SAGE Therapeutics' (SAGE) CEO Dr. Jeff Jonas on Q2 2016 Results - Earnings Call Transcript

| About: Sage Therapeutics (SAGE)

SAGE Therapeutics, Inc (NASDAQ:SAGE)

Q2 2016 Earnings Conference Call

August 09, 2016 08:00 AM ET

Executives

Paul Cox - Investor Relations

Dr. Jeff Jonas - Chief Executive Officer

Kimi Iguchi - Chief Financial Officer

Steve Kanes - Chief Medical Officer

Dr. Al Robichaud - Chief Scientific Officer

Analysts

Carol Werther - HC Wainwright

Operator

Good day ladies and gentlemen. Welcome to the SAGE Therapeutics Second Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the investors and media section of SAGE website at sagerx.com. This call is the property of SAGE Therapeutics, and the recordings, reproduction or transmission of this call without the express written consent of SAGE Therapeutics is strictly prohibited. Please note that this call is being recorded.

I would now like to introduce Paul Cox from SAGE.

Paul Cox

Good morning. Today we issued a press release with our second quarter 2016 financial results, along with recent company highlights, upcoming milestones, and an update on our corporate strategy. The press release and the presentation slides used on this call can be found on the Investor and Media section of our website at sagerx.com. On slide two of the presentation is the agenda for today's call.

We will begin the call with prepared remarks by Dr. Jeff Jonas, our Chief Executive Officer, Dr. Steve Kanes, our Chief Medical Officer, and Kimi Iguchi, our Chief Financial Officer. Following prepared remarks, we will open the call for a Q&A session, and we will be joined by Dr. Al Robichaud, our Chief Scientific Officer.

On Slide 3 is our Safe Harbor statement. During today's call, we may make forward-looking statements, including statements about our future expectations, Clinical Development and regulatory timelines, the potential success of our product candidates, financial projections, 2016 milestones, and upcoming events and presentations. Actual results may differ materially. The risks and other factors that could cause actual results to differ are discussed in today's press release, and in the Risk Factors section of our quarterly report on Form 10-K filed with the Securities and Exchange Commission on May 6th, 2016, and other reports filed with the SEC. Any forward-looking statements represent our views as of today only. We may update these statements in the future, but we disclaim any obligation to do so.

I would now like to turn the call over to Jeff.

Dr. Jeff Jonas

Thanks, Paul and welcome to our call this morning. We have had a productive and eventful last few months at SAGE, as we continue our transformation from developing single compounds in a single indication, to a company that's advancing multiple compounds in multiple clinical stage trials. We remain focused on creating an industry-leading pipeline of medicines, leveraging the extra-synaptic GABA mechanism of action. And we are beginning to see these efforts come to fruition.

And as you can see in our pipeline on Slide 4, our progress has been driven by our recent successful studies, which have produced positive data for both SAGE-547 and our oral medicine, SAGE-217, and we're now beginning to explore our pipeline's utility in much larger indications. Based on our recent positive results in our SAGE-547 study of postpartum depression, or PPD, we've expanded our Phase 2 development program, exploring SAGE-547 for PPD, with the initiation of two clinical trials in moderate and severe PPD, and we've already enrolled our first patient in this program.

With respect to SAGE-217, we now plan to focus initial development on essential tremor and postpartum depression, with Phase 2 studies set to begin this year in both. As we consider other new indications for SAGE-217, we'll continue to exploit small, efficient proof of concept studies to guide our portfolio strategy. We therefore plan to begin two small proof of concept studies in Parkinson's disease using SAGE-217, and in major depressive disorder using SAGE-547 to further study the application of this mechanism, and to guide the expansion of our pipeline. Further, we're also evaluating several additional candidates within our GABA pipeline, such as SAGE 105 and SAGE 324, to explore their potential impact in such GABA-related CNS disorders, as orphan epilepsies. Steve will speak more about these updates on our clinical plans moving forward in greater detail later in the call.

Lastly, we announced this morning that the data readout of the Phase 3 STATUS trial in super refractory status epilepticus will be delayed from the second half of this year to the first half of next year, based on findings from a recently conducted blinded analysis of enrollment patterns in the study, which showed that while the number of patients presenting at sites for evaluation was meeting our expectations, we were approximately 16% off from our plan randomization at this time. Steve will cover this in more detail in a moment.

