Sage Therapeutics - Q2 2024

Transcript

Operator (participant)

Good afternoon. Welcome to Sage Therapeutics' Q2 2024 Financial Results Conference Call. Currently, all participants are in listen-only mode. This call is being webcast live on the Investors and Media section of Sage's website at sagerx.com. This call is a property of Sage Therapeutics, and recording, reproduction, or transmission of this call without the express written consent of Sage Therapeutics is strictly prohibited. Please note that this call is being recorded. I would now like to introduce Ashley Kaplowitz, Vice President of Investor Relations and Capital Markets at Sage.

Ashley Kaplowitz (VP of Investor Relations and Capital Markets)

Good afternoon, and thank you for joining Sage Therapeutics' Q2 2024 Financial Results Conference Call. Before we begin, I encourage everyone to go to the Investors and Media section of our website at sagerx.com, where you can find the press release and slides related to today's call. I would like to point out that we will be making forward-looking statements which are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and our actual results may differ materially. Please review the risk factors discussed in today's press release and in our SEC filings for additional details. We will begin the call with prepared remarks by Barry Greene, our Chief Executive Officer, who will provide an overview of our progress during the Q2 of 2024.

Our Chief Business Officer, Chris Benecchi, will provide an update on the ongoing commercialization of ZURZUVAE in postpartum depression, or PPD. Laura Gault, our Chief Medical Officer, will review development activities across our programs. We will then be joined by Kimi Iguchi, our Chief Financial Officer, who will review our financial results from the Q2 of 2024. Mike Quirk, our Chief Scientific Officer, will be available for questions during the Q&A portion of the call. With that, I'll now turn the call over to Barry.

Barry Greene (CEO)

Thanks, Ashley, and thank you everyone for joining us this afternoon. As we progress through 2024, we remain focused on addressing unmet needs in brain health. Our successes and setbacks provide valuable learnings, and we push forward in our efforts to advance our science and support patients in need of new treatment options. As you may have seen, last week, we and Biogen announced negative results from our KINETIC 2 study of SAGE-324 in essential tremor, or ET. Given these results, we plan to close the ongoing open label safety study and do not plan to conduct further clinical development of SAGE-324 in ET. We recognize there's a high unmet need in this disease, with limited innovation treatments over the past 50 years, and are deeply disappointed with this outcome, and importantly for ET patients.

Now, we continue to work to accelerate launch momentum for ZURZUVAE and PPD and to progress our brain health pipeline and look forward to providing additional data readouts expected later this year. Now, where we are helping patients is postpartum depression. Turning to ZURZUVAE, I'm energized by the profound impact we're making on women with PPD and their families. We're the first and only oral medication approved for the treatment of PPD in adults. We're also seeing firsthand a progressive evolution in the treatment of PPD, particularly as OB-GYNs are on the forefront of a movement to vastly improve screening, diagnosis, and treatment. It's encouraging to see the progress we've made as we near the one-year anniversary of the FDA approval of ZURZUVAE.

The increasing demand and the growth in prescriptions and shipments in the Q2 is indicative of that progress and supports our goal to establish ZURZUVAE as a first-line therapy and standard of care for women with PPD. I'll highlight a few of the encouraging signals we saw this quarter, which Chris will dive into in more detail. We observed strong quarter-over-quarter growth, Q1 to Q2, in prescriptions and shipments of ZURZUVAE. Shipments delivered to patients nearly doubled in the Q2 relative to the Q1, reflecting the strong demand and level of interest we're seeing from HCPs for ZURZUVAE in treating women with PPD. HCP prescriber momentum continues, with prescriptions in Q2 seen across the breadth of HCPs who treat PPD and, in particular, OB-GYNs.

Notably, early data suggest that OB-GYNs who have prescribed ZURZUVAE are treating significantly more patients with PPD than they were previously. This is based on written prescriptions for all medications. This is an important metric that shows how ZURZUVAE is beginning to change the HCP treatment paradigm in postpartum depression. In addition, the number of new and repeat ZURZUVAE prescribers grew during the Q2 of 2024, and we're seeing many OB-GYNs write ZURZUVAE for multiple patients.

We continue to have strong commercial and government access for ZURZUVAE and PPD, with the majority of plans to date not imposing onerous prior auths or step edits for postpartum depression. We are also seeing momentum across the ecosystem, with broad policymaker interests across the country to advance policies to improve maternal mental health outcomes. For example, the state of Louisiana recently signed into law a bill that generally permits women with PPD to bypass step therapy requirements by commercial insurers and gain direct access to FDA-approved treatments for PPD.

We believe this law will help enable women with PPD in the state to gain direct access to ZURZUVAE when prescribed. As we highlighted at launch, our strategy has been to launch with a focused approach and scale as we see success. As the signs of launch have been encouraging, in addition to expanding marketing and non-personal promotion, Sage plans to strategically expand its sales force in early Q4, where we believe additional resources will help accelerate demand for ZURZUVAE in the treatment of PPD. We believe this planned expansion of our sales force is well-timed with access coverage and improvements in the specialty pharmacy processes, and will help to support the growing focus to treat PPD and to accelerate commercial momentum.

We continue to believe ZURZUVAE is the key to unlocking the blockbuster potential of PPD, enabling us to help many women suffering from this devastating disease, and we look forward to sharing more updates on our launch progress in the coming quarters. Moving to our clinical stage pipeline, we recently announced data from our phase II KINETIC 2 study in essential tremor, as I highlighted previously. We also continue to progress our clinical development program for dalzanemdor, our wholly owned NMDA receptor positive allosteric modulator, or PAM, formerly known as SAGE-718. In June, we reported results from our phase II SURVEYOR study of dalzanemdor, which reinforces the cognitive impact of Huntington's disease, or HD, a historically underrecognized aspect of HD for which there are no approved treatments.

