Sage Therapeutics, Inc. (SAGE) Earnings Call Transcript & Summary

Good afternoon, everybody. Thanks for joining us at the Bank of America Health Care Conference. I'm Tazeen Ahmad. I'm one of the senior SMID biotech analysts at the firm. It is my pleasure to have our next presenting company. We have Sage presenting with Chief Executive Officer, Jeff Jonas; as well as Chief Operating Officer, Mike Cloonan. Jeff and Mike, good afternoon. Thanks for joining us today.

Thanks for having us.

So we'll try to keep this as close as possible to what we ask on our face-to-face meetings. But we usually ask companies to give a 2-minute summary for anyone who may not be as familiar with Sage, about the genesis of the company and some of your recent accomplishments, and then we can go from there about some of the upcoming catalysts to expect.

Okay. Well, firstly, I'll kick it off, Tazeen. This is Jeff. First, I want to thank you for hosting us today, and I hope everyone listening in is healthy and taking care of themselves and their families. So I'm going to start by -- with a broader comment about Sage. As you all know -- or I hope you know, we've focused in the areas of neuroscience and brain health. And we think that, especially nowadays, this is an exciting time to be working in neuroscience. We've been doing this for some time at Sage, and we think the sector is beginning to open up. There have been a number of advancements in science and drug development and clinical trial design, especially concerning the underlying biology for new pathways underlying brain health disorders, and we like to think that we've made some key contributions in these areas. I think, of late, all of us who are dealing with the pandemic know that -- and as well as World Health Organization or others, have identified mental health as probably another associated major issue associated with the pandemic. And we think that a focus on this at this point is not only opportune, but really important to advance patient health. So we view our mission at Sage as becoming even more important. And we also think that we're uniquely positioned with a pipeline that's really focused on brain health and mental health with several franchises that have been successful or in development in excellent financial position with a lot of key milestones coming up. So let me stop there, and I'll see if Mike has any initial comments, and I'll be quiet.

No, I think we're ready to go to the questions, Tazeen.

Okay. Great. So Jeff, you talk about several successful studies, and I'm wondering if you could go into a little bit more detail into the different platforms that you think Sage can go into mechanistically. Let's spend a couple of minutes maybe talking about 217 just because it's exciting in a sense that it's basically a pipeline within a molecule. You've presented data now on several different indications for it. And then we can go from there and maybe talk about some of the other modalities that you might want to take into the clinic as well.

Okay. I'll start. So 217 or zuranolone, we think, is really a unique asset in terms of new molecules being positioned for major depressive disorder. It's not a repurposed molecule. It's new chemical matter, and it's already completed successfully 2 pivotal trials. After our recent breakthrough meeting with the FDA, we were given pathways that allowed us basically 3 shots on goal for unique indications, and then we can go into them in some detail. But each of these are distinct indications: One is postpartum depression. Another is what we're calling acute rapid response therapy, or RRT, which we think 217 is frankly unique in being able to meet the newly issued FDA guidance; as well as a potential use in major depressive disorder as a standard first-line antidepressant. These studies are currently progressing well. They're on schedule to read out in 2021. So we have multiple shots on goal. And what's important is each of these are independent of the other. Based on the available database that we've already achieved and developed for zuranolone, 2 of the -- all 3 of these indications only require one more additional acute study for filing. So we view zuranolone as a potentially unique asset in the depression space with, of course, composition of matter coverage. We have other molecules in development, which we are also very pleased with, which also had early or preliminary derisking data. The second is a molecule we call SAGE-324, which is being developed in essential tremor, which we expect to enroll in -- by the first half. And then we have Phase IIa studies with SAGE-718, which, unlike the other 2 drugs, is an NMDA PAM. And we've already shown some early data, open label, that shows it may have unique functions in enhancing executive function in patients with disordered cognition.

Okay. So maybe to stick with 217 for a second. You've talked about looking at it in different indications and having data so far and really only needing one study to get to those indications each. Can you talk about each of these separate entities, PPD, RRT, MDD? And what you think may be the specific addressable patient populations that these could take based on the mechanism of the drug?

