Sage Therapeutics Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
July 31, 2024

There are 17 speakers on the call.

Operator

Good afternoon. Welcome to Sage Therapeutics Second Quarter 2024 Financial Results Conference Call. Currently, 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 a property of Sage Therapeutics and recording, reproduction or transmission of this call without the expressed written consent of Sage Therapeutics is strictly prohibited.

Operator

Please note that this call is being recorded. I would now like to introduce Ashley Kapowitz, Vice President of Investor Relations and Capital Markets at Sage.

Speaker 1

Good afternoon and thank you for joining Sage Therapeutics' Q2 2024 Financial Results Conference Call. Before we begin, I encourage everyone to go to the Investors and Media section of our website at sagerx.com,

Speaker 2

where you

Speaker 1

can find the press release and slides related to today's call. I would like to point out that we will be making forward looking statements, which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. Please review the risk factors discussed in today's press release and in our SEC filings for additional details. We will begin the call with prepared remarks by Barry Green, our Chief Executive Officer, who will provide an overview of our progress during the Q2 of 2024.

Speaker 1

Our Chief Business Officer, Chris Bunecki will provide an update on the ongoing commercialization of XERZUVE in postpartum depression or PPD. Laura Gull, our Chief Medical Officer will review development activities across our programs.

Speaker 3

We will then be joined

Speaker 1

by Kimi Iguchi, our Chief Financial Officer, who will review our financial results from the Q2 of 2024. Mike Quirk, our Chief Scientific Officer, will be available for questions during the Q and A portion of the call. With that, I'll now turn the call over to Barry.

Speaker 4

Thanks, Ashley, and thank you everyone for joining us this afternoon. As we progress through 2024, we remain focused addressing unmet needs in brain health. Our successes and setbacks provide valuable learnings and we push forward in our efforts to advance our science and support patients in need of new treatment options. As you may have seen, last week we and Biogen announced negative results from our Kinetic2 study of SAGE-three twenty four in essential tremor or ET. Given these results, we plan to close the ongoing open label safety study and do not plan to conduct further clinical development of SAGE-three twenty four in ET.

Speaker 4

We recognize there's a high unmet need in this disease with limited innovation treatments over the past 50 years and are deeply disappointed with this outcome and importantly for ET patients. Now we continue to work to accelerate launch momentum for ZERZUVE and PPD and to progress our brain health pipeline and look forward to providing additional data readouts expected later this year. Now where we are helping patients is postpartum depression. Turning to ZERZUVE, I'm energized by the profound impact we're making on women with PPD and their families. For the 1st and only oral medication approved for the treatment of PPD in adults.

Speaker 4

We're also seeing firsthand a progressive evolution in the treatment of PPD, particularly as OBGYNs are on the forefront of a movement to vastly improve screening, diagnosis and treatment. It's encouraging to see the progress we've made as we near the 1 year anniversary of the FDA approval of ZERZUVE. The increasing demand and the growth in prescriptions and shipments in the Q2 is indicative of that progress and supports our goal to establish XERZUVE as a first line therapy and standard of care for women with PPD. I'll highlight a few of the encouraging signals we saw this quarter, which Chris will dive into in more detail. We observed strong quarter over quarter growth Q1 to Q2 in prescriptions and shipments of ZERZUVE.

Speaker 4

Shipments delivered to patients nearly doubled in the Q2 relative to the Q1, reflecting the strong demand and level of interest we're seeing from HCP's or XERZUVE in treating women with PPD. HCP prescriber momentum continues with prescriptions in Q2 seen across the breadth of HCT's true PPD and in particular OBGYNs. Notably, early data suggests that OBGYNs who have prescribed XERZUVE are treating significantly more patients with PPD than they were previously. This is based on written prescriptions for all medications. This is an important metric shows how XERZUVE is beginning to change the HCP treatment paradigm in postpartum depression.

Speaker 4

In addition, the number of new and repeat ZERZUVE subscribers grew during the Q2 of 2024 and we're seeing many OBGYNs right ZERZUVE for multiple patients. We continue to have strong commercial and government access for ZERZUVE and PPD with the majority of plans to date not imposing onerous prior auths or step edits or postpartum depression. We are also seeing momentum across the ecosystem with broad policymaker interests across the country to advance policies to improve maternal mental health outcomes. For example, the state of Louisiana recently signed into law a bill that generally permits women with TPD to bypass step therapy requirements by commercial insurers and gain direct access to FDA approved treatments for PPD. We believe this law will help enable women with PPD in the state to gain direct access to ZERZUVE when prescribed.

Speaker 4

As we highlighted at launch, our strategy has been to launch with a focused approach and scale as we see success. As the signs of launch have been encouraging, in addition to expanding marketing and non personal promotion, Sage plans to strategically expand its sales force in early Q4 where we believe additional resources will help accelerate demand for ZERZUVE in the treatment of PPD. We believe this planned expansion of our sales force is well timed with access coverage and improvements in the specialty pharmacy processes that will help to support the growing focus to treat PPD and to accelerate commercial momentum. We continue to believe XERZUVE is the key to unlocking the blockbuster potential of PPD, enabling us to help many women suffering from this devastating disease. And we look forward to sharing more updates on our launch progress in the coming quarters.

Speaker 4

Moving to our clinical stage pipeline, we recently announced data from our Phase 2 kinetics tube study in essential tremor, as I highlighted previously. We also continue to progress our clinical development program for dalcitamdar, our wholly owned NMDA receptor positive allosteric modulator or PAM formerly known as SAGE-seven eighteen. In June, we reported results from our Phase 2 surveyor study of dals and Amdur, which reinforces the cognitive impact of Huntington's disease or HD a historically under recognized aspect of HD for which there are no approved treatments. As you may have seen in our press release this afternoon, based on our review of relevant data, we have decided to adjust the primary endpoint in our ongoing placebo controlled dimension study in HD from the HDCAD composite to the symbol digit modalities test or STMT, one of the cognitive tests included in the composite. Laura will provide additional context and information for this change.

