Axsome Therapeutics (AXSM 2.25%) stood out last year. The biotech began selling its first two products: Sunosi, a sleep disorder drug it acquired from Jazz Pharmaceuticals; and Auvelity, an antidepressant it developed in house. Thanks to those successes, Axsome shares soared more than 100% in 2022, even amid the broader bear market.
On Thursday, the biotech delivered its first-quarter report, which makes this a good time to check in on how those drugs are doing in the marketplace, and get an idea about their future revenue potential. Auvelity in particular was a winner for the company in Q1. Does this make Axsome a buy right now?
A late-stage pipeline
First, a bit of background on Axsome. Its focus is on developing treatments for central nervous system conditions, and it has a pipeline of drug candidates targeting migraine, Alzheimer's disease agitation, and other areas. What I particularly like about Axsome's pipeline is the fact that all of its candidates are already in late-stage development -- in phase 2 or farther along.
This is positive for two reasons. First, it means these candidates have cleared some of the major safety and efficacy hurdles. Second, it means that if they are successful, they may not be too far from producing revenue. These factors reduce some of the risks involved in biotech investing.
Now, let's talk about Auvelity. Axsome earned FDA approval for the antidepressant in August and launched it in October. But Q1 2023 was the first full quarter of sales for the drug. Auvelity brought in $15.7 million in sales in the period, compared to $5.2 million in the last two months of 2022.
That's solid top-line growth, but what's really impressive is its prescription growth. The company reported 31,000 Auvelity prescriptions for the first quarter. That's up nearly 300% from the fourth quarter.
The antidepressant market may be crowded. But there's reason to be optimistic about Auvelity's chances to carve out a healthy share of it -- and even become a blockbuster. Data analytics consultancy GlobalData predicts peak sales for Auvelity of $1.3 billion by 2029.
That's because Auvelity is a fast-acting drug, showing improvement in symptoms after just one week. And the drug isn't linked to weight gain -- one of the common side effects of antidepressants.
Payer coverage for Auvelity
In further positive news, among people with insurance in the U.S., 65% are in plans that will cover Auvelity. Insurance coverage is key because it makes doctors and patients more willing to give a new treatment a try -- instead of opting for an older, less expensive drug, for example.
So, does all of this make Axsome a buy right now? Let's take a look at the stock's performance so far. It posted big gains in 2022 -- but at this point in 2023, it's now close to even for the year. However, its path to that point was not flat -- it slumped during Q1, but investor response to the recent earnings report boosted the shares back into the green for the year. Still, the average price target among Wall Street analysts covering the stock predicts a 40% gain over the coming 12 months.
Yes, Axsome stock did post a triple-digit gain last year. But it's important to remember the company is early in its growth story. It recently began selling two drugs with blockbuster potential. Though Jazz previously commercialized Sunosi, it's a new product for Axsome. And when Axsome announced the purchase, it predicted billion-dollar peak annual revenues for the drug. If Axsome and analysts are right about the sales potential of Auvelity and Sunosi, the stock could move significantly higher from today's level. Any progress in the sales of these two products could be a catalyst for the stock.
Finally, Axsome's late-stage pipeline could result in additional regulatory approvals over the next few years. That could seriously lift its revenue. News on these potential products and any eventual approvals also could send the shares higher. Of course, as with any biotech company, there's always a risk of a candidate stumbling during development. And that could hurt share performance.
But, overall, Axsome makes a solid biotech buy right now -- and one you'll want to hold onto for the long term. That way, you'll profit from Auvelity's progress, and also have a chance to benefit from the potential of Sunosi and the company's other up-and-coming candidates. Axsome still has a lot of room for share price gains, and investors who bet on it early may not regret it.