Why don't I take that, Tazeen, and then Jeff can jump in. So this is Mike. Yes. So as Jeff said, there are these 3 distinct pathways. We're really excited about the opportunity to clear a pathway with zuranolone, and we'll kind of take it step by step with the 3 different paths that exists. So the first is PPD. And as Jeff said, we need one additional study in PPD to require an indication in that disease state. So that's an exciting opportunity for us. We also have the rapid response treatment, or the RRT, as Jeff said, which also requires one additional positive study, and we would have that indication. And this would be when you co-initiate with a new antidepressant, which we can get into a little more detail on. And then the third is the one we've been moving forward for a while now, is the episodic treatment, which we still see as a very positive differentiated opportunity for Sage. So it's really more this treat-as-needed concept that we've been proposing for a while. So we have these 3 distinct paths. The first 2, as I said, one additional study gets you the indication. With the episodic, we need one additional -- almost MOUNTAIN 2, which is now called the waterfall study. That positive study plus data from the REDWOOD or 302 study will give us an indication. And really, if you step back and you think about why we're excited about it, what's the business strategy, some of the stuff Jeff alluded to, when you think about PPD, right, we know the unmet need continues to be high. Even with ZULRESSO on the marketplace, you have an IV that's mainly a hospital-based product. You've obviously seen some complexities with COVID hitting. So the unmet need is still very, very high in PPD, and we think this is a great opportunity with an oral medication that we think could be positioned as the lead product in this market that is still underserved. We're excited about that. With RRT, as we said, this is one study we get the initiation of that indication co-initiated with a new antidepressant. There is a hole in the current treatment paradigm that Jeff can speak to you as a psychiatrist, that there is nothing in the toolkit today that acts as rapidly as zuranolone has the potential to do. And we've heard this from physicians and payers and patients that, within days, experiencing an effect with a molecule like zuranolone could really be added on to an antidepressant and really do something that's very game-changing and different than what exists today. And so that rapid response is really something that all of the stakeholders have grabbed on to and fills a real unmet need that exists. And it's going to get us there first, right? That's the reality of the timing of this, the rapid response treatment for MDD will get us to the marketplace first in advance of episodic. So what that allows us to do is it allows us to gain real-world experience for patients, physicians and payers in advance of the episodic treatment. They'll get comfort with the molecule, they'll get comfort with the benefit/risk profile, while we are finishing up the re-treatment studies, both SHORELINE and REDWOOD. And so by the time we launched the episodic treatment after RRT, you'll already have built up a lot of, hopefully, championship in the market and real-world experience that will make the transition to episodic even that much stronger. And so that's really the business strategy as you lay it out. And we've leveraged learnings from not only the MOUNTAIN Study, but the entire clinical program as we've designed these studies to give ourselves the best chance of success. So Jeff, I don't know if there's anything you'd want to add to that, but that's the overall business strategy.

That's perfect.

Okay. Great. So you mentioned a lot of studies. How should we be thinking about SHORELINE? Is that the next data set that could be seen in the near term? Just remind us of how that re-treatment or intermittent treatment schemata is and how that might relate to what we could see in a real-world setting.

So SHORELINE is -- or the 303 study is a real-world -- maybe I think the largest real-world study of its type, which is really designed to answer the questions that are often used as -- or questions that arise in clinical trials, which is, what really happens when the drug is put into the real-world with clinicians watching patients? So for example, when we talk about SSRI data, if you look at how SSRIs are actually used, most patients, especially with their index episode, are treated for 6 months and then they're stopped. Now it takes 2 -- often 2 weeks, 2 to 3 months to get a response. So we're really, in SHORELINE, replicating what -- or trying to understand how physicians might use this drug. And if you think about it from that way, the -- and again, this is on track for the 30-milligram to report out this year. We will be enrolling 50-milligram patients and re-treating with 50 milligrams. But we don't know the time line of those data yet and when we read those out. But if you think about the outcome of what this might offer for physicians in particular. Now we believe, by the way, that -- I say this because we think the data from SHORELINE could be included in the label. So what this offers physicians, today, a patient goes to a doctor, and whatever molecule is being prescribed, the narrative is take this drug. And if you get better, we will keep you on it at least 6 months to a year. Now imagine if SHORELINE shows, let's say, 1/3 of patients, or whatever number it is hypothetically, get better. And you've seen from our -- already from our other data, both in PPD and MDD, the majority of these patients remain stable after their responses. If you could offer a patient a completely different alternative, even for 1/3 of patients with depression, and say to them, "If you get better, you don't have to stay on a medicine the rest of the year. You have at least a 40% or a 30% chance of not needing any re-treatment. And then you're done. You're not part of the mental health system." We think that could be a really valuable option for patients. Not everyone will want to do it, but think about all the patients who would prefer not to take an antidepressant for an indefinite period of time. So we think SHORELINE will give us that kind of information. How many patients respond? How many patients require re-treatment? How long that is? What that gap is? And how many patients may remain stable for 6 months to a year? So we think this is going to be immensely valuable for the clinician and also to help us think about how best to position this product for patients.