Speaker 4

Both the Phase 2 LIGHT WAVE and DIMENSION studies remain on track to read out late 2024. Additionally, we remain encouraged about the potential of our earlier stage pipeline, including SAGE-three nineteen and SAGE-four twenty one and believe the important development opportunities as we explore areas of unmet need in brain health. With that, I'll turn the call over to Chris to provide additional context on the ongoing commercialization of XERZUVE in postpartum depression. Chris?

Speaker 5

Thanks, Barry. We've made important progress in the launch of XERZUVE over the Q2, and I'm excited to share details on our recent achievements and ongoing initiatives. Since the launch of XERZUVE in December of 2023, Sage and Biogen have been focused on our shared goal of establishing XERZUVE as the first line therapy and standard of care for women with PPD. Our commercialization efforts have enabled us to exceed expectations and we look forward to the potential to further maximizing patient impact over the coming quarters. First, I'll review key performance metrics, which highlight the strong progress made throughout the 2nd quarter.

Speaker 5

XERZUVE generated $14,800,000 in total revenue in the Q2 of 2024, of which Sage recognized $7,400,000 in collaboration revenue. In the Q2, there were approximately 2,000 prescriptions written with more than 1400 prescriptions filled and delivered to patients. The number of shipments delivered to patients nearly doubled compared to the Q1. We are pleased to see our ongoing commercialization efforts positively impacting demand for XERZUVE and PPD and feel these figures are reflective of the interest and enthusiasm we're seeing from HCPs and women with PPD for this important medication. As a reminder, while we believe the number of prescriptions was an important early indicator, next quarter and going forward, we plan to focus on shipments and collaboration revenue.

Speaker 5

Turning to prescriber trends, we are seeing XERZUVE prescribed across a breadth of HCPs who treat PPD, with more than 70% of prescriptions in the 2nd quarter coming from OBGYNs, followed by psychiatrists and DCPs. As we've underscored, OBGYNs are critical to this launch and the ongoing success of Zuvi for women with PPD as these HCPs are on the frontline of peripartum care and therefore the earliest and best place to screen, diagnose and treat. When you reflect on our performance over the 1st and second quarter, including revenue, prescriptions, shipments and prescribing patterns, it's clear that there is a fundamental change in the way PPD is now thought about and treated. And we believe that XERZUVE is squarely at the center of this paradigm shift. I'll take a moment now to highlight a few notable signs that reflect the changes we are seeing unfold in the treatment of women with PPD.

Speaker 5

As Barry noted earlier, we are beginning to see changes in the PPD treatment paradigm, particularly among OBGYNs. Notably, early data suggests that OBGYNs who have prescribed XERZUVE are treating significantly more patients with PPD than they were previously based on written prescriptions for all medications. We see this as a clear uptick in OBGYN's increasing screening, diagnosis and treatment. In terms of other trends, adoption of XERZUVE as a treatment for women with PPD continues to increase. The total number of new and repeat XERZUVE prescribers continue to grow in Q2.

Speaker 5

It's encouraging to see that more than 30% of HCPs have now written multiple prescriptions, indicating both interest in using XERZUVE and satisfaction with the impact it can have on a woman with PPD. Notably, we are seeing that the majority of XERZUVA patients are receiving XERZUVA as their first treatment for PPD after giving birth. The prescribing trends I've described are what we would expect to see based on our promotional and educational efforts and suggest that these efforts are effectively informing stakeholders about XERZUVA. In summary, the data in totality suggests that a movement is occurring in PPD care, particularly OBGYNs who are moving from the old model of suspecting depression and referring patients to a psychiatrist to now screening, diagnosing and treating women with PPD with ZERZUVE when they present with symptoms. This is much needed progress in the ongoing effort to ensure that women with PPD get the treatment that they need.

Speaker 5

As I noted previously, this is a promotionally sensitive market, which reinforces the importance of our field force and omni channel efforts, which are intended to build awareness, underscore urgency to treat and inspire excitement in XERZUVE as a new treatment option for women diagnosed with PPD. The majority of prescriptions for XERZUVE are coming from HCPs who have been reached either through personal or digital promotion. To that end, we remain active in our educational efforts across all channels engage stakeholders with the goal of making XERZUVE top of mind as a first choice treatment for women with PPD. We recently launched our full consumer website, which includes information and resources for people experiencing PPD symptoms and provides a link to an independent leading telepsychiatry practice. Women experiencing PPD will have the potential through this platform to get matched with and see a psychiatrist.

Speaker 5

We are also making progress on our social media platforms with more to come in the second half of twenty twenty four. Turning to access, in the lead up to the launch, we stated that rapid and affordable access to XERZUVE in the treatment of women with PPD, regardless of coverage type was paramount to successful commercialization. To that end, Sage and Biogen have been proactively focused on the shared goal of helping women who are prescribed ZERZUFA for PPD receive the medication as quickly as possible regardless of coverage type. Our conversations with payers have been highly productive. We are encouraged to see the majority of plans finalizing policies that provide women with PPD first line access to XERZUVA without onerous prior authorizations or step edits.

Speaker 5

Today, we have approximately 80% of commercial lives covered for ZERZUVE and PPD, with the majority having no step therapy or complex prior authorizations, including 2 or 3 national PBMs who developed coverage policies for ZERZUVE in the disease. We continue to progress conversations with the 3rd national PBM. With respect to Medicaid, reviews are ongoing with additional states, including several of the largest states, completing reviews during the Q2 of 2024. While Medicaid policies continue to develop, most states that have made a decision to date are covering XERZUVA for women with PPD in line with our expectations of no step therapy and no complex prior authorizations. The majority of Medicaid coverage decisions have already been made with the remainder expected to occur in the second half of twenty twenty four.

Speaker 5

This type of progress with respect to coverage is not typical for new product launches. We attribute this payer progress to the profound need for women with PPD to receive treatment, the value proposition of XERZUVA and the willingness of Sage and Biogen to work closely with payers to rapidly make robust access a reality in PPD. To that end, we continue to work to enable affordable and equitable access to ZERZUVA for eligible women with PPD through our patient support and financial assistance programs. While the majority of shipments were covered by commercial and government payers in the Q2, we did see an uptick in our free goods programs. Our free goods program is intended to help accelerate access to XERZUBA for eligible women with PPD who are prescribed treatment.

