Is Axsome Therapeutics a Buy on the Dip?

Axsome Therapeutics (NASDAQ:AXSM) has seen its stock price climb over the past few years -- and for good reason. The company has progressively launched new products, confirming its expertise in the neuroscience space. This biotech aims to treat a variety of conditions linked to central nervous system (CNS) operations, from depression to migraine and narcolepsy.

All of this helped the stock advance 180% over three years, as investors got excited about new product approvals, pipeline progress, and double-digit revenue growth. But, in recent times, Axsome shares have pulled back, falling about 15% over the past three months. Is it too late to get in on this hot healthcare stock -- or is it a buy on the dip? Let's find out.

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A central nervous system specialist

First, let's consider Axsome's story so far. The biopharma company specializes in CNS conditions and is targeting several through currently marketed products as well as candidates in the pipeline. The company has three commercialized drugs, starting with its lead product, Auvelity, approved for major depressive disorder in 2022 and, more recently, approved for agitation associated with Alzheimer's disease. That drug's sales jumped more than 50% in the recent quarter to about $180 million, and it's making important progress in the Alzheimer's agitation indication.

Auvelity launched into the Alzheimer's market in June, and in the first eight weeks to follow, new-to-brand prescriptions among adults ages 65 and older increased 126% compared with the same period in the previous quarter. So the Alzheimer's indication immediately broadened the drug's revenue opportunity. And the number of Auvelity prescriptions written in the quarter, up 34% year-over-year to 266,000, confirms this.

Meanwhile, Sunosi, the company's treatment for excessive daytime sleepiness associated with narcolepsy or sleep apnea, saw a 14% year-over-year increase in prescriptions to 61,000. And that drug generated net product revenue, including product sales and royalties, of more than $35 million.

Finally, Symbravo, a migraine treatment that launched in June of last year, saw a 30% increase in prescriptions from the first quarter to 23,500. And sales surged more than 400% to $2.3 million. It's important to note that Symbravo is in the early stages of its growth story, as payer coverage is at 57% -- there's room for expansion -- and the company is completing additions to its Symbravo sales force. A larger sales force will help the company reach further into the primary care and specialist communities.

Five phase 3 programs

While these three drugs are powering revenue growth, Axsome isn't sitting still. The company has five phase 3 programs -- in attention deficit and hyperactivity disorder, major depressive disorder, binge eating disorder, shift work disorder, and fibromyalgia -- ongoing. And Axsome is awaiting a regulatory decision on its narcolepsy candidate -- regulators are expected to decide by May of next year. All of this suggests new revenue drivers may be near.

So, a lot is going on at Axsome, and these recent launches and late-stage trials could lead to significant growth over the next few years. This means now could be a very exciting time to own Axsome stock.

But, is it too late to buy? No -- this story is just beginning, and potential catalysts of revenue growth and product approvals could push the stock higher in the quarters to come. Meanwhile, the fact that Axsome has three commercialized products generating revenue makes it less of a risky bet than a company without products on the market. And Axsome recently said that it expects its current cash to fund operations into cash flow positivity. This is another element that lowers risk for shareholders.

So, when you buy Axsome stock, you're getting in on an innovative biopharma company -- something growth investors like -- but the company also offers you elements of safety, such as a portfolio of revenue-generating products and a healthy financial picture. This makes it a stock cautious investors may consider too.

All of this means that Axsome is a great stock to buy today on the dip -- and hold onto as new and possibly future drugs drive growth.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Axsome Therapeutics. The Motley Fool has a disclosure policy.