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Preheat the oven to 350 degrees F (175 degrees C). Grease a 9x13-inch baking dish.
Line the bottom of the prepared baking dish with biscuits.
Heat a large skillet over medium-high heat. Cook and stir sausage in the hot skillet until browned and crumbly, 5 to 7 minutes; drain and discard grease. Scatter sausage over biscuit layer and top with 1 cup shredded Cheddar cheese.
Whisk eggs, milk, salt, and pepper together in a bowl until well combined; pour over cheese layer.
Mix water and gravy mix together in a saucepan; bring to a boil. Reduce heat and simmer until gravy is thickened, 1 to 2 minutes, adding more water for a thinner gravy. Pour gravy over egg layer. Sprinkle remaining ½ cup Cheddar cheese over casserole.
Bake in the preheated oven until eggs are fluffy and cheese is bubbling, about 30 minutes.