Speaker 5

As more payers come online and as the specialty pharmacy process is further optimized, we expect to see the use of free goods decrease. In summary, we remain highly encouraged by and proud of the launch progress made to date with XERZUVA. Is a fundamental change occurring with respect to how PPD is thought about, diagnosed and treated. We are highly committed to helping women living with PPD and engaging the HCPs who treat them. As Barry noted, Sage plans to strategically expand our sales force in early Q4, which we believe will help accelerate commercial momentum by broadening our reach and increasing the frequency of our interactions with HCPs who treat PPD.

Speaker 5

I look forward to sharing additional updates on launch progress in the coming quarters. With that, I will now turn it over to Laura for a more detailed discussion of our recent development activities. Laura?

Speaker 3

Thanks, Chris, and good afternoon, everyone. Before I discuss the pipeline, I'd like to share my excitement to be part of this pivotal moment in maternal health as we make progress with the launch of ZSUVY enabling critical access for women with PPD. I'll begin with SelzmannMdoor, our wholly owned 1st in class NMDA receptor positive allosteric modulator or PAM as a potential oral therapy for cognitive impairment associated with neurodegenerative diseases, including cognitive impairment in Huntington's disease or HD, which is our lead indication and in Alzheimer's disease or AD. Disorders with cognitive impairment such as HD and AD present significant challenges to patients worldwide by limiting their ability to perform activities of daily living and ultimately their ability to remain independent. The incidence and prevalence of these disorders are increasing and addressing this unmet need remains crucial for improving patient well-being.

Speaker 3

In June, we reported data from the Phase 2 surveyor study, a small learning study designed to help inform our delta number program in HD, including the ongoing DIMENSION study. As previously reported, the surveyor study suggested the potential for directionally positive signals in a number of individual component tests of the HD cap composite and in some functional assessments. Based on the data from Surveyor and other relevant information, we have made the decision to adjust their primary endpoint in the DIMENSION study from the HD CAP composite to the symbol digit modalities test or SDMT. The SDMT is one of the assessments included in the HD CAP composite and our analysis of the surveyor data suggested the potential for a directionally positive signal. The SVMT is considered a reliable measure of executive function and researchers, clinicians and regulators have some familiarity with the test.

Speaker 3

The DRS independent scale will remain the key secondary endpoint. Other secondary endpoints will include additional measures of cognition, function and safety. We continue to expect to report top line data from the DIMENSION study in late 2024, And we will continue to work closely with the Huntington's community in this important area of patient need. We are also running the LIGHT WAVE study, a double blind placebo controlled Phase 2 study of 1,000 mDOR in people with mild cognitive impairment and mild dementia due to AD. The primary endpoint of the LIGHTWEIGHT study is the change from baseline to day 84 in the Wechsler Adult Intelligence Scale 4 or WAIS-four coding test.

Speaker 3

The WAIS-four coding test is an assessment of executive function that has a similar design as the SDMT. We continue to expect to report top line data from this study in late 2024. SAGE-three twenty four is an investigational GABA A receptor PAM that is being developed in collaboration with Biogen. Last week, we reported top line data from the Phase 2 KineticQ study of SAGE-three twenty four in essential tremor. The Kinetic Q study did not demonstrate a statistically significant dose response relationship and change from baseline to day 91 based on the primary endpoint TETRIS PS item 4 upper limb total score.

Speaker 3

In addition, there were no statistically significant differences demonstrated for any dose of SAGE-three twenty four versus placebo and the change from baseline to day 91 on the TETRIS performance scale item 4 total score or the TETRIS ADL composite score. Given these results, Sage and Biogen do not plan to conduct further clinical development of SAGE-three twenty four in essential tremor and we will close the ongoing open label safety study of SAGE-three twenty four. We are deeply disappointed by the results of the Kinetic2 study, and we are evaluating next steps if any for other potential indications. We are grateful to the essential tremor community, researchers, study participants, investigators and site staff for their contributions to this study. I am also deeply appreciative of our incredibly talented and committed teams who have worked tirelessly to support our efforts in ET.

Speaker 3

Lastly, I'd like to reiterate our excitement for our early stage pipeline, including SAGE-three nineteen and extrasynaptic GABA A receptor PAM and SAGE-four twenty one and NMDA receptor PAM. We look forward to sharing more about these programs as they progress. Now I'll turn the call over for a review of our financials. Kimi?

Speaker 2

Thanks, Laura. Our financial results for the Q2 of 2024 are detailed in our press release issued this afternoon. Before discussing some of our financial results from the quarter, I would like to add my enthusiasm for the ZERZUVE launch. We're building a new market opportunity in an area where innovation was long overdue and as a result have accelerated a paradigm shift in the treatment of PPD. The commercialization of XERZUVA remains a top priority as seek to expand access and build momentum.

Speaker 2

Beyond XERZUVE, we plan to continue to make decisions on strategic pipeline investments supported by data and we look forward to the additional data readouts expected later in the year. I'll now turn to the financial. Today, we announced collaboration revenue from the sales of ZERZUVE of $7,400,000 in the 2nd quarter, representing 50% of the net revenues buyers and records for ZERZUVE. This represents a 19% revenue growth from Q1 to Q2. The growth in total underlying demand grew by greater than 95% from Q1 to Q2 as measured by the number of units shipped to commercial, government and functionally uninsured patients.

Speaker 2

A key factor impacting revenue in the 2nd quarter was wholesalers bringing down initial inventory levels, which is typical as product launches progress. In the second quarter, we saw an average of 5.5 weeks of inventory as compared to an average of 8 weeks of inventory in the Q1 of 2024. Our target inventory levels are in the 3.5 to 4 week range. Definitely, we saw a slightly higher use of free goods relative to the Q1. Although as Chris detailed, we expect the use of these programs to decrease as additional payer coverage comes online in the second half of the year and as the SP process is further optimized.

