AXSOME THERAPEUTICS, INC. – 10-K – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis contain forward-looking statements about
our plans and expectations of what may happen in the future. You should read the
following discussion and analysis in conjunction with "Item 8. Financial
Statements and Supplementary Data," and our consolidated financial statements
beginning on page F-1 of this report. Forward-looking statements are based on a
number of assumptions and estimates that are inherently subject to significant
risks and uncertainties, and our results could differ materially from the
results anticipated by our forward-looking statements as a result of many known
or unknown factors, including, but not limited to, those factors discussed in
"Item 1A. Risk Factors." See also the "Special Cautionary Notice Regarding
Forward-Looking Statements" set forth at the beginning of this report.

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. This section of this Annual Report on Form 10-K generally
discusses 2022 and 2021 items and year-to-year comparisons between 2022 and
2021. Discussions of 2020 items and year-to-year comparisons between 2021 and
2020 that are not included in this Annual Report on Form 10-K can be found in
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in Part II, Item 7 of the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2021.

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. 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. 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"). 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. 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.

Since our incorporation in January 2012, our operations to date have included
organizing and staffing our company, business planning, raising capital,
developing our compounds, engaging in other discovery and preclinical
activities, and the commercial launches of Sunosi and Auvelity. Subsequent to
our IPO, we financed our operations primarily through proceeds from sales of our
common stock to equity investors and debt borrowings. For a further discussion,
see the section entitled "Liquidity and Capital Resources" below.

Our ability to become profitable depends on our ability to generate revenue. We
have recently begun commercial sales of Sunosi and Auvelity but we have limited
experience with commercializing these, or any, products.

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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. 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. We expect our expenses
to increase in connection with our ongoing activities, as we continue the
commercialization of our on-market products and the development and clinical
trials of, and seek regulatory approval for, our current product candidates and
any other product candidates that we develop or in-license and advance to
clinical development. Further, we have incurred and will continue to incur
additional costs associated with operating as a public company. Accordingly, we
may need additional financing to support our continuing operations. We may seek
to fund our operations through public or private equity, debt financings, or
other sources. 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.

Financial Overview

Product sales, net

Net revenues from product sales consist of Sunosi, which, subsequent to our
acquisition from Jazz, we began selling in the U.S. in May 2022 and certain
international markets in November 2022, and Auvelity, which was made available
in October 2022.

We expect that Sunosi and Auvelity revenues are likely to fluctuate based on
demand quarter to quarter. We will not generate revenue from other products
unless and until we successfully develop, obtain regulatory approval of, and
commercialize one of our current or future product candidates. We have incurred
significant operating losses since inception. If we fail to complete the
development of our product candidates in a timely manner or obtain regulatory
approval for them, our ability to generate future revenue from such product
candidates, and our results of operations and financial position, would be
materially and adversely affected. 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.

Research and Development Expenses

Research and development expenses primarily include preclinical studies,
clinical trials, manufacturing costs, employee salaries and benefits,
stock­based 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 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. 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. The duration, costs, and timing of clinical trials and
development of our product candidates will depend on a variety of factors,
including the uncertainties of future clinical trials and preclinical studies,
uncertainties in clinical trial enrollment rate, and significant and changing
government regulation. 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.

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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. 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.
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.

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.

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.

Fair value in contingent consideration

Consideration paid in a business combination may include potential future
payments that are contingent upon the acquired business achieving certain
milestones in the future ("contingent consideration"). The royalty payments due
to Jazz are a high single-digit royalty on our U.S. net sales of Sunosi in the
current indication and a mid single-digit royalty on our U.S. net sales of
Sunosi for future indications. 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. 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.

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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. The preparation of these consolidated
financial statements requires us to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities at the date of the consolidated financial statements and the
reported amounts of expenses during the reported period. 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.

While our significant accounting policies are more fully described in Note 2 to
our audited consolidated financial statements appearing elsewhere in this
report, we believe the following accounting policies are critical to the
judgments and estimates we use in the preparation of our consolidated financial
statements.

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. Reserves are established for the estimates of variable consideration
based on the amounts earned or to be claimed on the related sales. The reserves
are classified as reductions to Accounts receivable, net or accrued expenses and
other current liabilities. The Company's estimates of variable consideration and
determination of whether to include estimated amounts in the transaction price
are based largely on an assessment of its anticipated performance and all
information (historical, current, and forecasted) that is reasonably available.
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. Claims by third parties for rebates,
chargebacks and discounts frequently are submitted to us significantly after the
related sales, potentially resulting in adjustments in the period in which the
new information becomes known. We will adjust our estimates based on new
information, including information regarding actual rebates, chargebacks and
discounts for our products, as it becomes available.

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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. We estimate
research, preclinical and clinical study expenses based on services performed,
pursuant to contracts with third-party research and development organizations
that conduct and manage research, preclinical and clinical activities on our
behalf. 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. 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 made to third parties under these arrangements in advance of the
performance of the related services by the third parties are recorded as prepaid
expenses until the services are rendered.

