Commercial Performance of ZURZUVAE - In Q1 2025, over 3,000 shipments of ZURZUVAE were made to women with PPD[13] - Approximately 80% of ZURZUVAE prescriptions in Q1 2025 were written by OBGYNs[15] - More than 70% of women prescribed ZURZUVAE received it as their first new treatment for PPD[17] - The company is strategically investing in the commercialization of ZURZUVAE in the PPD market[12] Financial Results (Q1 2025) - Total revenue was $14.1 million, compared to $7.9 million in Q1 2024[23] - Collaboration revenue was $13.8 million, compared to $6.2 million in Q1 2024[23] - Net loss was ($62.2 million), compared to ($108.5 million) in Q1 2024[23] - Research and Development (R&D) expenses were $22.8 million, compared to $71.7 million in Q1 2024[23] - Cash and marketable securities totaled $0.4 billion, compared to $0.7 billion in Q1 2024[23] Pipeline and Strategic Focus - The company is focused on developing novel programs in diseases with high unmet needs in Neurodevelopmental Disorders & Neuropsychiatry[12] - The company is evaluating potential indications for SAGE-324, including seizures in developmental and epileptic encephalopathies (DEEs), with an update expected in mid-2025[24]

Company Performance - Sage Therapeutics reported a quarterly loss of $1.01 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.99, and an improvement from a loss of $1.80 per share a year ago [1] - The company posted revenues of $14.06 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.67%, but showing growth from $7.9 million in the same quarter last year [2] - Over the last four quarters, Sage Therapeutics has not surpassed consensus EPS estimates, although it has topped consensus revenue estimates twice [2] Stock Performance - Sage Therapeutics shares have increased by approximately 43.1% since the beginning of the year, contrasting with a decline of 6% in the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is -$0.95 on revenues of $17.11 million, and for the current fiscal year, it is -$3.38 on revenues of $81.59 million [7] Industry Outlook - The Medical - Biomedical and Genetics industry, to which Sage Therapeutics belongs, is currently ranked in the top 31% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5]

Financial Data and Key Metrics Changes - The company reported collaboration revenue of $13.8 million for Q1 2025, a 21% increase from Q4 2024 [16][18] - R&D expenses were $22.8 million, reflecting a 68% decrease compared to Q1 2024, and a nearly 40% decrease from Q4 2024 [17][18] - The net loss for Q1 2025 was $62.2 million, down from a net loss of $95.8 million in Q4 2024 [18] Business Line Data and Key Metrics Changes - XERZUVEY was shipped to over 3,000 women with postpartum depression (PPD) in Q1 2025, representing a 22% increase from Q4 2024 [8][12] - The company generated $13.8 million in collaboration revenue from XERZUVEY, which is 50% of the net revenue reported by Biogen [16][18] - Over 70% of women prescribed XERZUVEY received it as their first new treatment for PPD [12][42] Market Data and Key Metrics Changes - The majority of prescriptions (almost 80%) came from OBGYNs, indicating strong engagement from healthcare providers [12][26] - The total number of prescribers for XERZUVEY increased by over 20% in Q1 2025 [12] Company Strategy and Development Direction - The company is focused on establishing XERZUVEY as the standard of care for women with PPD and is actively working to expand its reach [8][9] - A strategic review process is ongoing to evaluate opportunities for maximizing shareholder value [7] - The company has recalibrated its R&D approach to focus on neuropsychiatry and neurodevelopmental disorders, prioritizing programs with strong scientific rationale [10][19] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing growth of XERZUVEY and the potential for continued quarter-on-quarter revenue growth throughout 2025 [25][54] - The company anticipates that its existing cash and marketable securities will support operations until mid-2027 [18][113] Other Important Information - The company has seen a significant increase in awareness of XERZUVEY among healthcare providers, with approximately 90% aided awareness reported [66] - The sales force expansion is complete, and management expects this will lead to continued growth in prescriptions and revenue [41][112] Q&A Session Summary Question: What kind of early pull through are you seeing from your Salesforce initiatives? - Management noted strong first-quarter growth of over 20% in both demand and revenue, attributing this to the expanded sales force [25][26] Question: Could you provide some additional color on the pipeline and your upcoming catalysts? - Management emphasized confidence in the pharmacology of their pipeline drugs and the potential for significant shareholder value if successful [32][34] Question: What do you believe are the key factors for prescribers and patients deciding not to use XERZUVEY as their first-line treatment? - Management indicated that over 70% of women prescribed XERZUVEY are receiving it as their first new treatment, suggesting minimal obstacles to frontline use [42][44] Question: How should we look at inventory levels now? - Management stated that inventory levels fluctuate due to wholesalers' purchasing habits, but emphasized focusing on demand trends rather than inventory [48][60] Question: What is the current penetration in the OBGYN market? - Management did not disclose specific numbers but indicated ongoing growth in new prescribers and repeat prescribing [98][100] Question: What is the persistence of prescribers for XERZUVEY? - Management confirmed that once healthcare providers prescribe XERZUVEY, they tend to become repeat prescribers, indicating strong retention [118]