Okay. Now how should we think about it in terms of, as you said, Jeff, you're going to look at the lower dose with the first data readout and then you're going to take a look at the higher dose. How are you feeling about the lower dose versus the higher dose? And what might be more applicable to the patient population?

We've always hoped to have these 2 doses. That makes good commercial sense and clinical sense. And one of the findings of the MOUNTAIN Study -- and with the caveat that it didn't meet its primary end point, is that we had a clear dose response. And you don't get a clear dose response absent an active molecule. So we're very comfortable that the 30 milligrams is an active dose, so we -- which is one of the reasons proceeding, we believe that it's fileable dose. The rest of the trials will only involve the 50-milligram dosage. So we feel pretty good about the 50. We have a lot of data, a lot of it is proprietary. We've submitted to the agency. The 50 has a very adequate margin of safety, so we're very optimistic that, that is the right dose to test.

Okay. And in terms of how much of a gap to leave between treatments, so how do you get comfortable with that in the context of a clinical study? Is 8-week gap the right amount of gap? Or could it be shorter for some patients or longer for others?

Well, that's one thing we'll learn in SHORELINE, which is what does that gap look like. Now you've seen our data. And even in all of our studies, and this is, we think, one of the unique features of public data that's been made for zuranolone versus other types of molecules. We've shown that when the drug is stopped, you don't see rapid rebound or recurrence of the disease. Patients seem to remain relatively stable over time. Now we've seen that out to 6 weeks. What we'll find out from SHORELINE is how much farther that durability persists. And we don't know. I mean we have some ideas. But that's what -- that's the importance of what SHORELINE will do and what we'll learn from it. But I think this gets back to one of the unique attributes of zuranolone or SAGE-217. When it's stopped -- and we're not tapering it, it's simply stopped, most of the patients remained stable over time, out to 6 weeks or if not longer. And if you go -- and so we think that's one of the important attributes that this drug has. Plus, if you think about this from the rapid response approach, that -- in that area, this drug is meant to be taken in association with newly initiated serotonin reuptake inhibitors. And if you think about what that requires, we already have a large database showing safety in combination, which is, again, which we think is unique. And we also believe that with respect to combination therapy or therapy in associated with SSRIs, we know that SSRIs are actually better at preventing reoccurrence than treating the acute episode. So it may be that if we see an enhanced benefit from 217, associated with SSRIs, might actually maintain that response. So we think there's a number of ways this could play out. But as Mike has pointed out, the one thing the RRT does, the one thing that SHORELINE does will to be instruct physicians about what is a completely novel mechanism of action for treating depression.

Yes. And I'll just add, Tazeen. I think Jeff's really saying is, what we're trying to create with both the RRT and the episodic is approaches to treat MDD, right? If we have -- we'll be informed by the data, right? The re-treatment data, whether it's SHORELINE or REDWOOD in the future, is going to help inform the physicians about what is possible, right? And what we know from having done a lot of work in this space already is that you're going to have different physicians that are going to have different preferences as to how they may want to use the drug. And so like RRT, for an example, you may have physicians that want that booster concept, that rapid onset, but yet still maintain a patient on antidepressants. We do know that patients and physicians do want to try this episodic regimen and get patients off chronic therapy. But we're really trying to do as much data as we can generate to help them inform their choices that give them different approaches as to how to treat their patients.

