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

Great. Thanks very much, everyone, for joining in this later afternoon panel with Sage Therapeutics. With me is CEO, Barry Greene, who I'm sure everyone listening in knows well. Barry, assuming everyone knows Sage well, maybe you can just offer some introductory remarks, a couple of high-level updates, and we can get into Q&A. Does that work?

Yes. Sounds great, Paul. And I just want to thank you and Stifel for having us here today.

Awesome. So please.

Yes, please. So thank you. Look, as all of you know, at Sage, we've developed deep expertise in brain circuitry with real demonstrated leadership in GABA, NMDA receptor pathways. And we focused on applying our unique chemical innovation to develop drugs specifically targeting those pathways. And clearly, the methodology has worked well with one approved drug for PPD and a number of new chemical entities across 12 or more possible indications. So we think we're in really strong shape, supported by a great balance sheet, strategic partnerships that provide us real flexibility for our pipeline going forward. For zuranolone, we are on track to start our NDA submission in MDD for zuranolone earlier this year and plan to complete the submission in the second half of 2022. I'm pleased to share today that we've completed enrollment in the SKYLARK study and remain on track to share those top line PPD data in mid-2022. So that's great news. And then as we've guided, pending completion of the SKYLARK study and after the full MDD NDA is submitted, we plan to submit an associated NDA in PPD in the first half of 2023. Also have some new updates on SAGE-718. We've initiated the SURVEYOR study in Huntington's cognitive impairment and the PRECEDENT study in Parkinson's mild cognitive impairment, both as guided. We do have slides on our website, so we won't get into all the detailed design now. People can kind of look at the website and design. What I want to convey is, strategically, we're treating each indication as an integrated yet separate program. The Phase II SURVEYOR study is designed to advance our understanding success of 718 in cognition and functioning in participants with Huntington. And it's meant to complement the DIMENSION study providing deeper and better understanding of the clinical meaningfulness of the differences that we see in SAGE-718 versus placebo and the well-powered DIMENSION study. Now the SURVEYOR study will seek to correlate performance on the same cognitive measures used in DIMENSION with sophisticated proxy measures of real-world functioning, including performance on a tablet-placed functioning assessment as well as performance in a driving simulator for those individuals who opt in. And understanding this relationship between cognitive performance and improvement of those tasks will really give us a well-rounded view and really answered the so-what questions, how will performance improvement impact patients in their everyday living? So again, slides are in the website for a more detailed overview. I also will highlight at this point that SAGE-324 being evaluated for central tremor, the Phase IIb KINETIC study is on track and starting to enroll well this year.

Excellent. Great. So as you prepare for the NDA filing for zuranolone, what's left to put together? And I was wondering if you could specifically comment on any outstanding requirements for the 50 mg dose, like abuse liability work, driving studies, things like that and where you are with those?

Paul, we're actually really in good shape with everything, all the nonclinical modules, truly matter at this point of compiling it, putting in the right formats and getting it to the FDA. And I'll remind you, when I take a step back, we shared with everybody at the beginning of last year, 2021, that we have -- we designed the LANDSCAPE and NEST programs with 2 MDD, 1 PPD study, any one of which, if positive, constituted a positive filing. And with WATERFALL being positive, following the pre-NDA meeting with the FDA, we confirmed that, so really on track to submit everything we've outlined. Now again, we highlighted this last year. We did chose to rerun all the nonclinical work at the 50-milligram level. So the abuse liability, driving studies, we rerun all that and believe we're in very good shape to move forward.

Yes. Okay. Okay. And I'm sure you've heard all the kind of regulatory questions or things that KOLs pointed out on the call here or there. And one of them [ points ] to the dose. What do you expect the recommended dose to be for this drug?

Well, we think based upon all of the data to date that the right starting dose, at least in the United States, should be 50 milligrams. As with many drugs and many indications, we want dose flexibility. So as you may recall from our clinical studies, about 8% or 9% of subjects in the studies had the dose reduced, so not a very large number. So we want other doses available, such as 40 and 30 should dose reduction be required. But we believe the starting dose should be 50 milligrams. And I'll highlight, Paul, that even those that suffer any level of adverse event, we're talking about 2 weeks of dosing.

Yes. Yes. No, totally. And then, again, I know these are FDA speculation questions, but certainly important commercially and how you're framing the drug. How do you think that redosing will be indicated in terms of guidelines and also any potential restrictions, right, given that the SHORELINE study tried hard to kind of maybe enable physicians to not just panic and redose right away, but is that really the right way in the real world? So what's your thought process there and how that might look?

