Sage Therapeutics - Q3 2024

Executive Summary

• Q3 2024 total revenue was $11.9M, driven by $11.0M collaboration revenue from ZURZUVAE (+49% QoQ), and ~2,000 prescriptions shipped (+~40% QoQ), reflecting accelerating PPD adoption supported by broad payor coverage (>90% commercial/Medicaid).
• Net loss narrowed to $93.6M (vs. $201.6M YoY), with lower R&D and SG&A from prior restructuring; cost of revenues spiked on one‑time ZULRESSO excess inventory and intangible impairments ($3.6M) ahead of discontinuation on Dec 31, 2024.
• Strategic shifts: discontinuation of zuranolone for MDD in the U.S., sunsetting ZULRESSO, and an October reorganization (workforce -33%) to extend cash runway and prioritize ZURZUVAE commercialization and the dalzanemdor HD program.
• Management reiterated cash runway into 2026 (pre-reorg savings update), expects 2025 OpEx to decline, and highlighted near-term catalyst: DIMENSION Phase 2 HD topline late 2024.
• Wall Street consensus estimates via S&P Global were unavailable for this period; we will update once mapping is resolved (S&P Global consensus unavailable).

What Went Well and What Went Wrong

What Went Well

• Continued commercial traction in PPD: collaboration revenue from ZURZUVAE rose 49% QoQ to $11M, with ~2,000 shipped prescriptions (+~40% QoQ); inventory normalized and free goods declined as coverage improved.
• Broad access achieved: “All three national PBMs have developed favorable coverage policies…more than 90% of commercial and Medicaid lives are covered…with first‑line access without burdensome prior authorizations,” enabling front‑line use by OB/GYNs (~70% of prescribers).
• Strategic focus and operating discipline: Q3 net loss improved significantly YoY ($93.6M vs. $201.6M), reflecting the impact of prior reorganization and reduced R&D/SG&A; October reorg aims to further extend cash runway.
  Quote: “We are committed to harnessing the full potential of ZURZUVAE…continued growth in revenue and shipments…establishing ZURZUVAE as the standard of care” – Barry Greene.

What Went Wrong

• Pipeline setbacks: LIGHTWAVE Phase 2 in Alzheimer’s did not meet the primary endpoint; Sage will not pursue dalzanemdor in AD and discontinued SAGE‑324 in ET following negative KINETIC 2.
• ZULRESSO drawdown: product revenue fell to $0.8M (vs. $2.7M YoY), and Q3 cost of revenues rose to $5.3M due to $3.6M one‑time write‑offs and intangible impairments tied to ZULRESSO discontinuation.
• Estimates could not be benchmarked: S&P Global consensus for EPS and revenue was unavailable for SAGE this quarter, limiting beat/miss assessment (S&P Global consensus unavailable).

Transcript

Operator (participant)

Good afternoon. Welcome to Sage Therapeutics' third quarter 2024 financial results conference call. Currently, all participants are in a listen-only mode. This call is being webcast live on the investors' and media section of Sage's website at sagerx.com. This call is 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 Katie Plant, Manager of Investor Relations at Sage.

Katie Plante (Manager of Investor Relations)

Good afternoon, and thank you for joining Sage Therapeutics' third quarter 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 third quarter of 2024. Our Chief Business Officer, Chris Benecchi, will provide an update on the ongoing commercialization of ZURZUVAE.

We will then be joined by Laura Gault, our Chief Medical Officer, who 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 third quarter of 2024. Mike Quirk, our Chief Scientific Officer, will be available for questions during the Q&A portion of the call. With that, I will now turn the call over to Barry.

Barry Greene (CEO)

Thanks, Katie, and thank you, everyone, for joining us this afternoon. Discovering new medicines and bringing them to market, especially in brain health, is a formidable challenge, but when successful, has the potential for major advances in human health. The impact of our work in postpartum depression is an important example of this. However, other areas of drug development, including the most devastating brain health conditions, remain the next frontier. Recent pipeline setbacks require us to further focus our business priorities. We announced earlier this month that we are implementing a reorganization of our business operations intended to strengthen our balance sheet and focus investment to support the ongoing launch of ZURZUVAE for the treatment of women with PPD, our upcoming readout in Huntington's disease, and exploring opportunities across our early-stage pipeline. This decision was necessary. We believe that this restructuring will right-size Sage for future success.

I'm grateful to all our employees, including those departing, for their impact on our business and dedication to making a difference for patients. As you've seen in our recent press release, we're also making the strategic decision to stop making Zulresso commercially available after December 31st, 2024. As we've noted, we've made progress in supporting more women with PPD since the launch of ZURZUVAE, and we see this important treatment accelerating change in the PPD treatment paradigm. With the increased demand for ZURZUVAE in the treatment of women with PPD, we're also seeing an expected decrease in demand for Zulresso. We believe healthcare providers who have prescribed Zulresso will continue to transition to ZURZUVAE and that women with PPD will be well supported by ZURZUVAE. It's a logical business decision to discontinue availability and focus our resources on ZURZUVAE so we can help even more women with PPD.

