Sage Therapeutics(SAGE) - 2024 Q2 - Quarterly Report

Cover Page Sage Therapeutics, Inc. submitted its 10-Q quarterly report for the period ended June 30, 2024, and the company is designated as a large accelerated filer - Sage Therapeutics, Inc. submitted its 10-Q quarterly report for the period ended June 30, 2024, and the company is designated as a large accelerated filer[1] Company Basic Information | Indicator | Detail | | :--- | :--- | | File Type | 10-Q Quarterly Report | | Reporting Period | As of June 30, 2024 | | Company Name | Sage Therapeutics, Inc. | | State of Incorporation | Delaware | | Principal Executive Offices | 215 First Street, Cambridge, Massachusetts 02142 | | Telephone | (617) 299-8380 | | Stock Symbol | SAGE | | Exchange | Nasdaq Global Market | | Filer Status | Large Accelerated Filer | | Common Stock Outstanding | 61,050,418 shares as of July 24, 2024 | Cautionary Note Regarding Forward-Looking Statements This section outlines the company's forward-looking statements, emphasizing that actual results may differ materially due to various known and unknown risks and uncertainties, and the company disclaims any obligation to update these statements unless legally required - Forward-looking statements cover expectations and goals for ZURZUVAE commercialization in the U.S., next steps for zuranolone in MDD, development plans for product candidates (including dalzanemdor), expense levels and cash flow projections, potential outcomes of existing collaborations, and the impact of macroeconomic and geopolitical events[2] - Actual results may differ materially from forward-looking statements, with key risk factors detailed in Part II, Item 1A, "Risk Factors"[4] - The company disclaims any obligation to update or revise forward-looking statements, unless required by law[4] Summary of Risks Related to our Business This section outlines the company's primary business risks, including potential ZURZUVAE commercialization failure, uncertainties in product candidate development and regulatory approval, smaller-than-expected market size, adverse clinical trial outcomes, insufficient financial resources, supply chain disruptions, increased competition, collaboration agreement risks, intellectual property protection challenges, and adverse impacts from regulatory and economic changes - ZURZUVAE commercialization faces risks such as market acceptance, payer reimbursement limitations, and safety and tolerability concerns (including a boxed warning), potentially preventing it from achieving anticipated revenue levels[7][252] - The future prospects of product candidates are highly dependent on successful development and regulatory approval, but development programs may yield negative or insufficient results for submission, and timelines may not be met[8][254][255] - If the target patient population or the number of patients actually treated for the target indication is smaller than anticipated, or if market assumptions are inaccurate, the company's ability to achieve profitability could be severely impacted[8][284] - Serious adverse events or undesirable side effects in clinical trials could affect market acceptance, delay or prevent further development or approval, or lead to regulatory requirements for a boxed warning[9][275] - The company may not achieve anticipated product revenue levels or collaboration milestone payments, expenses may exceed expectations, leading to insufficient cash flow, and additional financing may be required in the future[11][435] - Existing collaborations with Biogen and Shionogi, and future collaborations, may not successfully develop, approve, or commercialize products, and collaborators may have competing priorities or disagreements, hindering development or increasing costs[12][328] - Failure to adequately protect proprietary technology or to obtain and maintain sufficient patent protection could lead to increased competition and materially adversely affect the business, operating results, and financial condition[13][370] PART I – FINANCIAL INFORMATION This section contains the company's unaudited condensed consolidated financial statements and notes, including the balance sheets, statements of operations and comprehensive loss, cash flows, and changes in stockholders' equity, along with management's discussion and analysis of financial condition and results of operations, and disclosures on market risk and internal controls Item 1. Financial Statements (Unaudited) This section presents the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, cash flows, and changes in stockholders' equity, accompanied by detailed notes explaining business nature, significant accounting policies, fair value measurements, investments, accrued expenses, commitments and contingencies, collaboration agreements, common stock, stock-based compensation, net loss per share, and restructuring activities Condensed Consolidated Balance Sheets As of June 30, 2024, the company's total assets decreased to $697.1 million from $882.3 million at year-end 2023, primarily due to a reduction in marketable securities, with total liabilities and stockholders' equity decreasing accordingly, and accumulated deficit increasing to $2.78 billion Condensed Consolidated Balance Sheets Key Data (in thousands of dollars) | Indicator | June 30, 2024 | December 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Assets | | | | | Cash and Cash Equivalents | $99,901 | $70,992 | +$28,909 | | Marketable Securities | $546,892 | $682,192 | -$135,300 | | Accounts Receivable from Collaboration - Related Party | $9,943 | $83,009 | -$73,066 | | Total Current Assets | $686,811 | $869,350 | -$182,539 | | Total Assets | $697,105 | $882,277 | -$185,172 | | Liabilities and Stockholders' Equity | | | | | Total Current Liabilities | $69,043 | $82,747 | -$13,704 | | Total Liabilities | $69,043 | $82,747 | -$13,704 | | Accumulated Deficit | $(2,780,996) | $(2,569,659) | -$211,337 | | Total Stockholders' Equity | $628,062 | $799,530 | -$171,468 | - As of June 30, 2024, the company's total assets were $697.1 million, a decrease of $185.2 million from $882.3 million as of December 31, 2023, primarily due to a $135.3 million reduction in marketable securities[20] - As of June 30, 2024, the company's accumulated deficit increased to $2.78 billion, an increase of $211.3 million from $2.57 billion as of December 31, 2023[21] Condensed Consolidated Statements of Operations and Comprehensive Loss For the three and six months ended June 30, 2024, the company's net loss significantly narrowed, driven by increased collaboration revenue from ZURZUVAE commercialization and reduced operating expenses due to restructuring, with a net loss of $102.9 million for three months and $211.3 million for six months Condensed Consolidated Statements of Operations and Comprehensive