Axsome Therapeutics Stock Forecast: Billion Dollar Breakthrough?

Axsome Therapeutics Stock Forecast: A long list of biopharmaceutical companies, scientists, and university-based researchers are hard at work on improving treatment options for Central Nervous System disorders. They are exploring enhancements to existing therapies, and they are developing new drugs to prevent, delay onset, and ease the impact of symptoms. Some are even working on cures. They have accepted the challenge to eradicate these disorders altogether.

Any company that develops an effective new medication can look forward to massive revenues. The demand for better treatments is enormous. This presents an important opportunity for investors. Putting money into the right company supports the search for better therapies, and – if that company is successful – can lead to big financial rewards. The question is, which company is most likely to develop a breakthrough drug?

Some investors and analysts are taking a hard look at Axsome Therapeutics, a firm that is exclusively focused on improving the quality of life for patients with CNS disorders. But is Axsome Therapeutics a buy? First let’s get up to speed on what CNS disorders are in the first place.

Central Nervous System Disorders Primer

The central nervous system, made up of the brain and the spinal cord, forms the foundation of human experience. These organs control movement, and more importantly, they take in and interpret interactions with the world. All of the senses – sight, smell, touch, taste, and hearing – rely on the central nervous system for interpretation, and chemical interactions in the brain signal the body to respond.

Central Nervous System (CNS) Disorders are a group of diseases that impact the brain and spinal cord. They may disrupt messages from the brain to the body causing issues with movement, or they can make it impossible for the brain to function normally.

The results range from memory issues to mood disorders that vary in level of severity. However, these diseases are often progressive. Mild issues become major ones over time, and depending on the disorder, victims may lose the ability to feel joy, to control their movements, or in some cases, to recognize their loved ones.

Examples of CNS disorders include addiction, Attention Deficit/Hyperactivity Disorder (ADHD), autism, bipolar disorder, depression, migraines, Multiple Sclerosis (MS), Alzheimer’s disease, Huntington’s disease, and Parkinson’s disease. According to a report published by the United Nations (UN), one out of every six people worldwide – more than a billion people total – suffer from a CNS disorder.

CNS Disorders Are Axsome Therapeutics’ Specialty

Axsome Therapeutics [NASDAQ: AXSM] is a biopharmaceutical company that is exclusively focused on formulating new and improved therapies for CNS disorders.

It is primarily concerned with conditions that currently lack effective treatment options, and it has four drug candidates in the clinical stage of development. In addition, Axsome Therapeutics has a business unit dedicated to pain and primary care treatment. That division has three drug candidates in the clinical stage of development.

The products designed by Axsome Therapeutics are differentiated from others in the marketplace, because they incorporate proprietary technology owned by Axsome. For example, AXS-09, a treatment for CNS disorders in the Phase I clinical trial stage, uses specialized chiral chemistry and advanced formulation methods to identify, isolate, and stabilize chirally pure enantiomers.

Axsome Wants To Treat Migraines & Depression

Axsome’s AXS-07 product candidate, a new option for treating migraines, is currently in Phase III clinical trials. It incorporates the company’s MoSEIC technology, which increases the drug’s solubility and speeds absorption by the body. That means faster relief for those suffering from debilitating headaches.

Both the AXS-09 and another product candidate, AXS-05, use a proprietary metabolic inhibition technology in delivery of the drug. This technology increases the bioavailability and extends the half-life of the drug molecules, so they provide longer relief.

AXS-05 is currently in Phase III trials for use in cases of treatment-resistant depression and agitation in Alzheimer’s disease, and it has been designated as a breakthrough therapy for major depressive disorder. It is also in Phase II trials for use as a smoking cessation treatment.

Axsome Therapeutics [NASDAQ: AXSM] has another product candidate in Stage II trials, AXS-12, that meets the criteria for classification as an orphan drug. It offers a new treatment option for narcolepsy.

A High Risk, High Reward Gambit

Any of these drugs could be life-changing solutions for patients and their caregivers.

The good news for those suffering from these conditions is that they have made it to the later stages of the clinical trial process. With that said, there is no guarantee that Axsome Therapeutics will bring any of these drugs to market.

Many biopharmaceutical companies have had major setbacks in Stage II and Stage III trials. In some cases, the drugs being studied must be completely scrapped due to safety concerns or a failure to prove the product’s effectiveness.

Axsome Therapeutics investors are gambling on the likelihood that one or more of Axsome’s drugs will come to market – and that when they do, patients will realize tremendous benefits to the point that Axsome products become first-line treatment options.

Such an investment is high-risk, but if successful, there are high rewards. A single first-line drug can generate billions in revenue every year. With that in mind, is Axsome Therapeutics a smart bet?

A Billion Dollar Breakthrough?

Few investors really took notice of Axsome Therapeutics [NASDAQ: AXSM] until the start of 2019, when the company announced that its versatile AX-05 product candidate was advancing rapidly through clinical trials with positive results.

Members of the medical community, investors, and patients are most interested in the drug’s potential for relieving the symptoms of treatment-resistant Major Depressive Disorder.

More than 16 million US adults suffer from Major Depressive Disorder, and 3.6 million of those have been unable to find relief from two or more attempts at antidepressant therapy.

The announcement that Axsome might have a breakthrough boosted the company from a valuation of $79 million to a valuation of just over $1 billion.

Results from the AX-05 Phase III trial were expected by the end of 2019, however during the third quarter earnings call, business leaders reported a delay. Now, the results are expected in the first quarter of 2020. This spooked investors, who know how quickly promising drugs can fail, and the stock dropped 20 percent in just a couple of hours.

Axsome Falls Short Of Investor Expectations But…

Most analysts have decided that this lack of faith is misplaced for two reasons. First, Axsome still has other clinical trial results due in by the end of the year. There are two separate Phase III trials wrapping up, and a Phase II trial should have data available on-time.

Second, the slight delay in this particular Phase III trial doesn’t dampen the long-term revenue prospects for this drug.

The delay in trial results isn’t due to a problem with the product. It is because Axsome is required to add participants to the drug’s long-term safety database, so that unforeseen side effects can be tracked in years to come.

Yes, this should have been taken care of at the start of the trial, but the company’s miss in terms of complying with this requirement shouldn’t substantively affect the drug’s commercial prospects.

Axsome Therapeutics Stock Forecast

For the third quarter of 2019, Axsome spent $15.8 million on research and development, which is quite a bit higher year over year than third quarter 2018’s $6 million. The increase was due to the costs of the clinical trials currently in progress, so management expects a significant decrease in these expenses in coming quarters.

Of greater importance is the fact that Axsome ended the third quarter with $43.6 million in cash. This is expected to cover expenses related to current clinical trials, and there shouldn’t be a need for further fundraising through second quarter 2021 based on the operating plan currently in place. All of that spells good news for investors.

The company has the cash it needs to fund current and planned projects, and results from several high-profile trials are due in the near future.

Axsome Therapeutics stock is an affordable portfolio addition for investors who want to be a part of the future of medicine. The company is in a comparatively strong position in terms of bringing important drugs to market, so all in all, Axsome Therapeutics is a buy.

Learn more about investing in today’s most promising biotechs from the experts at Financhill – where many of the world’s smartest investors go for information.

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