SAGE Therapeutics (SAGE) Risk Analysis

There have been, and likely will continue to be, legislation and legislative, administrative and regulatory proposals in the U.S., both at the federal and state level, and in many foreign jurisdictions, aimed at reducing healthcare costs. The implementation of cost containment measures, drug pricing controls or other reforms could have an adverse effect on our revenue from ZURZUVAE or from the sales of any other future products that are successfully developed and approved, and may limit our ability to achieve profitability. For example, the ACA substantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacted the U.S. pharmaceutical industry. The ACA, among other things, subjects biological products to potential competition by lower-cost biosimilars, provided a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain branded prescription drugs, and created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 70% (pursuant to the Bipartisan Budget Act of 2018, effective as of 2019) point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer's outpatient drugs to be covered under Medicare Part D (subsequently modified by the Inflation Reduction Act of 2022, or IRA, as discussed below). The Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation's automatic reduction to several government programs. These changes included aggregate reductions to Medicare payments to providers of up to 2% per fiscal year, which went into effect in April 2013 and will remain in effect through 2031. Pursuant to the Coronavirus Aid, Relief and Economic Security Act and subsequent legislation, these Medicare sequester reductions were reduced and suspended, with the current 2% rate of sequestration resuming in July 2022. The rate of sequestration is currently set at 2%, will increase to 2.25% for the first half of fiscal year 2030, to 3% for the second half of fiscal year 2030, and to 4% for the remainder of the sequestration period that lasts through the first six months of fiscal year 2031. These and other laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our products or product candidates for which we may obtain regulatory approval or the frequency with which any such product is prescribed or used. Certain provisions of the ACA have been subject to judicial challenges as well as efforts to modify them or to alter their interpretation or implementation. For example, the U.S. Tax Cuts and Jobs Act of 2017 included a provision repealing the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the "individual mandate." We expect that the ACA, its implementation, efforts to challenge or modify the ACA or its implementing regulations, or portions thereof, and other healthcare reform measures that may be adopted in the future, could have a material adverse effect on our industry generally and on our ability to commercialize our products and product candidates, if approved. There has been increasing legislative and enforcement interest in the U.S. with respect to drug pricing practices. Specifically, there have been several U.S. Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to drug pricing; reduce the cost of prescription drugs, including under Medicare and Medicaid, which may potentially impact negotiations on pricing and discounts with commercial payors; review the relationship between pricing and manufacturer patient programs; and reform government program reimbursement methodologies for drugs. There have been multiple Congressional and administrative efforts to address drug pricing, including the IRA. It is unclear whether any other legislation or public policy will come to pass, and if so, what effect it could have on our business. The IRA has implications for Medicare Part D, which is a program available to individuals who are entitled to Medicare Part A or enrolled in Medicare Part B to give them the option of paying a monthly premium for certain outpatient prescription drug coverage, as well as Medicare Part B. Among other things, the IRA requires manufacturers of certain drugs to engage in price negotiations with Medicare, with negotiated prices subject to a cap and first set to take effect in 2026; imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation (the first Part B inflation rebate period was in the first quarter of 2023; the first Part D inflation rebate period was the fourth quarter of 2022 through the third quarter of 2023); and replaces the Part D coverage gap discount program with a new Part D discounting program, which began in 2025. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years of these programs. Manufacturers may be subject to civil monetary penalties for certain violations of the negotiation and inflation rebate provisions and an excise tax during a noncompliance period under the negotiation program. Specifically, with respect to price negotiations, Congress authorized CMS to negotiate lower prices for certain costly single-source drug and biologic products that do not have competing generics or biosimilars and are reimbursed under Medicare Part B and Part D. CMS may negotiate prices for ten high-cost drugs paid for by Medicare Part D starting in 2026, followed by 15 Part D drugs in 2027, 15 Part B or Part D drugs in 2028, and 20 Part B or Part D drugs in 2029 and beyond. Drugs may be selected for negotiation only once they are at least seven years post-approval (such that they will be nine years post-approval when first subject to the maximum negotiated price) and biologics may be selected for negotiation 11 years post approval (such that they will be 13 years post-approval when first subject to the maximum negotiated price). It does not apply to drugs and biologics that have orphan drug designation and have been approved for a single rare disease or condition. We could be at risk of government action for any noncompliance with the price negotiation program if, in the future, any of our products are the subject of Medicare price negotiations. In that event, the outcome of the Medicare price negotiations, which will be made publicly available, may also impact negotiations on pricing and discounts with commercial payors. The first cycle of negotiations for the Medicare Drug Price Negotiation Program commenced in the summer of 2023. On August 15, 2024, HHS published the results of the first Medicare drug price negotiations for ten selected drugs that treat a range of conditions, including diabetes, chronic kidney disease, and rheumatoid arthritis. The prices of these ten drugs are scheduled to become effective January 1, 2026. On