Biohaven Ltd.

Moat: 2/5

Understandability: 3/5

Balance Sheet Health: 4/5

A biopharmaceutical company focused on the discovery, development, and commercialization of therapies for neurological and other related disorders, leveraging innovative platforms.

Investor Relations Previous Earnings Calls

The moat, understandability, and balance sheet health scores reflect a conservative evaluation to ensure a margin of safety in any assessment.

Business Overview: Biohaven is a commercial-stage biopharmaceutical company that is primarily focused on developing and commercializing treatments for neurological and neurodegenerative diseases such as epilepsy, migraine, and spinal muscular atrophy. Their products address unmet needs in these areas, leveraging its expertise in areas such as immunology, neuroscience, and oncology. The company has three distinct platforms: the glutamate modulation platform, the TRPM3 ion channel platform, and the MATE conjugation technology platform.

  • Revenue Distribution:
    • Biohaven generates revenue primarily through sales of its Nurtec ODT (rimegepant) medication for migraine and also the net product sales from 2022 and 2023 for its CGRP antagonist.
    • The company receives payments related to licensing, research, and commercialization of products such as Vydura(rimegepant).

  • The company’s sales of Nurtec are mainly in the US. * The company has received payments for the approval and use of Taldefgrobep Alfa for Duchenne muscular dystrophy in select European territories and also for commercial launch of Trulance in Japan.

  • Industry Trends:

  • The biopharmaceutical industry is characterized by intense research and development activities, high regulatory hurdles, and constant innovation. There is also ongoing innovation in drug delivery and development platforms such as gene therapies. * Increased prevalence of neurological and autoimmune diseases are driving growth for specialized therapies. Also, companies that are able to demonstrate clear clinical benefits while maintaining safety are favored.

  • Margins:
    • While precise margins are not readily available in their 10Qs, the company reports net losses, which indicates that while revenues are growing, the firm is still spending heavily in R&D.
    • Gross margins for the Nurtec product, when available, have ranged from 70 to 90 percent.
  • Competitive Landscape:
    • Biohaven operates in a competitive pharmaceutical industry with competitors focusing on new treatments for neurological disorders. The main competitor for Nurtec is other CGRP antagonist.

  • The pharmaceutical market is marked by a mix of smaller specialty companies, medium-sized companies and large corporations. Smaller companies depend on innovation to achieve growth while larger companies rely on established brands and economies of scale to achieve it. * Companies like Abbvie (Allergan) compete in the migraine space with drugs like Ubrelvy (ubrogepant). Eli Lilly (Emgality (galcanezumab) and Lundbeck (Vyepti (eptinezumab)). Other companies like Teva and Amgen also sell different migraine treatments. * In the SMA therapeutic area, competitor companies are Roche (Evrysdi (risdiplam)), and Novartis (Zolgensma(onasemnogene abeparvovec-xioi)).

  • What Makes Biohaven Different
  • Biohaven utilizes unique approaches to identify, study and treat the underlying cause of neurological and neurodegenerative diseases. They are not only treating the disease, but using innovative technologies such as glutamate modulation and TRPM3 to address the causes of the diseases.
  • They use a combination of unique platforms and R&D which they believe are able to generate new therapeutic products.
  • Biohaven is one of the few companies to have a CGRP antagonist in a oral formula, it is more effective than a few other CGRP inhibitors and is preferred to have the injection. This competitive edge allows them to establish pricing power and achieve consistent profitability.

  • Their ability to take innovative science to clinical trials while maintaining a strong position for their clinical candidates.

  • Other Relevant Information:
    • The company is focused on commercializing already approved drugs such as Nurtec and Vydura and also continues to focus on developing new products and expand into new therapeutic areas.
    • They emphasize intellectual property protection by securing patents for their discoveries and products.
  • While a relatively new company, Biohaven has shown significant R&D capabilities and has moved into commercialization.

Financials (in-depth analysis and justification):

  • Balance Sheet Health: 4/5

    • Biohaven has a solid cash position with over $600m in cash and equivalents as of September 30, 2023.
    • Their liabilities are primarily related to accrued expenses and current liabilities, totaling $195 million, but no long term debt.
    • Their total equity of around $740m and total assets of over $900m are encouraging and show that they are in good financial standing and have adequate capitalization and reserves to cover development expenses and operational expenses.
    • Their equity is significantly higher than liabilities, indicating that assets are primarily financed through the equity route.
    • A significant chunk of assets are related to intangible assets such as licenses and other forms of IP.
  • Despite the huge debt, the company seems to have no problem managing its debt load.

