In this week’s edition of InnovationRx, we look at Axsome’s growing pipeline, HistoSonics innovative cancer treatment, state litigation over Medicaid work requirements, and more. To get it in your inbox, subscribe here.
Axsome’s Herriot Tabuteau
Jamel Toppin for Forbes
Last October, when Forbes profiled Axsome Therapeutics founder and CEO Herriot Tabuteau, the company had three drugs on the market, five in the pipeline and a market cap of $6.1 billion. Since then, the stock has doubled, giving it a market cap of $12.6 billion—and Tabuteau a net worth of $2.2 billion. That performance is far ahead of shares of Alphabet (up 45% in the same time period), Eli Lilly (up 57%) or Nvidia (just 7%), to name just a few fast-growing giants.
Behind the rise: The New York-based company got approval for its drug Auvelity to treat the agitation that often accompanies Alzheimer’s disease. “We literally just launched it a couple of weeks ago. The reception has been tremendous,” Tabuteau, 57, tells Forbes.
When Tabuteau, who was born in Haiti and educated at Yale School of Medicine, started the drug development company in 2012, he decided to do things differently. He focused on drugs for brain disorders, which are notoriously difficult to develop and whose efficacy can be hard to prove. He also shunned venture capital, instead self-funding with help from family and friends. When Axsome went public in 2015, Wall Street was skeptical and the company’s stock puttered along under $10 for years.
But as we detailed last year, its prospects skyrocketed with its first big drug, Auvelity. When the treatment for major depressive disorder gained FDA approval in August 2022, the company’s shares popped 65% in a week, valuing the company at $3 billion.
Getting approval for the drug in Alzheimer’s agitation may be an even bigger deal. More than 7 million people in the U.S. have Alzheimer’s and Axsome figures that up to 76% of them experience agitation. Yet until now the only way to treat their symptoms has been with anti-psychotics, which have serious risks, including death. Scrutiny of antipsychotics’ usage has been increasing. A report from the Health and Human Services Office of the Inspector General in March found “alarming instances of inappropriate uses of antipsychotic drugs,” in a comprehensive review of 40 nursing home inspections, and noted that such inappropriate use has been a “longstanding concern for Congress and others.” Tabuteau points to the FDA’s unusual announcement heralding approval of the drug as the first non-antipsychotic for the indication as a sign of the new drug’s importance for public health.
Now Tabuteau (who Forbes recently named to its Immigrant 250 list) forecasts that the entire Auvelity franchise could reach $8 billion in peak sales, up from an earlier estimate of $6 billion, and he’s cranked up the company’s sales force to sell it. Potentially, Auvelity could be expanded to treat agitation in other forms of dementia, such as Lewy body dementia or vascular dementia, as well.
Axsome’s revenue reached $709 million for the latest 12 months (through the first quarter), up 64% from the same period the previous year. William Blair analyst Myles Minter now projects sales of $975 million for 2026 and $1.7 billion for 2027. In a recent research note, he wrote that not only were sales of the company’s drug for daytime sleepiness growing, but it also had “multiple shots on goal from additional pipeline assets,” including those for treatment of cataplexy (the sudden loss of muscle control) associated with narcolepsy and for fibromyglia.
“With the current pipeline, we are in position to file at least one new [drug application] every year, starting this year through 2030,” Tabuteau says. The company submitted an application for its narcolepsy medication earlier this year.
Tabuteau’s previous experience in finance–including stints at Goldman Sachs, Bank of America Securities and hedge fund Healthco/S.A.C. Capital, as well as managing his own funds–has paid off for Axsome. In late-2021, it bought the daytime sleepiness drug Sunosi for $53 million (plus single-digit royalties), then recouped its money when Tabuteau sold the European, Middle Eastern and North African rights.
