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

Okay. Let's go ahead and get started. Welcome, everyone. This is the fireside chat with Sage Therapeutics. My name is Vikram Purohit, I'm one of the biotech analysts with Morgan Stanley Research. Before we get started, I am going to let you know of a disclosure for all important disclosures, please see the Morgan Stanley website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to your sales representative. With that, happy to have with me Barry Greene from stage. Barry, thanks for joining us.

Yes, Vikram, I really appreciate being here. I thank the organizers of Morgan Stanley for having us. Great to be here in New York with you.

Great. Barry, we have quite a few items to talk about, but maybe the best thing to do is to start with some opening remarks from your side on some of the key milestone inflection points that you think Sage has kind of gone through year-to-date, and we can go into specifics from there.

Yes, Vikram obviously. I've to in -- just to sure I will also be making forward-looking statements and you got to look at our website now yours, okay? Look, it's a really exciting time for us at Sage. We're really excited to launch Zurzuvae for PPD. As we've said, we'll have Zurzuvae available shortly after DEA scheduling some kind of end of the year, fourth quarter, and we'll talk more about it, but we're really excited by the opportunity to help lots of women suffering from PPD and really an opportunity to make a brand-new market that hasn't existed before in PPD. And then we have a very catalyst-rich season next year. We have SAGE-718, our wholly owned NMDA positive allosteric modulator that we're studying in cognition in neurodegenerative diseases. And we'll have all the Alzheimer's, Huntington Parkinson's readout next year. We'll try to provide a little bit more clarity on early, mid or late but right now, we have those reading out next year. We also have SAGE-324, our chronic GABAA PAM that we're developing for movement disorders, starting with essential tremor. The KINETIC 2 trial will also read out next year. Now you also know that given the CRL we received, Sage has restructured ourselves so that we're rightsized now to take advantage of their Zurzuvae launch in PPD and to create significant value from here by prosecuting the rest of our pipeline.

Great. Maybe the first topic, just to address it head on is MDD. Have you received any feedback from the agency on their thinking their rationale behind their decision in that indication?

Yes. What I can say is my advice is to be thinking about Zurzuvae and Sage as PPD only. If MDD comes back into the picture anytime in the future, that's kind of a high-class problem to have. But we have sized ourselves and spending ourselves to be PPD only. So that's our thought process. What we can say on the MDD front is we received the CRL. We're going through what it says, and we plan on meeting with the agency to talk through the rationale for the CRL and see if there's next steps after that. But right now, we're really solely focused on PPD. And I advise everybody to be PPD-focused.

Got it. Okay. So in that vein then, what are some of the key kind of prelaunch activities currently underway with yourself in?

Yes. So we're working on the overall launch strategy and plan. Obviously, this is a scenario we worked out, so there's some good work being done. Strategically, in philosophically, we're thinking that this is a really big opportunity, but we're going to start small and be prepared to scale fast. This is the kind of launch that we want to get the capitalization be the launch right, but not overcapitalize the launch. And as we see pockets of success, we'll increase spending in people on those pockets of success. Anytime you're building a brand-new market that doesn't really exist and PP doesn't really exist, we think that's the right way to go. And the team is working on the details. We'll launch, obviously, with a very broad digitization omnichannel approach to reach broad audiences. The health care providers, we're looking to -- are not only physicians but nurse practicers and PAs that are OB/GYN related, psych-related, and some of the larger primary care offices. We are thrilled that when Zurzuvae got approved, the media attention was dramatic and extremely positive. I think everybody saw good morning America every morning, CNN every night. I've got a friend of mine who I've known for every, don't know if he knows what I do, but he called me and said, "I saw you in the Washington Post on the cover. So it really received attention. I think that media attention was not by mistake, and that media will continue to be orchestrated. So we're going to have really good tailwinds behind us on the health care provider, patient patient advocate media front as well as policy. What's going on in most states in the United States right now are maternal mental health bills that really pay attention to what's been underserved before maternal mental health. We're really happy to be part of the new solution set there.

Got it. Okay. And remind us, how are the responsibilities currently split between yourself and Biogen?

Yes. In the United States, the partnership with Biogen is a 50-50 relationship, so a joint decision making. Now exactly what people we deploy and who does what. We're still working on the details there, but it's a 50-50 partnership.

Understood. Okay. And then based on the label you received for Zurzuvae, how do you think about the immediate addressable population within PPD.