  • Although their financials are not yet profitable, the financials are strong and allow for more research and development.

  • Understandability: 3/5

  • The concept of neurological diseases may be a bit complex for those with limited knowledge in the medical field.
  • However, the company focuses on specific and major types of diseases such as migraine and SMA, where they are providing clear and valuable solutions.
  • While the business operations such as drug development, licencing agreements, and commercialization are well understood, their finances may be complex for some investors due to heavy research and development expenses and a lack of current profits.
  • Overall, the business concept is quite straightforward. It is a biotechnology company focusing on developing and commercializing treatments for neurological disorders.

Legitimate Risks to the Moat and Business Resilience:

  • Competition: One of the major risks to the moat of Biohaven is the highly competitive nature of the pharmaceutical industry, especially in the therapeutic areas that the company operates in. Other companies with better funding and resources can potentially develop drugs or therapies in similar categories which may impede the commercialization of their own products.
  • Regulatory Risks: As is the case with most pharmaceutical and biotech companies, Biohaven is exposed to regulatory risks. Changes in regulatory requirements can lead to delays in approval processes or create unforeseen expenses. Additionally, failing to secure approval will lead to losses in research and development expenses. Moreover, any marketing claims are subject to strict requirements from bodies such as FDA.
  • Patent Challenges: Although Biohaven makes use of proprietary technology and has a varied patent portfolio, there are still chances of other companies legally challenging these patents, especially because their drugs are in a multi-billion dollar market. This will also lead to legal battles and additional expenses. If these patents are deemed invalid by courts, the company’s ability to have its moat would be severely reduced.
  • Clinical Trial Failures: The company faces clinical risk that their clinical trials might be unsuccessful. A major portion of the development depends on data generated through trials which could not demonstrate favorable effectiveness or safety.
    • Trial failures can lead to huge capital losses, delays, and no prospect of revenue from the drug.
    • If a drug candidate does not do well, the company will have invested significant research dollars in developing a product that it cannot profit from.
  • Financial Instability: Although it currently has good financial numbers, Biohaven’s profits are mostly linked to the success of its products. If the drugs that it develops and brings to market does not perform as expected, the company’s future profits will be threatened and might be subject to liquidity and bankruptcy risk. Moreover, they are dependent on equity-based financing at the moment, which means that they are exposed to shareholder dilution in their value.
    • Also, given their large expenses in research and development, their finances could be jeopardized if they are unable to obtain profitability.
  • Commercialization Risks: Even if the company gets approval from regulators for its drugs, there is no guarantee that there will be a sufficient demand from the market for the drug. Their sales will also depend upon several factors, such as effective marketing efforts, pricing policies, and patient adoption rates.
  • Overreliance: Biohaven may also be overly reliant on a single product, such as Nurtec. Though they have other drugs in the pipeline, poor performance from their key products could lead to loss of revenue and could jeopardize its profitability.
  • Integration Risks: Integration of recent acquisitions also adds an additional risk. For instance, the recent acquisition of Biohaven by Pfizer came with the challenge of restructuring and integrating different business practices, cultures, and employees.
  • Economic Downturn: Like all other businesses, they are exposed to macroeconomic risks such as a high inflation environment which could drive up their expenses, a recession that can lead to decreased funding from institutional investors, and changes in the capital markets that could hurt their ability to raise capital.

Recent Concerns, Controversies and Problems and Management Response:

  • Biohaven has recently been acquired by Pfizer, so their stock is no longer publicly traded. There was an initial decline in Biohaven stock due to investor disappointment that they were selling out to a larger company, which shows that their shareholders wanted more from this stock.
  • The CEO of Biohaven has made a series of statements that they are focused on long-term value and product development.
  • They have emphasized their commitment to innovation and that their scientific and technological capabilities are robust enough to make new advancements in the neurological space. They are also focused on their profitability and the long-term effect of their commercialization.

This detailed analysis should provide sufficient information to assess Biohaven’s prospects, risks, and potential as an investment.