Sage Therapeutics, Inc.

Good morning, welcome to Sage Therapeutics third quarter 2021 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 the 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 Helen Rubenstein, Investor Relations at Sage.

Good morning, and thank you for joining Sage Therapeutics' third quarter 2021 financial results conference calls. 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 related to today's call, as well as the slides that contain supplemental details. I'd 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 consult 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 Green, our Chief Executive Officer, who will provide an overview of accomplishments during the quarter and some general context. We will also be joined by Jim Daugherty, our Chief Development Officer, who will review recent development progress across our programs, and Kimi Noguchi, our Chief Financial Officer, who will review financial results from the quarter. With that, I'll now turn the call over to Barry.

Thanks, Helen, and thank you, everyone, for joining us this morning. I'll begin the call by reviewing our recent corporate and clinical progress before turning the call to Jim to provide commentary on our clinical expectations for the remainder of 2021. Then Kimmy will provide an update on our financials. This year and quarter have been marked by significant progress for SAGE. We recently announced that following a pre-NDA meeting with the FDA, we and Biogen plan to submit an NDA for Xeranilone in MDD in the second half of 2022 and with an additional associated submission in PPD in the first half of 2023. We're pleased that we've reached alignment with the agency and believe we have a clear path for this submission. This brings us one step closer toward our goal of helping patients suffering from MDD and PPD. Now, let me take a step back to reflect on how we got here. We met with the agency in early 2020 and designed three distinct Phase III studies, two in MDD and one in PPD. The plan set in motion was for a positive study from any one of the three paths to support an NDA filing and subsequent approval, since it will provide the third positive pivotal study. Based on the positive results from the waterfall study, we believe that we have the necessary data to submit an NDA for Xeranalog. And we're delighted that our recent pre-NDA meeting with the FDA reaffirmed that belief. And now, in fact, we have four positive studies, MDD-201B, Robin, Waterfall, and the Shinugai Phase 2 study. The data we have generated in clinical development to date support our belief in the overall benefit-risk of Zoranolone. The plan NDA will include efficacy data from MDD-201B, Waterfall, Robin, and the Japanese study, as well as retreatment data from Shoreline, data from the ongoing pharmacology studies and CORAL, and safety from the entirety of the program. Importantly, The CORAL study is an adjunctive use study designed to demonstrate the benefits of Zoranilone when co-initiated with the standard antidepressant treatment, or ADT. Given the efficacy data we already have in hand to support the planned NDA filing and to align the CORAL study primary endpoint with the goal of the study, we announce today that the primary endpoint, HAMD17 change from baseline, will be measured at day three. This change is designed to allow us to demonstrate the rapid reduction of depressive symptoms. We'll also assess the impact of Zoranilone during the dosing period, as well as its safety profile. We believe if successful, these data may be important to inform potential real-world use if Zoranilone is approved. But we do not believe choral efficacy data will be required for the MDD filing pathways. CORAL data will, however, contribute to the overall safety database, regardless of the outcome of the primary endpoint. We've had a highly productive and transparent relationship with the agency and look forward to continuing to engage with them as we begin the rolling submission for Xeronalone, planned to commence in early 2022. We will work to ensure the totality of the landscape and nest programs are appropriately reflected in our planned NDA submission package and the product label if approved. We've recently also presented data from the landscape and nest programs at both the ECMP and annual site congress that reinforce the differentiated profiles around what we've seen to date in clinical development. Jim will walk you through the data we've presented, but I want to take a moment to highlight that we've seen a consistent profile for xeranolone across the totality of data. I would also like to take a moment to congratulate our colleagues at Shinugi, who recently presented positive results from a phase two study of Zoranilone conducted in Japan. These results further demonstrate the promise of Zoranilone for people living with MDD, and we look forward to continuing our relationship with them. As you can see from the totality of data collected across the landscape and nest program to date, Zoranilone has consistently demonstrated rapid and sustained reductions in depressive symptoms and a well-tolerated safety profile without the adverse events that are often associated with discontinuation of standard of care ADTs. We believe that we are well-positioned to be able to provide this important treatment to patients suffering from MDD and PPD, if approved. To this end, we're actively engaging in scientific exchange with KOLs and are pleased that many of them recognize both the value demonstrated across the Xoranilone clinical theta package as well as the potential for use in specific patient types they see in clinical practice. As we look to the next year, we anticipate building on this work. By remaining steadfast in our commitment to put MDD and PPD patients first in our Zoranolone development efforts, assembling the right team at the right time to execute on our planned NDA filing, and reinvesting our learnings from Zoranolone across our pipeline, we believe we are poised to make a difference for people with depression and other brain health disorders. We look forward to continuing to provide updates on Zoranilone as we pursue the initial NDA filing submission for MDD. Now, turning to our neurology franchise led by Sage 324, which is developed in-house and is part of our collaboration with Biogen. Sage 324 is currently being evaluated as a potential treatment for patients suffering from essential tremor and other neurological disorders, including epileptic form disorders, and Parkinson's disease. We believe that the pharmacologic characteristics of SAGE-324 are well suited to address the significant unmet need in patients suffering from essential tremor and other neurological diseases. Following the positive results from the kinetic study, we're preparing to initiate a Phase II dose-ranging study expected to commence later this year. The goal will be to optimize the dose and frequency with a good tolerability profile and a dosing schedule to maintain plasma concentrations that translate into sustained tremor symptom control. We look forward to providing updates on this study as we are able. Turning to our new oral franchise, where we are evaluating SAGE718, our wholly owned first-in-class NMDA receptor PAM, as a potential oral therapy for cognitive disorders associated with an MDA receptor dysfunction. This quarter, SAGE 718 received fast-track designation for development as a potential treatment for Huntington's disease from the FDA. As a reminder, we saw promising early data in a Phase I study of SAGE 718 in people with early Huntington's disease last year. We're on track with our plan to initiate a randomized placebo-controlled Phase II study with SAGE 718 in early to moderate Huntington's disease this year. The study F-positive will bring us one step closer to pursuing an initial regulatory indication for SAGE 718. I'm also pleased to announce that we plan to initiate a second randomized placebo phase two study with SAGE 718 in 2022. This will be in patients with Parkinson's disease cognitive dysfunction. We believe the study will meaningfully contribute to our understanding of SAGE 718 as we seek to provide a safe and efficacious treatment for patients suffering from this disorder. Lastly, SAGE 718 is also being evaluated in an ongoing luminary study as a potential treatment for Alzheimer's disease cognitive dysfunction. Today we announced the study is fully enrolled and we are on track to announce top line data from the study before the end of this year. As you can see, we've realized great progress across our brain health franchises so far this year. I'm also pleased to share progress on key corporate updates on today's call. This quarter, we are happy to welcome Chris Finecke, Chief Commercial Officer to SAGE, and announce that Vanessa Proctor has been elevated to serve as Head of External Affairs and joined our Executive Leadership Team. Additionally, Jim Dougherty, on the call with me, has assumed the role of Chief Development Officer. We've also elevated Mike Quirk to Senior Vice President Discovery and Research, where he will continue to build our research capabilities. As we expand and accelerate our efforts across our organization, and with so much to look forward to in the balance of 2021 and next year, I'm confident that their contributions across our organization will be instrumental to our collective progress toward becoming leaders in brain health. Today, we're also announcing the departure of Steve Keynes, SAGE's Chief Medical Officer. It's been Steve's goal since I met him to seek a CEO role, and he's fulfilling that today and will become CEO at a private biotech company. I'm thrilled for Steve and his new role. Steve has made significant contributions to SAGE over the past eight and a half years. We extend our thanks for his leadership in advancing our brain health programs and wish him success in his future endeavors. Steve has contributed to establishing SAGE as a leader in brain health and progressing programs across our pipelines. We're highly confident in the strong team that we have to continue to execute on our priorities. I invite Steve to say a few words, Steve.

