Use
these
links
to
rapidly
review
the
document
TABLE
OF
CONTENTS
Biohaven
Pharmaceutical
Holding
Company
Ltd.
Financial
Statements
For
the
Years
Ended
December
31,
2017,
2016
and
2015
Table
of
Contents
UNITED
STATES
SECURITIES
AND
EXCHANGE
COMMISSION
WASHINGTON,
DC
20549
FORM
10-K
(Mark
One)
ý
ANNUAL
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
For
the
fiscal
year
ended
December
31,
2017
OR
o
TRANSITION
REPORT
PURSUANT
TO
SECTION
13
OR
15(d)
OF
THE
SECURITIES
EXCHANGE
ACT
OF
1934
Commission
File
Number:
001-38080
Biohaven
Pharmaceutical
Holding
Company
Ltd.
(Exact
Name
of
Registrant
as
Specified
in
its
Charter)
British
Virgin
Islands
(State
or
other
jurisdiction
of
incorporation
or
organization)
c/o
Biohaven
Pharmaceuticals,
Inc.
234
Church
Street,
New
Haven,
Connecticut
(Address
of
principal
executive
offices)
Not
applicable
(I.R.S.
Employer
Identification
No.)
06510
(Zip
Code)
(203)
404-0410
(Registrant's
telephone
number,
including
area
code)
Not
applicable
(Former
name,
former
address
and
former
fiscal
year,
if
changed
since
last
report)
Title
of
each
class
Common
Shares,
without
par
value
Name
of
each
exchange
on
which
registered
New
York
Stock
Exchange
Securities
registered
pursuant
to
Section
12(g)
of
the
Act:
None
Indicate
by
check
mark
if
the
registrant
is
a
well-known
seasoned
issuer,
as
defined
in
Rule
405
of
the
Securities
Act.
Yes
o
No
ý
Indicate
by
check
mark
if
the
registrant
is
not
required
to
file
reports
pursuant
to
Section
13
or
Section
15(d)
of
the
Exchange
Act.
Yes
o
No
ý
Indicate
by
check
mark
whether
the
registrant:
(1)
has
filed
all
reports
required
to
be
filed
by
Section
13
or
15(d)
of
the
Securities
Exchange
Act
of
1934
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
file
such
reports),
and
(2)
has
been
subject
to
such
filing
requirements
for
the
past
90
days.
Yes
ý
No
o
Indicate
by
check
mark
whether
the
registrant
has
submitted
electronically
and
posted
on
its
corporate
Web
site,
if
any,
every
Interactive
Data
File
required
to
be
submitted
and
posted
pursuant
to
Rule
405
of
Regulation
S-T
during
the
preceding
12
months
(or
for
such
shorter
period
that
the
registrant
was
required
to
submit
and
post
such
files).
Yes
ý
No
o
Indicate
by
check
mark
if
disclosure
of
delinquent
filers
pursuant
to
Item
405
of
Regulation
S-K
is
not
contained
herein,
and
will
not
be
contained,
to
the
best
of
registrant's
knowledge,
in
definitive
proxy
or
information
statements
incorporated
by
reference
in
Part
III
of
this
Form
10-K
or
any
amendment
to
this
Form
10-K.
o
Indicate
by
check
mark
whether
the
registrant
is
a
large
accelerated
filer,
an
accelerated
filer,
a
non-accelerated
filer,
a
smaller
reporting
company,
or
emerging
growth
company.
See
the
definitions
of
"large
accelerated
filer,"
"accelerated
filer,"
"smaller
reporting
company,"
and
"emerging
growth
company"
in
Rule
12b-2
of
the
Exchange
Act.
(Check
one):
Large
accelerated
filer
o
Accelerated
filer
o
Non-accelerated
filer
ý
(Do
not
check
if
a
smaller
reporting
company)
Smaller
reporting
company
o
Emerging
growth
company
ý
If
an
emerging
growth
company,
indicate
by
check
mark
if
the
registrant
has
elected
not
to
use
the
extended
transition
period
for
complying
with
any
new
or
revised
financial
accounting
standards
provided
pursuant
to
Section
13(a)
of
the
Exchange
Act.
ý
Indicate
by
check
mark
whether
the
registrant
is
a
shell
company
(as
defined
in
Rule
12b-2
of
the
Exchange
Act).
Yes
o
No
ý
The
aggregate
market
value
of
the
registrant's
common
shares
held
by
non-affiliates
of
the
registrant
as
of
the
last
business
day
of
the
registrant's
most
recently
completed
second
fiscal
quarter,
June
30,
2017,
based
on
the
last
reported
sale
price
of
the
registrant's
common
stock
on
the
New
York
Stock
Exchange
on
June
30,
2017
of
$25.00,
was
$492.3
million.
The
calculation
does
not
reflect
a
determination
that
certain
persons
are
affiliates
of
the
registrant
for
any
other
purpose.
As
of
March
2,
2018,
there
were
36,520,442
common
shares,
no
par
value
per
share,
outstanding.
Portions
of
the
registrant's
definitive
Proxy
Statement
to
be
filed
pursuant
to
Regulation
14A
under
the
Securities
Exchange
Act
of
1934
for
its
2018
Annual
Meeting
of
Shareholders
are
incorporated
by
reference
into
Part
III
of
this
Annual
Report
on
Form
10-K.
Documents
Incorporated
by
Reference
Table
of
Contents
Cautionary
Note
Regarding
Forward-Looking
Statements
This
Annual
Report
on
Form
10-K,
or
this
report,
contains
forward-looking
statements
that
involve
risks
and
uncertainties.
We
make
such
forward-looking
statements
pursuant
to
the
safe
harbor
provisions
of
the
Private
Securities
Litigation
Reform
Act
of
1995
and
other
federal
securities
laws.
All
statements
other
than
statements
of
historical
facts
contained
in
this
report
are
forward-looking
statements.
In
some
cases,
you
can
identify
forward-looking
statements
by
terminology
such
as
"may",
"will",
"should",
"expects",
"intends",
"plans",
"anticipates",
"believes",
"estimates",
"predicts",
"potential",
"continue"
or
the
negative
of
these
terms
or
other
comparable
terminology.
These
forward-looking
statements
include,
but
are
not
limited
to,
statements
about:
•
•
•
•
•
•
•
•
•
•
the
accuracy
of
our
estimates
regarding
expenses,
future
revenues
and
capital
requirements;
our
ability
to
obtain
and
maintain
regulatory
approval
of
our
product
candidates
for
any
indications,
and
the
labeling
under
any
approval
we
may
obtain;
intense
competition
in
the
market
and
the
ability
of
our
competitors,
many
of
whom
have
greater
resources
than
we
do,
to
offer
different,
better
or
lower
cost
therapeutic
alternatives
than
our
product
candidates;
anticipated
regulatory
developments
in
the
United
States
and
foreign
countries;
our
plans
to
develop
and
commercialize
our
product
candidates,
including
expected
preclinical
and
clinical
results
and
timing;
our
ability
to
obtain
and
maintain
intellectual
property
protection
for
our
proprietary
assets;
the
size
and
growth
of
the
potential
markets
for
our
product
candidates,
and
our
ability
to
serve
those
markets;
the
rate
and
degree
of
market
acceptance
of
our
product
candidates
for
any
indication;
our
ability
to
obtain
additional
financing;
and
the
loss
of
key
scientific
or
management
personnel.
Any
forward-looking
statements
in
this
report
reflect
our
current
views
with
respect
to
future
events
and
with
respect
to
our
future
financial
performance
and
involve
known
and
unknown
risks,
uncertainties
and
other
factors
that
may
cause
our
actual
results,
performance
or
achievements
to
be
materially
different
from
any
future
results,
performance
or
achievements
expressed
or
implied
by
these
forward-looking
statements.
Factors
that
may
cause
actual
results
to
differ
materially
from
current
expectations
include,
among
other
things,
those
described
under
Part
I,
Item
1A.
Risk
Factors
and
elsewhere
in
this
report.
Given
these
uncertainties,
you
should
not
place
undue
reliance
on
these
forward-looking
statements.
Except
as
required
by
law,
we
assume
no
obligation
to
update
or
revise
these
forward-
looking
statements
for
any
reason,
even
if
new
information
becomes
available
in
the
future.
This
report
contains
estimates,
projections
and
other
information
concerning
our
industry,
the
general
business
environment,
and
the
markets
for
certain
diseases,
including
estimates
regarding
the
potential
size
of
those
markets
and
the
estimated
incidence
and
prevalence
of
certain
medical
conditions.
Information
that
is
based
on
estimates,
forecasts,
projections,
market
research
or
similar
methodologies
is
inherently
subject
to
uncertainties
and
actual
events,
circumstances
or
numbers,
including
actual
disease
prevalence
rates
and
market
size,
may
differ
materially
from
the
information
reflected
in
this
report.
Unless
otherwise
expressly
stated,
we
obtained
this
industry,
business
information,
market
data,
prevalence
information
and
other
data
from
reports,
research
surveys,
studies
and
similar
data
prepared
by
market
research
firms
and
other
third
parties,
industry,
medical
and
general
publications,
government
data,
and
similar
sources,
in
some
cases
applying
our
own
assumptions
and
analysis
that
may,
in
the
future,
not
prove
to
have
been
accurate.
Table
of
Contents
TABLE
OF
CONTENTS
Part
I
.
Item
1.
Item
1A.
Item
1B.
Item
2.
Item
3.
Item
4.
Business
Risk
Factors
Unresolved
Staff
Comments
Properties
Legal
Proceedings
Mine
Safety
Disclosures
Part
II
.
Item
5.
Market
for
Registrant's
Common
Equity,
Related
Shareholder
Matters
and
Issuer
Purchases
of
Equity
Securities
Item
6.
Item
7.
Item
7A.
Item
8.
Item
9.
Item
9A.
Item
9B
Other
Information
Selected
Consolidated
Financial
Data
Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations
Quantitative
and
Qualitative
Disclosures
About
Market
Risk
Financial
Statements
and
Supplementary
Data
Changes
in
and
Disagreements
with
Accountants
on
Accounting
and
Financial
Disclosure
Controls
and
Procedures
Part
III
.
Item
10.
Item
11.
Item
12.
Item
13.
Item
14.
Part
IV
.
Item
15.
Item
16.
Directors,
Executive
Officers
and
Corporate
Governance
Executive
Compensation
Security
Ownership
of
Certain
Beneficial
Owners
and
Management
and
Related
Shareholder
Matters
Certain
Relationships
and
Related
Transactions,
and
Director
Independence
Principal
Accounting
Fees
and
Services
Exhibits
and
Financial
Statement
Schedules
Form
10-K
Summary
Signatures
Page
1
62
125
125
125
125
126
128
130
151
151
152
152
153
155
155
155
155
155
155
158
159
Table
of
Contents
Item
1.
Business
Overview
PART
I
We
are
a
clinical-stage
biopharmaceutical
company
with
a
portfolio
of
innovative,
late-stage
product
candidates
targeting
neurological
diseases,
including
rare
disorders.
Our
product
candidates
are
small
molecules
based
on
two
distinct
mechanistic
platforms—calcitonin
gene-related
peptide
("CGRP"),
receptor
antagonists
and
glutamate
modulators—which
we
believe
have
the
potential
to
significantly
alter
existing
treatment
approaches
across
a
diverse
set
of
neurologic
indications
with
high
unmet
need
in
both
large
markets
and
orphan
indications.
The
most
advanced
product
candidate
from
our
CGRP
receptor
antagonist
platform
is
rimegepant,
an
orally
available,
potent
and
selective
small
molecule
human
CGRP
receptor
antagonist
that
we
are
developing
for
the
acute
treatment
of
migraine.
We
expect
to
receive
the
topline
results
of
our
two
Phase
3
clinical
trials
in
the
first
quarter
of
2018.
Our
glutamate
platform
includes
three
clinical-stage
product
candidates
being
developed
for
the
treatment
of
various
neurological
indications:
trigriluzole
for
the
treatment
of
obsessive-compulsive
disorder
("OCD"),
spinocerebellar
ataxia
("SCA")
and
Alzheimer's
disease;
BHV-0223
for
the
treatment
of
amyotrophic
lateral
sclerosis("ALS");
and
BHV-5000
for
the
treatment
of
neurological
and
psychiatric
illnesses
such
as
Rett
syndrome,
neuropathic
pain
and
treatment-resistant
depression.
One
of
our
advanced
product
candidates
from
our
glutamate
platform
is
BHV-0223,
which
we
are
developing
for
the
treatment
of
ALS,
a
neurodegenerative
disease
that
affects
nerve
cells
in
the
brain
and
spinal
cord.
We
have
received
orphan
drug
designation
from
the
U.S.
Food
and
Drug
Administration
("FDA")
for
BHV-0223
in
ALS,
and
we
have
observed
results
suggesting
bioequivalence
to
Rilutek
in
a
recently
completed
Phase
1
clinical
trial.
We
plan
to
file
a
new
drug
application
("NDA")
with
the
FDA
for
BHV-0223
in
the
second
half
of
2018.
With
respect
to
our
next
most
advanced
product
candidate
in
our
glutamate
platform,
trigriluzole,
we
expect
to
receive
the
results
from
an
open-label
48-week
extension
study
in
SCA
in
the
fourth
quarter
2018.
We
expect
to
complete
enrollment
in
our
Phase
2
clinical
trial
of
trigriluzole
for
the
treatment
of
OCD
by
the
end
of
2018.
With
respect
to
BHV-5000,
we
initiated
a
Phase
1
study
in
December
2017
which
we
expect
to
be
completed
in
the
second
half
of
2018.
Table
of
Contents
Product
Candidates
The
following
table
summarizes
our
lead
development
programs.
We
hold
the
worldwide
rights
to
all
of
our
product
candidates.
Our
CGRP
Receptor
Antagonist
Platform
Migraine Overview and Market Opportunity
Migraine
is
a
chronic
and
debilitating
disorder
characterized
by
recurrent
attacks
lasting
four
to
72
hours
with
multiple
symptoms,
including
typically
one-
sided,
pulsating
headaches
of
moderate
to
severe
pain
intensity
that
are
associated
with
nausea
or
vomiting,
and/or
sensitivity
to
sound
(phonophobia)
and
sensitivity
to
light
(photophobia).
Migraines
are
often
preceded
by
transient
neurological
warning
symptoms,
known
as
auras,
which
typically
involve
visual
disturbances
such
as
flashing
lights,
but
may
also
involve
numbness
or
tingling
in
parts
of
the
body.
Migraine
is
both
widespread
and
disabling.
The
Migraine
Research
Foundation
ranks
migraine
as
the
world's
third
most
prevalent
illness,
and
the
Global
Burden
of
Disease
Study
2015
rates
migraine
as
the
seventh
highest
specific
cause
of
disability
worldwide.
According
to
the
Migraine
Research
Foundation,
in
the
United
States,
approximately
36
million
individuals
suffer
from
migraine
attacks.
While
most
sufferers
experience
migraine
attacks
once
or
twice
per
month,
more
than
4
million
people
have
chronic
migraine,
defined
as
experiencing
at
least
15
headache
days
per
month,
of
which
at
least
eight
are
migraine,
for
more
than
three
months.
Others
have
episodic
migraine,
which
is
characterized
by
experiencing
less
than
15
migraine
days
per
month.
People
with
episodic
migraine
may
progress
to
chronic
migraine
over
time.
Migraine
attacks
can
last
four
hours
or
up
to
three
days.
More
than
90%
of
individuals
suffering
from
migraine
attacks
are
unable
to
work
or
function
normally
during
a
migraine
attack,
with
many
experiencing
comorbid
conditions
such
as
depression,
anxiety
and
insomnia.
Triptans
are
the
current
first-line
therapy
for
treatment
of
migraine,
with
over
13.9
million
annual
prescriptions
in
the
United
States.
Despite
the
market
for
triptans
being
highly
genericized,
branded
options
continue
to
be
popular.
For
example,
even
at
a
price
of
approximately
$400-600/month,
Maxalt
2
Table
of
Contents
is
a
commonly
prescribed
triptan.
There
has
been
minimal
improvement
in
the
standard
treatment
for
migraine
since
the
early
1990s.
Reformulations
of
generic
triptans
or
incremental
improvements
with
new
agents
that
target
the
same
pathway
are
predicted
to
generate
additional
sales
in
the
near
term,
but
major
sales
growth
for
the
migraine
market
are
expected
from
novel
therapeutics
over
the
next
several
years.
We
believe
that
rimegepant
will
be
a
potential
best-in-class
small
molecule
CGRP
receptor
antagonist
for
the
acute
treatment
of
migraine
and
could
achieve
meaningful
penetration
of
the
market
of
migraine
sufferers
whose
symptoms
are
not
adequately
addressed
with
current
treatments.
The
prevention
of
migraine
in
the
United
States
is
a
multi-billion
dollar
potential
market.
According
to
a
report
published
by
Neuropsychiatric Disease and
Treatment ,
38%
to
50%
of
diagnosed
migraine
sufferers
may
be
candidates
for
migraine
prevention
therapy.
Currently,
preventive
medications
approved
for
migraine
include
beta
blockers,
such
as
propranolol,
topiramate,
sodium
valproate,
and
botulinum
toxin
("Botox")
and
generate
nearly
10
million
prescriptions
annually.
In
patients
with
high
frequency
and
chronic
migraine,
beta
blockers,
topiramate
and
sodium
valproate
are
commonly
used.
These
medications
are
often
not
well
tolerated
by
patients
because
of
adverse
events
("AEs")
such
as
cognitive
impairment,
nausea,
fatigue
and
sleep
disturbance.
In
clinical
trials
with
topiramate,
the
reduction
in
number
of
migraine
days
per
month
has
been
observed
to
be
relatively
small;
for
example,
migraine
days
reduced
by
2.5
days
from
six
to
seven
days
at
baseline,
or
reduced
by
3.5
days
from
15
to
16
days
at
baseline.
Migraine
is
twice
as
prevalent
in
women
as
compared
to
men.
In
the
affected
female
patient
population,
predominantly
women
of
child-bearing
age,
the
association
of
these
agents
with
poor
pregnancy
outcomes
and
fetal
abnormalities
can
limit
their
use.
Botox
is
only
approved
for
the
prevention
of
migraine
in
patients
diagnosed
with
chronic
migraine.
Approximately
47%
of
Botox-treated
patients
experience
a
50%
reduction
in
either
migraine
days
per
month
or
migraine
frequency
per
month
within
six
months,
which
leaves
more
than
half
of
patients
inadequately
treated.
In
addition,
the
Botox
dosing
regimen
consists
of
approximately
31
subcutaneous
injections
at
various
sites
on
the
head
and
neck,
with
recommended
repetition
every
12
weeks
if
the
patient
has
a
therapeutic
response.
CGRP's Role in Migraine
The
CGRP
receptor
is
located
within
pain-signaling
pathways,
intracranial
arteries
and
mast
cells
and
its
activation
is
thought
to
play
a
causal
role
in
migraine
pathophysiology.
For
example,
research
and
clinical
studies
have
shown:
serum
levels
of
CGRP
are
elevated
during
migraine
attacks,
infusion
of
intravenous
CGRP
produces
persistent
pain
in
migraine
sufferers
and
non-migraine
sufferers,
and
treatment
with
anti-migraine
drugs
normalizes
CGRP
activity.
Additionally,
multiple
clinical
studies
show
that
small
molecule
CGRP
receptor
antagonists,
which
inhibit
the
binding
of
endogenous
CGRP
to
CGRP
receptors,
are
effective
in
diminishing
migraine
attacks.
Treatment
with
a
CGRP
receptor
antagonist
is
believed
to
relieve
migraine
through
the
following
mechanisms:
•
•
•
Blocking
Neurogenic
Inflammation:
Binding
of
CGRP
receptor
antagonists
to
CGRP
receptors
located
on
mast
cells
inhibit
inflammation
caused
by
trigeminal
nerve
release
of
CGRP
onto
mast
cells
within
the
tough
outer
covering
of
the
brain,
or
the
meninges.
Decreasing
Artery
Dilation:
By
blocking
the
CGRP
receptors
located
in
smooth
muscle
cells
within
vessel
walls,
CGRP
receptor
antagonists
inhibit
the
pathologic
dilation
of
intracranial
arteries
without
the
unwanted
effect
of
active
vasoconstriction.
Inhibiting
Pain
Transmission:
Binding
of
CGRP
receptor
antagonists
to
CGRP
receptors
suppress
the
transmission
of
pain
by
inhibiting
the
central
relay
of
pain
signals
from
the
trigeminal
nerve
to
the
caudal
trigeminal
nucleus.
3
Table
of
Contents
The
graphic
below
depicts
the
mechanism
of
action
by
which
CGRP
receptor
antagonism
is
thought
to
alleviate
migraine.
N
Engl
J
Med,
Paul
L.
Durham,
"CGRP-Receptor
Antagonists—A
Fresh
Approach
to
Migraine
Therapy,"
March
11,
2004.
Copyright
©
Massachusetts
Medical
Society.
Our Lead Product Candidate: Rimegepant, an Oral CGRP Receptor Antagonist for Acute Treatment of Migraine
We
are
developing
rimegepant
as
an
orally
available,
selective
and
potent
small
molecule
CGRP
receptor
antagonist
for
the
acute
treatment
of
migraine.
We
believe
that
rimegepant
has
the
potential
to
be
the
best-in-class
CGRP
receptor
antagonist
for
the
treatment
of
migraine
with
the
ability
to
address
important
unmet
needs,
such
as
durable
efficacy
across
all
four
traditional
migraine
symptoms
and
reduced
incidence
of
headache
recurrence,
without
contraindications
or
warnings
in
patients
with
cardiovascular
disease
or
cardiovascular
risk
factors
such
as
hypertension.
Rimegepant
dosed
at
75
mg
was
observed
to
have
statistically
significant,
durable
improvement
as
compared
to
placebo
in
a
Phase
2b,
double-blind,
randomized,
placebo-controlled,
dose-ranging
clinical
trial
completed
by
Bristol-Myers
Squibb
Company
("BMS").
In
this
trial,
812
patients
suffering
from
migraine
attacks
received
either
placebo,
sumatriptan
100
mg
(a
currently
approved
triptan
medication
for
migraine)
or
rimegepant
dosed
at
10,
25,
75,
150,
300
or
600
mg.
The
Phase
2b
data
showed
statistically
significant
effects
of
rimegepant
starting
at
the
75
mg
dose
compared
to
placebo,
meaning
4
Table
of
Contents
that
at
this
dose
level,
statistically
significant
results
were
observed
on
all
four
key
migraine
symptoms—pain,
nausea,
photophobia
and
phonophobia.
Higher
doses
of
rimegepant,
while
also
showing
improvement
compared
to
placebo,
did
not
appear
to
convey
any
meaningful
additional
benefit
above
the
75
mg
dose.
The
observed
improvement
profile
is
consistent
with
the
published
literature
showing
a
lack
of
a
progressive
dose-response
curve
for
anti-migraine
drugs
used
in
the
acute
treatment
of
migraine.
To
our
knowledge
and
based
on
publicly
available
information,
rimegepant
is
the
only
small
molecule
CGRP
receptor
antagonist
currently
in
development
that
has
achieved
statistically
significant
improvement
on
all
four
of
the
traditional
endpoints
within
a
single
study,
which
suggests
a
broad
efficacy
profile
important
both
to
patients
and
physicians.
Rimegepant
also
was
observed
to
have
evidence
of
durable
improvement
as
demonstrated
by
statistically
significant
effects
on
two-to-24
hour
and
two-to-48
hour
pain
freedom
and
two-to-24
hour
pain
relief,
as
compared
to
placebo.
In
these
measurements,
benefits
were
present
at
two
hours
after
dosing
and
persisted
through
24
hours
after
dosing
and,
with
respect
to
pain
freedom,
through
48
hours
after
dosing.
This
durable
improvement
is
significant
because
other
common
migraine
medications,
such
as
triptans,
have
been
associated
with
headache
recurrence.
The
Phase
2b
trial
successfully
completed
its
aim
of
identifying
a
Phase
3
dose.
Based
on
these
observations,
we
are
advancing
the
75
mg
dose
of
rimegepant
in
our
Phase
3
clinical
trials.
In
July
2017,
we
initiated
two
Phase
3
clinical
trials
of
rimegepant,
and
we
completed
enrollment
in
these
trials
in
November
2017.
We
expect
to
receive
topline
results
from
both
of
these
trials
in
the
first
quarter
2018.
Additionally,
in
November
2017,
we
received
agreement
from
the
FDA
of
an
initial
pediatric
study
plan.
In
February
2018,
we
submitted
a
request
for
scientific
advice
for
rimegepant
to
the
Committee
for
Medicinal
Products
for
Human
Use
("CHMP")
a
committee
of
the
European
Medicines
Agency
("EMA")
and
we
anticipate
receiving
feedback
in
the
first
half
of
2018.
Those
suffering
from
migraine
often
have
accompanying
nausea
and
have
an
aversion
to
consuming
food
or
liquids
during
an
attack.
We
are
also
developing
an
oral
solid
dosage
formulation
of
rimegepant
that
disperses
almost
instantly
in
the
mouth,
without
the
need
for
water.
The
Zydis
oral
dissolving
tablet
("ODT")
formulation
being
utilized
uniquely
addresses
this
issue.
Biohaven
has
exclusive
worldwide
rights
to
the
Zydis
ODT
fast-dissolving
formulation
for
the
development
of
rimegepant
pursuant
to
a
January
2018
license
agreement
with
Catalent
U.K.
Swindon
Zydis
Limited,
a
subsidiary
of
Catalent,
Inc.
("Catalent").
The
agreement
also
provides
exclusivity
with
respect
to
other
small
molecule
CGRP
receptor
antagonists
with
the
Zydis
ODT
technology.
In
February
2018,
a
bioequivalence
study
was
conducted
to
compare
this
new
ODT
formulation
to
the
tablet
in
current
clinical
development
and
provided
evidence
of
equivalence.
A
third
Phase
3
efficacy
study
with
rimegepant
commenced
in
February
2018.
This
study,
utilizing
the
new
ODT
formulation,
is
designed
to
replicate
the
other
two
ongoing
Phase
3
studies
and
support
the
new
formulation.
The
study
is
expected
to
complete
in
the
fourth
quarter
of
2018.
Acute Treatment of Migraine and Limitation of Current Treatments
Clinicians
use
a
number
of
pharmacologic
agents
for
the
acute
treatment
of
migraine.
A
study
published
by
the
American
Headache
Society
in
2015
concluded
that
the
medications
deemed
effective
for
the
acute
treatment
of
migraine
fell
into
the
following
classes:
triptans,
ergotamine
derivatives,
non-steroidal
anti-
inflammatory
drugs
("NSAIDs"),
opioids
and
combination
medications.
The
current
standard
of
care
for
the
acute
treatment
of
migraine
is
prescription
of
triptans,
which
are
serotonin
5-HT
1B/1D
receptor
agonists.
Triptans
have
been
developed
and
approved
for
the
acute
treatment
of
migraine
over
the
past
two
decades.
The
initial
introduction
of
triptans
represented
a
shift
toward
drugs
more
selectively
targeting
the
suspected
pathophysiology
of
migraine.
While
triptans
account
for
almost
80%
of
anti-migraine
therapies
prescribed
at
office
visits
by
healthcare
providers,
issues
such
as
an
incomplete
effect
or
headache
recurrence
remain
important
clinical
limitations.
In
fact,
only
about
30%
of
patients
from
clinical
trials
are
pain
free
at
two
hours
after
taking
triptans.
In
addition,
triptans
are
5
Table
of
Contents
contraindicated
in
patients
with
cardiovascular
disease,
cerebrovascular
disease,
or
significant
risk
factors
for
either
because
of
potential
systemic
and
cerebrovascular
vasoconstriction
from
the
5-HT
1B
-mediated
effects.
The
package
insert
for
triptans
includes
warnings
and
precautions
for
migraine
patients
with
risk
factors
for
cardiovascular
disease
and
states
that
high
risk
patients,
including
those
with
increased
age,
diabetes,
hypertension,
smoking,
obesity
or
a
strong
family
history
of
coronary
artery
disease,
should
be
evaluated
prior
to
receiving
the
first
dose
of
a
triptan.
Triptans
are
contraindicated
in
patients
with
a
history
of
ischemic
heart
disease,
coronary
artery
vasospasm,
history
of
stroke,
peripheral
vascular
disease
or
uncontrolled
hypertension.
Even
in
patients
who
have
a
negative
cardiovascular
evaluation,
product
labeling
for
triptans
recommends
that
consideration
be
given
to
administration
of
the
first
dose
in
a
medically-supervised
setting
and
performing
an
electrocardiogram
immediately
following
administration.
Additionally,
periodic
cardiovascular
evaluation
should
be
considered
for
long-term
users
of
triptans
who
have
cardiovascular
risk
factors.
According
to
a
January
2017
study
published
in
the
journal
Headache, an
estimated
2.6
million
migraine
sufferers
in
the
United
States
have
a
cardiovascular
event,
condition
or
procedure
that
limits
the
potential
of
triptans
as
a
treatment
option.
Thus,
we
believe
there
remains
a
significant
unmet
medical
need
for
a
novel
migraine-specific
medication
that
does
not
increase
the
risk
of
cardiovascular
liability.
The Potential Benefits of Rimegepant Compared to Other Treatments
Traditionally,
for
approval
of
drugs
for
the
acute
treatment
of
migraine,
the
FDA
required
the
drug
to
meet
four
co-primary
endpoints
at
two
hours
after
dosage
in
clinical
trials:
pain
freedom
or
pain
relief,
and
freedom
from
nausea,
phonophobia
and
photophobia.
In
October
2014,
the
FDA
issued
new,
less
stringent
draft
guidance
(and
formal
guidance
in
February
2018)
indicating
that
pivotal
migraine
trials
could
use
a
preferred
approach
of
co-primary
2-hour
endpoints
of
freedom
from
pain
and
freedom
from
most
bothersome
symptom
(among
nausea,
photophobia
or
phonophobia)
to
support
approval.
We
believe
rimegepant
may
be
superior
to
other
acute
treatments
for
migraine
currently
approved
and
in
development
because,
based
on
our
Phase
2b
clinical
trial
data,
rimegepant
was
observed
to
result
in
statistically
significant
improvement
in
all
four
endpoints
of
pain,
nausea,
photophobia
and
phonophobia
at
the
75
mg
dose,
compared
to
placebo,
with
a
favorable
safety
profile.
The
table
below
compares
key
features
of
rimegepant
to
two
other
product
candidates
targeting
the
acute
treatment
of
migraine
that
are
currently
in
development
and
that
we
anticipate
could
receive
marketing
approval
as
early
as
2019-2020,
and
to
CGRP
antibodies,
which
represent
another
class
of
6
Table
of
Contents
migraine-targeting
product
candidates
in
development
and
which
target
migraine
prevention
rather
than
acute
treatment
of
migraine.
Based
on
the
results
from
the
Phase
2b
trial
and
earlier-stage
development,
we
believe
rimegepant
offers
the
following
clinical
and
product
benefits
for
the
acute
treatment
of
migraine:
•
•
•
•
Oral
Availability.
To
our
knowledge,
rimegepant
is
one
of
only
two
small
molecule
CGRP
receptor
antagonists
that
is
currently
in
late-stage
clinical
development
and
that
offers
patients
convenient
oral
administration.
Comprehensive
Treatment
Effect.
In
the
Phase
2b
trial,
the
75
mg
dose
of
rimegepant
showed
statistically
significant
improvement
as
compared
to
placebo
across
all
four
key
migraine
symptoms
(pain,
nausea,
photophobia
and
phonophobia),
while
the
other
small
molecule
CGRP
receptor
antagonists
currently
in
development
have
failed
to
show
statistically
significant
improvement
on
nausea,
and
also
failed
to
show
significant
improvement
on
pain
relief.
Durable
Improvement.
In
the
Phase
2b
trial,
the
improvement
of
the
75
mg
dose
of
rimegepant
on
pain
freedom
was
statistically
significant
at
two-to-24
hours
and
two-to-48
hours
after
dosing,
and
on
pain
relief
was
statistically
significant
at
two
and
24
hours
after
dosing,
in
each
as
compared
to
placebo,
showing
durability
of
treatment
effect.
Favorable
Safety
Profile.
In
the
Phase
2b
trial,
rimegepant
was
generally
well
tolerated
with
low
rates
of
AEs,
no
discontinuations
for
AEs,
no
treatment-related
serious
adverse
events
("SAEs")
and
no
deaths.
AEs
in
the
75
mg
treatment
group
were
comparable
to
the
placebo
group,
and
most
AEs
across
all
treatment
groups
were
mild
to
moderate
in
intensity
and
dose-dependent.
Rimegepant
does
not
cross
the
blood
brain
barrier,
so
there
is
low
potential
for
centrally
mediated
AEs.
In
addition,
the
preclinical
and
clinical
evidence
suggests
that
CGRP
receptor
antagonists,
such
as
rimegepant,
have
an
absence
of
vasoconstrictor
activity
and
lack
other
undesirable
cardiovascular
side
effects,
such
as
changes
in
the
blood
pressure
or
heart
rate,
that
are
commonly
associated
with
triptans.
7
Table
of
Contents
•
•
Potency.
Rimegepant
is
highly
potent
with
subnanomolar
affinity
for
the
human
CGRP
receptor,
which
allows
for
a
relatively
low
dose
to
provide
maximal
treatment
effect.
Lower
Expected
Cost.
We
expect
that
as
a
small
molecule,
rimegepant
will
have
a
lower
cost
of
goods
than
CGRP
antibodies,
which
are
biologics.
The Potential of CGRP Antagonists: Novel mechanism of action without causing vasoconstriction
The
release
of
the
neuropeptide
CGRP
from
pain
nerves
is
believed
to
play
a
causal
role
in
the
underlying
pathophysiology
of
migraine
and
is
also
a
potent
dilator
of
intracranial
arteries.
Unlike
triptans,
which
possess
potent
vasoconstrictive
properties
that
could
worsen
cardiovascular
or
cerebrovascular
disease,
blocking
the
CGRP
receptor
reverses
pathologic
dilation
of
blood
vessels
without
constricting
them
past
their
normal
resting
state
size
and
without
active
vasoconstriction.
The
absence
of
cardiovascular
effects
may
prove
to
be
one
of
the
major
advantages
in
the
use
of
CGRP
receptor
antagonists
for
the
treatment
of
migraine.
Preclinical
and
clinical
evidence
suggests
that
the
use
of
CGRP
receptor
antagonists
may
be
effective
in
treating
migraine
by
blocking
the
pathophysiological
processes
associated
with
CGRP
release,
specifically
by:
(1)
inhibiting
pain
transmission;
(2)
decreasing
artery
dilation
without
any
active
vasoconstriction;
and
(3)
halting
neurogenic
inflammation.
To
date,
the
preclinical
and
clinical
evidence
indicates
that
CGRP
receptor
antagonists
have
an
absence
of
vasoconstrictor
activity
and
lack
other
undesirable
cardiovascular
side
effects,
such
as
changes
in
the
blood
pressure
or
heart
rate.
Studies
of
numerous
drugs
in
development
have
provided
proof
of
concept
of
the
effects
of
CGRP
targeting
agents
in
humans.
Our Clinical Program for Rimegepant in Acute Treatment of Migraine
We
licensed
rimegepant
from
BMS
in
July
2016.
To
date,
the
majority
of
data
has
been
derived
from
clinical
and
preclinical
development
with
rimegepant
conducted
by
BMS.
BMS
selected
rimegepant
as
a
lead
CGRP
receptor
antagonist
compound
for
its
potential
best-in-class
chemical
profile
after
10
years
of
research
on
this
drug
target.
Phase 2b Clinical Trial Design and Results
Rimegepant
is
being
developed
for
oral
administration
and
was
observed
to
have
evidence
of
comprehensive
and
durable
treatment
effect
in
a
large
Phase
2b
clinical
trial
conducted
by
BMS.
This
Phase
2b
clinical
trial,
the
results
of
which
were
published
in
2014,
was
a
double-blind,
randomized,
placebo-controlled,
dose-ranging
trial
of
rimegepant
for
the
acute
treatment
of
migraine.
The
primary
objective
was
to
evaluate
the
efficacy
of
rimegepant
compared
with
placebo
in
the
acute
treatment
of
migraine
as
measured
by
pain
freedom
(headache
pain
intensity
level
reported
as
"no
pain")
at
two
hours
post-dosing
using
a
four
point
rating
scale
(no
pain,
mild
pain,
moderate
pain,
severe
pain)
while
identifying
an
optimal
dose
to
support
the
Phase
3
clinical
trials.
Subjects
were
randomized
to
receive
placebo,
a
100
mg
dose
of
sumatriptan
or
one
of
six
doses
of
rimegepant
(10
mg,
25
mg,
75
mg,
150
mg,
300
mg,
or
600
mg).
Randomization
made
use
of
an
adaptive
design,
whereby
one
quarter
of
subjects
were
assigned
placebo
and
one-eighth
were
assigned
sumatriptan;
the
remainder
were
assigned
to
one
of
six
rimegepant
groups
based
on
a
Bayesian
analysis
of
the
observed
response
rates.
Subjects
were
instructed
to
treat
one
migraine
of
moderate
to
severe
pain
intensity
and
return
to
the
clinic
within
seven
days.
A
total
of
885
subjects
were
randomized
and
812
completed
the
study
(the
remaining
subjects
did
not
experience
a
migraine
during
the
treatment
phase
of
the
trial).
Key
entry
criteria
included:
age
18
to
65
inclusive
with
at
least
a
one-year
history
of
migraine
beginning
prior
to
50
years
of
age;
migraine
attacks
lasting
four
to
72
hours
if
left
untreated;
not
more
than
eight
attacks
per
month
of
moderate
or
greater
severity
over
the
prior
three
months;
and
less
than
15
total
headache
days
per
month
(migraine
plus
non-migraine)
in
each
of
the
three
preceding
months.
8
Table
of
Contents
Patients
were
given
an
electronic
diary
to
record
improvements
and
returned
to
the
study
site
within
seven
days
of
study
treatment
for
review
of
the
data.
Patients
who
experienced
relief
of
headache
pain
to
a
mild
intensity
or
pain-free
intensity
level
at
two
hours
post-dosing
were
considered
to
be
responders.
The
patients
who
did
not
experience
such
relief
at
the
end
of
two
hours
were
permitted
to
use
an
approved
rescue
medication.
Use
of
rescue
medication
within
48
hours
was
also
recorded.
Whatever
the
case,
the
patient
was
required
to
continue
to
complete
his
or
her
electronic
diary
for
up
to
48
hours
after
dosing.
Secondary
efficacy
variables
included
total
migraine
freedom:
a
composite
endpoint
consisting
of
freedom
from
headache
pain
coupled
with
no
symptoms
of
photophobia,
phonophobia
or
nausea,
at
two
hours
post-dosing,
and
sustained
pain
freedom
from
two-to-24
hours.
Exploratory
measures
included
pain
relief
at
two
hours
post-
dosing,
sustained
pain
relief
from
two-to-24
hours
post-dosing,
freedom
from
photophobia,
phonophobia
or
nausea
at
two
hours
post-dosing,
and
sustained
pain
freedom
from
two-to-48
hours
post-dosing.
Safety
variables
included
AEs,
SAEs,
clinical
laboratory
evaluations,
vital
sign
measurements,
physical
examinations,
and
electrocardiograms
("ECGs").
The
following
graphic
illustrates
the
study
design
of
the
Phase
2b
clinical
trial:
With
regard
to
the
primary
study
outcome,
the
percentage
of
patients
who
were
pain
free
at
two
hours
after
dosing
is
depicted
in
the
figure
below.
The
rimegepant
75
mg,
150
mg,
and
300
mg
dose
groups
each
were
significantly
superior
to
placebo
(p
£
0.01).
Among
the
rimegepant
dose
groups,
the
percentage
of
subjects
who
were
pain
free
at
two
hours
after
dosing
was
31.4%
(27/86)
in
the
75
mg
group;
32.9%
(28/85)
in
the
150
mg
group;
and
29.7%
(33/111)
in
the
300
mg
group,
compared
to
9
Table
of
Contents
15.2%
of
patients
in
the
placebo
group.
Statistical
separation
from
placebo
was
not
seen
with
the
600
mg
group
(24.4%,
20/82)
as
compared
to
the
lower
doses.
Pain
Freedom
2
hours
Post-Dosing
(+/–95%
Confidence)
The
table
below
shows
the
percentage
of
patients
in
the
placebo,
sumatriptan,
and
each
rimegepant
dose
groups
who
experienced
pain
freedom
and
pain
relief
in
the
trial,
and
the
corresponding
p-values.
P-value
is
a
conventional
statistical
method
for
measuring
the
statistical
significance
of
clinical
results.
A
p-value
of
0.05
represents
statistical
significance,
meaning
that
there
is
only
a
5%
likelihood
that
the
observed
results
occurred
by
chance.
The
table
shows
that
rimegepant
75
mg
showed
statistically
significant
improvements
compared
to
placebo
on
sustained
pain
freedom
from
two-to-24
hours
and
two-to-48
hours
post-dose,
on
pain
relief
two
hours
post-dose
and
on
sustained
pain
relief
from
two-to-24
hours
post-dose
(all
with
a
0.1%
likelihood
that
the
observed
results
were
merely
due
to
chance).
The
figure
below
shows
the
percentage
of
patients
who
reported
sustained
pain
freedom
and
sustained
pain
relief
at
two-to-24
hours
after
dosing
among
the
placebo
dose
group,
the
sumatriptan
10
Table
of
Contents
dose
group,
and
each
dose
group
of
rimegepant.
Rimegepant
was
statistically
superior
to
placebo
on
pain
freedom
and
pain
relief
at
two-to-24
hours
across
all
dose
groups
75
mg
and
above.
Sustained
Pain
Freedom
and
Pain
Relief
2-24
Hours
Post-Dosing
(+/–95%
Confidence)
The
figure
below
shows
the
Phase
2
trial
results
for
the
three
other
traditional
co-primary
endpoints
previously
required
by
the
FDA—freedom
from
nausea,
phonophobia
and
photophobia,
showing
the
proportion
of
patients
with
alleviation
of
these
symptoms
at
two
hours
after
dosing
in
the
placebo
dose
group,
the
sumatriptan
dose
group,
and
in
each
of
the
rimegepant
dose
groups.
Rimegepant
75
mg
was
statistically
superior
to
placebo
on
nausea,
photophobia
and
phonophobia
freedom
at
two
hours
after
dosing.
Nausea,
Phonophobia
and
Photophobia
Freedom
2
Hours
Post-Dosing
(+/–95%
Confidence)
With
regard
to
safety
and
tolerability
in
the
Phase
2
clinical
trial,
the
overall
incidence
of
AEs
was
comparable
across
the
placebo
and
rimegepant
treatment
groups.
The
most
commonly
seen
AE
in
the
rimegepant
dosing
groups
was
nausea,
which
appeared
to
exhibit
a
dose
dependent
trend
at
the
higher
11
Table
of
Contents
doses:
1.4%
in
the
10
mg
dose
group;
0%
in
the
25
mg
dose
group;
3%
in
each
of
the
75
mg
and
150
mg
dose
groups;
4%
in
the
300
mg
dose
group;
and
8%
in
the
600
mg
dose
group.
Importantly,
although
the
patient
numbers
were
small,
the
reported
events
of
chest
discomfort,
chest
pain,
muscle
tightness,
and
jaw
pain
were
only
observed
in
the
sumatriptan-treated
patients,
with
no
rimegepant
treated
patients
reporting
chest
pain-related
symptoms.
Most
of
the
AEs
reported
were
mild
to
moderate
in
intensity.
Two
SAEs
were
reported
(post-lumbar
puncture
headache
and
pneumonia),
but
neither
was
deemed
by
the
trial
investigators
to
be
treatment-related.
No
deaths
were
reported,
and
no
patients
discontinued
because
of
AEs.
There
were
no
clinically
important
ECG
findings,
vital
sign
abnormalities,
or
physical
examination
findings
after
administration
of
rimegepant.
The
table
below
shows
the
number
and
percentage
of
patients
reporting
a
commonly
occurring
AE
within
48
hours
post-dosing.
Rimegepant
was
generally
well
tolerated
with
no
events
of
chest
discomfort
and
low
rate
of
AEs
across
dose
groups.
Treatment-emergent
AEs
that
occurred
within
two
hours
post-dosing
were
reported
most
often
in
the
sumatriptan
group
(10.0%),
followed
by
the
600
mg
(8.3%),
300
mg
(8.0%),
150
mg
(7.0%),
10
mg
(6.9%),
25
mg
(4.8%),
and
the
75
mg
(4.7%)
dose
groups,
and
the
placebo
group
(2.9%).
In
the
rimegepant
dose
groups,
the
most
common
AEs
reported
within
two
hours
post-dosing
were
primarily
low
rates
of
dizziness
and
somnolence,
and
gastrointestinal
disorders,
primarily
nausea
and
vomiting.
The
liver
has
been
a
target
of
interest
in
certain
small
molecule
CGRP
receptor
antagonists,
as
indications
of
liver
toxicity
have
been
associated
with
frequent
use.
In
the
Phase
2b
trial,
one
patient
in
the
rimegepant
75
mg
dose
group
and
one
patient
in
the
placebo
group
had
a
report
of
an
asymptomatic
and
mild
increase
in
certain
hepatic
enzymes,
which
are
types
of
liver
enzyme
measured
in
a
liver
function
test
to
detect
damage
and
inflammation
to
the
liver.
The
subject
in
the
rimegepant
75
mg
dose
group
had
peak
alanine
transaminase
("ALT")
and
aspartate
transaminase
("AST")
elevations
that
were
less
than
1.22
times
the
upper
limit
of
normal
("ULN")
and
reported
as
an
AE,
while
the
placebo
subject
had
a
total
bilirubin
level
that
was
greater
than
2xULN.
No
subjects
in
the
Phase
2b
trial
had
AST
or
ALT
elevation
that
exceeded
3xULN,
a
level
that
is
considered
to
be
a
potentially
meaningful
indicator
of
a
drug's
potential
to
cause
severe
drug-induced
liver
injury
("DILI"),
based
on
FDA
guidance.
In
conclusion,
in
the
Phase
2b
clinical
trial,
rimegepant
was
observed
to
be
superior
to
placebo
in
the
acute
treatment
of
migraine
and
the
trial
identified
the
lowest
dose
that
is
fully
effective
in
patients.
More
specifically,
the
selection
of
75
mg
rimegepant
as
the
dose
for
advancement
in
Phase
3
trials
was
based
on
observed
improvement
as
compared
to
placebo
on
the
key
primary
outcome
measure,
pain
freedom
at
two
hours
(31.4%
vs
15.2%
placebo;
p
=
0.0018)
and
key
secondary
and
exploratory
outcome
measures:
total
migraine
freedom
at
two
hours
(27.9%
vs
11.8%;
p
=
0.0008),
12
Table
of
Contents
sustained
pain
freedom
two-to-24
hours
(27.9%
vs
7.4%,
p
<
0.0001),
freedom
from
photophobia
at
two
hours
(41.9%
vs
24.0%,
p
=
0.0023),
freedom
from
phonophobia
at
two
hours
(52.3%
vs
27.9%,
p
<
0.0001),
freedom
from
nausea
at
two
hours
(67.4%
vs
51.0%,
p
=
0.0074),
pain
relief
at
two
hours
(72.1%
vs
51.2%,
p
=
0.0007),
and
sustained
pain
relief
from
two-to-24
hours
(69.8%
vs
42.4%,
p
<
0.0001).
Notably,
rimegepant
is
the
only
small
molecule
and
orally
available
CGRP
receptor
antagonist
that
has
shown
statistically
significant
improvement
on
the
key
migraine
symptoms
of
pain,
nausea,
photophobia
and
phonophobia
in
a
single
trial.
Phase 3 Clinical Trial Development Plan
Based
on
the
results
of
the
Phase
2
clinical
trial,
we
elected
to
advance
the
75
mg
dose
of
rimegepant
in
our
Phase
3
clinical
trials.
According
to
FDA
2014
draft
guidance
for
developing
drugs
for
acute
treatment
of
migraine,
approval
for
this
indication
has
historically
involved
the
demonstration
of
an
effect
on
four
co-
primary
endpoints:
pain,
nausea,
photophobia
and
phonophobia.
More
recently,
the
agency
has
considered
an
alternate
approach
and
in
the
recently
published
FDA
2018
formal
guidance
indicated
as
the
"preferred
approach"
for
approval
based
on
an
effect
at
2
hours
on
headache
pain
freedom
and
freedom
from
a
patient's
most
bothersome
migraine
symptom,
or
MBS,
selected
as
either
nausea,
photophobia
or
phonophobia.
Using
this
approach,
the
two
co-primary
endpoints
would
be
(1)
having
no
headache
pain
at
two
hours
after
dosing
and
(2)
a
demonstrated
effect
on
freedom
from
the
MBS
at
two
hours
after
dosing.
Regardless
of
the
associated
symptom
identified
as
most
bothersome,
the
FDA
guidance
states
that
all
three
important
migraine
symptoms
(nausea,
photophobia
and
phonophobia)
should
be
assessed
as
secondary
endpoints.
We
had
an
end
of
Phase
2
meeting
with
the
FDA
in
March
2017
and
we
commenced
two
Phase
3
clinical
trials
in
July
2017.
We
completed
enrollment
in
these
trials
in
November
2017.
Approximately
3,000
patients
were
enrolled
and
2,300
patients
randomized
across
these
two
Phase
3
trials.
We
expect
to
receive
topline
results
from
both
of
these
trials
in
the
first
quarter
of
2018.
Additionally,
in
November
2017,
we
also
received
agreement
from
the
FDA
on
an
initial
pediatric
study
plan.
We
submitted
a
request
for
scientific
advice
to
CHMP
for
rimegepant
in
February
of
2018,
and
we
anticipate
receiving
feedback
in
the
first
half
of
2018.
Both
Phase
3
trials
conform
to
the
FDA
guidance
for
approval
in
acute
treatment
of
migraine.
The
trials
are
double-blinded,
randomized,
and
placebo-
controlled.
The
trials
recruited
male
and
female
patients
18-65
years
of
age
with
at
least
a
one
year
history
of
migraine,
including
an
age
of
onset
prior
to
50,
migraine
attacks
that
last
about
four
to
72
hours,
not
more
than
eight
attacks
of
moderate
to
severe
intensity
per
month
within
the
last
three
months
and
not
less
than
two
attacks
per
month.
Our
goal
was
to
enroll
patients
who
represent
the
spectrum
of
real-world
migraineurs,
including
those
who
have
previously
been
non-
responsive
to
triptans,
as
the
FDA
stated
to
us
at
our
end
of
Phase
2
meeting
that
triptan-resistant
patients
may
benefit
from
rimegepant
treatment.
We
also
enrolled
patients
who
have
cardiovascular
risk
factors
and/or
vascular
disease.
The
primary
objective
of
the
trials
is
to
evaluate
the
efficacy
of
75
mg
of
rimegepant
compared
with
placebo
in
the
acute
treatment
of
migraine
as
measured
by
two
co-primary
endpoints:
(1)
pain
freedom
(headache
pain
intensity
level
reported
as
"no
pain")
at
two
hours
after
dosing
using
a
four-point
numeric
rating
scale
(no
pain,
mild
pain,
moderate
pain,
severe
pain)
and
(2)
freedom
from
the
MBS
at
two
hours
after
dosing.
The
three
other
important
migraine
symptoms
(nausea,
photophobia
and
phonophobia)
will
be
assessed
as
secondary
endpoints,
consistent
with
FDA
guidance.
13
Table
of
Contents
In
designing
the
Phase
3
trials,
care
was
taken
to
minimize
any
changes
in
study
populations
compared
to
the
already
completed
Phase
2
trial
with
rimegepant
with
no
major
changes
in
inclusion
and
exclusion
criteria
between
the
completed
and
planned
trials.
The
main
differences
in
trial
design
between
the
previous
Phase
2
trials
and
our
ongoing
Phase
3
clinical
trials
include:
1.
2.
3.
Change in the primary outcome measure and statistical analysis plan to conform to recent FDA guidance .
The
Phase
2b
trial
identified
pain
freedom
at
two
hours
as
the
primary
outcome
measure
and
included
various
secondary
and
exploratory
outcome
measures
to
assess
the
associated
symptoms
of
nausea,
photophobia
and
phonophobia.
The
Phase
3
trials
utilize
pain
freedom
and
freedom
from
MBS
at
two
hours
after
dosing
as
co-
primary
endpoints.
In
addition,
to
conform
to
recent
FDA
developments,
and
confirmed
in
our
recent
regulatory
interactions,
we
intend
to
analyze
the
data
collected
in
our
Phase
3
trials
on
a
non-completer-equals-failure
(NC=F)
basis,
rather
than
on
a
last-observation-carried-forward
(LOCF)
basis
used
in
the
Phase
2b
trial;
Number of treatment arms .
The
Phase
2b
trial
included
six
different
dose
groups
of
rimegepant,
sumatriptan
and
placebo
arms.
The
Phase
3
trials
only
include
75
mg
rimegepant
versus
placebo,
since
75
mg
rimegepant
was
identified
as
the
lowest
dose
in
the
Phase
2b
trial
at
which
improvements
were
observed
in
the
four
key
migraine
symptoms;
and
Increase in sample size .
The
two
Phase
3
trials
enrolled
approximately
3,000
patients
with
the
aim
of
treating
around
550
patients
per
arm
with
placebo
or
75
mg
rimegepant,
respectively,
in
each
trial;
whereas
in
the
Phase
2b
trial
203
patients
received
placebo
and
just
under
100
patients
per
arm
received
rimegepant.
This
increase
in
sample
size
is
expected
to
support
statistical
comparisons
on
both
primary
and
secondary
endpoints.
This
change
in
the
hierarchy
of
outcome
measures,
sample
size
and
number
of
treatment
arms
reflect
somewhat
standard
changes
in
clinical
trial
design
to
increase
technical
and
regulatory
chances
of
success
in
the
registrational
program.
We
also
developed
a
commercial-grade,
tablet
formulation
of
rimegepant
that
we
are
using
in
our
Phase
3
clinical
trials.
In
August
2017,
we
commenced
a
long-term
safety
study
to
meet
FDA
requirements
for
approval.
This
study
will
be
a
12-month,
long-term,
open
label
safety
study
conducted
in
patients
with
migraine.
Two
thousand
patients
will
be
treated
in
this
study.
A
subset
of
approximately
600
patients
will
have
a
history
of
more
frequent
migraine
attacks
(i.e.,
more
than
eight
migraine
attacks
per
month)
and
will
be
able
to
take
up
to
30
doses
of
75
mg
rimegepant
in
one
month.
At
our
end
of
Phase
2
meeting,
the
FDA
stated
its
desire
to
see
a
safety
study
in
which
patients
received
daily
or
near-daily
dosing
of
rimegepant
for
at
least
three
months.
This
desire
stems
from
the
FDA's
concern
about
a
potential
liver
signal
with
the
class
of
CGRP
antagonists.
The
FDA
stated
that
any
risk
of
liver
injury
has
to
be
very
low
and
that
exposure
with
the
drug
has
to
be
sufficient
to
cap
the
risk
of
liver
injury
at
a
level
acceptable
for
the
migraine
population.
We
believe
the
design
of
our
long-term
safety
study
may
adequately
address
this
concern
by
providing
for
the
enrollment
of
approximately
600
patients
who
experience
nine
to
fourteen
migraine
episodes
per
month
and
will
be
allowed
to
use
rimegepant
on
a
daily
basis,
which
we
believe
will
generate
safety
data
with
respect
to
long-term,
frequent
use
of
rimegepant.
Importantly,
we
believe
this
study
design,
where
patients
are
allowed
to
take
up
to
30
doses
of
75
mg
rimegepant
in
one
month,
embraces
the
FDA
guidance
for
conduct
of
a
long-term
safety
trial
during
which
patients
can
treat
all
acute
migraine
episodes
with
the
investigational
drug.
Study
visits
for
all
patients
will
be
monthly
for
the
first
three
months
and
every
three
months
thereafter.
Based
on
feedback
we
received
at
our
end
of
Phase
2
meeting
with
the
FDA,
we
will
administer
liver
function
testing
at
two
weeks
post-dose
and
will
follow
patients
with
any
abnormal
liver
function
tests
until
clinical
resolution.
We
expect
sufficient
clinical
data
needed
for
filing
an
NDA
for
rimegepant
will
be
available
by
the
end
of
2018.
As
of
December
31,
2017,
approximately
1,100
patients
are
enrolled
in
this
study,
and
we
expect
enrollment
to
be
complete
in
the
first
half
of
2018.
14
Table
of
Contents
Those
suffering
from
migraine
often
have
accompanying
nausea
and
have
an
aversion
to
consuming
food
or
liquids
during
an
attack.
We
are
also
developing
an
oral
solid
dosage
formulation
of
rimegepant
that
disperses
almost
instantly
in
the
mouth,
without
the
need
for
water.
The
Zydis
ODT
formulation
uniquely
addresses
this
issue.
Biohaven
has
exclusive
worldwide
rights
to
the
Zydis
ODT
fast-dissolving
formulation
for
the
development
of
rimegepant
through
a
January
2018
license
agreement
with
Catalent.
The
agreement
also
provides
exclusivity
with
respect
to
other
small
molecule
CGRP
receptor
antagonists
with
the
Zydis
ODT
technology.
In
February
2018,
a
bioequivalence
study
was
conducted
to
compare
this
new
ODT
formulation
to
the
tablet
in
current
clinical
development
and
provided
evidence
of
equivalence.
A
third
Phase
3
clinical
trial
with
rimegepant
commenced
in
February
2018.
This
study,
utilizing
the
new
ODT
formulation,
is
designed
to
replicate
the
other
two
ongoing
Phase
3
trials.
The
trial
compares
placebo
to
75
mg
of
the
ODT
formulation
and
will
randomize
approximately
850
patients
with
migraine
to
evaluate
approximately
425
patients
per
treatment
arm.
We
expect
to
complete
this
Phase
3
clinical
trial
in
the
fourth
quarter
2018.
Clinical Trials with Rimegepant
As
of
March
2,
2018,
thirteen
clinical
trials
have
been
completed
(enrollment
and
treatment
completed)
in
healthy
volunteers
and
patients
with
migraine
that
inform
pharmacokinetic,
metabolic
interactions,
safety,
tolerability
and
efficacy
of
rimegepant.
Rimegepant
has
been
observed
to
be
generally
safe
and
well
tolerated
in
humans
when
given
as
single
oral
doses
up
to
the
maximum
dose
of
1500
mg
and
multiple
oral
doses
up
to
the
maximum
daily
dose
of
600
mg
for
14
days.
No
deaths
have
occurred
in
clinical
trials
to
date.
Currently,
there
are
three
ongoing
Phase
3
clinical
trials,
one
Phase
2/3
long-term
safety
study
as
well
as
two
ongoing
Phase
1
clinical
trials,
with
one
more
Phase
1
expected
to
commence
in
the
second
quarter
of
2018.
These
Phase
1
trials
included
evaluation
of
important
drug-drug
interactions
looking
at
the
effect
of
administering
itraconazole,
rifampin
or
fluconazole
on
the
pharmacokinetics
("PK")
of
rimegepant.
Also
included
are
population
studies
to
evaluate
any
differences
seen
in
PK
in
patients
with
hepatic
or
renal
impairment,
as
well
as
differences
in
PK
that
could
be
seen
in
the
elderly.
We
expect
to
initiate
a
cardiac
conduction
study
("TQT
study")
in
2018.
Prior
to
the
initiation
of
our
Phase
3
clinical
trials,
approximately
687
subjects
had
been
dosed
with
rimegepant.
In
Phase
1
and
2b
trials,
approximately
600
subjects
have
received
single
doses
of
rimegepant,
ranging
from
25
mg
to
1500
mg;
and
approximately
87
subjects
have
received
multiple
doses
of
rimegepant,
ranging
from
75
mg
to
600
mg
daily
for
up
to
14
days.
In
total,
we
believe
the
current
data
suggests
a
favorable
benefit-risk
profile
for
rimegepant
in
the
acute
treatment
of
migraine
attacks.
The
clinical
experience
with
rimegepant
to
date
has
allowed
the
characterization
of
safety
and
tolerability
at
substantial
multiples
of
the
intended
therapeutic
dose
and
intended
frequency
of
use.
Rimegepant
has
been
assessed
in
single
doses
up
to
1500
mg
and
in
multiple
doses
from
75
mg
to
600
mg
with
14
days
of
dosing
(including
300
mg
twice
daily),
where
the
higher
doses
yielded
exposures
more
than
54
times
greater
in
area
under
the
curve
("AUC"),
which
is
a
measure
of
drug
exposure,
and
23
times
higher
in
C
max
,
which
is
the
peak
concentration
that
a
drug
achieves
after
dosing,
as
compared
to
the
mean
therapeutic
exposure
of
a
single
75
mg
dose.
These
high
exposure
multiples
were
observed
to
be
generally
well
tolerated.
In
completed
rimegepant
trials
for
which
the
results
have
been
unblinded,
as
of
March
2,
2018,
three
SAEs
have
been
reported
in
rimegepant-treated
patients.
None
of
these
SAEs
were
considered
to
be
related
to
study
drug:
one
subject
had
an
SAE
of
severe
post-lumbar
puncture
headache
seven
days
after
exposure
to
a
single
dose
of
rimegepant
that
was
considered
unrelated
to
study
treatment,
one
subject
had
stress
related
cardiomyopathy
that
occurred
8
days
after
a
single
dose
of
rimegepant
that
was
considered
unrelated
to
study
treatment,
and
one
subject
had
an
SAE
of
moderate
pneumonia
with
onset
five
days
after
exposure
to
a
single
dose
of
rimegepant
that
was
considered
unrelated
to
study
treatment.
In
addition,
one
subject
who
received
placebo
experienced
an
SAE
(appendicitis).
15
Table
of
Contents
Since
no
data
are
available
regarding
the
effects
of
rimegepant
on
human
fetuses
or
newborns,
women
of
childbearing
potential
must
use
adequate
birth
control
and
have
a
negative
serum
or
urine
pregnancy
test
to
be
eligible
to
receive
rimegepant.
Female
subjects
should
avoid
attempts
at
pregnancy
in
the
month
prior
to
exposure
to
rimegepant
and
eight
weeks
after
exposure
to
rimegepant.
All
urine
pregnancy
testing
results
must
be
confirmed
by
serum
pregnancy
testing.
Drug
interaction
studies
with
oral
contraceptives
demonstrated
modest
increase
in
exposure
to
estrogen
and
norelgestromin
upon
multiple
doses
of
rimegepant
75
mg.
Co-administration
of
rimegepant
with
oral
contraceptives
was
safe
and
well
tolerated.
These
results
enabled
enrollment
of
women
of
child
bearing
potential
receiving
oral
contraceptives
to
be
enrolled
in
the
Phase
3
studies.
Nonclinical Toxicology
Rimegepant
is
not
genotoxic
or
phototoxic
and
has
a
low
potential
for
off-target
receptor
interactions
or
effects
on
the
cardiovascular,
respiratory,
and
CNS
systems.
With
repeated
dosing
up
to
three
months,
rimegepant
was
clinically
tolerated
at
up
to
150
mg/kg/day
in
rats
and
100
mg/kg/day
in
monkeys.
No
histopathologic
liver
findings
were
noted
in
monkeys
treated
for
3
months
at
all
doses
(the
highest
dose
yielded
an
AUC
exposure
that
was
120×
the
anticipated
human
AUC
at
a
therapeutic
dose
of
75
mg/day).
The
liver
was
the
primary
target
organ
in
mice
at
levels
of
100
mg/kg/day
and
greater
and
in
rats
at
levels
of
60
mg/kg/day
and
greater.
These
dosing
levels
were
not
associated
with
hepatocellular
degeneration/necrosis,
inflammation,
or
fibrosis.
In
monkeys
treated
for
3
months,
target
organ
effects
were
limited
to
minimal
to
moderate
macrophage
accumulation
(histiocytosis)
in
mandibular
and
mesenteric
lymph
nodes
(considered
to
be
a
marginal
exacerbation
of
a
common
spontaneous
change
in
this
species)
at
³
100
mg/kg/day.
Hepatic
lipidosis
identified
in
mouse
and
rat
studies
was
determined
to
be
rodent
specific
as
it
was
not
observed
at
rimegepant
exposures
in
monkeys
which
overlapped
those
producing
lipid
effects
in
rats
in
the
three-month
pivotal
studies.
At
the
NOEL
(no
observable
effect
level)
and
NOAEL
(no
observable
adverse
effect
level)
doses
in
rats
(30
mg/kg/day)
and
monkeys
(50
mg/kg/day)
in
the
three-month
studies,
mean
(male
and
female
combined)
AUC
exposures
were
at
least
23×
(for
rats)
and
56×
(for
monkeys)
the
anticipated
human
AUC
at
a
75
mg/day
clinical
dose.
Since
fetal
effects
in
rats
were
observed
only
at
doses
that
produced
maternal
toxicity
(300
mg/kg/day)
and
there
were
no
fetal
findings
in
rabbits
at
any
dose
level,
rimegepant
is
not
considered
to
be
a
selective
developmental
toxicant.
In
a
6-month
rat
study,
animals
were
administered
rimegepant
orally
at
daily
doses
of
0,
20,
or
45
mg/kg/day.
The
NOAEL
was
the
high
dose,
45
mg/kg/day
with
no
evidence
of
toxicity
at
any
dose.
In
a
9-month
cynomolgus
monkey
study,
animals
were
administered
rimegepant
orally
at
daily
doses
of
0,
15
or
50
mg/kg/day.
The
NOAEL
was
the
high
dose,
50
mg/kg/day
with
no
evidence
of
toxicity
at
any
dose
level.
Chronic
administration
to
rats
(6
months)
and
monkeys
(9
months)
demonstrated
NOAEL
values
at
doses
of
45
and
50
mg/kg/day,
respectively.
Exposures
were
at
least
29X
(rat)
and
17X
(monkey)
the
anticipated
human
AUC
at
a
75
mg/day
clinical
dose.
Clinical
monitoring
for
potential
hepatotoxicity
has
been
and
will
continue
to
be
conducted
in
subsequent
studies
in
humans.
Such
monitoring
will
include
routine
liver
function
tests
including
ALT,
AST,
total
bilirubin,
GGT
and
ALP
at
all
study
phases,
including
screening
(before
exposure
to
rimegepant),
regularly
during
exposure,
and
after
exposure.
Additionally,
the
frequency,
severity,
and
discontinuations
of
hepatic-related
AEs
are
monitored
closely.
All
cases
of
DILI
are
reported
as
SAEs.
There
have
been
no
reported
cases
of
DILI
with
rimegepant
administration
to
date.
Other
symptoms
or
target
organs
from
nonclinical
studies
that
will
continue
to
be
followed
include
skeletal
muscle
effects,
emesis,
skin
rash
and
hematology
measures.
We
expect
to
complete
the
ongoing
two-year
carcinogenicity
study
in
the
fourth
quarter
of
2018
and
receive
the
study
report
in
2019.
16
Table
of
Contents
Our Product Candidate BHV-3500, a CGRP Receptor Antagonist for Acute Treatment and Prevention of Migraine
BHV-3500
is
the
second
compound
from
our
CGRP
receptor
antagonist
platform.
We
are
developing
BHV-3500
for
the
acute
treatment
and
prevention
of
migraine,
and
we
believe
it
has
the
potential
to
improve
the
existing
standard
of
care
based
on
the
following
benefits:
•
•
•
•
•
Multiple
Potential
Routes
of
Delivery
—BHV-3500
may
be
used
by
nasal,
subcutaneous,
inhalation
or
potential
oral
routes
of
administration
with
rapid
onset
of
treatment
effect,
compared
to
the
anti-CGRP
monoclonal
antibodies
("mAbs")
that
are
currently
in
development
which
have
a
more
cumbersome
route
of
administration
to
patients
in
the
form
of
intravenous
or
subcutaneous
use.
The
first
formulation
of
BHV-3500
entering
the
clinic
is
for
intranasal
delivery
that
will
be
assessed
for
rapid
onset
of
action
in
the
acute
treatment
of
migraine.
Favorable
Safety
Profile
—Like
rimegepant,
we
believe
BHV-3500
will
have
a
favorable
safety
and
tolerability
profile
in
the
clinic,
attributable
to
multiple
properties
such
as
its
high
selectivity
for
the
CGRP
receptor,
low
propensity
to
aggregate
in
lipids,
and
its
expected
excretion
from
the
body
in
a
largely
unchanged
state.
Unlike
other
small
molecule
CGRP
receptor
antagonists
that
show
potential
for
liver
effects
at
high
exposures,
BHV-3500
has
not
demonstrated
any
propensity
for
liver
abnormalities
in
preclinical
studies
to
date,
even
at
very
high
dose
levels.
Because
preventative
treatments
involve
chronic
dosing
on
a
daily
basis,
any
potential
target
organ
effects
on
the
liver
could
be
problematic.
Therefore,
based
on
these
observations
from
nonclinical
toxicology
studies,
we
believe
that
BHV-3500
may
provide
a
substantial
benefit
over
other
agents
with
such
propensities.
In
addition,
in
preclinical
studies
of
BHV-3500,
no
significant
cardiovascular
safety
or
systemic
toxicity
issues
were
observed,
in
contrast
to
sumatriptan,
which
displays
dose-dependent
vasoconstriction.
Superior
Chemical
Attributes
—BHV-3500
is
a
highly
soluble,
potent
antagonist
at
the
human
CGRP
receptor.
Because
BHV-3500
exhibits
an
in
vitro and
in vivo efficacy
profile
similar
to
rimegepant,
we
believe
that
BHV-3500
will
also
have
a
comprehensive
(pain,
nausea,
photophobia
and
phonophobia)
and
durable
efficacy
profile.
The
chemical
attributes
of
BHV-3500
also
allow
for
a
variety
of
formulations
that
may
provide
a
more
rapid
onset
of
efficacy.
Unlike
mAbs,
which
are
large
biologic
molecules,
BHV-3500
is
a
small
molecule
that
directly
binds
with
high
potency
to
the
CGRP
receptor.
Higher
Value
to
Patients
and
Payors
with
Lower
Expected
Cost
Compared
to
Biologics
—We
expect
that
as
a
small
molecule,
BHV-3500
will
have
a
lower
cost
of
goods
than
mAbs,
which
are
biologics.
Potential
for
Multiple
Indications
—Although
its
nonclinical
safety
and
efficacy
profile
suggests
BHV-3500's
potential
for
daily
administration
and
development
for
prevention
of
migraine,
this
compound
also
has
the
potential
to
be
developed
in
the
acute
treatment
of
migraine.
BHV-3500
adds
flexibility
to
our
CGRP
development
program
as
a
stand-alone
agent
for
prevention
therapy
or
a
complementary/backup
intranasal
formulation
for
rapid
onset
of
action
in
the
acute
treatment
of
migraine.
We
believe
BHV-3500
has
the
potential
to
address
a
significant
unmet
need
in
the
acute
treatment
of
migraines
in
patients
with
both
episodic
and
chronic
migraine,
as
well
as
compete
effectively
with
current
and
future
migraine
prevention
therapies.
BHV-3500
may
afford
multiple
routes
of
delivery
including
intranasal
delivery
and
daily
oral
administration
for
acute
and
preventative
treatment
of
migraine,
potential
for
enhanced
safety
profile,
superior
chemical
attributes
and
a
higher
value
to
patients
and
payors
with
lower
expected
costs
compared
to
large
molecule
biologics
in
current
development.
17
Table
of
Contents
Clinical Development Plans
We
have
commenced
a
toxicology
development
program
to
support
the
submission
of
an
investigational
new
drug
application
("IND")
to
the
FDA
for
BHV-
3500.
This
preclinical
program
includes
intranasal
and
subcutaneous
dose
toxicity
studies.
We
intend
to
submit
an
IND
for
BHV-3500
in
the
first
half
of
2018
to
permit
us
to
commence
clinical
trials.
We
plan
to
conduct
a
Phase
1
clinical
trial
in
the
second
half
of
2018
to
assess
safety,
tolerability
and
PK
of
BHV-3500
in
healthy
volunteers.
Our
Glutamate
Platform
We
are
developing
three
product
candidates,
trigriluzole,
BHV-0223
and
BHV-5000,
that
modulate
the
glutamate
system
via
two
distinct
mechanisms
which
form
the
basis
of
our
glutamate
platform—glutamate
transporter
modulators
(trigriluzole
and
BHV-0223)
and
glutamate
N -methyl-D-aspartate
("NMDA")
receptor
antagonists
(BHV-5000).
Glutamate
is
an
important
neurotransmitter
present
in
over
90%
of
all
brain
synapses
and
is
a
naturally
occurring
molecule
that
nerve
cells
use
to
send
signals
to
other
cells
in
the
central
nervous
system.
Glutamate
plays
an
essential
role
in
normal
brain
functioning
and
its
levels
must
be
tightly
regulated.
Abnormalities
in
glutamate
function
can
disrupt
nerve
health
and
communication,
and
in
extreme
cases
may
lead
to
nerve
cell
death.
Nerve
cell
dysfunction
and
death
leads
to
devastating
diseases,
including
ataxia,
ALS
and
other
neurodegenerative
disorders.
Glutamate
clearance
is
necessary
for
proper
synaptic
activation
and
to
prevent
neuronal
damage
from
excessive
activation
of
glutamate
receptors.
Excitatory
amino-acid
transporters
("EAATs"),
help
regulate
glutamate
clearance,
and
are
responsible
for
most
of
the
glutamate
uptake
within
the
brain.
The
mechanism
of
action
of
our
glutamate
platform
is
depicted
below.
Glutamate
must
be
tightly
regulated
once
released
from
a
pre-synaptic
neuron
and
acts
as
a
signaling
neurotransmitter
to
stimulate
the
post-synaptic
neuron
via
stimulation
of
glutamate
receptors
(e.g.,
NMDA,
AMPA
or
Kainate
receptors).
Glial
cells
surrounding
the
synaptic
junction
are
predominantly
responsible
for
clearing
glutamate
through
transporters,
the
EAATs.
There
are
five
distinct
types
of
glutamate
transporters.
(1)
As
depicted
in
the
glial
cell
to
the
right
of
the
figure
below,
BHV-0223
and
trigriluzole
increase
the
activity
of
the
EAATs
to
increase
the
clearance
of
glutamate
and
decrease
glutamate
release
from
the
pre-synaptic
neuron.
Trigriluzole
and
BHV-0223
also
inhibit
presynaptic
ion
channels
that
may
inhibit
the
release
of
glutamate
from
presynaptic
neurons.
(2)
As
depicted
in
the
postsynaptic
neuron
to
the
bottom
of
the
figure
below,
BHV-5000
blocks
glutamate
signaling
that
is
mediated
by
post-synaptic
NMDA
receptors.
Modulating
glutamate
also
has
the
potential
to
be
neuroprotective
and
increase
the
release
of
neurotrophic
factors,
including
brain
derived
neurotrophic
factor
("BDNF")
18
Table
of
Contents
which
are
endogenous
molecules
that
help
to
support
the
survival
of
existing
neurons,
and
encourage
the
growth
and
differentiation
of
new
neurons
and
synapses.
Glutamate Transporter Modulation
Abnormal
glutamate
release
or
dysfunction
of
glutamate
clearance
can
cause
overstimulation
of
glutamate
receptors
which
can
lead
to
a
dangerous
neural
injury
called
excitotoxicity,
which
has
been
associated
with
a
wide
range
of
neurodegenerative
diseases.
The
FDA
has
approved
anti-excitotoxicity
drugs
that
act
on
the
glutamatergic
system
by
blocking
NMDA
receptors,
such
as
memantine
("Namenda")
for
Alzheimer's
disease,
lamotrigine
("Lamictal")
for
epilepsy
and
bipolar
disorder
and
riluzole
("Rilutek")
for
ALS.
Although
these
drugs
show
the
therapeutic
potential
of
glutamate
receptor
antagonists
in
the
treatment
of
a
range
of
neurological
diseases,
many
of
these
approved
drugs
have
serious
side
effects
and
other
drawbacks
that
we
have
attempted
to
solve
with
our
development
of
BHV-0223
and
trigriluzole.
We
are
currently
developing
trigriluzole
as
a
potential
FDA-approved
drug
treatment
option
for
patients
suffering
from
OCD,
Alzheimer's
disease
and
ataxia
(initially
focusing
on
SCA).
A
Phase
2
double-blind,
randomized
controlled
trial
on
the
use
of
trigriluzole
in
OCD
commenced
in
late
2017
and
enrollment
is
expected
to
complete
in
2018.
In
addition,
a
Phase
2
double-blind,
randomized
controlled
trial
of
trigriluzole
in
the
treatment
of
mild-to-moderate
Alzheimer's
disease
is
being
advanced
in
collaboration
with
the
Alzheimer's
Disease
Cooperative
Study,
a
consortium
of
sites
funded
by
the
National
Institutes
of
Health.
We
expect
that
this
trial
will
begin
in
the
first
half
of
2018.
The
48-week
extension
phase
of
the
SCA
Phase
2/3
trial
is
ongoing,
and
we
expect
to
receive
the
data
from
that
portion
of
the
trial
by
the
end
of
2018.
OCD
is
a
chronic
neuropsychiatric
disorder
characterized
by
symptoms
of
obsessions
(intrusive
thoughts)
and
compulsions
(repetitive
behaviors)
that
can
interfere
with
patients'
functional
abilities.
According
to
the
National
Institute
of
Mental
Health,
the
12-month
prevalence
of
OCD
is
1%
of
the
U.S.
adult
population,
and
approximately
half
of
these
cases
are
characterized
as
severe.
First-line
treatment
for
OCD
includes
cognitive
behavior
therapy,
selective
serotonin
reuptake
inhibitors
("SSRIs")
and
adjunctive
use
of
atypical
antipsychotics.
Nonetheless,
up
to
60%
of
patients
have
an
inadequate
response
to
conventional
intervention
strategies.
While
SSRIs
and
atypical
antipsychotics
have
been
approved
for
OCD,
the
majority
of
patients
do
not
have
an
adequate
response
to
pharmacologic
treatment,
and
some
seek
invasive
neurosurgical
procedures
to
ameliorate
symptoms.
Despite
the
significant
public
health
burden,
no
novel
mechanisms
of
action
have
been
approved
by
the
19
Table
of
Contents
FDA
for
OCD
in
over
two
decades.
The
rationale
for
use
of
trigriluzole
in
OCD
is
supported
by
clinical
data
with
its
active
metabolite,
riluzole,
in
populations
with
OCD
in
open-label
and
placebo-controlled
clinical
trials
as
well
as
in
preclinical,
genetic
and
neuroimaging
studies
implicating
the
glutamatergic
hyperactivity
in
the
pathogenesis
of
OCD.
Alzheimer's
disease
is
the
most
common
form
of
dementia,
characterized
by
symptoms
of
progressive
memory
loss
and
impairment
in
other
areas
of
cognition.
According
to
the
Alzheimer's
Association,
approximately
5.5
million
people
in
the
United
States
are
affected
by
the
disease
and,
with
the
aging
population,
that
number
is
expected
to
triple
by
2050.
We
believe
the
rationale
for
the
study
of
trigriluzole
in
Alzheimer's
disease
is
supported
by
preclinical
studies
on
the
active
metabolite,
riluzole,
in
multiple
relevant
preclinical
models
and
our
own
clinical
data
from
the
Phase
2/3
clinical
trial
on
the
potential
of
trigriluzole
to
overcome
limitations
of
administering
riluzole.
