Sage Therapeutics, Competitive Strategy Report

SAGE THERAPEUTICS, COMPETITIVE STRATEGY REPORT – OCTOBER 2016

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SAGE THERAPEUTICS

Theshiftfromaword-orientedtoanumber-orientedplanningprocesscouldgiverisetoafalsesenseofcertainty,althoughanalyticaltoolsshouldbeused

tofacilitate,ratherthandiminish,communication.


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Disclaimer ........................................................................................................................................ - 4 -

Overview Of Sage Therapeutics ....................................................................................................... - 5 -

Case Abstract ................................................................................................................................... - 6 -

Mission Statement ........................................................................................................................ - 10 -

Upcoming Milestones .................................................................................................................... - 10 -

External Audit ............................................................................................................................... - 12 -

Opportunities ................................................................................................................................ - 13 -

Threats ......................................................................................................................................... - 13 -

External Factor Evaluation Matrix ................................................................................................. - 13 -

Porter’s Five Forces ..................................................................................................................... - 15 -

Internal Audit ................................................................................................................................ - 16 -

Strengths ...................................................................................................................................... - 17 -

Weaknesses .................................................................................................................................. - 17 -

Financial Ratio Analysis ................................................................................................................ - 17 -

Internal Factor Evaluation Matrix .................................................................................................. - 18 -

Matching Stage ............................................................................................................................. - 22 -

Competitive Profile Matrix ............................................................................................................. - 23 -

Swot Matrix ................................................................................................................................... - 24 -

Space Matrix ................................................................................................................................. - 25 -


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Grand Strategy Matrix ................................................................................................................... - 27 -

Internal-External Matrix ................................................................................................................ - 28 -

Decision Stage .............................................................................................................................. - 29 -

Quantitative Strategic Planning Matrix .......................................................................................... - 30 -

Strategy Diamond ......................................................................................................................... - 34 -

Expected Monetary Value ............................................................................................................. - 34 -

Gap Analysis ................................................................................................................................. - 36 -

Risk Assessment ........................................................................................................................... - 37 -

Conclusion .................................................................................................................................... - 39 -

Recommendations ........................................................................................................................ - 40 -

Appendix A. Sage-547 Development Profile –Thomson Reuters Cortellis- .................................. - 41 -

Appendix B. Sage-217 Development Profile –Thomson Reuters Cortellis- .................................. - 47 -

Appendix C. Sage-689 Development Profile –Thomson Reuters Cortellis- .................................. - 49 -


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DISCLAIMER

This report (Report) has been produced independently by QStat Consulting. The intent of this Report is to provide a structured example of QStat Consulting’s service and to provide information for the public. The views expressed in this Report are not necessarily the views of QStat Consulting. The information, statements, statistics and commentary (together the ‘Information’) contained in this Report have been prepared by QStat Consulting from publicly available material and from discussions held with stakeholders. QStat Consulting does not express an opinion as to the accuracy or completeness of the information provided, the assumptions made by the parties that provided the information or any conclusions reached by those parties. QStat Consulting has based this Report on information received or obtained, on the basis that such information is accurate and, where it is represented to QStat Consulting as such, complete. The information contained in this Report has not been subject to an audit. All expressions of opinion are subject to change without notice, and the Authors do not undertake to update this Report or any information contained herein. This Report remains the property of QStat Consulting and any effort to use this Report as an actual and factual appraisal Report is not permitted.


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OVERVIEW OF SAGE THERAPEUTICS


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CASE ABSTRACT

SAGE Therapeutics (Company) was incorporated on April 16, 2010 and trades on the NASDAQ Global Market (NASDAQ:SAGE). Headquartered in Cambridge, Massachusetts, it is a clinical-stage biopharmaceutical company engaged in developing and commercializing medicines to treat central nervous system (CNS) disorders. The Company's chemistry platform is focused on chemical scaffolds of endogenous or chemically modified synthetic neuroactive steroid compounds that are allosteric modulators of GABAA or N-Methyl-D-aspartic acid or N-Methyl-D-aspartate (NMDA) receptors. The Company originally started with a plan to use its platform of “allosteric receptor modulators” primarily for CNS diseases with large market like schizophrenia, though the Company fine-tuned its strategy before its IPO and started focusing its own drug discovery efforts on rare, or specialty CNS disorders with the plan to develop such drugs at a low cost and on accelerate timelines by qualifying for things like breakthrough or orphan designations from the FDA. SAGE-547, the Company's lead product candidate, is an intravenous formulation of allopregnanolone, a neurosteroid that acts as a synaptic and extrasynaptic modulator of the GABAA receptor. SAGE-547, is currently in clinical development for the treatment of super-refractory status epilepticus, -SRSE- (Phase 3), postpartum depression –PPD- (Phase 2), major depressive disorder –MDD- (Phase 2) and essential tremor (Phase 2). SAGE-217 is also being evaluated in Phase 2 for Parkinson’s disease –PD- and PPD. SAGE-105, -324, -718, -689 are under investigation in the research stage for GABA indications and NMDA-dysfunction-related disorders.


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SAGE Therapeutics Field of activity: Specialty & Advanced Pharmaceuticals Numbers of drug in active development: 8 Number of inactive drugs: 3 Number of patents as owner: 29 Number of patent as Third party: 0 Number of deals: 4 (Drug – Early research Development Phase 3 ; Technology Phase 3 ; Drug – Funding Discovery ; Drug –Development/Commercialization Phase 3) Key indications: Status epilepticus ; Central nervous system disease ; Epilepsy ; Postnatal depression ; Essential tremor ; Psychiatric disorder ; Unidentified indication ; Anesthesia ; Traumatic brain injury ; Mood disorder ; Pain ; Sleep disorder. Key Target-based Actions: GABA A receptor modulator ; NMDA receptor modulator. Key Technologies: Small molecule therapeutic ; Intravenous formulation ; Steroid ; Oral formulation ; Infusion ; Analytical method ; Drug screening ; Pharmaceutical carrier ; Solution


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Pipeline Drugs (Trials 2011-2016): Single Targets with Cannabinoid and GABA Agonists Dominant. SRSE and SE markets are constituted by a number of direct and indirect competitors. Of interest, most of the conventional drugs used in SE today have been in use for many decades, and advances in pharmacologic therapy have rather lagged behind advances in basic science and other clinical aspects. The Company’s current major competitor is Marinus Pharmaceuticals (NASDAQ:MRNS), whose scientific founder has been heavily involved in Sage’s research. Marinus Pharmaceuticals’ lead compound –ganaxolone-, which is a synthetic version of Sage’s allopregnanolone, has failed to impress FDA in 2016.


