What happened

Shares of Axsome Therapeutics (AXSM 0.31%) are down more than 10% in late-afternoon trading after the Food and Drug Administration (FDA) pulled the breakthrough therapy designation of its AXS-12 drug.

So what

The drug -- designed to treat cataplexy, the sudden loss of muscle control in narcolepsy patients -- was originally granted the designation in August of last year. The label allows for the expedited review of a promising new medicine. The decision to rescind it was due to the approval of another drug from Harmony Biosciences (HRMY -0.89%) for the same condition.

A person sitting at a table in front of a laptop computer with their head down sleeping.

Image source: Getty Images.

Now what

Management said the action doesn't change any timelines associated with the drug. The breakthrough designation was specifically for cataplexy as a condition. AXS-12 already has orphan drug designation for the treatment of narcolepsy. The company plans to initiate a randomized, double-blind, placebo-controlled, parallel-group phase 3 study in the third quarter.

Shareholders will now look to August 22, the action date set by the FDA for a decision on AXS-05. That ruling will determine if the drug can be used to treat major depressive disorder. The company is also enrolling patients to determine its effectiveness in treating Alzheimer's-related agitation and for smoking cessation.