Axsome Therapeutics, Inc. — Q2 2020 Form 10-Q
Reporting period: Three and six months ended June 30, 2020; filed August 10, 2020. Axsome is a clinical-stage biopharmaceutical company developing central nervous system therapies. It had no approved products and generated no revenue.
Financial performance and liquidity
| Metric | Q2 2020 | Q2 2019 | Six months 2020 | Six months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development | $10.5 million | $11.0 million | $38.1 million | $18.6 million |
| General and administrative | $7.2 million | $2.4 million | $12.2 million | $5.3 million |
| Net loss | $18.3 million | $13.8 million | $50.8 million | $24.4 million |
| Loss per share, basic and diluted | $0.49 | $0.41 | $1.37 | $0.73 |
- At June 30, cash and cash equivalents were $190.7 million, down $29.3 million from year-end 2019. Six-month operating cash use was $42.2 million; investing cash use was less than $0.1 million, and financing provided $12.9 million.
- Total assets were $191.0 million, current liabilities $23.0 million, and stockholders’ equity $154.2 million. The company had $20.0 million of loan principal outstanding, with $6.7 million classified as current; debt matures in February 2023. It reported compliance with loan covenants.
- No meaningful operating margin is available because the company had no revenue. Accumulated deficit was $226.7 million.
Changes and significant items
- Q2 R&D expense declined $0.5 million year over year, which management attributed mainly to completion of several trials. First-half R&D rose $19.5 million, including a one-time $10.2 million Pfizer license expense ($7.2 million non-cash) and spending on clinical trials and study close-outs.
- G&A increased $4.8 million in Q2 and $6.9 million for the first half, mainly due to higher stock-based compensation and commercial-function build-out. First-half stock-based compensation was $6.3 million versus $2.1 million in 2019.
- January’s Pfizer license covered data and intellectual property for AXS-12 and U.S. rights for AXS-14. Consideration included $3.0 million cash and 82,019 shares; Pfizer may receive up to $323 million in milestones plus tiered royalties.
- First-half financing included $12.1 million net proceeds from at-the-market stock sales. The share count increased from 36.9 million at December 31, 2019 to 37.3 million at June 30, 2020.
Outlook, developments, and risks
- Management expects continuing substantial losses and expenses and does not anticipate near-term revenue or profitability. It stated that cash would fund anticipated operating needs for at least two years from the report date; elsewhere, the liquidity note states at least twelve months following filing. The filing does not reconcile these runway estimates.
- Key pipeline progress: AXS-05 met primary endpoints in the GEMINI MDD and ADVANCE-1 Alzheimer’s agitation trials; AXS-07 met co-primary endpoints in the MOMENTUM and INTERCEPT migraine trials. AXS-05’s STRIDE-1 TRD trial met key secondary endpoints but did not achieve statistical significance on its primary endpoint.
- After quarter-end, the company reported a successful FDA pre-NDA meeting for AXS-05 in MDD in July, and in August announced AXS-12 Breakthrough Therapy designation and initiation of additional AXS-05 studies. These are subsequent developments, not Q2 results.
- COVID-19 had not significantly affected trial progress to date, according to management, but effects on trials, operations, financing markets, and liquidity remained uncertain. The company described risks from clinical and regulatory outcomes, trial enrollment, manufacturing dependence, competition, commercialization readiness, and access to future capital.
- Patent proceedings involving AXS-02-related intellectual property included adverse PTAB decisions on some challenged claims. No material pending legal proceedings were reported. Management said disclosure controls were effective and there had been no material change in internal control over financial reporting.
Important facts for investors to verify
- Reconcile the stated cash runway estimates of at least twelve months and at least two years, and assess runway against operating cash use and planned development spending.
- Track FDA feedback, NDA filing requirements and timing for AXS-05 and AXS-07, and the status and outcomes of ongoing or planned clinical trials—particularly given the STRIDE-1 primary-endpoint result.
- Review the potential timing and scale of Pfizer milestone and royalty obligations, as well as the related license terms and AXS-14 development plans.
- Assess financing needs, potential dilution from further equity issuance, and debt repayment obligations under the term loan.
- Monitor intellectual-property challenges, including the scope and consequences of PTAB decisions affecting the company’s portfolio.