What happened

Shares of Axsome Therapeutics (NASDAQ:AXSM) were sinking 9.6% lower as of 11:56 a.m. EDT on Monday. The decline appears to be due to traders taking profits off the table after Axsome's shares jumped last week on news that the Food and Drug Administration granted Breakthrough Therapy designation for the company's drug AXS-05 in treating Alzheimer's disease agitation.

So what

It's not uncommon for traders to buy and sell biotech stocks in attempts to make quick profits. Even investors with long-term perspectives will at times sell some of their shares after nice jumps to lock in profits. These actions create pressure that can cause stocks to fall.

Female scientists in lab

Image source: Getty Images.

That's probably what we're seeing with Axsome Therapeutics today. The biotech stock enjoyed a double-digit-percentage jump on Friday with the FDA's Breakthrough Therapy designation for AXS-05. That marked the second such designation for the drug: Axsome previously won Breakthrough Therapy designation for AXS-05 in treating major depressive disorder (MDD).

But long-term investors shouldn't pay much attention to the noise created by these kinds of swings. It's better to instead focus on Axsome's prospects for its pipeline candidates. Those prospects continue to look very good.

Now what

There are three primary things for investors to watch with Axsome in the coming months. The drugmaker intends to submit for FDA approval of AXS-05 in treating MDD in the latter part of this year. Axsome plans to file for FDA approval of migraine drug AXS-07 in the fourth quarter of 2020 as well. The company also hopes to initiate late-stage testing of AXS-12 as a potential treatment for narcolepsy in the second half of the year.

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