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

Good morning, everybody. Thanks for joining us again for the next segment of our Bank of America Healthcare Conference. It's my pleasure to introduce our next presenting company, Sage Therapeutics. Presenting for Sage with us for the next 30 minutes is CEO, Barry Greene. Barry, Good morning. Thank you for joining us.

Good morning, Tazeen, and thanks for having us at the conference today. Appreciate it.

So there's a lot to talk about. I don't think we're going to get through everything in 30 minutes, but we're going to try to speed through some of the important things.

So for anybody who is not familiar with Sage, maybe talk to us about the company for a minute about kind of what the overall arching goal of Sage is, and then we can go into some specific questions about some upcoming studies, if that makes sense?

Yes, absolutely, Tazeen. So Sage is a company focused on being a leader in brain health. For the last decade, the team has done a deep dive in understanding brain circuitry, particularly around GABA and NMDA as pathways. And understanding how to modulate those pathways for brain health diseases. And of course, as we're well aware, as we exit this infectious disease pandemic, we are realizing that we are, in fact, in a brain health pandemic. So we plan on being part of the solution to get people back to work and productive once we're all vaccinated. And we have an extensive pipeline of programs that the team has developed over the last decade, approved drug, ZULRESSO, first approved drug for postpartum depression; and then our lead molecule, which I know we'll talk about zuranolone. So we're very excited to be here and in building Sage for the future.

Okay. Great. So let's talk about the program that's on everyone's mind right now. MDD or 217. You have had some recent data updates, but the one that everybody is looking for is happening, I guess, this first half of the year still?

Yes. So what you're talking about is the lead program, zuranolone, which is being studied for MDD, major depressive disorders; and PPD, postpartum depression. The zuranolone is being studied in an overall program called Landscape, where we actually have 3 unique opportunities for positive readouts and 3 unique opportunities for submission and approval. The most near-term readout is WATERFALL, which you highlighted, and our goal -- this is for MDD, our goal is to have that data readout first half of this year.

Okay.

We've seen very consistent data for zuranolone over time. We've studied zuranolone in over 3,000 subjects and patients and have seen a profile that's very consistent time and time again. We see statistically significant improvement at day 3 across the board. We see results as evidenced by SHORELINE, where most patients require only 1 or 2 2-week treatments in the course of the full year. So we're very much look forward to the WATERFALL readout and getting those top line data out.

Okay. So that study, WATERFALL that you just mentioned, was marked completed in clin trials, I guess, last several weeks ago. We don't know how accurate or not that marking is, but I think people have been trying to extrapolate, obviously, on when it could come. So you've stated that your targeted goal is for the data to come out in the first half of the year. Is there a reason why it would slip past the first half of the year?

No, I don't think so. I mean we had twice been able to expand the trial while also keeping our time lines for the first half of the year. And we do remind people that clintrials.com is not a tool to judge guidance. We really need to judge guidance by what we as management are saying. We're looking forward to the readout. We're on track for the first half of the year. And as soon as we get the envelope and open it and can analyze it, we'll get the data out with our partners, Biogen, as quickly as possible.

Okay. Now what should we be expecting to see? I know you've been asked this question several different times now. Beyond the primary endpoint, which is, of course, looking at efficacy measured by HAM-D at day 15, what else is going to be important for people to really want to take a look at to determine the potential of this drug from a commercial standpoint, do you think?

Yes. So we believe that the zuranolone can help all of us rethink how to treat depression. Depression has been thought of as an underlying chronic disease that needs to be treated chronically. And we believe that while there is underlying depression, it's sparked by specific events. Patients go into depressive episodes. And with a drug like zuranolone, which ostensibly rewires the brain architecture, we can get people better, faster and keep them better. The evidence of that, as I mentioned, is SHORELINE, where we had 70% of the patients at the 30-milligram dose require only 1 or 2, 2-week treatments. And interestingly, when patients needed more than 2 weeks, they responded each and every time. The 50-milligram dose with an 80% response rate. So we're really looking forward to that 50-milligram readout in SHORELINE. And I think this is a really important point. The primary endpoint of statistically significant difference from placebo at day 15, as measured by HAM-D, is the key endpoint. And the reason I say that is if we hit statistical significance at day 15, irrespective of all the other secondary endpoints, based upon the differentiated benefit risk of zuranolone, we have a drug, and we have an important drug for the overall depression landscape. That being said, we're looking at all the secondary endpoints. And people have asked a lot about day 42, so let's put that on the table. What's important about day 42 is that we maintain drug effect -- near drug effect similar to day 15. So we don't want to see an absolute loss of drug effect at day 42, we want it within range of that day 15. We are not necessarily looking for statistical significance at day 42, that's far and less important.