Okay. Maybe, Mike, while we're on this particular topic, can you get us -- give us a better sense of how you would parse, let's say, the RRT indication from the broader MDD indication? Do you have a sense of what percent of depressed patients would fall under RRT?

Yes. At this point, Tazeen, I'd say, listen, we don't -- at this point, we haven't really parsed it out to say it's sort of a separate patient group. We see it as a part of MDD, right? At the end of the day, it's an overall patient group that may benefit from this. And some of it's going to come down to how we position the product and what line of therapy we think might make sense. And we're going to do a lot of that research now, and the data that we generate in the RRT study is going to help inform that overall positioning strategy. But we think the opportunity is large for both RRT and episodic. And as I said, we're trying to create that optionality as an approach to treat patients that have the disorder, right, so that they can choose what's best for their patient and how comfortable the patients and physicians may be with each one of those approaches, right? So it's going to inform our pricing strategy. And I know that's one of your questions. We can even get into that now. I mean our overall pricing approach for this is really -- it's the same philosophy that we used on ZULRESSO. It first starts with making sure our pricing represents the clinical value of the product, right? And we have 3 different pathways here with -- in PPD and the 2 in MDD. But what we said, if we have all 3 indications, we will price zuranolone to an MDD pricing paradigm. And so what we will need to do is then inform, okay, how -- what is the course of treatment price for zuranolone, knowing that we may have different re-treatment algorithms that are used here. But we'll think about this first as an MDD price; second, as an annualized price in terms of what we think the annualized value, clinical value of the program, of the product is; and then, we can then back into the per course of treatment cost once we have more re-treatment data. So that's the way we're thinking about it, and we think about the opportunity as large. As Jeff said, the product profile could represent very early line therapy, but we've got to work through that with additional data and to really parse out what's the positioning strategy that will then also inform the pricing strategy.

Yes. Tazeen, the only thing I'd add -- the one thing I'd add on this, if I could, is we're really trying to offer different options for physicians. And as you think about this, zuranolone may fit into -- in a multiple series of ways. One is, firstly, you could think of it as a jump start before patients go on maintenance therapy of SSRIs. And if you think about it from that standpoint, it would be unique. And sometimes you'll talk to practicing clinicians and they'll say, "Well, I use trazodone or I use a benzodiazepine." But the fact of the matter is none of those data -- none of those agents have ever actually been shown to augment or speed up the activity of SSRIs. And that's where the gap in that paradigm is. And so if you think about this, physicians who want to keep patients on maintenance SSRIs could still begin with zuranolone. And then as Mike has pointed out with episodic, you also have the possibility of zuranolone being used simply as a monotherapy. So we think that if this -- as our development strategy plays out, it will potentially offer zuranolone in a number of ways for treating physicians of all stripes.

Okay. That makes sense. So just to wrap up on this particular topic. You've got the 30 mg portion of SHORELINE that we should see data for this year. Can you help us understand what studies to expect in '21? So out of the 3 additional studies that you would need for the indications that you would go for approval for, should we expect all those 3 to also read out in '21? And for the studies that you have halted, do you expect to restart some of those or all of those studies?

So for the studies that we're undertaking for approval, those are the ones that have the top priority. And for postpartum and RRT, those effectively only require one additional study in order for filing. Those are -- and then for episodic therapy, we'll need to -- we have the 302 study, which would need -- we need some data from that, depending on -- and the design of that will probably be modified depending on what the SHORELINE data look like at this point. So I think in terms of sequencing, which is sort of the question you're asking, we began very early to plan around the world of COVID and what we were doing. But you may recall that even after MOUNTAIN was completed, we knew that quickly we'd have to do a repeat study, and we planned for a higher dose. And so many of those sites are already open. And most of our studies involve outpatients. Most of them are not at inpatient or academic centers. And in fact, if you look at the CRO industry today, you're seeing a lot of excess capacity. So those studies are still on target to enroll and -- complete, rather, in 2021. But we -- at this point, I think it's premature to speculate how it might be sequenced.

