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

All right, go ahead and get started. Thanks, everyone, for joining. My name is Vikram Purohit. I'm one of the biotech analysts with Morgan Stanley Research. This is the fireside chat with Sage Therapeutics. Happy to have with me CEO, Barry Greene. Barry, thanks for joining us.

Thanks for having us. Appreciate you and Morgan Stanley for doing this.

Of course. Let me quickly read a disclosure before we get started. So for important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative.

With that, let's kick it off. Before we get into any sort of program or pipeline specific questions, do you want to just provide some opening remarks and just kind of hit on the highlights that you think the business has achieved throughout the course of 2022?

Absolutely. So Sage Therapeutics is a commercial-stage biopharmaceutical company based in Cambridge, Massachusetts focused on brain health. We have a pipeline of Sage invented programs that I believe can yield new drugs or new indications every 12 to 24 months starting next year. So it's really a rich pipeline. The most advanced program we have is zuranolone, we'll talk about. We're in the process of rolling NDA submission for MDD and PPD. We have another program, SAGE-718, that's being studied for improvement of cognition. We're starting with neurodegenerative diseases, Huntington's, Parkinson's, Alzheimer's and another program that is partnered with Biogen SAGE-324 that we're studying right now for essential tremor and behind that, a rich pipeline, as I said, of Sage invented assets. I believe that we have the team, the pipeline and the balance sheet to be a leader in brain health and a top-tier biopharmaceutical company in the years to come.

Great. Let's start with zuranolone then. You mentioned that the filing is -- the process is underway. Could you clarify for us which components of the filing have been completed? And what's pending to get to that year-end 2022 completion?

Yes, we're really excited. We started the rolling NDA Submission earlier in the year. We announced that in May. And for purposes of updates, what we've said is that we plan on completing the NDA in the second half of this year. And if we are fortunate enough to get a priority review, that we should have a PDUFA date in the third quarter of next year 2023. So that's the disclosure we've done so far. We have also said that we'll update everybody when we filed the NDA and then again when the FDA accepts the NDA. So that will be the disclosure rollout. But we're very much on track to complete the NDA by the second half of the year. There's nothing new that needs to get done. All the work is completed. It's really a matter of completing the modules, making sure they're high quality and then submitting them in the right format.

Got it. And could you remind us which data sets are going to be included both for MDD and for PPD?

Yes, we're going to do -- it's 1 NDA filing both for MDD and PPD, and we will use all of the data from the landscape and NEST program. So all the Phase IIIs, early Phase II that was published in New England Journal as well as the Phase II study that was done in Japan, which had some really nice results. So that will all be part of the filing. SHORELINE, of course, the largest naturalistic study run that demonstrates what retreatment might look like, will also be part of the filing from a safety perspective, but also re-guidance on when treatment may be required.

Okay. Got it. And one common investor question that comes up is the potential for an AdCom. If one does come up, what do you think is going to be the topic of discussion? And how are you internally preparing for that?

