Sage Therapeutics' (SAGE) CEO Jeff Jonas on Q4 2016 Results - Earnings Call Transcript

| About: Sage Therapeutics (SAGE)

Sage Therapeutics (NASDAQ:SAGE)

Q4 2016 Earnings Conference Call

February 23, 2017 08:00 AM ET

Executives

Paul Cox - Head of IR

Jeff Jonas - CEO

Jim Doherty - Chief Research Officer

Kimi Iguchi - CFO

Steve Kanes - Chief Medical Officer

Analysts

Ritu Baral - Cowen

Salveen Richter - Goldman Sachs

Paul Matteis - Leerink

Gary Nachman - BMO Capital Markets

Cory Kasimov - JP Morgan

John Newman - Canaccord Genuity

Katherine Breedis - Stifel

Laura Chico - Raymond James

Raju Prasad - William Blair

Edward Nash - SunTrust

Carol Werther - H.C. Wainwright

Operator

Good morning and welcome to the SAGE Therapeutics Fourth Quarter and Full-Year 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's website at sagerx.com. This call is the property of SAGE Therapeutics, and recording, 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, Head of Investor Relations at SAGE.

Paul Cox

Thank you and good morning. Today we issued a press release with our fourth quarter and full-year 2016 financial results, along with the 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 3 of the presentation is the agenda for today's call. We will begin with prepared remarks by Dr. Jeff Jonas, our CEO, Dr. Jim Doherty, our Chief Research Officer, and Kimi Iguchi, our CFO. We will also be joined for Q&A by Dr. Steve Kanes, our Chief Medical Officer.

On Slide 4 is our Safe Harbor statement. During today's call, we may make forward-looking statements, including statements about our expectations as to Clinical Development and regulatory claims and timelines, the potential success of our development efforts and product candidates, financial projections, and upcoming events. 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 most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission 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.

Jeff Jonas

Thanks, Paul and good morning and welcome to everyone to our call. Many of you have heard us describe our vision to rethink the development of treatments for central nervous system or CNS disorders. There's been a paucity of innovation in the CNS field with few real breakthroughs in new treatments for brain disorders in recent decades. SAGE is focused on closing the CNS innovation gap by pioneering new approaches to neuroscience R&D with the goal of developing and commercializing novel medicines to treat life altering CNS disorders. Jim will speak more to our translational approach later on the call. But first I'd like to highlight the progresses we've made across our portfolio of product candidates and our key objectives for 2017. We've had continued momentum advancing a portfolio of novel CNS product candidate which you can see on Slide 5. These candidates target the GABA and NMDA receptor systems. Dysfunction in these systems is believed to be at the core of numerous brain disorders. Our focus on these systems has led us to our current portfolio. Now focused on exploring three disease areas in neuropsych, neurology, mood and movement disorders.

Turning to Slide 6, our lead product candidate is brexanolone or SAGE-547. We are currently developing brexanolone in separate Phase 3 clinical programs has an acute interventional treatment for super-refractory status epilepticus or SRSE and postpartum depression or PPD. For SRSE, brexanolone is being evaluated in the Phase 3 status trial, a global randomized double blind placebo controlled study. This Phase 3 program is being conducted in agreement with the FDA under a special protocol assessment or SPA, and we believe the results of this Phase 3 trial if successful could form the basis of a new drug application for SRSE in the US. With respect to SRSE we received positive scientific advice in the fourth quarter of 2016 from the European Medicines Agency or EMA. Based on this advice, we believe the Phase 3 clinical program if successful will be sufficient to support a marketing authorization application to the EMA seeking approval of brexanolone for SRSE in the EU. So for brexanolone family and SRSE, we believe we know the regulatory pathways in both the US and the EU. For postpartum depression, we are currently enrolling our Phase 3 clinical program evaluating brexanolone as a potential treatment for PPD. This program consists of separate placebo-controlled trials in severe PPD patients which is 202B and in moderate PPD patients which is study 202C collectively known as the Hummingbird Study.

In 2016, FDA granted breakthrough designation and the EMS granted prime designation to brexanolone for the treatment of PPD. We plan to discuss with European authorities the appropriate development pathways for approval in the EU. And we expect to receive scientific advice from the EMA in the first half of this year. On Slide 7, you see our most advanced next generation product SAGE-217, a novel orally active neurosteroid that like brexanolone is a positive allosteric modulator of GABA A receptors targeting both synaptic and extrasynaptic receptors. In December, we were granted a patent by the US Patent and Trademark Office with claims covering the composition of matter for SAGE-217. In the fourth quarter we also initiated Phase 2 development for SAGE-217 in both mood and movement disorders with four Phase 2 clinical programs now underway in major depressive disorder or MDD, PDD, essential tremor and Parkinson's disease.

Turning to Slide 8, we were interested in moving SAGE-217 into an MDD program given the potential read through from our data and PDD with SAGE-547 and given the evidence supporting the GABA hypothesis in depression. On Slide 9, earlier this month we reported positive clinical results from Part A of a two part Phase 2 clinical trial evaluated in the safety, tolerability, pharmacokinetics and efficacy of SAGE-217 in patients with moderate to severe MDD. Part A of the Phase 2 trial was an open-label study evaluating SAGE-217 in 13 patients. This study fits within our strategy of pursuing data driven approaches to CNS drug development, where we employ efficient human proof of concept studies to both uncover activity signals and to help us understand future trial design and methodology before investing in larger clinical programs. The primary endpoint of the study was to evaluate safety and tolerability. SAGE-217 was found to be generally well tolerated with no serious adverse event or discontinuations reported. The most common side effects were sedation/somnolence, headache, dizziness, and myalgia. The trial also examines the effect of SAGE-217 on the Hamilton Rating Scale for Depression or the HAM-D. Total score in addition to other secondary measures.