SCA
represents
an
orphan
disease.
According
to
a
2016
report
by
Orphanet
cataloging
the
prevalence
and
incidence
of
rare
diseases,
SCA
affects
approximately
22,000
individuals
in
the
United
States.
We
have
received
both
orphan
drug
designation
and
fast
track
designation
from
the
FDA
for
trigriluzole
for
the
treatment
of
SCA.
In
October
2017,
we
reported
topline
data
from
the
8-week
randomization
period
from
the
Phase
2/3
clinical
trial
in
SCA.
At
the
eight
week
time
point,
trigriluzole
did
not
statistically
differentiate
from
placebo.
Post-hoc
analyses
suggested
the
potential
for
favorable
therapeutic
effects
of
trigriluzole,
based
on
numerically
superior
treatment
effects
compared
to
placebo
in
groups
of
subjects
with
less
inherent
pre-randomization
variability
on
the
primary
endpoint
and
also
in
those,
who
based
on
baseline
characteristics,
would
be
expected
to
have
greater
drug
exposures.
In
the
trial,
we
observed
a
favorable
safety
and
tolerability
profile.
For
example,
no
subjects
demonstrated
an
elevation
of
liver
transaminases
of
3-fold
or
greater
than
the
upper
limit
of
normal;
whereas,
a
similar
exposure
of
the
active
metabolite,
riluzole,
is
associated
with
about
an
8%
rate
of
such
elevations,
based
on
the
Rilutek
Prescribing
Information.
The
48-week
extension
phase
of
the
SCA
trial
is
ongoing,
and
we
are
continuing
to
assess
the
data
from
the
trial.
Based
on
post-hoc
analyses
we
are
in
active
dialogue
with
the
FDA
to
discuss
the
potential
for
further
development
of
trigriluzole
in
ataxias
and
the
FDA
has
expressed
willingness
to
accept
a
modification
of
our
trial's
primary
endpoint,
the
Scale
for
Assessment
and
Rating
of
Ataxia
("SARA"),
as
an
acceptable
registrational
endpoint.
Future
development
of
trigriluzole
in
ataxia
will
be
based
on
these
interactions
and
results
from
the
extension
phase
of
the
ongoing
Phase
2/3
trial.
In
addition,
preclinical
and
small-scale
pilot
studies
are
underway
to
explore
trigriluzole's
use
in
the
treatment
of
a
pipeline
of
other
indications
such
as
essential
tremor,
psychiatric
disorders
including
anxiety
and
depression
as
well
as
some
cancers
whose
spread
is
thought
mediated
by
glutamate
transmission,
such
as
melanoma
and
glioblastoma.
We
are
also
developing
analogs
of
trigriluzole
and
other
related
prodrugs
for
potential
use
in
these
indications.
We
are
currently
developing
BHV-0223
for
the
treatment
of
ALS.
According
to
the
ALS
Association,
ALS
affects
up
to
20,000
individuals
in
the
United
States
and
according
to
industry
data,
we
estimate
15,000
individuals
are
clinically
diagnosed,
with
7,500
ALS
patients
actively
treated
with
generic
riluzole
or
branded
Rilutek.
As
the
first
of
two
drugs
approved
by
the
FDA
for
the
treatment
of
ALS
and
the
only
drug
to
extend
life
and/or
time
to
tracheostomy,
riluzole
is
the
established
standard
of
care.
However,
while
the
market
is
highly
genericized,
there
have
not
been
further
clinical
improvements
or
advances
in
ALS
riluzole
therapeutics
since
the
FDA's
approval
in
1995.
In
addition,
the
use
of
riluzole
is
limited
by
a
number
of
non-desirable
attributes.
We
have
received
orphan
drug
designation
from
the
FDA
for
BHV-0223
in
ALS
and
we
have
observed
results
suggesting
bioequivalence
to
Rilutek
in
a
recently
completed
Phase
1
clinical
trial.
We
believe
that
BHV-0223,
if
approved,
could
gain
meaningful
market
share
based
on
its
favorable
formulation
attributes.
BHV-5000
is
an
orally
available,
first-in-class,
low-trapping,
NMDA
receptor
antagonist
prodrug
that
we
are
developing
for
the
treatment
of
neuropsychiatric
indications,
including
Rett
syndrome.
Rett
20
Table
of
Contents
syndrome
is
a
rare
and
severe
genetic
neurodevelopmental
disorder.
After
six
to
18
months
of
apparently
normal
post-natal
development,
patients
with
Rett
syndrome
develop
global
deceleration
of
psychomotor
function,
loss
of
acquired
cognitive
skills
and
brain-mediated
episodes
of
transient
respiratory
suppression.
With
intensive
care,
patients
may
survive
into
adulthood,
yet
they
are
severely
physically
and
cognitively
impaired.
Rett
syndrome
affects
approximately
15,000
individuals
in
the
United
States.
No
approved
drug
therapies
for
Rett
syndrome
are
currently
available
and
care
is
supportive.
The
rationale
for
the
study
of
BHV-
5000
in
Rett
syndrome
is
based
on
results
of
studies
with
BHV-5000,
its
active
metabolite
and
ketamine
in
preclinical
mouse
models,
in
which
improvement
in
key
clinical
features
of
the
disease
have
been
observed,
including
a
reduction
in
the
frequency
of
episodes
of
respiratory
suppression.
These
preclinical
findings
are
supported
by
anecdotal
clinical
reports
regarding
the
use
of
ketamine,
another
NMDA
receptor
antagonist,
in
patients
with
Rett
syndrome
that
have
been
reported
to
also
show
clinical
improvements.
Our Product Candidate Trigriluzole for Ataxias, OCD and Alzheimer's Disease
Trigriluzole
is
a
new
chemical
entity
("NCE")
and
tripeptide
prodrug
of
the
active
metabolite,
riluzole.
Based
on
its
mechanism
of
action,
preclinical
data
and
clinical
studies,
trigriluzole
has
potential
for
therapeutic
benefit
in
a
range
of
neurological
and
neuropsychiatric
illnesses.
Initial
development
has
focused
on
its
use
in
treating
SCA,
an
orphan
neurological
indication
that
currently
has
no
approved
drug
therapies
and
for
which
the
active
metabolite,
riluzole,
has
demonstrated
preliminary
efficacy
in
two
prior
randomized
controlled
trials
conducted
by
third
parties.
We
acquired
trigriluzole
from
ALS
Biopharma,
LLC
("ALS
Biopharma"),
and
Fox
Chase
Chemical
Diversity
Center,
Inc.
("FCCDC"),
along
with
an
estate
of
over
300
prodrugs.
A
prodrug
is
a
compound
that,
after
administration,
is
metabolized
in
the
body
into
an
active
drug.
Trigriluzole
is
actively
transported
by
virtue
of
recognition
of
its
tripeptide
moiety
by
the
PepT1
transporter
in
the
gut,
and
is
responsible
for
the
increased
bioavailability
of
the
drug.
Once
inside
the
body,
the
prodrug,
trigriluzole
is
cleaved
by
enzymes
in
the
blood
to
the
active
metabolite
riluzole.
To
mitigate
the
limitations
of
riluzole,
several
classes
of
prodrugs
were
designed,
synthesized,
and
evaluated
in
multiple
in vitro stability
assays
that
predict
in vivo drug
levels.
Trigriluzole
is
a
third
generation
of
prodrug
development
and
the
product
of
six
years
of
intensive
chemistry
efforts.
Riluzole
is
currently
only
indicated
for
ALS
and
has
a
number
of
non-desirable
attributes
that
have
limited
its
clinical
use.
Key
limitations
of
riluzole
include:
•
•
•
•
Poor
oral
bioavailability
—When
riluzole
is
administered
in
a
tablet
form,
approximately
40%
is
either
not
absorbed
or
is
metabolized
in
the
liver
before
reaching
systemic
circulation.
The
fraction
that
does
not
reach
systemic
circulation
and
does
not
contribute
to
efficacy
only
increases
the
drug
burden
to
the
liver.
This
is
thought
to
contribute
to
its
negative
safety
effects,
such
as
the
liver
effects
described
below.
Only
tablet
formulation
currently
available
in
United
States
—It
is
difficult
for
many
patients
with
ALS
to
swallow,
as
oral
and
laryngeal
dysfunction
can
be
an
early
symptom
of
ALS.
Such
patients
may
choose
to
crush
the
tablets
and
mix
it
with
food
to
make
them
easier
to
swallow;
however,
this
is
thought
to
decrease
bioavailability.
Negative
food
effect
—Riluzole
must
be
taken
on
an
empty
stomach,
at
least
one
hour
before
or
two
hours
after
a
meal,
and
failure
to
adhere
to
these
guidelines
results
in
lower
drug
levels
and
potentially
decreased
therapeutic
effects.
This
can
be
particularly
challenging
for
late-stage
ALS
patients
who
require
a
feeding
tube
for
nutrition.
Negative
effect
on
liver
—Riluzole
has
been
shown
to
have
dose-dependent
liver
effects
that
include
elevations
on
liver
function
tests.
Taking
riluzole
necessitates
regular
laboratory
monitoring
of
liver
function.
In
addition,
according
to
the
FDA's
warnings
and
precautions
for
21
Table
of
Contents
•
•
Rilutek
in
its
U.S.
prescribing
information,
cases
of
clinical
hepatitis,
one
of
which
has
been
fatal,
have
been
reported
in
patients
taking
riluzole.
Pharmacokinetic
variability
—Due
to
extensive
first-pass
metabolism
and
CYP1A2
metabolism,
which
is
heterogeneously
expressed
and
thought
to
be
responsible
for
the
marked
pharmacokinetic
variability
between
individuals,
riluzole
has
been
observed
to
have
marked
pharmacokinetic
variability,
an
attribute
that
manifests
as
a
wide
range
of
systemic
drug
exposure
in
populations
administered
the
same
dose.
Oral
numbness
—Patients
have
reported
oral
numbness
associated
with
the
active
pharmaceutical
ingredient
riluzole,
which
makes
development
of
alternate
formulations
challenging.
The
prodrug
design
and
selected
administration
pathway
that
was
pursued
with
trigriluzole
is
intended
to
address
all
of
these
limitations
of
riluzole.
In
addition,
a
prodrug
can
be
engineered
to
enhance
absorption
and
protect
from
diminished
absorption
when
taken
with
meals.
The
trigriluzole
preclinical
development
strategy
was
based
on
optimizing
in vivo and
in vitro features,
such
as
stability
in
gastrointestinal
and
stomach
fluids;
stability
in
liver
microsomes;
favorable
safety
pharmacology
with
respect
to
off-target
effects
(particularly
liver
effects);
metabolic
cleavage
in
the
plasma
to
release
the
active
moiety;
and
enhanced
gastrointestinal
absorption
properties.
In
in vivo studies
in
rodents,
the
intended
benefits
of
this
optimization
program
were
observed,
including
delayed
peak
concentrations
and
greater
exposure.
After
six
years
of
chemistry
development
and
preclinical
testing,
the
resulting
lead
prodrug
from
the
chemistry
program
was
trigriluzole.
Trigriluzole
is
chemically
comprised
of
riluzole
linked
via
an
amide
bond
to
a
tripeptide
that
is
a
substrate
for
gut
transporters
(PepT1)
and
which
contributes
to
its
improved
bioavailability.
The
tripeptide
moiety
is
cleaved
by
plasma
aminopeptidases,
releasing
riluzole
and
naturally
occurring
amino
acids,
which
we
believe
are
readily
managed
by
endogenous
metabolic
routes.
We
believe
that
the
estate
of
compounds
we
acquired,
combined
with
our
internally
developed
intellectual
property,
will
provide
a
significant
barrier
to
entry
from
competitors.
Trigriluzole
is
stable
in
fluids
from
the
gastrointestinal
tract
and
expected
to
have
a
differentiated
profile
with
regard
to
any
liability
for
hepatic
effects.
SCA
was
chosen
as
the
lead
indication
based
on
a
strong
preclinical
rationale
as
well
as
demonstration
of
preliminary
efficacy
of
trigriluzole's
active
metabolite,
riluzole,
in
two
randomized
controlled
trials
in
patients
with
SCA
and
other
ataxias
conducted
by
third
parties
(Ristori
2010;
Romano
2015).
We
continue
to
develop
trigriluzole
for
the
treatment
of
ataxias,
with
an
initial
focus
on
SCA.
The Potential Benefits of Trigriluzole Compared to Riluzole
We
believe
trigriluzole
offers
the
following
potential
advantages,
compared
to
orally
dosed
riluzole:
•
•
Improved
Bioavailability
—Trigriluzole
is
a
substrate
for
the
gut
transporters
(PepT1).
This
is
thought
to
increase
the
bioavailability
of
the
drug
as
compared
to
orally
dosed
riluzole,
meaning
that
more
of
the
compound
is
absorbed
by
the
body
into
the
blood
stream
and
can
have
an
active
effect.
Studies
have
shown
that
administration
of
agents
through
peptide
transporters
significantly
increases
the
absorption
of
drugs
with
otherwise
poor
oral
bioavailability.
No
Negative
Food
Effect
—Trigriluzole
shows
no
food
effect
in
human
studies,
meaning
that
the
drug
will
not
be
associated
with
special
meal
restrictions,
a
phenomenon
potentially
attributable
to
enhanced
uptake
by
intestinal
transporters
specific
to
the
peptide-containing
moiety
of
trigriluzole.
This
is
in
contrast
to
oral
riluzole
tablets,
which
require
a
period
of
fasting
around
dosing
in
order
to
reach
therapeutic
levels,
currently
a
dose-limiting
factor
of
riluzole.
22
Table
of
Contents
•
•
•
Lower
Overall
Drug
Burden
to
the
Liver
—As
a
prodrug
that
mitigates
first-pass
liver
metabolism
and
enhances
bioavailability,
therapeutic
concentrations
of
the
active
metabolite
riluzole
can
be
achieved
with
a
lower
drug
dose
as
compared
to
riluzole
tablets.
In
addition,
release
of
the
active
metabolite
over
time
will
result
in
a
reduced
bolus
hepatic
concentration
as
compared
to
that
associated
with
riluzole
tablets.
Taken
together,
we
believe
these
attributes
of
trigriluzole
will
reduce
the
potential
for
adverse
liver
effects.
Optimized
Dosing
Regimen
and
Compliance
—Trigriluzole
has
been
developed
as
a
convenient
once-daily
dose,
which
could
improve
regimen
compliance
for
patients.
We
believe
these
are
important
features
to
optimize
long-term
health
outcomes
in
the
treatment
of
patients
with
chronic
diseases.
Potential
for
Developing
Multiple
Formulations
— Trigriluzole
is
highly
soluble
and
does
not
exhibit
the
profound
oral
numbness
associated
with
riluzole
tablets.
As
such,
we
believe
trigriluzole
has
the
potential
to
be
developed
in
multiple
formulations
including
intranasal,
subcutaneous,
intravenous,
sublingual
and
other
forms.
Overview of Ataxias and Limitations of Current Treatment
Ataxias
are
a
group
of
degenerative
diseases
of
the
nervous
system,
including
hereditary
ataxias
and
sporadic
ataxias.
According
to
the
National
Ataxia
Foundation,
the
word
"ataxia"
originates
from
a
Greek
word
meaning
"without
order"
or
"incoordination"
and
aptly
describes
many
of
the
symptoms
that
are
experienced
by
people
who
suffer
from
the
many
forms
of
ataxia,
including
problems
with
coordination,
balance
and
movement
which
can
affect
a
person's
fingers,
hands,
arms,
legs,
body,
speech
and
eye
movements.
Ataxias
are
generally
classified
as
being
either
hereditary
or
sporadic.
Hereditary
ataxias
are
degenerative
disorders
that
progress
over
a
number
of
years.
The
hereditary
ataxias
include
autosomal
dominant
forms,
such
as
SCA,
episodic
ataxias
and
dentratorubral-
pallidoluysian
atrophy,
and
autosomal
recessive
forms,
such
as
Friedreich's
ataxia,
fragile
X-associated
tremor/ataxia
syndrome
and
ataxia-telangiectasia.
Sporadic
ataxias
are
generally
idiopathic,
do
not
run
in
families
and
have
an
onset
later
in
life.
Sporadic
ataxias
share
many
clinical
features
of
the
hereditary
forms,
which
is
thought
to
be
attributable
to
similar
underlying
cerebellar
dysfunction.
Although
symptoms
may
vary,
the
typical
clinical
course
of
SCA
might
be
described
as
follows.
Balance
and
coordination
are
affected
first.
Incoordination
of
hands,
arms,
and
legs,
and
slurring
of
speech
are
other
common,
early
symptoms.
Over
time,
individuals
with
SCA
may
develop
numbness,
tingling,
or
pain
in
the
arms
and
legs
(sensory
neuropathy),
uncontrolled
muscle
tensing
(dystonia),
muscle
wasting
(atrophy),
and
muscle
twitches
(fasciculations).
Walking
becomes
difficult
and
is
characterized
by
walking
with
feet
placed
further
apart
to
compensate
for
poor
balance.
Impaired
coordination
of
the
arms
and
hands
affects
the
ability
to
perform
tasks
requiring
fine
motor
control
such
as
writing
and
eating.
Rarely,
rigidity,
tremors,
and
involuntary
jerking
movements
(chorea)
have
been
reported
in
people
who
have
been
affected
for
many
years.
As
time
goes
on,
ataxia
can
affect
speech
and
swallowing.
Finally,
individuals
with
SCA
may
also
have
difficulty
processing,
learning,
and
remembering
information
(cognitive
impairment).
Notably,
there
can
also
be
significant
clinical
variation
in
the
order
and
extent
of
symptom
expression
between
mutations,
within
a
common
mutation,
and
even
within
a
kindred
that
shares
the
same
genotype.
Non-cerebellar
involvement
may
also
occur
in
many
SCA
subtypes
(such
as
cognition,
pyramidal,
extrapyramidal,
motor
neuron,
peripheral
nerve
or
macular
involvement).
Signs
and
symptoms
of
SCA
typically
begin
in
early
adulthood,
but
can
appear
anytime
from
childhood
to
late
adulthood;
SCA
is
degenerative
and
progresses
over
a
number
of
years.
The
neurodegeneration
is
attributed
to
the
production
of
abnormal
proteins
that
cause
the
affected
nerve
cells,
predominantly
cerebellar
purkinje
fibers,
to
eventually
function
poorly
and
ultimately
degenerate.
As
SCA
progresses,
coordination
problems
become
more
pronounced.
Atrophy
of
the
cerebellum
and
sometimes
brainstem
may
be
apparent
on
brain
imaging.
The
diagnosis
of
SCA
requires
the
exclusion
of
acquired,
non-genetic
causes
of
ataxia,
such
as
23
Table
of
Contents
alcoholism,
vitamin
deficiencies,
multiple
sclerosis,
vascular
disease,
tumors,
and
paraneoplastic
disease.
A
definitive
diagnosis
requires
genetic
testing
or
occurrence
within
a
kindred
that
has
an
identified
mutation.
Lifespan
is
significantly
shortened
due
to
complications
related
to
neurological
deficits.
There
are
currently
no
FDA-approved
medications
for
the
treatment
of
SCA
or
any
other
cerebellar
ataxia,
and
treatment
is
supportive.
In
general,
multidisciplinary
care
provides
supportive
measures
and
the
goal
of
this
treatment
is
to
improve
quality
of
life
and
survival.
Our Clinical Program for Trigriluzole in Spinocerebellar Ataxia
Phase 1 Trials with Trigriluzole
In
July
2016,
we
began
a
Phase
1
randomized,
double-blind,
placebo-controlled
study
to
evaluate
the
safety,
tolerability
and
PK
of
single
and
multiple
ascending
doses
of
trigriluzole
in
normal
healthy
volunteers.
In
this
study,
the
initial
safety
and
tolerability
of
trigriluzole
at
single
doses
ranging
from
9.5
mg
to
200
mg
and
multiple
doses
ranging
from
35
mg
to
200
mg
daily
were
assessed.
Fifty-eight
healthy
volunteers
have
been
dosed
with
trigriluzole
and
20
have
been
dosed
with
placebo.
Based
on
preliminary
data,
both
single
and
multiple
doses
up
to
200
mg
have
been
well
tolerated
without
evidence
of
novel,
clinically
significant
safety
signals
or
lab
abnormalities.
There
is
no
apparent
dose
response
regarding
the
frequency
or
severity
of
AEs.
In
the
blinded
group,
including
subjects
treated
with
both
placebo
and
trigriluzole,
the
most
common
AEs
were
headache
(five
subjects,
two
with
moderate
severity
and
three
with
mild
severity)
and
constipation
(two
subjects).
No
pattern
of
AEs
or
lab
abnormalities
has
become
apparent
to
provide
specific
cautions
or
to
suggest
cautions
beyond
what
is
appropriate
for
the
active
metabolite,
riluzole.
Preliminary
results
suggest
approximately
25%
to
30%
greater
systemic
exposure
of
the
active
metabolite
via
oral
administration
of
trigriluzole
as
compared
to
riluzole
tablets.
In
addition,
the
time
to
peak
concentration
of
the
active
metabolite
via
oral
administration
of
trigriluzole
was
extended
relative
to
that
achieved
with
oral
riluzole
tablets,
thus
suggesting
the
mitigation
of
first-pass
metabolism.
A
cross-over
arm
of
the
trial
assessing
fed
and
fasted
conditions
suggested
no
food
effect.
These
pharmacokinetic
properties
differentiate
from
direct
oral
administration
of
the
active
metabolite.
These
preliminary
safety,
tolerability
and
pharmacokinetic
data
support
advancement
of
trigriluzole.
Commencing
in
December
2017,
an
additional
single
and
multiple
dose
study
was
conducted
to
assess
the
safety,
tolerability
and
PK
of
a
280
mg
dose
in
10
healthy
young
and
elderly
volunteers
(8
active;
2
placebo).
Preliminary
results
support
adequate
safety
and
tolerability
and
yielded
mean
exposures
comparable
to
what
would
be
expected
from
a
200
mg
dose
of
Rilutek
(based
on
extrapolation
from
Chandu
2010),
a
dose
that
has
been
safely
used
in
clinic
populations
and
associated
with
efficacy
in
a
range
of
disorders
in
randomized
controlled
trials
(Huntington
Study
Group
Neurology
2003;
Lacomblez
Neurology
1996).
In
addition,
a
bioequivalence
study
was
conducted
to
bridge
a
commercial
formulation
with
a
Phase
2/3
formulation
in
32
healthy
volunteers.
The
commercial
formulation
was
well-tolerated
and
provided
bioequivalent
exposure
with
the
Phase
2/3
formulation.
Exposures
from
these
recent
Phase
1
studies
are
consistent
with
an
absolute
bioavailability
of
approximately
85%
or
greater,
based
on
known
absolute
bioavailabilty
of
Rilutek
of
60%.
Based
on
the
results
of
our
Phase
1
trial
with
trigriluzole
and
two
third-party
academic
trials
that
have
shown
preliminary
efficacy
of
riluzole
in
cerebellar
ataxias,
we
advanced
trigriluzole
into
a
Phase
2/3
clinical
trial
for
SCA.
The
Phase
2/3
trial
has
two
periods:
an
8-week
randomized,
double-blind,
placebo-controlled
phase
followed
by
a
48-week
open-label
treatment.
The
study
is
being
conducted
at
approximately
15
sites
in
the
United
States.
The
design
of
the
trial
was
informed
predominantly
by
an
advisory
panel
of
the
leading
ataxia
experts
that
we
hosted
in
February
2016
as
well
as
the
observations
from
peer-reviewed
publications
in
the
scientific
literature.
141
subjects
were
randomized
to
receive
a
once-daily
dose
of
either
placebo
or
140
mg
trigriluzole.
Patients
were
stratified
by
diagnosis
(genotype)
and
baseline
severity
(as
measured
by
the
patient's
gait
SARA
score
of
£
4
and
>4).
The
primary
outcome
measure
24
Table
of
Contents
of
the
trial
is
the
change
from
baseline
in
patient
SARA
score
after
eight
weeks
of
treatment.
The
choice
of
the
SARA,
a
validated
scale,
as
the
primary
outcome
measure
was
based
on
the
consensus
of
a
panel
of
national
experts,
based
largely
on
the
validation
of
the
instrument
in
multiple
populations,
its
effective
use
in
demonstrating
efficacy
in
a
trial
with
riluzole
(as
shown
in
the
Romano
study
discussed
above),
favorable
psychometric
properties,
and
its
ability
to
assess
a
broad
spectrum
of
ataxia-related
symptoms.
A
secondary
outcome
measure
is
the
patient
time
to
perform
an
eight-meter
walk
test.
Exploratory
outcome
measures
include
improvement
as
measured
using
the
Unified
Huntington's
Disease
Rating
Scale
Part
IV
on
functional
assessment,
Clinical
Global
Impression
of
Improvement
and
the
Patient
Global
Impression
of
Change.
Qualifying
subjects
have
genotypically
confirmed
diagnosis
of
the
most
common
SCA
subtypes.
They
must
have
moderate
symptom
severity
(i.e.,
SARA
scores
of
8
to
30
inclusive
and
be
able
to
walk
eight
meters
without
assistance).
Almost
all
subjects
who
completed
the
eight-week
treatment
phase
elected
to
participate
in
the
48-week
open-label
extension
phase.
We
reported
topline
data
from
the
8-week
randomization
period
from
the
Phase
2/3
clinical
trial
in
SCA.
At
the
eight
week
time
point,
trigriluzole
did
not
statistically
differentiate
from
placebo.
After
eight
weeks
of
treatment,
trigriluzole
treated
subjects
demonstrated
an
improvement
of
–0.81
points
[95%
CI:
–1.4
to
–0.2]
on
the
SARA
versus
–1.05
points
[95%
CI:
–1.6
to
–0.4]
improvement
in
placebo,
p-value
=
0.52.
Placebo
response
in
this
genetically
defined
disorder
was
higher
than
expected
based
upon
prior
European
randomized
controlled
trials
in
SCA
(Romano
et
al
2015;
Ristori
et
al
2010).
Post-hoc
analyses
suggested
the
potential
for
favorable
therapeutic
effects
of
trigriluzole,
based
on
numerically
superior
treatment
effects
compared
to
placebo
in
groups
of
subjects
with
less
inherent
pre-randomization
variability
on
the
primary
endpoint
and
also
in
those,
who
based
on
baseline
characteristics,
would
be
expected
to
have
greater
drug
exposures.
In
this
trial,
we
observed
a
favorable
safety
and
tolerability
profile
of
trigriluzole,
with
no
drug-related
SAEs
and
low
discontinuation
rates
due
to
AEs.
No
randomized
subjects
demonstrated
an
elevation
of
liver
transaminases
of
three-fold
or
greater
than
the
upper
limit
of
normal;
whereas,
a
similar
exposure
of
the
active
metabolite,
riluzole,
is
associated
with
about
an
8%
rate
of
such
elevations.
We
believe
that
the
reduced
effects
on
the
liver
may
be
attributable
to
a
higher
bioavailability
that
in
part
reflects
mitigated
first-pass
liver
metabolism
and
enhanced
PepT1-mediated
absorption.
Trigriluzole
has
shown
absence
of
a
negative
food
effect,
optimized
oral
bioavailability
and
no
pattern
of
clinically
significant
effects
on
liver
function,
presenting
a
profile
that
appears
distinct
from
what
is
described
for
riluzole
in
its
U.S.
prescribing
information.
This
profile,
in
context
of
recent
Phase
1
data
assessing
higher
doses,
will
allow
for
exploration
of
higher
exposures
of
the
active
metabolite
than
allowed
by
the
current
Rilutek
label.
Post-hoc
analyses
of
the
data
have
led
to
our
continued
interest
in
developing
trigriluzole
in
SCA
and
is
also
founded
on
two
academic
randomized
controlled
trials
studying
the
active
metabolite
or
trigriluzole
in
diverse
populations
with
cerebellar
ataxia.
In
these
two
publications,
the
authors
conducted
studies
of
riluzole
compared
to
placebo
to
assess
improvement
in
patients
with
ataxias
using
two
different
ataxia
rating
scales.
In
each
study,
the
authors
observed
statistically
significant
improvements
in
the
riluzole
treatment
groups
compared
to
the
placebo
groups.
•
Ristori
et
al
2010
demonstrated
statistically
significant
improvement
in
patients
with
a
variety
of
cerebellar
ataxias:
In
a
paper
published
in
Neurology in
2010,
Ristori
and
colleagues
reported
results
from
a
randomized,
double-blind,
placebo-controlled
trial
of
patients
presenting
with
cerebellar
ataxias
of
diverse
etiologies.
Forty
subjects
were
randomized
to
receive
eight
weeks
of
treatment
with
either
placebo
or
100
mg
riluzole
(50
mg
riluzole
tablets,
dosed
twice
daily).
The
primary
endpoint
of
the
trial
was
the
proportion
of
patients
with
a
decrease
of
at
least
5
points
in
the
International
Cooperative
Ataxia
Rating
Scale
(ICARS)
after
four
and
eight
weeks
of
treatment,
compared
with
the
baseline
score.
The
ICARS
quantifies
severity
of
ataxia-related
symptoms
on
a
scale
of
zero
to
100,
with
a
higher
score
indicating
greater
impairment.
The
total
score
is
the
sum
of
four
subscores
which
measure
a
patient's
posture
and
gait
(static
subscore),
25
Table
of
Contents
limb
coordination
(kinetic
subscore),
speech
(dysarthria
subscore)
and
oculomotor
function
(ocular
movement
subscore).
The
number
of
patients
with
a
five-point
ICARS
drop
(the
primary
outcome
measure)
was
significantly
higher
in
the
riluzole
treatment
group
than
in
the
placebo
group
after
four
weeks
(9
out
of
19
versus
1
out
of
19;
p-value
=
0.003)
and
at
eight
weeks
(13
out
of
19
versus
1
out
of
19;
p-value
=
0.001).
The
patient
group
treated
with
riluzole
demonstrated
superior
mean
changes
on
the
ICARS
scores
over
eight
weeks
of
treatment
as
compared
to
the
placebo
group
(–
7.05
versus
0.16;
p-value
<
0.001).
The
table
below
shows
the
changes
in
ICARS
from
baseline
in
each
treatment
group
after
eight
weeks
of
treatment,
as
well
as
the
change
in
each
subscore
category.
Only
sporadic,
mild
AEs
were
reported
in
the
trial.
Results
from
this
study
suggest
that
riluzole,
which
is
the
active
metabolite
of
trigriluzole,
may
confer
acute
therapeutic
effects
after
eight
weeks
of
dosing
in
diverse
forms
of
cerebellar
ataxia.
•
Romano
et
al
2015
demonstrated
statistically
significant
improvement
in
patients
with
hereditary
cerebellar
ataxia
(both
SCA
and
Friedreich's
ataxia):
In
an
article
published
in
The Lancet in
2015,
Romano
and
colleagues
described
results
of
a
study
on
the
use
of
riluzole
in
patients
with
hereditary
cerebellar
ataxias
over
a
12-month
period.
In
this
multi-center,
double-blind,
placebo-controlled
trial,
sixty
subjects
diagnosed
with
either
SCA
or
Friedreich's
ataxia
(enrolled
in
a
2:1
ratio)
were
randomized
to
receive
12
months
of
treatment
with
either
placebo
or
100
mg
riluzole
(50
mg
tablets
of
riluzole,
twice
daily).
The
primary
endpoint
was
the
proportion
of
patients
with
a
minimum
one-point
improvement
on
the
Scale
for
the
Assessment
and
Rating
of
Ataxia
(SARA)
after
12
months.
The
SARA
is
a
validated
scale
consisting
of
an
eight-item,
semi-quantitative
performance-based
assessment
of
cerebellar
ataxia
symptoms
that
measures
impairment
on
a
scale
of
zero
to
40,
with
a
higher
score
indicating
more
severe
ataxia.
This
scale
was
developed
to
address
limitations
of
the
ICARS
and
has
been
broadly
adopted
over
the
ICARS
based
on
superior
practicability,
reliability
and
psychometric
properties.
Twenty-eight
patients
were
treated
with
riluzole
(19
with
SA
and
9
with
Friedreich's
ataxia)
and
27
patients
were
in
the
placebo
group
(19
with
SA
and
8
with
Friedreich's
ataxia).
The
proportion
of
patients
in
the
riluzole
treatment
group
with
a
decreased
SARA
score
was
14
(50%)
versus
three
(11%)
in
the
placebo
group
(p-value
=
0.002).
No
severe
AEs
were
reported.
Primary
and
secondary
outcome
measures
are
shown
in
the
table
below.
Mean
changes
in
the
SARA
scores
were
reported
at
three
and
12
months
of
treatment,
with
riluzole
associated
with
reductions
in
SARA
ratings
(1.00
and
1.02
points
improvement,
respectively)
and
placebo
associated
with
increases
(0.50
and
1.67
points,
respectively)
and
resulting
in
differences
between
treatment
groups
that
were
statistically
significant
(p-values
of
0.008
and
0.001,
respectively).
Results
from
26
Table
of
Contents
this
study
suggest
the
potential
efficacy
of
riluzole,
which
is
the
active
metabolite
of
trigriluzole,
in
the
treatment
of
cerebellar
ataxia.
The
48-week
extension
phase
of
the
SCA
trial
is
ongoing
and
we
are
continuing
to
assess
the
data
from
the
trial.
Development and Regulatory Pathway
Our
clinical
program
for
trigriluzole
is
based
on
a
regulatory
pathway
under
section
505(b)(2)
of
the
U.S.
Food
Drug
and
Cosmetic
Act
that
allows
reference
to
data
on
riluzole
for
the
purpose
of
safety
assessments.
In
addition,
under
current
FDA
interpretations,
we
believe
trigriluzole
also
qualifies
as
an
NCE
and
thereby
is
eligible
for
conventional
regulatory
data
exclusivities.
We
are
in
active
dialogue
with
the
FDA
to
discuss
the
potential
for
further
development
of
trigriluzole
in
ataxias
and
the
FDA
has
expressed
willingness
to
accept
a
modification
of
our
study's
primary
endpoint,
the
Scale
for
Assessment
and
Rating
of
Ataxia,
also
called
SARA,
as
an
acceptable
registrational
endpoint.
Future
directions
in
ataxia
will
be
based
on
this
interaction
and
results
from
the
extension
phase
of
the
ongoing
study.
In
the
fourth
quarter
2017,
we
completed
a
study
demonstrating
the
bioequivalence
of
a
commercial
formulation
of
140
mg
trigriluzole
with
the
Phase
2/3
formulation
that
is
being
used
in
ongoing
studies.
An
additional
Phase
1
study
has
been
conducted
to
assess
the
safety,
tolerability
and
PK
of
higher
doses
of
trigriluzole
(280
mg
daily)
in
healthy
young
and
elderly
adults.
We
believe
the
preliminary
results
suggest
an
acceptable
safety
and
tolerability
profile
of
this
dose
and
support
its
exploration
in
clinical
populations.
Overview of Trigriluzole in OCD
OCD
is
a
chronic
neuropsychiatric
disorder
characterized
by
symptoms
of
obsessions
(intrusive
thoughts)
and
compulsions
(repetitive
behaviors)
that
can
interfere
with
patients'
functional
abilities.
According
to
the
National
Institute
of
Mental
Health,
the
12-month
prevalence
of
OCD
is
1%
of
the
U.S.
adult
population,
and
approximately
half
of
these
cases
are
characterized
as
severe.
First-line
treatment
for
OCD
includes
cognitive
behavior
therapy,
SSRIs
and
adjunctive
use
of
atypical
antipsychotics.
Nonetheless,
up
to
60%
of
patients
have
an
inadequate
response
to
conventional
intervention
strategies.
While
SSRIs
and
atypical
antipsychotics
have
been
approved
for
OCD,
the
majority
of
patients
do
not
have
an
adequate
response
to
pharmacologic
treatment,
and
some
seek
invasive
neurosurgical
procedures
to
ameliorate
symptoms.
Despite
the
significant
public
health
burden,
no
novel
mechanisms
of
action
have
been
approved
by
the
FDA
for
OCD
in
over
two
decades.
In
multiple
case
studies,
the
use
of
riluzole
in
patients
with
refractory
OCD
has
commonly
been
associated
with
meaningful
improvement
of
symptoms.
A
small-scale
randomized
controlled
trial
in
27
Table
of
Contents
adults
with
OCD
conducted
by
a
third
party
showed
favorable
trends
for
the
use
of
riluzole
in
outpatient
settings
but
not
in
inpatient
settings,
a
difference
possibly
attributed
to
the
intensive
therapeutic
interactions
often
available
in
an
inpatient
setting.
Another
randomized
controlled
third-party
study
in
refractory
OCD
failed
to
demonstrate
the
efficacy
of
the
adjunctive
use
of
riluzole
in
60
pediatric
patients
with
refractory
OCD.
A
third
randomized
controlled
third
party
trial
demonstrated
statistically
significant
therapeutic
effects
with
the
adjunctive
use
of
riluzole
as
compared
to
adjunctive
placebo
in
50
adults
with
refractory
OCD.
These
clinical
effects
are
consistent
with
findings
such
as
genetic
associations
of
glutamate
transporter
genes
with
OCD
and
increased
glutamate
concentrations
in
brain
and
cerebrospinal
fluid
of
patients
with
OCD.
Taken
together,
we
believe
there
is
a
clear
rationale
for
advancement
of
trigriluzole
or
another
optimized
prodrug
of
riluzole
from
our
pipeline
into
a
Phase
2
proof-of-concept
trial
in
OCD.
A
Phase
2/3
double-blind,
randomized
controlled
trial
on
the
use
of
trigriluzole
in
adults
with
OCD
commenced
in
late
2017
and,
based
on
learnings
from
the
Phase
2/3
trial
in
SCA,
employs
a
higher
target
dose
(200
mg
daily)
than
the
study
in
SCA.
Enrollment
is
expected
to
complete
in
2018.
If
the
results
are
favorable,
we
anticipate
beginning
additional
studies
necessary
to
support
a
NDA.
Overview of Trigriluzole in Alzheimer's Disease
Alzheimer's
disease
is
a
progressive,
fatal
neurodegenerative
dementia.
It
accounts
for
up
to
80%
of
dementias.
According
to
the
Alzheimer's
Association,
in
2016
there
were
approximately
5.5
million
people
in
the
United
States
with
the
disease,
and
that
number
is
expected
to
escalate
rapidly
in
the
coming
years
as
the
population
ages.
Observations
in
multiple
preclinical
models,
suggests
the
active
metabolite
of
trigriluzole
protects
from
Alzheimer's-related
pathology
and
cognitive
dysfunction.
Reduced
glutamate
uptake
transporters
have
been
reported
in
postmortem
brain
tissue
of
individuals
with
Alzheimer's
disease
and
the
level
of
glutamate
transporter
reduction
correlates
with
cognitive
impairment
as
well
as
markers
of
synaptic
density
and
neurodegeneration.
Preclinical
studies
also
suggest
that
age-related
memory
impairment
in
rats
correlates
with
decreased
glutamate
transporter
expression
and
this
impairment
has
been
shown
to
be
restored
by
three-weeks
of
daily
treatment
with
trigriluzole's
active
drug
metabolite.
These
findings
form
our
rationale
for
pursuing
a
Phase
2,
proof-of-concept
trial
of
trigriluzole
in
patients
with
mild
to
moderate
Alzheimer's
disease,
which
we
anticipate
beginning
in
the
first
half
of
2018
in
collaboration
with
the
Alzheimer's
disease
Cooperative
Study
("ADCS").
The
ADCS
is
a
leading
Alzheimer's
disease
clinical
trials
research
consortium
that
receives
major
support
from
the
U.S.
National
Institute
on
Aging,
a
part
of
the
U.S.
National
Institutes
of
Health.
The
ADCS
was
developed
to
promote
the
discovery,
development,
and
testing
of
new
drugs
for
the
treatment
of
Alzheimer's
disease.
Overview of Trigriluzole in Other Indications
Given
the
novel
chemical
properties
of
trigriluzole
and
its
unique
mechanism
of
action,
we
believe
trigriluzole,
or
another
optimized
prodrug
of
riluzole,
has
the
potential
for
broad
applicability
across
several
neurological
indications
where
modulation
of
brain
glutamate
has
been
implicated
in
underlying
disease
states.
A
brief
description
of
potential
indications
that
we
could
pursue
in
the
future
with
trigriluzole
or
other
optimized
prodrugs
from
our
pipeline
is
summarized
below.
We
will
determine
the
timing
and
prioritization
of
additional
indications
as
warranted
by
emerging
data.
Other Orphan Indications
If
data
from
the
ongoing
extension
phase
of
the
SCA
trial
support
the
role
of
trigriluzole
in
the
treatment
of
SCA,
then
we
will
explore
the
role
trigriluzole
in
the
treatment
of
other
ataxias.
Of
note,
preliminary
data
is
also
provided
by
the
Ristori
and
Romano
randomized
controlled
trials,
which
28
Table
of
Contents
showed
improvement
in
some
patients
with
Friedreich's
ataxia,
multisystem
atrophy
of
the
cerebellar
type,
sporadic
ataxia,
antibody-associated
ataxia
and
fragile
X-associated
tremor/ataxia
syndrome.
We
expect
that
the
next
wave
of
ataxia
indications
we
would
pursue,
if
warranted
by
data
from
the
SCA
trial,
would
include
Friedreich's
ataxia
and
sporadic
ataxia.
•
•
Friedreich's Ataxia:
Friedreich's
ataxia
is
an
autosomal
recessive
disorder
associated
with
progressive
cerebellar
degeneration
with
worsening
ataxia,
areflexia,
which
is
the
absence
of
reflexes,
sensory
loss,
weakness,
glucose
dysregulation,
and
cardiomyopathy—often
with
onset
in
early
childhood.
According
to
the
Friedreich's
Ataxia
Research
Alliance,
an
estimated
6,400
individuals
in
the
United
States
have
Friedreich's
ataxia.
Treatment
is
supportive
and
no
pharmacotherapies
are
approved
by
the
FDA
for
the
treatment
of
Friedreich's
ataxia.
Sporadic Ataxia:
Sporadic
ataxia,
also
called
idiopathic
ataxia,
shares
symptoms
of
SCA
but
is
associated
with
an
unknown
cause,
typically
presenting
after
the
age
of
40
years
and
commonly
associated
with
cerebellar
degeneration.
Sporadic
ataxia
comprises
the
majority
of
patients
treated
in
specialty
ataxia
clinics.
These
patients
typically
have
progressive
balance
difficulties
with
other
features
of
cerebellar
disease
such
as
dysarthria
(speech
problems),
dysphagia
(swallowing
difficulty),
as
well
as
visual
symptoms
such
as
double
vision.
According
to
Orphanet,
the
prevalence
of
sporadic
ataxia
is
between
1
and
9
per
100,000
persons,
suggesting
that
there
are
between
3,200
and
28,000
individuals
with
sporadic
ataxia
in
the
United
States.
Other (Non-Orphan) Cerebellar Disorders
•
Essential Tremor:
Like
SCA,
the
pathophysiology
of
essential
tremor
("ET")
reflects
underlying
cerebellar
dysfunction.
ET
is
the
most
common
type
of
tremor,
characterized
by
action
and
postural
tremor
in
the
upper
extremities
and/or
head
and
voice
tremor.
The
prevalence
of
ET
is
approximately
four
times
that
of
the
second
most
common
tremor
disorder,
Parkinson's
disease.
ET
can
be
highly
disabling,
as
many
ET
patients
cannot
write,
type,
drink,
or
feed
themselves
due
to
tremor.
ET
is
a
progressive
disease
and
with
time,
the
tremor
becomes
more
severe
and
disabling.
Currently,
only
two
medications,
primidone
and
propranolol,
are
commonly
employed
as
first-line
symptomatic
treatment
of
ET,
but
these
are
ineffective
in
40%
of
ET
patients
and
none
of
the
available
medications
are
FDA-approved
for
ET.
Therefore,
a
novel
symptomatic
therapy
for
ET
could
serve
an
important
unmet
medical
need
for
a
substantial
population.
Preclinical
studies
with
trigriluzole
in
mouse
genetic
and
toxicity
models
of
ataxia
have
shown
reductions
in
tremor.
Supported
by
this
data,
we
are
developing
a
Phase
2
study
of
trigriluzole
in
subjects
with
ET
in
collaboration
with
the
Tremor
Research
Group,
a
national,
independent,
non-profit
organization
of
scientific
investigators.
Broader Neuropsychiatric Indications
Based
upon
preclinical
and
preliminary
clinical
work,
we
also
believe
there
are
several
potential
expansions
for
trigriluzole,
or
another
optimized
prodrug
of
riluzole
from
our
pipeline,
including
potential
for
therapeutic
application
in
a
broad
range
of
neuropsychiatric
conditions,
such
as
anxiety
disorders,
mood
disorders
and
neurodegenerative
disorders.
Anxiety
Disorders
•
Generalized Anxiety Disorder:
Generalized
anxiety
disorder
("GAD")
is
a
neuropsychiatric
disorder
characterized
by
chronic
or
excessive
worry,
restlessness,
fatigue,
difficulty
concentrating,
or
insomnia
to
such
a
degree
that
it
causes
diminished
social
or
occupational
functioning.
Somatic
symptoms
such
as
irritable
bowel-like
gastrointestinal
complaints
are
common.
According
to
the
Anxiety
and
Depression
Association
of
America,
GAD
affects
6.8
million
adults,
or
3.1%
of
the
U.S.
population.
According
to
the
National
Institute
of
Mental
29
Table
of
Contents
Health,
only
43.7%
of
these
patients
receiving
treatment
are
receiving
minimally
adequate
treatment,
which
equates
to
only
18.9%
of
those
with
the
disorder.
Current
first-line
treatments
include
SSRIs,
serotonin
and
norepinephrine
reuptake
inhibitors
(duloxetine
and
venlafaxine),
benzodiazepines
and
combinations
thereof.
Nonetheless,
approximately
half
of
patients
do
not
respond
adequately
to
these
therapies
and
many
patients
are
not
amenable
to
treatment
with
these
agents
(e.g.,
due
to
tolerability
or
predisposition
to
substance
abuse).
GAD
has
significant
societal
and
economic
impact.
For
example,
it
is
the
most
common
contributor
to
workplace
disability.
In
addition,
patients
with
GAD
utilize
high
levels
of
medical
services;
in
addition
to
visiting
psychiatrists
to
directly
manage
symptoms
of
GAD,
patients
visit
internists
and
specialty
clinicians
to
evaluate
somatic
complaints
that
range
from
headaches
to
fatigue
to
gastrointestinal
distress.
Our
rationale
for
potentially
advancing
trigriluzole
into
a
Phase
2
trial
in
GAD
in
the
future
is
based
on
treatment
effect
in
preclinical
models
of
anxiety
as
well
as
favorable
open-label
case
studies
of
patients
treated
with
riluzole.
In
one
case
study,
eight
of
15
patients
demonstrated
a
remission
with
a
median
response
time
of
2.5
weeks
after
starting
riluzole
50
mg
twice
daily.
•
Social Anxiety Disorder:
Social
anxiety
disorder
("SAD"),
is
a
marked
and
persistent
fear
of
social
situations,
causing
impairment
and
distress,
which
can
impair
school,
work
and
social
functioning.
SAD
affects
approximately
12%
of
Americans.
Roughly
one-third
to
one-half
of
patients
with
SAD
do
not
experience
significant
clinical
benefit
from
current
treatments,
including
SSRIs.
Several
uncontrolled
trials
have
suggested
the
efficacy
of
glutamate
modulating
agents
for
reducing
anxiety
symptoms
in
adults
with
other
anxiety
disorders,
such
as
GAD
and
OCD,
as
well
as
major
depression.
We
are
collaborating
with
researchers
at
Yale
University
to
explore
the
use
of
our
glutamate
modulating
agents
in
the
treatment
of
SAD.
Mood
Disorders
•
Bipolar Depression:
Bipolar
disorder
is
a
chronic
disorder
associated
with
periods
of
depressive
or
manic
moods
that
often
severely
affect
overall
functioning.
The
limited
available
treatment
options
include
conventional
antidepressants,
but
they
are
associated
with
increased
cycling
between
manic
and
depressed
phases.
Approved
agents
for
bipolar
depression
(atypical
antipsychotics)
are
associated
with
weight
gain,
sedation
and
safety
issues.
According
to
the
National
Institute
of
Mental
Health,
bipolar
disorder
affects
approximately
5.7
million
Americans,
or
about
2.6%
of
the
U.S.
population,
every
year.
As
many
as
one
in
five
patients
with
bipolar
disorder
commits
suicide.
The
rationale
for
assessing
trigriluzole
in
treating
bipolar
depression
derives
from
multiple
third-party
publications
on
the
use
of
riluzole.
In
one
study
of
14
patients
with
bipolar
depression,
improvement
was
observed
after
treatment
with
riluzole
(and
within
a
subset
of
four
patients
that
were
resistant
to
lamotrigine,
three
remitted
or
partially
responded).
Another
third-party
study
observed
positive
effects
in
14
largely
treatment-resistant
patients
after
six
weeks
of
treatment
with
100-200
mg
per
day
of
riluzole.
In
this
study,
early
changes
observed
on
magnetic
resonance
spectroscopy,
which
measures
patients'
brain
glutamate
levels,
correlated
with
clinical
improvement.
Other Indications Being Pursued by our Collaborators
Our
collaborators
are
exploring
the
potential
applicability
of
trigriluzole
beyond
cerebellar
and
neuropsychiatric
indications,
including
in
melanoma
(Rutgers
University)
and
glioblastoma
(Johns
Hopkins
University).
The
oncology
collaborations
with
Rutgers
and
Johns
Hopkins
are
based
upon
the
mechanistic
rationale
that
some
tumors
overexpress
glutamate
receptors,
the
central
role
that
glutamate
may
have
in
cancer
metabolism
and
the
effect
of
glutamate
on
the
tumor
microenvironment.
Trigriluzole
is
currently
being
assessed
in
a
Phase
1
study
(NCT03229278)
to
evaluate
the
safety
in
30
Table
of
Contents
combination
with
nivolumab
and
pembrolizumab
in
patients
with
metastatic
or
unresectable
cancer
(including
melanoma).
The
study
is
being
conducted
at
Rutgers
University.
Our Product Candidate BHV-0223 for ALS
Overview of Amyotrophic Lateral Sclerosis and Limitations of Current Treatments
ALS
is
a
progressive
neurodegenerative
motor
neuron
disease
that
affects
nerve
cells
in
the
brain
and
the
spinal
cord.
The
disease
belongs
to
a
group
of
disorders
known
as
motor
neuron
diseases,
which
are
characterized
by
the
gradual
degeneration
and
death
of
motor
neurons.
ALS
affects
up
to
20,000
individuals
in
the
United
States
and
typically
presents
in
patients
with
painless
muscle
weakness,
trouble
swallowing
and
muscle
atrophy
that
ultimately
progresses
to
paralysis,
impaired
breathing
and
death.
Since
the
FDA's
approval
of
riluzole
in
1995,
only
two
agents
have
been
approved
by
the
FDA
in
ALS
drug
therapeutics
and
riluzole
is
the
only
agent
indicated
to
enhance
survival
and/or
time
to
tracheostomy.
Several
therapies
are
currently
in
clinical
trials.
Riluzole
itself
has
pharmacokinetic
and
pharmaceutic
limitations
that
have
restricted
its
broader
clinical
application.
Riluzole
tablets
have
60%
bioavailability,
attributed
to
high
first-pass
metabolism
in
the
liver
that
is
thought
to
be
mediated
via
metabolism
by
the
heterogeneously
expressed
CYP1A2
enzyme.
This
metabolic
route
is
also
thought
to
contribute
to
the
high
pharmacokinetic
variability
associated
with
riluzole.
In
addition,
riluzole
is
associated
with
reduced
exposure
when
taken
with
meals,
or
a
negative
food
effect,
resulting
in
the
guidance
to
take
riluzole
within
a
period
of
fasting
(one
hour
before
or
two
hours
after
a
meal)
for
each
of
two
daily
doses.
In
addition,
riluzole
has
dose-dependent
effects
on
liver
function
tests
that
necessitate
periodic
liver
function
test
monitoring
and
is
associated
with
transient
liver
transaminase
elevations.
At
riluzole
daily
doses
of
100
mg,
drug
discontinuation
is
required
in
2%
to
4%
of
subjects.
However,
this
has
not
been
observed
with
lower
doses,
an
important
observation
as
the
planned
commercial
dose
of
BHV-0223
represents
a
lower
drug
load
than
the
FDA-approved
dose
of
riluzole
while
delivering
similar
exposures.
The
drug
substance
of
riluzole
itself
has
other
intrinsic
limitations
that
complicate
the
ability
to
produce
non-tablet
formulations,
including
very
low
solubility
in
water,
poor
oral
palatability,
pH
dependent
chemical
stability
and
intense
oral
numbness
if
administered
directly
to
the
oral
mucosa.
Our Clinical Program for BHV-0223 in ALS
BHV-0223
is
a
formulation
of
riluzole
designed
to
advance
beyond
the
limitations
of
riluzole
tablets
for
application
in
ALS.
BHV-0223
is
a
sublingual
ODT
of
riluzole,
that
makes
use
of
proprietary
Zydis
ODT
technology
that
we
have
licensed
from
Catalent
for
use
with
riluzole.
Catalent's
ODT
technology
allows
us
to
develop
a
form
of
riluzole
that
is
fast-dissolving
and
which
we
expect
will
mitigate
many
of
the
shortcomings
associated
with
the
solid
oral
dosage
form
of
riluzole.
Based
on
over
20
years
of
global
clinical
experience
with
riluzole,
we
expect
that
BHV-0223
is
likely
to
be
well
tolerated
in
chronic
dosing.
To
date,
Biohaven
has
conducted
two
Phase
1
trials
of
BHV-0223
in
healthy
volunteers.
We
believe
BHV-0223
offers
the
following
potential
advantages,
compared
to
the
solid
oral
dosage
form
of
riluzole,
in
the
treatment
of
ALS:
•
•
Ease
of
Administration
—An
early
symptom
in
many
patients
with
ALS
is
difficulty
swallowing,
which
makes
it
especially
challenging
for
ALS
patients
to
swallow
traditional
riluzole
tablets.
In
contrast,
using
our
licensed
ODT
technology,
ALS
patients
will
benefit
from
a
fast-dissolving
tablet
that
does
not
require
swallowing
or
administration
of
liquids.
More
Predictable
Pharmacokinetic
Performance
—Because
some
ALS
patients
experience
difficulty
swallowing,
they
often
crush
their
solid
riluzole
tablets
and
take
with
food
in
order
to
31
Table
of
Contents
ease
administration,
which,
in
addition
to
resulting
in
mucosal
numbness,
leads
to
uncertain
pharmacokinetic
performance
as
riluzole
is
supposed
to
be
administered
on
an
empty
stomach.
With
BHV-0223,
ALS
patients
will
not
have
to
crush
or
alter
the
form
of
administration,
leading
to
more
predictable
pharmacokinetic
performance.
In
our
Phase
1
trials,
we
have
observed
that
BHV-0223
is
associated
with
less
pharmacokinetic
variability
than
50
mg
riluzole.
Lack
of
Food
Effect
on
Overall
Exposure
(as
assessed
by
AUC)
—Prescribing
instructions
for
riluzole
tablets
state
that
it
should
be
taken
at
least
an
hour
before,
or
two
hours
after,
a
meal
to
avoid
food-related
decreases
in
bioavailability.
Patients
who
do
not
strictly
adhere
to
these
fasting
requirements
or
administer
crushed
riluzole
in
food
may
not
be
obtaining
desired
therapeutic
levels
of
riluzole.
BHV-0223
was
designed
to
readily
be
absorbed
sublingually
and
directly
enter
the
blood
stream
without
passing
through
the
intestines.
Since
absorption
of
BHV-0223
occurs
through
the
vasculature
under
the
tongue,
we
do
not
anticipate
fasting
requirements.
We
believe
this
attribute
will
be
particularly
beneficial
for
late-stage
ALS
patients
who
require
a
continuous
feeding
tube
for
nutrition.
Topline
results
from
a
food
effect
assessment
with
a
Phase
1
study,
demonstrated
bioequivalent
exposure
(i.e.,
overall
exposures
as
measured
by
AUC)
for
BHV-0223
40
mg
when
administered
under
fed
or
fasted
states.
C
max
concentrations
under
fed
and
fasted
conditions
differed,
as
is
commonly
observed
with
sublingual
formulations;
however,
it
is
generally
thought
that
efficacy
of
riluzole
is
driven
by
overall
extent
of
exposure
(AUC).
Reduced
Drug
Load
and
Liver
Exposure
—Riluzole
is
associated
with
dose-dependent
liver
function
increases
attributable
to
high
dose
loads
and
extensive
liver
metabolism.
Since
BHV-0223
is
sublingually
absorbed,
first-pass
liver
metabolism
is
mitigated
and
lower
doses
of
riluzole
are
needed
to
be
administered,
thereby
reducing
potential
risk
for
hepatic
enzyme
elevations.
•
•
BHV-0223
has
been
dosed
in
approximately
150
healthy
subjects
in
Phase
1
studies
and
is
currently
being
assessed
in
patients
with
ALS
for
safety
and
tolerability.
AEs
have
generally
been
mild
and
transient;
no
treatment-related
SAEs
have
been
observed.
In
January
2018,
we
announced
topline
results
of
a
bioequivalence
study.
Topline
results
confirmed
that
sublingual
BHV-0223
(40
mg)
achieves
bioequivalent
exposures
relative
to
Rilutek
(50
mg).
In
the
study,
138
healthy
volunteers
were
administered
BHV-0223
and
Rilutek
under
fasted
conditions.
In
the
pre-specified
primary
analysis,
BHV-0223
achieved
area-under-the-
curve
and
peak
exposures
of
approximately
90%
and
113%,
respectively,
compared
to
those
generated
by
generic
riluzole.
The
90%
confidence
intervals
were
within
the
80%
to
125%
range
that
is
used
to
define
bioequivalence.
In
this
study,
67
of
these
138
subjects
were
also
assessed
after
being
administered
BHV-0223
(40mg)
under
fed
conditions.
Topline
results
from
a
food
effect
assessment
with
a
Phase
1
study,
demonstrated
bioequivalent
AUC
exposures
for
BHV-0223
40
mg
when
administered
under
fed
or
fasted
states.
C
max
concentrations
under
fed
and
fasted
conditions
differed,
as
is
commonly
observed
with
sublingual
formulations;
however,
it
is
generally
thought
that
efficacy
of
riluzole
is
driven
by
overall
extent
of
exposure
(AUC).
In
addition,
we
commenced
a
study
in
January
2018
assessing
tolerability
in
dysphagic
patients
with
ALS
and
will
also
start
a
tolerability
study
with
two-month
dosing
in
ALS
patients
in
the
first
quarter
2018.
Development and Regulatory Pathway
In
December
2016,
the
FDA
granted
orphan
drug
designation
of
BHV-0223
for
the
treatment
of
ALS,
with
eligibility
for
orphan
exclusivity
contingent
on
a
showing
that
BHV-0223
is
clinically
superior
to
Rilutek,
a
previously
approved
form
of
riluzole,
as
well
as
any
other
versions
of
riluzole
that
may
be
approved
for
the
same
indication
before
BHV-0223
is
approved.
Clinical
superiority
may
be
demonstrated
by
showing
that
a
drug
has
greater
effectiveness
than
the
approved
drug,
greater
safety
in
a
substantial
portion
of
the
target
population,
or
otherwise
makes
a
major
contribution
to
patient
care.
32
Table
of
Contents
Within
the
first
quarter
of
this
year,
Biohaven
will
have
a
pre-NDA
meeting
with
the
FDA
and
subsequently
plans
to
submit
a
NDA
to
the
FDA
to
pursue
the
regulatory
approval
of
BHV-0223
for
ALS
under
Section
505(b)(2)
of
the
U.S.
Federal
Food,
Drug,
and
Cosmetic
Act
in
the
second
half
of
2018.
Glutamate
NMDA
Receptor
Antagonism
An
NMDA
receptor
antagonist
is
a
type
of
glutamate
antagonist
that
works
to
inhibit
the
action
of
NMDA
receptors
which
may
play
a
role
in
degenerative
diseases
that
affect
the
brain.
BHV-5000
is
an
oral
prodrug
of
the
intravenous
drug
lanicemine,
also
referred
to
as
BHV-5500,
both
of
which
we
in-licensed
from
AstraZeneca
AB
("AstraZeneca").
In
addition
to
being
orally
available,
BHV-5000
is
a
first-in-class,
low-trapping,
NMDA
receptor
antagonist
with
differentiating
pharmacologic
properties
from
other
agents
in
development
targeting
this
receptor.
The
unique
property
of
low-trapping
antagonists
is
their
ability
to
uncouple
from
the
NMDA
receptor
more
freely
than
other
agents,
a
property
that
is
thought
to
contribute
to
their
mitigated
risk
of
dissociative
effects
as
has
been
observed
in
the
clinic.
Lanicemine,
the
active
metabolite
of
BHV-5000,
binds
within
the
NMDA
channel
pore
and
functionally
blocks
the
flow
of
charged
ions
through
the
NMDA
receptor
complex.
Lanicemine
was
initially
advanced
by
AstraZeneca
into
clinical
trials
for
the
potential
treatment
of
stroke,
but
this
development
was
discontinued
as
initial
results
did
not
warrant
continued
development
for
this
indication.
We
are
developing
BHV-5000
as
a
potential
best-in-class
NMDA
receptor
antagonist
for
treatment
of
neuropsychiatric
indications.
Our Product Candidate BHV-5000 for Rett Syndrome
Overview of Rett Syndrome and Limitations of Current Treatments
Rett
syndrome
is
a
severe
neurodevelopmental
disorder
resulting
from
an
X-linked
dominant
gene
mutation
(MECP2).
As
a
result,
it
occurs
almost
exclusively
in
females.
After
six
to
18
months
of
apparently
normal
development,
patients
with
Rett
syndrome
show
global
deceleration
of
psychomotor
development
and
subsequent
loss
of
acquired
cognitive
and
motor
skills,
such
as
the
loss
of
speech.
Patients
may
also
develop
pathognomonic
stereotyped
hand
movement
or
display
autonomic
dysfunction
such
as
breathing
irregularities,
including
brain-mediated
episodes
of
transient
respiratory
suppression,
or
apneic
periods.
With
intensive
care,
patients
may
survive
into
adulthood,
yet
they
are
severely
physically
and
cognitively
impaired.
Rett
syndrome
occurs
in
all
racial
and
ethnic
groups
and
occurs
worldwide
in
approximately
1
in
every
10,000
live
female
births.
There
are
approximately
15,000
females
with
Rett
syndrome
in
the
United
States.
No
approved
treatments
for
Rett
syndrome
are
currently
available
and
care
is
supportive.
Our Clinical Program for BHV-5000 in Rett Syndrome
BHV-5000
and
lanicemine
have
been
observed
to
ameliorate
the
phenotype
in
transgenic
mouse
models
of
Rett
syndrome,
models
which
recapitulate
key
clinical
features,
such
as
irregular
breathing,
apneic
periods,
abnormal
EEG
with
altered
seizure
threshold.
Based
on
the
preclinical
experience,
we
have
chosen
to
advance
BHV-5000
into
clinical
trials
for
the
treatment
of
breathing
irregularities
associated
with
Rett
syndrome.
The
orally
bioavailable
prodrug
BHV-5000,
which
was
developed
as
an
advancement
on
the
intravenously
administered
lanicemine,
offers
an
improved
route
of
administration
over
lanicemine,
and
has
thus
been
positioned
as
the
lead
candidate
in
this
series.
After
ingestion,
BHV-5000
is
rapidly
cleaved
by
the
enzyme
dipeptidyl
peptidase-4
(DPP-4),
yielding
the
active
metabolite
lanicemine.
AstraZeneca
studied
BHV-5000
in
a
Phase
1
single
and
multiple
ascending
dose
trial.
Doses
up
to
95
mg
of
BHV-5000
were
studied
and
were
observed
to
be
well
tolerated
without
any
clinically
relevant
safety
issues.
Among
the
AEs
reported
were
three
cases
of
euphoria,
three
cases
of
hallucination,
or
visual
distortion,
and
eight
cases
of
nystagmus,
a
visual
condition.
These
AEs
are
33
Table
of
Contents
consistent
with
NMDA
receptor
antagonism.
After
oral
ingestion,
systemic
concentrations
of
BHV-5000
were
observed
to
be
very
low,
typically
below
the
limit
of
quantification.
Preclinical Studies and Previous Clinical Trials with Lanicemine and BHV-5000
As
noted
above,
BHV-5000
and
lanicemine
have
been
observed
to
ameliorate
the
phenotype
in
transgenic
mouse
models
of
Rett
syndrome.
In
particular,
BHV-5000
has
been
observed
to
reduce
the
number
of
apneic
episodes
that
are
driven
by
dysfunctions
in
the
central
nervous
system.
These
preclinical
findings
are
consistent
with
those
reported
for
the
NMDA
receptor
antagonist,
ketamine,
and
have
been
observed
at
concentrations
that
have
been
well
tolerated
by
healthy
volunteers
in
clinical
trials.
The
potential
relevance
of
the
preclinical
models
with
this
mechanism
of
action
are
supported
by
anecdotal
reports
on
the
incidental
use
of
ketamine
in
patients
with
Rett
syndrome
that
have
been
associated
with
clinical
improvements.
The
figure
below
shows
results
from
a
preclinical
study
with
BHV-5000
in
a
transgenic
mouse
model.
Transgenic
(heterozygous
for
MECP2
mutation)
and
wild-type
mice
were
administered
a
single
dose
of
saline
or
BHV-5000
followed
by
measurement
of
apneic
episodes.
Acute
administration
of
BHV-5000
was
associated
with
a
marked
reduction
in
the
number
of
apneic
episodes.
Lanicemine
has
been
administered
to
approximately
770
subjects
in
single
or
multiple
doses
in
18
clinical
trials
conducted
by
AstraZeneca
and
has
been
observed
to
be
generally
well
tolerated.
In
clinical
experience
with
lanicemine,
the
most
common
adverse
event
was
dizziness.
CNS-type
AEs
from
Phase
1
trials
also
included
headache,
somnolence,
asthenia,
impaired
concentration
and
dysesthesias.
In
one
study,
formal
assessment
of
cognitive
function
in
healthy
volunteers
revealed
improvement
in
some
components
of
memory,
decreased
vigilance
and
decreased
calmness.
Hypotension
and
hypertension
have
been
reported
as
AEs,
with
low
mean
increases
in
blood
pressure
reported
in
some
studies
(e.g.,
4
-
8
mmHg
supine
systolic
blood
pressure;
2
-
4
mmHg
supine
diastolic
blood
pressure—
which
occurred
at
doses
higher
than
considered
necessary
for
therapeutic
effects).
AEs
related
to
dissociation
were
infrequent
but
more
common
in
the
lanicemine
group
compared
to
placebo.
AEs
potentially
associated
with
abuse
potential
were
low
but
more
common
in
the
lanicemine
group
than
the
placebo
group.
No
pattern
of
clinically
meaningful
differences
between
lanicemine
and
placebo
were
noted
on
physical
exam,
clinical
laboratory
test
results
or
ECG
results.
Approximately
40
healthy
volunteers
have
been
dosed
with
single
or
multiple
doses
of
BHV-5000
in
clinical
trials
conducted
by
AstraZeneca,
and
it
was
observed
to
be
well
tolerated
without
any
clinically
relevant
safety
issues.
We
believe
BHV-5000
has
no
pharmacologic
activity
of
its
own
and
is
rapidly
metabolized
to
lanicemine
in
humans.
After
oral
ingestion,
systemic
concentrations
of
BHV-5000
are
very
low,
typically
below
the
limit
of
quantification.
34
Table
of
Contents
Nonclinical Toxicology Experience with Lanicemine and BHV-5000
In
nonclinical
studies,
the
major
dose
limiting
effects
in
both
rats
and
dogs
were
central
nervous
system
effects,
which
appeared
rapidly
and
included
ataxia,
head
weaving,
depressed
activity,
and,
at
very
high
doses,
convulsions.
At
pharmacologically
effective
doses,
lanicemine
did
not
elicit
adverse
effects
on
learning,
memory
or
attention.
Small
increases
in
heart
rate
and
blood
pressure
at
very
high
doses
were
observed.
In
the
rat
with
daily
dosing,
effects
on
adrenal
gland,
heart
tissue,
thyroid
and
kidney
were
apparent
at
very
high
doses—more
than
10-fold
the
proposed
maximum
clinical
exposure.
These
effects
were
not
seen
in
dogs
and
intermittent
dosing
in
the
rat
was
not
associated
with
effects
on
the
kidney
or
heart.
At
very
high
doses,
evidence
of
neuron
degeneration
was
apparent
in
very
few
neurons,
a
finding
that
is
associated
with
glutamate
antagonists.
Based
on
these
preclinical
findings,
which
were
consistent
with
other
NMDA
receptor
antagonists,
such
as
ketamine,
lanicemine
was
advanced
into
clinical
trials.
Toxicology
studies
with
BHV-5000,
up
to
2
weeks
in
rats
and
dogs,
revealed
findings
consistent
with
lanicemine,
which
was
expected
given
the
negligible
concentrations
of
BHV-5000
as
compared
to
the
active
metabolite,
lanicemine.
A
GLP
neurotoxicology
study
is
ongoing,
as
required
for
this
class
of
agent,
in
order
to
confirm
maximum
acceptable
therapeutic
exposures
in
clinic
populations.
Clinical Development of BHV-5000
In
July
2017,
we
received
orphan
drug
designation
from
the
FDA
for
BHV-5000
for
the
treatment
of
patients
with
Rett
syndrome.
Our
clinical
program
for
BHV-5000
will
build
upon
AstraZeneca's
previous
development
efforts
for
lanicemine.
In
support,
BHV-5000
is
rapidly
metabolized
to
lanicemine
and,
in
a
Phase
1
trial,
concentrations
of
BHV-5000
were
detectable
in
only
a
few
subjects
who
received
the
highest
dose.
As
a
result,
we
intend
to
rely
on
long-term
Good
Laboratory
Practices
("GLP")
toxicology,
reproductive
toxicology
and
carcinogenicity
studies
of
lanicemine
to
potentially
expedite
the
safety
package
for
BHV-
5000.
A
lead
formulation
has
been
selected
for
advancing
into
a
Phase
1
clinical
trial
of
BHV-5000,
to
bridge
PK
with
a
prior
formulation.
Enrollment
in
this
study
commenced
in
the
fourth
quarter
of
2017,
with
the
first
patient
dosed
in
January
2018.
All
10
subjects
have
been
enrolled
in
a
combined
single
and
multiple
dose
trial
(8
active;
2
placebo)
and
completed
study
participation.
From
preliminary
results
on
blinded
data,
administration
was
observed
to
be
well
tolerated
with
no
clinically
relevant
safety
signals.
These
results
are
consistent
with
prior
experience.
That
is,
prior
formulations
of
BHV-5000
had
been
dosed
in
approximately
40
healthy
subjects
in
a
Phase
1
trial
conducted
by
AstraZeneca,
and
was
observed
to
be
well
tolerated
with
no
clinically
relevant
safety
signals.
Its
active
metabolite,
lanicemine,
has
been
administered
intravenously
in
clinical
trials
conducted
by
AstraZeneca
to
approximately
770
subjects,
in
single
or
multiple
doses,
and
has
been
observed
to
be
generally
well
tolerated
with
most
AEs
being
mild
and
transient
in
nature.
After
completing
the
ongoing
Phase
1
study,
we
plan
to
commence
a
randomized
controlled
trial
of
BHV-5000
with
the
potential
for
positive
results
to
provide
pivotal
registration
evidence
of
efficacy.
One
of
our
planned
indications
for
BHV-5000
is
Rett
syndrome,
based
on
the
ability
of
BHV-5000
and
its
active
metabolite
to
favorably
impact
breathing
abnormalities
and
global
brain
biochemical
abnormalities
in
transgenic
mouse
models.
The
Phase
2/3
trial
is
being
developed
in
collaboration
with
experts
in
the
field.
The
current
aim
is
to
enroll
approximately
120
patients,
and
the
patients
will
be
randomly
assigned
to
up
to
24
weeks
of
treatment
of
either
placebo
or
BHV-5000.
The
primary
outcome
measure
is
under
consideration
with
experts
and
may
include
a
behavioral
outcome
scale
and
potentially
reduction
in
respiratory
abnormalities
(number
of
apneic
episodes).
Discussion
of
outcome
measures
will
be
a
focus
of
regulatory
interactions
with
the
FDA.
35
Table
of
Contents
Overview of BHV-5000 in Other Indications
We
believe
that
modulation
of
NMDA
receptor
activity
has
the
potential
for
broad
applicability
across
a
number
of
CNS
disorders.
Our
goal
is
to
rapidly
advance
BHV-5000
into
the
clinic
to
assess
for
efficacy
in
neuropsychiatric
indications
with
high
unmet
medical
needs.
Potential
other
conditions
include
depression,
neuropathic
pain
and
other
disorders
involving
NMDA
receptor
dysfunction.
Major Depressive Disorder
Major
depressive
disorder
("MDD")
is
the
leading
cause
of
disability
worldwide,
according
to
the
World
Health
Organization.
In
the
United
States,
the
prevalence
rate
is
approximately
7%.
Despite
the
approval
of
over
two
dozen
agents,
therapeutic
effects
are
limited.
More
than
one-third
of
patients
who
complete
an
initial
course
of
antidepressant
treatment
will
not
achieve
a
satisfactory
response,
and
as
many
as
20%
of
patients
have
chronic
depression
despite
multiple
interventions.
The
only
class
of
agents
approved
for
this
population
of
inadequate
responders
(also
deemed
treatment
resistant
depression)
is
atypical
antipsychotic
medications
(e.g.,
aripiprazole,
quetiapine,
olanzapine-fluoxetine
combination
and
brexpiprazole),
agents
associated
with
significant
short-term
and
long-term
side
effect
burdens
(sedation,
metabolic
syndrome,
obesity,
extrapyramidal
side
effects
that
can
include
akathisia
and
elevated
risk
of
tardive
dyskinesia).
Other
agents
in
clinical
stages
of
development
for
major
depressive
disorder
include
rapastinel
(Allergan,
in
Phase
2
testing),
esketamine
(Johnson
&
Johnson,
in
Phase
3
testing),
and
ALKS-5461
(a
combined
formulation
of
buprenorphine
and
samidorphin
developed
by
Alkermes,
which
has
reported
positive
Phase
3
data).
Clinical
findings
of
antidepressant
effects
of
the
NMDA
receptor
antagonist
ketamine
have
provided
a
link
between
the
NMDA
receptor
function
and
depression
and
a
rationale
for
testing
BHV-5000
as
an
antidepressant.
In
nonclinical
studies,
BHV-5000's
active
metabolite
is
active
in
models
of
depression
and
anxiety.
These
data
prompted
a
line
of
investigation
with
lanicemine
that
included
four
randomized
controlled
trials
conducted
by
AstraZeneca
in
patients
with
treatment
resistant
depression,
overall
suggesting
an
adequate
safety
and
tolerability
profile
and
potential
for
therapeutic
benefit.
However,
the
clinical
data
to
date
has
not
established
clear
efficacy
and
additional
trials
are
needed.
Neuropathic Pain
Neuropathic
pain
is
a
chronic
condition
caused
by
dysfunctional
or
damaged
nerves.
Neuropathic
pain
can
be
a
debilitating
and
common
problem
affecting
approximately
10%
of
adults
in
the
United
States.
Despite
the
availability
of
multiple
approved
drugs,
including
Lyrica,
and
guidelines
for
the
treatment
of
neuropathic
pain,
treatment
of
this
condition
remains
a
major
therapeutic
challenge.
Existing
analgesics
are
often
ineffective,
can
cause
serious
side
effects
and
have
abuse
potential
that
limits
widespread
use.
Increased
NMDA
receptor
activity
is
known
to
contribute
to
central
sensitization
in
neuropathic
pain.
NMDA
receptor
antagonists
have
been
shown
to
reduce
hyperalgesia
and
pain
in
animal
models
of
neuropathic
pain
induced
by
nerve
injury
and
diabetic
neuropathy.
Clinically
used
NMDA
receptor
antagonists,
including
ketamine
and
dextromethorphan,
can
be
effective
in
patients
suffering
from
neuropathic
pain
syndromes.
The
clinical
use
of
robust
NMDA
antagonists,
such
as
ketamine,
is
limited
due
to
dissociative,
psychotomimetic
and
abuse
potential
properties.
Novel
NMDA
receptor
antagonists,
such
as
BHV-5000,
that
are
not
associated
with
the
psychotomimetic
effects
and
abuse
potential
could
lead
to
better
management
of
neuropathic
pain
without
causing
serious
side
effects.
Kleo
Pharmaceuticals,
Inc.
From
August
2016
through
January
2018,
we
made
several
investments
to
acquire
a
minority
equity
interest
in
Kleo
Pharmaceuticals,
Inc.
("Kleo")
a
privately
held,
development-stage
company
founded
36
Table
of
Contents
by
a
professor
of
chemistry
and
pharmacology
at
Yale
University
that
is
developing
small
molecule
immunotherapies
that
emulate
biologics
to
fight
cancers
and
infectious
diseases.
We
have
also
entered
into
a
consulting
agreement
with
Kleo
to
assist
Kleo
with
clinical
development.
To
date,
no
services
have
been
provided
under
this
agreement.
On
August
29,
2016,
we
entered
into
a
stock
purchase
agreement
with
Kleo
to
purchase
3,000,000
shares
of
Kleo's
common
stock
at
an
initial
closing,
with
a
commitment
to
purchase
an
aggregate
of
5,500,000
additional
shares
of
common
stock,
in
each
case
at
a
share
price
of
$1.00
per
share).
We
purchased
3,000,000
shares
upon
the
initial
closing
on
August
31,
2016,
and
the
remaining
5,500,000
shares
were
purchased
in
four
equal
tranches
of
1,375,000
shares,
which
we
completed
in
March,
June
and
October
2017
and
January
2018.
In
connection
with
the
initial
investment,
we
received
the
right
to
designate
two
members
of
Kleo's
board
of
directors.
In
March
2017,
we
purchased
500,000
shares
of
Kleo
common
stock
directly
from
a
co-founder
of
Kleo
for
consideration
of
$249,750
in
cash
and
32,500
of
our
common
shares.
In
addition
to
these
purchases,
in
October
2017,
we
purchased
an
additional
aggregate
of
2,049,543
shares
for
cash
consideration
of
$2.3
million
which
allowed
us
to
maintain
our
relative
ownership
interest
in
Kleo.
Upon
completion
of
the
fourth
tranche
in
January
2018,
our
ownership
interest
in
the
outstanding
stock
of
Kleo
was
46.6%.
Competition
The
biotechnology
and
pharmaceutical
industries
are
characterized
by
rapidly
advancing
technologies,
intense
competition
and
a
strong
emphasis
on
proprietary
drugs.
While
we
believe
that
our
knowledge,
experience
and
scientific
resources
provide
us
with
competitive
advantages,
we
face
potential
competition
from
many
different
sources,
including
major
pharmaceutical,
specialty
pharmaceutical
and
biotechnology
companies,
academic
institutions
and
governmental
agencies
and
public
and
private
research
institutions.
Any
product
candidates
that
we
successfully
develop
and
commercialize
will
compete
with
existing
therapies
and
new
therapies
that
may
become
available
in
the
future.
