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

Good afternoon. Thank you, everyone, for joining us. We're really pleased to have Sage with us, and we have Barry Greene, CEO of the company. Barry, with that, I'm going to turn it over to you for any opening remarks, and then we can jump in.

Yes. Well, thanks. It's great being and thanks for everyone in the audience for being here. Really quickly, we've got a couple updates. One that came out this morning where we articulated that we were able to accelerate the PPD aspect of the NDA and do 1 filing for both PPD and MDD. We're excited by that because it simplifies the review process. It's better for us, it's better for the agency to have 1 filing. So that was one of the updates this morning. The second update, which we hadn't updated folks on is that the SHORELINE study is completing enrollment. We were able to roll a majority of the patients from CORAL on the SHORELINE and that allows us to wrap up SHORELINE moving forward. In addition to that, we've got a robust pipeline being developed with 7 clinical trials ongoing across our pipeline. So a lot going on at Sage right now across zuranolone, SAGE-324, SAGE-718 with the early pipeline emerging. So it's a pretty exciting time.

Well, congrats on the news today.

Thank you.

What prompted the change here? And how receptive was the FDA? And does this in any way strengthen or increase the opportunity here for approval. And I guess what I'm trying to get at is now PPD and MDD 1 indication essentially and all trials can be used for almost 2 diseases, but at the end of the day, like they're looked at as fluid as depression?

The -- we're really excited by the totality of data. And by combining MDD and PPD, we strengthened the totality of data, particularly given how strong the SKYLARK study was. We believe, and this is something that we still have to work with the ADC on. It's still appropriate for an indication statement for the treatment of MDD and for the treatment of PPD. And we really do want PPD in the label because as you're well aware, an approval of zuranolone PPD will offer the first oral therapy ever approved specifically for PPD. And we think, particularly in PPD, that zuranolone based upon the benefit, risk and being the only oral drug approved for moms with depression, should become standard of care pretty quickly. In MDD, there's a bunch of different things to work through, which we will. So this greatly strengthens the overall package and kind of the timely probability of approval by having a totality of the data. It also allows us, should the FDA decide to do an AdCom to bring the totality of data to an AdCom. And importantly, this allows 1 filing and 1 set of reviews so that we don't have to do CMC module twice or other modules, allows us to each module and answer questions in a timely fashion. And again, we think given the breakthrough designation and Fast Track designation for MDD and the PPD, it heightens the probability of a prior review. And if all that goes as expected, then our PDUFA date will be third quarter of next year, which is really close to hand.

And how did this come about?

The 1 filing? When we -- I'll take you back, when in 2001 at the beginning, we had time lines for all our clinical trials and SKYLARK was due to readout last year. With COVID raging and the challenge with accruing a trial mom -- moms being part of a clinical trial, accrual had slowed down. So we articulated that we believe that the SKYLARK readout would be mid-2022. And internally, it was the latter half of mid. We want that specific. So when SKYLARK right out as early as it did because of clinical trial accrual picked up. And the study was as clean as it was. The team went back and looked at our time lines. We've built in time for SKYLARK to read out, then we built an extra time depression trials are complicated. So extra time to work through the richness of the data, assuming there'd be some murky areas. Well, there weren't. So we were able to both accelerate the readout and accelerate the time line to integrate it with an NDA. And being able to accelerate PB and have it be part of 1 filing is an exciting opportunity, as I said, file 1 NDA and kind of work through the review cycle one time.

Perfect. And at this point, what's left to do for the clinical modules, I believe the rolling NDA submission has been completed.

No, the rolling NDA started in April of last year.

Sorry, what parts?

Yes, with a nonclinical module. And what we said solving at that time was that we'd update everybody when we started, which we did when we complete the NDA and then assuming it's accepted 60 days later when the FDA accepts the NDA names or PDUFA date, which again we believe will be in the third quarter. So all of the nonclinical and clinical and sort of CMC work analytics are done. And it's really a matter of the teams and it's a lot of work. The team is completing each of the modules and make sure the modules are of high quality, error-free and then submitting the modules. And we're on track to get all that done by the second half of this year.