Now, as we are focused on PPD, Sage and Biogen will also not pursue further development of zuranolone as a treatment for major depressive disorder in the U.S. Based on the significant new investment and time we expect will be needed to conduct the additional studies, we're prioritizing our resources on supporting the PPD patient community. We're grateful to all the patients, providers, and advocates who have supported our clinical trials and efforts in MDD. We believe these decisions will provide us with the agility, cash runway, and focus to advance our business. We continue to build a foundation for the future that is supported by the momentum we're seeing with ZURZUVAE. Last year, we set a goal to establish ZURZUVAE as a first-line therapy and standard of care for women with PPD. We're making progress, as demonstrated in our third consecutive quarter of solid growth.

ZURZUVAE has a critical role in advancing PPD care by helping to support a dialogue between healthcare providers and women with PPD, a condition that has often been stigmatized and undertreated. As a result, more women have the potential to be treated for PPD, and more OB-GYNs should begin to screen, diagnose, and treat this disorder. We believe a shift in practice patterns is starting among OB-GYNs, who are now integrating maternal mental health with obstetric care and initiating medical treatment for PPD. In fact, once an OB-GYN has written ZURZUVAE, on average, we see an encouraging increase in the number of women with PPD they treat based on written prescriptions for all medications. Of those healthcare prescribers prescribing ZURZUVAE, the majority are using ZURZUVAE as a first-line PPD treatment. We're seeing broad and favorable coverage for ZURZUVAE and PPD, and progress across the ecosystem continues to energize our efforts.

Since launch, women with PPD are going online and sharing their treatment success stories. Medical associations are publishing screening guidelines. Payers are recognizing the benefit of innovation, and the media continue to discuss PPD as an urgent and treatable medical condition. While progress in overall screening rates for PPD is encouraging, it should be the first step in a deliverable process to ensure women who are diagnosed with PPD understand their options for care. Chris will provide a more specific breakdown of our commercial performance in Q3. Looking ahead, we plan to continue to scale with success and believe that our strategic investments, including our recent sales force expansion, will accelerate the demand and market growth for ZURZUVAE and PPD. Now, turning to the pipeline, earlier this month, we reported that the phase 2 LIGHTWAVE study in Parkinson's disease did not meet the primary endpoint.

We're disappointed for the millions of patients suffering with Alzheimer's disease. We look forward to reporting top-line data from the phase II DIMENSION study of dalzanemdor in people with cognitive impairment associated with Huntington's disease expected later this year. Finally, we announced in September that Biogen has decided to terminate our collaboration and license agreement with the SAGE-324 program. With the termination of this agreement, Sage will have full ownership of SAGE-324, and we plan to continue to evaluate potential indications, if any, for the program. We anticipate that any future investment in SAGE-324 will be based on a broader portfolio review and pipeline prioritization. Our commitment to advance brain health medicines endures through our successes and setbacks. Patient impact, long-term growth, and value creation remain our guiding principles.

With that, I'll turn the call over to Chris to provide additional context on the ongoing commercialization of ZURZUVAE. Chris?

Chris Benecchi (Chief Business Officer)

Thanks, Barry. We have achieved notable progress in our launch of ZURZUVAE over the third quarter. We are making notable strides in our goal to establish ZURZUVAE as the first-line therapy and standard of care for women with PPD. ZURZUVAE generated $22.1 million in total revenue in the third quarter of 2024, of which Sage recognized $11 million in collaboration revenue. This represents a 49% growth in revenue over the second quarter. We also observed increased demand as measured by shipments in the third quarter, with approximately 2,000 prescriptions filled and delivered to women with PPD. This represents an approximately 40% growth compared to the second quarter. Inventory levels have normalized since the initial build at launch. Additionally, we saw a reduction in the percentage of free goods as commercial and Medicaid policies covering ZURZUVAE have been implemented.

Prescriber trends also signal encouraging growth of ZURZUVAE as a treatment for women with PPD. We are building from a strong foundation with data that suggests 90% aided brand awareness among OB-GYNs and psychiatrists. Prescribers and repeat writers continue to increase quarter over quarter, with most new prescriptions initiating after an interaction with a sales representative. These data and trends reinforce our view that this is a promotionally sensitive market with potential to further scale, as we've recently done with our field sales force expansion. ZURZUVAE is being prescribed across a breadth of HCPs who treat PPD. Importantly, OB-GYNs continue to lead the way, accounting for 70% of all prescribers. A majority of the OB-GYNs who first wrote a script prior to July 2024 have written multiple prescriptions.

This is noteworthy as OB-GYNs are at the forefront of peripartum care, seeing these women at the most critical time to screen, diagnose, and treat PPD. At the same time, we continue to recognize broad and equitable coverage as a critical element of our efforts to ensure women with PPD get access to this important treatment. As of today, more than 90% of commercial and Medicaid lives are covered, with a vast majority of policies enabling first-line access to ZURZUVAE for women with PPD without burdensome prior authorizations. I'm pleased to report that all three national PBMs have now developed favorable coverage policies for ZURZUVAE in the treatment of PPD. The progress we've made this quarter speaks to the need and strong value proposition for ZURZUVAE in the treatment of women with PPD.

