Biohaven Ltd. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023. Filed November 14, 2023. Biohaven is a clinical-stage biopharmaceutical company; it reported no product revenue. The company became independent in October 2022, so 2022 comparisons include periods when its business operated within its former parent.
Financial results and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | No product revenue | No product revenue | No product revenue | No product revenue |
| Research and development | $95.5m | $52.8m | $238.5m | $300.0m |
| General and administrative | $15.0m | $14.8m | $43.9m | $54.5m |
| Operating loss | $(110.5)m | $(67.6)m | $(282.3)m | $(354.5)m |
| Other income (expense), net | $4.7m | $0.0m | $18.8m | $(0.1)m |
| Net loss | $(102.6)m | $(68.9)m | $(263.4)m | $(369.2)m |
| Net loss per share | $(1.50) | $(1.75) | $(3.86) | $(9.38) |
- Cash and investments: At September 30, cash and cash equivalents were $111.7m and marketable securities were $128.9m. Restricted cash was $14.3m; $10.0m was held in escrow for the Highlightll license consideration. The company reported no borrowings; liabilities included $28.3m of long-term operating lease liabilities.
- Cash flow: Nine-month operating cash use was $216.8m, versus $222.3m in 2022. Investing activities provided $133.7m, primarily reflecting net sales and maturities of marketable securities. Financing activities used $33.3m, including the release of restricted cash payable to the former parent. Cash, cash equivalents and restricted cash declined by $116.6m.
- Liquidity after quarter-end: On October 5, Biohaven completed a common-share offering that generated approximately $242.4m net. In October it also established an at-the-market program for up to $150.0m of additional shares. Management stated that cash, cash equivalents and marketable securities were expected to fund its current forecast for more than one year after the filing. No gross margin is meaningful because the company had no product sales.
Material changes and operating drivers
- Q3 R&D expense increased $42.7m year over year, driven by expanding and advancing clinical and preclinical programs. In the first nine months, R&D decreased $61.6m, mainly because 2022 included a $93.7m Kv7 asset-acquisition charge and a $25.0m milestone, as well as higher share-based compensation and spending on programs since reduced or discontinued.
- YTD net loss narrowed by $105.8m, reflecting lower operating expenses, $18.8m of other income and a lower tax provision. Q3 net loss nevertheless widened by $33.7m as R&D spending rose. Other income included investment income and transition-service income from the former parent: $12.0m and $6.8m, respectively, for the nine-month period.
- The income-tax benefit/provision comparison was affected by IRS proposed-rule guidance that enabled deductions for certain U.S. R&D expenditures. Biohaven reported a $598.7m increase to its federal net operating loss carryforward and continued to maintain a full valuation allowance against net deferred tax assets.
Outlook, pipeline, and key risks
- Management expects significant operating losses and R&D spending to continue for the foreseeable future and says additional capital will be needed until the company can generate sufficient product revenue, if ever. Financing may dilute shareholders or require unfavorable terms; failure to raise capital could lead to delays or reductions in development programs.
- Key development plans include Phase 3 programs for BHV-7000 in focal epilepsy and bipolar disorder; Phase 2/3 development of BHV-8000 for Parkinson’s disease and potentially other neuroinflammatory disorders; and completion of enrollment in the two Phase 3 OCD trials for troriluzole, expected in 2024. These are plans, not assured outcomes.
- Biohaven reported positive preliminary EEG biomarker findings and CNS activity for BHV-7000, and said projected therapeutic concentrations were well tolerated in early BHV-8000 testing. These early findings do not establish clinical efficacy.
- Important regulatory uncertainty: the FDA informed Biohaven in July 2023 that it would not review the troriluzole SCA3 NDA because the pivotal study missed its primary endpoint. The EMA validated the SCA marketing application in October 2023 and it is under review; validation is not approval.
- Biohaven disclosed up to approximately $123.8m in potential future development, $547.4m in regulatory and $1,270.5m in commercial milestone payments under license agreements, plus possible royalties. These are contingent maximums, not currently recorded liabilities. Research commitments in excess of one year were approximately $11.5m, variable and milestone-dependent.
- The company said no material legal proceedings were pending and that risk factors were otherwise not materially changed from its 2022 Form 10-K. It expected to become a large accelerated filer and lose emerging-growth-company status effective December 31, 2023, increasing compliance costs and reporting demands. Disclosure controls were assessed as effective at the reasonable-assurance level.
Most important facts for investors to verify
- Whether the October share offering and any ATM sales provide adequate runway relative to actual cash burn and planned trial costs.
- Clinical progress, safety, and efficacy data for BHV-7000, BHV-8000, troriluzole, taldefgrobep alfa, and other pipeline programs, including whether stated timelines are met.
- The regulatory path and outcome for the EMA troriluzole application, given the FDA’s refusal to review the SCA3 NDA.
- Potential dilution, future milestone and royalty obligations, and the status of the $10.0m Highlightll escrow payment and associated shares.
- Whether spending, financing needs, and management’s more-than-one-year liquidity assessment remain consistent with the company’s evolving pipeline plans.