January 17, 2025, CMS announced its selection of 15 additional drugs covered by Part D for the second cycle of negotiations by February 1, 2025. While there had been some questions about the Trump Administration's position on this program, CMS issued a public statement on January 29, 2025, declaring that lowering the cost of prescription drugs is a top priority of the new administration and CMS is committed to considering opportunities to bring greater transparency in the negotiation program. The second cycle of negotiations with participating drug companies will occur during 2025, and any negotiated prices for this second set of drugs will be effective starting January 1, 2027. These risks as to pricing may further heighten the risk that we would not be able to achieve the expected return on our drug products or full value of our patents protecting our products if the pricing of any of our products are the subject of Medicare price negotiations. As a result, these risks may also impact the development decisions we make with respect to our products and product candidates, including zuranolone. Further, the IRA subjects drug manufacturers to civil monetary penalties and a potential excise tax for failing to comply with the IRA by offering a price that is not equal to or less than the negotiated "maximum fair price" under the law. The IRA also requires manufacturers to pay rebates for drugs reimbursed under Medicare Part B or Part D whose price increases exceed inflation and caps Medicare Part D out-of-pocket drug costs beginning in 2025, at $2,000 a year, subject to an adjustment for inflation thereafter. Drug manufacturers may also be subject to civil monetary penalties with respect to their compliance with these programs. It is unclear how the IRA will be implemented. Several pharmaceutical companies, as well as the U.S. Chamber of Commerce, and the Pharmaceutical Research and Manufacturers of America, or PhRMA, have filed lawsuits against HHS and CMS asserting that, among other things, the IRA's drug price negotiation program for Medicare constitutes an uncompensated taking in violation of the Fifth Amendment of the U.S. Constitution and is otherwise unlawful. HHS has generally won the substantive disputes in these cases, and various federal district court judges have expressed skepticism regarding the merits of the legal arguments being pursued by the pharmaceutical industry. Certain of these cases are now on appeal and, on October 30, 2024, the U.S. Court of Appeals for the Third Circuit heard oral argument in three of these cases. We expect that litigation involving these and other provisions of the IRA will continue, with unpredictable and uncertain results. We further cannot predict with certainty what impact the IRA or any other federal or state health reforms will have on us, but such changes could impose new or more stringent regulatory requirements on our activities or result in reduced reimbursement for our products, any of which could adversely affect our business, results of operations and financial condition. There may be additional Congressional and administrative efforts to address drug pricing. At the state level, legislatures have increasingly passed legislation and agencies have implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and price transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Additionally, some individual states have begun establishing Prescription Drug Affordability Boards, or PDABs, to conduct affordability reviews for certain drugs, including high-cost drugs and drugs with qualifying price increases. In some states, the PDAB has authority to set upper payment limits on what certain purchasers and payers may pay or reimburse for drugs that are found to pose an affordability challenge in the state. If one of our products is selected for an affordability review and subject to an upper payment limit by a PDAB, it could have a material adverse effect on our ability to commercialize the product and achieve the full value of our patents. In addition, in October 2020, the HHS and the FDA published a final rule allowing states and other entities to develop a Section 804 Importation Program to import certain prescription drugs from Canada into the U.S. That regulation was challenged in a lawsuit by PhRMA, but the case was dismissed by a federal district court in February 2023 after the court found that PhRMA did not have standing to sue the HHS. Seven states (Colorado, Florida, Maine, New Hampshire, New Mexico, Texas and Vermont) have passed laws allowing for the importation of drugs from Canada. North Dakota?and Virginia have passed legislation establishing workgroups to examine the impact of a state importation program.?As of October 2024, five states (Colorado, Florida, Maine, New Hampshire and New Mexico) had submitted Section 804 Importation Program proposals to the FDA. Vermont has submitted a concept letter to the HHS. On January 5, 2024, the FDA approved Florida's plan for Canadian drug importation. Florida now has authority to import certain drugs from Canada for a period of two years once certain conditions are met. Florida will first need to submit a pre-import request for each drug selected for importation, which must be approved by the FDA. The state will also need to relabel the drugs and perform quality testing of the products to meet FDA standards. There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at containing or lowering the cost of healthcare or limiting exclusivity periods for pharmaceutical products. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect: - the demand for ZURZUVAE or any of our product candidates, if approved;- our ability to receive or set a price that we believe is fair for our products;- our ability to generate revenue and achieve or maintain profitability;- the amount of taxes that we are required to pay; and - the availability of capital. We expect that the measures discussed above, as well as other healthcare reform measures that may be adopted in the future, may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, lower reimbursement, and new payment methodologies. This could lower the price that we receive for any approved product. Any denial in coverage or reduction in reimbursement from Medicare or other government-funded programs may result in a similar denial or reduction in payments from private payors, which may prevent us from being able to generate sufficient revenue from sales of ZURZUVAE, successfully commercialize any other products if approved in the future, and achieve profitability.

