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MarketScreener Homepage  >  Equities  >  Nasdaq  >  Sage Therapeutics, Inc.    SAGE

SAGE THERAPEUTICS, INC.

(SAGE)
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SAGE THERAPEUTICS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

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08/10/2020 | 07:23am EDT
You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed consolidated financial
statements and related notes appearing elsewhere in this Quarterly Report on
Form 10-Q, or Quarterly Report, and the audited financial statements and related
notes contained in our Annual Report on Form 10-K for the year ended December
31, 2019, or Annual Report. In addition to historical information, this
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. We caution you that forward-looking statements
are not guarantees of future performance, and that our actual results of
operations, financial condition and liquidity, and the developments in our
business and the industry in which we operate, may differ materially from the
results discussed or projected in the forward-looking statements contained in
this Quarterly Report. We discuss risks and other factors that we believe could
cause or contribute to these potential differences elsewhere in this report,
including under Part II, Item 1A. "Risk Factors" and under "Cautionary Note
Regarding Forward-Looking Statements" in this Quarterly Report. In addition,
even if our results of operations, financial condition and liquidity, and the
developments in our business and the industry in which we operate are consistent
with the forward-looking statements contained in this Quarterly Report, they may
not be predictive of results or developments in future periods. We caution
readers not to place undue reliance on any forward-looking statements made by
us, which speak only as of the date they are made. We disclaim any obligation,
except as specifically required by law and the rules of the Securities and
Exchange Commission, or SEC, to publicly update or revise any such statements to
reflect any change in our expectations or in events, conditions or circumstances
on which any such statements may be based, or that may affect the likelihood
that actual results will differ from those set forth in the forward-looking
statements.



                                    Overview

We are a biopharmaceutical company committed to developing and commercializing
novel medicines with the potential to transform the lives of people with
debilitating disorders of the brain. Our first product, ZULRESSO™ (brexanolone)
CIV injection, was approved by the U.S. Food and Drug Administration, or FDA, in
March 2019 for the treatment of postpartum depression, or PPD, in adults, and
was made commercially available in the U.S. beginning on June 24, 2019. We have
a portfolio of other product candidates with a current focus on modulating two
critical central nervous system, or CNS, receptor systems, GABA and NMDA. The
GABA receptor family, which is recognized as the major inhibitory
neurotransmitter in the CNS, mediates downstream neurologic and bodily function
via activation of GABAA receptors. The NMDA-type receptors of the glutamate
receptor system are a major excitatory receptor system in the CNS. Dysfunction
in these systems is implicated in a broad range of CNS disorders. We are
targeting CNS indications where patient populations are easily identified,
clinical endpoints are well-defined, and development pathways are feasible.



The COVID-19 pandemic is causing major disruptions to businesses and financial
markets worldwide. The pandemic continues to significantly impact the U.S. A
number of states within the U.S. are seeing a substantial increase in cases of
COVID-19 after beginning to reopen businesses and public facilities. These
surges in the number of cases of COVID-19 could continue, worsen and spread,
including as a result of states lifting restrictions, declines in the use of
protective measures, increases in activities and access to settings that involve
a higher risk of exposure or due to other factors. We are closely monitoring the
impact of the pandemic on our employees, and our business operations. We have
adopted a series of precautionary measures in an effort to protect our employees
and mitigate the potential spread of COVID-19 in our community. For example, we
have instituted a remote work policy for our employees, including our
field-based employees, and have temporarily replaced all in-person meetings and
interactions with virtual interactions.



The rapid spread of COVID-19 in the U.S. has resulted in a significant reduction
in patient demand for ZULRESSO and in the number of sites available to
administer ZULRESSO. This has had a negative impact on our revenue from sales of
ZULRESSO.  The pandemic may also negatively impact our ongoing and planned
development activities.  Concerns, precautions and restrictions arising from the
COVID-19 pandemic may substantially slow clinical site recruitment and
initiation; impede enrollment; impair the conduct of our trials or integrity of
our data; or cause us to pause trials. Any of these effects may significantly
impact our ability to meet our expected timelines or increase our costs, impact
other aspects of our business, or cause us to have to change our plans. To date,
we and our third-party suppliers and contract manufacturing partners have been
able to continue to supply ZULRESSO and our product candidates without
significant disruption, and we currently do not anticipate any interruptions in
supply. Any prolonged material disruptions to the work of our employees,
suppliers, contract manufacturers, or vendors could negatively impact our
business, results of operations, and activities. In addition, the COVID-19
pandemic has caused major volatility in capital markets and a significant global
economic downturn, and the Company's ability to access the capital markets in
the future could be impacted if volatility in the capital markets and the
economic downturn continue.

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The following table summarizes the status of our product and product candidate portfolio as of the filing date of this Quarterly Report.



                               [[Image Removed]]



Our first product, ZULRESSO, is a proprietary intravenous, or IV, formulation of
brexanolone. Brexanolone is chemically identical to allopregnanolone, a
naturally occurring neuroactive steroid that acts as a positive allosteric
modulator of GABAA receptors. In March 2019, the FDA approved ZULRESSO for the
treatment of PPD in adults. We launched ZULRESSO commercially in the U.S.
beginning on June 24, 2019, after completion of controlled substance scheduling
of brexanolone by the U.S. Drug Enforcement Administration, or DEA, and
incorporation of the scheduling into the FDA-approved label and other product
information. The DEA placed ZULRESSO into Schedule IV of the Controlled
Substances Act. PPD is one of the most common medical complications during and
after pregnancy.



ZULRESSO is administered as a continuous infusion given over two and a half
days. Because of the risk of serious harm resulting from excessive sedation or
sudden loss of consciousness during the ZULRESSO infusion, ZULRESSO is approved
for administration only in a medically-supervised healthcare setting that has
been certified under a Risk Evaluation and Mitigation Strategy, or REMS, program
and meets the other requirements of the REMS program, including requirements
related to monitoring of the patient during the infusion. Patients who are
prescribed ZULRESSO are required to enroll in a registry which may allow us to
compile additional information to further our understanding of the risk of
excessive sedation or sudden loss of consciousness during administration of
ZULRESSO and to improve management of the risk. Given the mode and setting of
administration of ZULRESSO and the requirements of the REMS program, ZULRESSO
has been administered to date primarily to treat women with severe PPD, and we
expect that to continue to be the case. We estimate that about 20% to 30% of
women diagnosed with PPD fall into this category.



In the second quarter of 2020, we received clearance from the FDA, under the
Coronavirus Treatment Acceleration Program (CTAP), to initiate a Phase 3
clinical trial with brexanolone in patients with advanced COVID-19 related acute
respiratory distress syndrome (ARDS).





