What happened

Shares of Axsome Therapeutics (NASDAQ:AXSM) fell over 20% today after the company provided a quarterly update to investors. There wasn't much to report for the pre-commercial company in terms of financial metrics, but investors focused on one line in particular: A closely watched phase 3 study won't have results until the first quarter of 2020. It was originally expected to have results before the end of 2019.

The delay is disappointing. After all, the potential for AXS-05 to become a leading treatment for depressive disorders has catalyzed the stock's rise from obscurity in January 2019 to a more than $1 billion market valuation months later. But the explanation seems innocent and should benefit patients.

As of 2:32 p.m. EST, the pharma stock had settled to a 8.5% loss.

A finger tracing a declining stock chart on a screen

Image source: Getty Images.

So what

Axsome Therapeutics was expecting to report top-line results for the STRIDE-1 phase 3 trial of AXS-05 in treatment-resistant depression (TRD) before the end of 2019. It was forced to postpone reporting to the first quarter of 2020 to allow for more patients to be included in the long-term safety database; that's a requirement for any new drug application (NDA) and will help to track any unforeseen side effects down the road, thus improving long-term patient safety.

Investors are understandably unhappy with the delay. For one thing, it's a reminder that Axsome Therapeutics is inexperienced in conducting clinical trials, which has tripped up a number of promising drug candidates and companies on their quest to commercial operations. A similar hiccup during meetings with the U.S. Food and Drug Administration could prove costly.

For another, the results from the STRIDE-1 study are needed to file the NDA for AXS-05 in major depressive disorder (MDD), after the drug received "breakthrough therapy" designation in that indication after a phase 2 study. In other words, the STRIDE-1 delay is holding up two regulatory filings for the drug candidate.

Now what

In the grand scheme of things, the delay shouldn't make a significant difference to the commercial prospects of AXS-05, especially if the impressive results from earlier hold up. It's also worth remembering that Axsome Therapeutics expects to report top-line results from two separate phase 3 trials and a phase 2 trial before the end of 2019.

Put another way, the company is still loaded with potential -- and a delay of a few months is unlikely to dent that.