Sage Therapeutics, Inc.
Q3 2015 Earnings Call Transcript

Published: 8 Nov 2015

[Operator:]

Good morning, and welcome to SAGE Therapeutics Conference Call. At this time, all participants are in a listen-only mode. This call is being webcast live on the Investors & Media section of SAGE’s website at sagerx.com. This call is property of SAGE Therapeutics and recordings, reproduction or transmission of this call without the expressed written consent of SAGE Therapeutics is strictly prohibited. Please note that this call is being recorded. I would like to introduce Paul Cox from SAGE.

[Paul Cox:]

Good afternoon. Today, we reported our third quarter 2015 financial results and recent pipeline progress. The press release and the presentation slides used on this call can be found on the Investors & Media section of our website at sagerx.com. On Slide 2 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 and Kimi Iguchi Chief Financial Officer. Following prepared remarks, we will open the call for a Q&A session. On Slide 3 is our safe harbor statement. During today’s call, we may make forward-looking statements, including statements about our future expectations, clinical development and regulatory timelines, the potential success of our product candidates, financial projections, 2015 and 2016 milestones, and upcoming events and presentations. Actual results may differ materially. The risks and other factors that could cause actual results to differ are discussed in today’s press release and in the risk factors section of our quarterly report on Form 10-Q filed with the Securities and Exchange Commission on August 12, 2015 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, where we disclaim any obligation to do so. I would now like to turn the call over to Jeff.

[Jeff Jonas:]

Thanks, Paul. And I like to welcome everyone to our call. I’m pleased today to update you on the progress we’ve made across our pipeline, which you can see on Slide 5. SAGE continues to focus on developing innovative new treatments for patients with life-altering Central Nervous System or CNS disorders. We’ve been successful to date in generating a wholly-owned pipeline and internally generated assets, developing programs across a broad swath of two receptor families GABAA and NMDA. These are important mechanisms in the CNS that are implicated in many disorders. We’ll be updating you today on our progress in both of these areas. Our pipeline is led by a Phase 3 asset, SAGE-547, which is being trialed for the most severe form of seizure, Super-Refractory Status Epilepticus or SRSE. In addition, we’re advancing other differentiated next-generation New Chemical Entities or NCEs for both acute and chronic CNS disorders, including postpartum depression, essential tremor and assorted orphan epilepsies. Today, we also announced three new development candidates, including our first novel NMDA modulator. And I’ll provide more details on that in moment. Turning to Slide 6, I’m going to start on the GABAA side of our program with our lead molecule, SAGE-547 for SRSE. SAGE-547 is a positive allosteric modulator of GABAA, which is a major inhibitory mechanism of the brain. As some of you may know, SAGE-547 demonstrated robust activity in our Phase 1/2 program with a good tolerability profile with no serious adverse events reported attributable to the drug. It’s also been granted orphan drug designation for status epilepticus including SRSE and Fast Track by the FDA. Our Phase 3 program also gained agreement under a SPA with the FDA for that trial. Slide 7, shows you a summary and outline of the trial, the Phase 3 STATUS Trial of 547 in SRSE. This trial is continuing to enroll and is on track. This is a randomized, double-blind, placebo-controlled study. And it’s an efficient trial, requiring only 126 evaluable patients at up to 150 sites in the U.S., Canada and Europe. As some of you may know SRSE is a devastating disorder. Two-thirds of those afflicted may become disabled or die from the disorder. And we believe SAGE-547 offers the potential to be the first approved medicine for patients with this disorder. Turning to Slide 8, we announced today as well that our placebo-controlled proof-of-concept trial using SAGE-547 in severe postpartum depression patients has now been initiated. You may recall that early this year we reported on a preliminary open-label study in postpartum depression, in a concept study that evaluated 4 women with severe HAM-D scores, a rating scale for depression. And these women all demonstrated significant improvement in their symptoms in less than 24 hours and that improvement was sustained for 60-hours during the treatment period. During the study, SAGE-547 was well-tolerated and the only adverse event reported in more than one patient was sedation observed in two patients. Turning to Slide 9, we also recently announced positive top-line data and a proof-of-concept trial studying SAGE-547 as a mechanism in patients with essential tremor. This was a placebo-controlled crossover study in 25 patients designed to generate a signal of activity. In that spirit, the study in some ways was handicapped against finding such a signal. It was a small number of patients, 19 of the 25 were allowed to use their underlying medications and they were all exposed to the target dose for only two hours. The primary endpoints involve using a clinical rating scale known as the TETRAS and accelerometer measures, which is a physical measure of tremor. This study, we believe generated a clear signal of activity showing clear separation from placebo at the target dose of 12 hours in the accelerometer measures, and nearly showing a significant finding on the TETRAS clinical rating scale. This signal to us justified further investment in this indication and we plan to study SAGE-217 in a Phase 2 essential tremor trial next year, pending the Phase 1 data, which is on target to report out in the first-half of 2016. I’d now like to turn your attention to our oral modulator, SAGE-217 on Slide 10. SAGE-217 is our oral modulator, which is recently started in the Phase 1 healthy volunteers and is currently dosing. This a New Chemical Entity, an NCE, with a similar modulatory profile to SAGE-547, but more potent at both receptors. And with a PK profile that is optimized for oral once-daily use. Slide 11 shows why we’re excited about this compound, not only because we believe it will be a novel first-in-class highly bio-available oral agent, but because in pre-clinical models, that many believe is translatable, it shows broad activity as an anti-seizure drug. And you can see this here on Slide 11. We’ve tested it in numerous seizure animal models and it is active across all of them, including