Financial Position - As of March 31, 2025, the company's total cash equivalents amounted to $42.139 million, a decrease from $80.239 million as of December 31, 2024[80][81]. - The total marketable securities held by the company as of March 31, 2025, were valued at $378.630 million, down from $423.397 million as of December 31, 2024[80][83]. - The company held cash, cash equivalents, and marketable securities totaling $423.9 million as of March 31, 2025[267]. - The company does not expect significant impact from fluctuations in interest rates on its financial condition due to the short-term nature of its cash and marketable securities[267]. - The company has exposure to foreign currency exchange rate fluctuations but considers this exposure to be immaterial[268]. - Inflation has not materially affected the company's results of operations during the three months ended March 31, 2025, and 2024[270]. Marketable Securities and Investments - The company reported unrealized losses of $82,000 on its marketable securities as of March 31, 2025, attributed to interest rate increases[84]. - The fair value of U.S. corporate bonds held by the company was $253.414 million as of March 31, 2025, compared to $269.013 million as of December 31, 2024[82][83]. - The company had accrued interest receivable of $2.7 million related to available-for-sale securities as of March 31, 2025[83]. - All marketable securities held by the company had remaining contractual maturities of one year or less, except for U.S. corporate bonds and international corporate bonds with a fair value of $40.0 million and maturities of one to two years as of March 31, 2025[85]. - The company did not experience any impairments of assets measured and carried at fair value during the three months ended March 31, 2025[87]. - The company performed validation procedures on fair value measurements and did not adjust any provided by pricing services as of March 31, 2025[79]. Legal and Regulatory Matters - The Company is involved in a federal securities class action lawsuit alleging violations of U.S. securities laws, with unspecified damages sought for stock purchases made between April 12, 2021, and July 23, 2024[89]. - The Company received a subpoena from the SEC regarding zuranolone for MDD treatment, and is cooperating with the investigation[90]. - The Company is unable to predict the outcome of ongoing legal proceedings or reasonably estimate potential losses[93]. Collaborations and Revenue - The Company entered a strategic collaboration with Shionogi for zuranolone, with an upfront payment of $90 million and potential milestone payments of up to $485 million[95]. - The Company achieved a $75 million milestone for the first commercial sale of ZURZUVAE for treating women with PPD in the U.S. in Q4 2023[106]. - The Biogen Collaboration Agreement allows for potential milestone payments of up to $1.6 billion, but the Company will not receive $150 million for MDD due to halted development[106]. - The Company is eligible for tiered royalties on net sales of SAGE-217 products in the Biogen Territory, ranging from high teens to low twenties percentage rates[108]. - The Biogen Collaboration Agreement will continue until royalty terms expire in the Biogen Territory, with Biogen responsible for development and commercialization costs[112]. - The Company maintains exclusive rights to develop and commercialize zuranolone outside the Shionogi Territory[95]. - In Q4 2023, the Company recognized $75 million in license and milestone revenue related to the first commercial sale of ZURZUVAE for the treatment of women with PPD in the U.S.[119]. - For the three months ended March 31, 2025, collaboration revenue from Biogen was $13.8 million, compared to $6.2 million for the same period in 2024[123]. - The Company recorded a collaboration receivable of $10.7 million as of March 31, 2025, representing net reimbursement amounts due[123]. Stock-Based Compensation and Equity - The Company has an ATM Sales Agreement allowing for the sale of up to $250 million in common stock, with no shares sold under this agreement as of March 31, 2025[131][136]. - The 2024 Equity Incentive Plan was approved, allowing for the grant of up to 16,502,166 shares of common stock[138]. - As of March 31, 2025, the total number of shares underlying outstanding awards under the 2024 Plan, the 2014 Plan, and the 2016 Plan was 8,782,994, with 6,214,108 shares available for future issuance under the 2024 Plan[142]. - The Company granted 1,493,452 time-based restricted stock units during the three months ended March 31, 2025, compared to 857,084 in the same period of 2024[147]. - The total unrecognized stock-based compensation expense related to time-based restricted stock units was $15.8 million, expected to be recognized over a remaining weighted average vesting period of 3.57 years[148]. - The Company recorded stock-based compensation expense of $6.9 million for the three months ended March 31, 2025, down from $13.7 million in the same period of 2024[161]. - As of March 31, 2025, the total unrecognized stock-based compensation expense related to performance restricted stock units was $34.4 million[154]. - The Company accepted for exchange eligible options to purchase a total of 3,079,608 shares, granting replacement options for a total of 1,483,113 shares with an exercise price of $22.20 per share[144]. - The Company expects to incur a total of $1.7 million of additional stock-based compensation expense as a result of the Option Exchange, to be recognized over the 18-month vesting period[145]. Financial Performance - The net loss for the three months ended March 31, 2025, was $62.2 million, resulting in a basic and diluted net loss per share of $1.01, compared to a net loss of $108.5 million and a loss per share of $1.80 in 2024[163]. - Revenues for the three months ended March 31, 2025, were $14,063,000, a 77.5% increase from $7,902,000 in the same period of 2024[172]. - Net loss for the three months ended March 31, 2025, was $(62,214,000), a significant improvement compared to $(108,483,000) in the same period of 2024, reflecting a reduction of 42.7%[172]. - Program expenses for zuranolone (ZURZUVAE) increased to $12,010,000 in Q1 2025 from $5,257,000 in Q1 2024, representing a 128.5% increase[172]. - Non-program expenses decreased to $19,258,000 in Q1 2025 from $22,131,000 in Q1 2024, indicating a reduction of 12.6%[172]. - Total restructuring charges incurred through March 31, 2025, amounted to $32.9 million, with no related expenses recorded during the three months ended March 31, 2025[165]. - Total charges related to the 2024 Restructuring incurred through March 31, 2025, are $22.8 million, which is the total expected amount to be incurred[167].

