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Edited Transcript of SAGE earnings conference call or presentation 12-Nov-19 1:00pm GMT

Q3 2019 SAGE Therapeutics Inc Earnings Call

Cambridge Dec 3, 2019 (Thomson StreetEvents) -- Edited Transcript of SAGE Therapeutics Inc earnings conference call or presentation Tuesday, November 12, 2019 at 1:00:00pm GMT

TEXT version of Transcript


Corporate Participants


* 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


Conference Call Participants


* Akash Tewari

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

* Brian Corey Abrahams

RBC Capital Markets, Research Division - Senior Biotechnology Analyst

* Cory William Kasimov

JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst

* Dane Vincent Leone

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

* Danielle Catherine Brill

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

* Douglas Dylan Tsao

H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst

* Gary Jay Nachman

BMO Capital Markets Equity Research - Analyst

* Jay Olson

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

* Laura Kathryn Chico

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

* Lin Tsai

Jefferies LLC, Research Division - Equity Analyst

* Marc Harold Goodman

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

* Maxwell Nathan Skor

Morgan Stanley, Research Division - Research Associate

* Paul Andrew Matteis

Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst

* Ritu Subhalaksmi Baral

Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst

* Salveen Jaswal Richter

Goldman Sachs Group Inc., Research Division - VP

* 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




Operator [1]


Good morning and welcome to Sage Therapeutics Third 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 the 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 Claistri, Investor relations at Sage Therapeutics.


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


Hello, and thank you for joining Sage Therapeutics' Third Quarter 2019 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 as well as the slides that contain supplemental details.

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 in 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; Kimi Iguchi, our Chief Financial Officer; we will also be joined for the Q&A portion of the call by Dr. Steve Kanes, our Chief Medical Officer, Dr. Jim Doherty, our Chief Research Officer; and Dr. Al Robichaud, our Chief Scientific Officer.

I will now turn the call over to Jeff.


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


Hello, everyone. Thanks for joining us on our first full quarter call, as a commercial organization. We have a lot to discuss with you today, including our update on the launch of ZULRESSO and the continued advancement of multiple compounds in all 3 of our franchises: depression, neurology, and neuropsych.

As you've heard me say before, 8 years ago, we stepped into an innovation void in neuroscience drug development. We've taken an approach to drug discovery and development that we think is unique. And by thinking differently about brain disorders, we believe we've made significant progress.

With this strategy, we built a pipeline of differentiated assets. And with the launch of ZULRESSO and postpartum depression or PPD, we've taken the first step in accomplishing our long-term goal of making a difference for patients suffering from brain health disorders.

We're optimistic about the long-term prospects of our pipeline and historically difficult neuroscience space.

More importantly, ZULRESSO, along with SAGE-217 represents a true paradigm shift in how one can think about and treat psychiatric disorders.

We believe people deserve new treatment options. Options that will allow patients to choose among standard chronic therapeutic interventions and newer rapidly acting short-term options that may not require ongoing pharmacotherapy.

So let me first provide a brief update on the launch of ZULRESSO. And then Mike will take a deeper dive into the launch metrics. And Kimi will follow up with an update on our third quarter financials.

In our first full quarter of the launch, the commercial team has made significant progress in awareness, access, and reimbursement, although that is not necessarily reflected in the revenue for the quarter, which was $1.5 million.

As the first treatment ever approved for postpartum depression, this is a unique launch, a hospital-based product.

Of note, it is a health care facility based launch for a disorder that has a devastating impact on women with PPD and their families.

These are the early days of a launch. But what we're seeing is giving us reason to be optimistic about the long-term prospects for ZULRESSO, and that is strong patient demand, enthusiasm from health care providers about this innovative treatment option and broad and favorable payer coverage only 4 months into the launch.

As Mike will explain later in the call, however, our experiences in the field are also confirming that the majority of health care sites will take 6 to 9 months to become treatment ready, as we've told you in prior calls.

Unfortunately, that means that many women with postpartum depression, have not been able to access treatment with ZULRESSO during the first few months of the launch.

Mike will walk you through the approach we're taking to help sites accelerate to become treatment ready.

We believe we've made good progress in establishing the foundation for long-term growth for ZULRESSO, based on our work in this first full quarter.

Later on, Mike will also provide more detail on some key learnings we have 3 months into the launch as well as some baseline metrics.

Now moving to what we believe is one of the most promising neuroscience pipelines in the industry, I'd like to review some other milestones.

In the third quarter, we continued to advance multiple candidates across our 3 brain health franchise.

We've made significant advancements in our depression franchise. Specifically, our program evaluating SAGE-217 as a rapidly acting durable short-course treatment for major depressive disorder, or MDD.

In September, we initiated the REDWOOD Study, our pivotal study evaluating the efficacy, time to first relapse and long-term safety of fixed interval SAGE-217 monotherapy maintenance in patients with MDD.

Also in September, we completed enrollment in our MOUNTAIN Study, our pivotal Phase III placebo-controlled trial, starting a 2-week course of treatment with SAGE-217. We expect to report top line results from MOUNTAIN Study this quarter.

Additionally, we completed an enrollment in the SHORELINE Study, our open-label real-world pivotal trial, evaluating the long-term safety of as-needed treatment with SAGE-217 and assessing the need for treatment up to 1 year.

We expect to report top line results from this study in 2020. We're also in the process of evaluating the design and timing of a placebo-controlled study of SAGE-217 in treatment-resistant depression.

Moving now on to our neurology and neuropsych franchises. For SAGE-324, the lead asset in our neurology franchise, we plan to initiate study-related activities for a Phase II clinical trial in essential tremor or ET by the end of the year.

