Sage Therapeutics, Inc.
Q3 2016 Earnings Call Transcript

Published: 3 Nov 2016

[Operator:]

Good morning and welcome to the SAGE Therapeutics Third Quarter 2016 Financial Results Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the investors and media section of SAGE's website at sagerx.com. This call is the property of SAGE Therapeutics, and the recordings, reproduction or transmission of this call without the express written consent of SAGE Therapeutics is strictly prohibited. Please note that this call is being recorded. I would now like to introduce Paul Cox from SAGE.

[Paul Cox:]

Good morning. Today we issued a press release with our third quarter 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 two of the presentation is the agenda for today's call. We will begin the call with prepared remarks by Dr. Jeff Jonas, Chief Executive Officer, Dr. Steve Kanes, Chief Medical Officer, and Kimi Iguchi, our Chief Financial Officer. Following prepared remarks, we will open the call for a Q&A and we will also be joined by Dr. Al Robichaud, our Chief Scientific Officer. On Slide 3 is our Safe Harbor statement. During today's call, we may make forward-looking statements, including statements about our expectations, Clinical Development and regulatory 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-K 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 welcome to our call this morning everyone. I'd like to start with our next slide, Slide 4. I'd like to begin by our recent progress and a productive year that we've had so far, which included moving our lead compound SAGE-547 into a second indication postpartum depression or PPD with positive Phase 3 data, the advancement of the second compound SAGE-217 through Phase 1 clinical development and the overall expansion of our pipeline. We continue to transform our vision of SAGE from an initial focus in the epilepsy space to a company with a much broader vision, a company with a multiproduct central nervous system product portfolio crossing multiple therapeutic areas, where we think our molecules internally developed by SAGE scientists can add value t patient care. At SAGE we feel we have executed on our distinctive approach to R&D. We've done this by building upon our learnings from the CNS space over the past three decades and by our understanding of science, regulatory pathways, innovative development approaches and the data. We are committed to exploring the potential applications of our novel compounds through deliberate and step wise R&D approaches. As you can see on the next slide, Slide 5, our strategies coupled with our compounds that have distinct activities on GABA NMDA have led to our current portfolio, now focused on exploring three disease areas narrow sight, neurology, mood disorders and movement disorders. As we progress our pipeline we are well-positioned to produce eight important data readouts throughout 2017 and as you can see from the slide if we are successful SAGE has the potential to provide innovative and new therapies to patients across several large central nervous system indications. Building on our clinical advancement and recent positive data, we continue to have important progress in our discussions with regulatory agencies regarding the development of SAGE-547. As many of you know, the FDA recently granted Breakthrough Therapy Designation to SAGE-547 for the treatment of PPD following our positive top-line data that we announced in July. We are currently in discussion with the FDA regarding the design of the development program to support potential approval. Regarding super-refractory status epilepticus or SRSE, we announced this morning that we recently received positive scientific advice from the European Medicines Agency or EMA for our SAGE-547 Phase 3 program in SRSE. This now provides SAGE with a clear regulatory pathway forward in SRSE in the European union and it is important for SAGE as we plan for top-line results from the Phase 3 STATUS trial in SRSE expected in the first half of next year while continuing to lay the groundwork for potential near term commercial launches of SAGE-547. With respect to our SAGE-547 PPD program, we plan to discuss with the European authorities the appropriate development pathway to approval. With the activity demonstrated in our SAGE-547 program and with the completion of a successful Phase I program, we are excited about the potential for our new oral agent SAGE-217. We are no on the cusp of initiating four Phase 2 clinical programs with SAGE-217 our novel GABA compound in both mood and movement disorders. This is an important milestone for SAGE as we are developing SAGE-217 as a first in class extra-synaptic GABAA oral modulator that has been designed to address the pharmacokinetic and other limitations of the first generating compounds of this class. With all that taking place at SAGE, we are now entering a period in our history where we expect to have a large number of important milestones and data readouts over the next 12 plus months, each of which has the potential to further our efforts to development innovative treatments for patients. Much of our focus has been and will continue to be our goal of executing on the clinical trials we plan to conclude in 2017. However, there is a lot more to SAGE science than that. So we're excited to announce we will discuss our research and development programs and strategy in greater detail at our first R&D Day to be held in Boston on December 13. We plan to cover the basic science of the GABA NMDA systems, some new preclinical data involving these mechanisms, the role these systems are believed to play in the indications we are studying, the potential of our molecules as new innovative treatments and our development and regulatory strategies as we look ahead to next year. We look forward to seeing many of you at that event and we will provide further details in upcoming communications. With that, let me turn the call over to Steve to review our clinical programs in greater detail.

