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

Good afternoon. Thanks for taking time to sit it in, in our next session here at the Bank of America Healthcare Conference. I'm Tazeen Ahmad. I'm one of the senior SMID biotech analysts here. It's my pleasure to have our next presenting company here with me, Sage Therapeutics. There are several members from the management team on stage with me. So I'll introduce. Just to my left, Kimi Iguchi, who is, of course, CFO of the company. And then, Kimi, you may introduce your other colleagues.

Chris Benecchi, Chief Business Officer; and Al Robichaud, Chief Scientific Officer.

So thank you all for making the trip out west. We really appreciate it. So we usually ask all companies to do a 2-minute elevator pitch. And so there's a lot going on at Sage. Well I'm sure it's going to be hard to do that, but you can just tell us what the most important things about the company are, and we'll delve into the details right after.

Super. Well, thanks so much for having us, Tazeen. We really appreciate it. We're thrilled to be here. And it's an exciting year for Sage. For those of you who aren't familiar with Sage, Sage is a company that's focused in the area of brain health disorders. And we do that with a sense of urgency. There's a lot going on out there, and we know it's time to make a difference. So we're working hard at that. And we've made a lot of progress. And so let me hit the highlights on where we are currently. And I'll start with probably what's been in the spotlight the most, which is our zuranolone program, which is a program in depression for MDD and PPD. Earlier this year, we were fortunate to get our NDA accepted by the FDA, and that's with priority review. And we're looking forward to a PDUFA date of August 5. And so the team is off and running on the commercialization efforts. And I'm sure Chris will talk a lot about that today. And so that's a big component of what we do, and we're doing that together with Biogen, in our strategic collaboration with Biogen. In addition to that, though, we have a tremendous amount going on in the pipeline itself. We have been spending a lot of time and investment in the earlier parts of the pipeline, both early clinical and even into the discovery stages. So there's a tremendous amount of assets that you'll see, and we'll be talking about, hopefully, today as well. And then finally, we do that with a really strong finance position. Happy to say, we have a strong balance sheet. And that really gives us the flexibility to continue to pursue and work on our commercialization efforts for zuranolone as well as to accelerate the work on the pipeline. We have an experienced team. We have a great portfolio. We have a strong balance sheet, and we have a lot of catalysts that we are looking forward to over the rest of the year and into 2024. So looking forward to talking about it.

Okay. Great. So now let's talk about zuranolone, as that's the nearest term update. What's your view on not getting an AdCom? So I think people have been speculating on whether or not an advisory committee meeting would be needed. But you applied for two indications. You've got the priority review and updated data right at the beginning that there would be no need for an AdCom. Was that a surprise to you? Or do you think that, that's just a function of FDA just trying to streamline things?

Maybe I can take that, Tazeen. Thank you. As we had indicated in the past, we were agnostic to it. I didn't know if the FDA would want one or not. It is not a totally unprecedented mechanism. There is -- ZULRESSO is the same mechanism for this compound. So it is a new oral therapy for this area and certainly, the first time in depression. And we look at it as sort of an affirmation that the data set that we've compiled and submitted to the agency has given them a sufficient data in order for them to review the drug and make a determination of whether not the drug should be approved or not. So we -- to some point, we would have looked forward to it because it gave us an opportunity to really dive into specifics around the drug. But at the same time, it is an enormous lift for the team to be prepared for that. And if the agency would want an AdCom, we would have been ready for it, but we believe that they have a data set necessary to make the determination.

Okay. So now following the PDUFA, assuming that you get approved, there is the 3-month scheduling period. Does it ever take less than 3 months to fix the schedule?

It historically does not. It used to take a lot more than 3 months, but I think they passed or there is a law that requires to be done in 90 days. And it was exactly 90 days, I believe with ZULRESSO, and I think it typically is 3 months.

And so what does that mean when you get scheduled for people who may not understand what the implications of that are, if there are any implications?

Many drugs of this type are scheduled. In fact, all benzodiazepines, all GABA modulators [indiscernible] drugs. So I think we would expect the drug to be scheduled. And it doesn't really put any limitation to us to the use the way that we intend to use the drug. So we don't see it as being any hindrance to the uptake or the utilization of zuranolone.