Okay. Now thanks for the color on day 42. Our Dr. Chuck's indicated it's really the fast onset of action that people are most excited about. And I think that will be something that could -- will be able to be teased out easily from the data that you present from all of your studies, especially WATERFALL. So can you get a sense of whether or not you will likely see consistency in the time of onset of efficacy across the population that you've chosen to study in this particular program?

Yes. So Tazeen, what I'm expecting to see within the WATERFALL readout is that patients report that they're feeling better almost immediately, and that's measured at day 3. And in thinking about both staff and [Technical Difficulty] patients are taking the drug at night, that's actually [ 2-milligram ] doses. And by the third day when it's up, patients are already reporting that they're feeling better. And as you highlighted, that rapid onset of action is actually remarkable, unlike anything we've had in the depressive landscape to date.

Right. And so keeping that in mind, you are dosing at night. And I guess some question that I have is, as it relates to side effects, the only thing that doctors mentioned with any frequency is sedation or somnolence to kind of use that -- those terms interchangeably. It's highlighted that a good percent of their population has trouble sleeping. So that particular side effect would, by many, be actually welcomed. The question is whether or not the somnolence or sedation effects last into the morning hours and whether or not that can potentially impact quality of life for some patients. How should we be thinking about that?

Yes. So the way I'm looking at the overall adverse event profile for zuranolone is it's actually quite differentiated from other SSRIs or other classes of antidepressants because we're not seeing cardiac effects. We're not seeing effects on the gut, which many people complain about. What we are seeing, as you highlighted, is sleepiness in the evening, which is, as you said in the KOLs have highlighted, is actually a benefit. Most depressed patients need sleep aids to fall asleep have trouble sleeping. And what we believe is happening here is that we're actually, in addition to rewiring brain circuitry for depression and anxiety, we're also helping the sleep architecture. And we'll see the results of those over a period of time. And many KOLs have reported that their patients have said that they are sleeping much better even after the 2-week dosing. So what's important is that, as you said, that we're not seeing too much sleepiness the next day. But again, let's put all this in context. The drugs that patients are taking today, they're taking chronically. So they're having these side effects each and every day. Here, we're talking about, even for those few patients that might have a second day sleepiness, we're talking about 2 weeks. And if you are an MDD patient or PPD patient and you want to get better faster and stay better, there aren't any side effects we're seeing that can't be tolerated for 2 weeks. So we're seeing the adherence rate quite high and expect to see this in WATERFALL.

Okay. And then as you think about the importance of durability, day 42 is not going to be required for approval. It's not being brought up really, at least in the checks that we're doing with physicians. What would be your expectation of what day 42 could show? Knowing that this study was not designed really to look that far out, it's going to be observed. But based on what you know about the drug, what would be a realistic expectation there?

Well, so what we're looking for, for day 42, is a maintenance of drug effect. So we're looking for the drug to have about the same effect within, call it, 60% of the drug effect it had at day 15 and not a massive dropout. And what I think many of us have learned over the years now in studying brain health is that it's really about drug effects. It's not about managing placebo per se, it really is about drug effect. So we're looking to see that approximate drug effect out to day 42, within range of what we saw in day 15.

Okay. And so when that data does come out, I think people are going to ask the next question, which is assuming that it's statistically significant, what would happen after that? Is there a chance that you would then take that study and go to FDA and start the process of filing for approval? Or do you want to wait for some of these other studies that are going to read out later this year?

Yes. So when we open the envelope and hopefully, we see a positive significant study, we'll certainly communicate that as we talked about, maybe celebrate a little bit. But then, we have breakthrough designation, Tazeen. So we plan on sitting down with the FDA almost immediately and really talking about the best way to bring this innovative treatment to patients as quickly as possible and we have many options to get there. So one would be filing on WATERFALL and starting other aspects of the NDA kind of with the rolling submission. What we're really looking for to put it out there is will CORAL be a major review study or not. And if the agency believes that CORAL is going to be a major review study, meaning if we submitted WATERFALL, they started reviewing CORAL right out and they wanted to review it, we don't want to do a submitted NDA, have a PDUFA date and have a 3-month extension. So if they believe that CORAL is important, then we'll wait for the outcome of CORAL and file the whole clinical section together, so it's a coherent clinical story. I don't think that we'll need another PPD study filing, but certainly, a major MDD readout in the review period would probably cause a major review. So if they believe, again, CORAL is going to be critical, we'll include that in the overall filing.