Thanks Barry. As I reflect on my time at Sage, I'm proud of all that we've accomplished. In my eight and a half years here, I've had the opportunity to develop and launch Zorresso, establish and grow our development organization, advance the pipeline and bring Zoranilone through a robust clinical development program. It's long been my aspiration to lead a company, and I made the decision that now is the right time to pursue a CEO role. I couldn't be leaving Sage in a better position. We've seen great data with Zorana Loan, believe we have a clear path to filing an MBA, and I'm very confident in this team's ability to take this program forward. I appreciate the support and encouragement from Barry and the leadership team, and I look forward to watching Sage's continued success. I know that I leave Sage in great hands and in extraordinary shape with a clear path towards Sage's second drug to market.

Thanks, Steve. In closing, I'm highly confident that our accomplishments across our brain health franchises in the third quarter will translate into continued success as we execute on our strategic goals. And I believe we are primed to enter the next phase of Sage's journey to becoming the leader in brain health. Now I'd like to turn the call over to Jim to detail our clinical accomplishments and expectations for the balance of 2021. Jim? Thanks, Barry, and good morning, everyone. In 2021, we have made important advancements across our three brain health franchises, including our early-stage programs, and I am pleased to highlight our next steps across each, starting with the three ongoing Phase III studies in our seranolone program, Coral, Shoreline, and Skylark. As a reminder, CORAL is designed to evaluate the efficacy and safety of Zoranlone 50 milligrams when co-initiated with new open-label SSRIs in patients with MDD. We also announced today that the primary endpoint in the CORAL study, change from baseline on the HAMD17, will be measured at day three. We believe this update is in line with the goal of the study to demonstrate the rapid onset of Zoranlone, and we will also assess the benefits throughout the treatment period and expect to see a consistent, well-tolerated safety profile. Additionally, as we continue to increase our focus on the potential commercial launch of Zoranilone, we believe that including a trial with a day three primary endpoint may be a useful complement to the broad clinical package for Zoranilone. The study is now closed to screening and top line results are expected in early 2022. Of note, the enrollment for the CORAL study is anticipated to be within the expected range allowed by the study protocol. The target enrollment is 424, and we expect the study to enroll about that number of patients or perhaps slightly higher. The SHORELINE study is a naturalistic, open-label safety and tolerability study to investigate as needed repeat treatment with Zoranlo over a one-year period in patients with MDD. We believe this study will provide physicians with important information on how Zoranone may be used to treat people with MDD if approved. We are on track with our plan to report a top-line data cut from the 50-milligram one-year cohort in Shoreline later this year. Moving forward, enrollment in the study will continue following our prior announcement that we expanded the target enrollment to 500 patients. and we are offering patients from the CORAL study the ability to roll over into the SHORELINE study following their completion of the CORAL study. The other ongoing phase three study of Zoranilone is the Skylark study in PPD, which we expect to read out in mid-2022. Our vision for the Zoranilone program is to offer a new way of thinking about the treatment of depression, and we recognize that that means providing a robust data package to drive that change. This is a program with seven major clinical studies and more than 4,000 patients treated, and MDD is a large market with an estimated 19 million sufferers every year. The size of both the MDD population and our program necessitate a significant filing package. As such, we're planning to assemble a package that meets the requirements of the FDA for a submission of this size and provides information on how Zaranloan might be used in the real world if approved. Let me lay out the filing strategy. We plan to begin the rolling submission in early 2022 with the CMC and non-clinical modules submitted first. The clinical module will likely be the last module submitted for this filing, expected to occur in the second half of 2022. This timing reflects five to six months after the last component of the clinical module is anticipated to be completed, during which time the team will focus on integrating the data package across studies to tell the most complete clinical story for Zoranilone. Additionally, in October, we presented data at the 34th European College of Neuropsychopharmacology, or ECMP, Congress, that further supports the differentiated profile seen to date with Zoranilone in clinical development, including a rapid and sustained reduction in depressive symptoms and a unique and well-tolerated safety profile. Further, in a pooled analysis from the landscape and nest programs, xeranolin treatment has led to rapid and sustained improvement in quality of life and overall health at day 15. This improvement continued to increase through day 42, as measured by the SF36 version 2, a patient self-reported measure of general health. Dr. Anita Clayton, Chair of Psychiatry and Neurobehavioral Sciences at the University of Virginia School of Medicine and Principal Investigator of the Waterfall Study, recently presented these data in an encore presentation that is available via the investor section of our website. And if you haven't seen her presentation yet, I recommend watching it. We also presented data at the 34th Psych Congress showing that Zoranolone demonstrated rapid improvements across