2023-09-27 16:30:10 ET
Summary
- Biohaven's stock surged nearly 30% following updates on its preclinical asset, the IgA degrader BHV-1300.
- The company's stock has risen more than 270% since its spinout from parent company Biohaven Pharmaceutical.
- Biohaven's preclinical pipeline includes assets targeting a wide range of central nervous system conditions and autoimmune diseases.
- As intriguing as today's data was, it does not necessarily support the buy case for Biohaven.
- Arguably, the data may have been released in response to promising IgG removal data released by Immunovant earlier this week. Time will tell, but I'm on the sidelines.
Biohaven Ltd Stock Surging Again
I last covered Biohaven ( BHVN ) for Seeking Alpha back in June , when its stock price was surging on the back of an investor day presentation that suggested a positive outlook for the company. Today, shares are buoyant again - up nearly 30% in trading today - owing to updates provided in relation to a preclinical asset - the IgA degrader BNV-1300 - in its latest corporate presentation .
Back in June I discussed how Biohaven Ltd was formed via a spinout of assets from parent company Biohaven Pharmaceutical, in June 2022, just before the parent company was acquired by pharma giant Pfizer (PFE) in an $11.6bn deal. The assets spun out were Biohaven's Kv7 ion channel activators, glutamate modulation and myostatin inhibition platforms, preclinical product candidates, and certain corporate infrastructure. The assets acquired by Pfizer were Biohaven's migraine drug product portfolio, which included the calcitonin gene-related peptide (CGRP) inhibitor Nurtec - revenues >$200m per quarter - and six other migraine-focused pipeline assets.
In my last note I speculated that Pfizer may have regretted not acquiring the spinout as well as the migraine franchise, as Biohaven Ltd.'s stock price has risen by >270% since its debut as a standalone company, based on the promise of six clinical and five preclinical assets targeting a wide range of central nervous system ("CNS") conditions, as shown below:
FDA Refusal To Accept Troriluzole NDA Drops Share Price ~20%
Biohaven's bull run from its post-listing price of ~$6 to $25 per share ended in July when the company revealed that the Food and Drug Administration had declined to accept its new drug application ("NDA") for its most advanced asset, Troriluzole, in the ultra-rare disease spinocerebellar ataxia Type 3.
A Phase 3 study of the drug had failed to reach statistical significance for its primary endpoint - change from baseline to Week 48 on the modified functional Scale for the Assessment and Rating of Ataxia (f-SARA) - but in a subset of patients with SCA Type 3 genotype only, which represented ~41% of the study population, a "numerical treatment benefit" was observed, which persuaded Biohaven to submit its NDA.
As I noted in my last post, however, Troriluzole had previously failed pivotal studies in Alzheimer's, obsessive compulsive disorder and generalized anxiety disorder, so perhaps the FDA's knock-back was understandable.
In its Q2 2023 earnings and business updates press release, Biohaven insisted that "we plan to continue to work with regulatory agencies to try to advance troriluzole for individuals suffering from SCA3," but the setback dropped the company's share price from $24, to $19 - a loss of ~20%.
Biohaven's IgG Degrader Data Reignites Bull Run
I stated in my last note that despite a large and diverse pipeline, addressing multi-billion dollar markets such as epilepsy, pain, oncology, and immuno-mediated diseases, there were no obvious "slam dunks" in the pipeline that, on their own, could justify the company's market cap valuation of ~$1.5bn.
That was my main concern around investing in the company, but based on an SEC filing made this morning, containing its latest investor presentation, it's possible the company may have uncovered an asset with breakthrough potential within its preclinical pipeline.
The asset in question, as mentioned in my intro, is the IgG degrader BHV-1300. I suggested as much in my June note on the company:
In terms of the upcoming IND submissions, for pain (BHV-2100), and epilepsy and mood disorders (BHV-7010 looks like a next-generation BHV-7000), the one that stands out to me is actually the protein degrader BHV-1300, indicated for immune-mediated diseases.