The
key
competitive
factors
affecting
the
success
of
all
of
our
product
candidates,
if
approved,
are
likely
to
be
their
safety,
efficacy,
convenience,
price,
the
level
of
generic
competition
and
the
availability
of
coverage
and
reimbursement
from
government
and
other
third-party
payors.
Many
of
the
companies
against
which
we
are
competing,
or
against
which
we
may
compete
in
the
future,
have
significantly
greater
financial
resources
and
expertise
in
research
and
development,
manufacturing,
preclinical
testing,
conducting
clinical
trials,
obtaining
regulatory
approvals
and
marketing
approved
drugs
than
we
do.
Mergers
and
acquisitions
in
the
pharmaceutical
and
biotechnology
industries
may
result
in
even
more
resources
being
concentrated
among
a
smaller
number
of
our
competitors.
Smaller
or
early-stage
companies
may
also
prove
to
be
significant
competitors,
particularly
through
collaborative
arrangements
with
large
and
established
companies.
These
competitors
also
compete
with
us
in
recruiting
and
retaining
qualified
scientific
and
management
personnel
and
establishing
clinical
trial
sites
and
patient
registration
for
clinical
trials,
as
well
as
in
acquiring
technologies
complementary
to,
or
necessary
for,
our
programs.
37
Table
of
Contents
CGRP Receptor Antagonist Platform
With
regard
to
rimegepant
and
BHV-3500,
our
compounds
target
acute
treatment
of
migraine
and
migraine
prevention.
We
face
competition
from
companies
that
develop
and/or
sell
the
following
types
of
migraine
treatments:
Triptans (Acute Treatment of Migraine)
Clinicians
use
a
number
of
pharmacologic
agents
for
the
acute
treatment
and/or
prevention
of
migraine.
Initial
management
is
often
with
over-the-counter
products
(e.g.
Excedrin,
ibuprofen)
or
some
prescription
non-steroidal
anti-inflammatories
(e.g.
diclofenac).
The
dominant
class
of
prescription
medication
for
the
acute
treatment
of
migraine
are
serotonin
5-HT
1B/1D
receptor
agonists,
or
triptans.
There
are
seven
different
triptans
(almotriptan,
eletriptan,
frovatriptan,
naratriptan,
rizatriptan,
sumatriptan,
zolmitriptan),
the
first
of
which
was
developed
and
approved
over
25
years
ago
and,
today,
all
triptans
are
generic.
The
initial
introduction
of
triptans
represented
a
shift
toward
drugs
more
selectively
targeting
the
suspected
pathophysiology
of
migraine.
A
5-HT
1F
receptor
antagonist,
lasmiditan,
could
be
approved
as
early
as
2019.
Lasmiditan
was
developed
by
CoLucid
and
acquired
by
Eli
Lilly
in
January
2017.
Lasmiditan
could
be
the
first
new
class
of
agent
approved
for
the
acute
treatment
of
migraine
since
the
triptans
and,
if
approved,
would
be
launched
prior
to
rimegepant.
Lasmiditan
was
designed
to
act
through
non-vasoconstrictive
mechanisms
in
the
5-HT
1
pathways
such
that
patients
who
have
cardiovascular
risk
factors,
stable
cardiovascular
disease,
or
those
who
are
dissatisfied
with
current
triptan
therapies
could
be
treated.
In
August
2017,
Lilly
announced
that
lasmiditan
met
both
its
primary
(pain
freedom)
and
key
secondary
(most
bothersome
symptom)
endpoints
at
2
hours.
Lilly
plans
to
submit
lasmiditan
for
approval
in
the
second
half
of
2018.
Preliminary
data
from
lasmiditan,
compared
with
the
results
from
the
rimegepant
program,
would
suggest
ability
to
differentiate
on
both
durability
of
benefit
and
AEs.
Other Oral CGRP Candidates in Development
Since
we
will
be
pursuing
approval
of
our
orally
available,
small
molecule
rimegepant
for
the
acute
treatment
of
migraine,
the
most
relevant
comparator
to
rimegepant
is
the
oral
CGRP
receptor
antagonist
under
development
from
Allergan,
ubrogepant.
Allergan
recently
announced
results
on
an
earnings
call
from
the
first
of
their
Phase
3
studies
(Achieve
1)
with
results
from
the
second
trial
anticipated
by
mid-2018.
This
study
evaluated
the
safety
and
efficacy
of
orally
administered
ubrogepant
50
mg
and
100
mg
compared
to
placebo
in
a
single
migraine.
Both
doses
showed
a
statistically
greater
percentage
of
ubrogepant
patients
pain
free
at
2
hours
as
compared
to
placebo,
as
well
as
statistical
significance
on
the
co-primary,
absence
of
the
most
bothersome
migraine
associated
symptom
at
2
hours
post
dose.
Patients
were
permitted
to
take
a
second
dose
of
investigational
product
or
rescue
medication
after
the
2
hour
time
point.
Durability
of
effect
was
not
shared
beyond
8
hours
post
dose,
at
which
time
pain
freedom
appeared
statistically
significantly
more
improved
than
placebo
for
both
doses
of
ubrogepant.
Ubrogepant
was
well
tolerated
with
an
adverse
event
profile
similar
to
placebo.
There
were
6
cases
of
LFTs
(ALT
or
AST)
>3x
ULN
(1
on
placebo,
5
on
ubrogepant):
2
cases
of
LFTs
>5x
ULN
on
ubrogepant
and
1
case
of
LFTs
>10x
ULN
on
ubrogepant.
No
cases
were
determined
to
have
a
probable
relationship
to
study
drug.
There
were
no
cases
of
Hy's
Law.
Launch
of
ubrogepant
is
anticipated
in
the
first
quarter
2020.
Based
on
the
published
Phase
2
studies
with
both
of
rimegepant
and
ubrogepant,
and
the
early
data
from
the
Phase
3
study
of
ubrogepant,
we
believe
rimegepant
has
the
potential
to
be
best-in-class.
Allergan
is
a
global
pharmaceutical
company
with
presence
in
the
CNS
area
and,
in
particular,
with
physicians
treating
chronic
migraine
through
its
Botox
franchise.
38
Table
of
Contents
Other Acute Treatments for Migraine
Ergot
alkaloids
(such
as
Dihydroergotamine
("DHE")),
analgesics,
including
opioids,
NSAIDs,
acetaminophen
and
antiemetics
also
are
used
in
the
acute
treatment
of
migraine.
DHE
is
also
a
potent
vasoconstrictor
and
has
been
primarily
displaced
by
the
introduction
of
the
triptans.
Opioid
use
for
migraine
is
associated
with
increased
disability
and
health
care
utilization.
Opioids,
while
effective
for
headache
pain,
are
not
approved
for
migraine
and
carry
risk
of
abuse
and
addiction.
Migraine Prevention Treatments
Agents
currently
used
to
reduce
the
frequency
of
migraine
episodes
were
first
approved
for
other
uses
(e.g.
beta
blockers,
antidepressants,
anticonvulsants).
Botox
is
the
only
product
that
has
been
approved
by
the
FDA
for
the
prevention
of
chronic
migraine
(defined
as
at
least
15
headache
days
per
month,
at
least
8
of
which
are
migraine).
For
those
patients
who
do
not
qualify
as
having
chronic
migraine,
but
still
have
significant
disability
due
to
migraine,
there
are
five
products
approved
by
the
FDA
for
use:
topiramate
(Topamax)
and
valproic
acid
(Depakote),
both
anticonvulsant
medicines,
propranolol
(Inderal)
and
timolol
(Blocadren),
both
beta-blockers,
and
amitriptyline,
a
tricyclic
antidepressant.
The
biologic
CGRP
therapies
have
been
studied
for
the
prevention
of
migraine.
Phase
3
studies
for
erenumab
(Amgen/Novartis)
and
framenezumab
(Teva)
have
recently
been
published
and
both
of
these
agents,
in
addition
to
galcanezumab
(Lilly)
and
ALD-403
(Alder)
are
expected
to
begin
to
enter
the
market
in
the
second
half
of
2018.
These
therapies,
while
effective,
do
not
eliminate
the
need
for
acute
treatment
of
migraine
attacks.
In
addition,
they
all
require
SQ
or
IV
administration.
We
believe
that
BHV-3500
may
have
the
opportunity
to
differentiate
from
these
therapies
due
to
its
potential
to
be
used
for
both
the
acute
treatment
and
prevention
of
migraine.
Glutamate Platform
With
respect
to
trigriluzole,
which
we
are
currently
developing
for
the
treatment
of
ataxias,
OCD
and
Alzheimer's
disease,
there
are
currently
no
approved
drug
treatments
for
SCA
or
any
other
cerebellar
ataxia,
in
the
United
States.
We
are
aware
of
companies
with
clinical
stage
programs
in
development
for
potential
treatments
for
SCA
and
other
cerebellar
disorders,
including
Bioblast
Pharma,
which
is
in
Phase
2
development
of
trehalose,
which
targets
SCA
3
and
acts
as
a
protein
stabilizer;
Steminent
Biotherapeutics,
which
is
currently
conducting
a
Phase
2
trial
of
allogeneic
adipose-derived
mesenchymal
stem
cells
that
target
polyglutamine
SCAs;
EryDel
which
is
planning
a
Phase
3
trial
for
its
product,
IEDAT01,
which
delivers
dexamethasone
sodium
phosphate
through
red
blood
cells,
Shionogi
&
CO.,
Ltd.,
which
is
investigating
Rovatirelin,
a
non-
peptide
mimetic
of
thyrotropin-releasing
hormone,
in
a
Phase
3
trial
in
Japan;
Shire
Plc,
which
is
exploring
Cuvitru,
an
intravenous
immune
globulin
that
is
approved
for
the
treatment
of
primary
immunodeficiency
disorders,
in
Phase
2
development.
Mitsubishi
Tanabe
received
approval
for
taltirelin,
an
oral
thyrotropin
releasing
hormone,
in
Japan
in
2009
but
has
not
filed
with
the
FDA
to
seek
approval
in
the
United
States.
With
regards
to
OCD,
there
have
been
no
new
classes
of
drugs
approved
in
over
a
decade.
We
are
not
aware
of
other
product
candidates
besides
trigriluzole
that
are
currently
in
clinical
development
targeting
populations
with
OCD.
With
respect
to
BHV-0223,
which
we
are
developing
for
the
treatment
of
ALS,
we
believe
our
primary
competitor
is
Covis
Pharmaceuticals,
which
sells
Rilutek,
the
brand
name
for
riluzole,
which
is
currently
the
only
approved
drug
for
the
treatment
of
ALS
in
the
United
States.
Riluzole
is
also
generically
available.
Edaravone
(Radicava,
Mitsubishi
Tanabe
Pharma)
was
recently
approved
by
the
FDA
in
May
2017
for
the
treatment
of
ALS,
based
on
efficacy
studies
conducted
in
Japan
with
the
vast
39
Table
of
Contents
majority
of
patients
on
background
riluzole
therapy.
Edaravone
is
administered
to
patients
by
intravenous
infusion.
We
are
aware
of
at
least
two
other
companies
that
are
marketing
or
plan
to
market
new
formulations
of
riluzole:
Aquestive
Therapeutics
has
filed
an
IND
to
begin
clinical
development
of
a
riluzole
oral
soluble
film,
and
Italfarmaco
SpA,
a
private
Italian
company,
markets
an
oral
liquid
suspension
formulation
of
riluzole
in
the
United
Kingdom
and
elsewhere
in
Europe
under
the
brand
name
Teglutik.
We
are
aware
of
several
companies
that
are
exploring
potential
treatments
for
ALS,
mostly
agents
with
novel
mechanisms
of
action
being
administered
with
riluzole.
We
are
not
aware
of
any
company
marketing
or
developing
a
sublingual
formulation
of
riluzole.
Other
companies
of
which
we
are
not
aware
may
also
be
developing
formulations
using
the
API
riluzole;
if
such
companies
pursued
regulatory
approval
of
such
product
candidates
using
the
Section
505(b)(2)
regulatory
pathway,
those
product
candidates
would
potentially
compete
with
BHV-0223.
For
example,
Italfarmaco
and
Aquestive
have
obtained
orphan
designation
for
their
products,
and
are
eligible
to
obtain
orphan
exclusivity
subject
to
a
showing
of
clinical
superiority
to
riluzole.
Based
on
orphan
drug
designation
requirements,
the
first
approval
of
a
novel
formulation
of
riluzole
may
obligate
subsequent
formulations
to
demonstrate
advantages
with
regard
to
safety,
efficacy
or
meaningful
contribution
to
patient
care,
in
order
to
achieve
marketing
authorization.
With
respect
to
BHV-5000,
which
we
are
developing
for
the
treatment
of
Rett
syndrome,
there
are
currently
no
approved
treatments
for
Rett
syndrome
in
the
United
States.
We
are
aware
of
companies
with
clinical
stage
programs
in
development
for
potential
treatments
for
Rett
syndrome,
including
Newron
Pharmaceuticals
SpA
which
is
launching
a
Phase
2/3
clinical
trial
of
sarizotan,
an
agent
with
serotonin
subtype-1A
(5-HT
1A
)
receptor
agonist
and
dopamine
subtype-2
(D2)
receptor
antagonist
activities,
and
Neuren
Pharma,
which
has
completed
a
Phase
2a
trial
of
trofinetide
in
adult
patients
and
a
Phase
2
trial
in
pediatric
patients
with
Rett
syndrome.
If
we
expand
our
development
of
trigriluzole,
BHV-0223
or
BHV-5000
into
additional
neuropsychiatric
or
other
indications,
we
would
face
substantial
competition
from
companies
that
develop
or
sell
products
that
treat
those
indications.
Manufacturing
We
do
not
have
any
manufacturing
facilities
or
personnel.
We
currently
rely,
and
expect
to
continue
to
rely,
on
third
parties
for
the
manufacturing
of
our
product
candidates
for
preclinical
and
clinical
testing,
as
well
as
for
commercial
manufacturing
if
our
product
candidates
receive
marketing
approval.
All
of
our
product
candidates
are
small
molecules
and
are
manufactured
in
reliable
and
reproducible
synthetic
processes
from
readily
available
starting
materials.
The
chemistry
does
not
require
unusual
equipment
in
the
manufacturing
process.
We
expect
to
continue
to
develop
product
candidates
that
can
be
produced
cost-effectively
at
contract
manufacturing
facilities.
Commercialization
We
intend
to
develop
and,
if
approved
by
the
FDA,
commercialize
our
product
candidates
in
the
United
States,
and
we
may
enter
into
distribution
or
licensing
arrangements
for
commercialization
rights
for
other
regions.
With
respect
to
rimegepant
and
BHV-3500,
we
plan
to
build
a
specialty
team
of
sales
and
medical
marketing
professionals
to
focus
on
targeting
neurological
specialists
and
headache
centers
in
the
United
States,
potentially
in
combination
with
a
larger
pharmaceutical
partner,
to
maximize
patient
coverage
in
the
United
States
and
to
support
global
expansion.
40
Table
of
Contents
With
respect
to
the
product
candidates
in
our
glutamate
modulation
platform,
we
currently
intend
to
build
a
neurological
specialty
sales
force
to
manage
orphan
drug
commercialization
for
these
product
candidates
on
our
own.
Intellectual
Property
We
strive
to
protect
and
enhance
the
proprietary
technologies
that
we
believe
are
important
to
our
business,
including
seeking
and
maintaining
patents
intended
to
cover
our
products
and
compositions,
their
methods
of
use
and
any
other
inventions
that
are
important
to
the
development
of
our
business.
We
also
rely
on
trade
secrets
to
protect
aspects
of
our
business
that
are
not
amenable
to,
or
that
we
do
not
consider
appropriate
for,
patent
protection.
Our
success
will
depend
significantly
on
our
ability
to
obtain
and
maintain
patent
and
other
proprietary
protection
for
commercially
important
technology,
inventions
and
know-how
related
to
our
business,
defend
and
enforce
our
patents,
preserve
the
confidentiality
of
our
trade
secrets
and
operate
without
infringing
the
valid
and
enforceable
patents
and
proprietary
rights
of
third
parties.
We
also
rely
on
know-how,
continuing
technological
innovation
and
in-licensing
opportunities
to
develop,
strengthen
and
maintain
the
proprietary
position
of
our
products
and
our
other
development
programs.
Patents and Patent Applications
We
have
approximately
400
U.S.
and
foreign
patents
and
patent
applications
in
our
portfolio
related
to
the
composition
of
matter,
methods
of
use,
methods
of
manufacture
or
formulations
of
our
product
candidates
which
have
been
filed
in
major
markets
throughout
the
world,
including
the
United
States,
Europe,
Japan,
Korea,
China,
Hong
Kong
and
Australia.
Rimegepant and BHV-3500
The
intellectual
property
rights
related
to
rimegepant
and
BHV-3500
are
in-licensed
from
BMS
and
are
covered
by
five
families
of
U.S.
and
certain
selected
foreign
patents,
with
statutory
expiration
dates
ranging
from
2023
to
2033.
U.S.
Patent
8,314,117
covers
the
composition
of
matter
of
rimegepant,
and
has
a
statutory
expiration
date
of
October
12,
2030,
not
including
patent
term
adjustment
or
any
potential
patent
term
extension.
U.S.
Patent
8,481,546
covers
the
composition
of
matter
of
BHV-3500,
and
has
a
statutory
expiration
date
of
March
2,
2031,
not
including
patent
term
adjustment
or
any
potential
patent
term
extension.
These
or
other
patents
cover
rimegepant
and
BHV-3500
and
their
use
in
treating
migraine
and,
in
certain
ex-U.S.
jurisdictions,
other
neurological
conditions.
The
license
also
includes
several
patent
families
of
related
compounds
directed
to
the
CGRP
receptor.
We
also
have
an
agreement
with
Catalent
whereby
Catalent
granted
an
exclusive
license
under
certain
of
its
patents
and
technology
to
use
the
Zydis
ODT
technology
for
development
of
our
rimegepant
product.
Catalent
retains
all
manufacturing
rights.
Trigriluzole
We
own
several
families
of
patent
applications
containing
claims
directed
to
prodrugs
of
riluzole.
These
patent
applications
include
several
U.S.
applications
and
corresponding
PCT
applications.
These
families
of
patent
applications
contain
claims
directed
to
trigriluzole
and
numerous
other
prodrugs
of
riluzole.
In
addition,
the
use
of
these
compounds
for
treating
ALS,
SCA,
depression
and
other
diseases
is
described
and
claimed
in
these
patent
applications.
We
own
these
patent
applications
subject
to
a
license
agreement
with
ALS
Biopharma
and
Fox
Chase
Chemical
Diversity
Center,
Inc.
If
a
patent
covering
trigriluzole
issues
from
one
of
these
pending
patent
application
families,
it
would
have
a
statutory
expiration
date
in
2036.
Other
patent
applications
provide
coverage
for
alternative
formulations
of
riluzole
prodrugs
and
their
uses.
41
Table
of
Contents
BHV-0223
BHV-0223,
a
sublingual
or
ODT
form
of
riluzole,
and
its
use
for
treating
various
forms
of
pain,
ALS
and
depression
are
covered
by
two
families
of
patent
applications
pending
in
the
U.S.
and
selected
foreign
jurisdictions,
each
patent
family
having
a
statutory
expiration
date
in
2035.
We
have
an
agreement
with
Catalent
whereby
Catalent
granted
an
exclusive
license
under
certain
of
its
patents
and
technology
to
use
the
Zydis
ODT
technology
for
our
BHV-0223
product.
Catalent
retains
all
manufacturing
rights.
In
addition
to
patent
protection,
although
not
an
NCE,
BHV-0223
may
also
be
entitled
to
certain
regulatory
exclusivity.
In
addition
to
the
patent
applications
we
own,
we
have
also
licensed
one
issued
patent
and
several
pending
patent
applications
from
Yale
University
which
provide
protection
for
the
use
of
riluzole
in
treating
generalized
anxiety
disorder
and
other
neurological
uses,
respectively.
Further,
we
have
licensed
several
patents
from
Rutgers
University
covering
the
use
of
riluzole
for
treating
various
forms
of
cancer
and
an
animal
model
for
tumors
which
may
cover
the
use
of
BHV-0223
for
treating
the
specific
cancers.
BHV-5000
We
have
also
in-licensed
one
patent
family
related
to
certain
uses
of
lanicemine
and
a
patent
application
family
containing
claims
directed
to
BHV-5000
from
AstraZeneca.
They
contain
claims
directed
to
the
use
of
the
base
compound,
lanicemine,
in
treating
depression,
and
the
structure
of
the
prodrug
form,
BHV-5000,
as
well
as
the
use
of
the
prodrug
in
treating
a
variety
of
neurological
diseases
including
Rett
syndrome
and
depression.
The
issued
patents
related
to
uses
of
lanicemine
have
a
statutory
expiration
date
in
2019.
The
patent
applications
related
to
BHV-5000
would,
if
issued,
have
a
statutory
expiration
date
in
2033
and
the
corresponding
U.S.
patent
has
been
issued.
Additional Licensed Patent Applications
We
have
also
licensed
a
family
of
patent
applications
related
to
the
treatment
of
depression
with
a
combination
of
ketamine
and
scopolamine
from
Massachusetts
General
Hospital.
Patent Protection and Terms
The
term
of
individual
patents
depends
on
the
legal
term
for
patents
in
the
countries
in
which
they
are
granted.
In
most
countries,
including
the
United
States,
the
patent
term
is
generally
20
years
from
the
earliest
claimed
filing
date
of
a
non-provisional
patent
application
in
the
applicable
country.
In
the
United
States,
a
patent's
term
may,
in
certain
cases,
be
extended
by
patent
term
adjustment,
which
compensates
a
patentee
for
administrative
delays
by
the
U.S.
Patent
and
Trademark
Office
in
examining
and
granting
a
patent,
or
may
be
shortened
if
a
patent
is
terminally
disclaimed
over
a
commonly
owned
patent
or
a
patent
naming
a
common
inventor
and
having
an
earlier
expiration
date.
The
Drug
Price
Competition
and
Patent
Term
Restoration
Act
of
1984
(the
"Hatch-Waxman
Act")
permits
a
patent
term
extension
of
up
to
five
years
beyond
the
expiration
date
of
a
U.S.
patent
as
partial
compensation
for
the
length
of
time
the
drug
is
under
regulatory
review.
Patent
term
extension
is
not
available
for
all
approved
products
and,
even
if
an
approved
product
is
eligible,
only
one
patent
covering
the
approved
product
may
be
extended,
the
extension
can
only
be
based
on
a
single
approved
product,
and
the
total
extension
granted
cannot
extend
the
remaining
term
of
the
patent
beyond
14
years
from
product
approval.
Furthermore,
the
patent
positions
of
biotechnology
and
pharmaceutical
products
and
processes
like
those
we
intend
to
develop
and
commercialize
are
generally
uncertain
and
involve
complex
legal
and
factual
questions.
No
consistent
policy
regarding
the
breadth
of
claims
allowed
in
such
patents
has
emerged
to
date
in
the
United
States.
The
patent
situation
outside
the
United
States
is
even
more
uncertain.
Changes
in
either
the
patent
laws
or
in
interpretations
of
patent
laws
in
the
United
States
and
other
countries
can
diminish
our
ability
to
protect
our
inventions
and
enforce
our
intellectual
42
Table
of
Contents
property
rights,
can
make
it
easier
to
challenge
the
validity,
enforceability
or
scope
of
any
patents
that
may
issue,
and,
more
generally,
could
affect
the
value
of
intellectual
property.
Accordingly,
we
cannot
predict
the
breadth
of
claims
that
may
be
allowed
or
enforced
in
our
patents
or
in
third-party
patents.
Third-Party Patent Filings
Numerous
U.S.
and
foreign
issued
patents
and
patent
applications
owned
by
third
parties
exist
in
the
fields
in
which
we
are
developing
products.
In
addition,
because
patent
applications
can
take
many
years
to
issue,
there
may
be
applications
unknown
to
us,
which
may
later
result
in
issued
patents
that
our
product
candidates
or
proprietary
technologies
may
infringe.
Moreover,
we
may
be
aware
of
patent
applications,
but
incorrectly
predict
the
likelihood
of
those
applications
issuing
with
claims
of
relevance
to
us.
Under
U.S.
law,
a
person
may
be
able
to
patent
a
discovery
of
a
new
way
to
use
a
previously
known
compound,
even
if
such
compound
itself
is
patented,
provided
the
newly
discovered
use
is
novel
and
non-obvious.
Such
a
method-of-use
patent,
however,
if
valid,
only
protects
the
use
of
a
claimed
compound
for
the
specified
methods
claimed
in
the
patent.
This
type
of
patent
does
not
prevent
persons
from
using
the
compound
for
any
previously
known
use
of
the
compound.
Further,
this
type
of
patent
does
not
prevent
persons
from
making
and
marketing
the
compound
for
an
indication
that
is
outside
the
scope
of
the
patented
method.
License Agreements
License Agreement with BMS
Overview
In
July
2016,
we
entered
into
an
exclusive,
worldwide
license
agreement
with
BMS
for
the
development
and
commercialization
rights
to
rimegepant
and
BHV-3500,
as
well
as
other
CGRP-related
intellectual
property.
Subject
to
certain
limitations
and
certain
retained
rights
of
BMS,
the
license
included
an
exclusive
license
under
certain
BMS
patent
rights
and
BMS
know-how
to
the
extent
necessary
to
research,
discover,
develop,
make,
have
made,
use,
sell,
offer
to
sell,
export
and
import
licensed
compounds
and
licensed
products
in
the
field
of
prevention,
treatment
or
control
of
any
disease,
disorder
or
condition
in
humans.
In
exchange
for
these
rights,
we
agreed
to
pay
BMS
initial
payments,
milestone
payments
and
tiered
royalties
on
net
sales
of
licensed
products
under
the
agreement.
Our
initial
payments
to
BMS
totaled
$9.0
million
and
were
paid
within
90
days
after
entering
into
the
agreement.
The
milestone
payments
due
to
BMS
under
the
agreement
consist
of
development
and
commercial
milestones.
The
development
milestones
due
under
the
agreement
depend
on
the
licensed
product
being
developed.
Development
milestones
due
under
the
agreement
with
respect
to
rimegepant
or
a
derivative
thereof
total
up
to
$127.5
million,
and,
for
any
product
other
than
rimegepant
or
a
derivative
thereof,
total
up
to
$74.5
million.
Commercial
milestones
total
up
to
$150.0
million
for
each
licensed
product.
If
we
receive
revenue
from
sublicensing
any
of
our
rights
under
the
agreement,
we
are
also
obligated
to
pay
a
portion
of
that
revenue
to
BMS
as
well.
The
tiered
royalty
payments
are
based
on
annual
worldwide
net
sales
of
licensed
products
under
the
agreement,
with
percentages
in
the
low-to-mid
teens.
We
made
a
payment
of
$5.0
million
to
BMS
pursuant
to
our
obligations
under
the
BMS
agreement
during
the
third
quarter
of
2017
for
the
achievement
of
a
specified
milestone.
Under
the
BMS
agreement,
we
agreed
to
refrain,
either
ourselves
or
via
our
sublicensees
or
third
parties,
from
engaging
in
the
development
and
commercialization
of
specified
competitive
compounds
for
a
period
of
seven
years.
Further,
BMS
has
retained
the
right
to
use
the
licensed
compounds
for
internal
research
purposes
and
for
the
generation
of
analogs
and
derivatives
of
licensed
compounds.
Our
right
to
sublicense
our
rights
under
the
BMS
agreement,
other
than
to
an
affiliate
or
to
certain
43
Table
of
Contents
third-party
manufacturers,
is
subject
to
BMS's
prior
written
consent,
which
cannot
be
unreasonably
withheld
or
delayed.
While
we
will
be
responsible
for
preparing,
prosecuting
and
maintaining
the
licensed
patents
and
applications
and
for
defending
them
in
post-grant
proceedings,
BMS
must
consent
before
a
licensed
patent
or
application
is
abandoned
in
a
major
jurisdiction.
We
will
also
be
responsible
for
listing
licensed
patents
in
the
Orange
Book
and
for
determining
which
patents
will
be
extended
based
on
any
regulatory
delays.
Our Development, Regulatory and Commercialization Obligations
Under
the
agreement,
we
are
obligated
to
use
commercially
reasonable
efforts
to
develop
licensed
products
using
the
patent
rights
we
have
licensed
from
BMS,
including
setting
forth
a
development
plan
with
specific
development
activities
and
timelines,
updating
the
development
plan
each
year,
providing
BMS
with
annual
reports
of
our
progress
and
keeping
BMS
informed
of
material
changes
that
may
affect
the
development
plan.
With
respect
to
any
of
the
licensed
products,
we
are
solely
responsible
for
all
development,
regulatory
and
commercial
activities
and
costs.
We
are
also
obligated
to
use
commercially
reasonable
efforts
to
achieve
specified
regulatory
and
commercial
milestones,
and
maintain
a
sufficient
supply
of
our
products
to
satisfy
our
expected
commercialization
efforts
in
each
country
in
which
we
sell
such
products.
Following
our
first
commercial
sale
of
a
product,
we
must
provide
BMS
with
periodic
reports
of
our
commercial
activities.
In
connection
with
the
agreement,
BMS
agreed
to
use
commercially
reasonable
efforts
to
assign
and
transfer
any
INDs
for
the
licensed
compounds
to
us.
Equity Consideration
As
part
of
this
agreement,
we
agreed
to
issue
BMS
common
shares
in
the
amount
of
$12.5
million
upon
the
occurrence
of
specified
events,
including
upon
an
initial
public
offering
("IPO").
In
satisfaction
of
this
obligation,
in
May
2017
upon
the
completion
of
our
IPO,
we
issued
1,345,374
common
shares
to
BMS.
Right of First Negotiation
After
we
receive
topline
data
from
a
Phase
3
trial
of
our
most
advanced
product
candidate
licensed
under
the
agreement,
we
must
provide
notice
and
a
summary
of
the
data
to
BMS.
BMS
will
then
have
60
days
to
exercise
its
right
of
first
negotiation
to
regain
its
intellectual
property
rights
or
enter
into
a
license
agreement
with
us
with
respect
to
such
product
candidate.
If
we
do
not
execute
an
agreement
with
BMS
during
this
time
period
after
using
good
faith
efforts,
we
will
have
the
right
to
retain
our
rights
or
sublicense
our
rights
to
third
parties
subject
to
the
terms
of
the
agreement.
Non-Competition
Until
2023,
neither
we
nor
our
affiliates
may,
ourselves
or
through
or
in
collaboration
with
a
third
party,
engage
directly
or
indirectly
in
the
clinical
development
or
commercialization
of
specified
competitive
compounds.
In
the
event
that
we
are
or
become
non-compliant
with
this
provision
due
to
licensing,
collaboration
or
acquisition
activity,
we
must
either
divest
ourselves
of
the
competitive
compound
within
a
certain
period
of
time
or
negotiate
with
BMS
to
have
the
competitive
compound
included
as
a
licensed
product
under
our
agreement
with
BMS.
The
failure
to
so
divest
or
reach
terms
with
BMS
may
result
in
the
termination
of
our
license
with
BMS.
Term and Termination
The
agreement
will
terminate
on
a
licensed
product-by-licensed
product
and
country-by-country
basis
upon
the
expiration
of
the
royalty
term
with
respect
to
each
licensed
product
in
each
country.
The
patents
related
to
the
licensed
products
have
statutory
expiration
dates
ranging
from
2023
to
2033.
44
Table
of
Contents
BMS
has
the
right
to
terminate
the
agreement
upon
our
insolvency
or
bankruptcy,
our
uncured
material
breach,
including
our
failure
to
meet
our
development
and
commercialization
obligations,
our
challenge
to
any
BMS
patent
rights,
or
our
failure
to
close
a
financing
within
specified
parameters.
We
have
the
right
to
terminate
the
agreement
if
BMS
materially
breaches
the
agreement
or
if,
after
we
provide
notice,
we
choose
not
to
move
forward
with
development
and
commercialization
in
a
specific
country.
In
the
event
that
BMS
exercises
its
right
to
terminate
the
agreement
following
our
insolvency,
our
breach
of
the
agreement
or
our
failure
to
develop
or
commercialize
the
licensed
compounds,
or
if
we
terminate
the
agreement
after
providing
notice,
all
rights
and
licenses
granted
to
us
will
terminate,
and
all
patent
rights
and
know-how
transferred
pursuant
to
the
agreement
will
revert
to
BMS.
In
addition,
upon
such
termination,
we
agree
to,
at
BMS's
election,
(i)
assign
all
regulatory
filings,
approvals
and
regulatory
documents
necessary
to
further
develop
and
commercialize
the
reverted
products
or
(ii)
withdraw
or
inactivate
such
filings
and
approvals.
Agreement with ALS Biopharma, LLC and Fox Chase Chemical Diversity Center Inc.
In
August
2015,
we
entered
into
an
agreement
with
ALS
Biopharma
and
FCCDC
pursuant
to
which
ALS
Biopharma
and
FCCDC
assigned
to
us
their
worldwide
patent
rights
to
a
family
of
over
300
prodrugs
of
glutamate
modulating
agents,
including
trigriluzole,
as
well
as
other
innovative
technologies.
In
addition,
we
received
a
non-exclusive
license
to
certain
trade
secrets
and
know-how
of
ALS
Biopharma.
We
took
assignment
of
these
patent
rights
subject
to
the
provisions
of
the
Bayh
Dole
Act,
as
applicable,
to
the
extent
that
any
invention
included
with
the
assigned
patent
rights
was
funded
in
whole
or
in
part
by
the
United
States
government.
In
addition,
certain
of
the
patent
rights
that
do
not
cover
trigriluzole
were
co-owned
by
Rutgers,
and
thus,
we
took
assignment
of
these
patent
rights
subject
to
the
co-ownership
interest
of
Rutgers.
Under
the
agreement,
we
are
obligated
to
use
commercially
reasonable
efforts
to
diligently
commercialize
and
develop
markets
for
the
patent
products.
As
consideration
for
this
assignment
of
patent
rights,
we
paid
ALS
Biopharma
$2.5
million
between
August
2015
and
November
2016
as
funding
for
research
to
be
performed
by
ALS
Biopharma
in
connection
with
a
mutually
agreed
upon
research
plan.
We
are
also
obligated
to
pay
regulatory
milestone
payments
of
$3.0
million
upon
a
specified
regulatory
approval
for
the
first
licensed
product
under
the
agreement
as
well
as
additional
milestone
payments
of
$1.0
million
for
each
licensed
product
that
completes
the
specified
regulatory
milestone
thereafter.
We
are
also
obligated
to
make
royalty
payments
of
a
low
single-digit
percentage
based
on
net
sales
of
products
licensed
under
the
agreement,
payable
on
a
quarterly
basis.
Equity Consideration
As
part
of
the
agreement,
we
also
issued
to
ALS
Biopharma
50,000
common
shares
as
well
as
two
warrants
to
purchase
a
total
of
600,000
common
shares
with
an
exercise
price
of
$5.60
per
share,
of
which
275,000
shares
were
immediately
exercisable
at
issuance
and
the
remaining
325,000
shares
became
exercisable
upon
our
achievement
of
a
specified
regulatory
milestone.
This
milestone
was
achieved
in
May
2016.
We
also
agreed
to
grant
specified
preemptive
rights
to
ALS
Biopharma
to
participate
in
equity
offerings
that
are
open
to
our
other
shareholders.
In
January
2018,
ALS
Biopharma
exercised
a
warrant
for
the
purchase
of
275,000
shares
through
a
net
share
settlement.
The
Company
issued
228,119
shares
as
a
result
of
the
exercise.
Term and Termination
The
agreement
terminates
on
a
country-by-country
basis
as
the
last
patent
rights
expire
in
each
such
country.
Our
current
patent
rights
consist
of
owning
several
families
of
patent
applications.
If
a
patent
covering
trigriluzole
issues
from
one
of
these
pending
patent
applications,
it
would
have
a
45
Table
of
Contents
statutory
expiration
date
in
2036.
ALS
Biopharma
has
the
right
to
terminate
the
agreement
or
its
applicability
to
one
or
more
countries
upon
30
days'
prior
written
notice
to
us
if
we
fail
to
make
an
undisputed
payment
within
the
60-day
period
after
receipt
of
a
termination
notice
or
if
we
commit
a
material
breach
of
the
agreement
that
is
not
cured
within
the
60-day
period
after
receipt
of
a
termination
notice.
We
have
the
right
to
terminate
the
agreement
if
ALS
Biopharma
commits
a
material
breach
of
the
agreement
that
is
not
cured
within
the
60-day
period
after
written
notice
thereof
from
us
or,
as
to
a
specific
country,
if
no
valid
claims
exist
in
such
country.
Both
we
and
ALS
Biopharma
may
terminate
the
agreement
as
to
a
specific
country
if
we
are
enjoined
from
exercising
our
patent
rights
under
the
agreement
in
such
country.
If
we
affirmatively
abandon
our
development,
research,
licensing
or
sale
of
all
products
covered
by
one
or
more
claims
of
any
patent
or
patent
application
assigned
under
the
agreement,
or
if
we
cease
operations,
we
have
agreed
to
reassign
the
applicable
patent
rights
back
to
ALS
Biopharma.
License Agreement with AstraZeneca
Overview
In
October
2016,
we
entered
into
an
exclusive
license
agreement
with
AstraZeneca
pursuant
to
which
AstraZeneca
granted
us
a
license
to
certain
patent
rights
and
know-how
for
all
human
uses
for
the
commercial
development,
manufacture,
distribution
and
use
of
any
products
or
processes
resulting
from
development
of
those
patent
rights,
including
BHV-5000
and
lanicemine.
Under
the
AstraZeneca
agreement,
we
have
the
right
to
sublicense
our
rights
under
the
agreement
subject
to
AstraZeneca's
prior
written
consent,
such
consent
not
to
be
unreasonably
withheld,
conditioned
or
delayed.
We
will
be
responsible
for
preparing,
filing,
prosecuting
and
maintaining
the
licensed
patents
and
applications,
and
for
Orange
Book
listing
any
listable
patents.
We
have
the
right
to
enforce
the
licensed
patents
and
to
defend
challenges
to
the
validity
or
enforceability
of
the
licensed
patents.
AstraZeneca,
however,
retains
the
right
to
apply
for
patent
term
extensions
for
the
licensed
patents.
We
may
not
assign
our
rights
or
delegate
our
obligations
under
the
AstraZeneca
agreement
without
AstraZeneca's
consent,
including
in
the
event
of
a
change
of
control.
In
exchange
for
these
rights,
in
addition
to
the
agreement
to
issue
equity
consideration
noted
below,
we
agreed
to
pay
AstraZeneca
an
upfront
payment,
milestone
payments
and
royalties
on
net
sales
of
licensed
products
under
the
agreement.
We
made
the
upfront
payment
to
AstraZeneca
of
$5.0
million
upon
signing
the
agreement.
The
milestone
payments
due
to
AstraZeneca
under
the
agreement
consist
of
regulatory
and
commercial
milestones.
The
regulatory
milestones
due
under
the
agreement
depend
on
the
indication
of
the
licensed
product
being
developed
as
well
as
the
territory
where
regulatory
approval
is
obtained.
Development
milestones
due
under
the
agreement
with
respect
to
Rett
syndrome
total
up
to
$30.0
million,
and,
for
any
indication
other
than
Rett
syndrome,
total
up
to
$60.0
million.
Commercial
milestones
are
based
on
net
sales
of
all
products
licensed
under
the
agreement
and
total
up
to
$120.0
million.
We
have
agreed
to
pay
tiered
royalties
of
mid
single-digit
to
low
double-digit
percentages
based
on
net
sales
of
products
licensed
under
the
agreement.
If
we
receive
revenue
from
sublicensing
any
of
our
rights
under
the
agreement,
we
are
also
obligated
to
pay
a
portion
of
that
revenue
to
AstraZeneca.
Our Development, Regulatory and Commercialization Obligations
Under
the
agreement,
we
are
obligated
to
use
commercially
reasonable
efforts
to
develop,
and
obtain
and
maintain
regulatory
approvals
for,
licensed
products
using
the
rights
we
have
licensed
from
AstraZeneca,
including
providing
AstraZeneca
with
annual
reports
of
our
development
activities.
With
respect
to
any
of
the
licensed
products,
we
are
solely
responsible
for
all
development,
regulatory
and
commercial
activities
and
costs.
Following
our
first
commercial
sale
of
a
product,
we
must
provide
AstraZeneca
with
periodic
reports
of
our
commercial
activities.
AstraZeneca
agreed
to
use
46
Table
of
Contents
commercially
reasonable
efforts
to
transfer
all
of
its
regulatory
documentation
related
to
BHV-5000
and
lanicemine
in
each
country
to
us,
including
all
INDs,
NDAs
and
approvals,
promptly
following
the
effective
date
of
the
agreement.
Right of First Negotiation
After
we
receive
topline
data
from
the
first
Phase
2b
study
of
a
product
candidate
licensed
under
the
agreement,
we
must
provide
notice
and
a
summary
of
the
data
to
AstraZeneca.
AstraZeneca
will
then
have
a
period
of
time
to
exercise
its
right
of
first
negotiation
to
regain
its
intellectual
property
rights
or
enter
into
a
sublicense
agreement
with
us.
If
AstraZeneca
does
not
give
notice
of
its
intent
to
exercise
its
right
of
first
negotiation
during
this
time
period,
or
we
do
not
execute
a
definitive
agreement
within
an
additional
time
period,
we
will
have
the
sole
right,
in
our
discretion,
to
negotiate
and
execute
any
agreement
with
third
parties,
or
to
retain
our
rights.
Equity Consideration
As
part
of
the
consideration,
we
agreed
to
issue
to
AstraZeneca
common
shares
in
the
amount
of
$5.0
million
if
we
completed
a
financing
within
specified
parameters.
This
condition
was
satisfied
upon
the
closing
of
our
Series
A
preferred
share
financing,
at
which
time
we
issued
538,150
Series
A
preferred
shares
to
AstraZeneca
which,
at
the
completion
of
our
IPO,
automatically
converted
into
538,150
common
shares.
In
addition,
we
agreed
to
issue
to
AstraZeneca
common
shares
in
the
amount
of
$5.0
million
upon
the
completion
of
specified
events,
including
upon
an
IPO.
In
satisfaction
of
this
obligation,
in
May
2017
upon
the
completion
of
our
IPO,
we
issued
an
additional
538,149
common
shares
to
AstraZeneca.
Term and Termination
The
agreement
will
terminate
upon
the
expiration
of
the
last
royalty
term
for
the
last
licensed
product
under
the
agreement.
Each
royalty
term
begins
on
the
date
of
the
first
commercial
sale
of
the
applicable
licensed
product
in
the
applicable
country
and
ends
on
the
later
of
10
years
from
such
first
commercial
sale
or
the
expiration
of
the
last
to
expire
of
the
applicable
patents
in
that
country.
The
patent
applications
related
to
BHV-5000
would,
if
issued,
have
a
statutory
expiration
date
in
2033.
Either
party
may
terminate
the
agreement
upon
the
other
party's
uncured
material
breach
or
upon
insolvency
or
bankruptcy.
AstraZeneca
also
has
the
right
to
terminate
the
agreement
in
certain
circumstances.
We
have
the
right
to
terminate
the
agreement
without
cause.
In
the
event
the
agreement
is
terminated
in
its
entirety
for
any
reason,
all
rights
and
licenses
granted
to
us
by
AstraZeneca
under
the
agreement,
and
all
sublicenses
granted
by
us
under
the
agreement,
immediately
terminate,
and
we
are
required
to
assign
to
AstraZeneca
all
of
the
regulatory
documentation
applicable
to
any
licensed
compound
or
licensed
product
owned
or
controlled
by
us
or
our
affiliates,
to
transfer
control
of
any
clinical
studies
involving
licensed
products
to
AstraZeneca
and
continue
such
studies
at
our
cost
for
six
months,
and
to
assign
to
AstraZeneca
all
of
our
agreements
with
third
parties
that
are
reasonably
necessary
for
the
exploitation
of
the
licensed
products.
Agreements with Catalent U.K. Swindon Zydis Limited
In
March
2015,
we
entered
into
a
development
and
license
agreement
with
Catalent
pursuant
to
which
we
obtained
certain
license
rights
to
the
Zydis
ODT
technology
in
BHV-0223.
BHV-0223
was
developed
under
this
agreement.
Catalent
has
manufactured
BHV-0223
for
clinical
testing
and
we
expect
them
to
do
so
for
commercial
supply.
We
made
an
upfront
payment
of
$0.3
million
to
Catalent
upon
entering
into
the
agreement
and
are
obligated
to
pay
Catalent
up
to
$1.6
million
upon
the
achievement
of
specified
regulatory
and
commercial
milestones.
We
are
also
obligated
to
make
royalty
payments
of
a
low
single-digit
percentage
based
on
net
sales
of
products
licensed
under
the
agreement.
47
Table
of
Contents
Under
the
agreement,
we
are
responsible
for
conducting
clinical
trials
and
for
preparing
and
filing
regulatory
submissions.
We
have
the
right
to
sublicense
our
rights
under
the
agreement
subject
to
Catalent's
prior
written
consent.
Catalent
has
the
right
to
enforce
the
patents
covering
the
Zydis
technology
and
to
defend
any
allegation
that
a
formulation
using
Zydis
technology,
such
as
BHV-0223,
infringes
a
third
party's
patent.
The
development
and
license
agreement
terminates
on
a
country-by-country
basis
upon
the
later
of
(i)
10
years
after
the
launch
of
the
most
recently
launched
product
in
such
country
and
(ii)
the
expiration
of
the
last
valid
claim
covering
each
product
in
such
country,
unless
earlier
voluntarily
terminated
by
us.
Our
current
patent
rights
with
respect
to
BHV-0223
consist
of
owning
several
patent
applications.
If
a
patent
covering
BHV-0223
issues
from
one
of
these
pending
patent
applications,
it
would
have
a
statutory
expiration
date
in
2035.
The
agreement
automatically
extends
for
one-year
terms
unless
either
party
gives
advance
notice
of
intent
to
terminate.
In
addition,
Catalent
may
terminate
the
agreement
either
in
its
entirety
or
terminate
the
exclusive
nature
of
the
agreement
on
a
country-by-
country
basis
if
we
fail
to
meet
specified
development
timelines,
which
we
may
extend
in
certain
circumstances.
In
January
2018,
we
entered
into
a
development
and
license
agreement
with
Catalent
pursuant
to
which
we
obtained
certain
license
rights
to
the
Zydis
ODT
technology
for
use
with
rimegepant.
If
we
obtain
regulatory
approval
or
launch
a
rimegepant
product
that
utilizes
the
Zydis
ODT
technology,
we
are
obligated
to
pay
Catalent
up
to
$1.5
million
upon
the
achievement
of
specified
regulatory
and
commercial
milestones.
If
we
commercialize
a
rimegepant
product
that
utilizes
the
Zydis
ODT
technology,
the
agreement
permits
us
to
purchase
the
commercial
product
from
Catalent
at
a
fixed
price,
inclusive
of
a
royalty.
Under
the
agreement,
Catalent
agreed
that
it
will
not
develop
or
manufacture
a
formulation
of
any
oral
CGRP
compound
using
Zydis
ODT
technology
for
itself
or
a
third
party
for
a
specified
period
of
time,
subject
to
certain
minimum
commercial
revenues.
License Agreement with Yale University
In
September
2013,
we
entered
into
an
exclusive
license
agreement
with
Yale
to
obtain
rights
under
certain
patent
rights
for
the
commercial
development,
manufacture,
distribution,
use
and
sale
of
products
and
processes
resulting
from
the
development
of
those
patent
rights
related
to
the
use
of
riluzole
in
treating
various
neurological
conditions
such
as
general
anxiety
disorder,
post-traumatic
stress
disorder
and
depression.
As
part
of
the
consideration
for
this
license,
we
issued
Yale
250,000
of
our
common
shares
and
granted
Yale
the
right
to
purchase
up
to
10%
of
the
securities
issued
in
each
of
our
equity
offerings.
Under
the
terms
of
the
agreement,
in
the
event
of
a
change
of
control,
as
defined
in
the
agreement
to
include
our
IPO,
we
will
be
obligated
to
pay
to
Yale
the
lesser
of
(i)
5%
of
the
dollar
value
of
all
initial
and
future
potential
consideration
paid
or
payable
by
the
acquirer
or
(ii)
$1.5
million
as
a
change-of-control
payment.
In
the
event
of
an
IPO,
which
we
completed
in
May
2017,
the
change-of-control
payment
to
Yale
is
reduced
by
the
value
of
Yale's
equity
investment
in
our
company.
The
value
of
this
change-of-control
payment
was
determined
to
be
zero
at
the
expiration
of
the
lockup
period
in
October
2017
since
the
value
of
shares
at
the
end
of
the
lockup
were
worth
more
than
their
initial
equity
investment.
In
addition,
we
agreed
to
pay
Yale
regulatory
milestone
payments
of
up
to
$2.0
million
and
annual
royalty
payments
of
a
low-single
digit
percentage
based
on
net
sales
of
products
from
the
licensed
patents,
subject
to
a
minimum
amount
of
up
to
$1.0
million
per
year.
If
we
grant
any
sublicense
rights
under
the
agreement,
we
must
pay
Yale
a
low
single-digit
percentage
of
sublicense
income
that
we
receive.
The
agreement
also
requires
us
to
meet
certain
due
diligence
requirements
based
upon
specified
milestones.
We
can
elect
to
extend
the
due
diligence
requirements
by
a
maximum
of
one
year
upon
payments
of
up
to
$150,000
to
Yale.
We
are
also
required
to
reimburse
Yale
for
any
fees
that
Yale
48
Table
of
Contents
incurs
related
to
the
filing,
prosecution,
defending
and
maintenance
of
patent
rights
licensed
under
the
agreement.
In
the
event
that
we
fail
to
make
any
payments,
commit
a
material
breach,
fail
to
maintain
adequate
insurance
or
if
we
challenge
the
patent
rights
of
Yale,
Yale
can
terminate
the
agreement.
We
can
terminate
the
agreement
with
90-days'
notice
if
Yale
commits
a
material
breach
or
in
a
specific
country
if
there
are
no
valid
patent
rights.
The
agreement
expires
on
a
country-by-
country
basis
upon
the
later
of
expiration
of
the
patent
rights
or
ten
years
from
the
date
of
first
sale.
Any
patent
that
has
issued
or
does
issue
from
one
of
the
pending
patent
applications
under
this
agreement
would
have
a
statutory
expiration
date
in
2026.
License Agreement with The General Hospital Corporation d/b/a Massachusetts General Hospital
In
September
2014,
we
entered
into
a
license
agreement
with
The
General
Hospital
Corporation
d/b/a
Massachusetts
General
Hospital
("MGH")
pursuant
to
which
MGH
granted
us
a
license
under
certain
patent
rights
for
the
commercial
development,
manufacture,
distribution
and
use
of
any
products
or
processes
resulting
from
development
of
those
patent
rights,
related
to
treating
depression
with
a
combination
of
ketamine
and
scopolamine.
Under
this
agreement,
we
paid
MGH
an
upfront
license
fee
of
$20,000.
We
are
also
obligated
to
pay
MGH
annual
license
maintenance
fees
up
to
$50,000,
beginning
in
2017.
In
addition,
we
are
obligated
to
pay
MGH
future
milestone
payments
of
up
to
$750,000
upon
the
achievement
of
specified
clinical
and
regulatory
milestones
and
up
to
$2.5
million
upon
the
achievement
of
specified
commercial
milestones.
We
have
also
agreed
to
pay
MGH
royalties
of
a
low
single-digit
percentage
based
on
net
sales
of
products
licensed
under
the
agreement.
We
are
also
required
to
reimburse
MGH
for
any
fees
that
MGH
incurs
related
to
the
filing,
prosecution,
defending
and
maintenance
of
patent
rights
licensed
under
the
agreement.
If
we
receive
revenue
from
sublicensing
any
of
our
rights
under
the
agreement,
we
are
also
obligated
to
pay
a
portion
of
that
revenue
to
MGH.
The
agreement
expires
upon
the
expiration
of
the
patent
rights
licensed
under
the
agreement,
which
could
occur
as
early
as
2033,
unless
earlier
terminated
by
either
party.
License Agreement with Rutgers, The State University of New Jersey
In
June
2016,
we
entered
into
an
exclusive
license
agreement
with
Rutgers,
The
State
University
of
New
Jersey,
licensing
several
patents
and
patent
applications
related
to
the
use
of
riluzole
to
treat
various
cancers.
Certain
of
the
Rutgers
patent
rights
were
developed
using
federal
funding.
Accordingly,
the
U.S.
Government
has
certain
rights
in
the
Rutgers
patents
and
applications.
We
have
the
right
to
sublicense
our
rights
under
the
Rutgers
Agreement.
We
are
responsible
for
prosecuting
and
maintaining
the
patents
and
applications
in
the
Rutgers
patent
rights,
and
Rutgers
has
an
opportunity
to
review
and
comment
on
correspondences
with
government
patent
offices.
We
have
the
right
to
prepare
any
documents
related
to
the
application
for
an
extension
of
the
term
of
any
licensed
patent
and
to
list
any
listable
patents
in
the
Orange
Book.
We
have
the
first
right
to
enforce
the
licensed
patents.
Under
this
agreement,
we
are
required
to
pay
Rutgers
annual
license
maintenance
fees
of
up
to
$25,000
per
year
until
the
first
commercial
sale
of
a
licensed
product.
We
are
also
obligated
to
pay
Rutgers
payments
totaling
up
to
$825,000
upon
the
achievement
of
specified
clinical
and
regulatory
milestones.
We
also
agreed
to
pay
Rutgers
royalties
of
a
low
single-digit
percentage
based
on
net
sales
of
licensed
products
sold
by
us,
our
affiliates
or
sublicensees,
subject
to
a
minimum
of
up
to
$100,000
per
year.
If
we
grant
any
sublicense
rights
under
the
license
agreement,
we
must
pay
Rutgers
a
low
double-digit
percentage
of
sublicense
income
we
receive.
In
the
event
that
we
experience
a
change
of
control
or
sale
of
substantially
all
of
our
assets
prior
to
the
initiation
of
a
Phase
3
trial
related
to
products
licensed
under
the
agreement,
and
such
change
of
control
or
sale
results
in
a
full
liquidation
of
our
company,
we
will
be
obligated
to
pay
Rutgers
a
change-of-control
fee
equal
to
0.3%
of
the
total
value
of
the
transaction,
but
not
less
than
$100,000.
49
Table
of
Contents
The
agreement
also
requires
us
to
meet
certain
due
diligence
requirements
based
upon
specified
milestones.
We
can
elect
to
extend
the
due
diligence
requirements
by
a
maximum
of
one
year
upon
payments
to
Rutgers
of
up
to
$500,000
in
the
aggregate.
The
agreement
expires
on
a
country-by-country
basis
upon
the
later
of
expiration
of
the
last
patent
rights
to
expire
in
such
country,
which
could
occur
as
early
as
2024,
or
ten
years
from
the
date
of
first
commercial
sale
of
a
licensed
product,
unless
terminated
by
either
party.
Government
Regulation
In
the
United
States,
the
FDA
regulates
drugs
under
the
Federal
Food,
Drug
and
Cosmetic
Act
("FDCA")
and
its
implementing
regulations.
The
process
of
obtaining
regulatory
approvals
and
the
subsequent
compliance
with
appropriate
federal,
state,
local
and
foreign
statutes
and
regulations
requires
the
expenditure
of
substantial
time
and
financial
resources.
Failure
to
comply
with
the
applicable
U.S.
requirements
at
any
time
during
the
product
development
process,
approval
process
or
after
approval
may
subject
an
applicant
and/or
sponsor
to
a
variety
of
administrative
or
judicial
sanctions,
including
imposition
of
a
clinical
hold,
refusal
by
the
FDA
to
approve
applications,
withdrawal
of
an
approval,
import/export
delays,
issuance
of
warning
letters
and
other
types
of
enforcement
letters,
product
recalls,
product
seizures,
total
or
partial
suspension
of
production
or
distribution,
injunctions,
fines,
refusals
of
government
contracts,
restitution,
disgorgement
of
profits,
or
civil
or
criminal
investigations
and
penalties
brought
by
the
FDA
and
the
Department
of
Justice
or
other
governmental
entities.
The
clinical
testing,
manufacturing,
labeling,
storage,
distribution,
record
keeping,
advertising,
promotion,
import,
export
and
marketing,
among
other
things,
of
our
product
candidates
are
governed
by
extensive
regulation
by
governmental
authorities
in
the
United
States
and
other
countries.
The
FDA,
under
the
FDCA,
regulates
pharmaceutical
products
in
the
United
States.
The
steps
required
before
a
drug
may
be
approved
for
marketing
in
the
United
States
generally
include:
•
•
•
•
•
•
•
preclinical
laboratory
tests
and
animal
tests
conducted
under
GLP;
the
submission
to
the
FDA
of
an
IND
application
for
human
clinical
testing,
which
must
become
effective
before
human
clinical
trials
commence;
approval
by
an
independent
institutional
review
board
("IRB"),
representing
each
clinical
site
before
each
clinical
trial
may
be
initiated;
adequate
and
well-controlled
human
clinical
trials
to
establish
the
safety
and
efficacy
of
the
product
for
each
indication
and
conducted
in
accordance
with
Good
Clinical
Practices
("GCP");
the
preparation
and
submission
to
the
FDA
of
an
NDA;
FDA
acceptance,
review
and
approval
of
the
NDA,
which
might
include
an
Advisory
Committee
review;
satisfactory
completion
of
an
FDA
inspection
of
the
manufacturing
facilities
at
which
the
product,
or
components
thereof,
are
made
to
assess
compliance
with
current
Good
Manufacturing
Practices
("cGMPs").
The
testing
and
approval
process
requires
substantial
time,
effort
and
financial
resources,
and
the
receipt
and
timing
of
any
approval
is
uncertain.
The
FDA
may
suspend
clinical
trials
at
any
time
on
various
grounds,
including
a
finding
that
the
subjects
or
patients
are
being
exposed
to
an
unacceptable
health
risk.
50
Table
of
Contents
Preclinical and Human Clinical Trials in Support of an NDA
Preclinical
studies
include
laboratory
evaluations
of
the
product
candidate,
as
well
as
in vitro and
animal
studies
to
assess
the
potential
safety
and
efficacy
of
the
product
candidate.
The
conduct
of
preclinical
trials
is
subject
to
federal
regulations
and
requirements
including
GLP
regulations.
The
results
of
the
preclinical
studies,
together
with
manufacturing
information
and
analytical
data,
among
other
things,
are
submitted
to
the
FDA
as
part
of
the
IND,
which
must
become
effective
before
clinical
trials
may
be
commenced.
The
IND
will
become
effective
automatically
30
days
after
receipt
by
the
FDA,
unless
the
FDA
raises
concerns
or
questions
about
the
conduct
of
the
trials
as
outlined
in
the
IND
prior
to
that
time.
In
this
case,
the
IND
sponsor
and
the
FDA
must
resolve
any
outstanding
concerns
before
clinical
trials
can
proceed.
The
FDA
may
nevertheless
initiate
a
clinical
hold
after
the
30
days
if,
for
example,
significant
public
health
risks
arise.
Clinical
trials
involve
the
administration
of
the
product
candidate
to
human
subjects
under
the
supervision
of
qualified
investigators
in
accordance
with
GCP
requirements.
Each
clinical
trial
must
be
reviewed
and
approved
by
an
IRB
at
each
of
the
sites
at
which
the
trial
will
be
conducted.
The
IRB
will
consider,
among
other
things,
ethical
factors,
the
safety
of
human
subjects
and
the
possible
liability
of
the
institution.
Clinical
trials
are
typically
conducted
in
three
sequential
phases
prior
to
approval,
but
the
phases
may
overlap
or
be
combined.
These
phases
generally
include
the
following:
Phase 1.
Phase
1
clinical
trials
represent
the
initial
introduction
of
a
product
candidate
into
human
subjects,
frequently
healthy
volunteers.
In
Phase
1,
the
product
candidate
is
usually
tested
for
safety,
including
adverse
effects,
dosage
tolerance,
absorption,
distribution,
metabolism,
excretion
and
pharmacodynamics.
Phase 2.
Phase
2
clinical
trials
usually
involve
studies
in
a
limited
patient
population
to
(1)
evaluate
the
efficacy
of
the
product
candidate
for
specific
indications,
(2)
determine
dosage
tolerance
and
optimal
dosage
and
(3)
identify
possible
adverse
effects
and
safety
risks.
Phase 3.
If
a
product
candidate
is
found
to
be
potentially
effective
and
to
have
an
acceptable
safety
profile
in
Phase
2
clinical
trials,
the
clinical
trial
program
will
be
expanded
to
Phase
3
clinical
trials
to
further
demonstrate
clinical
efficacy,
optimal
dosage
and
safety
within
an
expanded
patient
population
at
geographically
dispersed
clinical
trial
sites.
Phase 4.
clinical
trials
may
be
conducted
after
approval
to
gain
additional
experience
from
the
treatment
of
patients
in
the
intended
therapeutic
indication
and
to
document
a
clinical
benefit
in
the
case
of
drugs
approved
under
accelerated
approval
regulations,
or
when
otherwise
requested
by
the
FDA
in
the
form
of
post-market
requirements
or
commitments.
Failure
to
promptly
conduct
any
required
Phase
4
clinical
trials
could
result
in
enforcement
action
or
withdrawal
of
approval.
A
Phase
2/3
trial
design,
which
we
are
using
in
our
trigriluzole
and
BHV-5000
development
programs,
is
often
used
in
the
development
of
pharmaceutical
and
biological
products.
The
trial
includes
Phase
2
elements,
such
as
an
early
interim
analysis
of
safety
or
activity,
and
Phase
3
elements,
such
as
larger
patient
populations
with
less
restrictive
enrollment
criteria.
The
early
interim
analysis
of
clinical
or
physiologic
activity
and/or
safety
allows
the
study
to
be
stopped,
changed
or
continued
before
a
large
number
of
patients
have
been
enrolled,
while
still
allowing
all
data
from
enrolled
patients
to
count
in
the
analysis
used
to
support
approval.
Submission and Review of an NDA
The
results
of
preclinical
studies
and
clinical
trials,
together
with
detailed
information
on
the
product's
manufacture,
composition,
quality,
controls
and
proposed
labeling,
among
other
things,
are
submitted
to
the
FDA
in
the
form
of
an
NDA,
requesting
approval
to
market
the
product.
The
51
Table
of
Contents
application
must
be
accompanied
by
a
significant
user
fee
payment,
which
typically
increases
annually,
although
waivers
may
be
granted
in
limited
cases.
The
FDA
has
substantial
discretion
in
the
approval
process
and
may
refuse
to
accept
any
application
or
decide
that
the
data
is
insufficient
for
approval
and
require
additional
preclinical,
clinical
or
other
studies.
Once
an
NDA
has
been
accepted
for
filing,
which
occurs,
if
at
all,
60
days
after
submission,
the
FDA
sets
a
user
fee
goal
date
that
informs
the
applicant
of
the
specific
date
by
which
the
FDA
intends
to
complete
its
review.
We
will
be
required
to
pay
a
user
fee
to
the
FDA
to
review
the
NDA,
unless
we
receive
a
waiver
or
qualify
for
an
exemption.
This
is
typically
10
months
from
the
date
that
the
FDA
receives
the
application-filing
for
standard
review
NDAs
(
i.e. ,
NDAs
seeking
approval
of
drugs
that
are
not
new
molecular
entities).
The
review
process
can
be
extended
by
FDA
requests
for
additional
information
or
clarification.
The
FDA
reviews
NDAs
to
determine,
among
other
things,
whether
the
proposed
product
is
safe
and
effective
for
its
intended
use,
and
whether
the
product
is
being
manufactured
in
accordance
with
cGMPs
to
assure
and
preserve
the
product's
identity,
strength,
quality
and
purity.
Before
approving
an
NDA,
the
FDA
typically
will
inspect
the
facilities
at
which
the
product
is
manufactured
and
will
not
approve
the
product
unless
the
manufacturing
facilities
comply
with
cGMPs.
Additionally,
the
FDA
will
typically
inspect
one
or
more
clinical
trial
sites
for
compliance
with
GCP
and
integrity
of
the
data
supporting
safety
and
efficacy.
During
the
approval
process,
the
FDA
also
will
determine
whether
a
risk
evaluation
and
mitigation
strategy
("REMS")
is
necessary
to
assure
the
safe
use
of
the
product.
If
the
FDA
concludes
a
REMS
is
needed,
the
sponsor
of
the
application
must
submit
a
proposed
REMS,
and
the
FDA
will
not
approve
the
application
without
an
approved
REMS,
if
required.
A
REMS
can
substantially
increase
the
costs
of
obtaining
approval.
The
FDA
could
also
require
a
special
warning,
known
as
a
boxed
warning,
to
be
included
in
the
product
label
in
order
to
highlight
a
particular
safety
risk.
The
FDA
may
also
convene
an
advisory
committee
of
external
experts
to
provide
input
on
certain
review
issues
relating
to
risk,
benefit
and
interpretation
of
clinical
trial
data.
The
FDA
may
delay
approval
of
an
NDA
if
applicable
regulatory
criteria
are
not
satisfied
and/or
the
FDA
requires
additional
testing
or
information.
The
FDA
may
require
post-marketing
testing
and
surveillance
to
monitor
safety
or
efficacy
of
a
product.
On
the
basis
of
the
FDA's
evaluation
of
the
NDA
and
accompanying
information,
including
the
results
of
the
inspection
of
the
manufacturing
facilities,
the
FDA
will
issue
either
an
approval
of
the
NDA
or
a
Complete
Response
Letter,
detailing
the
deficiencies
in
the
submission
and
the
additional
testing
or
information
required
for
reconsideration
of
the
application.
Even
with
submission
of
this
additional
information,
the
FDA
may
ultimately
decide
that
the
application
does
not
satisfy
the
regulatory
criteria
for
approval.
Post-Approval Requirements
Approved
drugs
that
are
manufactured
or
distributed
in
the
United
States
pursuant
to
FDA
approvals
are
subject
to
pervasive
and
continuing
regulation
by
the
FDA,
including,
among
other
things,
requirements
relating
to
recordkeeping,
periodic
reporting,
product
sampling
and
distribution,
advertising
and
promotion
and
reporting
of
adverse
experiences
with
the
product.
After
approval,
most
changes
to
the
approved
product,
such
as
adding
new
indications
or
other
labeling
claims
and
some
manufacturing
and
supplier
changes
are
subject
to
prior
FDA
review
and
approval.
There
also
are
continuing,
annual
user
fee
requirements
for
marketed
products
and
the
establishments
at
which
such
products
are
manufactured,
as
well
as
new
application
fees
for
certain
supplemental
applications.
The
FDA
may
impose
a
number
of
post-approval
requirements
as
a
condition
of
approval
of
an
NDA.
For
example,
the
FDA
may
require
post-marketing
testing,
including
Phase
4
clinical
trials,
and
surveillance
programs
to
further
assess
and
monitor
the
product's
safety
and
effectiveness
after
commercialization.
The
FDA
may
also
require
a
REMS,
which
could
involve
requirements
for,
among
52
Table
of
Contents
other
things,
medication
guides,
special
trainings
for
prescribers
and
dispensers,
patient
registries,
and
elements
to
assure
safe
use.
In
addition,
entities
involved
in
the
manufacture
and
distribution
of
approved
drugs
are
required
to
register
their
establishments
with
the
FDA
and
state
agencies,
and
are
subject
to
periodic
unannounced
inspections
by
the
FDA
and
these
state
agencies
for
compliance
with
cGMP
requirements.
The
FDA
has
promulgated
specific
requirements
for
drug
cGMPs.
Changes
to
the
manufacturing
process
are
strictly
regulated
and
often
require
prior
FDA
approval
before
being
implemented.
FDA
regulations
also
require
investigation
and
correction
of
any
deviations
from
cGMP
requirements
and
impose
reporting
and
documentation
requirements
upon
the
sponsor
and
any
third-party
manufacturers
that
the
sponsor
may
decide
to
use.
Accordingly,
manufacturers
must
continue
to
expend
time,
money,
and
effort
in
the
area
of
production
and
quality
control
to
maintain
cGMP
compliance.
Once
an
approval
is
granted,
the
FDA
may
issue
enforcement
letters
or
withdraw
the
approval
if
compliance
with
regulatory
requirements
and
standards
is
not
maintained
or
if
problems
occur
after
the
product
reaches
the
market.
Corrective
action
could
delay
product
distribution
and
require
significant
time
and
financial
expenditures.
Later
discovery
of
previously
unknown
problems
with
a
product,
including
AEs
of
unanticipated
severity
or
frequency,
or
with
manufacturing
processes,
or
failure
to
comply
with
regulatory
requirements,
may
result
in
revisions
to
the
approved
labeling
to
add
new
safety
information;
imposition
of
post-
market
studies
or
clinical
trials
to
assess
new
safety
risks;
or
imposition
of
distribution
or
other
restrictions
under
a
REMS
program.
Other
potential
consequences
include,
among
other
things:
•
•
•
•
•
restrictions
on
the
marketing
or
manufacturing
of
the
product,
suspension
of
the
approval,
complete
withdrawal
of
the
product
from
the
market
or
product
recalls;
fines,
warning
letters
or
holds
on
post-approval
clinical
trials;
refusal
of
the
FDA
to
approve
applications
or
supplements
to
approved
applications,
or
suspension
or
revocation
of
product
approvals;
product
seizure
or
detention,
or
refusal
to
permit
the
import
or
export
of
products;
or
injunctions
or
the
imposition
of
civil
or
criminal
penalties.
The
FDA
strictly
regulates
marketing,
labeling,
advertising
and
promotion
of
products
that
are
placed
on
the
market.
Drugs
may
be
promoted
only
for
the
approved
indications
and
in
accordance
with
the
provisions
of
the
approved
label.
The
FDA
and
other
agencies
actively
enforce
the
laws
and
regulations
prohibiting
the
promotion
of
off-label
uses,
and
a
company
that
is
found
to
have
improperly
promoted
off-label
uses
may
be
subject
to
significant
liability,
including
investigation
by
federal
and
state
authorities.
Section 505(b)(2) NDAs
As
an
alternative
path
to
FDA
approval
for
modifications
to
formulations
or
uses
of
drugs
previously
approved
by
the
FDA,
an
applicant
may
submit
an
NDA
under
Section
505(b)(2)
of
the
FDCA.
Section
505(b)(2)
was
enacted
as
part
of
the
Hatch-Waxman
Amendments.
A
Section
505(b)(2)
NDA
is
an
application
that
contains
full
reports
of
investigations
of
safety
and
effectiveness,
but
where
at
least
some
of
the
information
required
for
approval
comes
from
studies
not
conducted
by,
or
for,
the
applicant
and
for
which
the
applicant
has
not
obtained
a
right
of
reference
or
use
from
the
person
by
or
for
whom
the
investigations
were
conducted.
This
type
of
application
permits
reliance
for
such
approvals
on
literature
or
on
an
FDA
finding
of
safety,
effectiveness
or
both
for
an
approved
drug
product.
As
such,
under
Section
505(b)(2),
the
FDA
may
rely,
for
approval
of
an
NDA,
on
data
not
developed
by
the
applicant.
The
FDA
may
also
require
companies
to
perform
additional
studies
or
53
Table
of
Contents
measurements,
including
clinical
trials,
to
support
the
change
from
the
approved
branded
reference
drug.
The
FDA
may
then
approve
the
new
product
candidate
for
the
new
indication
sought
by
the
505(b)(2)
applicant.
Our
clinical
programs
for
trigriluzole
for
the
treatment
of
SCA
and
BHV-0223
for
the
treatment
of
ALS
are
each
based
on
a
regulatory
pathway
under
section
505(b)(2)
of
the
FDCA
that
allows
reference
to
data
on
riluzole
for
the
purpose
of
safety
assessments.
Orange Book Listing
In
seeking
approval
for
a
drug
through
an
NDA,
including
a
505(b)(2)
NDA,
applicants
are
required
to
list
with
the
FDA
certain
patents
whose
claims
cover
the
applicant's
product
or
an
approved
method
of
using
the
product.
Upon
approval
of
an
NDA,
each
of
the
patents
listed
in
the
application
for
the
drug
is
then
published
in
the
FDA's
Approved
Drug
Products
with
Therapeutic
Equivalence
Evaluations,
known
as
the
Orange
Book.
Any
applicant
who
files
an
Abbreviated
New
Drug
Application
("ANDA"),
seeking
approval
of
a
generic
equivalent
version
of
a
drug
listed
in
the
Orange
Book
or
a
505(b)(2)
NDA
referencing
a
drug
listed
in
the
Orange
Book
must
certify,
for
each
patent
listed
in
the
Orange
Book
for
the
referenced
drug,
to
the
FDA
that
(1)
no
patent
information
on
the
drug
product
that
is
the
subject
of
the
application
has
been
submitted
to
the
FDA,
(2)
such
patent
has
expired,
(3)
if
such
patent
has
not
expired,
the
date
on
which
it
expires
or
(4)
such
patent
is
invalid,
unenforceable,
or
will
not
be
infringed
upon
by
the
manufacture,
use
or
sale
of
the
drug
product
for
which
the
application
is
submitted.
The
fourth
certification
described
above
is
known
as
a
paragraph
IV
certification.
A
notice
of
the
paragraph
IV
certification
must
be
provided
to
each
owner
of
the
patent
that
is
the
subject
of
the
certification
and
to
the
holder
of
the
approved
NDA
to
which
the
ANDA
or
505(b)(2)
application
refers.
The
applicant
may
also
elect
to
submit
a
"section
viii"
statement
certifying
that
its
proposed
label
does
not
contain
(or
carves
out)
any
language
regarding
the
patented
method-of-
use
rather
than
certify
to
a
listed
method-of-use
patent.
This
section
viii
statement
does
not
require
notice
to
the
patent
holder
or
NDA
owner.
There
might
also
be
no
relevant
patent
certification.
If
the
reference
NDA
holder
and
patent
owners
assert
a
patent
challenge
directed
to
one
of
the
Orange
Book
listed
patents
within
45
days
of
the
receipt
of
the
paragraph
IV
certification
notice,
the
FDA
is
prohibited
from
approving
the
application
until
the
earlier
of
30
months
from
the
receipt
of
the
paragraph
IV
certification,
expiration
of
the
patent,
settlement
of
the
lawsuit,
or
a
decision
in
the
infringement
case
that
is
favorable
to
the
applicant.
Even
if
the
45
days
expire,
a
patent
infringement
lawsuit
can
be
brought
and
could
delay
market
entry,
but
it
would
not
extend
the
FDA-related
30-month
stay
of
approval.
The
ANDA
or
505(b)(2)
application
also
will
not
be
approved
until
any
applicable
non-patent
exclusivity
listed
in
the
Orange
Book
for
the
branded
reference
drug
has
expired
as
described
in
further
detail
below.
Non-Patent Exclusivity
In
addition
to
patent
exclusivity,
the
holder
of
the
NDA
for
the
listed
drug
may
be
entitled
to
a
period
of
non-patent
exclusivity,
during
which
the
FDA
cannot
approve
an
ANDA
or
505(b)(2)
application
that
relies
on
the
listed
drug.
A
drug,
including
one
approved
under
a
505(b)(2)
application,
may
obtain
a
three-year
period
of
non-patent
market
exclusivity
for
a
particular
condition
of
approval,
or
change
to
a
marketed
product,
such
as
a
new
formulation
for
a
previously
approved
product,
if
one
or
more
new
clinical
studies
(other
than
bioavailability
or
bioequivalence
studies)
was
essential
to
the
approval
of
the
application
and
was
conducted/sponsored
by
the
applicant.
Should
this
occur,
the
FDA
would
be
precluded
from
approving
any
ANDA
or
505(b)(2)
application
for
the
protected
modification
until
after
that
three-year
exclusivity
54
Table
of
Contents
period
has
run.
However,
the
FDA
can
accept
an
application
and
begin
the
review
process
during
the
three-year
exclusivity
period.
A
505(b)(2)
NDA
may
also
be
subject
to
a
five-year
exclusivity
period
for
a
new
chemical
entity,
whereby
the
FDA
will
not
accept
for
filing,
with
limited
exception,
a
product
seeking
to
rely
upon
the
FDA's
findings
of
safety
or
effectiveness
for
such
new
chemical
entity.
Orphan Drugs
Under
the
Orphan
Drug
Act,
the
FDA
may
grant
orphan
designation
to
a
drug
intended
to
treat
a
rare
disease
or
condition
affecting
fewer
than
200,000
individuals
in
the
United
States,
or
in
other
limited
cases.
Orphan
drug
designation
does
not
convey
any
advantage
in
or
shorten
the
duration
of
the
regulatory
review
and
approval
process,
though
companies
developing
orphan
drugs
may
be
eligible
for
certain
incentives,
including
tax
credits
for
qualified
clinical
testing.
In
addition,
an
NDA
for
a
product
that
has
received
orphan
drug
designation
is
not
subject
to
a
prescription
drug
user
fee
unless
the
application
includes
an
indication
other
than
the
rare
disease
or
condition
for
which
the
drug
was
designated.
A
Company
must
request
orphan
drug
designation
before
submitting
an
NDA.
Generally,
if
a
product
that
has
orphan
drug
designation
subsequently
receives
the
first
FDA
approval
for
the
disease
or
condition
for
which
it
has
such
designation,
the
product
is
entitled
to
orphan
drug
exclusivity,
which
means
that
the
FDA
may
not
approve
any
other
applications
to
market
the
same
active
moiety
for
the
same
indication
for
seven
years,
except
in
limited
circumstances,
such
as
another
drug's
showing
of
clinical
superiority
over
the
drug
with
orphan
exclusivity.
Competitors,
however,
may
receive
approval
of
different
active
moieties
for
the
same
indication
or
obtain
approval
for
the
same
active
moiety
for
a
different
indication.
In
some
cases,
orphan
drug
status
is
contingent
on
a
product
with
an
orphan
drug
designation
showing
that
it
is
clinically
superior
to
a
previously
approved
product
or
products.
Foreign Regulation
In
order
to
market
any
product
outside
of
the
United
States,
we
would
need
to
comply
with
numerous
and
varying
regulatory
requirements
of
other
countries
and
jurisdictions
regarding
quality,
safety
and
efficacy
and
governing,
among
other
things,
clinical
trials,
marketing
authorization,
commercial
sales
and
distribution
of
our
products.
Whether
or
not
we
obtain
FDA
approval
for
a
product,
we
would
need
to
obtain
the
necessary
approvals
by
the
comparable
foreign
regulatory
authorities
before
we
can
commence
clinical
trials
or
marketing
of
the
product
in
foreign
countries
and
jurisdictions.
Although
many
of
the
issues
discussed
above
with
respect
to
the
United
States
apply
similarly
in
the
context
of
the
European
Union
and
other
geographies,
the
approval
process
varies
between
countries
and
jurisdictions
and
can
involve
additional
product
testing
and
additional
administrative
review
periods.
The
time
required
to
obtain
approval
in
other
countries
and
jurisdictions
might
differ
from
and
be
longer
than
that
required
to
obtain
FDA
approval.
Regulatory
approval
in
one
country
or
jurisdiction
does
not
ensure
regulatory
approval
in
another,
but
a
failure
or
delay
in
obtaining
regulatory
approval
in
one
country
or
jurisdiction
may
negatively
impact
the
regulatory
process
in
others.
Coverage, Reimbursement and Pricing
Significant
uncertainty
exists
as
to
the
coverage
and
reimbursement
status
of
any
products
for
which
we
may
obtain
regulatory
approval.