AMD-17 subscales measuring the core symptoms of depression as well as symptoms of anxiety in the waterfall study. These findings are consistent with the totality of data from the landscape and nest programs. We also presented analyses demonstrating that Xeranolin treatment led to rapid improvements in functional impairment and improvements in depressive symptoms across patient populations, such as age, gender, and body mass index at day 15. regardless of whether patients were receiving Zoranilone as monotherapy or concomitantly with a standard-of-care antidepressant. We're proud of the progress we've made with Zoranilone throughout 2021 and excited by the profile we've seen across the totality of the development program. We believe Zoranilone has the potential to offer a different treatment approach that may enable patients to experience reduction in depressive symptoms quickly and maintain longer treatment-free intervals without burdensome side effects. Now, I'd like to detail the advancements made in our neurology franchise, led by Sage 324, a next-generation positive allosteric modulator of GABA-A receptors, which we believe holds significant potential in treatment of neurological conditions like essential tremor. As a reminder, we reported positive data from the kinetic study earlier this year that showed improvements in upper limb tremor scores measured by the Tetris performance subscale item 4 upper limb tremor score and importantly, demonstrated a statistically significant correlation between Tetra scores and activities of daily living observed at every time point. This is an important finding that demonstrates that the reductions in tremor seen with phase 324 in the study translated to meaningful effects for patients. Based in part on these results, we are on track to initiate a placebo-controlled phase 2 dose ranging study in SAGE 324 for ET to optimize the dose and frequency plan to commence in late 2021. In collaboration with Biogen, we look forward to continuing the development of SAGE 324. We remain confident that our planned Phase II study will generate a dose and frequency for further development to advance our goal of establishing an optimal benefit-risk profile. Moving to the development underway in our neurology franchise, we're excited about the future prospects of Sage 689, a potent product candidate that has demonstrated rapid absorption, good viability, and solid formulation flexibility, with potential to treat therapeutic areas that suffer from a lack of treatment options, including acute agitation, mania, or even migraine. We announced last quarter that we dosed the first patient in the Phase I program for Sage 689, and remain on track to complete the Phase I SAT study in late 2021. Additionally, I'm also pleased to share that IND-enabling preclinical work is continuing for SAGE319, an oral extrasynaptic GABA-A receptor-preferring PAM. The advancements of the SAGE689 and SAGE319 programs represent continued data-driven expansion and growth of our SAGE-developed, wholly-owned neurology pipelines. Turning to our neuropsychiatric franchise, we are making important strides in developing SAGE718, our NMDA receptor PAM, that is a potential oral therapy for disorders where impairment of cognition is one of the main drivers of disability. The FESTRAC designation recently granted to SAGE718 as a potential treatment for Huntington's disease accelerates our developmental efforts to bring this therapy to patients. In a phase one study of patients with early HD, treatment with SAGE718 was associated with robust improvements in tests of cognitive performance, such as the two-back test, that began on day eight and were maintained through day 14, the end of the treatment period. We are on track with our plan to initiate a double-blind, placebo-controlled phase two study of SAGE718 in Huntington's disease later this year. We also previously reported exciting data in the first part of our open-label phase 2A trial for SAGE-718, known as the PARADIGM study, evaluating patients with mild cognitive impairment due to Parkinson's disease. The data demonstrate that SAGE-718 had a positive impact on multiple domains of cognition, including executive function and learning memory, while leaving domains altering simple attention or reaction time unaffected. SAGE 718 has been well-tolerated in studies to date. As Barry mentioned, we are excited to announce our plans to launch a Phase II placebo-controlled study in Parkinson's disease cognitive impairment, which we expect to begin in 2022. Lastly, the luminary study with SAGE 718 in patients with Alzheimer's disease, mild cognitive impairment, and mild dementia is fully enrolled, and we look forward to reporting top-line data expected later this year. In further developing our nurse psychiatry franchise, we are making progress evaluating SAGE 904, an NMDA receptor PAM product candidate, as a potential oral therapy for other disorders associated with NMDA hypofunction. We remain on track to complete the SAD study in late 2021, and the MAD study is ongoing. Additionally, our other earlier stage neuropsychiatry program, SAGE 421, and oral NMDA PAM being evaluated for potential use in neurodevelopmental disorders and cognitive recovery and rehabilitation is making good progress, and we look forward to providing updates on this program when they become available. I'm excited about the future development opportunities for our earlier stage product candidates and the advancement of our later stage product candidates with the ultimate goal of regulatory approval and commercialization. We are continuing to expand and accelerate potential indications for our wholly-owned programs, and I believe we have the potential to make a difference for people living with brain health disorders, as well as their families, caregivers, and communities. Now, I'll turn the call over to Kimme for a review of our financials. Kimme?