Well, the dynamic in PPD right now is epidemiologically, and this is a conservative thinking. But epidemiologically, 1 and 8 live births has resulted in a depressive episode PPD. That's about 0.5 million women in the United States. Of those 0.5 million women, about half are diagnosed and then less than half of those are treated. So about 100,000 women get treated per year with PPD. A significant number of them unfortunately stay in a state of being unwell. So they may be a little bit better on necessaries a couple of months, but they're not yet well. And the consequence of a mom not being well is not only devastating for her, but the entire family, including that baby, which is not bonding with and that could have generational impact. So we're going after PPD. If a mom's got PPD, she deserves to be treated.

Understood. Any best practices, lessons learned from the experience with ZULRESSO when you think about devising the commercial strategy for Zurzuvae?

Yes, we obviously know a lot about PPD. And the challenge with ZULRESSO is one of access to an infusion site and then the REMS program. So we don't have infusion sites with a REMS program. The axis here should be pretty straightforward. We understand the OB/GYNs that are interested in PPD, even though the solution sets today are challenging, Zurzuvae that changes dramatically. We also understand the psychiatrist interested in PPD and some of the larger primary care type offices are interested. So we live in a world of very good information. So we know where to start. The other important part of PPD are the referral networks, which we've understand it and mapped out. And some of the larger institutions that are forming on mental health clinics or chains of clinics that are forming. So by understanding where to go and where the patient flows, which we know, we should have a good uptake and understanding of Zurzuvae and PPD.

Understood. Okay. Now walk us through the time lines here for DEA scheduling, disclosing the price, getting product actually available to patients, how long is that all going to take? And what are some of the key steps there.

Right. So when we got the news from the FDA on August 4, we announced a couple of hours later that Zurzuva would be commercially available shortly after DEA scheduling. So fourth quarter. Typically, the DEA takes all of the 90 days they've been permitted to take before scheduling. We believe that Zurzuva will be scheduled for a drug, which is what we've planned for. It really has an impact on the supply chain more than anything. And that kind of commercial available will be there by the end of the year, and we'll be in full launch mode into next year. Now it's important to understand the kind of the year 1 dynamic of a make the market kind of launched particularly this one. There are a number of insurance companies that will cover ZurzuvaE right away. But we all know that there are payers out there that have policies in place that wait 6 months and a day before engaging the conversation. So what we're looking at in kind of the first full plus year of launch are the prescribers we're getting, the patient flow. We will have free goods and other things going on there. So what volume of prescriptions and flow-through we're getting that we're really set up kind of year 2 and beyond the launch. This is really where the revenue kicks in.

Got it. And I know you're not disclosing the price point at this point. But in general, how should people think about price? What are some good bookends to keep in mind?

When you say about price, which -- our plan right now, we talk about further commercialization strategy, potentially including price toward the end of the year when the drug is commercially available kind of at that point, not before that. And the way to think about price is really revenue optimization, it's end times price. So the price is too much on the low side, then you're leaving value on the table. To the high side, we're not going to help as many women suffering from PPD because it will be obstacles in the way. We -- as I said, we've got tremendous tailwinds behind us. In the health care provider for patient, patient advocate, the legislative front, the media front. We want to keep those positive until ones going. The other thing we've said is previously, we highlighted that with MDD and PPD, that $10,000 was the ceiling specialty tier -- that -- I would not consider that on the table right now, but without giving any more specifics.

Okay. All right. Fair enough. Then I guess when you think about duration. I think that's another topic of interest for people. Annual courses per therapy. What kind of commentary you can provide there on -- we should think about an appropriate range?

Well, our assumption is 114-day pack. What our data suggests from PPD trials is that mom on quickly day 3, day 15, it's clinically relative [indiscernible] significant. And that beneficial effect lasted all the way out to day 45, clinically meaningful separate from placebo. Now we have anecdotes and lots of anecdotes don't add up to data, so take it's worth. But with anecdotes from our trials and reaching back out to moms that as far as we follow up, mom stayed well. So we expect one pack a year.

Okay. Understood. Next question is a little bit on the nose, but I think it's a topic of interest for people. Biogen's level of commitment in PPD and coming into this partnership. Any commentary you can provide to how that interaction has been since the approval came through for PPD, but not for MDD?