Speaker 2

Turning to operating expenses. R and D expenses were $62,600,000 in the Q2 of 2024. SG and A expenses were $56,000,000 in the Q2 of 2024. The decrease in both R and D and SG and A expenses compared to the Q2 of last year was primarily related to the Q3 2023 restructuring, which reduced headcount and decreased spend on the early stage pipeline, duranolone clinical development, manufacturing overhead and technology. As we previously stated, we expect operating expenses to decrease in 2024 relative to 2023.

Speaker 2

We are already seeing this decrease in the first half of twenty twenty four. Our net loss for the Q2 of 2024 was $102,900,000 and we ended the Q2 of 2024 with cash, cash equivalents and marketable securities of approximately $647,000,000 With increased investment in the launch of XERZUVA, as well as ongoing clinical readouts expected in 2024, we will not be making changes to our runway guidance. With that, we are reaffirming that based on our current operating plan, we anticipate cash, cash equivalents and marketable securities, anticipated funding from ongoing collaborations and estimated revenues will support operations into 2026. Before I turn the call over for Q and A, I'd like to emphasize our ongoing commitment to advancing our mission of promoting better brain health for everyone. We look forward to sharing updates in the coming quarters.

Speaker 2

I'll now turn it over to Ashley to handle Q and A with the operator. Ashley?

Speaker 1

Thanks, Kimi. I'll ask that you limit yourself to one question. If you have an additional question, feel free to return to the queue. Now, I'll turn it over to the operator to handle Q and A. Operator?

Operator

Thank you. And the first question comes from Salveen Richter with Goldman Sachs.

Speaker 3

Good afternoon. Thank you for taking my question. Could you just speak to, with regard to ZERVE, the difference that we're seeing in sales versus shipments or demand? And then also how the free drug dynamics play a role in this? Thank you.

Speaker 4

Yes, Salveen. Thanks for the interest. I'll start and I'll ask Chris to comment. So as we commented, we're highly encouraged by the launch dynamic to date, both in terms of prescription shipments and revenue. And there's certainly some temporality to how each of those flow and Chris will cover that.

Speaker 4

The other comment I'd highlight is that we're absolutely seeing this very important paradigm shift, particularly among OB GYNs from the behavior of suspect depression refer to screen diagnose and treat. So all dynamics and growth metrics are very, very strong. Chris, you want to talk about some of the temporal differences?

Speaker 5

Yes. So with respect to the shipment process, in effect, what the shipment here is, is it's the measure of when the prescription goes to the specialty pharmacy, it's the movement of the product from the specialty pharmacy into the hands of the patient. And as Barry noted, we saw encouraging performance in and around shipments over the course of the second quarter with a 95% increase. So more than 1400 shipments over the course of the Q1 over the second quarter, again, as I said, a 95% increase over that time, reflective of the strong demand that we saw from OBGYNs, psychiatrists and primary care physicians. That's different than the revenue that we reported.

Speaker 5

And I think Kimi hit it. With regard to the revenue that we reported over the course of the second quarter, a key factor impacting revenue in the Q2 were wholesalers bringing down inventory levels to what we would see as being where you would be in the Q2 versus the 1st year. And Kimi actually hit it, it was 5.5 weeks of inventory as compared to an average of 8 weeks Q2 versus the Q1. So that in effect is the difference that we're seeing here. But again, strong performance over the course of the quarter with respect to prescriptions and shipments, as we noted in our opening remarks.

Speaker 5

Now in and around free goods, we in Barry's comments mentioned that the majority of shipments that we saw were covered by commercial and government payers over the course of the second quarter and that we did see an uptick in terms of free goods. Free goods are a part of our strategy. We want to ensure that if there's ever a prescription that needs to speed into the hands of mothers with PVD that we're able to do that rapidly. And the uptick that we saw in the Q2 was a byproduct of making sure that as we continue to optimize the SP to patient model, women with PPD can get the medication and get it rapidly.

Speaker 4

Thanks, Salveen.

Operator

And the next question will come from Anupam Rama with JPMorgan.

Speaker 6

Hey guys, thanks so much for taking the question.

Speaker 7

Just a quick question on physician dynamics here. How are you tracking relative to your initial expectations for ZERZUVA in each of the physician segments? It seems like OBGYN is kind of leading the charge here, but how are you tracking relative to what you first thought? Thanks so much.

Speaker 4

Yes, Anupam, thanks. And we're highly encouraged as well. Thank you for that. So the dynamics you're seeing is actually a lot very much what we expected. As you know, we've been a PPD company for quite a while, and OB GYNs are the frontline of where disease is seen and diagnosed.

Speaker 4

Just like any disease, you want to pick the disease up at the point of getting the disease and OBGYNs are the right part. I mentioned this earlier to Salveen's question, but the dynamic previously because of the lack of tools that OB GYNs had was to suspect depression, but refer out to either a psychiatrist or primary care. As we've said previously, we think ZERSUVA is the key to unlock the blockbuster potential PPD helping men and women suffering. So now OBGYNs have a tool in their armamentarium that fits their treatment paradigm. So we're seeing this major dynamic now of screening, diagnosing and treating while mom is under the care of the OBGYN.

Speaker 4

That's exactly what we thought. Now it's encouraging not only to see OBGYNs, but also psych and PCP prescribed. Those might be other kind of patient journeys, other someone previously under care or someone whose symptoms really don't worsen or develop until after they're done with their OBQN. So, it's good to see prescriptions coming from all those patient group, all the healthcare provider groups.

Speaker 6

Thanks so much for taking the question.

Speaker 4

Thanks, Anupam.

Operator

And our next question will come from Yasmeen Rahimi with Piper Sandler.

Speaker 8

Good afternoon, team and thank you so much for all the color. I guess, let's do you think the PPD market is like an OBGYN market that really needs to be unlocked? And if that's the case, could you quantify how many out of the target OBGYNs have been reached out currently in the last few months? Or do you think it really to unlock the PPD opportunity, one has to think about expansion into sort of primary care physicians or the psychiatric division. So I would love to kind of think about like what is the perfect audience to introduce this product to patients early on?