Turning the Slide 10. You can see that patients in this trial had a mean HAM-D score of 27.2 at baseline which represents severe depression. Data demonstrated a mean reduction from baseline in the HAM-D of 19.9 points at day 15 with 85% of patients showing at least a 50% reduction of their HAM-D and 62% of patients achieving a remission as determined by a HAM-D score of less than or equal to 7. Statistically significant mean changes from baseline were observed by day two of the study. Following the first of once daily night-time oral dosing of 30 milligrams of SAGE-217. A significant mean change from baseline was maintained throughout the treatment period with p-value of less than 0.0001 at day 15. The reduction from baseline in depression rating seen in Part A of the trial along with the tolerability met the company's criteria for advancing 217 into a planned double-blind placebo controlled study. We expect to initiate the Part B study in the first half of this year when we introduced the solid oral dosage form of SAGE-217. We’re also pursuing a similar strategy with SAGE-217 in Parkinson's disease. We expect the Part A open label portion of the study to read out in the first half of this year. Topline results from the Phase 2 placebo-controlled trial of SAGE-217 in PPD and essential tremor are expected in the second half of the year.

For earlier pipeline programs turn to Slide 11. We recently initiated IND enabling studies for both SAGE-105 and SAGE-324, novel orally active next generation GABA modulators that are intended to be developed for GABA-related indications such as orphan epilepsies and other disorders involving GABA hypofunction. For NMDA programs, we are planning to advance SAGE-718, our lead NMDA positive allosteric modulator into Phase 1 clinical testing in the first half of this year. As you can see we have made great progress across our portfolio with at least eight important data readouts scheduled throughout 2017. Slide 12 reviews our key objectives for 2017. We are focused on completing the Phase 3 clinical development of brexanolone in both SRSE and PPD. And if successful, expeditiously filing a regulatory approval, preparing for potential commercial launch of brexanolone in both SRSE and PPD, advancing Phase 2 development of our next generation oral compound SAGE-217 in mood and movement disorders. Advancing our lead NMDA modulator SAGE-718 into Phase 1 clinical development. Continuing discovery and development of other novel compounds including IND enabling studies for GABA development candidate SAGE-105 and SAGE-324 and further growing our translational science expertise to better enhance the probability of future development success.

Along these lines, I'm delighted to announce the promotion of Jim Doherty to Chief Research Officer. Please see Slide 13 for more information on Jim. Jim has worked with GABA and NMDA systems for over 25 years and was one of the early pioneers at SAGE. Its contributions to building our research team, translational science capabilities and multi-product development portfolio have been significant. So I look forward to Jim's leadership in our new experimental medicine group which will seek to further build on our innovative translation approaches that have been developed at SAGE over the last five years.

With that let me turn the call over to Jim for more details on our plans and what this means for SAGE. Thanks everybody.

Jim Doherty

Thank you Jeff. First I'd like to say how proud I am to have been part of the SAGE R&D team for the past five years. We've made tremendous progress to date and I am now excited to share with you some more details on our new experimental medicine initiative. As Jeff referenced, the CNS space has been challenged by high historical clinical failure rates. The brain can be seen as a large complex interactive neural network. Our approach to treating CNS disorders remains focused on targeting and seeking to correct imbalances in two critical nerve transmitter receptor systems in this network which are the GABA A and NMDA systems. Both of these systems regulate essential CNS signaling and are implicated in a broad range of CNS disorders. Our approach emphasizes targeting CNS indications were patient populations are readily identified, clinical endpoints are well designed and developmental pathways are feasible. We believe that one key element of our success to-date has been our utilization of novel and efficient approaches to translational science which helps give us better certainty when selecting the right patient population endpoint or compound. We are now focusing on a new phase of transitional research at SAGE.

On Slide 14, our new experimental medicine group will further build on our expertise by establishing a translational foundation across our discovery and clinical programs that we believe will better position SAGE for long-term success. The experimental medicine group will have four key goals; to identify functional biomarkers in animals that respond to target engagement and can be deployed in human clinical trials, to identify genetic in biochemical criteria, to identify patient populations to increase the technical chances of success of the clinical trial, to translate insights between compounds and indications for better odds of success across the pipeline and to conduct small exploratory human studies in new disease areas. We very much believe that the most efficient way to develop CNS drugs is to lead whenever possible with human data. You've already seen this in our developmental programs most recently with SAGE-217 in MDD. SAGE has been selecting compounds for developments that have potent activity on brain function at the network level. It is important not only that our compounds are well characterized but that our patient populations are well defined.

Some of our key questions moving forward will be, do we have the right dose, which biomarkers can be utilized early in development and which patient populations are appropriate for further investigation. Our initial focus will be working hand in hand with our clinical team on high value studies for the lead next generation oral compounds from both our GABA A receptor and NMDA receptor modulator platforms, SAGE-217 and SAGE-718 respectively. Finally, I'm very excited about this new initiative at SAGE which builds on much of what we've been doing over the past five years. Ultimately our goal is to improve our probability of success in bringing new and differentiated therapeutic options to improve patient care.

With that I’ll turn the call over to Kimi.

