10-Q 1 sage-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-36544

 

Sage Therapeutics, Inc.

(Exact name of registrant as specified in its Charter)

 

 

 

Delaware

27-4486580

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

215 First Street

Cambridge, Massachusetts 02142

(Address of principal executive office) (Zip Code)

Registrant’s telephone number, including area code: (617) 299-8380

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

SAGE

The Nasdaq Global Market

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

Smaller reporting company

Emerging Growth Company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 18, 2024, there were 60,182,031 shares of the registrant’s common stock, $0.0001 par value per share, outstanding.

 

 

 


 

Cautionary Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, or Quarterly Report, contains forward-looking statements that involve risks and uncertainties. We make such forward-looking statements pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expects”, “intends”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”, “potential”, “continue” or the negative of these terms or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

our expectations and goals for commercialization of ZURZUVAE™ in the U.S. as a treatment for women with postpartum depression, or PPD, including our beliefs in the potential benefit and profile of ZURZUVAE for the treatment of women with PPD; our estimates as to the number of women with PPD and our belief in the market opportunity in this indication; the potential market for ZURZUVAE for the treatment of women with PPD; our market access, sales and marketing, customer support, and distribution strategies for ZURZUVAE and related expectations, goals, and assumptions; our market access goal of helping all women with PPD who are prescribed ZURZUVAE gain access to ZURZUVAE as quickly as possible with minimal restrictions; and the potential future results of our commercialization efforts in the U.S.;
our plans to continue to evaluate next steps after receipt of a complete response letter, or CRL, issued by the U.S. Food and Drug Administration, or FDA, related to our new drug application, or NDA, for zuranolone for the treatment of major depressive disorder, or MDD, in adults;
our views as to the potential for zuranolone to be developed in additional indications;
our expectations and estimates regarding: the level of expenses we may incur in connection with our activities; use of cash, cash runway and projected cash balance at any given time; timing of future cash needs; capital requirements; funding from potential revenue; anticipated funding from ongoing collaborations; sources of future financing; and our ability to obtain additional financing when needed to fund future operations;
our plans for the development of our product candidates for the treatment of brain health diseases and disorders, and potentially for other indications, including our development plans for dalzanemdor; the potential for positive results from our ongoing studies of dalzanemdor for the treatment of cognitive impairment associated with Huntington’s disease and Alzheimer’s disease, despite negative results from the Phase 2 PRECEDENT Study evaluating dalzanemdor for the treatment of cognitive impairment associated with Parkinson’s disease; our beliefs as to the potential profile and benefit of our product candidates; our plans with respect to other research and development activities; and expected timelines for our planned activities;
our ability, within the expected time frames, to initiate clinical trials and non-clinical studies of existing or future product candidates, including pivotal clinical trials, and to successfully enroll, complete and announce the results of ongoing or future clinical trials;
our belief as to potential outcomes of our clinical development and commercialization activities;
our plans and potential outcomes with respect to interactions with regulatory authorities;
our plans for and the potential costs, benefits and outcomes of our existing collaborations with Biogen MA Inc., or BIMA, and Biogen International GmbH, or, together with BIMA, Biogen, and Shionogi & Co., Ltd., or Shionogi, and our plans for and potential outcomes of any additional business development efforts;
our plans and expectations with respect to the potential development of any product or product candidate for markets outside the U.S.;
our expectations with respect to the availability of supplies of ZURZUVAE, ZULRESSO, and our product candidates, and the expected performance of our third-party manufacturers, including conformity with applicable regulatory requirements;
our ability to obtain and maintain intellectual property protection for our proprietary assets and other forms of exclusivity relevant to our business;

2


 

the estimated number of patients with diseases or disorders of interest to us and the potential size of the market for our products and product candidates in the indications we are pursuing or plan to study;
the potential for our current products and current or future product candidates, if successfully developed and approved, for the indications and in the markets for which they are approved and our ability to serve those markets;
the potential for success of competing products that are or become available for the treatment of PPD or any of the other indications that we are pursuing or may pursue in the future with our products and our product candidates;
the impact of changes to the macroeconomic environment and geopolitical events on our activities, business and results of operations, and the potential success of our efforts to address or mitigate such impact; and
other risks and uncertainties, including those listed under Part II, Item 1A, Risk Factors.

Any forward-looking statements in this Quarterly Report reflect our current views with respect to future events and with respect to our business and future financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations include, among other things, those described under Part II, Item 1A, Risk Factors and elsewhere in this Quarterly Report. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future.

We may from time to time provide estimates, projections and other information concerning, among other things, our industry, the general business environment, and the markets for certain diseases, including estimates regarding the potential size of those markets and the estimated incidence and prevalence of certain medical conditions. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties, and actual events, circumstances or numbers, including actual disease prevalence rates and market size, may differ materially from the information we provide in this Quarterly Report. Unless otherwise expressly stated, we obtained this industry and business information, market data, prevalence information and other data from reports, research surveys, studies and similar data prepared by market research firms and other third parties; industry, medical and general publications; government data; and similar sources, in some cases applying our own assumptions and analysis that may, in the future, prove not to have been accurate.