Loss Key Data (in thousands of dollars) | Indicator | For the three months ended June 30, 2024 | For the three months ended June 30, 2023 | Change | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $8,654 | $2,474 | +$6,180 | $16,556 | $5,768 | +$10,788 | | Net Product Revenue | $600 | $2,460 | -$1,860 | $2,289 | $5,754 | -$3,465 | | Collaboration Revenue - Related Party | $7,420 | — | +$7,420 | $13,633 | — | +$13,633 | | Other Collaboration Revenue | $634 | $14 | +$620 | $634 | $14 | +$620 | | Total Operating Costs and Expenses | $119,954 | $172,931 | -$52,977 | $245,529 | $331,695 | -$86,166 | | Research and Development Expenses | $62,564 | $97,161 | -$34,597 | $134,297 | $189,987 | -$55,690 | | Selling, General and Administrative Expenses | $55,983 | $75,565 | -$19,582 | $108,556 | $141,273 | -$32,717 | | Net Loss | $(102,854) | $(160,325) | +$57,471 | $(211,337) | $(307,153) | +$95,816 | | Net Loss Per Share | $(1.70) | $(2.68) | +$0.98 | $(3.50) | $(5.14) | +$1.64 | - For the three months ended June 30, 2024, total revenue increased by 249.8% to $8.7 million, primarily driven by $7.4 million in related party collaboration revenue from ZURZUVAE commercialization[23] - For the six months ended June 30, 2024, net loss narrowed to $211.3 million, a $95.8 million reduction from $307.2 million in the prior year period, mainly due to increased total revenue and decreased operating costs and expenses[23] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2024, the company experienced a significant reduction in net cash used in operating activities, decreased net cash provided by investing activities, and increased net cash provided by financing activities, with total cash, cash equivalents, and restricted cash at period-end amounting to $102.7 million Condensed Consolidated Statements of Cash Flows Key Data (in thousands of dollars) | Indicator | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(118,269) | $(285,200) | +$166,931 | | Net Cash Provided by Investing Activities | $139,050 | $240,460 | -$101,410 | | Net Cash Provided by Financing Activities | $9,628 | $3,519 | +$6,109 | | Net Increase (Decrease) in Cash, Cash Equivalents and Restricted Cash | $30,409 | $(41,221) | +$71,630 | | Cash, Cash Equivalents and Restricted Cash, End of Period | $102,733 | $122,748 | -$20,015 | - For the six months ended June 30, 2024, net cash used in operating activities was $118.3 million, a significant reduction from $285.2 million in the prior year period, primarily due to a lower net loss and favorable changes in operating assets and liabilities, including the receipt of a $75.0 million milestone payment from Biogen[25][229] - Net cash provided by investing activities was $139.1 million, a decrease from $240.5 million in the prior year period, reflecting the purchases, sales, and maturities of marketable securities[25][231] - Net cash provided by financing activities was $9.6 million, an increase from $3.5 million in the prior year period, mainly due to $8.3 million in gross proceeds from the sale of common stock under an ATM sales agreement[25][232] Condensed Consolidated Statements of Changes in Stockholders' Equity As of June 30, 2024, total stockholders' equity decreased to $628.1 million from $799.5 million at year-end 2023, primarily reflecting a $211.3 million net loss for the period, partially offset by capital increases from stock issuance and stock-based compensation Stockholders' Equity Changes Key Data (in thousands of dollars) | Indicator | December 31, 2023 | June 30, 2024 | Change | | :--- | :--- | :--- | :--- | | Additional Paid-in Capital | $3,370,397 | $3,410,143 | +$39,746 | | Accumulated Deficit | $(2,569,659) | $(2,780,996) | -$211,337 | | Total Stockholders' Equity | $799,530 | $628,062 | -$171,468 | - As of June 30, 2024, total stockholders' equity was $628.1 million, a decrease of $171.5 million from $799.5 million as of December 31, 2023[28] - Additional paid-in capital increased by $39.7 million, primarily from stock option exercises, employee stock purchase plan issuances, stock-based compensation expense, and proceeds from public stock offerings[28] - Accumulated deficit increased by $211.3 million, reflecting the net loss for the period[28] Notes to Condensed Consolidated Financial Statements This section provides detailed notes to the condensed consolidated financial statements, covering the company's business nature, significant accounting policies, fair value measurements, investment portfolio, accrued expenses, commitments and contingencies including leases and licensing agreements, collaboration agreements with Biogen and Shionogi, common stock information, stock-based compensation plans, net loss per share calculation, and restructuring activities 1. Nature of the Business Sage Therapeutics is a biopharmaceutical company focused on developing brain health medicines, with ZURZUVAE (for PPD) approved in August 2023 and commercialized in December, and ZULRESSO (for PPD) launched in June 2019; the company's pipeline targets GABA and NMDA receptor systems, and despite an accumulated deficit of $2.8 billion as of June 30, 2024, existing cash is expected to support operations through at least 2026 - The company's mission is to innovate brain health medicine solutions[30] - ZURZUVAE™ (zuranolone) was approved by the FDA on August 4, 2023, for the treatment of postpartum depression (PPD) in adults and commercialized in December 2023, making it the first oral, once-daily, 14-day treatment for PPD[31][155] - ZULRESSO® (brexanolone) CIV injection is approved for the treatment of PPD in patients 15 years and older, requiring administration in a qualified, medically supervised healthcare facility[31][158] - The FDA issued a Complete Response Letter (CRL) on August 4, 2023, for the new drug application (NDA) for zuranolone in major depressive disorder (MDD), requesting one or more additional clinical trials[32][158] - As of June 30, 2024, the company's accumulated deficit was $2.8 billion[37][171] - The company expects that its existing cash, cash equivalents, and marketable securities will be sufficient to fund its planned operations through at least 2026, based on current operating plans[38][172][234] 2. Summary of Significant Accounting Policies This section outlines the significant accounting policies followed in preparing the condensed consolidated financial statements, including the basis of presentation under SEC rules, consolidation principles, use of estimates, accounting for research and development expenses, and revenue recognition methods under ASC Topic 606 and Topic 808, as well as fair value measurements and recently issued accounting pronouncements - The condensed consolidated financial statements are prepared in accordance with the rules and regulations of the U.S. Securities and Exchange