[Kimi Iguchi:]

Great, thank you, Jeff. On Slide 22, we have a summary of financial results for the third quarter of 2015. Cash and cash equivalents at the end of the quarter totaled $204.9 million. This included net proceeds of $129 million from offering that we completed back in April 2015. Research and development expenses for the third quarter of 2015 were $17.5 million, this includes $1.5 million of non-cash stock-based compensation expense. Additionally, general and administrative expenses for the third quarter were $6.6 million, and this also included at $2.9 million charge of - non-cash stock-based compensation charge. We reported a net loss in the third quarter of $24 million, and as of November 1, we had 28.9 million shares outstanding. In the upcoming quarters, we expect to see increases in operating expenses as we continue to enroll our Phase 3 STATUS trial for SAGE-547 in super-refractory status epilepticus. As we continue to advance our clinical development and discovery efforts and further grow our infrastructure and organization. Based on our current operating plan, we continue to expect our current cash balance of fund our operations to mid-2017. As you can see on Slide 23, we had an eventful 2015 and look forward to continuing enrollment in the STATUS trial and beginning our placebo-controlled SAGE-547 proof-of-concept study for postpartum depression this quarter. We also expect to have number of data readouts in 2016 with the potential for multiple Phase 2 study beginning later in the year. Before, we turn the call over to Q&A, I’d like to remind you that we plan to attend number of conferences in the third quarter, which are listed on Slide 24. These include the Credit Suisse, Stifel and Goldman Sachs investor conferences in November, the Piper Jaffray investor conference in December and the American Epilepsy Society annual meeting in December, where we have three scientific and clinical ad-checks [ph] that have been accepted. We’ll now like to open the call for Q&A. Operator?

[Operator:]

Thank you. [Operator Instruction] Our first question comes from Paul Matteis with Leerink. You may begin. It looks like we lost Paul. Our next question is from Cory Kasimov with J.P. Morgan. You may begin.

[Morgan Haller:]

Hey, good afternoon. This is Morgan on for Cory. I just had a quick question regarding the 689 delay. Can you give us more color on specifically what the requests are for, if it’s not for toxicology? And does this any read through to other GABAA programs?

[Jeff Jonas:]

Hey, thanks for the question. We’re not going to be more specific, but it is not a tox-form and it doesn’t have a - it has no read through to any of the other programs. So it’s not a class effect or anything like that. One of the - candidly, one of the - I think as an innovator company from time-to-time, we’re going to be asked to develop data that we hadn’t expected, especially when we’re going after novel indications. But one of the things that we’ve learned is that, as people begin to - we have competitors who are following closely on our heels. These are learnings that we’re gaining that we are - we don’t think we - we don’t think it is material. And as I mentioned, I think we’re estimating only of one to two quarter delay in this. So it’s not a tox finding and it’s not something that we’ll read through to any of the other programs.