Exhibit 99.1 "We delivered strong growth in revenue and shipments of ZURZUVAE during the first quarter of 2025 through the team's disciplined execution and unwavering commitment to bringing ZURZUVAE to more women with postpartum depression," said Barry Greene, Chief Executive Officer at Sage Therapeutics. "We remain focused on establishing ZURZUVAE as the standard of care for women with postpartum depression and driving our business strategy forward with the goal of creating value for shareholders." First Q ...

Core Insights - Biogen's key multiple sclerosis drugs, including Tecfidera and Tysabri, along with Spinraza for spinal muscular atrophy, are facing declining sales due to increased competition, leading to a 2% decline in total revenues in 2024, with a projected mid-single-digit percentage decline in 2025 [1][4][6] Group 1: Revenue Declines - Biogen's global MS revenues declined by 7% in 2024, with expectations of a steeper decline in 2025 due to the potential entry of Tysabri biosimilars in the U.S. and generic versions of Tecfidera in Europe [4] - Spinraza sales fell nearly 10% in 2024, attributed to competitive pressure and decreased demand, with little improvement anticipated in 2025 [4][10] Group 2: Competitive Landscape - The launch of multiple generic versions of Tecfidera in North America, Brazil, and Europe has negatively impacted its revenues [3] - Regulatory approvals for biosimilars of Tysabri in the U.S. and Europe are contributing to the competitive pressure faced by Biogen [3][5] Group 3: New Drug Potential - Biogen is optimistic about new drugs like Leqembi for Alzheimer's, Skyclarys for Friedreich's ataxia, and Zurzuvae for depression, which are seen as potential drivers for long-term growth [2][8] - Leqembi has shown sequential improvement in sales since its launch, with expectations for continued growth in 2025 [7][8] Group 4: Market Challenges - The FDA approval of Eli Lilly's Alzheimer's drug Kisunla poses significant competition to Leqembi [5] - Foreign exchange headwinds are expected to negatively impact 2025 revenues by 1%, alongside a projected $50 million to $100 million impact from the redesign of Medicare Part D [6] Group 5: Pipeline Developments - Biogen faced setbacks in its pipeline, including the discontinuation of Zurzuvae's development for major depressive disorder, which had a larger market potential than its current indication [5] - The acquisition of Reata Pharmaceuticals added Skyclarys to Biogen's portfolio, which is experiencing strong launch trends [9]

Financial Data and Key Metrics Changes - In Q4 2024, collaboration revenue from XERZUVE sales was $11.4 million, a 4% increase from Q3 2024, with full-year revenue at $36.1 million [19] - The net loss for Q4 2024 was $95.8 million, with R&D expenses at $37 million and SG&A expenses at $54 million [20][21] - The company anticipates overall operating expenses to substantially decrease in 2025 compared to 2024 due to reductions in R&D and G&A from pipeline prioritization [20] Business Line Data and Key Metrics Changes - XERZUVE saw nearly 2,500 prescriptions shipped in Q4 2024, representing a 21% increase from Q3 2024, with over 6,600 prescriptions shipped throughout 2024 [13][14] - More than 70% of XERZUVE patients received it as their first new treatment for PPD, with about 60% of targeted healthcare providers writing repeat prescriptions [15][16] Market Data and Key Metrics Changes - Over 95% of commercial and Medicaid lives are covered or have a path to coverage for XERZUVE, with the majority having no step edits or complex prior authorizations [17] - The company is seeing a promotionally responsive market, with a 33% growth rate in patient shipments in territories where the sales force was expanded [18] Company Strategy and Development Direction - The company plans to build on XERZUVE's commercial momentum, recalibrate its R&D approach, and maintain financial discipline to enhance shareholder growth [7] - The focus for 2025 includes establishing SERGEUVA as a standard of care for PPD and prioritizing the pipeline for neuropsych and neurodevelopmental disorders [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing commercialization of XERZUVE and the potential for significant growth in 2025, supported by strong demand and a favorable reimbursement environment [11][12] - The company is committed to maintaining a strong financial position with a cash runway expected to last until mid-2027 [21] Other Important Information - The Board rejected Biogen's unsolicited acquisition proposal, stating it undervalued the company and initiated a strategic review to maximize shareholder value [12] - The company is exploring partnerships and out-licensing opportunities for clinical and preclinical stage compounds [24] Q&A Session Summary Question: Can you elaborate on the sales force expansion and marketing efforts? - Management confirmed an aligned commercialization plan with increased sales force and investment in marketing, including social media campaigns [28][30] Question: What are the inventory dynamics for the quarter? - Management explained that revenue is influenced by inventory management at specialty pharmacies and wholesalers, emphasizing that demand is the key metric to assess performance [34][36] Question: How do you anticipate the first quarter will perform given historical seasonality? - Management expects continued quarter-on-quarter growth, noting that the reimbursement structure does not present typical first-quarter issues [42][43] Question: What proportion of patients are receiving XERZUVE as their first-line therapy? - Over 70% of patients are receiving XERZUVE as their first-line treatment, with historical bias being a challenge for those on other medications [115][117] Question: Can you provide insights on the collaboration with Shionogi in Japan? - Management indicated that a decision on MDD from the Japanese FDA is expected later this year, with potential regulatory and commercial milestones amounting to approximately $55 million [96][97] Question: How sensitive is the market to marketing efforts? - Management noted that the market is promotionally responsive, with both physician engagement and patient awareness contributing to prescription growth [104][106]

