SEC Filing | Sage Therapeutics, Inc.

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10-Q

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 September 30, 2023


☐	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 October 31, 2023, there were 59,967,516 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 expectations as to the planned commercial launch, availability, and commercialization of ZURZUVAE™ in the U.S. as a treatment for women with postpartum depression, or PPD; our plans for commercial launch of ZURZUVAE in PPD, and our views as to our readiness for such a launch; the potential benefit of ZURZUVAE in the treatment of women with PPD; the number of women with PPD; the potential market for ZURZUVAE for the treatment of women with PPD; and our expected pricing and market access strategy for ZURZUVAE and related assumptions;

•

our plans to continue to evaluate next steps after receipt of a complete response letter, or CRL, issued by the U.S. Food & Drug Administration, or FDA, related to our new drug application, or NDA, for zuranolone for the treatment of major depressive disorder, or MDD, in adults;

•

our views as to the potential for zuranolone to be developed in additional indications;

•

our expectations and estimates regarding: the level of expenses we may incur in connection with our activities, including as a result of our August 2023 corporate reorganization and reprioritization of our pipeline; use of cash, cash runway and projected cash balance at any given time; timing of future cash needs; capital requirements; sources of future financing; timing of receipt of potential milestone payments; and our ability to obtain additional financing when needed to fund future operations;

•

our plans for the development of our 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 enroll, 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 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 PPD in adults;

•

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 expectations with respect to the availability of supplies of ZULRESSO, ZURZUVAE and our product candidates, and the expected performance of our third-party manufacturers, including conformity 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 our products and product candidates in the indications we are pursuing or plan to study;

•

the potential for our current products 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 the treatment of PPD 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 changes to the macroeconomic environment and geopolitical events 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 in this Quarterly Report. 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.

This Quarterly Report on Form 10-Q contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

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:

•

Our future business prospects depend heavily on our ability, with our collaborator Biogen, to successfully commercialize ZURZUVAE for the treatment of women with PPD. We and Biogen may not be successful in our commercialization efforts for ZURZUVAE for the treatment of women with PPD. ZURZUVAE may not achieve broad market acceptance or reimbursement at sufficient levels, or we may encounter other limitations or issues related to the commercialization, including as a result of the price, of ZURZUVAE. As a result, we may not be able to generate revenues at the levels or on the timing we expect or at levels or timing necessary to support our goals. The number of women with PPD, the unmet need for additional treatment options, and the potential market for ZURZUVAE in this indication may be significantly smaller than we expect. Any setback or delay in our ability to market ZURZUVAE for the treatment of women with PPD may have a material adverse effect on our business and prospects.

•

Our future business prospects also depend heavily on our ability to successfully develop and gain regulatory approval of our product candidates. We cannot be certain that we or our collaborators, where applicable, will be able to initiate new clinical trials, complete ongoing enrollment, dosing or data analysis of clinical trials, or announce results of ongoing or future clinical trials of our product candidates in each case 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. Decisions or actions of the FDA or other regulatory agencies may adversely affect our plans, progress or results at any stage of development. 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 product candidates on the timelines we expect or at all. For example, we received a CRL with respect to our NDA for zuranolone for the treatment of MDD. The FDA has taken the position that one or more additional clinical trials are required to support approval. We may never achieve regulatory approval of zuranolone for the treatment of MDD. If we decide to conduct additional trials of zuranolone to support regulatory approval for the treatment of MDD, these trials may take a significant amount of time, may significantly increase our expenses, and may not be successful. Any setback or delay in obtaining regulatory approval for any of our product candidates or in our ability to commence marketing of our products, if approved, may have a material adverse effect on our business and prospects.

•

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, are smaller than we anticipate, or our other assumptions with respect to the potential markets for our products and product candidates are incorrect, our ability to achieve profits from the commercialization of such products, if approved, 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, if initiated for any of our products or product candidates, 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 may not achieve events tied to cash milestone payments from our collaboration partners on the timelines we expect or at all, or generate revenues from ZURZUVAE for the treatment of women with PPD, or any other of our products that may be successfully developed, at the levels we expect. Our expenses may also be higher than we expect, including as a result of unexpected events or changes in plans. In addition, we may not achieve cost savings from the August 2023 corporate reorganization at the levels we expect. As a result, our expectations as to our cash runway and the sufficiency of cash to fund our future operations may prove not to be correct. We may need to raise additional funding in the future, which may not be available on acceptable terms, or at all. Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish valuable rights.