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Our next most advanced product candidate is zuranolone (SAGE-217), an oral
compound that is currently in Phase 3 clinical development for PPD and major
depressive disorder, or MDD. Zuranolone is a novel neuroactive steroid that,
like brexanolone, is a positive allosteric modulator of GABAA receptors that
targets both synaptic and extrasynaptic GABAA receptors. The FDA has granted
Breakthrough Therapy designation and Fast Track designation to zuranolone for
the treatment of MDD. To date, we have completed three pivotal clinical trials
of zuranolone, two in MDD and one in PPD. The first completed pivotal trial, a
Phase 2 clinical trial evaluating zuranolone in the treatment of MDD, and a
completed pivotal trial evaluating zuranolone in the treatment of PPD both met
their primary endpoints. In each case, these trials evaluated the effect of
zuranolone at a 30 mg dose. The pivotal Phase 3 clinical trial evaluating the
effect of 30 mg of zuranolone on depressive symptoms in adults with MDD, known
as the MOUNTAIN Study, did not meet its primary endpoint. Following discussions
with the FDA, we determined to conduct three new Phase 3 clinical trials as part
of our pivotal program for zuranolone in MDD and PPD:

-a placebo-controlled trial evaluating a two-week course of zuranolone 50 mg in women with PPD, with additional short-term follow-up, known as the SKYLARK Study;


-a placebo-controlled trial evaluating a two-week course of zuranolone 50 mg,
when co-initiated with a newly administered standard antidepressant therapy, as
an acute rapid response treatment in patients with MDD, with additional
short-term follow-up, known as the CORAL Study; and

-a placebo-controlled trial evaluating a two-week course of zuranolone 50 mg in
patients with MDD, with additional short-term follow-up, known as the WATERFALL
Study.

We initiated patient dosing in the SKYLARK Study and the WATERFALL Study in the
second quarter of 2020 and expect to initiate dosing in the CORAL Study later in
2020. Topline results from these three studies are anticipated in 2021, with
topline data from the WATERFALL Study expected in the first half of 2021. We are
also continuing our SHORELINE study, an open-label Phase 3 clinical trial
evaluating the safety of as-needed repeat treatment with zuranolone in which
patients with MDD receive an initial two-week course of zuranolone and as needed
retreatment for up to one year. Enrollment of patients receiving the 30 mg dose
in the SHORELINE study was completed in the third quarter of 2019, and we expect
to report top-line results as to patients at the 30 mg dose in 2020. We have
amended the SHORELINE protocol to allow currently enrolled patients to receive
retreatment with zuranolone 50 mg. Additionally, the SHORELINE Study has begun
enrolling a new cohort of patients with MDD who will receive zuranolone 50 mg.

In the fourth quarter of 2019, we paused enrollment in our REDWOOD study, a
placebo-controlled Phase 3 clinical trial in MDD evaluating the efficacy (time
to first relapse) and long-term safety of fixed interval zuranolone monotherapy
maintenance treatment (treatment without traditional antidepressants) in which
randomized patients receive a two-week course of zuranolone or placebo every two
months until the first relapse for up to one year. We also paused enrollment in
our RAINFOREST study, a placebo-controlled polysomnography Phase 3 clinical
trial of zuranolone in patients with MDD who have co-morbid insomnia. We paused
both of these studies, and have closed all clinical trial sites for these
studies, to focus our resources and activities on enrollment in the three new
Phase 3 clinical studies. We plan to reevaluate whether to reinitiate the
REDWOOD and RAINFOREST studies at a later date. We also continue to evaluate the
ongoing zuranolone clinical pharmacology and safety program.

In addition to zuranolone, we have a portfolio of other novel compounds that
target GABAA receptors. SAGE-324 is a novel GABAA receptor positive allosteric
modulator with preclinical pharmacokinetic and pharmacodynamic properties that
suggest suitability for chronic oral dosing. We plan to develop SAGE-324 for a
number of neurological conditions, including essential tremor, a disorder
causing involuntary and rhythmic shaking, and, potentially, epileptiform
disorders and Parkinson's disease. Based on the results of the Phase 1 clinical
program, including a positive signal observed in a small cohort of patients with
essential tremor and a safety profile consistent with GABAA positive allosteric
modulation, and our other work in this area to date, in the second quarter of
2020, we began enrolling patients in a Phase 2 clinical trial evaluating
SAGE-324 in the treatment of essential tremor. Topline data from this study are
expected in the fourth quarter of 2020 or the first quarter of 2021. Our
portfolio of novel GABAA receptor positive allosteric modulators also includes
SAGE-689, a product candidate intended for intramuscular administration, and for
which we have completed the non-clinical studies required to move into a Phase 1
clinical development program, and other compounds at earlier stages of
development with a focus on both acute and chronic CNS disorders.

Our second area of focus is the development of novel compounds that target the
NMDA receptor. The first product candidate selected for development from this
program is SAGE-718, an oxysterol-based positive allosteric modulator of the
NMDA receptor, which we are exploring in certain cognition-related disorders
associated with NMDA receptor dysfunction, including Huntington's disease and
Parkinson's disease. Examples of indications involving NMDA receptor

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dysfunction also include certain types, aspects or subpopulations of a number of
diseases and disorders such as depression, Alzheimer's disease, attention
deficit hyperactivity disorder, schizophrenia, and neuropathic pain. As part of
our Phase 1 clinical program, we evaluated the safety, tolerability and
pharmacokinetics of SAGE-718 in a small cohort of patients with early
Huntington's disease. As part of this study, we also conducted assessments of
executive functioning with measures relevant to the core cognitive decline
observed in people with Huntington's disease. Based on the signals observed in
this study and in similar measures during an earlier Phase 1 cohort of healthy
volunteers without Huntington's disease, we plan to initiate a Phase 2a
open-label study evaluating patients with Parkinson's disease cognitive
dysfunction, and potentially other Phase 2a open-label clinical studies in
patients with certain other cognition-related disorders, which will inform
potential advancement of SAGE-718 into further Phase 2 clinical development,
including potentially in Huntington's disease. We expect to report top-line data
from the Phase 2a study in patients with Parkinson's disease cognitive
dysfunction in the second half of 2020. Our second product candidate targeting
the NMDA receptor, SAGE-904, is in development as a potential oral therapy for
disorders associated with NMDA hypofunction. We initiated a Phase 1 clinical
trial of SAGE-904 in healthy volunteers in the third quarter of 2019.

We expect to continue our work on allosteric modulation of the GABAA and NMDA
receptor systems in the brain. The GABAA and NMDA receptor systems are broadly
accepted as impacting many psychiatric and neurological disorders, spanning
disorders of mood, seizure, cognition, anxiety, sleep, pain, and movement, among
others. We believe that we may have the opportunity to develop molecules from
our internal portfolio with the goal of addressing a number of these disorders
in the future. We also continue to evaluate development opportunities in
potential new areas of interest as well as to explore partnering opportunities
where we believe a strategic partner may add significant value to our efforts,
including through capabilities, infrastructure, speed or financial resources.

