Leerink Reiterates Outperform Rating on Axsome Stock Amid FDA Uncertainty for Auvelity

On Monday, Leerink Partners sustained their Outperform rating and $110.00 price target for Axsome Therapeutics (NASDAQ: ) shares. The firm's stance comes in the wake of recent clinical trial outcomes for Axsome's drug Auvelity, which is under consideration for the treatment of Alzheimer's disease agitation (ADA).

The trials in question included ADVANCE-1, a randomized placebo-controlled trial, and ACCORD-1 and ACCORD-2, both randomized withdrawal trials. According to InvestingPro data, analyst targets for AXSM range from $105 to $180, with 7 analysts recently revising earnings estimates upward.

Leerink Partners highlighted that the positive long-term safety data from these studies could be influential in the drug's approval process. The firm expressed that the clear potential of Auvelity is marred by uncertainty regarding the FDA's perception of the withdrawal studies.

This uncertainty is compounded by the company's announcement that the New Drug Application (NDA) submission will be delayed until the second half of 2025, which is expected to push back regulatory clarity to 2026.

The market's reaction to these developments was somewhat negative, with Axsome's stock experiencing a greater than 5% drop compared to a 1% decline in the XBI biotechnology index. Leerink's analysis suggests that investors may remain skeptical about the drug's approval prospects, given the mixed success of the withdrawal studies.

Despite recent volatility, InvestingPro analysis indicates the company maintains impressive gross profit margins of 91% and strong revenue growth of 51% over the last twelve months. The company's current ratio of 2.44 suggests solid short-term financial stability.

Leerink Partners anticipates that an Advisory Committee (AdCom) will be convened to deliberate the efficacy and safety trade-offs of Auvelity. The firm remains optimistic, noting that the positive safety profile of Auvelity, particularly when compared to antipsychotics that carry a black box warning for increased mortality, might tip the scales in favor of approval during the AdCom discussions. Despite the current hurdles, Leerink Partners' rating reflects their confidence in the stock's performance.

In other recent news, Axsome Therapeutics has made significant strides in its clinical trials and financial performance. The biopharmaceutical company announced positive outcomes from recent Phase 3 clinical trials for its Alzheimer's disease treatment, AXS-05, and its narcolepsy drug, AXS-12. The trials demonstrated promising efficacy in reducing symptoms and improving patient cognition.

Axsome also reported record-breaking revenue for the third quarter, exceeding $100 million for the first time. This financial milestone was largely driven by the sales of its major depressive disorder treatment, Auvelity, and its excessive daytime sleepiness medication, Sunosi.

Analyst firms have responded positively to these developments. RBC Capital Markets and H.C. Wainwright have reiterated their positive ratings on Axsome, with RBC Capital Markets increasing its price target to $132 and H.C. Wainwright maintaining a $180 price target. Mizuho (NYSE: ) Securities also increased its price target for Axsome shares following a post-third quarter evaluation and the inclusion of revenue projections for solriamfetol, for two additional potential indications.

Guggenheim anticipates that the FDA's decision on Auvelity, expected in 2026, could significantly impact Axsome's stock. The firm maintains that the overall data supports a Buy case for Axsome stock, with the potential for the stock to rise to the $130 range upon approval of Auvelity.