On Tuesday, Guggenheim reaffirmed its Buy rating on Axsome Therapeutics (NASDAQ:AXSM), despite a short report released earlier today by Culper Research, which accused the company of questionable practices related to its recent Auvelity launch for major depressive disorder (MDD). The allegations suggested that Axsome used undisclosed consignment deals with questionable mail-order pharmacies and deceptive accounting practices to inflate sales figures.
In response to the short report, Axsome management clarified that the accusations were "completely baseless," and the report misunderstood the gross-to-net discounting dynamics, copay assistance programs, and general accounting practices that are typical in biotech product launches.
The company stated that it has no direct relationships with individual pharmacies and does not employ consignment sales for its drug products. Instead, Axsome emphasized that 96% of Auvelity sales are conducted through three national distributors—McKessen, Cencora, and Cardinal—with the remaining 4% through regional distributors.
Addressing concerns about accounts receivable mentioned in the short report, Guggenheim noted that Axsome has a disclosed 60-day payment term with its distributors and confirmed that payments have been received on time, with no significant bad debts reported. The analyst suggested that the pressure from the short report, which saw Axsome's stock decline approximately 6% intraday while the broader XBI index remained flat, presents an additional buying opportunity.
Guggenheim's outlook remains positive, particularly in anticipation of Axsome's pivotal clinical trial readout for Alzheimer's disease agitation, expected in the second half of 2024. The firm views the recent drop in stock price following the short report as an opportunity to invest ahead of these upcoming clinical results.
In other recent news, Axsome Therapeutics has reported a significant surge in its financial performance, with a year-over-year revenue increase of approximately 160% in the first quarter of 2024, reaching a total net product revenue of $75 million.
This growth is attributed to the positive performance of the company's products, Auvelity and Sunosi. Moreover, Axsome has reached a settlement with Unichem Laboratories Ltd. concerning a patent lawsuit over its narcolepsy drug Sunosi, allowing for the launch of a generic version in the U.S. by 2042 under certain conditions.
Analyst firms RBC (TSX:RY) Capital and Piper Sandler have maintained their positive outlook on Axsome, with RBC increasing its price target to $130.00, reflecting optimism on the intellectual property surrounding Auvelity. Piper Sandler reaffirmed its Overweight rating based on a survey of neurologists, indicating that Auvelity is viewed as an effective treatment option for Alzheimer's disease agitation.
In other developments, despite a temporary impact on Auvelity's prescriptions due to a cyberattack, Axsome managed to maintain a strong commercial foundation, expecting continued momentum throughout 2024. These are among the recent developments for Axsome Therapeutics, a company committed to addressing unmet needs in neuroscience and securing sustained growth in the market.
InvestingPro Insights
In light of the recent events surrounding Axsome Therapeutics, a closer look at the real-time data from InvestingPro provides additional context for investors. The company's substantial gross profit margin of 90.12% for the last twelve months as of Q1 2024 aligns with Guggenheim's positive stance, underscoring the financial health of Axsome's operations despite the allegations from the short report. Moreover, the market capitalization of $3.33 billion suggests a robust valuation in the biotech space.
Still, investors should be aware of the challenges ahead, as reflected in the InvestingPro Tips. Analysts have recently revised their earnings expectations downwards for the upcoming period, and there is a consensus that Axsome will not achieve profitability this year. These factors may influence the investment decision-making process, especially when considering the long-term potential of the company's pipeline, including the anticipated clinical trial results for Alzheimer's disease agitation.
For those looking to delve deeper into Axsome's financials and future prospects, InvestingPro offers a comprehensive analysis, including additional tips. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are currently 10 additional InvestingPro Tips available, providing a richer understanding of Axsome's financial position and market performance.
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