SAGE (2019 - Q2)

Good morning. Welcome to Sage Therapeutics Second Quarter 2019 Financial Results Conference Call. Currently, all participants are in a listen-only mode. This call is being webcast live on the Investors & 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 Matthew Calistri, Investor Relations at Sage. Matthew

Hello and thank you for joining Sage Therapeutics second quarter financial results conference call. Before we begin, I encourage everyone to go to the Investors & Media section of our website at sagerx.com where you can find the press release 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 consult the risk factors discussed in today's press release and our SEC filings for additional details. We will begin the call with prepared remarks by: Dr. Jeff Jonas, our Chief Executive Officer; Mike Cloonan, our Chief Business Officer; and Kimi Iguchi, our Chief Financial Officer. We will be joined for the Q&A session at the call by Dr. Steve Kanes, our Chief Medical Officer; and Dr. Jim Doherty, our Chief Research Officer. I'll now turn the call over to Jeff.

Thanks, Matt. Hello, everyone, and thank you for joining us this morning. Let me first start by congratulating and thanking all Sage employees and everyone involved in the launch of ZULRESSO. On June 24th, Sage reached another milestone in our history, one that only a small number of Biotechs ever achieved, launching our first product. ZULRESSO is the first and only treatment specifically indicated for postpartum depression or PPD, one of the most common medical complications during and after pregnancy. ZULRESSO is given at a one-time infusion offering the potential for improvement in depressive symptoms in days. We saw an unmet medical need in the treatment of PPD where traditional interventions may take weeks or even months to help. We believe that this is what innovation looks like and it may be a game-changing approach to the treatment of PPD. Six weeks into the launch, we are right where we expected to be. We are encouraged by the interest we’re hearing from women and their families, health care providers, and adequacy organizations that support this disorder. In a few minutes, Mike will provide details on the launch. First though, I'll pick up where we left off from FutureCast. Our R&D portfolio review, where we shared exciting progress building out our three brain health franchises in depression, neurology and neuropsychiatry. These franchises represent an opportunity to fundamentally shift how brain disorders are thought about, studied and treated. Then, I will turn it over to Mike to give you the update on the early days of our ZULRESSO launch. Kimi will provide an update on our second quarter financial results and I will make some closing comments before we open the call for Q&A. As we presented at FutureCast two weeks ago, we continue to see compelling activity from SAGE-217 across a variety of disorders. We have decided to prioritize study in treatment-resistant depression or TRD in addition to major depressive disorder in postpartum depression to optimize our go-to-market strategy if we're successful. We also plan to pursue bipolar depression and in generalized anxiety disorder in the future as our life cycle management for SAGE-217 evolves. For SAGE-324, we believe that Phase 1 data in essential tremor or ET support continued investment in our neurology franchise. We plan to initiate a Phase 2 clinical trial evaluating SAGE-324 in ET by the end of the year. And given its pharmacologic characteristics, we believe opportunities in epilepsy and Parkinson's are also worth pursuing. We're also very excited about our differentiated and NMDA PAM data for SAGE-718 and the potential to build neuropsych franchise centered around the molecule with a unique mechanism of action and profile of activity with the potential for cognitive enhancement in the domains of executive function in a variety of disorders. These are early days in the development of this compound and we look forward to continue our efforts. Taking a step back, I want to remind everyone that our mission is to create and develop medicines that matter, so people can get better sooner. We believe that in medicine, the best response is a rapid response. And with our pipeline of products we believe we’ve made significant progress towards this mission. Now, I will turn the call over to Mike to talk about our ZULRESSO launch.