Barry articulated our growth strategy when we launched ZURZUVAE at the end of 2023: to think big about the opportunity in PPD, start with a focused approach, and scale strategically with success. Our plan to accelerate growth of ZURZUVAE and PPD is centered around three key areas. First, we plan to continue to expand the HCP prescriber base through field force expansion and increasing peer-to-peer engagement, education, and awareness programs in Q4. Sage's expanded sales force is in the field as of the start of Q4. We plan to support repeat writing in PPD by prioritizing a positive clinical and brand experience, including through an efficient prescription fulfillment process. Our goal is for HCPs and women with PPD prescribed ZURZUVAE to feel supported throughout the process.

And finally, we plan to leverage targeted media, digital channels, and social media influencers to empower more women to discuss their PPD symptoms with their HCP and ask if ZURZUVAE is an appropriate treatment option. We are inspired by the ongoing efforts of the PPD community to create real and lasting change in the healthcare system, which fuels our shared commitment to support women with PPD. I look forward to sharing updates on our commercialization efforts in the coming quarters. With that, I will turn it over to Laura to highlight our pipeline updates. Laura?

Laura Gault (CMO)

Thanks, Chris, and good afternoon, everyone. We continue to believe that ZURZUVAE is contributing to the growing momentum in the healthcare community to recognize and treat PPD. I'm encouraged by the progress we are making and the potential to help even more women with PPD. With regard to the clinical stage pipeline, in early October, we announced the results from the phase II LIGHTWAVE study in Alzheimer's disease. Unfortunately, there was not a statistically significant difference from baseline to day 84 in participants treated with dalzanemdor versus placebo, as assessed by the WAIS-IV Coding test, the primary endpoint. A difference between dalzanemdor and placebo was also not observed for secondary endpoints. Given these results, we do not plan to pursue further clinical development of dalzanemdor in Alzheimer's disease.

While we are disappointed by the findings from the LIGHTWAVE study, we extend our gratitude to all the participants, investigators, care partners, patient advocates, and the broader Alzheimer's community, all of whom contributed to this important research. We are also conducting the phase 2 DIMENSION study that evaluates dalzanemdor in people with cognitive impairment associated with Huntington's disease. This cognitive impairment affects the ability of people with Huntington's disease to work and care for themselves, and there are currently no treatments. We look forward to the top-line data from the DIMENSION study, which are expected later this year. We continue to evaluate options across our early stage pipeline, including one I'll highlight today, SAGE-324. This work is built on the insight that alterations in inhibitory GABA signaling may play an important role in the pathophysiology of many brain health disorders.

SAGE-319 is an extra-synaptic preferring GABA A receptor, positive allosteric modulator, or PAM, that is designed to be differentiated from the other GABA PAMs in our portfolio. With SAGE-319, we see an opportunity to treat certain neurodevelopmental disorders where current treatment options are limited. I want to close on a note of appreciation for the hard work and dedication of our teams. They are on the front lines of advancing our understanding of the treatment of brain health disorders. Now, I will turn the call over for a review of our financials. Kimi?

Kimi Iguchi (CFO)

Thanks, Laura. Our financial results for the third quarter of 2024 are detailed in our press release issued this afternoon. As Chris mentioned, we reported collaboration revenue from the sales of ZURZUVAE of $11 million in the third quarter. As a reminder, our reported collaboration revenue is 50% of the net revenues Biogen reports for ZURZUVAE. Note that certain variables in the fourth quarter, including holidays, could influence revenue. Turning to operating expenses, R&D expenses were $54.6 million in the third quarter of 2024. SG&A expenses were $53.2 million in the third quarter of 2024. We expect operating expenses to decrease in 2025 relative to 2024. Our net loss for the third quarter of 2024 was $93.6 million. We ended the third quarter of 2024 with cash, cash equivalents, and marketable securities of approximately $569 million.

As we stated in our reorganization announcement earlier this month, we anticipate that implementation of the reorganization will extend our cash runway, and we plan to update cash runway guidance in the near future. Finally, I want to thank my colleagues for the opportunity to work alongside you as we built a company with a tremendous team. I'm proud of our efforts, especially in revolutionizing the approach to postpartum depression. It's been a privilege to make an impact in this area, and I wish you all continued success. I'll now turn it over to Katie to handle Q&A with the operator. Katie?

Katie Plante (Manager of Investor Relations)

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

Operator (participant)

Thank you. If you would like to signal with questions, please press star one on your touch-tone 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 for questions, star one. And our first question today comes from An Rama with J.P. Morgan.

Anupam Rama (Analyst)

Hey, guys. Thanks so much for taking the question. I know it's only been a few weeks, but wondering what color you can provide on sort of what you're seeing on ScriptTrend from the sales force expansion. Thanks so much.

Barry Greene (CEO)

Hey, Anne Cook. Thanks. Appreciate it. So as we highlighted in the prepared remarks, we put the sales force in for the fourth quarter. So they're out there in the field. Given the promotional sensitivity we've seen with the territories that were already, we're confident that we're going to see an uptick with these, but it's too early to provide any guidance or color other than they're in the field and operating effectively.