In
the
United
States
and
foreign
markets,
sales
of
any
products
for
which
we
receive
regulatory
approval
for
commercial
sale
will
depend,
in
part,
on
the
availability
of
coverage
and
the
adequacy
of
reimbursement
from
third-party
payors.
Third-party
payors
include
government
authorities,
and
private
entities,
such
as
managed
care
organizations,
private
health
insurers
and
other
organizations.
The
process
for
determining
whether
a
third-party
payor
will
provide
coverage
for
a
product
may
be
separate
from
the
process
for
setting
the
reimbursement
rate
that
the
payor
will
pay
for
the
product.
Third-party
payors
may
limit
coverage
to
specific
products
on
an
55
Table
of
Contents
approved
list,
or
formulary,
which
might
not
include
all
of
the
FDA-approved
products
for
a
particular
indication.
Moreover,
a
third-party
payor's
decision
to
provide
coverage
for
a
product
does
not
imply
that
an
adequate
reimbursement
rate
will
be
approved.
For
example,
the
payor's
reimbursement
payment
rate
may
not
be
adequate
or
may
require
co-payments
that
patients
find
unacceptably
high.
Additionally,
coverage
and
reimbursement
for
products
can
differ
significantly
from
payor
to
payor.
The
Medicare
and
Medicaid
programs
increasingly
are
used
as
models
for
how
private
payors
and
other
governmental
payors
develop
their
coverage
and
reimbursement
policies
for
drugs
and
biologics.
However,
one
third-party
payor's
decision
to
cover
a
particular
product
does
not
ensure
that
other
payors
will
also
provide
coverage
for
the
product,
or
will
provide
coverage
at
an
adequate
reimbursement
rate.
Adequate
third-party
reimbursement
may
not
be
available
to
enable
us
to
maintain
price
levels
sufficient
to
realize
an
appropriate
return
on
our
investment
in
product
development.
Further,
some
third-party
payors
may
require
pre-approval
of
coverage
for
new
or
innovative
devices
or
drug
therapies
before
they
provide
reimbursement
for
use
of
such
therapies.
Third-party
payors
are
increasingly
challenging
the
price
and
examining
the
medical
necessity
and
cost-effectiveness
of
products
and
services,
in
addition
to
their
safety
and
efficacy.
To
obtain
coverage
and
reimbursement
for
any
product
that
might
be
approved
for
sale,
we
may
need
to
conduct
expensive
pharmacoeconomic
studies
to
demonstrate
the
medical
necessity
and
cost-effectiveness
of
our
product.
These
studies
will
be
in
addition
to
the
studies
required
to
obtain
regulatory
approvals.
If
third-party
payors
do
not
consider
a
product
to
be
cost-effective
compared
to
other
available
therapies,
they
may
not
cover
the
product
after
approval
as
a
benefit
under
their
plans
or,
if
they
do,
the
level
of
payment
may
not
be
sufficient
to
allow
a
company
to
sell
its
products
at
a
profit.
Thus,
obtaining
and
maintaining
reimbursement
status
is
time-consuming
and
costly.
The
U.S.
and
foreign
governments
regularly
consider
reform
measures
that
affect
health
care
coverage
and
costs.
For
example,
the
U.S.
and
state
legislatures
have
shown
significant
interest
in
implementing
cost
containment
programs
to
limit
the
growth
of
government-paid
health
care
costs,
including
price
controls,
restrictions
on
reimbursement
and
requirements
for
substitution
of
generic
products
for
branded
prescription
products.
The
Patient
Protection
and
Affordable
Care
Act,
as
amended
by
the
Health
Care
and
Education
Reconciliation
Act
("collectively,
the
ACA")
contains
provisions
that
may
reduce
the
profitability
of
products,
including,
for
example,
increased
rebates
for
products
sold
to
Medicaid
programs,
extension
of
Medicaid
rebates
to
Medicaid
managed
care
plans,
mandatory
discounts
for
certain
Medicare
Part
D
beneficiaries
and
annual
fees
based
on
pharmaceutical
companies'
share
of
sales
to
federal
health
care
programs.
The
Centers
for
Medicare
and
Medicaid
Services
("CMS")
may
develop
new
payment
and
delivery
models,
such
as
bundled
payment
models.
For
example,
the
U.S.
Department
of
Health
and
Human
Services
("HHS")
set
a
goal
of
moving
30%
of
Medicare
payments
to
alternative
payment
models
tied
to
the
quality
or
value
of
services
by
2016
and
50%
of
Medicare
payments
into
these
alternative
payment
models
by
the
end
of
2018.
Adoption
of
government
controls
and
measures,
and
tightening
of
restrictive
policies
in
jurisdictions
with
existing
controls
and
measures,
could
limit
payments
for
our
products.
The
marketability
of
any
products
for
which
we
receive
regulatory
approval
for
commercial
sale
may
suffer
if
the
government
and
third-party
payors
fail
to
provide
adequate
coverage
and
reimbursement.
In
addition,
the
focus
on
cost
containment
measures,
particularly
in
the
United
States,
has
increased
and
we
expect
will
continue
to
increase
the
pressure
on
pharmaceutical
pricing.
Coverage
policies
and
third-party
reimbursement
rates
may
change
at
any
time.
Even
if
we
attain
favorable
coverage
and
reimbursement
status
for
one
or
more
products
for
which
we
receive
regulatory
approval,
less
favorable
coverage
policies
and
reimbursement
rates
may
be
implemented
in
the
future.
European Union Coverage Reimbursement and Pricing
In
the
European
Union,
pricing
and
reimbursement
schemes
vary
widely
from
country
to
country.
Some
countries
provide
that
drug
products
may
be
marketed
only
after
a
reimbursement
price
has
been
56
Table
of
Contents
agreed.
Some
countries
may
require
the
completion
of
additional
studies
that
compare
the
cost-effectiveness
of
a
particular
drug
candidate
to
currently
available
therapies,
or
so
called
health
technology
assessments,
in
order
to
obtain
reimbursement
or
pricing
approval.
For
example,
the
European
Union
provides
options
for
its
member
states
to
restrict
the
range
of
drug
products
for
which
their
national
health
insurance
systems
provide
reimbursement
and
to
control
the
prices
of
medicinal
products
for
human
use.
European
Union
member
states
may
approve
a
specific
price
for
a
drug
product
or
may
instead
adopt
a
system
of
direct
or
indirect
controls
on
the
profitability
of
the
company.
Healthcare Laws and Regulations
Physicians,
other
healthcare
providers,
and
third-party
payors
will
play
a
primary
role
in
the
recommendation
and
prescription
of
any
product
candidates
for
which
we
obtain
marketing
approval.
Our
current
and
future
arrangements
with
healthcare
professionals,
principal
investigators,
consultants,
customers
and
third-
party
payors
are
and
will
be
subject
to
various
federal,
state
and
foreign
fraud
and
abuse
laws
and
other
healthcare
laws
and
regulations.
These
laws
and
regulations
may
impact,
among
other
things,
our
arrangements
with
third-party
payors,
healthcare
professionals
who
participate
in
our
clinical
research
programs,
healthcare
professionals
and
others
who
purchase,
recommend
or
prescribe
our
approved
products,
and
our
proposed
sales,
marketing,
distribution,
and
education
programs.
The
U.S.
federal
and
state
healthcare
laws
and
regulations
that
may
affect
our
ability
to
operate
include,
without
limitation,
the
following:
•
•
•
•
•
The
federal
Anti-Kickback
Statute,
which
prohibits
persons
from,
among
other
things,
knowingly
and
willfully
soliciting,
receiving,
offering
or
paying
remuneration,
directly
or
indirectly,
in
cash
or
in
kind,
to
induce
or
reward
either
the
referral
of
an
individual
for,
or
the
purchase,
order
or
recommendation
of,
any
good
or
service,
for
which
payment
may
be
made
under
federally
funded
healthcare
programs,
such
as
Medicare
and
Medicaid.
The
term
"remuneration"
has
been
broadly
interpreted
to
include
anything
of
value;
The
federal
civil
and
criminal
false
claims
laws,
including,
without
limitation,
the
federal
civil
monetary
penalties
law
and
the
civil
False
Claims
Act
(which
can
be
enforced
by
private
citizens
through
qui tam actions),
prohibit
individuals
or
entities
from,
among
other
things,
knowingly
presenting,
or
causing
to
be
presented,
false
or
fraudulent
claims
for
payment
of
federal
funds,
and
knowingly
making,
or
causing
to
be
made,
a
false
record
or
statement
material
to
a
false
or
fraudulent
claim
to
avoid,
decrease
or
conceal
an
obligation
to
pay
money
to
the
federal
government;
The
federal
Health
Insurance
Portability
and
Accountability
Act
of
1996
("HIPAA")
which
imposes
criminal
liability
for
executing
or
attempting
to
execute
a
scheme
to
defraud
any
healthcare
benefit
program
and
creates
federal
criminal
laws
that
prohibit
knowingly
and
willfully
falsifying,
concealing
or
covering
up
a
material
fact
or
making
any
materially
false
statement
in
connection
with
the
delivery
of
or
payment
for
healthcare
benefits,
items
or
services;
HIPAA,
as
amended
by
the
Health
Information
Technology
for
Economic
and
Clinical
Health
Act
of
2009
("HITECH")
and
its
implementing
regulations,
which
imposes
certain
obligations,
including
mandatory
contractual
terms,
with
respect
to
safeguarding
the
privacy,
security
and
transmission
of
individually
identifiable
health
information
without
the
appropriate
authorization
by
entities
subject
to
the
law,
such
as
healthcare
providers,
health
plans,
and
healthcare
clearinghouses
and
their
respective
business
associates;
The
federal
transparency
requirements
under
the
Physician
Payments
Sunshine
Act,
created
under
the
ACA,
which
requires
certain
manufacturers
of
drugs,
devices,
biologics
and
medical
supplies
reimbursed
under
Medicare,
Medicaid
("CHIP")
to
report
to
HHS
information
related
57
Table
of
Contents
to
payments
and
other
transfers
of
value
provided
to
physicians
and
teaching
hospitals
and
physician
ownership
and
investment
interests;
and
•
Analogous
state
laws
and
regulations,
such
as
state
anti-kickback
and
false
claims
laws,
that
impose
similar
restrictions
and
may
apply
to
items
or
services
reimbursed
by
non-governmental
third-party
payors,
including
private
insurers;
state
laws
that
require
pharmaceutical
companies
to
implement
compliance
programs,
comply
with
the
pharmaceutical
industry's
voluntary
compliance
guidelines
and
the
relevant
compliance
guidance
promulgated
by
the
federal
government,
or
to
track
and
report
gifts,
compensation
and
other
remuneration
provided
to
physicians
and
other
health
care
providers;
and
state
health
information
privacy
and
data
breach
notification
laws,
which
govern
the
collection,
use,
disclosure,
and
protection
of
health-related
and
other
personal
information,
many
of
which
differ
from
each
other
in
significant
ways
and
often
are
not
pre-empted
by
HIPAA,
thus
complicating
compliance
efforts.
We
will
be
required
to
spend
substantial
time
and
money
to
ensure
that
our
business
arrangements
with
third
parties
comply
with
applicable
healthcare
laws
and
regulations.
Recent
healthcare
reform
legislation
has
strengthened
these
federal
and
state
healthcare
laws.
For
example,
the
ACA
amends
the
intent
requirement
of
the
federal
Anti-Kickback
Statute
and
criminal
healthcare
fraud
statutes
to
clarify
that
liability
under
these
statutes
does
not
require
a
person
or
entity
to
have
actual
knowledge
of
the
statutes
or
a
specific
intent
to
violate
them.
Moreover,
the
ACA
provides
that
the
government
may
assert
that
a
claim
that
includes
items
or
services
resulting
from
a
violation
of
the
federal
Anti-Kickback
Statute
constitutes
a
false
or
fraudulent
claim
for
purposes
of
the
civil
False
Claims
Act.
Because
of
the
breadth
of
these
laws
and
the
narrowness
of
the
statutory
exceptions
and
safe
harbors
available,
it
is
possible
that
some
of
our
business
activities
could
be
subject
to
challenge
under
one
or
more
of
such
laws.
Violations
of
these
laws
can
subject
us
to
criminal,
civil
and
administrative
sanctions
including
monetary
penalties,
damages,
fines,
disgorgement,
individual
imprisonment,
and
exclusion
from
participation
in
government
funded
healthcare
programs,
such
as
Medicare
and
Medicaid,
additional
reporting
requirements
and
oversight
if
we
become
subject
to
a
corporate
integrity
agreement
or
similar
agreement
to
resolve
allegations
of
non-compliance
with
these
laws,
and
reputational
harm,
we
may
be
required
to
curtail
or
restructure
our
operations.
Moreover,
we
expect
that
there
will
continue
to
be
federal
and
state
laws
and
regulations,
proposed
and
implemented,
that
could
impact
our
future
operations
and
business.
Healthcare Reform
The
legislative
landscape
in
the
United
States
continues
to
evolve.
There
have
been
a
number
of
legislative
and
regulatory
changes
to
the
healthcare
system
that
could
affect
our
future
results
of
operations.
In
particular,
there
have
been
and
continue
to
be
a
number
of
initiatives
at
the
United
States
federal
and
state
levels
that
seek
to
reduce
healthcare
costs.
In
March
2010,
the
ACA
was
enacted,
which
includes
measures
that
have
significantly
changed
health
care
financing
by
both
governmental
and
private
insurers.
The
provisions
of
the
ACA
of
importance
to
the
pharmaceutical
and
biotechnology
industry
are,
among
others,
the
following:
•
•
an
annual,
nondeductible
fee
on
any
entity
that
manufactures
or
imports
certain
branded
prescription
drug
agents
or
biologic
agents,
which
is
apportioned
among
these
entities
according
to
their
market
share
in
certain
government
healthcare
programs;
an
increase
in
the
rebates
a
manufacturer
must
pay
under
the
Medicaid
Drug
Rebate
Program
to
23.1%
and
13%
of
the
average
manufacturer
price
for
branded
and
generic
drugs,
respectively;
58
Table
of
Contents
•
•
•
•
•
•
•
•
•
a
new
Medicare
Part
D
coverage
gap
discount
program,
in
which
manufacturers
must
agree
to
offer
50%
point-of-sale
discounts
to
negotiated
prices
of
applicable
brand
drugs
to
eligible
beneficiaries
during
their
coverage
gap
period,
as
a
condition
for
the
manufacturer's
outpatient
drugs
to
be
covered
under
Medicare
Part
D;
extension
of
manufacturers'
Medicaid
rebate
liability
to
covered
drugs
dispensed
to
individuals
who
are
enrolled
in
Medicaid
managed
care
organizations,
unless
the
drug
is
subject
to
discounts
under
the
340B
drug
discount
program;
a
new
methodology
by
which
rebates
owed
by
manufacturers
under
the
Medicaid
Drug
Rebate
Program
are
calculated
for
drugs
that
are
inhaled,
infused,
instilled,
implanted
or
injected;
expansion
of
eligibility
criteria
for
Medicaid
programs
by,
among
other
things,
allowing
states
to
offer
Medicaid
coverage
to
additional
individuals
and
by
adding
new
mandatory
eligibility
categories
for
certain
individuals
with
income
at
or
below
133%
of
the
federal
poverty
level,
thereby
potentially
increasing
manufacturers'
Medicaid
rebate
liability;
expansion
of
the
entities
eligible
for
discounts
under
the
Public
Health
Service
pharmaceutical
pricing
program;
new
requirements
under
the
federal
Physician
Payments
Sunshine
Act
for
drug
manufacturers
to
report
information
related
to
payments
and
other
transfers
of
value
made
to
physicians
and
teaching
hospitals
as
well
as
ownership
or
investment
interests
held
by
physicians
and
their
immediate
family
members;
a
new
Patient-Centered
Outcomes
Research
Institute
to
oversee,
identify
priorities
in,
and
conduct
comparative
clinical
effectiveness
research,
along
with
funding
for
such
research;
creation
of
the
Independent
Payment
Advisory
Board,
which,
if
and
when
impaneled,
will
have
authority
to
recommend
certain
changes
to
the
Medicare
program
that
could
result
in
reduced
payments
for
prescription
drugs;
and
establishment
of
a
Center
for
Medicare
and
Medicaid
Innovation
at
CMS
to
test
innovative
payment
and
service
delivery
models
to
lower
Medicare
and
Medicaid
spending,
potentially
including
prescription
drug
spending.
Some
of
the
provisions
of
the
ACA
have
yet
to
be
implemented,
and
there
have
been
judicial
and
Congressional
challenges
to
certain
aspects
of
the
ACA,
as
well
as
recent
efforts
by
the
Trump
administration
to
repeal
or
replace
certain
aspects
of
the
ACA.
President
Trump
has
signed
two
Executive
Orders
designed
to
delay
the
implementation
of
any
certain
provisions
of
the
ACA
or
otherwise
circumvent
some
of
the
requirements
for
health
insurance
mandated
by
the
ACA.
Concurrently,
Congress
has
considered
legislation
that
would
repeal
or
repeal
and
replace
all
or
part
of
the
ACA.
While
Congress
has
not
passed
comprehensive
repeal
legislation,
two
bills
affecting
the
implementation
of
certain
taxes
under
the
ACA
have
been
signed
into
law.
The
Tax
Cuts
and
Jobs
Act
of
2017
includes
a
provision
repealing,
effective
January
1,
2019,
the
tax-based
shared
responsibility
payment
imposed
by
the
ACA
on
certain
individuals
who
fail
to
maintain
qualifying
health
coverage
for
all
or
part
of
a
year
that
is
commonly
referred
to
as
the
"individual
mandate".
Additionally,
on
January
23,
2018,
President
Trump
signed
a
continuing
resolution
on
appropriations
for
fiscal
year
2018
that
delayed
the
implementation
of
certain
ACA-mandated
fees,
including
the
so-called
"Cadillac"
tax
on
certain
high
cost
employer-sponsored
insurance
plans,
the
annual
fee
imposed
on
certain
health
insurance
providers
based
on
market
share,
and
the
medical
device
excise
tax
on
non-exempt
medical
devices.
59
Table
of
Contents
In
addition,
other
federal
health
reform
measures
have
been
proposed
and
adopted
in
the
United
States
since
the
ACA
was
enacted.
For
example,
as
a
result
of
the
Budget
Control
Act
of
2011,
providers
are
subject
to
Medicare
payment
reductions
of
2%
per
fiscal
year
through
2025
unless
additional
Congressional
action
is
taken.
Further,
the
American
Taxpayer
Relief
Act
of
2012
reduced
Medicare
payments
to
several
providers
and
increased
the
statute
of
limitations
period
for
the
government
to
recover
overpayments
from
providers
from
three
to
five
years.
The
Medicare
Access
and
CHIP
Reauthorization
Act
of
2015
also
introduced
a
quality
payment
program
under
which
certain
individual
Medicare
providers
will
be
subject
to
certain
incentives
or
penalties
based
on
new
program
quality
standards.
Payment
adjustments
for
the
Medicare
quality
payment
program
will
begin
in
2019.
At
this
time,
it
is
unclear
how
the
introduction
of
the
quality
payment
program
will
impact
overall
physician
reimbursement
under
the
Medicare
program.
Further,
there
have
been
several
recent
Congressional
inquiries
and
proposed
federal
and
state
legislation
designed
to,
among
other
things,
bring
more
transparency
to
product
pricing,
review
the
relationship
between
pricing
and
manufacturer
patient
programs,
and
reform
government
program
reimbursement
methodologies
for
products.
At
the
federal
level,
the
costs
of
prescription
pharmaceuticals
in
the
United
States
has
also
been
the
subject
of
considerable
discussion,
and
members
of
Congress
and
the
Trump
Administration
have
stated
that
they
will
address
such
costs
through
new
legislative
and
administrative
measures.
At
the
state
level,
legislatures
are
increasingly
aggressive
in
passing
legislation
and
implementing
regulations
designed
to
control
pharmaceutical
and
biological
product
pricing,
including
price
or
patient
reimbursement
constraints,
discounts,
restrictions
on
certain
product
access
and
marketing
cost
disclosure
and
transparency
measures,
and,
in
some
cases,
designed
to
encourage
importation
from
other
countries
and
bulk
purchasing.
In
addition,
regional
healthcare
authorities
and
individual
hospitals
are
increasingly
using
bidding
procedures
to
determine
what
pharmaceutical
products
and
which
suppliers
will
be
included
in
their
prescription
drug
and
other
healthcare
programs.
These
measures
could
reduce
the
ultimate
demand
for
our
products,
once
approved,
or
put
pressure
on
our
product
pricing.
The Foreign Corrupt Practices Act
The
Foreign
Corrupt
Practices
Act
(the
"FCPA")
prohibits
any
U.S.
individual
or
business
from
paying,
offering,
or
authorizing
payment
or
offering
of
anything
of
value,
directly
or
indirectly,
to
any
foreign
official,
political
party
or
candidate
for
the
purpose
of
influencing
any
act
or
decision
of
the
foreign
entity
in
order
to
assist
the
individual
or
business
in
obtaining
or
retaining
business.
The
FCPA
also
obligates
companies
whose
securities
are
listed
in
the
United
States
to
comply
with
accounting
provisions
requiring
the
company
to
maintain
books
and
records
that
accurately
and
fairly
reflect
all
transactions
of
the
corporation,
including
international
subsidiaries,
and
to
devise
and
maintain
an
adequate
system
of
internal
accounting
controls
for
international
operations.
Activities
that
violate
the
FCPA,
even
if
they
occur
wholly
outside
the
United
States,
can
result
in
criminal
and
civil
fines,
imprisonment,
disgorgement,
oversight,
and
debarment
from
government
contracts.
Employees
As
of
December
31,
2017,
we
employed
42
employees.
All
of
our
employees
are
located
in
the
United
States.
None
of
our
employees
is
represented
by
a
labor
union
or
covered
by
a
collective
bargaining
agreement.
We
consider
our
relationship
with
our
employees
to
be
good.
Information
about
Segments
We
currently
operate
in
a
single
business
segment
developing
a
portfolio
of
innovative,
late-stage
product
candidates
targeting
neurological
diseases,
including
rare
disorders.
See
additional
information
in
our
financial
statements
contained
in
Part
II,
Item
8
of
this
Annual
Report.
60
Table
of
Contents
Corporate
Information
We
were
incorporated
as
a
business
company
limited
by
shares
organized
under
the
laws
of
the
British
Virgin
Islands
in
September
2013.
Our
registered
office
is
located
at
P.O.
Box
173,
Road
Town,
Tortola,
British
Virgin
Islands
and
our
telephone
number
is
+1
(284)
852-3000.
Our
U.S.
office
and
the
office
of
our
U.S.
subsidiary
is
located
at
234
Church
Street,
New
Haven,
Connecticut
06510
and
our
telephone
number
is
(203)
404-0410.
Facilities
Our
principal
offices
currently
occupy
a
total
of
approximately
4,240
square
feet
of
leased
office
space
in
New
Haven,
Connecticut.
This
space
is
pursuant
to
two
separate
lease
agreements,
a
lease
for
2,240
square
feet
which
expires
in
June
2018
and
a
lease
for
2,000
square
feet
that
expires
in
October
2018.
In
August
2017,
we
entered
into
a
new
lease
agreement
to
consolidate
our
headquarters
into
a
free
standing
building
in
New
Haven,
Connecticut
compromising
of
approximately
10,366
square
feet
of
office
space.
The
lease
commenced
on
August
10,
2017
for
a
term
of
85
months
with
payments
commencing
in
February
2018.
The
lease
includes
two
optional
5-year
renewal
terms.
We
believe
that
our
current
facilities,
including
the
facilities
we
will
occupy
under
our
new
lease
agreement,
are
suitable
and
adequate
to
meet
our
current
needs,
and
that
our
new
facilities
under
our
new
lease
agreement
will
be
suitable
and
adequate
to
meet
our
needs
at
that
time.
We
intend
to
add
new
facilities
or
expand
existing
facilities
as
we
add
employees,
and
we
believe
that
suitable
additional
or
substitute
space
will
be
available
as
needed
to
accommodate
any
such
expansion
of
our
operations.
Legal
Proceedings
We
are
not
currently
a
party
to
any
material
legal
proceedings,
and
we
are
not
aware
of
any
pending
or
threatened
legal
proceeding
against
us
that
we
believe
could
have
a
material
adverse
effect
on
our
business,
operating
results
or
financial
condition.
Available
Information
Our
internet
website
address
is
www.biohavenpharma.com.
In
addition
to
the
information
about
us
and
our
subsidiaries
contained
in
this
Annual
Report,
information
about
us
can
be
found
on
our
website.
Our
website
and
information
included
in
or
linked
to
our
website
are
not
part
of
this
Annual
Report.
Our
annual
reports
on
Form
10-K,
quarterly
reports
on
Form
10-Q,
current
reports
on
Form
8-K
and
amendments
to
those
reports
filed
or
furnished
pursuant
to
Section
13(a)
or
15(d)
of
the
Securities
Exchange
Act
of
1934,
as
amended,
are
available
free
of
charge
through
our
website
as
soon
as
reasonably
practicable
after
they
are
electronically
filed
with
or
furnished
to
the
Securities
and
Exchange
Commission
("SEC").
The
public
may
read
and
copy
the
materials
we
file
with
the
SEC
at
the
SEC's
Public
Reference
Room
at
100
F
Street,
NE,
Washington,
DC
20549.
The
public
may
obtain
information
on
the
operation
of
the
Public
Reference
Room
by
calling
the
SEC
at
1-800-SEC-0330.
Additionally
the
SEC
maintains
an
internet
site
that
contains
reports,
proxy
and
information
statements
and
other
information.
The
address
of
the
SEC's
website
is
www.sec.gov.
61
Table
of
Contents
Item
1A.
Risk
Factors
You should carefully consider the risks described below, as well as general economic and business risks and the other information in this Annual Report on
Form 10-K. The occurrence of any of the events or circumstances described below or other adverse events could have a material adverse effect on our business,
results of operations and financial condition and could cause the trading price of our common shares to decline. Additional risks or uncertainties not presently
known to us or that we currently deem immaterial may also harm our business.
Risks
Related
to
Our
Financial
Position
and
Need
for
Additional
Capital
We have a limited operating history and have never generated any product revenues, which may make it difficult to evaluate the success of our business to date
and to assess our future viability.
We
were
incorporated
in
2013,
and
our
operations
to
date
have
been
largely
focused
on
organizing
and
staffing
our
company,
raising
capital
and
in-licensing
the
rights
to,
and
advancing
the
development
of,
our
product
candidates,
including
conducting
preclinical
studies
and
clinical
trials.
We
have
not
yet
demonstrated
an
ability
to
successfully
complete
Phase
3
clinical
trials,
obtain
marketing
approvals,
manufacture
products
on
a
commercial
scale,
or
arrange
for
a
third
party
to
do
so
on
our
behalf,
or
conduct
sales
and
marketing
activities
necessary
for
successful
commercialization.
Consequently,
predictions
about
our
future
success
or
viability
may
not
be
as
accurate
as
they
could
be
if
we
had
a
longer
operating
history
or
a
history
of
successfully
developing
and
commercializing
products.
We
expect
our
financial
condition
and
operating
results
to
continue
to
fluctuate
from
quarter
to
quarter
and
year
to
year
due
to
a
variety
of
factors,
many
of
which
are
beyond
our
control.
We
will
need
to
eventually
transition
from
a
company
with
a
research
and
development
focus
to
a
company
capable
of
undertaking
commercial
activities.
We
may
encounter
unforeseen
expenses,
difficulties,
complications
and
delays,
and
may
not
be
successful
in
such
a
transition.
We have incurred significant operating losses since inception and anticipate that we will continue to incur substantial operating losses for the foreseeable
future and may never achieve or maintain profitability.
Since
our
inception,
we
have
incurred
significant
operating
losses.
Our
net
loss
was
$127.2
million
and
$63.5
million
for
the
years
ended
December
31,
2017
and
2016,
respectively.
As
of
December
31,
2017,
we
had
an
accumulated
deficit
of
$202.6
million.
We
expect
to
continue
to
incur
significant
expenses
and
increasing
operating
losses
for
the
foreseeable
future.
None
of
our
product
candidates
have
been
approved
for
marketing
in
the
United
States,
or
in
any
other
jurisdiction,
and
may
never
receive
such
approval.
It
could
be
several
years,
if
ever,
before
we
have
a
commercialized
product
that
generates
significant
revenues.
As
a
result,
we
are
uncertain
when
or
if
we
will
achieve
profitability
and,
if
so,
whether
we
will
be
able
to
sustain
it.
The
net
losses
we
incur
may
fluctuate
significantly
from
quarter
to
quarter
and
year
to
year.
We
anticipate
that
our
expenses
will
increase
substantially
as
we:
•
•
•
•
•
complete
our
three
Phase
3
clinical
trials
of
rimegepant,
Phase
1
supporting
trials
and
our
long-term
safety
study;
complete
the
ongoing
extension
phase
of
the
Phase
2/3
clinical
trial
of
trigriluzole
in
SCA,
conduct
our
trigriluzole
OCD
trial;
conduct
patient
tolerability
studies
of,
and
prepare
to
file
a
NDA
for,
BHV-0223;
complete
our
Phase
1
clinical
trial
of
BHV-5000
and
support
activities
for
later-phase
studies
and
clinical
trials;
progress
formulation,
toxicology,
and
clinical
development
in
preparation
of
our
NDA
filing
and
planned
Phase
1
clinical
trials
of
BHV-3500
and
support
activities
for
later-phase
studies
and
clinical
trials;
62
Table
of
Contents
•
•
•
•
•
•
•
•
•
•
submit
INDs
and
initiate
randomized
controlled
trials
of
trigriluzole
in
Alzheimer's
disease;
continue
to
initiate
and
progress
other
supporting
studies
required
for
regulatory
approval
of
our
product
candidates,
including
long-term
safety
studies,
drug-drug
interaction
studies,
preclinical
toxicology
and
carcinogenicity
studies;
make
required
milestone
and
royalty
payments
under
the
license
agreements
by
which
we
acquired
some
of
the
rights
to
our
product
candidates;
initiate
preclinical
studies
and
clinical
trials
for
any
additional
indications
for
our
current
product
candidates
and
any
future
product
candidates
that
we
may
pursue;
continue
to
build
our
portfolio
of
product
candidates
through
the
acquisition
or
in-license
of
additional
product
candidates
or
technologies;
continue
to
develop,
maintain,
expand
and
protect
our
intellectual
property
portfolio;
pursue
regulatory
approvals
for
our
current
and
future
product
candidates
that
successfully
complete
clinical
trials;
ultimately
establish
a
sales,
marketing
and
distribution
infrastructure
to
commercialize
any
product
candidate
for
which
we
may
obtain
marketing
approval;
hire
additional
clinical,
regulatory,
scientific
and
accounting
personnel;
and
incur
additional
legal,
accounting
and
other
expenses
in
operating
as
a
public
company.
In
addition
to
the
fluctuation
of
our
operating
expenses,
our
financial
results
may
also
be
materially
impacted
in
the
future
by
material
changes
in
the
operating
results
of
Kleo
or
if
we
conclude
that
the
value
of
our
investment
in
Kleo
is
impaired
and,
as
a
result,
we
are
required
by
U.S.
GAAP
to
write
down
the
carrying
value
of
our
investment.
To
become
and
remain
profitable,
we
must
develop
and
eventually
commercialize
one
or
more
product
candidates
with
significant
market
potential.
This
will
require
us
to
be
successful
in
a
range
of
challenging
activities,
including
completing
clinical
trials
of
our
product
candidates,
developing
commercial
scale
manufacturing
processes,
obtaining
marketing
approval,
manufacturing,
marketing
and
selling
any
current
and
future
product
candidates
for
which
we
may
obtain
marketing
approval,
and
satisfying
any
post-marketing
requirements.
We
are
only
in
the
preliminary
stages
of
most
of
these
activities
and,
in
some
cases,
have
not
yet
commenced
certain
of
these
activities.
We
may
never
succeed
in
any
or
all
of
these
activities
and,
even
if
we
do,
we
may
never
generate
sufficient
revenue
to
achieve
profitability.
Because
of
the
numerous
risks
and
uncertainties
associated
with
product
development,
we
are
unable
to
accurately
predict
the
timing
or
amount
of
expenses
or
when,
or
if,
we
will
obtain
marketing
approval
to
commercialize
any
of
our
product
candidates.
If
we
are
required
by
the
FDA
or
other
regulatory
authorities
such
as
the
EMA
to
perform
studies
and
trials
in
addition
to
those
currently
expected,
or
if
there
are
any
delays
in
the
development,
or
in
the
completion
of
any
planned
or
future
preclinical
studies
or
clinical
trials
of
our
current
or
future
product
candidates,
our
expenses
could
increase
and
profitability
could
be
further
delayed.
Even
if
we
do
achieve
profitability,
we
may
not
be
able
to
sustain
or
increase
profitability
on
a
quarterly
or
annual
basis.
Our
failure
to
become
and
remain
profitable
would
decrease
the
value
of
our
company
and
could
impair
our
ability
to
raise
capital,
maintain
our
research
and
development
efforts,
expand
our
business
or
continue
our
operations.
A
decline
in
the
value
of
our
company
also
could
cause
you
to
lose
all
or
part
of
your
investment.
63
Table
of
Contents
We will need substantial additional funding to pursue our business objectives. If we are unable to raise capital when needed or on terms favorable to us, we
could be forced to curtail our planned operations and the pursuit of our growth strategy.
Identifying
potential
product
candidates
and
conducting
preclinical
studies
and
clinical
trials
is
a
time-consuming,
expensive
and
uncertain
process
that
takes
years
to
complete,
and
we
may
never
generate
the
necessary
data
or
results
required
to
obtain
regulatory
approval
and
achieve
product
sales.
We
expect
our
expenses
to
increase
in
connection
with
our
ongoing
activities,
particularly
as
we
continue
to
develop
our
product
candidates.
Our
expenses
could
increase
beyond
our
current
expectations
if
the
FDA
requires
us
to
perform
clinical
trials
and
other
studies
in
addition
to
those
that
we
currently
anticipate.
For
example,
for
our
trigriluzole
clinical
program,
we
intend
to
meet
with
the
FDA
to
review
the
Phase
2/3
clinical
trial
data
to
better
understand
the
potential
pathways
for
an
eventual
filing.
Given
that
the
topline
results
did
not
show
differentiation
of
trigriluzole
from
placebo
in
patients
with
SCA,
the
FDA
may
require
additional
data
and
studies
to
support
an
eventual
filing,
beyond
what
becomes
available
from
completion
of
the
ongoing
long-term
extension
phase
of
the
current
trial.
With
regard
to
our
BHV-5000
program,
due
to
the
small
number
of
patients
with
Rett
syndrome,
we
believe
that
BHV-5000
will
require
only
a
single
pivotal
trial.
However,
the
FDA
ordinarily
requires
two
well-controlled
clinical
trials
prior
to
marketing
approval
of
a
product
candidate.
If
the
FDA
requires
us
to
conduct
additional
clinical
trials
of
trigriluzole
or
BHV-5000,
or
any
of
our
other
product
candidates,
we
would
incur
substantial
additional,
unanticipated
expenses
in
order
to
obtain
regulatory
approval
of
those
product
candidates.
In
addition,
our
product
candidates,
if
approved,
may
not
achieve
commercial
success.
Our
revenue,
if
any,
will
be
derived
from
sales
of
products
that
we
do
not
expect
to
be
commercially
available
for
a
number
of
years,
if
at
all.
Additionally,
if
we
obtain
marketing
approval
for
our
product
candidates,
we
expect
to
incur
significant
expenses
related
to
manufacturing,
marketing,
sales
and
distribution
and,
with
respect
to
certain
of
our
product
candidates,
the
payment
of
milestone
and
royalty
fees.
Furthermore,
we
expect
to
incur
additional
costs
associated
with
operating
as
a
public
company.
As
of
December
31,
2017,
we
had
cash
of
$131.5
million.
We
expect
that
our
existing
cash
will
be
sufficient
to
fund
our
planned
operating
expenses,
financial
commitments
and
other
cash
requirements
through
December
31,
2018.
This
estimate
is
based
on
assumptions
that
may
prove
to
be
wrong,
and
we
could
use
our
available
capital
resources
sooner
than
we
expect.
Changes
may
occur
beyond
our
control
that
would
cause
us
to
consume
our
available
capital
before
that
time,
including
changes
in
and
progress
of
our
development
activities
and
changes
in
regulation.
Our
future
capital
requirements
will
depend
on
many
factors,
including:
•
•
•
•
•
•
the
scope,
progress,
results
and
costs
of
our
ongoing
and
planned
preclinical
studies
and
clinical
trials
for
our
product
candidates;
the
timing
and
amount
of
milestone
and
royalty
payments
we
are
required
to
make
under
our
license
agreements;
the
extent
to
which
we
in-license
or
acquire
other
product
candidates
and
technologies;
the
number
and
development
requirements
of
other
product
candidates
that
we
may
pursue,
and
other
indications
for
our
current
product
candidates
that
we
may
pursue;
the
costs,
timing
and
outcome
of
regulatory
review
of
our
product
candidates;
the
costs
and
timing
of
future
commercialization
activities,
including
drug
manufacturing,
marketing,
sales
and
distribution,
for
any
of
our
product
candidates
for
which
we
receive
marketing
approval;
64
Table
of
Contents
•
•
•
the
revenue,
if
any,
received
from
commercial
sales
of
our
product
candidates
for
which
we
receive
marketing
approval;
our
ability
to
establish
strategic
collaborations
for
the
development
or
commercialization
of
some
of
our
product
candidates;
and
the
costs
and
timing
of
preparing,
filing
and
prosecuting
patent
applications,
maintaining
and
enforcing
our
intellectual
property
rights
and
defending
any
intellectual
property-related
claims
brought
by
third
parties
against
us.
We
will
require
additional
capital
to
complete
our
planned
clinical
development
programs
for
our
current
product
candidates
to
seek
regulatory
approval.
If
we
receive
regulatory
approval
for
any
of
our
product
candidates,
we
expect
to
incur
significant
commercialization
expenses
related
to
product
manufacturing,
sales,
marketing
and
distribution.
Any
additional
capital
raising
efforts
may
divert
our
management
from
their
day-to-day
activities,
which
may
adversely
affect
our
ability
to
develop
and
commercialize
our
current
and
future
product
candidates,
if
approved.
In
addition,
we
cannot
guarantee
that
future
financing
will
be
available
on
a
timely
basis,
in
sufficient
amounts
or
on
terms
acceptable
to
us,
if
at
all.
Moreover,
the
terms
of
any
financing
may
adversely
affect
the
holdings
or
the
rights
of
our
shareholders
and
the
issuance
of
additional
securities
by
us,
whether
equity
or
debt,
or
the
market
perception
that
such
issuances
are
likely
to
occur,
could
cause
the
market
price
of
our
common
shares
to
decline.
As
a
result,
we
may
not
be
able
to
access
the
capital
markets
as
frequently
as
comparable
U.S.
companies.
See
"—Our
status
as
a
British
Virgin
Islands
("BVI"),
business
company
means
that
our
shareholders
enjoy
certain
rights
that
may
limit
our
flexibility
to
raise
capital,
issue
dividends
and
otherwise
manage
ongoing
capital
needs"
for
additional
information
related
to
our
ability
to
timely
raise
capital.
If
we
are
unable
to
obtain
funding
on
a
timely
basis
on
acceptable
terms,
we
may
be
required
to
significantly
curtail,
delay
or
discontinue
one
or
more
of
our
research
or
development
programs
or
the
commercialization
of
any
product
candidates,
if
approved,
or
be
unable
to
expand
our
operations
or
otherwise
capitalize
on
our
business
opportunities,
as
desired.
Our independent registered public accounting firm has included an explanatory paragraph relating to our ability to continue as a going concern in its report
on our most recent audited financial statements.
Our
report
from
our
independent
registered
public
accounting
firm
for
the
year
ended
December
31,
2017
includes
an
explanatory
paragraph
stating
that
our
recurring
losses
from
operations
since
inception
and
required
additional
funding
to
finance
our
operations
raise
substantial
doubt
about
our
ability
to
continue
as
a
going
concern.
If
we
are
unable
to
obtain
sufficient
funding,
our
business,
prospects,
financial
condition
and
results
of
operations
will
be
materially
and
adversely
affected
and
we
may
be
unable
to
continue
as
a
going
concern.
If
we
are
unable
to
continue
as
a
going
concern,
we
may
have
to
liquidate
our
assets
and
may
receive
less
than
the
value
at
which
those
assets
are
carried
on
our
audited
financial
statements,
and
it
is
likely
that
investors
will
lose
all
or
a
part
of
their
investment.
If
we
seek
additional
financing
to
fund
our
business
activities
in
the
future
and
there
remains
substantial
doubt
about
our
ability
to
continue
as
a
going
concern,
investors
or
other
financing
sources
may
be
unwilling
to
provide
additional
funding
to
us
on
commercially
reasonable
terms
or
at
all.
We are subject to significant obligations, including to potentially make significant payments under the license agreements by which we acquired the rights to
several of our product candidates.
In
July
2016,
we
acquired
the
rights
to
rimegepant
and
another
product
candidate,
BHV-3500,
pursuant
to
a
license
agreement
with
BMS,
and
in
October
2016,
we
acquired
the
rights
to
BHV-5000
pursuant
to
a
license
agreement
with
AstraZeneca.
We
are
subject
to
significant
obligations
under
these
agreements,
including
payment
obligations
upon
achievement
of
specified
milestones
and
royalties
on
65
Table
of
Contents
product
sales,
as
well
as
other
material
obligations.
We
may
be
obligated
to
pay
BMS
up
to
$127.5
million
in
development
milestones
for
rimegepant
or
a
derivative
thereof,
up
to
$74.5
million
in
development
milestones
for
any
licensed
product
other
than
rimegepant,
and
up
to
$150.0
million
in
commercial
milestones
for
each
licensed
product.
In
July
2017,
we
paid
BMS
$5.0
million
due
to
the
achievement
of
a
specified
milestone.
We
may
also
be
obligated
to
pay
AstraZeneca
up
to
$30.0
million
in
development
milestones
for
licensed
products
for
the
treatment
of
Rett
syndrome,
up
to
$60.0
million
in
development
milestones
for
licensed
products
for
indications
other
than
Rett
syndrome,
and
up
to
$120.0
million
in
commercial
milestones.
We
are
also
obligated
to
pay
fixed
royalties
based
on
net
sales
of
rimegepant,
BHV-3500
and
BHV-5000,
or
any
other
product
that
is
a
licensed
product
under
those
agreements.
If
these
payments
become
due
under
the
terms
of
our
license
agreements
with
BMS
and
AstraZeneca,
we
may
not
have
sufficient
funds
available
to
meet
our
obligations
and
our
development
efforts
may
be
materially
harmed.
In
addition,
our
license
agreements
with
BMS
and
AstraZeneca
obligate
us
to
use
commercially
reasonable
efforts
to
develop
and
commercialize
product
candidates,
to
provide
BMS
and
AstraZeneca
with
development
reports
documenting
our
progress,
and
to
provide
them
with
data
from
certain
clinical
trials.
In
addition,
such
license
agreements
provide
BMS
and
AstraZeneca
with
rights
of
first
negotiation,
triggered
by
their
receipt
of
a
summary
of
certain
topline
data
from
certain
of
our
clinical
trials,
to
regain
the
respective
rights
we
have
in-licensed
from
them.
If
either
BMS
or
AstraZeneca
exercises
their
right
of
first
negotiation,
we
will
be
required
to
negotiate
in
good
faith
with
BMS
or
AstraZeneca,
as
the
case
may
be,
for
a
specified
period
of
time
before
we
can
enter
into
negotiations
with
third
parties
to
sublicense
these
rights.
BMS's
and
AstraZeneca's
rights
of
first
negotiation
may
adversely
impact
or
delay
our
ability
to
enter
into
collaborations
with
third
parties
for
the
development
of
these
compounds.
Our
license
agreement
with
BMS
further
provides
that
any
sublicense,
other
than
to
an
affiliate
or
a
third-party
manufacturer,
requires
BMS'
prior
written
consent,
not
to
be
unreasonably
withheld
or
delayed.
Our
license
agreement
with
AstraZeneca
further
provides
that,
except
with
respect
to
wholly
owned
subsidiaries,
we
cannot
assign
the
agreement
without
their
consent,
even
in
the
event
of
a
change
of
control.
This
could
adversely
impact
or
delay
our
ability
to
effect
certain
transactions.
Moreover,
under
our
agreement
with
BMS,
until
2023,
neither
we
nor
our
affiliates
may,
ourselves
or
through
or
in
collaboration
with
a
third
party,
engage
directly
or
indirectly
in
the
clinical
development
or
commercialization
of
competitive
compounds
related
to
the
CGRP-based
mechanism
of
action
of
the
licensed
products.
In
the
event
that
we
are
or
become
non-compliant
with
this
provision
due
to
licensing,
collaboration
or
acquisition
activity,
we
must
either
divest
ourselves
of
the
competitive
compound
within
a
certain
period
of
time
or
negotiate
with
BMS
to
have
the
competitive
compound
included
as
a
licensed
product
under
our
agreement
with
BMS.
The
failure
to
so
divest
or
reach
terms
with
BMS
may
result
in
the
termination
of
our
license
with
BMS.
These
prohibitions
could
adversely
impact
or
delay
our
ability
to
effect
certain
transactions,
such
as
our
ability
to
acquire
or
be
acquired
by
a
third
party.
Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our intellectual property or future
revenue streams.
Until
such
time
as
we
can
generate
substantial
product
revenue,
if
ever,
we
expect
to
finance
our
operations
through
a
combination
of
equity
offerings,
debt
financings
and
license
and
development
agreements
in
connection
with
any
future
collaborations.
We
do
not
have
any
committed
external
source
of
funds.
In
the
event
we
seek
additional
funds,
we
may
raise
additional
capital
through
the
sale
of
equity
or
convertible
debt
securities.
In
such
an
event,
our
existing
shareholders
may
experience
substantial
dilution,
and
the
terms
of
these
securities
may
include
liquidation
or
other
preferences
that
adversely
affect
the
rights
of
the
holders
of
our
common
shares.
Debt
financing,
if
available,
could
result
in
increased
fixed
payment
obligations
and
may
involve
agreements
that
include
restrictive
66
Table
of
Contents
covenants,
such
as
limitations
on
our
ability
to
incur
additional
debt,
make
capital
expenditures,
acquire,
sell
or
license
intellectual
property
rights
or
declare
dividends,
and
other
operating
restrictions
that
could
hurt
our
ability
to
conduct
our
business.
Further,
if
we
raise
additional
capital
through
collaborations,
strategic
alliances,
or
marketing,
distribution
or
licensing
arrangements
with
third
parties,
we
may
have
to
relinquish
valuable
rights
to
our
intellectual
property
future
revenue
streams,
research
programs
or
product
candidates,
or
grant
licenses
on
terms
that
may
not
be
favorable
to
us.
Risks
Related
to
the
Development
of
Our
Product
Candidates
We depend entirely on the success of a limited number of product candidates, which are in clinical development and none of which have completed a pivotal
trial. If we do not obtain regulatory approval for and successfully commercialize one or more of our product candidates or we experience significant delays in
doing so, we may never become profitable.
We
do
not
have
any
products
that
have
received
regulatory
approval
and
may
never
be
able
to
develop
marketable
product
candidates.
We
expect
that
a
substantial
portion
of
our
efforts
and
expenses
over
the
next
few
years
will
be
devoted
to
the
development
of
our
product
candidates;
specifically,
the
conducting
of
our
completion
of
the
ongoing
extension
phase
of
the
Phase
2/3
clinical
trial
of
trigriluzole
in
SCA,
initiation
of
our
Phase
2
clinical
trials
in
both
OCD
and
Alzheimer's
disease,
patient
tolerability
studies
and
NDA
preparation
for
BHV-0223,
completion
of
our
three
Phase
3
clinical
trials
and
long-term
safety
study
for
rimegepant,
and
completion
of
our
Phase
1
study
for
BHV-5000.
As
a
result,
our
business
currently
depends
heavily
on
the
successful
development,
regulatory
approval
and,
if
approved,
commercialization
of
these
product
candidates.
We
cannot
be
certain
that
our
product
candidates
will
receive
regulatory
approval
or
will
be
successfully
commercialized
even
if
they
receive
regulatory
approval.
The
research,
testing,
manufacturing,
safety,
efficacy,
labeling,
approval,
sale,
marketing
and
distribution
of
our
product
candidates
are,
and
will
remain,
subject
to
comprehensive
regulation
by
the
FDA
and
similar
foreign
regulatory
authorities.
Before
obtaining
regulatory
approvals
for
the
commercial
sale
of
any
product
candidate,
we
must
demonstrate
through
pre-clinical
studies
and
clinical
trials
that
the
product
candidate
is
safe
and
effective
for
use
in
each
target
indication.
Drug
development
is
a
long,
expensive
and
uncertain
process,
and
delay
or
failure
can
occur
at
any
stage
of
any
of
our
clinical
trials.
Failure
to
obtain
regulatory
approval
for
our
product
candidates
in
the
United
States
will
prevent
us
from
commercializing
and
marketing
our
product
candidates.
The
success
of
our
product
candidates
will
depend
on
several
additional
factors,
including:
•
•
•
•
•
•
•
•
•
•
•
completing
clinical
trials
that
demonstrate
their
efficacy
and
safety;
receiving
marketing
approvals
from
applicable
regulatory
authorities;
completing
any
post-marketing
studies
required
by
applicable
regulatory
authorities;
establishing
commercial
manufacturing
capabilities;
launching
commercial
sales,
marketing
and
distribution
operations;
the
prevalence
and
severity
of
adverse
events
experienced
with
our
product
candidates;
acceptance
of
our
product
candidates
by
patients,
the
medical
community
and
third-party
payors;
a
continued
acceptable
safety
profile
following
approval;
obtaining
and
maintaining
healthcare
coverage
and
adequate
reimbursement
for
our
product
candidates;
competing
effectively
with
other
therapies,
including
with
respect
to
the
sales
and
marketing
of
our
product
candidates,
if
approved;
and
qualifying
for,
maintaining,
enforcing
and
defending
our
intellectual
property
rights
and
claims.
67
Table
of
Contents
Many
of
these
factors
are
beyond
our
control,
including
the
time
needed
to
adequately
complete
clinical
testing,
the
regulatory
submission
process,
potential
threats
to
our
intellectual
property
rights
and
changes
in
the
competitive
landscape.
It
is
possible
that
none
of
our
product
candidates
will
ever
obtain
regulatory
approval,
even
if
we
expend
substantial
time
and
resources
seeking
such
approval.
If
we
do
not
achieve
one
or
more
of
these
factors
in
a
timely
manner
or
at
all,
we
could
experience
significant
delays
or
an
inability
to
successfully
complete
clinical
trials,
obtain
regulatory
approval
or,
if
approved,
commercialize
our
product
candidates,
which
would
materially
harm
our
business,
financial
condition
and
results
of
operations.
Clinical trials are very expensive, time-consuming and difficult to design and implement and involve uncertain outcomes. Furthermore, results of earlier
preclinical studies and clinical trials may not be predictive of results of future preclinical studies or clinical trials.
The
risk
of
failure
for
our
product
candidates
is
high.
It
is
impossible
to
predict
when
or
if
any
of
our
product
candidates
will
prove
effective
or
safe
in
humans
or
will
receive
regulatory
approval.
To
obtain
the
requisite
regulatory
approvals
to
market
and
sell
any
of
our
product
candidates,
we
must
demonstrate
through
extensive
preclinical
studies
and
clinical
trials
that
our
product
candidates
are
safe
and
effective
in
humans
for
use
in
each
target
indication.
Clinical
testing
is
expensive
and
can
take
many
years
to
complete,
and
the
outcome
is
inherently
uncertain.
Failure
can
occur
at
any
time
during
the
clinical
trial
process.
In
addition,
the
results
of
preclinical
studies
and
earlier
clinical
trials
may
not
be
predictive
of
the
results
of
later-stage
preclinical
studies
or
clinical
trials.
The
results
generated
to
date
in
preclinical
studies
or
clinical
trials
for
our
product
candidates
do
not
ensure
that
later
preclinical
studies
or
clinical
trials
will
demonstrate
similar
results.
Further,
we
have
limited
clinical
data
for
each
of
our
product
candidates
and
have
not
completed
Phase
3
clinical
trials
for
any
of
our
product
candidates.
Product
candidates
in
later
stages
of
clinical
trials
may
fail
to
show
the
desired
safety
and
efficacy
traits
despite
having
progressed
through
preclinical
and
earlier
stage
clinical
trials.
For
example,
the
favorable
results
of
the
Phase
2b
trial
of
rimegepant
may
not
be
predictive
of
similar
results
in
subsequent
trials.
In
particular,
we
developed
a
different
tablet
formulation
of
rimegepant
for
use
in
our
Phase
3
clinical
trials
of
rimegepant,
which
commenced
enrollment
in
July
2017.
We
cannot
be
certain
that
we
will
observe
the
same
results
in
our
Phase
3
trials
with
the
new
dosage
form
as
we
did
in
the
Phase
2b
clinical
trial
of
rimegepant.
In
later-stage
clinical
trials,
we
will
likely
be
subject
to
more
rigorous
statistical
analyses
than
in
completed
earlier
stage
clinical
trials.
A
number
of
companies
in
the
biopharmaceutical
industry
have
suffered
significant
setbacks
in
later-stage
clinical
trials
due
to
lack
of
efficacy
or
adverse
safety
profiles,
notwithstanding
promising
results
in
earlier
trials,
and
we
cannot
be
certain
that
we
will
not
face
similar
setbacks.
Moreover,
preclinical
and
clinical
data
are
often
susceptible
to
varying
interpretations
and
analyses,
and
many
companies
that
have
believed
their
product
candidates
performed
satisfactorily
in
preclinical
studies
and
clinical
trials
have
nonetheless
failed
to
obtain
marketing
approval
of
their
products.
In
some
instances,
there
can
be
significant
variability
in
safety
or
efficacy
results
between
different
clinical
trials
of
the
same
product
candidate
due
to
numerous
factors,
including
changes
in
clinical
trial
procedures
set
forth
in
protocols,
differences
in
the
size
and
type
of
the
patient
populations,
adherence
to
the
dosing
regimen
and
other
clinical
trial
protocols,
and
the
rate
of
dropout
among
clinical
trial
participants.
If
we
fail
to
produce
positive
results
in
our
planned
pre-
clinical
studies
or
clinical
trials
of
any
of
our
product
candidates,
the
development
timeline
and
regulatory
approval
and
commercialization
prospects
for
our
product
candidates,
and,
correspondingly,
our
business
and
financial
prospects,
would
be
materially
adversely
affected.
68
Table
of
Contents
We have limited experience in drug discovery and drug development, and we have never had a drug approved.
Because
we
in-licensed
rimegepant
and
BHV-3500
from
BMS
and
BHV-5000
from
AstraZeneca,
we
were
not
involved
in
and
had
no
control
over
the
preclinical
and
clinical
development
of
these
product
candidates
prior
to
entering
into
these
in-license
agreements.
In
addition,
we
are
relying
on
BMS
and
AstraZeneca
to
have
conducted
such
research
and
development
in
accordance
with
the
applicable
protocol,
legal,
regulatory
and
scientific
standards,
having
accurately
reported
the
results
of
all
clinical
trials
conducted
prior
to
our
acquisition
of
the
applicable
product
candidate,
and
having
correctly
collected
and
interpreted
the
data
from
these
studies
and
trials.
To
the
extent
any
of
these
has
not
occurred,
our
expected
development
time
and
costs
may
be
increased,
which
could
adversely
affect
our
prospects
for
marketing
approval
of,
and
receiving
any
future
revenue
from,
these
product
candidates.
Clinical trials may be delayed, suspended or terminated for many reasons, which will increase our expenses and delay the time it takes to develop our product
candidates.
We
may
experience
delays
in
our
ongoing
or
future
preclinical
studies
or
clinical
trials,
and
we
do
not
know
whether
future
preclinical
studies
or
clinical
trials
will
begin
on
time,
need
to
be
redesigned,
enroll
an
adequate
number
of
patients
on
time
or
be
completed
on
schedule,
if
at
all.
The
commencement
and
completion
of
clinical
trials
for
our
clinical
product
candidates
may
be
delayed,
suspended
or
terminated
as
a
result
of
many
factors,
including:
•
•
•
•
•
•
•
•
•
•
•
•
the
FDA
disagreeing
as
to
the
design,
protocol
or
implementation
of
our
clinical
trials;
the
delay
or
refusal
of
regulators
or
institutional
review
boards
("IRBs")
to
authorize
us
to
commence
a
clinical
trial
at
a
prospective
trial
site;
changes
in
regulatory
requirements,
policies
and
guidelines;
delays
or
failure
to
reach
agreement
on
acceptable
terms
with
prospective
clinical
research
organization
("CROs")
and
clinical
trial
sites,
the
terms
of
which
can
be
subject
to
extensive
negotiation
and
may
vary
significantly
among
different
CROs
and
trial
sites;
delays
in
patient
enrollment
and
variability
in
the
number
and
types
of
patients
available
for
clinical
trials;
the
inability
to
enroll
a
sufficient
number
of
patients
in
trials,
particularly
in
orphan
indications,
to
observe
statistically
significant
treatment
effects
in
the
trial;
having
clinical
sites
deviate
from
the
trial
protocol
or
dropping
out
of
a
trial;
negative
or
inconclusive
results
from
ongoing
preclinical
studies
or
clinical
trials,
which
may
require
us
to
conduct
additional
preclinical
studies
or
clinical
trials
or
to
abandon
projects
that
we
expect
to
be
promising;
safety
or
tolerability
concerns
that
could
cause
us
to
suspend
or
terminate
a
trial
if
we
find
that
the
participants
are
being
exposed
to
unacceptable
health
risks;
reports
from
pre-clinical
or
clinical
testing
of
other
similar
therapies
that
raise
safety
or
efficacy
concerns;
regulators
or
IRBs
requiring
that
we
or
our
investigators
suspend
or
terminate
clinical
research
for
various
reasons,
including
noncompliance
with
regulatory
requirements
or
safety
concerns,
among
others;
lower
than
anticipated
retention
rates
of
patients
and
volunteers
in
clinical
trials;
69
Table
of
Contents
•
•
•
•
•
•
•
our
CROs
or
clinical
trial
sites
failing
to
comply
with
regulatory
requirements
or
meet
their
contractual
obligations
to
us
in
a
timely
manner,
or
at
all,
deviating
from
the
protocol
or
dropping
out
of
a
trial;
delays
relating
to
adding
new
clinical
trial
sites;
difficulty
in
maintaining
contact
with
patients
after
treatment,
resulting
in
incomplete
data;
delays
in
establishing
the
appropriate
dosage
levels;
the
quality
or
stability
of
the
product
candidate
falling
below
acceptable
standards;
the
inability
to
produce
or
obtain
sufficient
quantities
of
the
product
candidate
to
commence
or
complete
clinical
trials;
and
exceeding
budgeted
costs
due
to
difficulty
in
accurately
predicting
costs
associated
with
clinical
trials.
We
could
also
encounter
delays
if
a
clinical
trial
is
suspended
or
terminated
by
us,
by
the
IRBs
or
Ethics
Committees
of
the
institutions
at
which
such
trials
are
being
conducted,
by
the
Data
Safety
Monitoring
Board
for
such
trial
or
by
the
FDA
or
other
regulatory
authorities.
Such
authorities
may
suspend
or
terminate
a
clinical
trial
due
to
a
number
of
factors,
including
failure
to
conduct
the
clinical
trial
in
accordance
with
regulatory
requirements,
including
the
FDA's
current
Good
Clinical
Practice
("GCP")
regulations,
or
our
clinical
protocols,
inspection
of
the
clinical
trial
operations
or
trial
site
by
the
FDA
resulting
in
the
imposition
of
a
clinical
hold,
unforeseen
safety
issues
or
adverse
side
effects,
failure
to
demonstrate
a
benefit
from
using
a
drug,
changes
in
governmental
regulations
or
administrative
actions
or
lack
of
adequate
funding
to
continue
the
clinical
trial.
In
order
to
commence
our
planned
clinical
trials
of
BHV-0223,
BHV-3500
and
BHV-5000,
we
will
have
to
complete
development
of
a
commercial-grade
formulation
and
obtain
sufficient
clinical
supply
of
both
product
candidates.
If
we
experience
delays
in
the
commencement
or
completion
of
any
clinical
trial
of
our
product
candidates,
or
if
any
of
our
clinical
trials
are
terminated,
the
commercial
prospects
of
our
product
candidates
may
be
harmed,
and
our
ability
to
generate
product
revenue
from
sales
of
any
of
these
product
candidates
will
be
delayed
or
not
realized
at
all.
We
do
not
know
whether
any
of
our
preclinical
studies
or
clinical
trials
will
begin
as
planned,
will
need
to
be
restructured
or
will
be
completed
on
schedule,
or
at
all.
Any
delays
in
completing
our
clinical
trials
will
increase
our
costs,
slow
down
our
product
candidate
development
and
approval
process
and
jeopardize
our
ability
to
commence
product
sales
and
generate
revenue
from
product
sales.
Any
of
these
occurrences
may
significantly
harm
our
business,
financial
condition
and
prospects.
In
addition,
many
of
the
factors
that
cause,
or
lead
to,
a
delay
in
the
commencement
or
completion
of
clinical
trials
may
also
ultimately
lead
to
the
denial
of
regulatory
approval
of
our
product
candidates.
Significant
preclinical
study
or
clinical
trial
delays
also
could
shorten
any
periods
during
which
we
may
have
the
exclusive
right
to
commercialize
our
product
candidates
or
allow
our
competitors
to
bring
products
to
market
before
we
do
and
impair
our
ability
to
successfully
commercialize
our
product
candidates.
Additionally,
we
regularly
assess
our
portfolio
based
on
emerging
data
from
pre-clinical
studies
and
clinical
trials,
and
we
may
make
changes
to
expand
or
discontinue
programs
based
on
these
assessments.
Expansion
of
the
number
or
scope
of
clinical
trials
may
result
in
additional
expenses
compared
to
our
expectations.
70
Table
of
Contents
The regulatory approval process of the FDA and comparable foreign jurisdictions is lengthy, time-consuming and unpredictable.
Our
future
success
is
dependent
upon
our
ability
to
successfully
develop,
obtain
regulatory
approval
for
and
then
successfully
commercialize
one
or
more
of
our
product
candidates.
The
time
required
to
obtain
approval
by
the
FDA
is
unpredictable
but
typically
takes
many
years
following
the
commencement
of
clinical
trials
and
depends
upon
numerous
factors,
including
the
substantial
discretion
of
the
regulatory
authorities.
In
addition,
approval
policies,
regulations,
or
the
type
and
amount
of
clinical
data
necessary
to
gain
approval
is
generally
uncertain,
may
change
during
the
course
of
a
product
candidate's
clinical
development
and
may
vary
among
jurisdictions.
We
have
not
obtained
regulatory
approval
for
any
product
candidate
and
it
is
possible
that
none
of
our
existing
product
candidates
or
any
product
candidates
we
may
seek
to
develop
in
the
future
will
ever
obtain
regulatory
approval.
Neither
we
nor
any
future
collaborator
is
permitted
to
market
any
of
our
product
candidates
in
the
United
States
or
abroad
until
we
receive
regulatory
approval
of
a
NDA
from
the
FDA
or
approval
from
the
EMA
or
other
applicable
foreign
regulatory
agency.
Prior
to
obtaining
approval
to
commercialize
a
product
candidate
in
any
jurisdiction,
we
must
demonstrate
to
the
satisfaction
of
the
FDA,
EMA
or
any
comparable
foreign
regulatory
agency,
that
such
product
candidates
are
safe
and
effective
for
their
intended
uses.
Results
from
preclinical
studies
and
clinical
trials
can
be
interpreted
in
different
ways.
The
FDA,
EMA
or
any
comparable
foreign
regulatory
agency
can
delay,
limit
or
deny
approval
of
our
product
candidates
or
require
us
to
conduct
additional
preclinical
or
clinical
testing
or
abandon
a
program
for
many
reasons,
including:
•
•
•
•
•
•
•
•
•
•
•
the
FDA,
EMA
or
the
applicable
foreign
regulatory
agency's
disagreement
with
the
number,
design,
conduct
or
implementation
of
our
preclinical
studies
and
clinical
trials;
negative
or
ambiguous
results
from
our
clinical
trials
or
results
that
may
not
meet
the
level
of
statistical
significance
required
by
the
FDA,
EMA
or
any
comparable
foreign
regulatory
agency
for
approval;
serious
and
unexpected
drug-related
side
effects
experienced
by
participants
in
our
clinical
trials
or
by
individuals
using
drugs
similar
to
our
product
candidates;
our
inability
to
demonstrate
to
the
satisfaction
of
the
FDA,
EMA
or
the
applicable
foreign
regulatory
agency
that
our
product
candidates
are
safe
and
effective
for
their
proposed
indications;
the
FDA's,
EMA's
or
the
applicable
foreign
regulatory
agency's
disagreement
with
the
interpretation
of
data
from
preclinical
studies
or
clinical
trials;
actions
by
the
CROs
that
we
retain
to
conduct
our
preclinical
studies
and
clinical
trials,
which
are
outside
of
our
control
and
that
materially
adversely
impact
our
preclinical
studies
and
clinical
trials;
the
FDA's,
EMA's
or
other
applicable
foreign
regulatory
agencies'
disagreement
with
the
interpretation
of
data
from
preclinical
studies
or
clinical
trials;
our
inability
to
demonstrate
the
clinical
and
other
benefits
of
our
product
candidates
outweigh
any
safety
or
other
perceived
risks;
the
FDA's,
EMA's
or
the
applicable
foreign
regulatory
agency's
requirement
for
additional
preclinical
studies
or
clinical
trials;
the
FDA's,
EMA's
or
the
applicable
foreign
regulatory
agency's
disagreement
regarding
the
formulation,
labeling
or
the
specifications
of
our
product
candidates;
the
FDA's,
EMA's
or
the
applicable
foreign
regulatory
agency's
failure
to
approve
the
manufacturing
processes
or
facilities
of
third-party
manufacturers
with
which
we
contract;
or
71
Table
of
Contents
•
the
potential
for
approval
policies
or
regulations
of
the
FDA,
EMA
or
the
applicable
foreign
regulatory
agencies
to
significantly
change
in
a
manner
rendering
our
clinical
data
insufficient
for
approval.
For
example,
with
respect
to
our
ongoing
Phase
2/3
clinical
trial
of
trigriluzole
for
the
treatment
of
SCA,
we
are
in
discussions
with
the
FDA
regarding
the
data
and
understand
the
potential
for
the
already
acquired
data
and
pending
extension
phase
data
to
contribute
sufficient
support
for
a
filing.
Given
that
topline
results
of
the
8-week
randomization
phase
did
not
show
that
trigriluzole
differentiates
from
placebo,
the
limitations
of
relying
on
extension
phase
data
in
comparison
to
historical
controls
and
the
FDA's
previously
raised
concerns
on
the
adequacy
of
the
SARA
as
a
primary
outcome
assessment,
there
is
substantial
risk
that
the
FDA
or
any
regulatory
agency
would
interpret
any
favorable
results
from
the
subgroups
of
the
Phase
2/3
trial
or
from
the
long-term
extension
phase
to
not
be
an
adequate
basis
for
approval.
BHV-0223
40mg
met
bioequivalent
criteria
(AUC
and
C
max
)
with
generic
riluzole
50mg
tablets.
Since
the
currently
approved
riluzole
is
associated
with
a
negative
food
effect
(lower
AUC
and
C
max
when
administered
with
high
fat
meals),
a
food
assessment
was
performed
within
the
BHV-0223
Phase
1
study.
Topline
results
from
the
food
effect
assessment,
demonstrated
bioequivalent
AUC
exposure
for
BHV-0223
40
mg
under
both
fed
and
fasting
states.
However,
C
max
concentrations
were
lowered
by
more
than
20%
under
the
fed
state.
We
believe
that
BHV-0223's
property
of
maintaining
therapeutic
AUC
exposures
regardless
of
feeding
state
is
clinically
important
for
patients.
Ultimately,
the
FDA
will
determine
the
labeling
of
BHV-0223
with
regard
to
the
effect
of
feeding,
which
may
impact
our
marketing
of
BHV-0223
if
it
is
approved.
Any
of
our
current
or
future
product
candidates
could
take
a
significantly
longer
time
to
gain
regulatory
approval
than
expected
or
may
never
gain
regulatory
approval.
This
could
delay
or
eliminate
any
potential
product
revenue
by
delaying
or
terminating
the
potential
commercialization
of
our
product
candidates.
Of
the
large
number
of
drugs
in
development,
only
a
small
percentage
successfully
complete
the
FDA
or
foreign
regulatory
approval
processes
and
are
commercialized.
The
lengthy
approval
process
as
well
as
the
unpredictability
of
future
clinical
trial
results
may
result
in
our
failing
to
obtain
regulatory
approval
to
market
our
product
candidates,
which
would
significantly
harm
our
business,
financial
condition,
results
of
operations
and
prospects.
FDA
guidance
regarding
the
approval
of
drugs
for
the
acute
treatment
of
migraine
has
recently
changed.
No
drug
has
been
approved
under
the
new
guidance,
and
it
is
not
certain
how
such
guidance
will
be
interpreted
and
applied
by
the
FDA.
We
intend
to
seek
advice
and
guidance
from
the
FDA
which
may
include
requesting
a
pre-NDA
meeting
with
the
FDA
prior
to
the
submission
of
an
NDA
for
any
of
our
product
candidates.
If
the
feedback
we
receive
is
different
from
what
we
currently
anticipate,
this
could
delay
the
development
and
regulatory
approval
process
for
these
product
candidates.
We
generally
plan
to
seek
regulatory
approval
to
commercialize
our
product
candidates
in
the
United
States,
the
European
Union
and
other
key
global
markets.
To
obtain
regulatory
approval
in
other
countries,
we
must
comply
with
numerous
and
varying
regulatory
requirements
of
such
other
countries
regarding
safety,
efficacy,
chemistry,
manufacturing
and
controls,
clinical
trials,
commercial
sales,
pricing
and
distribution
of
our
product
candidates.
Even
if
we
are
successful
in
obtaining
approval
in
one
jurisdiction,
we
cannot
ensure
that
we
will
obtain
approval
in
any
other
jurisdiction.
Failure
to
obtain
approval
in
one
jurisdiction
may
negatively
impact
our
ability
to
obtain
approval
elsewhere.
Failure
to
obtain
marketing
authorization
for
our
product
candidates
will
result
in
our
being
unable
to
market
and
sell
such
products.
If
we
fail
to
obtain
approval
in
any
jurisdiction,
the
geographic
market
for
our
product
candidates
could
be
limited.
Similarly,
regulatory
agencies
may
not
approve
the
labeling
claims
that
are
necessary
or
desirable
for
the
successful
commercialization
of
our
product
candidates
or
may
grant
approvals
for
more
limited
patient
populations
than
requested.
72
Table
of
Contents
Even
if
we
eventually
complete
clinical
testing
and
receive
approval
of
an
NDA
or
foreign
marketing
application
for
our
product
candidates,
the
FDA
or
the
applicable
foreign
regulatory
agency
may
grant
approval
contingent
on
the
performance
of
costly
additional
clinical
trials,
including
Phase
4
clinical
trials
or
the
implementation
of
a
Risk
Evaluation
and
Mitigation
Strategy
("REMS")
which
may
be
required
to
ensure
safe
use
of
the
drug
after
approval.
Any
delay
in
obtaining,
or
inability
to
obtain,
applicable
regulatory
approval
would
delay
or
prevent
commercialization
of
that
product
candidate
and
would
adversely
impact
our
business
and
prospects.
Our product candidates may fail to demonstrate safety and efficacy in clinical trials, or may cause serious adverse or unacceptable side effects that could
prevent or delay regulatory approval and commercialization, limit the commercial profile of an approved label, increase our costs, necessitate the abandonment
or limitation of the development of some of our product candidates or result in significant negative consequences following marketing approval, if any.
Before
obtaining
regulatory
approvals
for
the
commercial
sale
of
our
product
candidates,
we
must
demonstrate
through
lengthy,
complex
and
expensive
preclinical
testing
and
clinical
trials
that
our
product
candidates
are
both
safe
and
effective
for
use
in
each
target
indication,
and
failures
can
occur
at
any
stage
of
testing.
Clinical
trials
often
fail
to
demonstrate
efficacy
or
safety
of
the
product
candidate
studied
for
the
target
indication.
For
example,
in
its
Phase
2b
clinical
trial,
rimegepant
dosed
at
75
mg
showed
statistically
significant
improvement
as
compared
to
placebo
on
all
four
key
migraine
symptoms—pain,
nausea,
photophobia,
phonophobia—which
are
inherently
subjective
endpoints
that
are
difficult
to
measure.
Patients
in
the
trial
were
provided
with
an
electronic
data
capturing
device,
or
an
electronic
subject
diary,
which
they
used
to
record
and
rank
their
assessments
of
pain,
nausea,
photophobia
and
phonophobia
at
specified
time
points
after
they
had
taken
the
study
medication
following
the
occurrence
of
a
moderate
to
severe
migraine
headache.
The
measurements
from
the
trial
were
based
on
subjective
patient
feedback
as
recorded
on
their
electronic
subject
diary,
which
can
be
influenced
by
factors
outside
of
our
control,
and
can
vary
widely
from
day
to
day
for
a
particular
patient,
and
from
patient
to
patient
and
site
to
site
within
a
clinical
study.
The
placebo
effect
also
tends
to
have
a
more
significant
impact
on
clinical
trials
involving
subjective
measures
such
as
pain.
Moreover,
undesirable
side
effects
caused
by
our
product
candidates
could
cause
us
or
regulatory
authorities
to
interrupt,
delay
or
halt
clinical
trials
and
could
result
in
a
more
restrictive
label,
the
limitation
of
commercial
potential
or
the
delay
or
denial
of
regulatory
approval
by
the
FDA.
Results
of
our
clinical
trials
could
reveal
a
high
and
unacceptable
severity
and
prevalence
of
side
effects
or
unexpected
characteristics.
Accordingly,
we
may
need
to
abandon
their
development
or
limit
development
to
certain
uses
or
sub-populations
in
which
such
side
effects
are
less
prevalent,
less
severe
or
more
acceptable
from
a
risk-benefit
perspective.
Prior
to
any
regulatory
approval
of
rimegepant,
we
would
need
to
complete
a
12-month
safety
study
as
well
as
longer-term
nonclinical
toxicology
and
carcinogenicity
studies.
If
any
of
these
studies
identify
safety
issues,
we
may
need
to
complete
additional
studies,
or
abandon
development
of
rimegepant.
Many
compounds
that
initially
showed
promise
in
preclinical
or
early-stage
testing
have
later
been
found
to
cause
side
effects
that
restricted
their
use
and
prevented
further
development
of
the
compound
in
the
tested
indication.
In
animal
studies,
at
very
high
doses,
rimegepant
was
observed
to
have
a
negative
effect
on
the
liver.
We
observed
elevated
liver
enzymes
in
one
patient
that
received
very
high
doses
of
rimegepant
in
a
drug-drug
interaction
study.
We
recently
repeated
that
drug-drug
interaction
study
at
the
anticipated
therapeutic
dose
of
rimegepant
and
did
not
observe
clinically
meaningful
elevations
in
liver
enzymes.
In
the
completed
Phase
2b
trial
of
rimegepant
conducted
by
BMS,
one
patient
dosed
with
rimegepant
experienced
an
asymptomatic
and
mild
increase
in
certain
hepatic
enzymes,
which
are
a
type
of
liver
enzyme
measured
in
a
liver
function
test
to
detect
damage
and
inflammation
to
the
liver.
Even
though
no
patient
treated
with
rimegepant
in
the
Phase
2b
trial
had
liver
enzyme
elevation
that
73
Table
of
Contents
exceeded
the
level
that
is
considered
by
the
FDA
to
be
a
potentially
meaningful
indicator
of
severe
drug-induced
liver
injury,
we
cannot
guarantee
that
these
safety
and
tolerability
results
will
be
replicated
in
our
Phase
3
trials,
and
it
is
possible
that
rimegepant
may
be
observed
to
cause
unacceptable
levels
of
adverse
effects
or
serious
adverse
effects.
In
addition,
at
our
end
of
Phase
2
meeting,
the
FDA
stated
its
desire
to
see
a
safety
study
in
which
patients
received
daily
or
near-daily
dosing
of
rimegepant
for
at
least
three
months.
This
desire
stems
from
the
FDA's
concern
about
a
potential
liver
signal
with
the
class
of
CGRP
antagonists.
The
FDA
stated
that
any
risk
of
liver
injury
has
to
be
very
low
and
that
exposure
with
the
drug
has
to
be
sufficient
to
cap
the
risk
of
liver
injury
at
a
level
acceptable
for
the
migraine
population.
We
believe
the
design
of
our
long-term
safety
study
may
adequately
address
this
concern
by
providing
for
the
enrollment
of
approximately
600
patients
who
experience
eight
or
more
migraine
days
per
month,
who
will,
in
the
study,
be
allowed
to
use
rimegepant
on
a
daily
basis,
which
we
believe
will
generate
safety
data
with
respect
to
long-term,
frequent
use
of
rimegepant.
However,
the
FDA
may
determine
that
our
trial
design
or
the
data
we
collect
is
insufficient
to
address
their
concerns,
in
which
case
we
could
be
required
to
conduct
additional
trials.
Occurrence
of
serious
treatment-related
side
effects
could
impede
subject
recruitment
and
clinical
trial
enrollment
or
the
ability
of
enrolled
patients
to
complete
the
trial,
require
us
to
halt
the
clinical
trial,
and
prevent
receipt
of
regulatory
approval
from
the
FDA.
They
could
also
adversely
affect
physician
or
patient
acceptance
of
our
product
candidates
or
result
in
potential
product
liability
claims.
Any
of
these
occurrences
may
harm
our
business,
financial
condition
and
prospects
significantly.
If any of our product candidates receives marketing approval and we, or others, later discover that the drug is less effective than previously believed or causes
undesirable side effects that were not previously identified, our ability to market the drug could be compromised.
Clinical
trials
of
our
product
candidates
are
conducted
in
carefully
defined
subsets
of
patients
who
have
agreed
to
enter
into
clinical
trials.
Consequently,
it
is
possible
that
our
clinical
trials
may
indicate
an
apparent
positive
effect
of
a
product
candidate
that
is
greater
than
the
actual
positive
effect,
if
any,
or
alternatively
fail
to
identify
undesirable
side
effects.
If
one
or
more
of
our
product
candidates
receives
regulatory
approval,
and
we,
or
others,
later
discover
that
they
are
less
effective
than
previously
believed,
or
cause
undesirable
side
effects,
a
number
of
potentially
significant
negative
consequences
could
result,
including:
•
•
•
•
•
•
•
•
•
withdrawal
or
limitation
by
regulatory
authorities
of
approvals
of
such
product;
seizure
of
the
product
by
regulatory
authorities;
recall
of
the
product;
restrictions
on
the
marketing
of
the
product
or
the
manufacturing
process
for
any
component
thereof;
requirement
by
regulatory
authorities
of
additional
warnings
on
the
label,
such
as
a
"black
box"
warning
or
contraindication;
requirement
that
we
implement
a
REMS
or
create
a
medication
guide
outlining
the
risks
of
such
side
effects
for
distribution
to
patients;
commitment
to
expensive
additional
safety
studies
prior
to
approval
or
post-marketing
studies
required
by
regulatory
authorities
of
such
product;
commitment
to
expensive
post-marketing
studies
as
a
prerequisite
of
approval
by
regulatory
authorities
of
such
product;
the
product
may
become
less
competitive;
74
Table
of
Contents
•
•
•
initiation
of
regulatory
investigations
and
government
enforcement
actions;
initiation
of
legal
action
against
us
to
hold
us
liable
for
harm
caused
to
patients;
and
harm
to
our
reputation
and
resulting
harm
to
physician
or
patient
acceptance
of
our
products.