But we have identified a number of needed clarifications to guide screening of patients, to prevent over exclusion of patients who may benefit from therapy, and we're confident that our updates and clarifications to the inclusion/exclusion criteria, will brings us in line with our enrolment model, and will allow us to report data in the first half of next year. With these changes, we continue to plan for commercial launch in 2018. I would like to note that one of the options we did consider was to increase resources on this trial. But we don't want to risk sacrificing the quality of the trial for speed. Plus as I hope you'll see, SAGE now has many more portfolio options than we did even a year ago, so we've elected to focus our additional spending on our new opportunities such as PPD.

More broadly, based on our recent positive trial readout and the potential opportunities before us, we are currently undertaking a full portfolio review of our GABA-based candidates, as well as expanding our research efforts to identify additional indications with a biological rationale for treatment with the Company's differentiated GABA compounds. This effort will extend research into other mood and affective disorders, such as depression, panic and mania, as well as other neurological disorders. SAGE plans to provide additional public updates on this initiative by the end of the year, including potential new development candidates.

In closing, we believe our recent clinical data are both promising and potentially transformative for both SAGE and the CNS patients that we serve. It gives us near term opportunities in several indications with both SAGE-547 and SAGE-217, while also opening the door for a broader GABA-based development effort into other movement, mood and affective disorders. We remain focused on executing on the opportunities before us, and will continue to appropriately balance our resources across our growing portfolio as we continue to expand. We look forward to updating you on these efforts during the months ahead.

With that, let me turn the call over to Steve to review our clinical programs and next steps.

Steve Kanes

Thank you, Jeff. On slide five, starting with the Phase 3 status trial in SRSE, as Jeff mentioned as part of our standard way of monitoring our trial, we did a blinded assessment of enrolment, and identified patterns important to the study. Overall the number of patients presenting at trial sites for possible enrolment is tracking ahead of schedule. However, the number of patients enrolled after screening was lower than expected based on several factors relating to patient evaluation and pre-treatment. These have varied from initial estimates, resulting in slower than expected trial randomization which is approximately 16% lower than expected at this time. The evaluation provided an opportunity to adjust and refine enrolment procedure.

For example, moving forward, the criteria for inclusion and exclusion has been clarified for new patients believed to be suffering from anoxic brain injury, to prevent exclusion from patients that could benefit from therapy. In addition, trial sites will now be permitted to use a more typical standard of care approach to identifying SRSE patients, allowing either seizure suppression or burst depression as the initial diagnostic screen. The studies aggressive screening approach was not consistent with the clinical practice of several sites, discouraging enrollment at those hospitals. This initial screen has no impact on the primary end point.

Clarifications to the enrollment procedures are expected to bring enrollment trends in line with our operational plan, and as Jeff has stated, we now expect to report top line results from the Phase 3 STATUS trial in the first half of 2017. While this is a delay from our timeline to report data, we continue to plan for a 2018 commercial launch. While we have been enrolling in our Phase 3 SRSE study, we have also focused on expanding our GABA pipeline with additional clinical programs, and the advancement of novel compounds into development.

Recently we reported positive top line results from a randomized placebo-controlled Phase 2 study of SAGE-547 in 21 patients with severe postpartum depression, which are summarized on Slide 6. Based on these positive results we have initiated an expansion of the SAGE-547 Phase 2 clinical program, and recently commenced dosing patients. On Slide 7, we have outlined the planned postpartum depression clinical program both for SAGE-547 and SAGE-217. The expanded clinical program for SAGE-547 in postpartum depression will consist of two concurrent trials conducted at up to 50 clinical sites in the United States. The first will seek to build on our recent positive data, and is designed to determine optimal dosing of SAGE-547 in the severe patient population. It is randomized, placebo-controlled, and is anticipated to study up to 60 patients with HAM-D scores of 26 or above. Patients will be randomized equally to a standard dose of SAGE-547, a lower dose of SAGE-547, or a placebo. The second trial is designed to evaluate the safety and efficacy of SAGE-547 in the moderate postpartum depression setting. This study will evaluate up to 36 patients with HAM-D scores between 20 and 25.

