Sage Therapeutics, Inc. (NASDAQ:SAGE) Q4 2021 Earnings Conference Call February 24, 2022 8:00 AM ET Company Participants Helen Rubinstein - Director, IR Barry Greene - CEO Jim Doherty - CDO Kimi Iguchi - CFO Chris Benecchi - CCO Conference Call Participants Andrea Tan - Goldman Sachs Tiffany Sun - JPMorgan Yasmeen Rahimi - Piper Sandler Laura Chico - Wedbush Securities Ami Fadia - Needham & Company Paul Matteis - Stifel Tazeen Ahmad - Bank of America Yatin Suneja - Guggenheim Douglas Tsao - H.C. Wainwright ...

Part I [Business](index=6&type=section&id=Item%201.%20Business) Sage Therapeutics focuses on brain health, with approved ZULRESSO for PPD and a pipeline led by zuranolone for MDD/PPD [Overview](index=6&type=section&id=Overview) Sage Therapeutics focuses on brain health, with ZULRESSO® for PPD and a pipeline led by zuranolone for MDD/PPD, supported by a Biogen collaboration - Sage's first product, ZULRESSO® (brexanolone), is an IV-administered treatment approved in the U.S. for adults with **postpartum depression (PPD)**[24](index=24&type=chunk) - The company's next most advanced candidate is zuranolone (SAGE-217), an oral compound for **major depressive disorder (MDD)** and **PPD**. An NDA for MDD is planned for submission in **H2 2022**, with a PPD filing anticipated in **H1 2023**[25](index=25&type=chunk) - Sage is jointly developing zuranolone and SAGE-324 in the U.S. with Biogen under a collaboration agreement effective **December 2020**. Biogen holds commercialization rights outside the U.S. (excluding specific territories for zuranolone licensed to Shionogi)[31](index=31&type=chunk)[32](index=32&type=chunk) - SAGE-324, a GABAA receptor modulator for **essential tremor**, has completed a Phase 2 study and is currently in a Phase 2b dose-ranging trial (KINETIC 2 Study)[33](index=33&type=chunk) - SAGE-718, an NMDA receptor modulator, is being developed for **cognitive impairment** in Huntington's disease (DIMENSION Study), Parkinson's disease (PARADIGM Study), and Alzheimer's disease (LUMINARY Study)[34](index=34&type=chunk)[35](index=35&type=chunk)[37](index=37&type=chunk) [Our Strategy](index=8&type=section&id=Our%20Strategy) The company aims to lead in brain health therapies by advancing zuranolone for MDD/PPD, optimizing ZULRESSO, progressing pipeline candidates, and leveraging collaborations - Seek U.S. regulatory approval for zuranolone in **PPD** and **MDD** and prepare for launch in collaboration with Biogen[40](index=40&type=chunk) - Continue commercializing ZULRESSO for **PPD** in the U.S., focusing on geographies with active treatment sites, and complete the SUNBIRD Study for potential at-home administration[40](index=40&type=chunk) - Advance clinical development of SAGE-324 for **essential tremor** (KINETIC 2 Study) and SAGE-718 for **cognitive impairment** in Huntington's, Parkinson's, and Alzheimer's diseases[40](index=40&type=chunk) - Support collaborations with Biogen for zuranolone and SAGE-324 in the U.S. and Biogen's territories, and with Shionogi for zuranolone in its licensed territories[41](index=41&type=chunk) - Continue research to identify new compounds and expand the intellectual property portfolio, while exploring further strategic collaborations or acquisitions[41](index=41&type=chunk) [Our Product Pipeline](index=11&type=section&id=Our%20Product%20Pipeline) Sage's pipeline features approved ZULRESSO for PPD, lead candidate zuranolone in Phase 3 for MDD/PPD, and other programs for essential tremor and cognitive disorders Sage Therapeutics Product Pipeline Status | Product/Candidate | Indication | Development Stage | | :--- | :--- | :--- | | **ZULRESSO® (brexanolone)** | Postpartum Depression (PPD) | Approved (U.S.) | | **Zuranolone (SAGE-217)** | Major Depressive Disorder (MDD) | Phase 3 (NDA submission planned H2 2022) | | | Postpartum Depression (PPD) | Phase 3 (SKYLARK Study ongoing) | | **SAGE-324** | Essential Tremor | Phase 2b (KINETIC 2 Study ongoing) | | **SAGE-718** | Huntington's Disease (Cognitive Impairment) | Phase 2 (DIMENSION Study ongoing) | | | Parkinson's Disease (Mild Cognitive Impairment) | Phase 2a (PARADIGM Study ongoing) | | | Alzheimer's Disease (Mild Cognitive Impairment/Dementia) | Phase 2a (LUMINARY Study completed) | | **SAGE-689** | Acute CNS Disorders (IM formulation) | Phase 1 | | **SAGE-319** | Social Interaction Disorders (Oral therapy) | Preclinical | | **SAGE-421** | Neurodevelopmental Disorders | Preclinical | [Manufacturing and Supply](index=17&type=section&id=Manufacturing%20and%20Supply) Sage relies entirely on third-party CMOs for manufacturing all supplies, with long-term agreements for ZULRESSO and preparations for zuranolone commercial production - The company does not own or operate any manufacturing facilities and relies completely on **third-party contract manufacturing organizations (CMOs)** for all supplies[81](index=81&type=chunk) - Long-term supply agreements are in place for ZULRESSO drug substance and drug product. For pipeline candidates like zuranolone, SAGE-324, and SAGE-718, manufacturing is managed through purchase orders under master service agreements[82](index=82&type=chunk)[83](index=83&type=chunk) - The company is currently working with CMOs to prepare for validation and commercial-scale manufacturing of zuranolone, contingent on regulatory approval[84](index=84&type=chunk) - The syntheses of ZULRESSO, zuranolone, SAGE-324, and SAGE-718 are considered reliable, reproducible, and amenable to large-scale manufacturing from readily available starting materials[85](index=85&type=chunk) [Sales and Marketing](index=17&type=section&id=Sales%20and%20Marketing) ZULRESSO sales are limited by complex administration and COVID-19, while Sage and Biogen prepare for zuranolone's potential U.S. commercialization - ZULRESSO sales have been negatively impacted by complex treatment requirements, including a **REMS program** mandating administration in a certified, medically-supervised healthcare setting over **2.5 days**[87](index=87&type=chunk)[88](index=88&type=chunk) - The **COVID-19 pandemic** has further compounded these barriers, reducing patient demand and site availability, with this adverse impact expected to continue[89](index=89&type=chunk) - The company's commercial strategy for ZULRESSO is now primarily focused on geographies with existing, active treating sites, which may limit the revenue opportunity[90](index=90&type=chunk) - Sage is actively working with Biogen on pre-launch and commercialization strategies for zuranolone. If approved, the companies will jointly commercialize the product in the U.S., with **Biogen booking sales**[92](index=92&type=chunk)[93](index=93&type=chunk) [Licenses and Collaborations](index=19&type=section&id=Licenses%20and%20Collaborations) Sage maintains key licenses with CyDex and the University of California, and major collaborations with Biogen for zuranolone/SAGE-324 and Shionogi for zuranolone in Asia - Sage has an exclusive license from CyDex Pharmaceuticals for its Captisol® drug formulation technology used in ZULRESSO (brexanolone) and SAGE-689, with obligations for milestones and **low single-digit royalties**[96](index=96&type=chunk)[98](index=98&type=chunk) - The collaboration with Biogen for zuranolone and SAGE-324 includes joint development and commercialization in the U.S. (**50/50 profit/loss split**) and exclusive rights for Biogen in most ex-U.S. territories. The deal involved an **$875 million upfront payment** and a **$650 million equity investment** in Sage[104](index=104&type=chunk)[105](index=105&type=chunk)[108](index=108&type=chunk)[113](index=113&type=chunk) - Sage is eligible for up to **$995 million in regulatory/commercial milestones** and up to **$600 million in sales milestones** from Biogen across both product classes, plus tiered royalties from ex-U.S. sales[109](index=109&type=chunk)[110](index=110&type=chunk) - A collaboration with Shionogi grants it rights to develop and commercialize zuranolone in Japan, Taiwan, and South Korea. Sage received a **$90 million upfront payment** and is eligible for up to **$485 million in milestones** and tiered royalties averaging in the **low to mid-twenty percent range**[116](index=116&type=chunk)[117](index=117&type=chunk) [Intellectual Property](index=22&type=section&id=Intellectual%20Property) Sage protects its technology through patents covering ZULRESSO, zuranolone, SAGE-324, and SAGE-718, with expirations into the 2030s, and may seek patent term extensions - The company holds an issued U.S. patent for a method of using its brexanolone formulation to treat PPD (expiring **2033**) and a U.S. patent for the dosage regimen (expiring **2037**)[126](index=126&type=chunk) - Zuranolone is covered by an issued U.S. patent for composition of matter (expiring **April 2034**) and an issued U.S. patent for solid forms (expiring **August 2037**), subject to potential extensions[126](index=126&type=chunk) - SAGE-324 has issued patents covering its composition of matter in Europe and Japan, expiring in **May 2035**[126](index=126&type=chunk) - The company may be eligible for patent term extensions under the Hatch-Waxman Act to compensate for time lost during regulatory review, potentially extending a patent's term by up to **five years**[127](index=127&type=chunk) [Competition](index=24&type=section&id=Competition) Sage faces intense competition across its portfolio, with ZULRESSO competing with standard antidepressants and zuranolone entering a crowded MDD market - ZULRESSO is the only therapy specifically approved for PPD, but competes with off-label use of standard antidepressants like **SSRIs** and **SNRIs**[131](index=131&type=chunk) - For MDD, zuranolone would compete with a wide range of antidepressants and potentially Axsome Therapeutics' NMDA receptor antagonist, AXS-05, which is under FDA review[132](index=132&type=chunk) - Key competitors in the GABAA neuroactive steroid space include **Marinus Pharmaceuticals (ganaxolone)** and **Praxis Precision Medicines (PRAX-114)**[133](index=133&type=chunk) - For essential tremor, SAGE-324 faces competition from current first-line treatments (**propranolol, primidone**) and pipeline candidates from Jazz Pharmaceuticals and Praxis[134](index=134&type=chunk)[135](index=135&type=chunk) [Government Regulation](index=25&type=section&id=Government%20Regulation) Sage's operations are extensively regulated by the FDA and other authorities, covering drug development, approval, manufacturing, marketing, and post-approval compliance, including pricing and reimbursement - The U.S. drug development process requires extensive non-clinical studies and