Any
of
these
events
could
prevent
us
from
achieving
or
maintaining
market
acceptance
of
the
particular
product
candidate,
if
approved,
and
could
significantly
harm
our
business,
financial
condition,
and
results
of
operations.
Our clinical drug development program may not uncover all possible adverse events that patients who use our products may experience. The number of
subjects exposed to treatment and the average exposure time in the clinical development program may be inadequate to detect rare adverse events, or chance
findings, that may only be detected once our products are administered to more patients and for greater periods of time.
Clinical
trials
by
their
nature
utilize
a
sample
of
the
potential
patient
population.
However,
with
a
limited
number
of
subjects
and
limited
duration
of
exposure,
rare
and
severe
side
effects
of
our
product
candidates
may
only
be
uncovered
when
a
significantly
larger
number
of
patients
are
exposed
to
the
product.
Although
we
have
monitored
the
subjects
in
our
studies
for
certain
safety
concerns
and
we
have
not
seen
evidence
of
significant
safety
concerns
in
our
clinical
trials,
patients
treated
with
our
product
candidates,
if
approved,
may
experience
adverse
reactions.
If
safety
problems
occur
or
are
identified
after
one
of
our
products
reaches
the
market,
the
FDA
or
comparable
foreign
regulatory
authorities
may
require
that
we
amend
the
labeling
of
our
product,
recall
our
product,
or
even
withdraw
approval
for
our
product.
SAEs
deemed
to
be
caused
by
our
product
candidates,
either
before
or
after
receipt
of
marketing
approval,
could
have
a
material
adverse
effect
on
the
development
of
our
drug
candidates
and
our
business
as
a
whole.
We depend on enrollment of patients in our clinical trials for our product candidates. If we are unable to enroll patients in our clinical trials, our research and
development efforts could be adversely affected.
Identifying
and
qualifying
patients
to
participate
in
clinical
trials
of
our
product
candidates
is
critical
to
our
success.
Successful
and
timely
completion
of
clinical
trials
will
require
that
we
enroll
a
sufficient
number
of
patients
who
remain
in
the
study
until
its
conclusion.
If
we
are
unable
to
enroll
a
sufficient
number
of
patients
in
our
clinical
trials,
our
timelines
for
recruiting
patients,
conducting
clinical
trials
and
obtaining
regulatory
approval
of
potential
products
may
be
delayed.
These
delays
could
result
in
increased
costs,
delays
in
advancing
our
product
development,
delays
in
testing
the
effectiveness
of
our
technology
or
termination
of
our
clinical
trials
altogether.
We
cannot
predict
how
successful
we
will
be
at
enrolling
patients
in
future
clinical
trials.
Patient
enrollment
is
affected
by
other
factors
including:
•
•
•
•
•
•
•
•
•
the
eligibility
criteria
for
the
trial
in
question;
the
perceived
risks
and
benefits
of
the
product
candidate
in
the
trial;
clinicians'
and
patients'
perceptions
as
to
the
potential
advantages
of
the
product
candidate
being
studied
in
relation
to
other
available
therapies,
including
any
new
drugs
that
may
be
approved
for
the
indications
we
are
investigating
or
drugs
that
may
be
used
off-label
for
these
indications;
the
size
of
the
patient
population
required
for
analysis
of
the
trial's
primary
endpoints;
competition
for
patients
for
competitive
product
candidates
undergoing
clinical
trials;
the
efforts
to
facilitate
timely
enrollment
in
clinical
trials;
the
design
of
the
trial;
the
patient
referral
practices
of
physicians;
our
ability
to
recruit
clinical
trial
investigators
with
the
appropriate
competencies
and
experience;
75
Table
of
Contents
•
•
•
•
•
the
ability
to
monitor
patients
adequately
during
and
after
treatment;
the
risk
that
patients
enrolled
in
clinical
trials
will
drop
out
of
the
trials
before
completion;
the
ability
to
obtain
and
maintain
patient
consents;
the
number
of
patients
with
the
indication
being
studied;
and
the
proximity
and
availability
of
clinical
trial
sites
for
prospective
patients.
In
addition,
our
clinical
trials
will
compete
with
other
clinical
trials
for
product
candidates
that
are
in
the
same
therapeutic
areas
as
our
product
candidates,
and
this
competition
will
reduce
the
number
and
types
of
patients
available
to
us,
because
some
patients
who
might
have
opted
to
enroll
in
our
trials
may
instead
opt
to
enroll
in
a
trial
being
conducted
by
one
of
our
competitors.
Delays
in
the
completion
of
any
clinical
trial
of
our
product
candidates
will
increase
our
costs,
slow
down
our
product
candidate
development
and
approval
process,
and
delay
or
potentially
jeopardize
our
ability
to
commence
product
sales
and
generate
revenue.
In
addition,
many
of
the
factors
that
may
lead
to
a
delay
in
the
commencement
or
completion
of
clinical
trials
may
also
ultimately
lead
to
the
denial
of
regulatory
approval
of
our
product
candidates.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may
be more profitable or for which there is a greater likelihood of success.
We
have
limited
financial
and
managerial
resources.
As
a
result,
we
may
forego
or
delay
pursuit
of
opportunities
with
other
product
candidates
or
for
other
indications
that
later
prove
to
have
greater
commercial
potential.
Our
resource
allocation
decisions
may
cause
us
to
fail
to
capitalize
on
viable
commercial
products
or
profitable
market
opportunities.
Our
spending
on
current
and
future
research
and
development
programs
and
product
candidates
for
specific
indications
may
not
yield
any
commercially
viable
products.
If
we
do
not
accurately
evaluate
the
commercial
potential
or
target
market
for
a
particular
product
candidate,
we
may
relinquish
valuable
rights
to
that
product
candidate
through
collaboration,
licensing
or
other
royalty
arrangements
in
cases
in
which
it
would
have
been
more
advantageous
for
us
to
retain
sole
development
and
commercialization
rights
to
such
product
candidate.
We may become exposed to costly and damaging liability claims, either when testing our product candidates in the clinic or at the commercial stage, and our
product liability insurance may not cover all damages from such claims.
We
are
exposed
to
potential
product
liability
and
professional
indemnity
risks
that
are
inherent
in
the
research,
development,
manufacturing,
marketing,
and
use
of
pharmaceutical
products.
We
currently
have
no
products
that
have
been
approved
for
commercial
sale.
However,
the
current
and
future
use
of
product
candidates
by
us
in
clinical
trials,
and
the
sale
of
any
approved
products
in
the
future,
may
expose
us
to
liability
claims.
These
claims
might
be
made
by
patients
that
use
the
product,
healthcare
providers,
pharmaceutical
companies,
or
others
selling
such
products.
In
addition,
we
have
agreed
to
indemnify
the
licensors
of
the
intellectual
property
related
to
our
product
candidates
against
certain
intellectual
property
infringement
claims.
Any
claims
against
us,
or
with
respect
to
which
we
are
obligated
to
provide
indemnification,
regardless
of
their
merit,
could
be
difficult
and
costly
to
defend
or
settle,
and
could
compromise
the
market
acceptance
of
our
product
candidates
or
any
prospects
for
commercialization
of
our
product
candidates,
if
approved.
Although
the
clinical
trial
process
is
designed
to
identify
and
assess
potential
side
effects,
it
is
always
possible
that
a
drug,
even
after
regulatory
approval,
may
exhibit
unforeseen
side
effects.
If
any
of
our
product
candidates
were
to
cause
adverse
side
effects
during
clinical
trials
or
after
approval
of
76
Table
of
Contents
the
product
candidate,
we
may
be
exposed
to
substantial
liabilities.
Physicians
and
patients
may
not
comply
with
any
warnings
that
identify
known
potential
adverse
effects
and
patients
who
should
not
use
our
product
candidates.
Although
we
maintain
product
liability
insurance
coverage,
such
insurance
may
not
be
adequate
to
cover
all
liabilities
that
we
may
incur.
We
may
need
to
increase
our
insurance
coverage
each
time
we
commence
a
clinical
trial
and
if
we
successfully
commercialize
any
product
candidate.
As
the
expense
of
insurance
coverage
is
increasing,
we
may
not
be
able
to
maintain
insurance
coverage
at
a
reasonable
cost
or
in
an
amount
adequate
to
satisfy
any
liability
that
may
arise.
If
a
successful
product
liability
claim
or
series
of
claims
is
brought
against
us
for
uninsured
liabilities
or
in
excess
of
insured
liabilities,
our
assets
may
not
be
sufficient
to
cover
such
claims
and
our
business
operations
could
be
impaired.
If serious adverse events or other undesirable side effects are identified during the use of our product candidates in investigator-sponsored trials, it may
adversely affect our development of such product candidates.
Undesirable
side
effects
caused
by
our
product
candidates
could
cause
us
or
regulatory
authorities
to
interrupt,
delay
or
halt
nonclinical
studies
and
clinical
trials,
or
could
make
it
more
difficult
for
us
to
enroll
patients
in
our
clinical
trials.
If
serious
adverse
events
or
other
undesirable
side
effects
or
unexpected
characteristics
of
our
product
candidates
are
observed
in
investigator-sponsored
trials,
further
clinical
development
of
such
product
candidate
may
be
delayed
or
we
may
not
be
able
to
continue
development
of
such
product
candidate
at
all,
and
the
occurrence
of
these
events
could
have
a
material
adverse
effect
on
our
business.
Undesirable
side
effects
caused
by
our
product
candidates
could
also
result
in
the
delay
or
denial
of
regulatory
approval
by
the
FDA
or
other
regulatory
authorities
or
in
a
more
restrictive
label
than
we
expect.
Risks
Related
to
Commercialization
of
Our
Product
Candidates
We have never commercialized a product candidate and we may lack the necessary expertise, personnel and resources to successfully commercialize any of our
products that receive regulatory approval on our own or together with collaborators.
We
have
never
commercialized
a
product
candidate.
Our
operations
to
date
have
been
limited
to
organizing
and
staffing
our
company,
business
planning,
raising
capital,
acquiring
the
rights
to
our
product
candidates
and
undertaking
preclinical
studies
and
clinical
trials
of
our
product
candidates.
We
currently
have
no
sales
force,
marketing
or
distribution
capabilities.
To
achieve
commercial
success
of
our
product
candidates,
if
any
are
approved,
we
will
have
to
develop
our
own
sales,
marketing
and
supply
capabilities
or
outsource
these
activities
to
a
third
party.
Factors
that
may
affect
our
ability
to
commercialize
our
product
candidates
on
our
own
include
recruiting
and
retaining
adequate
numbers
of
effective
sales
and
marketing
personnel,
obtaining
access
to
or
persuading
adequate
numbers
of
physicians
to
prescribe
our
product
candidates
and
other
unforeseen
costs
associated
with
creating
an
independent
sales
and
marketing
organization.
Developing
a
sales
and
marketing
organization
requires
significant
investment,
is
time-
consuming
and
could
delay
the
launch
of
our
product
candidates.
We
may
not
be
able
to
build
an
effective
sales
and
marketing
organization
in
the
United
States,
the
European
Union
or
other
key
global
markets.
If
we
are
unable
to
build
our
own
distribution
and
marketing
capabilities
or
to
find
suitable
partners
for
the
commercialization
of
our
product
candidates,
we
may
have
difficulties
generating
revenue
from
them.
We operate in a highly competitive and rapidly changing industry.
Biopharmaceutical
product
development
is
highly
competitive
and
subject
to
rapid
and
significant
technological
advancements.
Our
success
is
highly
dependent
upon
our
ability
to
in-license,
acquire,
develop
and
obtain
regulatory
approval
for
new
and
innovative
products
on
a
cost-effective
basis
and
to
market
them
successfully.
In
doing
so,
we
face
and
will
continue
to
face
intense
competition
from
a
77
Table
of
Contents
variety
of
businesses,
including
large,
fully
integrated,
well-established
pharmaceutical
companies
who
already
possess
a
large
share
of
the
market,
specialty
pharmaceutical
and
biopharmaceutical
companies,
academic
institutions,
government
agencies
and
other
private
and
public
research
institutions
in
the
United
States,
the
European
Union
and
other
jurisdictions.
With
respect
to
our
CGRP
receptor
antagonists,
rimegepant
and
BHV-3500,
we
face
competition
from
other
companies
that
market
or
are
developing
migraine
treatments.
These
include
products
in
the
class
of
products
known
as
triptans,
including
the
5-HT
1F
receptor
antagonist
lasmiditan
being
developed
by
CoLucid
Pharmaceuticals,
as
well
as
other
small
molecule
CGRP
receptor
antagonists
such
as
ubrogepant,
being
developed
by
Allergan.
These
products
are
more
advanced
in
their
clinical
development
than
rimegepant
and
BHV-3500,
and
therefore
may
receive
marketing
approval
before
our
migraine
product
candidates
receive
marketing
approval,
if
at
all,
which
could
make
it
more
difficult
for
our
products
to
achieve
commercially
reasonable
market
acceptance.
In
addition,
we
expect
that
our
migraine
product
candidates
will
also
compete
with
opioids
and
other
analgesics,
monoclonal
antibodies
in
development
and
Botox
and
other
treatments
that
have
been
approved
by
the
FDA
for
migraine.
With
respect
to
BHV-0223,
which
we
are
developing
for
the
treatment
of
ALS,
we
believe
our
primary
competition
is
Covis
Pharmaceuticals,
which
sells
Rilutek,
the
brand
name
for
riluzole,
and
the
six
approved
generic
versions
of
Rilutek.
Edaravone
(Radicava,
Mitsubishi
Tanabe
Pharma)
was
recently
approved
by
the
FDA
on
May
5,
2017
for
the
treatment
of
ALS,
based
on
efficacy
studies
conducted
in
Japan
with
the
vast
majority
of
patients
on
background
riluzole
therapy.
Edaravone
is
administered
to
patients
by
intravenous
infusion.
We
are
aware
of
at
least
two
other
companies
marketing
or
planning
to
market
new
formulations
of
riluzole.
MonoSol
Rx
has
filed
an
IND
with
the
FDA
to
conduct
clinical
trials
for
a
riluzole
oral
soluble
film,
and
Italfarmaco
SpA
("Italfarmaco")
a
private
Italian
company,
markets
an
oral
liquid
suspension
formulation
of
riluzole
in
the
United
Kingdom
and
elsewhere
in
Europe
under
the
brand
name
Teglutik.
To
our
knowledge
based
on
publicly
available
information,
no
other
companies
are
marketing
sublingual
formulations
of
riluzole.
Other
companies
of
which
we
are
not
aware
may
also
be
developing
formulations
using
the
API
riluzole;
if
such
companies
pursued
regulatory
approval
of
such
product
candidates
using
the
Section
505(b)(2)
regulatory
pathway,
those
product
candidates
would
potentially
compete
with
BHV-0223.
For
example,
Italfarmaco
has
obtained
orphan
designation
for
Teglutik,
and
is
eligible
to
obtain
orphan
exclusivity
subject
to
a
showing
of
clinical
superiority
to
riluzole.
If
Teglutik
is
shown
to
be
clinically
superior
to
Rilutek
and
receives
marketing
approval
before
BHV-0223,
then
BHV-0223
may
need
to
demonstrate
clinical
superiority
to
Teglutik
to
receive
marketing
approval.
With
respect
to
trigriluzole,
which
we
are
currently
developing
for
the
treatment
of
ataxias
and
other
neurologic
disorders,
with
SCA
as
our
initial
indication,
there
are
currently
no
approved
drug
treatments
for
spinocerebellar
ataxias
in
the
United
States.
We
are
also
developing
trigriluzole
for
the
potential
treatment
of
Alzheimer's
disease
and
OCD
and
if
we
continue
to
pursue
those
indications,
we
would
face
substantial
competition
from
companies
that
develop
or
sell
products
that
treat
Alzheimer's
disease
or
OCD.
With
respect
to
BHV-5000,
which
we
are
developing
for
the
treatment
of
Rett
syndrome,
there
are
currently
no
approved
drug
treatments
for
Rett
syndrome
in
the
United
States.
If
we
expand
our
development
of
BHV-0223
or
BHV-5000
into
additional
neuropsychiatric
or
other
indications,
we
would
face
substantial
competition
from
companies
that
develop
or
sell
products
that
treat
those
indications.
Many
of
the
companies
against
which
we
are
competing
or
against
which
we
may
compete
in
the
future
have
significantly
greater
financial
resources
and
expertise
in
research
and
development,
manufacturing,
preclinical
testing,
conducting
clinical
trials,
obtaining
regulatory
approvals
and
marketing
approved
drugs
than
we
do.
These
third
parties
compete
with
us
in
recruiting
and
retaining
qualified
scientific
and
management
personnel,
establishing
clinical
trial
sites
and
patient
registration
for
clinical
trials,
as
well
as
in
acquiring
technologies
complementary
to,
or
necessary
for,
our
programs.
78
Table
of
Contents
Mergers
and
acquisitions
in
the
biopharmaceutical
industry
could
result
in
even
more
resources
being
concentrated
among
a
small
number
of
our
competitors.
Competition
may
further
increase
as
a
result
of
advances
in
the
commercial
applicability
of
technologies
and
greater
availability
of
capital
for
investment
in
these
industries.
Our
competitors
may
succeed
in
developing,
acquiring
or
licensing,
on
an
exclusive
basis,
products
that
are
more
effective
or
less
costly
than
any
product
candidate
that
we
may
develop.
Established
biopharmaceutical
companies
may
invest
heavily
to
accelerate
research
and
development
of
novel
compounds
or
to
in-license
novel
compounds
that
could
make
our
product
candidates
less
competitive.
In
addition,
any
new
product
that
competes
with
an
approved
product
must
demonstrate
compelling
advantages
in
efficacy,
convenience,
tolerability
and
safety
in
order
to
overcome
price
competition
and
to
be
commercially
successful.
Accordingly,
our
competitors
may
succeed
in
obtaining
patent
protection,
discovering,
developing,
receiving
FDA
approval
for
or
commercializing
drugs
before
we
do,
which
would
have
an
adverse
impact
on
our
business
and
results
of
operations.
The
availability
of
our
competitors'
products
could
limit
the
demand
and
the
price
we
are
able
to
charge
for
any
product
candidate
we
commercialize,
if
any.
The
inability
to
compete
with
existing
or
subsequently
introduced
drugs
would
harm
our
business,
financial
condition
and
results
of
operations.
The successful commercialization of certain of our product candidates will depend in part on the extent to which governmental authorities and health insurers
establish adequate coverage, reimbursement levels and pricing policies. Failure to obtain or maintain adequate coverage and reimbursement for our product
candidates, if approved, could limit our ability to market those products and decrease our ability to generate revenue.
The
availability
and
adequacy
of
coverage
and
reimbursement
by
governmental
healthcare
programs,
such
as
Medicare
and
Medicaid,
private
health
insurers
and
other
third-party
payors,
is
essential
for
most
patients
to
be
able
to
afford
products
such
as
our
product
candidates,
if
approved.
Our
ability
to
achieve
acceptable
levels
of
coverage
and
reimbursement
for
products
by
governmental
authorities,
private
health
insurers
and
other
organizations
will
have
an
effect
on
our
ability
to
successfully
commercialize
our
product
candidates,
if
approved,
and
attract
additional
collaboration
partners
to
invest
in
the
development
of
our
product
candidates.
Coverage
under
certain
government
programs,
such
as
Medicare,
Medicaid
and
Tricare,
may
not
be
available
for
certain
of
our
product
candidates.
Assuming
we
obtain
coverage
for
a
given
product
by
a
third-party
payor,
the
resulting
reimbursement
payment
rates
may
not
be
adequate
or
may
require
co-payments
that
patients
find
unacceptably
high.
We
cannot
be
sure
that
coverage
and
adequate
reimbursement
in
the
United
States,
the
European
Union
or
elsewhere
will
be
available
for
any
product
that
we
may
develop,
and
any
reimbursement
that
may
become
available
may
be
decreased
or
eliminated
in
the
future.
Third-party
payors
increasingly
are
challenging
prices
charged
for
pharmaceutical
products
and
services,
and
many
third-party
payors
may
refuse
to
provide
coverage
and
reimbursement
for
particular
drugs
when
an
equivalent
generic
drug
or
a
less
expensive
therapy
is
available.
It
is
possible
that
a
third-party
payor
may
consider
our
product
candidates
as
substitutable
by
less
expensive
therapies
and
only
offer
to
reimburse
patients
for
the
less
expensive
product.
Even
if
we
show
improved
efficacy
or
improved
convenience
of
administration
with
our
product
candidates,
pricing
of
existing
drugs
may
limit
the
amount
we
will
be
able
to
charge
for
our
product
candidates,
once
approved.
These
payors
may
deny
or
revoke
the
reimbursement
status
of
a
given
product
or
establish
prices
for
new
or
existing
marketed
products
at
levels
that
are
too
low
to
enable
us
to
realize
an
appropriate
return
on
our
investment
in
product
development.
If
reimbursement
is
not
available
or
is
available
only
at
limited
levels,
we
may
not
be
able
to
successfully
commercialize
our
product
candidates,
and
may
not
be
able
to
obtain
a
satisfactory
financial
return
on
products
that
we
may
develop.
79
Table
of
Contents
There
is
significant
uncertainty
related
to
the
insurance
coverage
and
reimbursement
of
newly
approved
products.
In
the
United
States,
third-party
payors,
including
private
and
governmental
payors,
such
as
the
Medicare
and
Medicaid
programs,
play
an
important
role
in
determining
the
extent
to
which
new
drugs
and
biologics
will
be
covered.
The
Medicare
and
Medicaid
programs
increasingly
are
used
as
models
for
how
private
payors
and
other
governmental
payors
develop
their
coverage
and
reimbursement
policies
for
drugs
and
biologics.
Some
third-party
payors
may
require
pre-approval
of
coverage
for
new
or
innovative
devices
or
drug
therapies
before
they
will
reimburse
health
care
providers
who
use
such
therapies.
It
is
difficult
to
predict
at
this
time
what
third-party
payors
will
decide
with
respect
to
the
coverage
and
reimbursement
for
our
product
candidates.
Obtaining
and
maintaining
reimbursement
status
is
time-consuming
and
costly.
No
uniform
policy
for
coverage
and
reimbursement
for
products
exists
among
third-party
payors
in
the
United
States.
Therefore,
coverage
and
reimbursement
for
products
can
differ
significantly
from
payor
to
payor.
As
a
result,
the
coverage
determination
process
is
often
a
time-consuming
and
costly
process
that
will
require
us
to
provide
scientific
and
clinical
support
for
the
use
of
our
products
to
each
payor
separately,
with
no
assurance
that
coverage
and
adequate
reimbursement
will
be
applied
consistently
or
obtained
in
the
first
instance.
Furthermore,
rules
and
regulations
regarding
reimbursement
change
frequently,
in
some
cases
at
short
notice,
and
we
believe
that
changes
in
these
rules
and
regulations
are
likely.
Moreover,
increasing
efforts
by
governmental
and
third-party
payors
in
the
United
States
and
abroad
to
cap
or
reduce
healthcare
costs
may
cause
such
organizations
to
limit
both
coverage
and
the
level
of
reimbursement
for
newly
approved
products
and,
as
a
result,
they
may
not
cover
or
provide
adequate
payment
for
our
product
candidates.
We
expect
to
experience
pricing
pressures
in
connection
with
the
sale
of
any
of
our
product
candidates
due
to
the
trend
toward
managed
healthcare,
the
increasing
influence
of
health
maintenance
organizations,
and
additional
legislative
changes.
The
downward
pressure
on
healthcare
costs
in
general,
particularly
prescription
drugs
and
surgical
procedures
and
other
treatments,
has
become
very
intense.
As
a
result,
increasingly
high
barriers
are
being
erected
to
the
entry
of
new
products.
The
continuing
efforts
of
the
government,
insurance
companies,
managed
care
organizations
and
other
payors
of
health
care
services
to
contain
or
reduce
costs
of
health
care
may
adversely
affect:
•
•
•
•
•
the
demand
for
any
products
for
which
we
may
obtain
regulatory
approval;
our
ability
to
set
a
price
that
we
believe
is
fair
for
our
products;
our
ability
to
obtain
coverage
and
reimbursement
approval
for
a
product;
our
ability
to
generate
revenues
and
achieve
or
maintain
profitability;
and
the
level
of
taxes
that
we
are
required
to
pay.
Even if we obtain regulatory approval for our product candidates, they will remain subject to ongoing regulatory oversight.
Even
if
we
obtain
regulatory
approval
for
any
of
our
product
candidates,
they
will
be
subject
to
extensive
and
ongoing
regulatory
requirements
for
manufacturing
processes,
labeling,
packaging,
distribution,
adverse
event
reporting,
storage,
advertising,
promotion,
sampling
and
record-keeping.
These
requirements
include
submissions
of
safety
and
other
post-marketing
information
and
reports,
registration,
as
well
as
continued
compliance
with
current
good
manufacturing
practices
("cGMP")
regulations
and
good
clinical
practices,
or
GCPs,
for
any
clinical
trials
that
we
conduct
post-approval,
all
of
which
may
result
in
significant
expense
and
limit
our
ability
to
commercialize
such
products.
In
addition,
any
regulatory
approvals
that
we
receive
for
our
product
candidates
may
also
be
subject
to
limitations
on
the
approved
indicated
uses
for
which
the
product
may
be
marketed
or
to
the
conditions
of
approval,
or
contain
requirements
for
potentially
costly
post-marketing
testing,
including
Phase
4
80
Table
of
Contents
clinical
trials,
and
surveillance
to
monitor
the
safety
and
efficacy
of
the
product
candidate.
The
FDA
may
also
require
a
REMS
as
a
condition
of
approval
of
our
product
candidates,
which
could
include
requirements
for
a
medication
guide,
physician
communication
plans
or
additional
elements
to
ensure
safe
use,
such
as
restricted
distribution
methods,
patient
registries
and
other
risk
minimization
tools.
The
FDA's
and
other
regulatory
authorities'
policies
may
change
and
additional
government
regulations
may
be
enacted
that
could
prevent,
limit
or
delay
regulatory
approval
of
our
product
candidates.
We
cannot
predict
the
likelihood,
nature
or
extent
of
government
regulation
that
may
arise
from
future
legislation
or
administrative
action,
either
in
the
United
States
or
abroad.
If
we
are
slow
or
unable
to
adapt
to
changes
in
existing
requirements
or
the
adoption
of
new
requirements
or
policies,
or
if
we
are
not
able
to
maintain
regulatory
compliance,
we
may
lose
any
marketing
approval
that
we
may
have
obtained
and
we
may
not
achieve
or
sustain
profitability.
Moreover,
if
there
are
changes
in
the
application
of
legislation
or
regulatory
policies,
or
if
problems
are
discovered
with
a
product
or
our
manufacture
of
a
product,
or
if
we
or
one
of
our
distributors,
licensees
or
co-marketers
fails
to
comply
with
regulatory
requirements,
the
regulators
could
take
various
actions.
These
include:
•
•
•
•
•
•
•
•
issuing
warning
or
untitled
letters;
seeking
an
injunction
or
imposing
civil
or
criminal
penalties
or
monetary
fines;
suspension
or
imposition
of
restrictions
on
operations,
including
product
manufacturing;
seizure
or
detention
of
products,
refusal
to
permit
the
import
or
export
of
products,
or
request
that
we
initiate
a
product
recall;
suspension
or
withdrawal
of
our
marketing
authorizations;
suspension
of
any
ongoing
clinical
trials;
refusal
to
approve
pending
applications
or
supplements
to
applications
submitted
by
us;
or
requiring
us
to
conduct
additional
clinical
trials,
change
our
product
labeling
or
submit
additional
applications
for
marketing
authorization.
If
any
of
these
events
occurs,
our
ability
to
sell
such
product
may
be
impaired,
and
we
may
incur
substantial
additional
expense
to
comply
with
regulatory
requirements,
which
could
adversely
affect
our
business,
financial
condition
and
results
of
operations.
Even if any of our product candidates receives marketing approval, it may fail to achieve the degree of market acceptance by physicians, patients, third-party
payors and others in the medical community necessary for commercial success.
Even
if
the
FDA
approves
the
marketing
of
any
product
candidates
that
we
develop,
physicians,
patients,
third-party
payors
or
the
medical
community
may
not
accept
or
use
them.
Efforts
to
educate
the
medical
community
and
third-party
payors
on
the
benefits
of
our
product
candidates
may
require
significant
resources
and
may
not
be
successful.
If
any
of
our
product
candidates
do
not
achieve
an
adequate
level
of
acceptance,
we
may
not
generate
significant
product
revenue
or
any
profits
from
operations.
The
degree
of
market
acceptance
of
our
product
candidates
that
are
approved
for
commercial
sale
will
depend
on
a
variety
of
factors,
including:
•
•
•
•
the
efficacy
and
potential
advantages
compared
to
alternative
treatments;
effectiveness
of
sales
and
marketing
efforts;
the
cost
of
treatment
in
relation
to
alternative
treatments,
including
any
similar
generic
treatments;
our
ability
to
offer
our
products,
if
approved,
for
sale
at
competitive
prices;
81
Table
of
Contents
•
•
•
•
•
•
•
the
convenience
and
ease
of
administration
compared
to
alternative
treatments;
the
willingness
of
the
target
patient
population
to
try
new
therapies
and
of
physicians
to
prescribe
these
therapies;
the
strength
of
marketing
and
distribution
support;
the
availability
of
third-party
coverage
and
adequate
reimbursement,
and
patients'
willingness
to
pay
out-of-pocket
in
the
absence
of
third-party
coverage
or
adequate
reimbursement;
the
prevalence
and
severity
of
any
side
effects;
any
restrictions
on
the
use
of
our
products,
if
approved,
together
with
other
medications;
and
other
potential
advantages
over
alternative
treatment
methods.
Our
efforts
to
educate
physicians,
patients,
third-party
payors
and
others
in
the
medical
community
on
the
benefits
of
our
products,
if
approved,
may
require
significant
resources
and
may
never
be
successful.
Such
efforts
may
require
more
resources
than
are
typically
required
due
to
the
complexity
and
uniqueness
of
our
product
candidates.
Because
we
expect
sales
of
our
product
candidates,
if
approved,
to
generate
substantially
all
of
our
product
revenue
for
the
foreseeable
future,
the
failure
of
our
product
candidates
to
find
market
acceptance
would
harm
our
business
and
could
require
us
to
seek
additional
financing.
In
addition,
the
potential
market
opportunity
for
our
product
candidates
is
difficult
to
estimate
precisely.
Our
estimates
of
the
potential
market
opportunity
are
predicated
on
several
key
assumptions
such
as
industry
knowledge
and
publications,
third-party
research
reports
and
other
surveys.
While
we
believe
that
our
internal
assumptions
are
reasonable,
these
assumptions
may
be
inaccurate.
If
any
of
the
assumptions
proves
to
be
inaccurate,
then
the
actual
market
for
our
product
candidates
could
be
smaller
than
our
estimates
of
the
potential
market
opportunity.
If
the
actual
market
for
our
product
candidates
is
smaller
than
we
expect,
or
if
the
products
fail
to
achieve
an
adequate
level
of
acceptance
by
physicians,
health
care
payors
and
patients,
our
revenue
from
product
sales
may
be
limited
and
we
may
be
unable
to
achieve
or
maintain
profitability.
We currently have limited marketing, sales or distribution infrastructure. If we are unable to develop sales, marketing and distribution capabilities on our own
or through collaborations, or if we fail to achieve adequate pricing or reimbursement we will not be successful in commercializing our product candidates, if
approved.
We
currently
have
limited
marketing,
sales
and
distribution
capabilities
and
our
product
candidates
are
still
in
clinical
development.
If
any
of
our
product
candidates
are
approved,
we
intend
either
to
establish
a
sales
and
marketing
organization
with
technical
expertise
and
supporting
distribution
capabilities
to
commercialize
our
product
candidates,
or
to
outsource
these
functions
to
a
third
party.
Either
of
these
options
would
be
expensive
and
time-consuming.
These
costs
may
be
incurred
in
advance
of
any
approval
of
our
product
candidates.
In
addition,
we
may
not
be
able
to
hire
a
sales
force
that
is
sufficient
in
size
or
has
adequate
expertise
in
the
medical
markets
that
we
intend
to
target.
Any
failure
or
delay
in
the
development
of
our
internal
sales,
marketing
and
distribution
capabilities
would
adversely
impact
the
commercialization
of
our
products.
To
the
extent
that
we
enter
into
collaboration
agreements
with
respect
to
marketing,
sales
or
distribution,
our
product
revenue
may
be
lower
than
if
we
directly
marketed
or
sold
any
approved
products.
In
addition,
any
revenue
we
receive
will
depend
in
whole
or
in
part
upon
the
efforts
of
these
third-party
collaborators,
which
may
not
be
successful
and
are
generally
not
within
our
control.
If
we
are
unable
to
enter
into
these
arrangements
on
acceptable
terms
or
at
all,
we
may
not
be
able
to
successfully
commercialize
any
approved
products.
If
we
are
not
successful
in
commercializing
any
approved
products,
either
on
our
own
or
through
collaborations
with
one
or
more
third
parties,
our
future
product
revenue
will
suffer
and
we
may
incur
significant
additional
losses.
82
Table
of
Contents
If the FDA or comparable foreign regulatory authorities approve generic versions of any of our products that receive marketing approval, or such authorities
do not grant our products appropriate periods of exclusivity before approving generic versions of our products, the sales of our products could be adversely
affected.
Once
an
NDA
is
approved,
the
product
covered
thereby
becomes
a
"reference
listed
drug"
in
the
FDA's
publication,
"Approved
Drug
Products
with
Therapeutic
Equivalence
Evaluations,"
commonly
known
as
the
Orange
Book.
Manufacturers
may
seek
approval
of
generic
versions
of
reference
listed
drugs
through
submission
of
ANDAs
in
the
United
States.
In
support
of
an
ANDA,
a
generic
manufacturer
need
not
conduct
clinical
trials.
Rather,
the
applicant
generally
must
show
that
its
product
has
the
same
active
ingredient(s),
dosage
form,
strength,
route
of
administration
and
conditions
of
use
or
labeling
as
the
reference
listed
drug
and
that
the
generic
version
is
bioequivalent
to
the
reference
listed
drug,
meaning
it
is
absorbed
in
the
body
at
the
same
rate
and
to
the
same
extent.
Generic
products
may
be
significantly
less
costly
to
bring
to
market
than
the
reference
listed
drug
and
companies
that
produce
generic
products
are
generally
able
to
offer
them
at
lower
prices.
Thus,
following
the
introduction
of
a
generic
drug,
a
significant
percentage
of
the
sales
of
any
branded
product
or
reference
listed
drug
is
typically
lost
to
the
generic
product.
The
FDA
may
not
approve
an
ANDA
for
a
generic
product
until
any
applicable
period
of
non-patent
exclusivity
for
the
reference
listed
drug
has
expired.
The
FDCA
provides
a
period
of
five
years
of
non-patent
exclusivity
for
a
new
drug
containing
an
NCE.
Specifically,
in
cases
where
such
exclusivity
has
been
granted,
an
ANDA
may
not
be
submitted
to
the
FDA
until
the
expiration
of
five
years
unless
the
submission
is
accompanied
by
a
Paragraph
IV
certification
that
a
patent
covering
the
reference
listed
drug
is
either
invalid
or
will
not
be
infringed
by
the
generic
product,
in
which
case
the
applicant
may
submit
its
application
four
years
following
approval
of
the
reference
listed
drug.
While
we
believe
that
rimegepant
contains
active
ingredients
that
would
be
treated
as
NCEs
by
the
FDA
and,
therefore,
if
approved,
should
be
afforded
five
years
of
data
exclusivity,
the
FDA
may
disagree
with
that
conclusion
and
may
approve
generic
products
after
a
period
that
is
less
than
five
years.
Moreover,
while
we
believe
that
trigriluzole,
a
prodrug
of
riluzole,
and
BHV-5000
will
also
be
treated
as
NCEs
under
current
FDA
interpretations,
if
approved,
the
FDA
may
ultimately
disagree
with
our
conclusion.
Manufacturers
may
seek
to
launch
these
generic
products
following
the
expiration
of
the
applicable
marketing
exclusivity
period,
even
if
we
still
have
patent
protection
for
our
product.
Competition
that
our
products
may
face
from
generic
versions
of
our
products
could
materially
and
adversely
impact
our
future
revenue,
profitability
and
cash
flows
and
substantially
limit
our
ability
to
obtain
a
return
on
the
investments
we
have
made
in
those
product
candidates.
Risks
Related
to
Our
Dependence
on
Third
Parties
If we fail to comply with our obligations under our existing and any future intellectual property licenses with third parties, we could lose license rights that are
important to our business.
We
are
party
to
several
license
agreements
under
which
we
in-license
patent
rights
and
other
intellectual
property
related
to
or
business,
including
a
license
agreement
with
BMS,
under
which
we
were
granted
an
exclusive
license
relating
to
rimegepant
and
BHV-3500,
a
license
agreement
with
ALS
Biopharma
and
FCCDC,
pursuant
to
which
we
were
assigned
intellectual
property
rights
relating
to
trigriluzole,
a
license
agreement
with
Catalent,
pursuant
to
which
we
were
granted
an
exclusive
license
to
use
their
Zydis
technology
in
the
development
of
BHV-0223
and
rimegepant,
and
a
license
agreement
with
AstraZeneca,
pursuant
to
which
we
were
granted
an
exclusive
license
relating
to
BHV-5000.
We
have
also
entered
into
other
license
agreements
that
relate
to
other
patent
rights
and
other
indications
we
are
pursuing
or
may
pursue
in
the
future.
We
may
enter
into
additional
license
agreements
in
the
future.
Our
license
agreements
impose,
and
we
expect
that
future
license
agreements
83
Table
of
Contents
will
impose,
various
diligence,
milestone
payment,
royalty,
insurance
and
other
obligations
on
us.
Any
uncured,
material
breach
under
these
license
agreements
could
result
in
our
loss
of
rights
to
practice
the
patent
rights
and
other
intellectual
property
licensed
to
us
under
these
agreements,
and
could
compromise
our
development
and
commercialization
efforts
for
our
product
candidates.
See
"Business—License
Agreements"
for
a
more
detailed
description
of
our
current
license
agreements.
Our intellectual property in-licenses with third parties may be subject to disagreements over contract interpretations, which could narrow the scope of our
rights to the relevant intellectual property or technology or increase our financial or other obligations to our licensors.
The
agreements
under
which
we
currently
in-license
intellectual
property
or
technology
from
third
parties
are
complex,
and
certain
provisions
in
such
agreements
may
be
susceptible
to
multiple
interpretations.
The
resolution
of
any
contract
interpretation
disagreement
that
may
arise
could
narrow
what
we
believe
to
be
the
scope
of
our
rights
to
the
relevant
intellectual
property
or
technology,
or
increase
what
we
believe
to
be
our
financial
or
other
obligations
under
the
relevant
agreement,
either
of
which
could
harm
our
business,
financial
condition,
results
of
operations
and
prospects.
If
any
of
our
current
or
future
licenses
or
material
relationships
or
any
in-licenses
upon
which
our
current
or
future
product
candidates
are
based
are
terminated
or
breached,
we
may:
•
•
•
•
•
lose
our
rights
to
develop
and
market
our
product
candidates;
lose
patent
protection
for
our
product
candidates;
experience
significant
delays
in
the
development
or
commercialization
of
our
product
candidates;
not
be
able
to
obtain
any
other
licenses
on
acceptable
terms,
if
at
all;
or
incur
liability
for
damages.
If
we
experience
any
of
the
foregoing,
it
could
harm
our
business,
financial
condition
and
results
of
operations.
We rely on third parties to conduct our preclinical studies and clinical trials and if these third parties perform in an unsatisfactory manner, our business could
be substantially harmed.
We
intend
to
conduct
our
clinical
trials,
including
our
ongoing
Phase
3
clinical
trials
of
rimegepant
and
Phase
2/3
clinical
trial
of
trigriluzole,
using
our
own
clinical
resources
while
also
leveraging
expertise
and
assistance
from
CROs
as
appropriate.
We
do
not
currently
have
the
ability
to
independently
conduct
large-
scale
clinical
trials,
such
as
a
Phase
3
clinical
trial,
without
outside
assistance.
We
have
relied
upon
and
plan
to
continue
to
rely
upon
medical
institutions,
clinical
investigators,
contract
laboratories
and
other
third
parties,
such
as
CROs,
to
conduct
or
assist
us
in
conducting
GCP-compliant
clinical
trials
on
our
product
candidates
properly
and
on
time,
and
may
not
currently
have
all
of
the
necessary
contractual
relationships
in
place
to
do
so.
Once
we
have
established
contractual
relationships
with
such
third-party
CROs,
we
will
have
only
limited
control
over
their
actual
performance
of
these
activities.
We
and
our
CROs
and
other
vendors
are
required
to
comply
with
cGMP,
GCP
and
GLP,
which
are
regulations
and
guidelines
enforced
by
the
FDA,
the
Competent
Authorities
of
the
Member
States
of
the
European
Union
and
any
comparable
foreign
regulatory
authorities
for
all
of
our
product
candidates
in
preclinical
and
clinical
development.
Regulatory
authorities
enforce
these
regulations
through
periodic
inspections
of
trial
sponsors,
principal
investigators,
clinical
trial
sites
and
other
contractors.
Although
we
rely
on
CROs
to
conduct
any
current
or
planned
GLP-compliant
preclinical
studies
and
GCP-compliant
clinical
trials
and
have
limited
influence
over
their
actual
performance,
we
remain
responsible
for
ensuring
that
each
of
our
preclinical
studies
and
clinical
trials
is
conducted
in
84
Table
of
Contents
accordance
with
its
investigational
plan
and
protocol
and
applicable
laws
and
regulations,
and
our
reliance
on
the
CROs
does
not
relieve
us
of
our
regulatory
responsibilities.
If
we
or
any
of
our
CROs
or
vendors
fail
to
comply
with
applicable
regulations,
the
data
generated
in
our
preclinical
studies
and
clinical
trials
may
be
deemed
unreliable
and
the
FDA,
EMA
or
any
comparable
foreign
regulatory
agency
may
require
us
to
perform
additional
preclinical
studies
and
clinical
trials
before
approving
our
marketing
applications.
We
cannot
assure
you
that
upon
inspection
by
a
given
regulatory
agency,
such
regulatory
agency
will
determine
that
all
of
our
clinical
trials
comply
with
GCP
regulations.
In
addition,
our
clinical
trials
must
be
conducted
with
products
produced
under
cGMP
requirements.
Our
failure
to
comply
with
these
requirements
may
require
us
to
repeat
clinical
trials,
which
would
delay
the
regulatory
approval
process.
While
we
will
have
agreements
governing
their
activities,
our
CROs
will
not
be
our
employees,
and
we
will
not
be
able
to
control
whether
or
not
they
devote
sufficient
time
and
resources
to
our
future
preclinical
and
clinical
programs.
These
CROs
may
also
have
relationships
with
other
commercial
entities,
including
our
competitors,
for
whom
they
may
also
be
conducting
clinical
trials,
or
other
drug
development
activities
which
could
harm
our
business.
We
face
the
risk
of
potential
unauthorized
disclosure
or
misappropriation
of
our
intellectual
property
by
CROs,
which
may
reduce
our
trade
secret
protection
and
allow
our
potential
competitors
to
access
and
exploit
our
proprietary
technology.
If
our
CROs
do
not
successfully
carry
out
their
contractual
duties
or
obligations,
fail
to
meet
expected
deadlines,
or
if
the
quality
or
accuracy
of
the
clinical
data
they
obtain
is
compromised
due
to
the
failure
to
adhere
to
our
clinical
protocols
or
regulatory
requirements
or
for
any
other
reason,
our
clinical
trials
may
be
extended,
delayed
or
terminated,
the
clinical
data
generated
in
our
clinical
trials
may
be
deemed
unreliable,
and
we
may
not
be
able
to
obtain
regulatory
approval
for,
or
successfully
commercialize
any
product
candidate
that
we
develop.
As
a
result,
our
financial
results
and
the
commercial
prospects
for
any
product
candidate
that
we
develop
would
be
harmed,
our
costs
could
increase,
and
our
ability
to
generate
revenue
could
be
delayed.
If
our
relationship
with
these
CROs
terminates,
we
may
not
be
able
to
enter
into
arrangements
with
alternative
CROs
or
do
so
on
commercially
reasonable
terms.
Switching
or
adding
additional
CROs
involves
substantial
cost
and
requires
management
time
and
focus,
and
could
delay
development
and
commercialization
of
our
product
candidates.
In
addition,
there
is
a
natural
transition
period
when
a
new
CRO
commences
work.
As
a
result,
delays
occur,
which
can
negatively
impact
our
ability
to
meet
our
desired
clinical
development
timelines.
Though
we
intend
to
carefully
manage
our
relationships
with
our
CROs,
there
can
be
no
assurance
that
we
will
not
encounter
challenges
or
delays
in
the
future
or
that
these
delays
or
challenges
will
not
have
a
negative
impact
on
our
business
and
financial
condition.
We currently rely on third parties for the production of our clinical supply of our product candidates and we intend to continue to rely on third parties for our
clinical and commercial supply.
We
currently
rely
on
and
expect
to
continue
to
rely
on
third
parties
for
the
manufacturing
and
supply
of
chemical
compounds
for
the
clinical
trials
of
our
product
candidates
and,
if
approved,
our
commercial
supply.
Reliance
on
third-party
suppliers
may
expose
us
to
different
risks
than
if
we
were
to
manufacture
product
candidates
ourselves.
The
facilities
used
by
our
contract
manufacturers
to
manufacture
our
product
candidates
must
be
approved
by
the
FDA
or
other
regulatory
authorities
pursuant
to
inspections
that
will
be
conducted
after
we
submit
our
NDA
or
comparable
foreign
marketing
application
to
the
FDA
or
other
foreign
regulatory
agency.
Although
we
have
auditing
rights
with
all
our
manufacturing
counterparties,
we
do
not
have
control
over
a
supplier's
or
manufacturer's
compliance
with
these
laws,
regulations
and
applicable
cGMP
standards
and
other
laws
and
regulations,
such
as
those
related
to
environmental
health
and
safety
matters.
There
can
be
no
assurance
that
our
preclinical
and
clinical
development
product
supplies
will
not
be
limited,
interrupted
or
of
satisfactory
quality
or
continue
to
be
available
at
85
Table
of
Contents
acceptable
prices.
If
our
contract
manufacturers
cannot
successfully
manufacture
material
that
conforms
to
our
specifications
and
the
strict
regulatory
requirements
of
the
FDA
or
others,
they
will
not
be
able
to
secure
or
maintain
regulatory
approval
for
their
manufacturing
facilities.
In
addition,
we
have
no
control
over
the
ability
of
our
contract
manufacturers
to
maintain
adequate
quality
control,
quality
assurance
and
qualified
personnel.
In
the
event
that
any
of
our
manufacturers
fails
to
comply
with
regulatory
requirements
or
to
perform
its
obligations
to
us
in
relation
to
quality,
timing
or
otherwise,
or
if
our
supply
of
components
or
other
materials
becomes
limited
or
interrupted
for
other
reasons,
or
if
the
FDA
or
a
comparable
foreign
regulatory
agency
does
not
approve
these
facilities
for
the
manufacture
of
our
product
candidates
or
if
it
withdraws
any
such
approval
in
the
future,
we
may
need
to
find
alternative
manufacturing
facilities.
Any
replacement
of
our
manufacturers
could
require
significant
effort,
time
and
expense,
which
could
significantly
impact
our
ability
to
develop,
obtain
regulatory
approval
for
or
market
our
product
candidates,
if
approved.
Any
failure
to
achieve
and
maintain
compliance
with
these
laws,
regulations
and
standards
could
adversely
affect
our
business
in
a
number
of
ways,
including:
•
•
•
•
•
•
•
an
inability
to
initiate
or
continue
clinical
trials
of
our
product
candidates
under
development;
delay
in
submitting
regulatory
applications,
or
receiving
regulatory
approvals,
for
our
product
candidates;
subjecting
third-party
manufacturing
facilities
or
our
own
facilities
to
additional
inspections
by
regulatory
authorities;
requirements
to
cease
distribution
or
to
recall
batches
of
our
product
candidates;
suspension
of
manufacturing
of
our
product
candidates;
revocation
of
obtained
approvals;
and
inability
to
meet
commercial
demands
for
our
product
candidates
in
the
event
of
approval.
Furthermore,
third-party
providers
may
breach
agreements
they
have
with
us
because
of
factors
beyond
our
control.
They
may
also
terminate
or
refuse
to
renew
their
agreements
because
of
their
own
financial
difficulties
or
business
priorities,
potentially
at
a
time
that
is
costly
or
otherwise
inconvenient
for
us.
If
we
were
unable
to
find
adequate
replacement
or
another
acceptable
solution
in
time,
our
clinical
trials
could
be
delayed
or
our
commercial
activities
could
be
harmed.
In
addition,
the
fact
that
we
are
dependent
on
third
parties
for
the
manufacture,
storage
and
distribution
of
our
product
candidates
means
that
we
are
subject
to
the
risk
that
our
product
candidates
and,
if
approved,
commercial
products
may
have
manufacturing
defects
that
we
have
limited
ability
to
prevent
or
control.
The
sale
of
products
containing
such
defects
could
result
in
recalls
or
regulatory
enforcement
action
that
could
adversely
affect
our
business,
financial
condition
and
results
of
operations.
Our
reliance
on
third
parties
also
exposes
us
to
the
possibility
that
they,
or
third
parties
with
access
to
their
facilities,
will
have
access
to
and
may
appropriate
our
trade
secrets
or
other
proprietary
information.
We rely completely on third-party contractors to supply, manufacture and distribute clinical drug supplies for our product candidates, including certain sole-
source suppliers and manufacturers; we intend to rely on third parties for commercial supply, manufacturing and distribution if any of our product candidates
receive regulatory approval; and we expect to rely on third parties for supply, manufacturing and distribution of preclinical, clinical and commercial supplies
of any future product candidates.
We
do
not
currently
have,
nor
do
we
plan
to
acquire,
the
internal
infrastructure
or
capability
to
supply,
manufacture
or
distribute
preclinical,
clinical
or
commercial
quantities
of
drug
substances
or
products.
86
Table
of
Contents
Our
ability
to
develop
our
product
candidates
depends
and
our
ability
to
commercially
supply
our
products
will
depend,
in
part,
on
our
ability
to
successfully
obtain
the
APIs
and
other
substances
and
materials
used
in
our
product
candidates
from
third
parties
and
to
have
finished
products
manufactured
by
third
parties
in
accordance
with
regulatory
requirements
and
in
sufficient
quantities
for
preclinical
and
clinical
testing
and
commercialization.
If
we
fail
to
develop
and
maintain
supply
relationships
with
these
third
parties,
we
may
be
unable
to
continue
to
develop
or
commercialize
our
product
candidates.
We
do
not
have
direct
control
over
the
ability
of
our
contract
suppliers
and
manufacturers
to
maintain
adequate
capacity
and
capabilities
to
serve
our
needs,
including
quality
control,
quality
assurance
and
qualified
personnel.
Although
we
are
ultimately
responsible
for
ensuring
compliance
with
regulatory
requirements
such
as
cGMPs,
we
are
dependent
on
our
contract
suppliers
and
manufacturers
for
day-to-day
compliance
with
cGMPs
for
production
of
both
APIs
and
finished
products.
Facilities
used
by
our
contract
suppliers
and
manufacturers
to
produce
the
APIs
and
other
substances
and
materials
or
finished
products
for
commercial
sale
must
pass
inspection
and
be
approved
by
the
FDA
and
other
relevant
regulatory
authorities.
Our
contract
suppliers
and
manufacturers
must
comply
with
cGMP
requirements
enforced
by
the
FDA
through
its
facilities
inspection
program
and
review
of
submitted
technical
information.
If
the
safety
of
any
product
or
product
candidate
or
component
is
compromised
due
to
a
failure
to
adhere
to
applicable
laws
or
for
other
reasons,
we
may
not
be
able
to
successfully
commercialize
or
obtain
regulatory
approval
for
the
affected
product
or
product
candidate,
and
we
may
be
held
liable
for
injuries
sustained
as
a
result.
Any
of
these
factors
could
cause
a
delay
or
termination
of
preclinical
studies,
clinical
trials
or
regulatory
submissions
or
approvals
of
our
product
candidates,
and
could
entail
higher
costs
or
result
in
our
being
unable
to
effectively
commercialize
our
approved
products
on
a
timely
basis,
or
at
all.
We
also
rely
and
will
continue
to
rely
on
certain
third
parties
as
the
sole
source
of
the
materials
they
supply
or
the
finished
products
they
manufacture.
For
example,
Catalent
is
the
sole-source
supplier
for
the
Zydis
formulation
of
BHV-0223,
and
we
expect
Catalent
to
be
the
sole
source
supplier
for
the
ODT
formulation
of
rimegepant.
We
may
also
have
sole-source
suppliers
for
one
or
more
of
our
other
product
candidates.
Some
of
the
APIs
and
other
substances
and
materials
used
in
our
product
candidates
are
currently
available
only
from
one
or
a
limited
number
of
domestic
or
foreign
suppliers
and
foreign
manufacturers
and
certain
of
our
finished
product
candidates
are
manufactured
by
one
or
a
limited
number
of
contract
manufacturers.
In
the
event
an
existing
supplier
fails
to
supply
product
on
a
timely
basis
or
in
the
requested
amount,
supplies
product
that
fails
to
meet
regulatory
requirements,
becomes
unavailable
through
business
interruption
or
financial
insolvency
or
loses
its
regulatory
status
as
an
approved
source
or
if
we
or
our
manufacturers
are
unable
to
renew
current
supply
agreements
when
such
agreements
expire
and
we
do
not
have
a
second
supplier,
we
likely
would
incur
added
costs
and
delays
in
identifying
or
qualifying
replacement
manufacturers
and
materials
and
there
can
be
no
assurance
that
replacements
would
be
available
to
us
on
a
timely
basis,
on
acceptable
terms
or
at
all.
In
certain
cases
we
may
be
required
to
get
regulatory
approval
to
use
alternative
suppliers,
and
this
process
of
approval
could
delay
production
of
our
products
or
development
of
product
candidates
indefinitely.
We
and
our
manufacturers
do
not
currently
maintain
inventory
of
these
APIs
and
other
substances
and
materials.
Any
interruption
in
the
supply
of
an
API
or
other
substance
or
material
or
in
the
manufacture
of
a
finished
product
could
have
a
material
adverse
effect
on
our
business,
financial
condition,
operating
results
and
prospects.
In
addition,
these
contract
manufacturers
are
or
may
be
engaged
with
other
companies
to
supply
and
manufacture
materials
or
products
for
such
companies,
which
also
exposes
our
suppliers
and
manufacturers
to
regulatory
risks
for
the
production
of
such
materials
and
products.
As
a
result,
failure
to
meet
the
regulatory
requirements
for
the
production
of
those
materials
and
products
may
also
affect
the
regulatory
clearance
of
a
contract
supplier's
or
manufacturer's
facility.
If
the
FDA
or
a
comparable
foreign
regulatory
agency
does
not
approve
these
facilities
for
the
supply
or
manufacture
of
our
product
candidates,
or
if
it
withdraws
its
approval
in
the
future,
we
may
need
to
find
alternative
supply
87
Table
of
Contents
or
manufacturing
facilities,
which
would
negatively
impact
our
ability
to
develop,
obtain
regulatory
approval
of
or
market
our
product
candidates,
if
approved.
As
we
prepare
for
later-stage
clinical
trials
and
potential
commercialization,
we
will
need
to
take
steps
to
increase
the
scale
of
production
of
our
product
candidates,
which
may
include
transferring
production
to
new
third-party
suppliers
or
manufacturers.
In
order
to
conduct
larger
or
late-stage
scale
clinical
trials
for
our
product
candidates
and
supply
sufficient
commercial
quantities
of
the
resulting
drug
product
and
its
components,
if
that
product
candidate
is
approved
for
sale,
our
contract
manufacturers
and
suppliers
will
need
to
produce
our
product
candidates
in
larger
quantities,
more
cost
effectively
and,
in
certain
cases,
at
higher
yields
than
they
currently
achieve.
These
third-party
contractors
may
not
be
able
to
successfully
increase
the
manufacturing
capacity
for
any
of
such
product
candidates
in
a
timely
or
cost-effective
manner
or
at
all.
Significant
scale
up
of
manufacturing
may
require
additional
processes,
technologies
and
validation
studies,
which
are
costly,
may
not
be
successful
and
which
the
FDA
and
foreign
regulatory
authorities
must
review
and
approve.
In
addition,
quality
issues
may
arise
during
those
scale-up
activities
because
of
the
inherent
properties
of
a
product
candidate
itself
or
of
a
product
candidate
in
combination
with
other
components
added
during
the
manufacturing
and
packaging
process,
or
during
shipping
and
storage
of
the
APIs
or
the
finished
product.
If
our
third-party
contractors
are
unable
to
successfully
scale
up
the
manufacture
of
any
of
our
product
candidates
in
sufficient
quality
and
quantity
and
at
commercially
reasonable
prices,
and
we
are
unable
to
find
one
or
more
replacement
suppliers
or
manufacturers
capable
of
production
at
a
substantially
equivalent
cost
in
substantially
equivalent
volumes
and
quality,
and
we
are
unable
to
successfully
transfer
the
processes
on
a
timely
basis,
the
development
of
that
product
candidate
and
regulatory
approval
or
commercial
launch
for
any
resulting
products
may
be
delayed,
or
there
may
be
a
shortage
in
supply,
either
of
which
could
significantly
harm
our
business,
financial
condition,
operating
results
and
prospects.
We
expect
to
continue
to
depend
on
third-party
contract
suppliers
and
manufacturers
for
the
foreseeable
future.
Our
supply
and
manufacturing
agreements,
if
any,
do
not
guarantee
that
a
contract
supplier
or
manufacturer
will
provide
services
adequate
for
our
needs.
We
and
our
contract
suppliers
and
manufacturers
continue
to
improve
production
processes,
certain
aspects
of
which
are
complex
and
unique,
and
we
may
encounter
difficulties
with
new
or
existing
processes.
While
we
attempt
to
build
in
certain
contractual
obligations
on
such
third-party
suppliers
and
manufacturers,
we
may
not
be
able
to
ensure
that
such
third
parties
comply
with
these
obligations.
Depending
on
the
extent
of
any
difficulties
encountered,
we
could
experience
an
interruption
in
clinical
or
commercial
supply,
with
the
result
that
the
development,
regulatory
approval
or
commercialization
of
our
product
candidates
may
be
delayed
or
interrupted.
In
addition,
third-party
suppliers
and
manufacturers
may
have
the
ability
to
increase
the
price
payable
by
us
for
the
supply
of
the
APIs
and
other
substances
and
materials
used
in
our
product
candidates,
in
some
cases
without
our
consent.
Additionally,
any
damage
to
or
destruction
of
our
third-party
manufacturers'
or
suppliers'
facilities
or
equipment
may
significantly
impair
our
ability
to
have
our
product
candidates
manufactured
on
a
timely
basis.
Furthermore,
if
a
contract
manufacturer
or
supplier
becomes
financially
distressed
or
insolvent,
or
discontinues
our
relationship
beyond
the
term
of
any
existing
agreement
for
any
other
reason,
this
could
result
in
substantial
management
time
and
expense
to
identify,
qualify
and
transfer
processes
to
alternative
manufacturers
or
suppliers,
and
could
lead
to
an
interruption
in
clinical
or
commercial
supply.
Our
reliance
on
contract
manufacturers
and
suppliers
further
exposes
us
to
the
possibility
that
they,
or
third
parties
with
access
to
their
facilities,
will
have
access
to
and
may
misappropriate
our
trade
secrets
or
other
proprietary
information.
In
addition,
the
manufacturing
facilities
of
certain
of
our
suppliers
are
located
outside
of
the
United
States.
This
may
give
rise
to
difficulties
in
importing
our
products
or
product
candidates
or
88
Table
of
Contents
their
components
into
the
United
States
or
other
countries
as
a
result
of,
among
other
things,
regulatory
agency
approval
requirements
or
import
inspections,
incomplete
or
inaccurate
import
documentation
or
defective
packaging.
We, or third-party manufacturers on whom we rely, may be unable to successfully scale-up manufacturing of our product candidates in sufficient quality and
quantity, which would delay or prevent us from developing our product candidates and commercializing approved products, if any.
In
order
to
conduct
clinical
trials
of
our
product
candidates
and
commercialize
any
approved
product
candidates,
we,
or
our
manufacturers,
will
need
to
manufacture
them
in
large
quantities.
We,
or
our
manufacturers,
may
be
unable
to
successfully
increase
the
manufacturing
capacity
for
any
of
our
product
candidates
in
a
timely
or
cost-effective
manner,
or
at
all.
In
addition,
quality
issues
may
arise
during
scale-up
activities.
If
we,
or
any
of
our
manufacturers,
are
unable
to
successfully
scale
up
the
manufacture
of
our
product
candidates
in
sufficient
quality
and
quantity,
the
development,
testing,
and
clinical
trials
of
that
product
candidate
may
be
delayed
or
infeasible,
and
regulatory
approval
or
commercial
launch
of
any
resulting
product
may
be
delayed
or
not
obtained,
which
could
significantly
harm
our
business.
If
we
are
unable
to
obtain
or
maintain
third-party
manufacturing
for
commercial
supply
of
our
product
candidates,
or
to
do
so
on
commercially
reasonable
terms,
we
may
not
be
able
to
develop
and
commercialize
our
product
candidates
successfully.
We may in the future enter into collaborations with third parties to develop our product candidates. If these collaborations are not successful, our business
could be harmed.
We
may
potentially
enter
into
collaborations
with
third
parties
in
the
future.
We
will
face,
to
the
extent
that
we
decide
to
enter
into
collaboration
agreements,
significant
competition
in
seeking
appropriate
collaborators.
Moreover,
collaboration
arrangements
are
complex
and
time-consuming
to
negotiate,
document,
implement
and
maintain.
We
may
not
be
successful
in
our
efforts
to
establish
and
implement
collaborations
or
other
alternative
arrangements
should
we
so
chose
to
enter
into
such
arrangements.
The
terms
of
any
collaborations
or
other
arrangements
that
we
may
establish
may
not
be
favorable
to
us.
Any
future
collaborations
that
we
enter
into
may
not
be
successful.
The
success
of
our
collaboration
arrangements
will
depend
heavily
on
the
efforts
and
activities
of
our
collaborators.
Collaborations
are
subject
to
numerous
risks,
including:
•
•
•
•
•
•
•
collaborators
have
significant
discretion
in
determining
the
efforts
and
resources
that
they
will
apply
to
these
collaborations;
collaborators
may
not
perform
their
obligations
as
expected;
the
clinical
trials
conducted
as
part
of
these
collaborations
may
not
be
successful;
collaborators
may
not
pursue
development
and
commercialization
of
any
product
candidates
that
achieve
regulatory
approval
or
may
elect
not
to
continue
or
renew
development
or
commercialization
programs
based
on
clinical
trial
results,
changes
in
the
collaborators'
strategic
focus
or
available
funding
or
external
factors,
such
as
an
acquisition,
that
divert
resources
or
create
competing
priorities;
collaborators
may
delay
clinical
trials,
provide
insufficient
funding
for
clinical
trials,
stop
a
clinical
trial
or
abandon
a
product
candidate,
repeat
or
conduct
new
clinical
trials
or
require
a
new
formulation
of
a
product
candidate
for
clinical
testing;
89
Table
of
Contents
•
•
•
•
•
•
•
•
•
we
may
not
have
access
to,
or
may
be
restricted
from
disclosing,
certain
information
regarding
product
candidates
being
developed
or
commercialized
under
a
collaboration
and,
consequently,
may
have
limited
ability
to
inform
our
shareholders
about
the
status
of
such
product
candidates;
collaborators
could
independently
develop,
or
develop
with
third
parties,
products
that
compete
directly
or
indirectly
with
our
product
candidates
if
the
collaborators
believe
that
competitive
products
are
more
likely
to
be
successfully
developed
or
can
be
commercialized
under
terms
that
are
more
economically
attractive
than
ours;
product
candidates
developed
in
collaboration
with
us
may
be
viewed
by
our
collaborators
as
competitive
with
their
own
product
candidates
or
products,
which
may
cause
collaborators
to
cease
to
devote
resources
to
the
commercialization
of
our
product
candidates;
a
collaborator
with
marketing
and
distribution
rights
to
one
or
more
of
our
product
candidates
that
achieve
regulatory
approval
may
not
commit
sufficient
resources
to
the
marketing
and
distribution
of
any
such
product
candidate;
disagreements
with
collaborators,
including
disagreements
over
proprietary
rights,
contract
interpretation
or
the
preferred
course
of
development
of
any
product
candidates,
may
cause
delays
or
termination
of
the
research,
development
or
commercialization
of
such
product
candidates,
may
lead
to
additional
responsibilities
for
us
with
respect
to
such
product
candidates
or
may
result
in
litigation
or
arbitration,
any
of
which
would
be
time-
consuming
and
expensive;
collaborators
may
not
properly
maintain
or
defend
our
intellectual
property
rights
or
may
use
our
proprietary
information
in
such
a
way
as
to
invite
litigation
that
could
jeopardize
or
invalidate
our
intellectual
property
or
proprietary
information
or
expose
us
to
potential
litigation;
disputes
may
arise
with
respect
to
the
ownership
of
intellectual
property
developed
pursuant
to
our
collaborations;
collaborators
may
infringe
the
intellectual
property
rights
of
third
parties,
which
may
expose
us
to
litigation
and
potential
liability;
and
collaborations
may
be
terminated
for
the
convenience
of
the
collaborator
and,
if
terminated,
we
could
be
required
to
raise
additional
capital
to
pursue
further
development
or
commercialization
of
the
applicable
product
candidates.
If
any
such
potential
future
collaborations
do
not
result
in
the
successful
development
and
commercialization
of
product
candidates,
or
if
one
of
our
future
collaborators
terminates
its
agreement
with
us,
we
may
not
receive
any
future
research
funding
or
milestone
or
royalty
payments
under
the
collaboration.
If
we
do
not
receive
the
funding
we
expect
under
these
agreements,
the
development
of
our
product
candidates
could
be
delayed
and
we
may
need
additional
resources
to
develop
our
product
candidates.
In
addition,
if
one
of
our
future
collaborators
terminates
its
agreement
with
us,
we
may
find
it
more
difficult
to
attract
new
collaborators
and
the
perception
of
us
in
the
business
and
financial
communities
could
be
adversely
affected.
All
of
the
risks
relating
to
product
development,
regulatory
approval
and
commercialization
apply
to
the
activities
of
our
potential
future
collaborators.
If we are not able to establish or maintain collaborations, we may have to alter some of our future development and commercialization plans.
Our
product
development
programs
and
the
potential
commercialization
of
our
product
candidates
will
require
substantial
additional
capital
to
fund
expenses.
For
some
of
our
product
candidates,
we
may
decide
to
collaborate
with
pharmaceutical
and
biotechnology
companies
for
the
future
development
and
potential
commercialization
of
those
product
candidate.
Furthermore,
we
may
find
90
Table
of
Contents
that
our
programs
require
the
use
of
proprietary
rights
held
by
third
parties,
and
the
growth
of
our
business
may
depend
in
part
on
our
ability
to
acquire,
in-license
or
use
these
proprietary
rights.
We
face
significant
competition
in
seeking
appropriate
collaborators,
and
a
number
of
more
established
companies
may
also
be
pursuing
strategies
to
license
or
acquire
third-party
intellectual
property
rights
that
we
may
consider
attractive.
These
established
companies
may
have
a
competitive
advantage
over
us
due
to
their
size,
financial
resources
and
greater
clinical
development
and
commercialization
capabilities.
In
addition,
companies
that
perceive
us
to
be
a
competitor
may
be
unwilling
to
assign
or
license
rights
to
us.
Whether
we
reach
a
definitive
agreement
for
a
collaboration
will
depend,
among
other
things,
upon
our
assessment
of
the
collaborator's
resources
and
expertise,
the
terms
and
conditions
of
the
proposed
collaboration
and
the
proposed
collaborator's
evaluation
of
a
number
of
factors.
Those
factors
may
include
the
design
or
results
of
clinical
trials,
the
likelihood
of
approval
by
the
FDA,
EMA
or
similar
foreign
regulatory
authorities,
the
potential
market
for
the
subject
product
candidate,
the
costs
and
complexities
of
manufacturing
and
delivering
such
product
candidate
to
patients,
competing
products,
the
existence
of
uncertainty
with
respect
to
our
ownership
of
technology,
which
can
exist
if
there
is
a
challenge
to
such
ownership
without
regard
to
the
merits
of
the
challenge,
and
industry
and
market
conditions
generally.
The
collaborator
may
also
consider
alternative
product
candidates
or
technologies
for
similar
indications
that
may
be
available
to
collaborate
on
and
whether
such
a
collaboration
could
be
more
attractive
than
the
one
with
us
for
our
product
candidate.
We
may
also
be
restricted
under
existing
license
agreements
from
entering
into
agreements
on
certain
terms
with
potential
collaborators.
Collaborations
are
complex
and
time-
consuming
to
negotiate
and
document.
In
addition,
there
have
been
a
significant
number
of
recent
business
combinations
among
large
pharmaceutical
companies
that
have
resulted
in
a
reduced
number
of
potential
future
collaborators.
We
may
not
be
able
to
negotiate
collaborations
on
a
timely
basis,
on
acceptable
terms,
or
at
all.
Even
if
we
are
able
to
obtain
a
license
to
intellectual
property
of
interest,
we
may
not
be
able
to
secure
exclusive
rights,
in
which
case
others
could
use
the
same
rights
and
compete
with
us.
If
we
are
unable
to
successfully
obtain
rights
to
required
third-party
intellectual
property
rights
or
maintain
the
existing
intellectual
property
rights
we
have,
we
may
have
to
curtail
the
development
of
such
product
candidate,
reduce
or
delay
its
development
program
or
one
or
more
of
our
other
development
programs,
delay
its
potential
commercialization
or
reduce
the
scope
of
any
sales
or
marketing
activities,
or
increase
our
expenditures
and
undertake
development
or
commercialization
activities
at
our
own
expense.
If
we
elect
to
increase
our
expenditures
to
fund
development
or
commercialization
activities
on
our
own,
we
may
need
to
obtain
additional
capital,
which
may
not
be
available
to
us
on
acceptable
terms
or
at
all.
If
we
do
not
have
sufficient
funds,
we
may
not
be
able
to
further
develop
our
product
candidates
or
bring
them
to
market
and
generate
product
revenue.
Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets
will be misappropriated or disclosed.
Because
we
rely
on
third
parties
to
develop
and
manufacture
our
product
candidates,
we
must,
at
times,
share
trade
secrets
with
them.
We
seek
to
protect
our
proprietary
technology
in
part
by
entering
into
confidentiality
agreements
and,
if
applicable,
material
transfer
agreements,
collaborative
research
agreements,
consulting
agreements
or
other
similar
agreements
with
our
collaborators,
advisors,
employees
and
consultants
prior
to
beginning
research
or
disclosing
proprietary
information.
These
agreements
typically
limit
the
rights
of
the
third
parties
to
use
or
disclose
our
confidential
information,
such
as
trade
secrets.
Despite
these
contractual
agreements
with
third
parties,
sharing
trade
secrets
and
other
confidential
information
increases
the
risk
that
such
trade
secrets
become
known
by
our
competitors,
are
inadvertently
incorporated
into
the
technology
of
others,
or
are
disclosed
or
used
in
violation
of
these
agreements.
Given
that
our
proprietary
position
is
based,
in
part,
on
our
know-how
91
Table
of
Contents
and
trade
secrets,
a
competitor's
discovery
of
our
trade
secrets
or
other
unauthorized
use
or
disclosure
would
impair
our
competitive
position
and
may
harm
our
business.
In
addition,
these
agreements
typically
restrict
the
ability
of
our
advisors,
employees,
third-party
contractors
and
consultants
to
publish
data
potentially
relating
to
our
trade
secrets,
although
our
agreements
may
contain
certain
limited
publication
rights.
Despite
our
efforts
to
protect
our
trade
secrets,
our
competitors
may
discover
our
trade
secrets,
either
through
breach
of
our
agreements
with
third
parties,
independent
development
or
publication
of
information
by
any
of
our
third-
party
collaborators.
A
competitor's
discovery
of
our
trade
secrets
would
impair
our
competitive
position
and
have
an
adverse
impact
on
our
business.
Risks
Related
to
Regulatory
Compliance
Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and may
affect the prices we may set.
In
the
United
States,
the
European
Union,
and
other
foreign
jurisdictions,
there
have
been,
and
we
expect
there
will
continue
to
be,
a
number
of
legislative
and
regulatory
changes
and
proposed
changes
to
the
healthcare
system
that
could
affect
our
future
results
of
operations.
In
particular,
there
have
been
and
continue
to
be
a
number
of
initiatives
at
the
United
States
federal
and
state
levels
that
seek
to
reduce
healthcare
costs
and
improve
the
quality
of
healthcare.
For
example,
in
March
2010,
the
ACA
was
enacted,
which
substantially
changes
the
way
healthcare
is
financed
by
both
governmental
and
private
insurers.
Among
the
provisions
of
the
ACA,
those
of
greatest
importance
to
the
pharmaceutical
and
biotechnology
industries
include:
•
•
•
•
•
•
•
•
•
an
annual,
non-deductible
fee
on
any
entity
that
manufactures
or
imports
certain
branded
prescription
drugs
and
biologic
agents,
which
is
apportioned
among
these
entities
according
to
their
market
share
in
certain
government
healthcare
programs;
a
new
Medicare
Part
D
coverage
gap
discount
program,
in
which
manufacturers
must
agree
to
offer
50%
point-of-sale
discounts
off
negotiated
prices
of
applicable
brand
drugs
to
eligible
beneficiaries
during
their
coverage
gap
period,
as
a
condition
for
the
manufacturer's
outpatient
drugs
to
be
covered
under
Medicare
Part
D;
new
requirements
to
report
certain
financial
arrangements
with
physicians
and
certain
others,
including
reporting
"transfers
of
value"
made
or
distributed
to
prescribers
and
other
healthcare
providers
and
reporting
investment
interests
held
by
physicians
and
their
immediate
family
members;
an
increase
in
the
statutory
minimum
rebates
a
manufacturer
must
pay
under
the
Medicaid
Drug
Rebate
Program
to
23.1%
and
13.0%
of
the
average
manufacturer
price
for
branded
and
generic
drugs,
respectively;
a
new
methodology
by
which
rebates
owed
by
manufacturers
under
the
Medicaid
Drug
Rebate
Program
are
calculated
for
drugs
that
are
inhaled,
infused,
instilled,
implanted
or
injected;
extension
of
a
manufacturer's
Medicaid
rebate
liability
to
covered
drugs
dispensed
to
individuals
who
are
enrolled
in
Medicaid
managed
care
organizations;
expansion
of
eligibility
criteria
for
Medicaid
programs
by,
among
other
things,
allowing
states
to
offer
Medicaid
coverage
to
certain
individuals
with
income
at
or
below
133%
of
the
federal
poverty
level,
thereby
potentially
increasing
a
manufacturer's
Medicaid
rebate
liability;
expansion
of
the
entities
eligible
for
discounts
under
the
Public
Health
Service
pharmaceutical
pricing
program;
92
Table
of
Contents
•
•
•
a
new
Patient-Centered
Outcomes
Research
Institute
to
oversee,
identify
priorities
in,
and
conduct
comparative
clinical
effectiveness
research,
along
with
funding
for
such
research;
and
establishment
of
a
Center
for
Medicare
Innovation
at
the
CMS
to
test
innovative
payment
and
service
delivery
models
to
lower
Medicare
and
Medicaid
spending,
potentially
including
prescription
drug
spending.
Since
its
enactment,
there
have
been
judicial
and
Congressional
challenges
to
certain
aspects
of
the
ACA,
as
well
as
recent
efforts
by
the
Trump
administration
to
repeal
or
replace
certain
aspects
of
the
ACA.
Since
January
2017,
President
Trump
has
signed
two
Executive
Orders
designed
to
delay
the
implementation
of
certain
provisions
of
the
ACA
or
otherwise
circumvent
some
of
the
requirements
for
health
insurance
mandated
by
the
ACA.
Concurrently,
Congress
has
considered
legislation
that
would
repeal
or
repeal
and
replace
all
or
part
of
the
ACA.
While
Congress
has
not
passed
comprehensive
repeal
legislation,
two
bills
affecting
the
implementation
of
certain
taxes
under
the
ACA
have
been
signed
into
law.
The
Tax
Cuts
and
Jobs
Act
of
2017
includes
a
provision
repealing,
effective
January
1,
2019,
the
tax-based
shared
responsibility
payment
imposed
by
the
ACA
on
certain
individuals
who
fail
to
maintain
qualifying
health
coverage
for
all
or
part
of
a
year
that
is
commonly
referred
to
as
the
"individual
mandate".
Additionally,
on
January
23,
2018,
President
Trump
signed
a
continuing
resolution
on
appropriations
for
fiscal
year
2018
that
delayed
the
implementation
of
certain
ACA-mandated
fees,
including
the
so-called
"Cadillac"
tax
on
certain
high
cost
employer-sponsored
insurance
plans,
the
annual
fee
imposed
on
certain
health
insurance
providers
based
on
market
share,
and
the
medical
device
excise
tax
on
non-exempt
medical
devices.
We
continue
to
evaluate
the
effect
that
the
ACA
and
its
possible
repeal
and
replacement
has
on
our
business.
It
is
uncertain
the
extent
to
which
any
such
changes
may
impact
our
business
or
financial
condition.
In
addition,
other
legislative
changes
have
been
proposed
and
adopted
in
the
United
States
since
the
ACA
was
enacted.
On
August
2,
2011,
the
Budget
Control
Act
of
2011,
among
other
things,
created
measures
for
spending
reductions
by
Congress.
A
Joint
Select
Committee
on
Deficit
Reduction,
tasked
with
recommending
a
targeted
deficit
reduction
of
at
least
$1.2
trillion
for
the
years
2013
through
2021,
was
unable
to
reach
required
goals,
thereby
triggering
the
legislation's
automatic
reduction
to
several
government
programs.
This
includes
aggregate
reductions
of
Medicare
payments
to
providers
of
2%
per
fiscal
year.
These
reductions
went
into
effect
on
April
1,
2013
and,
due
to
subsequent
legislative
amendments
to
the
statute,
will
remain
in
effect
through
2025
unless
additional
Congressional
action
is
taken.
On
January
2,
2013,
the
American
Taxpayer
Relief
Act
of
2012
was
signed
into
law,
which,
among
other
things,
further
reduced
Medicare
payments
to
several
types
of
providers,
including
hospitals,
imaging
centers
and
cancer
treatment
centers,
and
increased
the
statute
of
limitations
period
for
the
government
to
recover
overpayments
to
providers
from
three
to
five
years.