Speaker 8

And I'll jump back into the queue.

Speaker 4

Thanks, guys. I think that was like 6 questions at once, so congratulations for that.

Operator

Oh, sorry.

Speaker 4

Look, you nailed the dynamic here. Let me comment on it and I'll ask Chris to provide some further color. So if we step back and think of any disease course, of any disease, you want to pick the disease up closest to the source And the healthcare providers in the case of PPD are OBGYNs either in consultation with the patient for a prior history or during pregnancy or in the first several weeks after giving birth. That's exactly where PPD starts mostly. Of course, it can worsen in the course of months after birth, but that's generally where it starts.

Speaker 4

So the OBGYNs are the right healthcare provider group to pick it up. It's wonderful that ACOG has guidelines and this group is wanting to own the disease of PPD. Now when we talk to psychiatrists, they of course are picking up some of these mothers as well. But they actually believe that having a standard operating procedure with ZERZUVE for PPD relieves them of a patient group that another healthcare provider can prescribe and diagnose and prescribe. So they're happy about pushing this to OBGYNs.

Speaker 4

Now to your point, when we launched, we thought big about the PPD opportunity, but we started at a focus scale and are scaling. Now that we've seen such great success, particularly among OB GYNs, it's time to increase the spend not just for our personal promotion, non personal promotion and marketing, but to now expand our field force, so we can continue to unlock the OBGYN marketplace. And as you commented, we're expanding the sales force, something that Sage is paying for in 2024. We haven't made any decisions in 2025, but that's how we're moving forward. Chris, any additional color to add?

Speaker 5

So Barry, you mentioned that what we're seeing here is a paradigm shift starting to occur. In the OBGYN community, it's moving from suspect and refer to screen diagnose and treat. And one of the really interesting things that we're seeing even at this early stage of the launch is the physicians who we reach who begin to prescribe XERZUVA begin to diagnose more patients at the practice level. So fundamentally what that's telling us is not only is XERZUVE doing its job with respect to the efficacy and safety profile of the medication and delivering a degree of satisfaction to those clinicians, it's causing them to go back and reflect again on patients that they're seeing on a regular basis and to really probe in and around the signs and symptoms of PPD and to recognize more women in the practice with PPD who may be viable for ZERZUVA. And that's a very exciting thing for the treatment of PPD in the near term and over the long run.

Speaker 8

Thank you so much.

Speaker 4

Thanks, Yaz.

Operator

And the next question will come from Paul Matteis with Stifel.

Speaker 9

Hey, thanks so much.

Speaker 5

I was wondering if you could explain

Speaker 9

a little bit more thought behind the change in the Huntington endpoint, your level of confidence in the validity of this subcomponent of HDCAB whether it would be acceptable to the FDA for evidence of benefit on cognition? Thank you.

Speaker 4

Yes, Paul. Thanks, Chris. I'll start and I'll turn it over to Laura. So you're talking about the Dallas and Emdoor that we are studying for cognitive improvement, specifically executive function learning and memory in Huntington's and Alzheimer's. As we talked about, we did a learning study and we learned and that learning is what we're applying to dementia.

Speaker 4

But Laura, why don't you take us through that?

Speaker 3

Yes. Sure. So thanks for the question, Paul. So as we look through the data from Surveyor, we announced last month that we saw small numerical differences between dosingmbdor and placebo on the HDCAP composite score at day 28. But we also saw in other specified analyses a number of directionally positive signals for some of the individual component tests of the HD test.

Speaker 3

And so based on that information and based on consultations with experts and publicly available information within the HD community, we made the decision to adjust the endpoint to the SDMT. Now the SDMT is actually a widely used clinical assessment of cognition in Huntington's disease and in other disorders. And we believe it is a reliable and standardized measure of executive function. It's one of the assessments of BHCb composite as I mentioned. And because we've seen positive data, directionally positive data in the surveyor study, we decided to choose that for the primary endpoint.

Speaker 3

In addition to the SDMT, we continue to evaluate the HTRS independent scale as the key secondary and other secondary endpoints include measures of cognition, function and safety.

Speaker 9

Thank you.

Speaker 4

Thanks, Paul. And we look forward to reporting these data out later this year.

Operator

And the next question will come from Jay Olson with Oppenheimer.

Speaker 10

Hey, thanks for providing this update and for taking the question. Can you talk about how you plan to increase the diagnosis rate for PPD and then expand uptake of ZERSUVY amongst psychiatrists and PCPs? For example, are you planning to invest in more resources such as additional sales reps? Thank you.

Speaker 4

Jay, thanks, Chris. I'll start and then I'll ask Chris to comment on the dynamic. So every healthcare provider that can help mom and prescribe Zuzu is important for us. But as we talked about on the call, the really key interception point of the disease is the OBGYN. So, the major increase in the non personal marketing as well as the additional sales force that we talked about will be aimed at OBGYN.

Speaker 4

Now of course, if a mom gets through that whole period and for example, her symptoms worsen 4 or 5 months after giving birth, which can happen, that's where we want psych or primary care to intercept. So we are applying resources there, but a big part of the improvement in the screening and diagnosis will come among OB GYNs. And as Chris already said, this paradigm shift of suspecting depression referring out because they didn't have the tools to screening, which most states require, diagnose and treat is the paradigm shift we're seeing. Chris, anything to add?

Speaker 5

What I would add, Barry, and I think you noted it in your opening remarks, but it's really worth coming back to is the ACOG guidelines play an important role in increased screening and diagnosis subsequently treatment. And it's a tailwind. It's a clear tailwind when we're out and engaged with OBGYNs. They're aware of the guidelines. And I think that's going to have an impact here.

Speaker 5

I think as you noted in and around what we do with psychiatrists and primary care physicians, there's an opportunity there for us with both personal and non personal promotion to broaden our reach and deepen our frequency with the right education around the need to screen and diagnose as well as to treat when you have patients that are the right patient, a woman with PPD for XERZUVA. All of that's going on right now and we're scaling as we've seen signs of success.

