Biohaven: A Complicated Tale

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Biohaven's stock has surged despite past setbacks, driven by promising data from its troriluzole trials for spinocerebellar ataxia and ongoing OCD studies.The company is advancing a diverse pipeline, ...

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(NYSE:BHVN) in December of last year, its stock was trading in mid-$30s. The company was almost wholly focused on neurological disorders with one early-stage multiple myeloma asset and an immunoglobulin gamma degrader that had demonstrated potential applications against autoimmune diseases in the pre-clinic. The FDA had just rejected its NDA for troriluzole in the treatment of spinocerebellar ataxia (SCA) with the thought that another trial would be necessary to receive approval. Furthermore, the company had removed SCA from its indications listed for troriluzole in its corporate presentation. I passed on any investment recommendation on BHVN at the time as it had no clinical data on the docket (at that time). Indeed, the company has not yet refiled its NDA for troriluzole in SCA and has diluted shareholders by 44% over the past year via secondary offerings. However, those two developments have not kept shares of BHVN from moving higher since our last examination it should be noted. Seeking Alpha As a reminder, Biohaven Ltd. is a British Virgin Islands domiciled, New Haven, Connecticut headquartered clinical-stage biopharmaceutical concern focused on developing treatments for various diseases from five technology platforms with an emphasis on neurological and neuropsychiatric disorders. The company, which typically in-licenses abandoned or deprioritized therapies from other biotechs, is advancing eight clinical programs pursuing 17 indications. Biohaven is what remained after legacy Biohaven Pharmaceutical Holding Company sold its migraine franchise to Pfizer Inc. (PFE) for ~$13 billion (including debt assumption) in October 2022. In addition to $148.50 per share, legacy Biohaven owners received 0.5 shares of new Biohaven, which was spun off as an independent entity concurrently, relisting its shares on the NYSE with their first regular-way transaction conducted at $6.39. The stock currently trades just above $51.00 a share, translating to an approximate market cap of $5.2 billion. Pipeline Troriluzole. The most recent excitement surrounding Biohaven is from the same compound that provided disappointment in 2023: glutamate receptor antagonist troriluzole. Glutamate is a neurotransmitter present in more than 90% of all brain synapses, the dysregulation of which is the source of dreadful neurodegenerative disorders including ataxia and amyotrophic lateral sclerosis (ALS). The company received a refuse-to-file notice from the FDA for troriluzole in July 2023, citing its inability to achieve statistical significance (p=0.0053) in a Phase 3 study treating all genotypes (~40) of spinocerebellar ataxia (SCA), a group of rare, primarily inherited neurodegenerative disorders characterized by atrophy of the cerebellum, brain stem, and spinal cord, ultimately leading to early death. With nothing to lose and no approved therapy for this indication, Biohaven requested and prevailed in a Type A meeting with the agency, essentially allowing it to continue its Phase 3 trial under a new protocol (BHV4157-206-RWE) that would evaluate troriluzole after three years versus natural history data. September 2024 Company Presentation Biohaven's efforts appeared to have paid off, with 63 patients demonstrating a 50%-70% slower rate of decline versus a natural history cohort of untreated patients, representing a 1.5-2.2 years delay in disease progression over the three-year study period. The percentage range represents two sets of historical data: American (50%) and European (70%). Troriluzole achieved statistical significance across nine primary and secondary endpoints, including change from baseline on the 16-point functional scale for the assessment and rating of ataxia (f-SARA), at years one, two, and three. The company assures that the untreated patients from the historical databases were \"rigorously matched\" to the treated patients in its study. With this data in tow, Biohaven anticipates refiling an NDA before year-end, potentially opening up an indication consisting of ~50,000 individuals in the U.S., EU, and Japan. News of this clinical success sparked a four-day 27% rally in shares of BHVN to $51.18 on September 26, 2024, where the