Thanks, Jim. The third quarter was a critical time for our company's growth and development. In reflecting on the tremendous progress made throughout 2021, I'm proud of the work our team has accomplished and believe we're well positioned to execute on our clinical and business priorities. Our strong balance sheet gives us the flexibility to continue to invest in our robust pipeline, and we are focusing on building the right team to support our expected growth now and into the future. I'd like to start by highlighting our third quarter financials and then provide some remarks on our financial guidance. We recorded $1.4 million in net revenue in the third quarter from the sale of Zareso. That compares to $1.6 million of net revenue from the sales of Zareso for the same period in 2020. We remain committed to moms, their families, and all those impacted by PPD. Our targeted commercial efforts, including an integrated approach to engaging key stakeholders, are aimed to help moms with PPD. Research and development expenses were $83.5 million in the third quarter. That was compared to $74.1 million for the same period of 2020. The increase in R&D expense reflects the planned acceleration and expansion of our wholly-owned pipeline, including advancement of SAGE 718, SAGE 689, and SAGE 904, as well as manufacturing-related activities for xeranolone. The increase also reflects the recognition of a one-time stock-based compensation milestone. These increases are partially offset by a reimbursement from our collaboration with Biogen for Xoranolone and Stage 324. Selling, general, and administration expenses were $48.7 million in the third quarter, compared to $35.1 million for the same period of 2020. The increase in SG&A expense reflects an increase in hiring of personnel and activities related to launch readiness to support a potential product launch. Similar to R&D, the increase also reflects recognition of a one-time stock-based compensation milestone and is partially offset by reimbursement from our collaboration with Biogen for Xerandalone and CH324. We reported a net loss of $130.2 million for the third quarter, which included $34 million of non-cash stock-based compensation. That was compared to a net loss of $105.7 million, including $20 million of non-cash stock-based compensation for the comparable period of 2020. Now I'd like to move to our financial guidance. Based on our current financial outlook and projections, our financial guidance remains unchanged. We expect to have a cash balance of more than $1.7 billion at the end of 2021. As a reminder, we do not expect to receive any milestone payments from collaborations for the remainder of 2021. We continue to invest thoughtfully and are well-positioned to achieve long-term success across our organization as we seek to develop meaningful treatments for the patients who inspire our work. I'll now turn it over to Helen to handle Q&A with the operator. Helen?

Thanks, Kimmy. Before I turn it over to the operator, 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?

As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound keys. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ritu Baral from CalWIN. Your line is now open.

Hi, guys. Thanks for taking the question. I did want to ask first about the CORAL primary endpoint change. I guess first, very quickly, was that FDA-driven or SAGE-driven, and how does it reflect on your anticipated active control changes at day three that you're anticipating? Are you anticipating that sort of 6.7 to 6.8 change that you saw in mountain and waterfall since SSRIs really won't have kicked in? Thanks.

Hey, Ritu. Thanks for the question. That's a great one. So, you know, as we shared, we had a very successful pre-NDA meeting that confirmed the NDA filing package. with efficacy data from MDD-201B, Waterfall, Robin, and the Japanese Phase II study, as well as retreatment data from Shoreline. We also anticipate the ongoing pharmacology studies and, as you mentioned, coral, as well as safety from the entire program. So with that clarity in hand, we sought overall feedback on the coral study statistical analysis plan from the agency. And after that feedback, we selected we selected the phase three or the day three endpoint as the key primary endpoint, really to get back to the original idea of the CORAL study, which is to demonstrate kind of the rapid relief of depressive symptoms early in clinical trials. And as you noted, current antidepressants don't kick in for 48 weeks, if ever. So this represents sort of rapid relief for the patient. And since we already had the efficacy data in hand for filing, it allowed us now to move the primary endpoint to CORAL to day three. And just kind of the second part of your question, you're right. We don't expect any efficacy benefits from the active arm of antidepressants because we know through millions of patients dosed in literature over the last 30 years that they take a while to kick in.

Great. Thanks for taking the question. Thank you. Thank you. Our next question comes in the line of Corey Casimo from JPMorgan. Your line is now open.

Hey, good morning. This is Thomas on for Corey. Thanks for taking the question. I guess maybe just another one on the CORAL update here. I think the update makes sense, and obviously you guys have said that you have all the efficacy data you need to file. But just curious how important you think it will be for physicians to see a separation from placebo at later time points in the study. particularly as we think about the effects of SLSRIs potentially taking over time. Thank you.

Yeah, thanks, Thomas, and please send our best to Corey. So, you know, I think reflecting, you're right, we believe after the pre-NDA meeting that we have the package to file, so it was important for us to have day three reflect that rapid onset. And the way I think physicians will think about Zoranolone is in the totality of data. It's not any individual study. It's the 4,000 patients and the consistent profile, where, as you know, we've seen rapid relief of depressive symptoms, anxiety, no change to sleep patterns, potential benefit to sleep patterns. So we really think about the totality of the data across the dosing period and extended period. I'll highlight that we saw in the Japanese study, in fact, which followed patients out to day 56, that patients continued to improve out to date 56, and you saw sort of a kick-up in the placebo patients, probably reflecting kind of return to baseline, which is what we'd expect in the real world. And then we need to reflect the shoreline data, which at 30 milligrams, as you remember, showed that 70% of patients only needed one or two two-week treatments in the course of a full year. So when we think about how physicians will think about the data, it's the totality of data and not any individual study.

