Axsome Therapeutics, Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Axsome is a clinical-stage biopharmaceutical company developing CNS therapies. It had no approved products and generated no revenue.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $13.2m | $14.8m | $44.3m | $52.9m |
| General and administrative | $20.2m | $6.3m | $47.8m | $18.5m |
| Total operating expenses | $33.4m | $21.1m | $92.1m | $71.4m |
| Net loss | $34.9m | $22.9m | $96.4m | $73.7m |
| Loss per share, basic and diluted | $0.93 | $0.61 | $2.57 | $1.98 |
| Operating cash used | $79.4m | $57.9m |
Balance sheet at September 30, 2021: Cash and cash equivalents were $114.6m, down from $183.9m at December 31, 2020. Current assets were $115.0m and current liabilities $24.7m. Total assets were $116.6m, total liabilities $73.9m, and stockholders’ equity $42.7m. Accumulated deficit was $375.2m.
Debt and liquidity: Outstanding term-loan principal was $50.0m; its balance-sheet carrying value was $49.2m. The loan is secured by substantially all company assets, including intellectual property. Management stated that cash was expected to cover anticipated operating needs for at least 12 months following filing. Separately, management said cash plus remaining committed capital under the amended facility was expected to fund the current plan, including potential launches, into at least 2024; further borrowing is conditional and some tranches require FDA approvals or lender approval.
Margins: Not meaningful because the company had no revenue. No income tax benefit was recorded; deferred tax assets were fully reserved.
Changes versus the comparable period
- Q3 net loss widened by $12.0m year over year; nine-month net loss increased by $22.7m.
- Q3 and nine-month G&A rose substantially, primarily from pre-commercialization activity, personnel, and higher stock-based compensation.
- R&D decreased 10.9% in Q3 and 16.2% for the first nine months. The nine-month comparison included a $10.2m Pfizer license expense in 2020; lower trial costs were partly offset by NDA-support costs, added headcount, and stock compensation.
- Operating cash use increased $21.5m year over year, which management attributed mainly to commercial-function build-out and pre-commercial costs.
- Interest and debt-discount expense rose to $4.3m for the first nine months from $1.1m, primarily because of higher debt outstanding in 2021. The 2020 comparison also included a $1.2m loss on extinguishment of debt.
- Cash fell by $69.3m during the first nine months of 2021. Financing provided $10.4m, mainly from ATM stock sales and option exercises; there were no term-loan proceeds in that period.
Business developments, outlook, and risks
- AXS-05 for major depressive disorder: The FDA accepted the NDA for Priority Review with an August 22, 2021 target date, but did not complete its review by that date. The company reported that the FDA identified deficiencies that precluded discussion of labeling and post-marketing requirements; review remained ongoing at filing.
- AXS-07 for acute migraine: The NDA was accepted for filing, with an April 30, 2022 target action date.
- Pipeline: A Phase 3 AXS-12 narcolepsy study began in Q3. Axsome planned to submit an AXS-14 fibromyalgia NDA in 2023. AXS-05 development also included Alzheimer’s disease agitation and smoking cessation programs.
- October 14, 2021 loan amendment: A subsequent event increased the facility’s maximum amount from $225m to $300m, including up to $100m available subject to FDA approval of AXS-05 and additional conditional tranches. The amendment extended maturity to October 2026, with a possible extension to October 2027, reset the interest-only period to 48 months (potentially 60 months subject to approvals), and lowered the stated floor rate from 9.15% to 8.95%. These are borrowing commitments, not cash already drawn.
- Key risks: The company expected continued losses and significant spending, and may need additional financing. Funding needs depend on trial progress, regulatory decisions, commercialization costs, and market conditions. Product approval, commercial adoption, reimbursement, manufacturing supply, and successful launch are uncertain. COVID-19 could affect trials, vendors, inspections, operations, and financing, although the company said it had not significantly affected trial progress to date.
- Other notable matters: The Hercules loan is secured by intellectual property and includes restrictive covenants and potential financial tests when specified borrowing or milestone conditions are met. The company reported compliance with its financing covenants through September 30, 2021. It also disclosed related-party licenses with Antecip, an entity owned by its CEO and board chair, and associated potential conflicts of interest. No material pending legal proceedings were reported. Management said disclosure controls were effective; a new ERP system was implemented during the quarter, with phased changes to processes and controls ongoing.
Important facts for investors to verify
- Current FDA status and any subsequent action on the AXS-05 MDD NDA, including how the identified deficiencies are resolved.
- Whether AXS-07 meets its April 30, 2022 target date and whether additional FDA requests affect review or launch timing.
- Actual cash burn and runway against management’s estimates, distinguishing cash on hand from conditional, undrawn loan tranches.
- Terms, availability, interest cost, covenants, and collateral implications of the amended Hercules facility; confirm which tranches are accessible and whether any have been drawn.
- Progress, cost, and outcomes of AXS-05, AXS-12, and other clinical programs, alongside pre-commercial spending and the company’s ability to finance operations.
- Potential dilution from equity financing and equity awards, and the obligations or conflicts associated with Pfizer and Antecip license agreements.