We began to generate revenue from product sales in the second quarter of 2019 in
conjunction with the launch of our first product, ZULRESSO, which commenced on
June 24, 2019. Prior to the second quarter of 2019, all of our revenue had been
derived from a strategic collaboration we entered into in the second quarter of
2018 with Shionogi & Co., Ltd., or Shionogi, for the clinical development and
commercialization of zuranolone in Japan, Taiwan and South Korea.

We have incurred net losses in each year since our inception, and we had an
accumulated deficit of $1.9 billion as of June 30, 2020. Our net losses were
$263.1 million for the six months ended June 30, 2020 and $680.2 million for the
year ended December 31, 2019. These losses have resulted principally from costs
incurred in connection with research and development activities and selling,
general and administrative costs associated with our operations and our
commercial build. We expect to incur significant expenses and increasing
operating losses for the foreseeable future.

We expect that we will incur significant expenses in the foreseeable future in connection with our ongoing activities, if and as we:

• continue to advance Phase 3 clinical development of zuranolone in PPD and

        MDD, and potentially advance zuranolone for other indications;


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• continue our commercialization efforts with respect to ZULRESSO for the

treatment of PPD in the U.S. with a primary focus in geographies that have

existing, active ZULRESSO treating sites;

• advance SAGE-324 through completion of the ongoing Phase 2 clinical trial

        in essential tremor, with potential future development in certain
        epileptiform disorders and other neurological conditions;

• advance SAGE-718 through initiation and completion of the planned Phase 2a

open-label clinical study of patients with Parkinson's disease cognitive

dysfunction, and potentially evaluate SAGE-718 in additional Phase 2a

open-label clinical studies in patients with certain other

cognition-related disorders, prior to determining potential next steps for

advancing SAGE-718 further into Phase 2 clinical development, including

potentially in Huntington's disease;

• advance one or more non-clinical stage compounds into clinical development;

• continue our research and development efforts to evaluate the potential

for our existing product candidates in the treatment of additional

indications or in new formulations, and to identify new product

candidates, with the goal of developing a diversified portfolio of assets

with differentiated features;



    •   continue to explore other opportunities to establish agreements or
        alliances with pharmaceutical company collaborators or distributors for
        our product candidates where we believe the partnering opportunity will

add significant value to our efforts, including through capabilities,

infrastructure, speed or financial contributions;

• prepare for potential new drug applications and pre-launch activities with

respect to our product candidates at the appropriate time to support next

steps if our pivotal programs are successful and support a filing;

• seek regulatory approvals for any product candidates that successfully

complete clinical development;

• refine the formulation and improve the manufacturing process for our

product candidates; and manufacture clinical supplies as development

progresses;

• commercialize any product candidates for which we obtain regulatory

approval, including the manufacture of commercial supplies;

• at the appropriate time if our development efforts progress successfully,

add personnel, including personnel to support our product development and

ongoing and future commercialization efforts, and incur increases in

stock-based compensation expense related to existing and new personnel

with respect to both service-based and performance-based awards;

• evaluate market opportunities for our products and product candidates in

markets outside the U.S.;

• maintain, leverage and expand our intellectual property portfolio,

including by utilizing the strengths of our proprietary chemistry platform

        and scientific know-how to expand our portfolio of new chemical
        entities to lessen our long-term reliance on the success of any one
        program and to facilitate long-term growth;

• add or optimize operational, financial and management information systems;

and

• incur non-cash stock compensation expense related to existing and new

personnel with respect to both service-based and performance-based awards.



Until such time that we can generate significant revenue from product sales, if
ever, we expect to finance our operations primarily through a combination of
revenue, equity or debt financings and other sources, which may include
collaborations with third parties. We may not be successful in our
commercialization of ZULRESSO or any other product, and may not generate
meaningful revenue or revenue at the levels or on the timing necessary to
support our investment and goals. We may never successfully complete development
of any of our current or future product candidates, obtain necessary regulatory
approval for such product candidates, or achieve commercial viability for any
resulting approved product. We may not obtain or maintain adequate patent
protection or other exclusivity for our products or product candidates. Adequate
additional financing may not be available to us on acceptable terms, or at all.
Our inability to raise capital as and when needed would have a negative impact
on our financial condition and on our ability to pursue our business strategy.
Arrangements with collaborators or others may require us to relinquish rights to
certain of our technologies or product candidates. We will need to generate
significant revenue to achieve profitability, and we may never do so.

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                         Financial Operations Overview

Revenue

We began to generate revenue from product sales in the second quarter of 2019 in
conjunction with the launch of our first product, ZULRESSO, which commenced on
June 24, 2019. Prior to the second quarter of 2019, all of our revenue had been
derived from a strategic collaboration we entered into in the second quarter of
2018 with Shionogi.

Our revenue from sales of ZULRESSO has been negatively impacted by significant
barriers to treatment arising from the complex requirements for a site to become
treatment ready and, more recently, by the spread of COVID-19 in the U.S.
ZULRESSO is administered as a continuous infusion given over two and a half
days. Because of the risk of serious harm resulting from excessive sedation or
sudden loss of consciousness during the ZULRESSO infusion, ZULRESSO must be
administered only in a medically-supervised healthcare setting that has been
certified under a REMS program and meets the other requirements of the REMS
program, including requirements related to monitoring of the patient during the
infusion.  The actions required for a healthcare setting to be ready and willing
to treat women with PPD are complex and time-consuming.  These actions include:
becoming REMS-certified; achieving formulary approvals; establishing protocols
for administering ZULRESSO; and securing satisfactory reimbursement. Sites must
often negotiate reimbursement on a payor-by-payor basis under commercial
coverage.  These requirements have created significant barriers to treatment.
 These barriers have been compounded recently by the COVID-19 pandemic.  The
spread of COVID-19 in the U.S. has resulted in a significant number of sites of
care pausing treatment of new patients with ZULRESSO. We believe concerns about
exposure to the virus have also caused a significant reduction in the number of
women with PPD seeking treatment with ZULRESSO and in physicians willing to
prescribe it. Given the ongoing surge in the number of cases of COVID-19 in the
U.S. and continuing concerns about the pandemic across the country, we expect
the significant adverse impact of the pandemic on ZULRESSO revenues to
continue. We anticipate that the COVID-19 pandemic will also continue to have an
adverse impact on our results of operations from sales of ZULRESSO even after
pandemic-related restrictions are eased, as sites adjust to new procedures and
address ongoing concerns as the situation evolves. The scope and timing of the
expected impact will depend on, among other factors, the duration and severity
of precautionary measures taken to curb the spread of COVID-19, the length and
frequency of surges or waves of COVID-19 cases and the timing and success of any
return to normal business operations across the U.S.

In April 2020, we implemented a workforce reduction that primarily affected the
ZULRESSO commercial operation and related support functions, including
eliminating the entire salesforce. While we remain committed to working with
healthcare providers and women with PPD seeking access to ZULRESSO, our ongoing
commercial efforts, including our small account management field-based team, are
primarily focused on geographies that have existing, active ZULRESSO treating
sites. We expect that this change in our commercial efforts may further
substantially reduce the revenue opportunity for ZULRESSO.

