Axsome Therapeutics says it expects the Food and Drug Administration to reject its migraine treatment, leading AXSM stock to crumble on Monday.
In a filing with the Securities and Exchange Commission, the biotech company said it still hasn't resolved issues with chemistry, manufacturing and controls the FDA identified during a review of its migraine treatment, AXS-07. Now, Axsome expects the FDA to turn down the drug.
SVB Leerink analyst Marc Goodman expressed surprise in a note to clients that the biotech stock crashed. Investors are much more interested in Axsome's efforts in depression and Alzheimer's disease with its AXS-05 drug, he said. Last Tuesday, shares surged 25% after Axsome said it finished FDA negotiations ahead of approval for that treatment.
"The focus has been consistently on AXS-05 for depression, and the news from management on that asset has been incrementally positive given the post-marketing requirement discussions, and approval seems much more likely now in the second quarter," he said. "We look at this sell-off as a good buying opportunity."
On today's stock market, AXSM stock tumbled 22% to 30.50.
AXSM Stock: A Potential Rival To Biohaven, AbbVie
Axsome indicated it thought it resolved these issues during the back-and-forth with the FDA, Goodman said.
The company "is obviously disappointed that it will probably receive a (rejection)," he added.
Still, Goodman kept his outperform rating on AXSM stock.
The drug would have rivaled Biohaven Pharmaceutical's Nurtec and AbbVie's Ubrelvy, which are acute migraine treatments. Sales estimates for AXS-07 are $11 million this year, Mizuho Securities analyst Vamil Divan said. He sees them possibly reaching $375 million in 2030. In comparison, the Street expects Biohaven to bring in $930.9 million in Nurtec sales this year.
Divan notes, however, AXSM stock investors focus more deeply on Axsome's depression efforts.
"While the news is obviously negative, we believe overall commercial expectations for AXS-07 are much lower than they are for the company's flagship candidate, AXS-05, that is in development for major depressive disorder and Alzheimer's agitation," he said in his note to clients.
Divan also has a buy rating on AXSM stock.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.