[Steve Kanes:]

Thank you, Jeff. First I'd like to say how proud I am of SAGE and our R&D teams for the progress we've made in passing our pipeline. Please turn to Slide six. We are currently advancing our lead compound SAGE-547 in two lead indications, SRSE and PPD, both of which are near term potential commercial opportunities characterized by large unmet needs or limited therapeutic options. SAGE-547 is our proprietary IV formulation of allopregnanolone, a naturally occurring neuroactive steroid that acts as a synaptic and extrasynaptic modulator of the GABA A receptor. GABA is the major inhibitory neurotransmitter in the CNS, and mediates downstream neurologic and bodily functions via activation of GABA receptors. Turning to Slide 7, as a treatment for SRSE SAGE-547 is being developed as an adjunctive therapy in conjunction with underlying third line therapies. SRSE is a rare and life-threatening condition of persistent seizure where treatment regimens normally sufficient in stopping seizure activity have failed and for which there are no approved therapies. We're currently enrolling the STATUS trial, a global Phase 3 randomized, double-blind, placebo-controlled clinical trial evaluating SAGE-547 in SRSE. We expect to enroll up to 140 patients ages two and above in order to obtain an estimated 126 evaluable patients. We anticipate that we will open up to a 150 trial phase in the United States, Canada and Europe for this study. The trial design endpoints and statistical analysis approach are based on an agreement we reached with the FDA under special protocol assessment. We continue to expect top-line results from the STATUS trial in the first half of 2017. In the U.S. SAGE-547 has Orphan Drug and Fast Track designations for SRSE and we believe the results of this Phase 3 clinical trial if successful, could form the basis of a new drug application in the United States. As Jeff discussed earlier we now have a clear regulatory path forward in SRSE in the EU as well. We see the positive scientific advice from the EMA. Based on scientific advice we believe our Phase 3 program as currently designed if successful will be considered sufficient to support a marketing authorization application to the EMA or SRSE. Scientific advice is a procedure offered by the EMA to stakeholders for the clarification of questions arising during the development of the dismal products and focuses on development strategies rather than pre-evaluation of data to support marketing authorization application. Turning to Slide 8 for our SAGE-547 program in PPD. PPD is a depressive disorder impacting women after childbirth. Without sufficient treatment, PPD can have devastating consequences for the mother and for her family which may increase significant functional impairment, depressed mood and associated symptoms of depression. PPD carries and increased risk of suicide which is the leading cause of maternal death following childbirth. There are no therapies specifically approved for PPD and there is a high unmet need for improved pharmacologic treatments. Converging preclinical and clinical evidence implicates deficits in GABAergic neurotransmission in the pathophysiology of depressive disorders including PPD. Naturally occurring allopregnanolone is found in its highest levels in women during the third trimester of pregnancy returning rapidly to normal levels at the time of birth. The gradual increase in allopregnanolone may have considerable effects on GABA A receptors during pregnancy with the rapid drop in allopregnanolone potentially causing GABA resistant mediated new disrution. Based on this hypothesis we believe that Allosteric modulators have the GABA A receptor may have potential for the treatment of postpartum depression. Turning to Slide 9 in July 2016 we announced positive top-line results from study 202A our first multicenter, placebo controlled, double blind, clinical trial of SAGE-547 for the treatment of severe PPD. We have recently presented additional secondary endpoints from this study at The Marcé Society for Perinatal Mental Health biannual scientific meeting showing consistent results with previously reported top-line data. After these results we initiated two additional multicenter, placebo controlled trials one of which is an illustrating study on SAGE-547 in severe PPD patients, Study 202B and the other is studying efficacy of SAGE-547 in moderate PPD patients, Study 202C. Both clinical trials are currently in enrollment. In September, the FDA granted Breakthough Therapy Designation to SAGE-547 for the treatment of PPD based on the results from Study 202A. Breakthough Therapy Designation is intended to offer a potentially expedited development path and review for promising drug candidates which includes increased interaction involving FDA senior managers and more intensive guidance from the FDA. We're currently in discussions with the FDA regarding the design of the 547 PPD program to support potential new drug application approval. Turning to Slide 10 for SAGE-217 our novel orally active GABA modulator which shows important GABA receptor pharmacology for SAGE-547 a design for the pharmacokinetic profile consistent with once a day oral dosing. In June we reported results for our positive Phase 1 program of SAGE-217 which demonstrated appropriate tolerability and pharmacokinetics along with clear evidence of CNS target engagement both SAD and MAD healthy volunteer studies. We believe these data are supportive of transitioning into Phase 2 development. Turning to Slide 11, based on the positive clinical results observed with SAGE-547 in PPD, we are particularly interested in setting SAGE-217 in mood and effect disorders even with PPD and major depressive disorder or MDD. In PPD we plan to initiate a Phase 2A multicenter, double blind, placebo controlled, randomized trial that will evaluate the efficacy, safety, tolerability, and pharmacokinetics for SAGE-217 in the treatment of patients with severe PPD. In MDD, we are planning to initiate a two-part Phase 2 clinical trial of SAGE-217. Part A of the Phase 2A trial will be an open label, proof-of-concept study which if positive will lead to a larger randomized, placebo controlled, Phase 2 trial. We are also studying SAGE-217 in movement disorders based on positive proof-of-concept data observed with both SAGE-547 and SAGE-217 in essential tremor which is believed to be associated with impaired GABAergic function in the cerebellum. In essential tremor we plan to initiate a Phase 2A multicenter, double blind, placebo controlled, randomized withdrawal trial to evaluate the efficacy, safety, tolerability and pharmacokinetics of SAGE-217 for the treatment of essential tremor patients. SAGE also plans to initiate a two-part Phase 2 clinical trial of SAGE-217 in Parkinson's disease. Part A of this trial will be an open label proof-of-concept study which if positive will lead to a larger randomized, placebo controlled, Phase 2 trial. On Slide 12, you can clearly see that we are advancing development of the SAGE-217 into large CNS markets all of which have considerable unmet medical need. To summarize on Slide 13, we look forward to a number of important upcoming clinical milestones. With our three SAGE-547 trials already ongoing in SRSE and PPD we also plan to initiate four Phase 3 trials with SAGE-217 this quarter and we're planning to initiate our Phase I program for SAGE-718 in Q1 of next year. SAGE-718 is our novel NMDA positive allosteric modulator which is currently in IND enabling studies. We are also evaluating a series of novel GABA modulators in preclinical development including SAGE-108, SAGE-324 and SAGE-689. We are planning to initiate IND enabling studies this year for either SAGE-105 or SAGE-324 we intend to begin clinical developments for GABA related indications such as Orphan Epilepsies. Next year, as we have mentioned on the call we expect to report eight top-line data readouts throughout this year setting up 2017 as the period of critical opportunities for SAGE as a company attempting to advance a growing portfolio of novel potential therapies. With that, I'll turn the call over to Kimi.