Speaker 4

Just to kind of close it out, Jay, with that question. And Chris comment on this, but let me make a point of emphasis. What we're seeing is when a healthcare provider, primarily OBGYN, prescribes XERZUVE for the first time, we're seeing them increase the number of women they're diagnosing in general in the practice. We get that from broader treatment. So it's not always ZERZUVE, but generally it is.

Speaker 4

So we're seeing them actually pick up this now and screen and diagnose and own it rather than pass it on. And that paradigm shift is we got the data to support that and it's exciting to see.

Operator

And the next question will come from Ritu Baral with TD Cowen.

Speaker 11

Hi, guys. Thanks for taking the question and apologies for the noise at the airport gate here. I wanted to ask about the 600 prescriptions that was the difference between the 2,000 prescriptions and the 1400 shipped prescriptions. Were free drug included were the free drug prescriptions included in that 600? Were those all insurance denials?

Speaker 11

And if I could squeeze one more in there, you're hiring up. 1st of all, can you tell us how many reps you'll be increasing the sales force by? And was that informed at all by the ACOG conference that just happened? Thanks.

Speaker 4

Yes, Ritu, a couple of different questions there. So as we talked about previously, and again, Chris can comment, we're highly encouraged by the growth of prescription shipments and revenue across all dimensions, we have a successful and growing launch. There are temporal differences because of when the quarter cuts off between prescriptions and shipments. So we report out prescriptions, we're reporting out all the prescriptions that we're seeing, whether they become paid shipments or free shipments. They're still there.

Speaker 4

The shipments are all the shipments, both paid and free shipments and then the revenue is the revenue. Kimi can comment after I'm done on how the revenue flows. So those are the totality of numbers. We really aren't seeing a great deal of coverage denial. In the free goods, which did click up, some of those free goods are functioning on insured patients and some are patients where the paperwork didn't fully get set out and we have a pretty liberal free goods program.

Speaker 4

So rather than delaying drug to mom, as Chris commented earlier, they get shipped to free good and that mom gets better and the healthcare providers prescriptions filled. So we think that strategically is the right thing to do. As coverage comes online and as the SP processes continue to get better and they're getting better month to month, we see the free goods falling off 3rd, Q4 into next year. There will always be some, of course, because they're functionally uninsured patients. But to help, maybe Kimi, you could talk about how the revenues recorded and where that comes from?

Speaker 2

Sure. Sure. Thanks, Barry. As a reminder, revenue is booked by when Biogen actually ships XERZUVE to wholesale distributors. So again, that's different than the shipments that we talked about, which are shipments to patients.

Speaker 2

So that's the 1400 units we talked about. And it's different from the prescriptions written, right? So that's the 2,000 prescriptions that we talk about. So just wanted to make sure people get grounded on revenue. And again, I'll just say again, the key factor we saw on impacting revenue this quarter was that wholesalers were starting to bring down initial inventory levels.

Speaker 2

It's typical as product launches progress and we did see that decrease in the number of weeks of inventory outstanding.

Speaker 4

Right. And then just to your second part of your one question question, the expansion. We're not commenting on numbers. What we said is that we see a tremendous opportunity to expand marketing, non personal and personal promotion. So at Sage's expense in the Q4, we're going to expand our field force in strategic areas.

Speaker 4

We think it makes a lot of sense given the coverage and the success we're seeing. And particularly, again, because once an OBGYN writes their Zuvi, they write another and another and another and they're increasing the practice, the amount of PPD that they're covering. So it all makes sense to us. We're not talking specific numbers, however.

Speaker 11

Got it. Thank you.

Speaker 4

Thanks for you too. Safe flight.

Operator

And we'll take a question from Brian Abrahams with RBC Capital Markets.

Speaker 12

Hey there, good afternoon. Thanks for taking my question. Maybe back to Delsamendur. I'm curious what we should be thinking about as a potential clinically meaningful change on this SDMT scale, when dimension reads out later this year. And do you have a sense to the mechanistic rationale as to why this scale might more sensitively pick up on a drug effect in this population?

Speaker 12

Thanks.

Speaker 4

Yes, Lee, Brian, thanks for the question. And Dallas and AmDor. Laura can start with the endpoint on what we're looking for and then Mike's in the room. May can talk about the mechanistic rationale, which is actually quite strong. But Laura, you want to start?

Speaker 3

Sure. So for the FEMT, there are a right of ways to try to understand what the clinically meaningful change is. One is to look into the literature where a change of about 4 points seems to be adequate across a number of disorders. The second way is actually look within our own data and we certainly will do that when we have the surveyor and dimension data sets together and we use classic psychometric analysis to identify the clinically meaningful change.

Speaker 10

Yes. Michael, it's Abbot. Yes. And Brian, thanks for the question on the mechanism. I mean, I think first starting with the SDMT, I think it's important to mention that it's a test that looks at a variety of different domains within executive functions such as sustained attention, processing speed, visual scanning and psychomotor speed.

Speaker 10

And then when you think about the brain circuits that are involved in that, it's classically those areas of the striatum frontal cortex that are very much damaged in HD patients or where you see deficits there. And then I think the other part to add is that if you go back to some of our original thesis when we were talking about 24 hours hydroxycholesterol as the endogenous ligand correlating with changes on cognitive tests, one of those tests that we've looked at is the SDMT in that patient population. So I think both from the endogenous modulation point of view as well as from the brain circuits that are impacted in Huntington's, we think there's a really tight correlation between the SDMT test as and those domains of cognition.

Speaker 12

Super helpful. Thank you.

Speaker 4

Thanks, Brian.

Operator

And we'll take a question from Laura Chico with Wedbush Securities.

Speaker 13

Hey, good afternoon guys. I'm going to just ask one and I think that's going to be how has the timing evolved for when a physician writes is their Zubay script to the point of delivery? And I'm just trying to understand if you're at your target goal yet in terms of the pace to get medicine to the patients yet. Thanks very much.