Got it. Thanks, Don.

Thanks, Don.

Thank you. Our next question comes from the line of Paul Matias from Stiefel. Your line is now open.

Great. Thanks so much for taking my questions. I have one really quick one, and then one that's a little bit more qualitative. Just on a quick one, can you confirm what the final sample size of coral ended up being and whether or not you over-enrolled? And then second, in your more recent FDA conversations, Barry, have you talked at all about how these durability time points will be interpreted from a regulatory perspective? I know there's the Zolresso adcom precedent, but because... you know, postpartum depression is an acute indication and MDD has more chronicity to it. Just kind of curious if you've got confirmation that statistical significance at these later time points isn't really a hurdle. Thanks so much.

Hey, Paul. Thanks for the questions. Let me start and then turn it over to Jim. I'll start with the second part of your question, then Jim can talk more about that part as well as the choral numbers. So, I guess the quick answer is, statistical significance at the later time point is not required. What the agency and what physicians look for is consistent and durable impact without a rapid return to baseline. And as we've already talked about across 4,000 patients and subjects' dose, we've seen rapid benefit at day three with continued benefit out to day 42 and again in shoreline even longer term feedback. So What you worry about, and we don't worry about this with Zoranilone, but other kinds of medicines, is that someone gets better quickly, but after they stop the drug, they quickly return to baseline. And we see nothing like that with Zoranilone across any of the trials. Jim, you want to add more color and then talk about the coral numbers? Yeah, of course, Barry. I would say, as Barry mentioned earlier, it's really about the totality of the data, Paul. And And the CORAL study adds to that story that we're telling for Zoranilone with 201B, Robin, Waterfall, the Shinogi study, the Shoreline study. And I think that where the CORAL study adds is in explaining that element of the co-initiation of Zoranilone with a standard antidepressant. And really, certainly from an efficacy point of view, but I think also perhaps as importantly from a tolerability point of view to understand, you know, what do we see from a tolerability perspective with the combination. To your question around the size for coral, as I said earlier, the target for coral, as you know, is 424. I think that we are, the study is closed for screening. And as I said, we expect to come in around that number with perhaps a little bit enrolled above it since the study ran a little bit longer than originally intended. But we expect to be in the range of that 424.

Great. Thank you. Thanks, Paul.

Thank you. Our next question comes from the line of Yasmine Rahimi from Piper Sandler. Your line is now open.

Hi, team. Steve, you'll be greatly missed, and thank you for all your entire contribution. I have a quick question. I guess what I'm trying to make a sense of is, I mean, day three placebo responses tend to be significantly lower than day 15 in the HMD-17 score, so a high probability to hit STAT-SIG and see a separation probability why not use this data and file from, you know, day three into your filing? I guess what I'm trying to figure out is, like, we knew all along that day three will show a statistical separation. Why not use this data for filing? Why do you guys keep saying that we shouldn't, we shouldn't, we don't need it? And B, why change it so close to rolling NDA? That would be helpful. And thank you for taking my questions.

Yeah, thanks for the question. So let me sort of take a step back, and I commented this in my prepared remarks on the call. But I'll remind you that in 2020, our team sat down with the agency following a number of Phase 3 studies, one recognizing that MDD was a major unmet need and, in fact, a growing unmet need. So we and the agency and others appreciated that we needed something in addition to the currently approved antidepressants, where we haven't seen a change in benefit-risk in a long time, and designed the landscape and NETS programs, two MDD studies and one PPD study. And we highlighted, and this is going back to consistent with our guidance in January, that we needed one more positive study to have the package to file. We've got that and more. We had the Japanese positive study as well. So we sat down with the agency in our pre-Indiana meeting and confirmed that that data package EFFICIENT FOR FILING AND THAT ANOTHER PHASE THREE WAS NOT REQUIRED. BUT THERE WAS A DILEMMA IN FRONT OF US AS WE HIGHLIGHTED. WE HAD TWO ONGOING PHASE THREE STUDIES. SO WE HAD WHAT I THOUGHT WAS A VERY GOOD OPEN STRATEGIC DISCUSSION WITH THE AGENCY WHICH SAID CORAL IS COMING UP. LET'S FILE FOR MDD. WE'RE GOING TO INCLUDE CORAL IN THE FILING. BUT THE EFFICACY DATA IS NOT NECESSARILY REQUIRED TO BE POSITIVE TO FILE. NOW THE CHANGE TO DAY THREE WILL BENEFIT US IF IN FACT day three is positive, and we see benefit over the treatment course, those data will be incredibly important to guide our medical affairs force, our sales force in educating physicians about the appropriate use of Zoranolone, including the totality of data. So with another positive study, we will see benefit in terms of educating physicians. And I think as you heard Anita Clayton say in her encore presentation with ECMP, who wouldn't want to get better faster? So this will allow us to really lean in on those kind of data.

Thanks, Barry.

Thanks, Yaz.

Thank you. Our next question comes from the line of Amy Spadia from Needham. Your line is now open.

Hi, good morning. Thanks for taking my question. I wanted to switch gears to 324. With the Phase II study planned, Are you in a position to talk about, you know, what type of doses or frequency you may be evaluating in that study to, you know, find kind of a finer tradeoff between efficacy and safety? And then just a quick follow-up on the spending for the quarter. You know, is the R&D spending this quarter reflective of the run rate that we should expect going forward? Thanks.

