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What changed in Axsome Therapeutics, Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Axsome Therapeutics, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+487 added−458 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-28)

Top changes in Axsome Therapeutics, Inc.'s 2023 10-K

487 paragraphs added · 458 removed · 364 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

100 edited+39 added−23 removed372 unchanged
Biggest changeIf our operations are found to be in violation of any of the laws or regulations described above or any other laws that apply to us, we may be subject penalties or other enforcement actions, including criminal and significant civil monetary penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, corporate integrity agreements, debarment from receiving government contracts or refusal of new orders under existing contracts, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations.
Biggest changeIf our operations are found to be in violation of any of the laws or regulations described above or any other laws that apply to us, we may be subject penalties or other enforcement actions, including criminal and significant civil monetary penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in government healthcare programs, corporate integrity agreements, debarment from receiving government contracts or refusal of new orders under existing contracts, reputational harm, diminished profits and future earnings, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our results of operations. 33 Table of Contents To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post‑marketing requirements, including safety surveillance, anti‑fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or transfers of value to healthcare professionals.
We have also completed the ACCORD trial, a Phase 3, double blind, placebo-controlled, randomized withdrawal trial in patients with AD agitation, and we are conducting an open-label long-term safety study in AD agitation. We are currently conducting the ADVANCE-2 trial, another Phase 3, double blind, placebo-controlled, randomized withdrawal trial in patients with AD agitation.
We have also completed the ACCORD trial, a Phase 3, double blind, placebo-controlled, randomized withdrawal trial in patients with AD agitation, and we are conducting an open-label long-term safety study in AD agitation. We are currently conducting the ADVANCE-2 trial, another Phase 3, double blind, placebo-controlled, trial in patients with AD agitation.
The ACA also imposed an affirmative obligation to report and repay any overpayments, including those payments that resulted from violations of the Anti-Kickback Statute, false claims act, or civil monetary penalties statute, within sixty (60) days after such overpayment has been identified. Corresponding case law imposes an obligation on entities to exercise reasonable diligence in identifying such overpayments.
The ACA also imposed an affirmative obligation to report and repay any overpayments, including those payments that resulted from violations of the Anti-Kickback Statute, False Claims Act, or Civil Monetary Penalties Law, within sixty (60) days after such overpayment has been identified. Corresponding case law imposes an obligation on entities to exercise reasonable diligence in identifying such overpayments.
In a Phase 3 trial conducted by Pfizer in 1,122 patients with fibromyalgia treated with esreboxetine or placebo for 14 weeks, the study met the two primary endpoints demonstrating statistically significant improvements compared to placebo in the weekly mean pain score (p 15 Table of Contents In a Phase 2 trial conducted by Pfizer in 267 patients with fibromyalgia treated with esreboxetine (dose escalated to 8 mg/day) or placebo for 8 weeks, esreboxetine met its primary endpoint demonstrating statistically significant improvements compared to placebo in the weekly mean pain score (p=0.006).
In a Phase 3 trial conducted by Pfizer in 1,122 patients with fibromyalgia treated with esreboxetine or placebo for 14 weeks, the study met the two primary endpoints demonstrating statistically significant improvements compared to placebo in the weekly mean pain score (p 14 Table of Contents In a Phase 2 trial conducted by Pfizer in 267 patients with fibromyalgia treated with esreboxetine (dose escalated to 8 mg/day) or placebo for 8 weeks, esreboxetine met its primary endpoint demonstrating statistically significant improvements compared to placebo in the weekly mean pain score (p=0.006).
The safety profile of AXS-07 over the 12-month treatment period was consistent with that previously reported in short-term controlled trials. The most commonly reported adverse events (≥3%) were nausea, dizziness, and vomiting. 13 Table of Contents AXS-12 Overview AXS-12, reboxetine, is a novel, oral, investigational medicine that we are initially developing for the treatment of the symptoms of narcolepsy.
The safety profile of AXS-07 over the 12-month treatment period was consistent with that previously reported in short-term controlled trials. The most commonly reported adverse events (≥3%) were nausea, dizziness, and vomiting. 12 Table of Contents AXS-12 Overview AXS-12, reboxetine, is a novel, oral, investigational medicine that we are initially developing for the treatment of the symptoms of narcolepsy.
Fraud and Abuse, and Transparency Laws and Regulations Our business activities, including but not limited to research, sales, promotion, marketing, distribution, medical education, sponsorships, relationships with prescribers and other referral sources are subject to regulation by numerous federal and state regulatory and law enforcement authorities in the United States in addition to the FDA, including potentially the Department of Justice, the Department of Health and Human Services and its various divisions, including the Centers for Medicare & Medicaid Services, or CMS the Office of Inspector General, or OIG, and the Health Resources and Services Administration, or HRSA, the Department of Veterans Affairs, the Department of Defense, and certain state and local governments.
Fraud and Abuse, and Transparency Laws and Regulations Our business activities, including but not limited to research, sales, promotion, marketing, distribution, medical education, sponsorships, relationships with prescribers and other referral sources are subject to regulation by numerous federal and state regulatory and law enforcement authorities in the United States in addition to the FDA, including potentially the Department of Justice, HHS and its various divisions, including the Centers for Medicare & Medicaid Services, or CMS, the Office of Inspector General, or OIG, and the Health Resources and Services Administration, or HRSA, the Department of Veterans Affairs, the Department of Defense, and certain state and local governments.
In the INTERCEPT study a total of 302 patients were randomized in a 1:1 ratio to treat a single migraine attack with a single dose of AXS-07, or placebo, at the earliest sign of migraine pain, while the pain intensity was mild. 12 Table of Contents AXS-07 met both of the two co-primary endpoints by demonstrating a statistically significantly greater percentage of patients as compared to placebo achieving pain freedom (32.6% versus 16.3%, p=0.002) and freedom from most bothersome symptom (43.9% versus 26.7%, p=0.003), 2 hours after dosing.
In the INTERCEPT study a total of 302 patients were randomized in a 1:1 ratio to treat a single migraine attack with a single dose of AXS-07, or placebo, at the earliest sign of migraine pain, while the pain intensity was mild. 11 Table of Contents AXS-07 met both of the two co-primary endpoints by demonstrating a statistically significantly greater percentage of patients as compared to placebo achieving pain freedom (32.6% versus 16.3%, p=0.002) and freedom from most bothersome symptom (43.9% versus 26.7%, p=0.003), 2 hours after dosing.
In this trial, 366 Alzheimer’s disease patients were randomized to treatment with AXS-05 (dextromethorphan-bupropion tablet, dose escalated to 45 mg-105 mg twice daily), bupropion (dose escalated to 105 mg twice daily), or matching placebo, for 5 weeks. 9 Table of Contents AXS-05 met the primary endpoint by demonstrating a statistically significant mean reduction in the Cohen Mansfield Agitation Inventory (CMAI) total score compared to placebo at Week 5, with mean reductions from baseline of 15.4 points for AXS-05 and 11.5 points for placebo (p=0.010).
In this trial, 366 Alzheimer’s disease patients were randomized to treatment with AXS-05 (dextromethorphan-bupropion tablet, dose escalated to 45 mg-105 mg twice daily), bupropion (dose escalated to 105 mg twice daily), or matching placebo, for 5 weeks. 8 Table of Contents AXS-05 met the primary endpoint by demonstrating a statistically significant mean reduction in the Cohen Mansfield Agitation Inventory (CMAI) total score compared to placebo at Week 5, with mean reductions from baseline of 15.4 points for AXS-05 and 11.5 points for placebo (p=0.010).
The FDA will determine that a product will fill an unmet medical need if the prroduct will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy, safety, or public health factors.
The FDA will determine that a product will fill an unmet medical need if the product will provide a therapy where none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy, safety, or public health factors.
AXS-12 treatment resulted in a 31.8% mean reduction from baseline in the average weekly number of inadvertent naps versus a 5.3% mean reduction for placebo (p 14 Table of Contents AXS-12 significantly improved cognitive function compared to placebo over the 2-week treatment period as measured by the Ability to Concentrate item of the Narcolepsy Symptom Assessment Questionnaire (NSAQ), which was assessed daily (p AXS-12 significantly improved sleep quality, as measured by overall improvement and by number of awakenings at night, and reduced sleep-related symptoms, as compared to placebo.
AXS-12 treatment resulted in a 31.8% mean reduction from baseline in the average weekly number of inadvertent naps versus a 5.3% mean reduction for placebo (p 13 Table of Contents AXS-12 significantly improved cognitive function compared to placebo over the 2-week treatment period as measured by the Ability to Concentrate item of the Narcolepsy Symptom Assessment Questionnaire (NSAQ), which was assessed daily (p AXS-12 significantly improved sleep quality, as measured by overall improvement and by number of awakenings at night, and reduced sleep-related symptoms, as compared to placebo.
Our portfolio primarily consists of two commercial products and the development programs described below. Commercial Products 1. Auvelity®. Auvelity (dextromethorphan-bupropion) is a novel, oral, N-methyl-D-aspartate (NMDA) receptor antagonist with multimodal activity indicated for the treatment of major depressive disorder, also known as MDD. Auvelity was developed by the Company and approved by the U.S.
Our portfolio primarily consists of two commercial products and the development programs described below. Commercial Products 1. Auvelity®. Auvelity (dextromethorphan-bupropion) is a novel, oral, N-methyl-D-aspartate (NMDA) receptor antagonist with multimodal activity indicated to the treatment of major depressive disorder, also known as MDD. Auvelity was developed by the Company and approved by the U.S.
Sales of our product candidates will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our products will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid, private health insurers, and other third‑party payors.
Sales of our products will therefore depend substantially, both domestically and abroad, on the extent to which the costs of our products will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, such as Medicare and Medicaid, private health insurers, and other third‑party payors.
The principal reasons given in the CRL relate to chemistry, manufacturing, and controls, or CMC considerations. 5 Table of Contents AXS-12, reboxetine, is a novel, oral, investigational medicine in development for the treatment of narcolepsy. AXS-12 is a highly selective and potent norepinephrine reuptake inhibitor. AXS-12 has been granted FDA Orphan Drug Designation for the treatment of narcolepsy.
The principal reasons given in the CRL relate to chemistry, manufacturing, and controls, or CMC considerations. 4 Table of Contents AXS-12, reboxetine, is a novel, oral, investigational medicine in development for the treatment of narcolepsy. AXS-12 is a highly selective and potent norepinephrine reuptake inhibitor. AXS-12 has been granted FDA Orphan Drug Designation for the treatment of narcolepsy.
We continue to evaluate strategic options for the commercialization of our other product candidates. 7 Table of Contents Our current CNS product candidate pipeline is summarized in the table below: 8 Table of Contents CNS Product Candidates AXS‑05 Overview AXS-05 is a novel, oral, investigational NMDA receptor antagonist with multimodal activity under development for the treatment of CNS disorders.
We continue to evaluate strategic options for the commercialization of our other product candidates. 6 Table of Contents Our current CNS product candidate pipeline is summarized in the table below: 7 Table of Contents CNS Product Candidates AXS‑05 Overview AXS-05 is a novel, oral, investigational NMDA receptor antagonist with multimodal activity under development for the treatment of CNS disorders.
The primary efficacy measure is the Cohen-Mansfield Agitation Inventory (CMAI). 10 Table of Contents Smoking Cessation We are developing AXS-05 as an aid to smoking cessation treatment. Nearly 40 million American adults smoke and around 70% report that they want to quit.
The primary efficacy measure is the Cohen-Mansfield Agitation Inventory (CMAI). 9 Table of Contents Smoking Cessation We are developing AXS-05 as an aid to smoking cessation treatment. Nearly 40 million American adults smoke and around 70% report that they want to quit.
Material License Agreements Exclusive License Agreement with Pfizer In January 2020, we entered into an agreement with Pfizer Inc., or Pfizer for an exclusive U.S. license to Pfizer’s clinical and nonclinical data, and intellectual property for reboxetine, the active pharmaceutical ingredient in AXS-12 which Axsome is developing for the treatment of narcolepsy.
Material License Agreements Exclusive License Agreement with Pfizer In January 2020, we entered into an agreement with Pfizer for an exclusive U.S. license to Pfizer’s clinical and nonclinical data, and intellectual property for reboxetine, the active pharmaceutical ingredient in AXS-12 which Axsome is developing for the treatment of narcolepsy.
We have other patent applications with claims covering the other programs in our pipeline, including those that are not relevant to our current programs in development. As with respect to Sunosi, Orange Book listed patents in the United States extend out to 2040. We also have patents in various other countries pertaining to Sunosi.
We have other patent applications with claims covering the other programs in our pipeline, including those that are not relevant to our current programs in development. As with respect to Sunosi, Orange Book listed patents in the United States extend out to 2042. We also have patents in various other countries pertaining to Sunosi.
For some specialty drugs, payors are conditioning payment on successful treatment measured by objective metrics. While we cannot predict whether any proposed cost‑containment measures will be adopted or otherwise implemented in the future, the announcement or adoption of these proposals could have a material adverse effect on our ability to obtain adequate prices for our product candidates and operate profitably.
For some specialty drugs, payors are conditioning payment on successful treatment measured by objective metrics. While we cannot predict whether any proposed cost‑containment measures will be adopted or otherwise implemented in the future, the announcement or adoption of these proposals could have a material adverse effect on our ability to obtain adequate prices for our products and operate profitably.
We believe that products with clearly differentiated features will be attractive to patients and their physicians, and will provide us with a competitive commercial advantage. 6 Table of Contents • Reduce clinical and regulatory risk, limit development costs, and accelerate time to market.
We believe that products with clearly differentiated features will be attractive to patients and their physicians and will provide us with a competitive commercial advantage. 5 Table of Contents • Reduce clinical and regulatory risk, limit development costs, and accelerate time to market.
Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA, permits an applicant to file a new drug application, or NDA, that relies, in part, on the FDA’s prior findings of safety and efficacy in the approval of a similar drug, or on published literature.
Section 505(b)(2) of the Federal Food, Drug, and Cosmetic Act, or FDCA, permits an applicant to file an NDA that relies, in part, on the FDA’s prior findings of safety and efficacy in the approval of a similar drug, or on published literature.
After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a Complete Response Letter, or CRL.
After evaluating the NDA and all related information, including the advisory committee recommendation, if any, and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter, or, in some cases, a CRL.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressures.
NDA Submission, Review by the FDA, and Marketing Approval Assuming successful completion of the required clinical and preclinical testing, the results of product development, including chemistry, manufacturing, and control (CMC) information, non-clinical studies, and clinical trial results, including negative or ambiguous results as well as positive findings, are all submitted to the FDA, along with the proposed labeling, as part of an NDA requesting approval to market the product for one or more indications.
NDA Submission, Review by the FDA, and Marketing Approval Assuming successful completion of the required clinical and preclinical testing, the results of product development, including CMC information, non-clinical studies, and clinical trial results, including negative or ambiguous results as well as positive findings, are all submitted to the FDA, along with the proposed labeling, as part of an NDA requesting approval to market the product for one or more indications.
Substantial new provisions affecting compliance have also been enacted through the ACA and otherwise, including the reporting of drug sample distribution, which may require us to modify our business practices with healthcare practitioners. Moreover, in the coming years, additional changes could be made to governmental healthcare programs that could significantly impact the success of our product candidates.
Substantial new provisions affecting compliance have also been enacted through the ACA and otherwise, including the reporting of drug sample distribution, which may require us to modify our business practices with healthcare practitioners. Moreover, in the coming years, additional changes could be made to governmental healthcare programs that could significantly impact the success of our products.
Due to the product sales of Auvelity in the fourth quarter of 2022, we recorded an accrual for royalty payments due to Antecip equal to 3.0% of net sales. This is considered to be a related party transaction.
Due to product sales of Auvelity since the fourth quarter of 2022, we recorded an accrual for royalty payments due to Antecip equal to 3.0% of net sales. This is considered to be a related party transaction.
These laws may affect our future sales, marketing, and other promotional activities by imposing administrative and compliance burdens. 33 Table of Contents Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that certain business activities could be subject to challenge under one or more of such laws.
These laws may affect our future sales, marketing, and other promotional activities by imposing administrative and compliance burdens. Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that certain business activities could be subject to challenge under one or more of such laws.
Adequate third‑party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products and product candidates or exclusion of our products and product candidates from coverage.
Adequate third‑party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in drug development. Legislative proposals to reform healthcare or reduce costs under government insurance programs may result in lower reimbursement for our products or exclusion of our products from coverage.
Any marketing efforts that are determined to have violated such policies could result in the denial or removal of our products from that hospital’s formulary. 35 Table of Contents Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.
Any marketing efforts that are determined to have violated such policies could result in the denial or removal of our products from that hospital’s formulary. Moreover, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.
Our results of operations could be adversely affected by current and future healthcare reforms. Government and private payors also increasingly require pre‑approval of coverage for new or innovative devices or drug therapies or condition coverage on unsuccessful alternative treatment before they will reimburse healthcare providers that use such therapies.
Our results of operations could be adversely affected by current and future healthcare reforms. 38 Table of Contents Government and private payors also increasingly require pre‑approval of coverage for new or innovative devices or drug therapies or condition coverage on unsuccessful alternative treatment before they will reimburse healthcare providers that use such therapies.
We are aware of other companies working to develop therapeutics for the treatment of fibromyalgia including Astellas Pharma, Inc.; Aptinyx Inc.; Innovative Med Concepts, Inc.; Teva Pharmaceutical Industries Ltd; and Tonix Pharmaceutical Holding Corp.
We are aware of other companies working to develop therapeutics for the treatment of fibromyalgia including Astellas Pharma, Inc.; Aptinyx Inc.; Innovative Med Concepts, Inc.; Teva; and Tonix Pharmaceutical Holding Corp.
We are dependent on these agreements, and if we breach these agreements, our business, financial condition, results of operations, and prospects will be materially harmed. Pharmanovia In February 2023, we announced a licensing transaction with Pharmanovia to market Sunosi in European and certain Middle East / North Africa countries.
We are dependent on these agreements, and if we breach these agreements, our business, financial condition, results of operations, and prospects will be materially harmed. Pharmanovia In February 2023, we announced a licensing transaction with Pharmanovia to market Sunosi in Europe and certain countries in the Middle East / North Africa.
The approval process is lengthy and difficult and involves numerous FDA personnel assigned to review different aspects of the NDA, and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional preclinical, clinical, chemistry, manufacturing, and control ("CMC"), or other data and information.
The approval process is lengthy and difficult and involves numerous FDA personnel assigned to review different aspects of the NDA, and the FDA may refuse to approve an NDA if the applicable regulatory criteria are not satisfied or may require additional preclinical or clinical CMC or other data and information.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it. 32 Table of Contents Further, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it. Further, we may be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business.
Our product candidates may not be considered medically necessary or cost‑effective, or the rebate percentages required to secure coverage may not yield an adequate margin over cost. There is often pressure to renegotiate pricing and reimbursement levels, including, in particular, in connection with changes to Medicare.
Our products may not be considered medically necessary or cost‑effective, or the rebate percentages required to secure coverage may not yield an adequate margin over cost. There is often pressure to renegotiate pricing and reimbursement levels, including, in particular, in connection with changes to Medicare.
On expiration (but not earlier termination), we will have a perpetual, non-exclusive, fully paid, royalty-free and irrevocable license under the licensed patent rights and related data to develop, manufacture, use, commercialize and otherwise exploit the compounds. Either party may terminate the agreement for the other party’s material breach following a cure period.
On expiration (but not earlier termination), we will have a perpetual, non-exclusive, fully paid, royalty-free and irrevocable license under the licensed patent rights and related data to develop, manufacture, use, commercialize and otherwise exploit the compounds. Either 16 Table of Contents party may terminate the agreement for the other party’s material breach following a cure period.
In the MOVEMENT trial, administration of AXS-07 resulted in rapid, and substantial relief of migraine pain and associated symptoms and was well tolerated with long term dosing. We submitted an NDA for AXS-07 in 2021, which was accepted, and received a complete response letter, or CRL, from the FDA in April 2022.
