Axsome Therapeutics, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023; filed August 7, 2023. Axsome is a commercial-stage CNS biopharmaceutical company selling Auvelity and Sunosi and developing additional candidates. Unless noted, amounts below are in millions of dollars.
Financial performance and position
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Total revenue | $46.7 | $8.8 | $141.3 | $8.8 |
| Net loss | $(67.2) | $(41.4) | $(78.4) | $(81.1) |
| Operating cash flow | Not separately provided | Not separately provided | $(61.2) | $(66.2) |
- Q2 product sales were $46.0 million: Auvelity $27.6 million and Sunosi $18.4 million. Six-month product sales were $74.6 million: Auvelity $43.3 million and Sunosi $31.3 million.
- Six-month revenue included a $65.7 million upfront Pharmanovia license payment recognized in Q1 and $1.0 million of related royalty revenue. Q2 royalty revenue was $0.7 million.
- Q2 operating expenses were $111.8 million, including R&D of $20.6 million and SG&A of $78.9 million. Six-month SG&A was $153.1 million. The filing does not report a gross-margin percentage.
- At June 30, cash and cash equivalents were $437.1 million, up from $200.8 million at year-end 2022. Current assets were $519.7 million and current liabilities $115.0 million.
- Long-term debt had a $180.0 million principal balance and $176.8 million carrying value. Total liabilities were $332.8 million; accumulated deficit was $674.7 million.
- Six-month financing cash flow was $297.6 million, principally reflecting $211.3 million net proceeds from the June equity offering and $83.6 million net proceeds from debt draws. Investing cash flow was $(0.2) million.
Changes versus the comparable periods
- Q2 revenue increased substantially, driven by Auvelity’s launch in October 2022 and higher Sunosi sales; the 2022 comparison included $8.8 million of Sunosi sales and no Auvelity sales.
- Q2 net loss widened by $25.7 million, primarily as SG&A increased to support commercialization, including sales and marketing. Six-month net loss narrowed by $2.7 million, as higher sales and the Pharmanovia upfront payment more than offset increased commercial and personnel costs.
- Six-month operating cash use declined by $5.0 million year over year. The 2022 investing outflow included the $53.0 million Sunosi acquisition payment.
Outlook, risks and unusual items
- Management expects continued operating losses and higher expenses, particularly for commercialization of Auvelity and Sunosi and continued pipeline development. It says existing cash is sufficient for anticipated requirements for at least 12 months after filing and, under the current operating plan, into cash-flow positivity; both estimates depend on assumptions that may prove incorrect. No numerical revenue or earnings guidance is provided.
- Pipeline programs include AXS-05 for Alzheimer’s disease agitation and smoking cessation, AXS-07 for migraine, AXS-12 for narcolepsy, AXS-14 for fibromyalgia, and solriamfetol for ADHD. The filing says a Phase 3 ADHD trial began in July 2023. AXS-07 previously received an FDA complete response letter citing CMC issues; the company says it intends to resubmit the NDA, without giving a timing estimate here.
- Generic competition is a material risk: Axsome reported a Teva Paragraph IV ANDA notice for Auvelity and, in August 2023, a Hikma notice for Sunosi. The filing cites Sunosi new-chemical-entity exclusivity expiring June 17, 2024 and Auvelity new-product exclusivity expiring August 18, 2025; patent rights and litigation may affect generic entry.
- The Hercules facility was amended, with up to $350 million aggregate principal capacity, $180 million outstanding and approximately $170 million remaining at June 30. Maturity is January 2028, potentially extendable to January 2029 subject to conditions. Covenants include minimum cash and other conditions; the company reported compliance at June 30. Debt is secured by substantially all assets, including intellectual property.
- Unusual and significant items include the Pharmanovia license payment, a $5.9 million six-month loss from remeasurement of Sunosi contingent consideration, and the June public offering. The underwriters exercised an option for 450,000 additional shares in July, after quarter-end, generating $31.7 million in net proceeds.
- Pending matters include a securities class action alleging misstatements related to AXS-07 CMC and NDA matters, with a motion to dismiss pending; related derivative actions are stayed. Axsome also filed patent-infringement litigation against Teva over Auvelity.
Key facts for investors to verify
- Whether Auvelity and Sunosi sales growth, payer access and product-level economics can support the expanding commercial cost base.
- Cash burn, the assumptions behind management’s cash-flow-positivity outlook, and the timing and cost of pipeline trials.
- Hercules borrowing conditions, cash-covenant compliance, interest costs, and the implications of the secured debt and potential additional draws.
- FDA and CMC progress for AXS-07, trial and regulatory milestones for other candidates, and exposure to generic-entry challenges for Auvelity and Sunosi.
- Potential financial and operational effects of the pending litigation, royalties and milestones, and related-party royalty arrangements.