IBB - Axsome Therapeutics: A Prescription For Success In The CNS Space

2023-04-19 17:54:02 ET

Summary

• We maintain a buy rating on Axsome Therapeutics, Inc.: despite potential clinical/regulatory risks, Axsome's solid cash runway and Auvelity's initial launch progress support a positive outlook.
• The key catalysts in the near future include data from Phase 3 trials of AXS-12 and NDA resubmissions of AXS-07, which we are cautiously positive about.
• Axsome Therapeutics focuses on CNS products, with Auvelity leading their promising pipeline in MDD; multiple product launches are expected in other CNS indications (Narcoplepsy and fibromyalgia).

Key update since our initiation

Axsome Therapeutics, Inc. (AXSM) is a pharmaceutical company focusing on CNS products, with a pipeline including proprietary drug formulations and repurposed molecules. Auvelity was approved by the FDA for MDD in August 2022, with AXS-07 being the next drug closest to the market. AXS-07 successfully completed Phase 3 trials for migraine but received a CRL from the FDA. AXSM plans to resubmit the NDA in 2H23. The pipeline also includes AXS-05 targeting ADA (Phase 3), AXS-12 targeting narcolepsy (Phase 3), and AXS-14 for fibromyalgia. Furthermore, AXSM acquired Sunosi from Jazz Pharma for EDS, aiming to enter adjacent CNS indications such as Attention deficit hyperactivity disorder ((ADHD)).

Auvelity's positive trajectory bodes well for AXSM

AXSM's promising trajectory in the CNS space, led by Auvelity's encouraging sales trends and strong potential in the MDD market, justifies maintaining a buy rating for the company. During Q4 2022, Auvelity was prescribed to 2,000s patients and 6,000 new patients (which grew to 4,300 unique HCP writers and over 13,700 new patients by the end of Feb 2023). Furthermore, the company emphasized that they have seen repeat prescribing by healthcare providers and refill requests from patients. However, we believe investors should prioritize the 2H 2023 sales ramp, rather than Q1 2023, given the seasonally weak 1Q23 due to the resetting of the commercial plan. Furthermore, we highlight that the company is making great progress in market access in the commercial channel (~60%). Therefore, we expect the drug to capture $1.3 billion in peak sales by 2029 without an issue.

Q4 2022 earnings :

With regards to payer coverage, the commercial channel is expected to be the primary channel for Auvelity as it accounts for more than 60% of antidepressant prescription item. Interactions with commercial payers as it relates to Auvelity have been active and productive. Effective January 2023, we have contracted with one of the largest group purchasing organizations, or GPO's, for potential coverage of Auvelity.

As a result, pharmacy benefit managers or PBMs and health plans under this GPO will now be able to make formulary coverage decisions for Auvelity based on the contracted terms. These interactions with commercial payers are proceeding as expected during the standard six to nine month period post-launch when new drugs are blocked, while coverage decisions are being made.

In the non-commercial channel, Medicaid coverage became effective in 49 states on January 1, and Medicare plans have up to six months post-launch to determine coverage and add Auvelity to formulary. We expect additional formulary decisions over the next six months. I look forward to discussing more as the payer process progresses. We are extremely encouraged by the initial launch progress and remain committed to our launch focus of driving fast HCP adoption, empowering patients and enabling quality assets.

Catalysts

We highlight that Axsome Therapeutics, Inc. has multiple high stake catalysts that can move the stock meaningfully in the near future. The key catalysts are summarized below:

1. 1H23: Topline data from the Phase 3 SYMPHONY trial evaluating AXS-12 in narcolepsy.
2. 2H23: NDA resubmission for AXS-07 targeting migraine.
3. YE23/H124: Phase 3 trial top-line results of solriamfetol targeting adult ADHD.
4. 1H24: Phase 3 ADVANCE-2 top-line data of AXS-05 targeting Alzheimer's disease agitation (ADA).

Risks

For further details see: