RBC Capital initiated coverage on Axsome Therapeutics Inc (NASDAQ:AXSM), citing that its near-term revenue growth and pipeline optionality are underappreciated.

RBC Capital says Auvelity, a key value driver, is demonstrating strong Rx growth, leading it to anticipate sales reaching $296 million in 2024, surpassing the consensus estimate of $272 million. 

This optimistic projection is attributed to the swift adoption of Auvelity (indicated for major depressive disorder), driven by its rapid-acting profile, which resonates well with patients and prescribers. 

The company’s overall appeal lies in the successful launch of Auvelity, consistent cash flows from Sunosi (excessive daytime sleepiness due to obstructive sleep apnea or narcolepsy), and the underestimated potential of its pipeline. 

RBC analysts anticipate that the strong support from physicians, with up to 10% first-line usage, combined with the drug’s fast-acting nature and effectiveness at the upper end of the standard of care, will sustain its usage. They expect Axsome to leverage its recent salesforce expansion to capitalize on this momentum. 

With Auvelity emerging as a preferred second or third-line option in Major Depressive Disorder (MDD), the analyst projects it to achieve peak revenues of $1.4 billion, aligning with the performance of other recently introduced MDD medications.

RBC initiates with an Outperform rating and a price target of $126.

Positioned as an appealing mid-cap biotech, Axsome Therapeutics’ value is supported by its commercial products, with near-term Phase 3 and launch catalysts offering the prospect of further share appreciation.

Earlier this month, Axsome Therapeutics released preliminary fourth quarter 2023 product revenue of approximately $71 million and $204 million for the full year of 2023.

The company sees Auvelity’s net product sales to be approximately $49 million and $130 million for the fourth quarter and full year of 2023, respectively.

Sunosi’s revenue is expected to be $22 million and $74 million for the fourth quarter and full year of 2023, respectively. 

The company will report fourth-quarter financial results on February 20.

Price Action: AXSM shares are down 1.17% at $90.71 on the last check Thursday.