[Morgan Haller:]

Okay. Great. Thanks. And one more question. As far as the new GABAA modulators you mentioned that they’re differentiated from the three already identified. Can you give us more color on that and exactly where they’re more differentiated?

[Jeff Jonas:]

They will both have different PK/PD characteristics, different receptor subtype selectivity. We’ve chosen again, because we’re seeing a lot of people beginning to imitate and follow what we’re doing in the genetic orphan epilepsies, most recently in essential tremor. Really these are chemically diverse compounds that we decide at least now as we go our preclinical data that we decided not to create a roadmap for other companies moving in the GABAA space. But they are distinct chemical entities with distinct PK/PD profiles and distinct receptor subtype selectivity.

[Morgan Haller:]

Okay. Great. Thanks.

[Operator:]

Thank you. Our next question comes from Ritu Baral with Cowen. You may begin.

[Ritu Baral:]

Hi, and thanks for taking the question. Can you give us an update on site activations or the status trial? Are most of the sites activated? Does it differ by geography?

[Jeff Jonas:]

Thanks, Ritu. Basically, we’re not going to do - we’re not going to give periodic updates around the sites. We will be updating on the ClinicTrials.gov from time-to-time. We do have sites now opened or opening both in the U.S. and in Europe. It’s well on schedule. The sites are opening and clearing. We are enrolling patient. As well as in Canada, so all that’s moving well. So based on our internal modeling, we are very comfortable that we’re comfortably on track at this point. But we made a decision not to sort of give incremental updates in how many sites are open or where they’re opening. I can just tell you that they are open or opening without difficulty in all the geographies where we’re targeting.

[Ritu Baral:]

Do you plan to give us sort of milestone updates on enrollment where you tell us when the trial is either 50% or 75% enrolled?

[Jeff Jonas:]

We’re not going to do that. I promise, we’d tell you when we finish. But that’s little earnings call joke. But I have said and I’ll reiterate that. We do have a model that worked fairly well for our Phase 1/2. And this is an event-driven trial. So as you know we created a net in effect of sites that are designed to capture patients when they become ill. And so there is some event driving. So we have said that as we enroll over this quarter and potentially the next quarter, if we’re able to revise the timeline for LPLV, we will do so. But we’re not going to be giving any other types of interim analysis or looks at the Phase 3. As a company, we think it’s important not to peek into the Phase 3 even in terms of enrollment. I just think it is bad practice.

[Ritu Baral:]

Fair enough. And last question on the Phase 2 PPD trial. What’s the number of sites for that? And also, do you have any entry criteria in place, for instance, whether the patients are hospitalized or outpatient or if there is a minimum depression score required?

[Jeff Jonas:]

So the - we’re anticipating 10 to 15 sites. We’ve had a lot of interest from sites who have - can treat in-patients. And so, that’s been one of the opportunities we’re looking at. There are number of - we are treating only patients, they have much PVL to be in-patient, and they have to be amenable to intravenous infusion. We are treating severe postpartum depression and they will have to had - have been sick for at least four weeks so that it’s unlikely that these are - it’s unlikely that they will be patients who are characterologic or having mild or dysthymia. So that’s having a look at - 10 to 15 sites as I mentioned. Probably, no more than 30 patients is what we’re estimating.

[Ritu Baral:]

So no exact specified HAM score is in line right now?

[Jeff Jonas:]

26 or above, sorry.

[Ritu Baral:]

26 or above, great. Thanks for taking the questions, guys.

[Jeff Jonas:]

You bet. Thank you.

[Operator:]

Thank you. Our next question is from Tim Lugo with William Blair. You may begin.

[Tim Lugo:]

Thanks for taking the question. So is it safe to say 105 and 324 acting extrasynaptically? And I’m not sure if I heard you mention if they were IV or oral. And we got three new compounds this quarter. I see that you have some NCEs under development for NMDA or you can get three more next quarter.

[Jeff Jonas:]

So I’m left swiping that question.

[Tim Lugo:]

Okay. Fair enough.

