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Edited Transcript of SAGE earnings conference call or presentation 6-Aug-19 12:00pm GMT

Q2 2019 SAGE Therapeutics Inc Earnings Call

Cambridge Aug 14, 2019 (Thomson StreetEvents) -- Edited Transcript of SAGE Therapeutics Inc earnings conference call or presentation Tuesday, August 6, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jeffrey M. Jonas

Sage Therapeutics, Inc. - CEO, President & Director

* Jim Doherty

Sage Therapeutics, Inc. - Chief Research Officer

* Kimi E. Iguchi

Sage Therapeutics, Inc. - CFO & Treasurer

* Matthew Calistri

Sage Therapeutics, Inc. - VP of IR

* Michael Cloonan

Sage Therapeutics, Inc. - Chief Business Officer

* Stephen J. Kanes

Sage Therapeutics, Inc. - Chief Medical Officer

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Conference Call Participants

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* Akash Tewari

Wolfe Research, LLC - Director of Equity Research & Senior Research Analyst

* Benjamin Jay Burnett

Stifel, Nicolaus & Company, Incorporated, Research Division - Associate

* Brian Corey Abrahams

RBC Capital Markets, LLC, Research Division - Senior Analyst

* Dane Vincent Leone

Raymond James & Associates, Inc., Research Division - Research Analyst

* Danielle Catherine Brill

Piper Jaffray Companies, Research Division - VP & Senior Research Analyst

* Jay Olson

Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst

* Joon So Lee

SunTrust Robinson Humphrey, Inc., Research Division - VP

* Lachlan Hanbury-Brown

William Blair & Company L.L.C., Research Division - Associate

* Laura Kathryn Chico

Wedbush Securities Inc., Research Division - SVP of Equity Research

* Lin Tsai

Jefferies LLC, Research Division - Equity Associate

* Marc Harold Goodman

SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst

* Matthew Kelsey Harrison

Morgan Stanley, Research Division - Executive Director

* Neena Marie Bitritto-Garg

JP Morgan Chase & Co, Research Division - Analyst

* Ross Howard Weinreb

Goldman Sachs Group Inc., Research Division - Research Analyst

* Subhalaxmi T. Nambi

Cowen and Company, LLC, Research Division - Research Associate

* Sumant Satchidanand Kulkarni

Canaccord Genuity Corp., Research Division - Analyst

* Tazeen Ahmad

BofA Merrill Lynch, Research Division - VP

* Yatin Suneja

Guggenheim Securities, LLC, Research Division - MD & Senior Biotechnology Analyst

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Presentation

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Operator [1]

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Good morning. Welcome to Sage Therapeutics Second Quarter 2019 Financial Results Conference Call. (Operator Instructions) This call is being webcast live on the Investors & Media section of Sage's website at sagerx.com. This call is a property of Sage Therapeutics and recording, reproduction or transmission of this call without the express written consent of Sage Therapeutics is strictly prohibited. Please note that this call is being recorded.

I would now like to introduce Matthew Calistri, Investor Relations at Sage.

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Matthew Calistri, Sage Therapeutics, Inc. - VP of IR [2]

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Hello, and thank you for joining Sage Therapeutics' second quarter financial results conference call. Before we begin, I encourage everyone to go to the Investors & Media section of our website at sagerx.com where you can find the press release related to today's call.

I would like to point out that we will be making forward-looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. Please consult the risk factors discussed in today's press release and our SEC filings for additional details.

We will begin the call with prepared remarks by Dr. Jeff Jonas, our Chief Executive Officer; Mike Cloonan, our Chief Business Officer; and Kimi Iguchi, our Chief Financial Officer. We will be joined in the Q&A session of the call by Dr. Steve Kanes, our Chief Medical Officer; and Dr. Jim Doherty, our Chief Research Officer.

I'll now turn the call over to Jeff.

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Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [3]

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Thanks, Matt. Hello, everyone, and thank you for joining us this morning. Let me first start by congratulating and thanking all Sage employees and everyone involved in the launch of ZULRESSO. On June 24, Sage reached another milestone in our history, one that only a small number of biotechs ever achieve, launching our first product. ZULRESSO is the first and only treatment specifically indicated for postpartum depression, or PPD. One of the most common medical complications during and after pregnancy. ZULRESSO is given as a onetime infusion, offering the potential for improvement in depressive symptoms in days. We saw an unmet medical need in the treatment of PPD where traditional interventions may take weeks or even months to help. We believe that this is what innovation looks like, and it may be a game-changing approach to the treatment of PPD.

Six weeks into the launch, we are right where we expect it to be. We are encouraged by the interest we're hearing from women and their families, health care providers and advocacy organizations that support this disorder. In a few minutes, Mike will provide details on the launch.

First, though, I'll pick up where we left off from FutureCast, our R&D portfolio review, where we shared exciting progress building out our 3 brain health franchises in depression, neurology and neuropsychiatry. These franchises represent an opportunity to fundamentally shift how brain disorders are thought about, studied and treated. Then I'll turn it over to Mike to give you an update on the early days of our ZULRESSO launch. Kimi will provide an update on our second quarter financial results, and I will make some closing comments before we open the call for Q&A.

