Axsome Therapeutics is inching closer to profitability, and Wall Street is taking notice. RBC Capital Markets said the drugmaker could turn a profit by 2027, following a third-quarter report that showed a much narrower loss and surging sales of its lead antidepressant, Auvelity.
The New York-based biopharmaceutical company reported a loss of $0.25 per share for the quarter, a dramatic improvement from the $0.94 per share loss it posted a year earlier. Revenue climbed to $259.7 million from $171.0 million in the same period last year, powered by Auvelity, which brought in $207.6 million in net product sales—a figure that RBC said matched Wall Street's expectations.
Auvelity's Growth Story
Auvelity, approved for major depressive disorder (MDD), has become the cornerstone of Axsome's business. The drug's rapid uptake is a key reason the company's losses are shrinking. RBC's analysts see Auvelity as the main driver of Axsome's next growth phase, which includes expanding its use into Alzheimer's disease agitation (ADA).
That expansion is crucial. RBC expects the ADA indication to ramp up more slowly than Auvelity's original depression launch, reflecting the complexities of treating Alzheimer's patients and the need for additional clinical data. Still, the firm sees a large long-term opportunity: it forecasts $2.2 billion in MDD sales and $1.7 billion in ADA sales by 2035.
Despite those intact forecasts, RBC trimmed its price target on Axsome to $273 from $295, while maintaining an “outperform” rating. The stock still rose more than 5% on the day, suggesting investors focused on the improving loss and the path to profitability rather than the target cut.
Why the Price Target Move Matters
For everyday investors, the price target adjustment might seem contradictory—how can a stock jump when an analyst lowers their target? The answer lies in how price targets are calculated. They are model outputs, not predictions of a stock's exact future price. Analysts adjust them based on changes in assumptions, such as future sales growth, profit margins, or the discount rate applied to future cash flows.
In this case, RBC's 2027 profitability call is significant because profitable companies are less dependent on cash flows many years down the road. That can make a stock more attractive when losses are improving, as it reduces the risk that the company will need to raise more capital or dilute shareholders.
However, RBC also flagged uncertainty around how quickly Auvelity can expand into ADA. If that second indication ramps more slowly than expected, analysts often trim long-range sales forecasts or apply a slightly lower valuation multiple. That's a clean way to arrive at a $273 target instead of $295 without changing the broader investment thesis.
What It Means for Investors
Axsome's valuation is likely to remain most sensitive to Auvelity's uptake in ADA, not small quarter-to-quarter beats. Investors should watch for updates on clinical trials, regulatory milestones, and any commentary from management about the launch trajectory in Alzheimer's disease agitation.
The broader biotech sector has seen similar dynamics, where a single drug's success can make or break a company's fortunes. For Axsome, the narrowing loss is a positive sign, but the real test will be whether Auvelity can replicate its depression success in a more challenging patient population.
RBC's price target cut, while notable, doesn't change the fundamental story: Axsome is on a path to profitability, and its lead drug is scaling fast. For investors, the key is to monitor the ADA opportunity and whether the company can execute on its expansion plans.
As always, it's worth remembering that analyst price targets are just one data point. They reflect a snapshot of expectations, not a guarantee of future performance. For those considering Axsome, the focus should be on the company's execution and the market opportunity for Auvelity in both MDD and ADA.