Protein degradation - like e.g., messenger-RNA - is a process that sounds almost too good to be true - unwanted proteins can be marked out for destruction by the immune system with few off-target toxicities - but unlike MRNA technology, vindicated by the development of MRNA COVID vaccines, protein degradation has not yet had its proof of concept moment, despite the efforts of companies such as Kymera Therapeutics ( KYMR ).
Biohaven opted to begin their investor day presentation by discussing BHV-1300, and a Phase 2 study is expected to begin next year - positive data would open the door to all the major autoimmune markets, worth well in excess of $100bn per annum.
So it has - apparently - proven to be. BHV-1300 has been developed using Biohaven's trademarked "MoDE" platform, which stands for Molecular Degraders of Extracellular Proteins - according to the latest presentation, this approach works because:
Small molecules bind extracellular target proteins and cause them to be removed from the body through the liver. Extracellular protein targets are eliminated via the asialoglycoprotein receptor ("ASGPR"). Protein targets are degraded via endolysosomal proteolysis.
MoDEs can be administered via subcutaneous or intravenous injection, and the use of the hepatic ASGPR receptor means that:
IgG may be more rapidly removed from the circulation than FcRn inhibitory antibody or antibody fragments, without causing hypoalbuminemia or dyslipidemia
- Improved, dialable potency (deeper IgG/IgA reductions possible).
- Improved pharmacodynamics (faster onset of action).
- Improved safety profile (fewer side-effects, rapid drug elimination).
BHV-1300, Its Unique MoA. & Its Favourable Comparison To Rivals - So Far
As ever, with biotechs presenting preclinical data, there's a lot of content and charts to wade through, but the headline story with BHV-1300 is probably the fact that, as the presentation states:
BHV-1300 can specifically remove target IgG from circulation faster than FcRn inhibitory antibodies, antibody fragments, or immunosuppressants
It's interesting to note, for example, that the share price of Immunovant - a company name-checked by Biohaven in its latest presentation - has been soaring (by >100%) this week based on Phase 1 data generated by its "next-generation" FcRn-inhibitor IMVT-1401. Immunovant's market cap has soared beyond $5bn as its new candidate reportedly reduces IgG, without the cholesterol raising issues that dogged its first-generation therapy, batoclimab.
The removal of IgG - immunoglobulin - is important for auto-immune diseases as, although immunoglobulins are antibodies created by white blood cells to help fight disease, they can become dysregulated by these conditions, and become pathogenic, requiring removal.
The faster pathogenic IgG can be removed from circulation, the better, and Biohaven is claiming that its drug, with its novel mechanism of action ("MoA"), is quicker at doing this than e.g., IMVT-1401, or e.g., the approved therapy Efgartigimod - marketed and sold as Vyvgart by Argenx ( ARGX ), earning revenues of ~$400m in 2022, or Johnson & Johnson's (JNJ) Phase 2 stage therapy nipocalimab.
As soon as Biohaven has its investigational new drug ("IND") application for BHV-1300 approved - allowing in-human studies of the drug to begin - the company plans to initiate a Phase 2 study (as shown in the slide above), and management believes BHV-1300 has "pipeline in a product" potential, with future target indications such as Rheumatoid Arthritis - a massive market dominated for nearly two decades by AbbVie's ( ABBV ) Humira, which earned >$20bn of revenues last year in RA and other indications, but has now lost its patent protection.
Analysis - Does Biohaven Possess Truly Breakthrough Therapy, Or Was Management More Focused On Derailing Immunovant Data?
Whenever I hear the words "pipeline in a product" in relation to a biotech drug developer, it puts me instantly on edge, especially when data is preclinical.
Given the high failure rate of ~90% when developing a drug through preclinical development, clinical study phases 1-3, and the NDA process, how can management start discussing approvals in multiple indications with any confidence when data is preclinical?