•

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.

•

Any of our current product candidates, if successfully developed and approved, and other future products, if any, may not have the profile we expect in clinical practice after launch or may not achieve broad market acceptance for the approved indications, 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, ZURZUVAE, 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 relating to development or commercialization strategy or appropriate program spending, that may hamper or delay our development and commercialization efforts or increase our costs. Our business may be adversely affected and we may be subject to delays, disputes, or litigation if we disagree significantly with any of our collaborators, or any of our collaborators fails to perform its obligations or terminates our collaboration in whole or in part.

•

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.

•

If we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents 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.

•

If we were to lose our rights to certain licensed intellectual property, or if we are not able to obtain licenses to intellectual property we may determine we need in the future, 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. For example, the Inflation Reduction Act of 2022 and other existing, pending or future federal and state reforms aimed at reducing healthcare costs, including pricing and reimbursement of pharmaceutical products, may in the future result in reduced reimbursement and access for our approved products or cause us to curtail certain development plans because of concerns about commercial viability, any of which could adversely affect our ability to commercialize our products and generate revenue and negatively impact our business, results of operations and financial condition.

•

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.

•

Our stock price may fluctuate in response to a number of factors.

Sage Therapeutics, Inc.

INDEX


		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	7
	Condensed Consolidated Balance Sheets as of September 30, 2023 and December 31, 2022	7
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2023 and 2022	8
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2023 and 2022	9
	Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 30, 2023 and 2022	10
	Notes to Condensed Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	33
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	53
Item 4.	Controls and Procedures	53

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	54
Item 1A.	Risk Factors	54
Item 5.	Other Information	94
Item 6.	Exhibits	95
	Signatures	96

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)


	September 30, 2023			December 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	148,712		$	162,700
Marketable securities		727,340			1,109,794
Prepaid expenses and other current assets		34,705			50,826
Collaboration receivable - related party		22,513			13,660
Total current assets		933,270			1,336,980
Property and equipment, net		2,442			2,898
Restricted cash		1,332			1,269
Right-of-use operating asset		6,026			10,532
Other long-term assets		6,593			4,770
Total assets	$	949,663		$	1,356,449
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	11,136		$	18,950
Accrued expenses		114,901			72,666
Operating lease liability, current portion		6,967			7,643
Total current liabilities		133,004			99,259
Operating lease liability, net of current portion		—			4,491
Other liabilities		—			100
Total liabilities		133,004			103,850
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized at September 30, 2023 and December 31, 2022; no shares issued or outstanding at September 30, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value per share; 120,000,000 shares authorized at September 30, 2023 and December 31, 2022; 59,970,549 and 59,512,158 shares issued at September 30, 2023 and December 31, 2022; 59,967,516 and 59,509,125 shares outstanding at September 30, 2023 and December 31, 2022		6			6
Treasury stock, at cost, 3,033 shares at September 30, 2023 and December 31, 2022		(400	)		(400	)
Additional paid-in capital		3,357,741			3,291,369
Accumulated deficit		(2,536,953	)		(2,028,170	)
Accumulated other comprehensive loss		(3,735	)		(10,206	)
Total stockholders’ equity		816,659			1,252,599
Total liabilities and stockholders’ equity	$	949,663		$	1,356,449

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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Product revenue, net	$	2,716		$	1,739		$	8,469		$	4,821
Collaboration revenue		—			—			14			—
Total revenue		2,716			1,739			8,483			4,821
Operating costs and expenses:
Cost of goods sold		905			184			1,339			670
Research and development		101,919			81,553			291,905			236,868
Selling, general and administrative		78,142			61,482			219,415			160,370
Restructuring		33,599			—			33,599			—
Total operating costs and expenses		214,565			143,219			546,258			397,908
Loss from operations		(211,849	)		(141,480	)		(537,775	)		(393,087	)
Interest income, net		10,274			4,127			29,276			7,397
Other income (expense), net		(55	)		30			(284	)		52
Net loss	$	(201,630	)	$	(137,323	)	$	(508,783	)	$	(385,638	)
Net loss per share—basic and diluted	$	(3.37	)	$	(2.31	)	$	(8.51	)	$	(6.51	)
Weighted average number of common shares outstanding—basic and diluted		59,912,378			59,428,123			59,786,254			59,242,563
Comprehensive loss:
Net loss	$	(201,630	)	$	(137,323	)	$	(508,783	)	$	(385,638	)
Other comprehensive items:
Unrealized gain (loss) on marketable securities		1,909			(1,011	)		6,471			(12,223	)
Total other comprehensive gain (loss)		1,909			(1,011	)		6,471			(12,223	)
Total comprehensive loss	$	(199,721	)	$	(138,334	)	$	(502,312	)	$	(397,861	)