[Kimi Iguchi:]

Thanks Steve. As Steve and Jeff have outlined this has been a very productive year for the company. Our portfolio has continued to expand and evolve. We are in a strong financial position which has allowed us to run our R&D efforts and advance our pre-commercial activity as we prepare for a potential launch of our lead product candidate. Let me start with a quick summary of our financial results for the quarter and then provide an overview of our financial guidance. On Slide 14 we have a summary of our financial results for the third quarter. In September, we completed a successful public offering of 5.1 million shares of common stock at an offering price of $39.75 per share. We ended the third quarter with $431.3 million in cash, cash equivalents and marketable securities which includes net proceeds of $189.2 million from the offering. Research and development expenses for the third quarter were $29.1 million, including $2.5 million of non-cash stock-based compensation compared to $17.5 million for the same period of 2015 which included $1.5 million of non-cash stock-based compensation. The increase in spending was primarily due to several factors. The ongoing clinical development of SAGE-547 in SRSE including the expenses associated with activities in preparation for a potential filing and regulatory approval, the clinical development work to progress SAGE-547 includes final impression, the spending for two Phase 1 clinical trials and CMC work for SAGE-217, the investments in the IND-enabling work for our first NMDA TAM [ph] program SAGE-718 and the investments in growing our team to enable us to rapidly execute and expand the pipeline. General and administrative expenses for the third quarter were $9 million including $2 million of noncash stock based compensation compared to $6.6 million for the same period of 2015 which included 2.9 million of noncash stock based compensation. The increase in G&A expenses was primarily due to the significant build in the organization and infrastructure to support the advance into the pipeline and sustainable operations, the increases in personnel-related expenses, professional fees and commercial planning. We reported a net loss in the third quarter of $37.8 million compared to $24.0 million for the same period of 2015. As of November 1, we had 37.2 million shares outstanding. Turning now to our financial guidance, given the size of our recent offerings, today we are providing updated financial guidance. We now expect our cash and cash equivalents to be sufficient to fund operations based on our current operating plan into the second quarter of 2018. This updated guidance takes into account continuing to enroll our three ongoing clinical trials of SAGE-547 in SRSE and postpartum depression, our ongoing activities for a potential launch of SAGE-547 and super-refractory status epilepticus including continued build out of the medical affairs function and commercial planning and preparations, our SAGE-217 clinical programs including our anticipated initiation of four Phase 2 studies of SAGE-217 in essential tremor, postpartum depression, Parkinson's disease and major depressive disorder and the expanded research effort within our GABA and NMDA based portfolio and earlier stage pipeline. Before we open the call over to Q&A I would like to remind you that we planned to have several conferences in the fourth quarter which are listed on Slide 15. These include the Society for Neuroscience Annual Meeting in San Diego from November 12 to 16; the Stifel Healthcare Conference in New York on November 16; the American Epilepsy Society Meeting in Houston from December 02 to December 06; and our first R&D Day to be held in Boston on December 13. With that, we'd now like to open the call for Q&A. I'll turn it over to the operator.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Ritu Baral of Cowen. Your line is now open.

