What happened

Shares of Axsome Therapeutics (NASDAQ:AXSM), an overlooked biopharmaceutical company that began 2019 with an $85 million market cap, finished the first half of the year worth $858 million. Investors have been flocking toward Axsome thanks to the potential launch of a drug for treatment-resistant major depressive disorder (MDD). According to data from S&P Global Market Intelligence, the company's stock took off like a Falcon Heavy rocket, producing an 813.1% gain during the first half of 2019.

So what 

Each year, around 18 million adults in America experience some form of major depressive disorder (MDD) that persists for at least two weeks. There are plenty of antidepressants available, but they can't get the job done for around a third of people with MDD. Axsome Therapeutics has been rocketing higher all year because its lead candidate AXS-05 looks like it's going to become an important new treatment option for roughly 6 million Americans plagued by treatment-resistant MDD. 

Guy in a suit making it rain money.

Image source: Getty Images.

Axsome's AXS-05 is a proprietary formulation of two very well-known drugs that amplify each other's effects, bupropion and dextromethorphan. These drugs are well known as Wellbutrin, and the main ingredient in cough syrup, respectively, and the combination is working better than anyone imagined possible.

With roughly 6 million MDD patients in the U.S. alone, AXS-05 could easily drive annual sales over the $1 billion mark, and soon. The Food and Drug Administration is comfortable enough with the combination that it will review an application to treat MDD with AXS-05 supported with data from a successful phase 2 study. If granted an accelerated approval, a larger phase 3 study that recently began will be treated as a post-market confirmation study.

Now what

Johnson & Johnson (NYSE:JNJ) recently made a big splash in the treatment-resistant MDD space with an FDA approval for a ketamine spray called Spravato, which the company expects to generate annual sales above $1 billion annually. Spravato's a nasal spray to be administered by healthcare professionals, and patients must hang around for at least two hours after each administration. As an easy-to-swallow tablet, AXS-05 should be much easier to sell.

Depression isn't the only potential indication for AXS-05, and AXS-05 isn't the only potential new drug in Axsome's pipeline. Bupropion is also a popular smoking cessation treatment, and AXS-05 appears significantly more effective. Before the end of the year, Axsome expects to present phase 3 trial results for AXS-07 as a treatment for migraine headaches, and AXS-12 to treat narcolepsy.

At recent prices, Axsome still looks like a bargain based on AXS-05's potential as an MDD treatment alone. If the company finds another giant piece of low-hanging fruit, this could be the best-performing biotech stock again in the second half of 2019.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.