Round two for Axsome

Fresh from a mid-stage success in depression Axsome offers an unusual way to trade its upcoming phase III result.


During JP Morgan conference week Axsome scored a phase II win in depression. Curiously, concurrently with the phase II study the company was running phase III, and conveniently for investors the pivotal trial is due to read out imminently.

However, those wanting to trade the upcoming data will not find it easy. True, the study has been structured in a way that minimises the chances of failure. But on the other hand, this fact could prove problematic with regulators if the data are positive, not to mention that an important conflict of interest exists.

The conflict relates to the precise ownership of the asset in question, AXS-05, which is a proprietary combination of the antidepressant bupropion and the cough suppressant dextromethorphan. The inventor of this is Herriot Tabuteau, Axsome’s chief executive.

Mr Tabuteau assigned these patents to an entity called Antecip Bioventures II, which he owns and which in turn licensed them to Axsome in return for a 3% royalty. Should a dispute arise Mr Tabuteau will clearly be conflicted; the arrangement can be terminated by Antecip “for cause” and by Axsome “for convenience”, the latter’s IPO document states.

Project AXS-05
Company Axsome
Market cap $240m
Product NPV $186m
NPV as % of mkt cap 77%
Event Readout of phase III Stride-1 study
Timing Q1 2019

As for the phase III trial, called Stride-1, this tests AXS-05 in treatment-resistant depression (TRD) rather than the acute episode setting of phase II. Should the study read out positively a potential issue for regulators will be whether it actually tests AXS-05 in the condition claimed.

Axsome classifies inadequate historical response to as little as one antidepressant as treatment resistance. Though there is no firmly accepted definition of TRD some papers cite a need to show failure to respond to multiple medications, psychotherapy and electroconvulsive therapy.

Most importantly, the US FDA’s own draft guidance on TRD says patients should have no response to “more than one prior antidepressant, administered at an adequate dose and duration”. Axsome might thus have boosted chances of success by enrolling insufficiently severe subjects into Stride-1, something that could come back to haunt it in regulatory review.

Another controversial aspect of Stride-1’s design is the requirement that patients have a prospective inadequate response to bupropion. AXS-05 is being compared precisely against bupropion in Stride-1, so such a requirement looks like a near-certain way of achieving zero response in the control group.

On the other hand, being non-responsive to bupropion could be seen as detrimental to AXS-05 too, since this is one of its ingredients. But, though bupropion is an antidepressant, its role in AXS-05 is to increase the bioavailability of dextromethorphan, which while being sold as an OTC cough suppressant is also active at NMDA receptors, giving it an anaesthetic-like effect at high doses.

Also important is that patents surrounding what is ultimately a combination of generically available drugs might be weak; Antecip-owned IP covering a separate Axsome reformulation, AXS-02, was recently struck down in an action brought by Grünenthal.

As Vantage went to press Axsome had not responded to questions about this and other aspects of the AXS-05 project.

At least the scientific hypothesis is backed by Axsome’s recent success in phase II, where AXS-05 beat bupropion in the acute setting. Bulls will also take heart in the efficacy measure of that study being the same as Stride-1’s primary endpoint, improvement in MADRS total score over six weeks.

This is not to say that Stride-1 is a slam dunk, but it certainly appears to have an artificially high chance of success. For investors buying for the long term, however, the real problems could come later.

Study Design Primary endpoint Trial ID
Ascend Phase II, acute depression episodes, 74 pts Safety* NCT03595579
Stride-1 Phase III, treatment-resistant depression, 350 pts 6wk MADRS score NCT02741791
Note: *showed benefit on 6wk MADRS score, a secondary endpoint.

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