As you may have seen in our press release this afternoon, based on our review of relevant data, we have decided to adjust the primary endpoint in our ongoing placebo-controlled DIMENSION study in HD from the HD-CAB composite to the Symbol Digit Modalities Test, or SDMT, one of the cognitive tests included in the composite. Laura will provide additional context and information for this change. Both the phase II LIGHTWAVE and DIMENSION studies remain on track to read out in late 2024. Additionally, we remain encouraged about the potential of our earlier stage pipeline, including SAGE-319 and SAGE-421, and believe the important development opportunities as we explore areas of unmet need in brain health. With that, I'll turn the call over to Chris to provide additional context on the ongoing commercialization of ZURZUVAE in postpartum depression. Chris?

Chris Benecchi (Chief Business Officer)

Thanks, Barry. We've made important progress in the launch of ZURZUVAE over the Q2, and I'm excited to share details on our recent achievements and ongoing initiatives. Since the launch of ZURZUVAE in December of 2023, Sage and Biogen have been focused on our shared goal of establishing ZURZUVAE as the first-line therapy and standard of care for women with PPD. Our commercialization efforts have enabled us to exceed expectations, and we look forward to the potential to further maximizing patient impact over the coming quarters. First, I'll review key performance metrics, which highlight the strong progress made throughout the Q2. ZURZUVAE generated $14.8 million in total revenue in the Q2 of 2024, of which Sage recognized $7.4 million in collaboration revenue.

In the Q2, there were approximately 2,000 prescriptions written, with more than 1,400 prescriptions filled and delivered to patients. The number of shipments delivered to patients nearly doubled compared to the Q1. We are pleased to see our ongoing commercialization efforts positively impacting demand for ZURZUVAE in PPD and feel these figures are reflective of the interest and enthusiasm we're seeing from HCPs and women with PPD for this important medication. As a reminder, while we believe the number of prescriptions was an important early indicator, next quarter and going forward, we plan to focus on shipments and collaboration revenue. Turning to prescriber trends, we are seeing ZURZUVAE prescribed across a breadth of HCPs who treat PPD, with more than 70% of prescriptions in the Q2 coming from OB-GYNs, followed by psychiatrists and PCPs.

As we've underscored, OB-GYNs are critical to this launch and the ongoing success of ZURZUVAE for women with PPD, as these HCPs are on the front line of peripartum care and therefore the earliest and best place to screen, diagnose, and treat. When you reflect on our performance over the first and Q2, including revenue, prescriptions, shipments, and prescribing patterns, it's clear that there is a fundamental change in the way PPD is now thought about and treated, and we believe that ZURZUVAE is squarely at the center of this paradigm shift. I'll take a moment now to highlight a few notable signs that reflect the changes we are seeing unfold in the treatment of women with PPD. As Barry noted earlier, we are beginning to see changes in the PPD treatment paradigm, particularly among OB-GYNs.

Notably, early data suggests that OB-GYNs who have prescribed ZURZUVAE are treating significantly more patients with PPD than they were previously, based on written prescriptions for all medications. We see this as a clear uptick in OB-GYNs, increasing screening, diagnosis, and treatment. In terms of other trends, adoption of ZURZUVAE as a treatment for women with PPD continues to increase. The total number of new and repeat ZURZUVAE prescribers continue to grow in Q2. It's encouraging to see that more than 30% of HCPs have now written multiple prescriptions, indicating both interest in using ZURZUVAE and satisfaction with the impact it can have on a woman with PPD. Notably, we are seeing that the majority of ZURZUVAE patients are receiving ZURZUVAE as their first treatment for PPD after giving birth.

The prescribing trends I've described are what we would expect to see based on our promotional and educational efforts, and suggest that these efforts are effectively informing stakeholders about ZURZUVAE. In summary, the data in totality suggests that a movement is occurring in PPD care, particularly OB-GYNs, who are moving from the old model of suspecting depression and referring patients to a psychiatrist, to now screening, diagnosing, and treating women with PPD with ZURZUVAE when they present with symptoms. This is much-needed progress in the ongoing effort to ensure that women with PPD get the treatment that they need. As I noted previously, this is a promotionally sensitive market, which reinforces the importance of our field force and omni-channel efforts, which are intended to build awareness, underscore urgency to treat, and inspire excitement in ZURZUVAE as a new treatment option for women diagnosed with PPD.

The majority of prescriptions for ZURZUVAE are coming from HCPs who have been reached either through personal or digital promotion. To that end, we remain active in our educational efforts across all channels to engage stakeholders with the goal of making ZURZUVAE top of mind as a first choice treatment for women with PPD. We recently launched our full consumer website, which includes information and resources for people experiencing PPD symptoms and provides a link to an independent leading telepsychiatry practice. Women experiencing PPD will have the potential, through this platform, to get matched with and see a psychiatrist. We are also making progress on our social media platforms, with more to come in the second half of 2024.