As we presented at FutureCast 2 weeks ago, we continue to see compelling activity from SAGE-217 across a variety of disorders. We have decided to prioritize studying treatment-resistant depression, or TRD, in addition to major depressive disorder and postpartum depression to optimize our go-to-market strategy if we're successful. We also plan to pursue bipolar depression and generalized anxiety disorder in the future as our life cycle management for SAGE-217 evolves.

For SAGE-324, we believe the Phase I data in essential tremor, or ET, support continued investment in our neurology franchise. We plan to initiate a Phase II clinical trial evaluating SAGE-324 in ET by the end of the year. And given its pharmacologic characteristics, we believe opportunities in epilepsy and Parkinson's are also worth pursuing.

We're also very excited about our differentiated NMDA PAM data for SAGE-718 and the potential to build a neuropsych franchise centered around the molecule with a unique mechanism of action and profile of activity with the potential for cognitive enhancement in the domains of executive function in a variety of disorders. These are early days in the development of this compound, and we look forward to continuing our efforts.

Taking a step back, I want to remind everyone that our mission is to create and develop medicines that matter so people can get better sooner. We believe that in medicine, the best response is a rapid response. And with our pipeline of products, we believe we've made significant progress towards this mission.

Now I'll turn the call over to Mike to talk about our ZULRESSO launch.

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Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [4]

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Thanks, Jeff, and hello, everyone. As Jeff mentioned, we're very proud to announce that on June 24, we launched ZULRESSO in the U.S., the first-ever treatment approved for postpartum depression. We are now about 6 weeks into the launch, and we are on track with our execution. In the early stages of the launch, we are focused on enabling pathways to care, helping to secure access and supporting women through the treatment journey. You have heard us discuss in the past our efforts to identify and enable sites of care, and there are 4 key actions a site must achieve to become treatment-ready: establish site protocols to administer ZULRESSO, certify under the ZULRESSO REMS, a team formulary access and secure satisfactory reimbursement from payers. Given that ZULRESSO is the first product specifically approved for PPD and the paradigm shift required, we estimate that fully activating a site to become treatment-ready can take 6 to 9 months or more from launch and will vary by site. Therefore, we expect to start seeing momentum in the fourth quarter of this year or into 2020.

With that said, I'm very pleased to announce that patients started being treated in July and exciting to see women with PPD starting to gain access to ZULRESSO. Although we are in the early days of the launch, we are encouraged by the excitement in the community among OB/GYNs, psychiatrists and patients.

As you may recall, last quarter, we mentioned some of the metrics we plan to share to demonstrate our progress including metrics related to enabling pathways to care and payer access and coverage. As of August 1, there are over 100 REMS-certified sites of care, the majority of this for hospitals, and we are encouraged by several nonhospital sites of care coming onboard as well. These REMS-certified sites are spread across 55 of the top 140 Metropolitan Statistical Areas, or MSAs, and these 55 MSAs are estimated to cover over 45% of potential patients. Over time, our goal is to have at least 1 site of care in all 140 MSAs providing treatment options for women with PPD across the U.S.

As I noted earlier, REMS certification is just one step in the process of sites becoming infusion-ready. Next quarter, we plan to share the number of sites that are treating patients as of September 30, 2019. Since our launch occurred in the last week of the second quarter, as expected, there were no sites treating patients as of June 30.

From a payer access and coverage perspective, we are encouraged by the early access trends, and we are seeing the benefit of our early engagement with the payers during the prelaunch setting. As of August 1, plans representing greater than 65% of all covered lives have committed to what we consider favorable coverage, meaning either no restrictions or light restrictions. The 65% represents progress across both commercial and Medicaid plans. To have this level of coverage decisions early in the launch is a positive signal of the payers' willingness to support ZULRESSO as an important option for women with PPD.

Approximately 30% of covered lives are awaiting decisions, which we expect over the coming months. For these plans, we expect payers to cover ZULRESSO on a medical exception basis until the formal policies are created. As we anticipated, the favorable policies that have been created typically include a prior authorization to the label with a diagnosis of PPD for moderate to severe patients.

I'm also proud to announce our patient support organization in Raleigh, North Carolina, or Sage Central, officially opened in June. We are taking a family-centered approach to our go-to-market strategy, and Sage Central is integral to our efforts to provide a range of patient support resources to assist women with PPD and their families. The Sage Central team is focused on connecting patients to resources such as dedicated case managers who can provide information to help navigate the treatment journey including information on available sites of care, personalized support to assist with understanding insurance and coverage options, financial assistance programs for eligible patients and access to educational resources and assistance with where to go for help on a particular topic including connecting to local resources. More than 60 local and national advocacy organizations have already opted to be part of the Sage Central resource center, and we are encouraged by the support of these organizations. Early feedback on Sage Central has been very positive as it has been a valued resource in the early days of the launch to support both ACPs and women with PPD after the decision to treat with ZULRESSO has been made.