As a reminder, we estimate that postpartum depression, or PPD, affects 10% to 20% of mothers based on a review of the literature. We have begun to look into more detailed epidemiology of women who suffer from PPD. According to our market research, we currently estimate that up to 80% of women with PPD will have moderate to severe symptoms. A subset of these will be severe enough to require hospitalization. PPD patients that may be likely candidates for SAGE-547 therapy approved include patients who would be hospitalized today, as well as those patients that are either undiagnosed or treated as outpatients now, who could be admitted once a new inpatient therapy is available. There are no approved therapies specific indicated for PPD, and therapeutic options for the severe PPD patient are limited. We'll be working with the FDA in the months ahead on the regulatory pathway in postpartum depression for SAGE-547 and SAGE-217, and plan to update you sometime this year.

Turning to SAGE-217 on Slide 8, SAGE-217 is our novel orally active GABA modulator designed with a half life consistent with once a day dosing. In June we reported results for our Phase 1 program of SAGE-217. On Slide 9 there is an overview. Our Phase 1 program demonstrated safety, tolerability and a therapeutic index in both SAD and MAD healthy volunteer studies, which supports advancing SAGE-217 into Phase 2 Clinical Development.

I would like to highlight a few pieces of data from the Phase 1 program. One of the methods we used for translational science to advance our development programs is electroencephalography, or EEG. In the Phase 1 program assessment of brain electrical using EEG showed clear evidence of target engagement and GABA receptor modulations starting at 15 milligrams, the lowest dose tested in healthy volunteers. The observed EEG effect was sustained throughout the seven-day dosing period without increased tolerance. In addition, there were no significant effects on psycho motor or cognitive assessments at doses likely to be used in the clinic.

Lastly, to set ourselves up for a Phase 2 clinical trial for SAGE-217 in essential tremor, we also studied one open label cohort of essential tremor patients in the Phase 1 program, as seen on slide 10. While these data are not designed to demonstrate efficacy, our preliminary data show that single doses of SAGE-217 resulted in a similar reduction in tremor symptoms as achieved with a 12-hour infusion of SAGE-547, previously demonstrated in our placebo-controlled proof of concept trial. Based on the wealth of previously mentioned data, we plan to focus Clinical Development for SAGE-217 on essential tremor and postpartum depression. We plan to initiate a Phase 2 clinical trial for SAGE-217 in essential tremor during the second half of this year.

Based on the recent positive SAGE-547 results in severe postpartum depression, we plan to begin a SAGE-217 clinical program in PPD initially studying severe postpartum depression patients. We also plan to begin this Phase 2 trial in the second half of this year. In addition, we will also continue to use small proof of concept studies to guide our Clinical Development plans. We will begin two proof of concept studies in the second half of this year to decide on further development options for SAGE-217. These include a study of SAGE-547 in major depressive disorder, and a study using SAGE-217 as a treatment for Parkinson's disease. Both of these studies are planned to begin this year with top line data expected in the first half of 2017. In addition we plan to prioritize advancement of a novel GABA candidate such as SAGE 105 or SAGE 324 into IND enabling studies for development in orphan epilepsies.

To summarize on slide 11, we look forward to a number of important upcoming clinical milestones. These include presenting detailed data from our recently completed Phase 2 study of SAGE-547 in severe PPD at the International Marseilles Society Biennial Scientific Conference, taking place in Melbourne, Australia from September 26th to the 28th. Initiating Phase 2 clinical trials for SAGE-217 in essential tremor and severe postpartum depression in the second half of this year and also initiating Phase 2 proof of concept trials for SAGE-547 in major depressive disorder in SAGE-217 in Parkinson's.

We will also be initiating a Phase 1 clinical program for SAGE-689 this year, subject to successfully addressing the FDA's request for additional non-clinical data. In the first half of next year, we plan to report top line results from the Phase 3 STATUS trial of SAGE-547 in SRSE, and top line data from our two proof of concept trials. We also plan to initiate a Phase 1 program for our first NMDA positive allosteric modulator, SAGE-718.

With that, I'll turn the call over to Kimi.

Kimi Iguchi

Thanks Steve. I will start with a run-through of our financials for the quarter, and then moving into an overview of our financial guidance, based on the development plans that Jeff and Steve have just walked you through. If you turn to slide 12, we have a summary of our financial results for the second quarter. Cash, cash equivalents, and marketable securities at the end of the quarter total $272.3 million, compared to 186.8 million at the end of 2016. Research and Development expenses for the second quarter were 26.1 million, compared to 18.6 million for the same period of 2015. The increase in R&D expense was primarily due to the continued advancement of our SAGE-547 and SAGE-217 clinical programs.