Commission and U.S. Generally Accepted Accounting Principles (GAAP)[40] - Research and development expenses are recognized as operating expenses when incurred, including salaries and benefits, overhead, depreciation, contract services, and other related costs[45] - Revenue recognition follows ASC Topic 606 (Revenue from Contracts with Customers) and Topic 808 (Collaborative Arrangements), with revenue recognized as performance obligations are satisfied[47][48][65] - Net product revenue is recognized when control is transferred to the customer, net of variable consideration related to rebates, discounts, distribution fees, chargebacks, and patient financial assistance[51][52] - The company is evaluating the potential impact of ASU 2023-09 (Improvements to Income Tax Disclosures) on its consolidated financial statements and related disclosures, with the standard effective for fiscal years beginning after December 15, 2025[70] 3. Fair Value Measurements The company classifies cash equivalents within Level 1 and Level 2 of the fair value hierarchy and marketable securities within Level 2, with fair values determined using independent pricing sources and observable market data, and no transfers between levels occurred during the reporting period - The company's cash equivalents are classified within Level 1 and Level 2 of the fair value hierarchy, and marketable securities are classified within Level 2[72] - The fair value of marketable securities is based on prices obtained from independent pricing sources, primarily relying on observable pricing or other market observable inputs for similar assets[73] - As of June 30, 2024, and December 31, 2023, the total fair value of the company's cash equivalents and marketable securities was $645.8 million and $750.7 million, respectively[74][76] Fair Value of Cash Equivalents and Marketable Securities (in thousands of dollars) | Category | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash Equivalents | $98,874 | $68,547 | | Marketable Securities | $546,892 | $682,192 | | Total | $645,766 | $750,739 | 4. Investments This section details the fair value and amortized cost of the company's marketable securities, including unrealized gains and losses; as of June 30, 2024, total marketable securities amounted to $546.9 million, with unrealized losses primarily due to rising interest rates, though the company does not intend to sell these investments before recovering their amortized cost Fair Value of Marketable Securities (in thousands of dollars) | Security Type | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | U.S. Government Securities | $84,508 | $166,925 | | U.S. Corporate Bonds | $205,394 | $210,198 | | International Corporate Bonds | $109,490 | $97,675 | | U.S. Commercial Paper | $67,154 | $23,370 | | International Commercial Paper | $45,109 | $46,900 | | U.S. Certificates of Deposit | $2,203 | $8,830 | | U.S. Municipal Securities | $33,034 | $128,294 | | Total | $546,892 | $682,192 | - As of June 30, 2024, unrealized losses on marketable securities were primarily due to rising interest rates, but the company does not intend to sell these investments before recovering their amortized cost[81] - As of June 30, 2024, all marketable securities had remaining contractual maturities of one year or less, except for $43.4 million in U.S. corporate bonds, international corporate bonds, and U.S. municipal securities with maturities between one and two years[82] - As of June 30, 2024, and December 31, 2023, the company had not incurred any impairment losses on assets measured and presented at fair value[83] 5. Accrued Expenses As of June 30, 2024, the company's total accrued expenses were $59.0 million, a decrease from $67.3 million as of December 31, 2023, primarily due to reduced restructuring and employee-related expenses Accrued Expenses Summary (in thousands of dollars) | Category | June 30, 2024 | December 31, 2023 | Change | | :--- | :--- | :--- | :--- | | Accrued Research and Development Costs | $33,753 | $26,040 | +$7,713 | | Restructuring | $762 | $10,589 | -$9,827 | | Employee-related | $14,297 | $21,339 | -$7,042 | | Professional Services | $9,726 | $8,589 | +$1,137 | | Other | $444 | $707 | -$263 | | Total | $58,982 | $67,264 | -$8,282 | - As of June 30, 2024, total accrued expenses were $59.0 million, a decrease of $8.3 million from $67.3 million as of December 31, 2023, primarily due to reductions in restructuring and employee-related expenses[86] 6. Commitments and Contingencies This section discloses the company's operating lease commitments, including the expiration of existing leases and details of a new headquarters lease agreement, and outlines licensing agreements with CyDex and the University of California, involving patent technology usage rights, milestone payments, and sales royalties - The company's existing office space leases in Cambridge, Massachusetts, and Raleigh, North Carolina, are set to expire in August and November 2024, respectively[85] - In January 2024, the company entered into a new lease agreement for approximately 30,567 square feet of office space in Cambridge, Massachusetts, to serve as its new headquarters, with a term of approximately 66 months and monthly base rent starting at $224,158, increasing by approximately 3% annually[87] - A licensing agreement with CyDex Pharmaceuticals, Inc. grants the company exclusive rights to use Captisol drug formulation technology for the manufacture and commercialization of brexanolone and SAGE-689, requiring low single-digit sales royalties and potential clinical development and regulatory milestone payments[89][90] - A licensing agreement with the Regents of the University of California includes rights to use brexanolone clinical data (sales royalties less than 1%) and allopregnanolone patent rights (low single-digit sales royalties, plus regulatory and sales milestone payments up to $2.7 million)[92][93] 7. Collaboration Agreements This section details collaboration agreements with Shionogi for zuranolone development and commercialization in Japan, Taiwan, and South Korea, involving milestone payments and sales royalties, and with Biogen for co-development and co-commercialization of SAGE-217 (ZURZUVAE) and SAGE-324 in the U.S., with equal cost and profit sharing, while Biogen holds exclusive rights in other regions; clinical development for SAGE-324 in essential tremor has recently been discontinued - The collaboration agreement with Shionogi (June 2018) covers the clinical development and commercialization of zuranolone in Japan, Taiwan, and South Korea; the company has received a $90.0 million upfront payment and is eligible for up to $485.0 million in milestone payments and sales royalties in the low to mid-twenty percent range[95][96] - For the three and six months ended June 30, 2024, the company