We expect that ZULRESSO revenues are likely to fluctuate quarter to quarter. We
will not generate revenue from other products unless and until we successfully
develop, obtain regulatory approval of, and commercialize one of our current or
future product candidates. If we enter into additional collaboration agreements
with third parties for our product candidates, we may generate revenue from
those collaborations. We expect that revenue, if any, we generate under
collaboration agreements will fluctuate from quarter to quarter as a result of
the timing and amount of license fees, research and development services and
related reimbursements, payments for clinical materials or manufacturing
services, and milestone and other payments.

Effective June 12, 2018, we entered into a strategic collaboration with Shionogi
for the clinical development and commercialization of zuranolone for the
treatment of MDD and other potential indications in Japan, Taiwan and South
Korea. Under the terms of the agreement, Shionogi is responsible for all
clinical development, regulatory filings and commercialization and manufacturing
of zuranolone for MDD, and potentially other indications, in Japan, Taiwan and
South Korea. On October 26, 2018, we also entered into a supply agreement with
Shionogi for zuranolone clinical material. To date, revenue from the Company's
collaboration with Shionogi has come from an initial, upfront license fee upon
execution of the collaboration agreement of $90.0 million, which was recorded as
collaboration revenue in the year ended December 31, 2018, and for the supply of
API for Shionogi's clinical trials.

Cost of goods sold


Cost of goods sold includes direct and indirect costs related to the
manufacturing and distribution of ZULRESSO, including third-party manufacturing
costs, packaging services, freight, third-party royalties payable on our net
product revenues and amortization of intangible assets associated with ZULRESSO.

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Operating Expenses

Our operating expenses since inception have consisted primarily of costs associated with research and development activities and selling, general and administrative activities.

Research and Development Expenses




Research and development expenses, which consist primarily of costs associated
with our product research and development efforts, are expensed as incurred.
Research and development expenses consist primarily of:

• personnel costs, including salaries, benefits, stock-based compensation

and travel expenses, for employees engaged in research and development

functions;

• expenses incurred under agreements with contract research organizations,

or CROs, and sites that conduct our non-clinical studies and clinical

trials;

• expenses associated with manufacturing materials for use in non-clinical

        studies and clinical trials and developing external manufacturing
        capabilities;


    •   costs of outside consultants engaged in research and development
        activities, including their fees and travel expenses;

• other expenses related to our non-clinical studies and clinical trials and

        expenses related to our regulatory activities;


  • payments made under our third-party license agreements; and

• a portion of our facilities and other related expenses, including rent,

        depreciation, maintenance of facilities, insurance and supplies.

Costs for certain development activities are recognized based on an evaluation of the progress to completion of specific tasks using information and data provided to us by our vendors and our clinical sites.


We have been developing our product candidates and focusing on other research
and development programs, including exploratory efforts to identify new
compounds, target validation for identified compounds and lead optimization for
our earlier-validated programs. Our direct research and development expenses are
tracked on a program-by-program basis, and consist primarily of external costs,
such as fees paid to investigators, central laboratories, CROs and contract
manufacturing organizations, or CMOs, in connection with our non-clinical
studies and clinical trials; third-party license fees related to our product
candidates; and fees paid to outside consultants who perform work on our
programs. We do not allocate employee-related costs and other indirect costs to
specific research and development programs because these costs are deployed
across multiple product programs under research and development and, as such,
are separately classified as unallocated or stock-based compensation in research
and development expenses.

Research and development activities are central to our business. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect that our research and development expenses will continue to increase
in the foreseeable future as we continue or initiate clinical trials and
non-clinical studies for certain product candidates, and pursue later stages of
clinical development of our product candidates.

We cannot determine with certainty the duration and costs of the current or future clinical trials of our product candidates. The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

• the scope, size, rate of progress, and expense of our ongoing as well as

any additional clinical trials, non-clinical studies, and other research

        and development activities;


    •   future results of ongoing, planned or future clinical trials and
        non-clinical studies;

• decisions by regulatory authorities related to our product candidates;


  • uncertainties in clinical trial enrollment rate or design;


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  • significant and changing government regulation; and


  • the receipt and timing of regulatory approvals, if any.


In addition, the COVID-19 pandemic and the rapid spread of the virus in the U.S.
and outside the U.S. may also negatively impact our ongoing and planned
development activities and increase our research and development costs.
Concerns, precautions and restrictions arising from the COVID-19 pandemic may
substantially slow clinical site recruitment and initiation and enrollment in
our clinical trials, may impair the conduct of our trials or the integrity of
our data, or may cause us to pause trials, in each case which may significantly
impact our ability to meet our expected timelines or cause us to change our
plans and may significantly increase our research and development costs.

A change in the outcome of any of these variables with respect to the
development of a product candidate could mean a significant change in the costs
and timing associated with the development of that product candidate. For
example, if the FDA or another regulatory authority were to require us to
conduct clinical trials beyond those that we currently anticipate will be
required for the completion of clinical development of a product candidate or
for regulatory approval, or if we experience significant delays in enrollment in
any of our clinical trials or need to enroll additional patients, we could be
required to expend significant additional financial resources and time on the
completion of clinical development.

Any failure to complete any stage of the development of any potential product
candidates in a timely manner could have a material adverse effect on our
operations, financial position and liquidity. A discussion of some of the risks
and uncertainties associated with not completing our programs on schedule, or at
all, and the potential consequences of failing to do so, are set forth in Part
II, Item 1A of this Quarterly Report under the heading "Risk Factors."

Selling, General and Administrative Expenses


Selling, general and administrative expenses consist primarily of personnel
costs, including salaries, benefits and travel expenses for our executive,
finance, business, commercial, corporate development and other administrative
functions; and stock-based compensation expense. Selling, general and
administrative expenses also include professional fees for expenses incurred
under agreements with third parties relating to the commercialization of
ZULRESSO; public relations, audit, tax and legal services, including legal
expenses to pursue patent protection of our intellectual property; and a portion
of our facilities and other related expenses, including rent, depreciation,
maintenance of facilities, insurance and supplies.

In April 2020, we implemented a workforce reduction that primarily affected the
ZULRESSO commercial operation and related support functions, including
eliminating the entire salesforce. We expect the workforce reduction to reduce
annualized operating expenses by approximately $170 million, of which $150
million is related to selling, general and administrative expenses. While we
remain committed to working with healthcare providers and women with PPD seeking
access to ZULRESSO, our ongoing commercial efforts, including our small account
management field-based team, are primarily focused on geographies that have
existing, active ZULRESSO treating sites.  Even with the expected reduction in
selling, general and administrative expenses as a result of the restructuring,
we expect to continue to incur significant commercialization expenses, including
payroll and related expenses, to support our ongoing commercial activities
associated with ZULRESSO.  We expect that selling, general and administrative
expenses will increase in the future if we are successful in our development
efforts and are preparing for potential commercialization of our current or
future product candidates, if approved. We expect to continue to incur
significant expenses associated with general operations, including costs related
to accounting and legal services, director and officer insurance premiums,
facilities and other corporate infrastructure and office-related costs, such as
information technology costs.

