Biotech company Axsome Therapeutics (AXSM -1.70%) has had a strong -- although somewhat volatile -- year on the stock market. The company's shares have been up about 50% since early January. Axsome has key regulatory developments to thank for that performance.

What's more, the company could encounter even brighter days ahead if things go according to plan. Let's consider why Axsome Therapeutics' stock could crush the market again next year. 

Revenue should meaningfully increase 

Axsome Therapeutics earned approval for Auvelity in August. Auvelity is a treatment for major depressive disorder (MDD). Naturally, this medicine isn't generating revenue yet, but that should change in the coming quarters as it becomes widely available across the U.S. Auvelity will help Axsome Therapeutics, a clinical-stage company at the beginning of the year, improve its financials. 

The therapy comes at a time when mental health illness issues are becoming more prevalent, as is awareness surrounding them. The frequency of anxiety and depression among adults in the U.S. experienced a pandemic boom and peaked between December 2020 and January 2021, according to the U.S. Centers for Disease Control and Prevention (CDC).

While it decreased afterward, it remains above its pre-pandemic level. Meanwhile, the percentage of U.S. adults receiving mental health treatment increased from 19.2% in 2019 to 21.6% in 2021, also according to the CDC. With more people suffering from mental health problems and seeking help to handle these issues, we can expect treatments like Auvelity to gain even greater adoption.

In clinical trials, Auvelity successfully decreased depressive symptoms in at little as two weeks for some patients, with sustained improvement over 12 months. In my view, the medicine could achieve annual peak sales of over $1 billion in treating MDD although that won't happen as quickly as next year. 

Axsome Therapeutics' other product is Sunosi, which treats excessive daytime sleepiness associated with narcolepsy. In the third quarter, the biotech reported $16.8 million in revenue, all of which was from Sunosi. This medicine was first approved in 2019. Axsome acquired it from Jazz Pharmaceuticals in May.

Between Sunosi and Auvelity, Axsome Therapeutics' top line will start looking much more respectable in 2023. 

Plenty of pipeline progress 

As important as revenue growth will be for Axsome Therapeutics next year, its pipeline progress should be equally (if not more) critical. The company kicked off a phase 3 clinical trial for Auvelity as a potential treatment for Alzheimer's disease (AD) agitation in September. Axsome expects a data readout for another late-stage clinical trial for Auvelity in treating AD agitation by the end of the year.

Axsome Therapeutics is also planning a phase 2/3 study for Auvelity in smoking cessation. While it hasn't announced when it will begin this study, that should happen by sometime next year. Roughly 40 million Americans are smokers, 70% of whom say they want to quit. But only 3% to 5% of smokers who try quitting without help are successful for six months to a year.

Elsewhere, Axsome Therapeutics is running a phase 3 study for AXS-12, a potential treatment for narcolepsy, and it expects top-line data from this study in the first half of 2023. Then there is AXS-14, an investigational medicine for fibromyalgia (a chronic disorder that causes such symptoms as body pain and sleep disruption). Axsome expects a regulatory submission for this medicine next year.

There is also Sunosi, which should kick off a late-stage study as a potential ADHD treatment before the year is over.

Last but not least, Axsome Therapeutics should also make progress with its potential migraine treatment, AXS-07. The U.S. Food and Drug Administration declined to approve it in May, but after discussing the matter with regulators, the biotech plans on resubmitting an application for the therapy in the third quarter of 2023.

To recap, Axsome Therapeutics should have two phase 3 data readouts in the next 13 months, two key regulatory submissions (or resubmission in the case of AXS-07), and it should advance two programs to late-stage studies in this period. For a biotech worth just $2.5 billion, these catalysts could help send its stock price much higher. 

Still a buy 

Of course, no one can say for sure whether Axsome Therapeutics' shares will double next year. Marketwide troubles could disrupt the drugmaker's progress. But even if Axsome does not achieve this lofty goal, the biotech company has plenty of potential catalysts that should help improve its prospects over the long haul. That's why the company's shares still look like a buy, even after the solid run it has had in the past six months.