Kimi Iguchi

Thanks Jim, let me start with a quick summary of our financial results for the quarter and full-year and then provide an overview of our financial guidance. On Slide 15 five we have a summary of our financial results for the fourth quarter. We ended the fourth quarter with 397.5 million in cash, cash equivalents and marketable securities. Research and development expenses were 42 million including 5 million of non-cash stock-based compensation expense in the fourth quarter of 2016 compared to 20.4 million including 1.6 million of non-cash stock-based compensation expense for the same period of 2015. For the year ended December 31, 2016, research and development expenses were 120.8 million including 11.2 of non-cash stock-based compensation expense compared to 69.4 million including 5.9 million of non-cash stock-based compensation expense for the same period of 2015. The increase in spending was primarily due to several factors. Ongoing clinical development of brexanolone or SAGE-547 in SRSE and PPD including one, expenses related to the enrollment of the Phase 3 status trial in SRSE, completion of the Phase 2 clinical trial of brexanolone in PPD, commencement of the Phase 3 clinical trial of brexanolone in PPD and expenses associated with activities in preparation for a potential filing and regulatory approval, also completion of Phase 1 development for SAGE-217, the initiation of four Phase 2 clinical programs for SAGE-217, the ongoing IND enabling study for SAGE-718 and investments in R&D headcounts to support the growth in SAGE’s pipeline and operation.

General and administrative expenses were 14.4 million including 5.1 million of non-cash stock-based compensation expense in the fourth quarter of 2016 compared to 8.2 million including 2.5 million of non-cash stock-based compensation expense for the same period of 2015. For the year ended December 31, 2016, general and administrative expenses were 39.4 million including 11.8 million of non-cash stock-based compensation expense compared to 25.3 million including 9.3 million of non-cash stock-based compensation expense for the same period of 2015. This increase G&A expenses were primarily due to the increase in personal-related expenses, professional fees and facilities to support expanding operations as well as continued preparations for potential commercial launch. We reported a net loss in the fourth quarter of 55.9 million as compared to 28.6 million for the same period of 2015. For the year ended 2016, we reported a net loss of 159 million compared to a net loss of 94.5 million for the same period in 2015. As of February 21, we had 37.3 million shares outstanding.

Turning now to our financial guidance, we expect that our existing cash, cash equivalents and marketable securities will fund the anticipated operations based on our current operating plans into the second quarter of 2018. This guidance takes into account the continuing Phase 3 clinical development of brexanolone in SRSE and PPD, our current SAGE-217 mood and movement clinical programs consisting of four Phase 2 studies of SAGE-217 in major depressive disorder, PPD, essential tremor and Parkinson's disease; the initiation of Phase 1 clinical development for our first NMDA positive allosteric modulator SAGE-718, the expanded research effort within our GABA and NMDA based portfolio in earlier stage pipeline including the recently initiated IND enabling studies for our next generation GABA modulator development candidates, SAGE-105 and SAGE-324. And our ongoing activities for potential launch of brexanolone such as continued build out of the medical affairs functions including field based MSLs and commercial planning and preparations. We continue to make progress in the growth of our commercial team and infrastructure in advance of our potential commercial launches in SRSE and PPD including a near-term higher and market access pair management and sales and marketing.

As we've highlighted on this call we are very encouraged by the progress by the team at SAGE. We continue to be very excited about the prospect of continued growth and expansion in 2017 both in our organization and our pipeline. As we look out across 2017 on Slide 15, you can see that we have a number of important milestone and data readouts over the next several months. Each of which are potential to further our efforts to develop innovative treatments for patients. Much of our focus has been and will continue to be on our goal of executing on the clinical trials we plan to conclude in 2017.

With that we will now like to open the call for Q&A. operator?

Question-and-Answer Session

Operator

[Operator Instructions] We will be taking our first question from the line of Ritu Baral from Cowen. Your line is open.

Ritu Baral

I have two questions, to start, my first one is on the status trial enrollment. Jeff, you have declined to sort of narrow the range on when you might finish enrollment. But can you talk to it qualitatively and also can you say whether the changes that you made late last year in some of the protocols are working, do they need some time to kick in, do they need any IRB approval sort of where those are?

Jeff Jonas

Firstly, giving some more details would be narrowing the range, so we are still planning to release the data from the Phase 3 program in the first half of this year. So every day the range is narrower. With respect to the changes that we made, I think we said this on our last call, we saw a very rapid response to that I think both in terms of - we've always had no issues with patients being presenting to these sites, but in terms of the qualifying means that we did see an impact from that as well, that continues

Ritu Baral

And then my follow question is on your MMD data that was released shortly. Can you talk a little bit to what your expectations or the literature would have guided to the placebo rate in these patients and given you guys can probably see the slope of response, can you at least qualitatively compare and contrast that to what you saw in PPD study.

Jeff Jonas

So from the literature, if you just look at say the [indiscernible] study and those studies in the first two weeks of treatment with SSRIs conglomerated, you only see about 10% or 15% response rate in those large studies. You know from the literature the placebo response is typically increase with the duration of the study. So we were thinking along the lines of remember we always said we need to be able to see robust signal and thinking about the SSRI in two weeks where you had like a 10% remission rate and a 20% response rate, we thought maybe 5, 6, 7 points on the HAM-D which is what you often see and if you go through the SBAs of other SSRIs that's what sort of we had thought the work that - typical maybe to the baseline scenario would be. As we looked at the response, we saw as you know the patient - after the first dose at night, the 30 milligram is given at night. We saw a significant improvement after the first dose. So as we've looked at the curves, we think that there's good correspondence in terms of the pharmacodynamics of that response between what we saw at PPD with 547 and what we saw with MDD with the oral molecular 217. And frankly that correspondence is what gave - was one of the pieces of data that led us to believe that this was a bonafide signal justifying further research and also gave us more confidence that this was a potentially generalized anti-depressant mechanism.

