Biotech Led by 29-Year-Old CEO Now Worth Billions With No Sales

What's Behind the Soaring Pay for Biotech Executives?

Investors are giving Axovant Sciences Ltd. an almost $3 billion valuation after its public-market debut. Not bad for a company that is years away from making a dime of sales, if it ever does.

Axovant, which is developing one treatment for Alzheimer’s disease, raised $315 million in its initial public offering Wednesday night, the largest ever deal for a pre-revenue biotech company, according to data compiled by Bloomberg. Its shares almost doubled Thursday, yielding a market value of $2.87 billion.

The market debut comes at a time of heightened enthusiasm for biotechnology stocks, even for companies that are years away from seeing their drugs hit the market. Axovant, for example, is doing another trial of its Alzheimer’s drug and plans to file for approval by the end of 2017. Its chief executive officer, 29-year-old former hedge fund manager Vivek Ramaswamy, declined to comment on when the company could start marketing the drug or on its pricing strategy.

The road ahead is tough. Alzheimer’s is a particularly challenging disease; researchers have failed for years to develop successful disease-modifying therapies for the memory-robbing illness. Axovant bought its main compound from GlaxoSmithKline Plc in December, paying $5 million and agreeing to give the British drugmaker additional payments and royalties if the drug hits the market.

“In the near term, we’ll rapidly advance RVT-101 for the treatment of Alzheimer’s and other forms of dementia,” Ramaswamy said. “Over time, our strategy includes acquisition or in-licensing for other candidates for all types of dementia.”

RVT-101 is a once-daily pill that Ramaswamy envisions being added to the current standard of care. It’s a therapy that promotes the release of certain neurotransmitters in the brain that helps to enhance cognition in Alzheimer’s patients.

Drugmaking giants like Eli Lilly & Co. and Biogen Inc. are also racing to create a treatment that can slow the memory-robbing affects of Alzheimer’s.

Biotech Record

Axovant, based in Hamilton, Bermuda, sold 17.9 million shares for $15 apiece. The stock is listed on the New York Stock Exchange, under the symbol AXON.

Axovant’s IPO coincides with a day where the Nasdaq Biotech Index is trading at a record high. The gauge has surged 21 percent this year, prompting a wave of biotech IPOs. The industry has raised $1.6 billion in 2015, the best start to the year since 2000, according to data compiled by Bloomberg.

Investors’ enthusiasm for the industry has been fueled by new developments in gene therapy, cancer treatment and other cutting-edge medical research, along with speedier drug approvals by U.S. regulators.

Still, the swift rise in biotech stocks has raised concerns that companies are becoming overvalued. The Nasdaq Biotechnology Index is trading at 9.8 times annual sales, compared with 1.9 times for the S&P 500.

“Valuation in biotech is like an opinion on a Jackson Pollock painting: Whatever assumptions you bring are what your outcome is,” Les Funtleyder, an investor who bought into the Axovant IPO, said in an e-mail.

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