Okay. If you were going to divide up the population based on what you enrolled in WATERFALL versus CORAL, how would that look in terms of addressable patients?

I don't have all the patient demographics yet, so it's hard to say, but they should be about the same.

Okay. Now I guess another question people ask is, how do you feel totally comfortable that you won't have a higher-than-expected placebo responder rate? Because these types of trials across the board historically, that has always been at risk. We've had studies in our coverage universe, both in CNS and outside this year have results that have come in less than what people expected them to be and part of it could be because of COVID. Now based on the type of patients that were enrolled in the study and the learnings that Sage got from the MOUNTAIN study, of course, how do you get comfortable that you've mitigated the risk of getting a higher-than-expected placebo responder rate here?

Well, let -- so as I mentioned earlier, the real key here is drug effect. And you said this well. As we look at the depression landscape over history, most depression Phase III studies actually have failed. And there are very successful drugs in the market that had more failed Phase III studies than they had successful Phase IIIs because these things are difficult to run. We believe that with zuranolone, we're having a significant effect size. And we certainly put all the measures in place to run a well-controlled double-blind study, but we really believe it's the big drug effect size that's going to win at the end of the day. And to that end, we took a number of lessons from previous studies worked about inclusion/exclusion criteria. Of course, we have to dose to 50, we upsized the trial twice because, as you mentioned, depression rates are significantly arising due to the pandemic and the lockdown. And then we very much optimized sites. We learned sites that were really great sites, sites that were less good and frankly, just included the better sites to conduct a good trial here.

Okay. So as we move forward and think about what the competitive landscape will look like. So first question is, how involved is Biogen going to be in the submission process for approval? They are, of course, your partner. But certainly, with MDD and zuranolone, is this going to be a partnership from the time MDD comes out? Or is it something that they would just become much more involved in, in terms of building out commercial strategy?

Well, it's a 50-50 partnership. And I can tell you that the Biogen kind of medical and regulatory team has been heavily involved and has been a tremendous addition to our very high-quality team. The teams are very synergistic. So they'll both be with us on FDA discussions filing, that's not just commercialization strategy. Of course, we're working with them on commercialization as well.

Okay. Now any kind of additional visibility that you've gotten as this partnership is now a few months old about how it's impacted Sage, in particular? Like has it allowed the company to kind of bring itself up to focus on more R&D projects? And if so, can you give examples of things that have maybe moved faster than expected into the clinics?

Yes. So Tazeen, I mean, for us, the Biogen deal was a critical kind of over-the-top strategic deal because our goal, as we talked about upfront, is to be the leading brain health company and a top-tier biopharmaceutical company. So the enhanced balance sheet has allowed us to expand and accelerate. In depression alone, with Biogen, now we can reach almost 0.5 billion people around the globe with our resources and their resources, and of course, our Japanese, our Asian partnership. We also have the benefit with Biogen now doing global development. Sage, on our own, did a little bit outside the United States, but it was really more U.S.-focused with the idea that if you study a drug in a country, you have obligation to service those patients in that country. So we really were more focused in the U.S. Now we can take a full global development view. They are, as you mentioned, our commercial partner. And then as we think about the rest of our pipeline, namely SAGE-718, which we fully own, and intend to commercialize as many geographies as we feel capable over the time, it really provides us great commercial optionality because we can build at a pace that we decide to build rather than have been building everything out quickly. Now specifically, whatever, well, we announced at our earnings call that we've accelerated 718, and we intend for Huntington's disease to be our first indication. I'm incredibly excited by that. There's huge unmet need in cognition in Huntington's disease, and there's really nothing for these patients around the world. And as you're well aware, should it be successful launching in the orphan space provides, again, great optionality for Sage to build that commercial presence in an orphan space outside the United States. And of course, as we talked about on our call, we have 904, 689, 319, 421, all of which were sort of sitting on the shelf that are now moving forward. And then importantly, we've announced that we're building the product engine that really is a product engine to allow 2 high-quality INDs a year by 2023. Now for zuranolone, our goal working with Biogen is really to win in MDD and PPD to make sure that we have all the data necessary to move the landscape of attitude in depression that we can actually treat episodically and then expand thereafter. For 324, we announced very positive KINETIC data and are working with Biogen on the next steps to get the right dose and frequency. And once we have that, not only will we move forward for essential tremor, but our goal will be to expand 324 as well.