The sale of ZURZUVAE and any future approved products, and the use of our product candidates in clinical trials expose us to the risk of product liability claims. In addition, product liability claims related to ZULRESSO may arise and/or be brought even though we discontinued commercial availability of the product as of December 31, 2024. Product liability claims might be brought against us by patients, healthcare professionals or others using, prescribing, selling or otherwise coming into contact with our products and product candidates. For example, we may be sued if any product or product candidate allegedly causes injury or is found to be otherwise unsuitable during clinical trials, manufacturing, marketing, sale or commercial use. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, including as a result of interactions with alcohol or other drugs, knowledge of risks, negligence, strict liability and a breach of warranties. Claims could also be asserted under state consumer protection laws. If we become subject to product liability claims and cannot successfully defend ourselves against them, we could incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in, among other things: - withdrawal of patients from our clinical trials, or difficulty in enrolling clinical trials;- substantial monetary awards to patients or other claimants;- decreased demand for our approved products;- damage to our reputation and exposure to adverse publicity;- increased FDA warnings on product labels;- litigation costs;- distraction of management's attention from our primary business;- loss of revenue; and - withdrawal of products from the market or our inability to successfully gain approval of product candidates. Although we maintain product liability insurance coverage, our insurance coverage may be insufficient to reimburse us for any expenses or losses we may suffer. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses, including if insurance coverage becomes increasingly expensive. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. The cost of any product liability litigation or other proceedings, even if resolved in our favor, could be substantial, particularly in light of the size of our business and financial resources. A product liability claim or series of claims brought against us could cause our stock price to decline and, if we are unsuccessful in defending such a claim or claims and the resulting judgments or settlements exceed our insurance coverage, our financial condition, business and prospects could be materially adversely affected.

The market price for our common stock, similar to that of other biopharmaceutical companies, is volatile. The market price of our common stock may fluctuate significantly in response to a number of factors, most of which we cannot control, including, among others: - the results of our commercialization efforts with respect to ZURZUVAE in the U.S. as a treatment for women with PPD, and our ability to attain and maintain commercial success;- developments related to the state of our collaborations, Biogen's unsolicited, non-binding acquisition proposal, and our strategic review process;- plans for, progress of, timing of, changes to, delays in or the results from clinical trials or non-clinical studies of any of our products or product candidates, serious adverse events arising in the course of development or post-marketing, or any delays or major announcements related to such studies or trials;- the success or failure of any regulatory activities with respect to our existing or future product candidates;- announcements of new products, technologies, commercial relationships, acquisitions, collaborations or other events by us or our competitors;- the success or failure of our therapies;- other developments with respect to our pipeline, including initiation of clinical trials of existing products in additional indications or key decisions of the FDA;- regulatory or legal developments in the U.S. and other countries;- adverse developments with respect to our intellectual property portfolio or failure to obtain or loss of exclusivity;- failure of our future product candidates, if successfully developed and approved, to achieve commercial success;- fluctuations in stock market prices and trading volumes of similar companies;- the state of the U.S. and world economies, general market conditions and overall fluctuations in U.S. equity markets, including as a result of U.S. or world events;- changes in healthcare laws affecting pricing, reimbursement or access;- variations in our quarterly operating results, including as a result of events beyond our control, such as natural disasters, regional economic downturns, pandemics or other global health crises, social unrest, political instability, terrorism, or acts of war;- changes in our financial guidance or securities analysts' estimates of our financial performance;- changes in accounting principles;- our ability to raise additional capital and the terms on which we can raise it;- the impact of macroeconomic and geopolitical conditions;- sales of large blocks of our common stock, including sales by our executive officers, directors and significant stockholders;- additions or departures of key personnel;- discussion of us or our stock price by the press and by online investor communities; and - other risks and uncertainties described in these risk factors.