These
new
laws
may
result
in
additional
reductions
in
Medicare
and
other
health
care
funding,
which
could
have
an
adverse
effect
on
our
customers
and
accordingly,
our
financial
operations.
Moreover,
payment
methodologies
may
be
subject
to
changes
in
healthcare
legislation
and
regulatory
initiatives.
For
example,
CMS
may
develop
new
payment
and
delivery
models,
such
as
bundled
payment
models.
The
U.S.
Department
of
Health
and
Human
Services
("HHS")
set
a
goal
of
moving
30%
of
Medicare
payments
to
alternative
payment
models
tied
to
the
quality
or
value
of
services
by
2016
and
50%
of
Medicare
payments
into
these
alternative
payment
models
by
the
end
of
2018.
We
expect
that
additional
U.S.
federal
healthcare
reform
measures
will
be
adopted
in
the
future,
any
of
which
could
limit
the
amounts
that
the
U.S.
federal
government
will
pay
for
healthcare
products
and
services,
which
could
result
in
reduced
demand
for
our
product
candidates
or
additional
pricing
pressures.
Further,
there
have
been
several
recent
U.S.
congressional
inquiries
and
proposed
state
and
federal
legislation
designed
to,
among
other
things,
bring
more
transparency
to
drug
pricing,
review
the
93
Table
of
Contents
relationship
between
pricing
and
manufacturer
patient
programs,
reduce
the
costs
of
drugs
under
Medicare
and
reform
government
program
reimbursement
methodologies
for
drug
products.
At
the
federal
level,
the
costs
of
prescription
pharmaceuticals
in
the
United
States
has
also
been
the
subject
of
considerable
discussion,
and
members
of
Congress
and
the
Trump
Administration
have
stated
that
they
will
address
such
costs
through
new
legislative
and
administrative
measures.
At
the
state
level,
legislatures
are
increasingly
passing
legislation
and
implementing
regulations
designed
to
control
pharmaceutical
and
biological
product
pricing,
including
price
or
patient
reimbursement
constraints,
discounts,
restrictions
on
certain
product
access
and
marketing
cost
disclosure
and
transparency
measures,
and,
in
some
cases,
designed
to
encourage
importation
from
other
countries
and
bulk
purchasing.
Legally
mandated
price
controls
on
payment
amounts
by
third-party
payors
or
other
restrictions
could
harm
our
business,
results
of
operations,
financial
condition
and
prospects.
In
addition,
regional
healthcare
authorities
and
individual
hospitals
are
increasingly
using
bidding
procedures
to
determine
what
pharmaceutical
products
and
which
suppliers
will
be
included
in
their
prescription
drug
and
other
healthcare
programs.
This
could
reduce
the
ultimate
demand
for
our
products
or
put
pressure
on
our
product
pricing,
which
could
negatively
affect
our
business,
results
of
operations,
financial
condition
and
prospects.
In
the
European
Union,
similar
political,
economic
and
regulatory
developments
may
affect
our
ability
to
profitably
commercialize
any
of
our
product
candidates,
if
approved.
In
addition
to
continuing
pressure
on
prices
and
cost
containment
measures,
legislative
developments
at
the
European
Union
or
member
state
level
may
result
in
significant
additional
requirements
or
obstacles
that
may
increase
our
operating
costs.
The
delivery
of
healthcare
in
the
European
Union,
including
the
establishment
and
operation
of
health
services
and
the
pricing
and
reimbursement
of
medicines,
is
almost
exclusively
a
matter
for
national,
rather
than
European
Union,
law
and
policy.
National
governments
and
health
service
providers
have
different
priorities
and
approaches
to
the
delivery
of
health
care
and
the
pricing
and
reimbursement
of
products
in
that
context.
In
general,
however,
the
healthcare
budgetary
constraints
in
most
EU
member
states
have
resulted
in
restrictions
on
the
pricing
and
reimbursement
of
medicines
by
relevant
health
service
providers.
Coupled
with
ever-increasing
European
Union
and
national
regulatory
burdens
on
those
wishing
to
develop
and
market
products,
this
could
prevent
or
delay
marketing
approval
of
our
product
candidates,
restrict
or
regulate
post-approval
activities
and
affect
our
ability
to
commercialize
any
products
for
which
we
obtain
marketing
approval.
In
international
markets,
reimbursement
and
healthcare
payment
systems
vary
significantly
by
country,
and
many
countries
have
instituted
price
ceilings
on
specific
products
and
therapies.
We
cannot
predict
the
likelihood,
nature
or
extent
of
government
regulation
that
may
arise
from
future
legislation
or
administrative
action,
either
in
the
United
States
or
abroad.
If
we
or
our
collaborators
are
slow
or
unable
to
adapt
to
changes
in
existing
requirements
or
the
adoption
of
new
requirements
or
policies,
or
if
we
or
our
collaborators
are
not
able
to
maintain
regulatory
compliance,
our
product
candidates
may
lose
any
regulatory
approval
that
may
have
been
obtained
and
we
may
not
achieve
or
sustain
profitability,
which
would
adversely
affect
our
business.
Our business operations and current and future relationships with investigators, health care professionals, consultants, third-party payors and customers will
be subject, directly or indirectly, to federal and state healthcare fraud and abuse laws, false claims laws, health information privacy and security laws, and
other healthcare laws and regulations. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.
Although
we
do
not
currently
have
any
products
on
the
market,
if
we
obtain
FDA
approval
for
our
product
candidates,
and
begin
commercializing
those
products
in
the
United
States,
our
operations
may
be
directly,
or
indirectly
through
our
prescribers,
customers
and
third-party
payors,
subject
to
various
U.S.
federal
and
state
healthcare
laws
and
regulations,
including,
without
limitation,
the
U.S.
federal
Anti-Kickback
Statute,
the
U.S.
federal
civil
and
criminal
false
claims
laws
and
Physician
Payments
94
Table
of
Contents
Sunshine
Act
and
regulations.
Healthcare
providers,
physicians
and
others
play
a
primary
role
in
the
recommendation
and
prescription
of
any
products
for
which
we
obtain
marketing
approval.
These
laws
may
impact,
among
other
things,
our
current
business
operations,
including
our
clinical
research
activities
proposed
sales
and
marketing
and
education
programs
and
constrain
the
business
or
financial
arrangements
and
relationships
with
healthcare
providers,
physicians
and
other
parties
through
which
we
market,
sell
and
distribute
our
products
for
which
we
obtain
marketing
approval.
In
addition,
we
may
be
subject
to
patient
data
privacy
and
security
regulation
by
both
the
U.S.
federal
government
and
the
states
in
which
we
conduct
our
business.
Finally,
we
may
be
subject
to
additional
healthcare,
statutory
and
regulatory
requirements
and
enforcement
by
foreign
regulatory
authorities
in
jurisdictions
in
which
we
conduct
our
business.
The
U.S.
laws
that
may
affect
our
ability
to
operate
include:
•
•
•
•
•
the
U.S.
federal
Anti-Kickback
Statute,
which
prohibits,
among
other
things,
persons
or
entities
from
knowingly
and
willfully
soliciting,
offering,
receiving
or
paying
any
remuneration
(including
any
kickback,
bribe,
or
certain
rebates),
directly
or
indirectly,
overtly
or
covertly,
in
cash
or
in
kind,
to
induce
or
reward
either
the
referral
of
an
individual
for,
or
the
purchase,
lease,
order
or
recommendation
of,
any
good,
facility,
item
or
service,
for
which
payment
may
be
made,
in
whole
or
in
part,
under
U.S.
federal
and
state
healthcare
programs
such
as
Medicare
and
Medicaid.
A
person
or
entity
does
not
need
to
have
actual
knowledge
of
the
statute
or
specific
intent
to
violate
it
in
order
to
have
committed
a
violation;
the
U.S.
federal
false
claims
and
civil
monetary
penalties
laws,
including
the
civil
False
Claims
Act,
which,
among
other
things,
impose
criminal
and
civil
penalties,
including
through
civil
whistleblower
or
qui
tam
actions,
against
individuals
or
entities
for
knowingly
presenting,
or
causing
to
be
presented,
to
the
U.S.
federal
government,
claims
for
payment
or
approval
that
are
false
or
fraudulent,
knowingly
making,
using
or
causing
to
be
made
or
used,
a
false
record
or
statement
material
to
a
false
or
fraudulent
claim,
or
from
knowingly
making
a
false
statement
to
avoid,
decrease
or
conceal
an
obligation
to
pay
money
to
the
U.S.
federal
government.
In
addition,
the
government
may
assert
that
a
claim
including
items
and
services
resulting
from
a
violation
of
the
U.S.
federal
Anti-Kickback
Statute
constitutes
a
false
or
fraudulent
claim
for
purposes
of
the
False
Claims
Act;
the
U.S.
federal
Health
Insurance
Portability
and
Accountability
Act
of
1996
("HIPAA")
which
imposes
criminal
and
civil
liability
for,
among
other
things,
knowingly
and
willfully
executing,
or
attempting
to
execute,
a
scheme
to
defraud
any
healthcare
benefit
program,
or
knowingly
and
willfully
falsifying,
concealing
or
covering
up
a
material
fact
or
making
any
materially
false
statement,
in
connection
with
the
delivery
of,
or
payment
for,
healthcare
benefits,
items
or
services;
similar
to
the
U.S.
federal
Anti-Kickback
Statute,
a
person
or
entity
does
not
need
to
have
actual
knowledge
of
the
statute
or
specific
intent
to
violate
it
in
order
to
have
committed
a
violation;
HIPAA,
as
amended
by
the
Health
Information
Technology
for
Economic
and
Clinical
Health
Act
of
2009
("HITECH"),
and
its
implementing
regulations,
and
as
amended
again
by
the
Modifications
to
the
HIPAA
Privacy,
Security,
Enforcement
and
Breach
Notification
Rules
Under
HITECH
and
the
Genetic
Information
Nondiscrimination
Act;
Other
Modifications
to
the
HIPAA
Rules,
commonly
referred
to
as
the
Final
HIPAA
Omnibus
Rule,
published
in
January
2013,
which
imposes
certain
obligations,
including
mandatory
contractual
terms,
with
respect
to
safeguarding
the
privacy,
security
and
transmission
of
individually
identifiable
health
information
without
appropriate
authorization
by
covered
entities
subject
to
HIPAA,
i.e.
health
plans,
healthcare
clearinghouses
and
healthcare
providers,
as
well
as
their
business
associates
that
perform
certain
services
for
or
on
their
behalf
involving
the
use
or
disclosure
of
individually
identifiable
health
information;
95
Table
of
Contents
•
•
•
•
•
•
•
the
U.S.
Federal
Food,
Drug
and
Cosmetic
Act,
which
prohibits,
among
other
things,
the
adulteration
or
misbranding
of
drugs,
biologics
and
medical
devices;
the
U.S.
federal
legislation
commonly
referred
to
as
Physician
Payments
Sunshine
Act,
enacted
as
part
of
the
ACA,
and
its
implementing
regulations,
which
require
certain
manufacturers
of
drugs,
devices,
biologics
and
medical
supplies
that
are
reimbursable
under
Medicare,
Medicaid,
or
the
Children's
Health
Insurance
Program
to
report
annually
to
the
CMS
information
related
to
certain
payments
and
other
transfers
of
value
to
physicians
(defined
to
include
doctors,
dentists,
optometrists,
podiatrists
and
chiropractors)
and
teaching
hospitals,
as
well
as
ownership
and
investment
interests
held
by
the
physicians
described
above
and
their
immediate
family
members;
analogous
state
laws
and
regulations,
including:
state
anti-kickback
and
false
claims
laws,
which
may
apply
to
our
business
practices,
including,
but
not
limited
to,
research,
distribution,
sales
and
marketing
arrangements
and
claims
involving
healthcare
items
or
services
reimbursed
by
any
third-
party
payor,
including
private
insurers;
state
laws
that
require
pharmaceutical
companies
to
comply
with
the
pharmaceutical
industry's
voluntary
compliance
guidelines
and
the
relevant
compliance
guidance
promulgated
by
the
U.S.
federal
government,
or
otherwise
restrict
payments
that
may
be
made
to
healthcare
providers
and
other
potential
referral
sources;
state
laws
and
regulations
that
require
drug
manufacturers
to
file
reports
relating
to
pricing
and
marketing
information,
which
requires
tracking
gifts
and
other
remuneration
and
items
of
value
provided
to
healthcare
professionals
and
entities;
state
laws
governing
the
privacy
and
security
of
health
information
in
certain
circumstances,
many
of
which
differ
from
each
other
in
significant
ways
and
often
are
not
preempted
by
HIPAA,
thus
complicating
compliance
efforts;
and
European
and
other
foreign
law
equivalents
of
each
of
the
laws,
including
reporting
requirements
detailing
interactions
with
and
payments
to
healthcare
providers.
Ensuring
that
our
internal
operations
and
future
business
arrangements
with
third
parties
comply
with
applicable
healthcare
laws
and
regulations
will
involve
substantial
costs.
It
is
possible
that
governmental
authorities
will
conclude
that
our
business
practices
do
not
comply
with
current
or
future
statutes,
regulations,
agency
guidance
or
case
law
involving
applicable
fraud
and
abuse
or
other
healthcare
laws
and
regulations.
If
our
operations
are
found
to
be
in
violation
of
any
of
the
laws
described
above
or
any
other
governmental
laws
and
regulations
that
may
apply
to
us,
we
may
be
subject
to
significant
penalties,
including
civil,
criminal
and
administrative
penalties,
damages,
fines,
exclusion
from
U.S.
government
funded
healthcare
programs,
such
as
Medicare
and
Medicaid,
or
similar
programs
in
other
countries
or
jurisdictions,
disgorgement,
individual
imprisonment,
contractual
damages,
reputational
harm,
diminished
profits,
additional
reporting
requirements
and
oversight
if
we
become
subject
to
a
corporate
integrity
agreement
or
similar
agreement
to
resolve
allegations
of
non-compliance
with
these
laws
and
the
curtailment
or
restructuring
of
our
operations.
Further,
defending
against
any
such
actions
can
be
costly,
time-consuming
and
may
require
significant
financial
and
personnel
resources.
Therefore,
even
if
we
are
successful
in
defending
against
any
such
actions
that
may
be
brought
against
us,
our
business
may
be
impaired.
If
any
of
the
physicians
or
other
providers
or
entities
with
whom
we
expect
to
do
business
is
found
to
not
be
in
compliance
with
applicable
laws,
they
may
be
subject
to
criminal,
civil
or
administrative
sanctions,
including
exclusions
from
government
funded
healthcare
programs
and
imprisonment.
If
any
of
the
above
occur,
it
could
adversely
affect
our
ability
to
operate
our
business
and
our
results
of
operations.
96
Table
of
Contents
We may not be able to obtain or maintain orphan drug designation or exclusivity for our product candidates.
We
have
obtained
orphan
drug
designation
in
the
United
States
for
trigriluzole
in
SCA,
BHV-0223
in
ALS
and
BHV-5000
in
Rett
syndrome.
We
may
seek
orphan
drug
designation
for
other
product
candidates
in
the
future.
Regulatory
authorities
in
some
jurisdictions,
including
the
United
States
and
the
European
Union,
may
designate
drugs
for
relatively
small
patient
populations
as
orphan
drugs.
Under
the
Orphan
Drug
Act,
the
FDA
may
designate
a
product
as
an
orphan
drug
if
it
is
a
drug
intended
to
treat
a
rare
disease
or
condition,
which
is
generally
defined
as
a
patient
population
of
fewer
than
200,000
individuals
in
the
United
States.
Our
orphan
drug
exclusivity
for
BHV-0223
for
ALS
is
contingent
upon
a
showing
that
BHV-0223
is
clinically
superior
to
Rilutek
in
the
treatment
of
ALS.
Clinical
superiority
may
be
demonstrated
by
showing
that
a
drug
has
greater
effectiveness
than
the
approved
drug,
greater
safety
in
a
substantial
portion
of
the
target
population,
or
otherwise
makes
a
major
contribution
to
patient
care.
If
we
are
unable
to
demonstrate
that
BHV-0223
is
clinically
superior
to
riluzole,
we
will
not
be
entitled
to
the
benefits
of
orphan
drug
exclusivity
for
BHV-0223
for
ALS,
which
could
adversely
affect
our
business
and
our
ability
to
market
and
sell
BHV-
0223
if
it
is
approved
for
sale.
Generally,
if
a
product
with
an
orphan
drug
designation
subsequently
receives
the
first
marketing
approval
for
the
indication
for
which
it
has
such
designation,
the
product
is
entitled
to
a
period
of
marketing
exclusivity,
which
precludes
the
FDA
or
the
EMA
from
approving
another
marketing
application
for
the
same
drug
for
the
same
indication
during
that
time
period.
The
applicable
period
is
seven
years
in
the
United
States
and
ten
years
in
the
European
Union.
The
European
exclusivity
period
can
be
reduced
to
six
years
if
a
drug
no
longer
meets
the
criteria
for
orphan
drug
designation
or
if
the
drug
is
sufficiently
profitable
so
that
market
exclusivity
is
no
longer
justified.
Orphan
drug
exclusivity
may
be
lost
if
the
FDA
or
the
EMA
determines
that
the
request
for
designation
was
materially
defective
or
if
the
manufacturer
is
unable
to
assure
sufficient
quantity
of
the
drug
to
meet
the
needs
of
patients
with
the
rare
disease
or
condition.
We
cannot
assure
you
that
any
future
application
for
orphan
drug
designation
with
respect
to
any
other
product
candidate
will
be
granted.
If
we
are
unable
to
obtain
orphan
drug
designation
with
respect
to
other
product
candidates
in
the
United
States,
we
will
not
be
eligible
to
obtain
the
period
of
market
exclusivity
that
could
result
from
orphan
drug
designation
or
be
afforded
the
financial
incentives
associated
with
orphan
drug
designation.
Even
when
we
obtain
orphan
drug
exclusivity
for
a
product,
that
exclusivity
may
not
effectively
protect
the
product
from
competition
because
different
drugs
can
be
approved
for
the
same
condition.
Even
after
an
orphan
drug
is
approved,
the
FDA
can
subsequently
approve
a
later
drug
for
the
same
condition
if
the
FDA
concludes
that
the
later
drug
is
clinically
superior
in
that
it
is
shown
to
be
safer,
more
effective
or
makes
a
major
contribution
to
patient
care.
Fast track designation by the FDA may not actually lead to a faster development or regulatory review or approval process and does not assure FDA approval of
our product candidate.
In
May
2017,
we
received
fast
track
designation
from
the
FDA
for
trigriluzole
for
the
potential
treatment
of
SCA.
Fast
track
designation
provides
opportunities
for
frequent
interactions
with
FDA
review
staff,
as
well
as
eligibility
for
priority
review,
if
relevant
criteria
are
met,
and
rolling
review.
Fast
track
designation
is
intended
to
facilitate
and
expedite
development
and
review
of
an
NDA
to
address
unmet
medical
needs
in
the
treatment
of
serious
or
life-threatening
conditions.
However,
fast
track
designation
does
not
accelerate
clinical
trials
or
mean
that
the
regulatory
requirements
are
less
stringent,
nor
does
it
ensure
that
trigriluzole
will
receive
marketing
approval
or
that
approval
will
be
granted
within
any
particular
timeframe.
We
may
also
seek
fast
track
designation
for
our
other
product
candidates.
We
may
not
experience
a
faster
development
process,
review
or
approval
compared
to
97
Table
of
Contents
conventional
FDA
procedures.
In
addition,
the
FDA
may
withdraw
fast
track
designation
if
it
believes
that
the
designation
is
no
longer
supported
by
data
from
our
clinical
development
program.
Risks
Related
to
Our
Intellectual
Property
If we are unable to obtain and maintain patent protection for product candidates, we may not be able to compete effectively in our markets.
Market
exclusivity
for
pharmaceutical
products
is
based
upon
patent
rights
and
certain
regulatory
forms
of
exclusivity.
The
failure
to
obtain
patents
of
commercially
relevant
scope,
or
limitations
on
the
use
or
loss
of
patent
rights,
could
have
a
negative
effect
on
our
business.
In
addition,
the
patent
environment
can
be
unpredictable
and
the
validity
and
enforceability
of
patents
cannot
be
predicted
with
certainty.
Absent
relevant
patent
protection
for
a
product,
once
the
regulatory
exclusivity
periods
expire,
generic
versions
can
be
approved
and
marketed.
Regulatory
forms
of
exclusivity
vary
from
country-to-country
and
are
not
available
in
certain
countries.
We
rely
upon
patents
to
protect
the
intellectual
property
related
to
our
development
programs
and
product
candidates.
Our
success
depends
in
large
part
on
our
ability
to
obtain
and
maintain
patent
protection
in
the
United
States
and
other
countries
with
respect
to
our
current
and
future
product
candidates.
We
have
sought
to
protect
our
proprietary
positions
by
filing
and
in-licensing
patents
and
patent
applications.
The
patent
prosecution
process
is
expensive
and
time-consuming,
and
we
or
our
licensors
may
not
be
able
to
file
and
prosecute
all
necessary
or
desirable
patent
applications
at
a
reasonable
cost
or
in
a
timely
manner
or
in
all
jurisdictions.
None
of
our
patents
claiming
trigriluzole
or
BHV-0223
have
issued,
and
applications
filed
under
the
Patent
Cooperation
Treaty,
or
PCT,
with
respect
to
trigriluzole
and
BHV-0223
have
been
nationalized
and
are
pending
in
the
U.S.,
European
countries,
Japan,
Korea,
China,
India,
Russia,
Brazil,
Canada,
and
other
countries.
It
is
also
possible
that
we
will
fail
to
identify
patentable
aspects
of
our
research
and
development
in
time
to
obtain
patent
protection.
The
patent
applications
that
we
own
or
in-license
may
fail
to
result
in
issued
patents
with
claims
that
cover
our
current
and
future
product
candidates
in
the
United
States
or
in
other
foreign
countries.
If
the
patent
applications
we
hold
or
have
in-licensed
with
respect
to
our
development
programs
and
product
candidates
fail
to
issue,
if
their
breadth
or
strength
of
protection
is
threatened,
or
if
they
fail
to
provide
meaningful
exclusivity
for
our
current
and
future
product
candidates,
it
could
dissuade
companies
from
collaborating
with
us
to
develop
product
candidates,
and
threaten
our
ability
to
commercialize,
products.
Any
such
outcome
could
have
a
negative
effect
on
our
business.
The
patent
position
of
biopharmaceutical
companies
generally
is
highly
uncertain,
involves
complex
legal
and
factual
questions.
In
addition,
the
laws
of
foreign
countries
may
not
protect
our
rights
to
the
same
extent
as
the
laws
of
the
United
States.
Publications
of
discoveries
in
scientific
literature
often
lag
behind
the
actual
discoveries,
and
patent
applications
in
the
United
States
and
other
jurisdictions
remain
confidential
for
a
period
of
time
after
filing,
and
some
remain
so
until
issued.
Therefore,
we
cannot
know
with
certainty
whether
we
were
the
first
to
make
the
inventions
claimed
in
our
owned
or
licensed
patents
or
pending
patent
applications,
or
that
we
were
the
first
to
file
for
patent
protection
of
such
inventions.
As
a
result,
the
issuance,
scope,
validity,
enforceability
and
commercial
value
of
our
patent
rights
are
highly
uncertain.
There
is
no
assurance
that
all
potentially
relevant
prior
art
relating
to
our
patents
and
patent
applications
has
been
found,
and
such
prior
art
could
potentially
invalidate
one
or
more
of
our
patents
or
prevent
a
patent
from
issuing
from
one
or
more
of
our
pending
patent
applications.
There
is
also
no
assurance
that
there
is
not
prior
art
of
which
we
are
aware,
but
which
we
do
not
believe
affects
the
validity,
patentability
or
enforceability
of
a
claim
in
our
patents
and
patent
applications,
which
may,
nonetheless,
ultimately
be
found
to
affect
the
validity,
patentability
or
enforceability
of
a
claim.
98
Table
of
Contents
Even
if
patents
are
granted
and
even
if
such
patents
cover
our
current
or
future
product
candidates,
third
parties
may
challenge
their
validity,
enforceability
or
scope,
which
may
result
in
such
patents
being
narrowed,
invalidated
or
held
unenforceable,
which
could
allow
third
parties
to
compete
directly
with
us,
without
payment
to
us,
or
result
in
our
inability
to
manufacture
or
commercialize
products
without
infringing
third-party
patent
rights.
Any
successful
opposition
to
these
patents
or
any
other
patents
owned
by
or
licensed
to
us
could
deprive
us
of
rights
necessary
for
the
successful
commercialization
of
any
product
candidates
that
we
may
develop.
Furthermore,
even
if
they
are
unchallenged,
our
patents
and
patent
applications
may
not
adequately
protect
our
intellectual
property,
provide
exclusivity
for
our
product
candidates,
prevent
others
from
designing
around
our
claims
or
provide
us
with
a
competitive
advantage.
Any
of
these
outcomes
could
impair
our
ability
to
prevent
competition
from
third
parties.
Changes
in
either
the
patent
laws
or
interpretation
of
the
patent
laws
in
the
United
States
and
other
countries
may
diminish
the
value
of
our
patents
or
narrow
the
scope
of
our
patent
protection.
We,
independently
or
together
with
our
licensors,
have
filed
several
patent
applications
covering
various
aspects
of
our
product
candidates.
We
cannot
offer
any
assurances
about
which,
if
any,
patents
will
issue,
the
breadth
of
any
such
patent,
or
whether
any
issued
patents
will
be
found
invalid
and
unenforceable
or
will
be
challenged
by
third
parties.
Any
successful
opposition
to
these
patents
or
any
other
patents
owned
by
or
licensed
to
us
after
patent
issuance
could
deprive
us
of
rights
necessary
for
the
successful
commercialization
of
any
product
candidates
that
we
may
develop.
Further,
if
we
encounter
delays
in
regulatory
approvals,
the
period
of
time
during
which
we
could
market
a
product
candidate
under
patent
protection
could
be
reduced.
Our patents and pending patent applications related to trigriluzole and BHV-0223 only protect or seek to protect the formulation or method of administration
of our product candidates and not the active pharmaceutical ingredient, riluzole, a compound for which patent protection is no longer available.
We
own
several
families
of
patent
applications
covering
prodrugs
and
formulations
of
riluzole.
These
patent
applications
include
several
U.S.
applications
and
corresponding
international
and
PCT
applications.
These
families
of
patent
applications
cover
trigriluzole
and
numerous
other
prodrugs
of
riluzole
as
well
as
BHV-
0223,
a
sublingual
or
ODT
form
of
riluzole.
Other
patent
applications
provide
coverage
for
alternative
formulations
of
riluzole
prodrugs
and
their
uses.
The
applications
also
cover
prodrugs
related
to
riluzole
and
prodrugs
relating
to
lanicemine.
The
patent
for
riluzole,
which
is
the
active
pharmaceutical
ingredient
in
these
product
candidates,
expired
in
2013,
and
so
only
novel
riluzole-containing
pharmaceutical
compositions
and
their
uses
can
be
protected
by
one
or
more
patent
applications.
We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third-party patent which might adversely
affect our ability to develop and market our product candidates.
We
cannot
guarantee
that
any
of
our
or
our
licensors'
patent
searches
or
analyses,
including
the
identification
of
relevant
patents,
the
scope
of
patent
claims
or
the
expiration
of
relevant
patents,
are
complete
or
thorough,
nor
can
we
be
certain
that
we
have
identified
each
and
every
third-party
patent
and
pending
application
in
the
United
States
and
abroad
that
is
relevant
to
or
necessary
for
the
commercialization
of
our
product
candidates
in
any
jurisdiction.
Patent
applications
in
the
United
States
and
elsewhere
are
published
approximately
18
months
after
the
earliest
filing
for
which
priority
is
claimed,
with
such
earliest
filing
date
being
commonly
referred
to
as
the
priority
date.
Therefore,
patent
applications
covering
our
product
candidates
could
have
been
filed
by
others
without
our
knowledge.
Additionally,
pending
patent
applications
that
have
been
published
can,
subject
to
certain
limitations,
be
later
amended
in
a
manner
that
could
cover
our
product
candidates
or
the
use
of
our
product
candidates.
The
scope
of
a
patent
claim
is
determined
by
an
interpretation
of
the
law,
the
written
disclosure
in
a
patent
and
the
patent's
prosecution
history.
Our
interpretation
of
the
relevance
99
Table
of
Contents
or
the
scope
of
a
patent
or
a
pending
application
may
be
incorrect,
which
may
negatively
impact
our
ability
to
market
our
product
candidates.
We
may
incorrectly
determine
that
our
product
candidates
are
not
covered
by
a
third-party
patent
or
may
incorrectly
predict
whether
a
third
party's
pending
application
will
issue
with
claims
of
relevant
scope.
Our
determination
of
the
expiration
date
of
any
patent
in
the
United
States
or
abroad
that
we
consider
relevant
may
be
incorrect,
which
may
negatively
impact
our
ability
to
develop
and
market
our
product
candidates.
Our
failure
to
identify
and
correctly
interpret
relevant
patents
may
negatively
impact
our
ability
to
develop
and
market
our
product
candidates.
If
we
fail
to
identify
and
correctly
interpret
relevant
patents,
we
may
be
subject
to
infringement
claims.
We
cannot
guarantee
that
we
will
be
able
to
successfully
settle
or
otherwise
resolve
such
infringement
claims.
If
we
fail
in
any
such
dispute,
in
addition
to
being
forced
to
pay
damages,
we
may
be
temporarily
or
permanently
prohibited
from
commercializing
any
of
our
product
candidates
that
are
held
to
be
infringing.
We
might,
if
possible,
also
be
forced
to
redesign
product
candidates
so
that
we
no
longer
infringe
the
third-
party
intellectual
property
rights.
Any
of
these
events,
even
if
we
were
ultimately
to
prevail,
could
require
us
to
divert
substantial
financial
and
management
resources
that
we
would
otherwise
be
able
to
devote
to
our
business.
We are dependent on licensed intellectual property. If we were to lose our rights to licensed intellectual property, we may not be able to continue developing or
commercializing our product candidates, if approved. If we breach any of the agreements under which we license the use, development and commercialization
rights to our product candidates or technology from third parties or, in certain cases, we fail to meet certain development deadlines, we could lose license rights
that are important to our business.
We
are
a
party
to
a
number
of
license
agreements
under
which
we
are
granted
rights
to
intellectual
property
that
are
important
to
our
business
and
we
may
need
or
choose
to
enter
into
additional
license
agreements
in
the
future.
Our
existing
license
agreements
impose,
and
we
expect
that
future
license
agreements
will
impose
on
us,
various
development,
regulatory
and/or
commercial
diligence
obligations,
payment
of
milestones
and/or
royalties
and
other
obligations.
If
we
fail
to
comply
with
our
obligations
under
these
agreements,
or
we
are
subject
to
a
bankruptcy,
the
licensor
may
have
the
right
to
terminate
the
license,
in
which
event
we
would
not
be
able
to
market
products
covered
by
the
license.
Our
business
could
suffer,
for
example,
if
any
current
or
future
licenses
terminate,
if
the
licensors
fail
to
abide
by
the
terms
of
the
license,
if
the
licensed
patents
or
other
rights
are
found
to
be
invalid
or
unenforceable,
or
if
we
are
unable
to
enter
into
necessary
licenses
on
acceptable
terms.
Licensing
of
intellectual
property
is
of
critical
importance
to
our
business
and
involves
complex
legal,
business
and
scientific
issues.
Disputes
may
arise
between
us
and
our
licensors
regarding
intellectual
property
subject
to
a
license
agreement,
including:
•
•
•
•
•
•
•
the
scope
of
rights
granted
under
the
license
agreement
and
other
interpretation-related
issues;
whether
and
the
extent
to
which
our
technology
and
processes
infringe
on
intellectual
property
of
the
licensor
that
is
not
subject
to
the
licensing
agreement;
our
right
to
sublicense
patent
and
other
rights
to
third
parties;
our
diligence
obligations
with
respect
to
the
use
of
the
licensed
technology
in
relation
to
our
development
and
commercialization
of
our
product
candidates,
and
what
activities
satisfy
those
diligence
obligations;
the
ownership
of
inventions
and
know-how
resulting
from
the
joint
creation
or
use
of
intellectual
property
by
our
licensors
and
us
and
our
partners;
our
right
to
transfer
or
assign
the
license;
and
the
effects
of
termination.
100
Table
of
Contents
If
disputes
over
intellectual
property
that
we
have
licensed
prevent
or
impair
our
ability
to
maintain
our
current
licensing
arrangements
on
acceptable
terms,
we
may
be
unable
to
successfully
develop
and
commercialize
the
affected
product
candidates.
We
have
entered
into
several
licenses
to
support
our
various
programs.
Termination
of
any
of
these
license
agreements
would
have
a
material
adverse
impact
on
our
ability
to
develop
and
commercialize
derived
products
under
each
respective
agreement.
We
may
enter
into
additional
licenses
to
third-party
intellectual
property
that
are
necessary
or
useful
to
our
business.
Our
current
licenses
and
any
future
licenses
that
we
may
enter
into
impose
various
royalty
payment,
milestone,
and
other
obligations
on
us.
Under
some
license
agreements,
we
may
not
control
prosecution
of
the
licensed
intellectual
property,
or
may
not
have
the
first
right
to
enforce
the
intellectual
property.
In
those
cases,
we
may
not
be
able
to
adequately
influence
patent
prosecution
or
enforcement,
or
prevent
inadvertent
lapses
of
coverage
due
to
failure
to
pay
maintenance
fees.
If
we
fail
to
comply
with
any
of
our
obligations
under
a
current
or
future
license
agreement,
the
licensor
may
allege
that
we
have
breached
our
license
agreement,
and
may
accordingly
seek
to
terminate
our
license.
Termination
of
any
of
our
current
or
future
licenses
could
result
in
our
loss
of
the
right
to
use
the
licensed
intellectual
property,
which
could
materially
adversely
affect
our
ability
to
develop
and
commercialize
a
product
candidate
or
product,
if
approved,
as
well
as
harm
our
competitive
business
position
and
our
business
prospects.
Under
some
license
agreements,
termination
may
also
result
in
the
transfer
of
or
granting
in
rights
under
certain
of
our
intellectual
property
and
information
related
to
the
product
candidate
being
developed
under
the
license,
such
as
regulatory
information.
In
addition,
if
our
licensors
fail
to
abide
by
the
terms
of
the
license,
if
the
licensors
fail
to
prevent
infringement
by
third
parties,
if
the
licensed
patents
or
other
rights
are
found
to
be
invalid
or
unenforceable,
or
if
we
are
unable
to
enter
into
necessary
licenses
on
acceptable
terms,
our
business
could
suffer.
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
Patents
have
a
limited
lifespan.
In
the
United
States,
if
all
maintenance
fees
are
timely
paid,
the
statutory
expiration
of
a
patent
is
generally
20
years
from
its
earliest
U.S.
non-provisional
filing
date.
Various
extensions
may
be
available,
but
the
life
of
a
patent,
and
the
protection
it
affords,
is
limited.
Even
if
patents
covering
our
product
candidates
are
obtained,
once
the
patent
life
has
expired
for
a
product
candidate,
we
may
be
open
to
competition
from
competitive
medications,
including
generic
medications.
Given
the
amount
of
time
required
for
the
development,
testing
and
regulatory
review
of
new
product
candidates,
patents
protecting
such
product
candidates
might
expire
before
or
shortly
after
such
product
candidates
are
commercialized.
As
a
result,
our
owned
and
licensed
patent
portfolio
may
not
provide
us
with
sufficient
rights
to
exclude
others
from
commercializing
product
candidates
similar
or
identical
to
ours.
Depending
upon
the
timing,
duration
and
conditions
of
FDA
marketing
approval
of
our
product
candidates,
one
or
more
of
our
U.S.
patents
may
be
eligible
for
limited
patent
term
extension
under
the
Drug
Price
Competition
and
Patent
Term
Restoration
Act
of
1984,
referred
to
as
the
Hatch-Waxman
Amendments,
and
similar
legislation
in
the
European
Union.
The
Hatch-Waxman
Amendments
permit
a
patent
term
extension
of
up
to
five
years
for
a
patent
covering
an
approved
product
as
compensation
for
effective
patent
term
lost
during
product
development
and
the
FDA
regulatory
review
process.
However,
we
may
not
receive
an
extension
if
we
fail
to
apply
within
applicable
deadlines,
fail
to
apply
prior
to
expiration
of
relevant
patents
or
otherwise
fail
to
satisfy
applicable
requirements.
Moreover,
the
length
of
the
extension
could
be
less
than
we
request.
In
the
United
States,
only
one
patent
per
approved
product
can
be
extended,
and
the
extension
cannot
extend
101
Table
of
Contents
the
total
patent
term
beyond
fourteen
years
from
approval.
If
we
are
unable
to
obtain
patent
term
extension
or
the
term
of
any
such
extension
is
less
than
we
request,
the
period
during
which
we
can
enforce
our
patent
rights
for
that
product
will
be
shortened
and
our
competitors
may
obtain
approval
to
market
competing
products
sooner.
As
a
result,
our
revenue
from
applicable
products
could
be
reduced.
Further,
if
this
occurs,
our
competitors
may
take
advantage
of
our
investment
in
development
and
trials
by
referencing
our
clinical
and
preclinical
data
and
launch
their
product
earlier
than
might
otherwise
be
the
case.
Because
riluzole
has
already
been
approved,
we
will
not
be
eligible
to
obtain
patent
term
extension
for
any
of
our
patents,
should
they
issue,
that
cover
BHV-0223.
If we are unable to obtain licenses from third parties on commercially reasonable terms or fail to comply with our obligations under such agreements, our
business could be harmed.
It
may
be
necessary
for
us
to
use
the
patented
or
proprietary
technology
of
third
parties
to
commercialize
our
products,
in
which
case
we
would
be
required
to
obtain
a
license
from
these
third
parties.
If
we
are
unable
to
license
such
technology,
or
if
we
are
forced
to
license
such
technology,
on
unfavorable
terms,
our
business
could
be
materially
harmed.
If
we
are
unable
to
obtain
a
necessary
license,
we
may
be
unable
to
develop
or
commercialize
the
affected
product
candidates,
which
could
materially
harm
our
business
and
the
third
parties
owning
such
intellectual
property
rights
could
seek
either
an
injunction
prohibiting
our
sales,
or,
with
respect
to
our
sales,
an
obligation
on
our
part
to
pay
royalties
and/or
other
forms
of
compensation.
Even
if
we
are
able
to
obtain
a
license,
it
may
be
non-
exclusive,
thereby
giving
our
competitors
access
to
the
same
technologies
licensed
to
us.
If
we
fail
to
comply
with
our
obligations
under
license
agreements,
our
counterparties
may
have
the
right
to
terminate
these
agreements,
in
which
event
we
might
not
be
able
to
develop,
manufacture
or
market,
or
may
be
forced
to
cease
developing,
manufacturing
or
marketing,
any
product
that
is
covered
by
these
agreements
or
may
face
other
penalties
under
such
agreements.
Such
an
occurrence
could
materially
adversely
affect
the
value
of
the
product
candidate
being
developed
under
any
such
agreement.
Termination
of
these
agreements
or
reduction
or
elimination
of
our
rights
under
these
agreements
may
result
in
our
having
to
negotiate
new
or
reinstated
agreements
with
less
favorable
terms,
cause
us
to
lose
our
rights
under
these
agreements,
including
our
rights
to
important
intellectual
property
or
technology
or
impede,
delay
or
prohibit
the
further
development
or
commercialization
of
one
or
more
product
candidates
that
rely
on
such
agreements.
Intellectual property rights do not necessarily address all potential threats to our business.
Once
granted,
patents
may
remain
open
to
invalidity
challenges
including
opposition,
interference,
re-examination,
post-grant
review,
inter
partes
review,
nullification
or
derivation
action
in
court
or
before
patent
offices
or
similar
proceedings
for
a
given
period
after
allowance
or
grant,
during
which
time
third
parties
can
raise
objections
against
such
grant.
In
the
course
of
such
proceedings,
which
may
continue
for
a
protracted
period
of
time,
the
patent
owner
may
be
compelled
to
limit
the
scope
of
the
allowed
or
granted
claims
which
are
the
subject
of
the
challenge,
or
may
lose
the
allowed
or
granted
claims
altogether.
In
addition,
the
degree
of
future
protection
afforded
by
our
intellectual
property
rights
is
uncertain
because
even
granted
intellectual
property
rights
have
limitations,
and
may
not
adequately
protect
our
business,
provide
a
barrier
to
entry
against
our
competitor
or
potential
competitors
or
permit
us
to
maintain
our
competitive
advantage.
Moreover,
if
a
third
party
has
intellectual
property
rights
that
cover
the
practice
of
our
technology,
we
may
not
be
able
to
fully
exercise
or
extract
value
from
our
intellectual
property
rights.
The
following
examples
are
illustrative:
•
others
may
be
able
to
develop
and/or
practice
technology
that
is
similar
to
our
technology
or
aspects
of
our
technology,
such
as
compounds
or
formulations
that
are
similar
to
our
product
102
Table
of
Contents
candidates,
but
that
are
not
covered
by
the
claims
of
the
patents
that
we
own
or
control,
assuming
such
patents
have
issued
or
do
issue;
we
or
our
licensors
or
any
future
strategic
partners
might
not
have
been
the
first
to
conceive
or
reduce
to
practice
the
inventions
covered
by
the
issued
patent
or
pending
patent
application
that
we
own
or
have
exclusively
licensed;
we
or
our
licensors
or
any
future
strategic
partners
might
not
have
been
the
first
to
file
patent
applications
covering
certain
of
our
inventions;
others
may
independently
develop
similar
or
alternative
technologies
or
duplicate
any
of
our
technologies
without
infringing
our
intellectual
property
rights;
it
is
possible
that
our
pending
patent
applications
will
not
lead
to
issued
patents;
issued
patents
that
we
own
or
have
exclusively
licensed
may
not
provide
us
with
any
competitive
advantage,
or
may
be
held
invalid
or
unenforceable,
as
a
result
of
legal
challenges
by
our
competitors;
our
competitors
might
conduct
research
and
development
activities
in
countries
where
we
do
not
have
patent
rights
and
then
use
the
information
learned
from
such
activities
to
develop
competitive
products
for
sale
in
our
major
commercial
markets;
third
parties
performing
manufacturing
or
testing
for
us
using
our
product
candidates
or
technologies
could
use
the
intellectual
property
of
others
without
obtaining
a
proper
license;
parties
may
assert
an
ownership
interest
in
our
intellectual
property
and,
if
successful,
such
disputes
may
preclude
us
from
exercising
exclusive
rights
over
that
intellectual
property;
we
may
not
develop
or
in-license
additional
proprietary
technologies
that
are
patentable;
we
may
not
be
able
to
obtain
and
maintain
necessary
licenses
on
commercially
reasonable
terms,
or
at
all;
and
the
patents
of
others
may
have
an
adverse
effect
on
our
business.
•
•
•
•
•
•
•
•
•
•
•
Should
any
of
these
events
occur,
they
could
have
significantly
harm
our
business
and
results
of
operations.
Changes in intellectual property laws or jurisprudence could impair our ability to protect our product candidates.
Changes
in
intellectual
property
laws
or
regulations
in
the
U.S.,
or
other
countries,
could
negatively
affect
our
business.
Similarly,
changes
in
the
interpretation
of
such
laws
or
regulations
could
have
an
impact
on
our
business.
The
current
law
in
the
United
States,
as
in
most
other
countries
in
the
world,
uses
a
"first-to-file"
system
for
deciding
which
party
should
be
granted
a
patent
when
two
or
more
patent
applications
are
filed
by
different
parties
claiming
the
same
invention.
This
requires
that
we
promptly
file
patent
applications
on
our
inventions.
The
failure
to
do
so
could
result
in
another
patent
applicant
being
awarded
a
patent,
even
though
we
may
have
made
the
invention
first.
Current
U.S.
law
also
provides
a
lower
evidentiary
standard
in
U.S.
Patent
and
Trademark
Office
("USPTO")
proceedings
compared
to
the
evidentiary
standard
in
U.S.
federal
courts
necessary
to
invalidate
a
patent
claim.
Hence,
a
third
party
could
potentially
provide
evidence
in
a
USPTO
proceeding
sufficient
for
the
USPTO
to
hold
a
claim
invalid
even
though
the
same
evidence
would
be
insufficient
to
invalidate
the
claim
if
first
presented
in
a
district
court
action.
Accordingly,
a
third
party
may
attempt
to
use
the
USPTO
procedures
to
invalidate
our
patent
claims
that
would
not
have
been
invalidated
if
first
challenged
by
the
third
party
as
a
defendant
in
a
district
court
action.
103
Table
of
Contents
Additionally,
the
U.S.
Supreme
Court
has
ruled
on
several
patent
cases
in
recent
years,
such
as
Impression
Products,
Inc.
v.
Lexmark
International,
Inc.,
Association
for
Molecular
Pathology
v.
Myriad
Genetics,
Inc.
(Myriad
I),
Mayo
Collaborative
Services
v.
Prometheus
Laboratories,
Inc.,
and
Alice
Corporation
Pty.
Ltd.
v.
CLS
Bank
International,
either
narrowing
the
scope
of
patent
protection
available
in
certain
circumstances
or
weakening
the
rights
of
patent
owners
in
certain
situations.
In
addition
to
increasing
uncertainty
with
regard
to
our
ability
to
obtain
patents
in
the
future,
this
combination
of
events
has
created
uncertainty
with
respect
to
the
value
of
patents,
once
obtained.
Depending
on
decisions
by
the
U.S.
Congress,
the
federal
courts,
and
the
USPTO,
the
laws
and
regulations
governing
patents
could
change
in
unpredictable
ways
that
could
weaken
our
ability
to
obtain
new
patents
or
to
enforce
our
existing
patents
and
patents
that
we
might
obtain
in
the
future.
Some intellectual property which we have in-licensed may have been discovered through government funded programs and thus may be subject to federal
regulations such as "march-in" rights, certain reporting requirements, and a preference for U.S. industry. Compliance with such regulations may limit our
exclusive rights, and limit our ability to contract with non-U.S. manufacturers.
Some
of
the
intellectual
property
rights
we
have
licensed
or
acquired,
including
rights
licensed
to
us
by
Rutgers,
the
State
University
of
New
Jersey,
and
rights
assigned
to
us
by
ALS
Biopharma
may
have
been
generated
through
the
use
of
U.S.
government
funding
and
may
therefore
be
subject
to
certain
federal
regulations.
As
a
result,
the
U.S.
government
may
have
certain
rights
to
intellectual
property
embodied
in
our
current
or
future
product
candidates
pursuant
to
the
Bayh-Dole
Act
of
1980
("Bayh-Dole
Act").
These
U.S.
government
rights
in
certain
inventions
developed
under
a
government-funded
program
include
a
non-
exclusive,
non-transferable,
irrevocable
worldwide
license
to
use
inventions
for
any
governmental
purpose.
In
addition,
the
U.S.
government
has
the
right
to
require
us
to
grant
exclusive,
partially
exclusive,
or
non-exclusive
licenses
to
any
of
these
inventions
to
a
third
party
if
it
determines
that:
(i)
adequate
steps
have
not
been
taken
to
commercialize
the
invention;
(ii)
government
action
is
necessary
to
meet
public
health
or
safety
needs;
or
(iii)
government
action
is
necessary
to
meet
requirements
for
public
use
under
federal
regulations
(also
referred
to
as
"march-in
rights").
The
U.S.
government
also
has
the
right
to
take
title
to
these
inventions
if
we,
or
the
applicable
licensor,
fail
to
disclose
the
invention
to
the
government
and
fail
to
file
an
application
to
register
the
intellectual
property
within
specified
time
limits.
Intellectual
property
generated
under
a
government
funded
program
is
also
subject
to
certain
reporting
requirements,
compliance
with
which
may
require
us
or
the
applicable
licensor
to
expend
substantial
resources.
In
addition,
the
U.S.
government
requires
that
any
products
embodying
the
subject
invention
or
produced
through
the
use
of
the
subject
invention
be
manufactured
substantially
in
the
United
States.
The
manufacturing
preference
requirement
can
be
waived
if
the
owner
of
the
intellectual
property
can
show
that
reasonable
but
unsuccessful
efforts
have
been
made
to
grant
licenses
on
similar
terms
to
potential
licensees
that
would
be
likely
to
manufacture
substantially
in
the
United
States
or
that
under
the
circumstances
domestic
manufacture
is
not
commercially
feasible.
This
preference
for
U.S.
manufacturers
may
limit
our
ability
to
contract
with
non-U.S.
product
manufacturers
for
products
covered
by
such
intellectual
property.
To
the
extent
any
of
our
current
or
future
intellectual
property
is
generated
through
the
use
of
U.S.
government
funding,
the
provisions
of
the
Bayh-Dole
Act
may
similarly
apply.
Any
exercise
by
the
government
of
certain
of
its
rights
could
harm
our
competitive
position,
business,
financial
condition,
results
of
operations
and
prospects.
Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and
could have a negative impact on the success of our business.
Generic
manufacturers
as
well
as
other
groups
seeking
financial
gain
are
also
increasingly
seeking
to
challenge
patents
before
they
expire.
Our
commercial
success
depends,
in
part,
upon
our
ability,
and
the
ability
of
our
future
collaborators,
to
develop,
manufacture,
market
and
sell
our
product
candidates,
if
approved,
and
use
our
proprietary
technologies
without
alleged
or
actual
infringement,
104
Table
of
Contents
misappropriation
or
other
violation
of
the
patents
and
proprietary
rights
of
third
parties.
There
have
been
many
lawsuits
and
other
proceedings
involving
patent
and
other
intellectual
property
rights
in
the
biotechnology
and
pharmaceutical
industries,
including
patent
infringement
lawsuits,
interferences,
inter
partes
reviews,
post
grant
reviews
and
re-examination
proceedings
before
the
USPTO,
and
corresponding
foreign
patent
offices.
Numerous
U.S.
and
foreign
issued
patents
and
pending
patent
applications,
which
are
owned
by
third
parties,
exist
in
the
fields
in
which
we
are
developing
product
candidates.
Some
claimants
may
have
substantially
greater
resources
than
we
do
and
may
be
able
to
sustain
the
costs
of
complex
intellectual
property
litigation
to
a
greater
degree
and
for
longer
periods
of
time
than
we
could.
In
addition,
patent
holding
companies
that
focus
solely
on
extracting
royalties
and
settlements
by
enforcing
patent
rights
may
target
us.
As
the
biotechnology
and
pharmaceutical
industries
expand
and
more
patents
are
issued,
the
risk
increases
that
our
product
candidates
may
be
subject
to
claims
of
infringement
of
the
intellectual
property
rights
of
third
parties.
We
may
in
the
future
become
party
to,
or
be
threatened
with,
adversarial
proceedings
or
litigation
regarding
intellectual
property
rights
with
respect
to
our
product
candidates
and
technology,
including
interference
or
derivation
proceedings,
post
grant
review
and
inter
partes
review
before
the
USPTO
or
similar
adversarial
proceedings
or
litigation
in
other
jurisdictions.
Similarly,
we
or
our
licensors
or
collaborators
may
initiate
such
proceedings
or
litigation
against
third
parties,
including
to
challenge
the
validity
or
scope
of
intellectual
property
rights
controlled
by
third
parties.
Third
parties
may
assert
infringement
claims
against
us
based
on
existing
patents
or
patents
that
may
be
granted
in
the
future,
regardless
of
their
merit.
There
is
a
risk
that
third
parties
may
choose
to
engage
in
litigation
with
us
to
enforce
or
to
otherwise
assert
their
patent
rights
against
us.
Even
if
we
believe
such
claims
are
without
merit,
a
court
of
competent
jurisdiction
could
hold
that
these
third-party
patents
are
valid,
enforceable
and
infringed,
and
the
holders
of
any
such
patents
may
be
able
to
block
our
ability
to
commercialize
such
product
candidate
unless
we
obtained
a
license
under
the
applicable
patents,
or
until
such
patents
expire
or
are
finally
determined
to
be
invalid
or
unenforceable.
Similarly,
if
any
third-party
patents
were
held
by
a
court
of
competent
jurisdiction
to
cover
aspects
of
our
technology,
such
as
our
compositions,
formulations,
or
methods
of
treatment,
prevention
or
use,
the
holders
of
any
such
patents
may
be
able
to
block
our
ability
to
develop
and
commercialize
the
applicable
product
candidate
unless
we
obtained
a
license
or
until
such
patent
expires
or
is
finally
determined
to
be
invalid,
unenforceable
or
not
infringed
by
our
technology.
In
either
case,
such
a
license
may
not
be
available
on
commercially
reasonable
terms,
or
at
all.
Even
if
we
were
able
to
obtain
a
license,
it
could
be
non-exclusive,
thereby
giving
our
competitors
access
to
the
same
technologies
licensed
to
us.
Furthermore,
even
in
the
absence
of
litigation,
we
may
need
or
may
choose
to
obtain
licenses
from
third
parties
to
advance
our
research
or
allow
commercialization
of
our
product
candidates,
and
we
have
done
so
from
time
to
time.
We
may
fail
to
obtain
any
of
these
licenses
at
a
reasonable
cost
or
on
reasonable
terms,
if
at
all.
In
such
an
event,
we
would
be
unable
to
further
practice
our
technologies
or
develop
and
commercialize
any
of
our
product
candidates
at
issue,
which
could
harm
our
business
significantly.
Parties
making
claims
against
us
may
obtain
injunctive
or
other
equitable
relief,
which
could
effectively
block
our
ability
to
further
develop
and
commercialize
one
or
more
of
our
product
candidates,
if
approved.
Defense
of
these
claims,
regardless
of
their
merit,
would
involve
substantial
litigation
expense
and
would
be
a
substantial
diversion
of
employee
resources
from
our
business.
Third
parties
making
such
claims
may
have
the
ability
to
dedicate
substantially
greater
resources
to
these
legal
actions
than
we
or
our
licensors
or
collaborators
can.
In
the
event
of
a
successful
claim
of
infringement
against
us,
we
may
have
to
pay
substantial
damages,
including
treble
damages
and
attorneys'
fees
for
willful
infringement,
pay
royalties,
redesign
our
infringing
products
or
obtain
one
or
more
licenses
from
third
parties,
which
may
be
impossible
or
require
substantial
time
and
monetary
expenditure.
105
Table
of
Contents
We may become involved in lawsuits to protect or enforce our patents, the patents of our licensors or our other intellectual property rights, which could be
expensive, time-consuming and unsuccessful.
Competitors
may
infringe
or
otherwise
violate
our
or
our
licensors'
patents
or
misappropriate
or
otherwise
violate
our
or
our
licensor's
other
intellectual
property
rights.
To
counter
infringement
or
unauthorized
use,
we
may
be
required
to
file
legal
claims,
which
can
be
expensive
and
time-consuming.
Our
adversaries
in
these
proceedings
may
have
the
ability
to
dedicate
substantially
greater
resources
to
prosecuting
these
legal
actions
than
we
can.
In
addition,
in
an
infringement
proceeding,
a
court
may
decide
that
a
patent
of
ours
or
our
licensors
is
not
valid
or
is
unenforceable,
or
may
refuse
to
stop
the
other
party
from
using
the
technology
at
issue
on
the
grounds
that
our
patents
do
not
cover
the
technology
in
question.
An
adverse
result
in
any
litigation
or
defense
proceedings
could
put
one
or
more
of
our
patents
at
risk
of
being
invalidated
or
interpreted
narrowly
and
could
put
our
patent
applications
at
risk
of
not
issuing.
The
initiation
of
a
claim
against
a
third
party
may
also
cause
the
third
party
to
bring
counter
claims
against
us
such
as
claims
asserting
that
our
patents
are
invalid
or
unenforceable
or
claims
challenging
the
scope
of
the
intellectual
property
rights
we
own
or
control.
In
patent
litigation
in
the
United
States,
defendant
counterclaims
alleging
invalidity
or
unenforceability
are
commonplace.
Grounds
for
a
validity
challenge
could
be
an
alleged
failure
to
meet
any
of
several
statutory
requirements,
including
lack
of
novelty,
obviousness,
non-enablement,
lack
of
adequate
written
description
or
lack
of
statutory
subject
matter.
Grounds
for
an
unenforceability
assertion
could
be
an
allegation
that
someone
connected
with
prosecution
of
the
patent
withheld
relevant
material
information
from
the
USPTO,
or
made
a
materially
misleading
statement,
during
prosecution.
Third
parties
may
also
raise
similar
validity
claims
before
the
USPTO
in
post-grant
proceedings
such
as
ex
parte
re-examinations,
inter
partes
review,
or
post-grant
review,
or
oppositions
or
similar
proceedings
outside
the
United
States,
in
parallel
with
litigation
or
even
outside
the
context
of
litigation.
The
outcome
following
legal
assertions
of
invalidity
and
unenforceability
is
unpredictable.
We
cannot
be
certain
that
there
is
no
invalidating
prior
art,
of
which
we,
our
licensors
and
the
patent
examiner
were
unaware
during
prosecution.
For
the
patents
and
patent
applications
that
we
have
licensed,
we
may
have
limited
or
no
right
to
participate
in
the
defense
of
any
licensed
patents
against
challenge
by
a
third
party.
Therefore,
these
patents
and
applications
may
not
be
defended
in
a
manner
consistent
with
the
best
interests
of
our
business.
If
a
defendant
were
to
prevail
on
a
legal
assertion
of
invalidity
or
unenforceability,
we
would
lose
at
least
part,
and
perhaps
all,
of
any
future
patent
protection
on
our
current
or
future
product
candidates.
Such
a
loss
of
patent
protection
could
harm
our
business.
In
addition,
if
the
breadth
or
strength
of
protection
provided
by
our
or
our
licensors'
patents
and
patent
applications
is
threatened,
it
could
dissuade
companies
from
collaborating
with
us
to
license,
develop
or
commercialize
current
or
future
product
candidates.
We
may
not
be
able
to
prevent,
alone
or
with
our
licensors,
infringement
or
misappropriation
of
our
intellectual
property
rights,
particularly
in
countries
where
the
laws
may
not
protect
those
rights
as
fully
as
in
the
United
States.
Any
litigation
or
other
proceedings
to
enforce
our
intellectual
property
rights
may
fail,
and
even
if
successful,
may
result
in
substantial
costs
and
distract
our
management
and
other
employees.
Furthermore,
because
of
the
substantial
amount
of
discovery
required
in
connection
with
intellectual
property
litigation,
there
is
a
risk
that
some
of
our
confidential
information
could
be
compromised
by
disclosure
during
this
type
of
litigation.
There
could
also
be
public
announcements
of
the
results
of
hearings,
motions
or
other
interim
proceedings
or
developments.
If
securities
analysts
or
investors
perceive
these
results
to
be
negative,
it
could
have
an
adverse
effect
on
the
price
of
our
common
shares.
106
Table
of
Contents
We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.
Filing,
prosecuting
and
defending
patents
covering
our
product
candidates
in
all
countries
throughout
the
world
would
be
prohibitively
expensive,
and
our
intellectual
property
rights
in
some
countries
outside
the
United
States
can
be
less
extensive
than
those
in
the
United
States.
In
addition,
the
laws
of
some
foreign
countries
do
not
protect
intellectual
property
rights
to
the
same
extent
as
federal
and
state
laws
in
the
United
States.
Further,
licensing
partners
may
not
prosecute
patents
in
certain
jurisdictions
in
which
we
may
obtain
commercial
rights,
thereby
precluding
the
possibility
of
later
obtaining
patent
protection
in
these
countries.
Consequently,
we
may
not
be
able
to
prevent
third
parties
from
practicing
our
inventions
in
all
countries
outside
the
United
States,
or
from
selling
or
importing
products
made
using
our
inventions
in
and
into
the
United
States
or
other
jurisdictions.
Competitors
may
use
our
technologies
in
jurisdictions
where
we
have
not
obtained
patent
protection
to
develop
their
own
products
and
may
also
export
infringing
products
to
territories
where
we
have
patent
protection,
but
enforcement
is
not
as
strong
as
that
in
the
United
States.
These
products
may
compete
with
our
product
candidates,
and
our
patents
or
other
intellectual
property
rights
may
not
be
effective
or
sufficient
to
prevent
them
from
competing.
Many
companies
have
encountered
significant
problems
in
protecting
and
defending
intellectual
property
rights
in
foreign
jurisdictions.
The
legal
systems
of
certain
countries,
particularly
certain
developing
countries,
do
not
favor
the
enforcement
of
patents,
trade
secrets
and
other
intellectual
property
protection,
particularly
those
relating
to
biotechnology
products,
which
could
make
it
difficult
for
us
to
stop
the
infringement
of
our
patents,
if
obtained,
or
marketing
of
competing
products
in
violation
of
our
proprietary
rights
generally.
Proceedings
to
enforce
our
patent
rights,
whether
owned
or
licensed
to
us,
in
foreign
jurisdictions,
whether
or
not
successful,
could
result
in
substantial
costs
and
divert
our
efforts
and
attention
from
other
aspects
of
our
business,
could
put
our
patents
at
risk
of
being
invalidated
or
interpreted
narrowly
and
our
patent
applications
at
risk
of
not
issuing,
and
could
provoke
third
parties
to
assert
claims
against
us.
We
may
not
prevail
in
any
lawsuits
that
we
initiate
and
the
damages
or
other
remedies
awarded,
if
any,
may
not
be
commercially
meaningful.
Accordingly,
our
efforts
to
enforce
our
intellectual
property
rights
around
the
world
may
be
inadequate
to
obtain
a
significant
commercial
advantage
from
the
intellectual
property
that
we
develop
or
license.
Furthermore,
while
we
intend
to
protect
our
intellectual
property
rights
in
our
expected
significant
markets,
we
cannot
ensure
that
we
will
be
able
to
initiate
or
maintain
similar
efforts
in
all
jurisdictions
in
which
we
may
wish
to
market
our
product
candidates.
Accordingly,
our
efforts
to
protect
our
intellectual
property
rights
in
such
countries
may
be
inadequate,
which
may
have
an
adverse
effect
on
our
ability
to
successfully
commercialize
our
product
candidates
in
all
of
our
expected
significant
foreign
markets.
Additionally,
the
requirements
for
patentability
may
differ
in
certain
countries,
particularly
developing
countries.
For
example,
unlike
other
countries,
China
has
a
heightened
requirement
for
patentability,
and
specifically
requires
a
detailed
description
of
medical
uses
of
a
claimed
drug.
In
India,
unlike
the
United
States,
there
is
no
link
between
regulatory
approval
of
a
drug
and
its
patent
status.
Furthermore,
generic
drug
manufacturers
or
other
competitors
may
challenge
the
scope,
validity
or
enforceability
of
our
or
our
licensors'
patents,
requiring
us
or
our
licensors
to
engage
in
complex,
lengthy
and
costly
litigation
or
other
proceedings.
Generic
drug
manufacturers
may
develop,
seek
approval
for,
and
launch
generic
versions
of
our
products.
In
addition
to
India,
certain
countries
in
Europe
and
developing
countries,
including
China,
have
compulsory
licensing
laws
under
which
a
patent
owner
may
be
compelled
to
grant
licenses
to
third
parties.
In
those
countries,
we
and
our
licensors
may
have
limited
remedies
if
patents
are
infringed
or
if
we
or
our
licensors
are
compelled
to
grant
a
license
to
a
third
party,
which
could
materially
diminish
the
value
of
those
patents.
This
could
limit
our
potential
revenue
opportunities.
Accordingly,
our
and
our
licensors'
efforts
to
enforce
intellectual
property
rights
around
the
world
may
be
inadequate
to
obtain
a
significant
commercial
advantage
from
the
intellectual
property
that
we
own
or
license.
107
Table
of
Contents
We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of their
former employers or other third parties.
We
do
and
may
employ
individuals
who
were
previously
employed
at
universities
or
other
biotechnology
or
pharmaceutical
companies,
including
our
licensors,
competitors
or
potential
competitors.
Although
we
try
to
ensure
that
our
employees,
consultants
and
independent
contractors
do
not
use
the
proprietary
information
or
know-how
of
others
in
their
work
for
us,
and
we
are
not
currently
subject
to
any
claims
that
our
employees,
consultants
or
independent
contractors
have
wrongfully
used
or
disclosed
confidential
information
of
third
parties,
we
may
in
the
future
be
subject
to
such
claims.
Litigation
may
be
necessary
to
defend
against
these
claims.
If
we
fail
in
defending
any
such
claims,
in
addition
to
paying
monetary
damages,
we
may
lose
valuable
intellectual
property
rights
or
personnel.
Such
intellectual
property
rights
could
be
awarded
to
a
third
party,
and
we
could
be
required
to
obtain
a
license
from
such
third
party
to
commercialize
our
technology
or
products.
Such
a
license
may
not
be
available
on
commercially
reasonable
terms
or
at
all.
Even
if
we
are
successful
in
defending
against
such
claims,
litigation
could
result
in
substantial
costs
and
be
a
distraction
to
management
and
other
employees.
We may be subject to claims challenging the inventorship or ownership of our patents, patent applications or other intellectual property, or our licensors may
be subject to similar such claims.
Although
we
are
not
currently
experiencing
any
claims
challenging
the
inventorship
or
ownership
of
our
patents
or
ownership
of
our
intellectual
property,
we
may
in
the
future
be
subject
to
claims
that
former
employees,
collaborators
or
other
third
parties
have
an
interest
in
our
patents
or
other
intellectual
property
as
an
inventor
or
co-inventor,
or
that
an
employee,
consultant,
or
other
third
party
performed
work
for
us
that
conflicts
with
that
person's
obligations
to
a
third
party,
such
as
an
employer,
and
thus,
that
the
third
party
has
an
ownership
interest
in
the
intellectual
property
arising
out
of
work
performed
for
us.
While
it
is
our
policy
to
require
our
employees
and
contractors
who
may
be
involved
in
the
conception
or
development
of
intellectual
property
to
execute
agreements
assigning
such
intellectual
property
to
us,
we
may
be
unsuccessful
in
executing
such
an
agreement
with
each
party
who,
in
fact,
conceives
or
develops
intellectual
property
that
we
regard
as
our
own.
For
example,
the
assignment
of
intellectual
property
rights
may
not
be
self-executing
or
the
assignment
agreements
may
be
breached,
or
we
may
have
disputes
arise
from
conflicting
obligations
of
consultants
or
others
who
are
involved
in
developing
our
product
candidates.
Litigation
may
be
necessary
to
defend
against
these
and
other
claims
challenging
inventorship
or
ownership.
If
we
fail
in
defending
any
such
claims,
in
addition
to
paying
monetary
damages,
we
may
lose
valuable
intellectual
property
rights,
such
as
exclusive
ownership
of,
or
right
to
use,
valuable
intellectual
property.
Even
if
we
are
successful
in
defending
against
such
claims,
litigation
could
result
in
substantial
costs
and
be
a
distraction
to
management
and
other
employees.
This
risk
similarly
applies
to
any
intellectual
property
that
we
in-license.
If
a
licensor
is
subject
to
a
claim
challenging
inventorship
or
ownership,
it
could
adversely
impact
our
exclusivity
under
or
rights
to
use
valuable
in-licensed
intellectual
property.
Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.
Litigation
or
other
legal
proceedings
relating
to
intellectual
property
claims,
with
or
without
merit,
is
unpredictable
and
generally
expensive
and
time-
consuming
and
is
likely
to
divert
significant
resources
from
our
core
business,
including
distracting
our
technical
and
management
personnel
from
their
normal
responsibilities.
Furthermore,
because
of
the
substantial
amount
of
discovery
required
in
connection
with
intellectual
property
litigation,
there
is
a
risk
that
some
of
our
confidential
information
could
be
compromised
by
disclosure
during
this
type
of
litigation.
In
addition,
there
could
be
public
announcements
of
the
results
of
hearings,
motions
or
other
interim
proceedings
or
developments
and
if
securities
analysts
or
investors
perceive
these
results
to
be
negative,
it
could
have
a
substantial
adverse
108
Table
of
Contents
effect
on
the
price
of
our
common
shares.
Such
litigation
or
proceedings
could
substantially
increase
our
operating
losses
and
reduce
the
resources
available
for
development
activities
or
any
future
sales,
marketing
or
distribution
activities.
We
may
not
have
sufficient
financial
or
other
resources
to
adequately
conduct
such
litigation
or
proceedings.
Some
of
our
competitors
may
be
able
to
sustain
the
costs
of
such
litigation
or
proceedings
more
effectively
than
we
can
because
of
their
greater
financial
resources
and
more
mature
and
developed
intellectual
property
portfolios.
Accordingly,
despite
our
efforts,
we
may
not
be
able
to
prevent
third
parties
from
infringing
upon,
misappropriating
or
successfully
challenging
our
intellectual
property
rights.
Uncertainties
resulting
from
the
initiation
and
continuation
of
patent
litigation
or
other
proceedings
could
have
an
adverse
effect
on
our
ability
to
compete
in
the
marketplace.
Our inability to protect our confidential information and trade secrets would harm our business and competitive position.
In
addition
to
seeking
patents
for
some
of
our
technology
and
product
candidates,
via
intellectual
property
we
own
or
license,
we
also
rely
on
trade
secrets,
including
unpatented
know-how,
technology
and
other
proprietary
information,
to
maintain
our
competitive
position.
We
seek
to
protect
these
trade
secrets,
in
part,
by
entering
into
non-disclosure
and
confidentiality
agreements
with
parties
who
have
access
to
them,
such
as
our
employees,
corporate
collaborators,
outside
scientific
collaborators,
contract
manufacturers,
consultants,
advisors
and
other
third
parties.
We
also
enter
into
confidentiality
and
invention
or
patent
assignment
agreements
with
our
employees
and
consultants.
We
also
seek
to
preserve
the
integrity
and
confidentiality
of
our
data,
trade
secrets
and
know-how
by
maintaining
physical
security
of
our
premises
and
physical
and
electronic
security
of
our
information
technology
systems.
Monitoring
unauthorized
uses
and
disclosures
is
difficult,
and
we
do
not
know
whether
the
steps
we
have
taken
to
protect
our
proprietary
technologies
will
be
effective.
We
cannot
guarantee
that
our
trade
secrets
and
other
proprietary
and
confidential
information
will
not
be
disclosed
or
that
competitors
will
not
otherwise
gain
access
to
our
trade
secrets.
Despite
these
efforts,
any
of
these
parties
may
breach
the
agreements
and
disclose
our
proprietary
information,
including
our
trade
secrets,
and
we
may
not
be
able
to
obtain
adequate
remedies
for
such
breaches.
Enforcing
a
claim
that
a
party
illegally
disclosed
or
misappropriated
a
trade
secret
is
difficult,
expensive
and
time-consuming,
and
the
outcome
is
unpredictable.
In
addition,
some
courts
both
within
and
outside
the
United
States
may
be
less
willing
or
unwilling
to
protect
trade
secrets.
Moreover,
if
a
competitor
lawfully
obtained
or
independently
developed
any
of
our
trade
secrets,
we
would
have
no
right
to
prevent
such
competitor
from
using
that
technology
or
information
to
compete
with
us.
Any
misappropriation,
disclosure
or
independent
development
of
our
trade
secrets
could
harm
our
competitive
position.
Trade
secrets
and
know-how
can
be
difficult
to
protect
as
trade
secrets
and
know-how
will
over
time
be
disseminated
within
the
industry
through
independent
development,
the
publication
of
journal
articles,
and
the
movement
of
personnel
skilled
in
the
art
from
company
to
company
or
academic
to
industry
scientific
positions.
If
any
of
our
trade
secrets
were
to
be
lawfully
obtained
or
independently
developed
by
a
competitor,
we
would
have
no
right
to
prevent
such
competitor
from
using
that
technology
or
information
to
compete
with
us,
which
could
harm
our
competitive
position.
If
we
are
unable
to
prevent
material
disclosure
of
the
intellectual
property
related
to
our
technologies
to
third
parties,
we
will
not
be
able
to
establish
or
maintain
a
competitive
advantage
in
our
market,
which
could
adversely
affect
our
business,
results
of
operations
and
financial
condition.
Even
if
we
are
able
to
adequately
protect
our
trade
secrets
and
proprietary
information,
our
trade
secrets
could
otherwise
become
known
or
could
be
independently
discovered
by
our
competitors.
Competitors
could
purchase
our
products
and
attempt
to
replicate
some
or
all
of
the
competitive
advantages
we
derive
from
our
development
efforts,
willfully
infringe
our
intellectual
property
rights,
design
around
our
protected
technology
or
develop
their
own
competitive
technologies
that
fall
outside
of
our
intellectual
property
rights.
If
any
of
our
trade
secrets
were
to
be
lawfully
obtained
or
independently
developed
by
a
109
Table
of
Contents
competitor,
in
the
absence
of
patent
protection,
we
would
have
no
right
to
prevent
them,
or
those
to
whom
they
communicate,
from
using
that
technology
or
information
to
compete
with
us.
We
may
not
be
able
to
prevent
misappropriation
of
our
intellectual
property,
trade
secrets
or
confidential
information,
particularly
in
countries
where
the
laws
may
not
protect
those
rights
as
fully
as
in
the
United
States.
Furthermore,
because
of
the
substantial
amount
of
discovery
required
in
connection
with
intellectual
property
litigation,
there
is
a
risk
that
some
of
our
confidential
information
could
be
compromised
by
disclosure
during
this
type
of
litigation.
In
addition,
there
could
be
public
announcements
of
the
results
of
hearings,
motions
or
other
interim
proceedings
or
developments.
If
securities
analysts
or
investors
perceive
these
results
to
be
negative,
it
could
have
a
substantial
adverse
effect
on
the
price
of
our
common
shares.
Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements
imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic
maintenance
and
annuity
fees
on
any
issued
patent
are
due
to
be
paid
to
the
USPTO
and
foreign
patent
agencies
in
several
stages
over
the
lifetime
of
the
patent.
The
USPTO
and
various
foreign
governmental
patent
agencies
require
compliance
with
a
number
of
procedural,
documentary,
fee
payment
and
other
similar
provisions
during
the
patent
application
process.
While
an
inadvertent
lapse
can
in
many
cases
be
cured
by
payment
of
a
late
fee
or
by
other
means
in
accordance
with
the
applicable
rules,
there
are
situations
in
which
noncompliance
can
result
in
abandonment
or
lapse
of
the
patent
or
patent
application,
resulting
in
partial
or
complete
loss
of
patent
rights
in
the
relevant
jurisdiction.
Non-compliance
events
that
could
result
in
abandonment
or
lapse
of
a
patent
or
patent
application
include
failure
to
respond
to
official
actions
within
prescribed
time
limits,
non-payment
of
fees
and
failure
to
properly
legalize
and
submit
formal
documents.
If
we
or
our
licensors
fail
to
maintain
the
patents
and
patent
applications
covering
our
products,
our
competitors
might
be
able
to
enter
the
market,
which
would
harm
our
business.
In
addition,
to
the
extent
that
we
have
responsibility
for
taking
any
action
related
to
the
prosecution
or
maintenance
of
patents
or
patent
application
in-licensed
from
a
third
party,
any
failure
on
our
part
to
maintain
the
in-licensed
rights
could
jeopardize
our
rights
under
the
relevant
license
and
may
expose
us
to
liability.
Risks
Related
to
Our
Business
Operations,
Employee
Matters
and
Managing
Growth
Our future growth and ability to compete depends on retaining our key personnel and recruiting additional qualified personnel.
We
are
highly
dependent
on
the
management,
development,
clinical,
financial
and
business
development
experience
of
our
senior
management.
Although
we
have
entered
into
employment
agreements
with
our
executive
officers,
each
of
them
may
terminate
their
employment
with
us
at
any
time.
We
do
not
maintain
"key
person"
insurance
for
any
of
our
executives
or
employees.
The
competition
for
qualified
personnel
in
the
biopharmaceutical
field
is
intense,
and
our
future
success
depends
upon
our
ability
to
attract,
retain
and
motivate
highly-skilled
scientific,
technical
and
managerial
employees.
We
face
competition
for
personnel
from
other
companies,
universities,
public
and
private
research
institutions
and
other
organizations.
If
our
recruitment
and
retention
efforts
are
unsuccessful
in
the
future,
it
may
be
difficult
for
us
to
implement
business
strategy,
which
could
harm
our
business.
In
addition,
we
rely
on
consultants
and
advisors,
including
scientific
and
clinical
advisors,
to
assist
us
in
formulating
our
development
and
commercialization
strategy.
Our
consultants
and
advisors
may
be
employed
by
employers
other
than
us
and
may
have
commitments
under
consulting
or
advisory
contracts
with
other
entities
that
may
limit
their
availability
to
us.
If
we
are
unable
to
continue
to
attract
and
retain
high
quality
personnel,
our
ability
to
pursue
our
growth
strategy
will
be
limited.
110
Table
of
Contents
Our future growth depends, in part, on our ability to penetrate foreign markets, where we would be subject to additional regulatory burdens and other risks and
uncertainties.
Our
future
profitability
will
depend,
in
part,
on
our
ability
to
commercialize
our
product
candidates
in
markets
outside
of
the
United
States
and
the
European
Union.
If
we
commercialize
our
product
candidates
in
foreign
markets,
we
will
be
subject
to
additional
risks
and
uncertainties,
including:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
economic
weakness,
including
inflation,
or
political
instability
in
particular
economies
and
markets;
the
burden
of
complying
with
complex
and
changing
foreign
regulatory,
tax,
accounting
and
legal
requirements,
many
of
which
vary
between
countries;
different
medical
practices
and
customs
in
foreign
countries
affecting
acceptance
in
the
marketplace;
tariffs
and
trade
barriers;
other
trade
protection
measures,
import
or
export
licensing
requirements
or
other
restrictive
actions
by
U.S.
or
foreign
governments;
longer
accounts
receivable
collection
times;
longer
lead
times
for
shipping;
compliance
with
tax,
employment,
immigration
and
labor
laws
for
employees
living
or
traveling
abroad;
workforce
uncertainty
in
countries
where
labor
unrest
is
common;
language
barriers
for
technical
training;
reduced
protection
of
intellectual
property
rights
in
some
foreign
countries,
and
related
prevalence
of
generic
alternatives
to
therapeutics;
foreign
currency
exchange
rate
fluctuations
and
currency
controls;
differing
foreign
reimbursement
landscapes;
uncertain
and
potentially
inadequate
reimbursement
of
our
products;
and
the
interpretation
of
contractual
provisions
governed
by
foreign
laws
in
the
event
of
a
contract
dispute.
Foreign
sales
of
our
products
could
also
be
adversely
affected
by
the
imposition
of
governmental
controls,
political
and
economic
instability,
trade
restrictions
and
changes
in
tariffs.
Laws and regulations governing our international operations may preclude us from developing, manufacturing and selling certain product candidates and
products outside of the United States and require us to develop and implement costly compliance programs.
As
we
expand
our
operations
outside
of
the
United
States,
we
will
be
required
to
dedicate
additional
resources
to
comply
with
numerous
laws
and
regulations
in
each
jurisdiction
in
which
we
plan
to
operate,
as
well
as
with
the
Foreign
Corrupt
Practices
Act
("FCPA")
compliance
with
which
is
expensive
and
difficult,
particularly
in
countries
in
which
corruption
is
a
recognized
problem.
As
a
result,
these
laws
may
preclude
us
from
developing,
manufacturing
or
selling
certain
product
candidates
outside
of
the
United
States,
which
could
limit
our
growth
potential
and
increase
our
development
costs.