Tommy, thanks for the question and for broadening the dialogue to the rest of our pipeline. I'm going to ask Jim to comment on 324 and then Kimmy to talk about our financials. Jim? Yeah, thanks, Barry. So the results from the kinetic study, the Phase IIa study we ran in 324, gave us clear evidence for activity of 324 in treating essential tremor, but along the way with some effects on somnolence. So we knew at the time that that 60 milligram once daily dosing was at the top of the range that we wanted to test for essential tremor based on our earlier work, open label in phase one, as well as the earlier work that we had done in essential tremor with both Zorresso and Zoranilin. And so really that it really helps clarify the strategy for the 2B study. So it will be a dose ranging study looking at multiple doses with 60 milligrams being the top dose in that study. And really the goal is to identify an appropriate balance between efficacy and tolerability, pretty much a standard activity for a phase 2B study. We've thought a lot about things like the PK profile of 324, as you know, the expressed intent for 324 was to produce a molecule with a relatively long half-life and therefore a well-suited compound for chronic dosing. And so all of those considerations go into the study design for the Phase IIb study, which, again, we intend to initiate before the end of the year.

Amy, the question on the R&D expenses for the quarter. So you did see some increases in the quarter. A couple things that I would like to point out. that we did have a one-time stock-based compensation cost that was reflected in the quarter, and that was about $13 million. So some of that was included in the R&D expenses. But what I will say is that we've always talked about the acceleration and expansion of the pipeline. That's reflected in what you see in the quarter for our operating expenses. The other thing I'll remind you is, of course, we have the cost-sharing arrangement with Biogen. So they are... reimbursing us for 50% of the cost for the development and commercialization for Zoranolone and Sage 324 in the U.S. So we do expect to see some additional increases in the R&D expenses as we continue to accelerate and expand the pipeline.

Got it. Can I just ask, was the full $13 million included in R&D, or what portion of it was in an R&D? Thanks.

Just a portion of that was in R&D, and I'm sorry the number is escaping me right now, but I think the most – think about it half and half maybe.

Got it.

Thank you.

Thanks, Ami.

Thank you. Our next question comes from the line of Salveen Richter from Goldman Sachs. Your line is now open.

Hey, everyone. Thanks for taking the question. This is Andrea on for Salveen, and sorry, Barry, to go back to Zoran alone. But just curious how your KOL conversations have evolved over the development course. And as you near a potential launch, are you hearing any points of pushback or concern about how the drug would eventually be used in the treatment paradigm?

Thanks, Andrea. And no problem going back to Zorano. I know it's on everybody's mind. So with the totality of data, particularly as presented at ECMP, and that really was the first Congress where an integrated data set including patient-reported outcomes at day 15 and 42 were presented. And when treating physicians saw the totality of data and reflected that even at day 42, four weeks after patients had stopped dosing, that they continued to improve and across all eight domains were statistically significantly better than placebo, I think a lot of light bulbs went off. You know, this is a new way of treating. It's not an SSR, SSNI. It's not a chronic treatment. It's a short-term treatment where patients get better faster, and as we've evidenced in Shoreline, stay better. So it's a pretty new approach from, frankly, what many of them learned in medical school for the last 50 years, which is if you diagnose someone with depression, you treat them for six months. At the end of six months, if they're fine, slowly remove drug. If not, keep them drugged, frankly, for the rest of their lives. So it's a very different approach. And I think, again, light bulbs are going off. The other part that treating physicians or potential treating physicians are really starting to appreciate is the safety profile. One of the things, and I think many of you who listen to Anita heard this, and I'm not quoting her exactly, but she said something like the two things she's worried about most is sexual dysfunction and weight gain for her patients, and that's why they stopped taking drugs. We don't see that. We see a little bit of somnolence, which, in fact, in these patients is helpful, but none of the side effects that hurt adherence. And, of course, it's a two-week course of treatment. So we're making a lot of traction, and as we continue the scientific exchange, I believe you're going to hear more positivity by potential treating physicians in the future.

Thanks, Barry.

Thank you. Our next question comes from the line of Laura Chico from Wedbush. Your line is now open.

Good morning. Thanks for taking the question. Just one on CORAL and I guess maybe the longer-term outlook. So could you speak a little bit to kind of the linkage between the day three separation and what is the read-through to remission rates, if there is any, and then kind of unrelated to the Saran loan, but And beyond coral, what are going to be the key data events that we should have in mind for 2022? Thank you.

Yeah, Laura, let me start, and then I can turn it over to Jim for kind of key data events. So, again, the key here is that we have four positive studies in over 3,000 patients and subjects showing the rapid relief of depressive symptoms, anxiety as early as day three, and as evidenced out to day 42. And then when you couple that with Shoreline, showing that most patients only need one or two two-week dose in the course of a year, we have really impressive data for the filing. Now, what's key for Coral on day three is we know that people suffering from depression on current standard of care if at all, take weeks to get better. So what's clinically meaningful, and I think Anita hit this on the call, is that you want people to get better quickly. And who wouldn't? Who wants to suffer for four to six weeks to see if I can work through my weight gain, work through my sexual dysfunction to see if my depression abates? So day three is incredibly clinically meaningful to patients and to physicians. And this choral study, day three, allows us to measure that and potentially even educate on that if the study is positive in the future. So we're thrilled with the change and, you know, looking forward to the core results. Jim, you want to talk about the rest of the year? Yeah, absolutely. Thank you, Barry. For the rest of the year in 2021, as far as readouts go, we will be expecting the 50 milligram shoreline data for Zoranilone showing up to one year dosing. Also, For the SAGE 718 program, we are expecting results from the open-label Alzheimer's disease patient population before the end of the year. And then moving into 2022 for the Zaranlone program, the CORAL study to read out early in 2022, the Skylark study to read out in mid-2022, and of course, we're expecting to submit our NDA in the second half of 2022. Great. Thank you. You know, these aren't data readouts per se, Laura, but we think it's very important that we'll be initiating the Huntington's trial later this year and then soon thereafter the Parkinson's trial for 718 in cognitive dysfunction. Not data readout, but clear progress on moving a program like 718 along. And, of course, as Jim already highlighted, the start of the Phase II along with Biogen for Phase 324, an essential tremor, Looking at dose frequency and the number of doses as well as longer treatment duration will also be exciting to explain the Phase II design in the future.

