SEC Filing | Sage Therapeutics, Inc.

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, 2022


☐	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 27, 2022, there were 59,422,343 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 views as to potential future results of our ongoing commercialization efforts in the U.S. with respect to ZULRESSO® (brexanolone) CIV injection, which is approved in the U.S. for the treatment of postpartum depression, or PPD, in adults;

•

our planned clinical and regulatory activities with respect to zuranolone (SAGE-217) for the treatment of major depressive disorder, or MDD, and PPD and related timelines, including: our planned completion of our ongoing rolling submission of a new drug application, or NDA, for zuranolone to the U.S. Food and Drug Administration, or FDA, as a treatment for MDD and PPD; the adequacy of the data we plan to submit to support such filing; our expectation that we will seek priority review of such NDA and the potential to receive priority review; and the potential for future approval and commercialization of zuranolone in MDD and PPD;

•

our view of the potential for zuranolone for the treatment of MDD and PPD, if approved, including the potential product profile and treatment benefit, and the potential for zuranolone to be developed in additional indications;

•

our plans for the development of our other product candidates for the treatment of brain health diseases and disorders, and potentially for other indications; our plans with respect to other research and development activities; and expected timelines for our planned activities;

•

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 belief as to potential outcomes of our clinical development and commercialization activities;

•

our plans and potential outcomes with respect to interactions with regulatory authorities;

•

our plans for and the potential costs, benefits and outcomes of our existing collaborations with Biogen MA Inc., or BIMA, and Biogen International GmbH, or, together with BIMA, Biogen, and Shionogi & Co., Ltd., or Shionogi, and our plans for and potential outcomes of any additional 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 the level of expenses we may incur in connection with our activities; use of cash and projected cash on hand at any given timepoint; timing of future cash needs; capital requirements; sources of future financings; and our ability to obtain additional financing when needed to fund future operations;

•

our expectations with respect to the availability of supplies of ZULRESSO or of zuranolone and our other product candidates, and the expected performance of our third-party manufacturers, including conformance with applicable regulatory requirements;

•

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 and the potential size of the market for ZULRESSO in PPD, for zuranolone in MDD and PPD, if approved, and for our other product candidates in the indications we are pursuing or plan to study;

•

the potential for our current product and current or future product candidates, if successfully developed and approved, for the indications and in the markets for which they are approved and our ability to serve those markets;

•

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

•

the impact of the COVID-19 pandemic and its downstream effects on our activities, business and results of operations, and the potential success of our efforts to address or mitigate such impact; 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, among other things, 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 we provide. Unless otherwise expressly stated, we obtained this industry and 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.

Summary of Risks Related to our Business

Our business, prospects, financial condition, and operating results are subject to numerous risks and uncertainties that you should be aware of before making an investment decision, as more fully described under Part II, Item 1A, Risk Factors and elsewhere in this Quarterly Report. These risks may include, but are not limited to, the following:

•

We may never be able to generate meaningful revenues from sales of ZULRESSO^® (brexanolone) CIV injection, or revenues at levels or on timing necessary to support our investment and goals.

•

Our future business prospects depend heavily on our ability, and that of our collaborators, where applicable, to successfully develop and gain regulatory approval of our current product candidates, including zuranolone (SAGE-217). We cannot be certain that we or our collaborators will be able to initiate new clinical trials, complete ongoing clinical trials, or announce results of ongoing or future clinical trials of our product candidates on the timelines we expect or at all, or that the results of our development programs will be positive or sufficient to file for regulatory approval. Even if we complete our NDA filing for zuranolone or file for regulatory approval for any other product candidate, we cannot be certain that our submissions will be accepted for review, that the design and results of our development programs will be sufficient to gain regulatory approval, or that we will receive priority review if we seek it. Decisions or actions of the FDA or other regulatory agencies may adversely affect our plans, progress or results at any stage of development, including during the regulatory filing and approval process. We cannot be certain that we or our collaborators will be able to successfully file or obtain regulatory approval for, or successfully commercialize, if approved, any of our current or future product candidates, including zuranolone, on the timelines we expect or at all.

•

Obtaining regulatory approval to market any of our product candidates is a complex, lengthy, expensive and uncertain process, and the FDA and regulatory authorities outside of the U.S. may delay, limit or deny approval of zuranolone or any of our other product candidates for many reasons.

•

If the affected populations for indications our products and product candidates are targeting, including the addressable markets within such populations, or the number of patients within such markets who are actually treated with our products, including zuranolone, if successfully developed and approved, are smaller than we anticipate, our ability to achieve profits from the commercialization of such products at the levels or on the timing we expect could be materially adversely impacted.

•

Positive results from non-clinical studies and clinical trials of our product candidates are not necessarily predictive of the results of later non-clinical studies and clinical trials of our product candidates in the same indications or other indications. Interim results from non-clinical studies and clinical trials may not be predictive of results of such non-clinical studies or clinical trials once completed. The results of non-clinical studies or clinical trials of our product candidates at any stage may not support further development or may not be sufficient to file for and obtain regulatory approval.