three phases of clinical trials (**Phase 1, 2, 3**) before an NDA can be submitted to the FDA for marketing approval[141](index=141&type=chunk)[146](index=146&type=chunk)[149](index=149&type=chunk) - The FDA has granted zuranolone **Fast Track designation for PPD** and both **Breakthrough Therapy** and **Fast Track designations for MDD**, which can facilitate development and expedite review[55](index=55&type=chunk)[161](index=161&type=chunk) - Approved products like ZULRESSO are subject to post-marketing requirements, including potential Phase 4 trials and **Risk Evaluation and Mitigation Strategy (REMS) programs** to ensure safe use[157](index=157&type=chunk) - The company is subject to numerous healthcare laws, including the federal **Anti-Kickback Statute** and **False Claims Act**, which regulate interactions with healthcare professionals and payors and prohibit off-label promotion[173](index=173&type=chunk)[333](index=333&type=chunk) - Sales are dependent on coverage and reimbursement from third-party payors. The company must comply with pricing and rebate programs like the **Medicaid Drug Rebate Program** and the **340B drug pricing program**[220](index=220&type=chunk)[222](index=222&type=chunk)[225](index=225&type=chunk) [Employees and Human Capital](index=45&type=section&id=Employees%20and%20Human%20Capital) As of February 2022, Sage employed 471 full-time staff, with a focus on diversity, equity, and inclusion, offering comprehensive benefits and professional development - As of **February 16, 2022**, the company had **471 full-time employees**: **253 in research and development** and **218 in selling, general and administrative roles**[240](index=240&type=chunk) - The company is committed to diversity, equity, and inclusion. As of **year-end 2021**, approximately **61% of its U.S. workforce identified as female** and **28% as racially or ethnically diverse**[241](index=241&type=chunk) - Sage offers comprehensive benefits and professional development opportunities, and enhanced support in response to the **COVID-19 pandemic**, including increased time off and resources for remote work[242](index=242&type=chunk)[243](index=243&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) Sage faces significant risks from limited ZULRESSO revenue, uncertain pipeline development, reliance on CMOs, intense competition, and future capital needs [Risks Related to Product Development, Regulatory Approval and Commercialization](index=47&type=section&id=Risks%20Related%20to%20Product%20Development%2C%20Regulatory%20Approval%20and%20Commercialization) Significant risks include limited ZULRESSO revenue, uncertain zuranolone development and approval, reliance on third-party manufacturing, intense competition, and challenges in market acceptance and reimbursement - The company may never generate meaningful revenues from ZULRESSO due to significant barriers, including its complex **2.5-day infusion administration**, a restrictive **REMS program**, and the continued adverse impact of the **COVID-19 pandemic**[253](index=253&type=chunk)[254](index=254&type=chunk) - Future prospects depend heavily on the successful development and regulatory approval of zuranolone. The company may not be successful in its plans to file for and obtain approval on expected timelines, or at all, as the FDA may find data insufficient or require additional trials[259](index=259&type=chunk)[266](index=266&type=chunk) - The company relies completely on **third-party suppliers for manufacturing**, and any failure by these suppliers to meet cGMP standards or pass regulatory inspections could significantly delay or halt product supply and development[292](index=292&type=chunk)[293](index=293&type=chunk) - Products may not achieve broad market acceptance or reimbursement at sufficient levels. Payors may impose restrictions, limit coverage, or require prior authorizations, which could impede product uptake and revenue generation[295](index=295&type=chunk)[296](index=296&type=chunk) - The company faces intense competition from existing therapies and pipeline candidates from other companies with greater resources, which could reduce the commercial opportunity for its products[309](index=309&type=chunk)[311](index=311&type=chunk) [Risks Related to Our Intellectual Property Rights](index=71&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property%20Rights) The company's success depends on securing and enforcing intellectual property, facing risks of patent invalidation, infringement claims, loss of licensed rights, and evolving patent laws - The company's success depends on its ability to obtain and maintain patent protection, but there is no assurance that pending applications will issue or that issued patents will be enforceable or provide a competitive advantage[351](index=351&type=chunk)[352](index=352&type=chunk)[354](index=354&type=chunk) - The company may infringe on the intellectual property rights of others, which could lead to costly litigation, substantial damages, and potentially prevent the commercialization of its products[361](index=361&type=chunk) - The company is dependent on licensed intellectual property for ZULRESSO and other candidates. Losing these rights due to breach of agreement or other factors could prevent the continued development or commercialization of these products[379](index=379&type=chunk) - Changes in U.S. patent law, such as the **America Invents Act** and various Supreme Court rulings, have increased uncertainty and could diminish the value of patents, impairing the ability to protect products[389](index=389&type=chunk)[390](index=390&type=chunk) [Risks Related to our Industry](index=80&type=section&id=Risks%20Related%20to%20our%20Industry) The company faces industry risks from healthcare cost-containment measures, drug pricing controls, and cybersecurity threats, which could impact profitability and operations - The company faces risks from healthcare reform and cost-containment measures, such as the **ACA** and other legislative proposals, which could impose price controls, restrict reimbursement, and negatively impact revenue and profitability[394](index=394&type=chunk)[395](index=395&type=chunk)[397](index=397&type=chunk) - Internal and third-party computer systems are vulnerable to security breaches and cyber-attacks, which could disrupt operations, compromise confidential data, and lead to significant financial and legal liabilities[401](index=401&type=chunk)[402](index=402&type=chunk) [Risks Related to Our Financial Position and Need for Capital](index=82&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Capital) Sage has a history of losses, uncertain profitability, and will require significant additional capital to fund operations, risking delays or termination of programs if funding is insufficient - The company has a history of significant operating losses, with an accumulated deficit of **$1.5 billion** as of **December 31, 2021**, and anticipates incurring losses for the foreseeable future[405](index=405&type=chunk)[406](index=406&type=chunk) - Future profitability depends on generating significant product revenue, which is uncertain and subject to numerous development, regulatory, and commercialization risks[408](index=408&type=chunk) - The company expects to require additional capital in the future to fund operations. Failure to obtain this funding on acceptable terms could force delays, limitations, or termination of product development or commercialization efforts[411](index=411&type=chunk)[416](index=416&type=chunk) - Raising additional capital may cause dilution to existing stockholders, and debt financing could impose restrictive covenants on the business[415](index=415&type=chunk) [Risks Related to Our Common Stock](index=84&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) The company's common stock price is highly volatile, influenced by clinical and regulatory outcomes, and future share sales or anti-takeover provisions could impact its value - The market price of the company's common stock is highly volatile and can be influenced by clinical trial outcomes, regulatory news, commercial results, and broader market conditions[418](index=418&type=chunk) - Anti-takeover provisions in the company's charter and under Delaware law could delay or prevent an acquisition, potentially hindering stockholder value[420](index=420&type=chunk) - Future sales of a substantial number of shares, such as those held by BIMA which become eligible for sale after **June 30, 2022**, could reduce the market price of the common stock[421](index=421&type=chunk) [Unresolved Staff Comments](index=85&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None[422](index=422&type=chunk) [Properties](index=85&type=section&id=Item%202.%20Properties) The company's corporate headquarters are in Cambridge, Massachusetts, where it leases approximately 103,436 square feet of office space across two multi-tenant buildings, with both leases expiring on August 31, 2024 - The company leases **63,017 square feet** of office space for its corporate headquarters in Cambridge, Massachusetts, with the lease expiring on **August 31, 2024**[423](index=423&type=chunk) - An additional **40,419 square feet** of office space is leased in a separate building in Cambridge, Massachusetts, with this lease also expiring on **August 31, 2024**[424](index=424&type=chunk) [Legal Proceedings](index=86&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any legal proceedings and is not aware of any material claims or actions pending or threatened against it - The company is not a party to any legal proceedings and is unaware of any material pending or threatened claims[425](index=425&type=chunk) [Mine Safety Disclosures](index=86&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[426](index=426&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=87&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the Nasdaq Global Market under "SAGE", with five stockholders of record as of February 16, 2022, and no cash dividends anticipated - The company's common stock began trading on the Nasdaq Global Market under the symbol **"SAGE"** on **July 18, 2014**[429](index=429&type=chunk) - As of **February 16, 2022**, there were **five stockholders of record**[430](index=430&type=chunk) - The company has never paid cash dividends and does not anticipate paying any in the foreseeable future[434](index=434&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=89&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Sage Therapeutics reported a net loss of $457.9 million for 2021, driven by the absence of 2020's $1.1 billion