[Ritu Baral:]

Good morning everyone. Thanks for taking the question. My questions are on Europe and their opinions of your SRSE program and maybe your PPD program as well. Sometimes we see European authorities look at trials a little differently either from an SAP or the statistical perspective or maybe importance of endpoints perspective. Is there any difference in how they are going to look at the STATUS trial data versus the FDA?

[Steve Kanes:]

Hey thanks Ritu, thanks for the question. No difference, no suggested change in the trial design endpoints or analysis plan. It is fair to say that every regulatory authority will often have, may have different analyses they would like to see in terms of informing them about a disease state. But in terms of the trial design metrics no changes and so again we are very pleased that the current program and this includes, this encompasses the entire program, not just the clinical program but the CMC supply and everything were felt to be adequate, you know if everything works for a submission to the EMA.

[Ritu Baral:]

Got it and any difference to how they approach PPD versus the FDA and what scientific advice you may be getting or have already gotten on that program?

[Steve Kanes:]

Well, honestly we will release the advice when we actually have the final minutes. So we never comment on ongoing discussions. All out I can – I will say is that there has been a great deal of interest in the PPD program based on really the data we've seen and shown publicly and as well as some of the preclinical data. So we're encouraged that will – about that, but beyond that we will have explicit advice when we receive it from the Europeans.

[Ritu Baral:]

Got it and can you give us, last question, can you give us any more color on what's going on with 689? Earlier in the year you gave us an update that so IND enabling studies and the agency asked for more data and now it seems to be prioritized and it's not on your Slide 13. Can you tell us what's going on there from a safety and IND enabling perspective?

[Steve Kanes:]

We're pretty comfortable we can meet the requirements and but, you know, as a company we just made a decision at this time given on where we are and where the oral pipeline has been not only with 217 but 105 and 324 that we just - it wasn't - there wasn’t an acute need for another intravenous agent at this time. So we will address the agency's question, we can, but beyond that we just, as you say we've sort of de-prioritize as in the things we want to accomplish next year.

[Ritu Baral:]

Okay, was it more from a, I mean was there any safety component at all, is there anything that could translate into or translate across 105 and 324?

[Steve Kanes:]

No, we've said this earlier and that remains and this is not something that's a class issue. It is something specific to this particular molecule and it is not, absolutely not, it has been very – it is I've been clear from the start and that's clear from today. 689 is a pretty unique molecule in terms of its half life and such so there is nothing here to translate. So we're very comfortable saying that.

[Ritu Baral:]

Got it, thanks for talking all the questions.

[Steve Kanes:]

You bet, thank you.

[Operator:]

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

[Salveen Richter:]

Good morning, thanks for taking my questions. Firstly, I'm just wondering with regard to the changes you made to the Study in SRSE how has that impacted your enrollment protocol or really your randomization bottleneck here with the study?

[Steve Kanes:]

As you know we never comment in the interim, but I'll tell that I think it's fair to say we're very encouraged by what we've seen very quickly after we made the alterations.

[Salveen Richter:]

Great and then on your meeting the FDA to discuss the PPD potential pivotal strategy going forward and just curious of scenarios that you think could play out coming out of this meeting given that you have two programs underway and a third to start?

[Steve Kanes:]

So we have a couple of points, when we started this I think we made this very clear to everybody, doesn’t mean to sound like I'm scolding you by the way, you should have paid attention last call. No a little earnings call joke, we've designed these studies in – with their design in numbers in a fashion that we believe were the right studies to do to support registration. We think this is the right way to do it and we believe they are adequately designed. We've been very conservative at how we describe them because as you know until our belief is that the right thing to do is you have to label these Phase 2 studies and so you have confirmation from the FDA that this is a program that's added for registration and our intention is that these should be added with the registration. But until we are able to release the minutes from our breakthrough meeting we just continue to designate them as Phase 2. But we believe in terms of size and quality that and the way we've looked at the populations that they should, we hope, should meet, should be adequate for registration. That said, again we believe that we will be able to report this out by the end of the year and if that's the case obviously it will be a very exciting time for SAGE because that means we'll have likely two Phase 3 programs reading out next year.

[Salveen Richter:]

Okay, and then you know just finally, I mean you have an extremely broad pipeline with eight programs that are going to read out next year. Strategically how are you thinking about developing these programs going forward or are you looking at taking these forward on your own or are you looking at strategic partnerships, just curious from on the strategy?

[Steve Kanes:]

So basically are thesis for all the programs we have developed is that, you know I always use the term incremental innovation. All of these programs are some extent really exploit our operating leverage and our knowledge and data that we've established in earlier studies. So for example, we've shown pretty clearly we can run a tremor program. We've had very encouraging results with 547. We've mimicked those albeit with an open label program. With 217 but the endpoints that's the clinical sites are all very similar for tremor and Parkinson's. So we exploit that operating leverage and as are the protocols except for obviously some of the endpoint measures, the UPDRS and such on Parkinson's. So we're very, very, very, comfortable that we can execute on the eight programs. I think that in this day and age we believe we have the manpower and the expertise to continue the execution. With respect to postpartum depression, I think for assuming that 547 will be in Phase 3 we're very comfortable we can also move forward with our oral molecule 217 with a longer pathway, to move that as an oral therapy for postpartum as well. So we're very comfortable with all of that. I think that in this day and age as I mentioned we at our size and with our execution ability can handle those challenges. I'll turn this over to Kimi about funding and partnering.