recognized $0.6 million in other collaboration revenue from the Shionogi agreement, primarily from the supply of zuranolone active pharmaceutical ingredient[99][205][217] - The collaboration agreement with Biogen (effective November 2020) involves the co-development and co-commercialization of SAGE-217 (ZURZUVAE) and SAGE-324 products in the U.S.; the company has received $1.5 billion in consideration and is eligible for up to $1.6 billion in additional milestone payments and sales royalties in the high-teens to low-twenty percent range[101][102][103] - The company and Biogen equally share the development and commercialization costs and profits/losses for ZURZUVAE in the U.S., with Biogen recording product sales[104][114] - In July 2024, the company and Biogen announced that they do not plan further development of SAGE-324 for essential tremor due to unfavorable KINETIC Phase 2 clinical trial results, and thus the company does not expect to receive the related $150.0 million milestone payment[103][159] - For the three and six months ended June 30, 2024, the company recognized $7.4 million and $13.6 million, respectively, in related party collaboration revenue as its share of Biogen's net sales of ZURZUVAE in the U.S.[115][204][216] 8. Common Stock This section describes the company's common stock structure, including authorized, issued, and treasury shares; the company initiated an 'at-the-market' (ATM) offering program in November 2023, and as of June 30, 2024, had sold 700,000 shares through this program, generating $8.3 million in gross proceeds - As of June 30, 2024, the company was authorized to issue 120 million shares of common stock, with 60,897,967 shares issued and 60,894,934 shares outstanding[20][120] - As of June 30, 2024, treasury stock amounted to 3,033 shares at a cost of $0.4 million[21][120] - On November 7, 2023, the company entered into a sales agreement with Cowen to establish an "at-the-market" (ATM) offering program, allowing for the sale of common stock with an aggregate offering price of up to $250.0 million[121] - For the three months ended June 30, 2024, the company sold 700,000 shares through the ATM program, generating gross proceeds of approximately $8.3 million (average price of $11.90 per share), resulting in net proceeds of $8.0 million after commissions and offering costs[123] - As of June 30, 2024, $241.7 million of common stock remained available for issuance and sale under the ATM sales agreement[123][227] 9. Stock-Based Compensation This section details the company's stock-based compensation plans, including the newly approved 2024 plan, a January 2024 stock option exchange program, and activities and expenses related to time-based restricted stock units (RSUs), performance-based restricted stock units, and stock options; as of June 30, 2024, the company recognized $30.9 million in stock-based compensation expense - Company stockholders approved the 2024 Stock Incentive Plan on June 10, 2024, which replaced the 2014 plan, initially reserving 5.5 million shares of common stock, with potential for an additional 11,002,166 shares[125] - On January 23, 2024, the company launched a one-time stock option exchange program, allowing eligible non-executive employees to exchange options with an exercise price above $35.00 for a smaller number of new options with an exercise price of $22.20, expected to result in $1.7 million of additional stock-based compensation expense[131][132] - As of June 30, 2024, there were 2,343,027 unvested time-based restricted stock units (RSUs), with $28.8 million in related unrecognized stock-based compensation expense[135] - As of June 30, 2024, there were 1,769,892 unvested performance-based restricted stock units, with $66.5 million in related unrecognized stock-based compensation expense; $2.8 million in expense was recognized this quarter due to the probable achievement of a commercial milestone[140] - As of June 30, 2024, there was $40.3 million in unrecognized stock-based compensation expense related to unvested time-based stock options[141] Stock-Based Compensation Expense (in thousands of dollars) | Category | For the three months ended June 30, 2024 | For the three months ended June 30, 2023 | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Research and Development | $6,118 | $4,496 | $11,084 | $13,269 | | Selling, General and Administrative | $11,049 | $7,197 | $19,781 | $18,462 | | Total | $17,167 | $11,693 | $30,865 | $31,731 | 10. Net Loss Per Share This section provides the basic and diluted net loss per share calculations for the three and six months ended June 30, 2024; due to the company's net loss position, all potentially dilutive securities, such as stock options and restricted stock units, were excluded from diluted net loss per share calculations as they were anti-dilutive Net Loss Per Share (Basic and Diluted) | Period | 2024 | 2023 | | :--- | :--- | :--- | | For the three months ended June 30 | $(1.70) | $(2.68) | | For the six months ended June 30 | $(3.50) | $(5.14) | - For the six months ended June 30, 2024, basic and diluted net loss per share was $(3.50), compared to $(5.14) in the prior year period[148] - As of June 30, 2024, 9,049,840 potentially dilutive securities (including stock options, restricted stock units, and employee stock purchase plan shares) were excluded from the diluted net loss per share calculation due to their anti-dilutive effect[149] 11. Restructuring In August 2023, the company implemented a strategic corporate restructuring and pipeline prioritization, including a 40% workforce reduction, to optimize its organizational structure and support ZURZUVAE commercialization; as of June 30, 2024, the vast majority of the $32.8 million in restructuring expenses has been incurred and paid - In August 2023, the company implemented a strategic corporate restructuring, including a workforce reduction of approximately 40%, aimed at optimizing its organizational structure for sustained growth and supporting ZURZUVAE commercialization[150][212][224] - This restructuring is expected to achieve approximately $100.0 million in annual cost savings[212][224] - As of June 30, 2024, the vast majority of the $32.8 million in restructuring expenses, primarily for one-time termination benefits for affected employees, has been incurred and paid[150][212][224] Restructuring Accrued Expenses Activity (in thousands of dollars) | Indicator | Amount | | :--- | :--- | | Balance as of December 31, 2023 | $10,589 | | Restructuring Expenses Incurred | $(597) | | Cash Paid | $(9,230) | | Non-cash Activities | — | | Balance as of June 30, 2024 | $762 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's detailed discussion and analysis of the company's financial condition and operating performance, covering an overview, financial operations (including revenue, collaboration arrangements, cost of revenues, and operating expenses), a comparison of operating results for three and six months, liquidity and capital resources, contractual obligations and commitments, and the application of critical accounting policies, highlighting progress and challenges in ZURZUVAE commercialization and pipeline development Overview Sage Therapeutics is a brain health biopharmaceutical company with ZURZUVAE and ZULRESSO for PPD, and a pipeline targeting GABA and NMDA receptor systems; the company reported a $211.3 million net loss in H1 2024 and an accumulated deficit of $2.8 billion, but expects existing cash to fund operations until 2026, despite recent unfavorable clinical trial results for SAGE-324 (essential tremor) and dalzanemdor (Parkinson's disease), leading to development discontinuation for those indications, while dalzanemdor studies in Huntington's and Alzheimer's diseases continue - The company's mission is to innovate brain health medicine solutions, and it is advancing a pipeline of product candidates targeting GABA and NMDA receptor systems[153] - ZURZUVAE™ (zuranolone) was approved by the FDA on August 4, 2023, for the treatment of PPD in adults and commercialized in the U.S. in December 2023, with the company co-commercializing ZURZUVAE with Biogen[155] - The FDA issued a Complete Response Letter (CRL) on August 4, 2023, for the NDA for zuranolone in MDD, requesting one or more additional clinical trials[158] - The KINETIC Phase 2 clinical trial for SAGE-324 in essential tremor did not meet its primary endpoint, and the company and Biogen do not plan further development of SAGE-324 for essential tremor[159] - Dalzanemdor (SAGE-718) is undergoing clinical trials for cognitive impairment in Huntington's disease (DIMENSION and PURVIEW studies) and Alzheimer's disease (LIGHTWAVE study), with topline data from the DIMENSION and LIGHTWAVE studies expected in late 2024[161][162][163][166] - The PRECEDENT study for dalzanemdor in cognitive impairment associated with Parkinson's disease did not meet its primary endpoint, and the company does not plan further development of dalzanemdor for Parkinson's disease[167] - As of June 30, 2024, the company reported a net loss of $211.3 million and an accumulated deficit of $2.8 billion; existing cash, cash equivalents, and marketable securities are expected to fund operations through at least 2026[171][172] Financial Operations Overview This section details the company's revenue sources, including ZULRESSO sales and collaboration revenue from Biogen (ZURZUVAE) and Shionogi (zuranolone), with collaboration arrangements accounted for under ASC Topic 606 and Topic 808; cost of revenues includes ZULRESSO and ZURZUVAE production and distribution expenses, while operating expenses (R&D and SG&A) are influenced by the Biogen cost-sharing agreement and the August 2023 restructuring, with a projected decrease in 2024 Revenue Company revenue primarily stems from ZULRESSO sales and collaborations with Biogen (ZURZUVAE) and Shionogi (zuranolone); ZURZUVAE, commercialized in December 2023 and co-promoted with Biogen, shipped over 1,400 prescriptions in Q2 2024, while ZULRESSO revenue is expected to continue declining due to ZURZUVAE's launch and treatment barriers - The company's revenue sources include ZULRESSO product sales, related party collaboration revenue from the Biogen collaboration for ZURZUVAE, and other collaboration revenue from the Shionogi collaboration for zuranolone[175] - ZURZUVAE was commercialized in the U.S. in December 2023 as the first FDA-approved oral PPD treatment; the company co-commercializes ZURZUVAE with Biogen, equally sharing operating profits and losses, with Biogen recording product sales[175] - As of Q2 2024, ZURZUVAE had shipped and delivered over 1,400 prescriptions; the company has launched a patient support program, "ZURZUVAE For You"[177][178] - ZULRESSO's commercial operations are limited, and revenue is expected to continue declining due to ZURZUVAE's commercialization and ZULRESSO's treatment barriers[179] - The company earned a $75.0 million milestone payment in Q4 2023 for the first commercial sale of ZURZUVAE in the U.S., which was received in January 2024[170][182] Collaborative Arrangements The company accounts for collaborative arrangements under ASC Topic 808 and Topic 606, distinguishing between joint operating activities and vendor-customer relationships, with collaboration revenue expected to increase following ZURZUVAE's commercialization - The company evaluates collaborative arrangements under ASC Topic 808 (Collaborative Arrangements) and Topic 606 (Revenue from Contracts with Customers) to determine the appropriate accounting treatment[183] - Payments or reimbursements within collaborative arrangements are classified as collaboration revenue, cost of revenues, research and development expenses, or selling, general and administrative expenses, depending on the nature of the activity[184] - Collaboration revenue is expected to increase with the launch of ZURZUVAE commercialization[185] Cost of Revenues Cost of revenues includes direct and indirect production and distribution costs for ZULRESSO, and a proportional share of ZURZUVAE production costs under the Biogen collaboration agreement; the company anticipates utilizing zero-cost inventory for ZULRESSO and ZURZUVAE for an extended period, but total cost of revenues is expected to increase with growing ZURZUVAE sales - Cost of revenues includes direct and indirect manufacturing and distribution costs for ZULRESSO (third-party manufacturing, packaging, freight, third-party royalties, intangible asset amortization) and a proportional share of ZURZUVAE manufacturing costs under the Biogen collaboration agreement[186][207][219] - The company expects to utilize zero-cost inventory for ZULRESSO and ZURZUVAE for an extended period[186][208][220] - The cost of revenues as a percentage of net product revenue for ZULRESSO is expected to remain in the high single-digit to low double-digit range[186][208][220] - Total cost of revenues is expected to increase over time as ZURZUVAE sales grow[186] Operating Expenses Operating expenses primarily comprise research and development (R&D) and selling, general and administrative (SG&A) expenses; R&D expenses are recognized as incurred and influenced by the Biogen cost-sharing agreement, while SG&A expenses, including personnel, professional services, and commercialization costs, are also affected by Biogen cost-sharing and the August 2023 restructuring, with a projected decrease in 2024 Research and Development Expenses Research and development expenses are recognized as incurred, encompassing personnel costs, CRO fees, clinical trial material production, consulting, and licensing fees, with co-development and