Speaker 4

Hey, Laura, thanks for the question and thanks for asking one question. We appreciate it. So you're highlighting a very important point. A major value proposition of ZERZUVE is the rapidity of onset and of course it's only a 14 day course, which is also very helpful. So that's very helpful in healthcare providers making decisions to prescribe and mom saying, yes, I want to take a drug because before ZERZUBA, many moms say, I don't want to take anything.

Speaker 4

I'm going to try to suffer through this. So it's really created this major, major paradigm shift. We won't be satisfied until moms get the drug as quickly as possible. So this is put this in the area of continuous improvement. There are many moms that after getting diagnosed get the drug in 2 to 3 days delivered to their home.

Speaker 4

Some take longer. So we want to increase the number that get there in 2 to 3 days shorten the median time for everybody. And we won't be satisfied until the time keeps coming down. So we're doing well. I classify as doing well, but always can get better.

Speaker 13

Thanks, Ray.

Speaker 4

Thanks, Laura.

Operator

And moving on to David Hoang with Citigroup.

Speaker 9

Hi there. Thanks for taking the question. I just wanted to ask a little bit about your perceived perception of the level of commitment to the ZERSUVA launch on the Biogen side and whether they would be expanding the sales force in concert with your planned expansion? And then post expansion, should we anticipate any type of acceleration or inflection in scripts, shipments and other metrics?

Speaker 4

Thanks. Hey, David. Thanks. Let me start with the second part of your 2 part question and then turn it over to Chris for Bajan. So the reason to expand is to have better reach and frequency in our target audience.

Speaker 4

So yes, we should see a profound uptick next year in because of that expansion. So the answer to that is yes. Chris, do you want to talk about sort of what we're doing versus Biogen and commitment?

Speaker 5

Yes. Thanks, Barry. So Sage is investing and expanding our field force in Q4 as you noted in your opening remarks. Now while we're doing this, Biogen is working with their existing resources to pilot a few approaches that will inform any additional investments from their perspective. We believe we have a strong business case to support expansion and collectively between the two organizations it all supports our shared mission of really helping as many women with PPD as possible as quickly as possible.

Operator

And our next question will come from Tazeen Ahmad with Bank of America.

Speaker 14

Hi, guys. Thanks so much for taking my question. Mine is also on expenses. Can you just maybe level set for us how we should think about R and D for the rest of the year? You did have a nice decrease in the R and D line item at least this quarter.

Speaker 14

How should we be thinking about that for the rest of the year and also taking into account your expectation for the 4Q sales force hires? Thanks.

Speaker 4

Yes. I'll start and then Kimi can comment on some more specifics. So yes, Tazeen, as we highlighted, the restructuring was meant to bring costs in R and D and SG and A down and we saw that this quarter, which we're happy about and you'll continue to see savings. But Kim, you want to talk more color there?

Speaker 2

Yes, sure. As Sage always does, we try to focus on being very disciplined and focused about how we do our investing. Last year, as Barry mentioned, we made several key strategic cost savings initiatives that included the pipeline prioritization and workforce reduction. We said that both R and D and SG and A were both going to decrease into 2024 And we've been seeing that obviously you saw that in the first half of twenty twenty four. And we did reaffirm our cash guidance of cash runway into 2026.

Operator

And we'll take a question from George Farmer with Scotiabank.

Speaker 15

Hi, good afternoon. I was intrigued by your comments related to the new law in Louisiana, which is basically mandating that all women with PPD get coverage. Was that in any way related to lobbying efforts by you and or Biogen? And if so, was that continuing throughout other states?

Speaker 4

Yes, George, great question. So as Chris highlighted, on the access front in both commercial and government is going incredibly well. Whether you're in a blue office or red office and I was down in DC couple of weeks ago, everybody cares about maternal health and everybody cares about brain health or mental health. So we're at the intersection of 2 unfortunately growing issues that people care about. There were several people in Louisiana, which has not had a great history of maternal health, very, very interested in making sure that if a prescription is written, it's delivered directly to mom.

Speaker 4

So that was a direct effort of our people in government affairs lobbying and big shout out to them. What's going on with the tailwinds of this launch, whether it's the coverage or what's happening state by state and the media, none of this is by accident. We actually have a solution for an issue that many it's bothering many people. So it's garnered the interest across all fronts and that will continue. We're seeing really good Medicaid coverage at the state.

Speaker 4

And I think the pharmacoeconomics at a state level support that if a mom is under diagnosed or not treated properly, she'll never get off Medicaid and that child will have development issues probably and might become a Medicaid child. So we're really seeing a strong dynamic and what we're seeing in Louisiana, we'll likely see in other states. Great. Thanks, Barry. Thanks, George.

Operator

And we'll take a question from Vikram Parugo with Morgan Stanley.

Speaker 5

Hi. Thanks for taking my question. We had one on SAGE-three twenty four. So you've obviously mentioned that you're winding down in ET, but are there other indications you're exploring the molecule for? And if so, what could those indications be?

Speaker 5

And how are you in Biogen thinking about next steps for this program? Thanks.

Speaker 4

Thanks. Laurie, you want to take that?

Speaker 3

Yes, sure. So as we mentioned in the press release and in our prepared remarks, we and Biogen together are evaluating potential next steps for SAGE-three twenty four, if any, and we will certainly relay those decisions when they're made.

Operator

And the next question will come from Sumant Kulkarni with Canaccord.

Speaker 16

Good afternoon. Thanks for taking our question, which I guess is a bit outside the box. With $647,000,000 in cash and equivalents, at what point do you think it might make sense to shop for outside assets to bring in so you could supplement Dazan Amdar and what recently happened with 3 24?

Speaker 4

Yes, Timna, thanks for that question. So we commented about this previously. We're intellectually curious. So we've got teams scanning what's going on out there and we are examining a lot of potential opportunities. If we see something that we're highly intrigued by and that fits into our strategic focus, we'd certainly make a move on that.