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Global Epilepsy Pipeline (October 2016). Before its incorporation in July 2014, the Company raised $91 million from Third Rock Ventures, Arch Venture Partners and Entities (Fidelity Investments) and others. Operating Incomes and EBITDA have reduced from $(10) million to $(95) million in 2012-2015, in which R&D expenses resulted the largest contributor (~70%). The current assets are mostly constituted by cash $187 millions at December 2015. Long term liabilities have been paid off in 2014 making the Company debt-free, with total liabilities and stockholder equities equal to $189 million. Common stocks have been issued by the Company, which accumulated $226 million in 2014/15 and announced a new proposed public


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offering of $150 millions of its common stock in September 2016 to expand and pay off their R&D expenses. Based on analysis of the Company’s trend in earnings per share over the past 5 quarters and operating earnings yield, the company is overvalued when compared to all the companies in the same sector. Investors have raised some concerns about low performance, poor novelty, high competition and small market size. This report is based on the analysis of possible strategic alternatives for the Company following FDA regulatory concerns for experimental SAGE-547 in SSRE Phase 3.

MISSION STATEMENT

The mission of SAGE Therapeutics is to make life better for patients with central nervous system diseases by discovering, developing and delivering important new medicines to patients in need.

UPCOMING MILESTONES

• Top-line results for the Phase 3 STATUS Trial of SAGE-547 in SRSE is expected during the first half of 2017.

• Phase 2 clinical trial initiations for SAGE-217 in Parkinson’s disease in the second half of 2017 and severe PPD in the second half of 2016, assuming successful completion of Phase 1 and, in the case of severe PPD, positive data from the ongoing SAGE-547 proof-of-concept trial.

• Initiation of the Phase 1 development program for SAGE-689, a next generation positive allosteric modulator of GABAA receptors, expected during the second half of 2016, assuming additional non-clinical data is satisfactory to the FDA.

• Clinical development with the first NMDA candidate, SAGE-718, planned to begin in 2017. • Underwritten public offering of shares of its common stock, with a total gross proceeds of

$175M, to close on September 14, 2016.


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EXTERNAL AUDIT


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OPPORTUNITIES

1. Focus on R&D for rare orphan CNS diseases 2. Driving out competitors with reduced costs 3. Potential higher revenues with designation of orphan drug 4. Penetration for emerging international markets 5. Diversification into CNS diseases with larger market than SRSE and PPD 6. Constant growth of total global pharma sales by 4% 7. Product diversification 8. Strategic M&A activity 9. Strategic agreement with other companies and organization to boost its research and drive

down the costs 10. Increasing awareness about healthcare and CNS disease needs 11. Increasing demand for high quality solutions

THREATS

1. Risk of expensive class action law suits 2. Loss or absence of patent protection 3. Tightening of FDA regulatory oversight 4. Increased competition 5. Failure to identify risks for long-term effects 6. Increasing R&D expenses 7. Reduction in company valuation 8. Launch of substitutes 9. Unpredictable external factors 10. Unjustified high cost/market size and reducing Medicaid drug benefits 11. Risk of unsuccessful new products 12. Pressure to reduce costs, increase efficiency, and prove value

EXTERNAL FACTOR EVALUATION MATRIX

The External Factor Evaluation Matrix (EFE) analyzes factors that the Company does not have control of. Some factors that influence EFE are economy, changing demographics and government regulation. EFE is a strategic-management tool that takes all of the factors in the External audit and 1. weights them in accordance with each other as a whole, 2. rates by importance to the Company and strategies, 3. multiplies weight and rating to give the Company a score in which to compare with competitors.


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KEY EXTERNAL FACTORS WEIGHT RATING WEIGHTED SCORE

OPPORTUNITIES 1. Focus on R&D for rare orphan CNS diseases 0.03 5 0.15 2. Driving out competitors with reduced costs 0.03 2 0.06 3. Potential higher drug revenues with designation orphan drug 0.05 5 0.25 4. Penetration for emerging international markets 0.03 1 0.03 5. Diversification into CNS diseases with larger market 0.06 1 0.06 6. Constant growth of total global pharma sales by 4% 0.05 1 0.05 7. Product diversification 0.05 3 0.15 8. Strategic M&A activity 0.06 1 0.06 9. Strategic agreement to boost research and drive down the costs 0.06 1 0.06 10. Increasing awareness about healthcare and CNS disease needs 0.02 2 0.04 11. Increasing demand for high quality solutions 0.02 1 0.02 THREATS 1. Risk of expensive class action law suits 0.04 1 0.04 2. Loss of patent protection 0.06 1 0.06 3. Tightening of FDA regulatory oversight 0.07 3 0.21 4. Increased competition 0.05 1 0.05 5. Failure to identify risks for long-term effects 0.03 2 0.06 6. Increasing R&D expenses 0.06 2 0.12 7. Reducing Company’s valuation 0.04 1 0.04 8. Launch of substitutes 0.03 1 0.03 9. Unpredictable external factors 0.03 1 0.03 10. Unjustified high cost/market size 0.02 2 0.04 11. Risk of unsuccessful new products 0.07 1 0.07 12. Price and quality pressure 0.04 3 0.12 TOTAL 1.00 (1-5) 1.8


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PORTER’S FIVE FORCES

Quantitative Porter’s five forces framework utilizing weighted average of the five market forces. Each single force, that includes threats by new competitors, rivalry among existing companies, threats by substitution products, suppliers’ negotiation power and buyer negotiation power, were measured in a linguistic scale (0.2-1).

The Company’s weighted averages of Porter’s five forces concentrated mostly on the number of substitutes, which are already available to current patients or are under clinical investigation, and the number of competitors in SSRE, SE, depression and PPD (highly unattractive). The Company is facing a fierce competition in these settings and it could overcome some difficulties by exploiting a price-strategy driven by low-cost R&D and manufacturing costs (highly attractive). Suppliers, entry and exit forces are in line with the sector.


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INTERNAL AUDIT


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STRENGTHS

1. Diversified product portfolio 2. Advanced clinical trials for its leading compounds 3. Financial strength related to lack of debt 4. Experienced CEO in CNS field 5. Generating therapeutics for underrepresented CNS diseases 6. Location with access to large pool of highly trained scientists 7. Low cost of innovation, manufacturing and operations 8. Access to financial solutions to raise capital for growth

WEAKNESSES

1. High R&D expenses, low investment in innovation 2. Poor novelty (SAGE-547-allopregnanolone similar to Marinus’ ganaxolone) 3. Weak core portfolio (lack of collaborations) 4. Limited financial resources (not adequate infrastructure, operational mistakes, loss of

business opportunities, loss of employees, reduced productivity) 5. Lack of partnerships and/or financing rounds from partners 6. Difficulties in completing board/C-level management 7. Potential misconduct by employees for insider trading 8. Failure of leading compound and others in the current pipeline 9. Public offerings affect share dilution and the overall company’s valuation

FINANCIAL RATIO ANALYSIS

The market capitalization of SAGE Therapeutics is $1.5 billion as of 09/27/2016. EPS reduced from (1.92) in 2013 to (3.40) in 2015 besides falling operating income equal to $(95) million and total assets at $189 million, of which $174 millions of total stockholders’ equity in 2015. The Company's operating earnings yield of (10.6)% ranks above 16% of the other companies, indicating that it is overvalued. Despite a positive book value per share of 6.87 (P/B of 5.5 lower than the industry average), the Company is still suffering of negative operating cash flow and increasing working capital as expected from business at this growth stage. ROA increased following the IPO from (321.74)% in 2012 to (59.30)% in 2015 with a ROE of (63.94)%. Company’s stock price is down 29.8% in the last 12 months, up 21.6% in the past quarter and up 5.8% in the past month. Overall the Company is experiencing high operating cash flow due to high R&D expenditures, lack of external sourcing of funding and reasonable capitalization of its common stocks, which at this date are over-valued.