So starting with MDD here, can you remind us of the profile that you've seen emerge between WATERFALL and CORAL and how they're guiding you to which patients may be ideal candidates for treatment in MDD and how the drug may be used.

Yes. So for MDD and PPD, when you look at the totality of data, the drug profile is incredibly consistent. What we see is rapid improvement in darkened, anxiety without an impact to sleep as soon as day 3. We see it continue to day 15. And importantly, the effect of the drug across those dimensions continue to last for a long time. And when we look at Shoreline, we know that a majority of patients only needed 2 weeks of drug in the course of the year. and 80% only 1 or 2, 2-week courses where that second course was really not treating that first event, but most likely the second depressing event. So across 7 positive trials, the drug works, the way the drug works. It works fast. It works for a long period of time. When we look at MDD specifically, while it works across all of MDD, we know that it works particularly well in a group of patients where standard of care doesn't work that well. And that's with MDD with elevated anxiety or as sometimes they're called anxious depression. We're calling MDD because it is a depressed patient with anxiety, non-anxiety, without depression. That -- those patients act a lot like the PPD patients. We see moms also have elevated anxiety. So outside of the moms in PPD, there's really kind of patient types that are coming to the forefront. The #1 that comes to people's minds are the young adults, 18 to 32-year-olds that might be starting school or starting their first job or their graduate program where they have a depressive episode. And what comes into people's minds or why would we wait 6 to 8 weeks to see if that drug works if ever, that could derail a young person's life and why would we have them suffer the through the side effects, sexual dysfunction, weight gain, particularly at age of euphoria. So young adults is a big part of our focus. On the other end of the spectrum are the elderly, someone that might have mild dementia with Parkinson's is on 5 or 6 or 7 different drugs, you really don't want to add another chronic treatment to that person and wait again, 6 to 8 weeks to see if the drug works. So something that works rapidly, that's taken a look for 2 weeks. And then there's a variety of other patient types. There's someone that's on an antidepressant, they're not suffering side effects, but they're still very depressed. In fact, about 1/3 of the patients in our clinical trials followed to that phenotype. They just weren't well enough on their antidepression. They add zuranolone, they get better, they stay on or off their antidepressant and they stay well for long according to the data. There are those that are doing very well in their anti-depressant, but having a breakthrough. The loss of a job, loss of a loved one, where their mood darkens or anxiety picks up, they have trouble sleeping. If approved, the idea would be use zuranolone there, on top of their antidepressants that they broke through on. They can remove it or do another one. And there's a number of people that simply don't like the side effects. So they may have gotten better, but they don't like the euphoria, the sexual dysfunction, the weight gain, their GI is upset and they stop taking the drug, not because it's not working but because they just don't want the side effect. That's kind of the adherence challenge patient. So those 5 patients we're hearing back from the community that should Ziran be approved, those are the first cessations that the work through. And then the red thread that pulls all of this together is MDD with all at anxiety where we hear from treating physicians, those are the hardest patients for them to treat. And the data support it. When you think about the 7 million people that get a new prescription per year about. The average course of treatment on current antidepressions is 7 weeks. And patients cycle through 2 to 3 different drugs in the course of the year. It's not good for the health care providers. It's not good for them. We also hear it from the payers.

And with KOLs who are going to prescribe -- I guess, from conversations with KOLs, the physicians that are going to be prescribing this drug, what has been the feedback on waterfall? Do they focus on the 1.7 point placebo adjusted delta and concerns that the benefit is limited? Or is there a more important metric to them? And maybe talk about the magnitude of reduction in depression to -- or is it the magnitude of reduction as we just talked about in scores here?

Right. Well, I mean the reason that we all do placebo-controlled trials to make sure that what we're seeing is not simply a placebo effect as the factors the drug. So the difference between placebo matters. And as you are well where there is no approved drug in depression other than ZULRESSO that hasn't filled at least 1 or more Phase IIIs. In fact, the lower is that Prozac at IV successful Phase 3 is in 7 failed tests is the lower. So this happens in the world of depression. So when you look at any 1 trial, there may be criticism, but when you look at the totality of data, what we're hearing back from the community is that the absolute change from baseline is a drug effect. We believe it's a drug effect, and that scale because the clinical trial of taking some money out of their home, day 0, 3, 8, 12, 15 and every other day after, hydrating them, feeding them, putting on a white coat, therefore, making them better. If that were standard of care, we have a lot of people who stay better. But in fact, we need drugs that work fast and are durable to deal with the depression crisis that we're under.