[Kimi Iguchi:]

Yes and Salveen I've just mentioned that of course with the recent offering that we just did that really is we're well funded through our next value inflexion points. So I think we're in a very good financial position.

[Salveen Richter:]

Okay, thanks guys.

[Operator:]

Thank you. Our next question comes from the line of Paul Matteis, Leerink. Your line is now open.

[Paul Matteis:]

Great, thanks guys for taking the questions. My first one is on postpartum depression and SAGE- 547s exclusivity there, what do you expect for regulatory exclusivity or IP exclusivity in PPD and does the order of approval of the indications PPD versus SRSE matter to the durability of the franchise?

[Jeff Jonas:]

Okay a couple of points. So I think we have created, we have not initiated yet before we put out our news fairly a large patent claim set around not only 547 but this mechanism in PPD. Those have yet to issue obviously, but they're out there. We did this very early on with respect to that. So, which of those issues, issue that offers a lot of potential IP protection beyond or beyond what we are expecting under [indiscernible]. We also have substantial IP around formulations and methods of manufacture and production. So there's a lot behind this that we believe might make a generic pathway at least difficult to replicate. There are also some - I think primarily though we think that's really the IP. There is there is a sequence event as you know. I think given - depending on where we are with IP around our results of the breakthrough meeting and when we can go into registration sequencing may become an issue and something we have to consider. All that being said, it's one of the reasons our intent has always been to set the foundation for the postpartum depression opportunity with 547 and then moving it to 217. One of the preclinical observations we've made which I think is very relevant here is we believe that this class of molecules is highly differentiated. You saw their publication in the neuropharmacology that showed that not all first generation neurosteroids have the impact on postsynaptic receptors that our molecule does. So we believe very strongly that our molecules represent a highly differentiated mechanism that can up-regulate the population of extrasynaptic receptors that distinguish the state from the older neurosteroids such as ganaxolone, which don't do this. So we believe that 547 in the worst-case scenario will set a firm foundation for this unmet medical need, but we're pretty comfortable that we've established a good IP ring fence around this formulation should this be entering the market after 547.

[Paul Matteis:]

Okay, thanks Jeff.

[Jeff Jonas:]

I'm sorry after SRSE, I'm sorry.

[Paul Matteis:]

Yes, I know, I understand, thank you, Jeff. And then on – you talked about in the press release that one of your PPD studies for the IV was dose ranging, I'm wondering if you could expand upon that and have you considered looking at potentially shortening the infusion and if so, what do you think the commercial implications of that could be?

[Jeff Jonas:]

So, that's a great, of course they are great questions Paul. Couple of points, one is right now we don’t have any safety signals and we're showing a very, very, robust response. So the introduction of this into a vulnerable population we think is not, it is actually a benefit for patients with the first introduction for a completely novel therapy can be done under medical supervision. And we're already doing some, looking at the potential markets outside of the hospital where this could be attempted, so for example, in other facilities where IV infusions can be obtained. That said, we believe that there may be opportunity after approval to look at other dose formulations or as a Phase 3B. But right now, without a safety signal with a drug with a short half life with this kind of durable response which we do believe is mechanistically related to this particular, this class of molecules we don’t see an acute need from a regulatory standpoint or also commercial standpoint based on our research for trying to shorten the dose at this time. We will look at those opportunities moving forward, but I think if we're fortunate enough to get into a registration program we'll continue with the dosing that works following the old rule you know it ain't broke don’t fix it.

[Paul Matteis:]

Okay, thanks Jeff. And can I just ask one more on the oral study?

[Jeff Jonas:]

Sure, go ahead.

[Paul Matteis:]

I'm wondering based on your understanding of the pharmacology of that compound in the proof-of-concept study that you are doing in MDD which I think is single arm how definitive do you think that readout is going to be? With 547 you have this super rapid effect, a really rapid time to Cmax and this single arm data caveat in single arm did look pretty clear but the compound was active. Do you think that you are going to get as definitive of a dataset from an open label study for SAGE-217?

[Jeff Jonas:]

If you look at 217, you remember the Tmax is not much different. It is one hour. So it's not very much different number one. Number two, if you remember we're not posting in any event in postpartum, so that - so it's not a Cmax effect we don't believe. We believe this is likely to be a far - one of the misunderstandings I think and I know you know this, but just for the benefit of others, this doesn't look like a hormonal effect, it looks like a pharmacologic effect and we think it's a pharmacologic effect and that's what we've been pushing for not only that it is extrasynaptic, but it has to do with receptor trafficking which is a mechanism that's unique to our class of molecules. So if we believe it is pharmacology, which we do, and we think it is the pharmacology of the hormonal alteration, then there's no reason we believe that the affection translates to 217 quite readily.