Biogen collaboration revenue, ending 2021 with $1.7 billion in cash [Results of Operations](index=103&type=section&id=Results%20of%20Operations) For 2021, Sage reported a net loss of $457.9 million, a shift from 2020's $606.1 million net income, primarily due to the absence of $1.1 billion in Biogen collaboration revenue Comparison of Results of Operations (2021 vs. 2020) | Financial Metric | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | | :--- | :--- | :--- | :--- | | **Total Revenue** | **$6,308** | **$1,114,200** | **($1,107,892)** | | Product revenue, net | $6,308 | $6,700 | ($392) | | Collaboration revenue - related party | $0 | $1,107,500 | ($1,107,500) | | **Total Operating Expenses** | **$467,217** | **$517,974** | **($50,757)** | | Cost of goods sold | $553 | $565 | ($12) | | Research and development | $283,166 | $292,714 | ($9,548) | | Selling, general and administrative | $183,498 | $196,952 | ($13,454) | | Restructuring | $0 | $27,743 | ($27,743) | | **Income (Loss) from Operations** | **($460,909)** | **$596,226** | **($1,057,135)** | | **Net Income (Loss)** | **($457,892)** | **$606,073** | **($1,063,965)** | - The decrease in total revenue was driven by the **$1.1 billion in collaboration revenue from Biogen** recognized in 2020, which did not recur in 2021[520](index=520&type=chunk) - R&D expenses decreased by **$9.5 million**, primarily due to a **$79.8 million net reimbursement from Biogen**, which offset increased spending on zuranolone manufacturing and SAGE-718 development[524](index=524&type=chunk)[527](index=527&type=chunk) - SG&A expenses decreased by **$13.5 million**, mainly due to lower personnel costs following the 2020 restructuring and an **$11.3 million net reimbursement from Biogen**[526](index=526&type=chunk)[528](index=528&type=chunk) [Liquidity and Capital Resources](index=106&type=section&id=Liquidity%20and%20Capital%20Resources) As of December 31, 2021, Sage had $1.7 billion in cash, cash equivalents, and marketable securities, with existing capital expected to fund operations for at least the next 24 months - As of **December 31, 2021**, the company's cash, cash equivalents, and marketable securities totaled **$1.7 billion**[532](index=532&type=chunk) Summary of Cash Flows (2021 vs. 2020) | Cash Flow Activity | 2021 (in thousands) | 2020 (in thousands) | | :--- | :--- | :--- | | Net cash (used in) provided by Operating Activities | ($378,182) | $664,280 | | Net cash (used in) provided by Investing Activities | ($1,002,448) | $442,684 | | Net cash provided by Financing Activities | $13,334 | $426,762 | - The company expects its existing cash and collaboration funding to be sufficient to fund operating expenses and capital requirements for at least the **next 24 months** from the filing date of the report[539](index=539&type=chunk) - Future capital requirements will depend on many factors, including ZULRESSO revenues, costs for zuranolone's potential launch, and the progress of other pipeline candidates[541](index=541&type=chunk)[542](index=542&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=110&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its $1.7 billion investment portfolio, though the short-term nature of these investments limits material impact, and foreign currency risk is immaterial - The company's primary market risk is interest rate fluctuations on its **$1.7 billion** in cash, cash equivalents, and marketable securities as of **December 31, 2021**[545](index=545&type=chunk) - Due to the short-term nature of its investments, management does not expect interest rate changes to have a material impact on the company's financial condition[545](index=545&type=chunk) - Exposure to foreign currency exchange rate risk is considered immaterial, and the company does not hedge this exposure[546](index=546&type=chunk) [Financial Statements and Supplementary Data](index=110&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for 2021 and PricewaterhouseCoopers LLP's unqualified opinion, highlighting accrued research and development costs as a critical audit matter [Report of Independent Registered Public Accounting Firm](index=114&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) PricewaterhouseCoopers LLP issued an unqualified opinion on Sage Therapeutics' 2021 consolidated financial statements and internal control over financial reporting, identifying "Accrued Research and Development Costs" as a critical audit matter - The auditor, PricewaterhouseCoopers LLP, issued an **unqualified (clean) opinion** on the consolidated financial statements and the effectiveness of internal control over financial reporting as of **December 31, 2021**[573](index=573&type=chunk) - The audit identified **"Accrued Research and Development Costs"** as a Critical Audit Matter. This was due to the significant management judgment required to estimate these costs, which in turn required a high degree of auditor judgment and effort to evaluate[581](index=581&type=chunk)[582](index=582&type=chunk) [Consolidated Financial Statements](index=116&type=section&id=Consolidated%20Financial%20Statements) The 2021 consolidated financial statements show total assets of $1.83 billion, a net loss of $457.9 million (compared to 2020's $606.1 million net income), and an accumulated deficit of $1.5 billion Consolidated Balance Sheet Data (as of Dec 31) | (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $294,233 | $1,661,082 | | Marketable securities | $1,448,063 | $438,467 | | **Total Assets** | **$1,825,288** | **$2,159,246** | | Total current liabilities | $85,193 | $67,204 | | **Total Liabilities** | **$96,257** | **$86,912** | | Accumulated deficit | ($1,495,386) | ($1,037,494) | | **Total Stockholders' Equity** | **$1,729,031** | **$2,072,334** | Consolidated Statement of Operations Data (Year Ended Dec 31) | (in thousands) | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Total Revenue | $6,308 | $1,114,200 | $6,868 | | R&D Expenses | $283,166 | $292,714 | $368,815 | | SG&A Expenses | $183,498 | $196,952 | $345,777 | | **Net Income (Loss)** | **($457,892)** | **$606,073** | **($680,238)** | | **Net Income (Loss) Per Share - Diluted** | **($7.80)** | **$11.43** | **($13.38)** | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=110&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports that there were no changes in or disagreements with its accountants on accounting and financial disclosure - None[550](index=550&type=chunk) [Controls and Procedures](index=110&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, a conclusion affirmed by PricewaterhouseCoopers LLP's unqualified opinion - Management concluded that the company's disclosure controls and procedures were **effective** as of **December 31, 2021**[552](index=552&type=chunk) - Management concluded that the company's internal control over financial reporting was **effective** as of **December 31, 2021**, based on the COSO framework[553](index=553&type=chunk) - The effectiveness of internal control over financial reporting was audited by PricewaterhouseCoopers LLP, which issued an **unqualified opinion**[554](index=554&type=chunk) [Other Information](index=111&type=section&id=Item%209B.%20Other%20Information) This item is not applicable to the company - Not applicable[556](index=556&type=chunk) [Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=111&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[557](index=557&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=112&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 proxy statement, and the company has adopted a Code of Business Conduct and Ethics - Information required by this item is incorporated by reference from the company's **2022 proxy statement**[559](index=559&type=chunk) - The company has adopted a **Code of Business Conduct and Ethics (Values Code)** applicable to all employees, officers, and directors[560](index=560&type=chunk) [Executive Compensation](index=112&type=section&id=Item%2011.%20Executive%20Compensation) Information concerning executive compensation is incorporated by reference from the company's definitive Proxy Statement for its 2022 annual meeting of shareholders - Information required by this item is incorporated by reference from the company's **2022 proxy statement**[561](index=561&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=112&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership and equity compensation plans is incorporated by reference from the company's definitive Proxy Statement for its 2022 annual meeting of shareholders - Information required by this item is incorporated by reference from the company's **2022 proxy statement**[562](index=562&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=112&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information concerning related party transactions and director independence is incorporated by reference from the company's definitive Proxy Statement for its 2022 annual meeting of shareholders - Information required by this item is incorporated by reference from the company's **2022 proxy statement**[563](index=563&type=chunk) [Principal Accounting Fees and Services](index=112&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information regarding principal accounting fees and services is incorporated by reference from the company's definitive Proxy Statement for its 2022 annual meeting of shareholders - Information required by this item is incorporated by reference from the company's **2022 proxy statement**[564](index=564&type=chunk) Part IV [Exhibits, Financial Statement Schedules](index=113&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements and exhibits filed with the report, with all financial statement schedules omitted as they are not applicable or included elsewhere - This item lists the financial statements and exhibits filed with the report. All financial statement schedules are omitted[566](index=566&type=chunk) [Form 10-K Summary](index=113&type=section&id=Item%2016.%20Form%2010-K%20Summary) This item is not applicable to the company - Not applicable[568](index=568&type=chunk)

J.P. Morgan Healthcare Conference January 2022 Safe Harbor Statement • The slides presented today and the accompanying oral presentations contain forward-looking statements, which may be identified by the use of words such as "may," "might," "will," "should," "can,","expect," "plan," "anticipate," "believe," "estimate," "project," "intend," "future," "opportunity", "goal", "mission", "potential," "target", or "continue," and other similar expressions. • Forward-looking statements in this presentation includ ...