We have considerable discretion in the use of our cash and the application of the net proceeds from potential future follow-on public offerings. We may use cash and net proceeds for purposes that do not yield a significant return or any return at all for our stockholders. In addition, pending their use, we may invest the net proceeds from any potential future follow-on offerings in a manner that does not produce income or that loses value.

Our drug development programs, the commercialization of ZURZUVAE for the treatment of women with PPD, and any potential commercialization of our product candidates will require substantial additional cash to fund expenses. For some of our product candidates, we may decide to collaborate with pharmaceutical and biotechnology companies for the development and potential commercialization of those product candidates in some or all markets. We and our collaboration partner Biogen achieved regulatory approval in the U.S. of ZURZUVAE for the treatment of adults with PPD, and launched ZURZUVAE for that indication. Our collaboration with Biogen may not lead to successful commercialization of ZURZUVAE in the U.S. or successful development of zuranolone in Biogen's ex-U.S. territory. In the third quarter of 2023, our collaboration partner, Shionogi, filed an NDA in Japan for zuranolone for the treatment of MDD; however, Shionogi may not be successful in obtaining regulatory approval for zuranolone for the treatment of MDD, or if approved, may not be successful in commercializing zuranolone in Japan. Our existing and future collaborations, if any, may also not lead to the successful development and commercialization of ZURZUVAE in other indications or territories or of any other products. Our collaborators face both the same challenges and hurdles that we would face in the development and commercialization of product candidates if we were engaged in the activities solely ourselves, as well as additional challenges related to operating under a collaboration. The efforts under our existing collaborations may not be successful and we may never meet applicable milestones or actually receive any additional milestone payments, profit-share revenue or royalty payments from Biogen or Shionogi. For example, while ZURZUVAE was approved for the treatment of adults with PPD in the U.S., the FDA issued a CRL to the NDA for zuranolone for the treatment of MDD in the U.S. Because we and Biogen have agreed not to pursue further development for zuranolone for the treatment of MDD in the U.S., we will not receive the $150.0 million milestone payment for the first commercial sale of ZURZUVAE for the treatment of MDD in the U.S. Our collaborators may decide to terminate their collaboration with us. For example, in September 2024, after we and Biogen decided to discontinue development of SAGE-324 in essential tremor, Biogen notified us of its termination of our collaboration agreement solely with respect to SAGE-324 on a worldwide basis, effective February 17, 2025. We are evaluating next steps, if any, for other potential indications of SAGE-324, including seizures in DEEs. We may choose not to further develop SAGE-324 in this or any other indication. Additional risks and uncertainties relating to our collaboration with Biogen are set forth in the Risk Factor above captioned "Our plans to explore strategic alternatives and our rejection of an unsolicited, non-binding acquisition proposal from Biogen to acquire all of our outstanding shares not owned by Biogen may have a material adverse effect on our business." In addition, under most collaborations, including our existing collaborations, a certain degree of control in decision-making is transferred to or shared with our collaborators. Our collaborators may use their decision-making authority to make decisions that could delay, decrease the potential of, or otherwise adversely impact, development of our product candidates or commercialization of approved products. Similarly, where we share decision-making authority, the need to gain alignment on decisions may slow or impede advancement of or appropriate investment in our programs or commercialization of an approved product, and cause us not to be able to meet our timelines or achieve our goals. Our collaborators may have competing priorities or different incentives that cause them to divert resources away from our collaboration, or we may not agree on appropriate spending levels or regulatory, development or commercialization strategy, which could hamper or delay our overall development and commercialization efforts or increase our overall spending. Our collaborators may independently develop, or develop with a competitor, competitive products or may believe that product candidates being evaluated in the collaboration could be competitive with the collaborator's own products. In the case of the collaboration with Biogen, both companies have agreed to certain exclusivity provisions for certain products in specified indications which may limit certain development opportunities outside the collaboration. In addition, if we depend on collaborators for capabilities and funding for major product development efforts or commercialization globally or in key territories then our business may be adversely affected if our collaborator fails to perform its obligations under the agreement or the collaboration terminates. Disputes may also arise with respect to the ownership of rights to technology or products developed with collaborators, which could have an adverse effect on our ability to develop and commercialize any affected product candidate. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators. We may not be able to negotiate additional collaborations on a timely basis, on acceptable terms, or at all.