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)


	Nine Months Ended September 30,
	2023			2022
Cash flows from operating activities
Net loss	$	(508,783	)	$	(385,638	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		60,422			46,358
Premium on marketable securities		(71	)		(1,464	)
Amortization of premium (discount) on marketable securities		(12,521	)		7,182
Depreciation expense		984			832
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		16,121			(13,176	)
Collaboration receivable - related party		(8,853	)		58
Other long-term assets		(1,823	)		(658	)
Right-of-use operating asset		4,506			4,139
Operating lease liabilities, current		(676	)		135
Operating lease liabilities, non-current		(4,491	)		(4,800	)
Accounts payable		(7,677	)		(3,357	)
Accrued expenses and other liabilities		41,796			17,285
Net cash used in operating activities		(421,066	)		(333,104	)
Cash flows from investing activities
Proceeds from sales and maturities of marketable securities		861,231			918,816
Purchases of marketable securities		(459,714	)		(682,505	)
Purchases of property and equipment		(665	)		(655	)
Net cash provided by investing activities		400,852			235,656
Cash flows from financing activities
Proceeds from stock option exercises and employee stock purchase plan issuances		6,930			3,080
Payment of employee tax obligations related to vesting of restricted stock units		(641	)		(39	)
Net cash provided by financing activities		6,289			3,041
Net decrease in cash, cash equivalents and restricted cash		(13,925	)		(94,407	)
Cash, cash equivalents and restricted cash at beginning of period		163,969			295,502
Cash, cash equivalents and restricted cash at end of period	$	150,044		$	201,095
Supplemental disclosure of non-cash operating activities
Purchases of property and equipment included in accounts payable	$	—		$	54

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, 2021		58,937,050	$	6		3,033	$	(400	)	$	3,227,471		$	(2,660	)	$	(1,495,386	)	$	1,729,031
Issuance of common stock from exercises of stock options		105,474		—		—		—			646			—			—			646
Issuance of common stock under the employee stock purchase plan		23,625		—		—		—			1,153			—			—			1,153
Stock-based compensation expense		—		—		—		—			18,268			—			—			18,268
Change in unrealized loss on available-for-sale securities		—		—		—		—			—			(8,541	)		—			(8,541	)
Net loss		—		—		—		—			—			—			(122,055	)		(122,055	)
Balances at March 31, 2022		59,066,149		6		3,033		(400	)		3,247,538			(11,201	)		(1,617,441	)		1,618,502
Issuance of common stock from exercises of stock options		31,801		—		—		—			37			—			—			37
Stock-based compensation expense		—		—		—		—			14,652			—			—			14,652
Change in unrealized loss on available-for-sale securities		—		—		—		—			—			(2,671	)		—			(2,671	)
Vesting of restricted stock units, net of employee tax obligations		290,779		—		—		—			(24	)		—			—			(24	)
Net loss		—		—		—		—			—			—			(126,260	)		(126,260	)
Balances at June 30, 2022		59,388,729		6		3,033		(400	)		3,262,203			(13,872	)		(1,743,701	)		1,504,236
Issuance of common stock from exercises of stock options		11,808		—		—		—			320			—			—			320
Issuance of common stock under the employee stock purchase plan		33,614		—		—		—			1,193			—			—			1,193
Stock-based compensation expense		—		—		—		—			12,722			—			—			12,722
Change in unrealized loss on available-for-sale securities		—		—		—		—			—			(1,011	)		—			(1,011	)
Vesting of restricted stock units, net of employee tax obligations		59,553		—		—		—			(15	)		—			—			(15	)
Net loss		—		—		—		—			—			—			(137,323	)		(137,323	)
Balances at September 30, 2022		59,493,704	$	6		3,033	$	(400	)	$	3,276,423		$	(14,883	)	$	(1,881,024	)	$	1,380,122

Balances at December 31, 2022		59,509,125	$	6		3,033	$	(400	)	$	3,291,369		$	(10,206	)	$	(2,028,170	)	$	1,252,599
Issuance of common stock from exercises of stock options		52,058