ADAM F on AXON
Axovant failed. Now what? A collection of takes hot and cold
By DAMIAN GARDE @damiangarde and ADAM FEUERSTEIN @adamfeuerstein SEPTEMBER 26, 2017

It finally happened. Biotech’s most anticipated data readout of the year, an Axovant Sciences trial in Alzheimer’s disease, came back, and it came back negative.

Now what?

Join us as we parse the reactions (and hysterics) that followed Axovant’s much-discussed setback with the drug intepirdine and run through the key takeaways.

Everyone loves honesty

There was no shortage of sarcasm, schadenfreude, and self-congratulation on Twitter after Axovant’s announcement, but even the company’s most fervent skeptics applauded its honesty.

“Axovant announces negative top-line results,” began the press release, which continued free of spin, hyperbole, and half-truth. A follow-on statement from parent company Roivant was similarly clear and contrite, calling the results “a setback for our company.” The drug failed, and Axovant came clean about it.

Analysts are…analyzing

What’s a post-Alzheimer’s Axovant worth? According to Cowen’s Ritu Baral, the answer is a hard-to-believe $2.5 billion. She sees dementia with Lewy bodies, intepirdine’s backup indication, as “a more promising future value driver,” claiming that the drug’s failure in Alzheimer’s has “no negative read-through.”

Baird’s Brian Skorney could not disagree more. After admitting his Axovant bull call was wrong (a refreshing bit of accountability), Skorney finds little of interest in the Lewy body program, slashing his valuation to just $6 a share.

Meanwhile, Chardan’s Dr. Gbola Amusa, one of the only analysts who predicted intepirdine’s failure, found himself vindicated.

Axovant isn’t the only Vivek Ramaswamy offspring on the public markets, and some investors fretted that a negative result for intepirdine might weigh on Myovant, a startup focused on women’s health. But it didn’t. Myovant shares were unmoved on Tuesday, suggesting that the market sees Axovant’s bad news as an isolated setback, not an indictment of the whole ethos.

And this wasn’t a sector-wide event

In the run-up to Axovant’s data release, investors braced for what they thought would be a seismic result for the whole industry. Success would send stocks soaring; failure would halt a rally. But that didn’t happen at all. The Nasdaq biotech index — which, notably, does not include Axovant — was flat in the intepirdine aftermath. It’s impossible to say whether a smashing success would have pushed the entire sector higher, but investors’ worst fears hardly came true.

Wall Street still believes in Dr. David Hung

Axovant may no longer have a promising Alzheimer’s therapy, but it does have roughly $300 million in cash and a well-regarded turnaround artist holding the purse strings. Hung, Axovant’s CEO, rescued Medivation from comparable doldrums, and Wall Street is holding out hopes he can do it again.

On a conference call to discuss the data, Hung faced multiple questions about what Axovant might buy to replenish its pipeline, with one analyst even requesting a specific time frame for a new deal. Hung, as adept at exec-speak as any CEO in biotech, shied away from particulars but acknowledged that his company had “scouted a number of opportunities, several of which we find interesting.”

Why it’s the timing, not the total sum, that matters most in Roivant’s big deal
Ramaswamy gets by with a little help from his friends

Ramaswamy relied on the support of his old hedge fund buddies to pull off the Axovant IPO, the largest in biotech history up to that point. Who can forget this quote from RA Capital’s Peter Kolchinsky, explaining to Forbes why he decided to buy $75 million worth of Axovant stock at the debut price of $15 a share.

“He comes from our world,” Kolchinsky said of Ramaswamy, a former all-star analyst at QVT Financial. “I saw the data, and I knew that if I didn’t say yes, it was going to go to someone else. The markets can fluctuate, but the fundamentals haven’t changed.”

Kolchinsky must be hurting now that the intepirdine Alzheimer’s study went up in flames. Right? Um… no.

RA Capital liquidated its position in Axovant during the fourth quarter of last year, when the stock traded from $11 to $17. Pity the poor schlubs on the other side of those trades.

How do you know when a hedge fund manager is talking his book? When his lips are moving.

How to invest in future Alzheimer’s drugs

Don’t.