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

Good afternoon, everyone. Thank you so much for joining us. Really pleased to have with us the Sage team. We have Barry Greene, CEO; and Laura Gault, CFO (sic) [ CMO ].

CMO.

CMO, I'm so sorry.

To start here, Barry, can you give us a brief overview of the company today following the recent launch of Zurzuvae and your strategy for commercial and pipeline execution heading into the second half of the year?

Yes, absolutely. And thanks for having us. And I'd like to thank the organizers for Goldman, selling to a sold-out crowd here is always fun in sunny Miami. So yes, really excited on the progress we've been making at Sage. So Sage is a brain health company, really focused on understanding the GABA and NMDA pathway, the inhibitory Excitatory pathway and understanding that in brain health diseases like depression, essential tremor, others that when these pathways are dysfunction or out of balance, it creates disease pathophysiology. And what we do at Sage is look for natural endogenous molecules that modulate these pathways and then using our neuroactive steroid and oxosterile chemistry, we mimic those endogenous molecules to create new chemical entities that allosterically modulate these pathways in the way we want. A great example of that, as you mentioned, is Zurzuvae. Zurzuvae or generic named zuranolone is a GABA positive allosteric modulator that modulates the GABA pathway. The observation that we and others have made is that in the case of depression, in our case, PPD, that pathway gets dysregulated. And what we are looking to do with Zurzuvae is reregulate that pathway back to a normative state. So all that work and a whole bunch of clinical trials last year led to the approval of Zurzuvae in postpartum depression. We launched Zurzuvae for PPD in December, mid-December of last year. The launch is going incredibly well. And we can come back to that, but the launch is going very well. We also have major clinical readouts with dalzanemr, SAGE-718, our NMDA positive allosteric modulator as well as SAGE-324 that we're studying for movement disorders, starting with essential tremor, another GABA PAM, but more for chronic administration. And then behind that, we have some very exciting program. SAGE-319 is an extrasynaptic. GABA PAM, the idea there is that we have the same kind of efficacy as we've seen with zuranolone, for example, but with a broader therapeutic index and another novel NMDA molecule as well. So a lot going on in brain health. We're looking to tackle really important diseases with fairly significant unmet needs and have a meaningful impact in the lives of patients as we've seen with Zurzuvae.

What part of the Sage story do you think is underappreciated by the Street when you look at the progress that's playing out with the launch and the pipeline? Help us understand that aspect but also what you're most excited about over the next 12 months?

Yes. It's hard. In the macro environment we're facing right now, I think everything is undervalued. So as I said, we're really excited by the progress we made with Zurzuvae. We think Zurzuvae is the key to unlock the blockbuster potential in postpartum depression. And the reason I say that is that the paradigm shift that we are already seeing, call it, 5, 6 months into the launch is that the PPD market, particularly around OB/GYN offices, which is the right place for these moms to get diagnosed and treated, is moving from a suspect depression referral to a screen diagnose and treat. And that paradigm shift should have many, many more moms getting diagnosed and treated. And I think we all appreciate that underdiagnosed woman suffering from PPD, it's bad for her from a personal perspective as well as a pharmacoeconomic perspective, and it's bad for the baby and the whole family unit. Many of the children of PPD -- undertreated PPD moms lead -- have developmental issues. So I think that's going really well. We just announced and that we'll talk about the SURVEYOR data with dalzanemdor but a very exciting NMDA positive allosteric modulator, where we know the opportunity with MDA as well as -- and then the hypofunction in these diseases. So we're excited by the clinical readouts, and we're executing to make that happen.

Can you speak to -- maybe starting with Zurzuvae here, let's talk about the feedback that you're getting from patients and prescribers in terms of just the overall demand and how the that's translating?

Yes, excuse me. So characterize -- excuse me, the launch of Zurzuvae is going incredibly well. Can you start and I'll pick it up, sorry.