Yes. The only thing I'd add, Tazeen, is -- one is, we did say in our last earnings call that waterfall would initiate first, right, just for the reasons that Jeff had mentioned, right? And then RRT and PPD would follow this year. But that's -- we said waterfall would be first just based on where we are. And I think one of the things to recognize, too, is beyond zuranolone, we also will be initiating our SAGE-324 essential tremor program the first half and in the second half continuing our 718 program, an NMDA for cognitive disorder. So those may also read out in 2021. So it's beyond just zuranolone. We'll have multiple data readouts across the pipeline.

Okay. Great. So maybe, I guess, let's move on to the rest of your pipeline. How should we be thinking about 718? Maybe tell us how you think it's different from 217 and the indication -- why the indications for 718 might be different than the indications that you've pursued thus far for 217. Hello?

Jeff, are you there? Jeff's talking, but you can't hear anything.

Sorry, can you hear me? Sorry. A little -- no, we had some bandwidth issues out here. Too many people wanting to listen. Zuranolone and 324 are positive allosteric modulators of GABA. So they upregulate what is effectively a braking mechanism on brain activity. They are distinct from benzodiazepines, although they're often confused with them. But they are fundamentally molecules that attenuate circuit hyperactivity in the brain. SAGE-718 is really a first-in-class molecule that upregulates NMDA also as an allosteric modulator. And so to our knowledge, it is the most advanced drug of its kind that's in human clinical trials. And as a result, we've made it our lead neuropsychiatric drug. If you look at the data we've had with this drug, and I can talk a little bit more about it, this is a drug that is unique. And so we're spending a fair bit of time trying to understand its potential activity and also how you measure that activity. So if you think about this from the standpoint of neuropsychiatry, we have a drug that we've shown in Phase I as well as -- and this is open -- one was controlled and one was in open-label patients, that had a unique effect on enhancing executive function in individuals in a way that was distinct from other drugs that are associated with performance enhancement, for example, the amphetamines. This is a drug that seems to improve executive function. It doesn't -- it's not -- it wasn't overly stimulating, didn't really impact attention. So now we have a drug that's a new -- an NCE that's never really been tested in humans. So our approach is going to do -- is going to be to do some probe work with this before we decide where to commit the double blind. We have good data on Huntington's, and that's certainly some place we'll pursue. But if you think by analogy, what goes on in Alzheimer's, in severe Alzheimer's, scales that are often useful, say the CIVIC, aren't terribly useful, for example, in MCI. So our approach with 718 will look to understand how the activity on enhancing cognition might be manifested across multiple disorders that have impaired cognitive function. And so we will be looking at -- and we're not -- we can't commit to the sequence yet, things like Parkinson's dementia, Alzheimer's and potentially ADHD as well. The results from these studies were going to be used to see what the impact is, if it is -- if we do see it, what clinical measures might be most sensitive and use that then to create more efficient Phase II programs.

Okay. Great. So maybe in -- can you give us a better sense of areas such as -- whether or not Huntington's, for example, would be something that you would choose to pursue? And how do you balance that out, knowing that right now, for whatever reason, there were a bunch of modalities being examined in Huntington's from gene therapy to several other different -- several other approaches? And why you think that it still makes sense to try and see if that indication, for example, could work?

I think the answer is pretty -- in our view, is straightforward, which is, until you cure a disease, symptomatic improvement is critical for patients. Getting patients better quickly is always going to be important. Whether gene -- in gene therapies, if they work or these kind of -- or oligos work or if they do work, patients will still have residual symptoms that will reflect abnormalities of neurochemical -- of neurochemistry and imbalance. So we think there's always going to be room for symptom improvement. And again, if someone cures Huntington's, God bless them, we'll find another indication. But I think that our approach is going to be getting patients better, relieving symptoms is always important, and we think 718 has that potential.

Okay. So you've clearly got a lot of clinical trials that are underway, will be underway and are planned. And so how are you navigating in this current pandemic environment about what's your expectation of the impact of COVID to your studies now? And maybe can you give us an idea of what steps you've undertaken? Assuming that the impact from COVID is long lasting, what are some changes that you've made now that you think could be permanent?

