Axsome Therapeutics reported strong fourth-quarter sales Tuesday, but AXSM stock tumbled on a setback for the company's Alzheimer's agitation treatment.
Investors had debated the possibility of a delay for the test results, now expected in the second half of the year, RBC Capital Markets analyst Leonid Timashev said in a report. Previously, Axsome expected to have the results of the Phase 3 study, called Advance-2, in the first half of the year.
But the downward move for AXSM stock is "an overreaction," he said in a report. On today's stock market, shares tumbled 12.6% to 81.14. Axsome stock undercut its 50-day moving average, according to MarketSmith.com.
"While the delay is disappointing and likely to push out the launch somewhat and shift a key catalyst to the second half of 2024, we see no change to the ultimate probability of success of the program nor the peak out-year opportunity," Timashev said.
AXSM Stock: Losses Widen And Miss
During the fourth quarter, Axsome lost $2.08 per share. That missed AXSM stock analysts' expectations for a smaller loss of $1.17 per share, FactSet shows. On the other hand, sales came in at $71.5 million, beating forecasts for $69.2 million. Losses widened year over year, but sales nearly tripled.
Axsome had already preannounced revenue from its drugs Auvelity and Sunosi. Auvelity, the branded name for AXS-05, sells as a depression treatment. Axsome is also testing AXS-05 in smoking cessation. Sunosi treats excessive sleepiness due to narcolepsy or obstructive sleep apnea.
So far, the Auvelity launch looks promising, RBC's Timashev said.
"Management sounded enthusiastic on the trajectory of the launch and the contribution of the salesforce expansion, with a 23% quarter-over-quarter prescription increase, 17,000 new patients, with most growth coming from specialists but noting signs of uptake among primary care doctors," he said.
Alzheimer's Agitation In Focus
Mizuho Securities analyst Graig Suvannavejh kept his buy rating and 112 price target on AXSM stock.
"In our view, the potential of AXS-05 in Alzheimer's disease agitation is the main topic on current investor interest, and the biggest source of potential stock inflection for Axsome this year," he said.
Timashev, the RBC analyst, estimates that the market for AXS-05 in Alzheimer's disease agitation could be worth $1.3 billion in the U.S. He noted that Rexulti, from Otsuka Pharmaceuticals and Lundbeck, recently gained Food and Drug Administration approval to treat Alzheimer's disease expansion. That could have slowed recruitment for Axsome's study, he said.
"Though a potential silver lining is that Rexulti's early success can validate the size of the Alzheimer's disease agitation market, where we believe AXS-05 should have important advantages over antipsychotics given its unique mechanism and better safety," he said.
Promisingly for AXSM stock, Axsome still expects to unveil the results of a Phase 3 study for a narcolepsy treatment in the first quarter. But the company now expects to ask the FDA to approve its fibromyalgia treatment in the first half of the year, a delay from earlier guidance for the first quarter.
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