This Quarterly Report on Form 10-Q contains references to our trademarks and service marks and to those belonging to other entities. Solely for convenience, trademarks and trade names referred to in this Quarterly Report on Form 10-Q and the documents incorporated by reference herein may appear without the ® or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable licensor to these trademarks and trade names. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

3


 

Summary of Risks Related to our Business

Our business, prospects, financial condition, and operating results are subject to numerous risks and uncertainties that you should be aware of before making an investment decision, as more fully described under Part II, Item 1A, Risk Factors and elsewhere in this Quarterly Report. These risks may include, but are not limited to, the following:

Our future business prospects depend heavily on our ability, with our collaborator Biogen, to successfully commercialize ZURZUVAE for the treatment of women with PPD. We and Biogen may not be successful in our commercialization efforts for ZURZUVAE for the treatment of women with PPD. ZURZUVAE may not achieve broad market acceptance from healthcare professionals, patients or payors for the treatment of this disease. For example, healthcare professionals may decide not to use ZURZUVAE as a treatment option for their patients with PPD or to only prescribe ZURZUVAE for a subset of women with PPD in their practice who they consider to have particularly severe symptoms relative to other patients suffering from this disease. Women with PPD may decide that they do not want to be treated with ZURZUVAE including out of concerns about its safety and tolerability profile or use while breastfeeding. Payors may decide to limit reimbursement for ZURZUVAE, including by requiring women with PPD to try other treatments prior to ZURZUVAE, requiring a specific showing of symptom severity on measurements scales, requiring prior consultation with a psychiatrist, or imposing other onerous prior authorization requirements, or may deny reimbursement for other reasons or in all cases. Also, even if a healthcare professional writes a prescription for ZURZUVAE, it may not result in product being shipped to a patient and a patient taking ZURZUVAE. The healthcare professional or the patient may, for example, not take the steps necessary to obtain reimbursement or to have the prescription filled at the specialty pharmacy or may find the process too slow or complicated. We may also encounter other limitations or issues related to the commercialization of ZURZUVAE, including as a result of its price. As a result, we may not generate revenues at the levels or on the timing we expect. The number of women with PPD, the unmet need for additional treatment options, and the potential market for ZURZUVAE in this indication may be significantly smaller than we expect. Any setback or delay in our ability to market ZURZUVAE for the treatment of women with PPD may have a material adverse effect on our business and prospects.
Our future business prospects also depend heavily on our ability to successfully develop and gain regulatory approval of our product candidates. We cannot be certain that we or our collaborators, where applicable, will be able to initiate new clinical trials, complete ongoing enrollment, dosing or data analysis of clinical trials, or announce results of ongoing or future clinical trials of our product candidates, in each case on the timelines we expect or at all, or that the results of our development programs will be positive or sufficient to file for regulatory approval. Decisions or actions of the FDA or other regulatory agencies may adversely affect our plans, progress or results at any stage of development. We cannot be certain that we or our collaborators will be able to successfully file or obtain regulatory approval for, or successfully commercialize, if approved, any of our product candidates on the timelines we expect or at all. Any setback or delay in obtaining regulatory approval for any of our product candidates or in our ability to commence marketing of our products, if approved, may have a material adverse effect on our business and prospects.
If the affected populations for indications our products and product candidates are targeting, including the addressable markets within such populations, or the number of patients within such markets who are actually treated with our products, are smaller than we anticipate, or our other assumptions with respect to the potential markets for our products and product candidates are incorrect, our ability to achieve profits from the commercialization of such products, if approved, at the levels or on the timing we expect could be materially adversely impacted.
We may not achieve positive results in the ongoing or planned clinical trials and non-clinical studies of our product candidates. Positive results from earlier non-clinical studies and clinical trials of our product candidates are not necessarily predictive of the results of later non-clinical studies and clinical trials of our product candidates in the same indications or other indications. The results of non-clinical studies or clinical trials of our product candidates at any stage may not support further development or may not be sufficient to file for and obtain regulatory approval.

4


 

If serious adverse events or other undesirable side effects are identified during the use of any of our marketed products or product candidates, such events may adversely affect market acceptance or result in other significant negative consequences for an approved product; delay or prevent further development or regulatory approval with respect to product candidates; or cause regulatory authorities to require labeling statements, such as boxed warnings, or a Risk Evaluation and Mitigation Strategy, on approved products.
We may not generate revenues from our existing products, or any of our product candidates if successfully developed, at the levels we expect. We may not achieve events tied to cash milestone payments or other payments from our collaboration partners on the timelines we expect or at all. Our expenses may also be higher than we expect, including as a result of unexpected events or changes in plans. Also, we may not achieve cost savings from our August 2023 corporate reorganization at the levels we expect. As a result, our expectations as to our cash runway and the sufficiency of cash to fund our future operations may prove to be incorrect. We may need to raise additional funding in the future, which may not be available on acceptable terms, or at all.
Any impairment of the ability of our third-party suppliers to supply product or to meet applicable regulatory standards may significantly negatively impact our ability to achieve our goals and plans and to meet the expectations for our business.
Competing therapies may exist or could emerge that adversely affect the amount of revenue we are able to generate from the sale of ZURZUVAE, ZULRESSO, or any of our other current or future product candidates, if successfully developed and approved.
Our existing collaborations with Biogen and Shionogi, and any future collaborations, may not lead to the successful development or regulatory approval of product candidates or commercialization of products in the territories covered by the applicable collaboration. Our collaborators may have competing priorities, conflicting incentives, or different views than us on key decisions, that may hamper or delay our development and commercialization efforts or increase our costs. Our business may be adversely affected and we may be subject to delays, disputes, or litigation if we disagree significantly with any of our collaborators, or any of our collaborators fails to perform its obligations or terminates our collaboration in whole or in part.
If we are unable to adequately protect our proprietary technology, or obtain and maintain issued patents sufficient to protect our products or product candidates, others could compete against us more directly, which would have a material adverse impact on our business, results of operations, financial condition and prospects.
If we were to lose our rights to certain licensed intellectual property, or if we are not able to obtain licenses to intellectual property we may determine we need in the future, we may not be able to continue developing or commercializing certain of our products or product candidates, if approved.
Existing or future laws, regulations, executive orders or policies aimed at reducing healthcare costs may have a material adverse effect on our business or results of operations. For example, the Inflation Reduction Act of 2022 and other existing, pending or future federal and state reforms aimed at reducing healthcare costs, including pricing and reimbursement of pharmaceutical products, may in the future result in reduced reimbursement and access for our products or cause us to curtail certain development plans due to concerns about commercial viability, any of which could adversely affect our ability to generate revenue and negatively impact our business, results of operations and financial condition.
We are subject to healthcare laws and regulations, which could expose us to the risk of criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and future earnings if we or our employees are alleged or determined not to have complied with such laws and regulations.
Our stock price may fluctuate in response to a number of factors.