Goodwill

Goodwill is deemed to have an indefinite life and therefore not amortized. 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. 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 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. 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 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.

Contingent Consideration

Consideration paid in a business combination may include potential future
payments that are contingent upon the acquired business achieving certain
milestones in the future ("contingent consideration"). 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. 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
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. Contingent consideration liabilities expected to be settled within
12 months after the balance sheet date are presented in current liabilities,
with the non-current portion recorded within total liabilities in the
consolidated balance sheets.

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Income Taxes

Income taxes are accounted for under the asset and liability method. Under this
method, deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases, operating losses, and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date. Valuation allowances are provided if, based upon the weight of
available evidence, it is more likely than not that some or all of the deferred
tax assets will not be realized.

We recognize the tax benefit from an uncertain tax position only if it is more
likely than not to be sustained upon examination based on the technical merits
of the position as well as consideration of the available facts and
circumstances. 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.

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. 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.

Utilization of the NOLs may be subject to a substantial annual limitation due to
ownership change limitations provided by the Internal Revenue Code of 1986, as
amended. The annual limitation for net operating losses incurred before the 2018
tax year may result in expiration before we can use them. We have recorded a
valuation allowance on all of our deferred tax assets.

Stock­based compensation

For issued stock options, we estimate the grant date fair value of each option
using the Black­Scholes option pricing model. 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. 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.
For awards subject to performance-based vesting conditions, we recognize
stock-based compensation expense using the accelerated attribution method when
it is probable that the performance condition will be achieved. The expense
related to the stock-based compensation is recorded within the financial
statement line item the grantee's cash compensation is recorded in.

Our 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.

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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. 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. 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.

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. 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. Our selling, general and
administrative expenses for the year ended December 31, 2022, were $159.3
million, compared to $66.6 million for the year ended December 31, 2021, an
increase of $92.7 million.

Loss in Fair Value of Contingent Consideration. The change in fair value of
contingent consideration was primarily due to the change in discount rates due
to market changes.

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. 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. 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.

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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. 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.
In the future, we may conduct additional offerings of one or more of these
securities utilizing the 2022 Shelf Registration Statement in such amounts,
prices and terms to be announced when and if the securities are offered. 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.

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. 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.

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. 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. 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. 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.

In December 2022, in connection with the 2022 Shelf Registration Statement, we
filed a new sales agreement prospectus to replace the prior prospectus
supplement filed in August 2022 associated with the expired 2019 Shelf
Registration Statement. 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.

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.

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Debt

In March 2022, we entered into a Second Amendment to the Loan Agreement with
Hercules. The Second Amendment amends the terms of that certain Loan and
Security Agreement, dated as of September 25, 2020, by and among us, Hercules
and the Lenders (as amended by that certain First Amendment to Loan and Security
Agreement, dated as of October 14, 2021, and as further amended by the Second
Amendment). In connection with the Second Amendment, the parties also clarified
certain terms of the Warrant Agreement previously issued to Hercules. The Second
Amendment was effective upon the closing of the Acquisition on May 9, 2022. See
"Contractual Obligations and Commitments - March 2022 Second Amendment to the
Loan and Security Agreement - Hercules'" section below for more information.

In January 2023, we entered into a Third Amendment to the Loan Agreement with
Hercules. The Third Amendment amends the terms of that certain Loan and Security
Agreement, dated as of September 25, 2020, by and among us, Hercules and the
Lenders (as amended by that certain First Amendment to Loan and Security
Agreement, dated as of October 14, 2021, and as further amended by the Second
Amendment to Loan and Security Agreement, dated as of March 27, 2022). 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. See "Contractual Obligations and Commitments - January 2023 Third
Amendment to the Loan and Security Agreement - Hercules" section below for more
information.

In the future, we may conduct additional offerings of one or more of the
securities covered by the 2022 Shelf Registration Statement in such amounts,
prices and terms to be announced when and if the securities are offered. 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.

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. Because the
process of commercializing products and evaluating product candidates in
clinical trials is costly and the timing of progress in these trials is
uncertain, it is possible that the assumptions upon which we have based this
estimate may prove to be wrong, and we could use our capital resources sooner
than we currently expect.

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. 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 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.

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Financing Activities. 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.

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. We are subject to all of the risks pertinent to the
development of new product candidates, and we may encounter unforeseen expenses,
difficulties, complications, delays, and other unknown factors that may harm our
business.

We may need to raise additional financing in the future to fund our operations.
In the event that we need additional financing, we may incur additional debt,
license certain intellectual property, and seek to sell additional equity or
convertible securities that may result in dilution to our stockholders. If we
raise additional funds through the issuance of equity or convertible securities,
these securities could have rights or preferences senior to those of our common
stock and could contain covenants that restrict our operations. There can be no
assurance that we will be able to obtain additional equity or debt financing on
terms acceptable to us, if at all. 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 property­related claims.

Please see "Risk Factors" for additional risks associated with our substantial
capital requirements.

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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. 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 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. 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. For a
more detailed description of these agreements, please see "Business-Material
License Agreements." Due to the commercial launch 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.