Sure. So around the time of launch, we heard from people who are on the bear side that OB/GYN wouldn't prescribe this, we wouldn't find the right people. And what we're finding is actually quite the opposite of that. That PBD is actually being diagnosed and OB/GYN are on the front line, given that diagnosis. And as Barry already alluded to, rather than essentially identifying someone and referring them out, they're actually choosing to treat themselves. And what we see overall in the data is that OB/GYNs are prescribing more than psychiatrists and PCPs although they are also to prescribing.

Yes, that's important. But if you think about to make a market opportunity like we're seeing with PPD, it's important to figure out the health care provider expertise that's going to own the disease. Happens with rare diseases a lot. This is not a rare disease per se but it is a make-a-market disease. So the fact that we hypothesized at the right place to pick up women suffering from PPD is OB/GYNs. And we're actually seeing that [indiscernible] in early launch, along with the paradigm shift is really, really important. Because if you think about it, whether someone has suffered mental health or depression before getting pregnant, which is a higher predictor of getting PPD or they had not had that kind of issue. In any case, the right place to diagnose a new case of PPDs in the third trimester or the first 4 weeks after giving birth to that baby. Obviously, diagnosis can happen after that, symptoms can worsen over time. But ideally, you pick it up in the third trimester in the first 4 weeks after launch. So we're seeing that paradigm shift happening, which is really, really exciting. The second part that we're seeing is that payers, any government payers understand that an undertreated mom is very costly to the health care system, is how they look at. Obviously, they want people to get better. We want people to get better. But that undertreated mom ends up costing them a lot downstream because depression is a leading comorbidity to things like cardiovascular disease, metabolic diseases and others, and they appreciate that. They also appreciate that a mom not paying attention to or latching to that kids lead the development issues for that child. So the payers are coming online with prior auths and not onerous and without step edits. And again, back to the bear, bull hypothesis, some of the bears thought that steps were going to be a problem. And frankly, they're just not. The third part is that patients and patient advocates are stepping up. Depression, PPD is still highly stigmatized particularly in certain communities across the United States. But we're starting to overcome that stigma and people are raising their hand and saying, "I need to be treated. I can't -- I need help," which is what you want to see. And finally, the kind of media attention that we saw when Zurzuvae was approved, [indiscernible] continued at the national level and importantly, at the local level. We just had a whole series of media out of Pittsburgh, for example, that highlighted mental health month, talked about PPD and then actually give patient stories on the [indiscernible] being treated and the buzz around that area, you can actually see it in terms of more moms being treated. So when media steps up locally, they're actually doing a great thing by helping moms. So we're really seeing that strong dynamic. Prescriptions have continued to increase, shipments have continued to increase. And we characterize what's going very, very well. In the last quarter, as we said, we increased our nonpersonal promotion and marketing spend. And we highlighted last quarter that you'd be hearing from us over the course of this year, increasing personal promotion, and that's something we're still looking forward to.

And with regard to the OB/GYN who clearly led prescriptions here in the first quarter, what are the factors that are really driving the uptake in that population?

Yes. So if you think about PPD, with ZULRESSO aside for a second, which is our IV drug but PPD before and after Zurzuvae, if I'm an OB/GYN and I suspect mom's got depression when she comes back for her 2-week visit, I don't really have any tools that allow me to immediately prescribe something so that when she and baby come back at 6 weeks, she is definitely on a path to getting better. In fact, many of the SSRIs as far as they move, require 4 to 8 weeks to even kick in, often require titration, offer required moving around. So the behavior was, it might be depressed. I really can't take care of you in my practice, let me refer you out to someone else. That's the suspecting [ effect ] I just talked about. With Zurzuvae, we're actually seeing this happen at the 2-week checkup, if they do a risk assessment and are suspecting depression, they'll actual do a full workup, diagnose PPD, prescribe Zurzuvae so that when mom goes back at the next 4 weeks, there's a chance that Zurzuvae kicked in, and she's much better. And we don't data on that, but we're hearing anecdotes to that effect, which is really exciting.

That's really exciting. Do you see prescribers writing scripts for Zurzuvae in the first line of post SSRI-SNRI? Are you seeing patients staying on treatment for the whole 14-day period? Or are discontinuations here starting to play out?