Our goal to dose the first patient in the first half of 2020 remains on track. Given SAGE-324's pharmacologic characteristics, we believe opportunities in epilepsy and Parkinson's disease will also be worth pursuing.

We're also very excited about our differentiated NMDA PAM, SAGE-718, the lead asset in our neuropsych franchise. SAGE-718 has unique mechanism of action and a profile of activity to date, that suggest the potential for cognitive enhancement in the domains of executive function in a variety of disorders.

We plan to report data from the Phase I clinical study of SAGE-718 in a cohort of patients with early Huntington's disease by the end of the year.

I'm also pleased to announce, we've expanded our early-stage pipeline with 2 new additional assets, both of which have recently had INDs cleared for development.

SAGE-904 is our second novel NMDA product candidate and is being developed as a potential oral therapy for disorders involving NMDA hypofunction.

We've begun dosing healthy volunteers in a Phase I clinical study in the third quarter.

Additionally, I'm pleased to announce that an IND has been cleared for SAGE-689, an intramuscular GABA PAM, which we plan to move into the clinic as a potential therapy for disorders associated with GABA hypofunction in 2020.

I want to remind everybody that our mission remains the same, to create, develop and deliver medicines that matter. That is particularly important to us, while we're executing the ZULRESSO launch and navigating the initial challenges for the first-ever treatment approved for PPD.

Now I'll turn the call over to Mike for additional details about the launch.


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


Thanks, Jeff, and hello, everyone. As Jeff stated earlier, this is a unique launch in many ways, a health care facility based launch for the first treatment ever approved for postpartum depression, a disorder that has a devastating impact on women with PPD and their families.

We remain encouraged by the positive indicators that continue to suggest the long-term potential of ZULRESSO.

For example, we have broad and favorable payer coverage. We believe the underlying demand is strong, and the number of interested sites of care continues to grow.

I finally feel like myself, again, that's the inspiring sentiment we're hearing anecdotally from some of the women who have been treated with ZULRESSO.

For the quarter, we recognized product revenue of $1.5 million with 11 treating sites of care. As we anticipated, it is taking 6 to 9 months or longer for activation of treatment ready sites.

The treating sites in Q3 were sites that we're able to accelerate the activation process. With a limited number of treating sites in Q3, only a fraction of the women with PPD who wanted ZULRESSO were able to receive it.

We're focused on continuing to accelerate site activation. We also received feedback from several treatment-ready sites about their intention to gain familiarity with the clinical profile of ZULRESSO and to secure direct experience with reimbursement prior to increasing patient intake.

Given initial treating patterns at sites of care, we believe revenue momentum may lag the expected increase in site of care activation.

As a result, we believe ZULRESSO revenue growth will be modest over the next few quarters, and we expect to see a meaningful shift in revenue momentum in the second half of 2020.

One of our goals today is to describe in detail the factors involved in launching this unique product.

Let me begin with some key learnings we have 3 months into the launch and some baseline metrics.

First, as we previously stated, there are several well-defined actions needed for hospitals and other sites to introduce an innovative therapy like ZULRESSO into their treatment offering, including establishing site protocols to administer ZULRESSO.

Certified under the ZULRESSO REMS, attaining formulary access and securing satisfactory reimbursement from payers.

We expect that it would take 6 to 9 months or more for sites to navigate these actions and start treating patients. And that is proven to be the case with the majority of sites.

As we mentioned earlier, 11 sites were able to accelerate to treatment readiness status by the end of Q3. And based on these experiences, we've developed and deployed various tools and shared best practices designed to further accelerate where possible, treatment readiness at sites of care.

We continue to focus on sites where access to ZULRESSO will have the greatest impact. And as of September 30, there were more than 140 REMS certified sites of care, spread across 66 of the top 140 metropolitan statistical areas, or MSAs, covering more than 54% of potential patients.

While REM certification is only one action in the activation process, we believe the level of interest from sites in becoming REM certified is one of the leading indicators of the long-term growth potential for ZULRESSO.

Second, patient demand has been strong, as has interest from HCPs. In the third quarter, we received more than 200-patient start forms and we had referrals from more than 150 HCPs.

In addition, we've made great strides in one of the key success factors for us, which is payer coverage, with 75% of aggregated lives across commercial and Medicaid having favorable coverage with no or light restrictions as of September 30.

From a coverage and reimbursement perspective, we've made progress across national commercial payers, regional blues and several state Medicaid plans.

And we're working with several states on appropriate reimbursement outside of the DRG.

As more patients are treated, we will continue to gain insights into each state and commercial plans of reimbursement while continuing to support the sites as appropriate.

Our early progress on access and reimbursement is on track and in some cases, exceeding expectations.

And third, our patient support program, Sage Central has enrolled more than 90% of referred patients as of September 30. This exceeds best-in-class benchmarks.

Sage Central is an integral part of our go-to-market model and has proven to be a valued resource for patients, sites, and HCPs.

In closing, we've learned a great deal from these early days and are confident in the long-term potential of ZULRESSO. The indicators of success are present, and we're encouraged by the opportunity ahead for ZULRESSO as a meaningful therapy for women with PPD.

As I stated earlier, revenue momentum may lag the site of care activation, given the initial treating patterns of sites of care, even as more sites become activated, we believe ZULRESSO revenue growth will be modest over the next few quarters, and we expect to see a meaningful shift in revenue momentum in the second half of 2020.

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


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


Thanks, Mike. I'll now walk you through the highlights of our financial results and guidance.

Starting with our balance sheet. We ended the third quarter with $1.1 billion in cash, cash equivalents, restricted cash, and marketable securities compared with $925.1 million at the beginning of the year.