stock is still trading. SCA is not the only condition being pursued by troriluzole. It is also being assessed in two 700-participant Phase 3 trials for obsessive-compulsive disorder [OCD]. Similar to its SCA trial, the tripeptide prodrug of sodium channel inhibitor (and approved ALS med) riluzole demonstrated middling results in a prior Phase 2/3 trial. However, armed with a well-known safety profile, the company pushed ahead, receiving permission to conduct two studies featuring a 40% higher dose. The primary endpoint of both ongoing trials is a change from baseline on the Yale-Brown Obsessive Compulsive Scale total score at weeks 4, 8, and 10. An interim analysis conducted by an independent Data Monitoring Committee after 70% of patients had reached the primary endpoint allowed the first study to continue in 2Q24. Top line data from that first trial is anticipated in 1H25 and a similar interim analysis is expected for the second study in 2H24. It should be noted that troriluzole has previously flunked Phase 2/3 trials for general anxiety (2020) and mild-to-moderate Alzheimer's disease (AD) (2021). That said, if it secures an OCD win, it will mark the first novel mechanism of action for this indication that afflicts three million Americans in over 20 years. Taldefgrobep alfa. Another candidate that has failed a past clinical trial is myostatin inhibitor taldefgrobep alfa (TA), which was in-licensed from Bristol Myers Squibb Company (BMY) after Roche Holding AG (OTCQX:RHHBY) returned it to the former upon failing to demonstrate any clinical benefit in the treatment of Duchenne muscular dystrophy. Myostatin is a protein that plays a role in limiting skeletal muscle growth and Biohaven believes TA could benefit patients suffering from spinal muscular atrophy (SMA), a progressive motor neuron disease that thwarts muscle mass development, leading to atrophy, diminished motor function, and death. For the rare (1 in 11,000) indication, TA has received Orphan Drug, Rare Pediatric, and Fast Track designations from the FDA, as well as an Orphan designation from the EMA. Enrollment for a 48-week, 269-patient, placebo-controlled Phase 3 trial (RESILIENT) evaluating TA as an adjunct therapy with the current standard of care [SOC] versus SOC alone is complete with topline data expected in 2H24. The primary endpoint is a change in the 32-item Motor Function Measure total score at week 48. Of potentially more interest to the investment community in regard to TA is the initiation of a Phase 2 study on obesity. Since TA is designed to promote muscle growth, it was paired with GLP-1 agonist semaglutide in a Phase 1 study, in which the combo demonstrated greater weight loss and reduction in fat mass, as well as an increase in lean mass versus semaglutide alone. A 90-patient, three-arm Phase 2 study is appraising the combo against each component as monotherapy is expected to commence in 2H24. September 2024 Company Presentation BHV-7000. There is also significant enthusiasm for the company's Kv7 (potassium) ion channel activator platform, the most advanced output of which is BHV-7000. It is being explored as a treatment for focal epilepsy, generalized epilepsy, bipolar disorder, and major depressive disorder (MDD) in five Phase 2/3 trials. Kv7 is a family (five subtypes) of ion channels that regulate neuronal excitability (i.e., the flow of potassium ions across cell membranes, repolarizing nerve cells, and resetting them for potential firing). Dysfunction of subtypes Kv7.2 and Kv7.3, located primarily in the cortex and hippocampus, can result in seizures. September 2024 Company Presentation Targeting Kv7 for epilepsy is not a novel approach, but Biohaven believes BHV-7000 represents a substantial uptick from prior therapies, featuring much broader efficacy and higher selectivity, meaning negligible off-site GABA-related issues that have dogged prior anti-seizure medicines, including GSK plc (GSK) Potiga (ezogabine), which was pulled from the market in 2017 due to its poor tolerability and adverse event profile. After demonstrating no CNS-associated adverse events in a Phase 1 trial on healthy subjects, BHV-7000 was advanced into the aforementioned later-stage studies in 1H24. BHV-7000 and the entire Kv7 platform were acquired from privately held Knopp Biosciences for a total upfront consideration of $93.7 million, consisting of cash and legacy Biohaven stock. Additionally, the now amended agreement obligates Biohaven on mid-single digit royalty payments, and in exchange