Granted, in the case of BHV-1300, we have preclinical evidence that protein degradation - an exciting field of development, as mentioned above - may really work. We also should remember, however, how far there's still to go, and how many unexpected setbacks - with regard to safety, efficacy, duration of response - may be encountered during the clinical development phase.
If we look at Biohaven's upcoming milestones shared in the slide above, BHV-1300 won't enter a Phase 2 until 2024 at the earliest, and therefore the chances of the drug being approved before 2027 I would say are fairly slim.
I do think it's interesting that Biohaven chose to release this data almost immediately following Immunovant's update on IMVT-1401, and subsequent share price spike - and planned $300m fundraising . I'm not sure that would be a coincidence, and I'm not sure that the IMVT-1401 data deserved to double Immunovant's market cap valuation to $5.2bn, or that BHV-1300 data deserved to drive Biohaven's market cap valuation beyond $1.5bn, although that's what has happened.
Biohaven reported a cash position of $349m as of Q2 2023 and a GAAP net loss of $161m across the first half of 2023. In short, with so many clinical trials in progress, the company's funding runway will not last a great deal longer - unless management can launch a fresh fundraising on the back of some strong data, as Immunovant has just done.
That may sound a little cynical, and Biohaven has plenty of late stage opportunities to point to, and is even targeting obesity with "novel, Phase 3-ready anti-myostatin adnectin" Taldefgrobep alfa, licensed from Bristol Myers Squibb.
Once again, however, a cynic might suggest that targeting obesity in the knowledge that Eli Lilly ( LLY ) and Novo Nordisk's ( NVO ) breakthrough GLP-1 inhibiting weight loss drugs have created massive hype around the space is an opportunistic move that plays well with the markets, but may be an unrealistic opportunity.
Where BHV-7000 and BHV-8000 are concerned, there's not a great deal of evidence (to my knowledge) that these drugs, which have the same MoA as already approved drugs, are a radical improvement on what is presently available to patients.
Concluding Thoughts - A Preclinical "Pipeline In A Product" Is A Potential Red Flag - But Progress Should Be Monitored
When Biohaven Ltd decoupled from its parent Biohaven Pharma, it retained much of the same management team, and having had tremendous success with its development of Nurtec, and securing an $11.6bn exit to Pfizer, perhaps it would be unwise to suggest that management cannot repeat the trick with the assets it kept hold of after the acquisition.
I'm sticking to my guns however, and suggesting that it may be a little early to get excited about BHV-1300, while the rest of the drug development portfolio is potentially a little "vanilla."
For context, I can recall, back in 2021, when Intellia Therapeutics ( NTLA ) was able to show i ts CRISPR/Cas9 based therapy had a meaningful effect on biomarkers - e.g., serum TTR reduction - in the disease transthyretin (ATTR) amyloidosis, with an in vivo therapy.
The market considered this an historic moment - using CRISPR in-vivo would absolutely constitute a momentous breakthrough - and the news sent Intellia's share price soaring to >$175, and its market cap valuation >$10bn. Today, however, Intellia shares trade at $32, and its market cap is $2.8bn - progress has been somewhat slow since that historic moment.
In short, arguably through no fault of the drug developers themselves, biotech valuations occasionally spiral out of control amid a buying frenzy. This can be good for management which can raise more funds for R&D, but it does not always result in a successful end product, or, that end product may take another decade to develop.
In the case of Biohaven, the company is across so many of the most hyped areas of drug development - from bispecifics, to protein degradation, to Kv7 channel activators - you have to wonder how it can excel in so many tricky fields of development all at once.
Naturally, I hope I'm wrong and the company delivers a best-in-class autoimmune protein degrader, but before buying at these prices, investors should probably consider how fiercely competitive autoimmune markets are, as well as how lucrative, and how much further down this path of development Biohaven still has to travel.
For further details see:
Biohaven: Soaring Share Price On New Data Could Be Too Good To Be True