Yes. So a couple of different thoughts. So I'll remind you that when we outlined the LANDSCAPE and NEST programs in January of 2021, we had a study in there called REDWOOD. And it was a study that looked at redosing every 6 weeks to get enough patients that are off third, fourth and fifth doses. We highlighted in January that we didn't believe that was a study that should be run, and we worked with the agency to confirm that with the SHORELINE, the largest naturalistic study to date in depression, we had enough people treated at various dose -- those 3 doses to not run that study. And I can't remember exactly when, but sometime last year, we guided that we no longer need to use REDWOOD, that SHORELINE would be sufficient for the retreatment dosing. So we do think those data will be very helpful. And importantly for physicians and their patients, a majority of people, 80% only need 1 or 2, 2-week doses in the course of the entire year. So when we think about it commercially, and we think about it in the context of VBAs, we think we'll be getting "paid for" about 4 weeks of drug in any patient population in the course of the year. Now the agency could restrict a third, fourth and fifth redose simply on the end not being big enough because, thankfully, not that many people need that. I don't think that's the right thing to do from a patient perspective, particularly given the overall safety profile of the drug and the benefit risk of the drug. But even if they did do that, it wouldn't really have a big commercial impact.

Okay. Do you think that the timing of redosing will be restricted?

Hard to say. I'm not sure. I'm not sure. I'm not sure again that makes sense. We've got to present these data at a congress this year, Paul, and we will. But if just to think about it, the fact that a majority of patients only needed 2 weeks of dose in the course of the year, 80% only needed 2 to 4 weeks, that sets up a -- you took the drug, you got better, you stayed better for a long period of time. You had another depressive event and maybe needed to be treated within that calendar year. Now there may be some people who, "Hey, you're getting better. You're not quite where we need you. We're going to give you another 2 weeks right away." Like other drugs, that's a possibility, but we don't think that will be a general practice.

Yes. Okay. Can you talk a little bit more about the anxious depression data you featured? And I guess one thing I thought was really -- I've been thinking more about that and the marketability of that, right? On one hand, you talked about this as being a really tough-to-treat population. On the other hand, I'm sure that with this being a new drug but one that works with the data system, you're not going to want physicians, especially the laypeople in nuanced pharmacology to think of a benzodiazepine. So how do you thread that needle with this messaging?

Yes. I'm not sure how much of a needle there is to thread because it's fundamentally different, but let's talk about it. So we know through lots of literature, the STAR*D registry, the Fava et al papers that people with anxiety or people who are depressed with comorbid anxiety as we say MDD with elevated anxiety have much worse outcomes on all the drugs available today with today's standard of care. So we retrospectively analyzed all of our data, including SHORELINE. And while we see that zuranolone works well across MDD, it works particularly well in MDD with elevated anxiety. So we prospectively defined that subgroup in the CORAL study and found, in fact, that while zuranolone worked well across the whole population, the effect size we're seeing in MDD with elevated anxiety was significant. Now that's important because there may be a KOL you talked to out there who off the cuff says, "Well, I'll throw in a benzo and that solves it." That's actually not really true. Only about 20% of patients have concomitant benzos. They're not really indicated for depression. As you know, there's a growing anxiety around benzos, including the FDA adding a black box warning in 2020 given the number of people that get, frankly, hooked on benzos and can't and suffer consequences of trying to remove themselves. So having a drug that works in depression, anxiety, doesn't impact sleep, may in fact benefit sleep is really what you want in a single drug treating depression. Not only that, but it works in 2 or 3 days and with sustained effect.

Yes. Yes. Okay. Very good. Maybe to round out the regulatory question, Barry, I'll just kind of like ask one that, I guess, is maybe just a little bit more blunt about the stock debate. But I think there are some folks out there who just think that there's real risk that zuranolone doesn't get approved either because of the effect size or some of the data or the period and dosing approach. Like when you just sort of take a step back and get ready to file the NDA, you joined the company, went through a multiple FDA meetings. There's been another one since. Like do you see any salient risk this not be an approvable drug at this point?

I see the risk is exceedingly low and shocking if it weren't. Why do I say that? So let's look at the wave of what's going on. We have a number of people studying psychedelics as a way to get people better fast. We have ketamine clinics as a way of getting people better fast. We have the FDA just approved J&J's esketamine, which, frankly, important for those patients, doesn't quite have a data set, over 3,500 patients with a benefit risk. And it's heroic way to get drug for people when they need it. So there's clearly the FDA understanding that depression is a big unmet need. It's growing. It's been greatly exacerbated by COVID pandemic with folds elevation over what it was prepandemic. So there's no question about the unmet need. Paul, when you throw in the MDD with elevated anxiety is yet a further part of unmet need. In addition to the repetitive effect, it's really no question. The real questions are, where should it be used? How should it be used? What will the commercial uptake look like? And we can talk more about that. We're highly confident there as well.