In the MOVEMENT trial, administration of AXS-07 resulted in rapid, and substantial relief of migraine pain and associated symptoms and was well tolerated with long term dosing. We submitted a new drug application, or NDA, for AXS-07 in 2021, which was accepted, and received a complete response letter, or CRL, from the FDA in April 2022.
We submitted an NDA for AXS-07 in September 2021 and received a complete response letter (“CRL”) from the FDA in April 2022. The CRL did not identify or raise any concerns about the clinical efficacy or safety data in the NDA, and the FDA did not request any new clinical trials to support the approval of AXS-07.
We submitted an NDA for AXS-07 in September 2021 and received a CRL from the FDA in April 2022. The CRL did not identify or raise any concerns about the clinical efficacy or safety data in the NDA, and the FDA did not request any new clinical trials to support the approval of AXS-07.
We are aware of several companies developing compounds for the treatment of the symptoms of narcolepsy including Avadel Pharmaceuticals plc and Jazz Pharmaceuticals plc. 19 Table of Contents AXS-14 Competition Products approved to treat fibromyalgia include Cymbalta, which is marketed by Eli Lilly and Company; Lyrica, which is marketed by Pfizer, Inc.; and Savella, which is marketed by AbbVie.
We are aware of several companies developing compounds for the treatment of the symptoms of narcolepsy including Avadel Pharmaceuticals plc and Jazz. 19 Table of Contents AXS-14 Competition Products approved to treat fibromyalgia include generic and/or branded forms of Cymbalta, the branded form of which is marketed by Eli Lilly and Company; Lyrica, which is marketed by Pfizer, Inc.; and Savella, which is marketed by AbbVie.
SYMPHONY Study In September 2021, we enrolled the first patient in SYMPHONY (Study Evaluating a Mechanistic Approach to Treating Narcolepsy), a Phase 3, randomized, double-blind, placebo-controlled trial of AXS-12 in patients with narcolepsy. Topline results from the SYMPHONY trial are anticipated in the first half of 2023.
SYMPHONY Study In September 2021, we enrolled the first patient in SYMPHONY (Study Evaluating a Mechanistic Approach to Treating Narcolepsy), a Phase 3, randomized, double-blind, placebo-controlled trial of AXS-12 in patients with narcolepsy. Topline results from the SYMPHONY trial are anticipated in the first quarter of 2024.
Additionally, the reimbursement process is complex and can involve lengthy delays. Third party payors may disallow, in whole or in part, providers’ requests for reimbursement based on determinations that certain amounts are not reimbursable under plan coverage, that the drugs provided were not medically necessary, or that additional supporting documentation is necessary.
Additionally, the reimbursement process is complex and can involve lengthy delays. Third-party payors may disallow, in whole or in part, providers’ requests for reimbursement based on determinations that certain amounts are not reimbursable under plan coverage, that the drugs provided were not medically necessary, or that additional supporting documentation is necessary. Retroactive adjustments may change amounts realized from third-party payors.
Upon expiration of the agreements with respect to a product in a country, our license grant for that product in that country will become a fully paid‑up, royalty‑free, perpetual non‑exclusive license.
Upon expiration of the agreements with respect to a product in a country, our license grant for that product in that country will become a fully paid up, royalty free, perpetual, nonexclusive license.
AXS‑07 Competition There are a number of products approved for the acute treatment of migraine including Maxalt, which is marketed by Merck & Co., Inc., Treximet, which is marketed by Pernix Therapeutics Holdings, Inc., Reyvow, which is marketed by Eli Lilly and Company; Nurtec, which is marketed by Pfizer, and Ubrelvy, which is marketed by AbbVie, and Trudhesa which is marketed by Impel.
AXS‑07 Competition There are a number of products approved for the acute treatment of migraine including generic and/or branded forms of Maxalt, the branded form of which is marketed by Merck & Co., Inc., generic and/or branded forms of Treximet, the branded form of which is marketed by Pernix Therapeutics Holdings, Inc., Reyvow, which is marketed by Eli Lilly and Company; Nurtec, which is marketed by Pfizer, and Ubrelvy, which is marketed by AbbVie, and Trudhesa which is marketed by Impel.
There is currently no FDA-approved pharmacological treatment for the indication of AD agitation. AD is a progressive neurodegenerative disorder that manifests initially as forgetfulness advancing to severe cognitive impairment and memory loss.
There is only one FDA-approved pharmacological treatment for the indication of AD agitation. AD is a progressive neurodegenerative disorder that manifests initially as forgetfulness advancing to severe cognitive impairment and memory loss.
In addition, the VHCA requires manufacturers participating in Medicaid to agree to provide different mandatory discounts to certain Public Health Service grantees and other safety net hospitals and clinics under the 340B Drug Pricing Program and report the ceiling price to HRSA within Department of Health and Human Services.
In addition, the VHCA requires manufacturers participating in Medicaid to agree to provide different mandatory discounts to certain Public Health Service grantees and other safety net hospitals and clinics under the 340B Drug Pricing Program and report the ceiling price to HRSA within HHS.
CNS Product Candidates AXS‑05 Competition We are aware of other companies working to develop therapeutics for the treatment of agitation associated with AD, including Otsuka Pharmaceutical Co. Ltd., which is working to develop a combination of deuterated dextromethorphan and quinidine, and Otsuka and Lundbeck A/S, who are working on developing Rexulti for this indication.
CNS Product Candidates AXS‑05 Competition We are aware of other companies working to develop therapeutics for the treatment of agitation associated with AD, including Otsuka Pharmaceutical Co. Ltd., which is working to develop a combination of deuterated dextromethorphan and quinidine, and Otsuka and Lundbeck A/S, which recently received approval for Rexulti for this indication.
Research and Development Conducting research and development is central to our business model. We have invested and expect to continue to invest significant time and capital in our research and development operations. Our research and development expenses were $57.9 million, and $58.1 million for the years ended December 31, 2022 and 2021, respectively.
Research and Development Conducting research and development is central to our business model. We have invested and expect to continue to invest significant time and capital in our research and development operations. Our research and development expenses were $97.9 million, and $57.9 million for the years ended December 31, 2023 and 2022, respectively.
For example, California recently enacted legislation – the California Consumer Privacy Act, or CCPA, was made effective January 1, 2020, and was recently amended and expanded by the California Privacy Rights Act (CPRA) passed on November 3, 2020.
For example, California recently enacted legislation – the California Consumer Privacy Act, or CCPA, which became effective January 1, 2020. The CCPA was recently amended and expanded by the California Privacy Rights Act (CPRA), which passed on November 3, 2020 and became effective on January 1, 2023.
U.S. patents generally have a term of 20 years from the earliest effective date of the application. 17 Table of Contents As of February 21, 2023, our intellectual property portfolio contains 300 issued patents and more than 400 pending applications in the United States and worldwide.
U.S. patents generally have a term of 20 years from the earliest effective date of the application. 17 Table of Contents As of February 13, 2024, our intellectual property portfolio contains more than 600 issued patents and more than 400 pending applications in the United States and worldwide.
We intend to commercialize our product candidates, if approved, in the United States through the establishment of our own focused, cost‑effective sales and marketing organization targeting high‑prescribing specialists.
We intend to commercialize our product candidates, if approved, in the United States through the establishment of our own focused, cost‑effective sales and marketing organization.
We plan to increase our research and development expenses for the foreseeable future as we seek to complete the development of AXS-05, AXS-07, AXS-12, AXS-14 and solriamfetol. 40 Table of Contents Employees and Human Capital Management As of February 21, 2023, we had 383 full‑time employees.
We plan to increase our research and development expenses for the foreseeable future as we seek to complete the development of AXS-05, AXS-07, AXS-12, AXS-14 and solriamfetol. 40 Table of Contents Employees and Human Capital Management As of February 13, 2024, we had 545 full‑time employees.
AXS-12 is a highly selective and potent norepinephrine reuptake inhibitor. Narcolepsy Narcolepsy is a serious and debilitating neurological condition that causes dysregulation of the sleep-wake cycle and is characterized clinically by excessive daytime sleepiness, cataplexy, hypnagogic hallucinations, sleep paralysis, and disrupted nocturnal sleep. Narcolepsy afflicts an estimated 185,000 individuals in the U.S.
Narcolepsy Narcolepsy is a serious and debilitating neurological condition that causes dysregulation of the sleep-wake cycle and is characterized clinically by excessive daytime sleepiness, cataplexy, hypnagogic hallucinations, sleep paralysis, and disrupted nocturnal sleep. Narcolepsy afflicts an estimated 185,000 individuals in the U.S.
More than 83 issued United States patents and more than 107 issued foreign patents covering our AXS-07 product candidate, and related compounds, have claims covering various aspects, including pharmacokinetics, pharmaceutical composition, method of delivery, and methods of use with protection extending through 2036. Five issued United States patents covering our AXS-12 product candidate with protection extending through 2039.
More than 96 issued United States patents and more than 125 issued foreign patents covering our AXS-07 product candidate, and related compounds, have claims covering various aspects, including pharmacokinetics, pharmaceutical composition, method of delivery, and methods of use with protection extending through 2038. Six issued United States patents covering our AXS-12 product candidate with protection extending through 2039.
Refer to Note 18 – Subsequent Events to our consolidated financial statements included in Part IV, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K for further detail.
Refer to Note 16 - License Agreements to our consolidated financial statements included in Part IV, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K for further detail.
Patients with EDS have available to them a variety of medications. such was Xyrem and Xywav, which is marketed by Jazz; Wakix, which is marketed by Harmony; Provigil and Nuvigil, which are manufactured by Teva.
Patients with EDS have available to them a variety of medications. such was generic and/or branded forms of Xyrem and Xywav, which is marketed by Jazz; Wakix, which is marketed by Harmony; Provigil and Nuvigil, which are manufactured by Teva Pharmaceutical Industries Limited, or Teva.
We believe that CNS disorders are significantly underserved therapeutic segments with currently limited treatment options. We are developing our product candidates for CNS indications where there exist significant unmet medical needs, or that have no or few FDA‑approved pharmacological treatments. CNS disorders are often disabling, difficult to treat, and associated with significant comorbidities.
We are developing our product candidates for CNS indications where there exist significant unmet medical needs, or that have no or few FDA‑approved pharmacological treatments. CNS disorders are often disabling, difficult to treat, and associated with significant comorbidities.
Published surveys of migraine sufferers indicate that more than 70% are not fully satisfied with their current treatment, that nearly 80% would try a new therapy, and that they desire treatments that work faster, more consistently, and result in less symptom recurrence.
Published surveys of migraine sufferers indicate that more than 70% are not fully satisfied with their current treatment, that nearly 80% would try a new therapy, and that they desire treatments that work faster, more consistently, and result in less symptom recurrence. 10 Table of Contents MOMENTUM Study In March 2019, we initiated the MOMENTUM study.
Some of these treatments include: Prozac, which is marketed by Eli Lilly and Company; Zoloft, which is marketed by Pfizer, Inc.; Trintellix, which is marketed by Takeda Pharmaceuticals America, Inc and H.
Some of these treatments include: generic and/or branded forms of Prozac, the branded form of which is marketed by Eli Lilly and Company; Zoloft, which is marketed by Pfizer, Inc.; Trintellix, which is marketed by Takeda Pharmaceuticals America, Inc and H.
AXS‑12 Competition Products approved to treat the symptoms of narcolepsy include Ritalin, which is marketed by Novartis Pharmaceuticals; Provigil and Nuvigil, which are both marketed by Teva Pharmaceutical Industries Ltd; Xyrem and Xywav, which are all marketed by Jazz Pharmaceuticals plc; and Wakix which is marketed by Harmony Biosciences LLC.
AXS‑12 Competition Products approved to treat the symptoms of narcolepsy include generic and/or branded forms of Ritalin, the branded form of which is marketed by Novartis Pharmaceuticals; Provigil and Nuvigil, which are both marketed by Teva; Xyrem and Xywav, which are all marketed by Jazz; and Wakix which is marketed by Harmony Biosciences LLC.
While the majority of the CPRA’s substantive provisions will not take effect until January 1, 2023, the CPRA’s expansion of the “Right to Know” impacts personal information collected on or after January 1, 2022. Companies must still comply with the CCPA during the ramp up period before CPRA goes into effect.
The CPRA’s expansion of the “Right to Know” impacts personal information collected on or after January 1, 2022. Companies must still comply with the CCPA during the ramp up period before CPRA goes into effect.
There are no royalty payments due to Jazz for net sales outside of the U.S. In addition, we assumed all of the commitments of Jazz to SK Biopharmaceuticals Co., Ltd., or “SK”, and Aerial Biopharma, LLC, or Aerial. The assumed commitments to SK and Aerial include single-digit tiered royalties and certain sales and development milestones.
There are no royalty payments due to Jazz for net sales outside of the U.S. In addition, we assumed all of the commitments of Jazz to SK Biopharmaceuticals Co., Ltd., or SK, and Aerial Biopharma, LLC, or Aerial.
The unavailability or inadequacy of third-party coverage and reimbursement could negatively affect the market acceptance of our products and the future revenues we may expect to receive from those products.
Delays and uncertainties in the reimbursement process may adversely affect market acceptance and utilization of our products, resulting in reduced revenues. The unavailability or inadequacy of third-party coverage and reimbursement could negatively affect the market acceptance of our products and the future revenues we may expect to receive from those products.
More than 114 issued United States patents and more than 70 issued foreign patents covering our AXS-05 product candidate has claims covering method of treatment, pharmaceutical composition, drug delivery, and pharmacokinetics with protection extending through 2034, and 2040.
More than 127 issued United States patents and more than 76 issued foreign patents cover our AXS-05 product candidate, which has claims covering method of treatment, pharmaceutical composition, drug delivery, and pharmacokinetics, with protection extending through 2043.
We may terminate the agreement for any reason upon ninety days written notice to Pfizer at any time after the first anniversary of the agreement. 16 Table of Contents Exclusive License Agreements with Antecip In 2012, we entered into three exclusive license agreements with Antecip Bioventures II LLC, or Antecip, an entity owned by our Chief Executive Officer and Chairman of the Board, Herriot Tabuteau, M.D., in which we were granted exclusive licenses to develop, manufacture, and commercialize Antecip’s patents and applications related to the development of AXS‑05 anywhere in the world for veterinary and human therapeutic and diagnostic use, and additional patents and applications that are not relevant to our current programs in development.
Exclusive License Agreements with Antecip In 2012, we entered into three exclusive license agreements with Antecip Bioventures II LLC, or Antecip, an entity owned by our Chief Executive Officer and Chairman of the Board of Directors, or the Board, Herriot Tabuteau, M.D., in which we were granted exclusive licenses to develop, manufacture, and commercialize Antecip’s patents and applications related to the development of AXS-05 anywhere in the world for veterinary and human therapeutic and diagnostic use, and additional patents and applications that are not relevant to our current programs in development.
CONCERT Study In January 2019, we initiated the CONCERT study to evaluate the efficacy and safety of AXS-12 in narcolepsy. In December 2019, we announced that AXS-12 met the prespecified primary endpoint and significantly reduced the total number of cataplexy attacks in the CONCERT trial.
In December 2019, we announced that AXS-12 met the prespecified primary endpoint and significantly reduced the total number of cataplexy attacks in the CONCERT trial.
We have in-licensed data from Pfizer which includes a completed Phase 2 trial and Phase 3 trial in fibromyalgia, both of which were positive. Solriamfetol is the active ingredient in Sunosi. It is an oral, dual-acting dopamine and norepinephrine reuptake inhibitor. We recently announced our intent to conduct a Phase 3 trial of solriamfetol in adults with attention-deficit/hyperactivity disorder.
We have in-licensed data from Pfizer Inc., or Pfizer, which includes a completed Phase 2 trial and Phase 3 trial in fibromyalgia, both of which were positive. Solriamfetol is the active ingredient in Sunosi. It is an oral, dual-acting dopamine and norepinephrine reuptake inhibitor and TAAR1 agonist.
Migraine attacks generally last from 4 to 72 hours and are often severe and disabling, requiring bed rest. Over 37 million Americans suffer from migraine according to the Centers for Disease Control, and it is the leading cause of disability among neurological disorders in the United States according to the American Migraine Foundation.
Over 37 million Americans suffer from migraine according to the Centers for Disease Control, and it is the leading cause of disability among neurological disorders in the United States according to the American Migraine Foundation.
Because there are no FDA-approved pharmacological treatments for the indication of agitation associated with AD, patients are currently treated off-label with various agents including antipsychotics, which have been considered the mainstay of treatment. These treatments however are limited by safety concerns.
Patients with AD are currently treated with various agents including antipsychotics, which have been considered the mainstay of treatment. These treatments however are limited by safety concerns.
Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates. Any reduction in payment that results from Medicare Part D may result in a similar reduction in payments from non‑governmental payors.
Moreover, while the MMA applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy and payment limitations in setting their own payment rates.
The compliance and enforcement landscape, and related risk, is informed by government litigation and settlement precedent, Advisory Opinions, and Special Fraud Alerts. Our approach to compliance may evolve over time in light of these types of developments. Payment or reimbursement of prescription drugs by Medicaid or Medicare requires manufacturers of the drugs to submit pricing information to CMS.
Our approach to compliance may evolve over time in light of these types of developments. Payment or reimbursement of prescription drugs by Medicaid or Medicare requires manufacturers of the drugs to submit pricing information to CMS.
Part D plans include both standalone prescription drug benefit plans and prescription drug coverage as a supplement to Medicare Advantage plans. Unlike Medicare Part A and B, which do not utilize formularies to restrict coverage, Part D coverage varies by plan.
Unlike Medicare Part A and B, which do not utilize formularies to restrict coverage, Part D coverage varies by plan.
Corporate Information We were incorporated in Delaware in January 2012. Our offices are located at 22 Cortlandt Street, 16 th Floor, New York, New York 10007, and our telephone number is (212) 332-3241. Available Information We file reports and other information with the SEC, as required by the Exchange Act.
Our offices are located at One World Trade Center 22nd Floor, New York, New York 10007, and our telephone number is (212) 332-3241. Available Information We file reports and other information with the SEC, as required by the Exchange Act.
Absent clinical differentiators, third‑party payors may treat products as therapeutically equivalent and base formulary decisions on net cost.
Absent clinical differentiators, third‑party payors may treat products as therapeutically equivalent and base formulary decisions on net cost. To lower the prescription cost, manufacturers frequently rebate a portion of the prescription price to the third‑party payors.
Therefore, achieving favorable CMS coverage and reimbursement is usually a significant gating issue for successful introduction of a new product.
Private payors often rely on the lead of the governmental payors in rendering coverage and reimbursement determinations. Therefore, achieving favorable CMS coverage and reimbursement is usually a significant gating issue for successful introduction of a new product.
Even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal Trade Commission, or the FTC, failing to take appropriate steps to keep consumers' personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a).
In addition, other federal and state laws may govern the privacy and security of health and other information in certain circumstances, many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. 32 Table of Contents Even for entities that are not deemed “covered entities” or “business associates” under HIPAA, according to the United States Federal Trade Commission, or the FTC, failing to take appropriate steps to keep consumers' personal information secure constitutes unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 USC § 45(a).
Our intellectual property portfolio includes issued U.S. and foreign patents with claims extending to 2034 and 2040 for AXS-05, to 2036 for AXS-07, and to 2039 for AXS-12, as well as U.S. and foreign patent applications for AXS-05, AXS-07, AXS-12, and AXS-14. As with respect to Sunosi, Orange Book listed patents in the United States extend out to 2040.
Our intellectual property portfolio includes issued U.S. and foreign patents with claims extending to 2034, 2040, 2041, and 2043 for AXS-05, to 2038 for AXS-07, and to 2040 for AXS-12, as well as U.S. and foreign patent applications for AXS-05, AXS-07, AXS-12, and AXS-14.