•

If serious adverse events or other undesirable side effects are identified during the use of any of our marketed products or product candidates, including during commercial use, in clinical trials or under an expanded access program, such events may adversely affect market acceptance or result in other significant negative consequences for an approved product; delay or prevent further development or regulatory approval with respect to product candidates; or cause regulatory authorities to require labeling statements, such as boxed warnings, or a Risk Evaluation and Mitigation Strategy, on approved products.

•

We rely completely on third-party suppliers to manufacture commercial supplies of ZULRESSO and clinical drug supplies for our product candidates and intend to rely on third-party manufacturers for commercial supplies of zuranolone, if approved, and of any of our other product candidates that is successfully developed and approved for marketing. Any impairment of the ability of our third party suppliers to supply product or to meet applicable regulatory standards may significantly negatively impact our ability to achieve our goals and plans and to meet the expectations for our business.

•

Our current product candidates, including zuranolone, if successfully developed and approved, and other future products, if any, may not achieve broad market acceptance or reimbursement at sufficient levels, and the results of our commercialization efforts may not meet our expectations, which may limit the revenue that we generate from sales of such products.

•

Competing therapies may exist or could emerge that adversely affect the amount of revenue we are able to generate from the sale of ZULRESSO, zuranolone, if approved, or any of our other current or future product candidates, if successfully developed and approved.

•

Our existing collaborations with Biogen and Shionogi, and any future collaborations, may not lead to the successful development or regulatory approval of product candidates or commercialization of products. Our collaborators may have competing priorities, conflicting incentives, or different views than us on key decisions, including appropriate program spending, that may hamper or delay our development and commercialization efforts or increase our costs. Our business may be adversely affected if any of our collaborators fails to perform its obligations or terminates our collaboration in whole or in part.

•

We may not be successful in our efforts to identify new targets, generate new compounds, and successfully bring such new compounds through investigational new drug application-enabling non-clinical studies. We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

•

If we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents that are sufficient to protect our products or product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.

•

For certain of our products and product candidates, we are dependent on licensed intellectual property. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or commercializing certain of our products or product candidates, if approved.

•

Existing or future laws, regulations, executive orders or policies aimed at reducing healthcare costs may have a material adverse effect on our business or results of operations.

•

We are subject to healthcare laws and regulations, which could expose us to the risk of criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings if we or our employees are alleged or determined not to have complied with such laws and regulations.

•

We are a biopharmaceutical company with a limited operating history, and have not generated significant revenue to date. We have incurred significant operating losses since our inception, and anticipate that we will incur losses for the foreseeable future.

•

We may need to raise additional funding, which may not be available on acceptable terms, or at all. Raising additional capital, even opportunistically, may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights.

•

The COVID-19 pandemic, its effects, and changes to the macroeconomic environment as the pandemic has continued, including healthcare and vendor staffing shortages and disruption to the U.S. healthcare system, may continue to adversely impact our business, including our sales of ZULRESSO and our initiation, conduct and completion of clinical trials.

Sage Therapeutics, Inc.

INDEX

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	7
	Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021	7
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2022 and 2021	8
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021	9
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2022 and 2021	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	52
Item 4.	Controls and Procedures	52

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	53
Item 1A.	Risk Factors	53
Item 6.	Exhibits	93
	Signatures	94

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, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	206,510		$	294,233
Marketable securities		1,307,197			1,448,063
Prepaid expenses and other current assets		41,455			39,841
Collaboration receivable - related party		23,722			18,506
Total current assets		1,578,884			1,800,643
Property and equipment, net		2,938			3,016
Restricted cash		1,269			1,269
Right-of-use operating asset		13,379			16,109
Other long-term assets		4,907			4,251
Total assets	$	1,601,377		$	1,825,288
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	5,410		$	10,450
Accrued expenses		76,268			67,275
Operating lease liability, current portion		7,563			7,468
Total current liabilities		89,241			85,193
Operating lease liability, net of current portion		7,800			10,964
Other liabilities		100			100
Total liabilities		97,141			96,257
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized at June 30, 2022 and December 31, 2021; no shares issued or outstanding at June 30, 2022 and December 31, 2021		—			—
Common stock, $0.0001 par value per share; 120,000,000 shares authorized at June 30, 2022 and December 31, 2021; 59,391,762 and 58,940,083 shares issued at June 30, 2022 and December 31, 2021; 59,388,729 and 58,937,050 shares outstanding at June 30, 2022 and December 31, 2021		6			6
Treasury stock, at cost, 3,033 shares at June 30, 2022 and December 31, 2021		(400	)		(400	)
Additional paid-in capital		3,262,203			3,227,471
Accumulated deficit		(1,743,701	)		(1,495,386	)
Accumulated other comprehensive loss		(13,872	)		(2,660	)
Total stockholders’ equity		1,504,236			1,729,031
Total liabilities and stockholders’ equity	$	1,601,377		$	1,825,288