Yes, so we need to prepare for an AdCom. We don't know if the FDA is going to want an AdCom or not. It's a completely new mechanism of action, a whole new approach to treating depression. It's really a paradigm shift. So they may in fact want an AdCom to demonstrate how they're thinking about it. If they don't do an AdCom and that represents a more speedy approval, that would be great. If they do an AdCom, it really is an opportunity for us to showcase the totality of data and of course, for patients and patient stories to show up to talk about the significant unmet need with depression. So we are very much preparing for it. And I know that the patient advocates, if there's an AdCom will want to participate and kind of tell their stories. I don't know exactly what the questions will be, but you can imagine that for 50 years, the world has thought about depression as a chronic disease that needs to be treated chronically. And while we're not creating a paradigm shift in how patients are treated by their docs, but we are creating a paradigm shift in you get better in 2 or 3 days. It's a 2-week course of treatment, which is fundamentally different. So it could take some time for people to get their heads wrapped around that. That paradigm shift, I think it could be the basis of questions. What happens if someone needs a retreatment? When might that be? What's the durability of the drug, those kinds of questions. Because it's very different than giving of anti-depressant that someone stays on chronically. What's interesting, and if there is an AdCom, we'll be able to share these data as well. You might interview 3 or 4 potential prescribers and they'll tell you that they diagnose the patient, they put them on the chronic meds, they check in 2 weeks to see what kind of side effects they might be suffering from. And then they have them come back in 6 months, expecting that they're on that same medicine. The data don't support that. The data suggests that when someone's prescribing antidepressant, on average, they're only on antidepressant for 7 weeks. And patients cycle through more than 2 different drugs in the course of the year, if they want retreatment. So this belief set that I put someone on a chronic drug, they stay on that drug chronically, the data just don't support that as a fact. So we'll be able to bring that to bear as well -- as well as again, patient -- patient testimony was talking about being depressed for years, taking zuranolone, being well for the first time in a long time.

Got it. Got it, okay. And you've also mentioned that you started now preparing for a potential launch next year. As you kind of go through that process, what parts of the commercial infrastructure do you think you've already put in place? And what are you learning from prescribers and the community at large as you kind of buildup this?

Well, so before my time, Sage is a commercial stage company, they were able to get the first drug ever approved for PPD, and have a small commercial footprint out there. So some of the basics for us of being commercial, the blocking and tackling, the recording revenue, a lot of that's in place. As we are commercializing zuranolone, there's things we can do now, then obviously, if it's approved, a whole bunch also put in place. What's important is that we and our partner, Biogen, have a very thoughtful approach on our payer strategy. We're leading with proactive value-based agreements, the healthcare provider strategy and then payer activation, payer advocacy strategy as well. So strategies are well in place. We've been communicating the unmet need of depression, making sure people are aware that it's not a well-treated disease with cheap drug. In fact, that's not true, bringing the data out. We are publishing on the health economic front. And the good news is that there's a wave of belief really for the first time, and I think COVID which exacerbated depression is helping with this belief set -- that getting somebody better fast is not only good for them and their family unit, but good for society and good from a health economic overall perspective. And there's a wave of fast-acting-ish drugs being approved and then approaches like esketamine and some of the psychedelic. So we're catching that wave of getting someone better fast and keeping them better is good. Then we'll move to direct-to-consumer, direct-to-physician. And we are heavily building out the digital assets as well for an omnichannel approach. And what we've learned over the last 2 or 3 years more than we've learned the decades before as everybody consumes information differently, some for live meetings, some of Congresses some through their digital platform. So the idea is to think really big about the opportunity, start the right scale and then follow key metrics to scale up with success. So we won't over invest in the beginning. We'll invest properly and then scale with success.

Okay. You mentioned the access piece of all of this. And I know you probably don't want to talk about pricing and too many specifics, but how should people think about what are the right bookends to look at or what are the right analogs to look at to think about what might feed into your pricing decision when the time comes?