Overall, we're pleased with the early progress we've made in launching ZULRESSO, and the launch is progressing as we have planned. We have an experienced and talented team that is executing well against what we believe is a well thought out, focused and purposeful commercial strategy. The go-to-market model we put into place is working as we anticipated and enabling us to respond to a range of complex situations inherent to a paradigm-shifting launch. We remain highly focused on enabling pathways to care and helping to secure access for women with PPD after their decision to treat with ZULRESSO has been made. The launch of ZULRESSO is an important step in the history of Sage. We believe we are transforming a treatment Paradigm and providing a groundbreaking new option to women with PPD who previously had access to a limited set of options, and we are creating the infrastructure and capabilities that we believe will prepare us for the potential of multiple commercial launches of diversified products across our 3 brain health franchises.

I look forward to providing you further updates on our commercial progress in the future and the impact we can make in the treatment of postpartum depression with ZULRESSO.

And now I'll turn it over to Kimi to review our financials.

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Kimi E. Iguchi, Sage Therapeutics, Inc. - CFO & Treasurer [5]

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Thanks, Mike. I'll now walk you through the highlights of our financial results and guidance. Starting with our balance sheet, we ended the second quarter with $1.2 billion in cash, cash equivalents, restricted cash and marketable securities compared with $925 million at the beginning of the year. Our cash on hand keeps us in a strong financial position as we prepare to deliver on upcoming milestones across 3 of our brain health franchises.

Turning now to the rest of our financial results for the second quarter. Revenues were $873,000 in the second quarter, which consisted of $519,000 of ZULRESSO net product revenue related entirely to channel stocking in preparation for the U.S. commercial launch and $354,000 in expense reimbursement related to our collaboration with Shionogi. Revenues in the second quarter of 2018 were $90 million as a result of a onetime upfront payment we recorded from Shionogi.

Eight years ago, we stepped into an innovation board with everyone said brain disorders were too tough to tackle. We said they're too important not to, and we proceeded by thinking differently on how we approach the discovery, development, financing and commercialization of new medicines. We built a portfolio of differentiated assets and are fortunate to have a broad pipeline that continues to advance. This has contributed to our increased R&D expenses of $89.1 million in the second quarter compared to $69 million for the same period of 2018.

As Mike spoke about earlier, the launch of ZULRESSO is an important step in the history of Sage. As we provide a groundbreaking treatment to a patient population who previously had limited options, we are transforming a treatment paradigm and enabling new pathways to care. As such, our selling, general and administrative expenses increased to $88.2 million in the second quarter compared to $43.2 million for the same period of 2018.

We reported a net loss in the second quarter of $168.2 million compared to a net loss of $17 million for the same period in 2018. The significant difference was driven by the $90 million in revenue related to our Shionogi collaboration that we recorded in the second quarter of 2018.

We continue to maintain a solid financial foundation and anticipate that our cash balance will be at least $950 million at the end of 2019.

We expect that our operating expenses will continue to increase year-over-year to support the ongoing investment in our multi-franchise portfolio and continued progress in our pipeline development. We believe we have developed a pipeline with enormous potential to improve the lives of people suffering from life-altering brain health disorders. We're taking a deliberate approach to investing in our early-stage pipeline as we move forward to thoughtfully sequence assets that have the potential to create near-, mid- and long-term value.

With that, I'll turn the call over to Jeff for closing remarks.

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Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [6]

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Thank you, Kimi. Eight years ago, we laid the foundation to become the leading brain health company during a time where there was tremendous skepticism about the ability to develop novel medicines. We started the company without any compounds. Today, our first compound is now our first commercially launched drug.

I'm pleased with the progress we've made so far. I believe we are one of the very few companies making true advances in brain health. We're doing this by continuing our strong commitment to improving the lives of people, building a world-class team and unique culture and executing well on our proven playbook for success.

Moving forward, we are focused on the following priorities: expanding on our SAGE-217 pivotal program and positive activity data seen to date. We are conducting a series of studies: REDWOOD, or MDD-302, which will commence in the third quarter; and SHORELINE, or MDD-303, which is ongoing and designed to provide longer-term retreatment data and follow-up safety and tolerability data; and our SAGE-217 MOUNTAIN Study in MDD.

Here, we are completing enrollment and are on track for an expected readout of top line data in the fourth quarter this year or the first quarter of 2020. We are also continuing enrollment in our RAINFOREST Study of co-morbid MDD and insomnia. And lastly, we plan to prioritize initiating a study evaluating SAGE-217 in TRD with the goal of optimizing our go-to-market strategy if we're successful.

For SAGE-324, we plan to initiate a Phase II essential tremor study by the end of this year and plan to pursue epilepsy and evaluate Parkinson's as we continue deliberately and thoughtfully to sequence our wholly owned assets.

For SAGE-718, the lead product candidate in our NMDA portfolio, we look forward to the results of our Phase I study in Huntington's disease, which we expect to report in the second half of 2019.

And for ZULRESSO, we expect launch momentum to continue to build on the fourth quarter of this year and into 2020 as we anticipate sites will need up to 6 to 9 months or more to complete all the steps required to begin to treat women with postpartum depression.

I'd like to conclude with 2 thoughts. First, the folks at Sage are developing medicines that we believe will force our rethinking about people with psychiatric disorders are treated. With that sort of innovation, we need to consider access for our medicines, and we are committed to helping in that area. But we also have to work with changing attitudes and stigma, changing how psychiatric treatment is delivered. This is an important challenge, and Sage is committed to helping achieve it.

