What happened
Shares of Axsome Therapeutics (AXSM 0.27%), a biopharmaceutical company that specializes in central nervous system disorders, rose 11.1% on Monday. The stock, after closing at $35.36 on Friday, opened at $36.47 on Monday and shot all the way up to $39.29 in the first hour of trading. The gains were short-lived as the stock dropped and by the late afternoon was trading as low as $34.51 before closing at $35.11. The stock's 52-week low is $19.38 with a 52-week high of $74.10.
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So what
The big news for Axsome was its announcement Monday that it was acquiring the drug Sunosi from Jazz Pharmaceuticals for $59 million, plus royalties on Axsome's U.S. net sales of Sunosi. Sunosi is approved by the Food and Drug Administration (FDA) to improve wakefulness in adults with excessive daytime sleepiness due to narcolepsy or obstructive sleep apnea.
As Axsome's first marketed drug, it will help the company begin its pivot from a clinical-stage biopharmaceutical company to a commercial-stage company. Sunosi, approved in 2019, brought in $59 million last year in sales, up 110% year over year, so the move should pay for itself by 2023, and that doesn't count any additional label indications the drug may be useful for. Ultimately, Axsome said that Sunosi has the potential to be a more-than $1 billion drug.
The timing works for Axsome because Sunosi fits in with the company's portfolio of central nervous system therapies that includes two pending 2022 launches: AXS-05 to treat major depressive disorder (MDD) and AXS-07 to treat migraines. That in turn will give Axsome's sales team three drugs to market to physicians, making their efforts a little more cost effective. Plus, Sunosi's properties mean that it could be combined with ASX-05 or AXS-07 in some indications.
Now what
The quick rise and fall on Monday is a classic case of investors selling on the news. The window to cash in on the biotech stock's brief rise was narrow, but long-term investors in Axsome should be encouraged. The company seems confident enough that the New Drug Applications for AXS-05 and AXS-07 will be approved by the FDA that it is proceeding with its marketing plans. The company has a promising pipeline with two other therapies, AXS-12 to treat narcolepsy and AXS-14 to treat fibromyalgia, in phase 3 trials. There is plenty of risk in investing in Axsome as it lost $130.4 million last year and has yet to prove that it can successfully commercialize its therapies. However, it now has made the jump to a commercial-stage biotech company.