for an $867.5 million reduction in potential milestone commitments down to $270 million ($210 million for BVH-7000), Biohaven issued Knopp 1.87 million shares of BHVN in mid-2024 and will make another stock issuance worth $75 million in mid-2025. September 2024 Company Presentation BHV-2100. Also, part of the Kv7 platform is BVH-2100, an oral TRPM3 antagonist that is being advanced into a Phase 2 trial for acute migraines and a proof-of-concept study for neuropathic pain - both in 2H24. BHV-8000. The company's other program that is about to enter mid-stage is BHV-8000, a brain penetrant, dual TYK2/JAK1 inhibitor targeting neuroinflammatory disorders, including Parkinson's disease, multiple sclerosis, Alzheimer's disease, ALS, and autoimmune encephalitis. After undergoing evaluation in healthy subjects, a Phase 2 trial in neuroinflammatory maladies is expected to initiate in 2H24. BHV-1300. Furthermore, Biohaven is developing new therapies from its Molecular Degrader of Extracellular Proteins (MoDE) platform, which targets autoimmune diseases. Its most advanced asset is BHV-1300, an immunoglobulin gamma degrader that is being investigated in a Phase 1 study for the treatment of rheumatoid arthritis. Interim data demonstrated rapid IgG reductions with no serious adverse events. Another three degraders are expected to enter the clinic in 2H24. Balance Sheet & Analyst Commentary: Leveraging the positive troriluzole readout, Biohaven priced a secondary offering on October 1, 2024, raising net proceeds of $269.9 million at $47.50 per share. When added to its unrestricted cash and marketable securities of $436.9 million as of June 30, 2024, management claims it has an operating runway into 2026. It should also be noted that the company is eligible to receive royalty payments from Pfizer in the low to mid-teens if sales of its legacy migraine franchise (Nurtec and Zavzpret) crest $5.25 billion, subject to a $400 million annual cap (at sales of $8.15 billion). However, with Nurtec likely to generate FY24 revenue of $1.4 billion and Zavzpret having just launched in 2023, any potential windfall from that arrangement appears a long way off. It's not as if any analyst on the Street needed validation from troriluzole or any other Biohaven program, as they have been unanimously constructive on Biohaven since the Pfizer deal in 2022. So far this month, eight analyst firms including Bank of America, JP Morgan, and Morgan Stanley have reiterated Buy ratings on the stock. Price targets proffered range from $55 to $69 a share. CEO Vlad Coric and board member John Childs are also in the bull camp, having each invested $1 million in the recent secondary. Also, board member Gregory Bailey purchased 5,000 shares at an average price of $44.19 on September 24, 2024. Conclusion: There is understandable excitement surrounding Biohaven's clinical franchise, with Phase 3 or Phase 2/3 trials either completing or initiating for indications including SCA (with a domestic market of ~30,000 patients), OCD (3.2 million), SMA (10,000), focal epilepsy (2 million), generalized epilepsy (1.2 million), bipolar disorder (7 million), not to mention an ongoing Phase 2 study for MDD and impending Phase 2 trials for obesity and neuroinflammatory disorders.  That said, Biohaven is playing (and currently winning) a dangerous game. Instead of leaning into positive news to raise enough capital to get it near cash flow positivity, it raises enough for another three to six months, expecting its stock to be trading higher on each subsequent secondary. If it continues to produce solid clinical data, it will benefit shareholders through lower dilution and possible debt financing. The strategy has prevailed with shares of BHVN have more than doubled over the past year. However, bad data from one of its programs could set its share price substantially backward as the market overreacts, knowing another secondary is always just around the corner. Given troriluzole's past clinical performance in OCD, it is nowhere near a lock to achieve its primary endpoints. Its broad portfolio is certainly suggestive of a higher market cap in the future. The question becomes, 'at what amount of dilution'. With a current market cap of $5.2 billion, with downside risk and upside potential equally weighted, Biohaven appears fairly valued and not compelling at current trading levels.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.1","shortVersion":"4.29.1","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2474020066"}