Thanks, guys.

Thank you. Our next question comes from the line of Jay Olson from Oppenheimer. Your line is now open.

Hey, guys. This is Matt on for Jay. Thanks for taking the questions. So we were wondering for SAGE-324, what forms of epilepsy do you believe make the most sense to study? And then separately for SAGE-718, what are you hoping to see in the luminary open-label data expected soon, and how could data from there inform a later-stage trial in Alzheimer's? Appreciate it. Thank you.

Thanks, Matt. Let me start with 718, and I'll ask Jim to comment on that. on three, two, four. So what's really exciting about SAIT 718, you know, our first PAM in NMDA is the biologic hypothesis that started 718 has been consistent now through all preclinical, early clinical studies, as well as the early Huntington's and Parkinson's readout. So while Alzheimer's is much more of a heterogeneous disease, we hope to see and expect to see the same kind of stabilization or even improvement in cognition. So that means that in the tests that we perform, we want to see that patients aren't progressing and, in fact, stabilize or improve. And we're really talking about really measuring executive function, learning, and memory. And the reason that's important is that in these neurodegenerative diseases, often the cognition issues they face lead to their lack of independence. And the hope for stage 718 is that by stabilizing or in many cases improving executive function, people can carry on activities of daily living. That is, you know, make a shopping list, go to the store, buy the food I want, put it away, and remember where I put it. And you can imagine that being able to stay independent for years with these kind of neurodegenerative diseases is very beneficial to patients and their families. So that's the kind of data that we're looking for. Do you want to talk about 324? Absolutely. So, Matt, the question around epilepsy types for 324, I think it kind of goes back to the way we think about our programs overall and sort of trying to follow the science behind what we do. And really, one of the things that is abundantly clear is that these compounds are quite good at lowering synchronized activity in the brain. And what that means is it really gets right at the mechanism that triggers seizures of multiple types. There are a lot of different kinds of seizures. What we've found in all of our modeling is that irrespective of which type of seizures we're struggling, studying the compounds have a pretty robust anti-epileptic effect. That gives us a lot of flexibility. So what we'll be discussing with our collaboration partners is really which epileptic syndromes make the most sense for that very broad mechanistic ability to intervene.

Okay, got it. Thank you. Appreciate it. Thanks, Matt.

Thank you. Our next question comes from the line of Sumant Kulkarni from Canaccord. Your line is now open.

Good morning. Thanks for taking my question. What do you expect to see in terms of potential dose dependence for the 50 mg cohort versus 30 mg in the upcoming shoreline data, and what would that mean for perhaps keeping things relatively simple in the real world for regulators, prescribers, and patients by filing only the 50 mg dose for your NDA?

Thanks, Saman. Thanks for the question. So in terms of Shoreline, I'll remind you that in the 30 milligram readout and the preliminary 50 milligram readout, we saw what we believe are pretty impressive data. The 30 milligram, we saw 70% response rate, and then same number, 7% of patients required only one or two two-week doses in the course of the year. The 50 milligram preliminary readout, we saw an 80% response rate, so slightly better. And we're hoping that, I believe at the end of the year, we'll see consistent data with that. And if you step back and think about it, someone reading only two, one, two, or even three two-week courses is certainly a major step up from a chronic therapy they have to take every day with the kind of side effects that we're talking about. In terms of filing, it's pretty common with many medicines, many antidepressants, to have multiple doses in the filing. Of course, we've got to work through the agency, but it's our belief set that in addition to the 50 milligram, we perhaps will have the 30 milligram available as well for flexibility and optionality for those patients or physicians who believe their patients might.

Got it. Thank you. Thank you.

Thank you. Our next question comes from the line of Yateen Suneha from Lugenheim Partners. Your line is now open.

Hey, guys. Thank you for taking my question. Again, it's a question on Coral, and we understand the change that you are making. We actually wrote about it in July. But trying to get a sense, you know, if you can talk about what differences do you see from commercial standpoint by getting an acute, by getting this acute onset on the label. And in terms of, you know, what led you or just trying to get a sense of what led to the realization that the shoulder endpoint is needed? Is it just the waterfall study, or was there an active engagement from the regulator that led you to decide, okay, let's change it?

Yeah, Yateen, thank you for the question. So let me again sort of remind you and everybody that when we set out the year, we set in motion the landscape and nest programs with two MDD and one PPD study. What we highlighted is that One of these studies, we needed to be positive for a filing package of the agency. At Waterfall, as you highlighted, it was in fact positive. We were thrilled with that. And during our pre-Indian meeting with the agency, we confirmed what the agency had guided before, which was that was the study required for a filing package. So with the filing package in hand, and in consultation with the agency, we set forth to use CORAL for what? it's intended to do, and it's asking a different question. The data we have to date shows the rapid and sustained effects of ziranolone as a monotherapy and on top of a stable antidepressant. So what we're doing with coral is we're concomitantly giving ziranolone with an antidepressant for the first time. So that's a different question that we're asking, and we believe that the rapid relief of ziranolone combined with an antidepressant. And that question is very important. And the rapid relief would be new. We know that current antidepressants take 48 weeks, if ever, to kick in. So getting somebody better fast is certainly very important for that patient and their treating physician. And we know through the totality of data that when people respond quickly, that leads to a very beneficial and often sustained response. So we think it's very important data in the totality of the data we already have.