Anupam Rama (Analyst)

Got it. Thanks so much for taking our question.

Barry Greene (CEO)

Thank you.

Operator (participant)

The next question will come from Salveen Richter with Goldman Sachs.

Salveen Richter (Senior Analyst)

Hi, guys. This is Shrinath calling for Salveen. Thanks for taking our question. Just a couple from our side. Could you speak to your early stage pipeline and if we'll be seeing any data there next year or the indications for SAGE-324? And also regarding the specialty pharma process for ZURZUVAE, any color on the optimization there? And if there's been any reduction in the lag between the prescriptions with demand shift?

Barry Greene (CEO)

Let me start with specialty pharma and ZURZUVAE, and then I'll turn it over to Laura to talk about the pipeline. So as we talked about in the last quarter, working with specialty pharmas is newer to the OB-GYNs. And just to be clear, OB-GYNs and that healthcare provider office is the right place to intercept PPD for moms early in the disease progress. So as we educate and implement additional solutions, that process is getting better and better. We're not really hearing much complaints about drug getting shipped to moms' homes. In fact, it's a very efficient process that continues to improve quarter on quarter. Laura, you want to talk about the early stage pipeline?

Laura Gault (CMO)

Yeah, sure, so as I highlighted on the call, one of the interesting compounds in our early stage pipeline is SAGE-319, and that differentiates from other equity in our GABA portfolio because it is an extrasynaptic preferring molecule, and so as compared to benzodiazepines or to our prior GABA compounds that have been in development, it has a different pharmacological profile that we hope will translate into a different profile in the clinic. In preclinical data, we have seen that this compound behaves differently than benzodiazepines and the balanced GABA compounds, and it is currently in phase one, and we look forward to starting to uncover some of the information about how this molecule will differentiate in the clinic during the phase one program.

With regard to the rest of the early pipeline, the approach that we've taken to develop our pipeline is to really understand the role of neurosteroids in impacting brain circuitry, and we've started with the GABA A platform and followed with the NMDA platform, but these are just two examples of how neurosteroids could influence various circuitry in the brain, and so in our earlier stage pipeline, we're looking to identify other opportunities for neurosteroids for a platform approach.

Salveen Richter (Senior Analyst)

Thank you.

Operator (participant)

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

Yasmeen Rahimi (Senior Research Analyst)

Thanks, team. First of all, Kimi, it's been great working with you, and you'll be greatly missed. Same goes to Chris, to all of you, and thank you for your contribution at Sage. Just want to maybe start that, and in terms of my question, I guess, given sort of the setbacks recently around the pipeline product, what evidence can you point us to get clients excited going into the Huntington's disease readout here at year-end? Appreciate color.

Barry Greene (CEO)

Yes, thanks. And Kimi's going to look forward to her retirement, but certainly has done a wonderful job helping to build Sage. Let me start, and then I'll ask Laura to talk about Huntington's and some of the earlier data we saw. So look, as you heard on the call, we're off to a very strong start with the launch of ZURZUVAE and PPD. And we think seeing that continued growth of shipments quarter to quarter and really the transformation of PPD is very exciting for us. Additionally, we have an earlier stage pipeline that Laura already commented on. And seeing those data move along, we think create a short, medium, and potentially longer-term value as we follow the science there and apply all the lessons learned from all the compounds we've already got data on to earlier stage compounds.

We were learning a lot over the last four years and applying those learnings to earlier stage pipeline. You should see some different thinking moving forward there. Laura, you want to talk about dalzanemdor, Huntington's, and some of the earlier data and some of the hope we have for the upcoming data readout?

Laura Gault (CMO)

Sure. So for those who may not be familiar, the DIMENSION study is our study of dalzanemdor in patients with Huntington's disease who have cognitive impairment. And we are expecting results from that study before the end of the year. We have a very strong scientific rationale for this study that relies on really two approaches. The first is decades of research into the role of the NMDA receptor in learning and memory. And the second is a later recognition that a neuroactive steroid, 24S-hydroxycholesterol, is reduced in patients with Huntington's. Now, this is a neurosteroid that binds to the NMDA receptor and modulates it. And we expect that dalzanemdor could be expected to modulate the receptor in the same way, restoring the function of the NMDA system towards normal.

One of the interesting factors of a study in Huntington's disease is that it is a genetically defined and younger population than what we've seen in some of our other studies. That means this population is more homogeneous, it has fewer medical comorbidities, and as a consequence, it's easier to detect a signal in this population. So as we said, we don't anticipate that the results we've seen in prior studies will necessarily predict the results from dementia. We're looking forward to seeing the results from those studies later this year.

Yasmeen Rahimi (Senior Research Analyst)

Thank you so much.

Barry Greene (CEO)

Thanks, Yaz.

Operator (participant)

The next question will come from Jay Olson with Oppenheimer.

Jay Olson (Executive Director and Senior Analyst)

Oh, hey. Thanks for providing this update. Could you please talk about the Talkiatry collaboration that Biogen has initiated and the potential for that opportunity to drive uptake in PPD through telehealth? Thank you.