The
failure
to
comply
with
laws
governing
international
business
practices
may
result
in
substantial
civil
and
criminal
penalties
and
suspension
or
debarment
from
government
contracting.
The
111
Table
of
Contents
SEC
also
may
suspend
or
bar
issuers
from
trading
securities
on
U.S.
exchanges
for
violations
of
the
FCPA's
accounting
provisions.
We expect to expand our development and regulatory capabilities and potentially implement sales, marketing and distribution capabilities, and as a result, we
may encounter difficulties in managing our growth, which could disrupt our operations.
As
of
December
31,
2017,
we
had
42
employees,
all
of
which
were
employed
directly
by
our
U.S.
subsidiary,
Biohaven
Pharmaceuticals,
Inc.
As
our
clinical
development
progresses,
we
expect
to
experience
growth
in
the
number
of
our
employees
and
the
scope
of
our
operations,
particularly
in
the
areas
of
clinical
operations,
regulatory
affairs
and,
if
any
of
our
product
candidates
receives
marketing
approval,
sales,
marketing
and
distribution.
To
manage
our
anticipated
future
growth,
we
must
continue
to
implement
and
improve
our
managerial,
operational
and
financial
systems,
expand
our
facilities
and
continue
to
recruit
and
train
additional
qualified
personnel.
Due
to
our
limited
financial
resources
and
the
limited
experience
of
our
management
team
in
managing
a
company
with
such
anticipated
growth,
we
may
not
be
able
to
effectively
manage
the
expansion
of
our
operations
or
recruit
and
train
additional
qualified
personnel.
The
expansion
of
our
operations
may
lead
to
significant
costs
and
may
divert
our
management
and
business
development
resources.
Any
inability
to
manage
growth
could
delay
the
execution
of
our
business
plans
or
disrupt
our
operations.
Our employees, independent contractors, consultants, commercial collaborators, principal investigators, CROs and vendors may engage in misconduct or other
improper activities, including non-compliance with regulatory standards and requirements.
We
are
exposed
to
the
risk
that
our
employees,
independent
contractors,
consultants,
commercial
collaborators,
principal
investigators,
CROs
and
vendors
may
engage
in
fraudulent
conduct
or
other
illegal
activity.
Misconduct
by
these
parties
could
include
intentional,
reckless
or
negligent
conduct
or
unauthorized
activities
that
violates
(1)
the
laws
and
regulations
of
the
FDA,
the
EMA
and
other
similar
regulatory
authorities,
including
those
laws
requiring
the
reporting
of
true,
complete
and
accurate
information
to
such
authorities,
(2)
manufacturing
standards,
(3)
federal
and
state
data
privacy,
security,
fraud
and
abuse
and
other
healthcare
laws
and
regulations
in
the
United
States
and
abroad
and
(4)
laws
that
require
the
true,
complete
and
accurate
reporting
of
financial
information
or
data.
In
particular,
sales,
marketing
and
business
arrangements
in
the
healthcare
industry
are
subject
to
extensive
laws
and
regulations
intended
to
prevent
fraud,
misconduct,
kickbacks,
self-dealing
and
other
abusive
practices.
These
laws
and
regulations
may
restrict
or
prohibit
a
wide
range
of
pricing,
discounting,
marketing
and
promotion,
sales
commission,
customer
incentive
programs
and
other
business
arrangements.
Misconduct
by
these
parties
could
also
involve
the
improper
use
of
individually
identifiable
information,
including
information
obtained
in
the
course
of
clinical
trials,
creating
fraudulent
data
in
our
preclinical
studies
or
clinical
trials
or
illegal
misappropriation
of
product
candidates,
which
could
result
in
regulatory
sanctions
and
serious
harm
to
our
reputation.
Although
we
have
adopted
a
code
of
business
conduct
and
ethics,
it
is
not
always
possible
to
identify
and
deter
misconduct
by
employees
and
other
third
parties,
and
the
precautions
we
take
to
detect
and
prevent
this
activity
may
not
be
effective
in
controlling
unknown
or
unmanaged
risks
or
losses
or
in
protecting
us
from
governmental
investigations
or
other
actions
or
lawsuits
stemming
from
a
failure
to
be
in
compliance
with
such
laws
or
regulations.
Additionally,
we
are
subject
to
the
risk
that
a
person
or
government
could
allege
such
fraud
or
other
misconduct,
even
if
none
occurred.
If
any
such
actions
are
instituted
against
us,
and
we
are
not
successful
in
defending
ourselves
or
asserting
our
rights,
those
actions
could
have
a
significant
impact
on
our
business,
including
the
imposition
of
significant
civil,
criminal
and
administrative
penalties,
including
damages,
fines,
disgorgement,
imprisonment,
exclusion
from
participation
in
government
healthcare
programs,
such
as
Medicare
and
112
Table
of
Contents
Medicaid,
contractual
damages,
reputational
harm
and
the
curtailment
or
restructuring
of
our
operations.
We may be subject to securities litigation, which is expensive and could divert management attention.
Our
share
price
has
been,
and
may
continue
to
be,
volatile,
and
in
the
past
companies
that
have
experienced
volatility
in
the
market
price
of
their
stock
have
been
subject
to
securities
class
action
litigation.
This
risk
is
especially
relevant
for
us
because
biotechnology
companies
have
experienced
significant
stock
price
volatility
in
recent
years.
Securities
litigation
against
us
could
result
in
substantial
costs
and
divert
our
management's
attention
from
other
business
concerns,
which
could
seriously
harm
our
business.
Our business and operations may be materially adversely affected in the event of computer system failures or security breaches.
Despite
the
implementation
of
security
measures,
our
internal
computer
systems,
and
those
of
our
CROs
and
other
third
parties
on
which
we
rely,
are
vulnerable
to
damage
from
computer
viruses,
unauthorized
access,
cyberattacks,
natural
disasters,
fire,
terrorism,
war
and
telecommunication
and
electrical
failures.
If
such
an
event
were
to
occur
and
interrupt
our
operations,
it
could
result
in
a
material
disruption
of
our
development
programs.
For
example,
the
loss
of
clinical
trial
data
from
ongoing
or
planned
clinical
trials
could
result
in
delays
in
our
regulatory
approval
efforts
and
significantly
increase
our
costs
to
recover
or
reproduce
the
data.
To
the
extent
that
any
disruption
or
security
breach
results
in
a
loss
of
or
damage
to
our
data
or
applications,
loss
of
trade
secrets
or
inappropriate
disclosure
of
confidential
or
proprietary
information,
including
protected
health
information
or
personal
data
of
employees
or
former
employees,
access
to
our
clinical
data
or
disruption
of
the
manufacturing
process,
we
could
incur
liability
and
the
further
development
of
our
product
candidates
could
be
delayed.
We
may
also
be
vulnerable
to
cyberattacks
by
hackers
or
other
malfeasance.
This
type
of
breach
of
our
cybersecurity
may
compromise
our
confidential
information
or
our
financial
information
and
adversely
affect
our
business
or
result
in
legal
proceedings.
Risks
Related
to
Ownership
of
Our
Common
Shares
An active trading market for our common shares may not continue to develop or be sustained, or be liquid enough for investors to resell our common shares
quickly or at the market price.
Prior
to
May
4,
2017,
there
was
no
public
market
for
our
common
shares,
and
we
cannot
assure
you
that
an
active
trading
market
will
continue
to
develop
or
be
sustained.
If
an
active
market
for
our
common
shares
does
not
develop
or
is
not
sustained,
it
may
be
difficult
for
our
shareholders
to
sell
shares
without
depressing
the
market
price
for
the
shares
or
to
sell
their
shares
at
all.
The trading price of our common shares has been, and may continue to be, volatile and may fluctuate due to factors beyond our control, and purchasers of our
common shares could incur substantial losses.
Our
share
price
has
been
and
may
continue
to
be
volatile.
The
stock
market
in
general
and
the
market
for
biopharmaceutical
companies
in
particular
have
experienced
extreme
volatility
that
has
often
been
unrelated
to
the
operating
performance
of
particular
companies.
As
a
result
of
this
volatility,
investors
may
not
be
able
to
sell
their
common
shares
at
or
above
the
price
paid
for
the
shares.
The
market
price
for
our
common
shares
may
be
influenced
by
many
factors,
including:
•
•
•
positive
or
negative
results,
including
preliminary
or
topline
results,
of
preclinical
studies
and
clinical
trials
reported
by
us,
strategic
partners
or
competitors;
any
delay
in
the
commencement,
enrollment
and
the
ultimate
completion
of
clinical
trials;
technological
innovations
or
commercial
product
introductions
by
us
or
competitors;
113
Table
of
Contents
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
failure
to
successfully
develop
and
commercialize
any
of
our
product
candidates;
developments,
announcements
or
changes
in
government
regulations
relating
to
drug
products,
including
related
to
drug
pricing,
reimbursement
and
healthcare
coverage;
delays
in
in-licensing
or
acquiring
additional
complementary
product
candidates;
developments
concerning
proprietary
rights,
including
patents
and
litigation
matters;
public
concern
relating
to
the
commercial
value
or
safety
of
any
of
our
product
candidates;
financing
or
other
corporate
transactions,
or
inability
to
obtain
additional
funding;
failure
to
meet
or
exceed
expectations
of
the
investment
community;
actual
or
anticipated
variations
in
our
operating
results;
changes
in
financial
estimates
by
us
or
by
any
securities
analysts
who
might
cover
our
shares;
announcements
by
therapeutic
drug
product
providers
related
to
pricing
of
therapeutics;
announcements
of
significant
licenses,
acquisitions,
strategic
partnerships
or
joint
ventures
by
us
or
our
competitors;
publication
of
research
reports
or
comments
by
securities
or
industry
analysts;
recruitment
or
departure
of
key
personnel;
sales
of
our
common
shares,
including
sales
by
our
directors
and
officers
or
specific
shareholders;
general
market
or
regulatory
conditions
in
the
pharmaceutical
industry
or
in
the
economy
as
a
whole;
or
other
events
and
factors,
many
of
which
are
beyond
our
control.
These
and
other
market
and
industry
factors
may
cause
the
market
price
and
demand
for
our
securities
to
fluctuate
substantially,
regardless
of
our
actual
operating
performance,
which
may
limit
or
prevent
investors
from
selling
their
common
shares
at
or
above
the
price
paid
for
the
shares
and
may
otherwise
negatively
affect
the
liquidity
of
our
common
shares.
Some
companies
that
have
experienced
volatility
in
the
trading
price
of
their
shares
have
been
the
subject
of
securities
class
action
litigation.
Any
lawsuit
to
which
we
are
a
party,
with
or
without
merit,
may
result
in
an
unfavorable
judgment.
We
also
may
decide
to
settle
lawsuits
on
unfavorable
terms.
Any
such
negative
outcome
could
result
in
payments
of
substantial
damages
or
fines,
damage
to
our
reputation
or
adverse
changes
to
our
offerings
or
business
practices.
Defending
against
litigation
is
costly
and
time-consuming,
and
could
divert
our
management's
attention
and
resources.
Furthermore,
during
the
course
of
litigation,
there
could
be
negative
public
announcements
of
the
results
of
hearings,
motions
or
other
interim
proceedings
or
developments,
which
could
have
a
negative
effect
on
the
market
price
of
our
common
shares.
If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our common shares
and our trading volume could decline.
The
trading
market
for
our
common
shares
will
depend
in
part
on
the
research
and
reports
that
securities
or
industry
analysts
publish
about
us
or
our
business.
As
a
newly
public
company,
we
have
only
limited
research
coverage
by
equity
research
analysts.
Equity
research
analysts
may
elect
not
to
initiate
or
to
continue
to
provide
research
coverage
of
our
common
shares,
and
such
lack
of
research
coverage
may
adversely
affect
the
market
price
of
our
common
shares.
Even
if
we
do
have
equity
research
analyst
coverage,
we
will
not
have
any
control
over
the
analysts
or
the
content
and
opinions
114
Table
of
Contents
included
in
their
reports.
The
price
of
our
shares
could
decline
if
one
or
more
equity
research
analysts
downgrade
our
shares
or
issue
other
unfavorable
commentary
or
research.
If
one
or
more
equity
research
analysts
ceases
coverage
of
our
company
or
fails
to
publish
reports
on
us
regularly,
demand
for
our
shares
could
decrease,
which
in
turn
could
cause
our
share
price
or
trading
volume
to
decline.
We will continue to incur increased costs as a result of operating as a public company, and our management and board of directors will be required to devote
substantial time to new compliance initiatives and corporate governance practices.
As
a
public
company
listed
in
the
United
States,
we
have
and
will
continue
to,
incur
significant
incremental
legal,
accounting
and
other
expenses.
We
estimate
the
additional
costs
we
will
incur
as
a
result
of
being
a
public
company
to
be
approximately
$1.5
million
to
$2.0
million
annually.
These
additional
costs
could
negatively
affect
our
financial
results.
In
addition,
changing
laws,
regulations
and
standards
relating
to
corporate
governance
and
public
disclosure,
including
regulations
implemented
by
the
SEC
and
the
New
York
Stock
Exchange,
may
increase
legal
and
financial
compliance
costs
and
make
some
activities
more
time
consuming.
We
intend
to
invest
resources
to
comply
with
evolving
laws,
regulations
and
standards,
and
this
investment
may
result
in
increased
general
and
administrative
expenses
and
a
diversion
of
management's
time
and
attention
from
revenue-generating
activities
to
compliance
activities.
Moreover,
these
rules
and
regulations
will
increase
our
legal
and
financial
compliance
costs
and
will
make
some
activities
more
time-consuming
and
costly.
For
example,
we
expect
that
these
rules
and
regulations
may
make
it
more
difficult
for
us
to
obtain
some
types
of
insurance,
including
director
and
officer
liability
insurance,
and
we
might
be
forced
to
accept
reduced
policy
limits
and
coverage
or
incur
substantially
higher
costs
to
obtain
the
same
or
similar
coverage,
which
in
turn
could
make
it
more
difficult
for
us
to
attract
and
retain
qualified
members
of
our
management
and
board
of
directors.
In
addition,
these
rules
and
regulations
are
often
subject
to
varying
interpretations,
in
many
cases
due
to
their
lack
of
specificity,
and,
as
a
result,
their
application
in
practice
may
evolve
over
time
as
new
guidance
is
provided
by
regulatory
and
governing
bodies.
This
could
result
in
continuing
uncertainty
regarding
compliance
matters
and
higher
costs
necessitated
by
ongoing
revisions
to
disclosure
and
governance
practices.
If,
notwithstanding
our
efforts
to
comply
with
new
laws,
regulations
and
standards,
we
fail
to
comply,
regulatory
authorities
may
initiate
legal
proceedings
against
us
and
our
business
may
be
harmed.
Concentration of ownership of our common shares among our executive officers, directors and existing principal shareholders may prevent new investors from
influencing significant corporate decisions.
Our
directors
and
executive
officers,
and
entities
affiliated
with
them,
as
well
as
current
holders
of
more
than
5%
of
our
outstanding
common
shares,
in
the
aggregate,
beneficially
own
approximately
over
35%
of
our
common
shares.
These
shareholders,
acting
together,
would
be
able
to
control
or
significantly
influence
all
matters
requiring
shareholder
approval,
including
the
election
and
removal
of
directors
and
approval
of
any
merger,
consolidation
or
sale
of
all
or
substantially
all
of
our
assets.
Some
of
these
persons
or
entities
may
have
interests
different
than
yours.
For
example,
because
many
of
these
shareholders
purchased
their
shares
at
prices
substantially
below
the
current
market
price
of
our
common
shares
and
have
held
their
shares
for
a
longer
period,
they
may
be
more
interested
in
selling
our
company
to
an
acquirer
than
other
investors,
or
they
may
want
us
to
pursue
strategies
that
deviate
from
the
interests
of
other
shareholders.
115
Table
of
Contents
Anti-takeover provisions in our memorandum and articles of association could make an acquisition of us, which may be beneficial to our shareholders, more
difficult and may prevent attempts by our shareholders to replace or remove our current management and limit the market price of our common shares.
Provisions
in
our
memorandum
and
articles
of
may
discourage,
delay
or
prevent
a
merger,
acquisition
or
other
change
in
control
of
us
that
shareholders
may
consider
favorable,
including
transactions
in
which
you
might
otherwise
receive
a
premium
for
your
shares.
These
provisions
also
could
limit
the
price
that
investors
might
be
willing
to
pay
in
the
future
for
our
common
shares,
thereby
depressing
the
market
price
of
our
common
shares.
In
addition,
because
our
board
of
directors
is
responsible
for
appointing
the
members
of
our
management
team,
these
provisions
may
frustrate
or
prevent
any
attempts
by
our
shareholders
to
replace
or
remove
our
current
management
by
making
it
more
difficult
for
shareholders
to
replace
members
of
our
board
of
directors.
Among
other
things,
these
provisions:
•
•
•
•
•
•
•
•
establish
a
classified
board
of
directors
such
that
not
all
members
of
the
board
are
elected
at
one
time;
allow
the
authorized
number
of
our
directors
to
be
changed
only
by
resolution
of
our
board
of
directors;
limit
the
manner
in
which
shareholders
can
remove
directors
from
the
board;
establish
advance
notice
requirements
for
shareholder
proposals
that
can
be
acted
on
at
shareholder
meetings
and
nominations
to
our
board
of
directors;
require
that
shareholder
actions
must
be
effected
at
a
duly
called
shareholder
meeting
and
prohibit
actions
by
our
shareholders
by
written
consent;
limit
who
may
call
shareholder
meetings;
authorize
our
board
of
directors
to
issue
preferred
shares
without
shareholder
approval,
which
could
be
used
to
institute
a
shareholder
rights
plan,
or
so-called
"poison
pill,"
that
would
work
to
dilute
the
stock
ownership
of
a
potential
hostile
acquirer,
effectively
preventing
acquisitions
that
have
not
been
approved
by
our
board
of
directors;
and
require
the
approval
of
the
holders
of
at
least
75%
of
the
votes
that
all
our
shareholders
would
be
entitled
to
cast
to
amend
or
repeal
certain
provisions
of
our
memorandum
and
articles
of
association.
Any
provision
of
our
memorandum
and
articles
of
association
or
BVI
law
that
has
the
effect
of
delaying
or
deterring
a
change
of
control
could
limit
the
opportunity
for
our
shareholders
to
receive
a
premium
for
their
common
shares,
and
could
also
affect
the
price
that
some
investors
are
willing
to
pay
for
our
common
shares.
A significant portion of our total outstanding shares recently were released from restrictions that prohibited their immediate resale, and may now be sold into
the market. This could cause the market price of our common shares to drop significantly, even if our business is doing well.
Sales
of
a
substantial
number
of
our
common
shares
in
the
public
market,
or
the
perception
that
these
sales
might
occur,
could
depress
the
market
price
of
our
common
shares
and
could
impair
our
ability
to
raise
capital
through
the
sale
of
additional
equity
securities.
As
of
March
2,
2018,
we
had
36,520,442
common
shares
outstanding.
All
of
these
shares
are
freely
tradable
without
restrictions
or
further
registration
under
the
Securities
Act
except
for
approximately
13.5
million
shares
held
by
our
affiliates
as
defined
in
Rule
144
under
the
Securities
Act.
116
Table
of
Contents
In
addition,
we
filed
a
registration
statement
on
Form
S-8
registering
the
issuance
of
approximately
12.8
million
common
shares
subject
to
options
or
other
equity
awards
issued
or
reserved
for
future
issuance
under
our
equity
incentive
plans
and
our
employee
stock
purchase
plan.
These
registered
shares
will
be
available
for
sale
in
the
public
market
subject
to
vesting
arrangements
and
exercise
of
options
and,
in
the
case
of
our
affiliates,
the
restrictions
of
Rule
144.
Additionally,
the
holders
of
approximately
10.0
million
common
shares
are
entitled
to
rights
with
respect
to
registration
of
such
shares
under
the
Securities
Act
pursuant
to
an
investors'
rights
agreement
between
such
holders
and
us.
If
we
file
a
registration
statement
for
the
purpose
of
selling
additional
shares
to
raise
capital
and
are
required
to
include
shares
held
by
these
holders
pursuant
to
the
exercise
of
their
registration
rights,
our
ability
to
raise
capital
may
be
impaired.
Because we do not expect to pay dividends on our common shares in the foreseeable future, capital appreciation, if any, would be your sole source of gain.
We
have
never
declared
or
paid
any
dividends
on
our
common
shares.
We
currently
anticipate
that
we
will
retain
future
earnings
for
the
development,
operation
and
expansion
of
our
business
and
do
not
anticipate
declaring
or
paying
any
cash
dividends
for
the
foreseeable
future.
The
decision
to
pay
future
dividends
to
shareholders
will
be
at
the
discretion
of
our
board
of
directors
after
taking
into
account
various
factors
including
our
business
prospects,
cash
requirements,
financial
performance
and
new
product
development.
Accordingly,
investors
cannot
rely
on
dividend
income
from
our
common
shares
and
any
returns
on
an
investment
in
our
common
shares
will
likely
depend
entirely
upon
any
future
appreciation
in
the
price
of
our
common
shares.
We have broad discretion in the use of proceeds from our recent initial public offering and may invest or spend the proceeds in ways with which you do not
agree and in ways that may not increase the value of your investment.
Our
management
has
broad
discretion
in
the
application
of
the
net
proceeds
from
our
recent
initial
public
offering
("IPO")
and
could
spend
the
proceeds
in
ways
that
do
not
improve
our
results
of
operations
or
enhance
the
value
of
our
common
shares.
You
may
not
agree
with
our
decisions,
and
our
use
of
the
proceeds
may
not
yield
any
return
on
your
investment.
We
expect
to,
and
in
some
cases
have
begun
to,
use
the
net
proceeds
from
our
recent
IPO
to
conduct
our
two
Phase
3
clinical
trials
of
rimegepant
for
the
acute
treatment
of
migraine
which
commenced
in
July
2017;
to
fund
continued
research
and
development
of
BHV-3500
for
the
acute
treatment
and
prevention
of
migraine;
to
complete
our
ongoing
extension
phase
of
the
Phase
2/3
clinical
trial
with
trigriluzole
for
the
treatment
of
spinocerebellar
ataxia,
and
initiate
studies
with
trigriluzole
in
OCD
and
Alzheimer's
disease;
to
fund
continued
research
and
development
of
BHV-5000
for
the
treatment
of
symptoms
associated
with
Rett
syndrome,
including
completion
of
our
planned
Phase
1
clinical
trial
for
this
indication;
to
fund
other
research
and
development
activities,
including
development
of
BHV-0223
for
the
treatment
of
ALS,
as
well
as
completion
of
our
bioequivalence
study
of
BHV-0223;
and
for
working
capital
and
other
general
corporate
purposes,
including
the
satisfaction
of
any
milestone
payment
obligations
under
our
license
agreements.
The
failure
by
our
management
to
apply
these
funds
effectively
could
result
in
financial
losses
that
could
have
an
adverse
effect
on
our
business,
cause
the
price
of
our
common
shares
to
decline
and
delay
the
development
of
our
product
candidates.
Pending
their
use,
we
may
invest
the
net
proceeds
from
our
IPO
in
a
manner
that
does
not
produce
income
or
that
loses
value.
117
Table
of
Contents
We are an "emerging growth company," and we cannot be certain if the reduced reporting requirements applicable to "emerging growth companies" will
make our common shares less attractive to investors.
We
are
an
"emerging
growth
company,"
as
defined
in
the
Jumpstart
Our
Business
Startups
Act
of
2012
(the
"JOBS
Act").
For
as
long
as
we
continue
to
be
an
"emerging
growth
company,"
we
may
take
advantage
of
exemptions
from
various
reporting
requirements
that
are
applicable
to
other
public
companies
that
are
not
"emerging
growth
companies,"
including
not
being
required
to
comply
with
the
auditor
attestation
requirements
of
Section
404
of
the
Sarbanes-Oxley
Act,
exemptions
from
the
requirements
of
holding
a
nonbinding
advisory
vote
on
executive
compensation
and
shareholder
approval
of
any
golden
parachute
payments
not
previously
approved.
As
an
"emerging
growth
company,"
we
are
required
to
report
only
two
years
of
financial
results
and
selected
financial
data
compared
to
three
and
five
years,
respectively,
for
comparable
data
reported
by
other
public
companies.
We
may
take
advantage
of
these
exemptions
until
we
are
no
longer
an
"emerging
growth
company."
We
could
be
an
"emerging
growth
company"
until
December
31,
2022,
which
is
the
end
of
the
fiscal
year
following
the
fifth
anniversary
of
the
completion
of
our
recent
IPO,
although
circumstances
could
cause
us
to
lose
that
status
earlier,
including
if
the
aggregate
market
value
of
our
common
shares
held
by
non-affiliates
exceeds
$700
million
as
of
any
June
30
(the
end
of
our
second
fiscal
quarter)
before
that
time,
in
which
case
we
would
no
longer
be
an
"emerging
growth
company"
as
of
the
following
December
31
(our
fiscal
year
end).
We
cannot
predict
if
investors
will
find
our
common
shares
less
attractive
because
we
may
rely
on
these
exemptions.
If
some
investors
find
our
common
shares
less
attractive
as
a
result,
there
may
be
a
less
active
trading
market
for
our
common
shares
and
the
price
of
our
common
shares
may
be
more
volatile.
We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, or if we
experience additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, we may not be able to accurately
or timely report our financial condition or results of operations, which may adversely affect investor confidence in us and, as a result, the value of our common
shares.
We
have
identified
material
weaknesses
in
our
internal
control
over
financial
reporting.
A
material
weakness
is
a
deficiency,
or
combination
of
deficiencies,
in
internal
control
over
financial
reporting
such
that
there
is
a
reasonable
possibility
that
a
material
misstatement
of
our
financial
statements
will
not
be
prevented
or
detected
on
a
timely
basis.
If
we
are
unable
to
remediate
these
material
weaknesses,
or
if
we
experience
additional
material
weaknesses
in
the
future
or
otherwise
fail
to
maintain
an
effective
system
of
internal
controls,
we
may
not
be
able
to
accurately
or
timely
report
our
financial
condition
or
results
of
operations,
which
may
adversely
affect
investor
confidence
in
us
and,
as
a
result,
the
value
of
our
common
shares.
Prior
to
the
completion
of
our
IPO,
we
were
a
private
company
with
limited
accounting
personnel
and
other
resources
to
address
our
internal
control
over
financial
reporting.
In
preparation
of
our
financial
statements
in
connection
with
our
IPO,
we
determined
that
material
weaknesses
in
our
internal
control
over
financial
reporting
existed
during
each
of
fiscal
2014,
2015
and
2016
and
remained
unremediated
as
of
December
31,
2017.
These
material
weaknesses
in
our
internal
control
over
financial
reporting
are
described
below.
We
did
not
design
or
maintain
an
effective
control
environment
commensurate
with
our
financial
reporting
requirements.
We
lacked
a
sufficient
number
of
trained
professionals
with
an
appropriate
level
of
accounting
knowledge,
training
and
experience
to
appropriately
analyze,
record
and
disclose
accounting
matters
timely
and
accurately.
This
material
weakness
contributed
to
the
following
material
weaknesses:
•
We
did
not
design
and
maintain
formal
accounting
policies,
procedures
and
controls
to
achieve
complete,
accurate
and
timely
financial
accounting,
reporting
and
disclosures,
including
controls
118
Table
of
Contents
over
the
preparation
and
review
of
account
reconciliations
and
journal
entries.
Additionally,
we
did
not
design
and
maintain
controls
over
the
appropriate
classification
and
presentation
of
accounts
and
disclosures
in
the
financial
statements.
We
did
not
design
and
maintain
formal
accounting
policies,
processes
and
controls
to
analyze,
account
for
and
disclose
complex
transactions.
Specifically,
we
did
not
design
and
maintain
controls
to
analyze,
account
for
and
disclose
complex
licensing
agreements,
income
taxes,
variable
interest
entities,
debt
arrangements,
equity
method
investments,
share-based
compensation
arrangements,
derivative
liabilities,
warrants
to
purchase
common
shares
and
contingently
issuable
equity.
We
did
not
design
and
maintain
controls
over
our
supervision
and
review
of
the
completeness
and
accuracy
of
third-party
vendors'
computations
supporting
our
common
share
valuations.
•
•
These
material
weaknesses
contributed
to
several
accounting
adjustments
being
made
to
our
financial
statements
for
the
years
ended
December
31,
2014,
2015,
2016
and
2017
related
to
our
accounting
for
our
license
agreement
obligations,
income
taxes,
variable
interest
entities,
share-based
compensation,
derivative
liabilities,
warrants
and
contingent
equity,
research
and
development
expense,
general
and
administrative
expense,
and
other
income
(expense).
In
addition,
these
material
weaknesses
contributed
to
the
restatement
of
our
financial
statements
for
the
nine
months
ended
September
30,
2016
related
to
our
accounting
for
license
agreement
obligations.
We
identified
an
additional
material
weakness
as
a
result
of
the
material
weakness
in
our
control
environment
in
that
we
did
not
design
and
maintain
controls
over
the
operating
effectiveness
of
information
technology
("IT")
general
controls
for
information
systems
that
are
relevant
to
the
preparation
of
our
financial
statements.
Specifically,
we
did
not
design
and
maintain
effective
controls
over
program
change
management;
user
access,
including
segregation
of
duties;
or
computer
operations.
These
IT
deficiencies
did
not
result
in
a
material
misstatement
to
our
financial
statements;
however,
the
deficiencies,
when
aggregated,
could
impact
the
effectiveness
of
IT-dependent
controls,
such
as
automated
controls
that
address
the
risk
of
material
misstatement
to
one
or
more
assertions,
along
with
the
IT
controls
and
underlying
data
that
support
the
effectiveness
of
system-generated
data
and
reports.
Each
of
the
control
deficiencies
could
result
in
a
misstatement
of
these
accounts
or
disclosures
that
would
result
in
a
material
misstatement
of
our
annual
or
interim
consolidated
financial
statements
that
would
not
be
prevented
or
detected,
and
accordingly,
we
determined
that
these
control
deficiencies
constitute
material
weaknesses.
We
have
initiated
remediation
efforts
focused
on
improving
our
internal
control
over
financial
reporting
and
to
specifically
address
the
control
deficiencies
that
led
to
our
material
weaknesses.
These
efforts
include
the
following:
•
•
Initial
investment
in
finance
and
accounting
organization
and
systems,
including:
•
•
•
Hiring
of
finance
and
accounting
personnel
with
experience
in
accounting
operations,
financial
controls
and
SEC
reporting
Completing
the
implementation
of
a
new
enterprise
resource
planning
("ERP")
system
during
the
first
quarter
2018;
and
Completing
the
implementation
of
stock-based
compensation
software
during
the
first
quarter
2018.
Retaining
a
technical
accounting
consulting
firm
to
provide
additional
depth
and
breadth
in
our
technical
accounting
and
financial
reporting
capabilities.
We
intend
to
continue
this
arrangement
119
Table
of
Contents
through
the
first
quarter
2018
until
permanent
technical
accounting
resources
are
identified
and
hired.
Initiating
design
and
implementation
of
our
financial
control
environment,
including
policies
and
procedures,
controls,
reporting
and
analysis,
and
segregation
of
duties.
Implementation
of
formal
disclosure
controls
and
procedures,
including
a
Disclosure
Committee
and
management
sub-certifications
•
•
We
cannot
assure
you
that
the
measures
we
have
taken
to
date,
and
actions
we
may
take
in
the
future,
will
be
sufficient
to
remediate
the
control
deficiencies
that
led
to
our
material
weaknesses
in
our
internal
control
over
financial
reporting
or
that
they
will
prevent
or
avoid
potential
future
material
weaknesses.
In
addition,
neither
our
management
nor
an
independent
registered
public
accounting
firm
has
ever
performed
an
evaluation
of
our
internal
control
over
financial
reporting
in
accordance
with
the
provisions
of
the
Sarbanes-Oxley
Act
because
no
such
evaluation
has
been
required.
Had
we
or
our
independent
registered
public
accounting
firm
performed
an
evaluation
of
our
internal
control
over
financial
reporting
in
accordance
with
the
provisions
of
the
Sarbanes-Oxley
Act,
additional
material
weaknesses
may
have
been
identified.
If
we
are
unable
to
successfully
remediate
our
existing
or
any
future
material
weaknesses
in
our
internal
control
over
financial
reporting,
or
identify
any
additional
material
weaknesses,
the
accuracy
and
timing
of
our
financial
reporting
may
be
adversely
affected,
we
may
be
unable
to
maintain
compliance
with
securities
law
requirements
regarding
timely
filing
of
periodic
reports
in
addition
to
applicable
stock
exchange
listing
requirements,
investors
may
lose
confidence
in
our
financial
reporting,
and
our
share
price
may
decline
as
a
result.
The holders of our common shares may have fewer protections as a shareholder of our company, as the rights of shareholders under BVI law differ from those
under U.S. law.
Our
corporate
affairs
are
governed
by
our
memorandum
and
articles
of
association,
the
BVI
Business
Companies
Act,
2004
(the
"BVI
Act")
and
the
common
law
of
the
BVI.
The
rights
of
shareholders
to
take
legal
action
against
our
directors,
actions
by
minority
shareholders
and
the
fiduciary
responsibilities
of
our
directors
under
BVI
law
are
to
a
large
extent
governed
by
the
common
law
of
the
BVI
and
by
the
BVI
Act.
The
common
law
of
the
BVI
is
derived
in
part
from
comparatively
limited
judicial
precedent
in
the
BVI
as
well
as
from
English
common
law,
which
has
persuasive,
but
not
binding,
authority
on
a
court
in
the
BVI.
The
rights
of
our
shareholders
and
the
fiduciary
responsibilities
of
our
directors
under
BVI
law
therefore
are
not
as
clearly
established
as
they
would
be
under
statutes
or
judicial
precedents
in
some
jurisdictions
in
the
United
States.
In
particular,
the
BVI
has
a
less
developed
body
of
securities
laws
as
compared
to
the
United
States,
and
some
states,
such
as
Delaware,
have
more
fully
developed
and
judicially
interpreted
bodies
of
corporate
law.
As
a
result
of
all
of
the
above,
holders
of
our
common
shares
may
have
more
difficulty
in
protecting
their
interests
through
actions
against
our
management,
directors
or
major
shareholders
than
they
would
as
shareholders
of
a
U.S.
company.
They
may
have
greater
difficulty
securing
legal
advice
about
the
law
of
the
BVI
than
they
would
U.S.
and
state
law,
and
the
relatively
less
developed
nature
of
that
country's
securities
law
may
leave
investors
with
less
certainty
about
the
validity
and
strength
of
any
claims
they
believe
they
may
have
against
us.
In
addition,
other
differences
between
BVI
and
U.S.
law,
as
well
as
the
terms
of
our
articles
of
association,
may
result
in
shareholders
having
different
potential
influence
than
they
would
under
various
U.S.
state
laws
with
respect
to
matters
such
as
officer
and
director
actions,
mergers
and
acquisitions,
takeover
efforts,
and
other
corporate
decision
making.
Shareholders in BVI business companies may not be able to initiate shareholder derivative actions, thereby depriving a shareholder of the ability to protect its
interests.
While
statutory
provisions
do
exist
in
BVI
law
for
derivative
actions
to
be
brought
in
certain
circumstances,
shareholders
in
BVI
business
companies
may
not
have
standing
to
initiate
a
shareholder
120
Table
of
Contents
derivative
action
in
a
federal
court
of
the
United
States.
The
circumstances
in
which
any
such
action
may
be
brought,
and
the
procedures
and
defenses
that
may
be
available
in
respect
to
any
such
action,
may
result
in
the
rights
of
shareholders
of
a
BVI
business
company
being
more
limited
than
those
of
shareholders
of
a
company
organized
in
the
United
States.
Accordingly,
shareholders
may
have
fewer
alternatives
available
to
them
if
they
believe
that
corporate
wrongdoing
has
occurred.
The
BVI
courts
are
also
unlikely
to:
(i)
recognize
or
enforce
against
us
judgments
of
courts
in
the
United
States
based
on
certain
civil
liability
provisions
of
U.S.
securities
law;
or
(ii)
to
impose
liabilities
against
us,
in
original
actions
brought
in
the
BVI,
based
on
certain
civil
liability
provisions
of
U.S.
securities
laws
that
are
penal
in
nature
or
that
relate
to
taxes
or
similar
fiscal
or
revenue
obligations
or
would
be
viewed
as
contrary
to
BVI
public
policy
or
the
proceedings
pursuant
to
which
judgment
was
obtained
were
contrary
to
natural
justice.
There
is
no
statutory
recognition
in
the
BVI
of
judgments
obtained
in
the
United
States,
although
any
final
and
conclusive
monetary
judgment
obtained
against
a
BVI
business
company
in
a
U.S.
court,
for
a
definite
sum,
may
be
treated
by
the
courts
of
the
BVI
as
a
cause
of
action
in
itself
so
that
no
retrial
of
the
issues
would
be
necessary
provided
that
in
respect
of
the
judgment
of
the
U.S.
court:
•
•
•
•
•
The
U.S.
court
issuing
the
judgment
had
jurisdiction
in
the
matter
and
the
company
either
submitted
to
such
jurisdiction
or
was
resident
or
carrying
on
business
within
such
jurisdiction
and
was
duly
served
with
process;
The
judgment
given
by
the
U.S.
court
was
not
in
respect
of
penalties,
taxes,
fines
or
similar
fiscal
or
revenue
obligations
of
the
company;
In
obtaining
judgment
there
was
no
fraud
on
the
part
of
the
person
in
whose
favor
judgment
was
given
or
on
the
part
of
the
U.S.
court;
Recognition
or
enforcement
of
the
judgment
in
the
BVI
would
not
be
contrary
to
public
policy;
and
The
proceedings
pursuant
to
which
judgment
was
obtained
were
not
contrary
to
natural
justice.
The laws of the BVI relating to the protection of minority shareholders differ from those under U.S. law and, in some circumstances, may offer less protection.
The
BVI
Act
includes
the
following
statutory
remedies
which
minority
shareholders
in
the
company
can
rely
upon:
•
•
•
If
the
company
or
a
director
of
the
company
engages
in
or
proposes
to
engage
in
conduct,
that
contravenes
the
BVI
Act
or
our
memorandum
and
articles
of
association,
a
shareholder
may
apply
to
the
BVI
court
for
an
order
directing
the
company
or
its
director(s)
to
comply
with
or
restraining
the
company
or
a
director
from
engaging
in
conduct
that
contravenes
the
BVI
Act
or
our
memorandum
and
articles
of
association.
Under
the
BVI
Act,
minority
shareholders
have
a
statutory
right
to
bring
a
derivative
action
in
the
name
of
and
on
behalf
of
the
company
in
circumstances
where
the
company
has
cause
of
action
against
its
directors.
This
remedy
is
available
at
the
discretion
of
the
BVI
court
which
will
take
a
number
of
factors
into
account
before
granting
or
refusing
a
leave
to
proceed
to
the
relevant
shareholder,
including
whether
such
action
is
in
the
interests
of
the
company,
the
cost
of
such
action
and
whether
there
are
alternative
remedies
that
the
shareholder
concerned
may
rely
upon.
A
shareholder
of
the
company
may
bring
an
action
against
the
company
for
breach
of
duty
owed
to
him
or
her
as
a
shareholder.
This
would
typically
be
relevant
in
a
situation
where
a
shareholder
is
aggrieved
by
the
company
for
breach
of
an
entitlement
or
right
under
the
company's
memorandum
and
articles
of
association.
121
Table
of
Contents
•
•
A
shareholder
of
the
company
who
considers
that
the
affairs
of
the
company
have
been,
are
being
or
likely
to
be,
conducted
in
a
manner
that
is,
or
any
act
or
acts
of
the
company
have
been,
or
are,
likely
to
be
oppressive,
unfairly
discriminatory,
or
unfairly
prejudicial
to
him
in
that
capacity,
may
apply
to
the
BVI
court
for
an
order
to
remedy
the
situation.
Again,
this
is
a
discretionary
remedy
and
the
BVI
court
will
only
award
it
if
they
are
satisfied
that
it
is
just
and
equitable
to
do
so.
A
shareholder
may
apply
for
a
liquidation
of
the
company
under
the
Insolvency
Act
2003
of
the
BVI,
and
the
BVI
court
should
not
refuse
such
an
application
merely
because
there
are
no
assets
to
distribute
to
the
shareholder.
Shareholders
can
also
by
resolution
appoint
a
liquidator
of
a
BVI
business
company
under
the
BVI
Act
if
the
company
is
solvent
or
under
the
Insolvency
Act
2003
if
the
company
is
insolvent.
In
addition
to
the
statutory
rights
outlined
above,
there
are
common
law
rights
for
the
protection
of
shareholders
that
may
be
invoked,
largely
dependent
on
English
common
law.
Under
the
general
rule
pursuant
to
English
common
law
known
as
the
rule
in
Foss v. Harbottle ,
a
court
will
generally
refuse
to
interfere
with
the
management
of
a
company
at
the
insistence
of
a
minority
of
its
shareholders
who
express
dissatisfaction
with
the
conduct
of
the
company's
affairs
by
the
majority
or
the
board
of
directors.
However,
every
shareholder
is
entitled
to
have
the
affairs
of
the
company
conducted
properly
according
to
law
and
the
constituent
documents
of
the
company.
As
such,
if
those
who
control
the
company
have
persistently
disregarded
the
requirements
of
company
law
or
the
provisions
of
the
company's
memorandum
and
articles
of
association,
then
the
courts
will
grant
relief.
Generally,
the
areas
in
which
the
courts
will
intervene
are
the
following:
(1)
an
act
complained
of
which
is
outside
the
scope
of
the
authorized
business
or
is
illegal
or
not
capable
of
ratification
by
the
majority;
(2)
acts
that
constitute
fraud
on
the
minority
where
the
wrongdoers
control
the
company;
(3)
acts
that
infringe
on
the
personal
rights
of
the
shareholders,
such
as
the
right
to
vote;
and
(4)
where
the
company
has
not
complied
with
provisions
requiring
approval
of
the
shareholders,
which
are
more
limited
than
the
rights
afforded
minority
shareholders
under
the
laws
of
many
states
in
the
United
States.
Having
regard
to
the
above,
the
protection
available
to
minority
shareholders
under
BVI
law
may
be
more
limited
than
under
the
laws
of
some
jurisdictions
in
the
United
States.
It may be difficult to enforce a U.S. or foreign judgment against us, our directors and our officers outside the United States, or to assert U.S. securities laws
claims outside of the United States.
As
a
BVI
business
company,
it
may
be
difficult
for
a
shareholder
to
effect
service
of
process
within
the
United
States
upon
us,
our
directors
and
officers,
or
to
enforce
against
us,
or
them,
judgments
obtained
in
U.S.
courts,
including
judgments
predicated
upon
the
civil
liability
provisions
of
the
securities
laws
of
the
United
States
or
any
state
therein.
Additionally,
it
may
be
difficult
to
assert
U.S.
securities
law
claims
in
actions
originally
instituted
outside
of
the
United
States.
Foreign
courts
may
refuse
to
hear
a
U.S.
securities
law
claim
because
foreign
courts
may
not
be
the
most
appropriate
forums
in
which
to
bring
such
a
claim.
Even
if
a
foreign
court
agrees
to
hear
a
claim,
it
may
determine
that
the
law
of
the
jurisdiction
in
which
the
foreign
court
resides,
and
not
U.S.
law,
is
applicable
to
the
claim.
Further,
if
U.S.
law
is
found
to
be
applicable,
the
content
of
applicable
U.S.
law
must
be
proved
as
a
fact,
which
can
be
a
time-consuming
and
costly
process,
and
certain
matters
of
procedure
would
still
be
governed
by
the
law
of
the
jurisdiction
in
which
the
foreign
court
resides.
Changes in tax law, determinations by tax authorities or changes in our effective tax rates may adversely affect our business and financial results.
Under
current
law,
we
expect
to
be
treated
as
a
non-U.S.
corporation
for
U.S.
federal
income
tax
purposes.
The
tax
laws
applicable
to
our
business
activities,
however,
are
subject
to
change
and
122
Table
of
Contents
uncertain
interpretation.
Our
tax
position
could
be
adversely
impacted
by
changes
in
tax
rates,
tax
laws,
tax
practice,
tax
treaties
or
tax
regulations
or
changes
in
the
interpretation
thereof
by
the
tax
authorities
in
jurisdictions
in
which
we
do
business.
Our
actual
tax
rate
may
vary
from
our
expectation
and
that
variance
may
be
material.
A
number
of
factors
may
increase
our
future
effective
tax
rates,
including:
(1)
the
jurisdictions
in
which
profits
are
determined
to
be
earned
and
taxed;
(2)
the
resolution
of
issues
arising
from
any
future
tax
audits
with
various
tax
authorities;
(3)
changes
in
the
valuation
of
our
deferred
tax
assets
and
liabilities;
(4)
our
ability
to
use
net
operating
loss
carryforwards
to
offset
future
taxable
income
and
any
adjustments
to
the
amount
of
the
net
operating
loss
carryforwards
we
can
utilize;
and
(5)
changes
in
tax
laws
or
the
interpretation
of
such
tax
laws,
and
changes
in
generally
accepted
accounting
principles.
As
a
company
organized
under
the
laws
of
the
BVI,
we
are
principally
subject
to
taxation
in
the
BVI.
Under
the
current
laws
of
the
BVI,
tax
on
a
company's
income
is
assessed
at
a
zero
percent
tax
rate.
For
U.S.
federal
tax
purposes,
a
corporation
is
generally
considered
a
"domestic
corporation"
if
it
is
incorporated
or
organized
in
the
United
States,
and
a
"foreign
corporation"
if
it
is
incorporated
or
organized
in
a
non-U.S.
jurisdiction.
Because
we
are
a
BVI
incorporated
entity,
we
would
be
classified
as
a
foreign
corporation
under
these
general
rules.
Section
7874
of
the
Code
("Section
7874")
however,
contains
rules
that
can
result
in
a
foreign
corporation
being
treated
as
a
domestic
corporation
for
U.S.
federal
tax
purposes.
Under
Section
7874,
a
foreign
corporation
will
nevertheless
be
treated
as
a
domestic
corporation
for
U.S.
federal
tax
purposes
if
(1)
the
foreign
corporation
directly
or
indirectly
acquires
substantially
all
of
the
assets
held
directly
or
indirectly
by
a
domestic
corporation
(including
the
indirect
acquisition
of
assets
by
acquisition
of
all
the
outstanding
shares
of
a
domestic
corporation),
(2)
the
shareholders
of
the
acquired
domestic
corporation
hold
at
least
80%
(by
either
vote
or
value)
of
the
shares
of
the
acquiring
foreign
corporation
after
the
acquisition
by
reason
of
holding
shares
in
the
acquired
domestic
corporation
(including
the
receipt
of
the
foreign
corporation's
shares
in
exchange
for
the
domestic
corporation's
shares)
(the
"ownership
test"),
and
(3)
the
foreign
corporation's
"expanded
affiliated
group"
does
not
have
substantial
business
activities
in
the
foreign
corporation's
country
of
organization
or
incorporation
relative
to
the
expanded
affiliated
group's
worldwide
activities.
For
purposes
of
Section
7874,
"expanded
affiliated
group"
means
the
foreign
corporation
and
all
subsidiaries
in
which
the
foreign
corporation,
directly
or
indirectly,
owns
more
than
50%
of
the
shares
by
vote
and
value.
On
December
31,
2016,
we
entered
into
an
agreement
with
the
stockholders
of
Biohaven
Pharmaceuticals,
Inc.
("BPI"),
a
Delaware
corporation,
to
purchase
all
of
the
outstanding
capital
stock
of
BPI
for
an
aggregate
purchase
price
of
$0.6
million,
payable
by
the
issuance
of
Company
promissory
notes
to
each
BPI
stockholder.
Although
we
and
BPI
had
certain
shareholders
in
common
before
December
31,
2016,
based
on
the
rules
for
determining
share
ownership
under
Section
7874,
we
believe
the
stockholders
of
BPI
owned
less
than
80%
of
our
company.
Accordingly,
we
do
not
believe
that
this
transaction
meets
the
ownership
test
under
Section
7874
and
therefore
do
not
believe
that
we
should
be
treated
as
a
domestic
corporation
for
U.S.
federal
tax
purposes.
However,
the
tax
law
in
this
area
could
be
changed,
including
changed
on
a
retroactive
basis,
and
the
application
of
Section
7874
to
our
acquisition
of
BPI
could
substantially
increase
our
effective
tax
rate.
On
December
22,
2017,
President
Trump
signed
into
law
new
legislation
that
significantly
revises
the
Internal
Revenue
Code
of
1986,
as
amended.
The
newly
enacted
U.S.
federal
income
tax
law,
among
other
things,
contains
significant
changes
to
corporate
taxation,
including
reduction
of
the
corporate
tax
rate
from
a
top
marginal
rate
of
35%
to
a
flat
rate
of
21%,
limitation
of
the
tax
deduction
for
interest
expense
to
30%
of
adjusted
earnings
(except
for
certain
small
businesses),
limitation
of
the
deduction
for
net
operating
losses
to
80%
of
current
year
taxable
income
and
elimination
of
net
operating
loss
carrybacks,
one
time
taxation
of
offshore
earnings
at
reduced
rates
regardless
of
whether
they
are
repatriated,
elimination
of
U.S.
tax
on
foreign
earnings
(subject
to
certain
important
exceptions),
immediate
deductions
for
certain
new
investments
instead
of
deductions
123
Table
of
Contents
for
depreciation
expense
over
time,
and
modifying
or
repealing
many
business
deductions
and
credits.
Notwithstanding
the
reduction
in
the
corporate
income
tax
rate,
the
overall
impact
of
the
new
federal
tax
law
is
uncertain
and
our
business
and
financial
condition
could
be
adversely
affected.
In
addition,
it
is
uncertain
if
and
to
what
extent
various
states
will
conform
to
the
newly
enacted
federal
tax
law.
The
impact
of
this
tax
reform
on
holders
of
our
common
shares
is
also
uncertain
and
could
be
adverse.
We
urge
our
shareholders
to
consult
with
their
legal
and
tax
advisors
with
respect
to
this
legislation
and
the
potential
tax
consequences
of
investing
in
or
holding
our
common
shares.
We
may
also
become
subject
to
income,
withholding
or
other
taxes
in
jurisdictions
by
reason
of
our
activities
and
operations,
and
it
is
possible
that
taxing
authorities
in
such
jurisdictions
could
assert
that
we
are
subject
to
greater
taxation
than
we
currently
anticipate.
For
example,
we
expect
to
form
an
Irish
subsidiary
that
will
be
the
principal
operating
company
for
conducting
our
business
and
the
entity
that
will
hold
our
intellectual
property
rights
in
certain
of
our
product
candidates.
This
new
Irish
subsidiary
would
be
subject
to
taxation
in
Ireland.
In
addition
to
the
establishment
of
this
Irish
entity
as
our
principal
operating
company,
we,
as
the
parent
company,
may
also
be
subject
to
taxation
in
Ireland
in
the
future,
even
as
we
remain
a
company
organized
under
the
laws
of
the
BVI.
Any
of
these
transactions
may
result
in
higher
tax
liabilities
and
a
higher
overall
effective
tax
rate.
Any
significant
increase
in
our
future
effective
tax
rates
could
reduce
net
income
for
future
periods.
If we are a passive foreign investment company there could be adverse U.S. federal income tax consequences to U.S. holders.
Under
the
Code,
we
will
be
a
passive
foreign
investment
company
("PFIC")
for
any
taxable
year
in
which
(1)
75%
or
more
of
our
gross
income
consists
of
passive
income
or
(2)
50%
or
more
of
the
average
quarterly
value
of
our
assets
consists
of
assets
that
produce,
or
are
held
for
the
production
of,
passive
income.
For
purposes
of
these
tests,
passive
income
includes
dividends,
interest,
gains
from
the
sale
or
exchange
of
investment
property
and
certain
rents
and
royalties.
In
addition,
for
purposes
of
the
above
calculations,
a
non-U.S.
corporation
that
directly
or
indirectly
owns
at
least
25%
by
value
of
the
shares
of
another
corporation
is
treated
as
if
it
held
its
proportionate
share
of
the
assets
and
received
directly
its
proportionate
share
of
the
income
of
such
other
corporation.
If
we
are
a
PFIC
for
any
taxable
year
during
which
a
U.S.
holder
holds
our
shares,
the
U.S.
holder
may
be
subject
to
adverse
tax
consequences
regardless
of
whether
we
continue
to
qualify
as
a
PFIC,
including
ineligibility
for
any
preferred
tax
rates
on
capital
gains
or
on
actual
or
deemed
dividends,
interest
charges
on
certain
taxes
treated
as
deferred,
and
additional
reporting
requirements.
Although
we
do
not
believe
we
were
a
PFIC
for
our
taxable
year
ended
December
31,
2017
and
do
not
currently
expect
to
be
a
PFIC
for
our
current
taxable
year
or
future
taxable
years,
we
cannot
provide
any
assurances
regarding
our
PFIC
status
for
any
past,
current
or
future
taxable
years.
The
determination
of
whether
we
are
a
PFIC
is
a
fact-intensive
determination
made
on
an
annual
basis
applying
principles
and
methodologies
which
in
some
circumstances
are
unclear
and
subject
to
varying
interpretation.
In
particular,
the
characterization
of
our
assets
as
active
or
passive
may
depend
in
part
on
our
current
and
intended
future
business
plans
which
are
subject
to
change.
In
addition,
for
our
current
and
future
taxable
years,
the
total
value
of
our
assets
for
PFIC
testing
purposes
may
be
determined
in
part
by
reference
to
the
market
price
of
our
shares
from
time
to
time,
which
may
fluctuate
considerably.
Under
the
income
test,
our
status
as
a
PFIC
depends
on
the
composition
of
our
income
which,
in
our
current
and
future
taxable
years,
we
may
not
be
able
to
fully
control,
for
example,
with
respect
to
income
attributed
to
us
from
entities
owned
25%
or
more
by
us.
The
composition
of
our
income
and
assets
is
also
affected
by
how,
and
how
quickly,
we
spend
the
cash
we
raise
in
any
offering,
including
in
our
recent
IPO.
In
certain
circumstances,
a
U.S.
holder
of
shares
in
a
PFIC
may
alleviate
some
of
the
adverse
tax
consequences
described
above
by
making
a
"qualified
electing
fund"
("QEF")
election
to
include
in
income
its
pro
rata
share
of
the
corporation's
income
on
a
current
basis.
However,
a
U.S.
holder
may
make
a
qualified
electing
fund
election
with
respect
to
our
common
shares
only
if
we
agree
to
furnish
such
U.S.
holder
annually
with
a
PFIC
annual
information
statement
as
specified
in
the
applicable
U.S.
Treasury
Regulations.
We
currently
do
not
intend
to
prepare
or
provide
the
information
that
would
enable
U.S.
holders
to
make
a
QEF
election
if
we
are
treated
as
a
PFIC
for
any
taxable
year,
and
prospective
investors
should
assume
that
a
QEF
election
will
not
be
available.
124
Table
of
Contents
Item
1B.
Unresolved
Staff
Comments
None.
Item
2.
Properties
Our
principal
offices
currently
occupy
a
total
of
approximately
4,240
square
feet
of
leased
office
space
in
New
Haven,
Connecticut.
This
space
is
pursuant
to
two
separate
lease
agreements,
a
lease
for
2,240
square
feet
which
expires
in
June
2018
and
a
lease
for
2,000
square
feet
that
expires
in
October
2018.
In
August
2017,
we
entered
into
a
new
lease
agreement
to
consolidate
our
headquarters
into
a
free
standing
building
in
New
Haven,
Connecticut
compromising
of
10,366
square
feet
of
office
space.
The
lease
commenced
on
August
10,
2017
for
a
term
of
85
months
with
payments
commencing
in
February
2018.
The
lease
includes
two
optional
5-year
renewal
terms.
We
believe
that
our
current
facilities,
including
the
new
leased
space,
are
suitable
and
adequate
to
meet
our
current
needs.
We
intend
to
add
new
facilities
or
expand
existing
facilities
as
we
add
employees,
and
we
believe
that
suitable
additional
or
substitute
space
will
be
available
as
needed
to
accommodate
any
such
expansion
of
our
operations.
Item
3.
Legal
Proceedings
We
are
not
a
party
to
material
legal
proceedings,
and
we
are
not
aware
of
any
claims
or
actions
pending
or
threatened
against
us.
In
the
future,
we
might
from
time
to
time
become
involved
in
litigation
relating
to
claims
arising
from
our
ordinary
course
of
business,
the
resolution
of
which
we
do
not
anticipate
would
have
a
material
adverse
impact
on
our
financial
position,
results
of
operations
or
cash
flows.
Item
4.
Mine
Safety
Disclosures
Not
applicable.
125
Table
of
Contents
Item
5.
Market
for
Registrant's
Common
Equity,
Related
Shareholder
Matters
and
Issuer
Purchases
of
Equity
Securities
Market
Information
PART
II
On
May
4,
2017,
our
common
shares
began
trading
on
the
New
York
Stock
Exchange
under
the
symbol
"BHVN".
Prior
to
that
time,
there
was
no
public
market
for
our
common
shares.
The
following
table
sets
forth,
for
the
periods
indicated,
the
high
and
low
intraday
sales
prices
of
our
common
shares
as
reported
by
the
New
York
Stock
Exchange:
Year
Ended
December
31,
2017
Second
Quarter
High
Low
(First
Trading
Day
of
May
4,
2017
through
June
30,
2017)
$ 28.34
$ 17.00
Third
Quarter
(July
1,
2017
through
September
30,
2017)
Fourth
Quarter
(October
1,
2017
through
December
31,
2017)
$ 39.51
$ 22.95
$ 36.15
$ 18.95
The
last
reported
sale
price
of
our
common
shares
on
the
NYSE
on
March
2,
2018
was
$33.98
per
share.
Stock
Performance
Graph
COMPARISON
OF
8
MONTH
CUMULATIVE
TOTAL
RETURN*
Among
Biohaven
Pharmaceutical
Holding
Company
Ltd.,
the
S&P
500
Index
and
the
S&P
Biotechnology
Index
*
$100
invested
on
5/4/17
in
stock
or
4/30/17
in
index,
including
reinvestment
of
dividends.
Fiscal
year
ending
December
31.
126
Table
of
Contents
Shareholders
As
of
March
2,
2018,
there
were
102
shareholders
of
record
of
our
common
shares.
The
actual
number
of
holders
of
our
common
shares
is
greater
than
this
number
of
record
holders,
and
includes
shareholders
who
are
beneficial
owners,
but
whose
shares
are
held
in
street
name
by
brokers
or
held
by
other
nominees.
This
number
of
holders
of
record
also
does
not
include
shareholders
whose
shares
may
be
held
in
trust
by
other
entities.
Dividend
Policy
We
have
never
declared
or
paid
dividends
on
our
share
capital.
We
do
not
anticipate
paying
any
dividends
on
our
share
capital
in
the
foreseeable
future.
We
currently
intend
to
retain
all
available
funds
and
any
future
earnings
to
fund
the
development
and
growth
of
our
business.
Any
future
determination
to
declare
dividends
will
be
subject
to
the
discretion
of
our
board
of
directors
and
will
depend
on
various
factors,
including
applicable
laws,
our
results
of
operations,
financial
condition,
future
prospects
and
any
other
factors
deemed
relevant
by
our
board
of
directors.
Equity
Compensation
Plans
The
information
required
to
be
disclosed
by
Item
201(d)
of
Regulation
S-K,
"Securities
Authorized
for
Issuance
Under
Equity
Compensation
Plans,"
is
incorporated
herein
by
reference.
Refer
to
Item
12
of
Part
III
of
this
Annual
Report
on
Form
10-K
for
additional
information.
Recent
Sales
of
Unregistered
Securities
From
January
1,
2017
through
May
23,
2017,
we
granted
to
our
employees,
directors
and
consultants
stock
options
to
purchase
an
aggregate
of
1,034,433
common
shares
at
exercise
prices
ranging
from
$9.29
to
$10.82,
and
we
did
not
issue
any
common
shares
upon
option
exercises
during
this
period.
These
option
issuances
were
exempt
from
registration
pursuant
to
Rule
701
and
Rule
506
promulgated
under
the
Securities
Act,
and
Section
4(a)(2)
of
the
Securities
Act.
Issuer
Purchases
of
Equity
Securities
We
did
not
purchase
any
of
our
registered
equity
securities
during
the
period
covered
by
this
Annual
Report.
Use
of
Proceeds
from
Registered
Securities
On
May
3,
2017,
our
registration
statement
on
Form
S-1,
as
amended
(File
No
333-217214)
was
declared
effective
by
the
SEC
in
connection
with
our
IPO,
pursuant
to
which
we
sold
11,385,000
of
our
common
shares
at
a
public
offering
price
of
$17.00
per
share,
including
the
full
exercise
by
the
underwriters
of
their
option
to
purchase
additional
shares.
We
received
net
proceeds
of
$176.1
million,
after
deducting
underwriting
discounts
and
commissions
and
offering
expenses
borne
by
us.
None
of
the
expenses
incurred
by
us
were
direct
or
indirect
payments
to
any
of
(i)
our
directors
or
officers
or
their
associates,
(ii)
persons
owning
10
percent
or
more
of
our
common
shares,
or
(iii)
our
affiliates.
Morgan
Stanley,
Piper
Jaffray
&
Co.
and
Barclays
Capital
acted
as
joint
book-running
managers
for
the
offering.
William
Blair
acted
as
lead
manager.
Needham
&
Company
acted
as
co-manager.
There
has
been
no
material
change
in
the
planned
use
of
proceeds
from
our
initial
public
offering
from
that
described
in
the
final
prospectus
filed
with
the
SEC
on
May
3,
2017.
During
the
period
from
the
closing
of
our
IPO
to
December
31,
2017,
we
used
the
proceeds
primarily
to
fund
continued
development
of
our
clinical
programs,
including
costs
associated
with
contract
research
organizations,
contract
manufacturing
organizations,
consultants,
personnel
and
other
infrastructure
costs
to
support
our
research
and
development
operations,
costs
associated
with
operating
as
a
public
company,
a
milestone
payment
to
BMS
and
investments
in
Kleo.
127
Table
of
Contents
Item
6.
Selected
Consolidated
Financial
Data
We
have
derived
the
consolidated
statement
of
operations
data
for
the
years
ended
December
31,
2017,
2016
and
2015
and
the
consolidated
balance
sheet
data
as
of
December
31,
2017
and
2016
from
our
audited
consolidated
financial
statements
appearing
at
the
end
of
this
Annual
Report
on
Form
10-K.
The
consolidated
balance
sheet
data
as
of
December
31,
2015
was
derived
from
our
historical
audited
consolidated
financial
statements
not
included
in
this
Annual
Report
on
Form
10-K.
You
should
read
the
following
selected
financial
data
together
with
our
consolidated
financial
statements
and
the
related
notes
and
the
"Item
7.
Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operations"
and
our
consolidated
financial
statements
and
related
notes
included
elsewhere
in
this
Annual
Report
on
Form
10-K.
Our
historical
results
are
not
necessarily
indicative
of
results
that
should
be
expected
for
any
future
period.
Statement
of
Operations
Data:
Operating
expenses:
Research
and
development(1)
General
and
administrative(1)
Total
operating
expenses
Loss
from
operations
Other
income
(expense):
Interest
expense
Change
in
fair
value
of
warrant
liability
Change
in
fair
value
of
derivative
liability
Change
in
fair
value
of
contingent
equity
liability
Loss
from
equity
method
investment
Total
other
income
(expense),
net
Loss
before
provision
for
income
taxes
Provision
for
income
taxes
Net
loss
and
comprehensive
loss
Net
loss
attributable
to
non-controlling
interests
Accretion
of
beneficial
conversion
feature
$
2017
Year
Ended
December
31,
2016
(in
thousands)
2015
89,441
$
18,141
107,582
(107,582)
(906)
(3,241)
512
(13,082)
(1,885)
(18,602)
(126,184)
1,006
(127,190)
—
(12,006)
55,529
$
5,109
60,638
(60,638)
(385)
154
(65)
(2,263)
(247)
(2,806)
(63,444)
90
(63,534)
143
—
7,559
2,137
9,696
(9,696)
—
—
(370)
—
—
(370)
(10,066)
—
(10,066)
(4)
—
Net
loss
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
$
(139,196) $
(63,677) $
(10,062)
Net
loss
per
share
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.—basic
and
diluted
Weighted
average
common
shares
outstanding—basic
and
diluted
$
(5.00) $
(5.05) $
27,845,576
12,608,366
(0.91)
11,009,277
(1)
Includes
stock-based
compensation
expense,
as
follows:
Research
and
development
General
and
administrative
$
6,933
$ 2,382
$ 1,527
1,310
2,221
6,306
$ 13,239
$ 4,603
$ 2,837
128
2017
Year
Ended
December
31,
2016
(in
thousands)
2015
Table
of
Contents
Consolidated
Balance
Sheet
Data:
Cash
Working
capital(1)
Total
assets
Notes
payable,
net
of
discount
Notes
payable
to
related
parties
Warrant
liability
Contingent
equity
liability
Convertible
preferred
shares
Total
shareholders'
equity
(deficit)
(1)
We
define
working
capital
as
current
assets
less
current
liabilities.
129
As
of
December
31,
2017
2016
2015
(in
thousands)
$ 131,468
$
127,236
146,888
—
—
4,021
—
—
131,971
23,565
$ 1,460
1,558
16,093
1,892
27,017
—
4,216
—
595
—
780
—
18,938
—
43,270
1,087
(45,033)
Table
of
Contents
Item
7.
Management's
Discussion
and
Analysis
of
Financial
Condition
and
Results
of
Operation
You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related
notes appearing elsewhere in this Annual Report on Form 10-K, or this Annual Report. In addition to historical information, this discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-
looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute to these differences below and elsewhere in this
report, including those set forth under Item 1A. "Risk Factors" and under "Cautionary Note Regarding Forward-Looking Statements" in this Annual Report.
Overview
We
are
a
clinical-stage
biopharmaceutical
company
with
a
portfolio
of
innovative,
late-stage
product
candidates
targeting
neurological
diseases,
including
rare
disorders.
Our
product
candidates
are
small
molecules
based
on
two
distinct
mechanistic
platforms—calcitonin
gene-related
peptide
("CGRP")
receptor
antagonists
and
glutamate
modulators—which
we
believe
have
the
potential
to
significantly
alter
existing
treatment
approaches
across
a
diverse
set
of
neurological
indications
with
high
unmet
need
in
both
large
markets
and
orphan
indications.
Our
programs
include
the
following:
Product
Rimegepant
Platform
Indication
CGRP
Acute
treatment
of
migraine
BHV-3500
CGRP
Acute
treatment
and
prevention
of
migraine
Development
Stage
Phase
3
Pre-clinical
Trigriluzole
Glutamate
Ataxias
Phase
2/3
in
SCA
complete;
Extension
trial
ongoing
Trigriluzole
Glutamate
Obsessive
Compulsive
Disorder
("OCD")
Phase
2/3
Trigriluzole
Glutamate
Alzheimer's
disease
Phase
2
to
commence
in
first
half
2018
BHV-0223
Glutamate
Amyotrophic
Lateral
Sclerosis
("ALS")
Phase
2
BHV-5000
Glutamate
Rett
syndrome
and
other
neuropsychiatric
disorders
Phase
1
commenced
in
December
2017
CGRP
Platform
In
July
2016,
we
acquired
exclusive,
worldwide
rights
to
our
CGRP
receptor
antagonist
platform,
including
rimegepant
and
another
product
candidate,
BHV-
3500,
which
we
are
developing
for
the
acute
treatment
and
prevention
of
migraine,
through
a
license
agreement
with
Bristol-Myers
Squibb
Company
("BMS").
Rimegepant
The
most
advanced
product
candidate
from
our
CGRP
receptor
antagonist
platform
is
rimegepant,
an
orally
available,
potent
and
selective
small
molecule
human
CGRP
receptor
antagonist
that
we
are
developing
for
the
acute
treatment
of
migraine.
In
July
2017,
we
initiated
two
Phase
3
clinical
trials
of
rimegepant,
and
we
completed
enrollment
in
these
trials
in
November
2017.
Topline
results
from
these
130
Table
of
Contents
trials
are
expected
in
the
first
quarter
2018.
In
August
2017,
we
commenced
a
long
term
safety
study
of
rimegepant
in
patients
with
migraine,
and
we
expect
sufficient
clinical
data
needed
for
filing
an
NDA
will
be
available
by
the
end
of
2018.
Additionally,
this
program
will
also
be
supported
by
results
of
thirteen
completed
(enrollment
and
treatment
completed)
Phase
1
studies,
two
ongoing
Phase
1
studies,
as
well
as
an
additional
Phase
1
study
planned
to
commence
in
2018.
A
third
Phase
3
clinical
trial
with
a
bioequivalent
ODT
of
rimegepant
was
commenced
in
February
2018,
and
we
expect
this
trial
to
be
completed
in
the
fourth
quarter
of
2018.
Additionally,
in
November
2017,
we
received
agreement
from
the
U.S.
Food
and
Drug
Administration
("FDA")
of
an
initial
pediatric
study
plan.
In
February
2018,
we
submitted
a
request
for
scientific
advice
for
rimegepant
was
submitted
to
the
Committee
for
Medicinal
Products
for
Human
Use,
or
CHMP,
a
committee
of
the
European
Medicines
Agency,
or
EMA,
and
we
anticipate
receiving
feedback
in
the
first
half
of
2018.
BHV-3500
We
intend
to
submit
an
investigational
new
drug
application
("IND")
for
BHV-3500,
our
third
generation
CGRP
receptor
antagonist,
in
the
first
half
of
2018
and
expect
to
conduct
a
Phase
1
clinical
trial
in
the
second
half
of
2018
to
permit
us
to
commence
later
stage
clinical
trials.
Glutamate
Platform
We
are
developing
three
product
candidates
that
modulate
the
body's
glutamate
system.
Two
of
these
product
candidates,
trigriluzole
and
BHV-0223,
act
as
glutamate
transporter
modulators,
while
our
product
candidate
BHV-5000
is
an
antagonist
of
the
glutamate
N -methyl-D-aspartate
("NMDA")
receptor.
Trigriluzole for ataxias
We
are
developing
trigriluzole
for
the
treatment
of
ataxias,
with
an
initial
focus
on
spinocerebellar
ataxia
("SCA").
We
have
received
both
orphan
drug
designation
and
fast
track
designation
from
the
U.S.
Food
and
Drug
Administration
for
trigriluzole
for
the
treatment
of
SCA.
In
October
2017,
we
reported
topline
data
from
the
8-week
randomization
period
from
the
Phase
2/3
clinical
trial
in
SCA.
At
the
eight
week
time
point,
trigriluzole
did
not
statistically
differentiate
from
placebo.
In
the
trial,
we
observed
a
favorable
safety
and
tolerability
profile.
The
48-week
extension
phase
of
the
SCA
trial
is
ongoing
and
we
are
continuing
to
assess
the
data
from
the
trial.
Based
on
post-hoc
subgroup
analyses
we
are
in
discussions
with
the
FDA
regarding
the
potential
for
further
development
of
trigriluzole
in
ataxias,
and
the
FDA
has
expressed
willingness
to
accept
a
modification
of
our
study's
primary
endpoint,
the
Scale
for
Assessment
and
Rating
of
Ataxia,
also
called
SARA,
as
an
acceptable
registrational
endpoint.
Trigriluzole for Other Indications
A
Phase
2
double-blind,
randomized
controlled
trial
on
the
use
of
trigriluzole
in
Obsessive
Compulsive
Disorder
("OCD")
commenced
in
December
2017.
In
addition,
a
Phase
2
double-blind,
randomized
controlled
trial
of
trigriluzole
in
the
treatment
of
mild-to-moderate
Alzheimer's
disease
is
being
advanced
in
collaboration
with
the
Alzheimer's
Disease
Cooperative
Study,
a
consortium
of
sites
funded
by
the
National
Institutes
of
Health.
This
study
is
expected
to
commence
in
the
first
half
of
2018.
BHV-0223
We
are
developing
BHV-0223
for
the
treatment
of
amyotrophic
lateral
sclerosis
("ALS").
In
December
2016,
we
received
orphan
drug
designation
from
the
FDA
for
BHV-0223
to
treat
ALS.
In
January
2018,
we
announced
results
of
a
bioequivalence
study
with
BHV-0223
and
marketed
riluzole.
131
Table
of
Contents
These
results
demonstrated
bioequivalence,
thus
providing
pivotal
data
that
we
believe
will
enable
submission
of
a
new
drug
application
("NDA")
to
the
FDA
and
pursue
the
regulatory
approval
of
BHV-0223
for
ALS
under
Section
505(b)(2)
of
the
U.S.
Federal
Food,
Drug,
and
Cosmetic
Act.
In
addition,
Biohaven
opened
an
IND
in
the
US
in
late
2017,
with
the
first
study
assessing
tolerability
in
dysphagic
patients
with
ALS.
This
study
is
expected
to
complete
dosing
in
the
first
quarter
2018.
A
pre-NDA
meeting
with
the
FDA
is
planned
in
the
first
quarter
2018,
and
we
plan
on
filing
a
NDA
in
the
second
half
of
2018.
We
are
also
starting
an
additional
tolerability
study
with
two-month
dosing
in
ALS
patients
in
the
first
quarter
of
2018.
BHV-5000
We
are
also
developing
BHV-5000,
an
orally
available,
first-in-class,
low-trapping
NMDA
receptor
antagonist,
for
the
treatment
of
neuropsychiatric
diseases.
One
key
target
indication
is
the
treatment
of
symptoms
associated
with
Rett
syndrome,
including
breathing
irregularities.
Rett
syndrome
is
a
rare
and
severe
genetic
neurodevelopmental
disorder
for
which
no
approved
treatments
are
currently
available.
We
acquired
worldwide
rights
to
BHV-5000
under
an
exclusive
license
agreement
with
AstraZeneca
AB
("AstraZeneca"),
in
October
2016.
We
selected
a
lead
formulation
at
the
end
of
2017
and
commenced
a
Phase
1
clinical
trial
of
BHV-5000
in
December
2017
to
evaluate
its
pharmacokinetic
properties
and
support
future
later
stage
trials.
Financings
and
Other
Recent
Developments
Since
our
inception
in
September
2013,
we
have
devoted
substantially
all
of
our
resources
to
acquiring
and
developing
product
candidates,
organizing
and
staffing
our
company,
business
planning,
raising
capital,
prosecuting
intellectual
property
rights,
planning
for
commercialization,
and
conducting
research
and
development
activities
for
our
product
candidates.
We
do
not
have
any
products
approved
for
sale
and
have
not
generated
any
revenue
from
product
sales.
Prior
to
our
initial
public
offering
("IPO")
in
May
2017,
we
funded
our
operations
primarily
with
proceeds
from
the
sale
of
preferred
shares
and
common
shares
through
private
placements
and
borrowings
under
a
credit
agreement
with
a
bank.
Prior
to
the
completion
of
our
IPO
in
May
2017,
we
had
received
net
cash
proceeds
of
$96.4
million
from
sales
of
our
preferred
shares
and
common
shares
through
private
placements
and
gross
proceeds
of
$5.0
million
from
borrowings
under
the
credit
agreement.
On
May
3,
2017,
our
registration
statement
on
Form
S-1
relating
to
our
IPO
was
declared
effective
by
the
SEC.
The
IPO
closed
on
May
9,
2017
and
we
issued
and
sold
9,900,000
common
shares
at
a
public
offering
price
of
$17.00
per
share,
for
net
proceeds
of
$152.7
million
after
deducting
underwriting
discounts
and
commissions
of
$11.8
million
and
other
offering
expenses
of
$3.9
million.
Upon
the
closing
of
the
IPO,
all
of
the
convertible
preferred
shares
then
outstanding
converted
into
an
aggregate
of
9,358,560
common
shares.
In
addition,
on
May
9,
2017,
the
underwriters
of
the
IPO
fully
exercised
their
option
to
purchase
additional
shares,
and
on
May
11,
2017,
we
issued
and
sold
1,485,000
common
shares
resulting
in
net
proceeds
of
$23.5
million
after
deducting
offering
expenses
of
$1.8
million.
Thus,
the
aggregate
net
proceeds
we
received
from
the
IPO,
after
deducting
underwriting
discounts
and
commissions
and
offering
expenses,
were
$176.1
million.
In
connection
with
the
completion
of
the
IPO,
we
issued
an
aggregate
of
1,883,523
common
shares
to
BMS
and
AstraZeneca
in
satisfaction
of
obligations
to
contingently
issue
equity
securities
pursuant
to
our
license
agreements
for
no
additional
consideration.
Since
our
inception,
we
have
incurred
significant
operating
losses.
Our
ability
to
generate
product
revenue
sufficient
to
achieve
profitability
will
depend
heavily
on
the
successful
development
and
eventual
commercialization
of
one
or
more
of
our
current
product
candidates
and
programs.
Our
net
loss
was
$127.2
million,
$63.5
million
and
$10.1
million
for
the
years
ended
December
31,
2017,
2016
and
2015,
respectively.
As
of
December
31,
2017,
we
had
an
accumulated
deficit
of
$202.6
million.
We
132
Table
of
Contents
will
not
generate
revenue
from
product
sales
unless
and
until
we
successfully
complete
clinical
development
and
obtain
regulatory
approval
for
our
product
candidates.
We
expect
to
continue
to
incur
significant
expenses
for
at
least
the
next
several
years
as
we
advance
our
product
candidates
from
discovery
through
preclinical
development
and
clinical
trials
and
seek
regulatory
approval
and
pursue
commercialization
of
any
approved
product
candidate.
In
addition,
if
we
obtain
marketing
approval
for
any
of
our
product
candidates,
we
expect
to
incur
significant
commercialization
expenses
related
to
product
manufacturing,
marketing,
sales
and
distribution.
In
addition,
we
may
incur
expenses
in
connection
with
the
in-license
or
acquisition
of
additional
product
candidates.
We
also
incur
incremental
costs
associated
with
operating
as
a
public
company,
including
significant
legal,
accounting,
investor
relations
and
other
expenses
that
we
did
not
incur
as
a
private
company.
Because
of
the
numerous
risks
and
uncertainties
associated
with
product
development,
we
are
unable
to
predict
the
timing
or
amount
of
increased
expenses
or
when
or
if
we
will
be
able
to
achieve
profitability.
Even
if
we
are
able
to
generate
product
sales,
we
may
not
become
profitable.
If
we
fail
to
become
profitable,
then
we
may
be
unable
to
continue
our
operations
at
planned
levels
and
be
forced
to
reduce
or
terminate
our
operations.
As
a
result,
we
will
need
substantial
additional
funding
to
support
our
continuing
operations
and
pursue
our
growth
strategy.
Until
such
time
as
we
can
generate
significant
revenue
from
product
sales,
if
ever,
we
expect
to
finance
our
operations
through
the
public
or
private
sale
of
equity,
debt
financings
or
other
capital
sources,
including
collaborations
with
other
companies
or
other
strategic
transactions.
We
may
be
unable
to
raise
additional
funds
or
enter
into
such
other
agreements
or
arrangements
when
needed
on
favorable
terms,
or
at
all.
If
we
fail
to
raise
capital
or
enter
into
such
agreements
as,
and
when,
needed,
we
may
have
to
significantly
delay,
scale
back
or
discontinue
the
development
and
commercialization
of
one
or
more
of
our
product
candidates
or
delay
our
pursuit
of
potential
in-licenses
or
acquisitions.