Ritu Baral

I’m going to squeeze one last in there, you said that the formulation for Part B, the placebo control is going to be a pill. What was the formulation for Part A and are you thinking of changing the PKPD for Part B at all for MDD.

Jeff Jonas

We don't need to, we haven't made this probably, we’ve obviously done bioequivalents work with a solid, with a capsule which is will be ready in the second quarter and we have had very good correspondence between the capsule pharmacokinetics and what we've been seeing with the oral solution that we got the suspension that we gave with 217 and the original study.

Operator

Our next question comes from the line of Salveen Richter from Goldman Sachs. Your line is open.

Salveen Richter

With regard to 217 in major depressive disorder, just comment on whether the benefit was sustained Post A 15 and how the profile compares to SSRIs. And then with the Part B study that you're initiating in the first half, any clarity you can give us a number of patients, any changes in design could this be how much proof of concept is a study going to layout for you.

Jeff Jonas

We only had - we haven't completed all the follow up. I think as I've said before the follow up that we've had informally suggested durability of response in little more than half the patients out two weeks, was not beyond that, I don’t think it's fair to say. In terms of - I'll let Steve comment on the design of the Phase 2.

Steve Kanes

What we've been doing for NMDA, we’re planning to do for MDD is going to match very closely to how we proceeded from open label data and postpartum depression into a placebo controlled trial. So we'll look closely at the effect size and use that to power a straight forward placebo controlled trial with oral capsule. As soon as we have the details on the evidence and so forth you know we’ll be able to share that. But you can use the you know the approach that we’ve taken with PPD as a general approach to how we’re doing with depressions.

Jeff Jonas

Salveen, one another point - two other points, one is, I think, our interest is in replicating the open-label data as rapidly as possible. And given that what we think is, now only the clarity of the signal and as I mentioned earlier the - what we think is the read group from - in terms of the pharmacogenomics from PPD to MDD we think we can do this in the way we've done all of our development as sort of an efficient program to give us a better replication. You can also look, we’re preparing these data and people will be able to see this in some of the secondaries and we’re preparing those for presentation in the near future. They're a number of potential meetings, obviously we can't say which ones where we'll be giving more granularity of the data.

Salveen Richter

And then with regard to how you're prioritizing your programs it looks like 547 is going to be prioritized to major and severe PPD oral 217 is going to you know be a key focus in MDD. So how should we view the outcome for the oral 217 study in PPD.

Jeff Jonas

We’ve very fortunate in that you know the way we've been developing has given us consistently I’d say positive or good signals of activity for the mechanism. And we’re in an unusual position as a company with multiple potential products from our chemistry group. So we've had to think about a number of issues from not only in terms of commercial segmentation but also trial metrics and things of that nature. So with that as you pointed out for 547 that focus will remain in PPD and again remember recalling that there breakthrough designation is for all PPD and in SRSE. After that we’re turning to oral will be turning to oral focus on 217 and frankly the follow up models as well - molecules as well. The selection of what we focus on is going to be data driven to some extent. So we see a very strong signal in Parkinson's, we may think about it differently and see a moderate signal in Parkinson's. So that's going to come into some of our calculus. I do think it's fair to say it is accurate that from a priority standpoint the enrollment in the oral PPD program for 217 will take a lesser priority than enrollment in the Phase 3 program which is chugging along quite well for 547 in PPD.

Operator

Our next question comes from the line of Paul Matteis from Leerink. Your line is open.

Paul Matteis

Jeff, I was wondering if you could expound a little bit upon the patient population in the MDD study. Can you talk about how many of those patients failed, any prior rounds of antidepressant therapy and whether or not there were any contaminant antidepressants, sure anti-anxiety medications on board during the trial?

Jeff Jonas

I’ll turn that over to Steve.

Steve Kanes

So Paul, very similar to what we did in postpartum depression, we took all patients that were symptomatic regardless of whether they were on medication or not. In the open-label data that we released, five of the patients were on concomitant medications, I wouldn't call that a formal treatment resistance but they all were symptomatic on stable doses antidepressant treatment.

Jeff Jonas

Yet the intend here is we believe that given the novelty of the mechanism and its potential utility especially with a potentially differentiating tolerability profile that we didn't see any reason to constrain the population and we thought that a signal obtained in this type of more generalized approach enrollment would be probably more valid especially since our vision and hope is that we can develop this as a potential first line agent for the treatment of MDD. So that will be our thesis.

Paul Matteis

And how long do you plan on following these patients. And is the long-term durability data is something you might present later this year?

Jeff Jonas

We’re going to take a look at some of the data now Paul and make some determination, I think one of the novelties of this mechanism we saw this with PPD and we think we're seeing this with MDD is the durability after acute dosing. So this may be a novel paradigm for treating depression, so that will have to have - we have to look at the data a little more but we are well aware that may offer some opportunities to more rapid development pathways, but again it's probably a little early to say whether we can continue to validate that finding.

Paul Matteis

And then maybe just one quickly on the Hummingbird Study, can you talk about how you're exploring at home infusion in the Phase 3 study and I guess from a commercial perspective, what kind of data do you need to generate to make that doable in the real world setting?