Right -- the final decision on price is based on lots of analysis as well as the specifics of the label that we get. So really can't pick your price until you understand exactly what the label will say. So -- and all companies will tell you that you really have to wait until they understand or to pick their final price obviously, these ranges. What I can say is we're leaning in with proactive value-based agreements. And -- if you talk to companies that have done value-based agreements, what they'll tell you is what we're experiencing is it fundamentally changes the dialogue about the unmet need of the disease, how we want to approach it. Because we're willing to share some risk with payers. So what payers are telling us is that the category of depression from a drug category is a small category, it's largely generic. However, depression is a cost is significant because they appreciate that undertreated people develop other comorbidities like cardiovascular disease, diabetes, even depress people -- have a chance of getting infectious diseases as well. So they understand the cost. And as payers and as human beings, they can appreciate that getting someone well quickly, particularly if they had a family experience is important. So the dialogues are going well. We ask them what concerns them because what payers want is they want budget certainty. They don't want to be surprised by numbers. They don't want to be surprised by price, which they didn't plan for, because they can plan for it, they can account for it. So we're having conversation about epidemiologically how many patients they should expect, how many doses per year should, they expect. And rather than the old-fashioned way of saying, let's give you a 30% discount just in case, it's actually no. We're going to give you protections on those things you're worried about, so that you have budget certainty and predictability. So what we're asking for is lack of prior auths, lack of step edits because of the value proposition of zuranolone is getting better in 3 days rather than waiting weeks to get paperwork done. So those conversations are going well. The key is, if a, doc write script, we want that script filled as quickly as possible. That's the value that we're bringing, getting better, best. So we're trying to eliminate all those steps in between. And the conversations are going well. One of the other things that we've said publicly is we're looking to avoid that specialty tier and there's lots of different ways of calculating exactly what that is. But that would be under $10,000 per patient per year. The reason is that once you click into the specialty tier, it's automatic adjudication. You're prompting either a step or a prior off again, will cost that patient's time to get well. So it's important that we think about those parameters as we move into the pricing discussions.

Got it, got it. And you mentioned digital channels a couple of times. When you talk about commercializing zuranolone, what could that look like? And how is that supposed to work with your in-person field force?

Well, we're certainly going to have -- we and Biogen will have people out in the field calling on psych -- just calling on other physician offices that have lots of psych patients. We live in a world with great information. We know where these are. We can also cross-reference insurance companies because some insurance companies will wait 6 months no matter what drug you are to cover the drug. So we understand that. From a digitization perspective, we can hit people on a variety of platforms that they engage with whether it, be phone or they're looking at medical information online to make sure that we're providing the information that's trying to pull from and over -- a large digital presence at the right time when people want it. There'll be some that prefer a kind of digital update rather than a live digital update. And of course, the speaker programs and what used to be dinner programs where people will engage on Zoom like platform and care world's expert talk about the disease and how they think about treating the disease. So it's a person, but it's not show up to a dinner in New York.

Got it, got it. And how big of a sales force do you think you'll need for MDD specifically?

We haven't talked about the size of the sales force. We're doing a commercial spotlight. We'll provide a little bit more color on the parameters we do the spotlight in the fall. But what we've said is that it's going to be a fit-for-purpose sales force. The days of multi-thousand person sales forces just calling on doors are over. They don't really necessarily lead to success if you do it only that way. So we're going to use a whole bunch of different metrics to see where we're having traction and success, either patient groups or physician groups and then scale with success.

Okay, got it. I guess shifting gears towards the patient profile that you think is going to be the right patient for zuranolone that something you approved. So based on the data you have in hand based on the KOL feedback you've received. And based on what you're seeing as you try to educate the market now, assuming you get the broad label that you're looking for, what are the right -- what are the suitable patient segments you think that are the best possible candidates for zuranolone?