Our cash on hand keeps us in a strong financial position as we work to deliver upcoming milestones across all 3 of our brain health franchises.

Turning now to the rest of our financial results for the third quarter. Revenues were $3.6 million in the third quarter, which consisted of $1.5 million of ZULRESSO net product revenue and a $2.1 million in expense reimbursement related to our collaboration with Shionogi.

For comparison, there were no revenues in the third quarter of 2018. Our portfolio continues to progress and expand. We have what we believe to be one of the most promising neuroscience pipelines.

We estimate that the diseases we could pursue with our pipeline impact over 300 million people worldwide.

We now have 5 clinical candidates across 3 franchises. As a result, our R&D expense increased to $102 million in the third quarter compared to $75 million for the same period of 2018.

We're building a high-impact company with a deliberate and disciplined approach to capital allocation across both drug development and commercialization, resulting in near, mid and long-term drivers for potential growth.

Selling, general and administrative expenses increased to $89 million in the third quarter compared to $54 million for the same period of 2018.

The third quarter expenses in 2019 reflect the full commercial build for the launch of ZULRESSO and other infrastructure required for the expansion of our pipeline.

We reported a net loss in the third quarter of a $180 million compared to a net loss of a $123 million for the same period of 2018.

The difference is driven by the increase in expenses as we transition to a commercial company with an expanding portfolio across 3 franchises.

We continued 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 the continued progress in our pipeline development.

We've created a lot of value to date with a proven financial playbook. We've made tremendous progress, and we look forward to multiple milestone events over the coming year.

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


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


Thanks, Kimi, and this is Jeff again. There was a general understanding, that we're experiencing a public health crisis, as incidents of brain health disorders increases globally.

Yes, with respect to psychiatric disorders, the treatment model for patients, a model that assumes chronic therapy and a slow onset of action, along with the lack of innovation, have both combined to create a lack of urgency in obtaining new treatment options for people.

Today, we believe that new approaches to research and drug development have led to a growing understanding of the underlying biology of how brain networks work.

This understanding has led Sage to approach the neuroscience space differently. And we've applied these learnings to our development strategy.

Our mission at Sage is not only to append conventional wisdom, but to develop medicines that will offer new pathways and new options to medical care that will be distinct from what are currently available and to build a high-impact company making medicines that matter.

As we continue to progress our clinical programs, we hope to create a clear alternative for people needing treatment, not only in terms of currently available therapies, but by providing a clear alternative to the chronic therapy approach, which predominates today in treating psychiatric disorders.

This is a big vision, we understand. But as of today, we're pleased with the progress we've made so far in these efforts. And of course, we have a lot more to do.

I'd like to conclude with 2 thoughts. First, the folks at Sage embraced this challenge of rethinking how people with psychiatric disorders ought to be treated.

And we understand with that sort of innovation, we need to consider access for our medicines as a high priority. Our progress in obtaining excellent coverage for ZULRESSO and PPD illustrates our commitment.

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

With that, I'd like to open the call for Q&A. (Operator Instructions)


Questions and Answers


Operator [1]


(Operator Instructions) Our first question comes from Tazeen Ahmad of Bank of America.


Tazeen Ahmad, BofA Merrill Lynch, Research Division - VP [2]


So Jeff, I'm going to go ahead and ask you the question that everyone's asking me. So for the MOUNTAIN Study, when you do release your top line data beyond the primary endpoint of day 15, do you have expectations of providing any of the secondary endpoints that you have been studying vis-à-vis the ones related to durability?


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


Good morning, everyone, and thanks for the first call. I'm surprised that it involved MOUNTAIN. I'm stunned. Yes. So obviously, as you said, we expect that the MOUNTAIN data will be made available this quarter.

We also expect, as it has been in our practice to release the data from the day 15 and day 42, and that's what will be compiled now. And we'll be also releasing some of the set key secondary endpoints as part of that.


Operator [4]


And our next question comes from Danielle Brill of Piper Jaffray.


Danielle Catherine Brill, Piper Jaffray Companies, Research Division - VP & Senior Research Analyst [5]


I'll have a follow-up to Tazeen's on MOUNTAIN. Jeff, how important is it to show a Sage separation on placebo at day 42 and is the trial powered for this?


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


So a couple of points. One is, as you know, the primary endpoint here is efficacy at day 15 after the course of treatment. And in that respect, although people have often spoken about this in different ways, it's no different than any other conventional antidepressant trial, the only difference being that SAGE-217, at least in the 2 studies already completed works much more rapidly than conventional antidepressants, which requires 6 weeks to achieve the primary endpoint of efficacy.

So although -- so we have some advantage in the drug. So far it has worked more rapidly. We're hopeful that we'll see separation at day 42, but our powering assumptions are typically based as most Phase III programs are on the primary endpoint of day 15. I'm going to turn it over to Steve for some further color on that.


Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [7]


Sure. What's important for everybody to remember is, the 301 or MOUNTAIN Study is an efficacy study. That's on the primary endpoint. Understanding what happens afterwards, we look at the follow-up data, especially for safety, but understanding the long-term efficacy and how the drug will be used, those are data that will emerge from the longer-term studies, the SHORELINE Study, as well as REDWOOD.

So really important to keep that in mind, we'll be looking for a stability of responses similar to what we've seen in ROBIN and in the MDD trial that was recently published. But the patterns and how and which patients might have recurrence of symptoms over what period of time, those will be determined from other studies.


Operator [8]


And our next question comes from Cory Kasimov of JPMorgan.