We believe that our existing suppliers of our product and product candidate active pharmaceutical ingredients and finished products will be capable of providing sufficient quantities of each to meet our commercial and clinical trial supply needs. Other CMOs may be used in the future for clinical supplies and, subject to approval, commercial manufacturing.
We do not currently own or operate any manufacturing facilities for the clinical or commercial production of our drug candidates. We believe that our existing suppliers of our product and product candidate active pharmaceutical ingredients and finished products will be capable of providing sufficient quantities of each to meet our commercial and clinical trial supply needs.
In addition to salaries, these programs include potential annual discretionary bonuses, stock awards, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and flexible work schedules, among other benefits. We took proactive steps throughout the COVID-19 pandemic to protect the health and safety of our employees.
In addition to salaries, these programs include potential annual discretionary bonuses, stock awards, healthcare and insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and flexible work schedules, among other benefits. Corporate Information We were incorporated in Delaware in January 2012.
Narcolepsy interferes with cognitive, psychological, and social functioning, increases the risk of work- and driving-related accidents, and is associated with a 1.5 fold higher mortality rate. In October 2018, we received Orphan Drug Designation from the FDA for AXS-12 for the treatment of narcolepsy.
Narcolepsy interferes with cognitive, psychological, and social functioning, increases the risk of work- and driving-related accidents, and is associated with a 1.5 fold higher mortality rate. CONCERT Study In January 2019, we initiated the CONCERT study to evaluate the efficacy and safety of AXS-12 in narcolepsy.
SK Biopharmaceuticals Co. Ltd., or SK, is the originator of Sunosi and retains rights in 12 Asian markets, including China, Korea, and Japan. We refer to the acquisition of Sunosi herein as the “Acquisition.” In February 2023, we announced a licensing transaction with Pharmanovia to market Sunosi in European and certain Middle East / North Africa countries.
SK Biopharmaceuticals Co. Ltd., or SK, is the originator of Sunosi and retains rights in 12 Asian markets, including China, Korea, and Japan. We refer to the acquisition of Sunosi herein as the Acquisition.
Several pharmaceutical and other healthcare companies have further been sued under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product.
Several pharmaceutical and other healthcare companies have further been sued under these laws for allegedly providing free product to customers with the expectation that the customers would bill federal programs for the product. Civil False Claims Act actions may be brought by the government or may be brought by private individuals on behalf of the government, called “qui tam” actions.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIf we are prevented from using the 505(b)(2) pathway, we will need to use the more time consuming and expensive NDA pathway to receive product approval; • the FDA or comparable foreign regulatory authorities may not accept data from studies with clinical trial sites in foreign countries; • the FDA or comparable foreign regulatory authorities may disagree with our intended indications; • the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or our manufacturing facilities for clinical and future commercial supplies; • in connection with the chemistry, manufacturing, and controls (CMC) data necessary for our NDA filing and approval, we will need to conduct stability studies and provide stability data to establish appropriate retest or expiration dating period; • applicable to all future drug substance and drug product batches manufactured, packaged, and stored under similar circumstances, to establish the long-term storage conditions, and to provide evidence of the effect of various environmental conditions on the quality of the drug substance and drug product.
Biggest changeIf we are prevented from using the 505(b)(2) pathway, we will need to use the more time consuming and expensive NDA pathway to receive product approval; • the FDA or comparable foreign regulatory authorities may not accept data from studies with clinical trial sites in foreign countries; • the FDA or comparable foreign regulatory authorities may disagree with our intended indications; • the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or our manufacturing facilities for clinical and future commercial supplies; • in connection with the CMC data necessary for our NDA filing and approval, we will need to conduct stability studies and provide stability data to establish appropriate retest or expiration dating periods; • applicable to all future drug substance and drug product batches manufactured, packaged, and stored under similar circumstances, to establish the long-term storage conditions, and to provide evidence of the effect of various environmental conditions on the quality of the drug substance and drug product -- our product candidates may not demonstrate sufficient long-term stability to support an NDA filing or obtain approval, or the product shelf life may be limited by stability results; • there may be delays in the FDA’s ability to conduct necessary Pre-Approval Inspections, or PAIs, and more generally the FDA or comparable foreign regulatory authorities may take longer than we anticipate to make a decision on our product candidates; and • we may not be able to demonstrate that a product candidate provides an advantage over current standards of care or current or future competitive therapies in development.
In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions, and may require us to amend our clinical trial protocols or conduct additional studies that require regulatory or institutional review board, or IRB, approval, or otherwise cause delays in the approval or rejection of an application.
In addition, approval policies, regulations, or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development, vary among jurisdictions, and/or require us to amend our clinical trial protocols or conduct additional studies that require regulatory or institutional review board, or IRB, approval, or otherwise cause delays in the approval or rejection of an application.
Among the companies that currently market or are developing therapies that, if approved, our product candidates would potentially compete with include: AbbVie Inc.; Amgen Inc.; Avadel Pharmaceuticals plc; Biogen Inc.; Eli Lilly and Company; H. Lundbeck A/S; Harmony Biosciences; Intra-Cellular Therapies, Inc.; Janssen; Jazz Pharmaceuticals plc; Otsuka Pharmaceutical Co.
Among the companies that currently market or are developing therapies that, if approved, our product candidates would potentially compete with include: AbbVie Inc.; Amgen Inc.; Avadel Pharmaceuticals plc; Biogen Inc.; Eli Lilly and Company; H. Lundbeck A/S; Harmony Biosciences; Intra-Cellular Therapies, Inc.; Janssen; Jazz; Otsuka Pharmaceutical Co.
Moreover, if we are not able to comply with these requirements in a timely manner or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, we could lose investor confidence in the accuracy and completeness of our financial reports, and we could be subject to sanctions or investigations by the Nasdaq Global Market, the SEC or other regulatory authorities, which would require additional financial and management resources.
Moreover, if we are not able to comply with these requirements in a timely manner or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline, we could lose investor confidence in the accuracy and completeness of our financial reports, and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources.
We expect that we will be subject to additional risks related to entering into international business relationships, including: • different regulatory requirements for approval of drugs in foreign countries; • the potential for so‑called parallel importing, particularly within Europe, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally with EU laws supporting such “free movement of goods” within the EU; • stricter harmonized EU rules on data privacy particularly in relation to health data than is the case in the United States which are being further toughened with the EU General Data Protection Regulation, or the GDPR, which became enforceable beginning May 25, 2018; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • unexpected changes in tariffs, trade barriers, and regulatory requirements and in the health care policies of foreign jurisdictions; • economic weakness, including inflation, or political instability in particular foreign economies and markets; EAST\200834587.2 66 Table of Contents • compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • difficulties staffing and managing foreign operations; • workforce uncertainty in countries where labor unrest is more common than in the United States and worker rights tend to be stronger; • costs of compliance with U.S. laws and regulations for foreign operations, including the Foreign Corrupt Practices Act or comparable foreign regulations, and the risks and costs of noncompliance; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods, and fires.
We expect that we will be subject to additional risks related to entering into international business relationships, including: • different regulatory requirements for approval of drugs in foreign countries; • the potential for so‑called parallel importing, particularly within Europe, which is what happens when a local seller, faced with high or higher local prices, opts to import goods from a foreign market (with low or lower prices) rather than buying them locally with EU laws supporting such “free movement of goods” within the EU; • stricter harmonized EU rules on data privacy particularly in relation to health data than is the case in the United States which are being further toughened with the EU General Data Protection Regulation, or the GDPR, which became enforceable beginning May 25, 2018; • challenges enforcing our contractual and intellectual property rights, especially in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States; • unexpected changes in tariffs, trade barriers, and regulatory requirements and in the health care policies of foreign jurisdictions; • economic weakness, including inflation, or political instability in particular foreign economies and markets; • compliance with tax, employment, immigration, and labor laws for employees living or traveling abroad; 65 Table of Contents • foreign taxes, including withholding of payroll taxes; • foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations incident to doing business in another country; • difficulties staffing and managing foreign operations; • workforce uncertainty in countries where labor unrest is more common than in the United States and worker rights tend to be stronger; • costs of compliance with U.S. laws and regulations for foreign operations, including the Foreign Corrupt Practices Act or comparable foreign regulations, and the risks and costs of noncompliance; • production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and • business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including earthquakes, typhoons, floods, and fires.
In addition, because we have submitted NDAs for AXS-05 and AXS-07 pursuant to the 505(b)(2) process, we have not conducted certain additional clinical trials for these product candidates and, as such, we will have less experience with actual testing of the product candidate.
In addition, because we have submitted NDAs for AXS-05 and AXS-07 pursuant to the 505(b)(2) process, we have not conducted certain additional clinical trials for these product candidates and, as such, we will have less experience with actual testing of these product candidates.
For example, our board of directors will have the authority to issue up to 10,000,000 shares of preferred stock and to fix the price, rights, preferences, privileges, and restrictions of the preferred stock without any further vote or action by our stockholders. We do not currently have any preferred stock outstanding.
For example, our Board will have the authority to issue up to 10,000,000 shares of preferred stock and to fix the price, rights, preferences, privileges, and restrictions of the preferred stock without any further vote or action by our stockholders. We do not currently have any preferred stock outstanding.
A breach of any of the covenants under the Loan Agreement could result in a default under the Term Loan. Upon the occurrence of an event of default under the Term Loan, the Lenders could elect to declare all amounts outstanding, if any, to be immediately due and payable and terminate all commitments to extend further credit.
A breach of any of the covenants under the Loan Agreement could result in a default under the 2020 Term Loan. Upon the occurrence of an event of default under the 2020 Term Loan, the Lenders could elect to declare all amounts outstanding, if any, to be immediately due and payable and terminate all commitments to extend further credit.
In connection with the acquisition of Sunosi, in addition to the upfront purchase price, we assumed certain liabilities in connection with the acquisition and agreed to make non-refundable, non-creditable royalty payments to Jazz Pharmaceuticals on U.S. net sales. There are no royalty payments due to Jazz Pharmaceuticals for net sales outside of the U.S.
In connection with the acquisition of Sunosi, in addition to the upfront purchase price, we assumed certain liabilities in connection with the acquisition and agreed to make non-refundable, non-creditable royalty payments to Jazz on U.S. net sales. There are no royalty payments due to Jazz for net sales outside of the U.S.
If another sponsor receives EMA approval for a reboxetine containing product for the treatment of narcolepsy before we EMA approval for AXS 12 for the treatment of narcolepsy, we would be prevented from launching our product in the EU for this indication for a period of at least 10 to 12 years.
If another sponsor receives EMA approval for a reboxetine containing product for the treatment of narcolepsy before we obtain EMA approval for AXS-12 for the treatment of narcolepsy, we would be prevented from launching our product in the EU for this indication for a period of at least 10 to 12 years.
In addition, later discovery of previously unknown adverse events or that the drug is less effective than previously thought or other problems with our products, manufacturers, or manufacturing processes, or failure to comply with regulatory requirements both before and after approval, may yield various results, including: • restrictions on manufacturing or distribution, or marketing of such products; • restrictions on the labeling, including required additional warnings, such as black box warnings, contraindications, precautions, and restrictions on the approved indication or use; • modifications to promotional pieces; • requirements to conduct post‑marketing studies or clinical trials; clinical holds or termination of clinical trials; • requirements to establish or modify a REMS or a comparable foreign authority may require that we establish or modify a similar strategy, that may, for instance, require us to create or modify a medication guide outlining the risks of the previously unidentified side effects for distribution to patients, or restrict distribution of the product, if and when approved, and impose burdensome implementation requirements on us; • changes to the way the drug is administered; • liability for harm caused to patients or subjects; • reputational harm; • the drug becoming less competitive; • warning or untitled letters; • suspension of marketing or withdrawal of the products from the market; • regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing warnings or other safety information about the drug; • refusal to approve pending applications or supplements to approved applications that we submit; • recall of products; • fines, damages, restitution, or disgorgement of profits or revenues; • suspension or withdrawal of marketing approvals; • refusal to permit the import or export of our products; • product seizure or detention; • FDA debarment, debarment from government contracts, and refusal of future orders under existing contracts, exclusion from federal healthcare programs, consent decrees, or corporate integrity agreements; or EAST\200834587.2 65 Table of Contents • injunctions or the imposition of civil or criminal penalties, including imprisonment.
In addition, later discovery of previously unknown adverse events or that the drug is less effective than previously thought or other problems with our products, manufacturers, or manufacturing processes, or failure to comply with regulatory requirements both before and after approval, may yield various results, including: • restrictions on manufacturing or distribution, or marketing of such products; • restrictions on the labeling, including required additional warnings, such as black box warnings, contraindications, precautions, and restrictions on the approved indication or use; • modifications to promotional pieces; • requirements to conduct post‑marketing studies or clinical trials; clinical holds or termination of clinical trials; • requirements to establish or modify a REMS or a comparable foreign authority may require that we establish or modify a similar strategy, that may, for instance, require us to create or modify a medication guide outlining the risks of the previously unidentified side effects for distribution to patients, or restrict distribution of the product, if and when approved, and impose burdensome implementation requirements on us; • changes to the way the drug is administered; • liability for harm caused to patients or subjects; • reputational harm; • the drug becoming less competitive; • warning or untitled letters; • suspension of marketing or withdrawal of the products from the market; • regulatory authority issuance of safety alerts, Dear Healthcare Provider letters, press releases, or other communications containing warnings or other safety information about the drug; • refusal to approve pending applications or supplements to approved applications that we submit; • recall of products; • fines, damages, restitution, or disgorgement of profits or revenues; • suspension or withdrawal of marketing approvals; • refusal to permit the import or export of our products; • product seizure or detention; • FDA debarment, debarment from government contracts, and refusal of future orders under existing contracts, exclusion from federal healthcare programs, consent decrees, or corporate integrity agreements; or 64 Table of Contents • injunctions or the imposition of civil or criminal penalties, including imprisonment.
Our future funding requirements will depend on many factors, including, but not limited to: • the rate of progress and costs related to the development of our product candidates, including the costs of preparing filings for regulatory approval; • the costs associated with conducting additional clinical and non-clinical studies with any of our product candidates; EAST\200834587.2 45 Table of Contents • the potential for delays in our efforts to seek regulatory approval for our product candidates, and any costs associated with such delays; • the costs associated with selling, marketing, and distributing our approved products; • the costs of filing, prosecuting, defending, and enforcing any patent claims and other intellectual property rights associated with our product candidates; • the cost and timing of manufacturing, or having third parties manufacture, sufficient supplies of our product candidates in preparation for commercialization; • the effect of competing technological and market developments; • revenues from commercial sales of our approved products; • the terms and timing of any collaborative, licensing, co‑promotion, or other arrangements that we may establish; and • the success of the commercialization of any of our current products and, if approved, any of our product candidates.
Our future funding requirements will depend on many factors, including, but not limited to: • the rate of progress and costs related to the development of our product candidates, including the costs of preparing filings for regulatory approval; • the costs associated with conducting additional clinical and non-clinical studies with any of our product candidates; 45 Table of Contents • the potential for delays in our efforts to seek regulatory approval for our product candidates, and any costs associated with such delays; • the costs associated with selling, marketing, and distributing our approved products; • the costs of filing, prosecuting, defending, and enforcing any patent claims and other intellectual property rights associated with our product candidates; • the cost and timing of manufacturing, or having third parties manufacture, sufficient supplies of our product candidates in preparation for commercialization; • the effect of competing technological and market developments; • revenues from commercial sales of our approved products; • the terms and timing of any collaborative, licensing, co‑promotion, or other arrangements that we may establish; and • the success of the commercialization of any of our current products and, if approved, any of our product candidates.
The degree of market acceptance of any of our products will depend on a number of factors, including: • the efficacy of our products; • the prevalence and severity of adverse events associated with such product; • the clinical indications for which the product is approved and the approved claims that we may make for the product; • limitations or warnings contained in the product’s FDA‑approved labeling, including potential limitations or warnings for such product candidate, that may be more restrictive than other competitive products; • changes in the standard of care for the targeted indications for such product candidate, which could reduce the marketing impact of any claims that we could make following FDA approval, if obtained; • the relative convenience and ease of administration of such product; • cost of treatment versus economic and clinical benefit in relation to alternative treatments or therapies; • the availability of adequate coverage or reimbursement by third parties, such as insurance companies and other healthcare payors, and by government healthcare programs, including Medicare and Medicaid; • the willingness of third-party payors to prefer similar but less expensive products even if not approved for our product’s indication; • the extent and strength of our marketing and distribution of such product; • the safety, efficacy, and other potential advantages over, and availability of, alternative treatments already used or that may later be approved for any of our intended indications; EAST\200834587.2 71 Table of Contents • distribution and use restrictions imposed by the FDA with respect to such product or to which we agree as part of a mandatory risk evaluation and mitigation strategy or voluntary risk management plan; • the timing of market introduction of such product, as well as competitive products; • our ability to offer such product candidate for sale at competitive prices, including prices that are competitive with generic products; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the extent and strength of our third‑party manufacturer and supplier support; • the approval of other new products for the same indications; • adverse publicity about the product or favorable publicity about competitive products; and • potential product liability claims.
The degree of market acceptance of any of our products will depend on a number of factors, including: • the efficacy of our products; • the prevalence and severity of adverse events associated with such product; • the clinical indications for which the product is approved and the approved claims that we may make for the product; • limitations or warnings contained in the product’s FDA‑approved labeling, including potential limitations or warnings for such product candidate, that may be more restrictive than other competitive products; • changes in the standard of care for the targeted indications for such product candidate, which could reduce the marketing impact of any claims that we could make following FDA approval, if obtained; • the relative convenience and ease of administration of such product; • cost of treatment versus economic and clinical benefit in relation to alternative treatments or therapies; • the availability of adequate coverage or reimbursement by third parties, such as insurance companies and other healthcare payors, and by government healthcare programs, including Medicare and Medicaid; • the willingness of third-party payors to prefer similar but less expensive products even if not approved for our product’s indication; • the extent and strength of our marketing and distribution of such product; • the safety, efficacy, and other potential advantages over, and availability of, alternative treatments already used or that may later be approved for any of our intended indications; • distribution and use restrictions imposed by the FDA with respect to such product or to which we agree as part of a mandatory risk evaluation and mitigation strategy or voluntary risk management plan; • the timing of market introduction of such product, as well as competitive products; 70 Table of Contents • our ability to offer such product candidate for sale at competitive prices, including prices that are competitive with generic products; • the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; • the extent and strength of our third‑party manufacturer and supplier support; • the approval of other new products for the same indications; • adverse publicity about the product or favorable publicity about competitive products; and • potential product liability claims.
For example: • we may not have been the first to conceive of and reduce to practice the inventions covered by each of our pending patent applications and issued patents; EAST\200834587.2 81 Table of Contents • we may not have been the first to file patent applications for these inventions; • others may independently develop similar or alternative technologies or duplicate any of our product candidates or technologies; • it is possible that none of the pending patent applications will result in issued patents; • the issued patents may not cover commercially viable active products, may not provide us with any competitive advantages, or may be successfully challenged by third parties; • we may not develop additional proprietary technologies that are patentable; • patents of others may have an adverse effect on our business; • noncompliance with requirements of governmental patent agencies can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction, potentially allowing competitors to enter the market earlier than would otherwise have been the case; • our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with, or eliminate our ability to make, use, and sell our potential product candidates; or • there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of available patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns.
For example: • we may not have been the first to conceive of and reduce to practice the inventions covered by each of our pending patent applications and issued patents; • we may not have been the first to file patent applications for these inventions; • others may independently develop similar or alternative technologies or duplicate any of our product candidates or technologies; • it is possible that none of the pending patent applications will result in issued patents; • the issued patents may not cover commercially viable active products, may not provide us with any competitive advantages, or may be successfully challenged by third parties; • we may not develop additional proprietary technologies that are patentable; • patents of others may have an adverse effect on our business; 78 Table of Contents • noncompliance with requirements of governmental patent agencies can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction, potentially allowing competitors to enter the market earlier than would otherwise have been the case; • our competitors, many of whom have substantially greater resources than we do and many of whom have made significant investments in competing technologies, may seek or may have already obtained patents that will limit, interfere with, or eliminate our ability to make, use, and sell our potential product candidates; or • there may be significant pressure on the U.S. government and international governmental bodies to limit the scope of available patent protection both inside and outside the United States for disease treatments that prove successful, as a matter of public policy regarding worldwide health concerns.
