When Herriot Tabuteau founded a drug development company in 2012, he decided to do it differently. First, it would focus on brain disorders, whose treatments are notoriously difficult to develop and whose efficiency can be difficult to demonstrate. He would be at the same time executive director and scientific founder, contributing his decades of experience investing at biotechnological startups and his medical training. But I would not accept risk capital, self -financing with the help of friends and family.
“If you do things exactly the same as others, you will get the same results as others. And we wanted to obtain results to highlight,” says Tabuteau, 57, during his first interview with a journalist about his company, Axsome Therapeutics.
Baptized with the name of two parts of a nerve cell, the “axon” and the “soma”, Axsome walked a long way from its inception in an office without windows of three desks in the Rockefeller Center in New York, affectionately remembered as “the wardrobe of the brooms.” Today, it has three medications in the market and five in development, with the potential to help the approximately 150 million Americans suffering from conditions such as depression, ADHD or Alzheimer’s. The income of the 12 -month period ended in June reached 495 million dollars, 70% more than in the same 2024 period. Axsome is not yet profitable, registering a net loss of 247 million dollars in that period.
The company quotes at the Nasdaq with a stock market capitalization of 6,100 million dollars; Tabuteau is a billionaire thanks to its 15%participation, more options. He estimates that Axsome could reach 16.5 billion dollars in maximum sales with its current medication portfolio, which would place it among the 25 main pharmaceuticals for current income. This assuming that everything comes out as planned, in particular that the FDA approves five new medications from here to 2028. It is a great demand: only about 25% of the medications have sufficient performance in phase III tests to advance in the FDA process.
Tabuteau was born in Haiti, where his biological mother had difficulty raising them and his sister. Remember to have suffered abandonment of all kinds – physical, nutritional, emotional – but “he taught me resilience,” he says now. At 9 years, he moved to his father and his adopted mother to the Upper East Side of Manhattan. His titles in Wesley’s molecular and biochemistry biology took him to Yale’s Faculty of Medicine, where he planned to become a neurosurgeon. But the obvious dissatisfaction of his medical professors that chose not to make a residence in neurosurgery and opt for a position in the Goldman Sachs health investment banking group disturbed him so much. That was the beginning of a race of almost two decades in finance, which included periods in Bank of America Securities and the Healthco/SAC Coverage Fund, in addition to managing its own funds.
From his privileged position on Wall Street, he observed the success and failure of thousands of biotechnology in the initial phase, and began to develop his own theories about what worked and why. While most biotechnology focus on a single drug, he realized that creating a portfolio would reduce the risk of a failure. To maintain low costs, it avoided the usual practice of the industry to outsource clinical trials, betting on it could do it internally more economically and with greater probabilities of success. A phase III trial could easily cost 50 million dollars; Tabuteau could do it between 30 and 50% less.
“We received a lot of resistance,” he says, since investors did not believe that he could make so many trials with such a low budget. Working in multiple drugs helped him: when an essay ended, his researchers immediately began working on the next.
Covering your back was a successful decision. After giving in 2015, Axsome had difficulties, something common for a biotechnological company in the initial phase, since the medications may take ten years to get from the idea to the market, and although Axsome’s essays were cheaper, they were not. The company’s shares remained down below $ 10 for years, and its stock market capitalization fell below 100 million dollars after an initial pain for pain failed in its clinical trial. “No one believed in Axsome years ago, and I think there are still many unbelievers,” says Nick Pizzie, financial director of Axsome. “It’s a sample story.”
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Axsome’s prospects shot with their first great drug, Auvelity. When the treatment for major depressive disorder obtained the approval of the FDA in August 2022, the shares shot 65% in a week, valuing the company at 3,000 million dollars. The drug combines two existing medications for a treatment that can start operating in just one week, compared to the six or eight weeks of serotonin -based antidepressants, a great advantage. For its launch, Axsome began with 165 sales representatives, less than half of the usual.
However, he matched these representatives with software that could identify which doctors would probably be receptive to their products and determine whether they would prefer email, a telephone call or a face -to -face meeting. Auvelity heads to reach 500 million dollars in sales this year, and analysts estimate that the drug should become a sales success, as is known in the industry to a medicine with more than 1,000 million dollars in revenue. Earlier this year, the company resolved a patent litigation that will keep imitations outside the market up to at least 2038, a great achievement.
Tabuteau’s financial experience also paid off. In 2022, Axsome acquired a medicine called Sunosi, which treats excessive diurnal drowsiness in people with narcolepsy or sleep apnea. After closing an agreement to buy it for 53 million dollars (more one -digit royalties) in just two weeks during Christmas of 2021, Axsome managed to recover its investment by far when Tabuteau sold the rights of the drug in Europe, the Middle East and North Africa for 66 million dollars (more milestones and royalties) less than a year later. Sunosi’s income now exceeds 100 million dollars annually. “It was a very cunning financial transaction,” says Mizuho analyst Graig Suvannavejh.
The shares continued, shooting 35% during the last year, until reaching $ 122, thus exceeding the Nasdaq Biotech index, which has only risen 1% during the same period. The next treatment to take into account: a drug to treat agitation that usually accompanies Alzheimer’s disease. Antipsychotics, currently the only available treatment, lead to serious risks, including death. The Axsome drug prevents these side effects, but has presented disparate results in phase III clinical trials. Axsome plans to request approval before the end of September.
It is possible that the FDA does not approve, but analysts expect that the need for an alternative to antipsychotics will increase the probability of approval. It is essential for Tabuteau’s plans to reach 16.5 billion dollars: it projects between 1,000 and 3,000 million dollars in annual sales for Auvelity and between $ 1,500 and 3,000 million dollars for the medication against Alzheimer’s agitation at its maximum point.
“We have a lot in front of the product portfolio and the number of patients we can attend,” he says. “We may be a small company in size, but we are not in terms of foundations or in terms of ambition.”
This article was originally published in Forbes US
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