SEC Filing | Sage Therapeutics, Inc.

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sage-10q_20190630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36544

Sage Therapeutics, Inc.

(Exact name of registrant as specified in its Charter)

Delaware

27-4486580

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

215 First Street

Cambridge, Massachusetts 02142

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code: (617) 299-8380

Securities registered pursuant to Section 12(b) of the Act:

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

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of July 31, 2019, there were 51,656,993 shares of the registrant’s common stock, $0.0001 par value per share, outstanding.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•

our view as to potential future results of our ongoing commercialization efforts in the U.S. with respect to ZULRESSO™ (brexanolone) injection which is approved in the U.S. for the treatment of postpartum depression, or PPD, including our expectations with respect to: future revenues and sales momentum; the number of patients who may receive ZULRESSO for the treatment of PPD; the availability and willingness of healthcare settings to administer ZULRESSO; the scope, level and availability of reimbursement, including reimbursement for costs incurred by the healthcare settings that administer ZULRESSO, reimbursement of cost of treatment to the patient, and the nature of any limitations imposed by payors; and the level of market acceptance of ZULRESSO as a treatment for PPD by healthcare settings, prescribers and women suffering from PPD.

•

our expectations as to the sufficiency of our planned development program for SAGE-217 in major depressive disorder and PPD, if successful, to support filing of a New Drug Application, or NDA, with the FDA; our statements regarding the potential for approval of SAGE-217 in such indications in the U.S.; our plans and expectations for development of SAGE-217 in additional indications; our plans and expectations for commercialization of SAGE-217 and our view of the potential product profile, market impact, market size and opportunity for SAGE-217, if successfully developed and approved.

•

our plans to develop SAGE-324, SAGE-718 and our other product candidates in the central nervous system, or CNS, disorders we discuss in this Quarterly Report, and potentially in other indications and our view of the potential product profile and treatment paradigm impact for such product candidates, if successfully developed and approved;

•

our ability, within the expected time-frames, to initiate clinical trials and non-clinical studies of existing or future product candidates, including pivotal clinical trials, and to successfully complete and announce the results of ongoing or future clinical trials;

•

our plans and potential outcomes with respect to other research and development activities and our business development efforts;

•

our plans and expectations with respect to the potential development of any product or product candidate for markets outside the U.S.;

•

our estimates regarding expenses, use of cash and projected cash on hand at any given timepoint, timing of future cash needs, and capital requirements;

•

our expectations as to the amount of future revenues that may be achieved;

•

our expectations with respect to the availability of supplies of ZULRESSO and our product candidates, and the expected performance of our third-party manufacturers;

•

our ability to obtain and maintain intellectual property protection for our proprietary assets and other forms of exclusivity relevant to our business;

•

the estimated number of patients with diseases or disorders of interest to us; the potential size of the market for ZULRESSO in PPD and for our product candidates in the indications we are studying or plan to study; the potential for ZULRESSO as a treatment for PPD and current or future product candidates, if successfully developed and approved, in the markets for which they are approved; and our ability to serve those markets;

•

the level of costs we may incur in connection with our activities, the possible timing and sources of future financings, and our ability to obtain additional financing when needed to fund future operations;

•

the potential for success of competing products that are or become available for PPD or any of the indications that we are pursuing or may pursue in the future with our product candidates;

•

the potential risk of loss of key scientific or management personnel; and

•

other risks and uncertainties, including those listed under Part II, Item 1A, Risk Factors.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events and with respect to our business and future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under Part II, Item 1A, Risk Factors and elsewhere in this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

We may from time to time provide estimates, projections and other information concerning our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Quarterly Report. Unless otherwise expressly stated, we obtained this industry, business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties; industry, medical and general publications; government data; and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.

Sage Therapeutics, Inc.

INDEX

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2019 and 2018	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018	7
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2019 and 2018	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	49
Item 4.	Controls and Procedures	50

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	51
Item 1A.	Risk Factors	51
Item 6.	Exhibits	92
	Signatures	93

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

	June 30, 2019			December 31, 2018
Assets
Current assets:
Cash and cash equivalents	$	166,185		$	190,943
Marketable securities		1,070,364			731,833
Prepaid expenses and other current assets		27,021			21,919
Total current assets		1,263,570			944,695
Property and equipment, net		8,363			5,643
Restricted cash		2,367			2,367
Right of use operating asset		37,224			—
Other long-term assets		4,023			—
Total assets	$	1,315,547		$	952,705
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	12,431		$	34,036
Accrued expenses		58,912			51,994
Other current liabilities		7,610			—
Total current liabilities		78,953			86,030
Long-term lease operating liability, net of current portion		33,309			—
Other long-term liabilities		410			3,704
Total liabilities		112,672			89,734
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized at June 30, 2019 and December 31, 2018; no shares issued or outstanding at June 30, 2019 and December 31, 2018		—			—
Common stock, $0.0001 par value per share; 120,000,000 shares authorized at June 30, 2019 and December 31, 2018; 51,472,137 and 46,891,296 shares issued at June 30, 2019 and December 31, 2018; 51,469,104 and 46,888,263 shares outstanding at June 30, 2019 and December 31, 2018		5			5
Treasury stock, at cost, 3,033 shares at June 30, 2019 and December 31, 2018		(400	)		(211	)
Additional paid-in capital		2,496,651			1,827,021
Accumulated deficit		(1,294,956	)		(963,329	)
Accumulated other comprehensive gain (loss)		1,575			(515	)
Total stockholders’ equity		1,202,875			862,971
Total liabilities and stockholders’ equity	$	1,315,547		$	952,705

The accompanying notes are an integral part of these condensed consolidated financial statements.