Yes. I think as an add to that, from a commercial perspective, what we see in this treating population is that they have experience using scheduled medication. Approximately 70 million or so prescriptions comes from this physician universe that's treating both MDD and PPD. So again, very familiar with anxiolytics and sleep aid, so quite common.

And I guess how are your discussions with payers going regarding that value-based assessment? Is it you? Is it Biogen? Is it both of you? Who's taking the lead in doing all of that?

Yes. So right now, it's both Sage and Biogen. And it has been for the better part of the last 2 years. I've personally been involved over the last 18 months, engaged in these conversations. And VBA conversations aren't the first conversation you have. The very first conversation at subs you have focus on things unmet need in MDD and PPD. And we find ourselves in conversations with payers, where there's alignment that in MDD and PPD, there is significant unmet need and the need for novel therapies to fundamentally change the way that those conditions are treated. We've also had the opportunity to present the LANDSCAPE and NEST data in both MDD and PPD to really demonstrate the appropriateness of this medication for the patients and what it has to offer. Subsequently then, it leads to the conversations around proactive value-based agreements, where, in effect, what we're doing when we're having those conversations is aligning with payers around what it's going to take to make sure that this medication is available to physicians in an easy way and for patients in an affordable way. And essentially, what is going to require to eliminate or to essentially impact onerous prior authorizations and step edits, which oftentimes can fundamentally undo where a product is used. In this case, what we hear from those interactions is that there's a piece of zuranolone in MDD as a first-line medication and in PPD, as a first line -- first add or first switch medication. And yet, for some patients, it's very appropriate for those that are treatment naive. So very encouraged by those conversations at this point.

Yes. So Tazeen, just to add on to that. So they understand -- payers understand the unmet need. And what we're trying to do here is really give them some budget predictability, right? So we want to share the risk with them. And so that's why we're thinking about mechanisms, like obvious agreements, to help them to have more budget predictability.

Yes. So how do you do that? How do you provide them with that predictability?

Can you explain that?

Yes. So in a sense, what effectively you do is you present your data. And in this case here, what we're talking about is helping them understand with respect to the access strategy and pricing, what it is we're going to be thinking about at the time of launch, and effectively giving them the opportunity to understand that with what we've seen clinically, particularly from the SHORELINE Study, where we have seen that -- of those who responded, 55% required just one 2-week course of therapy, an additional 25% required a second 2-week course of therapy. But 80% of the patients who've actually experienced zuranolone in that study would effectively require just one or two 2-week courses of therapy. That gives payers the opportunity to truly understand what they could expect, in real-world setting, if zuranolone as approved in and around utilization. And then you're able to come in and have conversations around pricing so that they effectively can triangulate what the cost of the plan is going to be. And thus, we're able to have deeper conversations about prior authorizations and step outs and what's required, again, to make the product available as we would like it to be if zuranolone is approved, first line for PPD, first add, first switch MDD.

Okay. So I think people are trying to figure out how a paradigm shift would happen because you're looking to treat something that's always been looked at as a chronic condition with acute treatment. And so we have done our own work with Dr. [ Chok ] on that particular topic, but I'd love to hear what, with your own word, Biogen's work is telling you? Biogen obviously is excited about this drug. They do mention it all the time in their prepared remarks and presentation. But one in particular makes Biogen excited that this market opportunity is one that could see success out the gate, just given that the require dose institute this parent shift?

