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Alzheimer's Disease

More on Axovant’s IPO

Update: the IPO went off at the top of its range, I am sorry to report. More here from FierceBiotech, and I agree with John Carroll’s take.
I wrote just recently about Axovant and their plans to go public with an Alzheimer’s therapy picked up on the cheap from GSK. Now here’s a look from Adam Feuerstein at at the whole situation, and it reeks even more than I’d thought.
20% of the company is being sold to the public, in an offering that’s recently been scaled up to $250 million. And it’s one of those friendly, welcoming deals, if you run in the right circles:

You with me so far? Hedge fund guy forms a company and subsidiary to buy an old Alzheimer’s drug Glaxo didn’t seem to want for $5 million. Six months later and without doing any clinical development at all, hedge fund guy sets terms for IPO of shell subsidiary which values the same old Alzheimer’s drug at well over $1 billion.
It gets better. Perhaps sensing reluctance from outside investors to buy a minority stake in an old Alzheimer’s drug Glaxo seemingly gave away for almost nothing, Ramaswamy gets two more hedge funds — RA Capital and Visium Asset Management — to “indicate an interest” in buying shares in the Axovant IPO valued at up to $150 million.
As inducement for their interest in the Axovant IPO, RA Capital and Visium are allowed to sell their shares (if they buy) after 90 days. The customary lock-up period for insiders in an IPO is 180 days.
The biotech bull market is a wonderful thing. . .

Indeed it is, if you’re on the nice side of it. But if this IPO goes off well this week, I’m going to have to take it as a sign of undeniable craziness in the market. There really seems to be no reason for Axovant to be going public at this time and under these terms, other than the fact that there’s a horde of people outside its door, jumping up and down and waving fistfuls of money. If that’s your idea of a sustainable market, or if it just sounds like a fun time, then go ahead, I guess. Caveat bug-eyed, clueless emptor and all that.

10 comments on “More on Axovant’s IPO”

  1. Hap says:

    Incorporating in Bermuda, giving options to family members at bargain-basement prices…boy this looks like a winner. Apparently I don’t run with the proper crowd, but I hadn’t realized there were so many people with investable money and no sense (or more greed than sense).
    Of course, the idea that a major drug company could misvalue its assets is not as far-fetched as it might seem –
    (although that one was bought in Phase II, not after it).

  2. annonie says:

    If GSK gave up the compound for next to nothing, let me just say that there was a reason for that.
    So as a drug, I’d think there’s not a lot of hope….but to print money, well, they seem to think this is the golden brick road to see the wizard.

  3. Vader says:

    I, for one, favor anything that separates fools from their money.

  4. Kumar says:

    Sounds like someone who is too greedy trying to take Biotech Bull Market to Biotech Bulls@#t Market. This type of shenanigans are going to create irreparable damage to the reputation of the industry which is already NOT in a healthy state of public perceptions.

  5. Anonymous says:

    Reminds me of tulips.

  6. matt says:

    Agree completely with Kumar. If you work in the pharmaceutical business, you should be complaining to the attorneys general of any state to which you can lay claim, and any members of Congress who aren’t on the take in one of these schemes. You should be working to educate any public you can reach, and caveat the emptors just as widely and strongly as possible.
    Because those fools and their money _will_ be parted, and you will be complaining, and begging, for prudent investors.
    The backlash from a bubble is not sanity, but insanity in the other direction, where even the most legitimate firm offering a genuine breakthrough in cancer or AD can’t get a dollar of investment.
    You know, we had a monetary crisis very, very shortly after Congress dismantled Glass Steagall. And we have many complaints about the foolish, short-term investors acting in the market…who was it, Kemp-Roth? that wiped out the tax incentives to keep longer-term investments? Maybe all those stodgy old Depression-era statues _were_ holding us back, not from gigantic profits, but from leaping off a cliff in our collective greed.

  7. biotechtoreador says:

    If people want to buy stuff like this, who’s to stop them? Guys like Lindsay Rosenwald have made hundreds of millions recycling crap molecules with a patina of credibility and are showing no signs of slowing down. A couple of impressive examples of Lindsay’s work were CNDo (selling, literally, pig sh!t to treat Crohn’s and VTUS (a cure for anal fissures—not even making this up). Heck, I’d never have thought a company selling curry to treat NLC (Nocturnal Leg Cramps) would be worth the $400,000,000 (all in) that FLKS is worth.
    All the stupidity of Axovant is in the S-1, including the CEO giving his mother and brother 1 million options…
    The worst part is, with 5 banks on Axovant’s cover, these guys will have 5 BUY ratings 25 days after the IPO, which is all Uncle Billy will see when he logs into his Scott Trade account to get rich trading his 401k.

  8. Devil's advocate says:

    Allow me to play the role of devil’s advocate here. GSK stopped development on this drug after a positive Phase 2 because the company was getting out of CNS. Axovant recognized the value of this drug and convinced GSK to sell it for a very modest upfront payment and future milestones and royalties. One can question GSK’s intelligence or the Axovant CEO’s judgement in doling out options to his family (which is disclosed openly in the S1 for all to read). However, what we are left with is a company that is taking a drug into Phase 3 for AD, after a POSITIVE Phase 2. What is that worth? Lundbeck got $150M upfront for a similar drug…
    Why is Axovant being demonized instead of cheered for having the sense and skill to take a promising drug off of GSK’s shelf and delivering an investment opportunity in a promising Phase 3 ready AD drug?
    Oh, and by the way, per article, usually only existing private investors are subject to a 180 day lock-up period after an IPO. New investors at the time of the IPO typically have zero lock-up so these hedge funds are willing to be locked up for 90 days, presumably to solidify their chance of getting big allocations in what they believe is a compelling investment.

  9. Hap says:

    I imagine, though, that if GSK thought they had something really good for Alzheimer’s, they might not have terminated their CNS work, or they might have used the project as a tradeable or partnerable asset for another company. Dumping it wouldn’t have been the only option for GSK, and while doing so doesn’t preclude the potential utility of the drug, it does say something not good about what GSK thought of it.
    I’d also make a snarky remark about tax avoidance and siting in Bermuda, but Pfizer kind of took the starch out of that one.

  10. braindoc says:

    Having worked on this compound, it might be helpful to put some context to this discussion based on data in the public domain.
    The compound was tested in both monotherapy and adjunctive trials in patients with mild-moderate AD. Although there was no signal in the monotherapy studies, the active control (donepezil) barely showed any activity either.
    The compound showed clinically relevant activity on one of two clinical outcome measures when added to donepezil at the higher dose.
    GSK management stopped development of this compound due to a number of reasons including a strategic decision to exit CNS, a lack of confidence in AD studies emanating from the slew of failures of anti-amyloid therapies and lots of discomfort with the subjective nature of AD clinical trial outcome measures (it’s a lot easier to measure titers and tumor volumes than to measure cognition). It should also be noted that the decision to sell it was an on-off-on-again saga.
    From a patient perspective, the lack of any new therapies for over 10 years is nothing short of cruel abandonment. So much effort is being spent on the development of disease modifying drugs that it’s easy to forget that these patients are still symptomatic and need new therapies.
    Lastly, the people investing in this company should given some credit for doing their due diligence. The pharmacological and pre-clinical rationale for this class of compound is strong and there are other compounds in the class that have shown clinically meaningful activity in phase II studies.

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