01:19 PM EDT, 04/29/2024 (MT Newswires) -- Axsome Therapeutics ( AXSM ) has a "strong risk/reward profile" for the phase 3 readout of AXS-05, an investigational treatment for Alzheimer's disease, , Morgan Stanley said in a note Monday.

The company has a high probability of success and potential for significant gains from the trial, and a downside protection from existing central nervous system therapies, the brokerage said.

Axsome is developing a pipeline of CNS therapies, but Morgan Stanley sees "ADA [Alzheimer's disease agitation] as the key pipeline area of investor focus."

Morgan Stanley said the company stock was pressured, at least partially, from a delay in the readout for the phase 3 trial. However, the readout is now expected in H2 and is anticipated to be a stock-moving event for the company.

Potential risks from the trial, according to the investment firm, include potential placebo outperformance, possible delays in the readout that could lead to investor disengagement, and third-party attempts to challenge the patents.

Morgan Stanley upgraded Axsome to overweight from equal-weight and raised price target to $115 from $90.

Price: 74.14, Change: +2.43, Percent Change: +3.39