When Herriot Tabuteau started a drug development company in 2012, he decided to do so differently. First, he’d focus on brain disorders, treatments for which are notoriously difficult to develop and whose efficacy can be hard to prove. And he’d be both CEO and the scientific founder, bringing to bear his decades of experience investing in biotech startups and his medical training. But he’d take no venture capital, self-funding with help from friends and family.
“If you do things exactly the same way as everybody else, you’re going to have the same outcomes as everybody else. And we wanted to have outcomes that stand apart,” Tabuteau, 57, says, during his first-ever interview with a reporter about his company, Axsome Therapeutics.
Named for two parts of a nerve cell, the “axon” and the “soma,” Axsome has come a long way from its beginnings in a windowless three-desk office in New York’s Rockefeller Center, affectionately remembered as “the broom closet.” Today, it has three drugs on the market and five in the pipeline, with the potential to help the estimated 150 million Americans suffering from conditions like depression, ADHD or Alzheimer’s disease. Revenue for the 12 months ended in June reached $495 million, up 70% from the same period in 2024. Axsome is not yet profitable, booking a net loss of $247 million in that time.
The company trades on the Nasdaq with a market cap of $6.1 billion; Tabuteau is a billionaire thanks to his 15% stake in it, plus options. He figures Axsome could hit $16.5 billion in peak sales from its current drug portfolio, which would put it among the top 25 drug companies by revenue today. That’s assuming all goes to plan, most particularly getting five new drugs through the FDA between now and 2028. It’s a big ask: Only about 25% of drugs do well enough in Phase III trials to move forward in the FDA process.
Tabuteau was born in Haiti, where his birth mother struggled to raise him and his sister. He recalls experiencing neglect of all kinds—“physical, nutritional, emotional”—but “it taught me resilience,” he says now. At age 9, he moved with his dad and adoptive mom to Manhattan’s Upper East Side. Degrees in molecular biology and biochemistry from Wesleyan led him to Yale’s School of Medicine, where he planned to become a neurosurgeon. But he was so unsettled by the transparent unhappiness of his physician professors that he opted against a neurosurgery residency in favor of a job at Goldman Sachs’ health care investment banking group. That was the start of a nearly two-decade career in finance that included stints at Bank of America Securities and hedge fund Healthco/S.A.C. Capital, as well as managing his own funds.
From his perch on Wall Street, he watched thousands of early-stage biotechs succeed and fail, and began to develop his own theories about what worked and why. While most biotechs focus on just one drug, he realized that building a portfolio would cut the risk of a flop. To keep costs low, he shunned the industry’s practice of outsourcing clinical trials, betting he could do it cheaper and with greater chance of success in-house. A Phase III trial could easily cost $50 million; Tabuteau could do it for 30% to 50% less. “We got a lot of pushback,” he says, as investors didn’t believe he could run so many trials on such a low budget. Working on multiple drugs helped: When one trial ended his researchers would immediately begin work on the next.
Hedging his bets was wise. After going public in 2015, Axsome struggled—not unusual for an early-stage biotech, as drugs can take ten years to get from idea to market, and while Axsome’s trials were cheaper, they were not cheap. The company’s stock puttered along under $10 for years, its market cap dipping below $100 million after an early drug for pain flunked its clinical trial. “Nobody believed in Axsome years ago, and I think there’s still a lot of unbelievers,” says Axsome chief financial officer Nick Pizzie. “It’s a show-me story.”
Axsome’s prospects skyrocketed with its first big drug, Auvelity. When the treatment for major depressive disorder gained FDA approval in August 2022, shares popped 65% in a week, valuing the company at $3 billion. The drug combines two existing medications for a treatment that can begin to work in just one week, compared to six or eight weeks for serotonin-based antidepressants, a huge advantage.
To launch it, Axsome started with 165 sales reps, less than half of what is typical. But it paired those reps with software that could identify which docs were likely to be receptive to its products and to determine whether they’d prefer email, a phone call or a face-to-face meeting. Auvelity is now on track to do $500 million in sales this year, and analysts figure the drug should become a blockbuster, industry parlance for a medication with more than $1 billion in revenue. Earlier this year, the company resolved patent litigation that will keep copycats off the market until at least 2038, a big win.
Tabuteau’s finance expertise also paid off. In 2022, Axsome acquired a drug called Sunosi, which treats excessive daytime sleepiness in people with narcolepsy or sleep apnea. After pulling together a deal to buy it for $53 million (plus single-digit royalties) in just two weeks over Christmas in 2021, Axsome was able to more than recoup its money when Tabuteau sold the European, Middle Eastern and North African rights to the drug for $66 million (plus milestones and royalties) less than a year later. Sunosi’s revenue is now over $100 million annually. “It was a very shrewd financial transaction,” says Mizuho analyst Graig Suvannavejh.
Shares have kept climbing, shooting up 35% over the past year to a recent $122, outperforming the Nasdaq Biotech Index, which is up just 1% over the same period. The next treatment to watch: a drug to treat the agitation that often accompanies Alzheimer’s disease. Antipsychotic medications, currently the only treatment available, have serious risks, including death. Axsome’s drug avoids these side effects but has reported mixed results in Phase III clinical trials. Axsome plans to file for approval before the end of September.
It’s possible the FDA may not greenlight it, but analysts expect the need for an alternative to antipsychotics makes approval likely. It’s core to Tabuteau’s plans to get to $16.5 billion: He projects $1 billion to $3 billion in sales for Auvelity and $1.5 billion to $3 billion from the Alzheimer’s agitation drug annually at their peak. “There is so much ahead of us right now in terms of the pipeline and the number of patients we’re able to address,” he says. “We might be a small company in terms of size, but we’re not a small company in terms of fundamentals or in terms of ambition.”
The Vault