[Paul Matteis:]

Okay, thank you, Jeff.

[Operator:]

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

[Cory Kasimov:]

Hey, good morning, guys. Thanks for taking my questions. I guess to start a bit of an odd one with regard to your Breakthrough Therapy Designation I was just wondering when you're talking with the agency about 547 for PPD are you permitted to work 217 into that conversation and kind of look at the development strategy from a like a more holistic portfolio approach or do you have to keep all the dialogue very specifically focused on 547 for the time being?

[Jeff Jonas:]

Let me just, I'm not going to comment specifically about our breakthrough meetings or anything like that, but I will just say as a general rule with the – I mean, the FDA is a highly credible organization. They are incredibly, they are very professional. They know the world probably better than any of us do individually. So while you may not have any statutory decisions about the portfolio, certainly opportunities come up to talk about what the company is doing and how you think about mechanisms. So that's pretty standard approach, but that's all I think I spare to say. We would never, I think it's bad behavior go in and try to slip something past the goalie and get an answer on another product, that's just not what you do. The agency when they, if you've ever been to an agency meeting they spend a great deal of time in preparation. They read your documents. They know what you are about and you really, it's really there to discuss the questions you have on the program that's on the table.

[Cory Kasimov:]

Okay, and then was there followup on the questions regarding the 202 B&C trials for 547 in PPD? You know aside from the patient populations and the dose ranging you just talked about, are there other any other key differences to the trial designs or maybe more importantly the endpoints for those trials?

[Jeff Jonas:]

I'll turn that over to Steve.

[Steve Kanes:]

Yes, the short answer to that is no. We really try to stick to the design in 202A and view these as replications. So, no changes there other than what is mentioned.

[Cory Kasimov:]

Okay and then last question from me is and this is looking way ahead here, but how do you think about the market opportunity for 547 and 217 in PPD assuming you are able to successfully develop both of those candidates and do you have any market research yet in terms of the percentage of women who actually seek treatment? And we talked a lot about the prevalence there but do you know how many are seeking treatment?

[Jeff Jonas:]

So we know about the prevalence. We know right now as you probably know, when there are no approved therapies those kinds of retrospective quantum kind of data are not terribly reliable. So we believe that, we believe it is significant unmet medical need. We can tell from the people who are contacting us and their interest in the level of sites to do this. It is fair to say though that one of the challenges for the company will be to create the knowledge base so women understand that these programs are available to them. It turns out that in Europe mother-baby units are quite common, more common than in the U.S., but they have been very successful for perinatal hospitalization. We're pretty comfortable based on our preliminary research that there will be substantial demand. One of the points to remember is that the most common of the leading cause of death after birth is actually suicide. So we believe that there will be substantial market interest in this and frankly probably more importantly we believe this will be a game changer in really offering a novel therapy for these women where there were no currently any approved medications. And I think the available alternatives I think are not terribly well accepted.

[Cory Kasimov:]

Okay, thank you guys.

[Operator:]

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

[Laura Chico:]

Hey, good morning guys and thanks very much for taking the question. I just wanted to circle back on an earlier question where you were discussing the Cmax effect on SAGE-547. We recently noticed a patent filing describing some deuterated analogues of what looks like SAGE-547 with improved metabolic stability. So just kind of trying to think about, you know if the PD is not necessarily a Cmax dependent event kind of what will be advantages of using deuterated modification?

[Jeff Jonas:]

I'll turn that over to Al.

[Al Robichaud:]

Yes we have – to be rigorous about the IP around the molecules we've obviously covered every potential analogue of SAGE-547 including the deuterated analogues. We are currently looking at any number of possibilities to improve upon the pharmacokinetics of the molecule. But right now the focus is on SAGE-547.

[Laura Chico:]

Okay, that's helpful. And I guess…

[Jeff Jonas:]

Actually one point to make is let's just and when we started the company very early on Al's group had the first capacity to think about this as the company were to grow and hoping for success we pursued a very aggressive program looking at deuterated across a number of first generation compounds just to cover our bases frankly. So we did this program for 547 we deuterated ganaxolone. We deuterated some of the other compounds and really to some extent it was really covering the bases, planning for success. And I think Al's group did a great job at that.

[Laura Chico:]

Okay, and then turning back to the EMA and the advice that you got from them, I'm just wondering if you could remind us kind of what is your European patent situation and did you get any clarity on data exclusivity through the scientific advice?

[Steve Kanes:]

We're anticipating 10 years of data exclusivity as you might expect for a first mover. Of course we have these other, we have a large number of other patents around this molecule that as I mentioned earlier that we think are not obvious and that might make a generic strategy difficult to achieve. But I think predicting what that those ANDA pathways are is going to be difficult and of course we have worldwide and we are anticipating worldwide coverage on all our patent portfolio.

