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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 September 30, 2020

OR

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: (617299-8380

 

 

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 October 29, 2020, there were 52,044,663 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 loss of key scientific or management personnel;

2


 

 

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 and 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.

 

 

3


 

Sage Therapeutics, Inc.

INDEX

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

5

 

 

Condensed Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019

 

5

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019

 

6

 

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019

 

7

 

 

Consolidated Statements of Changes in Stockholders’ Equity for the three and nine months ended September 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 6.

 

Exhibits

 

95

 

 

Signatures

 

96

 

4


 

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)

 

 

 

September 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

184,270

 

 

$

126,705

 

Marketable securities

 

 

484,267

 

 

 

881,688

 

Prepaid expenses and other current assets

 

 

30,347

 

 

 

26,700

 

Total current assets

 

 

698,884

 

 

 

1,035,093

 

Property and equipment, net

 

 

7,404

 

 

 

9,126

 

Restricted cash

 

 

2,367

 

 

 

2,367

 

Right-of-use operating asset

 

 

26,546

 

 

 

33,771

 

Other long-term assets

 

 

3,427

 

 

 

3,793

 

Total assets

 

$

738,628

 

 

$

1,084,150

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

4,289

 

 

$

15,266

 

Accrued expenses

 

 

46,756

 

 

 

86,618

 

Operating lease liability, current portion

 

 

8,620

 

 

 

10,244

 

Total current liabilities

 

 

59,665

 

 

 

112,128

 

Operating lease liability, net of current portion

 

 

21,069

 

 

 

26,848

 

Other liabilities

 

 

313

 

 

 

519

 

Total liabilities

 

 

81,047

 

 

 

139,495

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value per share; 5,000,000 shares authorized

   at September 30, 2020 and December 31, 2019; no shares issued or

   outstanding at September 30, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $0.0001 par value per share; 120,000,000 shares authorized

   at September 30, 2020 and December 31, 2019; 52,025,862 and 51,880,227

   shares issued at September 30, 2020 and December 31, 2019; 52,022,829 and

   51,877,194 shares outstanding at September 30, 2020 and December 31, 2019

 

 

5

 

 

 

5

 

Treasury stock, at cost, 3,033 shares

   at September 30, 2020 and December 31, 2019

 

 

(400

)

 

 

(400

)

Additional paid-in capital

 

 

2,669,419

 

 

 

2,587,322

 

Accumulated deficit

 

 

(2,012,389

)

 

 

(1,643,567

)

Accumulated other comprehensive gain

 

 

946

 

 

 

1,295

 

Total stockholders’ equity

 

 

657,581

 

 

 

944,655

 

Total liabilities and stockholders’ equity

 

$

738,628

 

 

$

1,084,150

 

 

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

5


 

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Product revenue, net

 

$

1,639

 

 

$

1,478

 

 

$

5,014

 

 

$

1,997

 

Collaboration revenue

 

 

 

 

 

2,092

 

 

 

 

 

 

2,911

 

Total revenue

 

 

1,639

 

 

 

3,570

 

 

 

5,014

 

 

 

4,908

 

Operating costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

149

 

 

 

137

 

 

 

429

 

 

 

181

 

Research and development

 

 

74,078

 

 

 

102,108

 

 

 

211,008

 

 

 

277,565

 

Selling, general and administrative

 

 

35,099

 

 

 

88,502

 

 

 

143,454

 

 

 

260,648

 

Restructuring

 

 

(529

)

 

 

 

 

 

27,873

 

 

 

 

Total operating costs and expenses

 

 

108,797

 

 

 

190,747

 

 

 

382,764

 

 

 

538,394

 

Loss from operations

 

 

(107,158

)

 

 

(187,177

)

 

 

(377,750

)

 

 

(533,486

)

Interest income, net

 

 

1,347

 

 

 

7,227

 

 

 

8,763

 

 

 

21,889

 

Other income (expense), net

 

 

76

 

 

 

(8

)

 

 

165

 

 

 

12

 

Net loss

 

