Biohaven Ltd.: Too Far, Too Fast (Rating Downgrade) (NYSE:BHVN)

Of all the words of mice and men, the saddest are, “It might have been.” ― Kurt Vonnegut.

It has been exactly one year since we last took a look at Biohaven Ltd. (NYSE:BHVN). The stock has had a huge rally in recent months. Given it has been 12 months since we last posted an article on this promising biopharma, it is time for a follow up. An updated analysis follows below.

Company Overview:

Biohaven Ltd. was spun out of legacy Biohaven just prior to Pfizer’s October 2022 acquisition of the latter. This biopharmaceutical concern is focused on the development of therapies off a variety of different platforms that leverages Biohaven’s expertise in neuropharmacology. The company is domiciled in the British Virgin Islands and based in New Haven, CT. The stock currently trades north of $33.00 a share and sports an approximate market capitalization of $2.7 billion.

The company has a large and diverse pipeline of novel therapies for people suffering from neurological and neuropsychiatric diseases, rare disorders and other strategic therapeutic adjacencies. A good portion of the company’s numerous drug candidates are early stage, it should be noted. Biohaven’s complete pipeline can be accessed by clicking here.

Recent Developments:

The stock took an approximate 20% tumble in late July after Biohaven announced that the FDA refused to accept its NDA for its investigational therapy troriluzole that was targeting at the movement disorder spinocerebellar ataxia or SCA. While the company thought the data from a Phase 3 study was compelling, the FDA noted that the trial did not hit its primary endpoint.

Of note, Biohaven plans to complete enrollment in two Phase 3 randomized, double-blind, placebo-controlled studies of troriluzole in obsessive-compulsive disorder or OCD in early 2024.

The company also has a late-stage compound called BHV-7000 which is targeting numerous indications. The company expects to initiate pivotal trials around BHV-7000 in patients with focal epilepsy by the end of this year and bipolar disorder in the first half of 2024.

Biohaven is also advancing a compound called BHV-8000. The company is in the process of initiating a Phase 2/3 study around BHV-8000 targeting Parkinson’s disease. That study should commence in 2024.

Finally, in September, Biohaven completed enrollment in a pivotal Phase 3 study ‘RESILIENT’ that is designed to evaluate the efficacy and safety of its compound taldefgrobep alfa as adjunctive therapy to enhance muscle mass and function in Spinal Muscular Atrophy, or SMA, patients treated with standard-of-care treatments.

However, what ignited the recent rally in the stock was data from a very early-stage candidate called BHV-1300. In late September, Biohaven disclosed that BHV-1300 was able to reduce IgG by more than 90% after repeat dosing. While this data was indeed impressive and potentially could mean deeper IgG reductions as compared with existing standard of care FcRn targeting treatments, BHV-1300 is very early in development. The data was also obtained via tests on cynomolgus monkeys. The company plans to file an IND or Investigational New Drug application by the end of this year for BH-1300

Analyst Commentary & Balance Sheet:

Since third quarter results came out, five analyst firms including JPMorgan and Piper Sandler have reissued/assigned Buy ratings on the stock. Price targets proffered range from $31 to $37 a share.

Approximately 10% of the outstanding float in the shares is currently held short. Insiders, including the company’s CEO and CFO, have purchased approximately $25 million worth of shares since August at prices ranging from $18.44 to $22.57 a share. That has been the only insider activity in the stock so far in 2023.

As of October 5th, the company had $495 million worth of cash and marketable securities on its balance sheet after completing a secondary offering in early October after the third quarter closed. The company had a net loss of $102.6 in the third quarter, results of which was posted on November 14th.

Verdict:

Biohaven certainly has multiple “shots on goal” within its pipeline, several of which are targeting potential lucrative end markets. The pipeline should deliver several trial milestones in 2024 as well. However, Biohaven is still some years from any potential commercialization. In addition, at its current quarterly burn rates, the company is likely going to raise capital again sometime in 2024.

In addition, the recent huge rally in the stock has shot the stock up in the middle of its current price target ranges. I made money on Biohaven via covered call holdings in 2023 which have now expired in the money. However, I am not chasing the recent rally in the shares that have seen this equity more than double in the second half of 2023. If the stock drops back down into the range that insiders were buying ($18.50 to $22.50 a share) at recently, then I will probably initiate a new position in BHVN at that point in time.

There was a long hard time when I kept far from me the remembrance of what I had thrown away when I was quite ignorant of its worth.”― Charles Dickens, Great Expectations.