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Is Axsome Therapeutics Stock Ready to Rebound?

By Keith Speights and Brian Orelli, PhD – Aug 12, 2021 at 6:09AM

Key Points

  • Axsome Therapeutics' pipeline includes several late-stage candidates.
  • One or more of these candidates could be winners if approved, although Axsome could face stiff competition in migraine.
  • The company could be an acquisition target at some point.

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The biotech stock is beaten down but still has potential catalysts ahead.

Axsome Therapeutics (AXSM 1.07%) has been a beaten-down biotech stock throughout much of this year. In this Motley Fool Live video recorded on Aug. 4, Motley Fool contributors Keith Speights and Brian Orelli discuss whether or not there's upside potential for the stock going forward. (Note: This video was recorded before Axsome announced that the U.S. Food and Drug Administration identified issues that delay an approval decision on AXS-05 in treating depression.)

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Keith Speights: We also had a question about Axsome Therapeutics, ticker there is AXSM. The person said, "Hi, any thoughts on Axsome? It's close to a 52-week low. Do they have more upside coming?" What do you think Brian?

Brian Orelli: Axsome focused on central nervous system therapies. I generally try to avoid these type of companies, because the clinical trials are so hard to run. But in the case of Axsome, the company's already produced clinical trial data that looks pretty successful. I'm a little more interested in this company than I would if they were a clinical-stage company that didn't have any phase 3 data.

The lead drug is AXS-05 that treats depression. The FDA decision on that is expected to occur pretty soon on Aug. 22. It's also being tested for agitation associated with Alzheimer's disease and to help people stop smoking. Then they have AXS-07 for migraine. That's also produced pivotal results. They're looking for an FDA submission fairly soon. I don't think they've disclosed exactly when or if they've actually done it yet.

Then the company also has a pain drug called the AXS-14 for fibromyalgia, and that will be submitted to the FDA next year. Then there's also AXS-12, which is ready to go into phase 3 study for narcolepsy. That was the most risky out of the four, but it's got three really solid drug candidates.

I don't really understand why it's at a 52-week low, other than just the general biotech sector has been in a slump that's been especially true of companies that don't have products on the market. Basically since last February when the biotech sector peaked.

Speights: A lot of clinical-stage biotechs don't have very robust pipelines. They have all of their eggs in one basket, but Axsome has quite a few promising candidates and the market cap -- the last I looked anyway -- was, I think under $3 billion for sure. I think it might have even been under $2 billion. This is a small company with some pipeline candidates that could be big winners if they get approved.

Orelli: Yeah, maybe the biggest, I like the data. Probably the biggest risk is actually in the launches because they're going into specialties that are quite large. Migraines obviously you don't have to basically see every doctor, promote your drug to almost every doctor, every generalist doctor is going to treat patients with migraine.

Then there's obviously a lot of big companies that have migraine drugs. Then there's also a lot of generic drugs for migraine and for depression, and so that's probably the biggest concern is that they'll probably have a lot of competition, both from generic drugs as well as from large pharmaceutical companies that can probably out-market them.

Speights: I'm going to step out on a limb here, Brian, I know we're out of time, but I think that Axsome would be a pretty good candidate for a company like Biogen (BIIB 0.56%) to buy. Biogen is probably going to have more cash coming in with this Alzheimer's disease drug, it's other products are struggling right now. Especially with Axsome being as cheap as it is, that might be a pretty good acquisition target.

Orelli: Yeah. I think they probably will end up getting taken out. Just probably mostly because the value to a larger company they can market their drugs better is probably higher than what investors will value the company at. Therefore, it will probably eventually get taken out at some point. But whether that's a year from now or five years from now, we'll have to wait and see.

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Axsome Therapeutics Stock Quote
Axsome Therapeutics
$56.82 (1.07%) $0.60
Biogen Stock Quote
$305.15 (0.56%) $1.70

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