Cory William Kasimov, JP Morgan Chase & Co, Research Division - Senior Biotechnology Analyst [9]


And I guess I might as well go for the trifecta here on MOUNTAIN, piggybacking off these first 2. Can you remind us how you plan to account for the missing data dropouts during the controlled follow-up period of the MOUNTAIN trial? Just wondering if there's any sort of risk that this may under or overestimate the efficacy in any of the 3 arms at these follow-up time points?


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [10]


Cory, Jeff. I don't -- we never make the SAD -- the statistical plan public. But as you can imagine, it's a standard mixed model that we've always employed. It's not a BOCF model, which would be in our favor, as you can imagine. Remember, the other major difference here is that we didn't allow rescue therapy in the program.

So we think that, that should attenuate any of the risk of that we -- even if we saw in the original study, where there was an imbalance in the placebo group of more placebo patients on follow-up, obtaining SSRI rescue.

So we're -- as much as one can be comfortable with the data, we think the design should allow us to see the separation moving forward without any advantageous interference with adjuvant pharmacotherapy.


Operator [11]


And our next question comes from Paul Matteis Stifel.


Paul Andrew Matteis, Stifel, Nicolaus & Company, Incorporated, Research Division - Co-Head of the Biotech Team, MD & Senior Analyst [12]


In the REDWOOD Study, the off drug treatment hiatus is 6 weeks, and I believe in SHORELINE per protocol, it's at least 6 weeks. I was wondering, how did you come up with, especially in SHORELINE, this 6-week hiatus? And when you think about this drug in practice, if a patient responds and then relapses sooner, is there any reason why they couldn't get SAGE-217 sooner? How did you contemplate that when you design these trials?


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [13]


Couple of the points I'd make. One is, we obviously had -- we're privy to the curves of what these patients look like in their response in all the trials we've conducted.

And when we -- you have to step back and think about our strategy. And that is when we first started with this mechanism with ZULRESSO, we saw this durable onset of action and maintenance of activity.

So -- and we saw that, and we didn't see a lot of basically decay in the response curves out of 42 days.

So when we did that, we decided in terms of designing this Phase II program to really put together, what we think is one of the most comprehensive depression programs constructed really in the last decade.

And one of the barriers we have, frankly, is that people are looking at 30 years of SSRI data and expecting us to replicate it in 2 studies, which we, of course, we can't.

And as Steve has pointed out, our goal is not only to show acute efficacy, but with 302 and 303 to demonstrate how this drug might be used in a completely different treatment paradigm, and that is offering patients a brand-new option.

So when we look at the 6-week data, we obviously had some level of confidence that this would be a pattern of treatment for physicians who might not want to have the responsibility of monitoring patients on an as-needed basis, which is the way many pharmacologists treat patients, which is start them on drugs, stop them after 2 or 3 months and then have them educated to call on a relapse, if it occurs.

The other point to remember is, this is a completely novel mechanism of action. This is not a monoamine inhibitor.

This is not in a tricyclic or an SSRI. This is a drug which we hope and believe works completely differently by offering some sort of brain reset of neural circuitry.

And as such, it's apples and oranges to compare this mechanism and this method of study to what's been done with SSRIs.

So our approach has been for advanced pharmacologists to do as, as needed treatment should the disease reoccur or a pattern of treatment in the 302 study or REDWOOD, which would, we believe, allow patients to remain symptom-free for up to a year.

But we believe in toto, that this would be one of the most comprehensive packages, not only for acute treatment, but also informing maintenance therapy.


Operator [14]


And our next question comes from Ritu Baral of Cowen.


Ritu Subhalaksmi Baral, Cowen and Company, LLC, Research Division - MD & Senior Biotechnology Analyst [15]


And I'm going to complete the trial trifecta by asking about SHORELINE and that data. And your plans for what sort of data might be released in 2020? It's an open-label study, Jeff. When are you guys going to take the first look at the efficacy and safety data in SHORELINE?

Will it be after the MOUNTAIN study, before going to the FDA internally, where could open-label data be useful in moving the whole program forward?

And how could that translate to when we, on the outside might see that, at least from a safety perspective?


Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [16]


Ritu, I'll take that one, it's Steve. So SHORELINE, of course, is part of our overall pivotal Phase III programs. And what we're going to be doing is making maximal use of that information. But what we -- what's important to understand about it is that these are data that are going to help us understand both safety in retreatment, as well as patterns of retreatment and understanding who may or may not be frequent, frequent people who have a recurrence of symptoms.

So it's not a kind of data that one looks at to sort of dig into the specifics.

It really is, as Jeff said, something that we look at in toto. As for how we make use of information with regard to regulatory interactions.

Of course, those are things that we will comment on until after we've had such interactions. But what I can tell you is, there's a lot of interest, of course, we've completed the enrollment. The study is going well, and we'll have a lot of very important information as a result of that trial.

What Jeff had said during the call is that this is the first and largest naturalistic study in patients with MDD.

And that's going to create important and critical information for understanding patterns of recurrence of symptoms as well as how best to use 217. That's what we're looking for in that study.


Operator [17]


And our next question comes from Andrew Tsai of Jefferies.


Lin Tsai, Jefferies LLC, Research Division - Equity Analyst [18]


So when we think about the approvability of 217 as it relates to the MOUNTAIN data set. What do you think is the minimum amount of efficacy delta 217 would need to achieve at day 15? Should investors be thinking a 2-point separation to placebo at the very least, 3 points, 4 points. Of course, you've shown them a much larger delta on your past trials?


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


This is Jeff, and I'll -- a quick comment with that. I think it's powered for significance. And I think we've never given out more information than that, but we believe the study will be adequately powered to show an adequate delta at day 15.