co-manufacturing costs for Biogen-partnered products proportionally shared; R&D expenditures are expected to decrease in 2024 due to a focus on dalzanemdor and pausing early-stage programs, though future costs and timelines remain uncertain - Research and development expenses include personnel costs, fees for contract research organizations (CROs) and clinical trial sites, costs for manufacturing non-clinical study and clinical trial materials, external consultant fees, regulatory activity costs, and payments under third-party license agreements[188] - Costs for co-development and co-manufacturing activities for SAGE-217 and SAGE-324 products in the U.S. under the Biogen collaboration are accounted for under Topic 808 as an increase or decrease to research and development expenses (or cost of revenues after commercialization)[189] Net R&D Reimbursements (from Biogen, in thousands of dollars) | Period | For the three months ended June 30, 2024 | For the three months ended June 30, 2023 | | :--- | :--- | :--- | | Net Reimbursement Amount | $(3,325) | $(22,418) | - Research and development expenditures are expected to decrease due to a recent focus on dalzanemdor and the pausing of certain early-stage programs[193] - The duration, cost, and timing of clinical trials depend on various factors, including the scope and progress of trials, regulatory decisions, enrollment rates, and changes in government regulations[193] Selling, General and Administrative Expenses Selling, general and administrative expenses primarily include personnel costs (sales, marketing, patient support, executive), stock-based compensation, and professional service fees; these expenses are expected to decrease in 2024 due to the August 2023 restructuring but will remain elevated as ZURZUVAE commercialization progresses, with plans to strategically expand the sales team in Q4 2024 - Selling, general and administrative expenses primarily include personnel costs (including direct sales and marketing teams for ZURZUVAE and patient support programs), stock-based compensation expense, professional service fees (commercialization, public relations, audit, legal services), and certain information technology and facility-related costs[197] - ZULRESSO's commercial operations are currently limited to customer management at existing active treatment sites[198] - Selling, general and administrative expenses are expected to decrease in 2024 due to the strategic corporate restructuring in August 2023[200] - The company plans to strategically expand its sales team in Q4 2024 to accelerate demand for ZURZUVAE in PPD treatment[200] Net SG&A Reimbursements (to Biogen, in thousands of dollars) | Period | For the three months ended June 30, 2024 | For the three months ended June 30, 2023 | | :--- | :--- | :--- | | Net Reimbursement Amount | $1,019 | $7,476 | Results of Operations This section provides a detailed comparison of the company's operating results for the three and six months ended June 30, 2024, and 2023, analyzing changes in revenue, operating costs, and net loss, along with their primary drivers, including ZURZUVAE commercialization, restructuring impacts, and research and development activities Comparison of the Three Months Ended June 30, 2024 and 2023 In Q2 2024, total revenue increased to $8.7 million, primarily driven by $7.4 million in collaboration revenue from ZURZUVAE sales; operating expenses decreased to $120.0 million, and net loss narrowed to $102.9 million, mainly due to reduced R&D expenses (zuranolone manufacturing and early-stage programs) and SG&A expenses (personnel and overhead) following the August 2023 restructuring Q2 2024 vs. Q2 2023 Operating Results Comparison (in thousands of dollars) | Indicator | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $8,654 | $2,474 | +$6,180 | | Net Product Revenue | $600 | $2,460 | -$1,860 | | Collaboration Revenue - Related Party | $7,420 | — | +$7,420 | | Other Collaboration Revenue | $634 | $14 | +$620 | | Total Operating Costs and Expenses | $119,954 | $172,931 | -$52,977 | | Research and Development Expenses | $62,564 | $97,161 | -$34,597 | | Selling, General and Administrative Expenses | $55,983 | $75,565 | -$19,582 | | Net Loss | $(102,854) | $(160,325) | +$57,471 | - Total revenue for Q2 2024 was $8.7 million, an increase of $6.2 million from $2.5 million in the prior year period, primarily driven by $7.4 million in related party collaboration revenue from ZURZUVAE sales[202][204] - Total operating costs and expenses for Q2 2024 were $120.0 million, a decrease of $53.0 million from $172.9 million in the prior year period, mainly due to lower research and development expenses and selling, general and administrative expenses[202] - Research and development expenses decreased by $34.6 million, primarily due to a $31.0 million reduction in zuranolone development expenditures, a $9.6 million reduction in other early-stage R&D program expenditures, and an $11.0 million reduction in unallocated expenses due to restructuring[209][210] - Selling, general and administrative expenses decreased by $19.6 million, primarily due to a $10.2 million reduction in personnel-related expenses and a $4.8 million reduction in other overhead expenses due to restructuring[211] - Net loss narrowed from $160.3 million in Q2 2023 to $102.9 million in Q2 2024[202] Comparison of the Six Months Ended June 30, 2024 and 2023 In H1 2024, total revenue increased to $16.6 million, primarily driven by $13.6 million in collaboration revenue from ZURZUVAE sales; total operating costs and expenses decreased to $245.5 million, and net loss narrowed to $211.3 million, mainly due to significant reductions in R&D expenses (zuranolone manufacturing, early-stage programs, unallocated expenses) and SG&A expenses (personnel, overhead) following the August 2023 restructuring H1 2024 vs. H1 2023 Operating Results Comparison (in thousands of dollars) | Indicator | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $16,556 | $5,768 | +$10,788 | | Net Product Revenue | $2,289 | $5,754 | -$3,465 | | Collaboration Revenue - Related Party | $13,633 | — | +$13,633 | | Other Collaboration Revenue | $634 | $14 | +$620 | | Total Operating Costs and Expenses | $245,529 | $331,695 | -$86,166 | | Research and Development Expenses | $134,297 | $189,987 | -$55,690 | | Selling, General and Administrative Expenses | $108,556 | $141,273 | -$32,717 | | Net Loss | $(211,337) | $(307,153) | +$95,816 | - Total revenue for H1 2024 was $16.6 million, an increase of $10.8 million from $5.8 million in the prior year period, primarily driven by $13.6 million in related party collaboration revenue from ZURZUVAE sales[214][216] - Total operating costs and expenses for H1 2024 were $245.5 million, a decrease of $86.2 million from $331.7 million in the prior year period, mainly