Second, I want to again thank the great team of people at Sage who have done excellent work in developing innovative molecules and launching our first commercial product.

We'd now like to open the call for Q&A. (Operator Instructions)

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Brian Abrahams with RBC Capital Markets.

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Brian Corey Abrahams, RBC Capital Markets, LLC, Research Division - Senior Analyst [2]

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It sounds like good engagement and enthusiasm around the ZULRESSO launch. So I'm curious, within the 100 facilities, how should we be thinking about the potential throughput at each of these centers? And what's the level of experience that they have with ZULRESSO in either the clinical trial or expanded access setting? How might that influence the speed of adoption of once through the initial logistics?

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Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [3]

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Brian, it's Mike. I'll take that question. So it is early days, right, we are encouraged by the signs that we've had with the sites, right, it really validates the early engagement we've had and what we mentioned before, the difference of having provider champions at these different sites. That really is the differentiator getting these sites up and running and online and getting to the point of treating patients. REMS certification is only one aspect of getting them all the way over the line in treating patients. But in terms of the throughput question that you had, it's going to take some time to determine that. We said it's going to take 6 to 9 months to really get these sites up and running and pass through the 4 different actions that they have to take including REMS certification, protocols, formulary access and then payer reimbursement. So into the fourth quarter, as we said, we'll start to see that momentum. We'll be in a better position to sort of comment on what that looks like.

And in terms of the differentiations, you said in terms of people, who might have had clinical experience or the EAP, it just gets back to my comment on sort of provider champions. Obviously, the more clinical experience that they've had, the more confidence they start to build with ZULRESSO. So if they've had that in the early settings through the trials of EAP, we can see that playing out. But again in time and into the fourth quarter, we'll see more and more clinical experience at the different sites.

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Operator [4]

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Our next question comes from Cory Kasimov with JPMorgan.

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Neena Marie Bitritto-Garg, JP Morgan Chase & Co, Research Division - Analyst [5]

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This is Neena on for Cory. So just one on the MOUNTAIN readout later this year. As we approach that readout, what's the biggest risk? And what have you done in terms of clinical trial design to kind of mitigate that risk?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [6]

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Thanks for the question. This is Steve Kanes. What we've been doing for all of our programs is focus very closely on execution throughout our programs both with ZULRESSO and with 217. We have very close oversight on patient inclusion and study conduct, and that's absolutely been key to our success. For the trial itself, we're looking forward to data in third quarter or first quarter. And for all our programs, really, what we do is just focus on the basics, make sure we have the right patients in the trial and really stay very closely engaged directly with the sites to make sure that everything is going well. Basic blocking and tackling, that's been very effective to date.

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Operator [7]

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Our next question comes from Tazeen Ahmad with Bank of America.

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Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [8]

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Maybe one on Huntington's. You mentioned some time lines there. What should we expect from the readout later this year? Can you talk about some of the influence that you're going to be looking at over the time period? And what would you consider to be good data worth progressing?

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Jim Doherty, Sage Therapeutics, Inc. - Chief Research Officer [9]

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This is Jim. I'm happy to take that question. So in our program for SAGE-718, as you mentioned, we're interested in looking at Huntington's disease. At the recent FutureCast, we talked about scales looking at cognitive performance and especially executive function in healthy volunteers. And so what we're doing as a next step is something that we've done with other programs in the past, and that is to look at a small open-label cohort of Huntington's patients using the same scales. So these patients have a baseline deficit relative to healthy controls, and so we'll be looking at whether or not we see a similar performance from 718 in these patients. And we'll use those data to both inform us methodologically and how to design future studies. And also, of course, we'll be looking at the magnitude effect in Huntington's patients as we plan future studies.

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Operator [10]

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Our next question comes from Danielle Brill with Piper Jaffray.

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Danielle Catherine Brill, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [11]

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With the 217 maintenance trial commencing in the third quarter and it being a year-long study, can you update us on how you're thinking about your filing strategy assuming MOUNTAIN and SHORELINE studies are positive? Can we expect NDA submission next year?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [12]

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Yes. It's is Steve, I'll take that one. One of the things that's important about the 217 program and that's so exciting is that we continue to generate great data and very predictable data. And what we've done is design a program that allows us to have multiple pathways to success, multiple filing strategies. So as we talked about in the previous call, we'll have data in fourth quarter or first quarter of this year with the MOUNTAIN Study, and then we'll look at that and understand how that fits best into an overall filing strategy. So as we know more, as we sort of decide how we're going to go forward, we'll, of course, share that. All of the data will really fit into that program, but how it all works together is something that we'll share as soon as we have clarity.

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Operator [13]

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Our next question comes from Ritu Baral with Cowen.

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Subhalaxmi T. Nambi, Cowen and Company, LLC, Research Division - Research Associate [14]

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This is Subbu Nambi on for Ritu Baral. So Cowen recently held a meeting with the FDA, and the FDA personnel emphasized the need for antidepressants to impact both mood and function and not just sleep improvement. In your discussion with the FDA for the breakthrough designation, did the FDA emphasize on any specific subscales of HAM-D?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [15]

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So the short answer is we generally don't comment on specifics around our overall programs. We can say that for the 217 program, the overall design of the registration program as well as the individual trials were all discussed well in advance prior to initiation of those trials in order to be able to have clarity moving forward. That said, we do include and have included in our studies other measures of function. We reported on those previously for our PPD studies as well as our MDD studies. So certainly, the ability to understand function is something that we're very interested in and is important to our overall program.