Okay. So maybe let's move on from MDD. We could probably spend the entire day talking about it, but there's so much else going on. Let's talk about essential tremor. So now we've gotten a chance to see some early data from that program, can you just quickly remind everybody what you shared with KINETIC and what are the next steps here for pursuing that indication?

Yes. So we were really excited about what we saw with KINETIC. As we announced, what we were looking for in the KINETIC study at a high dose -- the high end of the dose range was a reduction in essential tremor that was durable through the 28 days of 30% to 50% and no surprises with adverse events. We expected to see somnolence. In fact, in earlier studies at the same 60-milligram dose, we saw 100% somnolence. So we saw a little bit less with KINETIC. So when we announced the data, we actually announced an over 30% reduction in the intent-to-treat population. And importantly, in patients with HAM-D 12 or above, we saw a 41% decrease in essential tremor. And I'm convinced that -- in an adverse event profile, again, that was not surprising at all. The fact that we saw a statistically significant reduction in essential tremor amplitude at all time points is quite remarkable. And then to me, one of the huge wins out of the study, and it was nice to see, was a statistically significant correlation between essential tremor reduction and activities of daily living. And then why is that important? Obviously, activities of daily living are important for patients and patient function, but it also provides phenomenal flexibility on regulatory endpoints. If the way we're measuring tremor scores or tremor, it was not acceptable, we can use activity of daily living as regulatory endpoint. So very excited by what we saw out of KINETIC. In terms of path forward, we're working it through Biogen, but what we need now to do is the next step is make sure that we have a dosing frequency that is sufficient for chronic dosing for essential tremor. And I believe we'll get there with the next Phase II study.

Okay. And how do you think about the -- I guess, the competitive landscape in essential tremor? Are there other programs that you might potentially be continuing against to enroll studies? And it's a large addressable patient population. So by no means should there be a single winner, but how important is it for you to differentiate right from the get-go?

Yes. Well, look, as you said, essential tremor's the largest movement disorder disease that exists. There's millions of patients around the world. There hasn't been innovation in essential tremor for over 50 years. So for the benefit of patients, it'd be great to have multiple drugs with multiple options. Of course, we believe that SAGE-324, and it's been specifically designed, it's designed for chronic dosing and essential tremor. And we'll have a differentiated profile in terms of efficacy, activities of daily living as well as side effect profile. There are other drugs being studied out there, but I'm pretty sure we're a bit in the lead here.

Okay. Now one thing that I think people would like to get some more color on is, you're looking at a higher dose, at least up until now, in essential tremor than what we've seen for depression. And to the point we were discussing somnolence and sedation, how do you kind of balance that side effect in the essential tremor population, which may have a different profile than what doctors will look for in treating their depressed patients, let's say?

Yes. So what's really important is that the profile that is coming out of KINETIC answered the questions we were asking, which is, can we have a sustained reduction in essential tremor for the duration of the study in 28 days? And the answer there was yes. And do we have this adverse event profile that's within what our expectations? The answer there is yes. Now we move to ask the question, what's the right dosing frequency to ensure the greatest rate of adherence? And of course, what we're looking for is not only for patients to take the drug, but to stay on their drug chronically. And that's the profile that we're going to look for in this next Phase II. I'm confident that we'll come out with a dose and frequency that is good for patients and will allow the greatest adherence possible as we then, after this Phase II, move into a Phase III study.

Okay. And when is that Phase III starting?

We haven't guided on the Phase III start. We have said that we're going to start the next Phase II by the end of this year to examine dose and frequency.

Okay. And I guess, as it relates to any kind of overlap in physicians. So presumably, MDD would be more related to psychiatrists and essential tremor, at least initially, would be presumably more neurologists. And so how does the Sage think about targeting 2 different specialties? Is that something that you think will be able to be achieved within a relatively short period of time? Or do you think that you need a few years of head start in order to build those relationships?

Well, again, we've got Biogen as a partner that's got phenomenal relationships across neurology. Essential tremor will be the subset of movement disorder specialist. So we have the advantage of starting with zuranolone, where we'll focus primarily, as you said, in psychiatry. A large office will act as psychiatry office. Now Biogen, of course, will be involved there as well, but we'll leverage their deep neurology expertise and then map out the commercial landscape in the United States. And of course, they have rest of the world. When it's time to launch 324, you will have built those significant relationships and can leverage the ZULRESSO and zuranolone relationships for essential tremor. And again, we've got these very large diseases. So while many of these diseases will start with specialties. At some point in time, many of these will be managed by kind of large primary care offices, where over time, we'll also make sure we build the right presence with our partners, Biogen.

