This Biotech Is On Track To End 2019 As The Best Performing Stock In The Sector

Axsome Therapeutics Inc AXSM shares advanced strongly Tuesday after the company reported a positive mid-stage readout for its investigational compound to treat narcolepsy.

This small-cap biotech has been on a tear since late last year. For the year-to-date period, shares are up a staggering 1,300%.

Benzinga first alerted traders to this hugely successful biotech in late January, when the shares were already up about 200%. Even if the level that prevailed then were to be taken as an entry point, an investor would have made a neat gain of about 300% by now.

The major catalysts for the upside have been clinical readouts, which turned out to be mostly positive.

Related: Attention Biotech Investors: Mark Your Calendar For These December PDUFA Dates

Source: Axsome

The stock gained about 161% on Jan. 7 when it reported positive Phase 3 results for its lead drug AXS-05 for major depressive disorder, or MDD. The FDA accorded Breakthrough Therapy Designation, or BTD, for AXS-05 in MDD in March. Subsequently in mid-April, the company announced positive results for the mid-stage study of AXS-05 in smoking cessation.

In September, the stock made further gains following the presentation of positive Phase 1 pharmocokinetic data for AXS-07 at the 19th Congress of the International Headache Society in Dublin. AXS-07 is being evaluated for migraine.

The stock, however, came under pressure in early October, although it made good the lost ground subsequently. An announcement in its third-quarter earnings release Nov. 7 concerning a delay in the top-line data readout for AXS-05 in treatment-resistant depression, or TRD, weighed on the stock briefly before it rebounded strongly.

The trigger for Tuesday's rally was a Phase 2 readout for its AXS-12, which showed that Phase 2 study dubbed CONCERT, met the pre-specified primary endpoint and significantly reduced cataplexy attacks as compared to placebo in patients with narcolepsy. The asset also significantly reduced excessive daytime sleepiness and improved cognitive function, sleep quality and sleep-related symptoms.

Upcoming Catalysts

• Top-line results from the Phase 3 GEMINI placebo-controlled trial of AXS-05 in MDD – year-end 2019
• Top-line results from the Phase 3 MOMENTUM study of AXS-07 in migraine – year-end 2019
• Top-line results from the Phase 3 STRIDE-1 trial of AXS-05 in TRD – Q1 2020
• Top-line results from the Phase 2/3 ADVANCE study of AXS-05 in Alzheimer's agitation – first half of 2020

Is Stretched Valuation A Concern?

With a slew of clinical readouts between now and the end of the first half of 2020, the stock could be primed for further upside. Regulatory milestones could also act as upside catalysts.

The average analyst rating for the stock is a Buy and the average price target is $39.86, with the Street-high estimate at $50.

Axsome's stock closed Tuesday's session at $44.89 per share.