5


 

Sage Therapeutics, Inc.

INDEX

 

 

 

 

 

Page

PART I – FINANCIAL INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Financial Statements (Unaudited)

 

7

 

Condensed Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

 

7

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2024 and 2023

 

8

 

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2024 and 2023

 

9

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity for the three months ended March 31, 2024 and 2023

 

10

 

Notes to Condensed Consolidated Financial Statements

 

11

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

33

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

51

Item 4.

 

Controls and Procedures

 

51

 

 

 

PART II – OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

52

Item 1A.

 

Risk Factors

 

52

Item 5.

 

Other Information

 

93

Item 6.

 

Exhibits

 

94

 

Signatures

 

95

 

6


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share and per share data)

(Unaudited)

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

172,653

 

 

$

70,992

 

Marketable securities

 

 

544,360

 

 

 

682,192

 

Prepaid expenses and other current assets

 

 

26,588

 

 

 

31,825

 

Collaboration receivable - related party

 

 

10,509

 

 

 

83,009

 

Restricted cash

 

 

1,332

 

 

 

1,332

 

Total current assets

 

 

755,442

 

 

 

869,350

 

Property and equipment, net

 

 

1,585

 

 

 

1,921

 

Restricted cash

 

 

1,500

 

 

 

 

Right-of-use operating asset

 

 

2,857

 

 

 

4,458

 

Other long-term assets

 

 

6,216

 

 

 

6,548

 

Total assets

 

$

767,600

 

 

$

882,277

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

6,479

 

 

$

10,318

 

Accrued expenses

 

 

52,014

 

 

 

67,264

 

Operating lease liability, current portion

 

 

3,306

 

 

 

5,165

 

Total current liabilities

 

 

61,799

 

 

 

82,747

 

Total liabilities

 

 

61,799

 

 

 

82,747

 

Commitments and contingencies (Note 6)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Preferred stock, $0.0001 par value per share; 5,000,000 shares
   authorized at March 31, 2024 and December 31, 2023;
no shares
   issued or outstanding at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Common stock, $0.0001 par value per share; 120,000,000 shares
   authorized at March 31, 2024 and December 31, 2023;
   
60,185,064 and 60,046,676 shares issued at
   March 31, 2024 and December 31, 2023;
60,182,031
   and
60,043,643 shares outstanding at March 31, 2024 and
   December 31, 2023

 

 

6

 

 

 

6

 

Treasury stock, at cost, 3,033 shares at March 31, 2024 and December 31, 2023

 

 

(400

)

 

 

(400

)

Additional paid-in capital

 

 

3,385,124

 

 

 

3,370,397

 

Accumulated deficit

 

 

(2,678,142

)

 

 

(2,569,659

)

Accumulated other comprehensive loss

 

 

(787

)

 

 

(814

)

Total stockholders’ equity

 

 

705,801

 

 

 

799,530

 

Total liabilities and stockholders’ equity

 

$

767,600

 

 

$

882,277

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


 

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Product revenue, net

 

$

1,690

 

 

$

3,294

 

Collaboration revenue - related party

 

 

6,212

 

 

 

 

Total revenue

 

 

7,902

 

 

 

3,294

 

Operating costs and expenses:

 

 

 

 

 

 

Cost of revenues

 

 

1,269

 

 

 

230

 

Research and development

 

 

71,734

 

 

 

92,826

 

Selling, general and administrative

 

 

52,574

 

 

 

65,708

 

Total operating costs and expenses

 

 

125,577

 

 

 

158,764

 

Loss from operations

 

 

(117,675

)

 

 

(155,470

)

Interest income, net

 

 

9,204

 

 

 

8,830

 

Other expense, net

 

 

(12

)

 

 

(188

)

Net loss

 

$

(108,483

)

 

$

(146,828

)

Net loss per share—basic and diluted

 

$

(1.80

)

 

$

(2.46

)

Weighted average number of common shares
   outstanding—basic and diluted

 

 

60,136,198

 

 

 

59,674,127

 

Comprehensive loss:

 

 

 

 

 

 

Net loss

 

$

(108,483

)

 

$

(146,828

)

Other comprehensive items:

 

 

 

 

 

 

Unrealized gain on marketable securities

 

 

27

 

 

 

5,118

 

Total comprehensive loss

 

$

(108,456

)

 

$

(141,710

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

8


 

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities

 

 

 

 

 

 

Net loss

 

$

(108,483

)

 

$

(146,828

)

Adjustments to reconcile net loss to net cash
   used in operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

13,698

 

 

 

20,038

 

Premium on marketable securities

 

 

(23

)

 

 

(29

)

Amortization of discount on marketable securities

 

 

(1,554

)

 

 

(3,179

)

Depreciation expense

 

 

336

 

 

 

323

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

5,237

 

 

 

(8,024

)

Collaboration receivable - related party

 

 

72,500

 

 

 

(1,342

)

Other long-term assets

 

 

332

 

 

 

515

 

Right-of-use operating asset

 

 

1,601

 

 

 

1,470

 

Operating lease liabilities, current

 

 

(1,859

)

 

 

41

 

Operating lease liabilities, non-current

 

 

 

 

 