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Results of Operations


Comparison of the Three Months Ended June 30, 2020 and 2019

The following table summarizes our results of operations for the three months ended June 30, 2020 and 2019:



                                        Three Months Ended June 30,          Increase
                                           2020               2019          (Decrease)
                                                       (in thousands)
Product revenue, net                  $        1,089$       519$        570
Collaboration revenue                              -               354             (354 )
Total revenue                                  1,089               873              216
Operating costs and expenses:
Cost of goods sold                               110                44      

66

Research and development                      73,320            89,059          (15,739 )
Selling, general and administrative           38,224            88,227          (50,003 )
Restructuring                                 28,402                 -      

28,402

Total operating costs and expenses           140,056           177,330          (37,274 )
Loss from operations                        (138,967 )        (176,457 )         37,490
Interest income, net                           2,686             8,220           (5,534 )
Other income (expense), net                      (66 )              16              (82 )
Net loss                              $     (136,347 )$  (168,221 )$     31,874




Product revenue, net


During the three months ended June 30, 2020 and 2019, we recognized $1.1 million and $0.5 million, respectively, of net product revenues related to sales of ZULRESSO. Sales allowances and accruals consisted of patient financial assistance, distribution fees, discounts and chargebacks.

                                       36

--------------------------------------------------------------------------------

Collaboration revenue



For the three months ended June 30, 2020, we recognized no collaboration revenue
from our agreement with Shionogi. For the three months ended June 30, 2019, we
recognized $0.4 million in collaboration revenue from our agreement with
Shionogi related to the supply of zuranolone active pharmaceutical ingredient,
or API, for clinical development. For further discussion regarding our
collaboration agreement with Shionogi and the accounting for revenue from
collaboration agreements, refer to Note 6, Collaboration Agreement in the Notes
to Condensed Consolidated Financial Statements included in Part I, Item 1 of
this Quarterly Report.

Cost of goods sold



During the three months ended June 30, 2020 and 2019, cost of goods sold of $0.1
million and $44,000, respectively, was related to royalties on net sales of
ZULRESSO payable to CyDex Pharmaceuticals, Inc., or CyDex, and The Regents of
the University of California under license agreements (see Note 5, Leases,
Commitments and Contingencies in the Notes to Condensed Consolidated Financial
Statements included in Part I, Item 1 of this Quarterly Report), labeling and
packaging costs incurred after FDA approval for ZULRESSO, amortization of
intangibles related to ZULRESSO and certain distribution costs. Prior to
receiving initial FDA approval, we manufactured ZULRESSO inventory to be sold
upon commercialization and recorded all costs incurred as research and
development expense. As a result, the manufacturing costs related to the
ZULRESSO inventory build-up incurred before FDA approval were already expensed
in a prior period and are therefore excluded from the cost of goods sold for the
three months ended June 30, 2020 and 2019. We expect our cost of goods sold for
ZULRESSO to increase as a percentage of net sales in future periods as we
produce and then sell inventory that reflects the full cost of manufacturing.

Research and development expenses



                                                    Three Months Ended June 30,           Increase
                                                     2020                 2019           (Decrease)
                                                                   (in thousands)
zuranolone (SAGE-217)                           $       31,917$       37,450$     (5,533 )
SAGE-324                                                 3,738                4,367             (629 )
SAGE-718                                                 1,498                1,453               45
Other research and development programs                  8,322               12,598           (4,276 )
Unallocated expenses                                    17,725               19,519           (1,794 )
Stock-based compensation                                10,120               13,672           (3,552 )

Total research and development expenses $ 73,320 $

 89,059     $    (15,739 )




Research and development expenses for the three months ended June 30, 2020 were
$73.3 million, compared to $89.1 million for the three months ended June 30,
2019. The decrease of $15.7 million was primarily due to the following:



• a decrease of $5.5 million in expenses for zuranolone, primarily as a

result of completion of the MOUNTAIN Study;

• a decrease of $4.3 million in expenses for other research and development

programs, related to non-clinical studies and a decrease in spending for

        brexanolone (SAGE-547); and




    •   a decrease of $3.6 million in non-cash stock-based compensation expense.

There was no non-cash stock-based compensation expense recognized related

to the achievement of performance-based vesting criteria during the three

months ended June 30, 2020. The amount of non-cash stock-based

compensation expense related to the achievement of performance-based

        vesting criteria was $1.0 million for the three months ended June 30,
        2019. The remainder of the decrease is mainly from the impact of the

cancellation of option grants that had been made to terminated employees,

        primarily those terminated in the restructuring.




                                       37
--------------------------------------------------------------------------------

Selling, general and administrative expenses



                                                         Three Months Ended June 30,           Increase
                                                          2020                 2019           (Decrease)
                                                                        (in thousands)
Personnel-related                                    $       12,252$       31,993$    (19,741 )
Stock-based compensation                                     12,124               21,095           (8,971 )
Professional fees                                             6,708               20,670          (13,962 )
Other                                                         7,140               14,469           (7,329 )

Total selling, general and administrative expenses $ 38,224 $

      88,227     $    (50,003 )




Selling, general and administrative expenses for the three months ended June 30,
2020 and 2019 were $38.2 million and $88.2 million, respectively. The decrease
of $50.0 million was primarily due to the following:



• a decrease of $19.7 million in personnel-related costs, mainly as a result

of the termination of employees in the restructuring;

• a decrease of $9.0 million in non-cash stock-based compensation expense.

There was no non-cash stock-based compensation expense recognized related

to the achievement of performance-based vesting criteria during the three

months ended June 30, 2020. The amount of non-cash stock-based

compensation expense related to the achievement of performance-based

vesting criteria was $1.1 million during the three months ended June 30,

2019. The remainder of the decrease is mainly from the impact of the

cancellation of option grants that had been made to terminated employees,

        primarily those terminated in the restructuring;




    •   a decrease of $14.0 million in professional fees, primarily due to the

impact of the restructuring on our spending for commercial activities; and

• a decrease of $7.3 million in other costs, primarily due to the impact of

the restructuring and the impact of the COVID-19 pandemic resulting in our

employees working remotely and a reduction in business travel.

Restructuring


In April 2020, we announced a restructuring plan to enable us to advance our
corporate strategy and pipeline that included the elimination of approximately
53% of our workforce. The workforce reduction primarily affected the ZULRESSO
commercial operation and related selling, general and administrative support
functions. In the three months ended June 30, 2020, we recorded $28.4 million of
expense, primarily for one-time termination benefits to the affected employees,
primarily for cash payments of severance, healthcare benefits and outplacement
assistance.