[Jeff Jonas:]

So - but to the first part, they are all orally available and they will have extrasynaptic activity. As you know, we’ve often spoken about our ability in - and how much chemical equity we have to develop drugs with different receptor subtype selectivity and we’ve done it with these two. So - and they will be oral. And as you probably know once patients are oral, they do have the ability to more easily be made intravenously, but right now these are - these are being positioned as oral with extrasynaptic activity.

[Tim Lugo:]

Okay. That sounds good. And could you maybe give us some more background on SLOS, prevalence, influence; how these patients are being treated now? And I assume there are some off-label therapies being used for these patients now.

[Jeff Jonas:]

Sure, I mean, so SLO syndrome as you know is an in-born error of metabolism. It is current - so it’s associated with a number of pathognomonic signs and symptoms. It does have some physical abnormalities as well as changes in brain structure. It’s seen in various degrees of severity and basically it’s reported currently in anywhere between 120,000 and 150,000 live births. Now, one of the interesting features about this disorder is firstly, that in most severe forms the patients will unfortunately die within the first year or too, but after that they can live into adulthood with a gradation of symptomatology. One it’s the most common autosomal recessive disorder after PKU and cystic fibrosis among Caucasians. What’s interesting about the disorder is that if you look at the frequency of the actual, the based on the career frequency of the mutation. It is estimated it’s relatively seen in one to four or 5,000 live births. So, this suggest that and they’re all about a 120 mutations currently that can cause the deficiency. But what’s interesting is that that suggest that there are patients who probably have deficiencies in cerebrosterol aren’t being identified and it probably can’t be accounted for by in-utero death. And it turns out for example that many, we believe that there may be patients who have milder forms of this disorder who maybe misdiagnosed of artistic spectrum disorder or other developmental disorders where they have not been tested possibly because the more pathagnomonic physical manifestations have not been absorbed. So, we think this is a unique opportunity for us to intervene in, where you have a non-biochemical defect that’s associated with the distinct phenomenology that is neurologic and psychiatric. And we see the same thing with the anti-NMDA encephalitis a similar progression, likely undiagnosed, we have an answer and I can answer it later if you’d like, probably underdiagnosed right now. For for SLO syndrome, it’s likely that the subjects who have cerebrosterol deficit will have hypoactive or low functioning NMDA. So, we do think that we can make an impact on their neurological symptomatology which can include things like aggression, hyperactivity, self injury as a particular type of rapidly arching back movement that they make it federal. The current therapy right now is to supplement these individuals with peripheral cholesterol and remember this is an inborn error of metabolism. So it’s a very classic inborn error, you have toxicity from precursor buildup, which in this case is 78C and you also have a deficiency caused by the defect in cerebrosterol and obviously in low cholesterol and which impacts development. So the interventions to date involve oral supplementation of cholesterol, however that does not get into the brain very effectively well that’s the best they can do. And then they also interestingly used, liphophilic statin such as simvastatin and this is an attempt who obviously has an hmg coa reductase inhibitor to prevent the buildup of the precursor which is 7 DHC, because maybe there is a 7 DHC reductase deficiency. So, that is the current therapy as with most of these disorders, the pharmacotherapy is otherwise reasonably rudimentary with antipsychotics sometimes with benzos, which often can exacerbate, the antipsychotics often don’t help. So that’s where we are, so we do think that if we are successful in bringing forward SAGE-718 it could make a real difference in the lives of these patients.

[Tim Lugo:]

And I guess the question is if you go into the more severe patients first or are you looking into the attenuated versions it seems like maybe the more severe patients also skip being captured by the system whereas the more attenuated patients do as well. So, I guess who is actually being treated now and where you take, if you’re taking some of the worse patients first or maybe the more milder forms?

[Jeff Jonas:]

For this indication, we more likely go into the milder forms with the individual with cognitive deficits in the autism like behaviors. But one thing to point out and this is something we are looking into now, is that cerebrosterol deficits may expand beyond SLO syndrome. So, there are surveys for example of autism disorders where individuals are showing up low cholesterol associated with autistic like behavior. So, we think the milder forms maybe I think the turn maybe amenable to this and remember the most severe they’re very young and it’s unlike that we can impact their survival. We’re more interested in the neurological symptomatology that really cause the morbidity and the dysfunction as these individuals age and reach adulthood.

[Tim Lugo:]

Very interesting. Thanks for all the detail.