[Laura Chico:]

Okay, last question then, we did see there were some modifications to the clinical trials posting for the STATUS trial and I just wanted to confirm I think those are just the modifications that were disclosed in August, the malignant EEG and the removal of the DNR criteria, and I think you kind of mentioned you are talking too much about enrollment changes, but I guess more broadly what's your comfort level on hitting the first half read out?

[Jeff Jonas:]

They were very comfortable the first half read out. We've already seen a good response to the changes as we had anticipated. The study team really, one of things I think I've mentioned this earlier, we have a very close relationship with each of the trial sites, so we know when patients comes in, we know what happens with them. So we're very comfortable with that. We are very more than comfortable with what the changes that we've seen. Steve I don’t know if you want to add anything.

[Steve Kanes:]

No, you are absolutely correct, updates you know, we've tried to maintain [indiscernible] little bit patience when we implement things, but those are the same changes that are reflected there.

[Laura Chico:]

All right, thanks guys.

[Jeff Jonas:]

Thank you.

[Operator:]

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

[Gary Nachman:]

Hi, good morning. Jeff, now that you have a clear path for 547 in the EU is here a better chance that we could see you sign an ex-US partner for that program sometime soon, any chance you would actually try to commercialize that yourself in the EU?

[Jeff Jonas:]

Thanks for the question Gary. I think clearly if we're going to do a partnership this obviously clears the way substantially. I think it gives great clarity to the path in Europe and obviously it is great news for the company in terms of the ability to launch quickly in Europe if the trial is positive. So I agree with you, it does increase the opportunity for that. Our position we've looked at the European market and like most of our especially for the SRSE program we're comfortable that we could accommodate a launch if we - on our own in Europe, but we are obviously willing and interested in talking to partners if they can add substantial value, if they could accelerate our timelines and really in aiding the company in growing our portfolio. I think those have always been our criteria. Kimi has done a great job and making sure the company is well-financed. So we don't, we're not in any desperate straits for that at all. So if someone could add value and acceleration infrastructure, things of that nature, pricing and reimbursement we would obviously consider it. But again I think we're not, we're in a great position because we don't have to. It will be something that if we wanted but not, but we don’t need it.

[Gary Nachman:]

Okay. And then on 547 for SRSE it sounds like the pace of enrollment has improved. How many sites do you actually have onboard now? You know, that was also supposed to help you with commercialization once approved. I'm curious if you have any learnings from the enrollment with respect to commercialization.

[Steve Kanes:]

So we have well over 100 sites in U.S. Canada and Europe that are open enrolling patients. I think the key, the most important insights are ones that are reflected in the updates protocol around some level of different practice panels and so forth, but nothing fundamental other than there is a lot of interest in having something new in this area. You know, seeing scientific guidance and having the approach that we've taken so far aligned with what European expectations might be, I think gives us sort of confirmatory about it as well.

[Jeff Jonas:]

Yes, I think that was Steve's point, I mean one of the things we saw very clearly with a number of patients who were presenting were ahead of our expectations. So we're very comfortable with our market estimates. I think the data have suggested that we're on target without how common the disorder is and I think as we've discussed, I think we've discussed with a number people if anything there is some sense that this may be under-diagnosed in ER and underrepresented. So we're, very, very, comfortable that both the changes will have had positive impact as well on the size of the market.

[Gary Nachman:]

Okay, and when will you actually start to build the sales and marketing infrastructure and just remind us, I mean you've had some more time maybe to think about the market opportunity, what's going to be required for that?

[Jeff Jonas:]

Well, we've already begun hiring in certain areas. So for example, we're already in preparation, we're already in pre-NDA preparation as you might expect, and I think and we are hiring certain sales in key functions that we need for prelaunch. I think some of the other work will be gated to data as you might expect, but if we still believe in the U.S. it is a very compact organization that will be only be required since it's hospital-based and we think that will dovetail nicely with the postpartum program which we anticipate initially will be hospital-based, but we think will now grow beyond the hospital based on our marketing inputs. So we're still talking compact with MSLs and sales, no more 50 to 100 I think has always been our estimate. And I think Steve's group is with all the relationships now with so many of the major sites, I think that will really help accelerate our ability to provide this drug to patients.

[Gary Nachman:]

Okay great, thanks.

[Jeff Jonas:]

Thank you.

[Operator:]

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

[Raju Prasad:]

Hey guys, thanks for taking the questions, just a couple quick ones. So obviously given 217 oral dosing route and enhanced PK what are your thoughts on the mild population of PPD patients, is that something that you might enroll in the Phase 2 just to see how they look or stratify after the fact?

[Jeff Jonas:]

This is Jeff. We believe frankly that the indication will cover the entire span of the population based on our breakthrough designation. Right now we're choosing moderates mostly because that group is well moderate to severe I think mostly we will all recognize that they require pharmacotherapy. There is some trend among the miles that give them cognitive behavioral therapy or to do watchful waiting. So I think from the standpoint of trial metrics, I'm sure you know, as you go lower in Hamilton you need more patients to show given decrement in Hamilton score. So it's a little bit of a trial metric design issue as well. And if you look at the demographics of postpartum, you are talking about 80% of the population of moderate severe. So we think we can accomplish, it is a more efficient and probably more medically appropriate approach. With that said, we believe the indication based on the breakthrough designation is going to be just for postpartum depression.