Interest income, net and Other expense, net




Interest income, net, and other expense, net, for the three months ended
June 30, 2020 and 2019 were $2.6 million and $8.2 million, respectively. The
primary reason for the decrease was the decrease in the balance of marketable
securities and a reduction in interest rates.

                                       38

--------------------------------------------------------------------------------

Comparison of the Six Months Ended June 30, 2020 and 2019

The following table summarizes our results of operations for the six months ended June 30, 2020 and 2019:



                                          Six Months Ended
                                              June 30,                Increase
                                         2020           2019         (Decrease)
                                                    (in thousands)
Product revenue, net                  $    3,375$      519$      2,856
Collaboration revenue                          -            819             (819 )
Total revenue                              3,375          1,338            2,037
Operating costs and expenses:
Cost of goods sold                           280             44             

236

Research and development                 136,930        175,457          (38,527 )
Selling, general and administrative      108,355        172,146          (63,791 )
Restructuring                             28,402              -           

28,402

Total operating costs and expenses       273,967        347,647          (73,680 )
Loss from operations                    (270,592 )     (346,309 )         75,717
Interest income, net                       7,416         14,662           (7,246 )
Other income, net                             89             20               69
Net loss                              $ (263,087 )$ (331,627 )$     68,540




Product revenue, net


During the six months ended June 30, 2020 and 2019, we recognized $3.4 million and $0.5 million, respectively, of net product revenues related to sales of ZULRESSO. Sales allowances and accruals consisted of patient financial assistance, distribution fees, discounts and chargebacks.



Collaboration revenue



For the six months ended June 30, 2020, we recognized no collaboration revenue
from our agreement with Shionogi. For the six months ended June 30, 2019, we
recognized $0.8 million in collaboration revenue from our agreement with
Shionogi related to the supply of zuranolone API for clinical development. For
further discussion regarding our collaboration agreement with Shionogi and the
accounting for revenue from collaboration agreements, refer to Note 6,
Collaboration Agreement in the Notes to Condensed Consolidated Financial
Statements included in Part I, Item 1 of this Quarterly Report.

Cost of goods sold




During the six months ended June 30, 2020 and 2019, cost of goods sold of $0.3
million and $44,000, respectively, was related to royalties on net sales of
ZULRESSO payable to CyDex and The Regents of the University of California under
license agreements (see Note 5, Leases, Commitments and Contingencies in the
Notes to Condensed Consolidated Financial Statements included in Part I, Item 1
of this Quarterly Report), labeling and packaging costs incurred after FDA
approval for ZULRESSO, amortization of intangibles related to ZULRESSO and
certain distribution costs. Prior to receiving initial FDA approval for ZULRESSO
on March 19, 2019, we manufactured ZULRESSO inventory to be sold upon
commercialization and recorded all costs incurred as research and development
expense. As a result, the manufacturing costs related to the ZULRESSO inventory
build-up incurred before FDA approval were already expensed in a prior period
and are therefore excluded from the cost of goods sold for the six months ended
June 30, 2020 and 2019. We expect our cost of goods sold for ZULRESSO to
increase as a percentage of net sales in future periods as we produce and then
sell inventory that reflects the full cost of manufacturing.

                                       39

--------------------------------------------------------------------------------

Research and development expenses



                                             Six Months Ended
                                                 June 30,               Increase
                                            2020          2019         (Decrease)
                                                       (in thousands)
zuranolone (SAGE-217)                     $  52,059$  67,679$    (15,620 )
SAGE-324                                      7,155         7,278             (123 )
SAGE-718                                      2,170         6,949           (4,779 )
Other research and development programs      16,545        21,739           (5,194 )
Unallocated expenses                         36,657        37,395             (738 )
Stock-based compensation                     22,344        34,417         

(12,073 ) Total research and development expenses $ 136,930$ 175,457$ (38,527 )





Research and development expenses for the six months ended June 30, 2020 were
$136.9 million, compared to $175.5 million for the six months ended June 30,
2019. The decrease of $38.5 million was primarily due to the following:



• a decrease of $15.6 million in expenses for zuranolone, primarily as a

result of completion of the MOUNTAIN Study;

• a decrease of $4.8 million in expenses for SAGE-718, primarily due to the

        completion of certain Phase 1 studies during 2019;



• a decrease of $5.2 million in expenses for other research and development

programs, related to non-clinical studies and a decrease in spending for

brexanolone (SAGE-547); and

• a decrease of $12.1 million in non-cash stock-based compensation expense.

There was no non-cash stock-based compensation expense recognized related

to the achievement of performance-based vesting criteria during the six

months ended June 30, 2020. The amount of non-cash stock-based

compensation expense related to the achievement of performance-based

vesting criteria was $9.5 million for the six months ended June 30,

2019. The remainder of the decrease is mainly from the impact of the

cancellation of option grants that had been made to terminated employees,

        primarily those terminated in the restructuring.



Selling, general and administrative expenses



                                               Six Months Ended
                                                   June 30,               Increase
                                              2020          2019         (Decrease)
                                                         (in thousands)
Personnel-related                           $  41,005$  62,164$    (21,159 )
Stock-based compensation                       31,010        44,466          (13,456 )
Professional fees                              17,759        39,045          (21,286 )
Other                                          18,581        26,471           (7,890 )
Total selling, general and administrative
  expenses                                  $ 108,355$ 172,146$    (63,791 )




Selling, general and administrative expenses for the six months ended June 30,
2020 and 2019 were $108.4 million and $172.1 million, respectively. The decrease
of $63.8 million was primarily due to the following:



• a decrease of $21.2 million in personnel-related costs, mainly as a result

        of the termination of employees in the restructuring;




    •   a decrease of $13.5 million in non-cash stock-based compensation expense.

There was no non-cash stock-based compensation expense recognized related

to the achievement of performance-based vesting criteria during the six

months ended June 30, 2020. The amount of non-cash stock-based

compensation expense related to the achievement of performance-based

        vesting criteria was $6.8 million during the six months ended


                                       40
--------------------------------------------------------------------------------

June 30, 2019. The remainder of the decrease is mainly from the impact of

        the cancellation of option grants that had been made to terminated
        employees, primarily those terminated in the restructuring;



• a decrease of $21.3 million in professional fees, primarily due to costs

incurred in the six months ended June 30, 2019, related to preparations

for the commercial launch of ZULRESSO in the U.S., which commenced on June

        24, 2019 and the impact of the restructuring on our spending for
        commercial activities; and



• a decrease of $7.9 million in other costs, primarily due to the impact of

the restructuring and the impact of the COVID-19 pandemic resulting in our

        employees working remotely and a reduction in business travel.