[Jeff Jonas:]

You bet. Thanks so much.

[Operator:]

Thank you. Our next question is from Gary Nachman with Goldman Sachs. You may begin.

[Divya Harikesh:]

Hi, this is Divya Harikesh behalf of Gary Nachman. Just curious, how you’re thinking about European opportunity for SAGE-547 in SRSE, how those discussions with the regulatory agencies are progressing. And more specifically on SAGE-217, the Phase 1 in orphan epilepsies, can you talk through that opportunity and your expectations for that trial?

[Jeff Jonas:]

Yes. The European discussions are being scheduled or underway, we haven’t informed, we haven’t good timeline on that, yet. But we do have an internal timeline to do that. The Europe we have never - several European thought leaders with European meetings. We are also enrolling, obviously in Phase 3 and several multiple European countries. I think beyond that is probably nothing much, I think we can add right now. With respect to 217, we believe pretty strongly that the approach for treating orphan epilepsies, the right way to do this is to study the phenomenology entreat, the phenomenology that produces the in capacity of long patient. And we show the slide earlier, that we show in the presentation, because we believe - firstly on the preclinical data that there is no basis for selectivity between the orphan epilepsies. So we have activity in a Dravet model, we have activity in fragile X model, the mechanism appears to agnostic to the cause of the seizure. So we believe the grow of define in this population are simply be to help us find homogenous population characterized by high seizure burden, we can do a rapid study and show on clinical benefit. The end point is reasonably Prozac, which is reduction of seizure. So we don’t think that’s a regulatory challenge. So our approach is going to be looking at basket study across several Orphan Epilepsies, where we think that we can isolate patient with high frequency seizure burden. And as a result and just simply look for reduction of seizure, we may be used physical monitoring as well as PROs for this is well, because we think these populations we get much more reliable measure with outcome and simply observational data. So that’s going to be our approach is basically a basket approach, that will employ incremental endpoint and use genetics in just simply to identify the populations of interest that have the symptom etiology that we think we can impact with 217. But what we think that does is accomplish is that - it prevents artificial salami slicing, which is almost a pseudo-specific salami slicing of all these orphan epilepticus. We think we can enroll patient for rapidly, and frankly we think we can avoid the arbitrary demarcation of these disorders and frankly benefit patients were quickly as well.

[Divya Harikesh:]

Thank you.

[Operator:]

Thank you. [Operator Instruction] Our next question comes from Paul Matteis with Leerink. You may begin.

[Paul Matteis:]

Great, thanks. Can you hear me?

[Jeff Jonas:]

Now, we can hear you.

[Paul Matteis:]

Okay. Yes, I’m bombed, I was excited to be taken first and what can I do. I still have my questions. So the first one, Jeff, is on the postpartum depression study, 30 patients, it’s really small and almost seems to go a little bit ambitious, when you think about other depression study that, how over 100 patients and they power themselves nicely, because they’re concerned about a placebo effect, which has been raising over the past two decades in depression. So can you speak to the effect size that you’re hoping to see there, they would generate study success, and I guess your level of comfort with the end that you finalized?

[Jeff Jonas:]

Thanks. So, we are not going to put out the actual power calculage [ph], but I’ve had a lot of familiar with similarity with doing depression study, and although your question has made me depressed. The key here is going to be really still looking for binary outcome, based on the date we’ve seen some of which we are seeing to publish, but haven’t made public. We are very comfortable that if we’ve seen effected, needs to be robust effect and that’s based on the animal data that we commented on, as well as on the clinical data, that we’ve already seen. So we are really looking for a clear - we are really looking for this to be either a transformative, finding or something that we wouldn’t pursue. I don’t think, we are interesting in pursing this, if we see a two or three points difference in HAM, it might be significant, but that’s not what we’re looking for. We’re really looking for replication of the preliminary data we saw. I think that’s the only reason and rationale that I think, we could justify further investment in this space. So it is ambitious. But one of the paradoxes of smaller studies, if you have consistent data, people often talk about powering, that ought to give you more confidence rather than less confidence in the strength of the signal. So we will do that, obviously, if we had - if we see a positive - or a finding there then we’ll have to look about how we move it forward. I do believe that this maybe a distinct form of depression. So if you think about more generally depression programs that have been conducted in the past, we all know this - major depressive disorder is often confounded by dysthymic disorder, personality disorder et cetera, et cetera. I think the features that are attendant to postpartum depression, the secular biomarker, which - the occurrence after birth, the repeadity of the onset, the correlation with neuroendocrine findings and lowered levels of alepregmadilone, [ph] and obviously, always only in women. This suggested this maybe a distinct form of affective syndrome that may I think allow us to see a less of a placebo response and hitherto - expected among most depression programs.

