Part I Business Sage Therapeutics focuses on brain health, with approved ZULRESSO for PPD and a pipeline led by zuranolone for MDD/PPD 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 - 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 202325 - 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)3132 - 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 - 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)343537 Our Strategy 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 Biogen40 - 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 administration40 - 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 diseases40 - 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 territories41 - Continue research to identify new compounds and expand the intellectual property portfolio, while exploring further strategic collaborations or acquisitions41 Our Product Pipeline 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 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 supplies81 - 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 agreements8283 - The company is currently working with CMOs to prepare for validation and commercial-scale manufacturing of zuranolone, contingent on regulatory approval84 - The syntheses of ZULRESSO, zuranolone, SAGE-324, and SAGE-718 are considered reliable, reproducible, and amenable to large-scale manufacturing from readily available starting materials85 Sales and Marketing 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 days8788 - The COVID-19 pandemic has further compounded these barriers, reducing patient demand and site availability, with this adverse impact expected to continue89 - The company's commercial strategy for ZULRESSO is now primarily focused on geographies with existing, active treating sites, which may limit the revenue opportunity90 - 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 sales9293 Licenses and Collaborations 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 royalties9698 - 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 Sage104105108113 - 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. sales109110 - 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 range116117 Intellectual Property 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 - 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 extensions126 - SAGE-324 has issued patents covering its composition of matter in Europe and Japan, expiring in May 2035126 - 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 years127 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 SNRIs131 - For MDD, zuranolone would compete with a wide range of antidepressants and potentially Axsome Therapeutics' NMDA receptor antagonist, AXS-05, which is under FDA review132 - Key competitors in the GABAA neuroactive steroid space include Marinus Pharmaceuticals (ganaxolone) and Praxis Precision Medicines (PRAX-114)133 - For essential tremor, SAGE-324 faces competition from current first-line treatments (propranolol, primidone) and pipeline candidates from Jazz Pharmaceuticals and Praxis134135 Government Regulation 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 approval141146149 - 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 review55161 - 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 use157 - 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 promotion173333 - 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 program220222225 Employees and Human Capital 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 roles240 - 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 diverse241 - 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 work242243 Risk Factors 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 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 pandemic253254 - 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 trials259266 - 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 development292293 - 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 generation295296 - 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 products309311 Risks Related to Our Intellectual Property Rights 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 advantage351352354 - 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 products361 - 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 products379 - 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 products389390 Risks Related to our Industry 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 profitability394395397 - 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 liabilities401402 Risks Related to Our Financial Position and Need for Capital 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 future405406 - Future profitability depends on generating significant product revenue, which is uncertain and subject to numerous development, regulatory, and commercialization risks408 - 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 efforts411416 - Raising additional capital may cause dilution to existing stockholders, and debt financing could impose restrictive covenants on the business415 Risks Related to Our Common Stock 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 conditions418 - Anti-takeover provisions in the company's charter and under Delaware law could delay or prevent an acquisition, potentially hindering stockholder value420 - 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 stock421 Unresolved Staff Comments The company reports that it has no unresolved staff comments from the Securities and Exchange Commission - None422 Properties 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, 2024423 - 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, 2024424 Legal Proceedings 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 claims425 Mine Safety Disclosures This item is not applicable to the company - Not applicable426 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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, 2014429 - As of February 16, 2022, there were five stockholders of record430 - The company has never paid cash dividends and does not anticipate paying any in the foreseeable future434 Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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 2021520 - 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 development524527 - 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 Biogen526528 Liquidity and Capital Resources 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 billion532 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 report539 - Future capital requirements will depend on many factors, including ZULRESSO revenues, costs for zuranolone's potential launch, and the progress of other pipeline candidates541542 Quantitative and Qualitative Disclosures About Market Risk 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, 2021545 - 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 condition545 - Exposure to foreign currency exchange rate risk is considered immaterial, and the company does not hedge this exposure546 Financial Statements and Supplementary Data 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 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, 2021573 - 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 evaluate581582 Consolidated Financial Statements 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 The company reports that there were no changes in or disagreements with its accountants on accounting and financial disclosure - None550 Controls and Procedures 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, 2021552 - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework553 - The effectiveness of internal control over financial reporting was audited by PricewaterhouseCoopers LLP, which issued an unqualified opinion554 Other Information This item is not applicable to the company - Not applicable556 Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable557 Part III Directors, Executive Officers and Corporate Governance 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 statement559 - The company has adopted a Code of Business Conduct and Ethics (Values Code) applicable to all employees, officers, and directors560 Executive Compensation 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 statement561 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 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 statement562 Certain Relationships and Related Transactions, and Director Independence 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 statement563 Principal Accounting Fees and Services 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 statement564 Part IV Exhibits, Financial Statement Schedules 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 omitted566 Form 10-K Summary This item is not applicable to the company - Not applicable568
Sage Therapeutics(SAGE) - 2021 Q4 - Annual Report