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INTERNAL FACTOR EVALUATION MATRIX

The Internal Factor Evaluation matrix (IFE) targets the Company’s strengths and weaknesses that the Company is leading in or struggles with. KEYINTERNALFACTORS WEIGHT RATING WEIGHTED

SCORESTRENGTHS 1. Diversified product portfolio 3.0% 4 0.122. Advanced clinical trials for its leading compounds 7.0% 5 0.453. Financial strength related to lack of debt 7.0% 2 0.164. Experienced CEO in CNS field 2.0% 4 0.085. Generating therapeutics for underrepresented CNS diseases 5.0% 4 0.26. Location gives access to large pool of highly trained scientists 7.0% 5 0.37. Low cost of innovation, manufacturing and operations 8.0% 1 0.18. Access to financial solutions-public offerings of stocks- to raise

capital for growth 7.0% 1 0.08 WEAKNESSES 13. Low investment in innovative R&D (high R&D expenses) 9.0% 1 0.114. Poor novelty (SAGE-547-allopregnanolone similar to inactive

Marinus’ ganaxolone) 8.0% 1 0.0815. Weak core portfolio (lack of collaborations) 8.0% 1 0.08


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16. Limited financial resources (not adequate infrastructure, operational mistakes, loss of business opportunities, loss of employees, reduced productivity) 5.0% 1 0.05

17. Lack of partnerships and/or financing rounds from partners 5.0% 2 0.118. Difficulties in completing board/C-level management 9.0% 2 0.219. Potential misconduct by employees for insider trading 3.0% 1 0.0320. Failure of leading compound and others in the current pipeline 3.0% 4 0.1221. Public offerings affect share dilution and the overall company’s

valuation 7.0% 5 0.45TOTAL 1.00 (5-1) 2.13


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(extracted from SAGE Therapeutics 3Q16 report)

“….We expect that our expenses will increase substantially in connection with our ongoing activities, as we:

• advance clinical development of SAGE-547, including completing the Phase 3 clinical trial for SAGE-547 in SRSE, expanding the Phase 2 clinical program for SAGE-547 in PPD, and conducting additional clinical trials and non-clinical studies of SAGE-547 required for regulatory approval in SRSE and severe PPD;

• advance clinical development of SAGE-217, including initiating and conducting planned Phase 2 clinical trials of SAGE-217 in essential tremor and PPD and a proof-of-concept Phase 2 clinical trial in Parkinson’s disease, and initiating a small proof-of-concept Phase 2 trial using SAGE-547 in MDD to guide future development of SAGE-217;

• advance clinical development of SAGE-689, including initiation of a Phase 1 clinical trial, if we are able to successfully address the data request from the FDA;

• continue to advance SAGE-718, our early-stage novel allosteric modulator for NMDA, in non-clinical studies; and prioritize advancement of a novel GABA candidate, such as SAGE-105 or SAGE-324, into IND-enabling studies for development in other GABA-related indications, such as orphan epilepsies;

• continue our research and development efforts to evaluate the potential for our existing product candidates in the treatment of additional indications, and the identification of new drug candidates in the treatment of CNS disorders;

• advancing regulatory activities focused on a potential filing of an NDA for SAGE-547 and initial preparations for a potential commercial launch;

• seek regulatory approvals for our product candidates that successfully complete clinical development;


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• add personnel, including personnel to support our product development and future commercialization efforts;

• add operational, financial and management information systems, and maintain, leverage and expand our intellectual property portfolio….”


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MATCHING STAGE


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COMPETITIVE PROFILE MATRIX

Competitive Profile Matrix (CPM) is essential to compare the Company with competitors in the same industry and sector, such as Marinus Pharmaceuticals. It shows the firms strong and weak points relative to their competitors. CPM compares both internal and external audits in the same matrix. Decision making for the CPM has been determined using different factors. The pipeline of next-generation epilepsy drugs displays several novel mechanisms of action and are more specific to single targets. Cannabinoid receptor agonists and GABA receptor agonists are the most advanced. SAGE Therapeutics is one among a number of direct competitors like Marinus Pharmaceuticals, GW Pharmaceuticals, Insys Therapeutics and Zynerba Therapeutics.

CPM–CompetitiveProfileMatrix SAGE MRNS GWPH INSY ZYNE

CriticalSuccessFactors W R WS R WS R WS R WS R WS

Innovation 11% 3 0.33 3 0.33 2 0.22 2 0.22 4 0.44UseofCorporateAssets 9% 2 0.18 1 0.09 3 0.27 5 0.45 0 0

FinancialSoundness 12% 0 0 3 0.36 1 0.12 4 0.48 2 0.24Long-terminvestment 10% 1 0.1 1 0.1 3 0.3 4 0.4 1 0.1

GlobalCompetitiveness 8% 2 0.16 0 0 3 0.24 2 0.16 1 0.08Acquisition 6% 1 0.06 0 0 2 0.12 2 0.12 0 0

ProductDiversification 10% 2 0.2 2 0.2 3 0.3 2 0.2 3 0.3ProductQuality 12% 4 0.48 4 0.48 3 0.36 3 0.36 3 0.36

Marketing 6% 0 0 0 0 2 0.12 2 0.12 0 0R&D 6% 3 0.18 2 0.12 4 0.24 3 0.18 2 0.12

Patents 10% 3 0.3 3 0.3 5 0.5 4 0.4 1 0.1Total 100% 1.99 1.98 2.79 3.09 1.74

W:Weight;R:Rating:WS:WeightingScoreSAGE:SAGETherapeutics;MRN:MarinusPharmaceuticals;GWPH:GWPharmaceuticals;INSY:InsysTherapeutics;ZYNE:ZynerbaPharmaceuticals. Although the Company is strong on developing high quality small molecule, it languishes on several indexes of CPM, which creates a vacuum in the patent protection and more generally competition and financial soundness.


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SWOT MATRIX

The SWOT matrix is the quality learning management project process that puts together the internal and external audits to focus on each aspect and how they can influence new strategy. A SWOT analysis does not only result in the identification of a corporation’s core competencies, but also in the identification of opportunities that the firm is not currently able to take advantage of due to a lack of appropriate resources.

