In June Vivek Ramaswamy, a 29-year-old
former hedge fund partner, canceled his
honeymoon plans to hike in the French
and Swiss Alps. He instead brought his
new bride to stand beside him as he rang
the bell of the New York Stock Exchange
to launch the biggest initial public
offering in the history of the American
biotechnology industry. What could be
more romantic than a few hundred
million in paper gains in a single day?
Ramaswamy’s Bermuda-based company,
Axovant Sciences, had been formed only
eight months earlier, but here it was
raising $360 million to develop an
Alzheimer’s drug that had been all but
abandoned by giant pharma
GlaxoSmithKline. On the first day of
trading the stock almost doubled, giving
Axovant a market capitalization of nearly
$3 billion. Considering that Ramaswamy
had persuaded Glaxo to part with the
unproven remedy for a mere $5 million
up front, the newlyweds were ecstatic, as
was a veritable wedding party of hedge
fund pals who had followed Ramaswamy
into the stock.
Yet as quickly as it started, the
honeymoon was over. Why would Glaxo
sell off a promising drug for so little?
critics asked. And how could a company
with ten employees, two of whom were
Ramaswamy’s mother and brother, be
worth so much? Experts, analysts and
the collective blogosphere quickly piled
on, and Axovant’s shares went into free
fall. By early September they were
trading 12% below the IPO price.
The naysayers have positioned the
young, handsome and charming
Ramaswamy as the poster boy for a
biotech bubble. That’s not hard to do
when the iShares Nasdaq Biotechnology
Index has surged 300% in five years,
compared with a 100% gain for the
broader Nasdaq index and 70% for the
S&P 500. Scary numbers, despite a
plethora of real breakthroughs, including
cancer drugs that shrink tumors, cures
for hepatitis C and treatments that
replace defective genes. And they’d be
positively terrifying if the government
stops approving or paying high prices for
so many drugs.
But this creeping fear ignores the full
scope of what Ramaswamy is up to:
rescuing the pharmaceutical industry’s
forgotten drugs. Whether or not the
Axovant drug works, the IPO, according
to Ramaswamy, is just “a first step on a
broader mission” to liberate abandoned
or deprioritized drugs that routinely
languish in the pipelines of pharma
companies, never reaching patients or
enriching investors. “It’s an ethical
problem of an underappreciated
magnitude,” says Ramaswamy. “So many
drugs that would have been of use to
society are cast aside. Certain drugs have
gone by the wayside for reasons that
have nothing to do with their underlying
merits.”
Leaning on his Wall Street background
and armed with a $400 million war
chest, Ramaswamy is building a portfolio
not of stocks but of has-been drugs that
he grabs for “pennies on the dollar,”
free-riding on the billions in research
that pharma sometimes sinks into failed
trials. Using a pharmaceutical holding
company he formed last year, Roivant
Sciences, Ramaswamy hopes to spin out
dozens of companies, much as he did
with Axovant. “This will be the highest
return on investment endeavor ever
taken up in the pharmaceutical
industry,” he boasts. “It will be a
pipeline every bit as deep and diverse as
the most promising pharma company in
the world but with a capital efficiency
that is unprecedented.”
There’s precedent. Lipitor, the bestselling
drug ever, was almost abandoned, and
Imbruvica, the drug behind AbbVie’s $21
billion purchase of Pharmacyclics in May,
was bought in 2006 as part of a $7
million deal. At least a dozen successful
companies have been built around the
purchase of a forgotten drug.
And Ramaswamy has quickly established
a track record: Roivant Sciences’ 76%
stake in Axovant and its Alzheimer’s pill,
code-named RVT-101, has produced a
20,000% paper return on its initial $5
million investment. Before that
Ramaswamy turned an $8 million
purchase of several drugs to treat the
liver virus hepatitis B into a $110 million
stake in Arbutus BioPharma, a 1,275%
paper return. In May Roivant scooped up
a drug for psychosis for $4 million from
Arena Pharmaceuticals. It also recently
partnered with a Duke University group
with a track record for inventing rare-
disease drugs.
A whirlwind of such deals has made
Ramaswamy, a member of the FORBES 30
Under 30 list, biopharma’s youngest chief
executive. He may soon be its youngest
billionaire. FORBES estimates that
Roivant is worth $3.5 billion, making its
Millennial founder’s 20% or so stake
worth some $700 million. Ramaswamy,
who just turned 30, has bigger
aspirations. Roivant, he says, will become
the “Berkshire Hathaway of drug
development.” In June Vivek Ramaswamy, a 29-year-old
former hedge fund partner, canceled his
honeymoon plans to hike in the French
and Swiss Alps. He instead brought his
new bride to stand beside him as he rang
the bell of the New York Stock Exchange
to launch the biggest initial public
offering in the history of the American
biotechnology industry. What could be
more romantic than a few hundred
million in paper gains in a single day?