To accomplish our objectives, we require a strong management team with expertise in research and development, clinical development and commercialization. Although we have entered into employment agreements with each of our executive officers, each of them is employed "at will" and may terminate his or her employment with us at any time. We do not maintain "key person" insurance for any of our executives or other employees. Recruiting and retaining qualified personnel is critical to our success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific personnel from universities and research institutions. Failure to succeed in commercializing approved products or in conducting clinical trials or in obtaining regulatory approval may make it more challenging to recruit and retain qualified personnel. If we are unable to continue to attract and retain high quality personnel, our development efforts, commercialization activities, business, financial condition, results of operations and growth prospects could be adversely affected.

Successful completion of clinical trials at each applicable stage of development is a prerequisite to submitting an NDA to the FDA or equivalent filings outside the U.S. and, consequently, the ultimate approval and commercial marketing of any of our product candidates for the indications in which we develop them. We do not know whether we, or our collaborators, will complete and announce the results of any of our ongoing clinical trials, or whether future trials will begin, as planned or expected, if at all, as the commencement, enrollment, completion and announcement of results of clinical trials can be delayed or prevented for a number of reasons, including, among others: - denial by the FDA or other regulatory authority of permission to proceed with our planned clinical trials or any other clinical trials we may initiate, or placement of one or more clinical trials on full or partial clinical hold;- delay or inability to satisfy the requirements of the FDA to commence clinical trials, including chemistry, manufacturing and control, or CMC, requirements, or to file or receive approvals of additional investigational new drug applications, or INDs, that may be required;- delay or inability to satisfy the requirements for clinical trials conducted in the EU, if applicable, pursuant to Regulation (EU) No 536/2014, or the EU Clinical Trials Regulation;- negative or inconclusive results from our ongoing non-clinical studies or clinical trials;- challenges in identifying, recruiting, enrolling and retaining patients to participate in clinical trials;- challenges in qualifying and activating clinical trial sites, including due to capacity and resource constraints and attrition at sites, and potential delays at clinical trial sites;- general political and economic conditions, including as a result of future pandemics or other global health crises or bank failures;- delays in reaching or failing to reach agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites, or failures or problems by CROs or clinical trial sites in executing their activities under such agreements;- inadequate quantity or quality of supplies of a product candidate or other materials necessary to conduct clinical trials;- difficulties obtaining Institutional Review Board, or IRB, approval, and equivalent approval for sites outside the U.S., to conduct a clinical trial at a prospective site or sites;- delays or problems in analyzing data, or the need for additional analysis or data or the need to enroll additional patients;- the occurrence of serious adverse events or unexpected drug-related side effects experienced by patients in a clinical trial or unexpected results in ongoing non-clinical studies;- delays in validating endpoints utilized in a clinical trial or the impact of changes in trial design or analysis plans;- regulatory authorities disagreeing with our clinical trial design and our interpretation of data from clinical trials, or changing the requirements for approval even after the regulatory authority has reviewed and commented on the design for our clinical trials or delays caused by the need or desire for engagement with the applicable regulatory authorities; and - reports from non-clinical or clinical testing of other therapies that raise safety or efficacy concerns. In addition, a clinical trial may be suspended or terminated by us, regulatory authorities, the IRB or ethics committee, or EC, at the sites where the IRBs or ECs are overseeing a clinical trial, or recommended for termination or suspension by a data and safety monitoring board overseeing the clinical trial at issue or other regulatory authorities due to a number of factors, including, among others: - failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;- inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities that reveals deficiencies or violations that require us to undertake corrective action, including the imposition of a partial or full clinical hold;- unforeseen safety issues, including any that could be identified in our ongoing non-clinical studies, or adverse side effects or lack of effectiveness identified in ongoing clinical trials;- changes in government regulations or administrative actions; and - problems with clinical supply materials. Additionally, changes in regulatory requirements, guidance or unanticipated events during our non-clinical studies and clinical trials