And then for CORAL, you saw a rapid onset of action, but maybe you could walk us through how to think about the benefit on top of baseline antidepressants and the rationalization there.

So when we think about zuranolone out in the real world, we want data for zuranolone as a monotherapy, about 2/3 of our clinical trials were monotherapy, the Japanese trial that was done with all monotherapy versus placebo. And about 1/3 of the patients on the other trials were on top of a stable antidepression. What we were missing was what happens when you give zuranolone, co-administer with an antidepressant. And that's what CORAL does for us. What that suggests is that instead of 6 to 8 weeks with -- on top of antidepressant, the drug works incredibly fast and maintains that benefit out for an extended period of time. So CORAL gave us the information should a physician decide to prescribe zuranolone, co-administered with an antidepressant we have the data to support that, that can be done safely and we maintain the drug profile, the fast onset, the durable onset without additive adverse events that we've seen across the 3,500 other patients.

And you have the SHORELINE study that looks to answer the question in a real-world setting about durability. Can you just remind us how that study was designed and what you've learned from it?

The idea behind SHORELINE, which is the largest naturalistic study ever run in MDD was to understand the retreatment paradigm. If we give zuranolone for 2 weeks and follow that patient out for a full year, does that patients stay well for the year? Or do they return to their baseline. And what we saw in this large metros study is that a majority of patients after 2 weeks maintained wellness for the course of the year, about 80% in either 1 or 2 week treatments, and then there were some patients that had 3, 4 and up to 5, but those numbers were dwindling. The dynamic that we see is that the people got better with their first depressive episode and might have had another trigger in the course of the year requiring other treatments. What the data suggests is for those that responded, zuranolone can continue to work for their second or third depressive episode without any additive in fact, it's less side effects. So we have a profile where drone given for 2 weeks and then retreated should someone needed in the course of the year for another depressive episode. We believe that these data will be very structure out in the real world about how to think about zuranolone and retreatment.

And do you anticipate an AdCom here? And if so, what do you think will be the areas of conversation for the FDA.

The -- once we submit the NDA and it's accepted, we may get signals from the FDA whether an AdCom is warranted or not. -- it's up to them. It's not up to us. If they do an Adcom, will certainly be ready. And in fact, we will prepare for an AdCom. I would not compare will be prepared for no -- they could decide that given the unmet need and given the benefit risk, then Adcom is not warrant to move forward for approval. So either way, we'll prepare for an outcome. Should there be an AdCom, we believe that the kind of questions that would be asked are similar to what we saw with Brookstone is onset of action fast, important or not because you know the answer, but that will be debated. What about the durability of effect. I think what we've seen now with SHORELINE and SKYLARK that can be answered. I don't think there'll be a whole lot on adverse events because it's a pretty clean profile. And what's interesting is, as you know, there hasn't been anything really importantly now approved in years. and most prescribers forget what the labels for SSRIs and SNRIs look like. So can remind on AdCom with the current drugs approved that have been used in millions of people what their labels look like. And our adverse event profile stands up very well versus those. So those are the kind of questions that might be asked.

And can you talk about the lift that will be needed to change the treatment paradigm here from chronic to as needed therapy? How much education is required on your part to teach physicians and patients to recognize symptoms of depression that would necessitate an additional dose here?

So the -- I will say that at the beginning of 2001, based upon the data at hand, then we had a very heavy lift in front of us. We're moving from a view that this is a well-served population that can be treated with generics to something else. Now with the totality data, after waterfall, the updated SHORELINE, the SKYLARK data, that list has gotten a whole lot lighter. because When physicians see the totality of data and have an opportunity for an oral drug to work as quickly as day 3 and continue to work -- and we think about those patient types I've already described, particularly MDD with elevated anxiety where drugs today don't work very well, the list has gotten a lot lighter. Of course, there's education, but when you hear from folks that they've got young adults, elder these other patient types that aren't doing that well, they want to reach for zuranolone. Again, if approved, we think that's where the initial use case will come from. And on the payer front, payers appreciate that their patient population that's suppressed by not well served by today's drugs. Since it's mostly genericized, it's not a large category for them. but the cost of depression to plan is significant, particularly when people are on or undertreated and have downstream comorbidities like cardiovascular disease, diabetes, even infectious diseases.

