Summary
- Axsome Therapeutics is scheduled to release the topline data from four clinical trials this year.
- Positive results could enable two NDA filings in 2020 for MDD and migraine.
- Even a 1% - 5% of the antidepressant market by 2021 suggests a significant discount in the current price to sales ratio.
- The company is well-funded for further trials to experiment with its rich pipeline of drugs.
- Indicating a buying opportunity despite the uncertainty of clinical trial outcomes.
Investment Thesis
Backed by positive results from a phase 02 trial for Major Depressive Disorder (MDD), the shares of Axsome Therapeutics, Inc. (AXSM) have jumped nearly seven times in 2019 so far. Out of the six clinical trials currently in progress, four data readouts will be available before the year-end. Favorable results could support two separate NDA (New Drug Application) filings in 2020 to treat MDD and migraine. With its novel mechanism of action and two separate pathways available for an FDA (U.S. Food and Drug Administration) approval, the drug, AXS-05 holds particular promise to enter the largely under-treated market for MDD.
Despite the stiff competition AXS-05 likely to face when available for migraine therapy, even a 1% - 5% of share in the antidepressant market by 2021 indicates a significant discount in the Axsome's price to forward sales multiple compared to some of its peers. Furthermore, even with the uncertainty of pharmacological trials, sufficient liquidity, and the rich pipeline targeting a largely under-served area of pharmacology could sustain Axsome's share price in the months ahead. Coming after a c. 38% of decline since hitting a peak in mid-September, the Axsome shares with the discounted multiple hence suggest a compelling opportunity for a 'Buy'.
Source: The Company Presentation
Under-treated CNS disorders call for novel therapy
Held back by the complex anatomy, the study of the physiology of the Central Nervous System (CNS) disorders has long been the holy grail of clinical medicine. However, the successful innovations bring significant sales upside as many CNS disorders require long term therapy, and the proprietary versions of drugs create a long-term moat until generics encroach the demand. As a result, even a glimmer of positive news from clinical trials could skyrocket a value of a pharmaceutical company.
Axsome Therapeutics is a clinical-stage pharmaceutical company focused on the treatments for CNS disorders. Driven by positive results from one of its pivotal clinical studies, the New-York-based company with only 37 employees hit $ 1 billion market cap in mid-September. Despite a subsequent decline of c. 38%, the company stock remains elevated nearly seven times year-to-date in comparison to a c. 2% gain in the NASDAQ Biotechnology Index.