Jeff Jonas

So we haven’t got many of the details. We are looking at some now very actively mechanisms to allow home infusion. One of the points about 547 is that because of our, our chemists have done a really good job of this molecule. In terms of an intravenous molecule, it's delivered in very low volumes, only five - basically 5 CCs per hour. It has a in that trial, 5 CC is what, I’m pretty sure that's right. I'm 99% sure. It's not viscous, it's not sporadic, it doesn't require obviously a central vein. So it's a reasonably straightforward intravenous administration that doesn't require close monitoring. You don’t see IVs blown and stuff like that. So from that standpoint, it's not daunting. So we do have some programs in place now talking to a number of potential avenues or providers to do home infusion and that will be included in the Phase 3. But again, I don't think we can give you more details on that.

Paul Matteis

Okay. I mean. Jeff, would you be - is that something that you'd be stratifying since it obviously could impact placebo effect and patient outcome, stratifying between arms?

Jeff Jonas

Yeah. I'm not aware of ant data that’s been ever obtained systematically that shows being in the hospital versus being not in the hospital has any effect on placebo effect. That’s simply a pharmacomythology and we think that the drug works, the drug will work regardless of where it's being administered.

Operator

Thank you. Our next question comes from the line of Gary Nachman from BMO Capital Markets. Your line is open.

Gary Nachman

Hi, good morning. Jeff, how do you think of MDD more broadly as an indication to go after? Is this something you could potentially take to the finish line on your own or would you need a partner for it as you hopefully move into large Phase 3 studies at some point down the road?

Jeff Jonas

We think that - let me just say just more broadly, we've really been focused on being a leading CNS organization and I think the team at Sage has really created tremendous value through their efforts in developing molecules and bringing molecules over right so far over the finish line in each phase of development. So we're in great shape financially. We think we have the manpower and the smarts to continue to develop our assets independently. We don't see the need at this point to really engage a partner through development. I think that if you look at marketing, I think the current conventional wisdom is you need to have a big marketing group and with regional frequency. I think we may want to see if we can challenge that notion. But I think right now, as a company, I have complete confidence in the team and what they've done and our ability to drive this and this and many of our assets through development and to make them available to patients.

Gary Nachman

Okay. And then could you comment a little more on the AEs you saw on the MDD study and how that informs you about the appropriate dose to use moving forward?

Jeff Jonas

I’ll let Steve handle that one.

Steve Kanes

Yeah. Similar to what we've seen in other programs with 217, the only adverse event that we’ve seen with any frequency was mild sedation or sleepiness and we think that for many of these patients, when given at night, it was not something that affected their ability to be dosed and many of them in fact had to come out of insomnia. So one of the things that we're looking for in our development program is to understand whether or not something like mild sleepiness may be on the benefit rather than the recite, but there weren’t any other independent adverse events that we’ve seen.

Jeff Jonas

Gary, I think we think that, again, it's early days. Those of us who work with anti-depressant studies recognize what those side effect profiles look like. Our interest in this particular mechanism is that we think it may potentially offer a distinct mechanism of action with the potential to have benefits that SSRIs that don’t have with a very distinct and adverse event profile. I think that so far, we have a lot of information about 217. Remember, we have more than 100 patients in Phase 1. And so we have a very good understanding of the pharmacokinetics and AE profiles, very well done molecule. So from the standpoint of tolerability and what the profile might be, we’re very encouraged that this may be a very interesting first line agent.

Gary Nachman

And is it possible that you could use 217 as adjunctive therapy with other antidepressants, you think that's something that you'll study at some point?

Jeff Jonas

I think it's too early to say we’d study as an adjunct, but I think you picked up, I know because I said it. With the distinct side effect profile, it becomes an interesting potential adjuvant therapy. Our interest though is given the read through from PPD, I think was so consistent, it's hard to ignore that this may be a generalized antidepressant mechanism and if that's the case, I think our first goal will be to use this and develop this as a monotherapy for patients with MDD regardless of their prior treatment status. I think if you look at the data, so many people with major depression don't respond adequately to their first to second dose of SSRIs. So we think there is an important medical opportunity here to really benefit patients and to differentiate this product.

Operator

Thank you. Our next question comes from the line of Cory Kasimov from JP Morgan. Your line is open.

Cory Kasimov

Hey, good morning guys. Thanks for taking my questions. I guess first going back to the design of the pending randomized Phase 2 trial in MDD with 217, do you expect that the seven day in-patient dosing period will still be required as it was in part A?

Steve Kanes

This is Steve. The answer is no. We will be converting the entire program to an outpatient single test.

Cory Kasimov

Okay. Then for the Phase 1 trial for 718, is this initially going to be in healthy volunteers and other than safety, what kind of end points or data points will you be looking at, was there anything from pre-clinical models in terms of toxicities that you might predict as you put this into humans?

Jeff Jonas

Yeah. I'm going to turn this over to Jim Doherty.

Jim Doherty

Yes. So the plan for the study is healthy volunteers and we will be looking at typical safety and tolerability measures. The one thing that I would add is we are actively looking at pre-clinical models for endpoints of translation. We’ve done that extensively with our GABA programs and that's really helped us out in dose selection and things like that for later clinical trials. So we'll have the same approach for our program. The preclinical team is working right now on potential endpoints.

Cory Kasimov

Okay. And then one quick modeling question for Kimi regarding R&D spend. I know you reviewed some of the components that drove the jump you saw this last quarter, but is there anything you can say about how we should be thinking about trends going forward over the course of ‘17?

Kimi Iguchi

Yeah. The one other thing I would just mention Cory is that, if you look at the Q3 to Q4 burns, we went - the operating expenses went from 38 million to 66 million. 5 million of that growth was just in stock compensation. So non-cash based stock compensation. So just bear in mind that that's a component you should be thinking about. Also, we will continue to see increases in spend. You’ll understand all the things that we're doing in 2017. So I would expect to continue to see an uptick in R&D line.