And this is one clarification question. So on the day three endpoint, how does it get reflected into the label at some point? Will it just be in the clinical study section? And will you be able to market it?

Yeah, so thank you for that. So it's too early to talk about specifics of the label. And of course, we'd like to see a positive study. But I think what's important here is it gives us data to inform the marketplace about potential uses of Zoranol, and that's very important.

Thank you. Our next question comes from the line of Akash Tiwari from Jefferies. Your line is now open.

Thanks so much. So you mentioned you're going to include the Shionogi study in your package of the FDA. Is that mostly for safety and not efficacy, considering there was no meaningful separation between the 20 and 30 mg doses in that trial? And how do you think that impacts the agency's thinking on updosing to the 50 mg dose? Additionally, just looking at 217 for PPD, what do you think is kind of the long-term opportunity for 217 and PPD? Could this be a billion-dollar indication over time? And do you feel like 217 could avoid a box warning around excessive sedation for that indication? Thank you.

Yeah, Akash, I think many questions in there. So let me get to a couple of them. So PPD, we think PPD could be a very meaningful indication. You know, one in eight moms suffer from depression. It's highly underdiagnosed. So Having something that a mom takes for two weeks and gets better faster, I think, is very important. And if you think about the number of births, one-eighth mom certainly leads to a very large potential indication. Jim, you want to take the next one? Yeah. So, Akash, your question about the Shianogi trial, we would anticipate using the Shianogi trial both for safety but also, importantly, for efficacy. What we see in that trial is a significant effect of the drug separating from placebo in both dosing arms. We also see a similar profile to what we've seen in all of our other studies, that rapid improvement in symptoms occurring as early as the first measured time point, as well as the sustained benefit that's lasting out through the end of the treatment period at day 57 in the case of the Shinogi study. Yeah, I would only add, Akash, that if you think about the study out of Japan, there was a very meaningful difference between both drug arms and placebo that was sustained out to the later time points, which is very impressive. And this is the first study that we've seen that's a pure placebo study. All the other studies we've done have both monotherapy and background antidepressant therapy. So this really represents a true benefit for Zoranilone in a patient population. Very clean, very well-run study. We don't think the fact that study showed benefit in 20 and 30 impacts the opportunity that we've seen in 50 at all. So, as Jim said, it will be very important from an efficacy and safety perspective.

And just lastly, on excessive sedation, do you think you'd be able to avoid that box warning for 217? Thanks.

Again, it's too early to talk about the specifics of the label, but we don't see excessive sedation, so that's not a current issue.

Thank you. Our next question comes from the line of Vikram Turahit from Morgan Stanley. Your line is now open.

Good morning, and thank you for taking my call. This is Gospel on for Vikram. My question is, what can we expect to learn from the Luminary readout later this year, and what do you believe defines success for this readout? Thank you.

Yeah, thanks, Scott. Let me start and then ask Jim to talk more about Luminary. So I will remind you that we designed SAGE-718 to be a positive modulator for NMDA. It was based on the hypothesis that 24S hydroxycholesterol was seen at lower levels in cognitively impaired neurodegenerative patients specifically discovered in Huntington's disease. So we set out for the kind of most homogeneous population first, which is Huntington's, then Parkinson's. And while Alzheimer's is much more heterogeneous, what we're hoping to see is the same kind of stabilization or improvement in executive function and memory that we saw in Huntington's and Parkinson's patients. So those are the data we're looking for. later in the year. Jim, anything to add? Yeah, Barry, I would add to that. We believe that Sage 718 offers a truly novel opportunity here using the mechanism that Barry described. This is a way of interacting with NMDA receptors, a very powerful system in the brain. And so we've designed what we call the Cognex program to really examine the ability of 718 to have effects on learning memory, executive function, across a number of different patient populations with the idea of a truly new way of interacting with cognitive deficits in a number of these disorders. And so at this point, you know, we're trying to understand which patient populations show the most benefits. And to date, we've talked about the results from the Huntington's and Parkinson's populations. And so Luminary represents a similar investigation of Alzheimer's patients. And so by intent, many of the endpoints and many of the trial design elements are similar across studies. So we'll be looking to see what effects we're having in the AD population. But, you know, you can anticipate that many of the sort of trial design elements and endpoints are going to be similar to what we've looked at with both the Huntington's and Parkinson's patient populations. All right. Thank you very much.

Thanks, Gosselin. Thank you. At this time, I would like to turn the call back over to Barry Green for closing remarks.

Thanks, Ophir, and thank you again to everyone for joining us this morning to review our third quarter progress. I'm grateful to the entire SAGE team, our patients, clinical investigators, and all who have dedicated so much to advance our mission to become the leaders in brain health. I'm confident that the progress made this year and what we hope to achieve throughout the balance of the year next year will bring us closer to bringing new paradigm-shifting therapeutics to market. The SAGE team will continue to work tirelessly to deliver on our vision of developing medicines that matter to patients so they can get better sooner. Thanks again, everyone, and have a great day.

This concludes today's conference call. Thanks for participating. You may now disconnect.