Company Mission and Pipeline - Sage's mission is to be a top-tier biopharmaceutical company in the next 5 years, focusing on brain health[17] - The company has a rich pipeline across 3 franchises, including 3 late-stage programs and 5 NCE development programs across 12+ indications[17] - Sage aims for 2 or more IND-enabling programs per year by 2023[17] Zuranolone (SAGE-217) Development - Zuranolone is being developed for Major Depressive Disorder (MDD), Postpartum Depression (PPD), Treatment Resistant Depression, Generalized Anxiety Disorder, and Bipolar Depression[20, 21] - Clinical trials show consistent and rapid improvement in depressive symptoms with zuranolone[48] - Approximately 70% of participants with positive response to the initial 2-week course of zuranolone required only one or two courses of treatment during the 12-month SHORELINE study[54] - Shionogi's Phase 2 study in Japan achieved primary endpoints at both 20 mg and 30 mg doses, showing significant improvement over placebo from Day 3 to Day 15[71] SAGE-324 Development - SAGE-324 is being developed for Essential Tremor and Parkinson's Disease[23] - In an open-label, phase 1 study, a single dose of SAGE-324 resulted in nearly 50% tremor reduction in ET patients[97] - The KINETIC Study showed a statistically significant reduction from baseline in Upper Limb Tremor Score at Day 29 with SAGE-324[101] SAGE-718 Development - SAGE-718 is being developed for Huntington's Disease Cognitive Dysfunction, Parkinson's Disease Cognitive Dysfunction, and Alzheimer's Disease Mild Cognitive Impairment and Mild Dementia[24, 25] - In the Phase 2a open-label PARADIGM Study, patients with mild cognitive impairment due to Parkinson's disease showed performance improvements from baseline on multiple tests in the cognitive domain of executive function during the 14 days of treatment[132] Financial Position - Sage has over $1.8 billion in capital to fund efforts to accelerate and advance medicines[17] - The company anticipates a cash balance of more than $1.7 billion at the end of 2021[155] - Third quarter 2021 revenue from Zulresso was $1.4 million[155]

Financial Data and Key Metrics Changes - The company recorded $1.4 million in net revenue for Q3 2021 from the sale of ZULRESSO, a decrease from $1.6 million in the same period of 2020 [57] - Research and development expenses increased to $83.5 million in Q3 2021 from $74.1 million in Q3 2020, reflecting planned expansion of the pipeline [59] - Selling, general and administrative expenses rose to $48.7 million in Q3 2021 compared to $35.1 million in Q3 2020, driven by increased hiring and launch readiness activities [60] - The net loss for Q3 2021 was $130.2 million, including $34 million of non-cash stock-based compensation, compared to a net loss of $105.7 million in Q3 2020 [61] - The company expects to have a cash balance of more than $1.7 billion at the end of 2021 [62] Business Line Data and Key Metrics Changes - The zuranolone program has shown significant clinical progress, with four positive studies supporting the NDA filing [9][11] - The company is preparing to initiate a Phase 2 dose-ranging study for SAGE-324, which is aimed at treating essential tremor and other neurological disorders [21][45] - SAGE-718 received fast track designation for Huntington's disease, with plans for a Phase 2 study in early to moderate Huntington's disease expected to begin this year [22][50] Market Data and Key Metrics Changes - The MDD market is estimated to have 19 million sufferers annually, indicating a significant opportunity for zuranolone if approved [36] - The company is actively engaging with key opinion leaders (KOLs) to discuss the potential of zuranolone in clinical practice [18] Company Strategy and Development Direction - The company aims to submit an NDA for zuranolone in MDD in the second half of 2022 and for PPD in the first half of 2023 [9] - The strategic focus is on building a robust data package to support the launch of zuranolone and to educate physicians on its use [19][36] - The company is expanding its neurology franchise with SAGE-324 and SAGE-718, targeting significant unmet needs in neurological disorders [20][48] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to execute on strategic goals and become a leader in brain health [31] - The management highlighted the importance of rapid relief of depressive symptoms as a key differentiator for zuranolone compared to traditional antidepressants [19][114] - The company is optimistic about the potential of its pipeline and the impact it can have on patients suffering from brain health disorders [55] Other Important Information - The company announced the departure of its Chief Medical Officer, Steve Kanes, who will pursue a CEO role at a private biotech company [28] - The company welcomed new executives to its leadership team, indicating a focus on strengthening its organizational capabilities [26] Q&A Session Summary Question: About the CORAL primary endpoint change - Management confirmed that the change was driven by feedback from the FDA to demonstrate rapid relief of depressive symptoms early in clinical trials [66][67] Question: Importance of seeing a separation from placebo at later time points - Management emphasized that the totality of data across multiple studies will be important for physicians, rather than focusing on individual studies [73] Question: Final sample size of CORAL and FDA conversations - Management indicated that statistical significance at later time points is not required, focusing instead on consistent and durable impact [81][84] Question: Day 3 placebo responses and filing data - Management explained that the day 3 data will be beneficial for educating physicians about zuranolone's rapid onset of action [91][92] Question: SAGE-324 Phase 2 study details - Management confirmed that the Phase 2 study will be a dose-ranging study to find an appropriate balance between efficacy and tolerability [97] Question: KOL conversations and potential launch concerns - Management noted that treating physicians are increasingly recognizing the differentiated profile and safety of zuranolone compared to traditional treatments [106][109] Question: Linkage between day 3 separation and remission rates - Management highlighted the clinical significance of rapid relief of depressive symptoms and the importance of the CORAL study in demonstrating this [114]

[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q%20Filing%20Information) Essential filing details for Sage Therapeutics, Inc.'s Form 10-Q, including registrant, securities, and filer status [Registrant Details](index=1&type=section&id=Registrant%20Details) Basic filing information for Sage Therapeutics, Inc.'s Form 10-Q, covering registrant, securities, and filer status - Registrant: Sage Therapeutics, Inc., incorporated in Delaware[2](index=2&type=chunk) Securities Registered | Title of each class | Trading Symbol(s) | Name of each exchange on which registered | | :--- | :--- | :--- | | Common Stock, par value $0.0001 per share | SAGE | The Nasdaq Global Market | - Filer Status: **Large accelerated filer**, not an emerging growth company[3](index=3&type=chunk)[4](index=4&type=chunk) - **58,908,485 shares of common stock** outstanding as of October 26, 2021[4](index=4&type=chunk) [Cautionary Note Regarding Forward-Looking Statements](index=2&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section warns of forward-looking statements subject to various risks and uncertainties within the report [Overview of Forward-Looking Statements and Risks](index=2&type=section&id=Overview%20of%20Forward-Looking%20Statements%20and%20Risks) Forward-looking statements regarding ZULRESSO, zuranolone, and financial estimates are subject to significant risks and uncertainties - Forward-looking statements cover potential future results of **ZULRESSO commercialization**, planned clinical and regulatory activities for **zuranolone** (MDD and PPD), development of other brain health product candidates, and financial projections[6](index=6&type=chunk) - Actual results may differ materially due to known and unknown risks, uncertainties, and other factors, as detailed in Part II, Item 1A, Risk Factors[7](index=7&type=chunk) - Estimates and projections regarding industry, business environment, and market sizes are inherently uncertain and may not be accurate[8](index=8&type=chunk) - Key risks include competition, impact of **COVID-19**, and the success of ZULRESSO commercialization and product candidate development/approval[10](index=10&type=chunk)[11](index=11&type=chunk) [PART I – FINANCIAL INFORMATION](index=6&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and management's analysis [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Sage Therapeutics' unaudited condensed consolidated financial statements, including balance sheets, operations, cash flows, equity, and explanatory notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | Item | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $422,165 | $1,661,082 | | Marketable securities | $1,421,004 | $438,467 | | Total current assets | $1,901,697 | $2,122,370 | | Total assets | $1,927,180 | $2,159,246 | | Total current liabilities | $78,942 | $67,204 | | Total liabilities | $91,526 | $86,912 | | Total stockholders' equity | $1,835,654 | $2,072,334 | - Cash and cash equivalents decreased significantly from **$1.66 billion** at Dec 31, 2020, to **$422.2 million** at Sep 30, 2021[20](index=20&type=chunk) - Marketable securities increased from **$438.5 million** at Dec 31, 2020, to **$1.42 billion** at Sep 30, 2021[20](index=20&type=chunk) - Total assets decreased by approximately **$232 million**, while total liabilities increased by approximately **$4.6 million**[20](index=20&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section details the company's financial performance over specific periods, including revenue, operating costs, and net loss Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands, except per share data) | Item | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | :--- | :--- | | Product revenue, net | $1,440 | $1,639 | $4,666 | $5,014 | | Total operating costs and expenses | $132,334 | $108,797 | $340,088 | $382,764 | | Loss from operations | $(130,894) | $(107,158) | $(335,422) | $(377,750) | | Net loss | $(130,171) | $(105,735) | $(333,180) | $(368,822) | | Net loss per share—basic and diluted | $(2.21) | $(2.03) | $(5.69) | $(7.10) | - Net loss for the three months ended September 30, 2021, increased to **$130.2 million** from **$105.7 million** in the prior year period[22](index=22&type=chunk) - Net loss for the nine months ended September 30, 2021, decreased to **$333.2 million** from **$368.8 million** in the prior year period[22](index=22&type=chunk) - Product revenue, net, slightly decreased both for the three-month (**$1.4 million** vs **$1.6 million**) and nine-month (**$4.7 million** vs **$5.0 million**) periods year-over-year[22](index=22&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section outlines the sources and uses of cash over specific periods, categorized into operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | Item | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(280,681) | $(346,691) | | Net cash provided by (used in) investing activities | $(972,187) | $397,165 | | Net cash provided by financing activities | $13,504 | $7,091 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(1,239,364) | $57,565 | | Cash, cash equivalents and restricted cash at end of period | $423,434 | $186,637 | - Net cash used in operating activities decreased from **$346.7 million** in 2020 to **$280.7 million** in 2021[25](index=25&type=chunk) - Net cash from investing activities shifted from a **$397.2 million inflow** in 2020 to a **$972.2 million outflow** in 2021, primarily due to purchases of marketable securities[25](index=25&type=chunk) - Net cash provided by financing activities increased to **$13.5 million** in 2021 from **$7.1 million** in 2020[25](index=25&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This section details the changes in the company's equity over time, reflecting net losses, stock transactions, and other comprehensive income - Total stockholders' equity decreased from **$2.07 billion** at December 31, 2020, to **$1.84 billion** at September 30, 2021[28](index=28&type=chunk) - Accumulated deficit increased from **$(1.04) billion** to **$(1.37) billion**, reflecting ongoing net losses[28](index=28&type=chunk) - Additional paid-in capital increased by approximately **$97 million**, primarily due to stock option exercises and stock-based compensation expense[28](index=28&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, fair value, and specific balance sheet components [1. Nature of the Business](index=11&type=section&id=1.