2023-03-09 17:06:21 ET
Summary
- Biohaven is on the far side of its spin cycle and faces the world as a much diminished company.
- Biohaven has upcoming catalysts, but they are either early stage or have serious question marks.
- Biohaven has gotten ahead of itself and is overpriced.
This is my third Biohaven ( BHVN ) article; the last being 03/2021's "Biohaven: Exciting Times, Lots To Prove". In the intervening years, Biohaven accomplished a major transaction in which it sold off a trove of valuable assets.
In this article, I will briefly describe the spin-off keeping a stern focus on the assets and prospects of the post spin-off Biohaven.
Biohaven hit the jackpot with its Pfizer deal
On 05/10/2022 the companies announced a deal in which Pfizer ( PFE ) acquired Biohaven assets in a deal valued at $11.6 billion. Biohaven's stock soared by 77%. Under the deal Pfizer agreed to pay all of Biohaven's third party debt and to redeem all of its redeemable preferred shares.
Pfizer agreed to acquire three particular allotments of Biohaven's calcitonin gene-related peptide (CGRP) programs including:
- Rimegepant approved in US as NURTEC ODT, for both the acute treatment of migraine and preventive treatment of episodic migraine and in the European Union as VYDURA, for both acute treatment of migraine and prophylaxis of episodic migraine spray;
- Zavegepant for acute treatment of migraine whose NDA was approved by the FDA in 05/2022 with a Q1, 2023 PDUFA date; and
- A portfolio of five pre-clinical CGRP assets.
The Biohaven that is the subject of this article was referenced as "New Biohaven" in the spin-off announcement. It stipulated that after the closing:
... New Biohaven will continue to operate under the Biohaven name. New Biohaven will be led by Vlad Coric, MD, as Chairman and CEO, and include other members of the current management team of Biohaven. ... At distribution, New Biohaven will be capitalized with $275 million of cash. New Biohaven will also have the right to receive tiered royalties from Pfizer on any annual net sales of rimegepant and zavegepant in the United States in excess of $5.25 billion.
Biohaven's latest 10-Q (p. 6) dated 11/09/2022 confirms that the spin-off closed in 10/2022. As part of the deal New Biohaven retained pipeline business operations related to:
- the Kv7 ion channel activators platform,
- glutamate modulation,
- MPO inhibition,
- myostatin inhibition platforms,
- preclinical product candidates and
- appropriate corporate infrastructure and operational agreements.
Biohaven lacks compelling near term catalysts
Biohaven has three phase 3 assets following closing of its Pfizer deal. Take a look at its 03/07/2023 Cowen Health Care Conference presentation (the " Presentation ") pipeline (slide 6):
... and its near term upcoming catalysts slide 40 below:
These upcoming milestones are overwhelmingly early stage. The three in phase 3 trials that could signify potential approvals are its:
- BHV-4157 in treatment of spinocerebellar ataxia [SCA];
- BHV-4157 in treatment of obsessive compulsive disorder [OCD] and
- BHV-2000 in treatment of spinal muscular atrophy [SMA].
BHV-4157 has had decidedly unhappy trips through a variety of clinical trials. In 2020 it flunked in treatment of generalized anxiety disorder and again in treatment of Alzheimer's disease in 2021. It jettisoned these two indications which are no longer included in its pipeline.
It has faced challenges in both SCA and OCD which, so far, remain on its pipeline. It failed a 2020 phase 2/3 trial in OCD. It failed to show statistical significance in its primary endpoint in its phase 3 SCA trial. On post hoc analysis Biohaven determined that BHV-4157 was impactful in SCA Type 3 [SCA3] genotype, which represents the most common form of SCA.
Insofar as there are no approved therapies for SCA, a particularly debilitating disease, CEO Coric is planning to work with the FDA. In its 10-Q he describes the next steps as:
... we intend to interact with the FDA and or European Medicines Agency ("EMA") in the first half of 2023. We have not yet decided on the format of such a regulatory interaction but we could seek advice through various formal or informal interactions with regulatory agencies or we could choose to submit an NDA if we believe that is warranted from the results of our ongoing post-hoc analyses.