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Operator [16]

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Our next question comes from Andrew Tsai with Jefferies.

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Lin Tsai, Jefferies LLC, Research Division - Equity Associate [17]

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I have more of a high-level question about how you think about conducting your future clinical studies. Just curious what your thoughts are on the rising placebo rates that we've been seeing in U.S.-based clinical studies. We've kind of seen this issue occurring more recently. So curious if this trend kind of changes your thinking and how you run your next placebo-controlled studies, for example, in TRD or even bipolar depression down the line. Would you consider mostly enrolling ex U.S. patients, for example?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [18]

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So yes, this is Steve. What we have been doing is managing our studies by ensuring that our drugs have a very high level of activity. The secular trends in placebo response, if you follow them more than just the last 10 years, they vary quite a bit. And one of the things that we have noticed is that when you work in the same mechanism and in the same patient population over time, placebo response rates go up. But what we really do is just take that into account as we design and power our trials. And so far, that's worked out quite well. Placebo response is part and parcel of the work that we do, but being able to demonstrate differences is what counts, and we've been very effective at doing that to date.

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Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [19]

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Yes. This is Jeff. I just want to add that I think the trends -- Steve is right, the secular trends vary. I know recently people have talked about geographies, but we think that's typically more of an issue with trial design rather than any particular differences in the biology of the diseases. And as Steve has pointed out, we've been pretty rigorous in terms of how we -- our inclusion and our screening. So I don't think that is a generic risk, but rather one that you accommodate through the, as Steve said, the blocking and tackling of the trials.

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Operator [20]

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Our next question comes from Salveen Richter with Goldman Sachs.

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Ross Howard Weinreb, Goldman Sachs Group Inc., Research Division - Research Analyst [21]

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This is Ross on for Salveen. Just a quick question on the MDD trial design. So in the Phase II study, there was an inpatient treatment component while in the ongoing MOUNTAIN Study, patients were treated entirely outpatient. Do you see any risk here to the clinical trial design in regards to the introduction -- in regards to the introduction of any sort of treatment bias and how this might play out in the Phase III study?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [22]

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Yes. Thanks for the question and the opportunity to clarify it. One way -- one thing we've looked at in the program and one thing that everyone should be aware of is the PPD trial, which was done after the completion of the MDD trial, was an entirely outpatient study. And in that trial, the patient group and the drug performed exactly as it did in the inpatient/outpatient MDD previous trial. So what we're seeing really is a very consistent response with 217 regardless of setting, which is exactly how we designed the program what we would have expected in the first place.

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Operator [23]

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Our next question comes from Jay Olson with Oppenheimer.

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Jay Olson, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [24]

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Congratulations on the ZULRESSO launch progress. Since it looks like you're about to initiate the REDWOOD Study any day now, could you comment on the duration of the fixed treatment interval and how the duration is related to your learnings from previous or ongoing studies like SHORELINE?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [25]

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So the -- I'll give you the factual answer first, then we can talk about how it all fits together. So it's 2 weeks every 2 months. So the first 2 weeks of each month of treatment, patients are on 217. And what we are looking to do is ensure that we don't have continuous treatment with an important piece of the way that we're developing 217. What's so novel and what's so exciting about it is we think that the episodic treatment is really what's driving activity in these patients. So we don't want the dosing to be so close together that it will be hard to distinguish those episodes of dosing, but we want to make sure that patients are -- have opportunity to be treated over time. So that's the thinking that's gone into it, and it fits into the standard definitions of how you would go about doing this, and those 2-week intervals are exactly the way we've been dosing 217.

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Operator [26]

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Our next question comes from Paul Matteis with Stifel.

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Benjamin Jay Burnett, Stifel, Nicolaus & Company, Incorporated, Research Division - Associate [27]

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This is Ben Burnett on for Paul Matteis. I had a question on the PRN, the SHORELINE Study. I guess I was just tracking with your expectations, and are you seeing redosing? And is this at the rate that you are anticipating?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [28]

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Yes. So one of the things we can't do is comment on an ongoing trial. This is a registration program. What I can say is the study is going well. There's a ton of interest in the trials as there has been in all of our trials. But really, the results of what we're seeing in that emerging program is not something I can comment on, on the call unfortunately.

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Operator [29]

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Our next question comes from Akash Tewari with Wolfe Research.