And I'm not sure we can comment beyond that. It is correct, and we recently published data, doing some comparisons with SSRIs, that the effects I've seen with this mechanism is substantially larger.

But that being said, we believe the study is considerably powered.

I'm going to let Steve layer on this one.


Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [20]


Yes. An important piece of this is to understand the difference between effect size, which is the difference of drug from placebo versus effect, which is how much patients improve after treatment.

And what we've seen with 217 is very large improvements overall over a matter of days, with greater than 70% of patients responding, meaning greater than 50% of improvement, and 50% of patients having remissions over the course of that treatment period.

That is qualitatively different from all drugs that are approved right now are thereby precedence.

So the question around a delta from placebo, that's a technical question that Jeff answered, which is, how large a study do you need and to demonstrate statistical significance.

We're interested in more than that. Not just statistically significant; clinically meaningful and differentiated. Those are all parts of the profile we've been seeing in 217 as well as in brexanolone.


Operator [21]


And our next question comes from Brian Abrahams of RBC Capital Markets.


Brian Corey Abrahams, RBC Capital Markets, Research Division - Senior Biotechnology Analyst [22]


Maybe a question for Mike. Obviously, ZULRESSO has a pretty unique profile. But just curious if there are any learnings at all that you can take from your engagement with physicians, payers and academic centers that could potentially help inform your future commercial strategy for 217?

And along those lines, anything you can -- that you're hearing with respect to launch dynamics for recently approved -- competitors acute use antidepressant that you might be able to use to guide your commercial approach with 217?


Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [23]


Brian, it's Mike. Thanks for the question. Yes. So I think, if you think about the -- a lot of the thesis for ZULRESSO, we really believe in the long-term potential of ZULRESSO, right? We think this can be a meaningful product, for women with PPD given all leading indicators we've seen. The stories of the patients, the compelling stories around the treatment of ZULRESSO, also, the patient demand, the number of sites coming online and the payer coverage.

And so a lot of the investments we're making in ZULRESSO is not only about ZULRESSO. It's about the investments that we're making from a franchise perspective, to help 217, which is where your question is going to.

So there are definitely learnings that we're seeing on ZULRESSO, that we can apply to 217. Some of that is really about helping them understand what it takes to shift the paradigm, right. When you think about what it takes for patients to accept a new treatment like this and the experience that both physicians and patients have to have with the new therapy, that's absolutely a key learning.

What this is about with ZULRESSO, as we've always said, is building championship, right? That's a big part of the success for ZULRESSO.

We're going to see that with 217 as well. We want to build up championship and help them understand all the stuff that Jeff and Steve have walked through on the different trial designs and how 217 will work in the real world.

These are learnings we will apply from ZULRESSO and 217, and probably more specifically on TB, you asked about MDD. But I've said this before and that the market that 217 is going to launch into in PPD is going to be different than the launch for ZULRESSO because of what ZULRESSO has done.

All the work that we're doing, the foundation that we're setting with ZULRESSO is going to benefit 217. And I think for us, you asked about other antidepressants and recent launches.

The profile is so different of 217, like we look at analogs, and we learn from them. But at the end of the day, we've got to build the best-in-class go-to-market approach with 217 that fits the profile of this product and ensures it gets to as many patients as possible.

I'm going to turn it to Jeff if you just want to follow-up on one of this.


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [24]


Yes, thanks, Mike. I think a couple of points, I just want to emphasize. First, I think it's early days of the launch. And Mike's team has made great progress. One of the major obstacles that people had anticipated, which was obtaining coverage and lives covered. And they've done substantial good work in achieving that already.

I think we know this is unique. It's a hospital-based psychiatry launch for indication in women's health, that has -- and I think, my team, we've learned a lot about it, and it does represent a paradigm shift that we think we will be able to leverage as we move forward to 217, which is the idea of an acute therapeutic intervention, obviously, that would be an outpatient home-based therapy.

But overall, I think we're quite encouraged with how the launch has begun. And I think as we've said, it will -- we think it will take 6 to 9 months for this to really ramp up. And in that respect, we feel really good about that, we've been on track about our predictions.


Operator [25]


And our next question comes from Laura Chico of Wedbush.


Laura Kathryn Chico, Wedbush Securities Inc., Research Division - SVP of Equity Research [26]


I guess I had -- just had 1 on MOUNTAIN with regards to the 20 mg dose? And kind of how should we be thinking about the potential for success there in MOUNTAIN, but also the implications for the other studies, given that it's -- the other studies are focusing on 30 mg dosing?


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [27]


Laura, it's Jeff. Obviously, we don't -- it's a 3-arm study and the 30 milligram, we believe, is what it would -- a positive study in 1 of the arms is what would be required, for moving forward for a complete package.

We don't know if the 20-milligram will work. We don't believe it's necessary, frankly. And candidly, I think, a demonstration of a dose-response, is not a bad thing in terms of drug development.

So we're very comfortable about the design of the trial. Obviously, it was adjudicated early with the FDA and we just thought in terms of looking at minimal effective dosing, it was prudent to include the 20-milligram, but we don't believe that's a requirement for a registration.


Operator [28]


And our next question comes from Salveen Richter of Goldman Sachs.


Salveen Jaswal Richter, Goldman Sachs Group Inc., Research Division - VP [29]


So in MOUNTAIN, could you just walk us through why you're using HAM-D at the day 15 measure and then MADRS for day 42? Is there some sleep component that may be beneficial here?


Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [30]


Yes. In fact, we're using MADRS -- excuse me, HAM-D as the primary endpoint across all of our trials. It's the -- it is the endpoint that's the regulatory endpoint that we've used reliably across now 5 placebo-controlled trials, the entire ZULRESSO program, as well as our intent for the 217 program as well.