And how much payer work have you done at this point? And how do you think about where to price this drug just given a 14-day regimen versus like a yearly drug.

The payer work has started in earnest. We highlighted from the beginning that we planned on leaning in with value-based agreements. What that means to a payer is that we plan on talking to them about the unmet need, the patient population and being really forthright about how we see the drug being used. Payers want people in their plans to get better, faster and stay better. The reason that prior ops and step edits are used is fear of overuse of drugs that don't work very well. When a drug works well, it is priced properly and they plan -- they have time to plan for it and the forecast about it, they want to cover drugs like that. So the payer conversations are going incredibly well. What they want protection on their value-based agreement is somewhat epidemiologic protection, meaning if we estimate that 100,000 patients in their plans might be subject for zuranolone. And at the end of the day, it's 110,000, we can protect them on that overage of 10,000. We're worried that we would bump over specialty to your pricing because someone might want 3, 4, 5, 2-week course to the population model. So for that plan, we can protect them that their population might only need 4 weeks of drug. And if Blue Cross Blue Shield of name your state comes in and says, our population required not 4 weeks of drug, but 4.5 weeks of drug, we can protect them on a population level across that extra half. And when you talk to payers, they want their people to get better and they want to budget predictability, so they can forecast. And by doing proactive value-based agreements, we provide that, and there's been great enthusiasm to engage with us. There's been a recognition that the patient populations are not well served and a new mechanism of action that works quickly where people get better, quickly, it stayed better for a long period of time as a profile that they would like.

On average, is there a number of 2-week dose regimens you think a person would take like if you had to average it out?

Yes. So at a -- if you look at the totality of data to date, including all the SHORELINE data, that would suggest that in a population level, a payer's population would not require more than 4 weeks of drug at a population level. So there may be a whole bunch of people who take only 2 weeks, and there may be some that take 4 weeks and then maybe some that take a third or fourth 2-week cycle. But on a population level, we shouldn't see more than 4 weeks of drug or 2-week regimens at a population level in the course of the year.

And how are you and Biogen going to share the responsibilities here for commercializing the drug? And help us understand, I believe, in September, what you're laying out to the street in regard to commercial strategy?

The relationship with Biogen, which is going the partnership doing incredibly well. And people ask that because of some of what's gone on Biogen, but they've been phenomenal partners well aligned on development, regulatory and getting aligned on the commercialization aspect. It's a matter of laying out the work. It's a 50%-50% co-co in the United States, where equal decision-making and -- we haven't split up responsibilities, but it will be equal responsibilities for various prescribers across the United States, patient advocacy government. So we're working with exactly who's going to what. So it's 50%-50% co-co that we're working well through. Exactly who calls on whom we haven't decided yet. We have agreed on our payer strategy, which we articulated lean in with value-based agreements as a proactive part of the strategy. We've agreed that we're going to take an omnichannel approach, which means heavy digitization to start. It's not about simply knocking on office doors and patient advocacy strategies and strategies in terms of health care provider targeting. So that's well on its way. The deeper dive will do commercial, we'll give people a deeper flavor of what we're going to do, unlike to get into exact details until we're much closer to launch. We have a label and it makes more sense to completely lay out what we're doing.

And will there be 2 different commercialization plans for PPD versus MDD? I'm just wondering how you think about the overlap there versus non.

