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Here's Why Axsome Therapeutics Stock Is Surging Today

By Cory Renauer – Sep 1, 2021 at 2:42PM

Key Points

  • It's been over a week since the FDA was supposed to make an approval decision regarding the company’s experimental new depression treatment, AXS-05.
  • The FDA missed the original action date without proposing a new one, leaving investors with more questions than answers.

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The company still doesn't have much to say about the FDA and its experimental new anti-depression drug.

What happened

Shares of Axsome Therapeutics (AXSM 28.42%), a clinical-stage biotech company, were up 8% as of 2:10 p.m. EDT on Wednesday. The company hasn't had anything to say about its lead candidate, and that's a lot better than the devastating news that investors had feared. 

So what 

At the beginning of the summer, investors had been expecting the Food and Drug Administration to issue an approval decision for AXS-05, the company's experimental new treatment for major depressive disorder. On July 30, though, the agency told Axsome that it had identified deficiencies in the application that preclude discussion of labeling and post-marketing requirements at the time.

Excited investor checking his stocks on a computer.

Image source: Getty Images.

Working out a new drug's prescribing label is a final step on the path to approval, so the unexplained delay had investors extremely worried. Instead of a complete response letter (CRL), the agency told the company that it wouldn't be able to issue a decision by the proposed action date of Aug. 22. 

Axsome stock has risen about 16% this week because every day without bad news feels like a sign that the deficiencies identified weren't serious. 

Now what

The pandemic has made a mess of the FDA's ability to review new drug manufacturing facilities. Axsome investors, myself included, are hoping this is the cause of the delay and not some unforeseen safety problem.

Usually, when the FDA needs to miss a PDUFA date, the agency reschedules, but this didn't happen after missing the AXS-05 deadline. While the market is viewing this as a good sign, most investors don't realize biotech management teams can misrepresent FDA communications with impunity.

The lack of detail from Axsome Therapeutics about AXS-05's delay isn't necessarily a bad sign. Until we find out what the problem is, though, it's probably best to watch this stock from a safe distance.

Cory Renauer owns shares of Axsome Therapeutics. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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