So in fact, HAM-D will be what we report. We typically include both HAM-D and MADRS. It allows for some level of implicit comparison between what we're doing and what others are doing. But the primary endpoint and what our studies are powered for is always HAM-D.


Operator [31]


And our next question comes from Akash Tewari of Wolfe Research.


Akash Tewari, Wolfe Research, LLC - Director of Equity Research & Senior Research Analyst [32]


So you made some comments about why the 20 mg dose was kind of included in the MOUNTAIN Study. Given that we saw an 8% to 9% dropout rate in the 30 mg arm in your Phase II MDD trial. Could we potentially see a lower dropout rate because of the inclusion of the 20 mg dose for MOUNTAIN?

And also, can you comment a bit on what were the differences between the ROBIN Study and the Phase II MDD Study that led to 1 trial showing kind of a static durability past 40 days, and the other 1 not showing that. Is there something about MDD versus PPD that's causing this or maybe rescue treatments?


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [33]


This is Jeff. I didn't -- I missed the first, but let me just comment broadly, and I'll turn it over to Steve. With respect to the MDD Study, obviously, that was a smaller study.

But if you look at the patient curves, they're virtually superimposable. You're really seeing minimal variance over out to 42 days.

And as we noted, the rescue therapy was imbalanced in the MDD Study, with 11 patients in the placebo group receiving rescue therapy versus only 3 on the treatment group.

So the patient response curves and if you include ZULRESSO, again, you can argue whether it's probably not, you don't see much decay, and they're virtually superimposable. And I'm going to turn it over to Steve with the rest of it.


Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [34]


Yes. So with regard to 20 and 30 milligrams. We included it for the reasons that Jeff described to mainly to -- in agreement with the FDA to explore lower dosing, no more, no less. I don't -- given at the low rates of adverse events that we've seen across 2 studies, in low dropout rate. We really don't anticipate that to be a driver for the different arms.

We're really interested in understanding whether or not more than 1 dose might be useful for patients.

With regard to differences in the studies. I think the MDD trial was -- we had -- as people may be aware, 1 week was inpatient, the second was outpatient.

Of course, it was our first placebo-controlled trial. The ROBIN Study was an entirely outpatient study, which is the way we expect 217 to be used more broadly.

So as we build the development program, we had elements into each trial that help us understand with greater precision how the drug would best be used out in clinical practice.

And that's really what all of the elements that we're describing here are for.


Operator [35]


And our next question comes from Matthew Harrison of Morgan Stanley.


Maxwell Nathan Skor, Morgan Stanley, Research Division - Research Associate [36]


This is Max Skor on for Matthew. A quick question. For 217, how important do you believe sustained clinical benefit is to physicians and regulators out to day 42?


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [37]


This is Jeff. The -- if you look at how the study is, sustained benefit is part of a maintenance indication. And again, what we've shown is that we can get durable activity with only 2 weeks of treatment.

The idea of a maintenance claim is one that's generic, no pun intended to the entire antidepressant space.

So we don't -- so that is not a -- we don't believe that's going to be a separate -- as part of this package. However, as Steve and I have both noted, just looking at this more broadly, we believe that the package we're putting together will be informative both for acute therapy as well as maintenance therapy.

And that's always been our intent to have the 301, 302 and 303 data as part of the package, so that when this drug -- if and when this drug is launched, physicians will have clarity about how to use this drug acutely as well as in a maintenance therapy.

The other point I'd like to make is that, if you look at our data, the drug so far has worked very rapidly. So we believe it will always have a role in treating patients where rapid resolution of symptoms is desirable.

We think this is one of the great options that we might be able to offer the field, if this drug is approved, which is rapid onset of action without chronic pharmacotherapy and has also been used as an adjuvant in about 1/3 of our patients.

So we know it works alone and in combination. So far, we have to replicate those data.

So we believe this drug will have a place in the armamentarium, regardless of whether it's being used as a monotherapy or as an adjuvant therapy.


Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [38]


And with regard to sort of regulatory treatment, when we look at how the FDA viewed the data from the ZULRESSO development program.

And in that case, what was important to the FDA was when patients got better, they remain well. It has nothing to do with statistical significance out through a month or more after the treatment, it was, do the patients bounce back with their symptoms as soon as the treatment stops? Or do they overall stay well and have continued benefits?

That's the important piece of it. That's the pattern that we've seen with 217 in our 2 prior trials and what we think, as Jeff has described, represents a true change in paradigm for treatment of patients.


Operator [39]


And our next question comes from Gary Nachman of BMO Capital Markets.


Gary Jay Nachman, BMO Capital Markets Equity Research - Analyst [40]


For the SHORELINE data, given that you're evaluating patients up to a year. Should we assume that data likely will be at the end of 2020, any sense of average number of retreatments we might see just from other work that you've done?

And then just 1 quick follow-up with ZULRESSO. I know it's early, but is it more psychs or OB/GYN's that have been administering it in patients?

And where do you expect to see more of the uptake with that product?


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [41]


What we can say right now with SHORELINE is, we'll have the data in 2020 and we can't be more specific than that.

With regard to ZULRESSO insights, I'll turn it over to Mike.


Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [42]


Yes, Gary. So on the ZULRESSO uptake. So we're encouraged by the HCP demand, as we said, we had over 150 HCPs referring in. The majority of those at this point have been OB/GYN's, as we anticipated, right? We built our go-to-market model to approach both OB/GYN's and sites.

And what we're seeing is the majority of referrals are coming from OB's, but in many cases, the treatment in the sites of care can be by psychiatrists.