Right. So zuranolone brand, a single brand a 14-day booster pack, if you will, will be priced the same. So we're not going to try to do indication specific prices wouldn't fly very well in the maternal health world. It's also not the right thing to do. And there will be different approaches, the slightly different approach. The key points for MDD per psych, there'll be offices that are titled primary care office, but more comfortable seeing psych patient treating psych patients. And then there's a whole GYN segment, where today, the OB/GYNs are more reluctant to diagnose and prescribe because there's very little they can do with a diagnosed mom other than refer them to a psychotic because by the time they have the baby and are off, they're off to something else. In the case of zuranolone with a drug that works as quickly as 3 days, our belief set and we've seen this with ZULRESSO is they're more likely to diagnose and prescribe. So it'll be more of an OB/GYN. And you can imagine when a drug -- if zuranolone is approved for PPD, the first oral medication specifically proved PPD, it will be known broadly every Congress. And I think that like we've seen with high blood pressure, for example, preeclampsia. OPMs don't refer that off to a cardiologist. They take care of it with their drugs or early pregnancy, morbid. So pressure will fall into the category of take care of that mom for the safety of the babies.

And how big of a commercial footprint do you need here? I know in the past, Sage has talked about social media, but how do you go about getting into the market and both these indications changing the paradigm a bit?

The approach we're going to take, I mention is this an omnichannel approach. So that means that we'll have broad digital presence. We'll have social media presence. There's many groups out there that talk about that talk to each other about that. So we'll make sure that in the right compliant way, we're working with those various groups to make sure that a new drug for PPD should be approved, is on the market and available at every Congress when we talk about all the patient at groups, we'll be talking about it. So before a boot hits the ground to call him dock, there'll be a whole bunch of work that we'll have done to raise awareness. This is a medicine that it's really important to raise expectation at the patient model that being on well for 2 months is not okay. that you can get better in 2 or 3 days if the drug works for you, stay better for longer. You've got to ask for the drug, raise your expectations. Same is true with physician and physician extenders, any health care practice, many nurse practitioners and PAs can prescribe CDs' patients and deal with it. So the reach will be very broad from an omnichannel social media perspective. And then, of course, we'll have medical science liaisons for scientific exchange and then people that are more on the sales side to pull through at various office locations were required.

And then looking at SAGE-324, that's a drug being studied in essential tremor, and you had early data last year. Could you help us understand what was most exciting or surprising to you? And then how you think about the changes that you made to the trial to be more tolerable? And when you've done these exit interviews and collected patient feedback, what you heard and where you go from here?

Very excited by SAGE 324 in the sense of tremor SAGE-324 is a GABA positive LTAC modulator that's meant to be given chronically because that what's happening in the brain is sort of constant this firing that leads to tumors when someone tries to do some not at resting period. And the data we've seen is very promising. The first experiment was give SAGE-324 and do we see a change in tremor amplitude associated with pharmacokinetics of the drug of wood. The answer there was yes. The next question I asked was, if we give SAGE-324 over the course of 28 days, do we see constant effect over the 28 days? Or do we see some kind of tachyphylaxis or added adverse events? So the KINETIC study read out, we saw a statistically significant change in tremor amplitude across the 1 month without technical axis. Importantly and very rewardingly, we saw a statistically significant correlation to activities of daily living associated with tremor amplitude. So what does that mean? That means that I might have reduced my tremor amplitude by 30%, which now means that I can take a soon and feed myself soup by not spilling it over myself. It means I can button my shirt, get dressed in the morning, it means I can text my friends where before I couldn't. 30% may not sound like a lot, but it's meaningful to change in someone's life. Now that we had KINETIC 2 and we saw the change in tremor amplitude associated with living, the next question is what's the dose and frequency that means for chronic treatment? You're well aware that kinetic since we dosed at the top dose, we saw a fair degree of sleepiness online that for some patients with fine for others, they'd like to dose reduce. But once you have Cmax, those dose reductions could take a long time to kick in. What we've designed with KINETIC 2 is we're now giving the drug at night. So if you're a little sleepy and you go to sleep, that's fine. We are dosing 15, 30 and 60, but we're dose escalating to get to 60. And I believe that design is now over 3 months we'll answer the -- does this work over 3 months without technical collapses? Do we see any new adverse events? And then what's the dose and frequency to lead to chronic treatment. And the KINETIC 2 trial should be accrued this year with data sometime next year that will give us that dose and frequency to move on to a Phase III.

718 is a program that's less talked about than given the focus on zuranolone, but data from the program has been emerging over indications -- multiple indications of impaired cognitive function. How do you see the NMDA PAM as being differentiated from other molecules under development? And why did you decide to prioritize HD as your lead indication?