Yes. I think one thing people are hoping to get some color on as we get closer is the type of preparation Biogen might be undergoing to launch for MDD because besides that indication and then for that particular specialty would be on the newer side for them to focus on. And to the extent that you can share any kind of updates that they're -- progress that they're making in trying to get that effort off the ground, I think people would like to hear that.

Yes. Well, we -- the initial focus here for zuranolone should WATERFALL be successful and the filing go well and get approval is launching in the United States. The rest of the world will follow after the United States, could be a year or 2 after the United States based upon -- again, Sage was very U.S. focused; now with Biogen, we can be globally focused. So we've got a head start with zuranolone in the United States. As I mentioned, we already have an approved drug in the market. We have a relatively small medical affairs and commercial effort. But we have relationships across psych because of our efforts in PPD. We have great preparation with patient advocacy groups across all depressive disorders. We've got good relationships with the payers and plan on doing more of that in the future. And then, of course, likely, we'll work with Biogen also on making sure that we're addressing the health care community, the patient advocates and the payers as well the regulators together.

Okay. So we're looking forward to that as well. Before I let you go, I did want to get your thoughts about other indications in CNS. Obviously, among PPD and MDD and essential tremor, those are large populations of course. And there's opportunities to penetrate all of those markets. But as you think about your earlier stage pipeline, what indications do you think you could be pursuing in the near term?

Well, I mentioned this all the way back to December when I became the CEO. And in addition to zuranolone and 324, I'm incredibly excited by SAGE-718. We talked about this earlier. We've seen really consistent data from the very beginning with 718. We've highlighted that we're moving forward in the clinical development plans to get an approval in Huntington's disease. We saw very significant positive data with Parkinson's disease, and we'll have the Alzheimer's data also very soon. So we're looking forward to all those. By moving forward with Huntington's disease, we have an opportunity to move forward, again, as our primary indication, starting with an orphan disease. And then we have a, if you will, a pipeline within a program, should the data we saw out of PARADIGM continue in Parkinson's and should the LUMINARY data be positive at Alzheimer's, we have an opportunity for a significant drug here for cognition across all neurodegenerative diseases, which is really exciting, particularly for those patients in desperate need.

Okay. And so I guess beyond Huntington's, there's been a lot of data released from other companies on Huntington's recently, which has been, I think, deemed less than spectacular. What do you think could be differentiating for your program versus what they have seen?

Well, I mean, look, we've seen very disappointing data across Huntington's disease. I think we have a strong rationale for the role of NMDA receptors in cognition. Our approach is positive modulation of NMDA receptors. And through work that Sage and Wash-U did, we actually found specific brain metabolite, a 24(S)-hydroxycholesterol, which modulates MDA receptors. And it not only could be a potential biomarker to identify certain patient populations, but it certainly was the biologic rationale, seeing 24(S) deficit in Huntington's disease. Now it does look like patients may benefit even if they don't have that deficit. So I think we have a really unique biologic approach that is highly differentiated from anything else out there. And of course, if you can give someone 20 or 30 years of independence as the rest of the disease progresses, or if we are fortunate enough to move into Alzheimer's, a 7-year old independence for another decade rather than losing to cognition, it's a very -- it will be a very important drug for this landscape.

Yes. So we'll look forward to seeing data from that program as well. So we're coming down to the end of our time together. I just wanted to quickly ask you, what is it that you think investors, if there's anything, might not absolutely appreciate about Sage?

Well, look, I think -- and I said this upfront. I mean, Sage has spent better part of a decade, deeply diving into understanding brain and brain circuitry, particularly against GABA and MDA. And if you think about ZULRESSO, then zuranolone, and then 324, now 718, this methodology that Sage has used to deeply understand the biology and understand how we need to modulate endogenous receptors across this brain circuitry has resulted. And I'm pretty excited. I believe that while we are a small molecule company, the product engine of Sage really exists, and we have an organic pipeline for the next decade or so already in front of us, which is incredibly appealing.

Excellent. With that, I will close this conversation off. There's many other things that we can talk about. We'll reserve that for the next time when we have a deep discussion. So Barry, thank you so much for taking time this morning to chat with me. Really appreciate it.

Thanks, Tazeen. Thanks again. Thanks for having us. Really appreciate it.

Okay. Have a good rest of the day.