(1,728

)

Accounts payable

 

 

(3,839

)

 

 

(6,550

)

Accrued expenses and other liabilities

 

 

(15,778

)

 

 

(8,389

)

Net cash used in operating activities

 

 

(37,832

)

 

 

(153,682

)

Cash flows from investing activities

 

 

 

 

 

 

Proceeds from sales and maturities of marketable securities

 

 

201,054

 

 

 

351,982

 

Purchases of marketable securities

 

 

(61,618

)

 

 

(156,890

)

Purchases of property and equipment

 

 

 

 

 

(225

)

Net cash provided by investing activities

 

 

139,436

 

 

 

194,867

 

Cash flows from financing activities

 

 

 

 

 

 

Proceeds from stock option exercises and employee stock purchase
   plan issuances

 

 

1,559

 

 

 

3,301

 

Payment of employee tax obligations related to vesting of restricted
   stock units

 

 

(2

)

 

 

(629

)

Net cash provided by financing activities

 

 

1,557

 

 

 

2,672

 

Net increase in cash, cash equivalents and restricted cash

 

 

103,161

 

 

 

43,857

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

72,324

 

 

 

163,969

 

Cash, cash equivalents and restricted cash at end of period

 

$

175,485

 

 

$

207,826

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

9


 

Sage Therapeutics, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(in thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Treasury Stock

 

 

Paid-in

 

 

Comprehensive

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2022

 

 

59,509,125

 

 

$

6

 

 

 

3,033

 

 

$

(400

)

 

$

3,291,369

 

 

$

(10,206

)

 

$

(2,028,170

)

 

$

1,252,599

 

Issuance of common stock from exercises of stock options

 

 

52,058

 

 

 

 

 

 

 

 

 

 

 

 

438

 

 

 

 

 

 

 

 

 

438

 

Issuance of common stock under the employee stock purchase plan

 

 

76,105

 

 

 

 

 

 

 

 

 

 

 

 

2,863

 

 

 

 

 

 

 

 

 

2,863

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,568

 

 

 

 

 

 

 

 

 

19,568

 

Change in unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,118

 

 

 

 

 

 

5,118

 

Vesting of restricted stock units, net of employee tax obligations

 

 

124,713

 

 

 

 

 

 

 

 

 

 

 

 

(629

)

 

 

 

 

 

 

 

 

(629

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(146,828

)

 

 

(146,828

)

Balances at March 31, 2023

 

 

59,762,001

 

 

$

6

 

 

 

3,033

 

 

$

(400

)

 

$

3,313,609

 

 

$

(5,088

)

 

$

(2,174,998

)

 

$

1,133,129

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2023

 

 

60,043,643

 

 

$

6

 

 

 

3,033

 

 

$

(400

)

 

$

3,370,397

 

 

$

(814

)

 

$

(2,569,659

)

 

$

799,530

 

Issuance of common stock from exercises of stock options

 

 

7,142

 

 

 

 

 

 

 

 

 

 

 

 

52

 

 

 

 

 

 

 

 

 

52

 

Issuance of common stock under the employee stock purchase plan

 

 

61,402

 

 

 

 

 

 

 

 

 

 

 

 

1,507

 

 

 

 

 

 

 

 

 

1,507

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,170

 

 

 

 

 

 

 

 

 

13,170

 

Change in unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

 

 

 

 

 

 

27

 

Vesting of restricted stock units, net of employee tax obligations

 

 

69,844

 

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

 

 

(2

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(108,483

)

 

 

(108,483

)

Balances at March 31, 2024

 

 

60,182,031

 

 

$

6

 

 

 

3,033

 

 

$

(400

)

 

$

3,385,124

 

 

$

(787

)

 

$

(2,678,142

)

 

$

705,801

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

10


 

SAGE THERAPEUTICS, INC. AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1.
Nature of the Business

Sage Therapeutics, Inc. (“Sage” or the “Company”) is a biopharmaceutical company with a mission to pioneer solutions to deliver life-changing brain health medicines, so every person can thrive.

The Company’s product ZURZUVAE™ (zuranolone) was approved by the U.S. Food and Drug Administration (the “FDA”) on August 4, 2023 for the treatment of postpartum depression (“PPD”) in adults. ZURZUVAE is a neuroactive steroid that is a positive allosteric modulator of GABAA receptors, targeting both synaptic and extrasynaptic GABAA receptors, and is the first oral, once-daily, 14-day treatment specifically indicated for adults with PPD. ZURZUVAE became commercially available for women with PPD in December 2023. The Company’s product ZULRESSO® (brexanolone) CIV injection is approved in the U.S. for the treatment of PPD in individuals 15 years old and older. The Company launched ZULRESSO commercially in the U.S. in June 2019. ZULRESSO may only be administered in qualified, medically-supervised healthcare settings. Brexanolone is chemically identical to allopregnanolone, a naturally occurring neuroactive steroid that, like zuranolone, acts as a positive allosteric modulator of GABAA receptors.

Additionally, on August 4, 2023, the FDA issued a complete response letter (“CRL”) related to the Company’s new drug application (“NDA”) for zuranolone for the treatment of major depressive disorder (“MDD”). The CRL stated that the NDA did not provide substantial evidence of effectiveness to support the approval of zuranolone for the treatment of MDD and that one or more additional clinical trials will be needed. The Company and Biogen MA Inc. (“BIMA”) and Biogen International GmbH (collectively with BIMA, “Biogen”) are continuing to seek feedback from the FDA and are evaluating next steps.

The Company has a portfolio of product candidates with a current focus on modulating two critical central nervous system (“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. Alongside the Company’s postpartum depression commercial products, it is targeting diseases and disorders of the brain across its pipeline.