Operator

Thank you. Our next question comes from the line of John Newman from Canaccord Genuity. Your line is open.

John Newman

Hi, guys. Thanks for taking the question. For 217 in Parkinson’s, I just wonder going forward if the thinking here is to test the therapy as an initial combination with L-dopa, given that L-dopa sometimes needs to be titrated or if it is to take patients that are around still with those of L-dopa and an arm 217? Thanks.

Steve Kanes

Yeah. During the open label phase, we're actually looking at a variety of different approaches to understand where we're seeing an effect. So we’ll understand whether or not this is initially intended to work best as adjunctive to L-dopa or as monotherapy. First and most important goal for the study is to understand what effect it might have on its own. But then to explore further whether or not the complementary to L-dopa.

Jeff Jonas

Okay. So, well, I think as you know, John, there are a number of potential pathways for approaching Parkinson's. And as Steve said, we’ll be doing both on and off dopaminergic agents. I think we'll look at patients obviously tremor, which isn't as straightforward physical measure that we think we ought to see impact on early on. And so that's why we've always said we’re looking for a more modest signal here, given the complexity of polypharmacy and as particular indication. So - but we also will be looking at some of the other - something maybe less obvious in terms of mental status and things like that. And I think as a number of people pointed out, there's a pretty well established GABA hypothesis surrounding Parkinson's disease that we think this particular mechanism of action could potentially address.

Jim Doherty

And this is exactly how we do some of these exploratory studies, which is really to do some prototyping in-patients to really understand how best to go about doing a placebo-controlled if that’s warranted.

Operator

Thank you. Our next question comes from the line of Katherine Breedis from Stifel. Your line is open.

Katherine Breedis

Great. Thank you for taking my questions. First, with respect to SAGE-217 in MDD, you’ve talked about increasing the size of the Part B portion of the Phase 2 study, given the robust signal you've seen in Part A. It would seem to be a fairly capital efficient program, but it’d be very helpful if you could provide some further thoughts on the increased development cost, potential Part B duration, range of number of patients, range of clinical sales rights, et cetera. Thank you.

Jeff Jonas

Katherine, thanks. A couple of points. So you have a question of everyone on the team today. That was well done. It's like a triple. So I think you get all three out of four. You missed Jim, so send it out. So with respect to design, we need a little more time to look at both - some of the other data, et cetera, although we’re looking at some of the pharmacokinetic data as well to think about dosing, but we're pretty comfortable that we have - hypothetically a dose. That being said, one of the issues we have to think about is what we're seeking to prove in the next study. And do we simply want to look to validate or validate this signal and replicate it and to move the slot quickly and I think there's a strong case for that. But there may be some other potential advantages as we would like to test out. I think it's too early to say and those will require different types of approaches to the study.

I think it is fair to say that you're not talking about a very large study to start. I think, duration is going to be something we have to think about versus duration of follow up and I think if you think about the thesis of major depressive disorder, you can imagine that unlike PPD, some people with MDD will have some chronicity and perhaps a longer dosing. I think though we haven't seen evidence of that yet, but that's possible. So those are all the things we have to take into account before we can commit to the duration of the trial. I think it is fair to say that with the development of the capsule moving forward nicely that we'll be able to start this study within the first half of this year. I think how it ends is going to be a little bit unclear. I think the sizing for this is, this is a gas. And a guess is 50 to 100 at most, given the effect size, but we'd like to see and we got them want to answer some questions. So with that, let me turn that it to Steve and then Kimi for a quick comment.

Steve Kanes

I think Jeff put it well. One of the things that we’re faced with is the tactical position of how much information we are wanting to get under the next trial and that’s something that we’ll be looking at when we have the full dataset in front of us and not just the top line in terms of activity. And but our approach overall will be to really have very clear touch points we’re able to derisk and prove to ourselves that we have activity versus placebo and potentially other treatments as well. So with that, I’ll let Kimi, since we have details on that one.

Kimi Iguchi

Right. And Katherine, I think at this point, we believe that the trial that we've been talking about will be included - is within our financial guidance that we've already established.

Katherine Breedis

Great. Thanks very much. And if I could ask one follow-up quickly on brexanolone in Europe, have you, any anecdotal comments that you could offer in terms of how the dialog is going with European regulators, how patients and physicians have responded to the opportunity for potentially brexanolone to treat PPD?

Steve Kanes

We’re doing two things with Europe. First of all, we’re looking at clinical trial sites in Europe and of course the response there among treaters that we've been in contact with particularly KOLs at many sites where there are a lot of in-patients in other places where people are focused on is incredibly positive. With regard to regulatory interactions, we don’t comment on those until we’re completed with those, but we’re certainly pursuing pretty aggressively a plan to engage with them and get clarity before PPD as well.

Jeff Jonas

Well obviously because of the prim designation for PPD, we're in the process for scientific advice.

Operator

Thank you. Our next question comes from the line of Laura Chico from Raymond James. Your line is open.

Laura Chico

Hey, thanks very much for taking the question. I guess one on Parkinson's disease and SAGE-217. Jeff or Steve, I know placebo effects in Parkinson's disease trials can be particularly problematic. I guess kind of against that backdrop, could you elaborate a little bit more on your comments around potentially the magnitude of treatment effect you're looking for in the open label portion of the study? And then perhaps how you're planning on mitigating some of those placebo effects if you advance towards placebo controlled trial?