So one of the things, we started months ago to identify strategies to work through the pandemic. And the Sage team's done a great job with this, but it's important to point out we have not just recently discovered telemedicine. As you can imagine, even with doing SHORELINE, we already had several systems in place to do remote monitoring, to do remote -- and to conduct remote assessments of patients. One of the fortunate pieces about neurology and psychiatry, in particular, is that the rating scales are well validated. So we've already been working through that. We've spent a fair bit of time looking at derisking strategies. As I mentioned, many of our sites are open. I won't give you more details than that. And as we -- when we put out our time lines, we took into consideration potential delays and COVID. Now obviously, the world could change dramatically again. But right now, we're very comfortable that the strategies we evolved will continue to work through the pandemic. Just as a separate point just to make, and this is more -- probably more prosaic, but the supply chain, we have more than sufficient inventory for all our drugs at all levels of the supply chain for both clinical and commercial utility. For employees, obviously, we're focusing on the health and well-being of all our employees. And I'm happy to say, working at -- we're working very efficiently at home, and it's gone very, very well and things are moving along well. And our approach there is obviously the well-being of employees and public health. So we think we've handled it pretty, pretty well, and we're pretty pleased with how we've been doing with it.

Yes. And I would just add, Tazeen, real quick. As Jeff said, I mean, a lot of this is evolving day by day, right? As every company is evaluating, there's just very practical things like how are you going to return to work and have meetings with social distancing and testing employees. And as Jeff said, safety is the number one thing, and we're really proud of how our teams have responded to this unprecedented times. And you even think about things in the commercial side, right? How you engage physicians, right? So as you -- I know you're aware of digital nonpersonal promotion where you can't have reps walking into the hospital setting or the physician setting at this point in time, that -- they may be things that live on past this, right, that we want to continue to take advantage of. Innovation that we can do today may last well beyond COVID, and this could be a silver lining. If we can figure out ways to be more efficient and really support patients and employees in different ways, that's what we're looking at.

And maybe a question that's related, and maybe you guys have been a bit ahead of the curve here. But if the COVID environment moves us into a recessionary environment, what is your plan for your business in that scenario? And you did do a recent cost-reduction plan. And I'm just wondering if that -- what you've done so far gives you confidence that, if we do move into that type of environment, that you would be well prepped to run your business that way. You are also a commercial company after all.

Yes, Tazeen, I'll take it. It's Mike. I mean I think you hit it on the head. We do think we're well positioned. I think we believe we're a growth story, and the growth story may be underappreciated, right? When you look at what we have, a marketed asset in ZULRESSO, a late-stage asset in zuranolone with multiple shots to get to approval, a great pipeline, productive research engine and well positioned from a financial perspective. So we put ourselves, I think, in a position to manage through either business cycle, right? It really comes down to disciplined growth and making sure you're making the right strategic decisions. That execution is key, right? We've been very deliberate and disciplined in our approach. It's always taken from a portfolio perspective around prioritization and how we spend our dollars. It's based on readouts and letting the data drive those decisions and the science drive those decisions. So that really doesn't change. I think we've done that all along. And you have to manage your way through any business cycle. And I think we're really pleased -- even though it was a very tough decision with what we had to do with the restructure, it was the right decision, I think, for us to move the company forward, to execute on the strategy that we have ahead. And we're well positioned now. Kimi, on the earnings call, laid out we have $875 million of cash. We'll have at least $550 million by the end of this year, and that cash runway will take us into 2022 without having to do business development, et cetera. So we will continue to do what we've done, which is disciplined, deliberate portfolio decisions to move the company forward, and we'll let the data read out, and we'll drive the growth decisions that we have to make. But we think we're well positioned.

Okay. Great. I think with that, we are at the end of our half hour together. So Mike, Jeff, thanks so much, as always, for your time. We learned a lot. Good luck with the rest of the meetings today, and we look forward to speaking with you again soon.

Thanks, Tazeen.

Great. Thanks so much.

Talk to you soon. Bye-bye.

All right. Take care.