What happened
This week is shaping up to be a memorable, and lucrative, one for Axsome Therapeutics (AXSM -5.72%) investors. For the second day in a row, the biotech's stock notched a double-digit rise in price, advancing to close the day nearly 12% higher. Following a major acquisition announced yesterday, analysts are revising their price targets upwards on the shares.
So what
Axsome kicked off the week in spectacular fashion when it announced it had reached a deal with peer Jazz Pharmaceuticals to acquire Sunosi, a drug approved in 2019 that boosts wakefulness in people with excessive daytime sleepiness (EDS) deriving from sleep disorders. Axsome is paying $59 million for Sunosi, and under the terms it will also fork over the royalties from the drug's net sales in the U.S.
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Jefferies analyst Chris Howerton was impressed enough by this to bump his price target on Axsome stock to $77 per share, from his previous $71, while maintaining a buy recommendation.
"Net sales for the product this year were [around] $57.9 million and it has a reasonable growth rate of [roughly] 104% [year over year]," Howerton wrote in a new research note.
"We see little downside to the acquisition and expect the [company] to pay off the investment in a few years," he added.
Now what
Truist Securities prognosticator Joon Lee also got more bullish on Axsome, with a price target lift to $100 from $90 while keeping his buy recommendation intact. Lee pointed out that the biotech also has good future potential with its pipeline, which happens to be complementary to its new drug:
"The [Sunosi] deal is strategic as we expect approval of AXS-05 and AXS-07 for [major depressive disorder] and migraine and 37% to 50% of MDD and migraine patients have comorbid EDS."