We face competition with respect to our current product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide.
We face competition with respect to our current products and product candidates and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide.
Any future collaborations we might enter into may pose a number of risks, including: • collaborators may not perform their obligations as expected; • collaborators may not pursue development and commercialization of any product candidates which achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing; • collaborators could fail to make timely regulatory submissions for a product candidate; • collaborators may not comply with all applicable regulatory requirements or may fail to report safety data in accordance with all applicable regulatory requirements; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; EAST\200834587.2 79 Table of Contents • a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product candidate or product; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation, or the preferred course of development, might cause delays or termination of the research, development, or commercialization of product candidates, lead to additional responsibilities for us with respect to product candidates, or result in litigation or arbitration, any of which would be time consuming and expensive; • collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; and • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability.
Any future collaborations we might enter into may pose a number of risks, including: • collaborators may not perform their obligations as expected; • collaborators may not pursue development and commercialization of any product candidates which achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities; • collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials, or require a new formulation of a product candidate for clinical testing; • collaborators could fail to make timely regulatory submissions for a product candidate; • collaborators may not comply with all applicable regulatory requirements or may fail to report safety data in accordance with all applicable regulatory requirements; • collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours; • product candidates discovered in collaboration with us may be viewed by our collaborators as competitive with their own product candidates or products, which may cause collaborators to cease to devote resources to the commercialization of our product candidates; • a collaborator with marketing and distribution rights to one or more of our product candidates that achieve regulatory approval may not commit sufficient resources to the marketing and distribution of such product candidate or product; • disagreements with collaborators, including disagreements over proprietary rights, contract interpretation, or the preferred course of development, might cause delays or termination of the research, development, or commercialization of product candidates, lead to additional responsibilities for us with respect to product candidates, or result in litigation or arbitration, any of which would be time consuming and expensive; • collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential litigation; and • collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability.
The market price for our common stock may be influenced by many factors, including: • the commercial success of our products; • delays in the commencement, enrollment, and ultimate completion, of our planned and ongoing Phase 3 clinical trials for our product candidates; • any delay or refusal on the part of the FDA in approving an NDA for any of our current and future product candidates; • operating and stock price performance of other companies that investors deem comparable to ours; • recommendations by securities analysts; • news relating to our industry as a whole and news relating to trends in our markets; • results of clinical trials of any of our current and future product candidates or those of our competitors; • actual or anticipated variations in quarterly or annual operating results; EAST\200834587.2 98 Table of Contents • failure to meet or exceed financial projections we provide to the public, if any; • failure to meet or exceed the estimates and projections of the investment community, including securities analysts; • introduction of competitive products or technologies; • changes or developments in laws or regulations applicable to our product candidates; • the perception of the pharmaceutical industry by the public, legislatures, regulators, and the investment community; • general economic and market conditions and overall fluctuations in U.S. equity markets; • data or security breaches; • developments concerning our sources of manufacturing supply, warehousing, and inventory control; • disputes or other developments relating to patents or other proprietary rights; • additions or departures of key scientific or management personnel; • announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; • capital commitments; • investors’ general perception of our company and our business; • announcements and expectations of additional financing efforts, including the issuance of debt, equity or convertible securities; • sales of our common stock, including sales by our directors and officers or significant stockholders; • changes in the market valuations of companies similar to us; • announcements by us or our competitors of significant acquisitions, strategic partnerships, or divestitures; • general conditions or trends in our industry; and • the other factors described in this “Risk Factors” section.
The market price for our common stock may be influenced by many factors, including: • the commercial success of our products; 93 Table of Contents • delays in the commencement, enrollment, and ultimate completion, of our planned and ongoing Phase 3 clinical trials for our product candidates; • any delay or refusal on the part of the FDA in approving an NDA for any of our current and future product candidates; • operating and stock price performance of other companies that investors deem comparable to ours; • recommendations by securities analysts; • news relating to our industry as a whole and news relating to trends in our markets; • results of clinical trials of any of our current and future product candidates or those of our competitors; • actual or anticipated variations in quarterly or annual operating results; • failure to meet or exceed financial projections we provide to the public, if any; • failure to meet or exceed the estimates and projections of the investment community, including securities analysts; • introduction of competitive products or technologies; • changes or developments in laws or regulations applicable to our product candidates; • the perception of the pharmaceutical industry by the public, legislatures, regulators, and the investment community; • general economic and market conditions and overall fluctuations in U.S. equity markets; • data or security breaches; • developments concerning our sources of manufacturing supply, warehousing, and inventory control; • disputes or other developments relating to patents or other proprietary rights; • additions or departures of key scientific or management personnel; • announcements of investigations or regulatory scrutiny of our operations or lawsuits filed against us; • capital commitments; • investors’ general perception of our company and our business; • announcements and expectations of additional financing efforts, including the issuance of debt, equity or convertible securities; • sales of our common stock, including sales by our directors and officers or significant stockholders; • changes in the market valuations of companies similar to us; • announcements by us or our competitors of significant acquisitions, strategic partnerships, or divestitures; • general conditions or trends in our industry; and 94 Table of Contents • the other factors described in this “Risk Factors” section.
In March 2022, we entered into a Second Amendment to the Loan Agreement that among other things, changed the terms of the Term Loan Advances (as defined in the 2020 Term Loan) upon the consummation of the Acquisition.
In March 2022, we entered into a Second Amendment to the Loan Agreement that, among other things, changed the terms of the Term Loan Advances (as defined in the Loan Agreement) upon the consummation of the Acquisition (as defined in the Loan Agreement).
Based on the side effects disclosed in FDA product labeling for marketed drugs that contain the same active molecules as our product candidate, AXS-07 may result in fatigue, confusion, dry mouth, diarrhea, nausea, insomnia, anemia, increased appetite, anxiety, sweating, dizziness, palpitations, arrythmia, tachycardia, abnormal vision, syncope, seizure, tremor, tinnitus, dizziness, somnolence, paresthesia, dysgeusia, dyspepsia, constipation, weight increase or decrease, gastritis, hematuria, flatulence, esophagitis, gastric ulcers, gastroesophageal reflux, gastrointestinal hemorrhages, colitis, rash, pain or tightness in the chest, neck, throat or jaw, upper respiratory tract infections, influenza-like symptoms, or other adverse events or potential adverse events reported or discussed in the product labels for meloxicam‑containing or rizatriptan-containing products including Anjeso, Vivlodex, Mobic, and Maxalt.
Based on the side effects disclosed in FDA product labeling for marketed drugs that contain the same active molecules as our product candidate, AXS-07 may result in fatigue, confusion, dry mouth, diarrhea, nausea, insomnia, anemia, increased appetite, anxiety, sweating, dizziness, palpitations, arrythmia, tachycardia, abnormal vision, syncope, seizure, tremor, tinnitus, dizziness, somnolence, paresthesia, dysgeusia, dyspepsia, constipation, weight increase or decrease, gastritis, hematuria, flatulence, esophagitis, gastric ulcers, gastroesophageal reflux, gastrointestinal hemorrhages, colitis, rash, pain or tightness in the chest, neck, throat or jaw, upper respiratory tract infections, influenza-like symptoms, or other adverse events or potential adverse events reported or discussed in the 58 Table of Contents product labels for meloxicam‑containing or rizatriptan-containing products including Anjeso, Vivlodex, Mobic, and Maxalt.
Regardless of merit or eventual outcome, liability claims may result in loss of revenue from including from: • decreased demand for our products; • impairment of our business reputation or financial stability; • costs of related litigation; • substantial monetary awards to patients or other claimants; • diversion of management attention; • loss of revenues; • withdrawal of clinical trial participants and potential termination of clinical trial sites or entire clinical programs; • the inability to commercialize our product candidates; • significant negative media attention; • decrease in our stock price; • initiation of investigations and enforcement actions by regulators; and • product recalls, withdrawals, or labeling, marketing, or promotional restrictions.
Regardless of merit or eventual outcome, liability claims may result in loss of revenue from including from: • decreased demand for our products; • impairment of our business reputation or financial stability; • costs of related litigation; • substantial monetary awards to patients or other claimants; • diversion of management attention; 71 Table of Contents • loss of revenues; • withdrawal of clinical trial participants and potential termination of clinical trial sites or entire clinical programs; • the inability to commercialize our product candidates; • significant negative media attention; • decrease in our stock price; • initiation of investigations and enforcement actions by regulators; and • product recalls, withdrawals, or labeling, marketing, or promotional restrictions.
There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of pain and CNS disorders.
There are a number of large pharmaceutical and biotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of CNS disorders.
U.S. federal net operating loss carry forwards amounting to $60 million generated before the 2018 tax year will start expiring beginning 2032, if we have not used them prior to that time, and the net operating losses of approximately $398 million generated in 2018 and later have an indefinite carryforward period.
U.S. federal net operating loss carry forwards amounting to $60 million generated before the 2018 tax year will start expiring beginning 2032, if we have not used them prior to that time, and the net operating losses of approximately $487 million generated in 2018 and later have an indefinite carryforward period.
In February 2023, we announced a licensing transaction with Pharmanovia to market Sunosi in European and certain Middle East / North Africa countries. Our current and future collaboration arrangements may not be successful, and the success of them will depend heavily on the efforts and activities of our collaborators.
In February 2023, we announced a licensing transaction with Pharmanovia to market Sunosi in Europe and certain countries in the Middle East / North Africa. Our current and future collaboration arrangements may not be successful, and the success of them will depend heavily on the efforts and activities of our collaborators.
There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties, exist in the general field of treatment and management of pain and other CNS disorders and cover the use of numerous compounds and formulations in our targeted markets.
There is considerable intellectual property litigation in the biotechnology and pharmaceutical industries. Numerous U.S. and foreign issued patents and pending patent applications owned by third parties exist in the general field of treatment and management of CNS disorders and cover the use of numerous compounds and formulations in our targeted markets.
Our management will have broad discretion in the application of the net proceeds from our capital raises, which we refer to as our Capital Raises, including the proceeds from sales pursuant to our March 2022 “at-the-market” sales agreement with SVB Securities LLC (formerly known as SVB Leerink LLC, or SVB Leerink), or SVB Securities, which provides for the sale of up to $250.0 million of our common stock from time to time, and our stockholders will not have the opportunity as part of their investment decision to assess whether the net proceeds from our Capital Raises are being used appropriately.
Our management will have broad discretion in the application of the net proceeds from our capital raises, which we refer to as our Capital Raises, including the proceeds from sales pursuant to our March 2022 “at-the-market” sales agreement with SVB Securities LLC (now known as Leerink Partners LLC, or Leerink), or Leerink, which provides for the sale of up to $250.0 million of our common stock from time to time, and our stockholders will not have the opportunity as part of their investment decision to assess whether the net proceeds from our Capital Raises are being used appropriately.
A Phase 3 trial with AXS-05 in AD agitation and a Phase 3 trial with AXS-12 in narcolepsy are ongoing. As a result of one or more risks discussed in this section, we cannot assure you that we will meet projected timelines related to these trials.
A Phase 3 trial with AXS-05 in AD agitation, a Phase 3 trial with AXS-12 in narcolepsy, and a Phase 3 trial of solriamfetol in ADHD are ongoing. As a result of one or more risks discussed in this section, we cannot assure you that we will meet projected timelines related to these trials.
For example, the Inflation Reduction Act, or the IRA, was recently signed into law by President Biden, which makes significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits, and government price-setting for certain Medicare Part D drugs, starting in 2026, and Medicare Part B drugs starting in 2028.
For example, the IRA was recently signed into law by President Biden, which makes significant changes to how drugs are covered and paid for under the Medicare program, including the creation of financial penalties for drugs whose prices rise faster than the rate of inflation, redesign of the Medicare Part D program to require manufacturers to bear more of the liability for certain drug benefits, and government price-setting for certain Medicare Part D drugs, starting in 2026, and Medicare Part B drugs starting in 2028.
For example, in February 2023, we received a paragraph IV certification notice letter from Teva Pharmaceuticals, Inc., or Teva, providing notification to the Company that Teva has submitted an ANDA to the FDA seeking approval to manufacture, use, or sell a generic version of Auvelity.
For example, in February 2023, we received a paragraph IV certification notice letter from Teva providing notification to the Company that Teva has submitted an ANDA to the FDA seeking approval to manufacture, use, or sell a generic version of Auvelity.
Any delays in obtaining adequate supplies with respect to our products may delay the development or commercialization of our products.
Any delays in obtaining adequate supplies with respect to our products may delay or disrupt the development or commercialization of our products.
In both domestic and foreign markets, sales of our products depends in part upon the availability of coverage and reimbursement from third-party payors. Such third-party payors include government health programs such as Medicare and Medicaid, managed care providers, private health insurers, and other organizations.
In both domestic and foreign markets, sales of our products depend in part upon the availability of coverage and reimbursement from third-party payors. Such third-party payors include government health programs such as Medicare and Medicaid, managed care providers, private health insurers, and other organizations.
Our business may be materially harmed if the licenses are not available or terminated for any reason. • If we fail to comply with federal, state, and foreign healthcare laws, including fraud and abuse and transparency and health and other data protection, information privacy and security laws, we could face substantial penalties and our business, financial condition, results of operations, and prospects could be adversely affected. • If the government or third-party payors fail to provide adequate coverage and payment rates for any of our current or future product candidates, or if health maintenance organization (HMOs) or long-term care facilities choose to use therapies that are less expensive, our revenue and prospects for profitability will be limited. • We have and may continue to significantly increase the size of our organization, and we may experience difficulties in managing growth.
Our business may be materially harmed if the licenses are not available or terminated for any reason. • If we fail to comply with federal, state, and foreign healthcare laws, including fraud and abuse and transparency and health and other data protection, information privacy and security laws, we could face substantial penalties and our business, financial condition, results of operations, and prospects could be adversely affected. • If the government or third-party payors fail to provide adequate coverage and payment rates for any of our products, or if health maintenance organization (HMOs) or long-term care facilities choose to use therapies that are less expensive, our revenue and prospects for profitability will be limited. • We have and may continue to significantly increase the size of our organization, and we may experience difficulties in managing growth.
However, these business activities may entail numerous operational and financial risks, including: EAST\200834587.2 51 Table of Contents • difficulty or inability to secure financing to fund business activities for such development; • disruption of our business and diversion of our management’s time and attention; • higher than expected development costs; • exposure to unknown liabilities; • difficulty in managing multiple product development programs; and • inability to successfully develop new products or clinical failure.
However, these business activities may entail numerous operational and financial risks, including: 51 Table of Contents • difficulty or inability to secure financing to fund business activities for such development; • disruption of our business and diversion of our management’s time and attention; • higher than expected development costs; • exposure to unknown liabilities; • difficulty in managing multiple product development programs; and • inability to successfully develop new products or clinical failure.
Filing of a patent infringement lawsuit against the filer of the 505(b)(2) applicant within 45 days of the patent or NDA owner’s receipt of notice triggers a one time, automatic, 30 month stay of the FDA’s ability to make the 505(b)(2) NDA approval effective.
Filing of a patent infringement lawsuit against the filer of the 505(b)(2) applicant within 45 days of the patent or NDA owner’s receipt of notice triggers a one time, automatic, 30 months stay of the FDA’s ability to make the 505(b)(2) NDA approval effective.
For instance, antidepressants, including Auvelity, include a class‑wide black box warning regarding the increased risk of suicidal thoughts and behavior. In addition, because we plan to file certain product candidates under an NDA submitted pursuant to 505(b)(2), we will rely, at least in part, upon a reference drug and published literature.
For instance, antidepressants, including Auvelity, include a class‑wide black box warning regarding the increased risk of suicidal thoughts and behavior. 52 Table of Contents In addition, because we plan to file certain product candidates under an NDA submitted pursuant to 505(b)(2), we will rely, at least in part, upon a reference drug and published literature.
As a pharmaceutical company, we are subject to many federal and state healthcare laws, including those described in the “Business—Government Regulation and Product Approval” section of the filed Annual Report on Form 10‑K, such as the federal Anti-Kickback Statute, the federal civil and criminal False Claims Act, the civil monetary penalties statute, the Medicaid Drug Rebate statute and other price reporting requirements, the Veterans Health Care Act of 1992, the Physician Payments Sunshine Act, the Foreign Corrupt Practices Act of 1977, the Patient Protection and Affordable Care Act of 2010, and similar state and foreign laws.
As a pharmaceutical company, we are subject to many federal and state healthcare laws, including those described in the “Business—Government Regulation and Product Approval” section of this Annual Report on Form 10-K, such as the federal Anti-Kickback Statute, the federal civil and criminal False Claims Act, the civil monetary penalties statute, the Medicaid Drug Rebate statute and other price reporting requirements, the Veterans Health Care Act of 1992, the Sunshine Act, the Foreign Corrupt Practices Act of 1977, the Patient Protection and Affordable Care Act of 2010, and similar state and foreign laws.
Patient enrollment is affected by other factors including: • the size and nature of the patient population; • the severity of the disease under investigation; • the eligibility criteria for, and design of, the clinical trial in question, including factors such as frequency of required assessments, length of the study, and ongoing monitoring requirements; • the perceived risks and benefits of the product candidate under study, including the potential advantages or disadvantages of the product candidate being studied in relation to other available therapies; • competition in recruiting and enrolling patients in clinical trials; • the efforts to facilitate timely enrollment in clinical trials; • the patient referral practices of physicians; • effectiveness of publicity created by clinical trial sites regarding the trial; • patients’ ability to comply with the specific instructions related to the trial protocol, proper documentation, and use of the drug product; • inability to obtain or maintain patient informed consents; • risk that enrolled patients will drop out before completion; • the ability to identify patients for enrollment and maintain a sufficient level of patient participants in our clinical studies due to the ongoing COVID-19 pandemic; • the ability to monitor patients adequately during and after treatment; and • the proximity and availability of clinical trial sites for prospective patients.
Patient enrollment is affected by other factors including: • the size and nature of the patient population; • the severity of the disease under investigation; • the eligibility criteria for, and design of, the clinical trial in question, including factors such as frequency of required assessments, length of the study, and ongoing monitoring requirements; • the perceived risks and benefits of the product candidate under study, including the potential advantages or disadvantages of the product candidate being studied in relation to other available therapies; • competition in recruiting and enrolling patients in clinical trials; • the efforts to facilitate timely enrollment in clinical trials; • the patient referral practices of physicians; • effectiveness of publicity created by clinical trial sites regarding the trial; 59 Table of Contents • patients’ ability to comply with the specific instructions related to the trial protocol, proper documentation, and use of the drug product; • inability to obtain or maintain patient informed consents; • risk that enrolled patients will drop out before completion; • the ability to identify patients for enrollment and maintain a sufficient level of patient participants in our clinical studies; • the ability to monitor patients adequately during and after treatment; and • the proximity and availability of clinical trial sites for prospective patients.
Factors that may inhibit our efforts to commercialize any of our products on our own include: • our inability to recruit, train, manage, and retain adequate numbers of effective sales and marketing personnel; • the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any of our current or future product candidates; • the inability of sales personnel to travel and/or arrange in-person meetings with physicians due to the ongoing COVID-19 pandemic; • our inability to effectively oversee a geographically dispersed sales and marketing team; • the application of federal and state drug distribution and supply chain requirements to our business; • the costs associated with training sales and marketing personnel on legal and regulatory compliance matters and monitoring their actions; • an inability to secure adequate coverage and reimbursement by government and private health plans; • the clinical indications and labeled claims for which the product is approved; • limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling; • any distribution and use restrictions imposed by the FDA or to which we agree as part of a mandatory REMS or voluntary risk management plan; • liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory requirements; • the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and • unforeseen costs and expenses associated with creating an independent sales and marketing organization or engaging a contract sales organization.