Restructuring

In April 2020, we announced a restructuring plan to enable us to advance our
corporate strategy and pipeline that included the elimination of approximately
53% of our workforce. The workforce reduction primarily affected the ZULRESSO
commercial operation and related selling, general and administrative support
functions. In the six months ended June 30, 2020, we recorded $28.4 million of
expense, primarily for one-time termination benefits to the affected employees,
primarily for cash payments of severance, healthcare benefits and outplacement
assistance.

Interest income, net and Other expense, net




Interest income, net, and other expense, net, for the six months ended June 30,
2020 and 2019 were $7.5 million and $14.7 million, respectively. The primary
reason for the decrease was the decrease in the balance of marketable securities
and a reduction in interest rates.



Liquidity and Capital Resources




Prior to the second quarter of 2019, we had not generated revenue from product
sales. We began to generate revenue from product sales in the second quarter of
2019 in conjunction with the launch of our first product, ZULRESSO, which
commenced on June 24, 2019. Prior to the second quarter of 2019, all of our
revenue had been derived from our collaboration with Shionogi. To date, we have
incurred recurring net losses. As of June 30, 2020, we had an accumulated
deficit of $1.9 billion. From our inception through June 30, 2020, we received
net proceeds of $2.2 billion from the sales of redeemable convertible preferred
stock prior to our initial public offering, the issuance of convertible notes
and the sales of common stock in our initial public offering in July 2014 and
follow-on offerings.

On February 27, 2019, we completed the sale of 3,833,334 shares of our common
stock in a follow-on underwritten public offering at a price to the public of
$150.00 per share, resulting in net proceeds of $560.9 million after deducting
commissions and underwriting discounts and offering costs paid by us.

As of June 30, 2020, our primary sources of liquidity were our cash, cash
equivalents and marketable securities, which totaled $756.5 million. We invest
our cash in money market funds, U.S. government securities, corporate bonds and
commercial paper, with the primary objectives to preserve principal, provide
liquidity and maximize income without significantly increasing risk.



The following table summarizes the primary sources and uses of cash for the six months ended June 30, 2020 and 2019:



                                    Six Months Ended June 30,
                                      2020               2019
                                          (in thousands)
Net cash provided by (used in):
Operating activities              $    (255,675 )$ (283,278 )
Investing activities                    383,652         (333,019 )
Financing activities                      3,546          591,539
Total                             $     131,523$  (24,758 )




                                       41
--------------------------------------------------------------------------------

Operating Activities



Cash used in operating activities for the six months ended June 30, 2020 was
$255.7 million, compared to $283.3 million for the six months ended June 30,
2019. The decrease of $27.6 million in cash used was primarily due to the
following:

• a decrease of $68.5 million in cash used related to our net loss,

primarily due to a decrease in selling, general and administrative

expenses, mainly due to the restructuring during the three months ended

June 30, 2020; and a decrease in research and development activities

        related to the completion of the MOUNTAIN Study and the timing of study
        activities;


    •   a decrease of $16.7 million in non-cash charges, primarily due to a
        decrease in stock-based compensation expense due to the achievement of

performance-based vesting criteria resulting in expense of $16.3 million

in six months ended June 30, 2019, compared to none in the six months

ended June 30, 2020; and

• a decrease of $24.3 million in cash used in changes in our operating

assets and liabilities, primarily due to the timing of vendor invoicing

        and payments.


Investing Activities



During the six months ended June 30, 2020 and 2019, net cash provided by investing activities was $383.7 million and net cash used in investing activities was $333.0 million, respectively. During the six months ended June 30, 2020 and 2019, we purchased marketable securities and had sales and maturities of our marketable securities as part of managing our cash and investments portfolio, including purchases using proceeds received in our follow-on underwritten public offering in February 2019.

Financing Activities




During the six months ended June 30, 2020 and 2019, net cash provided by
financing activities was $3.5 million and $591.5 million, respectively. During
the six months ended June 30, 2019, we received $560.9 million of net proceeds
from our follow-on underwritten public offering, after deducting commissions and
underwriting discounts and offering costs paid by us.

Operating Capital Requirements


We began to generate revenue from product sales in the second quarter of 2019 in
conjunction with the launch of our first product, ZULRESSO. We anticipate that
we will continue to generate losses for the foreseeable future, and we expect
the losses to increase as we continue the development of our current and future
product candidates, and seek regulatory approvals for those product candidates
that are successfully developed; prepare for potential future commercialization
of product candidates beyond ZULRESSO that are successfully developed and
approved; begin to commercialize any such products, if successfully developed
and approved; and continue our efforts to identify and develop new product
candidates beyond our current portfolio. We also expect to incur significant
costs associated with general operations. In addition, we expect to incur
significant commercialization expenses for product sales, marketing and
outsourced manufacturing with respect to ZULRESSO and any future products that
are successfully developed and approved. Accordingly, we anticipate that we will
need substantial additional funding in connection with our continuing
operations.

Based on our current operating plans, we expect that our existing cash, cash
equivalents and marketable securities as of June 30, 2020, will enable us to
fund our operating expenses and capital expenditure requirements into 2022.
During that time, we expect to incur significant expenses as we:

• continue to advance Phase 3 clinical development of zuranolone in PPD and

        MDD, and potentially advance zuranolone for other indications;


                                       42
--------------------------------------------------------------------------------

• continue our commercialization efforts with respect to ZULRESSO for the

treatment of PPD in the U.S. with a primary focus in geographies that have

existing, active ZULRESSO treating sites;

• advance SAGE-324 through completion of the ongoing Phase 2 clinical trial

        in essential tremor, with potential future development in certain
        epileptiform disorders and other neurological conditions;

• advance SAGE-718 through initiation and completion of the planned Phase 2a

open-label clinical study of patients with Parkinson's disease cognitive

dysfunction, and potentially evaluate SAGE-718 in additional Phase 2a

open-label clinical studies in patients with certain other

cognition-related disorders, prior to determining potential next steps for

advancing SAGE-718 further into Phase 2 clinical development, including

potentially in Huntington's disease;

• advance one or more non-clinical stage compounds into clinical development;

• continue our research and development efforts to evaluate the potential

for our existing product candidates in the treatment of additional

indications or in new formulations, and to identify new product

candidates, with the goal of developing a diversified portfolio of assets

with differentiated features;



    •   continue to explore other opportunities to establish agreements or
        alliances with pharmaceutical company collaborators or distributors for
        our product candidates where we believe the partnering opportunity will

add significant value to our efforts, including through capabilities,

infrastructure, speed or financial contributions;

• prepare for potential new drug applications and pre-launch activities with

respect to our product candidates at the appropriate time to support next

steps if our pivotal programs are successful and support a filing;

• seek regulatory approvals for any product candidates that successfully

complete clinical development;

• refine the formulation and improve the manufacturing process for our

product candidates; and manufacture clinical supplies as development

progresses;

• commercialize any product candidates for which we obtain regulatory

approval, including the manufacture of commercial supplies;

• at the appropriate time if our development efforts progress successfully,

add personnel, including personnel to support our product development and

ongoing and future commercialization efforts, and incur increases in

stock-based compensation expense related to existing and new personnel

with respect to both service-based and performance-based awards;

• evaluate market opportunities for our products and product candidates in

markets outside the U.S.;

• maintain, leverage and expand our intellectual property portfolio,

including by utilizing the strengths of our proprietary chemistry platform

        and scientific know-how to expand our portfolio of new chemical
        entities to lessen our long-term reliance on the success of any one
        program and to facilitate long-term growth;

• add or optimize operational, financial and management information systems;

and

• incur non-cash stock compensation expense related to existing and new

personnel with respect to both service-based and performance-based awards.