Barry Greene (CEO)

Yeah, Jay, that's a great question. I'll start, and then I'll ask Chris to talk about it, so as we think about the paradigm shift we're trying to drive in PPD, it really does start with those that see moms before, during, and then obviously at the birthing event, and then directly after the pregnancy, and that is OB-GYNs and nurse practitioners and physician's assistants that help them. So that's the right time frame in place to screen, and then if appropriately diagnosed, diagnose and treat, and as you saw from this quarter, over 70% of the scripts are in fact coming from OB-GYN. So we are intercepting PPD early in the disease process. That's great. Some women don't get screened and diagnosed, and others, frankly, don't go on to develop symptoms until multiple months after birth, so they're outside the practice of OB-GYNs.

So it's important for us to act for us to have access and educate psychiatrists and primary care physicians so that those moms that have gotten out of the OB-GYN potential screening and diagnosis can get treatment for their PPD symptoms if diagnosed. And that's really where the other disease, the other specialties come in as well as psychiatry. Chris, you want to talk further about that?

Chris Benecchi (Chief Business Officer)

Yeah. Very, I think you hit it. Telehealth and organizations like Talkiatry are a much-needed resource for new mothers as they navigate the challenges of motherhood. And effectively, what they do is they meet that woman at a place in time where if she needs supportive care, she's able to do so from whatever environment that she's in. So we really believe, I think, as you said, that this is going to expand the opportunity for so many women to engage with a healthcare professional and gain deeper insight into how to manage through their postpartum depression.

Barry Greene (CEO)

Yeah. And Jay, I think you highlighted this in terms of further uptake. It might take in certain areas of the country weeks to months to get into a psychiatrist. So this provides immediate access should a mom really need that help that Chris just highlighted.

Jay Olson (Executive Director and Senior Analyst)

Super helpful. Thank you very much.

Barry Greene (CEO)

Thanks, Jay.

Operator (participant)

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

Athena Chin (Analyst)

Hi. This is Athena on from Ritu. Thanks for taking the question. Another on your early stage pipeline. What is your timeline to unveiling promising early-stage assets with cost-effective development? And would these assets also be neuro-focused or neuropsychic-focused? Thank you.

Barry Greene (CEO)

Thanks for the question, Athena. Let me ask Laura to start, and then Mike, you want to chime in there as well?

Laura Gault (CMO)

Yeah. So right now, we are in the process of evaluating all of the potential assets across our portfolio and are conducting a portfolio prioritization process. When that is complete, we will share more of the details about the early pipeline.

Michael Quirk (Chief Scientific Officer)

And then just to build a little bit on what Laura said earlier, I think from the beginning of Sage, there were two elements that we really focused in on in trying to understand the best way to bring forward new medicines in brain health disorders. And one, as Laura mentioned, was understanding how the neuropathology of neural circuits and the role of neural circuits play across a range of brain health disorders. And the other one was really around our in-house chemistry platform that's focused on understanding initially neurosteroids, but I think more broadly endogenous steroids and how they engage those neural circuits.

And so, while we focus our clinical pipeline right now is really emphasizing the GABA and NMDA receptors as critical ways of interacting with these neural circuits, we've also been working on research on understanding the other endogenous pathways within our chemistry platform that can engage these circuits that go beyond just the GABA and NMDA receptor. And as we continue to evaluate those opportunities, we'll have more information to share.

Athena Chin (Analyst)

Got it. Thank you.

Michael Quirk (Chief Scientific Officer)

Thanks, Athena.

Operator (participant)

We'll take a question from Ami Fadia with Needham.

Ami Fadia (Managing Director and Senior Analyst)

Hi, good evening. Thanks for taking my question. With regards to some of the efforts in conjunction with Biogen to support women that are sort of ending up being treated by a psychiatrist rather than an OB-GYN, can you just sort of step back and give us a sense of sort of how the market dynamics or how the market is split with regards to the number of women that actually get seen by an OB-GYN versus a psychiatrist and help us understand also from the sense of the severity of PPD, if you've been able to get a better sense of how the severity level of these patients differs across the market, that would be helpful. Thank you.

Barry Greene (CEO)

Yeah, I mean, thanks for the question. That's a good one. So just the numbers, as we've highlighted, over 70% of the prescriptions are coming from OB-GYN, which we think is the right place to intercept PPD. PPD, like any disease, the earlier in the disease onset, you can treat, the better off typically the outcomes, and as we all know, an under-treated mom has devastating consequences, not just for mom, but for baby, so the ideal state is during pregnancy or directly after the baby's born for the OB-GYN office to be the primary spot of standard screening and if appropriate diagnosis and then if appropriate treatment with an intervention. What we're seeing, and we highlighted this in the remarks, is that once an OB-GYN uses ZURZUVAE, they're seeing more PPD, and they're using ZURZUVAE more often than not in seeing that PPD.

So that's the dynamic we want to create. Now, as we highlighted, not every mom with PPD gets picked up in the weeks being treated by OB-GYN, and several women develop symptoms weeks or months after delivering a baby. Then our PPD symptoms. And that's where primary care and psychiatry comes in. But just to be clear, our real focus is to continue to grow awareness in the OB-GYN office because that's the right primary intervention for PPD. And we want to continue to see the scripts flowing from OB-GYNs.