Thanks, Jeff, and hello, everyone. As Jeff mentioned, we're very proud to announce that on June 24th, we launch the ZULRESSO in the U.S., the first ever treatment approved for the postpartum depression. We are now about six weeks into launch and we are on track with our execution. In the early stages of launch, we're focused on enabling pathways to care, helping to secure access and supporting women through the treatment journey. You have heard us discuss in the past our efforts to identify and enable sites of care, and there are four key actions a site must achieve to become treatment-ready, established site protocols to administer ZULRESSO, certify under the ZULRESSO REMS, attain formulary access and secure satisfactory reimbursement from payers. Given that ZULRESSO is the first products specifically approved for PPD and the paradigm shift required, we estimate that fully activating the site to become treatment-ready can take 6 to 9 months or more from launch, and will vary by site. Therefore, we expect to start seeing momentum in the fourth quarter of this year or into 2020. With that said, I’m very pleased to announce the patients start being treated in July and exciting to see women with PPD starting to gain access to ZULRESSO. Although we are in the early days of the launch, we're encouraged by the excitement in the community among OB/GYNs, psychiatrists and patients. As you may recall, last quarter, we mentioned some of the metrics we plan to share to demonstrate our progress including metrics related to enabling pathways to care and payer access and coverage. As of August 1st, there are over 100 REMS certified sites of care, the majority of this were hospitals, and we are encouraged by several non-hospital sites of care coming on board as well. These REMS certified sites are spread across 55 of the top 140 Metropolitan Statistical Areas or MSAs. And these 55 MSAs are estimated to cover over 45% of potential patients. Over time, our goal is to have at least one site of care in all 140 MSAs providing treatment options for women PPD across the U.S. As I noted earlier, REMS certification is just one step in the process of sites becoming infusion-ready. Next quarter, we plan to share the numbers of sites that are treating patients as of September 30, 2019. Since our launch occurred in the last week of the second quarter, as expected, there were no sites treating patients as of June 30th. From a payer access and coverage perspective, we are encouraged by the early access trends and we are seeing the benefit of our early engagement with the payers during the prelaunch setting. As of August 1st, plans represent greater than 65% of all covered lives have committed to what we consider favorable coverage, meaning either low restrictions or light restrictions. The 65% represents progress across both commercial and Medicaid plans. Having this level of coverage decisions early in the launch is a positive signal of the payers’ willingness to support ZULRESSO as an important option for women with PPD. Approximately 30% of covered lives are awaiting decisions, which we expect over the coming months. For these plans, we expect payers to cover ZULRESSO on a medical exception basis until the formal policies are created. As we anticipated, the favorable policies that have been created typically include a prior authorization to the label with a diagnosis of PPD for moderate to severe patients. I'm also proud to announce that our patient support organization in Raleigh, North Carolina or Sage Central officially opened in June. We are taking a family centric approach to our go-to-market strategy and Sage Central is integral to our efforts to provide a range of patient support resources to assist women PPD and their families. The Sage Central team is focused on connecting patients to resources such as dedicated case managers who can provide information to help navigate the treatment journey, including information on available sites of care, personalized support to assist with understanding insurance and coverage options, financial assistance programs for eligible patients and access to educational resources and assistance with where to go for help on a particular topic, including connecting to local resources, more than 60 local and national advocacy organizations have already opted to be part of the Sage Central Resource Center. And we're encouraged by the support of these organizations. Early feedback on Sage Central has been very positive as it has been a valued resource in the early days of the launch to support both HCPs and women with PPD after the decision to treat with ZULRESSO has been made. Overall, we’re pleased with the early progress we've made in launching ZULRESSO and the launch is progressing as we have planned. We have an experienced and talented team that is executing well against what we believe is a well-thought out, focused and purposeful commercial strategy. The go-to-market model we put into place is working as we anticipated and enabling us to respond to a range of complex situations inherent to a paradigm shifting launch. We remain highly-focused on enabling pathways to care and helping to secure access for women with PPD after the decision to treat with ZULRESSO has been. The launch of ZULRESSO is an important step in the history of Sage. We believe we are transforming a treatment paradigm and providing a groundbreaking new option to women with PPD who previously had access to a limited set of options. And we are creating the infrastructure and capabilities that we believe will prepare us for the potential of multiple commercial launches of diversified products across our three brain health franchise. I look forward to providing the further updates on our commercial progress in the future and the impact we can make in the treatment of postpartum depression with ZULRESSO. And now, I will turn it over to Kimi to review our financials.