The corporate management is expected to identify new strategic decision following the rejection of SAGE-547 for SSRE while developing company’s goals to create a long-term growth. Four major strategies have been reported –SO/ST/WO/WT- that include a series of decisions to be further discussed. Overall the management needs to align the whole Company’s activities in pursuit of low cost in search of a sustainable growth.


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SPACE MATRIX

The SPACE matrix evaluate the Company’s internal and external position to create directions for any particular strategic plan. It coincides with the above matrices and gives a sense of guidance. It focuses on strategy formulation especially related to the competitive position of the Company. INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITION

Competitive (CA) Industry (IS)

Axis

X

(-6 worst, -1 best) (+1 worst, +6 best) -4 Product quality 5 Barriers to entry -4 Market share 4 Growth Potential

-5 Manufacturing expertise 1 Financial avability

-2 Technological know-how 5 Profit potential

-4 Brand image 2 R&D costs vs Risk Average -3.8 Average 3.4

Total axis X score: -0.4

Axis

Y

Financial (FS) Environmental (ES) (+1 worst, +6 best) (-6 worst, -1 best)

1 ROA -4 Inflation 6 Working capital -4 Technological changes 6 Liquidity -2 Demand elasticity 2 EPS -4 Competition 2 Cash flow -2 Taxation Average 3.4 Average -3.2

TotalaxisYscore:0.2


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The Company cannot sustain either an aggressive or competitive strategy due to negative competitive and low industry factors. Likewise, the Company does not hold a strong position in the financial and environmental sectors positioning a potential strategy type as conservative and defensive.


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GRAND STRATEGY MATRIX

The Grand Strategy Matrix devises alternative strategies for the Company in relation with market growth and competitive position.

The Company holds a weak competitive position with a market growth strongly related to its competitors’ advances in the epilepsy market. Rapid market growth requires intense strategy while high competition is needed in slow-growth industries. Company’s weakness is mostly marked by lack of novelty, negative EPS and EBIT and others. It is mandatory that the Company improves its strategic position. Product development, retrenchment (reduction of cost and asset) and divestiture of minor programs are the main strategies reported by this matrix that matches previous SPACE and SWOT matric.


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INTERNAL-EXTERNAL MATRIX

The Internal-External Matrix (IE) is used to analyze working and strategic conditions of a business. It compares the scores from the IFE and EFE and puts them on a grid to show where a company is within quadrants 1-9.

This IE matrix tells us that the Company’s IFE and EFE (2.13; 1.80, quadrant VIII) suggest to pursue strategies focused cost-management as harvesting and divesting de-prioritized programs.


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DECISION STAGE


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QUANTITATIVE STRATEGIC PLANNING MATRIX

The Quantitative Strategic Planning matrix (QSP) is a strategic management approach for evaluating possible strategies and it is a key tool in the decision making process. It provides an analytical method for comparing feasible alternative actions indicated in the evaluation stage. The importance of using QSP is in the fact it extracts the information from the input and evaluation stage and combines all these analytical processes to decide the best strategy for the Company. Thus it is imperative to design the best tool to identify the most significant strategy.

QSP indicates the retrenchment-divestiture strategy within WT as the strategy with most probable success. This is necessary to minimize weaknesses and avoid threats. WT is followed by WO, SO and finally ST, as indicating and stressing on the weakness of the Company.


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Using a specific visualization tool of the factors analyzed by QSP, it has been possible to facilitate the identification and analysis of similarities and differences arising from comparisons of strategies. As expected WT strategy has the highest number of similarities with other individual factors. The factors O9 -strategic agreements to boost research and drive down the costs-, S7 -innovation, manufacturing and operations-, T11 -risk of unsuccess- and W2 –novelty- are ranked the top decisions that affect the final outcome.


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Utilizing a Monte-Carlo simulation of the weighted attractiveness score to see all the possible results of strategic decisions and assess the impact of risk, it has been possible to discern non-statistical significant factors while identifying outperformers for each strategy. Herein, attractiveness score was dissected to assess variability of random inputs. Retrenchment-divestiture (WT) still remain the leading decision.

0.00 0.05 0.10 0.15 0.20 0.25

SO

ST

WO

WT

Total Attractiveness Score (QSPM)

STR

ATEG

IES

PRODUCT DEVELOPMENT

MARKET DEVELOPMENT

INTEGRATION

RETRENCHMENTDIVESTITURE

10 20 30 40 100 200 300

-0.2

0.0

0.2

0.4

0.6

Number of eventsTota

l Attr

activ

enes

s Sc

ore

(QSP

M)


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TECHNIQUE FOR ORDER OF PREFERENCE BY SIMILARITY TO IDEAL SOLUTION, RANK AND ASSOCIATION WEIGHT METHOD

The Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS), rank and association weight method (AWM) are multi-criteria decision analysis methods. TOPSIS selects the alternative that is the closest to the ideal solution and farthest from negative ideal solution using weighted QSP indexes. In a similar model AWM identifies key decisions and generate ranked outcomes to better understand the distance from ideal solutions.

SO ST WO WT

RANK METHOD WEIGHTED RANK 2 1.92 2.05 2.19

CONCLUSION 3 4 2 1 AWM METHOD

AWM 0.38 0.40 0.44 0.50 CONCLUSION 3 4 2 1

TOPSIS

TOPSIS 0.46 0.37 0.44 0.56 CONCLUSION 2 4 3 1

The Weaknesses-Threats (WT) strategy that includes divestiture, retrenchment and reduction of operating losses still encourage the Company to refocus on its core business, in response to the operating environment in its industry or to release underperforming assets. Divestiture involves a sale, spinoff or liquidation of a program and selling off or distributing its assets to primary programs, while retrenchment is a limited withdrawal from one or more product or market segments. We need to consider possible options with the management to focus on cost management related to two key factors: lack of novelty and patent protection (W2), risks related to possible failures in clinical trial studies (T11).


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STRATEGY DIAMOND

DIVESTITURE RETRENCHMENT REDUCE OPERATING LOSSES

ARENAS: Profit from company’s assets

Suspend R&D activities

Outsourcing R&D –drug discovery- activities.

VEHICLES: Out-licensing IP Layoff/financial department

CROs and CSOs

DIFFERENTIATORS: Able to increase revenue

Able to vehicle capital to more profitable compounds

Able to engage in price strategy, and fund new growing programs

STAGING: Sequence of initiatives by corporate and BD

Corporate decisions on human and monetary capitals

Sequence of initiatives by BD, R&D, Alliance management.

ECONOMIC LOGIC: Focus is on increasing revenue by profits from out-licensing IP and products

Focus is on reducing out-flows activities and divest priorities

Focus is on reducing R&D costs and securing additional capital to fund operations.