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Akash Tewari, Wolfe Research, LLC - Director of Equity Research & Senior Research Analyst [30]

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So in your Sage MDD Phase II trial, at some days, HAM-D remained stat sig while MADRS became non stat sig. We know historically HAM-D and MADRS are pretty well correlated. So what could be the reason for this difference? Do you see any subcategory differences? And how confident is the team internally that 217 can clear the bar both for HAM-D and MADRS? And then how did the placebo arm for 217 in the Phase II MDD trial compare versus historical antidepressant trials? Specifically, after treatment was discontinued, how did the placebo arm -- did the placebo arm eventually return back to its baseline HAM-D score? And if so, how long did that take? And then finally, any comment on doing a race before the Phase III MDD study?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [31]

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Yes. A lot of questions there. I'll just give you the short version on the MADRS and HAM-D correlation. What we've done, of course, in our trials is we've used HAM-D as the primary endpoint. That's what we statistically powered the trial on, and that's how we designed the studies. We include MADRS because we know that it's a way to help others compare our results versus trials that have used MADRS. But obviously, if we're going to use MADRS as an endpoint, we would be powered against that and be training the investigators and so forth. That said, there's a very high statistical correlation between MADRS and HAM-D in all of our trials. So individual single-digit differences are not something that we're really looking at. If you look at subtypes or subcategories or the individual items, pretty much everything moves in parallel across both. And for the most part, we've seen a very high -- a very close tracking between both of those 2 endpoints across all of our studies both in 217, MDD, PPD as well as in ZULRESSO.

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Operator [32]

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(Operator Instructions) Our next question comes from Matthew Harrison with Morgan Stanley.

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Matthew Kelsey Harrison, Morgan Stanley, Research Division - Executive Director [33]

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I just wanted to ask one on ZULRESSO. Can you just comment -- broadly, you've obviously had good success with plan sponsors and getting on the plans. How does that influence -- I assume in a lot of these hospitals, you also need formulary access. So how should we think about those 2 items and how they're tracking or not tracking together?

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Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [34]

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It's Mike. I'll take that one. So as we said, the payer coverage, we've been very encouraged by what we're seeing on the payer coverage. And what we think is that, that to me is recognition that the payer sees the value in ZULRESSO, and that they want to provide access for women with PPD. The formulary status within the different hospitals, that's an internal process within the hospitals. That's one of the 4 actions they have to take to get all the way to treating patients. So it's not exactly correlative. And then the third thing I'd say that's even on top of that, the fourth thing that we've said that they had to take in a hospital setting is getting payer reimbursement. So we've been very pleased to see the patient side of this, and their plans are stepping up to cover ZULRESSO with favorable coverage. And that's a testament to the great work that our market access team has done and the investment we've made over a period of time in engaging those payers. And now we're seeing as the sites now taking that into their own shops and looking at it from a formulary perspective, going through their PNC committees and then looking to secure a satisfactory payer reimbursement for the administration of ZULRESSO in the hospital. So it's ongoing. Each site is at a different stage in that process. And as we've said, by Q4, we're going to start to see more momentum of sites coming online and patients getting treated.

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Operator [35]

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Our next question comes from Sumant Kulkarni with Canaccord.

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Sumant Satchidanand Kulkarni, Canaccord Genuity Corp., Research Division - Analyst [36]

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This is more of a conceptual one. On the generalized anxiety disorder indication, how do you compare and contrast your approach versus a competing glutamate approach out there...

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Jim Doherty, Sage Therapeutics, Inc. - Chief Research Officer [37]

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Well. So a very different approach relative to glutamate in the sense that the 2 systems act in opposition to regulate circuit-level function. It's been known for quite some time that the GABA system, which tends calm down brain function, is associated with an anxiolytic effect. So in many ways based on the target, we're on ground that we know about. But what we're looking at with our compounds and being able to modulate tonic GABA receptor function is very different than what's been out there. And so that's what we're looking at is how the addition of the tonic GABAergic inhibition really adds to the anxiolytic response.

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Operator [38]

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Our next question comes from Gary Nachman with BMO Capital Markets.

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Unidentified Analyst, [39]

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It's [Raffy] on for Gary. For SAGE-217, what are your expectations for potential scheduling? How did it impact your view of the commercial opportunity if 217 is a schedule IV like ZULRESSO?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [40]

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So yes. So this is Steve. But for all CNS programs, you need to go through standard studies regarding abuse liability and so forth. Every drug is evaluated separately based on its overall profile. And when we have those data, we'll certainly share them. I would turn it over to Mike to talk about its potential commercial implications.

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Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [41]

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Yes. And so on scheduling, it's early days, as Steve said, to find and what that may look like. But just from an overall commercial opportunity, obviously, the benefit/risk profile that we're seeing through the trials for 217 is really exciting from our commercial perspective. We see this as the opportunity, as Jeff has talked about, shifting the paradigm from a chronic to episodic. And if this benefit profile continues to be replicated in the ongoing studies, we think we have multiple ways to win with 217 to play broadly with patients. And we're getting positive feedback and the early engagement we're having, both from a payer perspective and ACPs as we do ad boards and just do our research at this point. So we'll wait and see what happens with the scheduling at this point. The benefit/risk profile is very exciting for 217.

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Operator [42]

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Our next question comes from Yatin Suneja with Guggenheim.

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Yatin Suneja, Guggenheim Securities, LLC, Research Division - MD & Senior Biotechnology Analyst [43]

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Question is on 718. Could you maybe talk about the biological rationale for using an NMDA receptor PAM in Huntington relative to some of the other indication that you could pursue? And then maybe also talk about your level of confidence in Huntington's disease now that you have a little bit more data, especially the healthy volunteer data that you recently announced a couple of weeks ago?

