Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.

Remember Axovant Sciences, Exhibit A in last year's biotech bubble? Its story is deflating, metric by metric.   

Axovant, the biotech creation of 30-year-old hedge-funder Vivek Ramaswamy, was last year's most controversial health care IPO, perhaps. It miraculously turned its $5 million purchase of an abandoned GlaxoSmithKline Alzheimer's drug into a valuation of nearly $3 billion on the day after its IPO in June.

For some, Axovant's IPO represented a brilliant fleecing of a sluggish pharma giant by a wunderkind upstart. Others saw the episode as proof positive that biotech valuations had massively over-inflated.

Axovant critics got vindication in the months after its IPO; yesterday, shares were down 40 percent from their post- IPO peak on doubts about the company and the broader sector it inhabits. Critics got more ammunition today, with the news that Pfizer had abandoned a phase two trial for an Alzheimer's drug extremely similar to Axovant's Alzheimer's offering (Axovant is also developing another drug for treating a type of dementia). Axovant shares are down an additional 23 percent so far today. 

The Pfizer Plunge
Axovant dropped on doubts about its only drug after Pfizer scuppered trials of a similar compound.
Intraday times are displayed in ET.

Pfizer dropped its drug after the trial results failed to meet "interim analysis futility criteria."

In other words, Pfizer looked at the data, and it was bad enough that the company couldn't justify continuing its study, let alone trying to move it along the assembly line.

Pfizer conducted a 12-week test of the drug on patients with mild to moderate Alzheimer's who were also taking a current treatment, Aricept, against those taking Aricept and a placebo. Axovant's is in the midst of a longer phase three trial with an otherwise similar structure.

Axovant hadn't even enrolled a patient in a clinical trial when it went public. Yet it managed to launch one of the biggest biotech IPOs in history -- as well as all of those red flags about bubbliciousness.

Beyond exuberance, however, the core concern was always with the viability of Axovant's drug. GlaxoSmithKline is one of the biggest drug developers in the world, so it hadn't simply given up on the drug on a whim. It thought its own clinical trial data didn't warrant moving forward. Axovant has shown more faith, but hoping that a bigger trial will produce a better result seems extremely over-confident. 

These kinds of Alzheimer's drugs (known as 5-HT6 inhibitors) have only managed to produce modest results with patients. Swiss pharma leader Roche abandoned its own effort long before Pfizer. There is previous clinical trial data as well from GSK and Lundbeck and Otsuka, which are co-developing a similar drug. Their approach so far only seems to have demonstrated the potential to slightly slow the disease's progress. 

Forgotten drugs have been turned into blockbusters before. But Alzheimer's might be the most difficult target, because treatments for the disease historically have a significantly higher failure rate than treatments for other diseases. 

So here we are with Axovant, which has legions of doubters. According to Bloomberg data, Axovant was among the most heavily shorted stocks in biotech, with short interest at 21.17 percent of its float as of January 15th.

Doubters Galore
Many have not bought in in Axovant's attempted rescue of an abandoned Alzheimer's drug
Source: Bloomberg

Pfizer’s choice to abandon its trial isn’t fatal for Axovant. The results of Axovant's phase three trial, due in 2017, could still surprise its critics. But with last year's market optimism gone and mounting skepticism about the company's premier drug, Axovant has a tough road ahead of it. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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Max Nisen in New York at

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Timothy L. O'Brien at