EXPECTED MONETARY VALUE

The expected monetary value (EMV) is the preferred criterion to assess probabilities for each decision and calculate the expected payoff from each decision based on these probabilities. EMV is a weighted average of the payoffs weighted by the probabilities of the outcomes. EMV is calculated for each decision and we selected the decision with the largest EMV (playing the averages). The EMV of the three output strategies associated with SAGE-547, SAGE-217, SAGE-689 and others (SAGE-105, -324, -718) resulted in the largest EMV for the divestiture, retrenchment and outsourcing of SAGE-547 with an overall decisional EMV of 289 million (based on operating expenses listed in 2015 annual financial report with an increment of 100%). Though we should consider a plethora of facts as the recent/possible rejection from the STATUS Trial in SRSE, diversification in target disease PDD and MDD, partial ownership of the formulation but not the lead compound, which might discount the value of its program through a high risk-adjustment.


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GAP ANALYSIS

GAP analysis involves the comparison of actual performance with potential or desired performance. FUTURE STATE CURRENT SITUATION NEXT ACTIONS/PROPOSALS Spin-off or sale of SAGE-547 program for current PPD, increase revenue and in-flow of capital

SAGE-547 does not impress FDA, failure in Phase 3 for SRSE, lack of ownership of lead compound, undermining diversification to other target disease

Expand intellectual property portfolio and divestiture of SAGE-547 for SE and PPD (Divestiture)

Suspended pre-clinical trials (on-hold), reduction of out-flow cash, focus human and revenue capital to primary compounds

Multitude of compounds for GABA and NMDA Indications at the pre-clinical stage, SAGE-689 Phase 1 halted by FDA, lack of capital to sustain clinical studies

Delay advancement of pre-clinical studies to next phase, focus on GABA indications while enhancing intellectual property (Retrenchment)

Preclinical data studied by external partners, reduction of out-flow cash, receive of up-front cash to finance R&D and reach milestones

R&D expenses result the largest contributor (~70%) of EBITDA, high costs for clinical development, weighting on any future price-strategy

Partner with CROs/CSOs, seek external partnerships through Business Development (Reduce operating losses)

It is imperative to determine the appropriate “plan, do, check, act” process to identify any gap in the final strategic implementation. This can be done through gap identification, cause investigation, select action, action implementation, study the results, standardize and plan continuous improvement to assess any loophole.


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RISK ASSESSMENT

DESCRIPTION OF RISK

POSSIBLE CONSEQUENCES

PROBABILITY OF RISK

SEVERITY OF RISK

OVERALL RISK

CONTINGENCY PLAN

SAGE-547 FAILURE IN PHASE 2 FOR PPD, WEAK SAGE-547 IP

no licensee, no buyers, high risk-adjusted net present value

H H H Secure IP, diversify target disease for SAGE-547 in pre-clinical studies

POOR INNOVATION, DELAY CLINICAL, STRONGER COMPETITION

Not unique products, poor IP, loss of potential revenue in the long term

M H M-H Secure IP, out-license activity with royalty monetization to accelerate payments, maximize returns and mitigate asset risk

HIGH COSTS FOR RELIABLE CROs/CSOs, NO PARTNERS TO SUSTAIN INTERNAL PROGRAM

High R&D expenses, low chance for any price-strategy, increased liabilities through long-term debt

L M L-M Deal a contract with the appropriate CRO/CSO, high activity in seeking valuable partnerships


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2 4 100 200 300 400

-0.5

0.0

0.5

1.0

1.5

2.0

Number of events

Tota

l Att

ract

iven

ess

Sco

re (Q

SP

M)

SAGE547 IP CLINICAL TRIALSCOMPETITION

INNOVATION CROs/CSOs PARTNERSSAGE547 PPD


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CONCLUSION

Any adverse event as the failure of the leading compound SAGE-547 in SRSE and following contingency plan may cause the Company to forgoes investment in capital or technology or it may perform below its potential. The external audit has showed a significant weakness and threats from competitors. The Company should strengthen its competitive position in a fast growing market where direct competitors and the presence of substitutes undermine potential opportunities. The Competitive Profile Matrix has showed a lack in novelty for the GABAA receptor agonists in comparison with Cannabinoid receptor agonists and its delivery method. Further the Company is experiencing a lack of partnerships with external collaborators and its finances relying uniquely on public offering of its common stock at 20% less than its current market value. The Company’s leading compounds SAGE-547 and SAGE-217 are being investigated in six clinical trials further soaring the operating expenses and delaying R&D activities. The Company should re-focus on its strategy to increase financial resources and protect ownership of its compounds. Four main strategies have been developed in this report and compared with the Company’s needs or ideal solution. A conservative/defensive strategy has been over and over represented in a number of matrix to be the most significant decision. The Company should lead cost management actions through divestiture, retrenchment and reducing operating expenses. Utilizing a quantitative strategic planning matrix, it has been possible to determine that these strategies, included in the Weakness-Threats group, rely on two major burden: potential failure in trials and lack of novelty/innovation. Though the strategy diamond reports possible actions to finalize all these three strategic decisions, a detailed risk assessment should indicate the most appropriate one. Divestiture of the leading company might be the most profitable solution even following the failure as treatment for SRSE and lack of novelty, though it might be risky to find a licensee/buyer in light of these associated risks. Reducing operating expenses through outsourcing activities is a secure decision but valued less than other actions. Finally, the Company should engage in a retrenchment phase and actively operate reduction of cost and assets. This strategy should be addressed to halt pre-clinical R&D operations especially for NMDA receptor agonists, clinical development of SAGE-689, while enforcing intellectual property and out-licensing SAGE-217 and SAGE-547 in their current Phase 1-2. The overall risk for these activities is limited with an expected monetary value of $48 million only for the main lead compound.


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RECOMMENDATIONS

SAGE Therapeutics is an exceptional pharmaceutical company that meets industry standards in most of its operations. The initial mission to make life better for patients with central nervous system diseases has been met. The first six years have set a solid course for developing drugs with the utmost respect for balance in the resources expanded without compromising known standards. It is imperative for SAGE Therapeutics to move into a limited retrenchment - divestiture phase following the regulatory concern for SAGE-547 in SRSE. The management needs to halt pre-clinical development of NMDA-receptor agonists, delay the clinical development of SAGE-689, enforce intellectual property of its core portfolio and improve out-licensing of SAGE-217 and SAGE-547 through royalty monetization. It will allow SAGE Therapeutics to accelerate payments, maximize returns and mitigate asset risks. SAGE Therapeutics must continue to evaluate its financial resource needs that assure it will develop innovative drugs in the most efficacious manner possible. And, as many other pharmaceutical companies have expanded into the same target disease market, SAGE Therapeutics should also examine strategies whereby costs associated with product development and manufacturing allow a price-strategy in the future.


