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Axsome Stock Skyrockets after Major FDA Approval; Should You Buy?

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Axsome shares have exploded today after its depression therapy won approval from the FDA. Wall Street is eyeing more gains from the stock.

Shares of biopharmaceutical company Axsome Therapeutics (AXSM) are up substantially in today’s trading session after its depression therapy gained approval from the U.S. Food and Drug Administration (FDA). Despite the large gains, most analysts still see the stock as a Buy. Axsome is focused on developing therapies for central nervous system (CNS) conditions.

With this approval, the company’s oral treatment Auvelity now becomes the first and only one available for major depressive disorder. Importantly, the therapy had received breakthrough therapy designation and was reviewed under priority by the FDA. The tablets are expected to be available in the market in the fourth quarter of 2022.

More than 20 million adults in the U.S. suffered from major depressive disorder (MDD) annually before the COVID-19 pandemic, and the number increased to over 80 million adults during the pandemic.

Dan V. Iosifescu, MD, Professor of Psychiatry at the New York University School of Medicine and Director of Clinical Research Division at the Nathan Kline Institute for Psychiatric Research, commented, “In clinical trials, Auvelity has demonstrated rapid and statistically significant improvement in depressive symptoms as early as Week 1, and increased rates of remission at Week 2 compared to Placebo.”

The therapy was studied in the GEMINI clinical study, which involved over 1,100 patients, and the drug was found to be statistically superior to a placebo in alleviating depressive symptoms. Importantly, its patent protection extends to at least 2037-2040.

Is AXSM Stock Expected to Rise?

Morgan Stanley’s (MSVikram Purohit recently reiterated a Hold rating on the stock alongside a price target of $55. Wall Street, though, is more optimistic, with a Moderate Buy consensus rating and an average AXSM price target of $69.11, which implies 21.8% upside potential. That’s on top of the stock almost tripling in the past year.

However, hedge funds are yet to catch the Axsome train and have decreased holdings in the stock by 101,900 shares in the last quarter. This implies a negative hedge fund confidence signal in the stock.

Major Gains Could be in the Offing for Axsome

This approval is a major win for the company, and rapid market share gains could be on the horizon. Further, a TipRanks Smart Score of 7 indicates Axsome shares could outperform the broader indices in the coming periods.

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