|Shares Out. (in M):||37||P/E||0||0|
|Market Cap (in $M):||1,479||P/FCF||0||0|
|Net Debt (in $M):||-64||EBIT||0||0|
|TEV (in $M):||1,415||TEV/EBIT||0||0|
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Earlier this summer, AXSM was facing an FDA decision on the approval of its drug candidate AXS-05 for major depressive disorder that was going to result in either a CRL or acceptance by their PDUFA date – August 22nd, 2021.
In early August, the company announced that they had received a letter from the FDA noting some deficiencies that precluded discussion of labeling but that the notification didn’t reflect a final decision.
The stock plummeted to $20 from the $50s on the supposition that this meant that they were surely going to get CRL’ed by that late August date. Then something strange happened – the PDUFA date came and went with no announcement.
It is exceedingly rare for the FDA to miss their PDUFA date – by this date the FDA is supposed to say your drug is cool for treating these indications (acceptance with labels) or these were the problems we had with the drug application (a CRL). They did neither.
On August 23rd the company told the investing public that they got a letter from the FDA saying there were deficiencies but the letter didn’t state what the deficiencies were and they have been in touch with the FDA in order to address them.
Since then we have just waited (as has the company). The communications to date from the FDA have been pretty sparse.
Of course, there are still two outcomes here – approval or CRL – but if the FDA was leaning towards a CRL – why didn’t they just do so on time? As we all know from the whole BMY-R situation of this past year, the FDA cares a lot about not screwing up PDUFA dates. What seems increasingly likely is that an overworked and overwhelmed FDA just hasn’t had the time to process this application and just decided to let this one swing past the PDUFA.
It is important to note that AXSM submitted more data than they needed to - including open-label trials - in an attempt to make their package insert more robust (doing so gives sales reps more things they can legally talk about). The verbiage in the FDA deficiency letter is worrisome, but unless the FDA has dramatically altered their standards, the data on MDD is strong. Perhaps, the FDA wants to see an additional head-to-head against a different agent but the FDA gave their tacit approval to the design of the trial in the first place, so even that makes little sense.
It seems likely that the FDA just happened to miss this one and wasn't organized and as they get organized, we will get an acceptance.
Other key tangential points in favor of an eventual acceptance.
The stock has recovered some the longer we have had to wait.
But this still seems like an interesting risk-reward here – we likely get some sort of definitive response by January – so perhaps the best way to play this is through the JAN Calls.
If we get a CRL the stock likely goes to $20 – acceptance and we get something north of $90 a share.
I’m pegging the probability of acceptance at higher than 50% by then. So $50 strike call options for January 2022 at $4.90 look pretty compelling. Its 0 if we're wrong and $45 if we're right.
Anyway, this is just a bet on an event here and on the wierdness of what the FDA is doing. If you care to learn about the drugs read below.
BACKGROUND ON THE DRUGS
AXS-05 is controversial, because it essentially is a combination of bupropion and dextromethorphan, i.e. the active ingredients in Wellbutrin, and Rubitusson cough syrup. The company quickly became derogatorily referred to as the ‘cough syrup company’ by detractors. The mantra was – these guys are trying to sell people cough syrup to treat their depression.
More technically, AXS-05 is a novel, oral, investigational NMDA, or N-methyl-D-aspartate, receptor antagonist with multimodal activity. AXS-05 consists of a proprietary formulation and dose of bupropion and dextromethorphan and utilizes a metabolic inhibition technology. The dextromethorphan component of AXS-05 is an uncompetitive NMDA, receptor antagonist, also known as a glutamate receptor modulator. The dextromethorphan component of AXS-05 is also a sigma-1 receptor agonist, nicotinic acetylcholine receptor antagonist, and inhibitor of the serotonin and norepinephrine transporters. The bupropion component of AXS-05 serves to increase the bioavailability of dextromethorphan, and is a norepinephrine and dopamine reuptake inhibitor, and a nicotinic acetylcholine receptor antagonist.
In plain English, the formulation of AXS-05 not an SSRI but really, a modulator of glutamate. Many that don't respond on Celexa, Zoloft, Lexapro, Prozac, Paxil etc. could greatly benefit from this agent. More importantly, Wellbutrin has been prescribed for depression and smoking cessation for decades, and combinations of Wellbutrin and dextromethorphan have been used off label in mental health clinics. The drugs simply work, whether you want to call them cough syrup or not, they seem to work better than many existing SSRI’s on the market.
AXS-05 TRIAL DATA
AXS-05 achieved the primary endpoint in both the ASCEND and GEMINI trials. A Phase 3, open-label, long-term safety study with AXS-05 in patients with MDD and TRD known as the COMET trial has also been completed. Additionally, three Phase 2 open-label efficacy sub-studies of the COMET trial have been completed. These sub-studies evaluated the efficacy and safety of AXS-05 in three clinically pertinent MDD patient populations: the COMET-TRD trial in treatment resistant MDD (TRD), the COMET-AU trial in antidepressant unresponsive MDD, and the COMET-SI trial in MDD with suicidal ideation. In the overall COMET trial, AXS-05 treatment resulted in rapid, substantial, and durable improvement in depressive symptoms, measured using the MADRS, which was sustained or increased with long-term treatment. Additionally, AXS-05 was well tolerated with long-term dosing. Similar findings of rapid and durable improvements in depressive symptoms were demonstrated in the COMET-AU and COMET-TRD sub-studies. In the COMET-SI trial, a rapid reduction in suicidal ideation was observed with AXS-05 treatment, as demonstrated by reductions in the MADRS-SI score.
$AXSM has completed a Phase 3 trial of AXS-05 in TRD, the STRIDE-1 trial, which met key secondary endpoints but did not reach statistical significance on the primary endpoint. Additionally, the company has completed a Phase 2, double-blind, placebo-controlled, multi-center, relapse prevention study in patients with TRD, the MERIT trial. In the MERIT trial, AXS-05 achieved its primary and secondary endpoints by delaying time to relapse and preventing relapse as compared to placebo.
AXS-05 OTHER INDICATIONS
AXS-05 is also under development for the treatment of Alzheimer's disease agitation, or AD agitation. $AXSM has completed one Phase 2/3 controlled trial, referred to as the ADVANCE-1 study, for this indication. $AXSM is conducting a Phase 3 placebo-controlled, randomized withdrawal trial in AD agitation, referred to as the ACCORD study, and one open-label long-term safety study in AD agitation. AXS-05 is also being developed for smoking cessation and a Phase 2 trial in this indication has been completed.
THE REST OF THE PIPELINE
AXS-07 is being developed for the acute treatment of migraine, for which $AXSM has completed two Phase 3 controlled trials, referred to as the MOMENTUM study and the INTERCEPT study, and one Phase 3 long-term open-label trial, referred to as the MOVEMENT study. An NDA has been submitted for filing for AXS-07 for the acute treatment of migraine.
AXS-09 is being developed for the treatment of CNS disorders. AXS-12 is being developed for the treatment of narcolepsy. $AXSM has completed a Phase 2 trial with AXS-12, referred to as the CONCERT study. A Phase 3 trial with AXS-12 in narcolepsy is planned. AXS-14 is being developed for the treatment of fibromyalgia. $AXSM plans to submit an NDA for AXS-14 in fourth quarter of 2022 for the management of fibromyalgia following a pre-NDA meeting with the FDA.
- Final decision by the FDA on AXS-05
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