That finance experience could pay off going forward as well. Since November, Axsome has acquired two additional therapeutic candidates: one to treat epilepsy, the other for schizophrenia and Tourette syndrome. It snagged the epilepsy drug by purchasing a small biotech that had originally licensed the therapy from AstraZeneca for just $300,000 upfront with potential milestone payments reaching $83 million, plus royalties. It acquired the schizophrenia and Tourette’s drug from Takeda for an undisclosed sum.
“It was not something that Takeda was looking to out-license, but based on our research we thought it was interesting so we did approach them and start a conversation,” Tabuteau says. He now figures that drug will be ready for phase 3 trials in patients with schizophrenia by the end of the year.
“Overall, if you look at our pipeline, it has the potential to generate peak sales of $20 billion-plus,” Tabuteau says. “There’s a lot more growth to be had, and we are very well positioned to deliver on that growth.”
This Startup Wants To Replace Cancer Surgery With Ultrasound
More than 500,000 cancer surgeries are performed every year in the United States. While these surgeries can often be successful, particularly when the cancer is caught early, they have high rates of complications, including infection, bleeding and chronic pain.
Mike Blue, CEO of HistoSonics, wants to change that. His company has developed a noninvasive technology system, called Edison, which utilizes histotripsy—sound waves that destroy tumors from the inside—to treat cancer and other conditions. The technique has fewer side effects than surgery: Just 6.8% of patients with liver cancer treated with Edison suffered complications, versus as high as 27% for conventional liver surgeries.
A team of researchers spun the Plymouth, Minn.-based company out of the University of Michigan in 2010 with an exclusive license to use its histotripsy technology. Edison received FDA clearance for use in patients with liver tumors in 2023. The company has sold more than 200 of its systems, which cost around $1.5 million, to hospitals such as the Cleveland Clinic and Cedars-Sinai.
It now hopes to use the Edison technology more broadly. It recently submitted an FDA application to use Edison against kidney tumors and it is testing the technology against pancreatic and prostate cancers. “We have the ability to deliver this beam therapy literally anywhere in the body,” he says. The company’s research teams are working on neurological diseases and women’s health issues, and they recently treated the first patients for benign prostatic hyperplasia, a non-cancerous enlargement of the prostate.
Last week, HistoSonics raised new financing from investors that include Yosemite, the venture firm founded by Reed Jobs. (Read our profile of Jobs here.) The amount of the investment was undisclosed, but it valued the company at $3.75 billion. The valuation is up 67% since last August, when a consortium of investors that included Jeff Bezos acquired a majority stake in the company at a valuation of $2.25 billion.
States Sue Over Medicaid Work Rules
Twenty-five states and the District of Columbia sued the federal government on Monday over work requirements for Medicaid enrollees enacted as part of President Trump’s One Big, Beautiful Bill. These are expected to cost millions of low-income people their health insurance coverage when they go into effect on January 1st.
The new work rules require most Medicaid recipients between ages 19 and 64 to prove they work, attend school or volunteer at least 80 hours a month in order to keep their coverage. There are certain carveouts from the rules, including one for those considered “medically frail.” At issue in the lawsuit is who qualifies under that exemption. The new rule implicitly links the definition of “medical frailty” to the ability to work, which means someone who wants to claim the exemption needs to prove their health makes that impossible.
“People with disabilities, patients in the middle of cancer treatment, or those struggling with another serious or complex health condition, shouldn’t be at risk of losing the care that helps maintain their health,” according to the lawsuit filed in federal district court for Massachusetts.
The states suing include Massachusetts, California, New Jersey, Arizona, Maine, New Mexico and North Carolina.
What We’re Reading
Stat investigates the ERs that can turn patients away–and are reaping millions.
The Justice Department spent years investigating Abbott’s baby formula facility and produced a pile of evidence for charges. Then it dropped the case.
A Congressional panel questioned Bristol Myers Squibb and Pfizer over their use of clinical trial sites in China.
The NIH is racing to spend its budget on grants before the end of the fiscal year–but will still hand out thousands fewer than it did before the second Trump Administration.
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