Our current operating plan does not contemplate other development activities
that we may pursue or that all of our currently planned activities will proceed
at the same pace, or that all of these activities will be fully initiated or
completed during that time. We have based our estimates on assumptions that
could change, and we may use our available capital resources sooner than we
currently expect. We may also choose to change or increase our development,
commercialization or other efforts. Because of the numerous risks and
uncertainties associated with the development and commercialization of any
product or product candidates, we are unable to estimate the amounts of
increased capital outlays and operating expenditures necessary to complete
development of our current or future product candidates or to commercialize any
approved product.

Our future capital requirements will depend on many factors, including:

• the amount and timing of revenues from sales of ZULRESSO, which will be

impacted by a number of factors, including: the rate, degree and level of

market acceptance for ZULRESSO for the treatment of PPD in the U.S.; the

        impact of our April 2020 restructuring and the decision to focus our
        efforts primarily on geographies


                                       43
--------------------------------------------------------------------------------

        in the U.S. that have existing, active ZULRESSO treating sites; the
        continued availability of healthcare settings in those geographies to

administer ZULRESSO and the ability and willingness of such healthcare

settings to make sufficient capacity available; the level of reimbursement

for both ZULRESSO and the infusion in the healthcare setting both by

commercial and government payors, and the nature of limitations on

reimbursement; the number of healthcare professionals willing to prescribe

ZULRESSO and women with PPD who agree to be treated with ZULRESSO; and the

scope, duration and timing of the impact of the COVID-19 pandemic;

• the timing and amount of costs associated with our commercialization of

ZULRESSO;

• the initiation, progress, timing, costs, and results of ongoing, planned

and future non-clinical studies and clinical trials for zuranolone and our

other existing and future product candidates; the number and length of

clinical trials required by regulatory authorities to support regulatory

approval; and the costs of preparing regulatory filings;

• the length, severity and costs of disruptions associated with the COVID-19

pandemic on initiation and conduct of our clinical trials;

• the ability of zuranolone and our other clinical-stage product candidates

to progress through clinical development successfully; the timing, scope

and outcome of regulatory filings, reviews and approvals of such product

candidates, if we are successful in our development efforts; the scope and

cost of any clinical trials or other commitments required post-approval

        for any approved products resulting from such development efforts, if
        successful; and the level, timing and amount of costs associated with

preparing for a potential future commercial launch of any such product

candidate that is successfully developed and approved;

• the size of the PPD market and the portion of the population for which

ZULRESSO may be prescribed; the size of the markets for which zuranolone

and our other product candidates may be approved in the future, if

successfully developed; the portion of the population in the approved

indications for which our future products are actually prescribed; the

rate and degree of market acceptance for our products, and the pricing,

availability and level of reimbursement for our products;

• the number and characteristics of the product candidates we pursue in

development and the nature and scope of our discovery and development

programs;

• the costs of preparing, filing and prosecuting patent applications,

maintaining and enforcing our intellectual property rights and defending

        intellectual property-related claims;


    •   the extent to which we acquire or in-license other products and
        technologies; and


    •   our ability to establish any future collaboration arrangements on
        favorable terms, if at all.




Until such time, if ever, as we can generate substantial product revenue and
achieve profitability, we expect to also finance our cash needs through a
combination of equity offerings, debt financings, collaborations, strategic
alliances, licensing arrangements and other sources of funding. Even if we
believe we have sufficient funds for our current or future operating plans, we
may seek additional capital if market conditions are favorable or in light of
other strategic considerations. To the extent that we raise additional capital
through the sale of equity or convertible debt securities, the ownership
interest of our stockholders will be diluted, and the terms of these securities
may include liquidation or other preferences that adversely affect the rights of
our common stockholders. Debt financing, if available, may involve agreements
that include covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making capital expenditures or
declaring dividends and may require the issuance of warrants, which could
potentially dilute the ownership interest of our stockholders. If we raise
additional funds through collaborations, strategic alliances or licensing
arrangements with third parties, we may have to relinquish valuable rights to
our technologies, future revenue streams or research programs or to grant
licenses on terms that may not be favorable to us. Raising funds in the current
economic environment may present challenges. The COVID-19 pandemic has caused
major volatility in the stock market and a significant global economic
downturn. If the pandemic and related economic downturn continue for an extended
period or surges in the number of cases of COVID-19 continue or worsen in the
future, or if our business prospects are impaired or the capital markets
disrupted for other reasons, additional capital may not be available to us on
acceptable terms, or at all. If we are unable to raise additional funds through
equity or debt financings or other means when needed, we may be required to
delay, limit, reduce or terminate our product development or future
commercialization efforts or grant rights to develop and market products or
product candidates that we would otherwise prefer to develop and market
ourselves.



Contractual Obligations and Commitments

                                       44

--------------------------------------------------------------------------------

There have been no material changes to our contractual obligations and commitments as included in our Annual Report.

Off-Balance Sheet Arrangements

We do not currently have, nor did we have during the periods presented, any off-balance sheet arrangements as defined by SEC rules.

Application of Critical Accounting Policies


We have prepared our condensed consolidated financial statements in accordance
with accounting principles generally accepted in the U.S. Our preparation of
these condensed consolidated financial statements requires us to make estimates,
assumptions, and judgments that affect the reported amounts of assets,
liabilities, expenses, and related disclosures at the date of the condensed
consolidated financial statements, as well as revenue and expenses recorded
during the reporting periods. We evaluate our estimates and judgments on an
ongoing basis. We base our estimates on historical experience and on various
other factors that we believe are reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Actual
results could therefore differ materially from these estimates under different
assumptions or conditions.

There have been no material changes to our critical accounting policies from
those described in "Management's Discussion and Analysis of Financial Condition
and Results of Operations - Critical Accounting Policies and Significant
Judgments and Estimates" included in our Annual Report.

Recently Issued Accounting Pronouncements


A description of recently issued accounting pronouncements that may potentially
impact our financial position and results of operations is set forth in Note 2,
"Summary of Significant Accounting Policies", in the accompanying Notes to
Condensed Consolidated Financial Statements included in Part I, Item 1 of this
Quarterly Report.

© Edgar Online, source Glimpses


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08/20SAGE THERAPEUTICS : to Host Sage FutureCast Webcast
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