Turning to access, in the lead-up to the launch, we stated that rapid and affordable access to ZURZUVAE in the treatment of women with PPD, regardless of coverage type, was paramount to successful commercialization. To that end, Sage and Biogen have been proactively focused on the shared goal of helping women who are prescribed ZURZUVAE for PPD receive the medication as quickly as possible, regardless of coverage type. Our conversations with payers have been highly productive. We are encouraged to see the majority of plans finalizing policies that provide women with PPD first-line access to ZURZUVAE without onerous prior authorizations or step edits. Today, we have approximately 80% of commercial lives covered for ZURZUVAE in PPD, with the majority having no step therapy or complex prior authorizations, including two of three national PBMs who developed coverage policies for ZURZUVAE in the disease.

We continue to progress conversations with the third national PBM. With respect to Medicaid, reviews are ongoing, with additional states, including several of the larger states, completing reviews during the Q2 of 2024. While Medicaid policies continue to develop, most states that have made a decision to date are covering ZURZUVAE for women with PPD, in line with our expectations of no step therapy and no complex prior authorizations. The majority of Medicaid coverage decisions have already been made, with the remainder expected to occur in the second half of 2024. This type of progress with respect to coverage is not typical for new product launches.

We attribute this payer progress to the profound need for women with PPD to receive treatment, the value proposition of ZURZUVAE, and the willingness of Sage and Biogen to work closely with payers to rapidly make robust access a reality in PPD. To that end, we continue to work to enable affordable and equitable access to ZURZUVAE for eligible women with PPD through our patient support and financial assistance programs. While the majority of shipments were covered by commercial and government payers in the Q2, we did see an uptick in our free goods programs. A free goods program is intended to help accelerate access to ZURZUVAE for eligible women with PPD who are prescribed treatment. As more payers come online and as the specialty pharmacy process is further optimized, we expect to see the use of free goods decrease.

In summary, we remain highly encouraged by and proud of the launch progress made to date with ZURZUVAE. There is a fundamental change occurring with respect to how PPD is thought about, diagnosed, and treated. We are highly committed to helping women living with PPD and engaging the HCPs who treat them. As Barry noted, Sage plans to strategically expand our sales force in early Q4, which we believe will help accelerate commercial momentum by broadening our reach and increasing the frequency of our interactions with HCPs who treat PPD. I look forward to sharing additional updates on launch progress in the coming quarters. With that, I will now turn it over to Laura for a more detailed discussion of our recent development activities. Laura?

Laura Gault (Chief Medical Officer)

Thanks, Chris, and good afternoon, everyone. Before I discuss the pipeline, I'd like to share my excitement to be part of this pivotal moment in maternal health as we make progress with the launch of ZURZUVAE, enabling critical access for women with PPD. I'll begin with dalzanemdor, our wholly owned, first-in-class, NMDA receptor positive allosteric modulator, or PAM, as a potential oral therapy for cognitive impairment associated with neurodegenerative diseases, including cognitive impairment in Huntington's disease, or HD, which is our lead indication, and in Alzheimer's disease, or AD.

Disorders with cognitive impairment, such as HD and AD, present significant challenges to patients worldwide by limiting their ability to perform activities of daily living and ultimately their ability to remain independent. The incidence and prevalence of these disorders are increasing, and addressing this unmet need remains crucial for improving patient well-being.

In June, we reported data from the phase II SURVEYOR study, a small learning study designed to help inform our dalzanemdor program in HD, including the ongoing DIMENSION study. As previously reported, the SURVEYOR study suggested the potential for directionally positive signals in a number of individual component tests of the HD-CAB composite and in some functional assessments.

Based on the data from SURVEYOR and other relevant information, we have made the decision to adjust our primary endpoint in the DIMENSION study from the HD-CAB composite to the Symbol Digit Modalities Test, or SDMT. The SDMT is one of the assessments included in the HD-CAB composite, and our analysis of the SURVEYOR data suggested the potential for a directionally positive signal. The SDMT is considered a reliable measure of executive function, and researchers, clinicians, and regulators have some familiarity with the test.

The UHDRS Independence Scale will remain the key secondary endpoint. Other secondary endpoints will include additional measures of cognition, function, and safety. We continue to expect to report top line data from the DIMENSION study in late 2024, and we will continue to work closely with the Huntington's community in this important area of patient need. We are also running the LIGHTWAVE study, a double-blind, placebo-controlled phase II study of dalzanemdor in people with mild cognitive impairment and mild dementia due to AD.

The primary endpoint of the LIGHTWAVE study is the change from baseline to day 84 in the Wechsler Adult Intelligence Scale-IV, or WAIS-IV, coding test. The WAIS-IV coding test is an assessment of executive function that has a similar design as the SDMT. We continue to expect to report top line data from this study in late 2024.

SAGE-324 is an investigational GABA-A receptor PAM that is being developed in collaboration with Biogen. Last week, we reported top line data from the phase 2 KINETIC 2 study of SAGE-324 in essential tremor. The KINETIC 2 study did not demonstrate a statistically significant dose-response relationship in change from baseline to day 91, based on the primary endpoint, TETRAS-PS item 4, upper limb total score. In addition, there were no statistically significant differences demonstrated for any dose of SAGE-324 versus placebo in the change from baseline to day 91 on the TETRAS performance scale item 4 total score, or the TETRAS-ADL composite score.