Yes. So what -- the data we have, which comes from early claims data, it says that -- suggests that about 50% of the women being prescribed had not been on an antidepressant a year prior to being diagnosed. That suggested that we're moving more and more towards front line. Our goal at Biogen certainly is for Zurzuvae to be drug of choice in the frontline drug of PPD and not to be stepped. On the payer side, we're not seeing steps. So what might cause Zurzuvae not to be frontline, isn't -- of course function by insurance, it's old physician behavior said, let me try something first. But more and more, we're moving to front line, which is, again, exactly where we want Zurzuvae to be used.

And could you provide some color of the process at which OB/GYN, psychiatrists and PCPs are diagnosing PPD? And what the screening process does look like? And I think in the past, too, you talked about how you would identify patients pre this situation, meaning patients which -- who have depression and which could lead to postpartum depression, but maybe help us understand how all of that this.

Laura, maybe you can talk about guidelines and help in how the screening and diagnosis process are evolving.

So Barry mentioned the media attention here. The media are not the only people paying attention to post-partner depression, professional organizations are as well. And even before Zurzuvae was approved ACOG, the American College of Centric and Gynecology updated their practice guidelines around postpartum depression. And in those guidelines, they recommend screening, they recommend potential tools that could be used for screening, and they also talk about treatment approaches. Zurzuvae wasn't available at the time that they did that. But several days after our PDUFA date, they actually sent out an update to their practice guidelines, pooling data from Zurzuvae label to outline the benefit risk of Zurzuvae this population. So definitely some tailwinds coming from that.

Could you speak to the status of your partnership with Biogen in terms of how you're dividing out responsibilities here?

Yes. So we're partnered with Biogen, 50-50 in United States. So we're contributing to 50% of all aspects going on. There are certain things that they have name responsibility for. For example, distribution network, managing the specialty pharmas, there's places where we take main responsibility. But in general, we're splitting things up. We both have field teams out there that are doing access, health economics, medical affairs as well as field sales. And our field teams are working incredibly well together. I was with them, I guess, now it's about 5 weeks ago, when you're in a group, you don't know who's Biogen, who says they're really working harmoniously together, really, frankly, calling each other on a pretty regular basis. So I think from a partnership perspective, people out in the field are really working well and are really focused on what we're all focused on, which is getting Zurzuvae to more and more moms and making sure Zurzuvae is the first choice when PPD diagnosis occurs.

Could you speak to payer policies and the free drug programs. So maybe to start here on the prior authorization, could you speak to how that is playing out right now under current plans?

Yes. So as I mentioned earlier, the payer coverage is going very well, in fact, maybe a little bit ahead of classic schedule. Our goal is for Zurzuvae to be the frontline treatment of PPD, which means that when insurance coverage comes on, we don't want to step edits, which is a utilization management tool. We did expect prior auths because we want to make sure that Zurzuvae is used in the right patient type. We don't -- we want that as well, that's important. So what largely we're seeing at both the commercial and government level is nice insurance coverage without steps and without owners prior off. So that's coming online. We made a strategic decision at the beginning of launch to have a fairly liberal free goods program. And the reason that's important is that in any launch if a health care provider writes 4 or 5 scripts and those prescriptions are blocked, meaning they're not going to be filled or not covered. And the drug doesn't get to the patient, they stop writing, they stop leaving the drug. There's always challenges with new drugs but outright injection is not what we wanted. Drug program works that if insurance verification doesn't happen in some time period, then that mom will get the drug. So if a health care provider that says that mom need Zurzuvae, then mom will get Zurzuvae. We should classically see a fairly large amount of free goods in the first several quarters. And as insurance coverage comes on, particularly at the state level, the amount of free goods will move to some level of steady state because there'll always be some percent of people with -- who are functional insured, and we still want to do the right thing for them as well. The business rationale for free goods early in the program, isn't necessarily because that free good, commercial paid good chronically, this isn't a chronic drug. But it does build, and we're seeing a fantastic health care provider advocacy, and our belief is that and we're seeing this play out is even though they had old practice patterns of doing things a certain way, when they do use Zurzuvae and see the kind of dramatic rapid results, they become rewriter and rewriter that steadily move to the first -- just for some patients, but for the majority of their patients.