%20Nature%20of%20the%20Business) This section describes Sage Therapeutics' core business as a biopharmaceutical company focused on brain disorders, its approved product ZULRESSO, and financial outlook - Sage Therapeutics is a biopharmaceutical company focused on developing and commercializing medicines for debilitating brain disorders[30](index=30&type=chunk) - The company's first approved product is **ZULRESSO® (brexanolone) CIV injection for postpartum depression (PPD)** in adults, launched in June 2019[31](index=31&type=chunk) - Current product candidates focus on modulating GABA and NMDA receptor systems for depression, neurology, and neuropsychiatry[31](index=31&type=chunk) - The company expects existing cash, cash equivalents, and marketable securities to fund operations for at least the next **12 months**, but anticipates needing additional financing thereafter[35](index=35&type=chunk) - The **COVID-19 pandemic has negatively impacted ZULRESSO demand** and clinical trial recruitment, particularly for older patients and PPD patients in the SKYLARK Study[36](index=36&type=chunk) [2. Summary of Significant Accounting Policies](index=12&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the key accounting principles and methods used in preparing the financial statements, including revenue recognition, R&D costs, and fair value measurements - Financial statements are condensed and unaudited, prepared in accordance with **GAAP**, and include normal recurring adjustments[38](index=38&type=chunk)[39](index=39&type=chunk) - Estimates and assumptions are made, particularly regarding the impact of the **COVID-19 pandemic**, which may change[41](index=41&type=chunk) - **Research and development costs are expensed as incurred**, with accruals based on progress and contractual terms[43](index=43&type=chunk)[44](index=44&type=chunk) - **Revenue is recognized when control of promised goods or services transfers to the customer**, following a five-step model (Topic 606)[46](index=46&type=chunk)[47](index=47&type=chunk) - Product revenue from **ZULRESSO is recognized net of variable consideration** (e.g., chargebacks, government rebates, trade discounts, financial assistance, product returns)[56](index=56&type=chunk)[58](index=58&type=chunk) - Collaboration arrangements are assessed under Topic 808 and Topic 606, with co-development/commercialization activities recorded as expense adjustments[65](index=65&type=chunk)[66](index=66&type=chunk) - Fair value measurements classify cash equivalents and marketable securities primarily within **Level 1 and Level 2** of the fair value hierarchy[67](index=67&type=chunk)[72](index=72&type=chunk) [3. Fair Value Measurements](index=18&type=section&id=3.%20Fair%20Value%20Measurements) This section details the fair value hierarchy and valuation methods applied to the company's financial assets, primarily cash equivalents and marketable securities Fair Value of Cash Equivalents and Marketable Securities (in thousands) as of September 30, 2021 | Category | Total | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Cash equivalents | $422,165 | $421,570 | $595 | $— | | Marketable securities | $1,421,004 | $— | $1,421,004 | $— | | **Total** | **$1,843,169** | **$421,570** | **$1,421,599** | **$—** | Fair Value of Cash Equivalents and Marketable Securities (in thousands) as of December 31, 2020 | Category | Total | Level 1 | Level 2 | Level 3 | | :--- | :--- | :--- | :--- | :--- | | Cash equivalents | $1,661,082 | $1,637,609 | $23,473 | $— | | Marketable securities | $438,467 | $— | $438,467 | $— | | **Total** | **$2,099,549** | **$1,637,609** | **$461,940** | **$—** | - Marketable securities are primarily U.S. government securities, U.S. and international corporate bonds, and commercial paper, classified within **Level 2**[75](index=75&type=chunk) - As of September 30, 2021, **$486.1 million of marketable securities had maturities of one to two years**; all others had maturities of one year or less[78](index=78&type=chunk) [4. Balance Sheet Components](index=20&type=section&id=4.%20Balance%20Sheet%20Components) This section provides a detailed breakdown of specific balance sheet items, including property and equipment, and accrued research and development costs Property and Equipment, net (in thousands) | Item | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Computer hardware and software | $1,260 | $2,758 | | Furniture and equipment | $897 | $1,865 | | Leasehold improvements | $5,799 | $9,220 | | Less: Accumulated depreciation | $(5,049) | $(7,088) | | **Total** | **$2,907** | **$6,755** | - **Depreciation expense for the nine months ended September 30, 2021, was $3.8 million**, up from **$2.0 million** in 2020[83](index=83&type=chunk) - **Accrued research and development costs increased to $44.8 million** at Sep 30, 2021, from **$34.4 million** at Dec 31, 2020[87](index=87&type=chunk) [5. Leases, Commitments and Contingencies](index=21&type=section&id=5.%20Leases,%20Commitments%20and%20Contingencies) This section outlines the company's lease obligations, contractual commitments, and potential contingencies, including license agreements and milestone payments - The company leases office space and equipment, with remaining lease terms up to approximately **three years**[88](index=88&type=chunk) - Operating leases for office space in Cambridge, Massachusetts, were terminated or subleased during 2021, leading to de-recognition of right-of-use assets[90](index=90&type=chunk)[85](index=85&type=chunk) - The company has license agreements with CyDex, University of California, and Washington University for various compounds, involving royalties and milestone payments[93](index=93&type=chunk)[97](index=97&type=chunk)[98](index=98&type=chunk)[100](index=100&type=chunk) - An additional clinical development milestone for **SAGE-689** under the CyDex agreement resulted in **$0.1 million expense** in Q3 2021[95](index=95&type=chunk) - An additional clinical development milestone for **SAGE-689** under the Washington University agreement resulted in **$0.1 million expense** in Q3 2021[102](index=102&type=chunk) [6. Collaboration Agreements](index=23&type=section&id=6.%20Collaboration%20Agreements) This section details the company's strategic collaboration agreements with Shionogi and Biogen, outlining their scope, financial terms, and cost-sharing arrangements - **Shionogi Collaboration**: For **zuranolone** in Japan, Taiwan, and South Korea; Shionogi is responsible for development, regulatory filings, and commercialization; Sage received a **$90.0 million upfront payment** in 2018 and is eligible for up to **$485.0 million in milestones** and tiered royalties[103](index=103&type=chunk)[104](index=104&type=chunk)[105](index=105&type=chunk) - **Biogen Collaboration**: Joint development and commercialization of **SAGE-217 (zuranolone)** and **SAGE-324** in the U.S., with Biogen having exclusive rights outside the U.S. (excluding Shionogi Territory)[111](index=111&type=chunk)[112](index=112&type=chunk) - **Biogen Collaboration Financials**: Sage received **$1.5 billion** in consideration in December 2020 (**$875.0 million upfront payment** + **$650.0 million from stock purchase**); Eligible for up to **$1.6 billion in additional milestones** and tiered royalties (high teens to low twenties)[113](index=113&type=chunk)[114](index=114&type=chunk) - **Biogen Collaboration Cost Sharing**: In the U.S., Sage and Biogen share equally in development, commercialization costs, profits, and losses; Biogen is solely responsible for costs in the Biogen Territory[117](index=117&type=chunk) - **Net reimbursement from Biogen**: **$24.2 million for Q3 2021** and **$72.6 million for the nine months ended Sep 30, 2021**, reducing R&D and SG&A expenses[126](index=126&type=chunk)[127](index=127&type=chunk) - **Biogen Stock Purchase Agreement**: BIMA purchased **6,241,473 shares for $650.0 million** at a **40% premium**; The excess proceeds of **$232.5 million** were included in the Biogen Collaboration Agreement's transaction price[129](index=129&type=chunk)[131](index=131&type=chunk) [7. Common Stock](index=29&type=section&id=7.%20Common%20Stock) This section provides details on the company's common stock, including significant transactions such as the private placement with BIMA - On December 31, 2020, the company sold **6,241,473 shares of common stock to BIMA for $650.0 million** in a private placement[133](index=133&type=chunk) [8. Stock-Based Compensation](index=29&type=section&id=8.%20Stock-Based%20Compensation) This section details the company's stock-based compensation plans, including unrecognized expenses and the impact on operating costs - **Total unrecognized stock-based compensation expense** for unvested time-based restricted stock units and performance restricted stock units was **$64.7 million** as of September 30, 2021[148](index=148&type=chunk) - Unrecognized stock-based compensation expense for unvested time-based stock options was **$115.8 million**, to be recognized over **2.25 years**[149](index=149&type=chunk) - **Stock-based compensation expense for Q3 2021 was $34.3 million** (vs **$20.1 million** in Q3 2020), and for the nine months ended Sep 30, 2021, was **$84.0 million** (vs **$75.3 million** in 2020)[156](index=156&type=chunk) - The increase in Q3 2021 stock-based compensation was primarily due to the determination that a milestone for certain performance restricted stock units was probable, resulting in **$7.9 million of expense**[207](index=207&type=chunk) [9. Net Loss Per Share](index=32&type=section&id=9.