The Secret to Biotech Riches: Buying Drugs That "Failed"
In December 2014, Axovant, a biotech company founded by Vivek Ramaswamy, purchased the patent for intepirdine from GlaxoSmithKline for $5 million. The drug had previously failed clinical trials four times.
Vivek Ramaswamy, a former hedge fund partner who later became a well-known Republican primary candidate for the United States presidency, had formed Axovant Sciences just eight months earlier. His $5 million bet on the drug, which had been abandoned by GlaxoSmithKline, essentially turned into $3 billion on the day of its listing on the New York Stock Exchange.
Vivek Ramaswamy is part of a growing number of hedge fund managers targeting obscure and often controversial 'Distressed clinical assets' for investments. 'Distressed clinical assets' refers to pharmaceutical, biotech, or medical device products that have encountered significant setbacks or challenges during their development or commercialization. These setbacks may include clinical trial failures, regulatory hurdles, financial issues, or technical problems, which can hinder or stop their progress.
Ramaswamy said that this effort is just the first step in a larger mission to save drugs that are abandoned or overlooked. These drugs often sit unused in pharmaceutical pipelines, failing to help patients or benefit investors. He described this as an important ethical problem that many people don’t recognize, noting that valuable drugs are often discarded for reasons unrelated to their potential usefulness.
Vivek is one of many biotech investors who are digging for gems in the rubble of drugs abandoned by big biotech. Surprisingly, it is not that hard to buy the rights or patents to drugs. Patient digging and diligence can uncover incredible drugs for a fraction of the cost. If you have a few millions of rands or even less, you can use that to diversify your investments. You could also be like them and own the rights to a few drugs.
Recommended by LinkedIn
Companies such as LifeSci Advisors and Evercore facilitate the auction of clinical-stage assets. Investors can subscribe and start purchasing patents or rights to drugs as investment assets. Online platforms like InnoThink and Biotechgate also list distressed or undervalued clinical assets.
Investors buy these assets for a variety of reasons. Some buy them to reposition or reengineer for regulatory approval, while others buy them simply to hold patent rights with the intention of selling them later for a profit. Early-stage patents, particularly those in preclinical research, are generally considered uncorrelated asset classes, as their performance does not follow that of listed assets.