General and administrative expenses for the second quarter were 8.9 million, compared to 6.5 million for the same period in 2015. The increase in G&A expenses was primarily as a result of building the team at SAGE, and expanding commercial operations in preparation for the potential launch of SAGE-547. We reported a net loss in the second quarter of 34.7 million, compared to 25 million for the same period of 2015.

Now turning to our financial guidance, following the recent positive clinical data readouts for SAGE-547 and SAGE-217, we're providing updated financial guidance. We expect that existing cash, cash equivalents, and our marketable securities will be sufficient to fund our operating expenses and capital expenditures into late 2017. This updated guidance continues to take into account the Company's ongoing commercial activities for a potential launch in SRSE.

On the development side, the updated guidance takes into account the expanded SAGE-547 development program in postpartum depression, the anticipated start of Phase 2 studies in essential tremor and postpartum depression for SAGE-217, the planned proof of concept studies of SAGE-547 in MTD and SAGE-217 in Parkinson's, and also the expanded research effort within our GABA-based portfolio and earlier staged pipeline. As Jeff talked about earlier, the recent clinical data provides a development task for us to move into multiple later stage studies, based on clear activity signals on different CNS indications.

On top of that, it has also opened up additional opportunities to expand our GABA-based pipeline into broader mood and anxiety disorders. We believe that our differentiated approach may provide much-needed treatment alternatives to these patients. This is an exciting time of expansion. It is critical that we support both the near and longer term opportunities, as we work to build SAGE into a fully integrated commercial biopharma Company, and the leader in innovative CNS drug development. We are focused on balancing our allocation of resources across our organization and portfolio, to best position SAGE for the long-term, as we pursue the exciting opportunities across our pipeline.

Before we open the call to Q&A, I would like to remind you that we plan to attend a number of conferences in the third quarter which are listed on slide 13. These upcoming conferences include the Canaccord Growth Conference in Boston on August 10th, the ETE Conference in Prague from September 11th to 15th, the NTS Annual Meeting in National Harbor, Maryland from September 15th to the 18th, and as Steve mentioned earlier we will be in Marseilles at the Marseilles Conference in September to present data from our Phase 2 study of SAGE-547 in severe PPD.

We would now like to open the call for Q&A. I'll turn it over to the operator.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question comes from the line of Gary Nachman of BMO Capital Markets. Your line is now open.

Unidentified Analyst

This is actually Chris on for Gary I appreciate you taking the question. I have had a little bit of a hard time hearing, so I apologize if this was already addressed. I just wanted to get an understanding in terms of the sites, if you're seeing a higher concentration of screening issues at a particular set of sites, or you're seeing it across all sites?

Dr. Jeff Jonas

This is Jeff. And hopefully you can hear us. It's like a bad Verizon commercial. I hope you can hear me now.

Unidentified Analyst

Yes.

Dr. Jeff Jonas

It's more a generalized screening issue as we've said. There were a number of sites who as a practice, who will now recruit, who tended to do this approach versus burst suppression. So those sites are likely to be included into the trial. But overall it was a generalized issue of patients and doctors making a decision on whether to use the burst suppression or not. So there was nothing concentrated.

Operator

Thank you. Our next question comes from the line of Carol Werther of HC Wainwright. Your line is now open.

Carol Werther

Yes, I wanted to ask about 217. And basically the indications for major depressive disorder, and how you think this might, what advantages it might have versus other compounds?

Dr. Jeff Jonas

This is Jeff, and then I'll turn it over to Steve. We're still coming through clearly, I hope?

Carol Werther

Now you are.

Dr. Jeff Jonas

It's an iPhone. So the thinking for 217 has been that based on the 547 data, that this could very well, obviously for depression, for postpartum depression, we think this is a pharmacological effect and as a result, since 217 shares pharmacology with 547, but a more potent and more highly bio-available, we felt this was an obvious next step. The probe study that we'll be doing with major depressive disorder is really designed to see whether this mechanism is generalizable into other affective syndromes. So obviously clearly to say whether it is or not, that's obviously that we think we need to do to answer that important question.