Factors that may inhibit our efforts to commercialize any of our products on our own include: • our inability to recruit, train, manage, and retain adequate numbers of effective sales and marketing personnel; • the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any of our current or future product candidates; • our inability to effectively oversee a geographically dispersed sales and marketing team; • the application of federal and state drug distribution and supply chain requirements to our business; • the costs associated with training sales and marketing personnel on legal and regulatory compliance matters and monitoring their actions; • an inability to secure adequate coverage and reimbursement by government and private health plans; • the clinical indications and labeled claims for which the product is approved; • limitations or warnings, including distribution or use restrictions, contained in the product’s approved labeling; • any distribution and use restrictions imposed by the FDA or to which we agree as part of a mandatory REMS or voluntary risk management plan; • liability for sales or marketing personnel who fail to comply with the applicable legal and regulatory requirements; • the lack of complementary products to be offered by sales personnel, which may put us at a competitive disadvantage relative to companies with more extensive product lines; and • unforeseen costs and expenses associated with creating an independent sales and marketing organization or engaging a contract sales organization.
Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We also are required to register certain clinical trials and post the results of certain completed clinical trials on a government sponsored database, ClinicalTrials.gov, within specified timeframes.
Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. We also are required to register certain clinical trials and post the results of certain completed clinical trials on a government 73 Table of Contents sponsored database, ClinicalTrials.gov, within specified timeframes.
If these third parties fail to perform as expected or to comply with legal and regulatory requirements, our ability to commercialize any of our current or future product candidates will be significantly impacted and we may be subject to regulatory sanctions. • Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. • We have licensed and may need to license certain intellectual property from third parties in the future.
If these third parties fail to perform as expected or to comply with legal and regulatory requirements, our ability to commercialize any of our products will be significantly impacted and we may be subject to regulatory sanctions. • Patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents. • We have licensed and may need to license certain intellectual property from third parties in the future.
In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs, in-license needed technology, or enter into development partnerships that would help us bring our products to market.
In addition, the uncertainties associated with litigation could have a material adverse effect on our ability to raise the funds necessary to continue our clinical trials, continue our internal research programs, in-license needed technology, or enter into development partnerships that would help us bring our product candidates to market.
In January 2023, we entered into a Third Amendment to the Loan Agreement that amended the terms of the Loan Agreement to, among other things, increase the size of the aggregate principal amount under the 2020 Term Loan from $300,000,000 to $350,000,000, reduce the interest rate, and extend the maturity and interest-only period of the Loan Agreement.
In January 2023, we entered into a Third Amendment to the Loan Agreement that amended the terms of the Loan Agreement to, among other things, increase the size of the aggregate principal amount under the 2020 Term Loan from $300.0 million to $350.0 million, reduce the interest rate, and extend the maturity and interest-only period of the Loan Agreement.
Moreover, if we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials or other testing of our product candidates, if the results of these trials or tests are not positive, or are only modestly positive or if there are safety concerns, we may: • be delayed in obtaining marketing approval for our product candidates; • not obtain marketing approval at all; • obtain approval for indications or patient populations that are not as broad as intended or desired or are not covered by our intellectual property; • obtain approval with labeling that includes significant use or distribution restrictions, including restrictions on the intended patient population, or safety warnings, including boxed warnings, contraindications, and precautions, or may not include label statements necessary or desirable for successful commercialization; EAST\200834587.2 57 Table of Contents • be subject to additional post‑marketing testing and surveillance requirements, including REMS; or • have the product removed from the market after obtaining marketing approval.
Moreover, if we are required to conduct additional clinical trials or other testing of our product candidates beyond that which we currently contemplate, if we are unable to successfully complete clinical trials or other testing 56 Table of Contents of our product candidates, if the results of these trials or tests are not positive, or are only modestly positive or if there are safety concerns, we may: • be delayed in obtaining marketing approval for our product candidates; • not obtain marketing approval at all; • obtain approval for indications or patient populations that are not as broad as intended or desired or are not covered by our intellectual property; • obtain approval with labeling that includes significant use or distribution restrictions, including restrictions on the intended patient population, or safety warnings, including boxed warnings, contraindications, and precautions, or may not include label statements necessary or desirable for successful commercialization; • be subject to additional post‑marketing testing and surveillance requirements, including REMS; or • have the product removed from the market after obtaining marketing approval.
Our ability to develop, manufacture, market, and sell any of our current and future products depends upon our ability to avoid infringing the proprietary rights of third parties, and our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market, and sell our products and use our proprietary technologies without infringing the proprietary rights of third parties.
Our ability to develop, manufacture, market, and sell any of our products depends upon our ability to avoid infringing the proprietary rights of third parties, and our commercial success depends upon our ability, and the ability of our collaborators, to develop, manufacture, market, and sell our products and use our proprietary technologies without infringing the proprietary rights of third parties.
As such, we are currently primarily focused on the development of solriamfetol for ADHD, AXS-05 for the treatment of agitation associated with AD, and smoking cessation, AXS-07 for the acute treatment of migraines, AXS-12 for the treatment of narcolepsy and AXS-14 for the treatment of fibromyalgia.
As such, we are currently primarily focused on the development of solriamfetol for additional indications, AXS-05 for the treatment of agitation associated with AD, and smoking cessation, AXS-07 for the acute treatment of migraines, AXS-12 for the treatment of narcolepsy and AXS-14 for the treatment of fibromyalgia.
Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected. Our business and operations would suffer in the event of system failures.
Accordingly, because of the inherent limitations in our control system, misstatements or insufficient disclosures due to error or fraud may occur and not be detected. 92 Table of Contents Our business and operations would suffer in the event of system failures.
We may also experience numerous unforeseen events during, or as a result of, clinical trials and in the course of our preparation, submission, and review of NDA filings that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including: • regulators or IRBs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or amend trial protocols; • we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites and our CROs; • clinical trials of our product candidates may produce negative or inconclusive results, or our studies may fail to reach the necessary level of statistical or clinical significance, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; EAST\200834587.2 55 Table of Contents • interim analyses may result in our clinical trials being discontinued for safety or futility reasons or may result in modifications to our clinical trials that prolong the trials or make them difficult and more expensive to complete, such as increases in the number of subjects; • the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate; • our third‑party contractors may fail to comply with regulatory requirements or the clinical trial protocol, or meet their contractual obligations to us in a timely manner, or at all, or we may be required to engage in additional clinical trial site monitoring; • we, the regulators, or IRBs may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks, undesirable side effects, or other unexpected characteristics of the product candidate, or due to findings of undesirable effects caused by a chemically or mechanistically similar drug or drug candidate.
Moreover, should there be a flaw in a clinical trial, it may not become apparent until the clinical trial is well advanced. 54 Table of Contents We may also experience numerous unforeseen events during, or as a result of, clinical trials and in the course of our preparation, submission, and review of NDA filings that could delay or prevent our ability to receive marketing approval or commercialize our product candidates, including: • regulators or IRBs may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site or amend trial protocols; • we may experience delays in reaching, or fail to reach, agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites and our CROs; • clinical trials of our product candidates may produce negative or inconclusive results, or our studies may fail to reach the necessary level of statistical or clinical significance, and we may decide, or regulators may require us, to conduct additional clinical trials or abandon product development programs; • interim analyses may result in our clinical trials being discontinued for safety or futility reasons or may result in modifications to our clinical trials that prolong the trials or make them difficult and more expensive to complete, such as increases in the number of subjects; • the number of patients required for clinical trials of our product candidates may be larger than we anticipate, enrollment in these clinical trials may be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate; • our third‑party contractors may fail to comply with regulatory requirements or the clinical trial protocol, or meet their contractual obligations to us in a timely manner, or at all, or we may be required to engage in additional clinical trial site monitoring; • we, the regulators, or IRBs may require that we or our investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks, undesirable side effects, or other unexpected characteristics of the product candidate, or due to findings of undesirable effects caused by a chemically or mechanistically similar drug or drug candidate.
In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the Nasdaq Global Market, impose various requirements on public companies, including requiring establishment and maintenance of effective disclosure controls and internal control over financial reporting and changes in corporate governance practices.
In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and The Nasdaq Stock Market LLC, or Nasdaq, impose various requirements on public companies, including requiring establishment and maintenance of effective disclosure controls and internal control over financial reporting and changes in corporate governance practices.
These disagreements can be difficult to resolve if neither of the parties has final decision-making authority. We may license the right to market and sell our product candidates under our collaborators’ labeler codes.
These disagreements can be difficult to resolve if neither of the parties has final decision-making authority. We may license the right to market and sell our products under our collaborators’ labeler codes.
Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization. EAST\200834587.2 67 Table of Contents Specifically, there are a large number of companies developing or marketing therapies for CNS disorders, including many major pharmaceutical and biotechnology companies.
Potential competitors also include academic institutions, government agencies, and other public and private research organizations that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing, and commercialization. 66 Table of Contents Specifically, there are a large number of companies developing or marketing therapies for CNS disorders, including many major pharmaceutical and biotechnology companies.
We are dependent on these agreements, and if we breach these agreements, our business, financial condition, results of operations, and prospects will be materially harmed. EAST\200834587.2 85 Table of Contents We may be subject to claims that our employees, independent contractors, or consultants have wrongfully used or disclosed alleged trade secrets of their former employers or other third parties.
We are dependent on these agreements, and if we breach these agreements, our business, financial condition, results of operations, and prospects will be materially harmed. 82 Table of Contents We may be subject to claims that our employees, independent contractors, or consultants have wrongfully used or disclosed alleged trade secrets of their former employers or other third parties.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous, or radioactive materials. EAST\200834587.2 93 Table of Contents In addition, we may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations.
We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological, hazardous, or radioactive materials. 89 Table of Contents In addition, we may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations.
The outcome of our studies may further necessitate additional clinical or preclinical work; • we may fail to reach an agreement with regulators regarding the scope or design of our clinical trials; • we may have delays in adding new investigators or clinical trial sites, or we may experience a withdrawal of clinical trial sites; • we may experience delays in our clinical trials due to the ongoing COVID-19 pandemic; • patients that enroll in our studies may misrepresent their eligibility or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the patients from the study or clinical trial, increase the needed enrollment size for the study or clinical trial, or extend the study’s or clinical trial’s duration; • there may be regulatory questions regarding interpretations of data and results, or new information may emerge regarding our product candidates; EAST\200834587.2 56 Table of Contents • the FDA or comparable foreign regulatory authorities may disagree with our study design or our interpretation of data from preclinical studies and clinical trials or find that a product candidate’s benefits do not outweigh its safety risks.
The outcome of our studies may further necessitate additional clinical or preclinical work; 55 Table of Contents • we may fail to reach an agreement with regulators regarding the scope or design of our clinical trials; • we may have delays in adding new investigators or clinical trial sites, or we may experience a withdrawal of clinical trial sites; • patients that enroll in our studies may misrepresent their eligibility or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the patients from the study or clinical trial, increase the needed enrollment size for the study or clinical trial, or extend the study’s or clinical trial’s duration; • there may be regulatory questions regarding interpretations of data and results, or new information may emerge regarding our product candidates; • the FDA or comparable foreign regulatory authorities may disagree with our study design or our interpretation of data from preclinical studies and clinical trials or find that a product candidate’s benefits do not outweigh its safety risks.
If the government or third-party payors fail to provide adequate coverage and payment rates for any of our current or future product candidates, or if health maintenance organization (HMOs) or long-term care facilities choose to use therapies that are less expensive, our revenue and prospects for profitability will be limited.
If the government or third-party payors fail to provide adequate coverage and payment rates for any of our products, or if health maintenance organization (HMOs) or long-term care facilities choose to use therapies that are less expensive, our revenue and prospects for profitability will be limited.
These risks include, among others, the following: • We have incurred significant losses since our inception, anticipate that we will incur substantial losses for the foreseeable future, and may never achieve or maintain profitability. • We may need additional funding to conduct our future clinical trials and to complete development and commercialization of our product candidates.
These risks include, among others, the following: • We have incurred significant losses since our inception, anticipate that we will continue to have losses, and may never achieve or maintain profitability. • We may need additional funding to conduct our future clinical trials and to complete development and commercialization of our product candidates.
To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. EAST\200834587.2 94 Table of Contents We may acquire businesses or products, or form strategic alliances in the future, and we may not realize the benefits of such acquisitions or alliances.
To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. 90 Table of Contents We may acquire businesses or products, or form strategic alliances in the future, and we may not realize the benefits of such acquisitions or alliances.
Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and continuing review by the FDA, Department of Justice, Department of Health and Human Services’ Office of Inspector General, state attorneys general, members of Congress, and the public.
Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and continuing review by the FDA, Department of Justice, HHS’s Office of Inspector General, state attorneys general, members of Congress, and the public.
EAST\200834587.2 59 Table of Contents If any of our other product candidates are associated with serious adverse events or undesirable side effects or have properties that are unexpected, we may need to abandon development or limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe, or more acceptable from a risk‑benefit perspective.
If any of our other product candidates are associated with serious adverse events or undesirable side effects or have properties that are unexpected, we may need to abandon development or limit development of that product candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe, or more acceptable from a risk‑benefit perspective.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. EAST\200834587.2 96 Table of Contents Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
In addition, in a patent infringement proceeding, a court may decide that a patent of ours is invalid or unenforceable, in whole or in part; construe the patent’s claims narrowly; or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.
In addition, in a patent infringement or validity proceeding, a decision maker (e.g., a court or the PTAB) may decide that a patent of ours is invalid or unenforceable, in whole or in part; construe the patent’s claims narrowly; or refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.
EAST\200834587.2 52 Table of Contents Under the 505(b)(2) pathway, the FDA may approve our product candidates for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought pursuant to the Section 505(b)(2) process.
Under the 505(b)(2) pathway, the FDA may approve our product candidates for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought pursuant to the Section 505(b)(2) process.
If any of the assumptions proves to be inaccurate, the actual markets for our product candidates could be smaller than our estimates of the potential market opportunities. EAST\200834587.2 72 Table of Contents We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability and may have to limit our products’ commercialization.
If any of the assumptions proves to be inaccurate, the actual markets for our product candidates could be smaller than our estimates of the potential market opportunities. We face potential product liability exposure, and if successful claims are brought against us, we may incur substantial liability and may have to limit our products’ commercialization.
EAST\200834587.2 74 Table of Contents RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIES We rely, and expect to continue to rely, on third parties to conduct, supervise, and monitor our preclinical studies and clinical trials, and those third parties may not perform satisfactorily, including by failing to meet deadlines for the completion of such trials or failing to comply with regulatory requirements.
RISKS RELATED TO OUR DEPENDENCE ON THIRD PARTIES We rely, and expect to continue to rely, on third parties to conduct, supervise, and monitor our preclinical studies and clinical trials, and those third parties may not perform satisfactorily, including by failing to meet deadlines for the completion of such trials or failing to comply with regulatory requirements.
The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs. EAST\200834587.2 91 Table of Contents Legislative and regulatory proposals may also be made to expand post approval requirements and restrict sales and promotional activities for drugs.
The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs. Legislative and regulatory proposals may also be made to expand post approval requirements and restrict sales and promotional activities for drugs.
These service providers provide key services related to warehousing and inventory control, distribution, government price reporting, customer service, accounts receivable management, and cash collection, and, as a result, much of our inventory is stored at a single warehouse maintained by one such service provider.
These service providers provide key services related to warehousing and inventory control, distribution, government price reporting, and customer service, and, as a result, much of our inventory is stored at a single warehouse maintained by one such service provider.
EAST\200834587.2 73 Table of Contents Sunosi is a controlled substance and may be subject to U.S. federal and state controlled substance laws and regulations, and our failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, could materially and adversely affect our business, results of operations, financial condition and growth prospects.
Sunosi is a controlled substance and may be subject to U.S. federal and state controlled substance laws and regulations, and our failure to comply with these laws and regulations, or the cost of compliance with these laws and regulations, could materially and adversely affect our business, results of operations, financial condition and growth prospects.
Our principal stockholders and management own a significant percentage of our stock and may be able to exert significant control over matters subject to stockholder approval. As of February 21, 2023, our executive officers, directors, and 5% stockholders and their affiliates beneficially owned an aggregate of approximately 44% of our outstanding common stock.
Our principal stockholders and management own a significant percentage of our stock and may be able to exert significant control over matters subject to stockholder approval. As of February 13, 2024, our executive officers, directors, and 5% stockholders and their affiliates beneficially owned an aggregate of approximately 47% of our outstanding common stock.
If a third-party claims that we infringe their intellectual property rights, we could face a number of issues, including: • infringement and other intellectual property claims which, whether meritorious or not, can be expensive and time consuming to litigate and can divert management’s attention from our core business; • substantial damages for past infringement which we may have to pay if a court decides that our product infringes on a competitor’s patent; • a court prohibiting us from selling or licensing our product unless the patent holder licenses the patent to us, which it would not be required to do; • if a license is available from a patent holder, we may have to pay substantial royalties or grant cross licenses to our patents; and EAST\200834587.2 83 Table of Contents • redesigning our products and processes so they do not infringe, which may not be possible or could require substantial funds and time.
If a third-party claims that we infringe their intellectual property rights, we could face a number of issues, including: • infringement and other intellectual property claims which, whether meritorious or not, can be expensive and time consuming to litigate and can divert management’s attention from our core business; • substantial damages for past infringement which we may have to pay if a court decides that our product infringes on a competitor’s patent; • a court prohibiting us from selling or licensing our product unless the patent holder licenses the patent to us, which it would not be required to do; • if a license is available from a patent holder, we may have to pay substantial royalties or grant cross licenses to our patents; and • redesigning our products and processes so they do not infringe, which may not be possible or could require substantial funds and time. 80 Table of Contents If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue developing and marketing our products and technology.
Third-party coverage and reimbursement for our products or product candidates for which we receive regulatory approval may not be available or adequate in either the United States or international markets, which could have a negative effect on our business, financial condition, results of operations, and prospects.
Third-party coverage and reimbursement for our products or product candidates for which we receive regulatory approval may not be available or adequate in either the United States or international markets, which could have a negative effect on our business, financial condition, results of operations, and prospects. Assuming coverage is approved, the resulting reimbursement payment rates might not be adequate.
EAST\200834587.2 75 Table of Contents Third parties we engage to conduct research may also have relationships with other entities, some of which may be our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position.
Third parties we engage to conduct research may also have relationships with other entities, some of which may be our competitors, for whom they may also be conducting clinical trials or other drug development activities that could harm our competitive position.
If these third parties fail to perform as expected or to comply with legal and regulatory requirements, our ability to commercialize any of our current or future product candidates will be significantly impacted and we may be subject to regulatory sanctions.
If these third parties fail to perform as expected or to comply with legal and regulatory requirements, our ability to commercialize any of our products will be significantly impacted and we may be subject to regulatory sanctions.
Our need to effectively manage our operations, growth and various projects requires that we: • continue the hiring and training of personnel for an effective commercial organization in anticipation of the potential approval of our product candidates, and establish appropriate systems, policies and infrastructure to support that organization; • ensure that our consultants and other service providers successfully carry out their contractual obligations, provide high quality results, and meet expected deadlines; • continue to carry out our own contractual obligations to our licensors and other third parties; and • continue to improve our operational, financial, and management controls, reporting systems, and procedures.
Our need to effectively manage our operations, growth and various projects requires that we: • continue the hiring and training of personnel for our commercial organization, and maintain appropriate systems, policies and infrastructure to support that organization; • ensure that our consultants and other service providers successfully carry out their contractual obligations, provide high quality results, and meet expected deadlines; • continue to carry out our own contractual obligations to our licensors and other third parties; and • continue to improve our operational, financial, and management controls, reporting systems, and procedures.