Given these results, SAGE and Biogen do not plan to conduct further clinical development of SAGE-324 in essential tremor, and we will close the ongoing open-label safety study of SAGE-324. We are deeply disappointed by the results of the KINETIC 2 study, and we are evaluating next steps, if any, for other potential indications. We are grateful to the essential tremor community, researchers, study participants, investigators, and site staff for their contributions to this study. I am also deeply appreciative of our incredibly talented and committed teams who have worked tirelessly to support our efforts in ET. Lastly, I'd like to reiterate our excitement for our early-stage pipeline, including SAGE-319, an extrasynaptic GABA-A receptor PAM, and SAGE-421, an NMDA receptor PAM. We look forward to sharing more about these programs as they progress. Now I'll turn the call over for a review of our financials. Kimi?

Kimi Iguchi (CFO)

Thanks, Laura. Our financial results for the Q2 of 2024 are detailed in our press release issued this afternoon. Before discussing some of our financial results from the quarter, I'd like to add my enthusiasm for the ZURZUVAE launch. We're building a new market opportunity in an area where innovation was long overdue, and as a result, have accelerated a paradigm shift in the treatment of PPD. The commercialization of ZURZUVAE remains a top priority as we seek to expand access and build momentum. Beyond ZURZUVAE, we plan to continue to make decisions on strategic pipeline investments supported by data, and we look forward to the additional data readouts expected later in the year. I'll now turn to the financials.

Today, we announced collaboration revenue from the sales of ZURZUVAE of $7.4 million in the Q2, representing 50% of the net revenues Biogen records for ZURZUVAE. This represents a 19% revenue growth from Q1 to Q2. The growth in total underlying demand grew by greater than 95% from Q1 to Q2, as measured by the number of units shipped to commercial, government, and functionally uninsured patients. A key factor impacting revenue in the Q2 was wholesalers bringing down initial inventory levels, which is typical as product launches progress. In the Q2, we saw an average of 5.5 weeks of inventory, as compared to an average of 8 weeks of inventory in the Q1 of 2024. Our target inventory levels are in the 3.5-4-week range.

Definitely, we saw a slightly higher use of free goods relative to, to the Q1, although, as Chris detailed, we expect the use of these programs to decrease as additional payer coverage comes online in the second half of the year and as the SP process is further optimized. Turning to operating expenses, R&D expenses were $62.6 million in the Q2 of 2024. SG&A expenses were $56 million in the Q2 of 2024. The decrease in both R&D and SG&A expenses compared to the Q2 of last year, was primarily related to the Q3 2023 restructuring, which reduced headcount and decreased spend on the early stage pipeline, zuranolone clinical development, manufacturing, overhead, and technology. As we've previously stated, we expect operating expenses to decrease in 2024 relative to 2023.

We are already seeing this decrease in the first half of 2024. Our net loss for the Q2 of 2024 was $102.9 million, and we ended the Q2 of 2024 with cash, cash equivalents, and marketable securities of approximately $647 million. With increased investment in the launch of ZURZUVAE, as well as ongoing clinical readouts expected in 2024, we will not be making changes to our runway guidance. With that, we are reaffirming that based on our current operating plan, we anticipate cash, cash equivalents, and marketable securities, anticipated funding from ongoing collaborations, and estimated revenues will support operations into 2026. Before I turn the call over for Q&A, I'd like to emphasize our ongoing commitment to advancing our mission of promoting better brain health for everyone. We look forward to sharing updates in the coming quarters.

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

Ashley Kaplowitz (VP of Investor Relations and Capital Markets)

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

Operator (participant)

Thank you. If you would like to signal with questions, please press star one on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that will be star one if you would like to signal with questions, star one. The first question comes from Salveen Richter with Goldman Sachs.

Salveen Richter (Biotechnology Equity Research Analyst)

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

Barry Greene (CEO)

Yeah, Salveen, thanks for the interest. I'll start, and I'll ask Chris to comment. So yeah, as we commented, we're highly encouraged by the launch dynamic to date, both in terms of prescription shipments and revenue. And there's certainly some temporality to how each of those flow, and Chris will cover that. The other comment I'd highlight is that, you know, we're absolutely seeing this very important paradigm shift, particularly among OB-GYNs, from the behavior of suspect depression to refer, to screen, diagnose, and treat. So all dynamics and growth metrics are very, very strong. You know, Chris, you want to talk about some of the temporal differences?

Chris Benecchi (Chief Business Officer)

Yeah. So with respect to the shipment process, in effect, what the shipment here is, is it's the measure of when the prescription goes to the specialty pharmacy. It's the movement of the product from the specialty pharmacy into the hands of the patient. And as Barry noted, we saw encouraging performance in and around shipments over the course of the Q2, with a 95% increase. So more than 1,400 shipments over the course of the Q2. Again, as I said, a 95% increase over that time, reflective of the strong demand that we saw from OB-GYNs, psychiatrists, and primary care physicians. That's different than the revenue that we reported, and I think Kimi hit it.

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

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

Barry Greene (CEO)

Thanks, Salveen.

Operator (participant)

The next question will come from Anupam Rama with JPMorgan.

Salveen Richter (Biotechnology Equity Research Analyst)

Hey, guys. Thanks so much for taking the question. Just quick question on physician dynamics here. How are you tracking relative to your initial expectations for ZURZUVAE in each of the physician segments? It seems like OB-GYN is kinda leading the charge here, but how are you tracking relative to what you first thought? Thanks so much.

Barry Greene (CEO)

Yeah, Anupam, thanks, and we're highly encouraged as well. So thank you, thank you for that. So the dynamics we're seeing is actually a lot very much what we expected. As you know, we've been a PPD company for quite a while, and OB-GYNs are the front line of where disease is seen and diagnosed. Just like any disease, you wanna pick the disease up at the point of getting the disease, and OB-GYNs are the right, right part. I mentioned this earlier to Salveen's question, but the dynamic previously, because of the lack of tools that OB-GYNs had, was to suspect depression, but refer out to either a psychiatrist or a primary care. As we've said previously, we think ZURZUVAE is the key to unlock the blockbuster potential PPD, helping many women suffering.