%20Net%20Loss%20Per%20Share) This section presents the calculation of basic and diluted net loss per share, reflecting the company's overall profitability relative to its outstanding shares Net Loss Per Share (Basic and Diluted) | Period | Net Loss (in thousands) | Weighted Average Common Stock Outstanding | Net Loss Per Share | | :--- | :--- | :--- | :--- | | 3 Months Ended Sep 30, 2021 | $(130,171) | 58,819,548 | $(2.21) | | 3 Months Ended Sep 30, 2020 | $(105,735) | 51,981,468 | $(2.03) | | 9 Months Ended Sep 30, 2021 | $(333,180) | 58,593,743 | $(5.69) | | 9 Months Ended Sep 30, 2020 | $(368,822) | 51,938,923 | $(7.10) | - Common stock equivalents (stock options, restricted stock units, ESPP) were excluded from diluted EPS calculation as they were anti-dilutive due to net losses[158](index=158&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial condition and results of operations, highlighting key business developments, financial performance, and liquidity [Overview](index=33&type=section&id=Overview) This section provides a high-level summary of Sage Therapeutics' business, product pipeline, financial performance, and capital resources - Sage Therapeutics is a biopharmaceutical company focused on brain disorders, with **ZULRESSO® (brexanolone) CIV injection approved for PPD** in the U.S.[161](index=161&type=chunk)[164](index=164&type=chunk) - Key product candidates include **zuranolone** (MDD and PPD, NDA planned for MDD in H2 2022, PPD in H1 2023), **SAGE-324** for essential tremor (Phase 2 dose-ranging trial in late 2021), and **SAGE-718** for cognition-related disorders (Fast Track for Huntington's, Phase 2 trials planned)[165](index=165&type=chunk)[166](index=166&type=chunk)[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - The company has incurred significant net losses, with an **accumulated deficit of $1.4 billion** as of September 30, 2021, and expects increasing operating losses due to R&D and commercialization costs[173](index=173&type=chunk) - Existing cash, cash equivalents, and marketable securities are expected to fund operations for at least the next **12 months**[176](index=176&type=chunk) [Financial Operations Overview](index=37&type=section&id=Financial%20Operations%20Overview) This section provides an overview of the company's financial operations, including revenue streams, collaborative arrangements, cost of goods sold, and operating expenses [Revenue](index=37&type=section&id=Revenue) This section discusses the company's revenue sources, primarily ZULRESSO product sales and collaboration revenue, and factors impacting their performance - **ZULRESSO product sales revenue has been negatively impacted** by complex treatment requirements (REMS, formulary approvals, reimbursement) and the **COVID-19 pandemic**[179](index=179&type=chunk)[180](index=180&type=chunk) - Commercial efforts for ZULRESSO are focused on existing, active treating sites, which is expected to limit revenue growth[181](index=181&type=chunk) - Collaboration revenue from Shionogi (**$90.0 million upfront in 2018**) and Biogen (**$1.1 billion in 2020**) is recognized based on license fees, clinical materials, and milestone payments[183](index=183&type=chunk)[184](index=184&type=chunk) [Collaborative Arrangements](index=38&type=section&id=Collaborative%20Arrangements) This section explains the accounting treatment for collaborative arrangements, particularly how payments and reimbursements from partners are recorded - Collaboration arrangements are assessed under **ASC Topic 808** (joint operating activities) and **Topic 606** (vendor-customer relationships)[185](index=185&type=chunk)[186](index=186&type=chunk) - Payments or reimbursements from collaborative partners for co-development and co-commercialization activities are recorded as adjustments to R&D or SG&A expenses[187](index=187&type=chunk) [Cost of Goods Sold](index=39&type=section&id=Cost%20of%20Goods%20Sold) This section defines the components of cost of goods sold, including manufacturing, distribution, royalties, and the impact of expensed pre-approval inventory - Cost of goods sold includes manufacturing, distribution, third-party royalties, and amortization of intangible assets for ZULRESSO[188](index=188&type=chunk) - Manufacturing costs for ZULRESSO inventory built before FDA approval were expensed in prior periods, resulting in zero-cost inventory for an extended period[205](index=205&type=chunk) [Operating Expenses](index=39&type=section&id=Operating%20Expenses) This section broadly categorizes the company's operating expenses into research and development and selling, general and administrative activities - Operating expenses primarily consist of **research and development (R&D)** and **selling, general and administrative (SG&A)** activities[189](index=189&type=chunk) [Research and Development Expenses](index=39&type=section&id=Research%20and%20Development%20Expenses) This section details the components of R&D expenses, including personnel, clinical trial costs, and the impact of collaboration reimbursements - R&D expenses are expensed as incurred and include personnel, CROs, manufacturing materials, consultants, regulatory activities, and license payments[190](index=190&type=chunk) - **R&D expenses were reduced by $21.6 million (Q3 2021) and $63.8 million (9M 2021)** due to net reimbursement from Biogen for co-development activities[191](index=191&type=chunk) - R&D expenses are expected to increase due to advancing clinical trials and non-clinical studies for product candidates[194](index=194&type=chunk) - **COVID-19 pandemic may negatively impact development activities**, causing delays and increased R&D costs, particularly in patient recruitment[195](index=195&type=chunk) [Selling, General and Administrative Expenses](index=41&type=section&id=Selling,%20General%20and%20Administrative%20Expenses) This section outlines the components of SG&A expenses, including personnel, professional fees, and the impact of collaboration reimbursements - SG&A expenses include personnel, stock-based compensation, professional fees (commercialization, pre-launch, legal), and corporate infrastructure costs[198](index=198&type=chunk) - **SG&A expenses were reduced by $2.6 million (Q3 2021) and $8.8 million (9M 2021)** due to net reimbursement from Biogen for co-commercialization activities[200](index=200&type=chunk) - SG&A expenses are expected to increase with development and potential commercialization of zuranolone and other product candidates[199](index=199&type=chunk) [Results of Operations](index=42&type=section&id=Results%20of%20Operations) This section provides a comparative analysis of the company's financial performance for the three and nine months ended September 30, 2021 and 2020 [Comparison of the Three Months Ended September 30, 2021 and 2020](index=42&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030,%202021%20and%202020) This section compares key financial metrics for the three-month periods, highlighting changes in revenue, operating expenses, and net loss Key Financials (Three Months Ended September 30, in thousands) | Item | 2021 | 2020 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Product revenue, net | $1,440 | $1,639 | $(199) | | Research and development | $83,497 | $74,078 | $9,419 | | Selling, general and administrative | $48,706 | $35,099 | $13,607 | | Net loss | $(130,171) | $(105,735) | $(24,436) | - Product revenue decreased by **$0.2 million** due to complex treatment requirements and COVID-19 impact[203](index=203&type=chunk) - R&D expenses increased by **$9.4 million**, driven by SAGE-718 and other early-stage programs, and stock-based compensation, partially offset by Biogen reimbursements and decreased zuranolone/SAGE-324 expenses[206](index=206&type=chunk)[207](index=207&type=chunk) - SG&A expenses increased by **$13.6 million**, primarily due to higher personnel costs, stock-based compensation (milestone achievement), and professional fees for disease awareness and launch readiness[208](index=208&type=chunk)[209](index=209&type=chunk) [Comparison of the Nine Months Ended September 30, 2021 and 2020](index=45&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030,%202021%20and%202020) This section compares key financial metrics for the nine-month periods, detailing changes in revenue, operating expenses, and net loss Key Financials (Nine Months Ended September 30, in thousands) | Item | 2021 | 2020 | Increase (Decrease) | | :--- | :--- | :--- | :--- | | Product revenue, net | $4,666 | $5,014 | $(348) | | Research and development | $207,723 | $211,008 | $(3,285) | | Selling, general and administrative | $131,899 | $143,454 | $(11,555) | | Restructuring | $— | $27,873 | $(27,873) | | Net loss | $(333,180) | $(368,822) | $35,642 | - Net loss decreased by **$35.6 million**, primarily due to lower restructuring expenses and reduced personnel-related SG&A costs[210](index=210&type=chunk)[217](index=217&type=chunk) - R&D expenses decreased by **$3.3 million**, mainly due to Biogen reimbursements for zuranolone and SAGE-324, offset by increased spending on SAGE-718 and other early-stage programs[215](index=215&type=chunk)[216](index=216&type=chunk) - SG&A expenses decreased by **$11.6 million**, primarily due to the April 2020 workforce reduction, partially offset by increased stock-based compensation and professional fees[217](index=217&type=chunk) - Restructuring expense of **$27.9 million in 2020** was for one-time termination benefits from the April 2020 workforce reduction[218](index=218&type=chunk) [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses the company's ability to meet its financial obligations, detailing cash flows from operating, investing, and financing activities, and future capital requirements [Operating Activities](index=48&type=section&id=Operating%20Activities) This section details the net cash used in operating activities, driven by net loss and changes in working capital, partially offset by non-cash items - **Net cash used in operating activities was $280.7 million** for the nine months ended September 30, 2021, primarily due to net loss and changes in operating assets/liabilities, partially offset by non-cash items[222](index=222&type=chunk) [Investing Activities](index=48&type=section&id=Investing%20Activities) This section describes the net cash used in investing activities, primarily reflecting the investment of Biogen collaboration proceeds into marketable securities - **Net cash used in investing activities was $972.2 million** for the nine months ended September 30, 2021, primarily due to investing the majority of cash received from Biogen into marketable securities[224](index=224&type=chunk) [Financing Activities](index=49&type=section&id=Financing%20Activities) This section outlines the net cash provided by financing activities, primarily from stock option exercises - **Net cash provided by financing activities was $13.5 million** for the nine months ended September 30, 2021, an increase from **$7.1 million** in 2020, driven by stock option exercises[226](index=226&type=chunk) [Operating Capital Requirements](index=49&type=section&id=Operating%20Capital%20Requirements) This section discusses the company's future funding needs, dependence on existing capital, and potential impacts of raising additional capital - The company expects existing cash, cash equivalents, and marketable securities (**$1.8 billion** as of Sep 30, 2021) to fund operations for at least the next **12 months**[228](index=228&type=chunk) - Significant additional funding will be required in the future to support