Jeff Jonas

So we're looking for about 30% improvement in tremor in the open label, understanding that that's simply signal finding. We’d like to see some movement and understanding where we are with regard to dose in those patients before moving forward. With regard to the placebo controlled trial, again, a lot of this is very early days, so we’ll be looking for patients to be, they’re on controls and understanding what they look like on and off treatment. We think that will allow us in some regards to mitigate placebo response in the early days. If we choose to move into this indication in larger trial, this is something that we’ll need to look into with some precision.

Operator

Thank you. Our next question comes from the line of [indiscernible]. Your line is open.

Unidentified Analyst

Hi. Thanks for taking my call. And I know this is early days, but assuming the 217 profile hold, might you at some point require breakthrough therapy designation, further drug in MDD to expedite development and review. And if you’re not guiding on that specifically, could you comment on the level of preliminary proof the regulator might want to see to award a breakthrough therapy designation, for example confirming that the placebo control trial would be expected for such a request?

Jeff Jonas

Thanks for the question. So as you know, I think it's a good one, because I think as you know historically, it looks - if you look at the historical pattern so far for breakthrough, I'm sure you noticed typically the agency has looked for placebo controlled data on the neuro side before they grant breakthrough. Our belief is that given the profile we've seen and the signal that we've seen that with a placebo - that it potentially is a differentiated mechanism that will offer potential improvements over the standard of care and a very differentiated approach, so that if we had a - certainly if we had a positive program, I would expect that we would hope that this could qualify for breakthrough. As a company, we never say what we're doing when, but that would be my hope that given the quality of the data and the need in this population that we would qualify for breakthrough.

Operator

Our next question comes from the line of Raju Prasad from William Blair. Your line is open.

Raju Prasad

Thank you for taking the question. I know at the analyst event, Dr. Rosenthal mentioned the QC hotline you guys have for status trial sites. Is there any anecdotal information you could provide on maybe how those calls are going. I know at the Analyst event, obviously you said 97% were in compliance, is that kind of consistent with what you're seeing now?

Steve Kanes

Yeah. That’s absolutely consistent. I mean, he’s presented his data and we do look to make sure that our investigators are making use of all of the distorting activities related to the trial. I mean that's one piece of it that involves KOL interactions, peer to peer interaction. There's also a lot of other support that we put into place for the program as well. And so we do track that very closely inside the clinical trial.

Jeff Jonas

Yeah. I just want to put a plugin for Steve and all the people who have done this, you have to remember these are very critically ill patients who are often coming into the hospital in crisis and so what you just asked about, which is a very important point is the sort of a testimony to the work that these guys have done, men and women have done to really getting these patients in the study, making sure that we have good regular treatment protocol and they’ve done a great job. And as you’ve just, and Steve as said and we made public, the compliance here is well above, I think 99% still with terms of what we need to see.

Raju Prasad

Great. And then I saw a recent published case study on evolution of cerebral atrophy leading to declining outcomes and is that something you guys have looked at in the open label study or is that something that you're aware of?

Jeff Jonas

So, awarded, we haven’t looked specifically at it because not prospectively collecting those data don’t allow us to speak to them directly. So as we get through in - if we anticipate having positive data, we’ll certainly be engaged with our investigators to go back and look at things like imaging data and other specialty aspects within the individual patients and individual physicians.

Raju Prasad

Great. And then one for Jim on his first call, functional biomarkers, are you talking about SRSE, PPD, MDD, are you talking about future indications, all the above? How are you thinking about identifying functional biomarkers in work?

Jim Doherty

Yes. The answer is really all the above and we've certainly done that for the GABA platform associated with 547 and 217. We’re planning to do that with 105 and 324 as well and then as we embark in a second platform of NMDA modulators with 718, it’s also going to be very important to have this data. So we're really doing across the board.

Raju Prasad

Is that something where you would see, if you did fund a functional biomarker for SRSE for example, payers could eventually pushback something that we're seeing with some of the other treatments that are being approved lately?

Jeff Jonas

This is Jeff. I think there are two points. One is, the most important thing and I’d not say that payers aren’t important, just do the right thing by patients and if we can do anything to enhance response or ensure safety, we're going to do it. And remember, a lot of the things that we're doing are pioneering studies, but people haven’t either used these mechanisms before. So we think it's important to the field and for us as responsible researchers to do that. I actually, certainly, I do think that finding biomarkers helps to expedite clinical trials. It also gives you potential IP protection. So I think the benefits outweigh the risks in doing this. On the NMDA side, this is a target rich environment in terms of potential biomarkers, we haven’t talked a lot about it, but we're pretty comfortable that that at least we have the opportunity to prospectively define biomarkers to help guide our approaches into larger markets using prospectively defined biomarkers.

Operator

Thank you. Our next question comes from the line of Edward Nash from SunTrust. Your line is open.

Unidentified Analyst

Hi. This is [indiscernible] for Edward. Thanks for taking the questions. So first is the follow-up question on the patient population enrolled in the MDD study. I think I heard just that the study enrolled all comers. But according to the information posted on clinicaltrials.gov, it looks like the study excluded patient who showed no adequate responses to two different causes of antidepressant. So wonder if you can clarify that please.

Jeff Jonas

So, thanks for that. We were excluding for the purposes of a signal finding study. Those patients that were non-responsive and as I said during the, when I answered, I appreciate the clarification, these were not treatment resistant or TRD patients and I think that's what those criteria. The all comers really was facing to patients who either were or were not on concurrently by the presence of the time of enrollment.