Thanks, Mike. I’ll now walk you through the highlights of our financial results and guidance. Starting with our balance sheet. We ended the second quarter with $1.2 billion in cash, cash equivalents, restricted cash and marketable securities, compared with $925 million at the beginning of the year. Our cash on hand keeps us in a strong financial position as we prepare to deliver on the upcoming milestones across three of our brain health franchises. Turning now to the rest of our financial results for the second quarter. Revenues were $873,000 in the second quarter, which consisted of $519,000 net product revenue, related entirely to channel stocking in preparation for the U.S. commercial launch and $354,000 in expense investment related to our collaboration with Shionogi. Revenues in the second quarter of 2018 were $90 million as a result of one-time upfront payment we recorded from Shionogi. Eight years ago we stepped into an innovation void with everyone said brain disorders were too tough tackle. We said that too important not to. And we proceeded by thinking differently and how we approach the discovery, development, financing and commercialization of new medicines. We built a portfolio of differentiated assets and are fortunate to have a broad pipeline that continues to advance. This has contributed to our increased R&D expenses of $89.1 million in the second quarter compared to $69 million for the same period in 2018. As Mike talked about earlier, the launch of ZULRESSO is an important step in history of Sage as we provide a groundbreaking treatment to a patient population who previously had limited options. We're transforming the treatment paradigm and enabling new pathways to care. As such, our selling, general and administrative expenses increased to $88.2 million in the second quarter, compared to $43.2 million for the same period of 2018. We reported a net loss from the second quarter of $168.2 million compared to a net loss of $17 million for the same period in 2018. The significant difference is driven by the $90 million in revenue related to our Shionogi collaboration that we recorded in the second quarter of 2018. We continue to maintain a solid financial foundation and anticipate that our cash balance will be at least $950 million at the end of 2019. We expect that our operating expenses will continue to increase year-over-year to support the ongoing investment in our multi-franchise portfolio and continue progress in our pipeline development. We believe we have developed a pipeline with enormous potential to improve the lives of people suffering from life-altering brain health disorders. We're taking a deliberate approach to investing in our early stage pipeline as we move forward to thoughtfully sequence assets to have the potential to create more mid and long-term value. With that, I will turn the call over to Jeff for closing remarks.

Thank you, Kimi. Eight years ago, we laid the foundation to become the leading brain health company during a time where there was tremendous skepticism about the ability to develop novel medicines. We started the Company without any compounds. Today, our first compound is now our first commercially launched drug. I’m pleased with the progress we’ve made so far. I believe we are one of the very few companies making true advances in brain health. We're doing this by continuing our strong commitment to improving the lives of people, building a world class team and you unique culture and executing well on our proven playbook for success. Moving forward, we are focused on the following priorities: Expanding on our SAGE-217 pivotal program and positive activity data seen to date. We are conducting a series of studies. REDWOOD or MDD-302 which will commence in the third quarter and SHORELINE or MDD-303, which is ongoing and designed to provide longer term retreatment data and follow-up safety and tolerability data, and our SAGE-217 MOUNTAIN study in MDD. Here, we are completing enrollment and are on track for an expected readout of top line data in the fourth quarter this year or the first quarter of 2020. We are also continuing enrollment in our RAINFOREST study of comorbid MDD and insomnia. And lastly, we plan to prioritize initiating the study evaluating SAGE-217 in TRD with the goal of optimizing our go-t-market strategy if we’re successful. For SAGE-324, we plan to initiate a Phase 2 essential tremor study by the end of this year and plan to pursue epilepsy and evaluate Parkinson's, as we continue to deliberately and thoughtfully to sequence our wholly owned assets. For SAGE-718, the lead product candidate in NMDA portfolio, we look forward to the results of our Phase 1 study in Huntington's disease, which we expect to report in the second half of 2019. And for ZULRESSO, we expect launch momentum to continue to build in the fourth quarter of this year and into 2020 as we anticipate sites will meet up to 6 to 9 months or more to complete all the steps required to begin to treat women with postpartum depression. I'd like to conclude with two thoughts. First, the folks at Sage are developing medicines that we believe will force a rethinking about people with psychiatric disorders are treated. With that sort of innovation, we need to consider access to our medicines, and we are committed to helping in that area. But, we also have to work with changing attitudes and stigma, changing how psychiatric treatment is delivered. This is an important challenge and Sage is committed to helping achieve it. Second, I want to again thank the great team of people at Sage, who've done excellent work in developing innovative molecules, and launching our first commercial product. We'd now like to open the call for Q&A. Given the interest in Sage and the number of questions we're likely to receive, we're asking everyone to limit themselves to one question each, so all of you can have enough time to ask a question. Thanks, everybody.

[Operator instructions] Our first question comes from Brian Abrahams with RBC Capital Markets.

Hi. Thanks very much for taking my question. It sounds like good engagement and enthusiasm around the ZULRESSO launch. So, I'm curious, within the 100 facilities, how should we be thinking about the potential throughput at each of these centers? And what's the level of experience that they have with ZULRESSO in either the clinical trial or expanded access setting, how might that influence the speed of adoption of once through the initial logistics? Thanks.