Ramaswamy’s Bermuda-based company,
Axovant Sciences, had been formed only
eight months earlier, but here it was
raising $360 million to develop an
Alzheimer’s drug that had been all but
abandoned by giant pharma
GlaxoSmithKline. On the first day of
trading the stock almost doubled, giving
Axovant a market capitalization of nearly
$3 billion. Considering that Ramaswamy
had persuaded Glaxo to part with the
unproven remedy for a mere $5 million
up front, the newlyweds were ecstatic, as
was a veritable wedding party of hedge
fund pals who had followed Ramaswamy
into the stock.
Yet as quickly as it started, the
honeymoon was over. Why would Glaxo
sell off a promising drug for so little?
critics asked. And how could a company
with ten employees, two of whom were
Ramaswamy’s mother and brother, be
worth so much? Experts, analysts and
the collective blogosphere quickly piled
on, and Axovant’s shares went into free
fall. By early September they were
trading 12% below the IPO price.
The naysayers have positioned the
young, handsome and charming
Ramaswamy as the poster boy for a
biotech bubble. That’s not hard to do
when the iShares Nasdaq Biotechnology
Index has surged 300% in five years,
compared with a 100% gain for the
broader Nasdaq index and 70% for the
S&P 500. Scary numbers, despite a
plethora of real breakthroughs, including
cancer drugs that shrink tumors, cures
for hepatitis C and treatments that
replace defective genes. And they’d be
positively terrifying if the government
stops approving or paying high prices for
so many drugs.
But this creeping fear ignores the full
scope of what Ramaswamy is up to:
rescuing the pharmaceutical industry’s
forgotten drugs. Whether or not the
Axovant drug works, the IPO, according
to Ramaswamy, is just “a first step on a
broader mission” to liberate abandoned
or deprioritized drugs that routinely
languish in the pipelines of pharma
companies, never reaching patients or
enriching investors. “It’s an ethical
problem of an underappreciated
magnitude,” says Ramaswamy. “So many
drugs that would have been of use to
society are cast aside. Certain drugs have
gone by the wayside for reasons that
have nothing to do with their underlying
merits.”
Leaning on his Wall Street background
and armed with a $400 million war
chest, Ramaswamy is building a portfolio
not of stocks but of has-been drugs that
he grabs for “pennies on the dollar,”
free-riding on the billions in research
that pharma sometimes sinks into failed
trials. Using a pharmaceutical holding
company he formed last year, Roivant
Sciences, Ramaswamy hopes to spin out
dozens of companies, much as he did
with Axovant. “This will be the highest
return on investment endeavor ever
taken up in the pharmaceutical
industry,” he boasts. “It will be a
pipeline every bit as deep and diverse as
the most promising pharma company in
the world but with a capital efficiency
that is unprecedented.”
There’s precedent. Lipitor, the bestselling
drug ever, was almost abandoned, and
Imbruvica, the drug behind AbbVie’s $21
billion purchase of Pharmacyclics in May,
was bought in 2006 as part of a $7
million deal. At least a dozen successful
companies have been built around the
purchase of a forgotten drug.
And Ramaswamy has quickly established
a track record: Roivant Sciences’ 76%
stake in Axovant and its Alzheimer’s pill,
code-named RVT-101, has produced a
20,000% paper return on its initial $5
million investment. Before that
Ramaswamy turned an $8 million
purchase of several drugs to treat the
liver virus hepatitis B into a $110 million
stake in Arbutus BioPharma, a 1,275%
paper return. In May Roivant scooped up
a drug for psychosis for $4 million from
Arena Pharmaceuticals. It also recently
partnered with a Duke University group
with a track record for inventing rare-
disease drugs.
A whirlwind of such deals has made
Ramaswamy, a member of the FORBES 30
Under 30 list, biopharma’s youngest chief
executive. He may soon be its youngest
billionaire. FORBES estimates that
Roivant is worth $3.5 billion, making its
Millennial founder’s 20% or so stake
worth some $700 million. Ramaswamy,
who just turned 30, has bigger
aspirations. Roivant, he says, will become
the “Berkshire Hathaway of drug
development.”
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