disease Lupus Nephritis)
    – one-drug company (Voclosporin)
    – large safety database (about 2000 patients tread in other indications)
    – some proof of concept that calcineurin inhibitors when added to SoC in LN (i.e. Cellcept, with only 9% complete remission) improve outcomes considerably
    – rather low valuation (approx. USD 120 mio)
    – considerable unmet medical need (LN)
    – important read-out of P2b towards end of the year

    would be nice to hear your opinion!

    questions to me are e.g. whether the other 2 calcineurin inhibitors (which are generic) can be a threat or not; company claims they are not suitable for LN in combination with Cellcept due to adverse event profile respectively interaction with Cellcept.

    PS: this link on their homepages gives a good overview:


  10. Christian,
    Ohad Hammer wrote on March 26, 2015 at 7:47 am said:
    JB (AUPH) – Actually I started tracking them closely a couple of months ago and think it’s a compelling opportunity based on reasonable likelihood of success in a decently powered study, potentially differentiated profile vs. cyclospronie and high unmet need (lupus nephritis).



  11. Christian,

    I think generics risk is non-existent. If voclosporin + MMF is superior to MMF alone, then it is the logical choice for FDA approval which will then become new SOC.


  12. Hi Ohad, thanks for your very informative blog. I was wondering if you followed CALA and wanted your thoughts on their arginase inhibitor program. They seem to be one of very few researching this area and with the recent Duke news on Alzheimer’s, CALA may be immensely undervalued at these prices?


  13. test123 (MGNX) – I still prefer to wait until I see data for their CD123 program in AML.

    Mike (STML) – No changes I am aware of. BPDCN is still the primary driver with data potentially at ASH this year. The XPO1 program is also very interesting imo given KPTI’s data but that’s a late- 2016 story. MGNX’s CD123 is the biggest threat.

    Dan (AAVL) – Yes I do and it will be the topic of my next write-up. Good risk/reward ratio given the relatively derisked P2.

    Peter (CLDX) – Don’t have a concrete opinion as I like Rintega (the only cancer vaccine I really like) but stakes are already high. The biggest question is whether OS data at ASCO will corroborate the trend in 2nd line GBM.

    steve (HALO) – Reaching understandings with the FDA is a positive but I still think results to date should be interpreted with caution.

    Christian (AUPH) – I like AUPH , as conveyed by what Chris posted (thanks). I tend to accept AUPH’s arguments regarding a differentiated profile that should allow them to capture a meaningful market share.

    Chrsitian (ESPR) – After AERI, I take nothing for granted but I expect the hypertension study to be positive and a positive feedback from the FDA later inthe year. Hard to interpret insider selling…

    Dan (CALA) – I am tracking them closely and am very interested in cancer metabolism (personally involved in a cancer metabolism company here at the fund). I like their approach which is distinct and riskier compared to AGIO, who are targeting mutated enzymes directly. For the glutaminase program, they have target engagement in humans, which is important but does not justify the current valuation (even after the sharp drop this week). Re: arginase as a target, imo the jury is still out re: direct evidence implicating it as an important player in cancer metabolism. Don’t know if the target is truly relevant in Alzheimer’s (models are questionable) and whether CALA’s inhibitors are suitable for this indication (safety, brain penetration etc.).



  14. Hello Ohad
    insider selling appers in many shares in April, espr mrns aavl stml and more
    just a coincidence?



  15. Alex – It’s no secret that valuations are quite rich.

    Mike – Thanks, very interesting. It clearly raises issues about the long term effect of RPE65 gene therapy. Not sure how relevant this is to AAVL, which relies on gene therapy as a way to replace chronic administration of VEGF mAbs and re-treatment every several years is still way better than 6 shots a year.



  16. hi Dan,

    it is perfectly normal to have a counter-move of the share price after the severe drop of the last few days in my opinion. I do doubt it has anything to do with news.


  17. Ohad,

    Seems after the deal settled with Roch, FMI is going down every single day. Are you worried by it’s movement?


  18. Chris Trau (MRNS) – I am always worried when a stock goes down but I amnot aware of any major developments. I plan to hold the stock going into Q1:16 P3 data given the low valuation.

    Cloud (FMI) – Yes, very surprising given the fact that more than 50% of shares are held by Roche. Still early to tell whether this has to do with something fundamental or just sympathy with the biotech sector.



  19. re FMI: I think that one of the reasons behind the current fall could also be yesterday’s announcement of IBM entering the market of cancer genetic analysis. I am long FMI too, but in the future I see Watson can have potential as a SaaS for commoditized NGS market. Of course things are far more complicated (liquid biopsy, companion diagnostics, etc.) but would be nice to know your opinion.

    As far as I understand, it’s to a large extent in direct competition with current FMI offering. At least on the patient’s side.


  20. Hey Ohad
    Have you ever looked at VNDA? They have a non 24 drug, a condition blind people have that relates to internal clock and sleep. They just released results for quarter andit seems sales are picking up. They are also awaiting EU decision, which will expand their market potential. I find the company as one of the few low cap biotechs with approved products that investorw will judge on market execution. If you are able to take a look, let me know your opinion. Market cap is 400M.


  21. Ohad,

    Could you please elaborate a bit more about $170 valuation calculation for MRNS? Given this number, the market cap is much higher than SAGE. Does this make sense?



  22. Cloud,

    MRNS market cap is $105M, Sage Market cap is 1.5B. Given these numbers how could MRNS market cap be higher than SAGE?



  23. Chris, $105M is for price $7.9 per share. As Ohad mentioned, $170 value will give market cap $2.26B, which is even higher than SAGE.


  24. Cloud,

    I understand that 15-20% market share out of $2B gives ~ $340M market cap,
    Using a 50% likelihood of technical success i.e. that ganaxolone and SAGE-547 are equally effective as Ohad mentioned = $170M valuation. 62% more than current valuation.
    Please correct me if I’m wrong.


  25. That is excluding all other chronic (epilepsy, fragile X, PCDH19) and acute care settings for ganaxolone as Ohad mentioned.


  26. Milos (FMI) – Competition is constantly growing, which is expected. The big question would be whether FMI’s experience, software tools and user interface can enable it to stay the leader (now with the help of Roche). I believe so but it’s impossible to predict.

    Luis (ARQL) – There wasn’t a lot of new stuff, next catalyst is ASCO for the FGFR program but I am not sure they’ll have another FGFR+ cholangiocarcinoma patient by then (so far one of the FGFR+ patients progressed based on the AACR poster). The Proteus study is moving forward which is also positive but data will take time to emerge.

    Dan (VNDA) – Sorry don’t know them well.

    Cloud (MRNS) – I was referring to market cap, not share price. (thanks, Chris)



  27. Hi Ohad,

    Thanks, very good article.
    IN CNS field, I think the best risk/opportunity is on Zogenix with a very interesting pipeline focused on epilespsy (Relday) and Dravet Syndrome (ZX008) : Milestones/royalties of Zohydro will give enough cash to conduct this two products enough to end phase 3.


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