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees. EAST\200834587.2 104 Table of Contents
Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management and other employees. 99 Table of Contents
EAST\200834587.2 60 Table of Contents Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays which would cause us to miss our projected timelines and could require us to abandon one or more clinical trials altogether.
Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays which would cause us to miss our projected timelines and could require us to abandon one or more clinical trials altogether.
We anticipate that our expenses will increase substantially as we: • seek regulatory approval for any additional product candidate; • hire additional commercial, clinical, medical, quality, regulatory, and scientific personnel; • add operational, financial, and management information systems and personnel; • expand our sales, marketing, and distribution infrastructure; • expand external manufacturing capabilities and production to commercialize any additional products for which we may obtain regulatory approval and that we choose not to license to a third-party; • undertake additional manufacturing activities of our product candidates to satisfy FDA requirements for marketing application submissions; • conduct our clinical trials with AXS‑05 AD agitation; • conduct our clinical trials with AXS-12 in narcolepsy; • continue to evaluate, plan for, and conduct, clinical trials for AXS-05 as an aid to smoking cessation treatment and other CNS disorders; • continue to evaluate, plan for, and conduct, clinical trials for Sunosi in attention-deficit/hyperactivity disorder ("ADHD"); • continue to evaluate, plan for, and potentially submit an NDA for AXS-14 in fibromyalgia; • continue to expand commercial sales of Sunosi and Auvelity; • develop, in‑license, or acquire additional product candidates; • conduct late‑stage clinical trials for any product candidates that successfully complete early‑stage clinical trials; • conduct additional non‑clinical studies with any product candidates; and • maintain, expand, and protect our intellectual property portfolio.
We anticipate that our expenses will increase substantially as we: • seek regulatory approval for additional product candidates; • hire additional commercial, clinical, medical, quality, regulatory, and scientific personnel; • add operational, financial, and management information systems and personnel; • expand our sales, marketing, and distribution infrastructure; • expand external manufacturing capabilities and production to commercialize any additional products for which we may obtain regulatory approval and that we choose not to license to a third party; • undertake additional manufacturing activities of our product candidates to satisfy FDA requirements for marketing application submissions; • conduct our clinical trials with AXS‑05 in AD agitation; • conduct our clinical trials with AXS-12 in narcolepsy; • continue to evaluate, plan for, and conduct clinical trials for AXS-05 as an aid to smoking cessation treatment and other CNS disorders; • continue to evaluate, plan for, and conduct clinical trials for solriamfetol in additional indications; • continue to evaluate, plan for, and potentially submit an NDA for AXS-14 in fibromyalgia; • continue to expand commercial sales of Sunosi and Auvelity; • develop, in‑license, or acquire additional product candidates; • conduct late‑stage clinical trials for any product candidates that successfully complete early‑stage clinical trials; • conduct additional non‑clinical studies with any product candidates; and • maintain, expand, and protect our intellectual property portfolio. 44 Table of Contents To become and remain profitable, we must succeed in developing (or in-licensing) and commercializing products that generate significant revenue.
EAST\200834587.2 90 Table of Contents We are subject to new legislation, regulatory proposals, and healthcare payor initiatives that may increase our costs of compliance, and adversely affect our ability to market our products, obtain collaborators, and raise capital.
We are subject to new legislation, regulatory proposals, and healthcare payor initiatives that may increase our costs of compliance, and adversely affect our ability to market our products, obtain collaborators, and raise capital.
Of our currently outstanding shares of common stock, 35,497,000 are freely tradable. The remainder of the outstanding shares of common stock are held by our affiliates and may be considered “control securities” for purposes of Rule 144 under the Securities Act.
Of our currently outstanding shares of common stock, 39,373,446 are freely tradable. The remainder of the outstanding shares of common stock are held by our affiliates and may be considered “control securities” for purposes of Rule 144 under the Securities Act.
To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential, or proprietary information, we could incur liability and the further development of any of our product candidates could be delayed.
To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or inappropriate disclosure of personal, confidential, or proprietary information, we could incur liability and the further development of any of our product candidates could be delayed. Environmental, social and governance matters may impact our business and reputation.
EAST\200834587.2 63 Table of Contents In the United States, engaging in the impermissible promotion of our products, following approval, for off‑label uses can also subject us to false claims and other litigation under federal and state statutes, including fraud and abuse and consumer protection laws, which can lead to civil and criminal penalties and fines, agreements with governmental authorities that materially restrict the manner in which we promote or distribute drug products and do business through, for example, corporate integrity agreements, suspension or exclusion from participation in federal and state healthcare programs, and debarment from government contracts and refusal of future orders under existing contracts.
Thus, we and any of our collaborators will not be able to promote any products we develop for indications or uses for which they are not approved. 62 Table of Contents In the United States, engaging in the impermissible promotion of our products, following approval, for off‑label uses can also subject us to false claims and other litigation under federal and state statutes, including fraud and abuse and consumer protection laws, which can lead to civil and criminal penalties and fines, agreements with governmental authorities that materially restrict the manner in which we promote or distribute drug products and do business through, for example, corporate integrity agreements, suspension or exclusion from participation in federal and state healthcare programs, and debarment from government contracts and refusal of future orders under existing contracts.
EAST\200834587.2 78 Table of Contents Any collaboration arrangements that we are a party to or may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our product candidates.
Any collaboration arrangements that we are a party to or may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize our product candidates.
If we are unable to implement appropriate controls and procedures to manage our growth, we will not be able to implement our business plan successfully. • If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock. • Our principal stockholders and management own a significant percentage of our stock and may be able to exert significant control over matters subject to stockholder approval. • The use of our net operating loss carryforwards and research tax credits may be limited.
If we are unable to implement appropriate controls and procedures to manage our growth, we will not be able to implement our business plan successfully. • If we fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately report our financial condition, results of operations or cash flows, which may adversely affect investor confidence in us and, as a result, the value of our common stock. • Our principal stockholders and management own a significant percentage of our stock and may be able to exert significant control over matters subject to stockholder approval. • The use of our net operating loss carryforwards and research tax credits may be limited. 43 Table of Contents RISKS RELATED TO OUR FINANCIAL CONDITION AND CAPITAL REQUIREMENTS We have incurred significant losses since our inception, anticipate that we will continue to have losses, and may never achieve or maintain profitability.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeITEM 2. PROPERTIE S. Our corporate and executive office is located at 22 Cortlandt Street in New York, New York. We currently have a lease agreement for this office space through April 30, 2023.
Biggest changeITEM 2. PROPERTIE S. In February 2023, we entered into a ten-year sublease agreement for our corporate and executive offices located at One World Trade Center in New York, New York.
Removed
In February 2023, we entered into a sub-lease agreement for office space located at One World Trade Center, for our corporate and executive offices, commencing March 2023. See “Item 9B – Other Information” for additional information. We believe that our current facilities are suitable and adequate to meet our current needs.
Added
The sublease commenced on April 7, 2023, and we have a one-time option to terminate the sublease before the fifth anniversary of the date on which we began paying rent upon the payment of a fee to the sublandlord. We believe that our current facilities are suitable and adequate to meet our current needs.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSecurities Class Action On May 13, 2022, Evy Gru filed a putative class action complaint captioned Gru v. Axsome Therapeutics, Inc., et. al., in the U.S. District Court for the Southern District of New York against the Company and certain of its current and former officers and one director (the “Securities Class Action”).
Biggest changeAxsome Therapeutics, Inc., et al. in the U.S. District Court for the Southern District of New York, or the SDNY District Court, against the Company and certain of its current and former officers and one director, which we refer to as the Securities Class Action.
The plaintiffs assert claims for breach of fiduciary duties against all of the defendants and for contribution for violations of Section 10(b) and 21D of the Securities Exchange Act of 1934. The plaintiffs seek unspecified damages, fees, interest, and costs, as well as corporate governance changes.
The plaintiffs assert claims for breach of fiduciary duties against all of the defendants and for contribution for violations of Section 10(b) and 21D of the Exchange Act. The plaintiffs seek unspecified damages, fees, interest, and costs, as well as corporate governance changes.
The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, and Rule 10b-5 promulgated thereunder, and alleges, among other things, that the defendants made false statements and omissions concerning the Company’s Chemistry Manufacturing and Controls practices, and its New Drug Application with the FDA, with respect to one of its product candidates, AXS-07.
The complaint asserts claims under Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated thereunder, and alleges, among other things, that the defendants made false statements and omissions concerning the Company’s Chemistry Manufacturing and Controls practices, and its NDA with the FDA, with respect to one of its product candidates, AXS-07.
District Court for the Southern District of New York against the Company’s current directors, certain of the Company’s current and former officers, and the Company (as nominal defendant). On January 27, 2023, Kyle Guterba filed a stockholder derivative complaint captioned Guterba v. Tabuteau, et al., in the U.S.
Herriot Tabuteau, et al. in the SDNY District Court against the Company’s current directors, certain of the Company’s current and former officers, and the Company (as nominal defendant). On January 27, 2023, Kyle Guterba filed a stockholder derivative complaint captioned Guterba v.
District Court for the Southern District of New York against the Company’s current directors, certain of the Company’s current and former officers, and the Company (as nominal defendant). The derivative complaints arise out of similar allegations as those made in the Securities Class Action.
Tabuteau, et al. in the SDNY District Court against the Company’s current directors, certain of the Company’s current and former officers, and the Company (as nominal defendant). The derivative complaints arise out of similar allegations as those made in the Securities Class Action.
ITEM 3. LEGAL PROCEEDINGS. Except as described herein, we, and our subsidiaries, are currently not a party to, and our property is not currently the subject of, any material pending legal proceedings; however, we may also become involved in various claims and legal actions arising in the ordinary course of business.
Except as described herein, we, and our subsidiaries, are currently not a party to, and our property is not currently the subject of, any material pending legal proceedings; however, we may also become involved in various claims and legal actions arising in the ordinary course of business. 101 Table of Contents Securities Class Action On May 13, 2022, Evy Gru filed a putative class action complaint captioned Gru v.
The named plaintiff seeks unspecified damages, fees, interest, and costs. On August 11, 2022, the Court appointed co-lead Plaintiffs in the Gru action. On October 7, 2022, the Gru plaintiffs filed an Amended Complaint, which contains substantially similar allegations as in the initial complaint.
The plaintiffs sought unspecified damages, fees, interest, and costs. On August 11, 2022, the SDNY District Court appointed co-lead plaintiffs in the Securities Class Action, one of whom later withdrew. On October 7, 2022, the Securities Class Action plaintiffs filed an amended complaint, which contained substantially similar allegations as in the initial complaint.
Removed
Defendants filed their motion to dismiss the Amended Complaint on December 16, 2022, which motion remains pending before the court. One of the Co-Lead Plaintiffs, Santoshanand Thakkar, withdrew from the case on January 18, 2023. Shareholder Derivative Action On July 21, 2022, Daniel Engel filed a stockholder derivative complaint captioned Engel v. Herriot Tabuteau, et al., in the U.S.
Added
On September 25, 2023, the SDNY District Court granted defendants’ motion to dismiss the amended complaint. On October 13, 2023, plaintiffs’ counsel filed a letter seeking leave to file an amended complaint and to substitute new plaintiffs, which defendants opposed. The SDNY District Court re-opened the lead plaintiff appointment process.
Removed
The Engel matter is currently stayed pending further proceedings in the Gru matter. 105 Table of Contents
Added
Thomas Giblin, Paul Berger, and Paul Sutherland moved jointly to be appointed replacement plaintiffs. On January 22, 2024, the SDNY District Court granted that motion and ordered that the case name be changed to In re Axsome Therapeutics, Inc. Securities Litigation .
Added
On January 26, 2024, the replacement plaintiffs renewed their request for leave to file a proposed second amended complaint, and, on February 6, 2024, the SDNY District Court granted that request. Plaintiffs filed the second amended complaint on February 7, 2024. Shareholder Derivative Action On July 21, 2022, Daniel Engel filed a stockholder derivative complaint captioned Engel v.
Added
The Engel and Guterba matters were consolidated on February 28, 2023 and are currently stayed pending further proceedings in the Securities Class Action. Auvelity Paragraph IV Litigation On March 24, 2023, we commenced a patent infringement action against Teva relating to Teva's ANDA for Auvelity. This action is captioned Axsome Therapeutics, Inc. and Antecip Bioventures II LLC v.
Added
Teva Pharmaceuticals, Inc. No. 2:23-CV-01695 in the United States District Court for the District of New Jersey, of the NJ District Court. On December 15, 2023, we commenced a second patent infringement action against Teva relating to Teva’s ANDA. This action is captioned Axsome Therapeutics, Inc., and Antecip Bioventures II LLC v. Teva Pharmaceuticals, Inc .
Added
No. 2:23-cv-23142 in the United States District Court for the District of New Jersey. Both actions are currently pending. Sunosi Paragraph IV Litigation On September 13, 2023, we commenced a patent infringement action against Hikma and five other drug companies relating to each defendant's ANDA for Sunosi. This action is captioned Axsome Malta Ltd. & Axsome Therapeutics, Inc. v.
Added
Alkem Laboratories Ltd., et al. No. 2:23-CV-20354 in the NJ District Court. We commenced related patent infringement actions against certain of the defendants relating to their ANDAs on December 20, 2023, January 11, 2024, and January 18, 2024. Those actions are captioned Axsome Malta Ltd. & Axsome Therapeutics, Inc. v. Unichem Laboratories Ltd .
Added
No. 2:23-cv-23255; Axsome Malta Ltd. & Axsome Therapeutics, Inc. v. Hetero USA, Inc. et al . No 2:24-cv-00196; and Axsome Malta Ltd. & Axsome Therapeutics, Inc. v. Aurobindo Pharma USA, Inc. et al . No. 2:24-cv-00309, respectively, all of which are in the District of New Jersey. All actions are currently pending. 102 Table of Contents

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed3 unchanged
Biggest changeThe graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2017 to 12/31/2022. 107 Table of Contents Holders The number of record holders of our common stock as of February 21, 2023, was six.
Biggest changeThe graph tracks the performance of a $100 investment in our common stock and in each index (with the reinvestment of all dividends) from 12/31/2018 to 12/31/2023. 104 Table of Contents Holders The number of record holders of our common stock as of February 13, 2024, was two.
Any future determination to pay dividends will be at the discretion of our board of directors, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and any other factors that our board may deem relevant.
Any future determination to pay dividends will be at the discretion of our Board, subject to applicable laws, and will depend on a number of factors, including our financial condition, results of operations, capital requirements, contractual restrictions, general business conditions, and any other factors that our Board may deem relevant.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock has been listed on the Nasdaq Global Market since March 3, 2017, under the symbol “AXSM”. Prior to that, our common stock was listed on the Nasdaq Capital Market since November 19, 2015, under the symbol “AXSM”.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOC KHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES. Market Information Our common stock has been listed on The Nasdaq Global Market since March 3, 2017, under the symbol “AXSM.” Prior to that, our common stock was listed on The Nasdaq Capital Market since November 19, 2015, under the symbol “AXSM”.
In addition, the terms of our existing term loan with Hercules Capital, Inc., or Hercules, precludes us from paying cash dividends without the consent of Hercules, except under certain circumstances. 108 Table of Contents
In addition, the terms of our existing term loan with Hercules Capital, Inc., or Hercules, precludes us from paying cash dividends without the consent of Hercules, except under certain circumstances. 105 Table of Contents

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

79 edited+60 added−29 removed34 unchanged
Biggest changeOur policy upon exercise of stock options is that shares will be issued as new shares drawing on our 2015 Omnibus Incentive Compensation Plan share pool that was adopted by the stockholders in November 2015. 114 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2022 and 2021 The following table summarizes our results of operations for the years ended December 31, 2022 and 2021: Year ended December 31, 2022 2021 Revenues: Product sales, net $ 50,037,106 $ — Operating expenses: Cost of product sales (excluding amortization and depreciation) 5,197,595 — Research and development 57,947,447 58,060,725 Selling, general and administrative 159,253,663 66,646,205 Loss in fair value of contingent consideration 3,298,230 — Intangible asset amortization 4,139,228 — Total operating expenses 229,836,163 124,706,930 Loss from operations (179,799,057 ) (124,706,930 ) Interest expense, net (7,334,596 ) (5,696,062 ) Net loss $ (187,133,653 ) $ (130,402,992 ) Net loss per common share, basic and diluted $ (4.60 ) $ (3.47 ) Weighted average common shares outstanding, basic and diluted 40,655,941 37,618,599 Product sales, net.
Biggest changeFor awards subject to performance-based vesting conditions, we recognize stock-based compensation expense using the accelerated attribution method when the achievement of the performance condition becomes probable. 112 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2023 and 2022 The following table summarizes our results of operations for the years ended December 31, 2023 and 2022 (in thousands, except share and per share amounts): Year ended December 31, 2023 2022 Revenues: Product sales, net $ 202,460 $ 50,037 License revenue 65,735 — Royalty revenue 2,405 — Total revenues 270,600 50,037 Operating expenses: Cost of revenue (excluding amortization and depreciation) 26,065 5,198 Research and development 97,944 57,947 Selling, general and administrative 323,123 159,254 Loss in fair value of contingent consideration 48,918 3,298 Intangible asset amortization 6,375 4,139 Total operating expenses 502,425 229,836 Loss from operations (231,825 ) (179,799 ) Interest expense, net (6,453 ) (7,335 ) Loss before income taxes (238,278 ) (187,134 ) Income tax expense (960 ) — Net loss $ (239,238 ) $ (187,134 ) Net loss per common share, basic and diluted $ (5.27 ) $ (4.60 ) Weighted average common shares outstanding, basic and diluted 45,425,212 40,655,941 Product sales, net.
At the time any of our securities covered by the 2022 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.
At the time any of our securities covered by the 2022 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.
Our future capital requirements will depend on many factors, including: • the commercial success of our products; • the scope, rate of progress, results, and cost of our clinical studies and other related activities; • our ability to enter into collaborative agreements for the development and commercialization of our product candidates; • the number and development requirements of any other product candidates that we pursue; • the costs, timing, and outcome of regulatory reviews of our product candidates; • the costs and timing of future commercialization activities, including product manufacturing, marketing, sales, and distribution, for any of our product candidates for which we receive marketing approval; • any product liability or other lawsuits related to our product candidates; • the expenses needed to attract and retain skilled personnel; • the general and administrative expenses related to being a public company; • the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; and • the costs involved in preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending our intellectual property‑related claims.
Our future capital requirements will depend on many factors, including: • the scope, rate of progress, results, and cost of our clinical studies and other related activities; • our ability to enter into collaborative agreements for the development and commercialization of our product candidates; • the number and development requirements of any other product candidates that we pursue; • the costs, timing, and outcome of regulatory reviews of our product candidates; • the costs and timing of our commercialization activities, including product manufacturing, marketing, sales, and distribution, for any of our products and product candidates for which we receive marketing approval; • any product liability or other lawsuits related to our product candidates; • the expenses needed to attract and retain skilled personnel; • the general and administrative expenses related to being a public company; • the revenue received from commercial sales of our products; and • the costs involved in preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights, and defending our intellectual property‑related claims.
Also included in selling, general and administrative expenses are commercial costs, marketing, pre-commercialization costs, facility-related costs, insurance expense, professional fees for legal and accounting services, and patent filing and prosecution costs. Selling, general and administrative expenses are expensed when incurred.
Also included in selling, general and administrative expenses are marketing costs, other commercial costs, pre-commercialization costs, facility-related costs, insurance expense, professional fees for legal and accounting services, and patent filing and prosecution costs. Selling, general and administrative expenses are expensed when incurred.