Unidentified Analyst

Okay. And also on the dose used in Part A and also to be used in part B, did you just use the single dose of 30 milligram?

Jeff Jonas

Yeah. Actually, we started with what was the MTD of the drug that we obtained or we thought was a J time MTD, and as you know, there was no requirement to decrease the dose. So it was very well tolerated and obviously we think as very well absorbed. So we may do some other dose exploration, but given the tolerability of this dose, we think certainly this is a potential dose for treatment moving forward. And again thanks for clarifying the all comers comment. That was a good - I appreciate that.

Unidentified Analyst

So just to confirm, you don't feel dose ranging, dose finding study for the Part B either?

Jeff Jonas

We’re not saying that. We’re saying that at least for one part of the Part B, for this one study, we don't have a safety signal if that requires dose ranging and often dose ranging because you see no activity signal or you haven't accessed some safety concern. That wasn't the outcome of the particular open label, which is of course one of the reasons you do open label is to help design the methodology to assure patient safety and we were able to do that. And that's why we’re able to start with 30 in patient and move everybody at the out-patient. So I'm not saying we won’t explore other doses, there may be reasons to do so, but I think that what I'm saying is that we think we have a pretty strong signal, especially given that the correspondence with the PPD activity and we’ll certainly pursue that in certainly one of our approaches to expedite the replication of the data.

Unidentified Analyst

And I assume that applies to the PPD study as well or for 217?

Steve Kanes

So that applies to pretty much all the programs that we do. We look for our initial placebo controlled trials to go to, if we're able to choose the MTD as the dose for those trials. I mean there isn't a safety signal. We just are - the biggest risk on our side is, if we dose too low and we don’t see a signal leaves us out. So for the first studies, we intend to use as we were saying, the highest doses possible for those trials.

Unidentified Analyst

Okay. And the last question is on the night time dosing. If you hadn't seen the sedation, would you think that maybe onetime dosing could have given you a better treatment effect?

Steve Kanes

No. We don't view that as the driver for the overall antidepressant effect. And in fact, in the Phase 1 program, we looked at both morning and evening dosing.

Jeff Jonas

Now, remember, this is pharmacology. So this is Jeff again. So it’s pharmacology. We think that the - and as Steve said earlier, when you only ask, if you ask everyone before they go to bed, are you sleeping, they say, yes, you are ticking that off as an AE. So we will have to do some work looking at potential benefit from this. And if you follow the SSRI space in particular, the ability to help sleep that we can validate that and show that is a potential advantage. We’re doing some more analyses, looking at the reports and as you might expect, we think they will be clustering towards night. We chose night because we think that it just simply makes the better sense with this mechanism. And once daily with a long acting half-life, remember, this is a drug with a 16 to 18-hour half-life. So it really shouldn't make a difference what time a day you give it with respect to clinical activity and we think that - and we've shown that with tremor and it doesn't really matter what we're giving it. When we see activity, it seems to be agnostic to time of day application.

Operator

[Operator Instructions] We’ll be taking our next question from the line of Carol Werther from H.C. Wainwright. Your line is open.

Carol Werther

Thank you for taking my question. So two questions. One is the first, if we don't have a positive result with the epilepsy trial, what are your thoughts about moving forward with that indication.

Jeff Jonas

I think if SRSE is not positive, we have to take a hard look at whether we would want to repeat it. When we started the company, we had very interesting data in this indication, but I think, given the opportunities that as the pipeline has grown and as we have multiple other shops on goal and potentially credible indications, I think we have to take a very hard look about whether repeating this would be prudent for us, given the other opportunities that we've been able to develop over the year. So it would become a portfolio question, and it is a very complicated study. It's the biggest of its kind. So I think those are all things that would go in to the mix when thinking about whether we would repeat it and whether given the opportunities, we are now looking at whether we would even be prudent to do so.

Carol Werther

I understand. And then my other question is just about the PPD indication and the Hummingbird trial, is that on clinicaltrials.gov, because I couldn't find it? And what’s the power of the trial?

Jeff Jonas

So I'll take the first question. The branded hummingbird trial, you won’t find it in clinicaltrials.gov, you will see it listed as, I believe it’s 202b and 202c. Those are the same trials. We’ve just come up with some branding that that we can use externally for things like patient recruitment and so forth. With regard to powering, these are Phase 3 power, so 90% double side statistical significance.

Carol Werther

Okay. Thank you very much, because they were listed I think as Phase 2 and that was why --?

Jeff Jonas

Remember, when we started this, they were Phase 2. We felt it was inappropriate. Yeah. We don't believe you should label anything as a Phase 3 program until you have the discussion with the FDA doing that. I know companies sometimes will call things pivotal, et cetera, but we believe that’s not the appropriate way to label trials. So when we have the additional data, we say we're going to continue as Phase 2, when we receive breakthrough and when we had the breakthrough meeting, these were designated as Phase 3.

Operator

I'm seeing no other questioners in the queue at this time. So I'd like to turn the call back over to Jeff Jonas for closing comments.

Jeff Jonas

Okay. And well, thanks everybody for your attention this morning. I want to thank the team at Sage for their great work. We have a big year ahead of us. We have eight data readouts, a lot of big news for both our intravenous program, 547 and the oral program, 217 and we're looking forward to the first ever positive allosteric modulator of NMDA 718. So again thanks for your attention and stay tuned everybody. Thanks again.

Operator

Ladies and gentlemen, thank you again for your participation in today's conference. This now concludes the program and you may now disconnect at this time. Everyone, have a great day.

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