Axsome Therapeutics, Inc. (NASDAQ: AXSM) stock got a major boost in the final days of November after posting positive results from recent clinical trials. The phase-3 study saw the new Alzheimer's Disease agitation treatment, known for now as AXS-05, meet not only its primary endpoint but also key secondary endpoints. These characteristics include the delaying of relapse duration and the prevention of agitation relapse.

This drug has already received Breakthrough status from the United States Food and Drug Administration. That is good news, of course, as the FDA has not presently approved any Alzheimer's Disease agitation treatments.

Early in the session, following the news, trading volume for AXSM jumped to 7 million. For reference, their average daily trading volume is only 1.3 million shares; an increase of more than 500%. The push raised the stock more than 31% (at one point), increasing the margin from the top of the year to +98.1%.

Specifically, the ACCORD trial found AXS-05 delays the time of relapse of agitation by a statistically significant 0.275. The figures imply a 3.6-fold lower relapse risk (when compared to a placebo).

Drug Trial Success(es) Bolsters Profit Potential

The good news comes only about eight weeks after a couple of other notable moments in Axsome Therapeutics' relatively short history. For one, the biopharmaceutical company had primary endpoint success in the SHARP trial for the drug Sunosi (Solriamfetol). The drug is designed to improve cognitive function in patients who are not only cognitively impaired but also experience excessive daytime sleepiness that is commonly associated with obstructive sleep apnea.

While the success of the SHARP trial has yet to be evaluated by the Federal government, Axsome did also recently receive FDA approval for another drug. In August, the FDA approved Auvelity (dextromethrorphan/bupropion), an extended-release tablet aimed at treating major depressive disorder in adults. Support for this drug came out of the success of two clinical studies: the [placebo-controlled] GEMINI study and the ASCEND study.

Both of these trials are crucial to Axsome's valuation trajectory, though the evidence is far more apparent in the more recent period. Indeed, the stock continued to climb as November came to a close, exchanging more than double its average daily share volume.

Growth Could Be Slow At First, so Proceed With Some Caution

Still, its moderate Buy rating suggests some caution may be warranted. After all, their current Earnings Per Share (EPS) is still in the red, and leveling out. So while the stock is certainly doing better than most of the past 12 months, it could stabilize at or around its present value and change only slightly over the next 12 months. And with a Price-to-Earnings ratio around -14.00, the company is definitely still losing money (and have a bit of a climb before they can celebrate some gains).

Along these same lines, AXSM is expected to grow earnings from -$4.42 to -$3.39. So while things are improving, the numbers continue to suggest it will be some time before AXSM gets out of the red. In addition, a -312.00% Return-on-Equity (RoE) and -90.97% Return-on-Assets (RoA) may not garner much more confidence.

At the end of the day, though, Axsome has the success of the two drugs mentioned in earlier trials to anchor their growth. Some analysts believe that annual sales of Auvelity, for one, could peak at nearly $1.8 billion. And with high expectations for Sunosi—which they acquired from industry peer Jazz Pharmaceuticals several months ago—analyst confidence remains strong.

Axsome Has More Long-Term Value than Its Peers

Jazz Pharmaceuticals plc (NASDAQ: JAZZ) is also, currently, a moderate Buy, with similar figures as AXSM. For one, they also have a negative EPS (-$0.30) and a much bigger P/E hurdle to overcome, at a value of -513.2; which might explain their sale of Sunosi to a competitor. An RoE over 30% suggests that JAZZ may be overvalued, but a 9.82% projected earnings growth is certainly more favorable than AXSM. More importantly, perhaps, Jazz Pharmaceuticals has a 0.74 beta value, making it more than 200% more stable than that of Axsome Therapeutics (whose beta is 1.75).

On the other hand, Axsome peers Bausch Health Companies, Inc. (NYSE: BHC) is down more than 75% on the year so far, sitting just above the bottom 10% of its 52-week range. And while this particular stock has better EPS (of $0.70), RoE (of 942.70%), and Projected Earnings Growth (17.86%), it does not show as much promise as AXSM. Indeed, analysts will be waiting to see if their HOLD consensus rating will improve when Bausch releases their next earnings report in February, about two weeks before Axsome releases theirs.

Take that into consideration as you ponder Axsome Therapeutic Inc.'s current moderate Buy rating.