Revenue Recognition Revenues from product sales are recorded at the net sales price, which includes estimates of variable consideration that result from: invoice discounts for prompt payment and distribution service fees, government rebates, Pharmacy Benefit Managers ("PBMs") and Managed Care Organization rebates, chargebacks, discounts and fees, product returns and costs of co-pay assistance programs for patients.
Revenue Recognition Revenues from product sales are recorded at the net sales price, which includes estimates of variable consideration that result from: invoice discounts for prompt payment and distribution service fees, government rebates, Pharmacy Benefit Managers (“PBMs”) and Managed Care Organization rebates, chargebacks, discounts and fees, product returns and costs of co-pay assistance programs for patients.
SVB Leerink is entitled to receive a commission of 3.0% of the gross proceeds for any shares sold under the December 2019 Sales Agreement.
Leerink is entitled to receive a commission of 3.0% of the gross proceeds for any shares sold under the December 2019 Sales Agreement.
The Company exhausted sales of its shares of the Company’s common stock under its prior at-the-market offering program. In August 2022, we filed a prospectus supplement to the 2019 Shelf Registration Statement for the issuance and sale, if any, of up to an additional $250 million in shares of our common stock under the March 2022 Sales Agreement.
The Company exhausted sales of its shares of the Company’s common stock under its prior at-the-market offering program. In August 2022, we filed a prospectus supplement to the 2019 Shelf Registration Statement for the issuance and sale, if any, of up to an additional $250 million in shares of our common stock.
If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value, and a charge is reported in impairment of goodwill in our consolidated statements of operations. As of December 31, 2022, the Company has determined that it has one reporting unit.
If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value, and a charge is reported in impairment of goodwill in our consolidated statements of operations. As of December 31, 2023, the Company has determined that it has one reporting unit.
Recent Accounting Pronouncements Refer to Note 2 – Summary of Significant Accounting Policies to our consolidated financial statements included in Part IV, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements. 121 Table of Contents
Recent Accounting Pronouncements Refer to Note 2 – Summary of Significant Accounting Policies to our consolidated financial statements included in Part IV, Exhibits and Financial Statement Schedules, of this Annual Report on Form 10-K for a discussion of recently issued accounting pronouncements. 120 Table of Contents
When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. As of December 31, 2022, we do not believe any material uncertain tax positions are present.
When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. As of December 31, 2023, we do not believe any material uncertain tax positions are present.
U.S. federal NOLs amounting to $60 million generated before the 2018 tax year will start expiring beginning 2032, and the NOLs of approximately $398 million generated in 2018 and later have an indefinite carryforward period.
U.S. federal NOLs amounting to $60 million generated before the 2018 tax year will start expiring beginning 2032, and the NOLs of approximately $487 million generated in 2018 and later have an indefinite carryforward period.
Research and development expenses consist primarily of personnel costs for our research and development employees, costs incurred to third-party service providers for the conduct of research, preclinical and clinical studies, laboratory supplies, product license fees, consulting and other related expenses.
Research and development expenses Research and development costs are expensed as incurred. Research and development expenses consist primarily of personnel costs for our research and development employees, costs incurred to third-party service providers for the conduct of research, preclinical and clinical studies, laboratory supplies, product license fees, consulting and other related expenses.
These reserves reflect our best estimate of the amount of consideration to which the Company is entitled based on the terms of the contracts. We make significant estimates and judgments that materially affect our recognition of net product revenue.
These reserves reflect our best estimate of the amount of consideration to which we are entitled to based on the terms of the contracts. We make significant estimates and judgments that materially affect our recognition of net product revenue.
SVB Securities is entitled to receive a commission of up to 3.0% of the gross proceeds for any shares sold under the March 2022 Sales Agreement. The March 2022 Sales Agreement supersedes the December 2019 Sales Agreement, by and between the Company and SVB Securities.
Leerink is entitled to receive a commission of up to 3.0% of the gross proceeds for any shares sold under the March 2022 Sales Agreement. The March 2022 Sales Agreement supersedes the December 2019 Sales Agreement, by and between the Company and Leerink.
The new sales agreement prospectus covered the issuance and sale by us of up to the same $250 million of our common stock that may be issued and sold from time to time through SVB Securities, as our sales agent, under the March 2022 Sales Agreement.
The new sales agreement prospectus covered the issuance and sale by us of up to the same $250 million of our common stock that may be issued and sold from time to time through Leerink, as the Company’s sales agent, under the March 2022 Sales Agreement.
In March 2022, we entered into a sales agreement, or the March 2022 Sales Agreement, with SVB Securities, pursuant to which we may sell up to $200 million in shares of our common stock from time to time through SVB Securities, acting as our sales agent, in one or more at-the-market offerings utilizing the 2019 Shelf Registration Statement.
In March 2022, we entered into a sales agreement (the “March 2022 Sales Agreement”) with Leerink, pursuant to which we may sell up to $200 million in shares of our common stock from time to time through Leerink, acting as our sales agent, in one or more at-the-market offerings utilizing the 2019 Shelf Registration Statement.
Interest expense, net Interest expense, net, primarily consists of cash interest and non-cash costs related to our term loans (see “Liquidity and Capital Resources” below for a further discussion). We amortize these costs over the term of our debt agreements as interest expense in our consolidated statement of operations. Interest expense, net also includes interest income earned on cash.
Interest expense, net Interest expense, net, primarily consists of cash interest and non-cash costs related to our term loans (see “Liquidity and Capital Resources” below for a further discussion). We amortize these costs over the term of our debt agreements as interest expense in our consolidated statement of operations.
The Company estimates the fair value of the contingent consideration as of the acquisition date and reporting periods thereafter using the estimated future cash outflows based on future sales. 111 Table of Contents Critical Accounting Policies and Significant Judgments and Estimates This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or GAAP.
We estimate the fair value of the contingent consideration as of the acquisition date and reporting periods thereafter using the estimated future cash outflows based on future sales. 108 Table of Contents Critical Accounting Policies and Significant Judgments and Estimates This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).
Net cash provided by financing activities for the year ended December 31, 2022, was $284.6 million, which included net proceeds of the sale of common stock through our December 2019 and March 2022 Sales Agreement with SVB Securities of $231.8 million, net proceeds from Tranche 1B related to the Second Amendment of the Loan and Security Agreement with Hercules of $45.0 million along with the purchase of 152,487 shares of our common stock for a total consideration of $5.0 million by Hercules, and proceeds from the issuance of common stock upon exercise of employee stock options of $6.3 million, offset by payment of contingent consideration and tax withholdings on stock awards for a total of $3.0 million.
Cash provided by financing activities was $284.6 million for the year ended December 31, 2022, which included net proceeds of $231.8 million from the sale of common stock through the March 2022 Sales Agreement with Leerink, net proceeds of $45.0 million from the draw down related to the Second Amendment to the Loan Agreement with Hercules, the purchase of 152,487 shares of our common stock for a total consideration of $5.0 million by Hercules, and proceeds from the issuance of common stock upon exercise of employee stock options of $6.3 million, offset by payment of contingent consideration and tax withholdings on stock awards for a total of $3.0 million.
The Company’s CNS portfolio includes three not yet approved product candidates, AXS-07, AXS-12, and AXS-14, which are being developed for multiple indications, and two approved products - Auvelity® (sometimes also referred to as "AXS-05") and Sunosi® - both of which are also being developed for further indications.
The Company’s CNS portfolio includes three not yet approved product candidates, AXS-07, AXS-12, and AXS-14, which are being developed for multiple indications, and two approved products - Auvelity® and Sunosi® - both of which are also being developed for further indications.
Under the terms of our exclusive license agreement with Pfizer, Pfizer received 82,019 shares of our common stock having a value of $8.0 million, based on the average closing price of the Company’s common stock for the 10 prior trading days of $97.538, in consideration for the license and rights.
(“Pfizer”). Under the terms of our exclusive license agreement with Pfizer, Pfizer received 82,019 shares of our common stock having a stated value of $8.0 million, based on the average closing price of our common stock for the ten prior trading days of $97.54, in consideration for the license and rights.
It is difficult to determine with certainty the costs and duration of our current or future clinical trials and preclinical studies, or if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates if we obtain regulatory approval. We may never succeed in achieving regulatory approval.
It is difficult to determine with certainty the costs and duration of our current or future clinical trials and preclinical studies, or to what extent we will generate revenue from the commercialization and sale of Sunosi and Auvelity or our product candidates if we obtain regulatory approval.
The Third Amendment amended the terms of the Loan Agreement to, among other things, (i) extend the maturity date to January 1, 2028, unless the Company meets certain revenue targets as described in the Loan Agreement, in which case the Company can extend the maturity date to January 1, 2029; (ii) increase the aggregate principal amount under the Loan Agreement from $300,000,000 to $350,000,000; (iii) subject to the terms and conditions in the Loan Agreement, change the Term Loan Advance amounts and dates available under the Tranche 1 Advance (as defined in the Loan Agreement) through Tranche 5 Advance (as defined in the Loan Agreement), including increasing the Tranche 1 Advance from one tranche of $95,000,000 to five sub-tranches of $95,000,000, $55,000,000, $30,000,000, $35,000,000 and $35,000,000, respectively, changing the Tranche 2 Advance (as defined in the Loan Agreement) from three sub-tranches of $35,000,000, $35,000,000 and $30,000,000 to one tranche of $25,000,000, changing the Tranche 3 Advance (as defined in the Loan Agreement) from two sub-tranches of $15,000,000 and $5,000,000 to one tranche of $75,000,000, and removing the Tranche 4 Advance (as defined in the Loan Agreement) and Tranche 5 Advance entirely; (iv) revise the interest rate applicable to extensions of credit under the Loan Agreement to equal the greater of 9.95% per annum or the prime rate plus 2.20% per annum, (v) increase the minimum cash requirement of the Company to $30,000,000; and (vi) require the Company to pay a facility fee equal to 0.75% of the amount of principal actually funded pursuant to the Tranche 1B Advance (as defined in the Loan Agreement), Tranche 1C Advance (as defined in the Term Loan), Tranche 1D Advance (as defined in the Loan Agreement), Tranche 1E Advance (as defined in the Term Loan), Tranche 2 Advance and Tranche 3 Advance.
The Third Amendment amended the terms of the Loan Agreement to, among other things: 118 Table of Contents • Extend the maturity date to January 1, 2028, unless the Company meets certain revenue targets as described in the Loan Agreement, in which case the Company can extend the maturity date to January 1, 2029; • Increase the aggregate principal amount under the Loan Agreement from $300.0 million to $350.0 million; • Subject to the terms and conditions in the Loan Agreement, change the Term Loan Advance (as defined in the Loan Agreement) amounts and dates available under the Tranche 1 Advance (as defined in the Loan Agreement) through Tranche 5 Advance (as defined in the Loan Agreement), including increasing the Tranche 1 Advance from one tranche of $95.0 million to five sub-tranches of $95.0 million, $55.0 million, $30.0 million, $35.0 million and $35.0 million, respectively, changing the Tranche 2 Advance (as defined in the Loan Agreement) from three sub-tranches of $35.0 million, $35.0 million and $30.0 million to one tranche of $25.0 million, changing the Tranche 3 Advance (as defined in the Loan Agreement) from two sub-tranches of $15.0 million and $5.0 million to one tranche of $75.0 million, and removing the Tranche 4 Advance (as defined in the Loan Agreement) and Tranche 5 Advance entirely; • Revise the interest rate applicable to extensions of credit under the Loan Agreement to equal (a) if the prime rate is greater than or equal to 7.00%, the greater of either (i) the prime rate plus 2.20%, and (ii) 9.95%, but in no event greater than 10.70%, and (b) if the prime rate is less than 7.00%, 9.70%; • Increase the minimum cash requirement of the Company to $30.0 million; and • Require the Company to pay a facility fee equal to 0.75% of the amount of principal actually funded pursuant to the Tranche 1B Advance (as defined in the Loan Agreement), Tranche 1C Advance (as defined in the Loan Agreement), Tranche 1D Advance (as defined in the Loan Agreement), Tranche 1E Advance (as defined in the Loan Agreement), Tranche 2 Advance and Tranche 3 Advance.
At the time any of the securities covered by the 2022 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.
At the time any of the securities covered by the 2022 Shelf Registration Statement are offered for sale, we prepare and file a prospectus supplement with the SEC containing specific information about the terms of any such offering.
We have recently begun commercial sales of Sunosi and Auvelity but we have limited experience with commercializing these, or any, products. 109 Table of Contents We have incurred significant operating and net losses since inception. We incurred net losses of $187.1 million and $130.4 million for the years ended December 31, 2022 and 2021, respectively.
We have recently begun commercial sales of Sunosi and Auvelity but we have limited experience with commercializing these, or any, products. We have incurred significant operating and net losses since inception. We incurred net losses of $239.2 million and $187.1 million for the years ended December 31, 2023 and 2022, respectively.
See discussion below. Equity On December 2, 2022, we filed an automatic shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an unlimited amount, which we refer to as the 2022 Shelf Registration Statement. It was declared effective by the SEC upon filing.
See discussion below. On December 2, 2022, we filed an automatic shelf registration statement with U.S. Securities and Exchange Commission (the “SEC”) for the issuance of common stock, preferred stock, warrants, rights, debt securities, and units up to an unlimited amount, (the “2022 Shelf Registration Statement”). It was declared effective by the SEC upon filing.
Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.
Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy.
In May 2022, the Company completed the U.S. acquisition of Sunosi from Jazz Pharmaceuticals ("Jazz") and in November 2022, the Company acquired the ex-U.S. assets of Sunosi from Jazz for certain international markets (the "Acquisition").
In May 2022, the Company completed the U.S. acquisition of Sunosi from Jazz Pharmaceuticals (“Jazz”), and in November 2022, the Company acquired the ex-U.S. assets of Sunosi from Jazz for certain international markets (collectively, the “Acquisition”). Sunosi is a product approved by the U.S.
As of December 31, 2022, we had U.S. federal net operating loss, or NOL carryforwards of approximately $458 million and foreign NOL carryforwads of $7.8 million.
As of December 31, 2023, we had U.S. federal net operating loss, or NOL carryforwards of approximately $547 million and foreign NOL carryforwards of $0.7 million.
In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Management considers many factors in developing the estimates and assumptions that are used in the preparation of our consolidated financial statements.
The Company has not identified any events or changes in circumstances that indicate the existence of potential impairment of goodwill during the year ended December 31, 2022. Intangible Assets Intangible assets are amortized using the straight-line method over their estimated period of benefit of ten years.
We have not identified any events or changes in circumstances that indicate the existence of potential impairment of goodwill during the year ended December 31, 2023. Intangible asset The intangible asset is amortized using the straight-line method over its estimated period of benefit of ten years.
Interest expense, net for the year ended December 31, 2022, was $7.3 million, compared to $5.7 million for the year ended December 31, 2021, an increase of $1.6 million.
Interest expense, net, was $6.5 million for the year ended December 31, 2023 as compared to $7.3 million for the year ended December 31, 2022.
The royalty payments due to Jazz are a high single-digit royalty on the Company's U.S. net sales of Sunosi in the current indication and a mid single-digit royalty on the Company's U.S. net sales of Sunosi for future indications.
In connection with the acquisition of Sunosi, we have obligations to make royalty payments to Jazz in the high single-digits on the Company's U.S. net sales of Sunosi in the current indication and a mid single-digit royalty on the Company's U.S. net sales of Sunosi for future indications.
Research and Development Expenses Research and development expenses primarily include preclinical studies, clinical trials, manufacturing costs, employee salaries and benefits, stock‑based compensation expense, contract services, including external research and development expenses incurred under arrangements with third parties, such as contract research organizations, or CROs, facilities costs, overhead costs, depreciation, and other related costs.
Research and development expenses Research and development expenses primarily include preclinical studies, clinical trials, manufacturing costs, employee-related expenses, including salaries, benefits, travel, and stock-based compensation expense, contract services, including external research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”), facilities costs, overhead costs, depreciation, and other related costs. 107 Table of Contents Research and development activities are central to our business model.
For a more detailed description of these agreements, please see “Business—Material License Agreements.” License agreements with Antecip Bioventures Under three exclusive license agreements with Antecip Bioventures II LLC, or Antecip, an entity owned by our Chief Executive Officer and Chairman of the Board, Herriot Tabuteau, M.D., we are obligated to make specified royalty payments ranging from 1.5% to 4.5%, subject to up to a 50% reduction depending on required payments to third parties, on net sales of licensed products.
License agreements with Antecip Bioventures Under three exclusive license agreements with Antecip Bioventures II LLC (“Antecip”), an entity owned by our Chief Executive Officer and Chairman of the Board, Herriot Tabuteau, M.D., we are obligated to make specified royalty payments ranging from 1.5% to 4.5%, subject to up to a 50% reduction depending on required payments to third parties, on net sales of our products containing the licensed technology of Auvelity (AXS-05) and certain other products not currently under active development.
Shelf Registration Statement On December 2, 2022, we filed a Form S-3ASR (File No. 333-235372) with the SEC, or the 2022 Shelf Registration Statement, for the issuance of common stock, preferred stock, warrants, rights, debt securities and units, which became effective immediately upon filing.
In connection with the Sublease, the Company received certain rent and work concessions from the Sublandlord. 119 Table of Contents Shelf Registration Statement On December 2, 2022, we filed the 2022 Shelf Registration Statement on Form S-3ASR (File No. 333-235372) with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities, and units, which became effective immediately upon filing.
Research and development activities are central to our business model. We will incur substantial costs beyond our present and planned clinical trials in order to file a new drug application, or NDA, for any of our product candidates.
We have and will incur substantial costs beyond our present and planned clinical trials in order to file a new drug application (“NDA”), for any of our product candidates.
Payments associated with licensing agreements to acquire licenses to develop, use, manufacture and commercialize products that have not reached technological feasibility and do not have alternative future use are expensed as incurred.
Payments associated with licensing agreements to acquire licenses to develop, use, manufacture and commercialize products that have not reached technological feasibility and do not have alternative future use are expensed as incurred. 110 Table of Contents Goodwill Goodwill is deemed to have an indefinite life and therefore not amortized.
In January 2023, we entered into a Third Amendment to the Loan Agreement with Hercules.
January 2023 Third Amendment to the Loan and Security Agreement – Hercules On January 9, 2023, we entered into the Third Amendment to the Loan Agreement with Hercules.
Pfizer also received an upfront cash payment of $3.0 million and will also receive up to $323 million upon the achievement of certain regulatory and sales milestones, and tiered mid-single to low double-digit royalties on future sales. Pfizer will also have a right of first negotiation on any potential future strategic transactions involving AXS-12 and AXS-14.
Pfizer can also receive up to $323 million upon the achievement of certain regulatory and sales milestones as well as tiered mid-single to low double-digit royalties on future sales of any such approved clinical products containing compounds reboxetine esreboxetine. Pfizer will also have a right of first negotiation on any potential future strategic transactions involving AXS-12 and AXS-14.
In August 2022, the Company announced the FDA approval, and in October 2022, the U.S. commercial availability, of Auvelity. Auvelity is an indication for the treatment of major depressive disorder in adults. Refer to Part I, Item 1. "Business" for a summary of our clinical programs.
Auvelity is an indication for the treatment of major depressive disorder in adults. Refer to Part I, Item 1. "Business" for a summary of our clinical programs.
In the evaluation, the fair value of the relevant reporting unit is determined and compared to its carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required.
If the qualitative factors determine it is necessary to complete a goodwill impairment test, the fair value of the relevant reporting unit is determined and compared to its carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required.
Contingent consideration liabilities are measured at their estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in the consolidated statements of operations during such period a change is recognized.
We estimate fair value of contingent consideration liabilities using the probability weighted income approach as of the date of acquisition, with subsequent changes in fair value recorded in the consolidated statements of operations during such period a change is recognized.
In December 2019, we entered into a sales agreement, or the December 2019 Sales Agreement, with SVB Leerink, pursuant to which we may sell up to $80 million in shares of our common stock from time to time through SVB Leerink, acting as our sales agent, in one or more at-the-market offerings utilizing the automatic shelf registration statement we previously filed with the SEC on December 5, 2019, which we refer to as the 2019 Shelf Registration Statement.