[Paul Matteis:]

Okay. Thanks. That makes a lot of sense. And then, in terms of the earlier data, the four patients, any timing updates you can give us and when that might be published or presented at a medical meeting and when we can get more granularity on that?

[Jeff Jonas:]

We submitted it to publication to a major journal. They obviously - then it’s up to the journal at this point. So that’s our intent. We’d like to put into a major journal. We’ve got a lot of interest in the publication. So there’ll be more granularity given when the data come out. But I don’t know when it will be accepted or published yet.

[Paul Matteis:]

Okay. Fair enough. Thanks, Jeff. And one more quick one, just on the NMDA program, you consistently said that you’re not bound by orphan, because of your superior IP position. And for NMDA there’s lots of exciting areas that I guess could theoretically be bigger markets like depression, given the anecdote with ketamine. So, just strategically, why did you choose to start in orphan indications with these products?

[Jeff Jonas:]

That’s actually a great question. So the couple of points, I think that, we really wanted to look at areas where a specific genetic or specific biologic event leads to a phenomenology that’s consistent. So if you look at the - and these were two areas where we could identify clear biological causes that are associated with known NMDA hypofunction, so that that’s number one. Secondly, we became very interested in these, because especially for cerebrosterol deficits and for low-hypofunction, we thought that this could then be expanded into larger patient populations. So, for example, as I mentioned earlier, we talked about SLO syndrome, but even for anti-NMDA so there is data that suggests, for example, that in non-familial dementias up to 20% of patients may have anti-NMDA circulating antibodies. So you can imagine that these patients likely to have low-NMDA function. And as a result, might be amenable to treating with this disorder. So we’re not abandoning larger market, but we think that we can see whether we have impact on the NMDA hypofunction in these smaller targeted markets which are orphaned markets, which we think we can get to market quickly. And in order to get proof-of-principle for the mechanism of action and the activity of the drug. And then, move into larger potential patient pools. So we, for example, think that there may be cerebrosterol deficits, not SLO syndrome. We have through different pathways. It is schizophrenia and autism in Parkinson, psychosis, Huntington’s, PKU, other aggressive personality disorders. And all of these interestingly have been reported to have documented changes and cerebrosterol or in cholesterol processing. So we think the way to do this, this is the way we’ve done this with GABAA, which is a start small, demonstrate activity and then move into larger populations. I will say one more point though. And this is - we are announcing today only an NMDA-PAM program. We’ve learned a lot in our chemical chemistry group and discovery group, who have done a great job at this, about the NMDA chemistry around oxysterols - chemistry around oxysterols. So we do have the capacity and as you develop other types of NMDA agonist and antagonist, but we’ve chosen to use a PAM first, partially because we have - it’s a portfolio decision in the company given the extent of equity we have. And we feel like we may look elsewhere over the next year or two. But right now, we decided this was the place where we had - we thought potentially a real competitive edge where there weren’t anyone playing and where we thought we can make a real difference for patients when there were no other available therapies.

[Paul Matteis:]

Okay. Great. Makes sense. Thanks, Jeff.

[Jeff Jonas:]

Thank you.

[Operator:]

Thank you. I’m showing no further questions at this time. I’d like to turn the call back over to Jeff Jonas for closing remarks.

[Jeff Jonas:]

I want to thank everyone for your attendance today. I also want to thank the team at SAGE. We’ve all done a great job, I think, in bringing us forward into - from a company focused on one drug into a company with multiple assets and multiple clinical events that are likely to take place over the next year. And I just want to thank everyone again for their attendance today. I know it’s a busy day for all of you.

[Operator:]

Ladies and gentlemen, this concludes today’s conference. Thanks for your participation. Have a wonderful day.