And if the one -- or the 1,200 prescriptions that were written in the first quarter, can you share the percentage covered by payers versus those falling under the free drug program?

We did not -- so of the greater than 1,200 scripts in the first quarter, we said the majority came from OB/GYN. It was psych and primary care. We did not break out the percent of free goods. If it becomes really important to the overall story, we might talk more about it, but we didn't break it out in the first quarter.

And you've also noted that expectations for gross to net here to be lower, much lower than other branded agents, given it's the only oral agent for PPD, and there's a novel mechanism and an unmet need here. Given you're further along in the coverage process, do you have an understanding of where this might end up?

Yes. And we'll stick with the view that this is the first and only oral drug specific. With PPD, payers generally understand the cost of an undertreated mom. We talked about that. And therefore, the kind of discounts are not deep discounts so that we use your drug, the discounts for administrative fees. So on the lower side. Now we do have about 50% of live births that are Medicaid and Medicaid has standard discount. So on one end, on the commercial end, you have small numbers, on Medicaid, you have standard 30-ish -- 30-plus percent discount. So it will even out somewhere in between.

Great. And then just speak very quickly to how we should think about shipments and stocking, how we should also think about the digital promotion efforts that you have here?

So the way our supply chain works, and it's really important, I'm glad you asked that, is that the Biogen will sell drug to wholesalers. That's revenue. And wholesalers manage their inventory. The next level is wholesalers will ship to specialty pharmas, that's not really corrugated output, prescriptions come in from health care providers and then shipments go out to moms, so -- directly to their homes. So what we record on a regular basis of the leading indicators are prescriptions and shipment. Obviously, the lagging indicator is revenue because that's Biogen to wholesalers. And in the first couple of quarters, there's inventory management and people are trying to figure it out. What we won't see, and this is always a fear to folks in a new launch is that in a retail launch, the wholesalers ship to pharmacies all across the country. And then what could happen is that in the third and fourth quarter, if demand is not there, holding of returns occur. The way our inventory works, it's really inventories held at the wholesale level and the specialty pharma level, and you don't see inventory at retail pharmacy. So it's pretty tight in terms of inventory management. Every quarter will ebb and flow. Last quarter, we reported over $12 million in revenue. It's hard to do. If a $2 million order comes in at the couple of last days, it becomes $12 million, it really varies towards-- so what we look quarter-to-quarter. We look at really is the leading indicators of prescriptions and shipments. And that will then drive further revenue demand.

Shifting over to major depressive disorder. Where do you -- I guess, what is the future of the pathway for this drug in that indication?

Yes. What we've said, Salveen, is that we are solely focused with Zurzuvae and PPD, and we're excited to continue to help as many moms as possible. If in the future, if there's any update on MDD, we'll invite you, we'll provide it. But for now, it should be very much and only a PPD focused.

You have a pretty deep pipeline with data sets that have started to play out, maybe starting with 324 here. Could you frame expectations ahead of the mid-2024 Phase IIb KINETIC 2 data in essential tremor, what would make you confident to move this forward into a Phase III?

Laura, do you want to start?

Yes, sure. So SAGE-324 is a GABA receptor positive allosteric modulator that was discovered by Sage and we're developing collaboration with Biogen. We are now in a Phase IIb study called KINETIC 2. But prior to that, we conducted a study called KINETIC, which was a proof-of-concept study. And in that study, we used a 60-milligram dose, and we treated patients for 1 month. And the doses administered in the morning. What we learned from that study is the drug works. It reduced tremor amplitude. However, when patients took that 60-milligram dose in the morning, it wasn't very tolerable. So taking those learnings, we move forward then to the KINETIC 2 study and change the design to really understand that dose response relationship. So first thing, we're now administering in the evening, the dose, and we're evaluating a 15, 30 and a titrate to 60-milligram dose for a time duration of 12 weeks. The primary endpoint remains the TETRAS performance scale. So we're looking at tremor amplitude. However, we're also collecting information on activities of daily living that will be helpful to inform decision-making. What we're looking for overall in the study is to identify a dose or doses that have the appropriate risk benefit profile for chronic dosing in the essential tremor population.