Ami Fadia (Managing Director and Senior Analyst)

Got it.

Barry Greene (CEO)

Okay. You also asked about the severity. Thanks, Amy. So let's hit that quickly. So we are seeing mild, moderate, and severe PPD treated at all specialty levels. So it's not really differentiating by specialty. The other thing we're working on from a disease state awareness is really to help the healthcare community understand that since PPD doesn't really fit into the buckets of mild, medium, severe, a woman could show up on Monday and be diagnosed with mild PPD, only develop severe PPD on Friday. So if someone has PPD, they need an intervention, whether it's another treatment through ZURZUVAE or therapy, they need help.

Ami Fadia (Managing Director and Senior Analyst)

Got it. Thank you.

Operator (participant)

Moving on to Brian Abrams with RBC Capital Markets.

Brian Abrahams (Managing Director and Global Sector Head)

Hi there. Thanks so much for taking my question. I'm curious, what will you guys be looking for in dimensions on SDMT and across the secondary endpoints in order to move dalzanemdor forward? Would signals or trends across all or some of these endpoints be enough? And how has the bar evolved since the decision to restructure and refocus resources? Thanks.

Barry Greene (CEO)

Hey, Brian. Thanks for the question. I'll ask Laura to start, and I'll circle back with potential additional color.

Laura Gault (CMO)

Yeah, so in the DIMENSION study, we have recently adjusted the primary endpoint to the SDMT, the Symbol Digit Modalities Test, and this is a test that's been around for nearly 100 years in multiple forms. Clinicians are aware of it. Regulators are familiar with it, and it's considered a reliable measure of cognition over time. We are looking in the study for obviously a clinically meaningful change between SAGE-718 and placebo on this endpoint, and we'd like to see that supported by meaningful changes on the secondary endpoint, which is an endpoint of function called the Independence Scale in Huntington's disease and across some of the other secondary endpoints.

Brian Abrahams (Managing Director and Global Sector Head)

Thanks, Laura. Thanks, Brian.

Operator (participant)

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

Tazeen Ahmad (Stock Analyst)

Hi, good afternoon, and thanks for taking my questions. On ZURZUVAE, can you potentially give us a little bit of color on breadth and depth of use? Are most of the scripts coming from physicians who have had experience prescribing it before and are adding to their prescriptions for other patients? And can you just talk about the rate with which you're adding new prescribers now relative to when the launch first started? And then to go back to MDD, can you give us a little bit of color on the details around your decision to not pursue MDD? Is it that the trial would be difficult to design, or is it more that you feel you want to focus your resources on PPD? Thanks.

Barry Greene (CEO)

Yeah. A good set of questions. Let me start with MDD, and then I'll provide some comment on ZURZUVAE, but just turn it over to Chris to elaborate further. So in terms of MDD, as we thought about the clinical trials required to generate a potential indication of the risk relative to our portfolio and our resource allocation, we think we're best off continuing to commercialize ZURZUVAE as the key to unlock the blockbuster potential in PPD, helping more and more moms. That's the right place for us to use our balance sheet, take risk, and spend the money, particularly after a more focused size of company. And obviously, Biogen also aligns with that decision. In terms of ZURZUVAE, our strategy is to drive both breadth and depth of prescribers. So our field force, our non-personal promotion, our marketing, our direct-to-consumer are all out there drawing breadth and depth.

Chris, you want to provide some more color?

Chris Benecchi (Chief Business Officer)

Yeah, so Barry, to reinforce what you said, we're seeing ZURZUVAE prescribed across that breadth and depth of prescribers that you mentioned who treat PPD, obviously led by OB-GYNs with 70% of prescribers being OB-GYNs that we saw in the third quarter, and many of them are using ZURZUVAE as a first-line therapy, so of course, over time, over the course of the quarter, what we see is that prescribers are increasing and repeat utilization of prescriptions are also increasing as physicians gain more experience with this medication. Obviously, that's enabled by the experience they have, the medication working as it did in our pivotal studies when they see it in the real-world setting, supported by the access and reimbursement ecosystem that we have that enables first-line access for this medication.

In effect, what we have happening here is a number of different commercialization factors coming together, enabling breadth and depth of utilization across that group of physicians that we've talked about.

Operator (participant)

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

Katie Plante (Manager of Investor Relations)

Hi everyone. Thanks for taking our question. This is Morgan for Vikram. So we have two. First, what magnitude of sales uplift do you think that the recent sales force expansion for ZURZUVAE could drive? And over what period of time, in terms of months or quarters, do you think it'll take to see this pull through? And then our second question is, do you think that the current ZURZUVAE sales force is rightly sized, or could there be any additional investments into the sales force in 2025? Thank you.

Barry Greene (CEO)

Morgan, that was actually three questions. Way to get it in there. I'll start, and I'll ask Chris to provide any comments. So just to back up, when we thought about the launch, we thought very big about the potential of PPD. And we've said it a number of times. We see the blockbuster potential in ZURZUVAE helping many, many women suffering with PPD. The epidemiology, the diagnosis rates, treatment rates support this. And we're already seeing tremendous use of ZURZUVAE frontline by many of those healthcare providers educated. So we're off to a really strong start with 30% growth. The Field Force is calling on targets, some of whom have been called on, some of whom have not. Those called on, we should see immediate impact. Those newer ones might take one or two or three calls to see the impact.