So now, OB-GYNs have a tool in their, in their armamentarium that fits their treatment paradigm. So we're seeing this major dynamic now of screening, diagnosing, and treating while mom is under the care of the OB-GYN. That's exactly what we thought. Now, it's encouraging not only to see OB-GYNs, but also psych and PCP prescribe. Those might be other kind of patient journeys, either someone previously under care or someone whose symptoms really don't worsen or develop until after they're done with their OB-GYN. So it's good to see prescriptions coming from all those patient groups, all the healthcare provider groups.

Salveen Richter (Biotechnology Equity Research Analyst)

Thanks so much for taking the question.

Barry Greene (CEO)

Thanks, Anupam.

Operator (participant)

Our next question will come from Yasmeen Rahimi with Piper Sandler.

Salveen Richter (Biotechnology Equity Research Analyst)

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

Barry Greene (CEO)

Thanks, Yas. I think that was, like, six questions in one, so congratulations for that.

Salveen Richter (Biotechnology Equity Research Analyst)

Oh, sorry.

Barry Greene (CEO)

Look, I, you nailed the dynamic here. Let me comment on it, and I'll ask Chris to provide some further color. So if we step back and think of any disease course, of any disease, you wanna pick the disease up closest to the source, and the healthcare providers, in the case of PPD, are OB-GYNs, either in consultation with a patient for a prior history or during pregnancy or in the first several weeks after giving birth. That's exactly where PPD starts, mostly. Of course, it can worsen in the course of months after birth, but that's generally where it starts. So the OB-GYNs are the right healthcare provider group to pick it up. It's wonderful that ACOG has guidelines, and this group is wanting to own the disease of PPD.

Now, when we talk to psychiatrists, they, of course, are picking up some of these mothers as well. But they actually believe that having a standard operating procedure with ZURZUVAE for PPD relieves them of a patient group that another healthcare provider can prescribe and diagnose and prescribe. So they're happy about pushing this to OB-GYNs. Now, to your point, when we launched, we thought big about the PPD opportunity, but we started it at a focus scale and are scaling. Now that we've seen such great success, particularly among OB-GYNs, it's time to increase the spend, not just for our personal promotion, non-personal promotion and marketing, but to now expand our field force so we can continue to unlock the OB-GYN marketplace. And, you know, as we commented, we're expanding the sales force.

It's something that Sage is paying for in 2024. We haven't made any decisions in 2025, but that's how we're moving forward. You know, Chris, any additional color to add?

Chris Benecchi (Chief Business Officer)

So, Barry, you mentioned that, you know, what we're seeing here is a paradigm shift starting to occur. In the OB-GYN community, it's moving from suspect and refer to screen, diagnose, and treat. And one of the really interesting things that we're seeing, even at this early stage of the launch, is the physicians who we reach, who begin to prescribe ZURZUVAE, begin to diagnose more patients at the practice level.

So fundamentally, what that's telling us is not only is ZURZUVAE doing its job with respect to the efficacy and safety profile of the medication and delivering a, a degree of satisfaction to those clinicians, it's causing them to go back and reflect again on patients that they're seeing on a regular basis, and to really probe in and around the signs and symptoms of PPD and to recognize more women in the practice with PPD who may be viable for, for ZURZUVAE. And that's, that's a very exciting thing for the, the, the treatment of PPD in, in the near term and over the long run.

Salveen Richter (Biotechnology Equity Research Analyst)

Thank you so much.

Barry Greene (CEO)

Thanks, Yas.

Operator (participant)

The next question will come from Paul Matteis with Stifel.

Salveen Richter (Biotechnology Equity Research Analyst)

Hey, thanks so much. I was wondering if you could explain a little bit more thought behind the change in the Huntington endpoint, your level of confidence in the validity of this subcomponent of HD-CAB, and whether it would be acceptable to the FDA for evidence of benefit on cognition? Thank you.

Barry Greene (CEO)

Yeah, Paul, thanks. I'll start, and I'll turn it over to Laura. So you're talking about dalzanemdor, that we are studying for cognitive improvement, in specifically executive function, learning and memory, in Huntington's and Alzheimer's. As we talked about, you know, we did a learning study, and we learned, and that learning is what we're applying to dementia. But, Laura, why don't you take us through that?

Laura Gault (Chief Medical Officer)

Yes. Sure. So thanks for the question, Paul. So as we looked through the data from SURVEYOR, we announced last month that we saw small numerical differences between dalzanemdor and placebo on the HD-CAB composite score at day 28. But we also saw in other pre-specified analyses, a number of directionally positive signals for some of the individual component tests of the HD-CAB. And so based on that information and based on consultations with experts and publicly available information within the HD community, we made the decision to adjust the endpoint to the SDMT. Now, the SDMT is actually a widely used clinical assessment of cognition in Huntington's disease and in other disorders, and we believe it is a reliable and standardized measure of executive function.

It's one of the assessments of the HD-CAB composite, as I mentioned, and because we've seen positive data, directionally positive data, in the SURVEYOR study, we decided to choose that for the primary endpoint. In addition to the SDMT, we continue to evaluate the UHDRS Independence Scale as the key secondary and other secondary endpoints include measures of cognition, function, and safety.