[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)

[Form 10-Q Filing Information](index=1&type=section&id=Form%2010-Q) The company filed its Q1 2021 Form 10-Q, detailing its filer status and outstanding common stock - Sage Therapeutics, Inc filed its Quarterly Report on Form 10-Q for the period ended March 31, 2021[1](index=1&type=chunk)[2](index=2&type=chunk)[3](index=3&type=chunk) - The company is incorporated in Delaware and its common stock trades on The Nasdaq Global Market under the symbol SAGE[1](index=1&type=chunk)[2](index=2&type=chunk)[3](index=3&type=chunk) Filing Details | Indicator | Value | | :--- | :--- | | Commission file number | 001-36544 | | Shares of Common Stock Outstanding (as of April 27, 2021) | 58,480,018 | | Filer Status | Large accelerated filer | [Cautionary Note Regarding Forward-Looking Statements](index=2&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) The report contains forward-looking statements subject to risks and uncertainties, with no obligation to update - This report contains forward-looking statements subject to risks and uncertainties, covering ZULRESSO commercialization, clinical development, financial estimates, and the impact of COVID-19[6](index=6&type=chunk)[7](index=7&type=chunk)[8](index=8&type=chunk) - **Actual results may differ materially** from current expectations due to various factors detailed in the Risk Factors section, and the company assumes no obligation to update these statements[9](index=9&type=chunk) [Summary of Risks Related to our Business](index=3&type=section&id=Summary%20of%20Risks%20Related%20to%20our%20Business) The company faces significant risks in commercialization, regulatory approval, competition, and financing - Key risks include unsuccessful ZULRESSO commercialization, challenges in developing and gaining regulatory approval for product candidates, and the potential for adverse events[11](index=11&type=chunk)[12](index=12&type=chunk) - Further risks involve reliance on third-party manufacturers, market acceptance, competition, intellectual property protection, limited operating history, and the need for additional funding[13](index=13&type=chunk) - The **COVID-19 pandemic** continues to pose a significant risk, potentially impacting ZULRESSO sales and clinical trial execution[13](index=13&type=chunk) [PART I – FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION) This part presents the unaudited financial statements and management's analysis for the first quarter of 2021 [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and accompanying notes for Q1 2021 [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheets show a significant shift from cash to marketable securities and a decrease in total assets Condensed Consolidated Balance Sheets (in thousands) | Item | March 31, 2021 | December 31, 2020 | | :-------------------------------- | :------------- | :---------------- | | **Assets** | | | | Cash and cash equivalents | $899,250 | $1,661,082 | | Marketable securities | $1,104,767 | $438,467 | | Total current assets | $2,051,866 | $2,122,370 | | Total assets | $2,080,698 | $2,159,246 | | **Liabilities** | | | | Total current liabilities | $62,011 | $67,204 | | Total liabilities | $77,422 | $86,912 | | **Stockholders' Equity** | | | | Total stockholders' equity | $2,003,276 | $2,072,334 | - Cash and cash equivalents **decreased significantly** from $1.66 billion to $899.3 million, while marketable securities **increased** from $438.5 million to $1.10 billion[18](index=18&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) The company's net loss improved year-over-year due to decreased operating expenses despite lower product revenue Condensed Consolidated Statements of Operations and Comprehensive Loss (in thousands) | Item | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Product revenue, net | $1,583 | $2,286 | | Cost of goods sold | $187 | $170 | | Research and development | $58,056 | $63,610 | | Selling, general and administrative | $39,847 | $70,130 | | Total operating costs and expenses | $98,090 | $133,910 | | Loss from operations | $(96,507) | $(131,624) | | Net loss | $(95,764) | $(126,740) | | Net loss per share—basic and diluted | $(1.64) | $(2.44) | - Net product revenue decreased from $2.3 million in Q1 2020 to $1.6 million in Q1 2021[20](index=20&type=chunk)[185](index=185&type=chunk) - Total operating costs and expenses **decreased by $35.8 million**, primarily driven by reductions in SG&A expenses[20](index=20&type=chunk)[185](index=185&type=chunk) - The **net loss improved** from $(126.7) million in Q1 2020 to $(95.8) million in Q1 2021, resulting in a lower net loss per share[20](index=20&type=chunk)[185](index=185&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flows show reduced operating cash burn but a significant use of cash for investing in marketable securities Condensed Consolidated Statements of Cash Flows (in thousands) | Item | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(109,086) | $(136,691) | | Net cash provided by (used in) investing activities | $(658,816) | $206,270 | | Net cash provided by financing activities | $5,623 | $3,160 | | Net increase (decrease) in cash, cash equivalents and restricted cash | $(762,279) | $72,739 | | Cash, cash equivalents and