What happened
Shares of Axsome Therapeutics (NASDAQ: AXSM) lost 9.75% of their value through Thursday's closing bell this week, according to data from S&P Global Market Intelligence. The good news -- if you can call it that -- is that the biotech's step backwards this week appears to be the result of marketwide headwinds, and not a company-specific event.
After all, Axsome hasn't released a material update since its third-quarter earnings report roughly three weeks ago. And the biotech equity market experienced a broad-based sell-off this week, thanks to fears over the omicron variant, travel restrictions, and inflationary pressures.
Image source: Getty Images.
So what
This nearly double-digit drop in Axsome's share price could turn out to be a gift for investors. The biotech's shares are currently well off of their 52-week highs due to a regulatory delay for its experimental major depressive disorder drug AXS-05.
What's important to understand is that this regulatory hiccup reportedly centers around two issues with the company's analytical methods in the Chemistry, Manufacturing, and Controls section of the New Drug Application submitted to the Food and Drug Administration (FDA).
As the FDA hasn't flatly rejected the NDA over these minor issues and Axsome seems confident that they can be addressed, the biotech's stock seems primed to land a major catalyst before year's end (i.e., an approval for AXS-05). Keeping with this theme, one of the biotech's directors recently bought shares, a potential sign that an approval may indeed be on the way.
Now what
Is Axsome stock a buy after this week's dip? While it is a risky equity, aggressive investors might be wise to pull the trigger on this stock soon. Axsome's shares, after all, could quite possibly double or even triple in value following a green light from the FDA for AXS-05. That said, investors should never underestimate the enormous risk associated with regulatory reviews for new drugs. Investors, therefore, may want to keep any position on the small side until this risk factor is favorably resolved.
10 stocks we like better than Axsome Therapeutics
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
They just revealed what they believe are the ten best stocks for investors to buy right now... and Axsome Therapeutics wasn't one of them! That's right -- they think these 10 stocks are even better buys.
*Stock Advisor returns as of November 10, 2021
George Budwell has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Axsome Therapeutics. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