Yes. So what I can say is that 2 hours after getting the news we issued a joint press release committing to make Zurzuvae available for PPD shortly after day schedule. We're still committed to that. That hasn't changed. We're working with them on any FDA action in MDD. So that will work done together. And the commitment level hasn't changed. Our teams are getting together and they're working. We're strategically aligned on the think big, start small, scale fast and the teams are really working out the details of who goes where, who does what and what all that looks like. We'll have broad omnichannel available, we'll have personal promotion or other nonperson promotion. And there'll be other creative things like influencers and other media that will continue to raise awareness of Zurzuvae and raise awareness about PPD being such an unmet need.

Understood. And Mike, from your survey of this patient population and from your experience with it through the commercialization of ZULRESSO, do you think there's going to need to be a very active push to activate patients? Or do you think there's like a very ready market right now in a ready patient base right now just waiting for therapy to be available?

Sort of yes and yes. So no drug sells itself. It always requires constant awareness, requires help with navigating potential reimbursement pathways. As I said, at launch, by definition, there'll be a number of payers. We're just waiting to cover the drug. So there's always this interesting dynamic out there. Again, let's go back to the media. I -- any -- you have to not have been paying attention to not see the Zurzuvae PPD, it was all over all the major outlets, all the newspapers. That will continue just yesterday or the day before, there was a people magazine article. I'm one woman who got Zurzuvae and she told her story to People Magazine. The big dynamic that I've seen since Sage launches ZULRESSO is the stigmatized dynamic of PPD is dropping drastically. And as the next generation of women have babies, they're already talking about their issues online with each other. So because the stigma is coming down so rapidly, our ability to influence will, I think, will go up. The epidemiology may or may not change. We have the COVID lockdown that provides a previous episode for some new moms. But for sure, we're going to see diagnosis and treatment rates go up.

Understood. Okay. Pivoting a little bit now to your recently announced restructuring. For those in the audience who may not be familiar with the specifics there. Just kind of walk us through what's been reprioritized. And I guess, what does the new business structure now look like?

Yes. As we said when we did our business update call after getting the FDA news that we were going to take a deep look at prioritizing our pipeline. Our philosophy was that we needed to get much smaller in size or sells through PPD or Zurzuvae launch. So any spend for MDD immediately could be stopped as possible, we stop. And we sized ourselves now to create value from here and build significant value with Zurzuvae with the pipeline. We're prioritizing Zurzuvae for PPD only. We have SAGE 79, which we've touched on early in my comments, reading out all those trials, reading out next year, it makes sense to continue to do that and read those out and then make decisions about what's next after that. We've got SAGE-324, the GABAA PAM Kinetic to appending this year, readout next year. So it made sense to complete that. And then for some of our stage programs, we took each program to its next logical value inflection point. So that if business circumstances change is 6 months, a year or 2 years from now, we can reach back out. They continue to prosecute the pipeline. We didn't think kind of abandoning programs in the side of the road, if you will, with the right business strategy. So the restructuring was about 40% of our workforce, and that now gives us runway into 2026.

Understood. Okay. So 718, maybe we can talk about that program. You mentioned some data readouts next year. A number of studies going on with that program. So just remind us which studies are underway and what can we see from those programs next year? And what could we learn? And what -- and I guess, the important question there is from your perspective, which key questions about the molecule do you think those data sets are going to derisk for you?

That's a great question. So we've got multiple trials set up in Huntington's and then Parkinson's, Alzheimer's, kind of go in reverse order. The way we've designed the Alzheimer's and Parkinson's trial, placebo-controlled trials just to understand the effect size on cognition and obviously, side effect profile. What we've seen thus far is that when orally taken SAGE-718 dramatically increases cognition in a very rapid period of time. So both Alzheimer's and Parkinson's trials are there to teach us effect size, variability, safety profile to allow us to effectively design the Phase III trial or trials or should we do that? The Huntington's trial, on the other hand, there's nothing can develop like this in Huntington. So we're sort of blazing new pathways here in terms of regulatory pathways. The way we've designed the Huntington's trial is we have a very large trial that is measuring cognition Huntington's patients via HD COG and a number of secondary endpoints. That's going to tell us the numerical improvement in cognition in 3 months. We're also looking for safety. We've got another parallel trial going that's measuring activities of daily living. So for example, if we see a multi-point change in HD COG, and then we see activity in data living that someone at the beginning of the study could make a list, drive in a store, buy the items on the list, return home one at ten times. Can they do that 5 at a 10 times at the end of the study. So we have a numerical tie to activities of daily living. And obviously, data here matter. We believe that we've designed Huntington's trials in a way that given the fact that given the orphan nature of Huntington's disease, that it's a reasonable package to go forward with regulators and understand the path to approval.