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APPENDIX A. SAGE-547 DEVELOPMENT PROFILE –Thomson Reuters Cortellis-

SUMMARY SAGE Therapeutics is developing SAGE-547 (SGE-102, allopregnanolone), the lead from an allosteric GABA A receptor modulator program that incorporates Ligand's Captisol technology, for the potential iv treatment of GABA-A disorders, primarily status epilepticus. In March 2014, the company was seeking to outlicense its programs. In August 2015, a phase III study (STATUS) for SRSE was initiated; in December 2015, topline data from the trial were expected in 2H16; in February 2016, the company stated that positive data from the global STATUS trial, as well as clinical data previously generated relating to SAGE-547 and ongoing non-clinical studies could form the basis of an NDA filing. Development in other indications is ongoing, including essential tremor, postpartum depression (PPD) and major depressive disorder (MDD). In October 2014, the first patient was dosed in a phase IIa trial for essential tremor; in September 2015, positive topline data were reported. In September 2014, a phase II study was initiated in severe PPD; in June 2015, topline data were reported; in November 2015, a second proof-of-concept in severe PPD began in July 2016, topline data were reported. In August 2016, the company planned to initiate a phase II trial for MDD. PATENTS AND GENERICS In February 2016, SAGE Therapeutics noted that it owned five patent families generally relating to SAGE-547. The first and second family patents included patent applications containing claims to compositions containing allopregnanolone and a cyclodextrin for the treatment of CNS disorders and claims to methods of treating seizure disorders by administering allopregnanolone using particular dosing regimens or multiple dosage phases, respectively; US patents from these two patent families were expected to expire in January and August 2033, respectively, subject to issuance. Additionally, further patent applications from the same two patent families were pending in foreign jurisdictions, including Australia, Brazil, Canada, China, Europe, Hong Kong, Israel, Indian, Japan, Mexico, New Zealand, Russia, Singapore, and South Africa. US patents coming from a third, fourth and fifth family patent applications including methods of treating essential tremor and depression such as severe PPD, claims to deuterated neuroactive steroid compounds and compositions, and claims to formulation and manufacturing of SAGE-547, respectively, were expected to expire in September 2035, April 2036, and June 2036, respectively, subject to issuance. However, at that time, all the patent applications were in early stages of prosecution and no patents had been issued yet.


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REGULATORY In September 2016, the FDA granted Breakthrough Therapy designation for the treatment of PPD. In April 2015, the company was planning to submit an NDA for SRSE. In February 2016, the company stated that positive data from the global STATUS phase III trial, as well as clinical data previously generated relating to SAGE-547 and ongoing non-clinical studies could form the basis of an NDA filing. In August 2016, launch for SRSE was expected in 2018. In April 2014, the FDA granted SAGE-547 Orphan Drug designation for the treatment of status epilepticus; including SRSE. In July 2014, the FDA granted Fast Track designation for the treatment of SRSE. PREMARKETING STATUS EPILEPTICUS In June 2016, clinical data from a phase III trial randomized, double-blind, placebo-controlled (547-SSE-301) study which evaluated the safety and efficacy of SAGE-547in patients with super-refractory status epilepticus were presented at the 13th EILAT Conference on New Antieplieptic Drugs and Devices in Madrid, Spain. Patients were randomized (1:1) to receive SAGE-547 or placebo and treated for 6 days with standard SAGE-547 dose, with follow-up 38 after 21 days. Number of patients able to be weaned off all third-line agents prior to the end of SAGE-547/placebo infusion and remained off all third-line agents for >/= 24 h post SAGE-547/placebo infusion, was the primary outcome measure. In April 2015, the first SRSE patient enrolled in the safety extension phase III study (Study 302; NCT02433314), completed treatment. Dose regimen, trial procedures and assessment of patient outcomes were to be consistent with the STATUS trial. In March 2016, it was reported at the 251st ACS meeting in San Diego, CA that the trial was ongoing. In April 2015, following a positive end-of-phase II meeting with the FDA, the company planned to conduct a randomized, double-blind, placebo-controlled trial (NCT02477618; STATUS; 547-SSE-301). In August 2015, the company reached an SPA agreement with the FDA for the phase III trial in patients (expected n = 126) with status epilepticus. Later that month, the first patient was treated in the trial, which would assess SAGE-547 as an interventional, adjunctive therapy compared to standard of care. At that time, the trial would be conducted in the US, Canada and Europe. In December 2015, topline data were expected in 2H16. In February 2016, it was stated that up to 140 patients aged 2 years and older would be recruited to achieve approximately 126 evaluable patients.


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The primary endpoint was the number of patients that were able to be weaned off all third-line agents before the end of SAGE-547 or placebo iv infusion, and remain off all third-line agents for >/= 24 hours following the end of SAGE-547 or placebo infusion. Subjects not responding to the initial treatment period would be eligible for retreatment on an open-label basis. In March 2016, the trial was expected to complete in June 2017. In August 2016, top-line data were expected in 1H17. In January 2014, a phase I/II trial of SAGE-547 began for refractory status epilepticus. In March 2014, first patient was dosed in the open-label, safety, tolerability, efficacy and pharmacokinetic study (NCT02052739; 547-SSE-201) of SAGE-547 as an adjunctive therapy in patients (expected n = 10) with SRSE; at that time, the trial was expected to complete in August 2014; in June 2014, preliminary data were presented at the Epilepsy Pipeline Conference in San Francisco, CA. The first four patients of the trial dosed with SAGE-547 met the primary and secondary endpoints. The drug was tolerated, and showed anti-epileptic activity, and showed resolution from SRSE. In November 2014, topline data were reported showing that all 12 patients enrolled in the study met the primary endpoint of safety and tolerability. Of the 11 patients evaluable for efficacy, 8 met the efficacy endpoint of being successfully weaned off anesthetic agents during the administration of SAGE-547, and 8 were successfully weaned off SAGE-547 without recurrence of SRSE. Mean duration of status epilepticus before treatment with SAGE-547 was 11 days. The overall response rate was 73% and mean exposure levels of SAGE-547 were approximately 200 nM. By that time, a protocol amendment had been approved by the FDA to treat pediatric patients and to increase the dose of SAGE-547 and SAGE was enrolling patients as an expansion cohort in the trial. In January 2014, further updated data from the 20 patients enrolled in the trial including a 30-day follow-up from the previously enrolled 12 patients were reported. Of 20 patients, 17 were evaluable with 71% evaluable patients successfully weaned off their anesthetic agents with SAGE-547 administration without recurrence of SRSE. By April 2015, enrollment had been completed. In April 2015, data were presented at the 67th AAN Annual Meeting in Washington DC. 71% of the evaluable patients were also successfully weaned off SAGE-547. The drug was tolerated with any serious adverse events reported not related to treatment. 30-day follow up data showed early and sustained improvement in patients that initially responded to SAGE-547 treatment. In May 2015, further data from 25 patients in the trial were reported. Data demonstrated that SAGE-547 showed robust activity with a 77% response rate. Also, clear pharmacodynamic activity as indicated in EEGs; the suppression of EEG occured approximately 1 h into the loading phase (mean = 19.6%) and terminal suppression was significantly greater than observed during the pre-SAGE-547 baseline period (9.8%). An overall a seven-point improvement was observed in the Glasgow coma scale [1660082]. In February 2016, further data regarding a post-hoc analysis from the 25-patient trial were reported. Of 22 evaluable patients, 16 (73%) and 18 (82%) subjects successfully weaned off both their anesthetic agents and SAGE-547 within 5 and 6 days, respectively, of starting the SAGE-547 infusion without the need to reinstate anesthetic agents in the following 24-hour period [1739102]. In March 2016, similar clinical data were presented at the 251st ACS meeting in San Diego, CA; and in April 2016, similar data were presented at the 68th