The Company was incorporated under the laws of the State of Delaware on April 16, 2010, and commenced operations on January 19, 2011 as Sterogen Biopharma, Inc. On September 13, 2011, the Company changed its name to Sage Therapeutics, Inc.

Risks and Uncertainties

The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including, but not limited to, the risks associated with developing product candidates at each stage of non-clinical and clinical development; the challenges associated with gaining regulatory approval of such product candidates; the risks associated with the marketing and sale of pharmaceutical products; the potential for development by third parties of new technological innovations that may compete with the Company’s products and product candidates; the dependence on key personnel; the challenges of protecting proprietary technology; the need to comply with government regulations; the high costs of drug development; the uncertainty of being able to secure additional capital when needed to fund operations; and the direct or indirect impacts of the macroeconomic environment and geopolitical events on its development activities, operations and financial condition.

The product candidates developed by the Company require approvals from the FDA or foreign regulatory agencies prior to commercial sales. There can be no assurance that the current and future product candidates of the Company will receive, or that the Company’s current products, ZULRESSO and ZURZUVAE, will maintain, the necessary approvals. If the Company fails to successfully complete clinical development and generate results sufficient to file for regulatory

11


 

approval or is denied approval or approval is delayed for any of its product candidates, such occurrences may have a material adverse impact on the Company’s business and its financial condition.

The Company is also subject to additional risks and uncertainties arising from changes to the macroeconomic environment and geopolitical events. U.S. and global financial markets have experienced volatility and disruption due to macroeconomic and geopolitical events such as rising inflation, the risk of a recession and ongoing conflicts in other countries. In addition, if equity and credit markets deteriorate, including as a result of past and potential future bank failures, it may make any future debt or equity financing more difficult to obtain on favorable terms, and potentially more dilutive to its existing stockholders. The Company cannot predict at this time to what extent it and its collaborators, employees, suppliers, contract manufacturers and/or vendors could potentially be negatively impacted by these events.

Going Concern

Under Accounting Standards Update (“ASU”) No. 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the financial statements are issued. The Company has incurred losses and negative cash flows from operations in each year since its inception, except for net income of $606.1 million for the year ended December 31, 2020, reflecting revenue recognized under a collaboration and license agreement with Biogen (the “Biogen Collaboration Agreement”). As of March 31, 2024, the Company had an accumulated deficit of $2.7 billion. Until such time, if ever, as the Company can generate substantial product revenue and/or collaboration revenue and achieve sustained profitability, the Company expects to finance its cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other sources of funding. If the Company is unable to raise additional funds through equity or debt financings or other sources of funding when needed, the Company may be required to delay, limit, reduce or terminate product development or future commercialization efforts or grant rights to develop and market products or product candidates that the Company would otherwise prefer to develop and market itself.

The Company expects that, based on its current operating plans, the Company’s existing cash, cash equivalents and marketable securities will be sufficient to fund its currently planned operations for at least the next 12 months from the filing date of these unaudited interim condensed consolidated financial statements (“condensed consolidated financial statements”). The Company anticipates it will require additional financing to fund its future operations. Even if the Company believes it has sufficient funds for its current or future operating plans, the Company may seek to raise additional capital if market conditions are favorable or in light of other strategic considerations.

2.
Summary of Significant Accounting Policies

The following is a summary of significant accounting policies followed in the preparation of these condensed consolidated financial statements.

Basis of Presentation

The condensed consolidated financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) have been condensed or omitted from this report, as is permitted by such rules and regulations. Accordingly, these condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

The condensed consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of the Company’s management, the accompanying condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2024, its results of operations and comprehensive loss for the three months ended March 31, 2024 and 2023, its cash flows for the three months ended March 31, 2024 and 2023, and its statements of

12


 

changes in stockholders’ equity for the three months ended March 31, 2024 and 2023. The consolidated balance sheet at December 31, 2023 was derived from audited financial statements, but does not include all disclosures required by GAAP. The results for the three months ended March 31, 2024 are not necessarily indicative of the results for the year ending December 31, 2024, or for any future period.

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries as disclosed in Note 2, Summary of Significant Accounting Policies, within the “Notes to Consolidated Financial Statements” accompanying its Annual Report on Form 10-K for the year ended December 31, 2023. Intercompany accounts and transactions have been eliminated.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

Research and Development Costs and Accruals

Research and development expenses are comprised of costs incurred in performing research and development activities, including salaries and benefits, overhead costs, depreciation, contract services and other related costs. Research and development costs are expensed to operations as the related obligation is incurred.

 

The Company has entered into various research and development contracts with research institutions and other companies both inside and outside of the U.S. These agreements are generally cancelable, and related costs are recorded as research and development expenses as incurred. The Company records accruals for estimated ongoing research and development costs. When billing terms under these contracts do not coincide with the timing of when the work is performed, the Company is required to make estimates of outstanding obligations to those third parties as of the end of the reporting period. Any accrual estimates are based on a number of factors, including the Company’s knowledge of the progress towards completion of the research and development activities, invoicing to date under the contracts, communication from the research institution or other companies of any actual costs incurred during the period that have not yet been invoiced, and the costs included in the contracts. Significant judgments and estimates are made in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made by the Company. The historical accrual estimates made by the Company have not been materially different from the actual costs.

Revenue Recognition

Under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“Topic 606”), an entity recognizes revenue when or as performance obligations are satisfied by transferring control of promised goods or services to a customer, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price, including variable consideration, if any; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. Arrangements that include rights to additional goods or services that are exercisable at a customer’s discretion are generally considered options. The Company assesses if these options provide a material right to the customer and if so, they are considered performance obligations. The exercise of a material right may be accounted for as a contract modification or as a continuation of the contract for accounting purposes.

