Axsome Therapeutics' (AXSM) shares are likely facing an "attractive setup" ahead of the US Food and Drug Administration's approval decision of a label expansion of Auvelity into Alzheimer's disease agitation, Oppenheimer said in a note Tuesday.

Oppenheimer said it forecasts a 20% upside with a 95% probability versus a 35% downside upon the FDA's decision, reflecting the investment firm's about $2 billion sales estimate, with a priority review for the drug backing its conviction.

The investment firm noted Auvelity was originally approved for major depressive disorder in Q3 2022, and was also given breakthrough therapy designation for a potential label expansion into Alzheimer's disease agitation.

Oppenheimer said it sees "distinct commercial advantages" for Auvelity, as it may "compete on clean safety, which also justifies formulary positioning and longer-term use" compared with competing Alzheimer's disease agitation drug Rexulti.

Meanwhile, Auvelity is also competitively well-positioned compared with candidate drugs in development like Cobenfy, which are "far behind," the note said.

Oppenheimer has an outperform rating on Axsome and a $220 price target.

Price: 183.26, Change: -5.43, Percent Change: -2.88