Got it. Okay. Assuming the initial data sets here are positive across indications. Do you think there's potential to pursue partnerships for any of these indications? Or do you think if that's even something that you're considering that would be further down the line for 718?

Well, for 718, our position had been that 718, given the improvement of cognition, given the big unmet need and then starting with Huntington's orphan disease, that SAGE-718 is something we could globalize age. That's if everything went well. Well, obviously, we hit a bump. So need to examine it. What I can say is that when we had the Alzheimer's readout, which was an open-label pretty, there was significant inbound partnership interest. So that's something that we certainly wouldn't do before a data readout but after do to read out, if we need to from a company perspective, a balance sheet perspective, do some kind of partnership that's certainly a partnerable asset.

Okay. Got it. And then I guess if you were to look at partnerships beyond capital, what would be additive to bring into Sage? Like what would be interesting from a know-how and capability standpoint?

Well, I think from a business development perspective, there's a little bit more sell-side opportunity then there is buy side right now. Besides SAGE-718, we've got earlier-stage programs that also could be -- they're also interested to people. So there's always those opportunities. We can't guarantee they happen, and we do not want to make them happen, but there are opportunities there. In terms of what we bring in, we're always intellectually curious. And since Sage has an expertise in brain health, brain [patent] drugs, oxysterol chemistry, neurosteroids. We're always looking at different targets and mechanisms and data. And if something kind of fit in the bag or fit to our strategy, we could look to bring that in. We do hav a broad pipeline of our own to prosecute that we're not taking full advantage of right now given the circumstances.

Got it. Okay. And on that topic then, maybe you can talk about 324, the KINETIC 2 study. Just update us on how that enrollment for that program is going and when we can expect to learn more there.

Yes. So SAGE-324 that is a administered GABAA PAM that we're looking at for movement disorders, starting with essential tremor. So pre kinetic, the question we had was if you administer SAGE-324, do you see change in tremor amplitude? The answer was yes. Then we ran connect, ask ourselves and we give it every day in the morning at kind of the max dose, which was 60 milligrams. Do you see change in tremor aptitude at the end of 28 days? And does that change in terms of amplitude aligned with activity with they are living? The answer there was yes. Now in Kinetic, we saw a greater discontinuation rate than we wanted to get the study was still statistically significantly positive. We are big enough to make it happen. The questions we're answering with Kinetic 2, it's a 3-month study. And we're doing dose exploration 15mg, 30mg, and then kind of dose escalation to 60mg, kind of titrating it up to 60mg over a 6-week period. The question is what kind of safety do we see over that 3-month period? What's the discontinuation rate? And then do we see continued efficacy not just at 28 days, but out to 2 and a few months. So in other words, there's no tachyphylaxis the drug continues to work and these people suffering from essential tremor have improved the tremor amplitude and that tremor amplitude improvement is consistent with improvement activities of billing. So that's the full package to read out. If the data are strongly positive, and the adherence rate is very high, then you have a drug to move forward. If any of those things come in negative, then we got to ask ourselves if that's the right profile drug to move forward with.

Got it. And assuming it hit your hurdle and you do want to move forward with it. What does a pivotal program here look like?

So we haven't -- we don't see going to connect 2 data, so I would just be speculating. It would be -- it would be a longer study with a dose that we think is right, administered at night. Exactly what the site looks like. It's too early to talk about.

Got it. Okay. Fair enough. So post the restructuring, your pipeline is obviously Zurzuvae and then 718, 324 or any other well-developed pipeline programs still under consideration under development at this point?

So we've talked about 2. We talked about SAGE-319 which is our extrasynaptic preferring GABAA PAM that will take to its next logical point. And then the SAGE-421, which is an NDA PAM, that will take that logical point. There's some earlier-stage stuff. Again, we're not going to banding. We're going to finish the work, wrap it up and then have it be available should business circumstances change and we need to be -- what's exciting about 319 is the hypothesis is that the same kind of activity as the other GABAA PAM has the differentiated profile because it's extra-synaptic preferring. So we'll see if that holds true.

Okay. Got it. And then over the course of the next year or 2, do you think it's realistic to see more programs enter the pipeline? Or do you think that with your current set of programs, you're kind of more in an execution phase with the launch and just developing these programs out?