Yes. So I think the -- I'll talk about the patient types. The prescribing behavior will very much depend on how familiar a doc or a healthcare provider is with zuranolone, what real experience they've had. So the first bucket that we've seen are those that have used the drug in our clinical studies. People like Greg Mattingly of St. Louis, he did a webcast with somebody a while ago, where he said that zuranolone is the first product he's going to reach for. Why should I wait weeks to get better, when I can get someone better for 2 or 3 days. And I won't put them on anything else because why complicate this, if I can get them better in 2 weeks and whether he or she patients that is treated for years, for the first time being well off drug, which is quite remarkable. So there's a middle bucket of people very familiar with the data who may not be as comfortable as the Dr. Matting's of the world until they've seen and they've realized. They might put a patient on zuranolone on top of a stable antidepressant or can commonly prescribe one. And then there's a whole bunch of people which we have yet to educate that -- have a variety of prescribing patterns. The low-hanging fruit, if you will, from the patient type is the patient that comes into the office is on an antidepressant not doing well. The choice today is, okay, I'm going to try something else. I'm going -- we knew of that I mean and SNRI works slightly differently, but hang in there. If you experience any issues, call me, I could do different prescriptions, but you got to trust this drug for 6 to 8 weeks. That's the choice they have today. That patient walks in with -- in the world of zuranolone, there's this new drug, you feel better in 2, 3 days let me try this. So that's sort of the -- they're on an antidepressant, but they're not well. They're still depressed. There are people that are doing well for years, but have some kind of breakthrough. They have death in the family, they lose their jobs, they move locations, COVID hit. That's another group of people that will be a big candidate because they're doing well, so adding another antidepressant and waiting 6 to 8 weeks with potentially stigmatizing side effects doesn't make a lot of sense. Then there's categories of the elderly, where they're already on polypharmacy and rather than add another chronic treatment, if you can get them better. So the other side, there's young adults. You take -- your daughter is a sophomore in college and is depressed because it's a rough patch. Do you want her to be unwell for 6 weeks or 8 weeks, maybe lose a semester, maybe the entire academic career or you want to back in class in 2 or 3 days. So those are the kind of categories that we think that physicians, when we talk about these patient types, the light bulbs go off.

Got it. Got it. Okay. So there was a recent therapy approved for AdCom for MDD. Does that approval change your view on the commercial potential for -- or positioning of zuranolone at all?

It doesn't. And I applaud AdCom for getting the drug approved. More options for patients are great. What AdCom to me signifies is yet another drug in the wave of getting patients better fast is good. They claim that patients are better in 1 to 2 weeks, which is fantastic, rather than waiting 6 to 8 weeks to get better. And we've already talked about this. The world of whether it's esketamine or psychedelic, get someone better fast without chronic treatment. But they had to get better fast. So I think it highlights a profile like zuranolone, which has been consistent now in 4,000 patients were more where after 2 evening doses of zuranolone, you feel better, take it for 2 weeks, get off drug, not wean off drug, stop drug and you feel better for long periods of time. The short line data, the largest natural study run is a good support of what this drug could do. That to me represents how the drug probably will behave in the real world, which is kind of an 80% response rate. And for those that responded, the majority didn't need another 2 weeks of drug for the full calendar year that we followed them, 80% required only 1 or 2-week course of treatment in the course of the year. So if you ask anybody living with depression, if they'd rather have 2 or 4 weeks of drug versus 365 days of drug, the answer is pretty self-evident.

Got it. And the -- it sounds like you're saying the number of courses of treatment per year. What you saw in SHORELINE, do you think that's pretty transferable to what you could see in the real world?

Yes, we believe that the SHORELINE -- well, SHORELINE is a real-world evidence kind of study, and we're going to use it as such. And it is how people transfer so what did SHORELINE tell us? SHORELINE told us that for those people that took zuranolone, they were followed up every other week and had to fill a survey if they were doing well. So if there was a likability or a rebound effect, you see people on drug very, very quickly. The fact that for those that responded, the median time to retreatment was 259 days. It suggested that they had a triggering event. They had -- struggled with a depressive episode. They got better and they stayed better likely to another depressed episode rather than the depression is slowly creeping back. And PPD is another great evidence of that, which is the moms that took zuranolone that responded did need another course of therapy. They got well after their baby stayed well for a long period of time. So that's the body of evidence. The other exciting part of the emerging zuranolone story, and we've talked about this, is that if you ask physicians or any healthcare provider the hardest to treat patient population. They'll talk about those with depression with other comorbidities like elevated anxiety or like inability to sleep. They automatically become part polypharmacy patients. And while one might suggest, well, it's all generic, it's easy. It's actually not easy to figure out the dose, the regimen. And a lot of physician time is spent trying to analyze the right drug sequence or drug cocktail for a patient rather than I can get you better with 1 pill.