Speaker 4

Nothing has happened there to date. But that's one of the places we could go and we've talked about that before. Nothing active to report obviously right now, but it's not it's on our radar screen.

Speaker 6

Thanks.

Operator

And the next question will come from Oi Ihir with Mizuho.

Speaker 7

Hey guys, thanks for taking my question. It seems like you made significant progress on coverage, particularly at the state level. Just maybe help us understand in the second half, how do you see the curve launch? What kind of shape do you think we should expect? Thanks.

Speaker 4

Thanks for the question. So to your question, we're seeing strong coverage both on the government and the commercial side as we reported 80% of commercial lives are covered. And importantly, the coverage does not impose step edits or onerous prior offs. So really encouraged by what we're seeing right now and truly have a lot of momentum. As we talked about, we believe given the success we're seeing particularly with OBGYNs who are writing the vast majority of scripts and now are growing their practice of PPD as we highlighted that increasing our sales force there makes a lot of sense.

Speaker 4

We're doing that in the Q4 and we believe that the work that we at Sage are doing should see an uptick particularly in the territories where we're adding resources into next year. So we do see an uptick coming with the added resources and further success.

Speaker 7

Thanks.

Operator

And the next question will come from Douglas Tsao with H. C. Wainwright.

Speaker 2

Hi, good afternoon. Thanks for taking the questions. So just on das and mTOR and the change on endpoints, I guess I'm just curious, have you consulted with the FDA in terms of the change? And I think it was asked, but I'm not sure you fully talked about, I mean, just the potential implications for filing based on this data set given the shift in endpoints?

Speaker 4

Yes. Hey, Doug. Yes, thanks for the question. So look, we're highly we're looking forward to the readouts for dials and mDOR. What we talked about, we've

Speaker 10

been talking about this for

Speaker 4

the last couple of years is the reason for the SURVEYER study was both to confirm that as measured by HDCAB, the significant difference in cognition between normal volunteers and Huntington's patients. We saw a significant deficit in cognition in Huntington's. So that confirms the opportunity. It's really important. It's an orphan disease with a big unmet need and there's nothing for these patients.

Speaker 4

So that's really important in terms of benefit risk. Secondly, we said we're going to learn from the surveyor study and apply that dimension. I won't repeat everything that Laura said, but we learned and we're putting SDMT as the primary endpoint as well as other secondary endpoints. It's a large study over 175 patient study, double blind placebo controlled well run study and this is a place where data matter. The data are positive and robust across the primary and other secondary endpoints, then we have a package to move forward with regulators both in the U.

Speaker 4

S. And outside the U. S. And we'll do that. In terms of specific interactions we've had with FDA or other regulators, we don't comment on specific interactions other than say that we've had interactions and we will continue to do so.

Speaker 2

Can I jump on is the HD cab a secondary still?

Speaker 3

So not in its entirety at this point, but we are looking at other components of the HDCAB in the secondary endpoints.

Speaker 4

Yes. Again, Doug, thanks for asking. The idea of HDCAB was we had several hypotheses going into Surveyor and again small study, right, 40 patient study 1 to 1, which aspects of HCCAB would move and what might not move, we learned we used all that learnings to modify dimension. So HD as a composite endpoint no longer makes sense, but some of its components do.

Speaker 2

Okay, great. Thank

Speaker 4

you. Thanks, Doug.

Operator

And we'll take a question from Mark Goodman with Leerink Partners. And again, Mark Goodman, your line is open. Please go ahead with your questions.

Speaker 4

You might have lost Mark.

Speaker 6

We'll go

Operator

ahead and take a question from Joon Lee with Truist Securities.

Speaker 7

Good afternoon. This is awesome on for Joon. Thanks for taking the questions. We're just wondering if you could quantify the ZERZUVE prescriber base growth you saw from 1Q to 2Q and how you expect the prescriber base to continue growing after the sales force expansion? Thank you.

Speaker 4

Yes, Azam, great question. Please send our best to June. I guess I'll start and Chris can provide some more color. So we continue to see prescriber growth. The denominator grows quarter to quarter and we see that continuing for many quarters to come.

Speaker 4

Part of the reason for sales force expansion is to get in front of more prescribers, educate them about XERZUVE PPD because again as we're seeing, once someone learns about and prescribes XERZUVE, they start treating far more PPD patients at the level we want to see it, which is the OBGYN level. So we see that continuing. Chris, any other color?

Speaker 5

What I would add, Barry, and I think we've lost a little bit of sight of this, but it's important to bring back up. The 1 in 8 live births are affected by postpartum depression, that's 500,000 or so women, half are diagnosed and fewer than half are treated. We just talked about 2,000 prescriptions in the Q2. There is a lot of room in this market for us to continue to lean in not just on patients that have severe PPD, but the totality of women that are suffering with PPD and to really make sure that not only are we reaching these women, but with respect to the paradigm shift that we've talked about that there's an opportunity for XERZUVE to continue to be not only a first line treatment, but the standard of care.

Speaker 2

Thank you.

Operator

Thank you. That will conclude the Q and A portion of today's call. With that, I will turn it back over to Mr. Green for closing remarks.

Speaker 4

Thanks, Justin, and thanks everyone for joining us this afternoon to review our results from the Q2 of 2024. As you heard many times, we're highly encouraged by the ongoing launch with XERZUVA and PPD, bolstering our confidence in our ability to positively impact women suffering from PPD. And as you just heard from Chris, we're just scratching the surface of the number of people we can help out there, which is really important. This is a big and growing market and we're going to have major impact for the foreseeable future. We're on track read out data from dals and mTOR program in the second half of this year.

Speaker 4

We believe our strong financial foundation enables us to progress these through critical milestones. And importantly, we believe strongly in the important mission to help people suffering from brain health disorders. That really what motivates us every day. So thank you for the clinicians and patients out there helping. Thanks for those at Sage and Biogen moving this along.

Speaker 4

And thanks everyone and have a great day.

Operator

Thank you. That does conclude today's conference. We do thank you for your

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Earnings Conference Call
Sage Therapeutics Q2 2024
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