sage-10q_20200630.htm

Covid

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number: 001-36544

Sage Therapeutics, Inc.

(Exact name of registrant as specified in its Charter)

Delaware

27-4486580

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

215 First Street

Cambridge, Massachusetts 02142

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code: (617) 299-8380

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	SAGE	The Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 4, 2020, there were 51,974,269 shares of the registrant’s common stock, $0.0001 par value per share, outstanding.

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

•

our views as to potential future results of our ongoing commercialization efforts in the U.S. with respect to ZULRESSO™ (brexanolone) CIV injection, which is approved in the U.S. for the treatment of postpartum depression, or PPD;

•

our planned clinical and regulatory activities with respect to zuranolone (SAGE-217) for the treatment of major depressive disorder, or MDD, and PPD and related timelines, and the potential for zuranolone in those indications and in additional indications, including our view of the potential product profile and treatment paradigm impact for zuranolone, if successfully developed and approved;

•

our plans for development of our other product candidates for the treatment of central nervous system, or CNS, diseases and disorders, and potentially for other indications, and expected timelines for our planned development activities;

•

our ability, within the expected time frames, to initiate clinical trials and non-clinical studies of existing or future product candidates, including pivotal clinical trials, and to successfully complete and announce the results of ongoing or future clinical trials;

•

our plans and potential outcomes with respect to interactions with regulatory authorities and other research and development activities;

•

our plans for and potential outcomes of business development efforts;

•

our plans and expectations with respect to the potential development of any product or product candidate for markets outside the U.S.;

•

our estimates regarding the level of expenses we may incur in connection with our activities; use of cash and projected cash on hand at any given timepoint; timing of future cash needs; capital requirements; sources of future financings; and our ability to obtain additional financing when needed to fund future operations;

•

our expectations with respect to the availability of supplies of ZULRESSO and our product candidates, and the expected performance of our third-party manufacturers;

•

our ability to obtain and maintain intellectual property protection for our proprietary assets and other forms of exclusivity relevant to our business;

•

the estimated number of patients with diseases or disorders of interest to us; the potential size of the market for ZULRESSO in PPD and for our product candidates in the indications we are studying or plan to study; the potential for ZULRESSO as a treatment for PPD and current or future product candidates, if successfully developed and approved, for the indications and in the markets for which they are approved; and our ability to serve those markets;

•

the potential for success of competing products that are or become available for PPD or MDD or any of the other indications that we are pursuing or may pursue in the future with our products and our product candidates;

•

the potential risk of loss of key scientific or management personnel;

•

our views as to the potential impact of the COVID-19 pandemic, our efforts to address the impact of the COVID-19 pandemic, and the resulting effects on our business, results of operations and activities and on any of the forward-looking statements in this Quarterly Report; and

•

other risks and uncertainties, including those listed under Part II, Item 1A, Risk Factors.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events and with respect to our business and future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under Part II, Item 1A, Risk Factors and elsewhere in this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

We may from time to time provide estimates, projections and other information concerning, among other things, our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information reflected in this Quarterly Report. Unless otherwise expressly stated, we obtained this industry, business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties; industry, medical and general publications; government data; and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.

Sage Therapeutics, Inc.

INDEX

		Page
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	5
	Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	5
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019	7
	Consolidated Statements of Changes in Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	47
Item 1A.	Risk Factors	47
Item 5.	Other Information	92
Item 6.	Exhibits	93
	Signatures	94

PART I — FINANCIAL INFORMATION

Item 1.

Financial Statements

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

	June 30, 2020			December 31, 2019
Assets
Current assets:
Cash and cash equivalents	$	258,228		$	126,705
Marketable securities		498,294			881,688
Prepaid expenses and other current assets		28,862			26,700
Total current assets		785,384			1,035,093
Property and equipment, net		8,077			9,126
Restricted cash		2,367			2,367
Right-of-use operating asset		27,999			33,771
Other long-term assets		3,415			3,793
Total assets	$	827,242		$	1,084,150
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,387		$	15,266
Accrued expenses		53,328			86,618
Operating lease liability, current portion		8,577			10,244
Total current liabilities		64,292			112,128
Operating lease liability, net of current portion		22,661			26,848
Other liabilities		374			519
Total liabilities		87,327			139,495
Commitments and contingencies (Note 5)
Stockholders’ equity:
Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized at June 30, 2020 and December 31, 2019; no shares issued or outstanding at June 30, 2020 and December 31, 2019		—			—
Common stock, $0.0001 par value per share; 120,000,000 shares authorized at June 30, 2020 and December 31, 2019; 51,938,012 and 51,880,227 shares issued at June 30, 2020 and December 31, 2019; 51,934,979 and 51,877,194 shares outstanding at June 30, 2020 and December 31, 2019		5			5
Treasury stock, at cost, 3,033 shares at June 30, 2020 and December 31, 2019		(400	)		(400	)
Additional paid-in capital		2,645,255			2,587,322
Accumulated deficit		(1,906,654	)		(1,643,567	)
Accumulated other comprehensive gain		1,709			1,295
Total stockholders’ equity		739,915			944,655
Total liabilities and stockholders’ equity	$	827,242		$	1,084,150

The accompanying notes are an integral part of these condensed consolidated financial statements.

