Axsome Therapeutics' (AXSM 0.27%) psychiatric drug Auvelity could reach blockbuster status by the end of the decade -- if the company can pull through its current cash crunch. It had just over $200 million in cash and cash equivalents on hand as of Dec. 31, 2022.
While that's more than double the amount it had on hand the year before, the money has to fund an extremely active research and development (R&D) program and the ongoing market launch of Auvelity.
Major new drug for major depression
The New York City-based company transitioned from a biopharmaceutical start-up to a commercial drug manufacturer and marketer last year, with the U.S. Food and Drug Administration's (FDA) approval of Auvelity extended-release tablets to treat major depressive disorder (MDD) in adults. Following the approval, the company hit the ground running and announced Auvelity was commercially available in October.
According to a market analysis conducted two years ago by Research and Markets, well before the agency's green light, Auvelity (then known as AXS-05) could bring in $1.3 billion in sales in 2029, a significant slice of the anticipated total global market size of $7.9 billion. A more recent general market analysis by The Brainy Insights is slightly lower, putting the MDD market at $6.8 billion.
Auvelity has the potential to become a leading treatment since MDD is notoriously difficult to treat, and doctors often have to try a number of different drugs on the same patient. Citing two published professional journal articles, Axsome says Auvelity "is the first and only rapid-acting oral medicine... [with] statistically significant antidepressant efficacy compared to placebo starting at one week."
Wakefulness drug added to the portfolio
In 2022, Axsome also acquired the rights to Sunosi from Jazz Pharmaceuticals.
Sunosi received FDA approval in 2019 to improve wakefulness in adult patients with excessive daytime sleepiness due to narcolepsy or obstructive sleep apnea -- the drug treats the symptoms, not the underlying disorders. Future Market Insights estimates that the global market for excessive daytime sleepiness treatments could grow from $4.9 billion in 2022 to $12.4 billion by 2033. Axsome bought the marketing rights for Sunosi in the U.S. and certain international markets for an undisclosed sum. However, SK Biopharmaceuticals, the discoverer of the compound, has kept the rights in 12 Asian markets.
Axsome plans to start a phase 3 clinical trial of Sunosi for adults with attention deficit hyperactivity disorder (ADHD) in the first half of 2023. The company announced in October that the drug significantly improved cognitive function in cognitively impaired patients with excessive daytime sleepiness associated with obstructive sleep apnea.
Burning through cash in an ambitious R&D program
Having $200 million cash and cash equivalents on hand and a $350 million term loan facility might seem like a good position for Axsome. The company says this "is sufficient to fund anticipated operations into cash flow positivity" despite increasing operating costs. But clinical R&D programs can burn through cash, and Axsome's pipeline is extensive.
Axsome is studying Auvelity for agitation that Alzheimer's disease patients suffer, and separately, to help people quit smoking. The FDA has granted the drug a "breakthrough therapy designation" for Alzheimer's agitation, which can help speed up approval. In November, the company announced positive phase 3 clinical trial results for this indication, with Auvelity "substantially and statistically significantly delaying the time to relapse and preventing relapse of agitation symptoms as compared to placebo." The company expects more clinical trial results in the first half of 2024.
On the smoking cessation front, Axsome is planning to start a pivotal phase 2/3 trial for Auvelity in the fourth quarter of 2023, which could lead to a new drug application (NDA) for FDA approval for this indication as soon as the results are in.
In addition to that and the continuing Sunosi program, Axsome:
- Plans to resubmit an application for its experimental acute migraine treatment AXS-07 in the third quarter of this year, following a "complete response letter" for resubmission from the FDA and subsequent meetings with the agency.
- Has received the FDA's "orphan drug" designation for its experimental drug AXS-12 to treat narcolepsy. The FDA grants incentives through its orphan drug program to encourage companies to develop drugs for uncommon conditions. Axsome is enrolling patients in a phase 3 clinical trial for this condition and expects to release topline results in the first half of 2023.
- Expects to submit an NDA this year for its drug AXS-14 to manage fibromyalgia. This involves "manufacturing and other activities," Axsome says, noting that the drug has already reached its primary endpoints (goals) and demonstrated positive and statistically significant results in phase 2 and 3 clinical trials.
A potentially positive prognosis despite short-term losses
It's hard to assess the prospects of a company that has just reached a pivotal moment in its history and may not have any precise competitors for its innovative products. Axsome reported $50 million in net sales in 2022, almost half of which came in the final quarter of the year, compared with zero sales in 2021. For 2023, analysts' expectations range widely but average $177 million in sales. But who can say what the true potential of Auvelity for MDD may be?
In 2022, Axsome's net loss was $187.1 million, or $4.60 per share, compared to a net loss of $130.4 million, or $3.47 per share, in 2021. Analysts' expectations for this figure in 2023 range even more widely than for sales, averaging a net loss of $4.11, which is why it's necessary to say that the company surviving the cash crunch isn't a sure thing. The company would have to prove itself to be sustainable. However, risk-tolerant biotech investors would likely want in on a potential blockbuster drug, and if Axsome ends up being sold to ensure that Auvelity continues to build its market, shareholders will surely benefit.
