Axsome Therapeutics, Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2021; filed May 10, 2021. Axsome is a clinical-stage biopharmaceutical company developing CNS therapies. Its five core candidates were AXS-05, AXS-07, AXS-09, AXS-12 and AXS-14. It had no approved products and generated no revenue.
Financial results and liquidity
| Metric | Q1 2021 | Q1 2020 / comparison |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $16.6 million | $27.5 million |
| General and administrative expense | $11.2 million | $5.0 million |
| Total operating expenses | $27.8 million | $32.5 million |
| Net loss | $29.3 million; $0.78 per share | $32.5 million; $0.88 per share |
| Net cash used in operating activities | $27.2 million | $23.3 million |
| Cash and cash equivalents, period end | $164.7 million | $197.3 million at March 31, 2020 |
Gross margin and profitability margins are not meaningful because the company had no revenue. Cash declined $19.2 million during Q1 2021, from $183.9 million at December 31, 2020. Investing activities used $0.03 million; financing activities provided $8.0 million, including $6.1 million net proceeds from an at-the-market stock sale and $1.9 million from option exercises. Accumulated deficit was $308.1 million.
At March 31, 2021, liabilities totaled $70.6 million, including $50.0 million of term-loan principal (carrying value $48.6 million) and $21.7 million of current liabilities. Stockholders’ equity was $96.3 million. The Hercules facility provides for up to $225 million across tranches, but most additional borrowing is conditional, and the final $50 million tranche requires lender approval. The outstanding loan bears interest at no less than 9.15%; principal repayments are scheduled to begin in 2023, subject to milestone-based extensions.
Changes and notable items
- R&D expense fell $10.9 million year over year, primarily because Q1 2020 included a one-time $10.2 million Pfizer license expense and several trials had since concluded. Q1 2021 R&D included a $2.9 million AXS-05 NDA user fee; the FDA subsequently granted the company’s small-business waiver, and the filing says the fee would be refunded.
- G&A rose $6.2 million, principally reflecting pre-commercialization activity and higher stock-based compensation.
- Interest and debt-discount expense was $1.4 million, compared with less than $0.1 million of interest income in Q1 2020, mainly due to higher debt.
- Operating cash use increased $3.9 million year over year, which management attributed mainly to the NDA fee and commercial-function build-out.
- As of March 31, 2021, the company had 37.6 million common shares outstanding; 37,570,390 shares were outstanding as of May 3.
Outlook, commentary and risks
In April 2021, the FDA accepted the AXS-05 NDA for major depressive disorder (MDD) for Priority Review, with an August 22, 2021 target action date. The company planned to submit an NDA for AXS-07 for acute migraine. AXS-05 development also included an ongoing Phase 3 Alzheimer’s disease agitation study; a Phase 3 AXS-12 narcolepsy trial was planned. The filing notes that AXS-05’s Phase 3 TRD study met key secondary endpoints but did not achieve statistical significance on its primary endpoint.
Management expects continued losses and substantial development and commercialization spending. It stated that existing cash would cover anticipated operating cash requirements for at least 12 months after filing; elsewhere, it said current cash and committed term-loan capital could fund planned operations, including launch preparation, into at least 2024. That longer estimate depends on operating assumptions and should not be treated as a guarantee; much of the loan facility is milestone-dependent or subject to lender approval. The company may seek further equity, debt, licensing or partnership funding, with potential dilution or additional restrictions.
Key risks include regulatory review or additional study requirements, clinical-trial outcomes, commercialization and market acceptance, reimbursement and pricing, competition, reliance on contract manufacturers and research organizations, intellectual-property protection, and debt covenants. COVID-19 had not significantly affected trial progress to date, according to management, but future operational, regulatory and financing effects remained uncertain. The company reported no material pending legal proceedings, stated that it was in compliance with financing covenants, and concluded disclosure controls were effective.
Important facts for investors to verify
- FDA decisions and timing for the AXS-05 MDD NDA, including the August 22, 2021 target date, and the status and timing of the planned AXS-07 NDA.
- Whether the $2.9 million user-fee refund was received after quarter-end and how it affected subsequent cash and expenses.
- Cash burn, commercialization spending and the assumptions supporting management’s stated funding runway, distinguishing cash on hand from conditional debt availability.
- Terms, availability and covenant consequences of additional Hercules tranches, including the senior security interest in substantially all assets and intellectual property.
- Progress and results of ongoing or planned trials, particularly AXS-05 in Alzheimer’s agitation and AXS-12 in narcolepsy, as well as the implications of the TRD primary-endpoint result.