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Product revenue, net	$	519		$	—		$	519		$	—
Collaboration revenue		354			90,000			819			90,000
Total revenue		873			90,000			1,338			90,000
Operating costs and expenses:
Cost of goods sold		44			—			44			—
Research and development		89,059			68,980			175,457			118,250
Selling, general and administrative		88,227			43,167			172,146			72,016
Total operating costs and expenses		177,330			112,147			347,647			190,266
Loss from operations		(176,457	)		(22,147	)		(346,309	)		(100,266	)
Interest income, net		8,220			5,137			14,662			8,666
Other income, net		16			32			20			24
Net loss	$	(168,221	)	$	(16,978	)	$	(331,627	)	$	(91,576	)
Net loss per share—basic and diluted	$	(3.28	)	$	(0.36	)	$	(6.65	)	$	(2.02	)
Weighted average number of common shares outstanding—basic and diluted		51,257,640			46,541,716			49,882,377			45,439,666
Comprehensive loss:
Net loss	$	(168,221	)	$	(16,978	)	$	(331,627	)	$	(91,576	)
Other comprehensive items:
Unrealized gain (loss) on marketable securities		1,681			40			2,090			(116	)
Total other comprehensive gain (loss)		1,681			40			2,090			(116	)
Total comprehensive loss	$	(166,540	)	$	(16,938	)	$	(329,537	)	$	(91,692	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities
Net loss	$	(331,627	)	$	(91,576	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		78,883			44,845
Premium on marketable securities		(1,887	)		(75	)
Amortization of discount on marketable securities		(4,973	)		(4,154	)
Depreciation		920			493
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(5,102	)		(25,091	)
Other long-term assets		(4,023	)		—
Right of use operating asset		4,713			—
Operating lease liabilities		(4,346	)		—
Accounts payable		(21,806	)		(903	)
Accrued expenses and other liabilities		5,970			(2,245	)
Net cash used in operating activities		(283,278	)		(78,706	)
Cash flows from investing activities
Proceeds from sales and maturities of marketable securities		588,652			263,460
Purchases of marketable securities		(918,233	)		(813,337	)
Purchases of property and equipment		(3,438	)		(1,054	)
Net cash used in investing activities		(333,019	)		(550,931	)
Cash flows from financing activities
Proceeds from stock option exercises and employee stock purchase plan issuances		31,282			19,402
Payment of employee tax obligations related to vesting of restricted stock units		(692	)		(904	)
Payments of offering costs		(328	)		(340	)
Proceeds from public offerings of common stock, net of commissions and underwriting discounts		561,277			631,494
Net cash provided by financing activities		591,539			649,652
Net increase (decrease) in cash, cash equivalents and restricted cash		(24,758	)		20,015
Cash, cash equivalents and restricted cash at beginning of period		193,310			307,084
Cash, cash equivalents and restricted cash at end of period	$	168,552		$	327,099
Supplemental disclosure of non-cash operating and investing activities
Purchases of property and equipment included in accounts payable	$	252		$	10
Right of use assets obtained in exchange for new operating lease liabilities	$	872		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Sage Therapeutics, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

													Accumulated
										Additional			Other							Total
	Common Stock				Treasury Stock					Paid-in			Comprehensive				Accumulated			Stockholders’
	Shares		Amount		Shares		Amount			Capital			Income (Loss)				Deficit			Equity
Balances at December 31, 2017		42,002,934	$	5		960	$	(113	)	$	1,066,059		$	(29	)		$	(590,447	)	$	475,475
Issuance of common stock from exercise of stock options		402,227		—		—		—			11,727			—				—			11,727
Issuance of common stock under employee stock purchase plan		11,683		—		—		—			1,127			—				—			1,127
Purchase of treasury stock		—		—		554		(98	)		—			—				—			(98	)
Stock-based compensation expense		—		—		—		—			15,549			—				—			15,549
Public offering of common stock, net of offering costs		4,032,012		—		—		—			631,154			—				—			631,154
Unrealized loss on available-for-sale securities		—		—		—		—			—			(156	)			—			(156	)
Vesting of restricted stock units, net of employee tax obligations		9,442		—		—		—			(904	)		—				—			(904	)
Net loss		—		—		—		—			—			—				(74,598	)		(74,598	)
Balances at March 31, 2018		46,458,298	$	5		1,514	$	(211	)	$	1,724,712		$	(185	)		$	(665,045	)	$	1,059,276
Issuance of common stock from exercise of stock options		145,541		—		—		—			6,643			—				—			6,643
Stock-based compensation expense		—		—		—		—			28,782			—				—			28,782
Unrealized loss on available-for-sale securities		—		—		—		—			—			40				—			40
Net loss		—		—		—		—			—			—				(16,978	)		(16,978	)
Balances at June 30, 2018		46,603,839	$	5		1,514	$	(211	)	$	1,760,137		$	(145	)		$	(682,023	)	$	1,077,763

Balances at December 31, 2018		46,888,263	$	5		3,033	$	(211	)	$	1,827,021		$	(515	)		$	(963,329	)	$	862,971
Issuance of common stock from exercise of stock options		287,659		—		—		—			14,072			—				—			14,072
Issuance of common stock under employee stock purchase plan		16,398		—		—		—			1,799			—				—			1,799
Purchase of treasury stock		—		—		—		(189	)		—			—				—			(189	)
Stock-based compensation expense		—		—		—		—			43,622			—				—			43,622
Public offering of common stock, net of offering costs		3,833,334		—		—		—			560,948			—				—			560,948
Unrealized gain on available-for-sale securities		—		—		—		—			—			409				—			409
Vesting of restricted stock units, net of employee tax obligations		8,518		—		—		—			(692	)		—		</