How Big Pharma's rejects become biotech gold

This summer, the biggest biotech initial public offering ever—Axovant Sciences (AXON)—hit the tape of the New York Stock Exchange, clocking in at a nearly $3 billion valuation after rising 100% in its first trading day.

The company’s 30-year old CEO Vivek Ramaswamy, who is currently gracing September’s Forbes magazine cover, spoke with Yahoo Finance about the potential for the company’s Alzheimer’s drug candidate and why there is so much hype—and controversy—surrounding his company.

Ramaswamy has become a symbol of promise for discarded drugs. Axovant’s sole drug candidate—RVT-101 for Alzheimer’s—was snatched up from GlaxoSmithKline for a mere $5 million upfront at the end of last year.

Ramaswamy says this drug is just one of many discarded drugs, many of which have gone on to be successful. "We see this as the highest ROI (return on investment) end of the drug development spectrum," he says. "Not only is that good for patients, we also think it's the most capital-efficient way to do it for shareholders."

The opportunity is large for Axovant: Alzheimer’s is the only disease among the top 10 causes of death without a preventative solution or cure. And from 2000 to 2013, the global mortality rate for Alzheimer’s increased by 71% versus a decline of 52% for HIV, 23% for stroke, and 14% for heart disease, according to RBC research.

But naysayers have come out strong, calling Axovant emblematic of a biotech bubble-- even for strong behemoths like Biogen (BIIB), Celgene (CELG), Gilead (GILD) and Regeneron (REGN)-- that has fueled pricing for the sector more broadly.

Ultimately the stock's binary Phase 3 results slated to come in 2017 will prove to be the 'make or break' moment for the stock and will have broader implications for the promise of 'discarded drugs.'