And what's the rationale behind evaluating the TETRAS subscale item for endpoint considering completing trials are looking at different endpoints here?

Yes. Yes. So we're aware that there has been some regulatory feedback to other sponsors about using the modified ADL. However, when you're trying to learn about how your product works, you want to measure something that is as proximal to its effect as possible. So actually measuring the tremor amplitude is much more proximal than measuring something around activities of daily living down the road. That doesn't mean it's not important. It doesn't mean we won't measure it. But the more proximate the measure, the better chance you have of detecting a clean signal.

We have measured activity of daily living, and it shows beneficial impact in line with the tremor impact. So yes, if KINETIC 2 finishes and we see the right dose or doses appropriate for chronic administration. We're not looking at percent AEs, we're looking at chronic administration. So people are staying on their drug because the benefit outweighs the risk. And we sit down with regulators and other endpoints are required, we feel pretty confident that we'll be able to do that as well. So we're using tremor amplitude to really understand the drug impact, as Laura said, which is what we're trying to do to stop tremors that should translate to ADL, which we've seen. So if we need other Phase III outcomes, we've got data to support that as well.

And you've seen some competitive news in this space with regard to Neurocrine and Praxis and what's played out there. And I think we're going to see data from Jazz late -- I guess, soon. How do you think about your mechanism in the context of the others and how you might differentiate yourselves versus the script?

I'll start, and Laura can talk about mechanism and the competitive landscape. So there hasn't been innovation in essential tremors in 50 years. So like postpartum depression, this is another build the market. It's not the market exists and get new Rx share of market. This is not that dynamic to really build the market, got to raise awareness. Everything we talked about with PPD, we need to raise awareness. You need to find the right group that will step up and prescribe and diagnose the patient, patient organizations, and we're prepared to do that. So other drugs in essential tremor are building the market are actually a very good thing. It'd be good to have other people out there talking about essential tremor, building the market because we think we have an opportunity to differentiate but being a big part of the big market, it's better than having to do all of that on our own. Maybe you can talk about the landscape.

Yes. In terms of Jazz and Praxis, they are developing drugs that are T-type calcium channel blockers, which is a very different mechanism from what we're developing. The GABA A receptor PAM is affecting GABAergic tone in a circuit that runs from the cerebellum to the striatum to the cortex. And it's really modulating tone to dampen the tremor. And so that's how we see this drug working here, and it does work in a different way than you see for these competitor drugs.

And essential tremor is an intention issue. So certain here, I can be fine if I reach for my coffee, that's when the tremor might happen. So we think the way we're approaching it is also potentially step up for that for an intention movement disorder.

Maybe for 718 here, you're evaluating the drug in multiple disorders. So give us a sense of, on a per disorder basis, where you stand with achieving proof of concept at this time point?

You want to take that?