due to lower research and development expenses and selling, general and administrative expenses[214] - Research and development expenses decreased by $55.7 million, primarily due to a $53.1 million reduction in zuranolone development expenditures, a $3.7 million reduction in SAGE-324 development expenditures, a $15.9 million reduction in other early-stage R&D program expenditures, and a $23.6 million reduction in unallocated expenses due to restructuring[221][222] - Selling, general and administrative expenses decreased by $32.7 million, primarily due to a $15.7 million reduction in personnel-related expenses and an $8.7 million reduction in other overhead expenses due to restructuring[223] - Net loss narrowed from $307.2 million in H1 2023 to $211.3 million in H1 2024[214] Liquidity and Capital Resources The company has incurred losses since inception, with an accumulated deficit of $2.8 billion as of June 30, 2024; primary liquidity sources include $646.8 million in cash, cash equivalents, and marketable securities, which are expected to fund operations until 2026, though substantial additional financing will be required to support ZURZUVAE commercialization and pipeline development, potentially leading to existing stockholder equity dilution Operating Activities For the six months ended June 30, 2024, net cash used in operating activities significantly decreased to $118.3 million from $285.2 million in the prior year period, primarily benefiting from a lower net loss and favorable changes in operating assets and liabilities, including the receipt of a $75.0 million milestone payment from Biogen Operating Activities Cash Flow (in thousands of dollars) | Period | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(118,269) | $(285,200) | - Net cash used in operating activities for H1 2024 decreased, primarily attributed to a lower net loss and favorable changes in operating assets and liabilities, including the receipt of a $75.0 million milestone payment from Biogen[229] Investing Activities For the six months ended June 30, 2024, net cash provided by investing activities decreased to $139.1 million from $240.5 million in the prior year period, reflecting the company's management of its cash and investment portfolio, including purchases, sales, and maturities of marketable securities Investing Activities Cash Flow (in thousands of dollars) | Period | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Net Cash Provided by Investing Activities | $139,050 | $240,460 | - Net cash provided by investing activities decreased, primarily reflecting the company's management of purchases, sales, and maturities of marketable securities[231] Financing Activities For the six months ended June 30, 2024, net cash provided by financing activities increased to $9.6 million from $3.5 million in the prior year period, primarily due to $8.3 million in gross proceeds from the sale of common stock under an ATM sales agreement Financing Activities Cash Flow (in thousands of dollars) | Period | For the six months ended June 30, 2024 | For the six months ended June 30, 2023 | | :--- | :--- | :--- | | Net Cash Provided by Financing Activities | $9,628 | $3,519 | - Net cash provided by financing activities increased, primarily due to $8.3 million in gross proceeds from the sale of common stock under an ATM sales agreement[232] Operating Capital Requirements The company anticipates continued losses in the foreseeable future, requiring substantial additional capital to support ZURZUVAE commercialization, product candidate development, and operations; while existing funds are expected to support operations until 2026, future financing may be challenging and could dilute existing stockholders' equity - The company expects to continue incurring losses for the foreseeable future, requiring substantial additional capital to support ZURZUVAE commercialization, product candidate development, and operations[233][433] - As of June 30, 2024, the company's cash, cash equivalents, and marketable securities totaled $646.8 million, which are expected to fund operations through at least 2026[234][438] - Future capital requirements depend on the commercial success of ZURZUVAE, sales trends for ZULRESSO, clinical trial progress for product candidates, regulatory approvals, market acceptance, and milestone and royalty payments under collaboration agreements[235][236] - If financing is not obtained on a timely basis, the company may need to significantly curtail, delay, or terminate research and development programs or commercialization of approved products, or be unable to expand operations[238][443] - Raising additional funds through equity or convertible debt securities will dilute existing stockholders' equity[238][441] Contractual Obligations and Commitments The company's primary contractual obligation is a new office space lease agreement signed in January 2024, commencing on or after September 1, 2024, for approximately 66 months, with monthly base rent starting at $224,158 and increasing by approximately 3% annually; there have been no other significant changes to contractual obligations and commitments since the annual report - The company entered into a new office space lease agreement in January 2024 for approximately 30,567 square feet in Cambridge, Massachusetts[239] - The new lease has an initial term of approximately 66 months, with monthly base rent starting at $224,158 and increasing by approximately 3% annually[239] - There have been no other material changes to the company's contractual obligations and commitments since its annual report[240] Application of Critical Accounting Policies Company critical accounting policies include revenue recognition, collaborative arrangements, accrued research and development expenses, and stock-based compensation; these policies involve significant estimates and judgments, but no material changes have occurred since the annual report - The company's most critical accounting policies include revenue recognition, collaborative arrangements, accrued research and development expenses, and stock-based compensation[241] - There have been no material changes to the company's critical accounting policies since its annual report[242] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company primarily faces interest rate risk, but due to the short-term nature of its cash, cash equivalents, and marketable securities, sudden changes in interest rates are not expected to have a material impact; the company's exposure to foreign currency exchange rates is not significant, and it does not engage in hedging activities, nor is inflation considered to have a material impact on operating results - The company primarily faces interest rate risk, but due to the short-term nature of its cash, cash equivalents, and marketable securities (totaling $646.8 million as of June 30, 2024), a sudden change in interest rates is not expected to have a material impact on its financial condition or results of operations[243] - The company's exposure to foreign currency exchange rates is not significant, and it does not engage in hedging activities[244] - The company does not believe that inflation had a material impact on its results of operations for the six months ended June 30, 2024, and 2023[245] Item 4. Controls and Procedures As of June 30, 2024, management assessed and concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level, and no material changes in internal control over financial reporting occurred during the reporting period - As of June 30, 2024, management (including the Chief Executive Officer and Chief Financial Officer) assessed and concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level[247] - There were no material changes in internal control over financial reporting during the reporting period[248] PART II – OTHER INFORMATION This section contains other information required by Form 10-Q, including legal proceedings, risk factors, other information, and exhibits, detailing various potential risks faced by the company, from product development, regulatory approval, and commercialization to intellectual property, industry-specific challenges, financial condition, and common stock-related risks Item 1. Legal Proceedings The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its financial condition, results of operations, or cash flows - The company is not currently involved in any legal proceedings that are expected to have a material adverse effect on its financial condition, results of operations, or cash flows[249] Item 1A. Risk Factors This section details the high risks associated with investing in the company's common stock, covering product development, regulatory approval and commercialization, intellectual property, industry-specific challenges, financial condition and capital needs, and common stock-related risks, all of which could materially adversely affect the company's business, financial condition, or results of operations Risks Related to Product Development, Regulatory Approval and Commercialization This section details significant risks in product development, regulatory approval, and commercialization, including uncertainties in ZURZUVAE's commercial success, clinical trial failures for product candidates (e.g., SAGE-324 and dalzanemdor), challenges in ZULRESSO commercialization, adverse side effects, regulatory approval delays, smaller-than-expected market size, reliance on third-party manufacturers, and uncertainties in market acceptance and reimbursement levels - The success of ZURZUVAE's commercialization for PPD in the U.S. is highly uncertain, and it may not achieve widespread market acceptance by healthcare professionals, patients, or payers, or reach anticipated revenue levels[251][252][253] - Product candidate development and regulatory approval are lengthy, expensive, and uncertain processes; positive results from early clinical trials may not be replicated in later stages, and safety concerns or mixed results may arise[254][255][256][287][288] - The KINETIC Phase 2 clinical trial for SAGE-324 in essential tremor did not meet its primary endpoint, leading the company and Biogen to discontinue further development for this indication[257][289] - The PRECEDENT study for dalzanemdor in Parkinson's disease did not meet its primary endpoint, and the company does not plan further development for this indication, with studies in Huntington's and Alzheimer's diseases also potentially unsuccessful[258][167][289] - ZULRESSO's commercial revenue is severely impacted by complex treatment requirements, limited treatment sites, competition from ZURZUVAE's launch, and reimbursement barriers, and is expected to continue declining[267][268][269][270][271][273] - Products or product candidates may cause adverse side effects, leading regulatory authorities to withdraw or restrict approval, require a boxed warning or REMS, or trigger other negative consequences[275][277] - The patient population for target indications may be smaller than anticipated, or market assumptions may be incorrect, leading to a significantly smaller market size and limiting revenue and profitability[284][285][286] - The company relies entirely on third-party suppliers for commercial and clinical drug supply; if suppliers fail to comply with regulations, experience disruptions, or cannot enter into long-term agreements, commercialization and development capabilities could be severely impacted[302][303][305][308] - Failure of ZURZUVAE or any future product to achieve widespread market acceptance by healthcare professionals, patients, and payers, or adequate reimbursement levels, will limit sales revenue[309][310][311][312][313] - Commercializing products in international markets faces additional risks such as regulatory burdens, price controls, reimbursement issues, and political and economic instability[367][368][369] Risks Related to Our Intellectual Property Rights This section details significant risks in intellectual property protection. Including failure to adequately protect proprietary technology, patent applications potentially not being granted or granted patents being challenged, the risk of infringing third-party intellectual property, reliance on licensed intellectual property, potential restrictions from government-funded projects, and adverse impacts from changes in U.S. patent law and the CREATES Act on patent exclusivity - The company may be unable to adequately protect its proprietary technology or obtain and maintain issued patents sufficient to protect its product candidates, leading to increased competition[370][371][375] - The company's business, products, and methods may infringe on third-party patents or other intellectual property rights, leading to hindered product development, increased commercialization costs, or inability to commercialize[377][378][379] - The company relies on licensed intellectual property, and if it loses licensing rights or fails to comply with license agreement terms, it may be unable to continue developing or commercializing certain products or product candidates[395][396][397] - Some licensed intellectual property may arise from government-funded programs and be subject to federal regulations like the Bayh-Dole Act, which could limit the company's exclusive rights and require preferential U.S. manufacturing[401][402] - Failure to obtain new chemical entity (NCE) or other types of market and data exclusivity, or to extend patent terms through the Hatch-Waxman Act, could lead to earlier market entry by competitors[403][404][405] - Changes in U.S. patent law (such as the America Invents Act and Supreme Cour