Vivek Ramaswamy’s Former Company Is Doing Just Fine Without Him

Thanks to positive data from two promising drugs, the company’s shares have more than tripled over the past 12 months, recovering from an abysmal performance for much of 2022. The SPDR S&P Biotech ETF, meanwhile, is down 11% over that period.

While the good times at Roivant couldn’t have happened without Ramaswamy’s original contributions, his departure—and his replacement with the former Goldman Sachs banker Matthew Gline—is working out just fine for Wall Street. It hasn’t been bad for Ramaswamy either: His 7% stake in Roivant is now worth about $639 million, making him a billionaire, according to Forbes magazine.

Ramaswamy has steadily reduced his role at the company, stepping down as chief executive officer in early 2021, then leaving his chairman role in February of this year to focus on his presidential campaign. When founders and big personalities leave, questions over a company’s growth trajectory are inevitable. But change at the top can also be an opportunity for a fresh start.

In the case of Roivant, parting ways with Ramaswamy has been something of a clearing event for Wall Street. “While there are still residual connotations for some that this is a Vivek company, that’s dissipating and the company can stand on its own products," says Yaron Werber, an analyst at TD Cowen.

Ramaswamy, while still in his 20s, made prescient investment decisions at a hedge fund by recognizing the potential of drugs to treat hepatitis C. He then leveraged that success to start Roivant, with the idea of licensing drugs that weren’t being prioritized at pharmaceutical companies. The company takes a unique approach by creating subsidiaries out of their investments, known as “vants," which they eventually hope to spin off. That allows each management team to focus on their drug, making Roivant almost like a publicly traded venture-capital firm.

Much as in the political sphere, where he has courted controversy by vowing to narrow the remit of the Federal Reserve and send the military to fight Mexican drug cartels, Ramaswamy has also been something of a divisive figure in biotech. Roivant has no doubt notched a handful of successes under his leadership, including the sale of stakes in five vants to Japan’s Sumitomo Pharma in 2019 for $3 billion. His success has earned him praise from plenty of investors and his backers include QVT Financial, the hedge fund where he got his start, which is Roivant’s largest shareholder.

But others have also criticized him as excessively promotional, as exemplified by the way in which he talked up an Alzheimer’s drug that ultimately failed. Axovant Sciences, the company, or “vant," that tried to bring that drug to market, reached a nearly $3 billion market valuation before collapsing in value after the pill it was developing, called intepirdine, failed in a late-stage study in 2017. “The proteins, cells, and organs that are being targeted in the patients are impervious to bold statements and applause in the press," Derek Lowe, a pharma researcher, wrote in 2017, ahead of the results.

While clinical trial failures are par for the course in biotech, the bombast with which Ramaswamy promoted that company made some investors tread carefully around other Roivant companies, investors and analysts familiar with the company told Heard. His departure now means investors can just analyze Roivant subsidiaries for what they are, with a bit less hype.

And investors like what they see. Last week, Roivant stock shot up after another vant in which it holds a majority stake, Immunovant, released results from an early study showing that its drug reduced the levels of a key immune marker in the blood while avoiding some key safety issues that had dogged the company in the past. Earlier this year, a drug being developed by another Roivant unit with Pfizer showed great promise in treating inflammatory bowel disease.

Even now that he is officially no longer with the company, Ramaswamy’s politics continue to be awkward for Roivant. He has criticized what he calls “corruption" at the Food and Drug Administration, a comment Roivant’s CEO Gline has disavowed. “I think he’s wrong about the FDA," Gline said in an interview. “We have a lot of respect for them as our regulator."

Gline played down the importance of Ramaswamy in investors’ minds. “Investors are thinking about our clinical progress and about the new programs we’ve added," he said. “Of course, if he were still leading the company while running for president that would be a different matter."

“He founded the company and we certainly owe a lot of our history to his vision and the way that he built things," said Gline. “And now we’ve graduated from that and we’ve added new chapters since his departure with a different focus and a different set of priorities and a different leadership team."

As he faces off against Florida Gov. Ron DeSantis and former ambassador to the U.N. Nikki Haley in nationally televised debates, Ramaswamy is probably less focused on things such as autoimmune diseases and clinical trials than he once was. For investors in Roivant, that is just fine.

Write to David Wainer at david.wainer@wsj.com