But we should be seeing some impact next quarter. And then in terms of growth, we see growth quarter to quarter here for a pretty extended period of time. I can't really provide a forecast or guidance there. But again, based upon the numbers, epidemiologically, half of women a year suffer from PPD. Less than half of those are diagnosed, and half of those are treated. We're trying to change all of that. The number of treated was ZURZUVAE, the increased diagnosis, and the increased awareness. So we see this continuing to grow for an extended period of time, quarter on quarter. As we see success, we might continue to invest in DTC, marketing, non-personal promotion, including additional sales force expansion if it's warranted and will drive further success.

Chris Benecchi (Chief Business Officer)

What I would add, Barry, is that what we've learned very quickly is this is a promotionally responsive market. It's promotionally responsive to field force effort. It's promotionally responsive to non-personal efforts, which is why we're investing in both of these as we go forward. We want to certainly make sure that as there is opportunity, that we're capitalizing on that opportunity right now, and I think you hit it. We'll continue to assess the investments required to grow the market as we move forward, but again, through promotional responsiveness and what we've learned, the time is right right now to be doing the things that we're doing.

Katie Plante (Manager of Investor Relations)

Thank you.

Barry Greene (CEO)

Thanks, Morgan.

Operator (participant)

The next question will come from Uy Ear with Mizuho.

Uy Ear (VP and Senior Equity Analyst)

Thanks for taking my questions. Yeah. So first question is, could you maybe elaborate a bit on coverage, particularly with, I guess, Medicaid reviews? I think in the last quarter, you were saying that several large states were conducting reviews. Just wondering how much more coverage have you gotten from Medicaid versus commercial? And second question, would you give the number of prescriptions that were written in Q3? I might have missed it. I didn't see it in the press release. Thanks.

Barry Greene (CEO)

Yeah. I'll start, and then I'll ask Chris to comment. So last quarter, we highlighted that we were going to provide shipments and revenues going forward and drop prescriptions. So we've done that. In terms of coverage, I characterize the coverage as way ahead of schedule in terms of where we are launched, both in terms of commercial, PBM, and Medicaid. But Chris, do you want to provide more color?

Chris Benecchi (Chief Business Officer)

I mean, as a part of our strategy, Barry, what we've historically said is that access and reimbursement is paramount to a successful launch, which is why we've worked so hard on ensuring that in this area, both with respect to commercial plans as well as Medicaid. What we've seen is that approximately 90% of all commercial and Medicaid lives are now covered with a vast majority of really the policies enabling first-line access to ZURZUVAE without burdensome prior authorizations. Again, it was a goal for us as we set out to launch this medication.

I think with regard to Medicaid and the specificity of Medicaid, while we haven't given out the exact percentages of Medicaid, what we can say is the majority of Medicaid plans for which we've worked, there is a pathway to the utilization of ZURZUVAE again in the sense of no onerous prior authorizations and no step edit, so regardless of whether you're a commercially insured patient or you're someone with Medicaid, there's a high likelihood that not only are you able to get this medication, but you get it in the first line, and you're able to do so rather affordably, so very encouraged by what we've seen so far. More work clearly to be done, and as I think the other thing that we said earlier today is that we now have three of three national PBMs, so the wins in our sales from a market access perspective.

Uy Ear (VP and Senior Equity Analyst)

Okay. Thank you.

Operator (participant)

Moving on to Danielle Brill with Raymond James.

Hey, guys. This is Alex on for Danielle. Thanks for taking the question. Question on ZURZUVAE. Just wondering how much insight you have into the ZURZUVAE patient demographics. Just curious if you have any visibility whether ZURZUVAE is being prescribed to mothers with a prior history of PPD or MDD, for that matter. And additionally, curious whether you're able to see a breakdown of % of patients prescribed ZURZUVAE who are first-time mothers versus those having their second or third child, for example. Thanks.

Barry Greene (CEO)

Yeah. Alex, thanks for the question. Chris, do you want to start?

Chris Benecchi (Chief Business Officer)

So what I would say about what we know about patients, we actually know quite a bit. The mix of patients that we see, some do have a prior history of major depressive disorder, and a significant group of the patient population has no prior history. They're new to the experience of postpartum depression. But I'd also say that across severity types, mild, moderate, or severe, we're seeing utilization of ZURZUVAE without focus on any one of those particular areas. And I think what's really important about that is it says that clinicians aren't making a determination based upon severity from a scale. They're really assessing the needs of the mother when she presents in front of them with the signs and symptoms of PPD while also taking into consideration prior history.

So what we have effectively happening here is that mothers with PPD have access to this medication, as I said. They have access to ZURZUVAE as a first-line therapy in many cases, which is really exciting because what it means is that there's the ability to fundamentally change the way PPD is not only thought about in terms of screening and diagnosis, but the way it's ultimately treated.