So it's a combination of both OB's and sites, we expect to continue to see referrals from both. But right now, it's been predominantly OB's.


Operator [43]


And our next question comes from Sumant Kulkarni of Canaccord.


Sumant Satchidanand Kulkarni, Canaccord Genuity Corp., Research Division - Analyst [44]


Assuming MOUNTAIN works, what are your latest thoughts on the timing of an NDA filing for 217 because having SHORELINE and REDWOOD in hand prior to approval might have important implications from an eventual clinical practice to competitive profile and pricing standpoint?


Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [45]


This is Steve. And what I'd say is that we're moving very, very -- what -- moving along very well with the 217 program and REDWOOD and SHORELINE will certainly add more and greater information.

With regard to the timing and the strategy for the NDA, the data themselves will inform the strategy. The next readout as we're all talking about today is our 301 data that we'll have here in the fourth quarter.

What we'll do is, look at those data and since 217 is a breakthrough program, we'll bring those data to the FDA, have a discussion about what we think is the most efficient and effective plan for filing.

As soon as we have that clarity, we'll share it. It would be premature to speculate.

One of the things that's important about the program is, there's lots of ways to unlock and articulate the value of 217 between the acute studies that we've done already, the 2 positive pivotal trials that we have, the MDD Study as well as the ROBIN Study, the 301, which we'll read out now, as well as the long-term studies, SHORELINE and REDWOOD, we really have a good idea of how best to advise both the agency patients and physicians on how to use the medicine.

So until we have all those pieces together, lots of potential pathways to a file. We wouldn't want to speculate about what the specific timing is for that plan.


Operator [46]


And our next question comes from Yatin Suneja of Guggenheim.


Yatin Suneja, Guggenheim Securities, LLC, Research Division - MD & Senior Biotechnology Analyst [47]


Just another question on the regulatory front. So with regard to the ICH guidelines, would you have an exception that you might not require 300 patients for 6 months or 100 patients for 12 months or would you require that?

And if you do, what would be the time line when you'll be able to file?

And then quickly, if you could comment on the Huntington readout, what would entail a successful study that would warrant further development?


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [48]


Yes. So this is Jeff. In terms of the numbers, we have an -- we already have a prearranged agreement with the agency. I think we're not concerned about meeting ICH guidelines.

If you look at our -- the programs we have understudy. But that -- so that we believe are well covered.

With respect to Huntington's, I'm going to turn it over to Jim Dougherty.


Jim Doherty, Sage Therapeutics, Inc. - Chief Research Officer [49]


Yes. With respect to Huntington's, you're referring to this SAGE-718 program, which is our lead NMDA asset. And as we've talked about previously, that asset has currently been in Phase I.

And we've looked at early open-label cohorts showing at least an acute setting some beneficial effects in cognition for those healthy volunteers.

So the study that's running now is a similar study but down open-label cohort, looking at the effects of 718 in Huntington's patients.

And so as we've done previously with our more matured programs, we will use the data to help inform the Phase II study that's currently in plan for the early part of next year.


Operator [50]


And our next question comes from Jay Olson of Oppenheimer.


Jay Olson, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [51]


I'm curious about the conduct of the MOUNTAIN Study. Can you describe any steps you've taken to ensure bedtime dosing? How these steps may differ from previous studies of 217? And how do you expect the dosing instruction to be reflected in a label?


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [52]


So I'll take the last one first, Chris. It's way too early to speculate about how instructions will be -- to be reflected in the label.

We take a very direct approach to management of our trials. We give the patients instructions, we tell them, it's best to take it at night. And what we've done in earlier studies, we've looked at PK samples to ensure that at least based on our modeling, we know that the levels were prior to the next dosing when they come in, identify that they've been taking the medication and so forth.

But that's not a -- regardless of what time of day the drug is administered, it's really not about a PK/PD relationship. For something like 217, we're talking about an effect that happens over the course of the entire dosing period.

So I think the most important piece of this is that the approach that we've taken to specifically instructing patients has been effective.

We've shown in study after study that the patients have been able to manage that relatively brief dosing period.


Stephen J. Kanes, Sage Therapeutics, Inc. - Chief Medical Officer [53]


Yes. And the other point I'd make, it's a pretty well-behaved drug. We've seen that in the 2 prior control trials, well the open-label data and the Phase I, and Steve first points out, the PK does not require dosing in any particular time.

But I think the other point, which is maybe more germane is that the drug has so far been extremely well-tolerated.

So when you look at issues of noncompliance, say, for example, in SSRI trials, you usually see that in the context of patients not obtaining benefit while they are experiencing the side effects, which occur very rapidly.

What you have with 217 to date has been sort of the opposite. You see a rapid onset of activity, coincident with improved sleep.

So compliance with our studies, and you've seen by a very low dropout rate, has not been a major tactical issue.


Operator [54]


And our next question comes from Dane Leone of RJF.


Dane Vincent Leone, Raymond James & Associates, Inc., Research Division - Research Analyst [55]


Just a quick follow-up on that. In the Phase II MDD study for SAGE-217, all the doses were actually delivered under a supervised basis, both in the inpatient and outpatient periods.

In the MOUNTAIN Study, are the doses also supervised for all the day 0 to 115 daily doses?

Then even though they're outpatient, is a clinician going to their house? Or are they going to clinics to receive their daily dose?


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [56]


Yes. No. First, let me clarify. In fact, for the second week of the MDD trial, patients were at home, and they're given their medications to take at home.

So after the patients were discharged, they were -- as is every -- which is standard in an antidepressant trial, patients were given instructions, and they came in for their follow-up appointments.