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Jim Doherty, Sage Therapeutics, Inc. - Chief Research Officer [44]

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This is Jim. Yes. So we're very excited about how our pipeline is progressing. We've got multiple midterm opportunities. For SAGE-718 in particular, as you know, it is a positive modulator of NMDA receptor function. But also importantly, as we've done with the GABA receptors, we've identified through Sage's science that there is a place where natural molecules interact with the NMDA receptor, and we can engage that mechanism. And so we take a biomarker-driven approach in Huntington's disease. It is a disorder where this natural mechanism is impaired, and so our logic there is that being able to engage that mechanism with SAGE-718 allows us to replace something that's missing. And so in that sense, it's a first patient population where we know we've got a deficit in this particular type of NMDA receptor function.

Now of course, there's a lot of knowledge about NMDA receptors involved in cognition, and so this isn't a necessary thing. And of course, down the road, we'll be looking at other patient populations as well, but it gives us high confidence upstart in Huntington's disease.

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Operator [45]

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Our next question comes from Joon Lee with SunTrust.

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Joon So Lee, SunTrust Robinson Humphrey, Inc., Research Division - VP [46]

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217 did work in Phase II MDD study, but can you remind us again the mechanism for why a delivered allopregnanolone works in MDD who don't necessarily have any deficiency in progesterone? I understand why it works in PPD, but just remind us again why it also works in MDD? And in the event that Phase III MOUNTAIN Study doesn't go as expected, could you still seek approval using the REDWOOD Study? Is the intention of REDWOOD to be able to serve as one of the pivotal?

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Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [47]

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So yes, we'll talk about the potential mechanism for 217. What we believe is going on is that we're really operating through the GABA system here for modulating. We need to separate out the notion of changes in "hormones" as a trigger for depression in patients with postpartum depression versus the mechanism of action of a drug that's improving mood. And what we've seen consistently across both ZULRESSO and now 217 is that direct interaction with the GABA receptor system actually has very powerful effects on mood states where we see rapid, profound and sustained improvement of mood through relatively brief durations of interaction with those receptors. And I'll turn it over to Jim to talk about some of our thinking related to that, but we do think that it's the action not through progesterone but through GABA that really is what's doing the work here.

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Jim Doherty, Sage Therapeutics, Inc. - Chief Research Officer [48]

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Yes, and I'll build off a point that Steve just made, and the point of triggering, right? So we do believe that what's happening is -- and our hypothesis is that whatever is triggering a depressive brain state, once that has been triggered, there's an opportunity with ZULRESSO or with SAGE-217 in major depression to adjust that state and allow a person to come back to a normal state.

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Operator [49]

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Our next question comes from Tim Lugo with William Blair.

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Lachlan Hanbury-Brown, William Blair & Company L.L.C., Research Division - Associate [50]

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This is Lachlan on for Tim. I guess I had a question on ZULRESSO. You said it takes 6 to 9 months for centers to get REMS-certified. But once they are certified, what kind of cadence do you see in terms of treating [those] patients and getting up to speed, acknowledging obviously that it's still early in the launch?

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Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [51]

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Yes. So let me just clarify that point what we said is it will take 6 to 9 months to get through the 4 actions that they have to take. REMS certification is just one of the actions that they have to take. And as a reminder, they have to set up a protocols internally in the hospital, go through the formulary process and also secure satisfactory reimbursement from the payers as well. So each one of those steps takes time. And that's what we've said 6 to 9 months, it will vary by site, right? Some of the sites might come up online sooner depending how quickly they can pass through each one of those actions. But for us, we know that based on the feedback we've had and what we've seen in these early days, it is going to take time to get there. So we feel very encouraged and right on track on where we want to be in terms of the early signals that we're getting from both the physicians and the patients. As I mentioned before, the payer access at this point so early in the game has been very positive. We've had some great wins at places like Aetna, Anthem and United and evenly distributed across Managed Medicaid and fee-for-service Medicaid. So lots of good progress being made. So as we move through the launch and, as I said, getting into the later half of the year, we'll have a much better perspective of how these sites are coming online relative to that 6 to 9 months and then what is the patient demand looking like as we go through.

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Operator [52]

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Our next question comes from Dane Leone with Raymond James.

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Dane Vincent Leone, Raymond James & Associates, Inc., Research Division - Research Analyst [53]

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It seems like the sell-side discovered SAGE-217 this quarter based on the battery of questions. So I'll ask one on ZULRESSO. Could you maybe just give us some description now that you have a couple of patients treated in July, what the patient presentation is like? Obviously, this is going to be a great drug broadly for PPD. I'm just curious who are kind of the first patients coming on the door right now and maybe looking for color like -- were these -- is this in an neonatal setting specifically? Are these patients that were discharged post birth and that have come back to the hospital to receive treatment? Anything like that would be great.

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Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [54]

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Yes. So this is Mike. I'll take that. So it's early days. We wouldn't comment on the specific patients themselves, right? But what I would say is consistent with what we've said all along in terms of the types of patients, we continue to see that this initially is going to be treated with severe patients to start. And as clinicians get more and more comfortable, we'll start to see them moving us back towards the MADRS severe -- MADRS patients, excuse me. The good news is that on the payer side, again, the coverage is broad, right in terms of MADRS severe patients, so we have the opportunity to continue to access more and more patients as ZULRESSO plays out.

