Looking for stocks with explosive growth potential? The biotech industry is a great place to start. Clinical trial wins and regulatory approvals can cause a biotech's shares to skyrocket, especially a company with a relatively small market cap.
Of course, these companies have their own, too. risks, so choosing the right drug manufacturer is essential. shattering long-term market gains. Let's take a closer look at a biotech whose shares have been hammered in recent months, Axsome Therapeutics ( NASDAQ: AXSM ) , and think about why this business still has serious potential.
AXSM data by YCharts.
A series of setbacks
Axsome Therapeutics has encountered some regulatory hurdles in recent times . On July 13, the company announced that the United States Food and Drug Administration (FDA) has decided to revoke the breakthrough designation of AXS-12, a potential treatment for catalepsy (loss of muscle control) in patients with narcolepsy. A revolutionary designation allows ato speed up the review process for drugs to treat serious illness. The FDA decision came after the approval of a competing drug for catalepsy.
Next, the review of Axsome Therapeutics' application for AXS-05 has experienced a downturn. AXS-05 is a potential treatment for major depressive disorder. The FDA initially set a date to complete its review, known as PDUFA target date - August 22.
But due to gaps in the company's enforcement, regulators were unable to complete the drug review by this date. The good news is that the FDA has not requested additional information from Axsome. The bad news is that we still don't know when the agency will complete its review of the application and what its outcome will be.
Image source: Images.
Why Axsome Therapeutics 'shares might soar
Despite these problems, Axsome could be a excellent long term bet. Let 's look at the potential that AXS-05 offers. Depression is a serious problem that affects millions of people, and it was exacerbated by the pandemic. Before the epidemic, 22 million people with The United States had symptoms of depression. That number almost quadrupled to 80 million.
There are certainly ways to manage this disease, but AXS-05 could be more thefficient. The drug significantly reduced symptoms of depression in a Phase 3 clinical trial, and the FDA gave it a "priority review" in this indication. The agency reserves the "priority review" designation for drugs that would be an improvement over current treatment options for a disease.
Axsome Therapeutics expects sales to peak between $ 1 billion and US $ 3 billion for AXS -05 in this indication if approved. The drug is also being investigated as a potential treatment for the agitation of Alzheimer's disease (aggressive and erratic behavior), an indication that could bring the company $ 3 billion in sales.
It's true, the current regulatory issues surrounding this drug make its future uncertain, but Axsome is not a one-ride pony. The company has several other promising pipelines and programs. There areAXS-07, an experimental therapy for migraine headaches. Axsome recently announced that the FDA has accepted its application for the drug and set a deadline for PDUFA of April 30, 2022. Peak sales of the drug could be between $ 500 million and $ 1 billion, according to the company. .
Axsome's potential treatment for narcolepsy, AXS-12, with annual sales peaking at $ 1 billion, should also be factored into the company's outlook. Although the proposed drug has lost its "breakthrough" designation, it remains under review by the FDA.
Bargain hunters don 't need to look elsewhere
With Axsome ' s market cap of $ 1.2 billion, Investors seem to have little confidence in the company's ability to generate the kind of sales it predicts through its programs - and they could be right. There are certainnement of regulatory risks to consider.
On the positive side, Axsome had a cash and cash equivalents balance of $ 141.2 million. That, combined with the remaining principal of a $ 225 million term loan facility obtained in September 2020, should be sufficient to fund operations through at least 2024, according to management.
Considering the current valuation and potential pipeline of the biotech company , this could provide explosive gains for investors entering these levels. However, be warned: there will be a lot of volatility along the way. Invest accordingly.