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Product revenue, net	$	1,089		$	519		$	3,375		$	519
Collaboration revenue		—			354			—			819
Total revenue		1,089			873			3,375			1,338
Operating costs and expenses:
Cost of goods sold		110			44			280			44
Research and development		73,320			89,059			136,930			175,457
Selling, general and administrative		38,224			88,227			108,355			172,146
Restructuring		28,402			—			28,402			—
Total operating costs and expenses		140,056			177,330			273,967			347,647
Loss from operations		(138,967	)		(176,457	)		(270,592	)		(346,309	)
Interest income, net		2,686			8,220			7,416			14,662
Other income (expense), net		(66	)		16			89			20
Net loss	$	(136,347	)	$	(168,221	)	$	(263,087	)	$	(331,627	)
Net loss per share—basic and diluted	$	(2.63	)	$	(3.28	)	$	(5.07	)	$	(6.65	)
Weighted average number of common shares outstanding—basic and diluted		51,926,074			51,257,640			51,917,417			49,882,377
Comprehensive loss:
Net loss	$	(136,347	)	$	(168,221	)	$	(263,087	)	$	(331,627	)
Other comprehensive items:
Unrealized gain on marketable securities		2,501			1,681			414			2,090
Total other comprehensive gain		2,501			1,681			414			2,090
Total comprehensive loss	$	(133,846	)	$	(166,540	)	$	(262,673	)	$	(329,537	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities
Net loss	$	(263,087	)	$	(331,627	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		55,142			78,883
Premium on marketable securities		(494	)		(1,887	)
Amortization of premium (discount) on marketable securities		304			(4,973	)
Depreciation		1,331			920
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(2,162	)		(5,102	)
Other long-term assets		378			(4,023	)
Right-of-use operating asset		3,461			4,713
Operating lease liabilities, current		(49	)		(48	)
Operating lease liabilities, non-current		(3,602	)		(4,298	)
Accounts payable		(12,815	)		(21,806	)
Accrued expenses and other liabilities		(34,082	)		5,970
Net cash used in operating activities		(255,675	)		(283,278	)
Cash flows from investing activities
Proceeds from sales and maturities of marketable securities		595,769			588,652
Purchases of marketable securities		(211,771	)		(918,233	)
Purchases of property and equipment		(346	)		(3,438	)
Net cash provided by (used in) investing activities		383,652			(333,019	)
Cash flows from financing activities
Proceeds from stock option exercises and employee stock purchase plan issuances		3,546			31,282
Payment of employee tax obligations related to vesting of restricted stock units		—			(692	)
Payments of offering costs		—			(328	)
Proceeds from public offerings of common stock, net of commissions and underwriting discounts		—			561,277
Net cash provided by financing activities		3,546			591,539
Net increase (decrease) in cash, cash equivalents and restricted cash		131,523			(24,758	)
Cash, cash equivalents and restricted cash at beginning of period		129,072			193,310
Cash, cash equivalents and restricted cash at end of period	$	260,595		$	168,552
Supplemental disclosure of non-cash operating and investing activities
Purchases of property and equipment included in accounts payable	$	—		$	252
Right-of-use assets obtained in exchange for new operating lease liabilities	$	—		$	872
Lease asset de-recognized upon lease cancellation	$	2,310		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

Sage Therapeutics, Inc. and Subsidiaries

Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

													Accumulated
										Additional			Other						Total
	Common Stock				Treasury Stock					Paid-in			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Shares		Amount			Capital			Income (Loss)			Deficit			Equity
Balances at December 31, 2018		46,888,263	$	5		3,033	$	(211	)	$	1,827,021		$	(515	)	$	(963,329	)	$	862,971
Issuance of common stock from exercise of stock options		287,659		—		—		—			14,072			—			—			14,072
Issuance of common stock under the employee stock purchase plan		16,398		—		—		—			1,799			—			—			1,799
Purchase of treasury stock		—		—		—		(189	)		—			—			—			(189	)
Stock-based compensation expense		—		—		—		—			43,622			—			—			43,622
Public offering of common stock, net of offering costs		3,833,334		—		—		—			560,948			—			—			560,948
Unrealized gain on available-for-sale securities		—		—		—		—			—			409			—			409
Vesting of restricted stock units, net of employee tax obligations		8,518		—		—		—			(692	)		—			—			(692	)
Net loss		—		—		—		—			—			—			(163,406	)		(163,406	)
Balances at March 31, 2019		51,034,172	$	5		3,033	$	(400	)	$	2,446,770		$	(106	)	$	(1,126,735	)	$	1,319,534
Issuance of common stock from exercise of stock options		434,932		—		—		—			15,601			—			—			15,601
Stock-based compensation expense		—		—		—		—			34,280			—			—			34,280
Unrealized gain on available-for-sale securities		—		—		—		—			—			1,681			—			1,681
Net loss		—		—		—		—			—			—			(168,221	)		(168,221	)
Balances at June 30, 2019		51,469,104	$	5		3,033	$	(400	)	$	2,496,651		$	1,575		$	(1,294,956	)	$	1,202,875

Balances at December 31, 2019		51,877,194	$	5		3,033	$	(400	)	$	2,587,322		$	1,295		$	(1,643,567	)	$	944,655
Issuance of common stock from exercise of stock options		7,196		—		—		—			367			—			—			367
Issuance of common stock under the employee stock purchase plan		33,429		—		—		—			2,793			—			—			2,793
Stock-based compensation expense		—		—		—		—			30,218			—			—			30,218
Unrealized loss on available-for-sale securities		—		—		—		—			—			(2,087	)		—			(2,087	)
Net loss		—		—		—		—			—			—			(126,740	)		(126,740	)
Balances at March 31, 2020		51,917,819	$	5		3,033	$	(400	)	$	2,620,700		$	(792	)	$	(1,770,307	)	$	849,206
Issuance of common stock from exercise of stock options		17,160		—