Business context and reporting period
Biohaven Ltd. is a clinical-stage biopharmaceutical company developing therapies for neurological, neuropsychiatric, neuromuscular and immune-mediated diseases. This unaudited Form 10-Q covers the three months ended March 31, 2023. Biohaven was spun off from its former parent in October 2022; the 2022 comparison reflects pre-spin-off operations and allocations, and may not be directly comparable with standalone results.
Financial performance and liquidity
Amounts below are in U.S. dollars; financial statement figures are converted from thousands to millions unless noted.
- Revenue: No product revenue; the company reported it does not expect product sales revenue in the near future.
- Operating costs and loss: R&D expense was $63.5 million, down from $70.1 million; G&A was $14.3 million, down from $19.7 million. Operating loss was $77.8 million versus $89.8 million, and net loss was $70.5 million versus $97.0 million. Basic and diluted loss per share was $1.03 versus $2.46.
- Other income and taxes: Other income was $8.2 million, compared with a small expense in Q1 2022, mainly reflecting $4.1 million net investment income and $3.9 million of transition-service income from the former parent. Income tax provision was $0.9 million versus $7.3 million.
- Cash flow: Operating cash use was $77.6 million, up from $58.8 million. Investing cash use was $1.1 million; financing provided $26.7 million, largely reflecting an increase in restricted cash payable to the former parent. Cash, cash equivalents and restricted cash decreased by $52.0 million.
- Liquidity and balance sheet: At March 31, cash and cash equivalents were $125.0 million and marketable securities were $263.0 million. Restricted cash was $65.6 million, including $61.5 million held on behalf of the former parent and $4.0 million held as lease-related collateral. Total assets were $618.5 million, total liabilities $146.3 million, and shareholders’ equity $472.3 million. The filing reports no borrowings; it does report operating lease liabilities.
- Margins: Not meaningful because the company had no product revenue.
Material changes versus the prior comparable period
- Total operating expenses declined $12.0 million. Management attributed the decrease principally to lower share-based compensation and personnel-related costs; spending increased for Kv7 programs, troriluzole and taldefgrobep, while spending declined for verdiperstat, BHV-2100 and the COVID-19 program.
- Net loss narrowed by $26.5 million, supported by lower operating expenses, higher other income and a lower tax provision.
- Operating cash use increased by $18.8 million, reflecting higher R&D spending and personnel costs.
- Year-over-year share-based compensation and cost allocations are affected by the former parent’s equity plans and pre-separation cost allocations; the company cautions these historical costs may not represent standalone expenses.
Outlook, management commentary and risks
- Management expects existing cash, cash equivalents and marketable securities to fund forecast operating expenses and other cash requirements for more than one year, while stating additional capital will be needed to pursue plans until the company can generate sufficient product revenue, if ever. Financing may dilute shareholders or require concessions; unavailable funding could force reductions, delays or termination of programs.
- Management expects significant R&D spending and operating losses to continue. No numerical financial guidance was provided.
- Clinical priorities include advancing BHV-7000 for epilepsy, with a pivotal trial expected to begin in the second half of 2023; developing it for bipolar disorder; and advancing taldefgrobep in a Phase 3 SMA trial. The company also expected 2023 development steps for BHV-8000 and IND submissions for BHV-2100 and BHV-1300.
- Management reported preliminary Phase 1 BHV-7000 safety and tolerability findings and PK levels above preclinical target concentrations; these are early findings, not evidence of efficacy in patients.
- Troriluzole’s Phase 3 SCA trial did not meet its primary endpoint in 2022. Reported subgroup observations were post hoc and do not establish efficacy. The OCD Phase 3 trials were ongoing, with enrollment expected to complete in 2023.
- In March 2023, Biohaven licensed a brain-penetrant TYK2/JAK1 inhibitor from Highlightll. A $10 million cash payment and 721,136 shares, valued at approximately $10 million at signing, were due after specified post-closing activities not completed by quarter-end; the agreement also includes substantial contingent milestones and royalties.
- Other material exposures include up to approximately $16.3 million of variable research commitments and substantial contingent development, regulatory and commercial payments under license agreements. The company identified no material legal proceedings and reported no material change to its previously disclosed risk factors.
Important facts for investors to verify
- Whether cash burn and trial spending remain consistent with management’s stated runway, and what financing may be required.
- Progress, timing and results for BHV-7000, taldefgrobep, troriluzole and the other stated clinical and regulatory milestones.
- The terms, post-closing payment status and potential economic impact of the Highlightll license and other milestone and royalty obligations.
- How standalone operating costs compare with the pre-spin-off comparison period, particularly personnel, share-based compensation and former-parent services.
- Whether early or subgroup clinical observations are confirmed in adequately designed trials; in particular, the failed overall SCA primary endpoint and pending OCD results.