Over the past five years, Axsome Therapeutics (AXSM +0.26%) has been on fire. The company has crushed the market in this period on the back of solid clinical and regulatory progress. At this point, it's fair to ask whether there is any upside left for the company, which is on the verge of reaching large-cap status.
The good news is that there might just be. Let's discuss why it's not too late to invest in Axsome Therapeutics.
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Strong sales growth
Axsome's current lineup features Auvelity, a medicine approved for depression; Sunosi, which treats daytime sleepiness associated with narcolepsy; and Symbravo, a migraine medicine. The company's top line is growing at a good clip. In the third quarter, Axsome's revenue came in at $171 million, up 63% compared to the year-ago period.
Symbravo was just approved in January 2025, while even Auvelity hasn't been on the market for that long -- it earned the green light in August 2022. So, these medicines should still drive top-line growth for a long time before running into patent cliffs.
More approvals on the horizon
Axsome Therapeutics can increase revenue by securing new approvals and label expansions. Let's first consider the latter. The company is seeking a new indication for Auvelity in Alzheimer's disease (AD) agitation. The medicine performed well in phase 3 studies and is currently being considered by the U.S. Food and Drug Administration (FDA) for this potential label expansion.
Elsewhere, Sunosi completed a phase 3 study in adults with ADHD. Axsome Therapeutics plans to run several other late-stage clinical trials for this drug, including in depression with daytime sleepiness; it should eventually pursue these markets as well.
NASDAQ: AXSM
Key Data Points
The company is working on several other products that could earn approval within the next few years. For instance, AXS-12 is being investigated to treat cataplexy in narcolepsy patients, while AXS-14 could, eventually, earn the green light in fibromyalgia. Axsome Therapeutics estimates that these new products and label expansions could add billions to its sales potential.
Consider the company's work in AD with Auvelity. Even though there are over 5 million patients in the U.S. who suffer from AD agitation, there is only one FDA-approved medicine in this market. There is a vast addressable market here for Axsome Therapeutics, and that's just a single indication.
If the company can deliver consistent clinical and regulatory progress through the end of the decade while still turning in strong revenue growth, the stock could maintain its momentum and, once again, outpace broader equities. That's why the stock is still a buy today.