Right. So I am really excited by the 718 program and have been from the beginning even before I started. The reason I'm excited is that there's nothing on the market today and nothing I've seen in development that has an opportunity to improve cognition in someone with cognitive impairment, particularly in neurodegenerative disease. So while this is not dealing with the underlying reason for the neurodegenerative disease, this is potentially a disease course model part. If we can maintain independence in people for long periods of time, they'll shower, they'll even remember to take their meds. And what often happens in neurodegenerative disease is the disease progression is bad, the disease progression causing loss of independence is worse. People don't take their meds, they don't shower, they don't need -- that accelerates the good disease. So if we can maintain independent change the course of the disease, Sage 7 be really important for cognitive impairment improvement across their degenerative disease. The biologic discovery by Sage scientists and collaborators at Wash U is that in Huntington's patients with mild cognitive impairment, there was a deficit of a very specific metabolic 24S hydroxy-cholesterol, that when that Sage 718, it's accounts very different, but it was designed to act like that to upregulate NMDA in a very, very specific way. Other drugs that have hit NMDA, hit more with a hammer, either on or off rather than kind of dialing the thermostat to a specific temperature. That's what SAGE-718 does. The consistency from preclinical to every clinical trial has been consistent. And in the world of drug development, when you have a biologic hypothesis and preclinical and clinical data that all is lined up and consistent, that's pretty exciting. So Huntington's offers us an opportunity as an orphan disease to forge a new regulatory pathway. Drugs have not been developed to improve cognition. We can do that with Huntington's and then follow with Parkinson's and Alzheimer's.

When we look at your stock and where it's trading today, recognizing we're in a difficult biotech tape, but the fact that you have a drug up for approval and 2 of these drugs in the pipeline and others. What do you think is not understood here? And when do you think we'll start to get that value inflection for your story.

We're living in an unbelievably unprecedented time. And the biotech sector is worse than it even was in 2000, 2001, where news that was communicated 2000 to about 2003 was just not belief I think we're living in an unprecedented time that when the macroeconomic environment starts to go up, the information in front of us will be very, very positive. We have a brain health pandemic going on where maternal and mental health at the forefront of the dilemma. We read in the news every single day about how bad depression is, and it's growing an oral medicine that gets people better in 3 days, that's only taken for 2 weeks as durable effect. That will be noticed in a big way when we return to a kind of a rational -- well, you tell me when that is, but that's what I think is going to happen. And it will unlock not only the value of zuranolone, but the value of 324 SAGE-718 and the fact that the Sage approach methodology while it's a small molecule platform is the fact that product engine is capable of producing drugs. When I look at what we've got with zuranolone and the rest of the pipeline, we have an opportunity starting in 2023 and to launch a new drug or a new drug indication every 12 to 24 months. That's a profile rarely achieved in the biopharmaceutical industry.

And maybe 1 last question. Turning back to the payer work that you're doing, how much buy-in are you getting just given you're talking about these DBAs, but also a different nonchronic situation, how much fine are you getting that they get comfortable with the pricing so that this is a successful product?

It's very important for us that when a doc or a health care provider writes a script, a patient gets the drug. The value proposition here is you've been diagnosed, I'm going to get your drug. And after 2 evening doses, you start to feel better. It's remarkable. Payers understand that depression is not well managed, that the downstream sequela, the downstream comorbidities lead to incredible cost to their health plans. They want better -- they want people to get better fast, and stay better. So by offering them value-based agreements, allowing for forecasting and but certainty they can plan for this. And what payers take our surprises, what they like or transparent companies who are very clear with what they're trying to do, how they want to use the drug and the patient population they think should be treated. And we're being incredibly transparent, which is leading to very solid conversations. And I do believe that the hurdles to getting a prescription for zuranolone, if we're successful here, will be much lower than other kinds of drug launches where steps and priorities become a big obstacle. But patient wants a drug, we think that you get the drug or doctor prescribe the drug would keep the patient should get the drug.

With that, Barry, thank you so much.

Thanks, Salveen, appreciate it. Thanks for your time.