From a site-of-care perspective, you're asking about where are they going, and it's very important to us, right, as we take this family-centric approach and we think about the experience the patient is going to be having, we really try our best to educate these sites on what's important to the moms and the families around that site of care. It's ultimately going to be the site of care that determines where in the hospital or their site of care that the mom will be treated. And in these early days, both in terms of those that are treating already and those that are coming online in the future months, it's going to be a range of different options for the moms to come in, right? So various settings. We do hear mom-and-baby units. We hear other settings of care as well, but what we try to really stress is how important it is for that patient experience, right? They're going to have to separate to a degree from the baby, but there are many places that are going to take the caregiver and the baby at the same time into the hospital setting. So that's really important. We'll continue to reinforce that. But ultimately, it's going to be the site of care that determines where in the hospital or their setting that mom is administered ZULRESSO.

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Operator [55]

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Our next question comes from Marc Goodman with SVB Leerink.

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Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [56]

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Just on ZULRESSO. Curious how many centers do you think in a year you'll have up and running, like what is the goal here. You mentioned to be in every MSA. So I'm assuming we're talking 200 to 300.

And then just second part of the question is, as you've talked to these 100 centers have already certified for the REMS, how many patients -- how many women are they seeing? Like, what are the -- I know this is kind of feeding off the last question, but are they seeing as many patients as you thought? Like just -- is the population bigger, the same? I'm just trying to get a sense of as you thought previously as we're getting into this.

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Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [57]

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Yes, I'll take it. It's Mike. In terms of the sites of care number, what we've said is that, at the end of the day, this is about access for women, right? That's ultimately what we want to get to. We're very focused on these top 140 MSAs, as we've talked about. We've made good progress that we've got 55 of the top 140 with a REMS-certified site in place. That translates to about 45% of patients across the U.S. having a site in place, knowing that they still have to take those other actions to get all the way to be certified. So in an ideal world, as I said, we would have at least 1 site up and running in all 140 MSAs. It will take sometime to get there as we talked about. And over time, we can get even more breadth in those MSAs, right? So we wouldn't give a number at this point, but we feel we're making very good progress along the lines of getting access for patients, which is the most important thing with these sites.

In terms of what we're seeing with at these sites, really asking about sort of patients and what we're seeing, the prevalence in the incident numbers are very similar to what we've talked about it in the past, right, the number of women that are being treated, the 400,000 -- over 400,000 with postpartum depression every year, the moderate to severe patient population is what we thought it would be, and that will continue to play out. I think the interesting thing is as we see more sites come online, it's not just about what the patients that are in that specific sites. A big part of our go-to-market model is also targeting OB/GYNs in the settings outside of those centers that we'll refer in. And so that's a big part that we'll learn over the coming months is what do those referral patterns look like and how many can a site actually take on and where are those referrals coming from.

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Operator [58]

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And our final question today will come from Laura Chico with Wedbush Securities.

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Laura Kathryn Chico, Wedbush Securities Inc., Research Division - SVP of Equity Research [59]

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I'm wondering if I could just ask one more on ZULRESSO. Mike, can you speak to the kind of expected timing you anticipate it's taking for payer reviews or I guess once you get to a more steady state? And I guess I'm trying to understand, once the decision to treat has been made, how long does it take before a patient actually starts on drug and kind of what proportion are you anticipating of these cases are going to be adjudicated favorably?

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Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [60]

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Yes. Laura, it's Mike. So on the expected timing, just to clarify, so the coverage is coming in, we're very pleased with where we're at. The 65% of covered lives today, the remaining policies we expect over the coming months to be [applied on]-- but in that interim period time, about 30% of lives that are waiting for a policy, we believe that medical exception basis patients will still be able to come through. And so really we're making very good progress on the coverage side. The flip side of that as we said on the reimbursement side, it's one of the steps that the hospitals have to secure that reimbursement directly from the payers, right? In our early engagement with the payers and the conversations we've had, they have signaled a willingness to provide reimbursement outside of DRG. The hospitals and the sites have to engage directly with the payers to make that happen. And what we're hearing is that they want to do that almost on a patient basis, right? So as patients come into the site, they'll have that negotiation and discussion on a very practical basis as opposed to theoretical. So once the patients come in, those conversations will happen. So it is one step in getting them all the way through treating. But again, the signals we're receiving from the payers has been positive, but it will take time to pass through all the steps to get them all the way to treating patients.

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Operator [61]

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Ladies and gentlemen, thank you for participating in today's question-and-answer session. I would now like to turn the call back over to Mr. Jeff Jonas for any closing remarks.

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Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [62]

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Well, thanks, everyone, again for your attention this morning. As you know, as we've said and as Mike has pointed out, we're really pleased with our progress on the ZULRESSO launch, and it's still early, but we're very comfortable and confident about the excitement that's building both among patient groups and in the community. And we're also, of course, pleased with the data that SAGE-217 continues to generate and the early data that we've seen for SAGE-718 and 324. So we're excited about the year to come, and I want to thank all of you again and all the folks at Sage for all the great work over this year. So again, thanks, everybody.

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Operator [63]

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And ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect and have a wonderful day.