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AAN Annual Meeting in Vancouver, Canada. In April 2016, further clinical data from 25 patients were presented at the 68th AAN Annual Meeting in Vancouver, Canada. Of 22 evaluable patients, 17 showed key efficacy endpoint response (being successfully weaned off the continuous iv anti-epileptic drugs (AED) while SAGE-547 was being administered at the maintenance dose). A total of six deaths were reported. EEG suppression ratio was found to be increased during initial infusion loading followed by sustained elevation. In June 2016, similar clinical data were presented at the 13th EILAT Conference on New Antieplieptic Drugs and Devices in Madrid, Spain. ESSENTIAL TREMOR By October 2014, an IND had been accepted. At that time, the first patient was dosed in a double-blind, single-center, proof-of-concept, exploratory phase IIa trial to assess safety, tolerability, efficacy, pharmacokinetics and activity of SAGE-547 in adult patients (n = 24) with essential tremor. In September 2015, positive topline data were reported from the randomized, placebo-controlled, crossover trial (NCT02277106; 547-ETD-201). Data demonstrated that SAGE-547 showed significant reductions in tremor including a significant reduction in accelerometer-measured upper limb kinetic tremor. Overall clinician ratings of large tremor motions, as well as smaller movements such as writing and spiral drawing, also showed improvement. In addition, SAGE-547 demonstrated a clinically meaningful reduction of tremor amplitude as measured by accelerometer (30% reduction from baseline) in 33% of patients, compared to placebo (16%). Further, 17 of the patients were exposed to higher doses of SAGE-547 in an open-label extension with 44% demonstrating at least a 30% reduction in tremor amplitude from baseline. In April 2016, further data were presented at the 68th AAN Annual Meeting in Vancouver, Canada. Dose-related reductions in tremor activity but associated with moderate sedation were observed at higher dose of SAGE-547. POSTPARTUM DEPRESSION In February 2016, a further phase II exploratory trial in severe PPD was ongoing. In July 2016, an expansion of the phase II program in PPD, presumably this exploratory trial, had been initiated to determine optimal dosing of SAGE-547 in moderate and severe patients with PPD. At that time, enrollment in this multicenter, placebo-controlled trial was expected to begin at the end of 2016. In September 2016, the company noted that two exploratory. randomized, placebo-controlled phase II trials were part of the expanded phase II program; one was to explore dose-ranging of SAGE-547 in severe PPD patients and the other was to evaluate SAGE-547 efficacy in moderate PPD patients. Later that month, top-line results from the two trials were expected in 2017. In November 2015, a multicenter, placebo-controlled, double-blind, parallel-group, proof-of-concept study (NCT02614547; 547-PPD-202) was initiated in the US to evaluate the efficacy, safety and pharmacokinetics of SAGE-547 in female patients (expected n = 32) with severe PPD. The primary


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endpoint was the effect of SAGE-547 on depressive symptoms compared with placebo as measured by the change from baseline in Hamilton Rating Scale for Depression (HAM-D) total score. In May 2016, patient enrollment was completed. In July 2016, topline data were reported from 21 enrolled patients, demonstrating that the primary endpoint was met. At 60 h, the SAGE-547 group achieved a > 20 point mean reduction in the depression scores with a > 12 point difference from placebo; significant differences from placebo began at 24 h and were maintained until 30-day follow-up. At 60 h, remission from depression, as determined by a HAM-D </= 7, was observed in 7 of 10 patients receiving SAGE-547 compared with 1 of 11 receiving placebo. In September 2016, additional positive results on secondary endpoints from the trial were reported at The Marce Society for Perinatal Mental Health in Melbourne, Australia. In the SAGE-547-treated group, secondary endpoints including the Edinburgh perinatal depression scale (EPDS: mean change of -13.5 versus -5.3 in SAGE-547 versus placebo groups, respectively) and the patient health questionnaire (PHQ-9) showed improvement through 30 days compared with the placebo group, thereby demonstrating a strong durability of effect from SAGE-547 for over three weeks following the end of treatment. A score of 0 to 4 indicating minimal or no depression was observed in PHQ-9 at day 30 in six patients in the SAGE-547 versus one patient in the placebo group, respectively. At that time, the company was pursuing publication of a comprehensive dataset from the trial in a peer-reviewed journal. In September 2014, an open-label, single-group-assignment, proof-of-concept, phase II study (NCT02285504; 547-PPD-201) was initiated in the US to assess safety, tolerability, pharmacokinetics and efficacy of SAGE-547 in patients (expected n = 10 or 15) with severe PPD. In January 2015, the first female patient was dosed in the phase IIa trial. In June 2015, topline data from an exploratory trial were reported. Data demonstrated a significant improvement from baseline in depression in four women with PPD within 24 h after administration of SAGE-547 (paired t-test p=0.001). All four patients rapidly achieved remission, with Hamilton Rating Scale for Depression (HAM-D) score of 26.5 at baseline and improved to a mean HAM-D score of 1.8 at the end of the 60-h treatment period. A consistent improvement as measured by the Clinical Global Impression-Improvement (CGI-I) scale was observed. SAGE-547 was tolerated. In March 2016, similar clinical data were presented at the 251st ACS meeting in San Diego, CA. No serious adverse events were observed during the following 30 days. PHASE I STUDIES In April 2013, data were presented from a first-in-human study of iv drug for a five-day period in pentobarbital-induced coma patient, treated under a compassionate use exemption. Data demonstrated that the patient recovered from coma without recurrence of seizures. At that time, the company planned to present the trial design of a planned phase I/II trial SE trial, which was expected to be initiated later that year, at the 4th London-Innsbruck Colloquium on Status Epilepticus and Acute Seizures, in Salzburg, Austria.


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OTHER CLINICAL STUDIES In August 2016, the company planned to initiate a small proof-of-concept, phase II trial for MDD in 2H16, and data were expected in 1H17. In November 2014, data from a trial in SAGE-547-treated pediatric patients (n = 2) with super-refractory status epilepticus (SRSE) under emergency-use IND applications were published. Data demonstrated that SE was resovled in both patients after weaning from general anesthetic infusions. An infusion of SAGE-547 over five and four days showed cognitive improvement in the first patient with SE caused by an autoimmune disorder with antithyroid and anti-glutamic acid decarboxylase antibodies, and in second patient with SE associated with a febrile illness, respectively. PRECLINICAL In October 2016, preclinical data were published. Data demonstrated that a sustained increase in tonic current was observed following exposure to allopregnanolone and was prevented by inhibiting protein kinase C with GF 109203X when slices were exposed to neuroactive steroid for 15 min and then transferred to a steroid naive recording chamber followed by >/= 30 min wash before tonic currents were measured. Also, in agreement with the observations of an increased tonic current, the neuroactive steroid allopregnanolone and increased the phosphorylation and surface expression of the beta-3 subunit-containing GABA(A)Rs. In April 2013, preclinical data were reported demonstrating that the drug was significantly effective in treating SE when compared with benzodiazepines. At that time, the company planned to present the preclinical data at the 4th London-Innsbruck Colloquium on Status Epilepticus and Acute Seizures, in Salzburg, Austria.