Yes. Yes. Okay. All right. Who do you think are going to be the early adopters of this drug?

It'd be hard to know...

And who might be the later adopters of this drug? Like how would you characterize each group?

Yes. Hard -- I mean, hard to know exactly who the early and late adopters are. I think that when we've started treating with potential prescribers, and we've described MDD with elevated anxiety and we've described specific patient types, like the young adult, so a physician that has a bunch of young adults in the practice, so they're college age students or newly working professionals, everybody knows, all the literature says, you do not want this group on drug for the rest of their lives. So I think people that have those patients are early adopters. The ones that have septua- and octogenarians in their practice, we don't want to put them on yet another chronic medication. So really, those that identify the patient groups that we're talking about -- the patient types that we're talking about, that's who we want them using the drug first on. I think, Paul, anybody that you've spoken to that's actually used zuranolone and seen it in their own hands have been pretty positive about the repetitive effect and the impact size and the duration of effect on their patients.

Yes. Yes. Okay. On the reimbursement side, VBA approach is really, really interesting. No one's really done that for a mass-market indication. Or I guess if I could -- like key [indiscernible] might be challenging if I'm a Harvard program, right? With ONPATTRO, I've got 2 people on drug. And if one gets a liver transplant, I can call up Barry Greene from Alnylam and say, "Hey, this is what happened." But if I'm looking at depression, right, like I don't even know if I employ the people to like do the analytics work on the pharmacoeconomics, right? So that's like the one thing we're trying to think through. Obviously, you know much more about this than I do. So what makes you confident that this is a workable system? And how might it be similar and different to what you did in rare disease?

Yes. So Paul, in a large population, it's important that we think about how we do these on a payer population level. So won't be an individual patient, individual patient outcome. Like you said there's just too much data specific to adjudicate. It doesn't make sense administratively. But at a population level, a payer will know who in their population got zuranolone, who might have gotten other concomitant medications or what other pharmacy needs they had. And that's all adjudicated through ICD-9 and 10 codes. So that's pretty notable. We'll also know, again, on a payer population level if a payer's population needed more than 4 weeks of drug, and of course, we're going to making that up as a boundary. But those are all knowable things, easily looked up and easily adjudicated. And when we talk to payers, I'd say the VBA strategy is already working because we're already talking to payers at strategic levels about their patient population, about the unmet need in depression that we might not had we taken a more traditional, okay, just let's do the rebate game question. People have to remember that where payers stop drugs, it's where they're unsure of outcomes. They're not quite sure of pricing damage. And I want -- they want forecasting and budget certainty. But -- so by working with them, helping them understand epidemiology, numbers of patients, how many courses of doses the patients might need, they can start planning and budgeting for that. And that's -- if they can budget for that, they're good.

Yes. Yes. Okay. Great. Anything else to add on zuranolone before we move on? I guess the filing -- finalized filing second half of this year. Is that right?

Yes. We'll be starting the rolling submission, as we said, early. So soon. And then we'll finish the really a clinical module second half of the year. Then it's 60 days after we submit to understand where they're accepted. And then once the NDA is accepted, there will be further dialogue about whether an AdCom is required or if it is, when it will be?

Yes. Okay. Okay. Do you think there will be an AdCom?

It's really up to the FDA to decide. It wouldn't be surprising given the unmet need in depression, new class of drugs, repetitive effect, 2-week course of duration, first new mechanism of action, 35 years other than ZULRESSO. So it wouldn't be surprising. And of course, we'll be prepared for it if they do decide to go that route.

Yes. Okay. Anything -- actually, anything lastly you can say on pricing and what that might look like?

Well, I mean, we've talked about the value-based agreements. And until you really get into label negotiation and understand, frankly, how the VBAs are turning out and what kind of medical policies, we'll have out there. It's too early to land on a price. What we said, Paul, is we're certainly not going to be at the generic per patient per year level. But we also won't be in that specialty per patient per year level, at over $10,000 per patient per year. That would require 100% of the scripts to be adjudicated. And the millions of people suffering taking that specialty, adjudicate every script approach, it doesn't make sense.

Yes. Okay. Okay. Maybe let's cover the pipeline quickly, Barry. On 718, do you want to just briefly outline the scope of this Phase II program? And when might we start seeing some real proof-of-concept readouts?

Yes. So we'll -- just keep my [indiscernible]. We'll see -- the studies are up and running. And we'll have more information once we understand accrual rates sometime later this year or early next year on the timing. What's important is today that we initiated the SURVEYOR study in Huntington. So if you think about Huntington's overall program, we have SURVEYOR, DIMENSION started. That's measuring a number of things drug versus placebo at various timelines. We think if that package demonstrate robust data, that might be a package we can go forward with the regulators and seek an approval for. We also again announced today that we kicked off the PRECEDENT study in Parkinson's mild cognitive impairment. And then later this year, we'll kick off an Alzheimer's study. So Parkinson's and Alzheimer's, if you're a betting person, will likely require with deeper Phase IIIs. But we might have all the data we need, again, depending on the data outcome in Huntington's with SURVEYOR and DIMENSION to move forward.