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. The Second Amendment amends the terms of that
certain Loan and Security Agreement, dated as of September 25, 2020, by and
among us, Hercules and the Lenders (as amended by that certain First Amendment
to Loan and Security Agreement, dated as of October 14, 2021, and as further
amended by the Second Amendment). In connection with the Second Amendment, the
parties also clarified certain terms of the Warrant Agreement previously issued
to Hercules. The Second Amendment was effective upon the closing of the
Acquisition on May 9, 2022.

The Second Amendment changed the Term Loan Advance (as defined in the Loan
Agreement) amounts and dates available under Tranche 1 through Tranche 5,
including increasing the Tranche 1 Advance (as defined in the Loan Agreement)
from $60.0 million to $95.0 million, changing the Tranche 2 Advances (as defined
in the Loan Agreement) from two sub-tranches of $50.0 million each to three
sub-tranches of $35.0 million, $35.0 million and $30.0 million, respectively,
changing the Tranche 3 Advance (as defined in the Loan Agreement) from one
tranche of $20.0 million to two sub-tranches of $15.0 million and $5.0 million,
respectively, decreasing the Tranche 4 Advance (as defined in the Loan
Agreement) from $55.0 million to $50.0 million, and decreasing the Tranche 5
Advance (as defined in the Loan Agreement) from $75.0 million to $35.0 million;
(iii) modified the interest rate (a floating rate based on the greater of (a)
8.95% or (b) US WSJ Prime + 5.70%) to not exceed 10.70%; and (iv) changed the
minimum cash requirement of the Company from $15,000,000 (plus certain accounts
payable amounts) to $40,000,000 (plus certain accounts payable amounts),
provided that upon U.S. Food and Drug Administration (the "FDA") approval of the
Company's AXS-05 product candidate for the treatment of major depressive
disorder, the minimum cash requirement shall be $25.0 million (plus certain
accounts payable amounts). The $40.0 million threshold decreased to $25.0
million upon achievement of the AXS-05 milestone.

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January 2023 Third Amendment to the Loan and Security Agreement - Hercules

In January 2023, we entered into a Third Amendment to the Loan Agreement with
Hercules. The Third Amendment amends the terms of that certain Loan and Security
Agreement, dated as of September 25, 2020, by and among us, Hercules and the
Lenders (as amended by that certain First Amendment to Loan and Security
Agreement, dated as of October 14, 2021, and as further amended by the Second
Amendment to Loan and Security Agreement, dated as of March 27, 2022).

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.

Royalty Agreements

On March 25, 2022, the Company entered into an Asset Purchase Agreement (the
"Purchase Agreement") with Jazz, pursuant to which the Company was to acquire
commercial and development rights with respect Sunosi from Jazz (the
"Acquisition") in certain U.S. and ex-U.S. markets. 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). 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. In 2014, Jazz acquired from Aerial worldwide
rights to Sunosi excluding those Asian markets stated previously. The assumed
commitments to SK and Aerial include single-digit tiered royalties based on our
sales of Sunosi, and we are committed to pay up to $165 million based on revenue
milestones and $1 million based on development milestones.

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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. The
agreements were amended in August 2015 to update the schedule of patents and
applications subject to the license agreements. Pursuant to the agreements, we
are required to use commercially reasonable efforts to develop, obtain
regulatory approval for, and commercialize AXS-05. Under the terms of the
agreements, we are required to pay to Antecip a royalty equal to 3.0% for
AXS-05, of net sales of products containing the licensed technology by us, our
affiliates, or permitted sublicensees. These royalty payments are subject to
reduction by an amount up to 50.0% of any required payments to third parties.
Unless earlier terminated by a party for cause or by us for convenience, the
agreements remain in effect on a product by product and country by country basis
until the later to occur of (1) the applicable product is no longer covered by a
valid claim in that country or (2) 10 years from the first commercial sale of
the applicable product in that country. 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. If Antecip terminates any of the agreements for cause, or if we
exercise our right to terminate any of the agreements for convenience, the
rights granted to us under such terminated agreement will revert to Antecip. Due
to the commercial launch 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.

License Agreement with Pharmanovia

On February 21, 2023, Axsome Malta Ltd., a Malta limited company ("Axsome
Malta"), a wholly-owned subsidiary of the Company, entered into a License
Agreement (the "License Agreement") with Atnahs Pharma UK Limited (Pharmanovia),
a company organized and existing under the laws of England and Wales (the
"Licensee"), pursuant to which Axsome Malta will license certain Licensed
Intellectual Property (as defined in the License Agreement) to the Licensee and
grant an exclusive license to Licensee in the Territory (as defined in the
License Agreement and which includes Europe and certain countries in the Middle
East and Africa) for use of the Licensed Intellectual property for the
development and commercialization of the Company's Licensed Products (as defined
in the License Agreement and which includes the Company's product Sunosi).

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. 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.

Off­Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any
off­balance sheet arrangements, as defined by applicable SEC regulations.

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.

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