Yes. So I don't want to speak for Biogen. We work closely and we're aligned on the strategy as we go forward. I think there's a significant amount of excitement that we see from clinicians as we go out and we talk to them around value proposition of zuranolone and what it could mean for those that are living with MDD and PPD and when we talk about the potential use cases. So what we've done is able to take those insights from physician conversations, whether one-on-one or conferences, and really use it to shape our go-to-market strategy. And I would say our launch strategy is predicated on three tenets. The first is really make sure that the launch is around that we are clear and compelling about where this medication can be used and anchor it squarely to the data that we have from LANDSCAPE and NEST. So that they understand the patient types this can be used and what the experience could look like and what patients really want from a new medication. I think the second tenet is really focused on driving early physician experience with the medication and using not to the ability to get covered from payers, but a number of different tools that are at our disposal that give them early experience and physicians an opportunity to try products as well as patients to experience the product affordably using those tools to drive early experience, to see how the medication can work so that they gain confidence and trust in the medication much of our investigators have having had that experience. And I think the last piece is something that you asked about earlier, proactive value-based agreements, really collaborating with payers to provide productivity and the budget certainty that they're looking for, so that when we ask for this medication to be first line for PPD and first add or first switch for MDD, they've written along with us in the journey and they're aligned if zuranolone is approved.

Okay. So what would be the ideal initial population that would be put on this drug?

Yes. So I think there are a number of patients that could benefit from this. I think taking a step back, when you think about dynamic patients in the market, patients that are actually seeking a treatment change, we're talking about 6.5 million adults in the U.S. on an annual basis that are looking for either their first therapy or new therapy. And of that 6.5 million, the vast majority are looking for a switch or an add-on therapy. They're not necessarily treatment naive. I think in that patient population, we talked about the patients that are adherent challenged or tolerability challenged, who need to switch from one medication to the other because, quite frankly, there may be side effects or broader tolerability issues that they're suffering from that they need a new medication. We talked about the patient with MDD with elevated anxiety, which represents more than 50% of the population out there that have a major depressive disorder, who need a new medication like zuranolone, which, in our clinical study has demonstrated an ability to work in those both with or without elevated anxiety. And then I think there are a number of other patients that I would categorize as maybe they're on a background ADT, but they're having a breakthrough episode. Perhaps there's been a death of a loved one or a loss of a job. They need something to add on to their existing therapy to get them back to the place where they really want to be. So I think those are really the use cases. And I'd be remiss if I didn't say that there are treatment-naive patients out there, like the treatment-naive young adults or the college students that would really benefit from a product like zuranolone that, in clinical studies, has demonstrated repetitive onset and durability of effect over time without stigmatizing side effects. I think those are really the use cases that we'll be focused on at launch with Biogen.

And do you think payers would allow it to be used in that target population without having to cycle through other therapies first?

So I think in PPD, clearly, which we haven't discussed a lot yet, I think that's the first-line therapy, as I mentioned earlier. I think in MDD, from the nature of the conversation, and the fact that payers appreciate that the patient populations that I've talked about have high unmet need, that they're not doing a particularly good job with those patients because they offer a certain degree of complexity. Yes, I think there is an opportunity for us to really pursue first add or first switch in MDD for those patients.

Okay. So what is first switch mean? How long would a patient -- does it matter, I guess, per payer, would a patient need to be on another line of therapy for less amount of time?

Yes. Typically, in the payer landscape, there's a look-back period that's a part of contracts. So again, to be negotiated in the contracts, it could be anywhere from 6 to 9 months, up to 18 months that a patient would have had to have been on a prior experience. Oftentimes, the look-back period, with respect to utilization, it's a mechanistic review. It's in the data. So there's not an extra step necessarily required, but effectively, it's how the patient is characterized when they're looking for a new therapy.

Okay. Let's talk about PPD for a few minutes. It's a smaller population, obviously, than MDD. But how are you thinking about dollar-wise like a range of how big it could be?

Yes. So we haven't communicated the size of the opportunity, but what I will say is PPD is a devastating condition. And in the same amount of time, over the last 70 or so years, there have been dozens of medications for MDD, and there is not one oral medication currently available for PPD. So the time is now for something different, something to change. And that's why I think we, as an organization, along with Biogen, are so excited about the opportunity to deliver something for the first time, an oral formulation that can help so many moms and their children and their families, which unmanaged PPD can have true generational impact. There's 500,000-or-so moms that suffer with PPD at this point. So we know that given the nature of PPD and the opportunity that we could deliver zuranolone. If approved, we can effectively profound percentage of those patients.