or other reasons may cause us or our collaborators to amend non-clinical studies and clinical trial protocols or the applicable regulatory authorities may impose additional non-clinical studies and clinical trial requirements. Amendments or changes to clinical trial protocols would require resubmission to the FDA and IRBs for review and approval, which may adversely impact the cost, timing or successful completion of clinical trials. If we or our collaborators experience delays completing, or if we or our collaborators terminate, any of our non-clinical studies or clinical trials, or if we or our collaborators are required to conduct additional non-clinical studies or clinical trials, the development pathway, and ultimately the commercial prospects, for our product candidates may be harmed and our ability to generate product revenue from resulting products, if any, will be delayed. Finally, if we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies governing clinical trials, our development plans may be impacted. For example, in December 2022, with the passage of Food and Drug Omnibus Reform Act, or FDORA, Congress required sponsors to develop and submit a diversity action plan for each Phase 3 clinical trial or any other "pivotal study" of a new drug or biological product. These plans are meant to encourage the enrollment of more diverse patient populations in late-stage clinical trials of FDA-regulated products. In June 2024, as mandated by FDORA, the FDA issued draft guidance outlining the general requirements for Diversity Action Plans, or DAPs. Unlike most guidance documents issued by the FDA, the DAP guidance when finalized will have the force of law because FDORA specifically dictates that the form and manner for submission of DAPs are specified in FDA guidance. On January 27, 2025, in response to an Executive Order issued by President Trump on January 21, 2025, on Diversity, Equity and Inclusion programs, the FDA removed this draft guidance from its website. This action raises questions about the applicability of statutory obligations to submit DAPs and the agency's current thinking on best practices for clinical development. Similarly, the regulatory landscape related to clinical trials in the EU has evolved. The EU Clinical Trials Regulation, or CTR, which was adopted in April 2014 and repeals the EU Clinical Trials Directive, became applicable on January 31, 2022. While the EU Clinical Trials Directive required a separate clinical trial application to be submitted in each member state, to both the competent national health authority and an independent ethics committee, the CTR introduced a centralized process and only requires the submission of a single application to all member states concerned. If we or our collaborators are not able to fulfill these new requirements, our ability to conduct clinical trials may be delayed or halted.

There is no precise method of establishing in any geography over any period of time the actual number of patients with the diseases and disorders for which our products are indicated and our product candidates are targeted. With respect to any indications for which we have developed, are developing, or plan to develop products and product candidates, we estimate the prevalence of the disease or disorder, and our estimates as to prevalence, including the assumptions we apply in determining our estimate, may not be accurate. In each case, there is a range of estimates in the published literature and in marketing studies, which include estimates within the range that are lower than our estimates. For example, our estimates of the prevalence of PPD are higher than estimates reported in some of the published literature and results obtained from certain studies analyzing claims databases and include women who have symptoms of PPD but have not been formally diagnosed with PPD or may not meet all of the diagnostic criteria. We believe these differences may be the result of variations in analytical methodologies and possibly under-diagnosis of PPD as a result of inadequate screening and under-reporting and some patients being reluctant to seek treatment in clinical practice. The actual number of women with PPD or any other indication for which we are pursuing or may elect to pursue development of our product candidates may, however, be significantly lower than we believe. Even if our prevalence estimates are correct, any approved product that we develop may only be indicated for or prescribed to and used by a subset of patients with the relevant disease or disorder. Our assumptions and estimates about the potential markets for ZURZUVAE for the treatment of women with PPD and for our other current and future product candidates in the indications we are or may pursue may not be accurate. In the event the number of patients with the diseases and disorders we are studying is significantly lower than we expect, we or our collaborators may have difficulties in enrolling patients in our clinical trials which may delay or prevent development of our product candidates. If our prevalence estimates with respect to any indication or our other market assumptions are not accurate, the markets for any approved product for these indications may be smaller than we anticipate, which could limit our revenues and our ability to achieve profitability or to meet our expectations with respect to the level and timing of revenues or profits.