Yes. Yes. Okay. Maybe -- I always think the biological story here is interesting. So what are the -- like there's some parallels between this and the allopregnanolone narrative, right, about endogenous levels and things like that. Can you talk a little bit more about that? And does that just apply to Huntington's? Or does it apply to other cognition diseases as well?

Yes. Paul, to separate out a biological observation that leads to a drugging approach with it being a specific biomarker for a specific disease because certainly, these are not monogenic diseases where you measure a protein level of knockdown, you reverse disease. It's a little bit more complicated biology than that. But the story still is very rich. What Sage and our collaborators observed is in Huntington's patients that were progressing in their disease, their 24S-hydroxycholesterol laterals were diminished. And we know that circulating cholesterol diminution can lead to people's inability to -- for learning and memory or inability to keep their cognition going. So that was the observation in Huntington's disease. We used 24-hydroxycholesterol as the starting endologous molecule to then design 718 targeting NMDA, and we're up regulating NMDA in a very specific way. So it was important that we start with Alzheimer's. But it begged the question, okay, if we do the same brain mechanism that we've observed in Huntington's, might we have impact in other neurodegenerative diseases? And if you were a betting person when the program started, you'd bet it really worked well at Huntington's, it might work less well in Parkinson's and then even less well in Alzheimer's because of how heterogeneous it was. So we were pleasantly surprised that, in fact, this biologic mechanism seems to hold true in all 3 neurodegenerative diseases to not only stop the degradation of cognitive decline but improve impairment in these diseases. And those are the Phase IIs that we're setting out to prove. If this plays out, what's exciting here is that we can demonstrate stabilization or even improvement in the higher order cognition, learning and memory, for example and in pretty short periods of time with much smaller ends than these multi-thousand Phase IIIs have been set up to observe lowering decline over a long period of time.

Yes. Okay. Very good. And then maybe lastly for the sake of completeness, let's just talk about SAGE-324. What are the specific plan on making in the next Phase II study to try to now say, okay, we have an efficacy signal? We want to get to the target product profile on the tolerability side.

Yes. So Paul, it's pretty clear, and we've talked about this that the tolerability piece, the somnolence specifically what you're talking about across our GABA PAM is literally driven by a TMAX phenomenon, so getting to very high drug levels very fast. I think that's what we saw in some patients on the 60-milligram dose in the KINETIC study. So what we've done is we're studying 15, 30 and 60 milligrams. We're studying 3 months of dosing. And for those patients that are getting up to the 60-milligram doses, we're up-titrating over the course of 6 weeks. So you'll get to kind of blood levels and brain levels that are required to lower tremor amplitude, improve activities of daily living. And our hypothesis is that it will drastically change the benefit risk of the program and lower the kind of side effects, that we have a drug that can be taken every single day or every single night.

Okay. And maybe anything on timing there?

Study's up and running. Sites are starting to open well. And again, just like we do when we have further clarity on how enrollment is going, we'll provide some better guidance on when we think readouts will come.

Okay. Okay. Great. And then maybe lastly on the finances. You guys have a lot of cash, but you've obviously a meaningful burn rate, too. How you -- given anything specific on how far your cash takes you and given the partnership with Biogen, any ballpark numbers on what you stand to potentially earn if zuranolone is gaining global approvals over the next 1.5 years?

We haven't given lots of breakdown there, Paul. What we have said is that we've got a balance sheet, along with Biogen reimbursement and early commercial revenues, that gets us into 2025. So that's a long way to go. Biogen is paying 50% of all U.S. costs for 324 and zuranolone, which is significant. So really -- our really big budget spend, if you will, over the next couple of years is SAGE-718. And as you know, we decided to do those 3 indications in parallel. Again, I will help people understand that when we get to the Phase IIIs, particularly for Parkinson's and Alzheimer's, I'm not ready to talk about the design. You can imagine smaller ends and faster designs because we're not measuring cognitive decline, we're measuring cognitive improvement. So we've got a very strong balance sheet. And we're being smart about every investment we make, including our early stage pipeline. I think stopping 904 because it didn't meet our product profile was a responsible thing to do. We'll continue to be very responsible in terms of how we think about each and every investment we make.

Okay. Great. Perfect timing, 4:25. It's like you've done one of these panels before.

I'm only following your lead, dude.

I appreciate it. All right. Well, thank you, Barry. It's always a pleasure. See you [ in person ]. Thanks.