restricted cash at end of period | $900,519 | $201,811 | - Net cash used in operating activities **decreased** from $(136.7) million in Q1 2020 to $(109.1) million in Q1 2021[22](index=22&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) - Investing activities shifted from providing $206.3 million to **using $(658.8) million**, primarily due to increased purchases of marketable securities[22](index=22&type=chunk)[194](index=194&type=chunk)[195](index=195&type=chunk)[196](index=196&type=chunk)[197](index=197&type=chunk)[198](index=198&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity decreased during the quarter primarily as a result of the net loss incurred Consolidated Statements of Changes in Stockholders' Equity (in thousands, except share data) | Item | March 31, 2021 | December 31, 2020 | | :------------------------------------ | :------------- | :---------------- | | Common Stock Shares | 58,406,821 | 58,308,411 | | Additional Paid-in Capital | $3,137,164 | $3,109,807 | | Accumulated Deficit | $(1,133,258) | $(1,037,494) | | Total Stockholders' Equity | $2,003,276 | $2,072,334 | - Total stockholders' equity **decreased from $2.07 billion to $2.00 billion**, primarily due to a net loss of $95.8 million and unrealized loss on marketable securities[24](index=24&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies, financial components, and collaboration agreements [1. Nature of the Business](index=10&type=section&id=1.%20Nature%20of%20the%20Business) Sage is a biopharmaceutical company with one approved product, a clinical pipeline, and a history of operating losses - Sage Therapeutics is a biopharmaceutical company focused on brain disorders, with ZULRESSO® (brexanolone) CIV injection approved for PPD in the U.S[26](index=26&type=chunk)[27](index=27&type=chunk) - The company has incurred losses since inception, with an **accumulated deficit of $1.1 billion** as of March 31, 2021, except for a net income in 2020 due to the Biogen collaboration[30](index=30&type=chunk) - Existing cash is expected to fund operations for at least the next 12 months, but **additional financing will be required** thereafter[31](index=31&type=chunk) - The **COVID-19 pandemic** has negatively impacted ZULRESSO demand and could disrupt operations and development activities[32](index=32&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This note outlines key accounting policies for financial statement preparation, including revenue recognition - The condensed consolidated financial statements are prepared in accordance with GAAP for interim reports[34](index=34&type=chunk) - Management makes significant estimates and assumptions, particularly regarding the **impact of the COVID-19 pandemic** on sales, expenses, and clinical trials[37](index=37&type=chunk) - Revenue is recognized when control of goods or services is transferred, net of variable consideration like rebates and returns[41](index=41&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - Collaboration revenue is recognized by allocating the transaction price to distinct performance obligations, such as licenses and clinical material supply[42](index=42&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) [3. Fair Value Measurements](index=17&type=section&id=3.%20Fair%20Value%20Measurements) This note details the fair value hierarchy and composition of the company's cash equivalents and marketable securities - Cash equivalents and marketable securities are classified within Level 1 and Level 2 of the fair value hierarchy based on observable inputs[66](index=66&type=chunk)[67](index=67&type=chunk) - As of March 31, 2021, most marketable securities had maturities of one year or less, with **no impairments** recorded during the period[71](index=71&type=chunk)[72](index=72&type=chunk)[73](index=73&type=chunk) Fair Value of Cash Equivalents and Marketable Securities (in thousands) | Item | March 31, 2021 (Total) | December 31, 2020 (Total) | | :-------------------------- | :--------------------- | :---------------------- | | Cash equivalents | $899,250 | $1,661,082 | | Marketable securities | $1,104,767 | $438,467 | | **Total** | **$2,004,017** | **$2,099,549** | Gross Unrealized Gains and Losses on Marketable Securities (in thousands) as of March 31, 2021 | Item | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | | :-------------------------- | :------------- | :--------------------- | :---------------------- | :--------- | | U.S. government securities | $173,073 | $30 | $(6) | $173,097 | | U.S. corporate bonds | $346,021 | $118 | $(282) | $345,857 | | International corporate bonds | $202,848 | $70 | $(148) | $202,770 | | U.S. commercial paper | $170,803 | $4 | $(11) | $170,796 | | International commercial paper | $212,258 | $0 | $(11) | $212,247 | | **Total** | **$1,105,003** | **$222** | **$(458)** | **$1,104,767** | [4. Balance Sheet Components](index=20&type=section&id=4.%20Balance%20Sheet%20Components) This note details the composition of property and equipment and accrued expenses, noting key changes - Property and equipment, net, **decreased from $6.8 million to $4.2 million**, due to asset removals and a write-off from an early lease termination[74](index=74&type=chunk)[75](index=75&type=chunk)[76](index=76&type=chunk) - Accrued expenses decreased from $54.9 million to $51.4 million, primarily due to a **decrease in employee-related accruals**[78](index=78&type=chunk) Property and Equipment, net (in thousands) | Item | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Computer hardware and software | $1,302 | $2,758 | | Furniture and equipment | $964 | $1,865 | | Leasehold improvements | $6,559 | $9,220 | | Less: Accumulated depreciation | $(4,652) | $(7,088) | | **Total** | **$4,173** | **$6,755** | Accrued Expenses (in thousands) | Item | March 31, 2021 | December 31, 2020 | | :-------------------------- | :------------- | :---------------- | | Accrued research and development costs | $39,276 | $34,398 | | Employee-related | $3,640 | $14,769 | | Professional services | $7,817 | $5,184 | | Other | $687 | $500 | | **Total** | **$51,420** | **$54,851** | [5. Leases, Commitments and Contingencies](index=21&type=section&id=5.