And would you say that PPD symptoms are recognized on time, while, let's say, mom might still be in a hospital? Or does it need additional education for the obstetrician to pay more attention to the details and help diagnose these patients quicker?

Yes. I think the answer to the question is that it's actually both. I think there's an opportunity to improve screening and diagnosis as well as treatment. And I think that's why it's so exciting for an organization like Sage that has a heritage in PPD with ZULRESSO, where we have actually learned so much about impacting the treating community, referral patterns within PPD, how to engage with patient organizations and patients, specifically in payers. So I think a big part of our work is going to have to be working with physicians who are seeing these moms oftentimes in sort of that perineal postpartum window to improve the nature of diagnosis and treatment. 50% of women who are actually undiagnosed have not had a screening for PPD. So think about the good that can be done, helping physicians understand the importance of not only screening diagnosing, but then actually treating. Because of those that are diagnosed, only 25% of those that are screened and diagnosed actually go on to treatment. So there's a significant opportunity for us to change the way PPD is treated.

What do you think that would have been improved with ZULRESSO?

Sorry. Could you...

Why wouldn't that have improved with ZULRESSO becoming available?

Yes. So we've learned a lot from ZULRESSO experience. ZULRESSO is not an oral formulation. It's administered in a hospital setting for moms that are suffering with postpartum depression, most often severe postpartum depression. We've seen the impact that treatment can really have and the importance in the urgency to treat moms that are living with PPD. And I think given that we have an oral formulation with zuranolone, that's why we're so excited. As we can take something that we've learned from the ZULRESSO experience. And again, apply it with a medication that works fundamentally similarly, but with an oral formulation that if the data that we've seen in clinical studies holds up and make that profound difference.

Okay. And then lastly, let's talk about pricing. How should we think about PPD versus MDD pricing?

Yes. So it's early to talk specifically about the pricing itself, more at the time of approval. But what I can say is it's important that when we think about pricing that we don't differentially price the mom with PPD or somebody that's living with MDD. So we're thinking about it on a course of care or cost per 14-day basis. In the past, what we've said is we want to stay under the specialty tier of $10,000 per year or less because we know that when you hit the specialty tier, it makes it hard for physicians to prescribe and for patients to get because there maybe onerous prior authorizations or step edits, which is why it's so important when we think about the 2-week course and the annual opportunity to deliver care to patients with both MDD and PPD that we think about in that sense we stay under that $10,000 per year specialty tier.

Okay. So let's maybe move on to some of the other pipeline assets in the time that we have left. 718, you're looking at it in multiple different indications. So maybe can we just talk about mechanistically why you're excited about 718? And how you've chosen ADT, Huntington as some of the things to look at?

Sure. I'd love to talk a little bit about. We're very excited about 718 program. As you said, 718 -- SAGE-718 is the first developed along an NMDA positive allosteric modulator for treatment of cognitive dysfunction associated with a number of neurodegenerative diseases. We currently have clinical trials going in Huntington's disease. Primarily, we have 3 trials going there right now, in addition to a trial going on in Parkinson's disease and one going on in Alzheimer's. We picked those diseases and done open-label studies for each one of those and demonstrated the benefit that 718 would have to cognitive function and execute functioning in those patient populations. We very nicely, I think, demonstrated that we see similar effects in those three different areas, which is very important to us because they're all impacting neck function and brain functioning. So we see the improvement in the cognitive function with those compounds. We've chosen to look specifically Huntington's disease right now because there's an orphan indication, which allows us to [ mutate ] a molecule for relatively quickly. And it is somewhat of a patient-defined population. We work closely with [ CURESZ ] Foundation to look for a biomarker type approach to treating that disease. And what we saw was a deficit in a particular [ dodge ] molecule called 24-hydroxycholesterol. And that molecule is somewhat in deficit in some Huntington's disease patients. And we're using that as an indication that these patients have a glutamatergic dysfunction. And we've seen -- as I said, we've seen some improvements in that. And now we have 3 Phase II placebo-controlled trials going on in Huntington's disease to look at the effects of 718 in that patient population.

