On Wednesday, RBC Capital maintained its Outperform rating on Axsome Therapeutics (NASDAQ:AXSM) and increased the shares target to $130.00 from $127.00.
The adjustment reflects a positive outlook on the intellectual property (IP) surrounding Auvelity, the company's drug with potential sales of approximately $3 billion across its leading indications, which include Major Depressive Disorder (MDD) and Alzheimer's Disease (AD) agitation.
The firm's confidence in Axsome's IP is supported by consultation with a patent attorney who regards the 2040 patents as defensible.
The attorney's assessment indicates that the patents have been well-prosecuted and that the 2034 patents would not be considered obvious or prior art. This legal perspective suggests a robust defense for Axsome's patents could be anticipated if challenged.
RBC Capital's revised price target is based on the expectation of extended market exclusivity for Auvelity, potentially lasting until the year 2040. This extended exclusivity period is anticipated to contribute to increased tail revenues for Axsome.
The firm has adjusted its base case to align more closely with this scenario, rather than one that would see IP protections expire in 2034.
While acknowledging that intellectual property disputes are commonly resolved through settlements, RBC Capital's analysis leans towards a scenario where Axsome could benefit from the longer exclusivity period. This potential for extended revenue generation from Auvelity has been factored into the new price target.
In summary, RBC Capital's updated target price for Axsome Therapeutics takes into account the potential for longer exclusivity due to the strength of the company's intellectual property, which could result in greater revenue over an extended period. The firm remains positive on the stock, reiterating its Outperform rating.
InvestingPro Insights
Building on RBC Capital's positive outlook, InvestingPro data reveals additional reasons for investor optimism in Axsome Therapeutics. The company boasts an impressive gross profit margin of 90.12% for the last twelve months as of Q1 2024, underlining the efficiency of its operations. Moreover, Axsome has demonstrated a robust revenue growth of 73.58% during the same period, indicating strong market demand for its offerings.
However, it's important to note a couple of considerations. Analysts have recently revised their earnings expectations downwards for the upcoming period, signaling caution. Additionally, while Axsmoe's liquid assets exceed short-term obligations, suggesting good liquidity, the company is not expected to be profitable this year, and it operates at a high Price/Book multiple of 23.82. These metrics highlight a mixed financial landscape that investors should consider.
For those looking to delve deeper, InvestingPro offers additional insights and metrics on Axsome Therapeutics, including an assessment of the company's moderate level of debt and its non-payment of dividends. With these nuanced perspectives, investors can make more informed decisions. To access these and other valuable insights, use the coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are 9 additional InvestingPro Tips available that can further guide investment choices in Axsome Therapeutics.
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