Right, okay. Let me ask you one last question on zuranolone and then we'll switch over to 718. In terms of data-related news flow, I guess, over the next 12 months anything to keep in mind for zuranolone?

So we -- have a very rich set of data. So the SHORELINE 259 days came out of the Congress. We've got the site Congress coming up in a couple of weeks in New Orleans. And then ECN in October and ACN at the end of the year, there'll be different cuts of data that various investigators will present showing the richness of zuranolone -- talking about the retreatment question, the longevity of retreatment question, some kind of patient exits to really talk about the robustness of the data.

Okay, got it. 718 so with this molecule, you've kind of laid out a pretty broad development program across Huntington's, Parkinson's, Alzheimer's. Just kind of recap for us, what have you seen so far that's given you confidence that that gave you kind of the go signal for these 3 indications?

Yes, so SAGE-718 is a first-in-class NMDA positive LTAC modulator that we designed with the discovery that as people age or suffer from neurological disease, there is a drop in 24S hydroxy-cholesterol. So by designing SAGE-718 and kind of up-regulating NMDA was our hypothesis that, that would lead to cognitive improvement, not stability or slowing decline, but actually cognitive improvement. And what we've seen in healthy volunteers, the ketamine challenge study and then the open-label Huntington's, Alzheimer's and Parkinson's studies is amazing consistency that SAGE-718 improves higher order cognition, executive function, learning and memory without any of the stimulatory things you see with other things people take to enhance their memory. So it's really, as far as I'm aware, the first drug of its kind is being studied for the improvement of cognition. The observation happened in Huntington's patients. So that was a great place to start. Huntington's is an orphan population. So we designed the Phase II program with 178 patient study and to mention, a company with surveyor, which will help us understand if we see a 2-point improvement in -- HD COG, what does that translate to in terms of activity there? Can I make a list, go to the store, buy my stuff, bring it back pretty way and do that consistently time and time again? So that's the richness of the study. The Huntington's program has started 2 placebo-controlled studies very large for orphan disease. Being an orphan being orphan disease, since nothing has been developed to improve cognition we're forging new pathways. So doing that in orphan disease before is the level of conversation with the agencies that we've had that have gone very well. So the agency, both U.S. and Europe is aligned with our approach. Things are sensible obviously, data matter always. And if we have the kind of results for the Huntington's program that we've seen so far, we won't be shy in working with regulators on the fastest path to get SAGE-718 to market in Huntington's. We've initiated the Parkinson's trial, a placebo-controlled trial, and we plan on initiating a largest Alzheimer's trial towards the end of the year. It's likely that because of the patient population in Parkinson's and Alzheimer's, will have to require these Phase IIs up the Phase IIIs. But we'll have already de-risked these Phase IIIs with many -- with several large controlled Phase II studies. So it's incredibly exciting to study a drug that improves cognition. Now the long-term, we're used to, for example, in Alzheimer's studying the Alzheimer's hypothesis, which takes thousands of patients in years because you're studying in theory, a slower decline in cognition. Here, we think we can have a smaller and in a much short period of time because we're studying improvement.

Got it. Going back to Huntington's, you announced that you wanted to -- you plan to run a Phase III safety study?

Correct.

How is that going to -- or how is the data from that study going to get weaved into the dimension and surveyor data? And then how is all of that going to impact kind of your regulatory decisions and the path forward?

Yes, so the -- we're calling a Phase III safety study because developing -- it's a chronic treatment, developing long-term data on a chronic treatment is important, and it will help us grow our end. So it offers us an ability to tell the patients you're taking a risk with us in a placebo-controlled study. If you get the drug for 3 months and you've seen benefit, you can continue to get the drug and you've got placebo, you can roll into a drug arm. So it's really a continuation of the study of Huntington's. And if the studies read out robustly and we get positive signs from the agencies, that will be part of the filing package.

Okay, got it. And then, I guess, same question here that I asked you for zuranolone. Looking over the next year, what is the cadence of news flow for 718?