ongoing development, regulatory approvals, and potential commercialization of product candidates[227](index=227&type=chunk)[231](index=231&type=chunk) - Future capital requirements depend on ZULRESSO revenue, zuranolone launch costs, clinical trial progress, collaboration payments, market acceptance, and intellectual property costs[230](index=230&type=chunk)[233](index=233&type=chunk) - Raising additional capital may dilute existing stockholders, impose restrictive covenants, or require relinquishing rights to technologies[231](index=231&type=chunk) [Contractual Obligations and Commitments](index=50&type=section&id=Contractual%20Obligations%20and%20Commitments) This section confirms that there have been no material changes to the company's contractual obligations and commitments since the last annual report - No material changes to contractual obligations and commitments since the Annual Report[232](index=232&type=chunk) [Off-Balance Sheet Arrangements](index=51&type=section&id=Off-Balance%20Sheet%20Arrangements) This section states that the company does not have any off-balance sheet arrangements that would materially impact its financial position - The company does not have any off-balance sheet arrangements[234](index=234&type=chunk) [Application of Critical Accounting Policies](index=51&type=section&id=Application%20of%20Critical%20Accounting%20Policies) This section identifies the critical accounting policies, including revenue recognition and collaborative arrangements, and notes no material changes - Critical accounting policies include revenue recognition, collaborative arrangements, accrued research and development expenses, and stock-based compensation[235](index=235&type=chunk) - No material changes to critical accounting policies, except for collaborative arrangements[236](index=236&type=chunk) [Recently Issued Accounting Pronouncements](index=51&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section discusses the impact of recently issued accounting standards, noting no significant material effects on the company's financial statements - Adoption of **ASU No. 2019-12 (Income Taxes)** on January 1, 2021, did not have a significant impact[70](index=70&type=chunk) - Other recently issued or proposed accounting standards are not expected to have a material impact[71](index=71&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=52&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate fluctuations, foreign currency, and inflation, concluding they are currently immaterial - Primary market risk exposure is to fluctuations in **interest rates**, but due to the short-term nature of investments, a sudden change is not expected to have a material impact[240](index=240&type=chunk) - Exposure to **foreign currency exchange rates** from foreign vendors and subsidiaries is believed to be immaterial, and no hedging is performed[241](index=241&type=chunk) - No significant risk of default or illiquidity in cash, cash equivalents, and marketable securities, though investments are in excess of federally insured limits[242](index=242&type=chunk) - **Inflation** is not believed to have had a material effect on results of operations for the nine months ended September 30, 2021 and 2020[243](index=243&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures and reports no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=52&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms that management, with CEO and CFO, concluded the disclosure controls and procedures were effective as of September 30, 2021 - Management, with CEO and CFO participation, concluded that **disclosure controls and procedures were effective** at a reasonable assurance level as of September 30, 2021[245](index=245&type=chunk) [Changes in Internal Control over Financial Reporting](index=52&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) This section reports that no material changes to internal control over financial reporting occurred during the period covered by this report - No material changes to internal control over financial reporting occurred during the period covered by this Quarterly Report[246](index=246&type=chunk) [PART II – OTHER INFORMATION](index=53&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part contains additional information not covered in the financial statements, including legal proceedings, risk factors, and exhibits [Item 1. Legal Proceedings](index=53&type=section&id=Item%201.%20Legal%20Proceedings) This section confirms that as of September 30, 2021, no legal proceedings are expected to materially impact the company's financial position or operations - As of September 30, 2021, no legal proceedings are expected to have a material adverse impact on the company's financial position, results of operations, or cash flow[248](index=248&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks that could materially affect the company's business, financial condition, and operating results, spanning product development, intellectual property, and financial position [Risks Related to Product Development, Regulatory Approval and Commercialization](index=53&type=section&id=Risks%20Related%20to%20Product%20Development,%20Regulatory%20Approval%20and%20Commercialization) This section details risks associated with developing, gaining approval for, and commercializing products, including ZULRESSO sales, clinical trial outcomes, and market acceptance - **ZULRESSO commercialization faces significant barriers** due to complex administration requirements (REMS, infusion setting), reimbursement challenges, and negative impact from the **COVID-19 pandemic**, limiting revenue growth[250](index=250&type=chunk)[251](index=251&type=chunk)[253](index=253&type=chunk) - Future business heavily depends on successful development and regulatory approval of product candidates like **zuranolone** (MDD, PPD) and **SAGE-324**, with risks of clinical trial failures, delays, and regulatory non-approval[257](index=257&type=chunk)[258](index=258&type=chunk)[259](index=259&type=chunk) - Undesirable side effects from ZULRESSO or product candidates could limit commercial profile, delay approval, or lead to regulatory actions like boxed warnings or REMS modifications[265](index=265&type=chunk)[267](index=267&type=chunk) - Obtaining regulatory approval is complex, lengthy, and uncertain; the FDA may delay, limit, or deny approval for various reasons, including insufficient data or disagreements on trial design[268](index=268&type=chunk) - The **COVID-19 pandemic continues to adversely impact ZULRESSO sales** and may cause delays in clinical trial initiation, enrollment, and completion, increasing R&D costs[273](index=273&type=chunk)[274](index=274&type=chunk) - Market size estimates for target diseases (PPD, MDD, essential tremor) may be smaller than anticipated, affecting revenue potential and patient enrollment[276](index=276&type=chunk)[277](index=277&type=chunk) - Positive results from early-stage studies are not predictive of later-stage success, and interim results may not be replicated in completed trials[278](index=278&type=chunk)[279](index=279&type=chunk) - Reliance on third parties (CROs, manufacturers) for clinical trials and supply carries risks of non-compliance, delays, and quality control issues, potentially hindering regulatory approval and commercialization[291](index=291&type=chunk)[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk)[295](index=295&type=chunk) - Broad market acceptance and adequate reimbursement for ZULRESSO or future products are not guaranteed, facing challenges from payor restrictions, cost containment, and competition[296](index=296&type=chunk)[297](index=297&type=chunk)[298](index=298&type=chunk)[299](index=299&type=chunk)[300](index=300&type=chunk) - Post-marketing obligations, potential controlled substance scheduling, and ongoing regulatory compliance (GMPs) pose significant costs and risks, including market withdrawal or manufacturing suspension[302](index=302&type=chunk)[304](index=304&type=chunk)[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Intense competition from other biopharmaceutical companies, including those with greater resources and similar products, could adversely affect revenue generation[310](index=310&type=chunk)[311](index=311&type=chunk)[312](index=312&type=chunk)[313](index=313&type=chunk)[314](index=314&type=chunk)[315](index=315&type=chunk) - Collaborations (Biogen, Shionogi) may not lead to successful development or commercialization due to competing priorities, conflicting incentives, or termination, impacting financial prospects[317](index=317&type=chunk)[319](index=319&type=chunk) - Failure to identify new product candidates or successfully advance IND applications, or misallocation of limited resources, could hinder future growth[322](index=322&type=chunk)[323](index=323&type=chunk) - Future growth requires significant expansion of the company, including personnel and systems, which may be difficult to manage effectively[324](index=324&type=chunk) - Inability to attract and retain qualified personnel, especially in a competitive environment, could adversely affect development efforts[326](index=326&type=chunk) - Product liability exposure from ZULRESSO sales and clinical trials could result in substantial liabilities, even with insurance coverage[327](index=327&type=chunk)[328](index=328&type=chunk) - Non-compliance with government pricing programs (Medicaid Drug Rebate Program) could lead to penalties, sanctions, and fines[329](index=329&type=chunk)[330](index=330&type=chunk) - Subject to various healthcare laws and regulations (anti-kickback, False Claims Act, HIPAA, Sunshine Act), non-compliance could result in criminal sanctions, civil penalties, and reputational harm[331](index=331&type=chunk)[332](index=332&type=chunk)[335](index=335&type=chunk) - Strict regulations on data collection, privacy (GDPR, CCPA), and cross-border data transfer pose compliance challenges, potential fines, and litigation risks[338](index=338&type=chunk)[339](index=339&type=chunk)[340](index=340&type=chunk) - Improper promotion of off-label uses could lead to significant liability, fines, and regulatory actions[342](index=342&type=chunk) - Penetrating foreign markets involves additional regulatory burdens, price controls, reimbursement issues, and political/economic instability, potentially impacting U.S. business[343](index=343&type=chunk)[344](index=344&type=chunk)[345](index=345&type=chunk)[346](index=346&type=chunk)[347](index=347&type=chunk) [Risks Related to Our Intellectual Property Rights](index=78&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property%20Rights) This section outlines risks concerning the company's ability to protect its intellectual property, including patent enforceability, trade secret protection, and potential infringement claims - Inability to adequately protect proprietary technology or obtain/maintain issued patents could lead to direct competition and adverse business impact[349](index=349&type=chunk) - Patent applications may not issue, issued patents may be unenforceable or have limited scope (e.g., ZULRESSO formulation-specific claims), and third-party patents could overlap or dominate[351](index=351&type=chunk)[352](index=352&type=chunk) - Patents can be challenged, invalidated, or circumvented