Hey, Brian. It's Mike. I'll take that question. So, it is early days, right? So, we are encouraged by the signs that we've had with the sites. It really validates the early engagement we've had. And we mentioned before, the difference in having provider champions at these different sites. That really is a differentiator of getting these sites up and running, and online and getting to the point of treating patients. Right? REMS certification is only one aspect of getting them all the way over the line and treating patients. But, in terms of the throughput question that you had, it's going to take some time to determine that. We said, it's going to take 6 to 9 months to really get these sites up and running and pass through the four different actions that they have to take and including REMS certification, protocols, formulary access and then payer reimbursement. So, into the fourth quarter, we said we'll start to see that momentum, we’ll be in a better position to sort of comment on what that looks like. And in terms of the differentiation, as you said, in terms of people might have clinical experience or the EAP, this gets back to my comment on sort of provider champion. So, obviously, the more clinical experience that they’ve had, the more confidence they start to built with ZULRESSO. So, if they’ve had that in the early settings through the trials of EAP, we can see that playing out. But again in time and into the fourth quarter, we will see more and more clinical experience at the different sites.

Thank you. Our next question comes from Cory Kasimov with J.P. Morgan.

This is Neena [ph] on for Cory. Thanks for taking the question. So, just one on the MOUNTAIN readout later this year. As we approach that readout, what's the biggest risk and what have you done in terms of clinical trial designs to kind of mitigate that risk? Thanks.

Thanks for the question. This is Steve Kanes. What we’ve been doing for all of our programs is focus very closely on execution. Throughout our programs, both ZULRESSO and with 217, we have close oversight on patient inclusion and study conduct. And that’s absolutely been key to our success. For the trial itself, we're looking forward to data in third quarter or first quarter. And for all our programs, really what we do is just focus on the basics, make sure we have the right patients in the trial and really very closely engaged directly with the sites to make sure that everything is going well, basic blocking and tackling, but has been very effective to-date.

Thank you. Our next question comes from Tazeen Ahmad with Bank of America.

Maybe one on Huntington's. You mentioned some timelines there. What should we expect from the readout later this year? Can you talk about some of the endpoints that you're going to be looking at over the time period, and what would you consider to be good data, worth progressing? Thanks.

Hi. This is Jim. I’m happy to take that question. So, in our program for SAGE-718, as you mentioned, we’re interested in looking at Huntington's disease. At the recent FutureCast, we talked about scales, looking at cognitive performance and especially, executive function in healthy volunteers. And so, what we're doing as a next step is something we've done with other programs in the past, and that is to look at a small open-label cohort of Huntington's patients using the same scales. So, these patients have a baseline deficit relative to healthy controls. And so, we’ll be looking at whether or not we see a similar performance from 718 in these patients. And we’ll use those data to both inform us methodologically and how to design future studies and also of course we’ll be looking at the magnitude affecting Huntington's patients as we plan future studies.

Thank you. Our next question comes from Danielle Brill with Piper Jaffray.

With the 217 maintenance trial commencing in the third quarter and it being a yearlong study, can you update us on how you are thinking about your filing strategy, assuming MOUNTAIN and SHORELINE studies are positive, can we expect NDA submission next year?

Yes. It’s Steve. I’ll take that one. One of the things that’s important about the 217 program and that's so exciting is that we continue to generate great data, and very predictable data. And what we’ve done is designed a program that allows us to have multiple pathways to success, multiple filing strategies. So, as we talked about in the previous call, we’ll have data in fourth quarter or first quarter of this year with the MOUNTAIN study. And then, we will look at that and understand how that fits best into an overall filing strategy. So, as we know more, as we sort of decide how we're going to go forward, we will of course share that. All of the data will really fit into that program. But how it all works together is something that we’ll share as soon as we have clarity.

Thank you. Our next question comes from Ritu Baral with Cowen.

Hi. This is Subbu Nambi on for Ritu Baral. So, Cowen recently held a meeting with the FDA and the FDA personnel emphasized the need for antidepressants to impact both mood and function and not just sleep improvement. In your discussion with the FDA for the breakthrough designation, did FDA emphasize on any specific subscales of HAM-D?

The short answer is we generally don't comment on specifics around our overall programs. We can say that for the 217 program, the overall design of the registration program, as well as the individual trials were all discussed well in advance prior to initiation of those trials, in order to be able to have clarity moving forward. That said, we do include and have included in our studies, other measures of function, we recorded on those previously for our PPD studies, as well as our MDD studies. So, certainly, the ability to understand function is something that we're very interested and is important to our overall program.

Thank you. Our next question comes from Andrew Tsai with Jefferies.

I have more of a high level question about how you think about conducting your future clinical studies. Just curious what your thoughts are on the rise in placebo rates that we've been seeing in U.S. based clinical studies, kind of seen this issue occurring more recently. So, curious, does this trend kind of changes your thinking on how you run your next placebo-controlled studies? For example, in TRD or even bipolar depression down the line, would you consider mostly enrolling ex-U.S. patients, for example? Thanks.

