Jefferies says $BIIB Nice Deal with $SAGE - Adds More Phase III Blockbuster
Programs to Pipeline

BIIB adds late-stage Phase III blockbuster pot'l programs from SAGE in two acute neuro
indications for depression that we think have high probability of success with data in
2021. We like this deal particularly because they paid an upfront and partnered it to bring
it in rather than full-out acquiring it in front of very binary data in 2021. Hence - they get
the milk without having buy the whole cow....
Big picture: The key driver for BIIB obviously remains the FDA decision for aducanumab
for Alzheimer's in the near future and we remain optimistic the FDA could still approve
the drug due to totality of evidence, agreements on a label and REMS, and the fact
that many of our KOLs said it is reasonable to approve and it would not be surprising
(and it would "run its course" meaning if it's great, it will get used, if it's not, it won't
get used much long-term and other Alzheimer's drug would come in the future). Hence,
significant upside from here vs downside - particularly since our sense is the buyside
thinks 75%-80% probability it will get rejected. We don't make any read-through to doing
this deal given recent Adu panel vote given this deal looks good regardless.
We like this type of deal: Regardless of what happens in Alzheimer's - BIIB is continuing
to build the late-stage pipeline - and this actually provides some backstop for BIIB stock
if Alzheimer's sends the stock down. We have been calling on them to do this and they're
doing it without full out paying up big for acquisitions. For example -- Street wanted BIIB
to acquire SAGE 1-2 years ago when stock was $150-200 (every investor was asking if
BIIB would do acute psychiatry deals)...and the Phase III MDD study actually didn't work!
That would have been a big problem for BIIB. Now two years later, they pay $1.5B instead
and when SAGE stock is much lower at $82/share and they wisely get the (split) rights to
SAGE's depression portfolio if it works in 2021 and they didn't have to full out acquire it for
what would probably have been $8-10B+....this also follows the BIIB/DNLI deal recently
to bring in Phase III-ready LRRK2 oral Parkinson's drug as well without having to acquire
all of DNLI.
SAGE Phase III assets should have reasonably high probability of success for BIIB
investors in 2021 - could be a big year for BIIB if cards fall right. SAGE has what could be a
$2-5B type depression franchise in post-partum depression (PPD) and major depression
disorder (MDD). SAGE has improved on the design of the Phase III MDD and given higher
dose, trial enhancements (evening dose, closer to meals) etc, we think there's a high
50%-65% PoS it works in 2021 for BIIB investors.
Details of the agreement: SAGE to receive $1.5B in cash ($875M upfront cash + $650M
equity via 6M newly issued shares at $104). SAGE is also eligible to receive up to $1.6B
in potential milestone payments regarding zuranolone and SAGE-324. BIIB and SAGE to
share US developmental costs and economics (50/50) while BIIB would be responsible
for commercialization OUS (ex-Japan, Taiwan, and South Korea) and to pay SAGE "high
teens to low twenties" royalty. SAGE and BIIB will hold calls on Nov 30 at 8AM and 9AM
EST, respectively.

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