Yes. But all 3 are potentially large indications, but all 3 historically have been difficult to drug. Alzheimer's is a little bit of an anomaly. Now there's more traction being built. But let's talk about Huntington's, and there are several companies trying to develop drugs for Huntington's. What is particularly giving you confidence that this mechanism would be well served in that particular population?

Yes. So I alluded to it earlier, I mean, we worked very closely with the [ CURESZ ] Foundation to identify that there is a deficit in those patients. That molecule that I mentioned earlier, 24-hydroxycholesterol, is a very post and natural endogenous MDA receptor modulator. And 718, basically, improves that function in patients who have that deficit. And we found in certain Huntington's disease patient populations that have early onset cognitive dysfunction, we saw a deficit in a 24-hydroxycholesterol levels in a patient population. So looking at a population where we think there's a deficit that the drug 718 -- SAGE-718 would pretty closely matches function. So that's why we chose that as a first indication to go into.

And did you say that there might be data this year or not?

We're recruiting this year. We should -- we're reporting data next year.

Yes, we expect to see -- start seeing data in 2024. As we get more experience with recruitment, we might be to firm that up.

Okay. Now what type of data should we expect to see next year?

So the 3 different trials are going on a lot of different, different aspects of the trial. One is, first of all, looking at the efficacy and somewhat traditional measures of cognitive function. That would be the -- I'm going to get this wrong, the DIMENSION Study. And then the SURVEYOR study is looking at what the effects of SAGE-718 has on the real-world effects of that sort of, for example, so what of improving your cognition, how does that translate into something that actually makes a difference in my life? So they're looking at endpoints that are -- there living count improves, how you can do certain things. How do you know how to put a shopping list together and then you go to the store and choose those items and then get to the checkout and get back in your car and bring those items home with you. That sort of executive connection of docs to do a task. That's not just remembering a number or remembering an address. It's a number of different things. And so that study is looking at that to see even though we've improved cognitive performance, how does that translate into improvements in your active daily living exercises? The third one is more around safety, around long term effects of 718. What is the date to that drug trial look like? Let's take that drug with -- in a slightly longer trial.

Okay. Now -- for Parkinson's, that's also a place where I think a lot of different mechanisms are being pursued. Are you looking for disease modification? Or are you looking for improvement in symptoms?

So I think we -- this is not a disease modifying as most people understand disease modifying, this is a disease course modifier. We believe that improving executive function through improvement of synaptic signaling in the brain and overall circuit function will ultimately have improvements on the course of the disease and how quickly the disease or how less quickly the disease would advance in those patients. And that's what we're looking for at this moment.

And so when would the -- would that all have data next year, you said?

I think as Kimi indicated. As we start to recruit, we get a better understanding of how it's going to take us to finish out that trial and get results.

Okay. And so for that, what would be good data?

I think similar that what we've seen to the open-label studies as well as looking for improvements in cognitive function in early -- in patients that were suffering from early cognitive deficits in that disease.

So any improvement in cognitive function is good?

There are -- for each one of the diseases, there are separate cognitive scales that are utilized at each one of them. And I'm not a clinical person necessarily, so I would be remiss naming those are probably get them wrong. But we're looking at the traditional batteries, just traditional tests, as well as some other tests to expand our understanding of cognitive performance of the patient population.

Okay. And lastly on Alzheimer's, what are you looking to show there?

So think improvement cause of function in early onset Alzheimer's disease in patients who experience in cognitive deficits associated with Alzheimer's. As you indicated earlier, much larger disease patient population, much more heterogeneous patient population than say, Huntington's or Parkinson's. But surely, a definite need in the number of people or impacted by Alzheimer's diseases in their family.

Why early onset as opposed to the regenerative?

I apologize, maybe I didn't get exactly right. I think we're looking for improvement of cognitive function which you typically see in early stages of that disease.

Early stage. Okay. I mean there are companies doing early onsets.

Yes, I misspoke there.

Yes. Okay. So I guess all those 3 that sits here today, it's hard to say, but if you were to venture, I guess, which do you think mechanistically is most likely to work?