Yes. This is Steve. What we have been doing is managing our studies by ensuring that our drugs have a very high level of activity. The secular trends in placebo response, as you follow them, more than just the last 10 years, they vary quite a bit. And one of the things that we have noticed is that when you work in the same mechanism and in the same patient population over time, placebo response rates go up. But, what we really do is just take that into account as design and power our trials. And so far, that's worked out quite well. Placebo response is part and parcel of the work that we do. But being able to demonstrate differences is what counts. And we've been very effective at doing that today.

Yes. This is Jeff. I just want to add that I think the trends -- Steve is right. The secular trends vary. I know, recently people have talked about geographies, but we think that's typically more of an issue with trial design, rather than any particular differences in the biology of the diseases. And as Steve’s pointed out, we've been pretty rigorous in terms of how we -- our inclusion criteria and our screening. So, I don't think that is a generic risk, but rather one that you accommodate through as Steve said, the blocking and tackling of trials.

Thank you. Our next question comes from Salveen Richter with Goldman Sachs.

This is Ross on for Salveen. Just a quick question on MDD trial design. So, in the Phase 2 study, there was an inpatient treatment component while in the ongoing MOUNTAIN study, patients were treated entirely outpatient. Do you see any risk here to the clinical trial design in regards to introducing -- in regards to the introduction of any sort of treatment bias of how this may play out in the Phase 3 study?

Thanks for the question and the opportunity to clarify it. One way -- one thing we've looked at in the program and one thing that everyone should be aware of is the PPD trial, which was done after the completion of the MDD trial, was an entirely outpatient study. And in that trial, the patient group and the drug performed exactly as it did in the inpatient, outpatient MDD previous trial. So, what we're seeing really is a very consistent response with 217, regardless of setting, which is exactly how we designed the program what we would have expected in the first place.

Thank you. Our next question comes from Jay Olson with Oppenheimer.

Hey, guys. Congratulations on the ZULRESSO launch progress, and thanks for taking my question. Since it looks like you're about to initiate the REDWOOD study any day now, could you comment on the duration of the fixed treatment interval and how the duration is related to your learnings from previous or ongoing studies like SHORELINE?

I will give you the factual answer first, then we can talk about how it all fits together. So, it’s two weeks every two months. So, the first two weeks of each month of treatment patients are on 217. And what we're looking to do is ensure that we don't have continuous treatment with an important piece of the way that we're developing 217. What's so novel and what's so exciting about it is we think that the episodic treatment is really what is driving activity in these patients. So, we don't want the dosing to be so close together that it would be hard to distinguish those episodes of dosing. But we want to make sure that patients have opportunity to be treated over time. So, that’s the thinking that’s gone into it. And it fits into the standard definition of how you would go about doing this. And those two-week intervals are exactly the way we’ve been dosing 217.

Our next question comes from Paul Matteis with Stifel.

Hi. Thanks so much. This is Ben Burnett on for Paul Matteis. I had a question on the PRN, the SHORELINE study. I guess, how is this tracking with your expectations and are you seeing redosing, and is this at the rate that you're anticipating? Thanks so much.

One of the things we can do is comment on an ongoing trial. This is a registration program. What I can say is the study is going well, there is a ton of interest in the trials as there has been in all of our trials. But, really the results and what we're seeing in that emerging program is not something I can comment on, on the call unfortunately.

Thank you. Our next question comes from Akash Tewari with Wolfe Research.

So, in your Sage MDD Phase 2 trial, at some days, HAM-D remained [indiscernible] while MADRS became [indiscernible]. We know historically HAM-D and MADRS matters are pretty well correlated. So, what could be the reason for this difference? Do you see any subcategory differences? And how confident is the team internally that 217 can clear the bar, both for HAM-D and MADRS? And then, how did the placebo arm for 217 in the Phase 2 MDD trial compare versus historical antidepressant trials? Specifically after treatment was discontinued, how did the placebo arm -- did the placebo arm eventually return back to its baseline HAM-D score? If so, how long did that take? And then, finally, any comment on doing a raise before the Phase 3 MDD study? Thank you.

Yes. A lot of questions there. I will just give you the short version on MADRS and HAM-D correlation. What we’ve done of course in our trials is we’ve used HAM-D as the primary endpoint. That’s what we statistically power the trial on and that’s how we design the studies. We include MADRS because we know that it’s a way to help others compare our results versus trials that have used MADRS. But obviously, if we're going to use MADRS as an endpoint, we would be powered against that and be training and the investigation and so forth. That said, there's a very high statistical correlation between MADRS and HAM-D in all of our trials. So, individual single-digit differences are not something that we're really looking at. If you look at -- if you look at subtypes or subcategories of the individual items, pretty much everything moves in parallel across both. And for the most part, we’ve seen a very high -- a very close tracking between both of those two endpoints across all of our studies, both in 217, MDD and PPD, as well as in ZULRESSO.