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APPENDIX B. SAGE-217 DEVELOPMENT PROFILE –Thomson Reuters Cortellis-

SUMMARY SAGE is developing SAGE-217, a second generation oral neuroactive steroid which acts as a positive allosteric modulator of synaptic and extra-synaptic GABAA receptor subtypes, for the potential treatment of epilepsy disorders including Rett syndrome, Dravet syndrome, status epilepticus, and essential tremor. The company is also investigating the drug for the potential treatment of postpartum depression (PPD) and Parkinson's disease (PD). By September 2015, a phase I trial had been initiated. In June 2016, topline data were reported. In August 2016, phase II trials for essential tremor, PPD and PD were to begin in the second half of 2016; in August 2016, data were presented. PREMARKETING In June 2016, phase II trial were planned for the second half of 2016. In August 2016, phase II trials for essential tremor, PPD and PD were to begin in the second half of 2016, and at that time, top-line from the proof-of-concept phase II trial for PD, were expected in the first half of 2017. In August 2016, data were presented at the 252nd ACS meeting in Philadelphia, PA. For postpartum depression and essential tremors, improvements in Hamilton depression rating scale and target engagement to GABA receptor in EEG was observed, respectively. By August 2016, a safety, tolerability and pharmacokinetic phase I study of the drug in essential tremor patients (n=6). Data demonstrated that the drug showed reduction in tremor symptoms. In November 2014, the company was planning to file an IND in late 2015 to initiate a phase I development. In May 2015, the company planned to initiate the phase I trial by the end of 2015. By September 2015, dosing had been initiated in the single-ascending dose, phase I trial in healthy volunteers. At that time, initial top-line data were expected in the first half of 2016. In May 2016, top-line results were expected in the second quarter of 2016. In June 2016, topline data from the double-blind, placebo-controlled single (SAD) and multiple (MAD) ascending dose trials were reported. In the SAD study, SAGE-217 was administered as an oral suspension at doses between 0.25 and 66 mg to 72 healthy volunteers. The maximum tolerated dose was established at 55 mg. In the MAD study, doses of 15 mg, 30 and 35 mg were tested against placebo over 7 days in 36 healthy volunteers. The MTD for MAD study was established at 30 mg/day. SAGE-217 was found to be generally well-tolerated in single and multiple ascending doses. At that time, additional data were expected to be presented at the Eilat Conference on New Antiepileptic Drugs and Devices in Madrid, Spain, later that month. In August 2016, further data were presented at the 252nd ACS meeting in Philadelphia, PA. In single ascending dose study (n = 6 and 2; SAGE-217 and placebo, respectively),


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low sedation with 35 and 30 mg (qd) SAGE-217 was observed. In multiple- ascending dose study, t1/2 was 16 to 21 h and Tmax was approximately 1 h. PRECLINICAL In August 2016, preclinical data were presented at the 252nd ACS meeting in Philadelphia, PA. The most potent compound had an EC50 and an Emax values of 163 and 639 nM, respectively. In January 2016, preclinical data demonstrated robust and dose-related anti-seizure activity in broad variety of acute seizure and chronic epilepsy models. Also, the drug had wide therapeutic index to sedation and acute suppression of status epilepticus induced by nerve gas. Further preclinical data were presented at the same conference. SAGE-217 had demonstrated anti-seizure and anxiolytic activity in multiple animal models, including potent activity in chronic (mesial temporal lobe epilepsy) and genetic (Fragile-X syndrome) pre-clinical epilepsy models. In September 2014, preclinical data were presented at the 12th Eilat Conference on new Anti-Epileptic drugs in Madrid, Spain. The results demonstrated that SAGE-217 had favorable pharmacokinetic profile with good CNS exposure (rodent brain to plasma ratio >1.3 to 3.2). Data from in vitro electrophysiology studies using mammalian cell line showed the drug to be more efficacious in in vitro assays of GABAA modulation than either allopregnanolone or ganaxolone at both synaptic alpha1beta2gamma2-containing GABA A receptors and extra-synaptic alpha4beta3delta-containing GABAA receptors. SAGE-217 was also found to be effective at reduced levels of plasma and brain exposure in models of benzodiazepine-resistant seizure. The drug showed improved activity compared with other first generation neuroactive steroids with a favorable selectivity and pharmacokinetic profile.


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APPENDIX C. SAGE-689 DEVELOPMENT PROFILE –Thomson Reuters Cortellis-

SUMMARY SAGE Therapeutics is investigating SAGE-689 (SGE-689; SGE-202), a GABA A receptor allosteric modulator that incorporates Ligand's Capitisol technology, for the potential iv use as an anesthetic and for the potential treatment of status epilepticus. In April 2013, the drug was listed as being in preclinical development as an anesthetic; in March 2014, the drug was listed as being in preclinical development for both neuroanesthesia and status epilepticus. In February 2015, a phase I trial was expected to be initiated by that year-end. In November 2015, the company delayed the initiation of the phase I trial to respond to the requests from the FDA for additional non-clinical study data unrelated to toxicology; in December 2015, the trial was expected to start in 2H16. In March 2014, the company was seeking to outlicense its programs. PREMARKETING In April 2013, the company planned to initiate a phase I trial in 2014. In January 2014, it was reported that SAGE-689 would enter a phase I trial in the third quarter of 2014 at the 32nd Annual JPMorgan Healthcare Conference in San Francisco, CA. In November 2015, the company delayed the initiation of the phase I trial to respond to the requests from the FDA for additional non-clinical study data unrelated to toxicology; in December 2015, the trial was expected to start in 2H16. In June 2016, it was reported at the at the 13th EILAT Conference on New Antieplieptic Drugs and Devices in Madrid, Spain, that a phase I, single ascending, double blind, placebo-controlled trial of po SAGE-217 in approximately 80 healthy adult volunteers was ongoing. PRECLINICAL In June 2016, preclinical data were presented at the 13th EILAT Conference on New Antieplieptic Drugs and Devices in Madrid, Spain. In a pharmaco-resistant status epilepticus animal model (lithium-pilocarpine rat model), SAGE-689 alone or in combination with sub-active doses of diazepam had rapidly aborted seizures and had exhibited clean drug-drug interaction profile and a wide therapeutic window to date in animal testing. By April 2013, studies in preclinical models demonstrated the drug had similar on and off rates with improved therpeutic index compared to propofol.

Sage Therapeutics, Competitive Strategy Report

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