%20Leases%2C%20Commitments%20and%20Contingencies) This note outlines operating leases and various license agreements with milestone and royalty obligations - The company **terminated an operating lease** for office space in Cambridge, Massachusetts, during Q1 2021[81](index=81&type=chunk) - Under the CyDex license agreement, the company has paid **$1.0 million in licensing fees** and **$3.6 million in clinical/regulatory milestones**[83](index=83&type=chunk)[84](index=84&type=chunk) - For the University of California license agreements, the company pays royalties of **less than 1% on net sales** and has paid $0.3 million in milestones[86](index=86&type=chunk)[87](index=87&type=chunk) - The Washington University license agreement includes up to **$1.2 million in future milestones** and low single-digit royalties[89](index=89&type=chunk)[90](index=90&type=chunk) [6. Collaboration Agreements](index=23&type=section&id=6.%20Collaboration%20Agreements) This note details strategic collaborations with Shionogi and Biogen, including financial terms and revenue recognition - The Shionogi collaboration grants rights for zuranolone in Japan, Taiwan, and South Korea for a **$90.0 million upfront payment** and up to $485.0 million in milestones[92](index=92&type=chunk)[93](index=93&type=chunk) - The Biogen collaboration involves joint U.S development and commercialization of SAGE-217 and SAGE-324[99](index=99&type=chunk)[100](index=100&type=chunk)[104](index=104&type=chunk) - Sage received **$1.5 billion from Biogen**, comprising an $875.0 million upfront payment and a $650.0 million equity investment, with eligibility for up to $1.6 billion in future milestones[101](index=101&type=chunk)[102](index=102&type=chunk) - In Q1 2021, Sage recorded a **net reimbursement of $24.8 million from Biogen**, reducing R&D and SG&A expenses[113](index=113&type=chunk)[114](index=114&type=chunk) - The **$1.1 billion transaction price** for the Biogen collaboration was allocated to licenses and recognized as revenue in 2020[114](index=114&type=chunk)[116](index=116&type=chunk) [7. Common Stock](index=27&type=section&id=7.%20Common%20Stock) This note states the completion of a common stock sale to BIMA, generating $650.0 million in gross proceeds - On December 31, 2020, the company sold 6,241,473 shares of common stock to BIMA, generating **$650.0 million in gross proceeds**[121](index=121&type=chunk) [8. Stock-Based Compensation](index=28&type=section&id=8.%20Stock-Based%20Compensation) This note details equity incentive plans, award activity, and a year-over-year decrease in compensation expense - As of March 31, 2021, total unrecognized stock-based compensation expense for unvested RSUs was **$85.6 million**[132](index=132&type=chunk) - Total unrecognized stock-based compensation expense for unvested stock options was **$152.7 million**, expected to be recognized over a weighted average period of 2.41 years[133](index=133&type=chunk) - Stock-based compensation expense **decreased from $31.1 million in Q1 2020 to $22.0 million in Q1 2021**, primarily due to employee terminations[139](index=139&type=chunk) Stock-Based Compensation Expense (in thousands) | Category | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Research and development | $9,281 | $12,224 | | Selling, general and administrative | $12,695 | $18,886 | | **Total** | **$21,976** | **$31,110** | [9. Net Loss Per Share](index=30&type=section&id=9.%20Net%20Loss%20Per%20Share) This note presents the calculation of basic and diluted net loss per share, excluding anti-dilutive securities - Common stock equivalents totaling **8.3 million shares in Q1 2021** and 8.2 million shares in Q1 2020 were excluded from diluted EPS calculations as their effect would have been anti-dilutive[141](index=141&type=chunk) Net Loss Per Share (Basic and Diluted) | Item | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Net loss (in thousands) | $(95,764) | $(126,740) | | Weighted average common stock outstanding—basic and diluted | 58,374,219 | 51,908,760 | | Net loss per share—basic and diluted | $(1.64) | $(2.44) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes financial condition and results of operations, covering performance, pipeline, and liquidity [Overview](index=32&type=section&id=Overview) Sage is a biopharmaceutical company advancing its pipeline for brain disorders while facing continued operating losses - The company's pipeline includes zuranolone (SAGE-217) in Phase 3, SAGE-324 in Phase 2 for essential tremor, and SAGE-718 in Phase 2a for cognition-related disorders[145](index=145&type=chunk)[149](index=149&type=chunk)[151](index=151&type=chunk)[152](index=152&type=chunk)[153](index=153&type=chunk) - The SHORELINE Study for zuranolone showed that **over 70% of patients achieved positive response** after initial treatment[150](index=150&type=chunk) - SAGE-324's Phase 2 KINETIC Study met its primary endpoint, showing a **statistically significant 36% reduction** in upper limb tremor score versus placebo[152](index=152&type=chunk) - The company incurred a **net loss of $95.8 million** for Q1 2021 and had an accumulated deficit of $1.1 billion, expecting continued significant operating losses[156](index=156&type=chunk) [Financial Operations Overview](index=36&type=section&id=Financial%20Operations%20Overview) This section details revenue streams, operating expense