[Operator instructions] Our next question comes from Matthew Harrison with Morgan Stanley.

I just wanted to ask one on ZULRESSO. Can you just comment broadly, you've obviously had good success with plan sponsors and getting on the plans, how's that influenced? I assume, and a lot of these hospitals, you also need formulary access. So, how should we think about those two items, and how they're tracking or not tracking together? Thanks.

Yes. Hey, it's Mike. I’ll take that one. So, as we said, the payer coverage, we've been very encouraged by what we're seeing on the payer coverage. And what we think is that that to me is recognition that the payers see that the value in ZULRESSO and they want to provide access for women with PPD. The formulary status within the different hospitals, that's an internal process within the hospitals, that’s one of the four actions they have to take to get all the way to treating patients. So, it's not exactly correlative. And then, the third thing I'd say that’s even on top of that, the fourth thing that we said that they have to take in the hospital setting is getting payer reimbursement. So, we've been very pleased to see the patient side of this and that plans are stepping up to cover ZULRESSO with favorable coverage. And that's a testament to the great work that our market access team has done and the investment we made over a period of time in engaging those players. And now, we're seeing as the sites now taking that into their own shops and looking at it from a formulary perspective going through their P&T committees, and then looking to secure a satisfactory payer reimbursement for the administration of ZULRESSO in the hospitals. So, it's ongoing, each side is at a different stage in that process. And as you said, by Q4, we're going to start to see more momentum of sites coming on line and patients getting treated.

Thank you. Our next question comes from Sumant Kulkarni with Canaccord.

This is more of a conceptual one. On the generalized anxiety disorder indication, how would you compare and contrast your approach versus competing glutamate e approach out there?

Well, so, it's very different approach relative glutamate in the sense that the two systems act in opposition to regulate circuit level function. It's been known for quite some time that the GABA system which tends to calm down brain function is associated with an anxiolytic effect. So, in many ways, based on the target we're on ground that we know about, but what we're looking at with our compounds in being able to modulate tonic of GABA receptor, a function is very different than what's been out there. And so, that's what we're looking at it is how the addition of the tonic GABAergic inhibition really adds to the anxiolytic response.

Thank you. Our next question comes from Gary Nachman with BMO Capital Markets.

Hi. Good morning. It’s Rafe [ph] on for Gary. For SAGE-217, what are your expectations for potential scheduling? How would it impact your view of the commercial opportunity if 217 is a schedule for like ZULRESSO?

For all CNS programs, you need to go through standard studies regarding abuse liability and so forth. Every drug is evaluated separately, based on its overall profile. And when we have those data, we will certainly share them. I would turn it over to Mike to talk about its pontifical commercial implications.

Yes. So, on scheduling, it’s early days, as Steve said to opine on what that may look like. But just from an commercial opportunity, obviously the benefit risk profile that we're seeing through the trials for 217 is really exciting from a commercial perspective. We see this as the opportunity as Jeff has talked about, shifting the paradigm from a chronic to episodic. And if this benefit profile continues to be replicated in the ongoing studies, we think we have multiple ways to win with 217 to play broadly with patients, and we're getting positive feedback in the early engagement we're having both from a payer perspective and ACPs as we do ad boards and just do our research at this point. So, we will wait and see what happens with the scheduling, but at this point, the benefit risk profile is very exciting for 217.

Thank you. Our next question comes from Yatin Suneja with Guggenheim.

Thanks for taking my question. Question is on 718. Could you maybe talk about the biological rationale for using a NMDA receptor PAM in Huntington’s relative to some of the other indication that you could pursue? And then, maybe also talk about your level of confidence in Huntington’s disease, now that you have little bit more data, especially the healthy volunteer data that you recently announced couple of weeks ago?

This is Jim. Yes. So, we're excited about how our pipeline is progressing. We’ve got multiple midterm opportunities. For SAGE-718, in particular, as you know, it is a positive modulator of NMDA receptor function. But also importantly, as we've done with the GABA receptors, we've identified through Sage’s science that there is a place where natural molecules interact with the NMDA receptor and we can engage that mechanism. And so we take a biomarker-driven approach in Huntington’s disease. It is a disorder where this natural mechanism is impaired. And so, our logic there is that being able to engage that mechanism with SAGE-718 allows us to replace something that's missing. And so, in that sense it’s a first patient population where we know we've got a deficit in this particular type of NMDA receptor function. Now, of course, there is a lot of knowledge about NMDA receptors involving cognition. And so, this isn't a necessary thing. And of course, down the road, we will be looking at other patient populations as well. But it gives us high confidence to start in Huntington’s disease.