Salveen Richter (Biotechnology Equity Research Analyst)

Thank you.

Barry Greene (CEO)

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

Operator (participant)

The next question will come from Jay Olson with Oppenheimer.

Salveen Richter (Biotechnology Equity Research Analyst)

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

Barry Greene (CEO)

Yeah, Jay. Jay, thanks. I'll start, and then I'll ask Chris to comment on the dynamics. So, every healthcare provider that can help mom and prescribe ZURZUVAE is important for us. But as we talked about on the call, the really key interception point of this disease is the OB-GYN. So the major increase in the non-personal marketing, as well as the additional sales force that we talked about, will be aimed at OB-GYN. Now, of course, if a mom gets through that whole period and, for example, her symptoms worsen, you know, four or five months after giving birth, which can happen, that's where we want psych or primary care to intercept.

So we are applying resources there, but a big part of the improvement in the screening and diagnosis will come among OB-GYNs. And as Chris already said, this paradigm shift of suspecting depression, referring out, 'cause they didn't have the tools, to screening, which most states require, diagnose and treat, is the paradigm shift we're seeing. Chris, anything to add?

Chris Benecchi (Chief Business Officer)

What I would add, Barry, and I think you noted it in your opening remarks, but it's really worth coming back to, is the ACOG guidelines play an important role in increased screening and diagnosis and subsequently treatment. And it's a tailwind. It's a clear tailwind when we're out and engaged with OB-GYNs. They're aware of the guidelines, and I think that's gonna have an impact here. I think, as you noted, in and around what we do with psychiatrists and primary care physicians, there's an opportunity there for us with both personal and non-personal promotion to broaden our reach and deepen our frequency, with the right education around the need to screen and diagnose, as well as to treat when you have patients that are the right patient, a woman with PPD for ZURZUVAE.

All of that's going on right now, and we're scaling as we've seen signs of success.

Barry Greene (CEO)

Yeah, just to kinda close it out, Jay, with that question, and Chris, comment on this, but let me make a point of emphasis. What we're seeing is when a healthcare provider, primarily OB-GYN, prescribes ZURZUVAE for the first time, we're seeing them increase the number of women they're diagnosing in general in their practice. We get that from broader treatment. So it's not always ZURZUVAE, but generally it is. So we're seeing them actually pick up this now and screen and diagnose and own it, rather than pass it on. And that paradigm shift is we've got the data to support that, and it's exciting to see.

Operator (participant)

The next question will come from Ritu Baral with TD Cowen.

Salveen Richter (Biotechnology Equity Research Analyst)

Hi, guys. Thanks for taking the question, and apologies for the noise at the airport gate here. I wanted to ask about the 600 prescription. That was the difference between the 2,000 prescriptions and the 1,400 shipped prescriptions. Were free drug included? Were the free drug prescriptions included in that 600? Were those all insurance denials? And if I could squeeze one more in there. You're hiring up. First of all, can you tell us how many reps you will be increasing the sales force by? And was that informed at all by the ACOG conference that just happened? Thanks.

Barry Greene (CEO)

Yeah, Ritu, a couple different questions there. So you know, as we talked about previously, and again, you know, Chris can comment. The we're highly encouraged by the growth of prescriptions, shipments, and revenue across all dimensions. We have a successful and growing launch. There are temporal differences because of when the quarter cuts off between prescriptions and shipments. So when we report out prescriptions, we're reporting out all the prescriptions that we're seeing, whether they become paid shipments or free shipments. The shipments are all the shipments, both paid and free shipments, and then the revenue is the revenue. Kimi can comment after I'm done on how the revenue, you know, how the revenue flows. So those are the totality of numbers.

We really aren't seeing a great deal of coverage denial. The within the free goods, which did click up, some of those free goods are functionally uninsured patients, and some are patients where the paperwork didn't fully get set out, and we have a pretty liberal free goods program. So rather than delaying drug to mom, as Chris commented earlier, they get shipped to free good, and that mom gets better, and the healthcare provider's prescriptions filled. So we think that strategically is the right thing to do. As coverage comes online and as the SP processes continue to get better, and they're getting better month to month, we see the free goods falling off third, Q4 into next year. There will always be some, of course, because they're functionally uninsured patients.

But to help, maybe Kimi, you could talk about, you know, how the revenues recorded and where that comes from?

Kimi Iguchi (CFO)

Sure, sure. Thanks, Barry. As a reminder, revenue is booked by when Biogen actually ships ZURZUVAE to wholesale distributors. So, so again, that's different than the shipments that we talk about, which are shipments to patients. So that's the 1,400 units we talked about, and it's different from the prescriptions written, right? So that's the 2,000 prescriptions that we talked about. So just wanted to make sure people get grounded on revenue. And again, I'll say again, the key factor we saw on impacting revenue this quarter was that wholesalers were starting to bring down initial inventory levels. You know, it's typical as product launches progress, and we did see that decrease in the number of weeks of inventory outstanding.

Barry Greene (CEO)

Right. And then just to your second part of your one question question, the expansion. We're not commenting on numbers. What we said is that we see a tremendous opportunity to expand marketing, non-personal and personal promotion. So at Sage's expense in the Q4, we're going to expand our field force in strategic areas. We think it makes a lot of sense given the coverage and the success we're seeing. And particularly, again, because once an OB-GYN writes ZURZUVAE, they write another and another and another, and they're increasing the practice, the amount of PPD that they're covering. So it all makes sense to us. We're not talking specific numbers, however.