through various proceedings (e.g., opposition, inter partes review), leading to loss or reduction of patent rights[354](index=354&type=chunk) - Failure to prevent unauthorized disclosure of trade secrets by employees or consultants, or independent discovery by competitors, could harm the business[358](index=358&type=chunk) - Risk of infringing third-party intellectual property rights, leading to costly litigation, substantial damages, royalties, or forced cessation of development/commercialization[359](index=359&type=chunk)[360](index=360&type=chunk) - Claims challenging inventorship or ownership of patents and IP could result in loss of valuable rights or costly litigation[362](index=362&type=chunk)[363](index=363&type=chunk)[364](index=364&type=chunk) - Non-compliance with procedural requirements of patent agencies can lead to abandonment or lapse of patent rights[365](index=365&type=chunk) - Lawsuits to protect or enforce patents can be expensive, time-consuming, and unsuccessful, potentially invalidating patents or leading to narrow interpretations[366](index=366&type=chunk)[368](index=368&type=chunk) - Not seeking IP protection in all jurisdictions, or weak enforcement in foreign countries, allows competitors to use technologies or export infringing products[371](index=371&type=chunk)[372](index=372&type=chunk)[373](index=373&type=chunk)[374](index=374&type=chunk) - Loss of rights to licensed intellectual property due to breach of agreements or failure to meet development deadlines could prevent continued development or commercialization[376](index=376&type=chunk)[379](index=379&type=chunk)[380](index=380&type=chunk)[381](index=381&type=chunk) - Licensed IP from government-funded programs may be subject to 'march-in' rights, reporting requirements, and U.S. industry preference, limiting exclusive rights and manufacturing options[382](index=382&type=chunk)[383](index=383&type=chunk) - Failure to obtain new chemical entity (NCE) or other marketing/data exclusivity, or patent term extensions, could facilitate earlier generic competition[385](index=385&type=chunk)[386](index=386&type=chunk) - Changes in U.S. patent law (e.g., America Invents Act, Supreme Court rulings) could diminish patent value and weaken protection capabilities[387](index=387&type=chunk)[388](index=388&type=chunk)[389](index=389&type=chunk) - Proposed legislation to limit patent exclusivity or facilitate generic entry could adversely affect products and accelerate generic competition[390](index=390&type=chunk) [Risks Related to our Industry](index=87&type=section&id=Risks%20Related%20to%20our%20Industry) This section addresses industry-specific risks, including healthcare regulations impacting costs and reimbursement, and potential cybersecurity failures - Healthcare regulations aimed at reducing costs (e.g., ACA, drug pricing controls) could adversely affect revenue, limit profitability, and reduce reimbursement for products[393](index=393&type=chunk)[394](index=394&type=chunk)[395](index=395&type=chunk)[396](index=396&type=chunk)[397](index=397&type=chunk)[398](index=398&type=chunk) - Internal computer systems or those of collaborators/contractors may fail or suffer security breaches, disrupting development programs, causing data loss, and incurring liabilities[399](index=399&type=chunk)[400](index=400&type=chunk) [Risks Related to Our Financial Position and Need for Capital](index=88&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Capital) This section highlights financial risks, including a limited operating history, significant accumulated losses, and the ongoing need for substantial additional funding - The company has a limited operating history, incurred significant operating losses (**$1.4 billion accumulated deficit** as of Sep 30, 2021), and anticipates continued losses due to high R&D and commercialization costs[402](index=402&type=chunk)[404](index=404&type=chunk)[405](index=405&type=chunk) - Future profitability depends on generating substantial product revenue, which is uncertain given ZULRESSO's limited opportunity and the challenges in developing and commercializing new candidates[406](index=406&type=chunk)[407](index=407&type=chunk) - Additional funding will be needed in the future, which may not be available on acceptable terms or at all, potentially forcing delays or termination of development programs[408](index=408&type=chunk)[410](index=410&type=chunk)[411](index=411&type=chunk)[414](index=414&type=chunk) - Raising additional capital through equity or convertible debt will dilute existing stockholders; debt financing may impose restrictive covenants; collaborations may require relinquishing valuable rights[412](index=412&type=chunk)[413](index=413&type=chunk) [Risks Related to Our Common Stock](index=91&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) This section addresses risks related to the company's common stock, including market price volatility, anti-takeover provisions, and potential dilution from future sales - Market price of common stock is volatile, influenced by clinical trial results, regulatory approvals, COVID-19 impact, competition, financial performance, and general market conditions[417](index=417&type=chunk) - Broad discretion in using cash and future offering proceeds may not yield significant returns, potentially affecting results and stock price[417](index=417&type=chunk) - Anti-takeover provisions in charter documents and Delaware law could make acquisitions difficult and prevent changes in management[418](index=418&type=chunk) - Future sales of common stock, including by significant stockholders like BIMA after lock-up periods, could cause the stock price to decline[419](index=419&type=chunk) [Item 6. Exhibits](index=93&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Quarterly Report on Form 10-Q, including various agreements and certifications - Exhibits include offer letters, severance agreements, license agreement amendments, collaboration side letters, officer certifications (Sarbanes-Oxley Act), and Inline XBRL documents[422](index=422&type=chunk) [Signatures](index=94&type=section&id=Signatures) This section contains the required signatures for the Form 10-Q, confirming its submission by the Chief Executive Officer, President, and Chief Financial Officer - Report signed by **Barry E. Greene** (CEO, President, and Director) and **Kimi Iguchi** (CFO) on November 2, 2021[427](index=427&type=chunk)

Financial Data and Key Metrics Changes - The company recorded $1.6 million in net revenue for Q2 2021 from ZULRESSO sales, an increase from $1.1 million in Q2 2020 [33] - Selling, general and administrative expenses rose to $43.3 million in Q2 2021 from $38.2 million in the same period of 2020 [34] - Research and development expenses decreased to $66.2 million in Q2 2021 from $73.3 million in Q2 2020, reflecting a reduction due to reimbursements from Biogen [35] - The net loss for Q2 2021 was $107.2 million, improved from a net loss of $136.3 million in Q2 2020 [35] - The company expects to end 2021 with a cash balance of over $1.7 billion [37] Business Line Data and Key Metrics Changes - The depression franchise, led by zuranolone, has shown consistent and differentiated data, with positive outcomes in pivotal studies [22][23] - The neurology franchise, led by SAGE-324, reported a 36% reduction in upper tremor amplitude from baseline in a recent study [27] - The neuropsych franchise is advancing SAGE-718, which has shown positive impacts on cognitive function in Parkinson's disease patients [30] Market Data and Key Metrics Changes - The company highlighted the increasing rates of depression, with over 19 million adults in the U.S. experiencing at least one major depressive episode annually [15] - The COVID-19 pandemic has exacerbated depressive symptoms, indicating a growing need for effective treatments [15] Company Strategy and Development Direction - The company aims to become a leader in brain health and a top-tier biopharmaceutical company by focusing on innovative treatments for brain disorders [7] - There is a strong emphasis on building a best-in-class commercialization program for zuranolone to meet patient needs [16] - The company is committed to expanding its pipeline and accelerating development across its three franchises [21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the regulatory path for zuranolone, citing sufficient efficacy data for filing an NDA [41][44] - The company is optimistic about the potential of zuranolone to revolutionize depression treatment with rapid onset and sustained effects [51] - Management acknowledged the challenges posed by the pandemic but remains focused on advancing their pipeline and achieving key milestones [31] Other Important Information - The company announced the termination of the Phase III study evaluating brexanolone for COVID-19-related ARDS due to enrollment issues [31] - Ongoing studies are expected to provide additional data to support the efficacy and safety of zuranolone [25] Q&A Session Summary Question: Clarification on regulatory strategy and study terminations - Management confirmed that sufficient efficacy data exists for filing and that the termination of certain studies will not hinder the NDA filing process [41][42] Question: Additional steps for Phase II dose-ranging study for SAGE-324 - Management indicated that they are working with Biogen to finalize the design of the next dose-frequency study [46][47] Question: Investor feedback on WATERFALL readout - Management noted positive feedback indicating a paradigm shift in depression treatment, emphasizing the rapid efficacy of zuranolone [50][51] Question: Discontinued RAINFOREST study and sleep benefits - Management reassured that existing data indicates improvements in sleep patterns among patients, which will be communicated during label negotiations [60][61] Question: SHORELINE study patient data - Management reported that over 500 patients are currently enrolled in the SHORELINE study, with high retention rates and positive response metrics [66][67]

Investor Presentation August 2021 Safe Harbor Statement • The slides presented today and the accompanying oral presentations contain forward-looking statements, which may be identified by the use of words such as "may," "might," "will," "should," "can,","expect," "plan," "anticipate," "believe," "estimate," "project," "intend," "future," "opportunity", "goal", "mission", "potential," "target", or "continue," and other similar expressions. • Forward-looking statements in this presentation include statements ...

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 001-36544 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2021 OR Sage Therapeutics, Inc. (Exact name of registrant as specified in its Charter) (State or other jurisdiction of incorporati ...

SAGE Therapeutics, Inc. (NASDAQ:SAGE) Q1 2021 Earnings Conference Call May 4, 2021 8:00 AM ET Company Participants Jeff Boyle - Investor Contact Barry Greene - President, CEO & Director Stephen Kanes - Chief Medical Officer Kimi Iguchi - CFO & Treasurer Jim Doherty - Chief Research Officer Conference Call Participants Andrew Tsai - Jefferies Ritu Baral - Cowen and Company Tazeen Ahmad - Bank of America Merrill Lynch Yasmeen Rahimi - Piper Sandler & Co. Turner Kufe - JPMorgan Chase & Co. Laura Chico - Wedbus ...