[Raju Prasad:]

Great, and then just this might be a little forward-looking, but I saw on one of your slides you had some preliminary pricing thoughts. So with the two, the PPD indication can I just assume that you guys are going to have a vile price a set amount and then based on dosing and time requirements for infusion that that is how we can determine price on PPD versus SRSE?

[Jeff Jonas:]

Yes, our hope is that we can do some proportional pricing depending on the sequencing so that there won't be any arbitraging between the indications. I think one of the other points to make and I've said this before is, we think that, we plan to try to, we understand we'll have a good pricing but we don’t believe that an orphan model alone is a sustainable model moving into the future and I think it is incumbent on the company is to think about, I don’t want to we really think about medicine and being driven by the science. But if you think about a financial model, we think it is incumbent on us to diversify the types of markets and cash flow we have through the larger markets and orphan markets and I think one of the things that we're most excited about in where these, how these molecules are performing, is their activity that we believe has been established both in orphan indications as well as larger potentially larger market indications.

[Raju Prasad:]

And I guess we could extrapolate that same start to the oral versus the IV formulations as well correct?

[Jeff Jonas:]

I think that, I think probably pricing from the oral will be separate and we'll have to see what the effects look like. We think that 217 may represent a true first-in-class molecule because of its unique activity versus the first generation neurosteroids except the 547 which acts like this. The earlier neurosteroids simply don’t have the bioavailability the brain penetrated or the postsynaptic activity that our molecules do so they are not comparable. So we believe that it may pose, the 217 may provide a really unique opportunity to treat these different diseases and we will price it accordingly.

[Raju Prasad:]

Great, thanks.

[Operator:]

Thank you. And our next question comes from the line of John Newman of Canaccord. Your line is now open.

[John Newman:]

Hi guys, good morning. I had two questions, the first one is Jeff, I believe with the SRSE Phase 2 program you do have a mechanism built in where you are going to be following patients after the primary endpoint is measured. I was just curious if when you read out top-line we might get a sense as to the durability of the effects? And the second question I have is, if you could maybe just chat a bit about the NMDA program and what we might see there in 2017? Thanks.

[Jeff Jonas:]

Okay so with SRSE, I mean we will get outcome data. It is not a regulatory requirement, but I think it's fair to say this is a very innovative program and those of you who have experience working with the agencies and I think it is perfectly appropriate and with physicians we want to learn about the indication and this is the largest double-blind study ever done in SRSE in this kind of circumstance. So there will be a lot of knowledge that we will gain beyond the regulatory and the pathway and we think it is important to the medical community that we obtain it. So we will look at outcome. We will have it after 30 days. We may decide to do more and that is something we've talked about, but the top-line will include simply the acute and regulatory endpoints. We may look at outcome later for publication and so forth. Obviously if there is something dramatic that were impaired or little bit of success we would never report it, but if it is favorable and we meet regulatory requirements we'll probably think about strategically how we look at that. And then some of that may help with the [indiscernible] 114 positioning with pricing and some of that we may want to keep proprietary until we sort through things. And then your answer that's so we're very excited about the NMDA program and I know we don't ask for lot, we don’t get a lot of credit for early molecules, but we think 718 molecule program is moving along well. The toxicology is moving along well. We think this will be a first time ever positive allosteric molecule of NMDA. At our R&D Day we are going to show some of our new preclinical data showing the potential impact on certain disease states where there is low levels of NMDA with really I think very exciting animal models and some diseases I think we're looking at and you can just look at the broad [indiscernible] usually I'm not going to say we're doing any of these, but areas where this has been implicated are anti-NMDA receptors encephalopathy. There may be a role of Huntington's that could be a role on Alzheimer's and other areas. So we're going to start teeing that up at the R&D Day. We're very, very, excited about the potential. It should be in the clinic next year and we should have this certainly by the end of the year, the single ascending dose for 718 should be read out. And so we're very pleased with this progress.

[John Newman:]

Great, thank you.

[Operator:]

Thank you and I'm showing no further questions at this time. I'll hand the call back over to Mr. Jeff Jonas for any closing remarks.

[Jeff Jonas:]

Well, thanks everyone for your attention today. We're very excited about what's been going on at SAGE. You know we have great data. We now have a pathway in Europe. We're looking forward to telling you the outcome of our breakthrough meeting with the FDA. Next year is going to be an extremely year and I think an exciting year for us. We have multiple data readouts and we have been continuing to grow the organization with a team of great people and obviously a team of great investors. So we're very excited about all the help and what we're looking for during 2017. So stay tuned everybody and I appreciate your support.

[Operator:]

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