$

(105,735

)

 

$

(179,958

)

 

$

(368,822

)

 

$

(511,585

)

Net loss per share—basic and diluted

 

$

(2.03

)

 

$

(3.48

)

 

$

(7.10

)

 

$

(10.13

)

Weighted average number of common shares

   outstanding—basic and diluted

 

 

51,981,468

 

 

 

51,704,687

 

 

 

51,938,923

 

 

 

50,496,489

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(105,735

)

 

$

(179,958

)

 

$

(368,822

)

 

$

(511,585

)

Other comprehensive items:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable

   securities

 

 

(763

)

 

 

202

 

 

 

(349

)

 

 

2,292

 

Total other comprehensive gain (loss)

 

 

(763

)

 

 

202

 

 

 

(349

)

 

 

2,292

 

Total comprehensive loss

 

$

(106,498

)

 

$

(179,756

)

 

$

(369,171

)

 

$

(509,293

)

 

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

 

6


 

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(368,822

)

 

$

(511,585

)

Adjustments to reconcile net loss to net cash used in operating

   activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

75,250

 

 

 

122,552

 

Premium on marketable securities

 

 

(1,066

)

 

 

(2,652

)

Amortization of premium (discount) on marketable securities

 

 

628

 

 

 

(6,429

)

Depreciation

 

 

1,981

 

 

 

1,618

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(3,647

)

 

 

(8,494

)

Other long-term assets

 

 

366

 

 

 

(3,818

)

Right-of-use operating asset

 

 

4,914

 

 

 

6,424

 

Operating lease liabilities, current

 

 

(6

)

 

 

116

 

Operating lease liabilities, non-current

 

 

(5,194

)

 

 

(6,249

)

Accounts payable

 

 

(10,913

)

 

 

(28,955

)

Accrued expenses and other liabilities

 

 

(40,182

)

 

 

25,492

 

Net cash used in operating activities

 

 

(346,691

)

 

 

(411,980

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Proceeds from sales and maturities of marketable securities

 

 

766,339

 

 

 

957,840

 

Purchases of marketable securities

 

 

(368,829

)

 

 

(1,077,702

)

Purchases of property and equipment

 

 

(345

)

 

 

(5,378

)

Net cash provided by (used in) investing activities

 

 

397,165

 

 

 

(125,240

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from stock option exercises and employee stock purchase

   plan issuances

 

 

7,091

 

 

 

46,684

 

Payment of employee tax obligations related to vesting of

  restricted stock units

 

 

 

 

 

(2,175

)

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

 

 

7,091

 

 

 

605,458

 

Net increase in cash, cash equivalents and restricted cash

 

 

57,565

 

 

 

68,238

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

129,072

 

 

 

193,310

 

Cash, cash equivalents and restricted cash at end of period

 

$

186,637

 

 

$

261,548

 

Supplemental disclosure of non-cash operating and investing

   activities

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable

 

$

 

 

$

11

 

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.

 

 

7


 

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 exercises 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 exercises 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

 

Issuance of common stock from exercises of stock options

 

 

248,196

 

 

 

 

 

 

 

 

 

 

 

 

12,436

 

 

 

 

 

 

 

 

 

12,436

 

Issuance of common stock under the employee stock purchase plan

 

 

39,006

 

 

 

 

 

 

 

 

 

 

 

 

3,946

 

 

 

 

 

 

 

 

 

3,946

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

43,053

 

 

 

 

 

 

 

 

 

43,053

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

202

 

 

 

 

 

 

202

 

Vesting of restricted stock units, net of employee tax obligations

 

 

59,686

 

 

 

 

 

 

 

 

 

 

 

 

(1,483

)

 

 

 

 

 

 

 

 

(1,483

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(179,958

)

 

 

(179,958

)

Balances at September 30, 2019

 

 

51,815,992

 

 

$

5

 

 

 

3,033

 

 

$

(400

)

 

$

2,554,603

 

 

$

1,777

 

 

$

(1,474,914

)

 

$

1,081,071