Well, we certainly -- we'll highlight greater detail on the Parkinson's design. We guided that we plan on starting the Alzheimer's study at the end of the year. So that will be part of the news flow. As these studies get up and running and sites get activated, we see what kind of patient activation we're seeing, we'll provide guidance on when we think the studies will accrue and read out so more to come. And then the data in hand as we present these data at various congresses I think there's a level of excitement out there for getting the drug in people's hands. So there may be other places we go to SAGE-718 as well.

Okay all right. Maybe around 5 minutes left. I just wanted to open it up for questions from the audience, if there are any. Not yet, all right.

You got more questions there?

I do okay. Prepared for the final 5 minutes here so SAGE-324. How is enrollment going in KINETIC 2?

Well, just to take a step back SAGE-324 -- has been designed for movement disorders. It's a GABA PAM, but meant for chronic treatment, being studied in essential tremor. And we've also said earlier that we're looking at different epilepsies as well. So following the positive KINETIC study, which demonstrated a statistically significant reduction in tremor amplitude linked with activities of daily living, which is good to see, we initiated KINETIC 2. KINETIC 2 is meant to demonstrate a dose that will be given at night for chronic treatment. We're studying 15, 30 and then dose escalation to 60 to understand the benefit risk of the various doses. So KINETIC is up and running. We're in the process of initiating sites and getting it going. And we'll provide -- once we initiated enough sites and we see the patient, who knows, we'll provide better guidance on that in the months to come.

Got it, got it. What do you ideally want to see from 324?

So what we're looking for is a 30% to 50% reduction in tremor amplitude accompanied with that link to improvement of activities of daily living. And just to put that in perspective, if you have a slight tremor, even a small amplitude thing, you can't feed yourself, you can't put your button. So being able to move from -- you can't put a spoon to mouth, so you can't put a spoon in mouth, button my buttons or some younger people can't tech. So being able to actually do the things you want to do by yourself without support, maintaining independence. So we won't see the actual measures there between 30% and 50%, but then that translates to, "Okay, I can now do things I couldn't do before. I could do them better." And then a dose that has a kind of benefit risk that we believe patients will take every night every night chronically. So and that we'll exit KINETIC 2 with.

Okay, understood. Got some broader question on the pipeline. So beyond 718, beyond 324, what additional programs are there that there's a good amount of excitement about internally in Sage?

Yes. So what -- the approach we've used at Sage to talk the pictures we've taken -- we know what the lead programs are doing and how they behave. There are significant other neurological brain health issues. So we designed pharmacologically a drug to have certain attributes, a slower onset, a faster onset, 689, which we can give subcu or intramuscularly and then start matching that with indications, potential indications. We bring the drug into the clinic first for safety. And then once we confer a little safety risk into a specific disease indication, we look for big effect size. So we want to see kind of large effects with any of our medicines before we take them forward for a very specific indication. And what we try to do is create significant optionality between the indications that we're looking at and the study of the drug. So it's possible in our pipeline to study a drug in a certain area, see good results, but have a different indication now that we've got a dose and frequency to switch to a, different indications, providing as much kind of flexibility as we can.

Okay, understood. Maybe one final housekeeping question then your cash balance, current runway, thinking around that.

Yes. We're in great shape from a balance sheet perspective. As I said, I think we have the pipeline, the team, the balance sheet to be a top-tier biopharmaceutical company demonstrate the leader -- being the leader in brain health. We'll finish the year $1.3 billion, and that gives us a runway to really execute on the 3 lead programs I talked about and then bringing multiple programs to the clinic in rapid order. The large picture is we want to be physicians to launch a new drug or a new indication every 12 to 24 months starting in 2023. We want to grow -- we won't be that kind of company that grows through innovation, grow through adding patients and adding programs not through price increases.

Okay. All right, understood. Final call for questions. All right. If not, we'll close out. Thanks for your time. I appreciate it.

Thank you very much. Appreciate it.