Thank you. Our next question comes from Joon Lee from SunTrust.

217 did work in Phase 2 MDD study. But, can you remind us again the mechanism for why a derivative of allopregnanolone works in MDD who don’t necessarily have any deficiency in progesterone? I understand why it works in PPD but just remind us again why it also works in MDD. And in the event that Phase 3 MOUNTAIN study doesn’t go as expected, could you still seek approval using the REDWOOD study? Is the intention of REDWOOD to be able to serve as one of the pivotal? Thank you.

We’ll talk about the potential mechanism for 217. What we believe is going on is that we are really operating through the GABA system here for modulating mood. We need to separate out the notion of changes in hormones as a trigger for depression in patients with postpartum depression versus the mechanism of action of a drug that’s improving mood. And what we’ve seen consistently across both ZULRESSO and now 217 is that direct interaction with the GABA receptor system actually has very powerful effects on mood states where we see rapid, profound and sustained improvement in mood through relatively brief durations of interaction with those receptors. And I'll turn it over to Jim to talk about some of our thinking related to that. But, we do think that it's the action not through progesterone, but through GABA that really is what's doing the work here.

And I'll build off a point that Steve just made and it’s a point of triggering, right? So, we do believe that what's happening is -- and our hypothesis is that whatever is triggering a depressive brain state, once that has been triggered, there's an opportunity with ZULRESSO or with SAGE-217 in major depression, to adjust that state and allow a person to come back to an old state.

Thank you. Our next question comes from Tim Lugo with William Blair.

Hi. This is Lachlan on for Tim. Thanks for taking the question. I guess, I had a question on ZULRESSO. You said it takes 6 to 9 months for it to get REMS certified. But once they are certified, what kind of cadence do you see, in terms of treating that type of patients and getting up to speed, acknowledging obviously it’s still early in the launch?

Yes. So, let me just clarify that point. We said it will take 6 to 9 months to get through the four actions that they have taken. REMS certification is just one of the actions they have to take. And as a reminder, they have set up protocols internally in the hospitals to go through the formulary process and also secure satisfactory reimbursement from the payers as well. So, each one of those steps takes time, and that's what we said. 6 to 9 months, it will vary by site. Right. Some of the sites might come up on line sooner, depending how quickly they can pass through each one of those actions. But for us, we know that based on the feedback we've had and what we’ve seen in these early days, it is going to take time to get there. So, we feel very encouraged and right on track where we want to be in terms of the early signals that we're getting from both the physicians and the patients. As I mentioned before that the payer access at this point is so early in the game, has been very positive, we've had some great wins at places like Aetna, Anthem, and United, and evenly distributed across managed Medicaid, and fee-for-service Medicaid. So, lots of good progress being made. So, as we move through the launch, and as I said, getting into the later half of the year, we'll have a much better perspective of how these sites are coming on line, relatively 6 to 9 months, and then what is the patient demand looking like as we go through.

Our next question comes from Dane Leone with Raymond James.

Thank you very much. It seems like the sell side discovered SAGE-217 this quarter based on the battery of questions. So, I'll ask one on ZULRESSO. Could you maybe just give us some description, now that you've had a couple of patients treated in July, what the patient presentation is like? Obviously, this is going to be a great drug, broadly for PPD. I'm just curious, who are kid of the first patients coming in the door right now? And maybe looking for color like where these -- is this in the neonatal setting specifically, or are these patients that were discharged post birth and then have come back to the hospital to receive treatment? Anything like that would be great.

So, it's early days. We wouldn't comment on the specific patients themselves, right. But, what I would say is consistent with what we've said all along, in terms of the types of patients, we continue to see this is initially going to be treated with severe patients to start. And as clinicians get more and more comfortable, we'll start to see them moving this back towards the moderate to severe -- moderate patients, excuse me. The good news is that on the payer side, again, the coverage is broad, right, in terms of moderate to severe patients. So, we have the opportunity to continue to access more and more patients, as ZULRESSO plays out. From a site of care perspective, you're asking about where are they going in, and it's very important to watch. As we take this family centric approach and we think about the experience that patient is going to be having, we really try our best to educate these sites on what's important to the moms and families around that site of care. It’s ultimately going to be the site of care that determines where in the hospital or their site of care that the mom will be treated. And in these early days, both in terms of those that are treating already and those that are coming on line in the future months, it’s going to be a range of different options for the moms to come in. So, various settings we do here, mom and baby units, we hear other settings of care as well. But what we try to really stress is how important it is for that patient experience. They are going to have to separate to a degree from the baby but there are many places that are going to take the caregiver and the baby at the same time, into the hospital settings. So, that’s really important. We will continue to reinforce that. But ultimately, it’s going to be site of care that determines where in the hospital or their setting that mom is administered ZULRESSO.

