In 2019, a handful of trial readouts involving more than one new drug candidate all came together to propel Axsome Therapeutics (NASDAQ:AXSM) stock more than 3,600% higher. That's an amazing rally for any type of stock, and investors who haven't kept an eye on Axsome all year are right to wonder how in the world it happened.

Here are four of the largest factors that contributed to this biotech stock's monster rally.

Prescription drugs and cash money.

Image source: Getty Images.

1. A low starting point

It's not unusual to see shares of pre-commercial stage drugmakers provide huge gains or losses overnight. This is mainly because in-human studies with experimental drugs are so unpredictable that it's impossible to pin an accurate value to the assets they're developing.

Axsome Therapeutics began 2019 with a market cap of just $85 million because analysts had good reason to assume the company's pipeline was going nowhere fast. Axsome's first candidate to reach late-stage clinical trials flopped in 2018, plus its remaining assets appeared too simple to be valuable.

2. Surprise success for AXS-05 

At the beginning of 2019, a combination of bupropion and dextromethorphan called AXS-05 succeeded in an 80-patient major depressive disorder (MDD) study. While this should have been front-page news, it didn't gain a great deal of attention because AXS-05 is simply a combination of a decades-old antidepressant and the active ingredient in most over-the-counter cough medicine.

Far more investors started taking Axsome seriously when the company announced success in a pivotal trial with 327 MDD patients in December. By this time, the company had also presented evidence that AXS-05 was effective as a treatment for smoking cessation, another common use for bupropion.

Each year, roughly 16 million Americans experience MDD, and initial treatment with today's therapies can't get the job done for around two-thirds of this enormous population. Axsome will send the Food and Drug Administration (FDA) an application to treat MDD with AXS-05 in early 2020, and if approved as expected, a large group of patents will protect its market exclusivity through 2034.

Dollar sign made of drugs.

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3. A winner for narcolepsy

There are around 185,000 people in the U.S. with narcolepsy, and about 70% of them suffer from sudden bouts of cataplexy or an inability to move that the rest of us only get to experience while we're sound asleep someplace safe. Axsome's candidate for this underserved group, AXS-12, is a drug that's been available for years in countries outside the U.S. called reboxetine.

In October, the company reported successful results from a 21-patient phase 2 narcolepsy study. Treatment with AXS-12 significantly reduced bouts of cataplexy and excessive daytime sleepiness without any serious side effects.

In the U.S., physicians generally treat narcolepsy with methylphenidate, a controlled substance with serious side effects. If results from a planned phase 3 trial fall in line with previous observations, Axsome could launch AXS-12 for this underserved population who have been clamoring for better treatment options.

4. A potential new migraine headache pain reliever

Recently, Axsome reported success from a phase 3 study with AXS-07 for patients who regularly experience debilitating migraine headaches and have a history of inadequate response to available treatments. AXS-07 is a combination of a commonly prescribed migraine headache pain reliever called rizatriptan plus meloxicam, a decades-old anti-inflammatory drug used by arthritis patients.

Patients treated with AXS-07 were significantly more likely to report freedom from pain and their most bothersome symptom two hours after taking the drug. Patients treated with rizatriptan on its own reported significantly less pain relief than those given AXS-07.

Another phase 3 study with migraine headache sufferers who resemble the real-world population -- not just those who are the most difficult to treat -- will read out in the first quarter of 2020. If successful, the company will submit an application to the FDA in the second half of 2020.

Person with his arms on a table looking through binoculars.

Image source: Getty Images.

More gains ahead?

Now that Axsome's market cap has swelled to $3.8 billion, another 3,600% gain in 2020 isn't going to happen. That said, there's still room to grow by leaps and bounds if Axsome's new drug candidates meet expectations in the commercial stage. 

Frequent migraine headaches impact the professional and social lives of more people than depression. Although narcolepsy isn't nearly as common, drugs that treat rare diseases often come with six-figure annual price tags. 

It's probably a good idea to wait for another dip before buying Axsome shares, but now isn't the time to let go if you're already holding some.