Axsome Therapeutics (AXSM 0.03%) recently announced that the U.S. Food and Drug Administration (FDA) wouldn't make an approval decision on AXS-05 for treating major depressive disorder as quickly as hoped. In this Motley Fool Live video recorded on Aug. 25, 2021, Motley Fool contributors Keith Speights and Brian Orelli discuss whether Axsome stock is a buy, sell, or hold after this FDA delay.

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Keith Speights: All right, in some other news, Axsome Therapeutics, ticker there's AXSM, announced on Monday that the FDA would not meet the original PDUFA date for an approval decision on AXS-05 and treating major depressive disorder.

Now, this really wasn't a surprise. The stock actually jumped initially on the news. I think those gains faded over time, but I think investors were probably relieved that the FDA hadn't just outright rejected the drug. So do you think Axsome is a buy, a sell, or a hold after this FDA delay?

Brian Orelli: I really don't know what to make of this latest update. There was actually an update before this on August 9th, when the company's CEO said that the FDA had "identified deficiencies that precluded labeling discussions at this time." And so the label is what tells the doctors what the drug is approved for and has the safety and efficacy data from the clinical trials as well as a whole bunch of other things. It's pages and pages long.

The Agency doesn't wait until the very last minute to start working on the label with the companies. Because there's no reason to talk about a label if the drug is not going to get approved, there's no issuing labels for drugs that get rejected, so they only issue a label if it's approved. There's something else work on it if they are going to get it approved, and if you start talking about the labels with the FDA, that pretty much means that you're going to get approved.

Although there's been some instances when CEOs have come out and said we're talking to the FDA about the label, and then they don't get approved. But we don't know how much of that is the company's interpretation of the FDA or whatever. But for the most part, I think that's true.

The company said basically, the FDA hasn't really telling us why, but they don't want to talk to us about the label. Now what they are saying is the FDA isn't going to complete its review by the PDUFA date, which is the goal, is not really a deadline that the FDA sets for itself. But it also didn't request any additional information. If there's deficiencies and the FDA hasn't asked for anything else, then it seems like that still means there's still deficiencies.

I don't think this drug gets approved anytime soon, but maybe the thought process with the stock going up was that the FDA is trying to figure out what it needs and it will request that, which will trigger an extension of the target action date by a few months. But that's way better than getting a rejection and having to go back and get additional information and then do a new filing.

The FDA makes that call based on how much additional data they need. They just need a little bit of extra data, they'll just requested and do the extension, and if they need a lot of data, then they'll reject it, and then you have to refile, and that obviously would take the company much longer.

I don't like in investing when there are unknowns that I can't handicap, and I can't handicap this. I have no idea whether there's 50% chance that we're a delay versus a rejection? Or is it a 90% chance? I just have no idea. But it's trading at less than half of where it was before this FDA drama started. I can see the appeal of some investors wanting to buy at this level, so I'd say it's a hold in my book.

Speights: Beyond AXS-05, Axsome is an unusual clinical-stage biotech in that it has multiple late-stage pipeline candidates, and at least a couple of its other candidates are close to at least, potentially winning FDA approval. There are some other potential catalysts here too. But you heard it from Brian: In his view, Axsome is a hold for now.