Barry Greene (CEO)

Yeah. Just to round that out, I guess to take the opposite side of that, Alex, we're not seeing ZURZUVAE limited to prior history or not, or limited to severity. It's being used across all kinds of PPD, including new mothers or mothers with, as I said, their second or third or more children, which is great. That's the dynamic we want to see.

That's very helpful. Thanks so much.

Thanks, Alex.

Operator (participant)

The next question comes from Joel Beatty with Baird.

Joel Beatty (Biotechnology Equity Research Analyst)

Hi. Thanks. Maybe a follow-up to the last question is, how is the use of ZURZUVAE in patients who are already on a treatment for depression? Is that a setting for growth, and do OB-GYNs feel comfortable prescribing there, or is that more a setting who has ever been managing the depression?

Barry Greene (CEO)

Yeah, Joel. So what we're seeing, again, the majority of scripts, over 70%, are coming from OB-GYNs, which is suggestive that as the OB-GYNs do and ACOG guides them to do, they need to screen and diagnose for PPD. So we're seeing that. And as we highlighted with the previous question, we're seeing moms being prescribed ZURZUVAE with or without prior history, irrespective of the number, the child they had, and across all ranges of severity: mild, medium, severe, which we shouldn't be using anyway. We are also seeing ZURZUVAE used as monotherapy on top of an antidepressant that a mom may have been on or reinitiated and concomitant use. So what's really good here is that we're seeing the opportunity for growth across all segments. There's not one segment that's primed for growth. It's really across all these segments.

Again, that's exactly what we want to see at this point in the launch.

Joel Beatty (Biotechnology Equity Research Analyst)

Thanks.

Barry Greene (CEO)

Thanks, Joel.

Operator (participant)

We'll go to Marc Goodman with Leerink.

Marc Goodman (Senior Research Analyst)

Yes. Two questions. One, Barry, on business development. Are you looking outside at all for new products, or should we be thinking internally developed and those products that we've talked about in the past that are preclinical and moving forward? And that's how we should think about your pipeline. And then just the other question is, can you talk about the inventory change? In the quarter, you were 5.5 weeks. Last quarter, where are you at the end of the third quarter, and how much revenue did that eat into what you actually reported? Thanks.

Barry Greene (CEO)

Yeah, Mark, thanks for the questions. I'll take the BD. You want to ask Chris to talk about inventory, so as we've highlighted, we continue to be very intellectually curious, and to be frank, anything we've liked that we might want to bring in, others have really liked too, and it's gone for pretty significant pieces of equity or cash, so we'll continue to evaluate any potential opportunities that we believe support our business priorities and advance new therapeutic options for patients, including bringing business development in and bringing our pipeline forward, so we are open for opportunities there. Chris, do you want to take the inventory piece?

Chris Benecchi (Chief Business Officer)

So with respect to inventory today, we haven't commented on days on hand or weeks on hand or the revenue impact of inventory. But what we can say is that the strong revenue growth in Q3 was largely driven by an increase in demand and that revenue from shipped units to PPD patients increased by approximately 40% in the third quarter. And our belief is that where we stand right now, inventory levels have largely normalized off of where they were from the initial build, and we're exactly where we should be as of the third full quarter of launch.

Barry Greene (CEO)

Yeah. What I'll highlight on the inventory side is as we continue to.

Marc Goodman (Senior Research Analyst)

What do you?

Barry Greene (CEO)

Go ahead, Mark.

Marc Goodman (Senior Research Analyst)

No, I was going to say, didn't you say that your target was three to four weeks? Or I think I heard that maybe last quarter. Is that correct?

Barry Greene (CEO)

Yeah. So what I was going to say is as we continue to see double-digit growth quarter to quarter, the number of units in inventory will obviously grow because to cover three or four weeks of demand, you need a bigger number of.

Yeah.

We'll continue to see inventory grow because demand continues to grow. That three-to-four-week target you highlighted is something we've highlighted in the past. Again, that's a decision that wholesalers and specialty pharmacies will be making.

Salveen Richter (Senior Analyst)

Thanks.

Marc Goodman (Senior Research Analyst)

Thank you.

Operator (participant)

Thank you. And that will conclude the Q&A portion of today's call. With that, I will turn it back to Barry for closing remarks.

Barry Greene (CEO)

Hey, thanks, Justin, and thanks again for all the questions and everyone for joining us this afternoon to review our results for the third quarter of 2024. I know I said it in the call, but I do want to take a moment to thank Kimi for her remarkable service to the company. Kimi has been instrumental in originating our exceptional culture, balancing top and bottom line, and really driving an aggressiveness and a fortitude that's part of the company now, really helping us to think about short, medium, and long-term value, so we wish Kimi the best and look forward to hearing about all her travels and adventures with Pauli. In closing, we're encouraged by the strength of ZURZUVAE's launch momentum as a treatment for women with PPD and deliberate in our plan to sustain growth through our commercialization efforts.

We're also looking forward to sharing top-line data from the dalzanemdor studies in people with cognitive impairment associated with Huntington's disease, anticipated before the end of the year, and finally, we're making strategic decisions intended to build for short, medium, and long-term value creation. Thanks again, everyone, and have a great day.

Operator (participant)

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