Biohaven’s drugs under development are for migraines (rimegepant and BHV-3500), Alzheimer’s disease and anxiety disorders (troriluzole and sublingual riluzole) and multiple system atrophy (BHV-3241).
The success of Biohaven’s troriluzole depends on the metabolic superiority of troriluzole over riluzole, which the available data does not indicate.
The extent of rimegepant’s success is dependent on bringing it to market before Allergan’s ubrogepant, but Biohaven has yet to submit their NDA.
Trading at $62.01, Biohaven appears to be overvalued – for now.
Biohaven (NYSE:BHVN) is a clinical-stage company developing drugs for migraine treatment and prevention, glutamate dysfunction in Alzheimer’s disease (AD) and anxiety disorders, and multiple system atrophy. The value of a drug company depends on the estimated demand for their products. In the case of Biohaven, their drugs in development potentially treat increasingly prevalent conditions such as migraines, AD, and anxiety. However, the following information casts doubt that Biohaven will capitalize significantly on these drugs.
Biohaven is developing troriluzole (BHV-4157), a 3rd generation prodrug of riluzole. Troriluzole is a prodrug because it has an additional dipeptide conjugated to riluzole that is cleaved by aminopeptidases in the blood to release riluzole. The prodrug allegedly slows liver metabolism and enables dosing with meals. Riluzole acts by augmenting the expression and function of excitatory amino acid transporters located on astrocytes, which increases glutamate uptake from the tripartite synapse. Riluzole has been used to slow Amyotrophic Lateral Sclerosis progression since 1995. Riluzole’s antiglutaminergic effect could also reduce the glutamate-related neuronal hyperactivity found in early AD. Supporting this, are preclinical studies, wherein riluzole improved memory in aged mice and AD mouse models.
Riluzole is currently being tested for AD in a Phase 2 trial sponsored by the Icahn School of Medicine, with a study end-date of 11/2020. Biohaven’s troriluzole trial enrolls patients with MMSE scores of 14-24 for 48 weeks of treatment, with a study end-date of 1/2020. Biohaven is also testing troriluzole for indications of anxiety (Phase 3), obsessive compulsive disorder (Phase 2/3) and spinocerebellar ataxia (Phase 3) with study end-dates of 10/2019, 11/2019, and 10/2020, respectively. Biohaven owns a patent for 2nd generation riluzole derivatives (9725427), but the application for the 3rd generation prodrugs, including troriluzole, is still pending at the US Patent Office. Although, an international search report has favorably indicated novelty for the 3rd generation prodrug variations.
There’s one issue – the proof of troriluzole’s superior metabolic profile is arguable. A paper published in 2018 reporting research that was funded by Biohaven, showed graphs comparing riluzole serum levels in rats after oral administration of a prodrug-riluzole and riluzole. However, the graphed extension times for the two drugs are different, which prevents an accurate assessment of the prodrug’s superiority. In fact, the graphs show that the prodrug slows the availability of riluzole which then drops almost 10-fold over 24 hours. Thus, the prodrug’s availability profile doesn’t appear suitable for daily dosing.
The intravenous administration, however, does appear to have improved pharmacokinetics, but intravenous administration is obviously less convenient. The paper also shows only a slight potency difference between the prodrug and riluzole in a mouse xenograft model of melanoma. While this recent paper doesn’t identify the prodrug as troriluzole, the prodrug was chosen as the best performing and the composition is included in the second patent application. Data for troriluzole in humans has only been described in Biohaven’s SEC filings, and does not include specifics on enhanced time to peak extension.
Biohaven’s patent applications also do not compare the time-concentration curves with riluzole to demonstrate superiority. My concerns are that the alleged improved metabolic profile will not justify insurance coverage (Medicare) since generic riluzole will be much cheaper. (The composition patent for riluzole expired in 2013.) Biohaven’s Phase 2 trial does not compare troriluzole to riluzole, but hopefully, the FDA will mandate that comparison for Phase 3, especially if Icahn’s Phase 2 trial results show riluzole with strong efficacy.
However, even if the prodrug’s metabolic profile and efficacy is superior, the assignor’s research was funded by the U.S. government, so Biohaven’s exclusivity is insecure. The U.S. government could license troriluzole to a third party if it deems a public need. In summary, while it appears promising, the indications are that troriluzole acceptance is unlikely and investors should focus on other Biohaven products for estimating value.
Biohaven has formulated riluzole for sublingual dosing in ALS patients with swallowing difficulty. Riluzole can be crushed and dissolved orally but has an unpleasant anesthetic effect, so there is a need for a more convenient and palatable option. Recently, a liquid suspension of riluzole, named Tiglutik, became available, so Biohaven’s sublingual riluzole would be competing with Tiglutik. Further, grant of the pending patent for Biohaven’s sublingual formulation is uncertain given the applicant’s faulty justification of surprise efficacy or a composition formula that teaches away.
Biohaven’s most valuable asset appears to be rimegepant. Rimegepant is used to prevent and treat migraines and has an estimated market size of $8B. Rimegepant, an oral cGRP antagonist, will compete with Allergan’s oral cGRP antagonist, ubrogepant. Allergan submitted their new drug application (NDA) for ubrogepant on March 11, 2019. Biohaven paid $105M for a priority review voucher from the FDA to expedite the review of rimegepant. The standard time for an NDA decision is 9-12 months and a priority review is 6 months.
Obviously, Biohaven was hoping to offer rimegepant before patients flock to and adopt ubrogepant. However, with Biohaven’s NDA still not submitted, it looks like Allergan’s ubrogepant will be first to market. Further, Allergan has brand identity with physicians and more manufacturing and marketing experience. Biohaven might end up having to offer rimegepant for substantially less than ubrogepant to woo prescribers.
Biohaven will also share the migraine market with companies selling cGRP targeting antibodies that are intravenously infused once a month. However, most patients will want to leave that experience and cost behind. Biohaven also has a small molecule inhibitor of cGRP (BHV-3500) in a Phase 2/3 clinical trial. BHV-3500 is structurally distinct from rimegepant and is being formulated for multiple ways of delivery.
Other drugs in Biohaven’s pipeline are BHV-5000 for Rett syndrome and complex regional pain syndrome (Phase 2), and verdiperstat for multiple system atrophy (Phase 3). Both drugs have been given orphan status by the FDA to incentivize their development.
Regarding Biohaven’s financials, they have 44.2 million shares outstanding and a market cap $2.97B. Biohaven’s 2019 10-Q filing shows $217M in cash and a monthly burn rate of $14.7M. Biohaven appears to have enough capital to manufacture and market rimegepant.
In summary, even if the troriluzole trial results are stellar, Biohaven may not be able to capitalize on it, and thus, Biohaven’s value appears to lay solely on rimegepant and BHV-3500. Because rimegepant and BHV-3500 are being offered much later and with less brand identity, they may never be the preferred prescription migraine treatment. All of this together, indicates that Biohaven’s stock is currently overvalued.
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