Axsome Therapeutics posted mixed results for its experimental depression treatment on Tuesday, leading Axsome stock to dive to a two-month low.
The company tested its drug, Sunosi, in patients with major depressive disorder. Sunosi didn't lead to a statistically significant improvement in all patients. But it showed promise in patients with excessive daytime sleepiness. Sunosi is approved to treat sleepiness in patients with narcolepsy or obstructive sleep apnea.
Investors had low expectations for the study, but still sent Axsome stock down 4.3% to 111.67 on today's stock market. Axsome stock undercut its 50-day moving average on Monday, falling alongside the biotech industry group.
Axsome Stock: Focus Remains On Auvelity
Axsome Therapeutics is well known for its approved depression treatment, Auvelity.
The company is aiming to market Sunosi for patients with major depressive disorder and excessive daytime sleepiness. This would avoid cannibalizing Auvelity's market. Axsome estimates roughly half of patients with depression also have sleep disturbances.
The positive signal in patients with sleepiness is encouraging, but Axsome Therapeutics likely will have to run two additional Phase 3 studies to win approval for this population, William Blair analyst Myles Minter said in a client note.
Still, he kept his outperform rating on Axsome stock. He expects Auvelity to become a blockbuster treatment for depression and agitation associated with Alzheimer's disease.
"We view any weakness in shares on today's news as a buying opportunity," he said.
Axsome Therapeutics' Second Sunosi Miss
It's important to note this is the second major miss for Sunosi in a week.
Last Tuesday, Axsome stock fell nearly 7% after it reported mixed results for Sunosi in adults with attention deficit hyperactivity disorder, or ADHD. Patients who received a low dose of the drug had a statistically significant improvement in symptoms. But the high-dose recipients didn't.
RBC Capital Markets analyst Leonid Timashev says the miss in depression "limits the market opportunity significantly and is disappointing given the company's expertise in the space." But it's also not totally surprising given the history of the drug.
He estimates 30% of patients with narcolepsy and obstructive sleep apnea also have depression.
"We could see a modest acceleration in Sunosi sales that could help AXSM reach and exceed our current $300M estimates, though note the drug has not been a major growth driver for the company," he said in a client report.
Timashev reiterated his outperform rating on Axsome stock.
Follow Allison Gatlin on X/Twitter at @AGatlin_IBD.