Thank you. Our next question comes from Marc Goodman with SVB.

Just on, ZULRESSO, I’m curious how many sensors do you think in a year you will have up and running, like what is the goal here? You mentioned to be in every MSA. So, I'm assuming we’re talking 200 to 300. And then just second part of the question is, as you’ve talked to these 100 centers, have already certified for the REMS, how many patients, how many women are they saying, like what are the -- I this kind of feeding off the last question, but are they seeing as many patients as you thought, like just is the population bigger, the same? I'm just trying to get a sense of as you thought previously, as we're getting into this. Thanks.

Yes. I will take it, this is Mike. In terms of the sites of care number, what we’ve said is that at the end of the day, this is about access for women. That's ultimately what we want to get to. We're very focused on these top 140 MSAs as we’ve talk about, we’ve made good progress that we’ve got 55 of the top 140 with a REMS certified site in place, that translates to about 45% of patients across the U.S. having a site in place, knowing that they still have to take those other actions to get all the way to be certified. So, in an ideal world, as I said, we would have at least one site up and running in all 140 MSAs, it will take some time to get there as we talk about. And over time, we can get even more breadth in those MSAs. So, we wouldn’t give a number at this point, but we feel we’re making very good progress along the lines of getting access for patients, which is the most important thing with the sites. In terms of what we're seeing at these sites, really asking about patients and what we're seeing, the prevalence and the incidence numbers are very similar to what we talked about in the past, the number of women that are being treated, over 400,000 women with postpartum depression every year, the moderate to severe patient population is what we thought it would be and that will continue to play out. I think the interesting thing is, as we see more sites come on line, it's not just about what the patients that are in that specific sites. A big part of our go-to-market model is also targeting OB/GYNs in the settings outside of those centers that we’ll refer in. And so that’s a big part that we'll learn over coming months as what do those referral patterns look like and how many kind of sites actually take on and where are those referrals coming from?

Thank you. And our final question today will come from Laura Chico with Wedbush Securities.

Good morning, guys. Thanks for fitting me in. I’m wondering if we can just ask one more on ZULRESSO. Mike, can you speak to the kind of expected timing you anticipated taking for payer reviews or I guess once you get to a more steady state? And I’m trying to understand once the decision to treat has been made, how long does it take before a patient actually starts on drug and what proportion are you anticipating of these cases that are going to be adjudicated favorably? Thanks.

It’s Mike. On the expected time, just to clarify. So, the coverage is coming in, we're very pleased with where we are at, the 65% covered lives today, the remaining policies we expect over the coming months to be opined on. But in that interim period of time, about the 30% of lives that are waiting for policy, we believe that the medical exception base as patients will still be able to come through. And so really, we're making very good progress on the coverage side. The flip side, as we said on the reimbursement side, it's one of the steps that the hospitals have to secure that reimbursement directly from the payers. In our early engagement with the payers and the conversations we've had, they have signaled a willingness to provide reimbursement outside of DRG. The hospitals and the sites have to engage directly with the payers to make that happen. And what we're hearing is that they want to do that almost on a patient basis. So as patients come into the site, they'll have that negotiation and discussion on a very practical basis, as opposed to theoretical. So, once the patients come in, those conversations will happen. So, it is one step in getting them all the way through to treating. But again, the signals we’re receiving from the payers has been positive, but it will take time to pass through all the steps to get them all the way to treating patients.

Ladies and gentlemen, thank you for participating in today's question-and-answer session. I would now like to turn the call back over to Mr. Jeff Jonas for any closing remarks.

Well, thanks, everyone, again, for your attention this morning. As you know, as we’ve said and Mike has pointed out, we're really pleased with our progress on the ZULRESSO launch. And it's still early but we're very comfortable and confident about the excitement that's building, both among patient groups and in the community. And we're also of course, pleased with the data that SAGE-217 continues to generate and the early data that we've seen for SAGE-718 and SAGE-324. So, we're excited about the year to come. And I want to thank all of you again and all the folks at Sage for all the great work over this year. So again, thanks, everybody.

Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may all disconnect and have a wonderful day.