New Trade for March 31st, 2023

Biotech stocks began the year with gusto but sold off when the broader-market rally fizzled in February as investors sought safer havens. Yet, with renewed optimism in the market as banking sector fears ease, biotech growth stocks are regaining popularity.  

Undoubtedly, it’s an exciting time to invest in biotech, and today we’re highlighting a standout from the category. This morning’s stock recommendation features a pipeline brimming with promise and potentially positive catalysts on the very near horizon. Another opportunity to strike up a position in this promising name at its current price may not come. 

Axsome Therapeutics (AXSM)

Axsome Therapeutics has two approved drugs for the treatment of central nervous system disorders on the market. Sunosi, a dopamine-norepinephrine reuptake inhibitor and the only one of its kind to treat narcolepsy, and Auvelity, a fast-acting oral treatment for depression, also the first of its kind.   

Share price sank more than 10% last month following the release of disappointing fourth-quarter earnings. The company incurred an adjusted loss of $1.28 per share and generated $24.4 million in revenues. Spending was up 227% year over year. But this increase was due to higher commercial activities for Sunosi and Auvelity, including sales force onboarding and marketing spending, which should pay off in the coming quarters. Auvelity launched in October and is being evaluated to treat agitation in people with Alzheimer’s disease and to help people quit smoking. 

Other potential tailwinds include two of Axsome’s drugs — AXS-07 for treating migraines and AXS-14 for fibromyalgia — that it plans to submit for FDA approval this year. AXSM’s share price is down 19% year to date but is up 78% over the past 12 months. Given the potential of the company’s therapies, its $2.7 billion market cap may not adequately reflect its long-term potential.

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