Salveen Richter (Biotechnology Equity Research Analyst)

Got it. Thank you.

Barry Greene (CEO)

Thanks, Ritu. Safe flight.

Operator (participant)

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

Salveen Richter (Biotechnology Equity Research Analyst)

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

Barry Greene (CEO)

Yeah, let me, Brian, thanks for the question on dalzanemdor. You know, Laura can start with the endpoint on what we're looking for, and then Mike's in the room, and Mike can talk about the mechanistic rationale, which is actually quite strong. But, Laura, you want to start?

Laura Gault (Chief Medical Officer)

Sure. So for the SDMT, there are a variety of ways to try to understand what the clinically meaningful change is. One is to look into the literature, where a change of about four points seems to be adequate across a number of disorders. The second way is actually look within our own data, and we certainly will do that when we have the SURVEYOR and DIMENSION datasets together, and we use classic psychometric analyses to identify the clinically meaningful change.

Barry Greene (CEO)

Yeah, Mike, what's up with-

Mike Quirk (Chief Scientific Officer)

Yeah, and Brian, thanks for the question on the mechanism. I mean, I think first starting with the SDMT, I think it's important to mention that it's a test that looks at a variety of different domains within executive function, such as sustained attention, processing speed, visual scanning, and psychomotor speed. And then when you think about the brain circuits that are involved in that, it's classically those areas of the striatum, frontal cortex that are very much damaged in HD patients or where you see deficits there.

And then I think the other part to add is that if you go back to some of our original thesis, when we were talking about 24-hydroxycholesterol as the endogenous ligand correlating with changes on cognitive tests, one of those tests that we've looked at is the SDMT in that patient population. So I think both from the endogenous modulation point of view, as well as from the brain circuits that are impacted in Huntington's, we think there's a really tight correlation between the SDMT test and those domains of cognition.

Salveen Richter (Biotechnology Equity Research Analyst)

Super helpful. Thank you.

Barry Greene (CEO)

Thanks, Brian.

Operator (participant)

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

Salveen Richter (Biotechnology Equity Research Analyst)

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

Barry Greene (CEO)

Hey, Laura. Like, thanks for the question, and thanks for asking one question. We appreciate it. So you're highlighting a very important point. A major value proposition of ZURZUVAE is the rapidity of onset, and of course, it's only a 14-day course, which is also very helpful. So that's very helpful in healthcare providers making decisions to prescribe, and moms saying, "Yes, I want to take a drug," because before ZURZUVAE, many moms say: You know, I don't want to take anything. I'm gonna try to suffer through this. So it's really created this major, major paradigm shift. We won't be satisfied until moms get the drug as quickly as possibly possible. So this is, put this in the area of continuous improvement.

There are many moms that, after getting diagnosed, get the drug in 2-3 days, delivered to their home. Some take longer, so we wanna increase the number that get there in 2-3 days and shorten the median time for everybody. And we won't be satisfied until the time keeps coming down. So we're doing well. I classify as doing well, but always can get better.

Salveen Richter (Biotechnology Equity Research Analyst)

Thanks, Barry.

Barry Greene (CEO)

Thanks, Laura.

Operator (participant)

Moving on to David Hoang with Citigroup.

David Hoang (Director and Senior Analyst)

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

Barry Greene (CEO)

Yeah, David, thanks. Let me start with the second part of your two-part question, then turn it over to Chris for Biogen. So the reason to expand is to have better reach and frequency in our target audience. So yes, we should see a profound uptick next year in, because of that expansion. So the answer to that is yes. Chris, you want to talk about sort of what we're doing versus Biogen and commitment?

Chris Benecchi (Chief Business Officer)

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

Operator (participant)

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

Tazeen Ahmad (Managing Director)

Hi, guys. Thanks so much for taking my question. Mine's also on expenses. Can you just maybe level set for us how we should think about R&D for the rest of the year? You did have a nice decrease in expenses in the R&D line item, at least this quarter. How should we be thinking about that for the rest of the year, and also taking into account your expectation for the Q4 sales force hires? Thanks.

Barry Greene (CEO)

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

Kimi Iguchi (CFO)

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

Operator (participant)

We'll take a question from George Farmer, with Scotiabank.

George Farmer (Managing Director)

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

Barry Greene (CEO)

Yeah, George, great question. So, you know, as Chris highlighted, on the access front, both commercial and government, is going incredibly well. You know, whether you're, you know, in a blue office or a red office, and I was down in D.C. a couple of weeks ago, everybody cares about maternal health, and everybody cares about brain health or mental health. So we're at the intersection of two, unfortunately, growing issues that people care about. There were several people in Louisiana, which has not had a great history of maternal health, very, very interested in making sure that if a prescription is written, it's delivered directly to moms. So that was a direct effort of our people in government affairs lobbying, and, you know, big shout-out to them.

What's gone on with the tailwinds of this launch, whether it's the, you know, the coverage or what's happening state by state and the media, none of this is by accident. We actually have a solution for an issue that many—it's bothering many people, so it's garnered the interest across all fronts, and that will continue. We're seeing really good Medicaid coverage at the state level, and I think the pharmacoeconomics at a state level support that if a mom is under, you know, underdiagnosed or not treated properly, she'll never get off Medicaid, and that child will have developmental issues, probably, and might become a Medicaid child. So we're really seeing a strong dynamic. And what we're seeing in Louisiana, we'll likely see in other states.

George Farmer (Managing Director)

Great. Thanks, Barry.

Barry Greene (CEO)

Thanks, George.