The latter given restructuring we just did and the runway we now have in 2026. Our focus really is the effective launch of Zurzuvae and PPD and demonstrate to you and others that there really is an important market here we can help a lot of moms that are suffering, and we can grow or kind of make this market, which just doesn't exist today because the solution sets are challenging, all of it, even ZULRESSO. So that's to make the market opportunity. And then to get the readouts of SAGE-324, SAGE-718 and make some decisions from there. For the earlier-stage programs, we're going to park them in a logical spot and not move them forward to business circumstances suggest we should.

Got it. Okay. Let me take a pause here and see if there's any questions from the audience. Okay. I can keep going. So let's pivot back to the commercial launch in PPD. You alluded to this a little bit, but maybe we can try to put a fine point on it to the extent possible. When thinking about what the first year performance looks like, we're thinking about the ramp quarter-over-quarter going from 1Q to 4Q next year. I know you're not in a position to provide anything like guidance or anything close to guidance, but just qualitatively, how do you think about what the sensible ramp and scope of revenue opportunity to think about for the first year?

Yes. I think the way to think about the first, call it, 12 to 14, 15 months is really -- what are the metrics you're seeing? Not necessarily with the revenue, but what are the metrics you're seeing? How many health care providers are writing? Are they writing depth? What's the breadth of writing? How many moms are flowing through Zurzuvae? Whether it's free good or paid good, whether it's reimbursed or not, our desire is because this is really about physician experience. Once our experience thus far with Zurzuvae is that once a health care provider uses Zurzuvae and sees the rapid onset of effect and the dramatic improvement in depressive episode, PPD in this case, then they become believers. And they only have to see one or 2 of these to see something we've not seen before. And think about what they're doing with today outside of ZULRESSO, they're dealing with another antidepressant, they could take 4 to 8 weeks to work if that work. They're typically titrating from lower doses to higher doses. And it could take weeks to months to figure out if I've got this person of state of wellness, not -- and many are better, but they're not yet in a state of wellness. So it's really the prescribing numbers, the patient flow that we're looking at for the first chunk of wants to understand. Once all the insurance is in place and Medicaid is in place, 6 to 12 months, it's after that time point that kind of revenues would be a guide. But the first big part of the launch is really about the metrics.

Got it. Okay. And do you foresee use purely as monotherapy? Or do you think there's a possibility that some prescribers, some patients maybe combined Zurzuvae with more traditional options than they've been previously using?

Yes. So what we're focused on is effectively communicating and educating on Zurzuvae. Whether or not the patient, health care provider and other medications involved is solely up to them. We're not in the business of guiding on other NIMs. What I can say that in the PPD trials we ran, between 15% and 30% of moms came into those trials already on an antidepressant and then about 5% exited the 45 days still antidepressant, for whatever reason, not given by protocol, not given by us, wean themselves off of that depressant. So we think that Zurzuvae will be monotherapy in many cases, but it could be combined, and there's no contraindications. It can't get combined with other antidepressants. If that's a decision the health care provider and the mom choose.

Got it. Okay. And when the drug was approved, there was some debate around certain portions of safety language in the label when you received your label, did any of that language kind of a surprise to you? Or did it strike you as anything that would impact the commercial opportunity in PPD?

So while we were in the review cycle, we tested a lot of different outcomes in the label. And what I can say is there's nothing in the label that is bothersome to health care providers or women with PPD that would stop into the facility with PPD from being treated. So certainly, we're certainly interested in unprecedented things in there. So for example, box warning on driving, all we always said we'll have a driving warning. The fact is that the box is fine. Now what's not in the box is the Suicidal Ideation, that's in the warning section, not in the box, that's in the box of many other antidepressants. So there's some differences here, but nothing that's going to in the way in our view of making a decision to use Zurzuvae with a women with PPD.

Okay. Got it. In our last 10 second, Barry, anything you would highlight that we haven't talked about, any key milestones or developments that you think people should keep on their radar for the next 6 to 12 months?

Well, we didn't talk about it, but I guess I'll repeat. We've been through a thing and this is the biotech world, unfortunate, but we're really well positioned to take advantage of Zurzuvae and PPD. And we have a very catalyst rich to 2024 with a number of data readouts across both SAGE-718 and SAGE-324. It's a really exciting time for Sage.

Okay. Great. That's a good place to close it out. Barry, thanks for your time.

Thank you. I appreciate it.

Thanks, everyone.