On Monday, Morgan Stanley adjusted its stance on Axsome Therapeutics (NASDAQ:AXSM) stock, elevating from Equalweight to Overweight and increasing the price target to $115 from $90. The firm sees a favorable risk/reward balance for the pharmaceutical company as it moves into the second half of 2024.
The upgrade follows a recent market pullback, which Morgan Stanley believes offers a compelling entry point into Axsome's stock, particularly in anticipation of upcoming data that may reveal substantial commercial potential. The firm's new price target reflects a series of revised projections and heightened confidence in Axsome's product pipeline.
Morgan Stanley has updated its peak sales estimates for AXS-05, Axsome's investigational treatment for Alzheimer's disease agitation (ADA), raising the expected market penetration from approximately 10% to around 15%. This adjustment increases the projected peak U.S. gross sales from under $600 million to approximately $850 million by the year 2030.
Furthermore, the firm has boosted its peak sales estimate for Auvelity, Axsome's medication for major depressive disorder (MDD), from about $900 million to roughly $1 billion, citing a strong product launch. The increased sales forecast is also supported by confidence in the intellectual property (IP) surrounding Auvelity, which is expected to remain protected through 2034.
The revised price target and stock rating reflect Morgan Stanley's updated financial models and expectations for Axsome's product performance in the market. The firm's analysis suggests a promising future for the company's treatments and their commercial success.
InvestingPro Insights
Morgan Stanley's upgrade of Axsome Therapeutics (NASDAQ:AXSM) to Overweight with a price target of $115 coincides with notable data points from InvestingPro. With a striking gross profit margin of 90.37% over the last twelve months as of Q1 2023, Axsome has demonstrated an ability to maintain an impressive level of profitability on its revenues. This aligns with Morgan Stanley's confidence in the commercial potential of Axsome's products, such as AXS-05 and Auvelity.
Despite the lack of profitability over the past year and analysts' expectations that the company will not be profitable this year, Axsome's liquid assets surpass its short-term obligations, indicating a degree of financial flexibility. This is a critical factor as the company moves into a period that Morgan Stanley anticipates to be filled with growth opportunities. Additionally, with a market capitalization of $3.41 billion and a substantial revenue growth of 440.8% in the last twelve months, Axsome's financial position appears robust as it approaches upcoming milestones.
For investors seeking deeper analysis, there are 7 additional InvestingPro Tips available on Axsome, which can be accessed at https://www.investing.com/pro/AXSM. These tips may provide further insights into the company's financial health and market performance. To enrich your investment research, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
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