components, and the financial impact of collaborations - ZULRESSO revenue has been negatively impacted by complex treatment requirements and the **COVID-19 pandemic**[162](index=162&type=chunk)[163](index=163&type=chunk) - A **workforce reduction in April 2020** has further limited ZULRESSO's revenue opportunity[164](index=164&type=chunk) - Collaboration revenue includes a **$90.0 million license fee from Shionogi** (2018) and **$1.1 billion from Biogen** (2020)[166](index=166&type=chunk)[167](index=167&type=chunk) - The Biogen collaboration resulted in a **$22.1 million reduction in R&D expenses** and a $2.7 million reduction in SG&A expenses for Q1 2021 due to net reimbursements[174](index=174&type=chunk)[184](index=184&type=chunk) - R&D expenses are expected to increase as product candidates advance, while SG&A expenses are expected to increase with potential future commercialization[173](index=173&type=chunk)[177](index=177&type=chunk)[183](index=183&type=chunk) [Results of Operations](index=41&type=section&id=Results%20of%20Operations) This section compares Q1 2021 to Q1 2020, showing lower revenue but a reduced net loss due to cost-cutting Results of Operations (in thousands) | Item | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | Increase (Decrease) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :------------------ | | Product revenue, net | $1,583 | $2,286 | $(703) | | Cost of goods sold | $187 | $170 | $17 | | Research and development | $58,056 | $63,610 | $(5,554) | | Selling, general and administrative | $39,847 | $70,130 | $(30,283) | | Total operating costs and expenses | $98,090 | $133,910 | $(35,820) | | Loss from operations | $(96,507) | $(131,624) | $35,117 | | Interest income, net | $708 | $4,729 | $(4,021) | | Other income, net | $35 | $155 | $(120) | | Net loss | $(95,764) | $(126,740) | $30,976 | - Net product revenue from ZULRESSO **decreased by 30.7%** from $2.3 million in Q1 2020 to $1.6 million in Q1 2021[185](index=185&type=chunk)[186](index=186&type=chunk) - Total operating costs and expenses **decreased by $35.8 million (26.7%)**, driven by a $30.3 million (43.2%) decrease in SG&A expenses due to restructuring[185](index=185&type=chunk)[190](index=190&type=chunk)[191](index=191&type=chunk) - R&D expenses decreased by $5.6 million (8.7%) due to a **$16.8 million reimbursement from Biogen**, partially offset by increased clinical trial spending[185](index=185&type=chunk)[189](index=189&type=chunk) - **Net loss improved by $31.0 million (24.4%)** from $(126.7) million in Q1 2020 to $(95.8) million in Q1 2021[185](index=185&type=chunk) [Liquidity and Capital Resources](index=43&type=section&id=Liquidity%20and%20Capital%20Resources) The company has sufficient liquidity for the next 12 months but will require additional future funding - As of March 31, 2021, primary liquidity sources were cash, cash equivalents, and marketable securities, totaling **$2.0 billion**[193](index=193&type=chunk) - Net cash used in operating activities was **$(109.1) million** in Q1 2021, while net cash used in investing activities was **$(658.8) million**[194](index=194&type=chunk)[195](index=195&type=chunk][197](index=197&type=chunk) - The company expects existing cash to fund operations for **at least the next 12 months** but anticipates needing substantial additional funding for future operations[199](index=199&type=chunk)[200](index=200&type=chunk) - Future capital requirements depend on ZULRESSO revenue, clinical trial progress, and collaboration payments, with potential for stockholder dilution from future financings[202](index=202&type=chunk)[203](index=203&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=47&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the company's primary market risk from interest rate fluctuations on its cash and investments - The company's primary market risk exposure is to **interest rate fluctuations** on its $2.0 billion in cash and marketable securities[212](index=212&type=chunk) - Due to the short-term nature of its investments, a sudden change in market interest rates is **not expected to have a material impact** on financial condition[212](index=212&type=chunk) - The company has **immaterial exposure to foreign currency exchange rates** and does not hedge against this exposure[213](index=213&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - As of March 31, 2021, management concluded that the company's disclosure controls and procedures were **effective** at the reasonable assurance level[217](index=217&type=chunk) - **No material changes** to internal control over financial reporting occurred during the period[218](index=218&type=chunk) [PART II – OTHER INFORMATION](index=49&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) This part covers legal proceedings, risk factors, and exhibits filed with the report [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company was not a party to any material legal proceedings as of the reporting date - As of March 31, 2021, the company was **not involved in any legal proceedings** expected to have a material adverse impact on its financial position or operations[220](index=220&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks related to product development, commercialization, IP, and financial position [Risks Related to Product Development, Regulatory Approval and Commercialization](index=49&type=section&id=Risks%20Related%20to%20Product%20Development%2C%20Regulatory%20Approval%20and%20Commercialization) This subsection outlines risks in drug development, regulatory approval, and commercialization, including COVID-19 impacts - ZULRESSO revenue is negatively impacted by **complex administration requirements** and the COVID-19 pandemic, creating significant barriers to