Topic 606 applies to all contracts with customers, except for contracts that are within the scope of other standards, such as collaboration arrangements.

13


 

For contracts determined to be within the scope of Topic 606, the Company assesses whether the goods or services promised within each contract are distinct to identify those that are performance obligations. This assessment involves subjective determinations and requires management to make judgments about the individual promised goods or services and whether such are separable from the other aspects of the contractual relationship. Promised goods and services are considered distinct provided that: (i) the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and (ii) the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.

The Company allocates the transaction price (the amount of consideration it expects to be entitled to from a customer in exchange for the promised goods or services) to each performance obligation and recognizes the associated revenue when (or as) each performance obligation is satisfied. The Company’s estimate of the transaction price for each contract includes all variable consideration to which the Company expects to be entitled.

Product Revenue, Net

The Company generates product revenue from the sale of ZULRESSO to a limited number of specialty distributors and specialty pharmacy providers. The Company recognizes product revenue, net of variable consideration related to certain allowances and accruals that are determined using the expected value method, in its condensed consolidated financial statements at the point in time when control transfers to the customer, which is typically when the product has been delivered to the customer’s location. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. The Company’s only performance obligation identified for ZULRESSO is to deliver the product to the location specified by the customer’s order. The Company records shipping and handling costs associated with delivery of product to its customers within selling, general and administrative expenses on its condensed consolidated statements of operations and comprehensive loss. The Company expenses incremental costs of obtaining a contract as incurred if the expected amortization period of the asset would be less than one year. If the Company were to incur incremental costs with an amortization period greater than a year, such costs would be capitalized as contract assets, as they are expected to be recovered, and would be expensed by amortizing on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. The Company did not have any contract assets (unbilled receivables) at March 31, 2024, as customer invoicing generally occurs before or at the time of revenue recognition. The Company did not have any contract liabilities at March 31, 2024, as the Company did not receive any payments in advance of satisfying its performance obligations to its customers. Amounts billed or invoiced that are considered trade accounts receivable are included in prepaid expenses and other current assets on the condensed consolidated balance sheets.

As of March 31, 2024 and December 31, 2023, the Company had not provided any allowance for bad debts against the trade accounts receivable, and the amount of trade accounts receivable was not significant.

The Company records reserves, based on contractual terms, for the following components of variable consideration related to product sold during the reporting period, as well as its estimate of product that remains in the distribution channel inventory of its customers at the end of the reporting period. On a quarterly basis, the Company updates its estimates, if necessary, and records any material adjustments in the period they are identified.

Chargebacks: The Company estimates chargebacks from its customers who directly purchase the product from the Company for discounts resulting from contractual commitments to sell products to eligible healthcare settings at prices lower than the list prices charged to its customers. Customers charge the Company for the difference between what they pay to the Company for the product and the selling price to the eligible healthcare settings. Reserves for chargebacks consist of credits that the Company expects to issue for units that remain in the distribution channel inventories at the end of each reporting period that the Company expects will be sold to eligible healthcare settings, and chargebacks that customers have claimed, but for which the Company has not yet issued a credit.

 

14


 

Government Rebates: The Company is subject to discount obligations under government programs, including Medicaid. The Company records reserves for rebates in the same period the related product revenue is recognized, resulting in a reduction of ZULRESSO product revenue and a current liability that is included in accrued expenses on its condensed consolidated balance sheets. The Company’s liability for these rebates consists of invoices received for claims from prior quarters that have not been paid or for which an invoice has not yet been received, estimates of claims for the current quarter, and estimates of future claims that will be made for product that has been recognized as revenue, but which remains in the distribution channel at the end of each reporting period.

Trade Discounts and Allowances: The Company generally provides customary invoice discounts on ZULRESSO sales to its customers for prompt payment and the Company pays fees for sales order management, data, and distribution services. The Company estimates its customers will earn these discounts and fees and deducts these discounts and fees in full from gross ZULRESSO revenue and accounts receivable at the time the Company recognizes the related revenue.

Financial Assistance: The Company provides voluntary financial assistance programs to patients with commercial insurance that have coverage and reside in states that allow financial assistance. The Company estimates the financial assistance amounts for ZULRESSO and records any such amounts within accrued expenses on its condensed consolidated balance sheets. The calculation of the accrual for financial assistance is based on an estimate of claims and the cost per claim that the Company expects to receive using demographics for patients who have registered and been approved for assistance. Any adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability, which is included as a component of accrued expenses on the condensed consolidated balance sheets.

Product Returns: Consistent with industry practice, the Company offers product return rights to customers for damaged, defective or expiring product, provided it is within a specified period around the product expiration date as set forth in the Company’s return goods policy. The Company estimates the amount of its product sales that may be returned by its customers and records this estimate as a reduction of revenue in the period the related product revenue is recognized, as well as a reserve within accrued expenses on the condensed consolidated balance sheets. Product returns have not been significant to date and are not expected to be significant in the future.

License, Milestone, and Collaboration Revenue

In assessing whether a promised good or service is distinct in the evaluation of a collaboration or license arrangement subject to Topic 606, the Company considers factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the general marketplace. The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, the Company is required to combine that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct.

The transaction price is then determined and allocated to the identified performance obligations in proportion to their standalone selling prices (“SSP”) on a relative SSP basis. SSP is determined at contract inception and is not updated to reflect changes between contract inception and when the performance obligations are satisfied. Determining the SSP for performance obligations requires significant judgment. In developing the SSP for a performance obligation, the Company considers applicable market conditions and relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs. In certain circumstances, the Company may apply the residual method to determine the SSP of a good or service if the SSP is considered highly variable or uncertain. The Company validates the SSP for performance obligations by evaluating whether changes in the key assumptions used to determine the SSP will have a significant effect on the allocation of arrangement consideration between multiple performance obligations.