The potential advantages is that aside from being a novel mechanism of action is that as a positive allosteric modulator, you have all of the attributes of this mechanism safety and overdose, regularization of anxiety and sleep patterns, as well as mood effect, those are all theoretical opportunities that this mechanism presents. There is a growing literature that suggests this mechanism is implicated in affective disorders that we are now coming across. And that gives us some encouragement that we can move forward. But that is our basic thinking. And especially with 217, we have the ability, based on its pharmacokinetic profile to formulate it with we believe a solid formulation with and without a pronounced Cmax. So in theory this could be given as either a daytime or a night time dose. I don't know, Steve, if you have anything that you want to add?

Steve Kanes

What Jeff has said about major depressive disorders, certainly we're interested in seeing how far extended into other affective syndromes this mechanism has activity. The other issue that we are interested in understanding is the speed of onset. So if you recall from the 547 data in postpartum depression, we saw activity as early as 24 hours. And if that's replicated in stage 217 in addition to activity in major depressive disorders, of course that would be of interest.

Carol Werther

Part of the reason I'm asking is that I thought with PPD, we had a hormonal influence, and would that apply to major depressive disorder?

Steve Kanes

I think the point with PPD is that there is a hormonal bioMarker. But we believe that the allopregnanolone functions as a natural positive allosteric modulator GABA. And as a vulnerability to that, it's that imbalance that we're correcting. If you look at the time course of the response to PPD, it doesn't look like a hormonal time course. It looks like a pharmacological time course. As a result, we believe this is a pharmacology, and that's why we think there may be a more generalized phenomenon. If you step back more broadly and look at phenomena that are well known in depression, you can see that the GABA urgent mechanisms have been implicated, so for example, post ECT, one sees mood elevation, you also see post seizure increased inhibition to another seizure, both of which are likely implicating increased GABA tone. We know anticonvulsants also work as antidepressants in certain mood states, so there's a confluence of disparate phenomena that we think can be tied together by a GABA urgent hypothesis for mood and other affective disorders.

Operator

Thank you. [Operator Instructions] Our next question comes from the line of Tim Lugo of William Blair. Your line is now open.

Unidentified Analyst

Hey, guys, this is Raj in for Tim. Thanks for taking the questions. Just a quick one, how are the kind of issues or the evaluations made with the trial? Was it kind of just a normal look back into the enrollment procedure, and then you found a few issues that were arising? Or were patients failing the initial wean, and then you kind of looked back to see why this was happening?

Steve Kanes

What we do is this is a trial where we are, as a Company, very closely involved, both in the operations and procedures as well as the investigators. So as part of our routine monitoring we're always looking at metrics related to the enrollment and submersion into randomization. So this was really identified through that standard monitoring trial.

Unidentified Analyst

Okay. And then just a sense of how many of these patients actually made it to that initial wean and failed, could you give any more clarity on that?

Dr. Jeff Jonas

We haven't really unblinded any of the actual activity. These are based only on enrollment figures and feedback from the sites in terms of an investigation, because of the basically difference between the number of patients who were presenting for evaluation, and which as I mentioned was basically ahead of schedule, and the actual enrollment. We haven't done anything that would jeopardize the blind, or any of the activity data.

Unidentified Analyst

Great. And I'm glad I can hear you guys now.

Dr. Jeff Jonas

I want to apologize again for all of the sound issues.

Unidentified Analyst

It is a hazard for the Pokey site.

Dr. Jeff Jonas

I sent out a lure and I'm hoping I'm keeping everybody here.

Operator

Thank you. And I'm showing no further questions at this time.

Dr. Jeff Jonas

Well, listen, I want to thank everybody for listening today. Again, I really apologize for the sound issues. I hope all of you appreciate, and I know we do appreciate all of the progress we've made, and the potential that SAGE is facing moving forward. We're building a great pipeline. I think we're trying to approach CNS development in a prudent and careful way, and at the same time our pipeline is offering us an opportunity to expand into multiple indications, well beyond our central indication of SRSE with 547. I think it's fair to say we have had a great year for data, and we look forward to communicating our progress over the next year. So I want to thank everyone again for your attention today.

Operator

Ladies and gentlemen, thank you for participating in today's conference. That does conclude today's program. You may all disconnect. Have a great day everyone.

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