SoftBank-Backed Biotech Roivant Climbs to $7 Billion Valuation

(Bloomberg) -- Roivant Sciences Ltd. raised $200 million in a new funding round that makes it one of the most highly valued private firms in the history of the biotechnology industry at $7 billion, according to the company.

Previous backers including SoftBank’s Vision Fund took part in the new financing, as did new investors NovaQuest Capital Management and RTW Investments, Roivant said in a statement on Tuesday. In August 2017, the company raised $1.1 billion from the Vision Fund, which has placed a series of splashy bets on Internet and other startups but backed few other biotech ventures.

Roivant is run by 33-year-old Vivek Ramaswamy, who began his career as a hedge-fund analyst before founding the company. It has a unique structure predicated on Ramaswamy’s belief that pharmaceutical research is more costly than it needs to be and that executives’ incentives are misaligned.

The financing is the latest private biotechnology funding round to top $100 million, which was once rare for the industry but has become routine. Record amounts of private capital have flowed into the sector, leading to private valuations that dwarfed historic norms.

The rush of private capital has in turn led to a boom in initial public offerings. Forty-nine biotechnology companies have gone public on U.S. exchanges this year, close to the all-time record set in 2014 when 53 companies conducted IPOs, including a Roivant subsidiary. Last week, closely watched startup Moderna Therapeutics Inc., which boasts a similar valuation to Roivant’s new price tag, said it plans to go public soon.

Roivant acts as a parent company for 14 offshoot firms known by their suffix, “-vant.” Each smaller firm had a different area of expertise and the drug-focused units have their own proprietary research pipeline. The companies often study compounds that larger pharmaceutical players have overlooked or retreated from. The company believes that approach can streamline drug research by aligning management teams’ incentives with individual research programs.

That angle attracted new investor NovaQuest Capital Management. NovaQuest, which typically backs late-stage pharmaceutical research programs, also says that drug executives don’t have adequate incentives to ensure that the research programs they oversee will succeed.

If “a program fails, you move on to the next product, but if you succeed, you may get a few more stock options” said Matt Bullard, partner at the Raleigh, North Carolina-based firm. “At the vants, they’ve really incentivized those management teams for the success of their individual program.”

Earlier Setback

Late-stage clinical trials are more costly to run than earlier research, but are generally seen as more likely to succeed because the drug candidates have been vetted by earlier studies. But such drugs aren’t guaranteed to clear their final hurdles. Last year, shares of Roivant unit Axovant Sciences Ltd. cratered after its experimental Alzheimer’s disease drug failed in a late-stage trial.

Prior to that, Ramaswamy had been hailed as a pharmaceutical wunderkind after taking Axovant public when he was only 29. The company reached a market value of as much as $2.9 billion before the trial failure, after which Ramaswamy was written off by some critics.

Roivant has sought to move on from the Axovant setback. Earlier this year, it said it planned to file for FDA approval for one of its drugs that treats an ultrarare childhood disease. It has a number of candidates in late-stage study at companies across its portfolio, including Relugolix, a drug for endometriosis and uterine fibroids. The company licensed the drug from Takeda Pharmaceutical Co. Ltd., which has reported positive final-stage studies already in Japan. Roivant unit Myovant is researching it for markets outside of Japan and Asia.

To contact the reporter on this story: Rebecca Spalding in Boston at rspalding@bloomberg.net

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Timothy Annett, Mark Schoifet

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