Axsome Therapeutics, Inc. — FY 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; the filing was signed March 12, 2020. Axsome is a clinical-stage biopharmaceutical company developing CNS therapies. It had no approved products and generated no product revenue.
Financial results and liquidity
| Metric | FY 2019 | FY 2018 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $53.6 million | $23.5 million |
| General and administrative expense | $13.6 million | $9.4 million |
| Total operating expenses / operating loss | $67.2 million | $32.8 million |
| Net loss | $68.3 million | $31.0 million |
| Net loss per share, basic and diluted | $2.01 | $1.15 |
| Net cash used in operating activities | $46.4 million | $30.1 million |
- R&D spending more than doubled, reflecting later-stage studies, including GEMINI, MOMENTUM and CONCERT, and startup of INTERCEPT and open-label safety studies. G&A rose mainly due to personnel, stock compensation and commercial-function buildout.
- At year-end, cash was $220.0 million; current assets were $220.4 million, current liabilities $24.5 million, total liabilities $41.8 million, and stockholders’ equity $178.7 million. Outstanding loan principal was $20.0 million; the loan matures February 2023 and bears interest at the greater of 7.5% or 2% above prime.
- Operating cash use increased year over year. Financing provided $252.4 million, including $187.1 million net proceeds from a December stock offering, approximately $26.6 million net proceeds from 2019 at-the-market sales, and a $20.0 million term loan, partly offset by $7.2 million of loan principal repayments. Shares outstanding rose to 36.9 million at year-end.
- Quarterly losses increased through 2019: Q4 operating expenses were $24.4 million and net loss was $24.8 million, versus $9.5 million and $9.6 million, respectively, in Q4 2018. No meaningful product margin was reported because the company had no product sales.
Material developments and outlook
- AXS-05: GEMINI, a Phase 3 MDD trial, met its primary endpoint versus placebo; the company reported a Week 6 MADRS reduction of 16.6 points versus 11.9 (p=0.002). The company planned an NDA filing based on GEMINI and ASCEND. STRIDE-1 for treatment-resistant depression and ADVANCE-1 for Alzheimer’s agitation remained ongoing. A Phase 2 smoking-cessation study also met its primary endpoint.
- AXS-07: MOMENTUM, a Phase 3 migraine trial conducted under an FDA Special Protocol Assessment, met its co-primary endpoints. The company planned an NDA filing; INTERCEPT and an open-label safety study were underway. FDA agreement on trial design does not guarantee approval.
- AXS-12: The Phase 2 CONCERT study in narcolepsy met its primary endpoint, according to the company. AXS-12 had FDA Orphan Drug Designation.
- AXS-09 was in earlier development. In January 2020, after year-end, Axsome licensed Pfizer data and rights for AXS-12 and AXS-14. Consideration included $3 million cash, 82,019 shares valued at $8 million, up to $323 million in milestones, and tiered royalties.
- Management expected substantial continuing losses and rising development costs, with no assurance of profitability. It described cash as sufficient for at least two years in the MD&A, while a financial-statement note said at least twelve months following filing; these runway statements use different time references and should be reconciled. No formal revenue or earnings guidance was provided.
Key risks and unusual items
- Clinical, regulatory and commercialization uncertainty is material: trials may fail or be delayed, FDA review may require additional studies, and approval, labeling, reimbursement, uptake and profitability are not assured. The company relied on third-party manufacturers and research organizations and had no commercial infrastructure in place.
- Funding needs remain dependent on capital markets and development progress. The $4 million optional loan tranche was not drawn and expired; debt covenants restrict certain activities and the loan is secured by company assets other than intellectual property.
- Patent challenges to AXS-02-related patents resulted in several adverse Patent Trial and Appeal Board decisions; some proceedings or review requests remained ongoing. AXS-02 was not among the core five CNS candidates described as the principal pipeline.
- Some licensed AXS-05 and AXS-02 rights came from an entity owned by the CEO and board chair, creating a disclosed related-party conflict risk. The company reported no material pending legal proceedings.
- The filing identified COVID-19 as a potential source of disruption to clinical trials, supply chains, regulators and operations; the effect was uncertain as of the filing date.
Important facts for investors to verify
- Current cash runway and projected burn against the different twelve-month and two-year statements.
- FDA status, NDA timing and any additional evidence required for AXS-05 and AXS-07; subsequent trial results and safety data for the pipeline.
- Actual debt repayment terms, interest rate, covenants and any remaining balance under the SVB/WestRiver facility.
- Status and scope of patent challenges, particularly their effect on relevant product rights and commercial protection.
- Full economic terms and development obligations under the Pfizer license, including contingent milestones and royalties.