In December 2019, we entered into a sales agreement (the “December 2019 Sales Agreement”), with SVB Securities LLC (now known as Leerink Partners LLC) (“Leerink”), pursuant to which we may sell up to $80 million in shares of our common stock from time to time through Leerink, acting as our sales agent, in one or more at-the-market offerings utilizing an automatic shelf registration statement we filed with the SEC on December 5, 2019 for the issuance of common stock, preferred stock, warrants, rights, debt securities, and units up to an unlimited amount (the “2019 Shelf Registration Statement”).
Intangible asset amortization. As part of the Sunosi acquisition preliminary purchase price allocation, we determined the identifiable intangible asset is developed technology. We amortize the intangible asset over its useful life of 10 years. Interest expense, net.
Intangible asset amortization . As part of the purchase price allocation for the part of the Acquisition that closed on May 9, 2022, we determined that the identifiable intangible asset is developed technology. We amortize the intangible asset over its useful life of 10 years.
Beginning July 2021, employee salaries and benefits were allocated to specific products. Selling, general and administrative expenses Selling, general and administrative expenses were primarily consist of salaries and related costs for personnel in executive, commercial, finance, and operational functions, and include stock-based compensation and travel expenses.
Selling, general and administrative expenses Selling, general and administrative expenses primarily consist of salaries and related costs for personnel in executive, commercial, finance, and operational functions, including stock-based compensation and travel expenses.
We test the carrying amounts of goodwill for recoverability on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired. We perform a one-step test in its evaluation of the carrying value of goodwill if qualitative factors determine it is necessary to complete a goodwill impairment test.
We test the carrying amounts of goodwill for recoverability on an annual basis or more frequently if events or changes in circumstances indicate that the asset might be impaired.
We estimate these expenses based on discussions with internal management personnel and external service providers as to the progress or stage of completion of services and the contracted fees to be paid for such services. If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly.
We estimate these expenses based on reviewing contracts, vendor agreements, discussions with internal management personnel and external service providers as to the progress or stage of completion of services and the contracted fees to be paid for such services.
In addition, we recognize expense for equity award forfeitures as they occur. For awards subject to service-based vesting conditions, we recognize stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting term.
We recognize the grant date fair value of the stock options over the requisite service period, which is generally the vesting term. For awards only subject to service-based vesting conditions, we elected to recognize stock-based compensation expense on a straight-line basis.
Sunosi is a product approved by the FDA and marketed in the U.S. to improve wakefulness in adult patients with excessive daytime sleepiness ("EDS") associated with narcolepsy or obstructive sleep apnea, and also approved in Europe in January 2020 by the European Commission.
Food and Drug Administration (the “FDA”) and marketed in the U.S. to improve wakefulness in adult patients with excessive daytime sleepiness (“EDS”) associated with narcolepsy or obstructive sleep apnea, and also approved in Europe in January 2020 by the European Commission. In August 2022, the Company announced the FDA approval, and in October 2022, the U.S. commercial availability, of Auvelity.
Our accumulated deficit as of December 31, 2022 was $596.3 million, and we expect to incur significant expenses and increasing operating losses for the foreseeable future.
Our accumulated deficit as of December 31, 2023 was $835.6 million, and we expect to incur significant expenses and continuing operating losses.
Intangible Assets Intangible assets are amortized using the straight-line method over their estimated period of benefit of ten years. We evaluate the recoverability of intangible assets periodically by considering events or changes in circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired.
We evaluate recoverability of the intangible asset periodically by considering events or changes in circumstances that may warrant revised estimates of useful life or that indicate the asset may be impaired.
Cash Flows The following table summarizes our primary sources and uses of cash for the periods indicated: Year Ended December 31, 2022 2021 Net cash (used in) provided by: Operating activities $ (116,510,798 ) $ (108,225,764 ) Investing activities (53,702,109 ) (307,549 ) Financing activities 284,582,008 11,129,714 Net increase (decrease) in cash $ 114,369,101 $ (97,403,599 ) Operating Activities.
Cash Flows The following table summarizes our primary sources and uses of cash for the periods indicated (in thousands): Year ended December 31, 2023 2022 Net cash (used in) provided by: Operating activities $ (145,080 ) $ (116,511 ) Investing activities (582 ) (53,702 ) Financing activities 331,013 284,582 Net increase (decrease) in cash $ 185,351 $ 114,369 Operating Activities.
Pursuant to the Purchase Agreement, we agreed to make non-refundable, non-creditable royalty payments to Jazz equal to a (A) high-single digit royalty for any Current Indication or (B) mid-single digit royalty for any Future Indication, of Net Sales in the U.S. Territory made during the applicable Royalty Term (in each case, as those terms are defined in the Purchase Agreement).
We allowed Tranche 1D to expire undrawn. Royalty Agreements Pursuant to the Asset Purchase Agreement, dated as of March 25, 2022 (the “Purchase Agreement”), we agreed to make non-refundable, non-creditable royalty payments to Jazz equal to a (A) high single-digit royalty for any Current Indication or (B) mid single-digit royalty for any Future Indication, of Net Sales in the U.S.
Cash used in investing activities for the year ended December 31, 2022 was $53.7 million as compared to $0.3 million for the year ended December 31, 2021. The increase was primarily due to the Sunosi acquisition for $53.0 million. 117 Table of Contents Financing Activities.
Cash used in investing activities for the year ended December 31, 2023 was $0.6 million, as compared to $53.7 million for the year ended December 31, 2022. In the second quarter of 2022, we made an upfront payment of $53.0 million to acquire Sunosi. 116 Table of Contents Financing Activities.
In 2014, Jazz acquired from Aerial worldwide rights to Sunosi excluding those Asian markets stated previously.
SK is the originator of Sunosi and retains rights in 12 Asian markets, including China, Korea, and Japan. In 2014, Jazz acquired from Aerial worldwide rights to Sunosi excluding those Asian markets stated previously.
We will pay SVB Securities a commission of up to 3.0% of the gross sales proceeds of any shares sold through SVB Securities, acting as sales agent, under the March 2022 Sales Agreement.
Leerink is entitled to receive a commission of up to 3.0% of the gross proceeds for any shares sold under the March 2022 Sales Agreement.
Net cash used in operating activities for the year ended December 31, 2022, was $116.5 million as compared to $108.2 million for the year ended December 31, 2021. The increase of $8.3 million in net cash used was mainly due to commercialization activities. Investing Activities.
Cash used in operating activities for the year ended December 31, 2023 was $145.1 million as compared to $116.5 million for the year ended December 31, 2022.
We will adjust our estimates based on new information, including information regarding actual rebates, chargebacks and discounts for our products, as it becomes available. 112 Table of Contents Research and Development Expenses Research and development costs are expensed as incurred.
We will adjust our estimates based on new information, including information regarding actual rebates, chargebacks and discounts for our products, as it becomes available. 109 Table of Contents License revenue We generate revenue from license or similar agreements with pharmaceutical companies for the development and commercialization of certain products.
In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability, and commercial viability.
In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability, and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.
We evaluate the recoverability of intangible assets periodically by considering events or changes in circumstances that may warrant revised estimates of useful lives or that indicate the asset may be impaired. We have not identified any events or changes in circumstances that indicate the existence of potential impairment of intangible assets during the year ended December 31, 2022.
We have not identified any events or changes in circumstances that indicate the existence of potential impairment of the intangible asset during the year ended December 31, 2023. Contingent consideration Consideration paid in a business combination may include contingent consideration.
Auvelity was launched on October 19, 2022 and had U.S. net sales of $5.2 million for the year ended December 31, 2022. No Auvelity sales were reported by Axsome for the 2021 comparable period reflecting the timing of the Auvelity approval and launch.
Auvelity was launched on October 19, 2022 and had U.S. net sales of $130.1 million and $5.2 million for the years ended December 31, 2023 and 2022, respectively. The increase in Auvelity sales was primarily due to an increase in sales volume and the timing of the Auvelity approval and launch.
Overview We are a commercial-stage biopharmaceutical company developing and delivering novel therapies for central nervous system (“CNS”) conditions that have limited treatment options. By focusing on this therapeutic area, we are addressing significant and growing markets where current treatment options are limited or inadequate.
By focusing on this therapeutic area, we are addressing significant and growing markets where current treatment options are limited or inadequate.
We believe that our current cash, along with the remaining committed capital from the $350 million term loan facility, is sufficient to fund anticipated operations into cash flow positivity, based on the current operating plan, which includes the continued commercialization of Sunosi and Auvelity.
We believe that our current available cash is sufficient to fund anticipated operations into cash flow positivity, based on the current operating plan.
If we enter into licensing or collaboration arrangements, such agreements may not generate revenue in the future. Cost of product sales Cost of product sales include direct costs of formulating, manufacturing and packaging drug product, overhead costs consisting of labor, customs, stock-based compensation, shipping, outside inventory management, royalty expense, and other miscellaneous operating costs.
Cost of revenue Cost of revenue includes direct costs of formulating, manufacturing, and packaging drug product as well as overhead costs consisting of labor, customs, stock-based compensation, shipping, outside inventory management, royalty expense, and other miscellaneous operating costs. In the first quarter of 2023, we recorded a $5.0 million license sharing expense related to the upfront license revenue received.
March 2022 Second Amendment to the Loan and Security Agreement – Hercules In March 2022, we entered into a Second Amendment to Loan and Security Agreement with Hercules Capital, Inc.
May 2023 Fourth Amendment to the Loan and Security Agreement - Hercules On May 8, 2023, we entered into the Waiver and Fourth Amendment to the Loan Agreement with Hercules.
There are no royalty payments due to Jazz for Net Sales outside of the U.S. Territory. At the initial closing, we assumed all of the commitments of Jazz to SK and Aerial. SK is the originator of Sunosi and retains rights in 12 Asian markets, including China, Korea, and Japan.
Territory made during the applicable Royalty Term (in each case, as those terms are defined in the Purchase Agreement). There are no royalty payments due to Jazz for Net Sales outside of the U.S. Territory. At the initial closing, we assumed all of the commitments of Jazz to SK Biopharmaceuticals Co. Ltd. (“SK”) and Aerial Biopharma, LLC (“Aerial”).
The Black-Scholes model takes into account the expected volatility of our common stock, the risk-free interest rate, the estimated life of the option, the closing market price of our common stock, expected dividend yield and the exercise price. The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment.
The Black-Scholes model requires management to make assumptions, including expected volatility of our common stock, the risk-free interest rate, the expected term of the option, the fair value of our common stock, expected dividend yield, and the exercise price.
Risk Factors.” See also the “Special Cautionary Notice Regarding Forward-Looking Statements” set forth at the beginning of this report.
Risk Factors.” See also the “Special Cautionary Notice Regarding Forward-Looking Statements” set forth at the beginning of this report. Overview We are a commercial-stage biopharmaceutical company developing and delivering novel therapies for central nervous system (“CNS”) conditions that have limited treatment options.
The increase is mainly due to a higher debt balance compared to the prior comparable period due to the execution of the Second Amendment to the 2020 Term Loan in May 2022. 115 Table of Contents Liquidity and Capital Resources Since our inception through December 31, 2022, we have financed our operations primarily through equity offerings, debt borrowings and proceeds from product sales.
The increase was primarily due to higher selling, general and administrative expenses related to commercial activities related to Sunosi and Auvelity, including sales force and marketing spend, and higher personnel costs, including non-cash stock compensation expense. 114 Table of Contents Liquidity and Capital Resources Since our inception through December 31, 2023, we have financed our operations primarily through proceeds from equity offerings, debt borrowings, and proceeds from product sales.
Please see “Risk Factors” for additional risks associated with our substantial capital requirements. 118 Table of Contents Contractual Obligations and Commitments The following is a summary of our contractual obligations as of December 31, 2022: Less than More than Total one year 1 - 3 years 3 - 5 years 5 years Term loan $ 133,947,600 $ 10,306,181 $ 43,329,631 $ 80,311,788 $ — Lease commitments $ 427,875 427,875 — — — Total contractual obligations $ 134,375,475 $ 10,734,056 $ 43,329,631 $ 80,311,788 $ — License agreement with Pfizer In January 2020, we entered into a license agreement with Pfizer.
Please see “Risk Factors” for additional risks associated with our substantial capital requirements. 117 Table of Contents Contractual Obligations and Commitments The following is a summary of our contractual obligations as of December 31, 2023 (in thousands): Payments due by year Total 2024 2025 - 2026 2027 - 2028 Thereafter Term loan $ 269,525 $ 19,581 $ 39,055 $ 210,889 $ — Lease commitments 11,418 1,240 4,453 5,725 — Total contractual obligations $ 280,943 $ 20,821 $ 43,508 $ 216,614 $ — License agreement with Pfizer In January 2020, we entered into a license agreement with Pfizer Inc.
The Third Amendment, among other things, increased the size of the aggregate principal amount of the 2020 Term Loan from $300,000,000 to $350,000,000, reduced the interest rate, and extended the maturity and interest-only period of the Loan Agreement.
The Third Amendment increases the size of the Term Loan Advance (as defined in the Loan Agreement) to $350.0 million, reduces the interest rate, and extends the maturity and interest-only period of the Loan Agreement.
See “Contractual Obligations and Commitments - January 2023 Third Amendment to the Loan and Security Agreement – Hercules” section below for more information.
See the “Contractual Obligations and Commitments – January 2023 Third Amendment to the Loan and Security Agreement – Hercules” section below for more information. 115 Table of Contents In May 2023, we entered into a Waiver and Fourth Amendment to the Loan Agreement to, among other things, increase the amount of Cash (as defined in the Loan Agreement) that could be held by Axsome Malta Ltd.
Funding requirements We have not achieved profitability since our inception, and we expect to continue to incur significant losses for the foreseeable future. We expect our losses to decrease over time if we are able to successfully commercialize Auvelity and Sunosi.
Funding requirements We have not achieved profitability since our inception, and we expect to continue to have losses as we continue the development of, and seek regulatory approvals for, our product candidates, and begin to commercialize any additional approved products while further investing in Auvelity and Sunosi.
Cost of product sales. Total cost of product sales was $5.2 million for the year ended December 31, 2022 compared to none for the 2021 comparable periods, reflecting the acquisition of Sunosi and launch of Auvelity. Research and Development Expenses.
Cost of revenue was $26.1 million for the year ended December 31, 2023, as compared to $5.2 million for the year ended December 31, 2022. The increase is in line with the increase in sales for Auvelity and Sunosi. Auvelity was launched in the fourth quarter of 2022 and Sunosi was acquired in the second quarter of 2022.
Additionally, we began selling Sunosi in the U.S. in May 2022 and in certain international markets in November 2022, and recorded net sales of $44.8 million for the year ended December 31, 2022, which included $0.9 million in ex-U.S. market net sales. No Sunosi sales were reported by us for the 2021 comparable periods, reflecting the acquisition of Sunosi.
Sales of Sunosi began in the U.S. in May 2022 and in certain international markets in November 2022. Sunosi product sales were $72.4 million and $44.9 million for the years ended December 31, 2023 and 2022, respectively. The increase in Sunosi sales was primarily due to an increase in sales volume and the timing of the Acquisition. License revenue.
We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential. 110 Table of Contents The following table summarizes our research and development expenses by program for the years ended December 31, 2022 and 2021: Year Ended December 31, 2022 2021 Sunosi $ 2,834,120 $ — AXS-05 23,949,287 24,525,561 AXS-07 9,060,693 14,787,625 AXS-12 7,091,036 4,862,688 AXS-14 2,330,131 235,933 Other research and development 4,077,772 6,192,869 Stock-based compensation 8,604,408 7,456,049 Total research and development expenses $ 57,947,447 $ 58,060,725 Other research and development expenses primarily consist of employee salaries and benefits, facilities and overhead costs.
The following table summarizes our research and development expenses for our primary products for the years ended December 31, 2023 and 2022 (in thousands): Year ended December 31, 2023 2022 Solriamfetol $ 18,232 $ 2,834 AXS-05 34,011 23,949 AXS-07 8,101 9,061 AXS-12 10,431 7,091 AXS-14 7,091 2,330 Other research and development (*) 5,998 4,078 Stock-based compensation 14,080 8,604 Total research and development expenses $ 97,944 $ 57,947 (*) Other research and development expenses primarily consist of costs related to other product candidates, facilities and overhead costs.
Our research and development expenses for the year ended December 31, 2022, were $57.9 million, compared to $58.1 million for the year ended December 31, 2021, a decrease of $0.2 million. See "Research and Development" section in the "Overview" section above for more further information. Selling, general and administrative expenses.
Research and development expenses increased by $40.0 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022.
Under the December 2019 Sales Agreement and March 2022 Sales Agreement, for the year ended December 31, 2022, we received approximately $238.8 million in gross proceeds through the sale of 5,167,973 shares, of which net proceeds were approximately $231.8 million. 116 Table of Contents Debt In March 2022, we entered into a Second Amendment to the Loan Agreement with Hercules.
We did not utilize the March 2022 Sales Agreement with Leerink during the year ended December 31, 2023. In January 2023, we entered into a Third Amendment to the Loan Agreement with Hercules.
Removed
In July 2019, the Financial Accounting Standards Board (which we refer to as “FASB”) issued Accounting Standards Update 2019-07, “Codification Updates to SEC Sections-Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No. 33-10532, Disclosure Update and Simplification", which changes were meant to simplify certain disclosures in financial condition and results of operations, particularly by eliminating year-to-year comparisons between prior periods previously disclosed.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Currency Exchange Risk We contract with vendors and third-party manufactures located in Europe and certain invoices are denominated in foreign currencies. We are therefore subject to fluctuations in foreign currency rates in connection with these agreements, and recognize foreign exchange gains or losses in our statement of operations. We have not historically hedged our foreign currency exchange rate risk.
Biggest changeWe are therefore subject to fluctuations in foreign currency rates for the Euro, Swiss Franc, and British Pound, in connection with these agreements, and recognize foreign exchange gains or losses in our statement of operations. We have not historically hedged our foreign currency exchange rate risk.
To date, we have not incurred any material effects from foreign currency changes on these contracts. We do not believe a 10% change in these currencies on December 31, 2022, would have had a material effect on our results of operations or financial condition. Inflation Risk Inflation generally affects us by increasing our cost of labor and pricing of contracts.
To date, we have not incurred any material effects from foreign currency changes on these transactions. We do not believe a 10% change in these currencies on December 31, 2023 would have had a material effect on our results of operations or financial condition. Inflation Risk Inflation generally affects us by increasing our cost of labor and pricing of contracts.
We do not believe that inflation has had a material effect on our business, financial condition, or results of operations during the year ended December 31, 2022.
We do not believe that inflation has had a material effect on our business, financial condition, or results of operations during the year ended December 31, 2023.
Due to the short‑term nature of our investment portfolio and debt agreement, we do not believe an immediate 100 basis point increase in interest rates would have a material effect on the fair market value of our portfolio, and, accordingly, we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.
Due to the short‑term nature of our investment portfolio and debt agreement, which use short term interest rates and the prime rate, respectively, we do not believe an immediate 100 basis point increase in interest rates would have a material effect on the fair market value of our portfolio, and, accordingly, we do not expect our operating results or cash flows to be materially affected by a sudden change in market interest rates.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Interest Rate Risk We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations. We had cash of $200.8 million as of December 31, 2022.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK Interest Rate Risk We are exposed to market risks in the ordinary course of our business. These market risks are principally limited to interest rate fluctuations. We had cash of $386.2 million as of December 31, 2023.
Added
Foreign Currency Exchange Risk We contract with vendors and third-party manufactures located in Europe and certain invoices are denominated in foreign currencies. Royalty revenues from Pharmanovia are derived from their sales of Sunosi in ex-U.S markets and those sales are denominated in Euros.

Other AXSM 10-K year-over-year comparisons