Still Don't Believe in a Biotech Bubble? Check out Axovant

June 12, 2015 Still don’t believe in a biotech bubble? Check out Axovant

Jacob Plieth

Anyone taking a cursory glance at Axovant could be excused for assuming that the new Nasdaq entrant’s sole pipeline asset, for Alzheimer’s disease, was a first-in-class project guaranteed to generate blockbuster sales.

In reality Axovant’s RVT-101 is nothing of the sort, having to contend with advanced competition from the likes of Lundbeck and Pfizer, and the fact that many similar projects have been abandoned (see table below). RVT- 101 was itself ditched by GlaxoSmithKline, but this and numerous other red flags have not stopped Axovant from completing one of the most successful floats of recent times.

The company’s upsized IPO on Nasdaq yesterday raised $315m, putting it ahead of Juno Therapeutics and just behind Circassia’s record-breaking £200m ($332m) float in 2014. At the close of play yesterday Axovant shares were up 99%, valuing the eight-month-old company at $2.8bn.

Bubble mania

Given the numerous alarm bells around Axovant it is hard to put this level of exuberance down to much more than biotech bubble mania.

From a purely financial perspective it is not clear why investors would back a company staking all on a project that Glaxo had been willing to abandon for just $5m, and which is still a majority-owned subsidiary of a separate holding company, Roivant Sciences. After the float Roivant holds an 81% stake in Axovant.

Axovant’s chief executive, the 29-year-old Vivek Ramaswamy, also heads up Roivant and chairs Tekmira Pharmaceuticals, the RNAi business in which Roivant has a 30% equity stake. These issues have been spelled out in detail by Adam Feuerstein at Thestreet.com so there is little point going over them here.

However, there are also scientific questions about RVT-101 and its place in the high-risk Alzheimer’s disease market. The compound works by inhibiting the 5-HT6 receptor, which is expressed in brain regions involved in cognition and might play a role in modulating the activity of neurotransmitter systems.

Under the code SB742457, RVT-101 completed four phase II studies in 1,840 patients, but reported data are at best mixed. One study did show an effect on the Adas-Cog scale but not on the CDR-SB measure, while another failed to hit either Adas-Cog or Cibic+. A third showed a borderline effect on Cibic+ but not Adas-Cog.

Then there is the threat of more advanced competitors. Lundbeck’s idalopirdine, for instance, hit an Adas-Cog endpoint in hard-to-treat moderate disease, and was picked up by Otsuka for $150m up front; it is now in a huge pivotal programme in 4,260 patients that could start reading out this year (Lundbeck’s non-amyloid Alzheimer’s move could embolden others, October 11, 2013). A selection of 5-HT6 antagonists

Project Company Status

Lu AE58054 (idalopirdine) Lundbeck/Otsuka Phase III

PF-05212377 Pfizer Phase II

RVT-101/SB742457 Axovant/Roivant Phase II

AVN-101 Avineuro/AllaChem Phase II

ABT-354 AbbVie Phase I

SUVN-502 Suven Life Sciences Phase I

AVN-322 Avineuro/AllaChem Phase I

Abandoned - phase SAM-531 (cerlapirdine) Pfizer II

SYN-114 Roche Abandoned - phase I

SYN-120 Roche Abandoned - phase I

SB 271046 GlaxoSmithKline Abandoned - phase I

BVT74316 Swedish Orphan Biovitrum Abandoned - phase I

SYN-114 Biotie Therapies Abandoned - phase I

Source: EvaluatePharma.

Avineuro has several 5-HT6 projects, the most advanced of which is AVN-101, while Pfizer’s PF-05212377 is in a 342-patient phase II trial that ends next year. Then there are the failures, including clinical assets from Roche, Pfizer and Glaxo, though it could be argued that the latter two represent duds that had led to development of the current projects.

True, no matter how advanced the competition, first in class is nowhere near as important as best in class, but based on Glaxo’s questionable data this assumption would be a stretch.

Instead, Axovant looks like biotech float in a similar league to Sage Therapeutics – worth $2.5bn on the back of a single-arm, four-patient trial – or Blueprint Medicines, now at $857m despite never yet having put any of its kinase inhibitors into a single patient.

Biotech bulls will insist that this time things really are different, but the unusual case of Axovant suggests otherwise.

To contact the writer of this story email Jacob Plieth in London at [email protected] or follow @JacobPlieth on Twitter