Yes, sure. So SAGE-718 is an NMDA receptor positive allosteric modulator that was discovered by Sage and we're developing it ourselves. It is currently under development to treat disorders of cognition associated with neurodegenerative disorders. And we have an ongoing Phase II program. Earlier in the year, you heard about the study in Parkinson's disease, which read out unfortunately negative, Certainly for people living with Parkinson's disease. But we have two ongoing programs: One in Alzheimer's disease and one in Huntington's disease. The Alzheimer's disease study is a Phase II signal-finding study. It is a study where we're randomizing approximately 80 subjects per arm for a 12-week treatment period, and we're looking at the waste for coding as our primary endpoint. Of course, we also have other measures of cognition and function in there. We expect to be able to use that -- the data from that study to make a go/no-go decision for an Alzheimer's program. The Huntington's disease program, however, is very different. Huntington's is a rare disease. There's so much unmet need in Huntington's in every aspect of the disease, but there's nothing available currently at all for cognition. And so as we thought about developing that program, we put together a series of studies that would answer important questions that we need to understand to know if the drug is going to work and to have the data we need to demonstrate that. The first study that we started is the DIMENSION study, and that is the study that will read out towards the end of this year. It is a study that is designed to potentially serve as a pivotal study, assuming the data are positive. It is a study that's enrolling again, about 80 subjects, 90 subjects actually per arm. And we are treating people over a 12-week treatment period there using the Huntington's disease cognitive assessment battery as the primary endpoint. So that study is more or less the centerpiece of the program. That is the efficacy study. We also recently read out as most people probably have seen a SURVEYOR study, and that's also 718 in Huntington's. The purpose of that study was very, very different. It is not an efficacy study. It is a study that was really designed to help us learn more about potential endpoints in the Huntington's disease population for cognition. So that study had several parts. In the first part of the study, we looked at healthy volunteers and patients with Huntington's disease. And before we treated anyone with Huntington's disease with anything, we gave them this HD-CAB, the cognitive assessment battery. We gave it to the healthy volunteers as well and looked at the magnitude of the difference between those 2 groups. And what we found, as you saw in the press release is that it's actually a huge difference. So we -- these patients are performing many standard deviations below what you see in healthy patients. So this was important to kind of add to the literature that's available in the field that patients at this stage of disease really have a powerful impact of their cognitive changes. So in the second part of the study, we designed that part of the study to understand more about how different measures on the HD-CAB change over time, and how -- what the relationship is between changes in measures of cognition and other measures like cognition -- or sorry, like function and global function. In this part of the study, we had about 20 subjects per arm for a 1-month treatment period. So it's a small study. It's a short study. It was really not intended to demonstrate efficacy. It's really intended to learn more about how these instruments move and how they move together. So what we saw in that part of the study is that there were -- there was a small directional signal of favoring Imdur over placebo on the HD-CAB. And we saw a similar trend on some of the subcomponent tests of the HD-CAB. We are now in the process of doing all of these additional analyses that need to be done to understand the relationships across these end points. And we intend to use this information to make decisions about what the primary and key secondary endpoints would be in dimension. So right now, it's the HD-CAB. It may stay the HD-CAB when -- after we are done sifting through all these data. But it's also possible we may learn that there's another measure that is more sensitive and we may make a change. We have time to do that. We can do a protocol amendment to make those changes. It's really -- it doesn't affect the contact of the study at all.

And just to add on to dimension, which is now fully enrolled. We don't -- based on what we've seen with SURVEYOR, we don't feel the sizing of the trial and the timing of the trial were changed. We certainly can't add any assessment. So it really is looking at all the measures we have, we hypothesized what might move and not might move based upon the mechanism of action. And now we have data that we can work through that said, are there a better set of ordering of endpoints that better recognize the potential benefit to Huntington's patients, and that's work in front of us.

Maybe in the last few minutes we have left, 2 quick questions. One is on SAGE-319 and 421. When can we get updates on them and how to think about the go-no/go there? And then just given all these programs you have, how are you thinking about resource allocations and capital allocation at this point?

The last minute we have left, so very quickly, strategically, the way that I think about any potential blockbuster drug launch is that you want to be smart, you think big, start small and scale fast about your resource allocation for the drug launch. But coming out of the third year of launch is when that brand should be putting positive cash flow in the system. So that's how we think about Zurzuvae. Making the decision -- it's is biotech, so making decisions about all the other programs really depend upon what's in front of us, how many other programs we have and what's exciting or not? And then partnership opportunities, royalty funding opportunities and others. So really we'll mix into that. Very quickly on 319, very excited by 319. That's our extra synaptic preferring GABA PAM. It's in clinical studies right now. I think that will be a big story starting off next year. If the hypothesis that it works, it works well and it's a broader therapy index hold forward. And then 421 probably later next year.

Great. So with that, Barry and Laura, thank you so much. Appreciate it.

Thank you, everyone.

Thank you.