Axsome Therapeutics, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; filed August 9, 2021. Axsome is a clinical-stage biopharmaceutical company developing CNS therapies. It had no approved products and generated no revenue.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $14.5 million | $10.5 million | $31.1 million | $38.1 million |
| General and administrative | $16.3 million | $7.2 million | $27.6 million | $12.2 million |
| Total operating expenses | $30.8 million | $17.8 million | $58.7 million | $50.3 million |
| Net loss | $32.3 million | $18.3 million | $61.5 million | $50.8 million |
| Net loss per share, diluted | $0.86 | $0.49 | $1.64 | $1.37 |
| Net cash used in operating activities | Not separately presented | Not separately presented | $52.6 million | $42.2 million |
Margins: Not meaningful because the company had no revenue. Q2 R&D and G&A increased year over year, with management attributing the increases to NDA support, headcount, stock compensation, and pre-commercialization activities. Six-month R&D declined mainly because the 2020 comparison included a $10.2 million Pfizer license expense; G&A rose with pre-commercialization and personnel costs.
Balance sheet at June 30, 2021: Cash and cash equivalents were $141.2 million, down from $183.9 million at December 31, 2020. Total assets were $143.3 million; current liabilities were $22.9 million; total liabilities were $71.8 million; and stockholders’ equity was $71.4 million. Accumulated deficit was $340.3 million.
Debt and financing: The Hercules term loan had $50.0 million principal outstanding, reported at $48.9 million net of unamortized debt discount and related adjustments. It bears interest at the greater of prime plus 5.90% or 9.15%, and is scheduled to mature in October 2025. Only the initial $50 million advance had been funded; additional tranches of the stated $225 million facility are conditional or subject to lender approval. The company reported covenant compliance. Six-month financing cash inflows were $10.0 million, primarily from at-the-market share sales and option exercises.
Liquidity outlook: Management said existing cash alone was expected to cover anticipated operating cash requirements for at least 12 months after filing. Separately, it estimated that cash plus access to committed loan capital could fund current operating plans, including potential launches of AXS-05 and AXS-07, into at least 2024. This estimate depends on assumptions and access to conditional financing; management cautioned that spending could be faster than expected.
Business developments and outlook
- AXS-05: The MDD NDA was accepted for filing with Priority Review and an FDA action date of August 22, 2021. A Phase 3 AD-agitation trial was ongoing. The company also reported, after quarter-end, positive primary and key secondary endpoint results in the Phase 2 MERIT treatment-resistant depression trial.
- AXS-07: An NDA for acute migraine treatment was submitted in June 2021; the filing does not provide an FDA action date.
- AXS-12: A Phase 3 narcolepsy trial was planned for Q3 2021. In July, the FDA rescinded its Breakthrough Therapy designation for cataplexy in narcolepsy after approving another product for that condition.
- AXS-14: Management planned to submit an NDA for fibromyalgia in Q4 2022 following an FDA pre-NDA meeting.
- The company expects significant ongoing development and commercialization-preparation costs and may never achieve profitability. It may seek further equity, debt, licensing, or partnership financing.
Risks, contingencies, and other notable items
- Regulatory approval, clinical outcomes, manufacturing readiness, and market acceptance remain uncertain. The company depends on third parties for clinical trials and manufacturing and has no commercial product history.
- Commercial launch preparation drove higher operating cash use and G&A. Future cash needs depend on development costs, regulatory timing, launch investment, and revenue that has not yet begun.
- The Hercules loan is secured by substantially all company assets, including intellectual property, and includes restrictions and potential financial covenants if specified funding thresholds or milestones are reached. Default could accelerate repayment.
- Antecip, an entity owned by the CEO and board chair, holds licenses that include AXS-05; the filing identifies potential conflicts of interest. Pfizer may receive up to $323 million in milestones plus royalties for licensed programs.
- COVID-19 had not significantly affected clinical-trial progress to date, according to management, but could disrupt trials, suppliers, regulatory inspections, markets, or liquidity. No material pending legal proceedings or off-balance-sheet arrangements were reported.
- Management concluded disclosure controls were effective. ERP implementation was underway, with financial-system changes expected in the second half of 2021; no material control change was reported for the quarter.
Key facts for investors to verify
- FDA decisions and timing for the AXS-05 MDD NDA and the AXS-07 migraine NDA, and the outcome of ongoing or planned trials.
- Whether launch preparation, clinical development, and commercialization costs keep cash burn near or above the first-half pace, and whether the stated runway assumptions remain valid.
- Availability and terms of additional Hercules tranches, including milestone-linked conditions, collateral, covenants, and repayment obligations.
- Commercial readiness, manufacturing capacity, reimbursement prospects, and potential competition if either lead product is approved.
- Potential financial and governance implications of the Antecip licensing relationship and Pfizer milestone and royalty obligations.