If the consideration promised in a contract includes a variable amount, the Company estimates the amount of consideration to which it will be entitled in exchange for transferring the promised goods or services to a customer. The Company determines the amount of variable consideration by using the expected value method or the most likely amount

15


 

method. The Company includes the unconstrained amount of estimated variable consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, the Company re-evaluates the estimated variable consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment.

If an arrangement includes development and regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company’s control or the licensee’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received.

In determining the transaction price, the Company adjusts consideration for the effects of the time value of money if the timing of payments provides the Company with a significant benefit of financing. The Company does not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the licensees and the transfer of the promised goods or services to the licensees will be one year or less. The Company assessed its arrangements with Shionogi & Co., Ltd. (“Shionogi”) and Biogen and concluded that a significant financing component does not exist for either arrangement. For arrangements with licenses of intellectual property that include sales-based royalties or milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties or milestone payments relate, the Company recognizes royalty revenue and sales-based milestones at the later of (i) when the related sales occur, or (ii) when the performance obligation to which the royalty or milestone payment has been allocated has been satisfied.

The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) each performance obligation is satisfied at a point in time or over time, and if over time this is based on the use of an output or input method. Revenue from the Company’s collaboration agreement with Shionogi has come from initial, upfront consideration upon execution of the agreement and for the supply of drug product for Shionogi’s clinical trials. Revenue from the Company’s collaboration agreement with Biogen has come from initial, upfront consideration related to the execution of the Biogen Collaboration Agreement, milestone payments and the Company’s share of ZURZUVAE revenues under the elements of the arrangement accounted for under ASC Topic 808. For additional information, see the Collaborative Arrangements section below and refer to Note 7, Collaboration Agreements.

Collaborative Arrangements

The Company analyzes its collaboration arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities and therefore within the scope of ASC Topic 808, Collaborative Arrangements (“Topic 808”). This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of Topic 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of Topic 808 and which elements of the collaboration are more reflective of a vendor-customer relationship and therefore within the scope of Topic 606. For elements of collaboration arrangements that are accounted for pursuant to Topic 808, an appropriate recognition method is determined and applied consistently, either by analogy to authoritative accounting literature or by applying a reasonable and rational policy election. For those elements of the arrangement that are accounted for pursuant to Topic 606, the Company applies the five-step model described above, and presents the arrangement as license and milestone revenue or other collaboration revenue in the condensed consolidated statements of operations and comprehensive loss.

 

16


 

For collaboration arrangements that are within the scope of Topic 808, the Company evaluates the income statement classification for presentation of amounts due from or owed to other participants associated with multiple activities in a collaboration arrangement based on the nature of each separate activity. Payments or reimbursements that are the result of a collaborative relationship instead of a vendor-customer relationship are recorded as an increase to collaboration revenue, an increase to or reduction of cost of revenues, research and development expense, or selling, general and administrative expense, depending on the nature of the activity. For additional information relating to the accounting for the co-commercialization of ZURZUVAE in the U.S. with Biogen under Topic 808, refer to Note 7, Collaboration Agreements.

Fair Value Measurements

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:

Level 1 — Quoted market prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

The Company’s cash equivalents and marketable securities at March 31, 2024 and December 31, 2023 were carried at fair value, determined according to the fair value hierarchy; see Note 3, Fair Value Measurements.

The carrying amounts reflected in the condensed consolidated balance sheets for the collaboration receivable – related party, accounts payable and accrued expenses approximate their fair values due to their short-term maturities at March 31, 2024 and December 31, 2023, respectively.

Recently Issued Accounting Pronouncements

Accounting standards that have been issued or proposed by the Financial Accounting Standards Board or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s condensed consolidated financial statements upon adoption.

3.
Fair Value Measurements

The Company’s cash equivalents are classified within Level 1 and Level 2 of the fair value hierarchy. The Company’s investments in marketable securities are classified within Level 2 of the fair value hierarchy.

 

The fair values of the Company’s marketable securities are based on prices obtained from independent pricing sources. Consistent with the fair value hierarchy described in Note 2, Summary of Significant Accounting Policies, marketable securities with validated quotes from pricing services are reflected within Level 2, as they are primarily based on observable pricing for similar assets or other market observable inputs. Typical inputs used by these pricing services include, but are not limited to, reported trades, benchmark yields, issuer spreads, bids, offers or estimates of cash flow, prepayment spreads and default rates. The Company performs validation procedures to ensure the reasonableness of this data. The Company performs its own review of prices received from the independent pricing services by comparing these prices to other sources. After completing the validation procedures, the Company did not adjust or override any fair value measurements provided by the pricing services as of March 31, 2024 and December 31, 2023.

 

17


 

The following tables summarize the Company’s cash equivalents and marketable securities as of March 31, 2024 and December 31, 2023:

 

 

 

March 31, 2024

 

 

 

Total

 

 

Quoted
Prices in
Active
Markets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

(in thousands)

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

159,464

 

 

$

159,464

 

 

$

 

 

$

 

U.S. government securities

 

 

4,983

 

 

 

 

 

 

4,983

 

 

 

 

U.S. corporate bonds

 

 

1,993

 

 

 

 

 

 

1,993

 

 

 

 

International corporate bonds

 

 

4,962

 

 

 

 

 

 

4,962

 

 

 

 

Total cash equivalents

 

 

171,402

 

 

 

159,464

 

 

 

11,938

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

 

136,725

 

 

 

 

 

 

136,725

 

 

 

 

U.S. corporate bonds

 

 

181,949

 

 

 

 

 

 

181,949

 

 

 

 

International corporate bonds

 

 

83,861

 

 

 

 

 

 