And that's the same approach that we're taking. And no, we're not sending people to supervise administration.

Remember, these are the registration programs that will go into labeling.

And if you have a particular procedure like this, it would then be translated into a label claim, meaning that people would need to be supervised.

That's not the way that antidepressants are administered. That's certainly not the way they work. And it comes down to this issue of effectiveness versus efficacy, effectiveness is when you have a long half-life drug, when people are taking it to get exposure and then they get the benefit.

And that's what we've seen, as Jeff said, in study after study. That's what we anticipate in 301 as well.


Operator [57]


And our next question comes from Marc Goodman of SVB Leerink.


Marc Harold Goodman, SVB Leerink LLC, Research Division - MD of Neuroscience & Senior Research Analyst [58]


Could you talk about the women who've tried ZULRESSO so far? Just some anecdotal evidence of what you're hearing? Were these women very severe patients, were they moderate patients.

Just curious what type of patients actually were being treated?

And then, you talked about the sustained benefit and how important that is obviously and that's the key to the product.

Can you talk about anecdotally what you're hearing? Were these women getting that kind of benefit? Are they on the antidepressants after they go home?

Whatever you could tell us, that would be great.


Michael Cloonan, Sage Therapeutics, Inc. - Chief Business Officer [59]


So Marc, I think -- this is Mike. I'll take that one. So in terms of the patients that we're seeing, right, you heard the patient stories, very encouraging, very compelling. It is consistent to what we've said prelaunch which is at this point what we're hearing from physicians is mainly, these physicians are saying it's the severe patient population that they're initially going after with ZULRESSO.

But what we do expect is that they gain clinical experience and they gain more trial experience with ZULRESSO. They'll start to use that with more moderate to severe patients. I think it's important to remember, our payer coverage is covering patients in the moderate to severe category.

So there's no reasons why this can't be moved up earlier in the treatment paradigm, and we expect that over time as they gain clinical experience.

I think to your other point about the trial period that we talked about with some of these sites wanting to get clinical profile, evaluation of the patients after they've been treated and also get comfort with reimbursement. Every site is sort of developing their own protocol, they follow the patient after treatment.

But as I said, everything seems to be very consistent with the trials, and we're very confident in what we've seen so far with the rest. And that's really what you look for when you launch a product like this is, do the real-world evidence replicate the clinical trials? And to date, we've been very encouraged by what we see with ZULRESSO.


Operator [60]


And our next question comes from Doug Tsao of H.C. Wainwright.


Douglas Dylan Tsao, H.C. Wainwright & Co, LLC, Research Division - MD & Senior Healthcare Analyst [61]


So just maybe on the new molecules that you announced today, 904 and 689. Just if you could provide some perspective on how, like say 904 differs from 718 and 689 from the other GABA modulators.

And just maybe some thoughts on timing, and when you'll sort of disclose the development plans and the indications that those are going to be targeted?


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


Yes. This is Jeff. And I'm going to turn this over to Jim in a minute. But 1 of the opportunities that Sage presents is a very robust compound library that our discovery folks have developed for us.

And as we move forward, we've been fortunate in being able to isolate new molecules that we think are pharmaceutical quality.

And what we've -- and so these 2 are examples of the productivity of our -- basically our product engine. I'm going to -- and so I think that's a really important feature about it.

And thank you for asking this question because we think Sage is obviously much broader than ZULRESSO and even 217, although MOUNTAIN tends to through shade on everything else as mountains tend to do.

Little earnings joke.

But anyway, I'm going to turn this over to Jim, to give you more detail.


Jim Doherty, Sage Therapeutics, Inc. - Chief Research Officer [63]


Yes. So I would say, look, we're really excited about how the pipeline is progressing in general. There were a lot of midterm opportunities here to 904 specifically. And we talk a lot about following the science.

And here, we're talking about a novel mechanism of action NMDA positive modulators, and so with 718, we're about to move into our Phase II studies in Huntington's disease.

But certainly, we see this mechanism of action that could be beneficial for a large number of patient populations.

And so as we've done in the past with our GABA platform, we are taking an opportunity to use the richness of the library to identify molecules that have distinct profiles.

And so that's what we think is the case with 904. We think that 904 and 718 both have distinct profiles. As we move forward into clinical development, we'll be talking about how those differences play out.


Kimi E. Iguchi, Sage Therapeutics, Inc. - CFO & Treasurer [64]


Add on to this -- this is Kimi. So this is a great example of our investment strategy and how it works. We've always said that we were going to continue to invest in the early-stage pipeline in the research, and we're seeing that bear fruit today.


Operator [65]


Thank you. And ladies and gentlemen, this does conclude our question-and-answer session. I'd now like to turn the call back over to Dr. Jeff Jonas for any closing remarks.


Jeffrey M. Jonas, Sage Therapeutics, Inc. - CEO, President & Director [66]


Firstly, thanks, everyone, for joining us this morning. And I hope it's apparent to everyone that our approach has really led to significant progress, both commercially and across the pipeline in the third quarter.

I think as you see the early development pipeline has been prolific, the depression program at 217 is moving along well. We're looking forward to MOUNTAIN readout this quarter.

And importantly, I think the ZULRESSO launch is really where we said it would be at this time in the launch.

Our major challenge and our major interest is to make sure that women who need this treatment can get it.

We've made important strides in terms of getting coverage for this drug, but our work isn't done. We're changing a treatment model, we're changing an approach to treating women with a really devastating disorder and trying to make sure that they have access to care as quickly as they need it.

So with that, I'd like to thank everyone for their attention today, and hope you all have a great day.


Operator [67]


Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.