Axsome Therapeutics, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; filed May 6, 2024. Axsome is a commercial-stage CNS biopharmaceutical company selling Auvelity and Sunosi and developing additional indications and candidates.
Key financial metrics
Amounts are in U.S. dollars; financial statement figures are in millions except per-share data.
| Metric | Q1 2024 | Q1 2023 or comparison |
|---|---|---|
| Total revenue | $75.0 | $94.6; down 20.7% |
| Product sales, net | $74.1 | $28.6; up 159% |
| Auvelity sales | $53.4 | $15.8 |
| Sunosi sales | $20.7 | $12.8 |
| Royalty revenue | $0.9 | $0.3 |
| Operating expenses | $142.3 | $101.0 |
| Operating loss | $(67.3) | $(6.4) |
| Net loss | $(68.4) | $(11.2) |
| Net loss per share, diluted | $(1.44) | $(0.26) |
| Cash used in operating activities | $(53.5) | $(5.8) |
| Cash and cash equivalents | $331.4 at March 31 | $386.2 at December 31, 2023 |
| Current assets / current liabilities | $460.5 / $144.0 | At March 31, 2024 |
| Debt | $180.0 principal; $178.7 carrying amount | Principal due in 2028 |
Gross margin is not presented as a separate reported metric. Cost of revenue was $6.3 million, versus $7.6 million, but the 2023 figure included a $5.0 million fee-sharing expense associated with the Pharmanovia upfront payment. Interest expense, net, was $1.1 million, versus $2.3 million. No income tax expense was recorded in Q1 2024; Q1 2023 included $2.6 million related to the Pharmanovia license revenue.
Material changes versus prior year
- Product sales increased substantially, primarily on higher unit sales of Auvelity and Sunosi. Auvelity sales rose to $53.4 million from $15.8 million; Sunosi sales rose to $20.7 million from $12.8 million.
- Total revenue declined because Q1 2023 included $65.7 million of one-time license revenue from Pharmanovia; no license revenue was recorded in Q1 2024. Pharmanovia royalty revenue increased to $0.9 million from $0.3 million.
- R&D expense increased to $36.8 million from $17.8 million, reflecting clinical trial activity, CMC costs and higher personnel costs. Selling, general and administrative expense increased to $99.0 million from $74.2 million, driven by commercial activity, organizational growth and stock-based compensation.
- Net loss widened to $68.4 million from $11.2 million, as increased operating spending and the absence of the prior-year upfront license revenue outweighed product-sales growth.
- Cash decreased by $54.8 million during the quarter. Operating cash use was partly offset by increased product receipts and working-capital movements; financing cash flow was a $1.2 million use, with no debt draw in Q1 2024.
Outlook, management commentary and risks
- Management expects continued operating losses and says expenses are expected to rise, particularly from commercializing Auvelity and Sunosi and advancing the pipeline. It expects R&D spending to increase moderately and SG&A to increase slightly.
- The company states cash is sufficient for anticipated operating requirements for at least 12 months after filing; elsewhere it says current cash is expected to fund operations into cash-flow positivity under its current plan. This is management’s estimate, not a guarantee, and depends on operating assumptions.
- Pipeline activity includes Phase 3 programs for AXS-05 in Alzheimer’s disease agitation, AXS-12 in narcolepsy, and solriamfetol in additional indications. AXS-07 previously received an FDA complete response letter citing CMC issues. The filing reports AXS-12 met the SYMPHONY trial’s primary endpoint. Subsequent to quarter-end, the company announced initiation of AXS-05’s ACCORD-2 trial in May and solriamfetol’s ENGAGE trial in April.
- Hercules term debt has $180 million outstanding, a stated interest rate tied to the prime rate (subject to contractual floors and caps), and a January 1, 2028 maturity, with a possible extension to 2029 subject to conditions. The debt is secured by substantially all company assets, including intellectual property, and includes minimum-cash and other operating covenants.
- Material risks include continued losses and possible need for additional capital; clinical, regulatory and manufacturing uncertainty; dependence on third-party manufacturers and service providers; payer coverage and pricing pressure; and generic competition. Patent litigation is pending over ANDAs for Auvelity and Sunosi. The company’s common stock is also exposed to potential dilution from equity financing and outstanding equity awards.
- Other notable matters: a securities class action’s second amended complaint is pending after defendants moved to dismiss in March 2024; related derivative actions are stayed. The company pays a 3% Auvelity net-sales royalty to Antecip, an entity owned by its CEO and board chair. Management reported disclosure controls were effective and no material change in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether Auvelity and Sunosi sales growth continues, and how net sales are affected by rebates, discounts, returns and access or reimbursement changes.
- The cash-burn trajectory and the assumptions behind management’s cash-runway statements, including progress toward cash-flow positivity and any financing needs.
- Pipeline trial timelines and results, particularly AXS-05 in Alzheimer’s disease agitation, solriamfetol’s Phase 3 studies, and the regulatory path to resolve AXS-07’s CMC issues.
- The outcome and timing of generic patent litigation, and the impact of Sunosi and Auvelity exclusivity periods and any potential generic launches.
- Compliance with Hercules’ cash and other loan covenants, the variable-rate borrowing cost, and the company’s ability to meet debt obligations at maturity.
- Developments in the securities class action and related derivative litigation, as well as the value and assumptions underlying Sunosi contingent consideration and royalty commitments.