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,
	2022			2021			2022			2021
Product revenue, net	$	1,501		$	1,643		$	3,082		$	3,226
Operating costs and expenses:
Cost of goods sold		200			148			486			335
Research and development		77,297			66,170			155,315			124,226
Selling, general and administrative		52,411			43,346			98,888			83,193
Total operating costs and expenses		129,908			109,664			254,689			207,754
Loss from operations		(128,407	)		(108,021	)		(251,607	)		(204,528	)
Interest income, net		2,102			732			3,270			1,440
Other income, net		45			44			22			79
Net loss	$	(126,260	)	$	(107,245	)	$	(248,315	)	$	(203,009	)
Net loss per share—basic and diluted	$	(2.13	)	$	(1.83	)	$	(4.20	)	$	(3.47	)
Weighted average number of common shares outstanding—basic and diluted		59,266,322			58,582,569			59,148,246			58,478,970
Comprehensive loss:
Net loss	$	(126,260	)	$	(107,245	)	$	(248,315	)	$	(203,009	)
Other comprehensive items:
Unrealized loss on marketable securities		(2,671	)		(49	)		(11,212	)		(700	)
Total other comprehensive loss		(2,671	)		(49	)		(11,212	)		(700	)
Total comprehensive loss	$	(128,931	)	$	(107,294	)	$	(259,527	)	$	(203,709	)

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,
	2022			2021
Cash flows from operating activities
Net loss	$	(248,315	)	$	(203,009	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		33,189			49,639
Premium on marketable securities		(1,454	)		(16,873	)
Amortization of premium on marketable securities		6,114			4,688
Depreciation expense		554			3,475
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(1,614	)		(6,025	)
Collaboration receivable - related party		(5,216	)		(48,438	)
Other long-term assets		(656	)		(258	)
Right-of-use operating asset		2,730			2,602
Operating lease liabilities, current		95			97
Operating lease liabilities, non-current		(3,164	)		(2,945	)
Accounts payable		(5,225	)		(774	)
Accrued expenses and other liabilities		8,723			5,966
Net cash used in operating activities		(214,239	)		(211,855	)
Cash flows from investing activities
Proceeds from sales and maturities of marketable securities		556,100			360,939
Purchases of marketable securities		(431,105	)		(1,308,143	)
Purchases of property and equipment		(291	)		—
Net cash provided by (used in) investing activities		124,704			(947,204	)
Cash flows from financing activities
Proceeds from stock option exercises and employee stock purchase plan issuances		1,836			12,484
Payment of employee tax obligations related to vesting of restricted stock units		(24	)		(796	)
Net cash provided by financing activities		1,812			11,688
Net decrease in cash, cash equivalents and restricted cash		(87,723	)		(1,147,371	)
Cash, cash equivalents and restricted cash at beginning of period		295,502			1,662,798
Cash, cash equivalents and restricted cash at end of period	$	207,779		$	515,427
Supplemental disclosure of non-cash operating and investing activities
Purchases of property and equipment included in accounts payable	$	256		$	—
Lease asset de-recognized upon lease cancellation	$	—		$	3,733

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

Sage Therapeutics, Inc. and Subsidiaries

Condensed 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			Loss			Deficit			Equity
Balances at December 31, 2020		58,308,411	$	6		3,033	$	(400	)	$	3,109,807		$	415		$	(1,037,494	)	$	2,072,334
Issuance of common stock from exercises of stock options		80,338		—		—		—			4,687			—			—			4,687
Issuance of common stock under the employee stock purchase plan		18,072		—		—		—			936			—			—			936
Stock-based compensation expense		—		—		—		—			21,734			—			—			21,734
Change in unrealized loss on available-for-sale securities		—		—		—		—			—			(651	)		—			(651	)
Net loss		—		—		—		—			—			—			(95,764	)		(95,764	)
Balances at March 31, 2021		58,406,821		6		3,033		(400	)		3,137,164			(236	)		(1,133,258	)		2,003,276
Issuance of common stock from exercises of stock options		159,070		—		—		—			6,861			—			—			6,861
Stock-based compensation expense		—		—		—		—			27,465			—			—			27,465
Change in unrealized loss on available-for-sale securities		—		—		—		—			—			(49	)		—			(49	)
Vesting of restricted stock units, net of employee tax obligations		204,473		—		—		—			(796	)		—			—			(796	)
Net loss		—		—		—		—			—			—			(107,245	)		(107,245	)
Balances at June 30, 2021		58,770,364	$	6		3,033	$	(400	)	$	3,170,694		$	(285	)	$	(1,240,503	)	$	1,929,512

Balances at December 31, 2021		58,937,050