83,861

 

 

 

 

U.S. commercial paper

 

 

30,357

 

 

 

 

 

 

30,357

 

 

 

 

International commercial paper

 

 

45,059

 

 

 

 

 

 

45,059

 

 

 

 

U.S. certificates of deposit

 

 

1,303

 

 

 

 

 

 

1,303

 

 

 

 

U.S. municipal securities

 

 

65,106

 

 

 

 

 

 

65,106

 

 

 

 

Total marketable securities

 

 

544,360

 

 

 

 

 

 

544,360

 

 

 

 

 

 

$

715,762

 

 

$

159,464

 

 

$

556,298

 

 

$

 

 

 

 

December 31, 2023

 

 

 

Total

 

 

Quoted
Prices in
Active
Markets
(Level 1)

 

 

Significant
Other
Observable
Inputs
(Level 2)

 

 

Significant
Unobservable
Inputs
(Level 3)

 

 

 

(in thousands)

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

59,852

 

 

$

59,852

 

 

$

 

 

$

 

U.S. government securities

 

 

8,695

 

 

 

 

 

 

8,695

 

 

 

 

Total cash equivalents

 

 

68,547

 

 

 

59,852

 

 

 

8,695

 

 

 

 

Marketable securities:

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

 

166,925

 

 

 

 

 

 

166,925

 

 

 

 

U.S. corporate bonds

 

 

210,198

 

 

 

 

 

 

210,198

 

 

 

 

International corporate bonds

 

 

97,675

 

 

 

 

 

 

97,675

 

 

 

 

U.S. commercial paper

 

 

23,370

 

 

 

 

 

 

23,370

 

 

 

 

International commercial paper

 

 

46,900

 

 

 

 

 

 

46,900

 

 

 

 

U.S. certificates of deposit

 

 

8,830

 

 

 

 

 

 

8,830

 

 

 

 

U.S. municipal securities

 

 

128,294

 

 

 

 

 

 

128,294

 

 

 

 

Total marketable securities

 

 

682,192

 

 

 

 

 

 

682,192

 

 

 

 

 

 

$

750,739

 

 

$

59,852

 

 

$

690,887

 

 

$

 

 

During the three months ended March 31, 2024 and 2023, there were no transfers among the Level 1, Level 2 and Level 3 categories.

18


 

4. Investments

The following tables summarize the fair value and amortized cost of the Company’s available-for-sale securities by major security type including gross unrealized gains and losses and credit losses as of March 31, 2024 and December 31, 2023:

 

 

 

March 31, 2024

 

 

 

Amortized
Cost

 

 

Gross Unrealized
Gains

 

 

Gross Unrealized
Losses

 

 

Credit Losses

 

 

Fair Value

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

136,948

 

 

$

16

 

 

$

(239

)

 

$

 

 

$

136,725

 

U.S. corporate bonds

 

 

182,247

 

 

 

42

 

 

 

(340

)

 

 

 

 

 

181,949

 

International corporate bonds

 

 

83,974

 

 

 

23

 

 

 

(136

)

 

 

 

 

 

83,861

 

U.S. commercial paper

 

 

30,349

 

 

 

9

 

 

 

(1

)

 

 

 

 

 

30,357

 

International commercial paper

 

 

45,064

 

 

 

2

 

 

 

(7

)

 

 

 

 

 

45,059

 

U.S. certificates of deposit

 

 

1,303

 

 

 

 

 

 

 

 

 

 

 

 

1,303

 

U.S. municipal securities

 

 

65,262

 

 

 

 

 

 

(156

)

 

 

 

 

 

65,106

 

 

 

$

545,147

 

 

$

92

 

 

$

(879

)

 

$

 

 

$

544,360

 

 

 

 

December 31, 2023

 

 

 

Amortized
Cost

 

 

Gross Unrealized
Gains

 

 

Gross Unrealized
Losses

 

 

Credit Losses

 

 

Fair Value

 

 

 

(in thousands)

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

167,165

 

 

$

107

 

 

$

(347

)

 

$

 

 

$

166,925

 

U.S. corporate bonds

 

 

210,491

 

 

 

191

 

 

 

(484

)

 

 

 

 

 

210,198

 

International corporate bonds

 

 

97,698

 

 

 

99

 

 

 

(122

)

 

 

 

 

 

97,675

 

U.S. commercial paper

 

 

23,360

 

 

 

11

 

 

 

(1

)

 

 

 

 

 

23,370

 

International commercial paper

 

 

46,935

 

 

 

3

 

 

 

(38

)

 

 

 

 

 

46,900

 

U.S. certificates of deposit

 

 

8,830

 

 

 

 

 

 

 

 

 

 

 

 

8,830

 

U.S. municipal securities

 

 

128,527

 

 

 

26

 

 

 

(259

)

 

 

 

 

 

128,294

 

 

 

$

683,006

 

 

$

437

 

 

$

(1,251

)

 

$

 

 

$

682,192

 

 

As of March 31, 2024 and December 31, 2023, the Company had $3.6 million and $4.2 million, respectively, of accrued interest receivable relating to the Company’s available-for-sale securities which is included within prepaid expenses and other current assets in the accompanying condensed consolidated balance sheets.

No accrued interest receivable was written off during the three months ended March 31, 2024 and 2023. Realized gains or losses were immaterial for the three months ended March 31, 2024 and 2023.

19


 

The following tables summarize the fair value and the unrealized losses of the Company’s marketable securities that have been in a loss position for either less than twelve months or greater than twelve months as of March 31, 2024 and December 31, 2023:

 

 

 

March 31, 2024

 

 

 

Less than 12 months

 

 

Greater than 12 months

 

 

Total

 

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value

 

 

Unrealized
Losses

 

 

Fair
Value