Operator (participant)

We'll take a question from Vikram Purohit with Morgan Stanley.

Vikram Purohit (Research Analyst)

Hi. Thanks for taking my question. We had one on SAGE-324. So you've obviously mentioned that you're winding down in ET, but are there other indications you're exploring the molecule for? And if so, what could those indications be, and, and how are you and Biogen thinking about next steps for this program? Thanks.

Barry Greene (CEO)

Yeah, thanks, Vikram. Laura, you wanna take that?

Laura Gault (Chief Medical Officer)

Yeah, sure. So as we mentioned in the press release and in our prepared remarks, we and Biogen together are evaluating potential next steps for SAGE-324, if any, and we will certainly relay those decisions when they're made.

Operator (participant)

The next question will come from Sumant Kulkarni with Canaccord.

Sumant Kulkarni (Senior Analyst)

Good afternoon. Thanks for taking our question, which I guess is a bit outside the box. With $647 million in cash and equivalents, at what point do you think it might make sense to shop for outside assets to bring in so you could supplement dalzanemdor and what recently happened with SAGE-324?

Barry Greene (CEO)

Yeah, Sumant, thanks for that question. So, you know, we've commented about this previously. We're intellectually curious, so we've got teams scanning what's going on out there, and we are examining a lot of potential opportunities. If we see something that we're highly intrigued by, and that fits into our strategic focus, we'd certainly make a move on that. Nothing has happened there to date, but that, you know, that's one of the places we could go, and we've talked about that before. Nothing active to report, obviously, right now, but it's on our radar screen.

Sumant Kulkarni (Senior Analyst)

Thanks.

Operator (participant)

The next question will come from Uy Ear with Mizuho.

Uy Ear (VP and Senior Equity Analyst)

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

Barry Greene (CEO)

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

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

Uy Ear (VP and Senior Equity Analyst)

Thanks.

Operator (participant)

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

Douglas Tsao (Managing Director)

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

Barry Greene (CEO)

Yeah, hey, Doug. Yeah, thanks for the question. So look, we're highly... You know, we're looking forward to the readouts for dalzanemdor. What we talked about, you know, we've been talking about this for the last couple of years, is the reason for the SURVEYOR study was both to confirm that, as measured by HD-CAB, the significant difference in cognition between normal volunteers and Huntington's patients. We saw a significant deficit in cognition in Huntington's. So that confirms the unmet need. It's really important. It's an orphan disease with a big unmet need, and there's nothing for these patients. So that's really important in terms of benefit risk. Secondly, we said we're going to learn from the SURVEYOR study and apply that to DIMENSION.

I won't repeat everything that Laura said, but we learned and we're putting, you know, SDMT as the primary endpoint as well as other secondary endpoints. It's a large study, over 175 patient study, double blind, placebo controlled, well-run study. And this is a place where data matter. If the data are positive and robust across the primary and other secondary endpoints, then we have a package to move forward with regulators, both in the U.S. and outside the U.S., and we'll do that. In terms of specific interactions we've had with, you know, FDA or other regulators, you know, we don't comment on specific interactions other than say that we've had interactions and we will continue to do so.

Douglas Tsao (Managing Director)

Can I, can I jump in? Is the HD-CAB a secondary still?

Laura Gault (Chief Medical Officer)

Not in its entirety at this point, but we are looking at other components of the HD-CAB in the secondary endpoint.

Barry Greene (CEO)

Yeah. Again, Doug, and, you know, thanks for asking. With the, you know, the idea of HD-CAB, with—we had several hypotheses going into SURVEYOR, and again, small study, right? 40-patient study, one to one. Which aspects of HD-CAB would move and what might not move? We learned—we used all of that learnings to modify, DIMENSION. So HD as a composite endpoint no longer makes sense, but some of its components do.

Douglas Tsao (Managing Director)

Okay, great. Thank you.

Barry Greene (CEO)

Thanks, Doug.

Operator (participant)

We'll take a question from Marc Goodman with Leerink Partners. Again, Marc Goodman, your line is open. Please go ahead with your questions.

Barry Greene (CEO)

We might have lost Marc.

Operator (participant)

Oh, we'll go ahead and take a question from Joon Lee with Truist Securities.

Asim Rana (Equity Research Associate)

Good afternoon. This is Asim for Joon. Thanks for taking the questions. We're just wondering if you could quantify the ZURZUVAE prescriber base growth you saw from Q1 to Q2, and how you expect the prescriber base to continue growing after the sales force expansion. Thank you.

Barry Greene (CEO)

Yeah Asim, great, great question. Please send our best to Joon. I guess I'll start, and Chris can provide some more color. So, we continue to see prescriber growth. The denominator grows quarter to quarter, and we see that continuing for many quarters to come. Part of the reason for sales force expansion is to get in front of more prescribers, educate them about ZURZUVAE PPD, because again, as we're seeing, once someone learns about and prescribes ZURZUVAE, they start treating far more PPD patients at the level we want to see it, which is the OB-GYN level. So we see that continuing. You know, Chris, any other color?

Chris Benecchi (Chief Business Officer)

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

Asim Rana (Equity Research Associate)

Thank you.

Operator (participant)

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

Barry Greene (CEO)

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

Importantly, we believe strongly in the important mission to help people suffering from brain health disorders. That really what motivates us every day. So, you know, thank you for the clinicians and patients out there helping. Thanks for those at Sage and Biogen moving this along, and thanks, everyone, and have a great day.

Operator (participant)

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