Biohaven has not released any subsequent updates on its SCA plans. As for OCD the 10-Q advises that based on a "strong signal" in the phase 2/3 trial and its meeting with the FDA it initiated phase 3 trials in which it expects enrollment to be complete in 2023.
As for BHV-2000 in SMA it is a tough situation. I tend not to give it much credibility. There are already three extremely high priced therapies that are approved for SMA. There are hundreds of SMA trials listed at clinical trials.gov. Biohaven has not done the type of basic footwork that would result in BHV-2000's inclusion in a key SMA advocacy group's SMA drug pipeline graphic in my opinion.
This tells me that Biohaven is asleep at the switch. It should be preparing the market including patient advocacy groups and KOL's for a possible launch of each of its therapies, particularly those in phase 3 development.
This sad litany of Biohaven trial failures is incomplete without mentioning its 09/2022 verdiperstat failure in ALS. Biohaven is contractually bound to AstraZeneca ( AZN ) to use commercially reasonable efforts to develop verdiperstat. Verdiperstat is no longer included on its pipeline which could put it at odds with AstraZeneca.
Biohaven's shares have rallied since the closing of its spin-off without good reason
As I write on 03/08/2023 Biohaven has a market cap of ~$0.933 billion. It is trading at ~$14.07 a share. It still commands a nice premium over its ~$10 price immediately following the spin. This premium is diminishing as shown by the chart below:
Biohaven has only issued one quarterly report since the closing of the spin-off; in 11/2022 it issued a third quarter 2022 financial results and recent business developments report. It characterized its clinical assets as:
... multiple late-stage clinical programs including innovative drug candidates targeting Kv7 modulation for epilepsy and neuropsychiatric disorders, glutamate modulation in Obsessive-Compulsive Disorder ('OCD') and spinocerebellar ataxia ('SCA'), and myostatin in spinal muscular atrophy ('SMA').
This release also reported its liquidity as:
... post-closing of the... sale to Pfizer on October 4, 2022,...[we] completed a public offering of 28,750,000 Biohaven Ltd. common shares at a price of $10.50 per share on October 25, 2022, with a total initial capitalization and net cash proceeds from offering of approximately $541 million, and no debt.
For its quarter's expenses it reported:
- Research and Development ("R&D") expenses including non-cash share-based compensation costs, were $52.8 million for the three months ended September 30, 2022;
- General and Administrative ("G&A") expenses, including non-cash share-based compensation costs, were $14.8 million for the three months ended September 30, 2022 (~$6 million was attributable to deal related expenses).
Biohaven issued no earnings call which might have fleshed out such issues as its actual cash burn and guidance for its future expectations. The Presentation is equally obtuse. Its only finance related slide is its "Capitalization Considerations" slide 39. It includes a scant three data points:
- 68.2 million1 O/S (excluding 9.1 million options — $7.00 strike price);
- cash of $540 million as of October 2022;
- Pfizer royalty obligations in low- to mid-teens % in respect of annual U.S. net sales of rimegepant and zavegepant >$5.25B, subject to annual cap ($400M/year).
Conclusion
Biohaven's $540 million should last it well into 2025 without taking any action on its part. Its situation is certainly not dire. However is it one that should attract investors? I submit that it is not.
It has prospects, most immediately three phase 3 trials and Pfizer migraine royalties. The phase 3 prospects are unattractive as I have discussed previously. The prospects for a royalty bonanza are equally if not more chimerical.
Migraine treatments are an increasingly crowded field. AbbVie ( ABBV ) has staked out an important claim , try watching TV without seeing its QULIPTA migraine ads . Nor is AbbVie the only recent migraine option. they are plentiful .
Pfizer's out front payment for Biohaven's migraine therapies was crazy high. I submit it is unlikely to cross the $5.2 billion threshold to trigger Biohaven royalties.
I no longer own any Biohaven stock. If I did I would take my money and run.
For further details see:
Biohaven: Spun And Done - Time To Exit