I think we -- the reason we chose the emphasis on Huntington's disease is because of the patient defined -- the genetically defined patient population. And what we hope is treating a patient population that we know has a deficit in glutamatergic function to their disease. As we've done with all of our programs, we're looking to certainly derisk them to try and get a signal early on in a program that convinced us to continue to invest. As I mentioned earlier, we have positive results in all 3 of those indications, albeit open-label studies. But we're looking forward now to demonstrate that those effects carry over to a placebo-controlled file. It's kind of hard to say one might be better than the other. We believe that in all 3 of those diseases, network function is impacted. And SAGE-718 has the ability to improve network function and to restore the homeostasis between the glutamatergic function in the brain. And in all 3 of the diseases, that's a deficit because of the neurodegeneration.

Okay. And strategically, Tazeen, Huntington's disease could be a good opportunity for us to go global if you think about a smaller indication and going on a country-by-country basis. So it has a strategic compact that way.

So just in terms of strategy, these are large indications as we said we discussed. Would you want to keep full rates to each of these?

Yes. That's the plan. That's the plan.

Okay. And so in terms of your current cash balance, how far does that take you in terms of developing these -- all of these programs that we just talked about?

Yes. So we have a strong balance. As I said earlier, we had $1.1 billion on the balance sheet at the end of the quarter. And so what we've talked about is we have runway into 2025 when think about the collaboration funding with Biogen and potential product revenues. That also includes the potential to earn milestones from Biogen on first commercial sale of MDD and PPD of $225 million. So we have a strong balance sheet opportunity for additional funding from Biogen through the collaboration to continue to grow and work on the commercialization efforts for zuranolone, if approved, but also to continue to expand the pipeline.

And maybe, Kimi, just to remind us, what's the maximum in terms of payments you could receive from Biogen?

On the milestone side, there's a total potential of $1.6 billion in milestones, and that's across both zuranolone and SAGE-324, and that's across multiple indications.

Okay. So let's quickly talk about 324 before we run out of time. So one thing that you're looking at, I think, is ET. What should be your expectation there?

So I think the better understanding of the dose and the dose regimen in the longer-term duration of the study as we did from the first that's a KINETIC 1, looked at a number of different doses for a shorter amount of time, KINETIC 2 is the largest study to investigate those doses, dose in a way that we would more appropriately dose the patient population as it's intended. I think one that dose was in the morning so that we could monitor their sense of tremor. Several hours after administration, this is going to be dosed in a more realized situation where we dose at nighttime once a day, the molecule -- once a day oral dose for treatment of central tremor. And we're looking at its impact on a number of different measurements of people's tremor who suffered from that disease.

So what population within essential tremor do you think this would be most appropriate for?

These are significantly large patient populations that suffers from essential tremor right now, and it's been a velocity of new medicines in that area for decades. So I think...

Would it be the whole population?

I would -- I think it's pretty appropriate for the large population. Their choices are very slim at this point right now.

Yes. What are they on to right now?

[ Perpetual ], and I think there's a couple of off-label uses for essential tremor. But side effect profile is significant for that medication. And 324 is a pretty exquisite side effect profile as to zuranolone, we don't see a lot going on there.

Yes. I mean, a couple of other companies that we look at practice and -- Neurocrine, for example, recently have had disappointments, frankly, in ET. Relative to some of these other programs that we've talked about, where would you read this on a scale of likely to work?

A different mechanism. I mean we were somewhat disappointed. It would be nice to see some effects because there are also a few choices for patients. But those are ion channel modulators, and SAGE-324 is a GABA-positive allosteric modulator. And we believe that it has overall effects on a larger brain circuit than with the ion channel modulators. So it's kind of hard to draw a connection between those two modalities.

Okay. With that, we're just about out of time. So we'll stop here, but there's a lot going on at the company, obviously. We'll be talking to you guys, I'm sure, in the next several months to get the next update from each of these programs. So thank you for making the trip out here. Really appreciate it. Thanks, everybody, for joining.

Thank you.

Thank you.

Thank you, Tazeen.