treatment[222](index=222&type=chunk)[223](index=223&type=chunk) - The company's commercial strategy for ZULRESSO is expected to **substantially limit revenue growth**[225](index=225&type=chunk) - Drug development is a long, expensive, and uncertain process; **success in early trials may not predict later-stage success**, as shown by the MOUNTAIN Study failure[228](index=228&type=chunk)[229](index=229&type=chunk) - The **COVID-19 pandemic** continues to adversely impact ZULRESSO sales and development activities, potentially causing delays in clinical trials and supply chain operations[231](index=231&type=chunk)[232](index=232&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) - The company **relies completely on third-party suppliers** for manufacturing, posing risks related to compliance, supply disruptions, and IP protection[262](index=262&type=chunk)[263](index=263&type=chunk)[264](index=264&type=chunk)[265](index=265&type=chunk) [Risks Related to Our Intellectual Property Rights](index=73&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property%20Rights) This subsection details risks associated with obtaining, enforcing, and defending intellectual property rights - The company's success depends on obtaining and maintaining patent protection, but there is **no assurance that patents will issue or be enforceable**[316](index=316&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk)[319](index=319&type=chunk) - **Patent litigation is costly and time-consuming**, and successful infringement claims against the company could lead to substantial damages or halt commercialization[320](index=320&type=chunk)[321](index=321&type=chunk)[322](index=322&type=chunk)[323](index=323&type=chunk][326](index=326&type=chunk)[327](index=327&type=chunk) - The company is **dependent on licensed intellectual property**, and a breach of license agreements could result in the loss of critical rights[342](index=342&type=chunk)[346](index=346&type=chunk) - Changes in U.S patent law could **diminish the value of patents** and weaken the company's ability to protect its products[352](index=352&type=chunk)[353](index=353&type=chunk)[354](index=354&type=chunk) [Risks Related to our Industry](index=81&type=section&id=Risks%20Related%20to%20our%20Industry) This subsection addresses industry-specific risks from healthcare regulations, data privacy, and foreign market entry - **Healthcare regulations and drug pricing controls** could adversely affect revenue and limit profitability[357](index=357&type=chunk)[358](index=358&type=chunk)[361](index=361&type=chunk)[362](index=362&type=chunk)[363](index=363&type=chunk) - The company is subject to numerous healthcare laws (e.g, anti-kickback, False Claims Act), and **non-compliance could lead to significant penalties**[299](index=299&type=chunk)[300](index=300&type=chunk)[301](index=301&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk) - Strict data privacy regulations (HIPAA, GDPR, CCPA) impose complex obligations and **potential fines for non-compliance**[306](index=306&type=chunk)[307](index=307&type=chunk)[308](index=308&type=chunk) - Penetrating foreign markets subjects the company to additional regulatory burdens, price controls, and **political or economic instability**[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) [Risks Related to Our Financial Position and Need for Capital](index=83&type=section&id=Risks%20Related%20to%20Our%20Financial%20Position%20and%20Need%20for%20Capital) This subsection highlights the company's history of losses and the need for substantial additional funding - Sage has a limited operating history and has incurred significant losses, with an **accumulated deficit of $1.1 billion** as of March 31, 2021[367](index=367&type=chunk)[368](index=368&type=chunk) - The company expects to incur **increasing operating losses** for the foreseeable future due to substantial R&D and commercialization costs[369](index=369&type=chunk)[370](index=370&type=chunk) - While existing cash of $2.0 billion is expected to fund operations for at least 12 months, **additional funding will be required** thereafter[373](index=373&type=chunk)[374](index=374&type=chunk)[375](index=375&type=chunk) - **Failure to obtain necessary capital** could force delays or termination of development programs[375](index=375&type=chunk)[378](index=378&type=chunk) [Risks Related to Our Common Stock](index=85&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) This subsection addresses risks related to common stock volatility, use of capital, and anti-takeover provisions - The market price of the company's common stock is **volatile** and can fluctuate significantly due to clinical, regulatory, and commercial developments[380](index=380&type=chunk) - Management has **broad discretion in using existing cash**, which may not yield significant returns[381](index=381&type=chunk) - **Anti-takeover provisions** in charter documents could make an acquisition more difficult[382](index=382&type=chunk) - Future sales of a substantial number of common shares could **significantly reduce the market price** of the stock[383](index=383&type=chunk) [Item 6. Exhibits](index=87&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including agreements and officer certifications - Exhibits filed include a Separation Agreement, certifications of Principal Executive and Financial Officers, and Inline XBRL documents[384](index=384&type=chunk)[386](index=386&type=chunk) [SIGNATURES](index=88&type=section&id=SIGNATURES) The report is duly signed by the company's Principal Executive Officer and Principal Financial Officer - The report was signed on May 4, 2021, by Barry E Greene, Chief Executive Officer, and Kimi Iguchi, Chief Financial Officer[388](index=388&type=chunk)[390](index=390&type=chunk)