As
of
December
31,
2017,
we
had
cash
of
$131.5
million.
Without
additional
external
funding,
we
expect
that
our
existing
cash
will
be
sufficient
to
fund
our
planned
operating
expenses,
financial
commitments
and
other
cash
requirements
through
December
31,
2018.
The
assumption
for
remaining
cash
usage
assumes
that
planned
programs
and
expenditures
continue
and
that
we
do
not
reduce,
stop
or
curtail
programs
or
other
spending.
Beyond
that
point,
we
will
need
to
raise
additional
capital
to
finance
our
operations,
which
cannot
be
assured.
We
have
concluded
that
this
circumstance
raises
substantial
doubt
about
our
ability
to
continue
as
a
going
concern
within
one
year
after
the
issuance
date
of
our
financial
statements
for
the
year
ended
December
31,
2017.
Similarly,
in
its
report
on
our
financial
statements
for
the
year
ended
December
31,
2017,
our
independent
registered
public
accounting
firm
included
an
explanatory
paragraph
stating
that
our
recurring
losses
from
operations
since
inception
and
required
additional
funding
to
finance
our
operations
raise
substantial
doubt
about
our
ability
to
continue
as
a
going
concern.
Components
of
Our
Results
of
Operations
Revenue
To
date,
we
have
not
generated
any
revenue
from
product
sales
and
do
not
expect
to
generate
any
revenue
from
the
sale
of
products
in
the
near
future.
If
our
development
efforts
for
our
product
candidates
are
successful
and
result
in
regulatory
approval
or
additional
license
agreements
with
third
parties,
we
may
generate
revenue
in
the
future
from
product
sales.
133
Table
of
Contents
Operating Expenses
Research and Development Expenses
Research
and
development
expenses
consist
primarily
of
costs
incurred
in
connection
with
the
development
of
our
product
candidates.
We
expense
research
and
development
costs
as
incurred.
These
expenses
include:
•
•
•
•
•
expenses
incurred
under
agreements
with
contract
research
organizations
("CROs")
or
contract
manufacturing
organizations
("CMOs"),
as
well
as
investigative
sites
and
consultants
that
conduct
our
clinical
trials,
preclinical
studies
and
other
scientific
development
services;
manufacturing
scale-up
expenses
and
the
cost
of
acquiring
and
manufacturing
preclinical
and
clinical
trial
materials
and
commercial
materials,
including
manufacturing
validation
batches;
employee-related
expenses,
including
salaries,
benefits,
travel
and
share-based
compensation
expense
for
employees
engaged
in
research
and
development
functions;
costs
related
to
compliance
with
regulatory
requirements;
payments
made
in
cash,
equity
securities
or
other
forms
of
consideration
under
third-party
licensing
agreements.
We
recognize
external
development
costs
based
on
an
evaluation
of
the
progress
to
completion
of
specific
tasks
using
estimates
of
our
clinical
personnel
or
information
provided
to
us
by
our
service
providers.
Our
external
direct
research
and
development
expenses
are
tracked
on
a
program-by-program
basis
for
our
product
candidates
and
consist
primarily
of
external
costs,
such
as
fees
paid
to
outside
consultants,
CROs,
CMOs,
and
central
laboratories
in
connection
with
our
preclinical
development,
process
development,
manufacturing
and
clinical
development
activities.
Our
direct
research
and
development
expenses
by
program
also
include
fees
incurred
under
license
agreements.
We
do
not
allocate
employee
costs
or
other
indirect
costs,
to
specific
programs
because
these
costs
are
deployed
across
multiple
programs
and,
as
such,
are
not
separately
classified.
We
use
internal
resources
primarily
to
oversee
the
research
and
development
as
well
as
for
managing
our
preclinical
development,
process
development,
manufacturing
and
clinical
development
activities.
Many
employees
work
across
multiple
programs
and
we
do
not
track
personnel
costs
by
program.
Research
and
development
activities
are
central
to
our
business
model.
Product
candidates
in
later
stages
of
clinical
development
generally
have
higher
development
costs
than
those
in
earlier
stages
of
clinical
development,
primarily
due
to
the
increased
size
and
duration
of
later-stage
clinical
trials.
As
a
result,
we
expect
that
our
research
and
development
expenses
will
increase
substantially
over
the
next
several
years
as
we
increase
personnel
costs
conduct
clinical
trials
and
prepare
regulatory
filings
for
our
product
candidates.
We
also
expect
to
incur
additional
expenses
related
to
milestone
and
royalty
payments
payable
to
third
parties
with
whom
we
have
entered
into
license
agreements
to
acquire
the
rights
to
our
product
candidates.
The
successful
development
and
commercialization
of
our
product
candidates
is
highly
uncertain.
At
this
time,
we
cannot
reasonably
estimate
or
know
the
nature,
timing
and
costs
of
the
efforts
that
will
be
necessary
to
complete
the
preclinical
and
clinical
development
of
any
of
our
product
candidates
or
when,
if
ever,
material
net
cash
inflows
may
commence
from
any
of
our
product
candidates.
This
uncertainty
is
due
to
the
numerous
risks
and
uncertainties
associated
with
product
development
and
commercialization,
including
the
uncertainty
of:
•
the
scope,
progress,
outcome
and
costs
of
our
preclinical
development
activities,
clinical
trials
and
other
research
and
development
activities;
134
Table
of
Contents
•
•
•
•
•
•
•
•
•
establishment
of
an
appropriate
safety
profile
with
IND-enabling
studies;
successful
patient
enrollment
in,
and
the
initiation
and
completion
of,
clinical
trials;
the
timing,
receipt
and
terms
of
any
marketing
approvals
from
applicable
regulatory
authorities;
establishment
of
commercial
manufacturing
capabilities
or
making
arrangements
with
third-party
manufacturers;
development
and
timely
delivery
of
commercial-grade
drug
formulations
that
can
be
used
in
our
clinical
trials
and
for
commercial
launch;
acquisition,
maintenance,
defense
and
enforcement
of
patent
claims
and
other
intellectual
property
rights;
significant
and
changing
government
regulation;
initiation
of
commercial
sales
of
our
product
candidates,
if
and
when
approved,
whether
alone
or
in
collaboration
with
others;
and
maintenance
of
a
continued
acceptable
safety
profile
of
the
product
candidates
following
approval.
General and Administrative Expenses
General
and
administrative
expenses
consist
primarily
of
salaries,
benefits,
travel
expense
and
share-based
compensation
expense
for
personnel
in
executive,
finance
and
administrative
functions.
General
and
administrative
expenses
also
include
professional
fees
for
legal,
patent,
consulting,
accounting
and
audit
services.
We
anticipate
that
our
general
and
administrative
expenses
will
increase
in
the
future
as
we
increase
our
general
and
administrative
headcount
to
support
our
continued
research
and
development
activities
of
our
product
candidates.
We
also
anticipate
that
we
will
continue
to
incur
increased
accounting,
audit,
legal,
regulatory,
compliance,
director
and
insurance
costs
as
well
as
investor
and
public
relations
expenses
associated
with
being
a
public
company.
Additionally,
if
and
when
we
believe
a
regulatory
approval
of
a
product
candidate
appears
likely,
we
anticipate
an
increase
in
payroll
and
related
expenses
as
a
result
of
our
preparation
for
commercial
operations,
especially
as
it
relates
to
the
sales
and
marketing
of
our
product
candidate.
Other Income (Expense)
Interest Expense
Interest
expense
primarily
consists
of
interest
on
outstanding
borrowings
under
our
credit
agreement
with
Wells
Fargo
Bank,
National
Association
("Wells
Fargo")
entered
into
in
August
2016
at
the
applicable
interest
rate
as
well
as
amortization
of
the
debt
discount
relating
to
that
loan.
The
credit
agreement
was
fully
satisfied
with
a
principal
repayment
to
Wells
Fargo
of
$5.0
million
on
August
31,
2017.
Change in Fair Value of Warrant Liability
In
connection
with
entering
into
our
credit
agreement
with
Wells
Fargo,
we
issued
warrants
to
purchase
our
common
shares
to
two
of
our
directors
in
connection
with
a
guarantee
of
our
obligations
under
the
agreement.
We
classify
the
warrants
as
a
liability
on
our
consolidated
balance
sheet
that
we
remeasure
to
fair
value
at
each
reporting
date,
and
we
recognize
changes
in
the
fair
value
of
the
warrant
liability
as
a
component
of
other
income
(expense),
net
in
our
consolidated
statement
of
operations
and
comprehensive
loss.
We
will
continue
to
recognize
changes
in
the
fair
value
of
the
135
Table
of
Contents
warrant
liability
until
the
warrants
are
exercised,
expire
or
qualify
for
equity
classification,
the
latter
of
which
will
occur
in
January
2018.
Change in Fair Value of Derivative Liability
Our
license
agreement
with
Yale
University
("Yale")
provided
for
a
change-of-control
payment
to
Yale
upon
the
occurrence
of
a
change-of-control
event,
including
an
initial
public
offering.
We
classified
the
change-of-control
payment
obligation
as
a
liability
on
our
consolidated
balance
sheet
that
we
remeasured
to
fair
value
at
each
reporting
date,
and
we
recognized
changes
in
the
fair
value
of
the
derivative
liability
as
a
component
of
other
income
(expense),
net
in
our
consolidated
statement
of
operations
and
comprehensive
loss.
The
derivative
liability
upon
expiration
of
the
lock-up
period
was
determined
to
be
$0
based
on
the
value
of
the
Company's
shares
on
this
date.
Change in Fair Value of Contingent Equity Liability
Our
license
agreements
with
BMS
and
AstraZeneca
require
us
to
issue
common
shares
upon
the
occurrence
of
specified
financing
or
change-of-control
events
or
development
milestones.
We
classify
these
contingent
obligations
to
issue
shares
as
liabilities
on
our
consolidated
balance
sheet
that
we
remeasure
to
fair
value
at
each
reporting
date,
and
we
recognize
changes
in
the
fair
values
of
the
contingent
equity
liabilities
as
a
component
of
other
income
(expense),
net
in
our
consolidated
statement
of
operations
and
comprehensive
loss.
We
continued
to
recognize
changes
in
the
fair
values
of
the
contingent
equity
liabilities
until
the
occurrence
of
a
respective
triggering
event.
Upon
the
closing
of
the
IPO
in
May
2017,
the
conditions
for
issuing
shares
to
BMS
and
AstraZeneca
under
the
terms
of
the
respective
license
agreements
were
satisfied,
and
accordingly,
we
issued
1,345,374
and
538,149
common
shares,
respectively,
to
BMS
and
AstraZeneca
valued
at
$22.9
million
and
$9.1
million,
respectively.
The
contingent
equity
liabilities
were
adjusted
to
fair
value
immediately
prior
to
the
completion
of
the
IPO,
and
upon
issuance
of
the
common
shares,
the
contingent
equity
liabilities
were
reclassified
to
equity.
Loss from Equity Method Investment
From
August
2016
through
December
2017,
we
purchased
shares
in
Kleo
Pharmaceuticals,
Inc.,
a
privately-held
Delaware
corporation
("Kleo").
As
of
December
31,
2017
and
2016,
we
owned
approximately
43.3%
and
18.6%,
respectively,
of
the
outstanding
shares
of
Kleo's
common
stock.
We
account
for
our
investment
in
Kleo
under
the
equity
method
of
accounting.
As
a
result,
our
proportionate
share
of
Kleo's
net
income
or
loss
each
reporting
period
is
included
in
other
income
(expense),
net
in
our
consolidated
statement
of
operations
and
comprehensive
loss
and
results
in
a
corresponding
adjustment
to
the
carrying
value
of
the
equity
method
investment
on
our
consolidated
balance
sheet.
Accretion of Beneficial Conversion Feature
In
connection
with
the
second
tranche
closing
of
Series
A
preferred
shares
in
February
2017,
we
determined
that
the
conversion
option
associated
with
the
shares
sold
met
the
definition
of
a
beneficial
conversion
feature
("BCF")
as
the
fair
value
of
the
underlying
common
shares
exceeded
the
adjusted
conversion
price.
The
BCF
was
recognized
at
its
fair
value
of
$12.0
million
as
a
reduction
to
the
carrying
value
of
the
Series
A
preferred
shares
and
a
corresponding
adjustment
to
additional
paid-in
capital.
In
May
2017,
upon
the
completion
our
IPO,
all
of
the
outstanding
Series
A
preferred
shares
were
automatically
converted
into
an
aggregate
of
9,358,560
common
shares.
Upon
conversion
of
the
Series
A
preferred
shares,
the
remaining
unamortized
BCF
was
reclassified
to
additional
paid-in
capital
as
a
deemed
dividend.
136
Table
of
Contents
Provision for Income Taxes
As
a
company
incorporated
in
the
British
Virgin
Islands
("BVI"),
we
are
principally
subject
to
taxation
in
the
BVI.
Under
the
current
laws
of
the
BVI,
tax
on
a
company's
income
is
assessed
at
a
zero
percent
tax
rate.
As
a
result,
we
have
not
recorded
any
income
tax
benefits
from
its
losses
incurred
in
the
BVI
during
each
reporting
period,
and
no
net
operating
loss
carryforwards
will
be
available
to
us
for
those
losses.
Our
BVI
company
has
historically
outsourced
all
of
the
research
and
clinical
development
for
its
programs
under
a
master
services
agreement
with
BPI.
As
a
result
of
providing
services
under
this
agreement,
BPI
was
profitable
during
the
years
ended
December
31,
2017
and
2016,
and
BPI
is
subject
to
taxation
in
the
United
States.
Our
tax
provision
includes
the
effects
of
consolidating
the
results
of
operations
of
BPI,
either
as
a
variable
interest
entity
for
periods
through
the
acquisition
of
BPI,
or
as
of
December
31,
2017
and
2016,
as
our
wholly
owned
subsidiary.
Due
to
BPI's
history
of
cumulative
losses
through
September
30,
2016,
we
had
recorded
no
tax
benefits
for
the
losses
incurred
by
BPI
through
that
date
and
had
recorded
a
full
valuation
allowance
against
BPI's
deferred
tax
assets,
which
consisted
primarily
of
its
U.S.
net
operating
loss
carryforwards
for
all
periods
through
September
30,
2016.
During
the
three
months
ended
December
31,
2016,
we
fully
utilized
BPI's
remaining
U.S.
net
operating
loss
carryforwards
due
to
BPI's
profitability,
and
we
recorded
a
full
release
of
the
valuation
allowance
of
$9
due
to
management's
reassessment
of
the
amount
of
deferred
tax
assets
that
it
believes
are
more
likely
than
not
to
be
realized.
As
a
result,
we
recorded
an
income
tax
provision
for
the
first
time
during
the
three
months
ended
December
31,
2016.
As
of
December
31,
2017,
we
evaluated
our
deferred
tax
assets
and
determined
that
a
full
valuation
allowance
on
these
assets
was
appropriate
due
to
excess
research
and
development
credits.
We
recorded
an
income
tax
provision
during
the
year
ended
December
31,
2017
of
$
1.0
million
which
primarily
represents
U.S.
Federal
alternative
minimum
tax
and
state
taxes
related
to
BPI's
profitable
operations
in
the
United
States.
Net Income (Loss) Attributable to Non-Controlling Interests
From
our
inception
through
December
30,
2016,
we
consolidated
the
results
of
BPI
as
a
variable
interest
entity.
Although
we
did
not
have
an
ownership
interest
in
BPI
through
that
date,
we
determined
that
BPI
was
a
variable
interest
entity,
of
which
we
were
the
primary
beneficiary.
Net
income
(loss)
attributable
to
non-controlling
interests
in
our
consolidated
statement
of
operations
and
comprehensive
loss
through
December
30,
2016
consisted
of
the
portion
of
the
net
income
or
loss
of
BPI
that
was
not
allocated
to
us.
On
December
31,
2016,
we
acquired
100%
of
the
issued
and
outstanding
shares
of
BPI.
As
a
result,
for
the
year
ended
December
31,
2017
and
for
periods
thereafter,
we
no
longer
report
any
non-controlling
interests
related
to
BPI.
137
Table
of
Contents
Results
of
Operations
Comparison of the Years Ended December 31, 2017 and 2016
The
following
table
summarizes
our
results
of
operations
for
the
years
ended
December
31,
2017
and
2016:
Operating
expenses:
Research
and
development
General
and
administrative
Total
operating
expenses
Loss
from
operations
Other
income
(expense):
Interest
expense
Change
in
fair
value
of
warrant
liability
Change
in
fair
value
of
derivative
liability
Change
in
fair
value
of
contingent
equity
liability
Loss
from
equity
method
investment
Total
other
income
(expense),
net
Loss
before
provision
for
income
taxes
Provision
for
income
taxes
Net
loss
and
comprehensive
loss
Net
loss
attributable
to
non-controlling
interests
Accretion
of
beneficial
conversion
feature
Year
Ended
December
31,
2017
2016
(in
thousands)
Change
$
89,441
$
18,141
107,582
(107,582)
55,529
$
5,109
60,638
(60,638)
33,912
13,032
46,944
(46,944)
(906)
(3,241)
512
(13,082)
(1,885)
(18,602)
(126,184)
1,006
(127,190)
—
(12,006)
(385)
154
(65)
(2,263)
(247)
(2,806)
(63,444)
90
(63,534)
143
—
(521)
(3,395)
577
(10,819)
(1,638)
(15,796)
(62,740)
916
(63,656)
(143)
(12,006)
Net
loss
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
$ (139,196) $ (63,677) $ (75,519)
Research and Development Expenses
Direct
research
and
development
expenses
by
program:
BHV-0223
Trigriluzole
Rimegepant
BHV-3500
BHV-5000
Unallocated
research
and
development
costs:
Personnel
related
(including
share-based
compensation)
Other
Total
research
and
development
expenses
Year
Ended
December
31,
2017
2016
(in
thousands)
Change
$
3,950
$
13,139
48,122
5,728
1,918
380
$
11,761
25,139
—
13,550
14,304
2,280
4,137
562
$ 89,441
$ 55,529
$
3,570
1,378
22,983
5,728
(11,632)
10,167
1,718
33,912
Research
and
development
expenses
were
$89.4
million
for
the
year
ended
December
31,
2017,
compared
to
$55.5
million
for
the
year
ended
December
31,
2016.
The
increase
of
$33.9
million
was
138
Table
of
Contents
primarily
due
to
increases
of
$11.9
million
in
personnel
and
unallocated
external
costs,
$23.0
million
in
direct
costs
for
our
rimegepant
program,
$5.7
million
in
direct
costs
for
our
BHV-3500
program,
$3.6
million
in
direct
costs
for
our
BHV-0223
program,
partially
offset
by
a
decrease
of
$11.6
million
in
direct
costs
for
our
BHV-5000
program.
The
increase
in
direct
costs
for
rimegepant
was
primarily
due
to
costs
of
Phase
3
trials,
long-term
safety
study
and
related
drug
supply,
as
well
as
a
$5.0
million
payment
to
BMS
upon
initiation
of
our
Phase
3
trial.
The
increase
in
costs
for
BHV-3500
were
primarily
related
to
formulation
development
and
toxicology
for
this
program.
The
increases
in
direct
costs
for
our
BHV-0223
program
was
primarily
a
result
of
our
bioequivalence
study
for
this
program.
The
decrease
in
direct
costs
for
our
BHV-5000
program
during
2017
primarily
related
to
the
costs
associated
with
acquiring
technology
under
our
licensing
agreement
with
AstraZeneca
in
October
2016
which
did
not
recur
in
2017.
Upon
acquiring
the
technology,
we
accrued
a
liability
of
$8.6
million
for
our
contingent
obligation
to
issue
equity
to
AstraZeneca
and
paid
an
upfront
license
fee
of
$5.0
million
under
the
agreement,
for
total
expense
of
$13.6
million
during
the
year
ended
December
31,
2016.
During
the
year
ended
December
31,
2017,
we
incurred
direct
costs
of
$1.9
million
primarily
associated
with
pre-clinical
studies
which
commenced
in
the
second
quarter
of
2017
and
start-up
activities
related
to
our
Phase
1
clinical
trial
which
commenced
in
the
fourth
quarter
of
2017.
The
increase
in
personnel
costs
of
$10.2
million
in
personnel-related
costs
was
primarily
as
a
result
of
hiring
additional
personnel
to
support
our
expanding
number
of
clinical
trials
and
preparing
for
potential
commercialization
of
BHV-0223.
Our
headcount
in
research
and
development
increased
to
29
as
of
December
31,
2017,
compared
to
6
as
of
December
31,
2016.
Personnel-related
costs
for
the
years
ended
December
31,
2017
and
2016
included
share-based
compensation
expense
of
$6.9
million
and
$2.4
million,
respectively.
The
increase
in
share-based
compensation
was
a
result
of
hiring
new
personnel
and
the
impact
of
higher
stock
price
on
both
our
employee
and
non-employee
share-based
compensation
expense.
The
increase
in
other
unallocated
costs
was
primarily
due
to
increased
use
of
research
and
development
consultants
that
support
activities
across
multiple
drug
candidate
programs
as
well
as
the
increased
purchase
of
supplies
used
across
all
programs.
General and Administrative Expenses
General
and
administrative
expenses
were
$18.1
million
for
the
year
ended
December
31,
2017,
compared
to
$5.1
million
for
the
year
ended
December
31,
2016.
The
increase
of
$13.0
million
was
primarily
due
to
increases
of
$5.9
million
in
personnel-related
costs,
including
share-based
compensation,
due
to
the
hiring
of
additional
personnel
in
our
general
and
administrative
functions,
$5.8
million
in
professional
fees
supporting
ongoing
business
operations,
including
increased
compliance
and
other
costs
associated
with
becoming
a
public
company.
Personnel-related
costs
for
the
years
ended
December
31,
2017
and
2016
included
share-
based
compensation
expense
of
$6.3
million
and
$2.2
million,
respectively.
The
increase
in
share-based
compensation
was
a
result
of
hiring
new
personnel
and
the
impact
of
higher
stock
price
on
both
our
employee
and
non-employee
share-based
compensation
expense.
Other Income (Expense), Net
Other
income
(expense),
net
was
a
net
expense
of
$18.6
million
for
the
year
ended
December
31,
2017,
compared
to
net
expense
of
$2.8
million
for
the
year
ended
December
31,
2016.
The
increase
of
$15.8
million
in
net
expense
was
primarily
due
to
an
increase
of
$10.8
million
in
the
fair
value
of
the
contingent
equity
liabilities
associated
with
our
license
agreements
with
BMS
and
AstraZeneca,
an
increase
of
$3.4
million
in
fair
value
of
the
warrant
liabilities
associated
with
the
warrants
issued
in
139
Table
of
Contents
connection
with
our
Wells
Fargo
credit
agreement
and
an
increase
of
$1.6
million
of
loss
from
equity
method
investment
which
also
reflects
the
increased
ownership
percentage
during
2017.
Provision for Income Taxes
We
recorded
a
provision
for
income
taxes
of
$1.0
million
for
the
year
ended
December
31,
2017,
compared
to
$0.1
million
for
the
year
ended
December
31,
2016.
We
recorded
a
tax
provision
for
the
year
ended
December
31,
2017
for
the
U.S.
Federal
alternative
minimum
tax
and
state
income
taxes
related
to
BPI's
profitable
operations
in
the
United
States.
Comparison of the Years Ended December 31, 2016 and 2015
The
following
table
summarizes
our
results
of
operations
for
the
years
ended
December
31,
2016
and
2015:
Operating
expenses:
Research
and
development
General
and
administrative
Total
operating
expenses
Loss
from
operations
Other
income
(expense):
Interest
expense
Change
in
fair
value
of
warrant
liability
Change
in
fair
value
of
derivative
liability
Change
in
fair
value
of
contingent
equity
liability
Loss
from
equity
method
investment
Total
other
income
(expense),
net
Loss
before
provision
for
income
taxes
Provision
for
income
taxes
Net
loss
and
comprehensive
loss
Net
loss
attributable
to
non-controlling
interests
Year
Ended
December
31,
2016
2015
(in
thousands)
Change
$
55,529
$
5,109
60,638
(60,638)
7,559
$
2,137
9,696
(9,696)
47,970
2,972
50,942
(50,942)
(385)
154
(65)
(2,263)
(247)
(2,806)
(63,444)
90
—
—
(370)
—
—
(370)
(10,066)
—
(63,534)
143
(10,066)
(4)
(385)
154
305
(2,263)
(247)
(2,436)
(53,378)
90
(53,468)
147
Net
loss
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
$ (63,677) $ (10,062) $ (53,615)
140
Table
of
Contents
Research and Development Expenses
Direct
research
and
development
expenses
by
program:
BHV-0223
Trigriluzole
Rimegepant
BHV-3500
BHV-5000
Unallocated
research
and
development
costs:
Personnel
related
(including
share-based
compensation)
Other
Total
research
and
development
expenses
Year
Ended
December
31,
2016
2015
(in
thousands)
Change
$
380
$ 1,627
$ (1,247)
8,264
25,139
—
13,550
3,497
—
—
—
11,761
25,139
—
13,550
4,137
562
2,222
42
$ 55,529
$ 7,559
$ 47,970
1,915
520
Research
and
development
expenses
were
$55.5
million
for
the
year
ended
December
31,
2016,
compared
to
$7.6
million
for
the
year
ended
December
31,
2015.
The
increase
of
$48.0
million
was
primarily
due
to
increases
of
$25.1
million
in
direct
costs
for
our
rimegepant
program,
$13.6
million
in
direct
costs
for
our
BHV-5000
program,
$8.3
million
in
spending
related
to
our
trigriluzole
program
and
$2.3
million
in
research
and
discovery
and
unallocated
costs,
all
partially
offset
by
a
decrease
of
$1.2
million
in
direct
costs
for
our
BHV-0223
program.
The
increase
in
direct
costs
for
our
rimegepant
program
was
primarily
due
to
an
accrual
of
a
liability
of
$13.1
million
for
our
contingent
obligation
to
issue
equity
to
BMS
under
our
license
agreement
with
BMS
and
the
payment
of
$9.0
million
in
license
fees
under
that
agreement.
The
increase
in
direct
costs
for
our
BHV-5000
program
was
due
to
an
accrual
of
a
liability
of
$8.6
million
for
our
contingent
obligation
to
issue
equity
to
AstraZeneca
under
our
license
agreement
and
the
payment
of
$5.0
million
in
license
fees
under
that
agreement.
The
increase
in
direct
costs
for
our
trigriluzole
program
primarily
related
to
an
animal
toxicity
study
that
commenced
in
December
2015.
The
decrease
in
direct
costs
for
our
BHV-0223
program
was
due
to
formulation
work
and
Phase
1
clinical
trial
work
that
was
completed
during
the
year
ended
December
31,
2015.
Our
Phase
2
clinical
trial
of
BHV-0223
had
not
begun
as
of
December
31,
2016.
The
increase
in
unallocated
costs
was
primarily
due
to
an
increase
of
$2.2
million
in
personnel-related
costs,
including
share-based
compensation,
as
a
result
of
hiring
additional
personnel
in
our
research
and
development
department.
Personnel-related
costs
for
the
year
ended
December
31,
2016
and
2015
included
share-
based
compensation
expense
of
$2.4
million
and
$1.5
million,
respectively.
General and Administrative Expenses
General
and
administrative
expenses
were
$5.1
million
for
the
year
ended
December
31,
2016,
compared
to
$2.1
million
for
the
year
ended
December
31,
2015.
The
increase
of
$3.0
million
was
primarily
due
to
increases
of
$1.9
million
in
personnel-related
costs,
including
share-based
compensation,
$1.0
million
in
professional
fees
and
$0.1
million
in
facility-related
costs.
Personnel-related
costs
for
the
year
ended
December
31,
2015
and
2016
included
share-based
compensation
expense
of
$2.2
million
and
$1.3
million,
respectively.
The
increase
in
personnel-related
costs
was
due
to
the
hiring
of
additional
personnel
in
our
general
and
administrative
functions.
Professional
fees
increased
due
to
costs
associated
with
the
preparation,
audit
and
review
of
our
financial
statements
as
well
as
ongoing
business
operations.
141
Table
of
Contents
Other Income (Expense), Net
Other
income
(expense),
net
was
a
net
expense
of
$2.8
million
for
the
year
ended
December
31,
2016,
compared
to
$0.4
million
for
the
year
ended
December
31,
2015.
The
increase
of
$2.4
million
in
net
expense
was
primarily
due
to
an
increase
of
$2.3
million
in
the
fair
value
of
the
contingent
equity
liability
associated
with
our
license
agreements
with
BMS
and
AstraZeneca
and
an
increase
in
interest
expense
of
$0.4
million
due
to
interest
on
borrowings
under
our
credit
agreement
with
Wells
Fargo
that
we
entered
into
in
August
2016.
These
increases
in
other
expense
were
partially
offset
by
a
decrease
of
$0.3
million
in
the
change
in
the
fair
value
of
the
derivative
liability
associated
with
our
license
agreement
with
Yale.
Provision for Income Taxes
We
recorded
a
provision
for
income
taxes
of
$0.1
million
for
the
year
ended
December
31,
2016,
compared
to
no
provision
for
income
taxes
for
the
year
ended
December
31,
2015.
We
recorded
a
tax
provision
in
2016
for
the
U.S.
federal
and
state
income
taxes
of
BPI's
profitable
operations
in
the
United
States
and
due
to
the
fact
that,
in
the
three
months
ended
December
31,
2016,
we
fully
utilized
BPI's
remaining
U.S.
net
operating
loss
carryforwards.
Liquidity
and
Capital
Resources
Since
our
inception,
we
have
not
generated
any
revenue
and
have
incurred
significant
operating
losses
and
negative
cash
flows
from
our
operations.
Prior
to
the
completion
of
our
IPO
in
May
2017,
we
funded
our
operations
primarily
with
proceeds
from
the
sale
of
preferred
shares
and
common
shares
through
private
placements
and
borrowings
under
our
credit
agreement
with
Wells
Fargo.
Prior
to
the
completion
of
our
IPO,
we
had
received
net
cash
proceeds
of
$96.4
million
from
sales
of
our
preferred
shares
and
common
shares
and
gross
proceeds
of
$5.0
million
from
borrowings
under
the
credit
agreement.
On
May
3,
2017,
our
registration
statement
on
Form
S-1
relating
to
our
IPO
was
declared
effective
by
the
SEC.
The
IPO
closed
on
May
9,
2017
and
we
issued
and
sold
9,900,000
common
shares
at
a
public
offering
price
of
$17.00
per
share,
resulting
in
net
proceeds
of
$152.7
million
after
deducting
underwriting
discounts
and
commissions
and
other
offering
expenses.
In
addition,
on
May
9,
2017,
the
underwriters
of
our
IPO
fully
exercised
their
option
to
purchase
additional
shares,
and
on
May
11,
2017,
we
issued
and
sold
an
additional
1,485,000
common
shares,
resulting
in
additional
net
proceeds
to
us
of
$23.5
million,
after
deducting
underwriting
discounts
and
commissions
and
other
offering
expenses.
The
aggregate
net
proceeds
we
received
from
the
IPO,
after
deducting
underwriting
discounts
and
commissions
and
offering
expenses,
were
$176.1
million.
Upon
the
closing
of
the
IPO,
we
paid
principal
and
interest
aggregating
$0.6
million
due
under
the
notes
payable
to
related
parties.
As
of
December
31,
2017,
we
had
cash
of
$131.5
million.
Cash
in
excess
of
immediate
requirements
is
invested
in
non-interest-bearing
accounts
with
a
view
to
liquidity
and
capital
preservation.
142
Table
of
Contents
Cash Flows
The
following
table
summarizes
our
cash
flows
for
each
of
the
periods
presented:
Net
cash
used
in
operating
activities
Net
cash
used
in
investing
activities
Net
cash
provided
by
financing
activities
Net
increase
(decrease)
in
cash
Operating Activities
2017
2015
Year
Ended
December
31,
2016
(in
thousands)
$ (94,815) $ (29,504) $ (5,625)
(3)
5,316
(312)
209,759
$ 107,903
$
(3,153)
54,762
22,105
$
(7,041)
During
the
year
ended
December
31,
2017,
operating
activities
used
$94.8
million
of
cash,
resulting
from
our
net
loss
of
$128.0
million,
including
a
$5.0
million
payment
to
BMS
upon
commencement
of
our
Phase
3
trial,
partially
offset
by
non-cash
charges
of
$31.8
million
and
net
cash
provided
by
changes
in
our
operating
assets
and
liabilities
of
$1.4
million.
Net
cash
provided
by
changes
in
our
operating
assets
and
liabilities
for
the
year
ended
December
31,
2017
consisted
primarily
of
a
$1.4
million
increase
in
accrued
expenses
and
a
$4.0
million
increase
in
accounts
payable
partially
offset
by
an
increase
of
$4.0
million
in
prepaid
expense
and
other
current
assets.
The
increases
in
accrued
expenses,
accounts
payable
and
prepaid
expenses
and
other
current
assets
were
primarily
due
to
increases
in
clinical
trial
activities,
as
well
as
professional
fees
associated
with
the
preparation,
audit
and
review
of
our
financial
statements.
During
the
year
ended
December
31,
2016
operating
activities
used
$29.5
million
of
cash,
resulting
from
our
net
loss
of
$63.5
million,
partially
offset
by
non-
cash
charges
of
$31.2
million
and
net
cash
provided
by
changes
in
our
operating
assets
and
liabilities
of
$2.8
million.
Net
cash
provided
by
changes
in
our
operating
assets
and
liabilities
for
the
year
ended
December
31,
2016
consisted
primarily
of
a
$2.1
million
increase
in
accrued
expenses
and
a
$0.7
million
increase
in
accounts
payable.
The
increase
in
accrued
expenses
and
accounts
payable
was
due
to
our
increased
level
of
operating
activities
and
the
timing
of
vendor
invoicing
and
payments.
During
the
year
ended
December
31,
2015,
operating
activities
used
$5.6
million
of
cash,
resulting
from
our
net
loss
of
$10.1
million
and
net
cash
used
in
changes
in
our
operating
assets
and
liabilities
of
$0.3
million,
partially
offset
by
non-cash
charges
of
$4.7
million.
Net
cash
used
in
changes
in
our
operating
assets
and
liabilities
for
the
year
ended
December
31,
2015
consisted
primarily
of
a
$0.4
million
increase
in
prepaid
expenses
and
other
current
assets
as
a
result
of
prepayments
under
our
ongoing
research,
development
and
clinical
trial
work
performed
by
CROs,
partially
offset
by
a
$0.1
million
increase
in
accrued
expenses.
The
increase
in
accrued
expenses
was
due
to
our
increased
level
of
operating
activities
and
the
timing
of
vendor
invoicing
and
payments.
Investing Activities
During
the
year
ended
December
31,
2017,
we
used
$7.0
million
of
cash
in
investing
activities,
primarily
consisting
of
$6.6
million
of
our
purchases
of
6,674,543
shares
of
Kleo
common
stock,
comprising
ownership
of
43.3%
ownership
of
Kleo,
and
$0.5
million
of
our
purchases
of
property
and
equipment.
Upon
completion
of
the
final
tranche
investment
obligation
of
$1.4
million
to
Kleo
in
January
2018,
we
now
own
a
total
of
11,049,543
shares
of
Kleo
comprising
a
46.6%
ownership
in
Kleo.
During
the
year
ended
December
31,
2016,
we
used
$3.2
million
of
cash
in
investing
activities,
primarily
consisting
of
our
initial
purchase
of
3,000,000
shares
of
Kleo
common
stock.
143
Table
of
Contents
Financing Activities
During
the
year
ended
December
31,
2017,
net
cash
provided
by
financing
activities
was
$209.8
million,
primarily
consisting
of
net
proceeds
of
$176.1
million
from
our
issuance
of
common
shares
in
our
IPO
and
$38.6
million
from
our
issuance
of
Series
A
preferred
shares,
partially
offset
by
our
repayment
of
notes
payable
of
$5.0
million
in
connection
with
the
Wells
Fargo
credit
agreement.
During
the
year
ended
December
31,
2016,
net
cash
provided
by
financing
activities
was
$54.8
million,
primarily
consisting
of
$38.6
million
in
net
proceeds
from
our
issuance
of
Series
A
preferred
shares,
$11.3
million
in
net
proceeds
from
our
issuance
of
common
shares
and
$5.0
million
in
proceeds
from
our
Wells
Fargo
credit
agreement.
During
the
year
ended
December
31,
2015,
net
cash
provided
by
financing
activities
was
$5.3
million,
consisting
of
net
proceeds
of
$4.8
million
from
our
issuance
of
common
shares
and
net
proceeds
of
$0.5
million
from
the
collection
of
a
payment
from
Portage
Biotech,
Inc.
in
connection
with
its
initial
equity
investment
in
our
company.
Credit Agreement
On
August
30,
2016,
we
entered
into
a
one-year
credit
agreement
with
Wells
Fargo
providing
for
a
term
loan
in
the
principal
amount
of
$5.0
million
(the
"Credit
Agreement")
and
we
borrowed
the
full
$5.0
million
available.
Our
obligations
under
the
Credit
Agreement
were
guaranteed
by
a
member
of
our
board
of
directors,
who
is
also
a
shareholder.
A
second
member
of
our
board
of
directors
and
shareholder
entered
into
a
separate
agreement
with
the
guaranteeing
director
to
share
the
guarantee
responsibilities
under
the
Credit
Agreement.
In
connection
with
their
respective
guaranties
of
the
loan,
Biohaven
issued
to
each
of
these
two
directors
an
immediately
exercisable
five
year
warrant
to
purchase
107,500
common
shares
at
an
exercise
price
of
$9.2911
per
share.
The
Credit
Agreement
was
fully
satisfied
with
a
principal
and
interest
repayment
to
Wells
Fargo
as
of
August
31,
2017.
Notes Payable to Related Parties
On
December
31,
2016,
we
entered
into
stock
purchase
agreements
with
each
of
the
stockholders
of
BPI,
acquiring
100%
of
the
issued
and
outstanding
shares
of
BPI
for
aggregate
purchase
consideration
of
$0.6
million.
We
funded
the
acquisition
through
the
issuance
of
promissory
notes
to
each
of
the
former
stockholders
of
BPI.
The
three
former
beneficial
stockholders
of
BPI
are
shareholders
of
our
company
and
currently
serve
as
our
chief
executive
officer,
our
chief
medical
officer
and
the
chairman
of
our
board
of
directors,
respectively.
Upon
consummation
of
our
IPO,
the
promissory
notes
became
due,
and
we
fully
satisfied
the
obligations
to
the
related
parties
with
a
principal
and
interest
payment
aggregating
$0.6
million.
Funding Requirements
We
expect
our
expenses
to
increase
in
connection
with
our
ongoing
activities,
particularly
as
we
advance
the
preclinical
activities
and
clinical
trials
of
our
product
candidates.
In
addition,
we
expect
to
incur
additional
costs
associated
with
operating
as
a
public
company.
Our
costs
will
also
increase
as
we:
•
•
•
complete
our
two
Phase
3
clinical
trials
of
rimegepant,
Phase
1
supporting
trials
and
our
long-term
safety
study;
complete
the
ongoing
extension
phase
of
the
Phase
2/3
clinical
trial
of
trigriluzole
in
SCA,
conduct
our
trigriluzole
OCD
trial,
patient
tolerability
studies
and
NDA
preparation
for
BHV-0223;
complete
our
planned
Phase
1
clinical
trial
of
BHV-5000
and
support
activities
for
later-phase
studies
and
clinical
trials;
144
Table
of
Contents
•
•
•
•
•
•
•
•
•
•
•
progress
formulation,
toxicology,
and
clinical
development
in
preparation
of
our
NDA
filing
and
planned
clinical
trials
of
BHV-3500;
submit
INDs
and
initiate
randomized
controlled
trials
of
trigriluzole
in
Alzheimer's
disease;
continue
to
initiate
and
progress
other
supporting
studies
required
for
regulatory
approval
of
our
product
candidates,
including
long-term
safety
studies,
drug-drug
interaction
studies,
preclinical
toxicology
and
carcinogenicity
studies;
complete
commercial-grade
formulation
work
and
stability
testing
for
all
of
our
programs;
seek
regulatory
approvals
for
any
product
candidates
that
successfully
complete
clinical
trials;
establish
a
sales,
marketing
and
distribution
infrastructure
in
anticipation
of
commercializing
any
product
candidates
for
which
we
may
obtain
marketing
approval
and
intend
to
commercialize
on
our
own
or
jointly;
hire
additional
clinical,
medical,
and
development
personnel;
expand
our
infrastructure
and
facilities
to
accommodate
our
growing
employee
base;
support
collaborations
with
external
institutions
or
agencies
for
the
purpose
of
ongoing
development
and
future
commercialization
of
our
product
candidates;
maintain,
expand
and
protect
our
intellectual
property
and
portfolio
pipeline;
and
pay
milestones
or
royalties
under
existing
contractual
arrangements
and/or
acquire
or
in-license
other
product
candidates
and
technologies.
Without
additional
external
funding,
we
expect
that
our
existing
cash
will
be
sufficient
to
fund
our
planned
operating
expenses,
financial
commitments
and
other
cash
requirements
through
December
31,
2018.
The
assumption
for
cash
usage
through
this
date
assumes
that
planned
programs
and
expenditures
continue
and
that
we
do
not
reduce,
stop
or
curtail
programs
or
other
spending.
Beyond
that
point,
we
will
need
to
raise
additional
capital
to
finance
our
operations,
which
cannot
be
assured.
We
have
concluded
that
this
circumstance
raises
substantial
doubt
about
our
ability
to
continue
as
a
going
concern
within
one
year
after
the
issuance
date
of
our
financial
statements
for
the
year
ended
December
31,
2017.
We
have
based
these
estimates
on
assumptions
that
may
prove
to
be
wrong,
and
we
could
utilize
our
available
capital
resources
sooner
than
we
expect.
We
expect
that
we
will
require
additional
capital
to
commercialize
rimegepant,
if
we
receive
regulatory
approval,
and
to
pursue
in-licenses
or
acquisitions
of
other
product
candidates.
If
we
receive
regulatory
approval
for
rimegepant,
trigriluzole,
BHV-0223,
or
our
other
product
candidates,
we
expect
to
incur
commercialization
expenses
related
to
product
manufacturing,
sales,
marketing
and
distribution,
depending
on
where
we
choose
to
commercialize.
Because
of
the
numerous
risks
and
uncertainties
associated
with
research,
development
and
commercialization
of
pharmaceutical
product
candidates,
we
are
unable
to
estimate
the
exact
amount
of
our
working
capital
requirements.
Our
future
funding
requirements
will
depend
on
and
could
increase
significantly
as
a
result
of
many
factors,
including:
•
•
•
the
scope,
progress,
results
and
costs
of
researching
and
developing
our
product
candidates,
and
conducting
preclinical
studies
and
clinical
trials;
the
costs,
timing
and
outcome
of
regulatory
review
of
our
product
candidates;
the
costs
of
future
activities,
including
product
sales,
medical
affairs,
marketing,
manufacturing
and
distribution,
for
any
of
our
product
candidates
for
which
we
receive
marketing
approval;
145
Table
of
Contents
•
•
•
•
•
•
•
the
revenue,
if
any,
received
from
commercial
sale
of
our
products,
should
any
of
our
product
candidates
receive
marketing
approval;
the
costs
and
timing
of
hiring
new
employees
to
support
our
continued
growth;
the
costs
of
preparing,
filing,
and
prosecuting
patent
applications,
maintaining
and
enforcing
our
intellectual
property
rights
and
defending
intellectual
property-related
claims;
the
extent
to
which
we
acquire
or
in-license
other
product
candidates
and
technologies;
the
costs
of
manufacturing
commercial-grade
product
and
necessary
inventory
to
support
commercial
launch;
the
costs
associated
with
payment
of
milestones
and
royalties
under
existing
contractual
arrangements
and/or
in-licensing
additional
products
candidates
to
augment
our
current
pipeline;
and
the
timing,
receipt
and
amount
of
sales
of,
or
milestone
payments
related
to
or
royalties
on,
our
current
or
future
product
candidates,
if
any.
Until
such
time,
if
ever,
that
we
can
generate
product
revenue
sufficient
to
achieve
profitability,
we
expect
to
finance
our
cash
needs
through
a
combination
of
public
and
private
equity
offerings,
debt
financings,
other
third-party
funding,
strategic
alliances,
licensing
arrangements
or
marketing
and
distribution
arrangements.
To
the
extent
that
we
raise
additional
capital
through
the
sale
of
equity
or
convertible
debt
securities,
the
ownership
interest
of
our
existing
shareholders
will
be
diluted,
and
the
terms
of
these
securities
may
include
liquidation
or
other
preferences
that
adversely
affect
the
rights
of
our
existing
shareholders.
Debt
financing
and
preferred
equity
financing,
if
available,
may
involve
agreements
that
include
covenants
limiting
or
restricting
our
ability
to
take
specific
actions,
such
as
incurring
additional
debt,
making
capital
expenditures
or
declaring
dividends.
If
we
raise
additional
funds
through
other
third-party
funding,
strategic
alliances,
licensing
arrangements
or
marketing
and
distribution
arrangements,
we
may
have
to
relinquish
valuable
rights
to
our
technologies,
future
revenue
streams,
research
programs
or
product
candidates
or
grant
licenses
on
terms
that
may
not
be
favorable
to
us.
If
we
are
unable
to
raise
additional
funds
through
equity
or
debt
financings
when
needed,
we
will
be
required
to
delay,
limit,
reduce
or
terminate
our
product
development
or
future
commercialization
efforts
or
grant
rights
to
develop
and
market
products
or
product
candidates
that
we
would
otherwise
prefer
to
develop
and
market
ourselves.
Contractual
Obligations
and
Commitments
The
following
table
summarizes
our
contractual
obligations
as
of
December
31,
2017
and
the
effects
that
such
obligations
are
expected
to
have
on
our
liquidity
and
cash
flows
in
future
periods:
Total
Less
than
1
Year
Payments
Due
by
Period
1
to
3
Years
(in
thousands)
4
to
5
Years
More
than
5
Years
Research
commitments(1)
Lease
commitments(2)
Share
purchase
obligation(3)
Total
$
8,149
$
1,496
1,375
$ 11,020
$
8,092
$
220
1,375
9,687
$
57
$ —
$
606
—
663
$
429
—
429
$
—
241
—
241
(1)
Amounts
in
the
table
reflect
commitments
for
costs
associated
with
external
CROs
and
CMOs
engaged
to
conduct
clinical
development
activities
and
clinical
trials
as
well
as
to
manufacture
clinical
trial
materials.
146
Table
of
Contents
(2)
(3)
Amounts
in
the
tables
reflects
our
future
minimum
lease
payments
under
our
operating
and
failed
sales-leaseback
leases
for
our
office
space
and
related
property
in
New
Haven,
Connecticut
that
expire
between
October
31,
2018
and
September
30,
2025.
Amount
in
the
table
reflects
our
commitment
to
purchase
an
aggregate
of
1,375,000
shares
of
common
stock
of
Kleo
in
satisfaction
of
the
fourth
and
final
installment
under
the
securities
purchase
agreement.
In
January
2018,
we
purchased
the
1,375,000
shares
of
Kleo
common
stock
for
consideration
of
$1.4
million
pursuant
to
our
commitment.
Clinical
development
commitments
in
the
preceding
table
include
agreements
that
are
enforceable
and
legally
binding
on
us
and
that
specify
all
significant
terms,
including
fixed
or
minimum
quantities
to
be
purchased;
fixed,
minimum
or
variable
price
provisions;
and
the
approximate
timing
of
the
transaction.
For
obligations
with
cancellation
provisions,
the
amounts
included
in
the
preceding
table
are
limited
to
the
non-cancelable
portion
of
the
agreement
terms
or
the
minimum
cancellation
fee.
Under
various
agreements
with
third-party
licensors
and
collaborators,
we
have
agreed
to
make
milestone
payments
and
pay
royalties
and
annual
maintenance
fees
to
third
parties
and
to
meet
due
diligence
requirements
based
upon
specified
milestones.
We
have
not
included
any
contingent
payment
obligations,
such
as
milestones,
royalties,
or
due
diligence,
in
the
table
above
as
the
amount,
timing
and
likelihood
of
such
payments
are
not
known.
We
have
not
included
any
of
the
annual
maintenance
fee
payments
in
the
above
table,
as
although
the
amount
and
timing
are
known,
we
cannot
currently
determine
the
final
termination
dates
of
the
agreements
and,
as
a
result,
we
cannot
determine
the
total
amounts
of
such
payments
we
will
be
required
to
make
under
the
agreements.
We
do
not
anticipate
making
material
payments
related
to
these
arrangements
in
the
next
12
months.
Under
our
license
agreement
with
BMS,
we
are
obligated
to
make
additional
development
milestone
payments
of
up
to
$122.5
million
for
rimegepant
or
a
derivative
thereof
and
up
to
$74.5
million
for
other
covered
product
candidates,
as
well
as
up
to
$150.0
million
in
commercial
milestone
payments
for
each
licensed
product
and
tiered
royalties
based
on
net
sales
of
licensed
products
under
the
agreement
at
percentages
in
the
low
to
mid-teens.
Under
our
license
agreement
with
AstraZeneca,
we
are
obligated
to
make
development
milestone
payments
of
up
to
$30.0
million
with
respect
to
Rett
syndrome
and
up
to
$60.0
million
for
any
other
indication,
as
well
as
commercial
milestone
payments
of
up
to
$120.0
million
for
all
products
licensed
under
the
agreement
and
tiered
royalties
based
on
net
sales
of
licensed
products
under
the
agreement
at
mid-single-digit
to
low
double-digit
percentages.
Under
our
license
agreement
with
Yale,
we
are
obligated
to
make
regulatory
milestone
payments
of
up
to
$2.0
million,
as
well
as
royalties
based
on
net
sales
of
products
from
the
licensed
patents
at
a
low
single-digit
percentage,
subject
to
a
minimum
amount
of
up
to
$1.0
million
per
year.
Under
our
license
agreement
with
Catalent
U.K.
Swindon
Zydis
Limited,
a
subsidiary
of
Catalent,
Inc.
("Catalent")
related
to
BHV-0223,
we
are
obligated
to
pay
up
to
$1.6
million
upon
the
achievement
of
specified
regulatory
and
commercial
milestones,
as
well
as
royalties
based
on
net
sales
of
products
licensed
under
the
agreement
at
a
low
single-digit
percentage.
Under
our
license
agreement
with
Catalent
related
to
rimegepant,
we
are
obligated
to
pay
up
to
$1.6
million
upon
the
achievement
of
specified
regulatory
and
commercial
milestones.
Under
our
license
agreement
with
MGH,
we
are
obligated
to
pay
an
annual
license
maintenance
fee
of
up
to
$50,000,
to
make
clinical
and
regulatory
milestone
payments
of
up
to
$0.8
million
and
commercial
milestone
payments
of
up
to
$2.5
million,
and
to
pay
royalties
based
on
net
sales
at
a
low
single-digit
percentage.
147
Table
of
Contents
Under
our
agreement
with
ALS
Biopharma,
LLC
("ALS
Biopharma")
and
Fox
Chase
Chemical
Diversity
Center,
Inc.
("FCCDC")
we
are
obligated
to
pay
$3.0
million
upon
the
achievement
of
a
specified
regulatory
milestone
with
respect
to
the
first
licensed
product
and
$1.0
million
upon
the
achievement
of
a
specified
regulatory
milestone
with
respect
to
subsequent
products,
as
well
as
royalties
based
on
net
sales
of
products
licensed
under
the
agreement
at
a
low
single-
digit
percentage.
Under
our
license
agreement
with
Rutgers,
we
are
obligated
to
pay
an
annual
license
maintenance
fee
of
up
to
$25,000
per
year,
to
make
clinical
and
regulatory
milestone
payments
of
up
to
$0.8
million,
and
to
pay
royalties
based
on
net
sales
of
products
at
a
low
single-digit
percentage,
subject
to
a
minimum
amount
of
up
to
$0.1
million
per
year.
Under
our
commercial
consulting
agreement
with
R
PHARM
US,
we
are
obligated
to
pay
quarterly
services
fees,
as
well
as
milestones
of
up
to
$2.5
million
based
on
commercial
milestones
related
to
BHV-0223.
Critical
Accounting
Policies
and
Significant
Judgments
and
Estimates
Our
consolidated
financial
statements
are
prepared
in
accordance
with
generally
accepted
accounting
principles
in
the
United
States
("GAAP").
The
preparation
of
our
consolidated
financial
statements
and
related
disclosures
requires
us
to
make
estimates
and
judgments
that
affect
the
reported
amounts
of
assets,
liabilities,
revenue,
costs
and
expenses,
and
the
disclosure
of
contingent
assets
and
liabilities
in
our
financial
statements.
We
base
our
estimates
on
historical
experience,
known
trends
and
events
and
various
other
factors
that
we
believe
are
reasonable
under
the
circumstances,
the
results
of
which
form
the
basis
for
making
judgments
about
the
carrying
values
of
assets
and
liabilities
that
are
not
readily
apparent
from
other
sources.
We
evaluate
our
estimates
and
assumptions
on
an
ongoing
basis.
Our
actual
results
may
differ
from
these
estimates
under
different
assumptions
or
conditions.
While
our
significant
accounting
policies
are
described
in
more
detail
in
the
notes
to
our
financial
statements
appearing
at
the
end
of
this
Annual
Report,
we
believe
that
the
following
accounting
policies
are
those
most
critical
to
the
judgments
and
estimates
used
in
the
preparation
of
our
financial
statements.
Accrued Research and Development Expenses
As
part
of
the
process
of
preparing
our
consolidated
financial
statements,
we
are
required
to
estimate
our
accrued
research
and
development
expenses.
This
process
involves
reviewing
open
contracts
and
purchase
orders,
communicating
with
our
personnel
to
identify
services
that
have
been
performed
on
our
behalf
and
estimating
the
level
of
service
performed
and
the
associated
cost
incurred
for
the
service
when
we
have
not
yet
been
invoiced
or
otherwise
notified
of
actual
costs.
The
majority
of
our
service
providers
invoice
us
in
arrears
for
services
performed,
on
a
pre-determined
schedule
or
when
contractual
milestones
are
met;
however,
some
require
advance
payments.
We
make
estimates
of
our
accrued
expenses
as
of
each
balance
sheet
date
in
the
consolidated
financial
statements
based
on
facts
and
circumstances
known
to
us
at
that
time.
We
periodically
confirm
the
accuracy
of
these
estimates
with
the
service
providers
and
make
adjustments
if
necessary.
Examples
of
estimated
accrued
research
and
development
expenses
include
fees
paid
to:
•
•
•
vendors,
including
central
laboratories,
in
connection
with
preclinical
development
activities;
CROs
and
investigative
sites
in
connection
with
preclinical
and
clinical
studies;
and
CMOs
in
connection
with
drug
substance
and
drug
product
formulation
of
preclinical
and
clinical
trial
materials.
148
Table
of
Contents
We
base
our
expenses
related
to
preclinical
studies
and
clinical
trials
on
our
estimates
of
the
services
received
and
efforts
expended
pursuant
to
quotes
and
contracts
with
multiple
research
institutions
and
CROs
that
conduct
and
manage
preclinical
studies
and
clinical
trials
on
our
behalf.
The
financial
terms
of
these
agreements
are
subject
to
negotiation,
vary
from
contract
to
contract
and
may
result
in
uneven
payment
flows.
There
may
be
instances
in
which
payments
made
to
our
vendors
will
exceed
the
level
of
services
provided
and
result
in
a
prepayment
of
the
expense.
Payments
under
some
of
these
contracts
depend
on
factors
such
as
the
successful
enrollment
of
patients
and
the
completion
of
clinical
trial
milestones.
In
accruing
service
fees,
we
estimate
the
time
period
over
which
services
will
be
performed
and
the
level
of
effort
to
be
expended
in
each
period.
If
the
actual
timing
of
the
performance
of
services
or
the
level
of
effort
varies
from
the
estimate,
we
adjust
the
accrual
or
the
amount
of
prepaid
expenses
accordingly.
Although
we
do
not
expect
our
estimates
to
be
materially
different
from
amounts
actually
incurred,
our
understanding
of
the
status
and
timing
of
services
performed
relative
to
the
actual
status
and
timing
of
services
performed
may
vary
and
may
result
in
reporting
amounts
that
are
too
high
or
too
low
in
any
particular
period.
To
date,
there
have
not
been
any
material
adjustments
to
our
prior
estimates
of
accrued
research
and
development
expenses.
Share-Based Compensation
We
measure
stock
options
and
other
share-based
awards
granted
to
employees
and
directors
based
on
the
fair
value
on
the
date
of
the
grant
and
recognize
the
corresponding
compensation
expense
of
those
awards
over
the
requisite
service
period,
which
is
generally
the
vesting
period
of
the
respective
award.
We
have
only
issued
stock
options
with
service-based
vesting
conditions
and
record
the
expense
for
these
awards
using
the
straight-line
method.
For
share-based
awards
granted
to
consultants
and
non-employees,
we
recognize
compensation
expense
over
the
period
during
which
services
are
rendered
by
such
consultants
and
non-employees
until
completed.
At
the
end
of
each
financial
reporting
period
prior
to
completion
of
the
service,
the
fair
value
of
these
awards
is
remeasured
using
the
then-current
fair
value
of
our
common
shares
and
updated
assumption
inputs
in
the
Black-Scholes
option-pricing
model.
We
estimate
the
fair
value
of
each
stock
option
grant
using
the
Black-Scholes
option-pricing
model,
which
uses
as
inputs
the
fair
value
of
our
common
shares
and
assumptions
we
make
for
the
volatility
of
our
common
shares,
the
expected
term
of
our
stock
options,
the
risk-free
interest
rate
for
a
period
that
approximates
the
expected
term
of
our
stock
options
and
our
expected
dividend
yield.
Valuation of Warrant Liability
In
connection
with
entering
into
the
Credit
Agreement,
we
issued
warrants
to
purchase
our
common
shares
to
the
guarantor
and
co-guarantor
of
our
obligations
under
the
agreement.
We
classify
the
warrants
as
a
liability
on
our
consolidated
balance
sheet
because
each
warrant
represents
a
freestanding
financial
instrument
that
is
not
indexed
to
our
own
shares.
The
warrant
liability
was
initially
recorded
at
fair
value
upon
entering
into
the
Credit
Agreement
and
is
subsequently
remeasured
to
fair
value
at
each
reporting
date.
Changes
in
the
fair
value
of
the
warrant
liability
are
recognized
as
a
component
of
other
income
(expense),
net
in
the
consolidated
statement
of
operations
and
comprehensive
loss.
We
will
continue
to
recognize
changes
in
the
fair
value
of
the
warrant
liability
until
the
warrants
are
exercised,
expire
or
qualify
for
equity
classification.
At
December
31,
2017,
we
utilized
the
Black-Scholes
option
pricing
model
to
value
the
warrant
liability.
The
Black-Scholes
option
pricing
model
incorporated
assumptions
and
estimates
to
value
the
warrant
liability.
Estimates
and
assumptions
impacting
the
fair
value
measurement
included
the
number
of
shares
for
which
the
warrants
will
be
exercisable,
the
fair
value
per
share
of
the
underlying
common
shares
issuable
upon
exercise
of
the
warrants,
the
remaining
contractual
term
of
the
warrants,
the
risk-free
interest
rate,
the
expected
dividend
yield,
and
the
expected
volatility
of
the
price
of
the
149
Table
of
Contents
underlying
common
shares.
Changes
to
these
assumptions
could
have
a
significant
impact
on
share-based
compensation.
Valuation of Derivative Liability
Our
license
agreement
with
Yale
provides
for
a
change-of-control
payment
to
Yale
upon
the
occurrence
of
a
change-of-control
event,
as
defined
in
the
agreement,
including
an
IPO.
We
classify
the
change-of-control
payment
obligation
as
a
liability
on
our
consolidated
balance
sheet
because
it
represents
a
contingent
obligation
to
pay
a
variable
amount
of
cash
that
may
be
based,
in
part,
on
the
value
of
our
own
shares.
The
derivative
liability
was
initially
recorded
at
fair
value
upon
entering
into
the
license
agreement
and
is
subsequently
remeasured
to
fair
value
at
each
reporting
date.
Changes
in
the
fair
value
of
the
derivative
liability
are
recognized
as
a
component
of
other
income
(expense),
net
in
our
consolidated
statement
of
operations
and
comprehensive
loss.
While
outstanding,
the
fair
value
of
the
derivative
liability
was
determined
using
a
Monte-Carlo
simulation,
which
is
a
statistical
method
used
to
generate
a
defined
number
of
share
price
paths
to
develop
a
reasonable
estimate
of
the
range
of
the
expected
share
prices.
The
Monte-Carlo
simulation
incorporated
assumptions
and
estimates
to
value
the
derivative
liability,
including
the
amount
of
the
payment,
the
settlement
date,
the
trading
price
of
our
common
shares,
the
risk-free
interest
rate
and
the
expected
volatility
of
the
price
of
the
underlying
common
shares.
Changes
to
these
assumptions
could
have
a
material
impact
on
the
fair
value
of
the
derivative
liability.
Valuation of Contingent Equity Liability
Our
license
agreements
with
BMS
and
AstraZeneca
require
us
to
issue
common
shares
upon
the
occurrence
of
specified
financing
or
change-of-control
events
or
development
milestones,
as
defined
in
the
agreements.
In
each
agreement,
the
class
and
number
of
shares
to
be
issued
upon
a
triggering
event
were
not
known
upon
entering
into
the
license
agreements;
however,
the
dollar
amount
of
the
shares
to
be
issued
upon
a
triggering
event
is
fixed.
We
classified
these
contingent
obligations
to
issue
shares
as
a
liability
on
our
consolidated
balance
sheet
because
each
represented
an
obligation
to
issue
a
variable
number
of
shares
for
a
fixed
dollar
amount.
Each
contingent
equity
liability
was
initially
recorded
at
fair
value
upon
entering
into
each
respective
agreement
and
was
subsequently
remeasured
to
fair
value
at
each
reporting
date.
Changes
in
the
fair
values
of
the
contingent
equity
liabilities
are
recognized
as
a
component
of
other
income
(expense),
net
in
our
consolidated
statement
of
operations
and
comprehensive
loss.
Upon
the
closing
of
the
IPO
in
May
2017,
the
conditions
for
issuing
shares
to
BMS
and
AstraZeneca
under
the
terms
of
the
respective
license
agreements
were
satisfied,
and
accordingly,
we
issued
1,345,374
and
538,149
common
shares,
respectively,
to
BMS
and
AstraZeneca
valued
at
$22.9
million
and
$9.1
million,
respectively.
The
contingent
equity
liabilities
were
adjusted
to
fair
value
immediately
prior
to
the
completion
of
the
IPO,
and
upon
issuance
of
the
common
shares,
the
contingent
equity
liabilities
were
reclassified
to
equity.
The
fair
values
of
the
contingent
equity
liabilities
were
determined
using
the
PWERM,
which
considers
as
inputs
the
probability
of
occurrence
of
events
that
would
trigger
the
issuance
of
shares,
the
expected
timing
of
such
events,
the
expected
value
of
the
contingently
issuable
equity
upon
the
occurrence
of
a
triggering
event
and
a
risk-adjusted
discount
rate.
The
estimates
are
based,
in
part,
on
subjective
assumptions
and
could
differ
materially
in
the
future.
Changes
to
these
assumptions
could
have
a
material
impact
on
the
fair
value
of
the
contingent
equity
liabilities.
JOBS Act
On
April
5,
2012,
the
JOBS
Act
was
signed
into
law.
The
JOBS
Act
contains
provisions
that,
among
other
things,
reduce
certain
reporting
requirements
for
an
"emerging
growth
company."
As
an
"emerging
growth
company,"
we
are
electing
not
to
take
advantage
of
the
extended
transition
period
150
Table
of
Contents
afforded
by
the
JOBS
Act
for
the
implementation
of
new
or
revised
accounting
standards,
and
as
a
result,
we
will
comply
with
new
or
revised
accounting
standards
on
the
relevant
dates
on
which
adoption
of
such
standards
is
required
for
non-emerging
growth
companies.
Section
107
of
the
JOBS
Act
provides
that
our
decision
not
to
take
advantage
of
the
extended
transition
period
is
irrevocable.
Subject
to
certain
conditions
set
forth
in
the
JOBS
Act,
as
an
"emerging
growth
company",
we
are
not
required
to,
among
other
things,
(i)
provide
an
auditor's
attestation
report
on
our
system
of
internal
controls
over
financial
reporting
pursuant
to
Section
404,
(ii)
provide
all
of
the
compensation
disclosure
that
may
be
required
of
non-emerging
growth
public
companies
under
the
Dodd-Frank
Wall
Street
Reform
and
Consumer
Protection
Act,
(iii)
comply
with
any
requirement
that
may
be
adopted
by
the
Public
Company
Accounting
Oversight
Board
regarding
mandatory
audit
firm
rotation
or
a
supplement
to
the
auditor's
report
providing
additional
information
about
the
audit
and
the
financial
statements
(auditor
discussion
and
analysis),
and
(iv)
disclose
certain
executive
compensation-related
items
such
as
the
correlation
between
executive
compensation
and
performance
and
comparisons
of
the
Chief
Executive
Officer's
compensation
to
median
employee
compensation.
These
exemptions
will
apply
until
the
last
day
of
our
fiscal
year
following
the
fifth
anniversary
of
the
completion
of
our
initial
public
offering
in
May
2017
or
until
we
no
longer
meet
the
other
requirements
for
being
an
"emerging
growth
company,"
whichever
occurs
first.
Off-Balance
Sheet
Arrangements
We
did
not
have
during
the
periods
presented,
and
we
do
not
currently
have,
any
off-balance
sheet
arrangements,
as
defined
in
the
rules
and
regulations
of
the
SEC.
Recently
Issued
Accounting
Pronouncements
A
description
of
recently
issued
accounting
pronouncements
that
may
potentially
impact
our
financial
position
and
results
of
operations
is
disclosed
in
Note
2
to
our
consolidated
financial
statements
appearing
at
the
end
of
this
Annual
Report.
Item
7A.
Quantitative
and
Qualitative
Disclosures
about
Market
Risks
Interest Rate Risk
The
market
risk
inherent
in
our
financial
instruments
and
in
our
financial
position
has
historically
been
the
potential
loss
arising
from
adverse
changes
in
interest
rates.
As
of
December
31,
2017
and
2016,
we
had
cash
of
$131.5
million
and
$23.6
million,
respectively.
As
of
December
31,
2017,
we
held
our
cash
in
non-interest-bearing
money
market
accounts
and
accordingly,
the
value
of
these
accounts
is
not
subject
to
fluctuation
in
interest
rates.
Prior
to
the
completion
of
our
IPO
in
May
2017,
we
adopted
an
investment
policy
related
to
the
use
of
the
net
proceeds
from
the
sale
of
our
common
shares
in
our
IPO,
pursuant
to
which
we
hold
such
net
proceeds
in
non-interest
bearing
accounts,
with
the
goal
of
capital
preservation
and
liquidity
so
that
such
funds
are
readily
available
to
fund
our
operations.
In
August
2017,
we
repaid
all
outstanding
amounts
under
the
Credit
Agreement
and,
as
a
result,
we
no
longer
have
any
exposure
to
interest
rate
risk
related
to
indebtedness
as
of
December
31,
2017.
We
do
not
engage
in
any
hedging
activities
against
changes
in
interest
rates.
We
do
not
have
any
foreign
currency
or
other
derivative
financial
instruments.
ITEM
8.
FINANCIAL
STATEMENTS
AND
SUPPLEMENTARY
DATA
The
consolidated
financial
statements
and
supplementary
data
of
the
Company
required
in
this
item
are
set
forth
beginning
on
page
F-1.
151
Table
of
Contents
ITEM
9.
CHANGES
IN
AND
DISAGREEMENTS
WITH
ACCOUNTANTS
ON
ACCOUNTING
AND
FINANCIAL
DISCLOSURE
None.
ITEM
9A.
CONTROLS
AND
PROCEDURES
Evaluation of Disclosure Controls and Procedures
The
term
"disclosure
controls
and
procedures,"
as
defined
in
Rules
13a-15(e)
and
15d-15(e)
under
the
Securities
Exchange
Act
of
1934,
as
amended
(the
"Exchange
Act"),
refers
to
controls
and
procedures
that
are
designed
to
ensure
that
information
required
to
be
disclosed
by
a
company
in
the
reports
that
it
files
or
submits
under
the
Exchange
Act
is
recorded,
processed,
summarized
and
reported,
within
the
time
periods
specified
in
the
SEC's
rules
and
forms.
Disclosure
controls
and
procedures
include,
without
limitation,
controls
and
procedures
designed
to
ensure
that
such
information
is
accumulated
and
communicated
to
a
company's
management,
including
its
principal
executive
and
principal
financial
officers,
as
appropriate
to
allow
timely
decisions
regarding
required
disclosure.
In
designing
and
evaluating
our
disclosure
controls
and
procedures,
management
recognizes
that
disclosure
controls
and
procedures,
no
matter
how
well
conceived
and
operated,
can
provide
only
reasonable,
not
absolute,
assurance
that
the
objectives
of
the
disclosure
controls
and
procedures
are
met.
Additionally,
in
designing
disclosure
controls
and
procedures,
our
management
necessarily
was
required
to
apply
its
judgment
in
evaluating
the
cost-benefit
relationship
of
possible
disclosure
controls
and
procedures.
The
design
of
any
system
of
controls
also
is
based
in
part
upon
certain
assumptions
about
the
likelihood
of
future
events,
and
there
can
be
no
assurance
that
any
design
will
succeed
in
achieving
its
stated
goals
under
all
potential
future
conditions;
over
time,
controls
may
become
inadequate
because
of
changes
in
conditions,
or
the
degree
of
compliance
with
policies
or
procedures
may
deteriorate.
Because
of
the
inherent
limitations
in
a
control
system,
misstatements
due
to
error
or
fraud
may
occur
and
not
be
detected.
Based
on
the
evaluation
of
our
disclosure
controls
and
procedures
as
of
December
31,
2017,
our
Chief
Executive
Officer
and
Chief
Financial
Officer
have
concluded
that,
as
of
December
31,
2017,
our
disclosure
controls
and
procedures
were
not
effective
at
the
reasonable
assurance
level
as
a
result
of
the
material
weaknesses
discussed
below.
Notwithstanding
these
material
weaknesses,
our
management
has
concluded
that
the
financial
statements
included
elsewhere
in
this
Annual
Report
present
fairly,
in
all
material
respects,
our
financial
position,
results
of
operations
and
cash
flows
in
conformity
with
generally
accepted
accounting
principles
("GAAP").
In
connection
with
the
preparation
of
our
financial
results
for
the
years
ended
December
31,
2014
and
2015,
our
management
concluded
that,
as
of
December
31,
2015,
our
internal
control
over
financial
reporting
was
not
effective
as
a
result
of
material
weaknesses
in
our
control
over
financial
reporting.
The
material
weaknesses
remained
unremediated
as
of
December
31,
2017.
A
material
weakness
is
a
deficiency,
or
a
combination
of
deficiencies,
in
internal
control
over
financial
reporting
such
that
there
is
a
reasonable
possibility
that
a
material
misstatement
of
our
financial
statements
will
not
be
prevented
or
detected
on
a
timely
basis.
The
material
weaknesses
identified
in
our
internal
control
over
financial
reporting
included
the
following:
We
did
not
design
or
maintain
an
effective
control
environment
commensurate
with
our
financial
reporting
requirements.
We
lacked
a
sufficient
number
of
trained
professionals
with
an
appropriate
level
of
accounting
knowledge,
training
and
experience
to
appropriately
analyze,
record
and
disclose
152
Table
of
Contents
accounting
matters
timely
and
accurately.
This
material
weakness
contributed
to
the
following
material
weakness:
•
•
•
•
We
did
not
design
and
maintain
formal
accounting
policies,
procedures
and
controls
to
achieve
complete,
accurate
and
timely
financial
accounting,
reporting
and
disclosures,
including
controls
over
the
preparation
and
review
of
account
reconciliations
and
journal
entries.
Additionally,
we
did
not
design
and
maintain
controls
over
the
appropriate
classification
and
presentation
of
accounts
and
disclosures
in
the
financial
statements.
We
did
not
design
and
maintain
formal
accounting
policies,
processes
and
controls
to
analyze,
account
for
and
disclose
complex
transactions.
Specifically,
we
did
not
design
and
maintain
controls
to
analyze,
account
for
and
disclose
complex
licensing
agreements,
income
taxes,
variable
interest
entities,
debt
arrangements,
equity
method
investments,
share-based
compensation
arrangements,
derivative
liabilities,
warrants
to
purchase
common
shares
and
contingently
issuable
equity.
We
did
not
design
and
maintain
controls
over
our
supervision
and
review
of
the
completeness
and
accuracy
of
third-party
vendors'
computations
supporting
our
common
share
valuations.
We
did
not
design
and
maintain
controls
over
the
operating
effectiveness
of
information
technology,
or
IT,
general
controls
for
information
systems
that
are
relevant
to
the
preparation
of
our
financial
statements.
Specifically,
we
did
not
design
and
maintain
effective
controls
over
program
change
management;
user
access,
including
segregation
of
duties;
or
computer
operations.
Changes in Internal Controls over Financial Reporting
During
the
year
ended
December
31,
2017,
we
hired
additional
finance
staff
with
significant
experience
with
financial
controls
and
GAAP
reporting.
Except
as
described
above,
there
has
been
no
change
in
our
internal
control
over
financial
reporting
during
the
year
ended
December
31,
2017
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
our
internal
control
over
financial
reporting.
In
the
first
quarter
2018,
we
completed
the
implementation
of
a
new
Enterprise
Resource
Planning
("ERP")
system
and
a
new
share-based
compensation
system.
During
this
period,
we
also
began
implementation
of
formal
disclosure
controls
and
procedures,
including
a
Disclosure
Committee
and
management
sub-
certifications.
We
believe
that
these
activities,
plus
the
hiring
of
experienced
finance
staff,
will
further
support
the
remediation
of
these
material
weaknesses.
Management's Report on Internal Control over Financial Reporting and Attestation Report of the Registered Public Accounting Firm
This
Annual
Report
does
not
include
a
report
of
management's
assessment
regarding
internal
control
over
financial
reporting
or
an
attestation
report
of
our
independent
registered
public
accounting
firm
due
to
a
transition
period
established
by
the
rules
of
the
Securities
and
Exchange
Commission
("SEC")
for
newly
public
companies.
ITEM
9B.
OTHER
INFORMATION
Not
applicable.
153
Table
of
Contents
PART
III
We
will
file
a
definitive
Proxy
Statement
for
our
2018
Annual
Meeting
of
Shareholders
(the
"2018
Proxy
Statement")
with
the
SEC,
pursuant
to
Regulation
14A,
not
later
than
120
days
after
the
end
of
our
fiscal
year.
Accordingly,
certain
information
required
by
Part
III
has
been
omitted
under
General
Instruction
G(3)
to
Form
10-K.
Only
those
sections
of
the
2018
Proxy
Statement
that
specifically
address
the
items
set
forth
herein
are
incorporated
by
reference.
Item
10.
Directors,
Executive
Officers
and
Corporate
Governance
The
information
required
by
this
Item
is
incorporated
herein
by
reference
to
the
information
that
will
be
contained
in
our
2018
Proxy
Statement
under
the
captions
"Information
Regarding
the
Board
of
Directors
and
Corporate
Governance,"
"Election
of
Directors,"
"Executive
Officers"
and
"Section
16(a)
Beneficial
Ownership
Reporting
Compliance."
Item
11.
Executive
Compensation
The
information
required
by
this
Item
is
incorporated
herein
by
reference
to
the
information
that
will
be
contained
in
the
2018
Proxy
Statement
under
the
captions
"Executive
Compensation"
and
"Director
Compensation."
Item
12.
Security
Ownership
of
Certain
Beneficial
Owners
and
Management
and
Related
Shareholder
Matters
The
information
required
by
this
Item
is
incorporated
herein
by
reference
to
the
information
that
will
be
contained
in
the
2018
Proxy
Statement
under
the
captions
"Security
Ownership
of
Certain
Beneficial
Owners
and
Management"
and
"Securities
Authorized
for
Issuance
under
Equity
Compensation
Plans."
Item
13.
Certain
Relationships
and
Related
Transactions,
and
Director
Independence
The
information
required
by
this
Item
is
incorporated
herein
by
reference
to
the
information
that
will
be
contained
in
the
2018
Proxy
Statement
under
the
captions
"Transactions
with
Related
Persons"
and
"Independence
of
the
Board
of
Directors."
Item
14.
Principal
Accounting
Fees
and
Services
The
information
required
by
this
Item
is
incorporated
herein
by
reference
to
the
information
that
will
be
contained
in
the
2018
Proxy
Statement
under
the
caption
"Ratification
of
Selection
of
Independent
Auditors."
154
Table
of
Contents
PART
IV
Item
15.
Exhibits,
Financial
Statement
Schedules
(a)
The
following
documents
are
filed
as
part
of
this
report:
(1)
Financial
Statements:
The
financial
statements
required
by
this
item
are
submitted
in
a
separate
section
beginning
on
page
F-1
of
this
report.
(2)
Financial
Statement
Schedules:
All
other
financial
statement
schedules
have
been
omitted
because
they
are
not
applicable,
not
required
or
the
information
required
is
shown
in
the
consolidated
financial
statements
or
the
notes
thereto.
(3)
Exhibits.
Exhibit
Number
Description
of
Document
2.1
Securities
Purchase
Agreement
between
Kleo
Pharmaceuticals,
Inc.
and
the
Registrant,
dated
as
of
August
29,
2016
(incorporated
by
reference
to
Exhibit
2.1
to
the
Registrant's
Current
Report
on
Form
8-K
(File
No.
001-
38080)
filed
with
the
Securities
and
Exchange
Commission
on
June
14,
2017).
2.2
First
Subscription
Agreement
between
Kleo
Pharmaceuticals,
Inc.
and
the
Registrant,
dated
as
of
October
5,
2017
(incorporated
by
reference
to
Exhibit
2.2
to
the
Registrant's
Current
Report
on
Form
8-K
(File
No.
001-38080)
filed
with
the
Securities
and
Exchange
Commission
on
October
12,
2017).
2.3
Second
Subscription
Agreement
between
Kleo
Pharmaceuticals,
Inc.
and
the
Registrant,
dated
as
of
October
5,
2017
(incorporated
by
reference
to
Exhibit
2.3
to
the
Registrant's
Current
Report
on
Form
8-K
(File
No.
001-
38080)
filed
with
the
Securities
and
Exchange
Commission
on
October
12,
2017).
3.1
Memorandum
and
Articles
of
Association
(incorporated
by
reference
to
Exhibit
3.1
to
the
Registrant's
Current
Report
on
Form
8-K
(File
No.
001-38080)
filed
with
the
Securities
and
Exchange
Commission
on
May
12,
2017).
4.1
Investors'
Rights
Agreement,
dated
as
of
October
31,
2016,
by
and
among
the
Registrant
and
certain
of
its
shareholders
(incorporated
by
reference
to
Exhibit
4.2
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017).
4.2
Term
Note,
dated
August
30,
2016,
issued
to
Wells
Fargo
Bank,
National
Association
(incorporated
by
reference
to
Exhibit
4.3
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017)
.
4.3
Warrant,
dated
January
26,
2017,
issued
to
John
Childs
(incorporated
by
reference
to
Exhibit
4.4
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017).
4.4
Warrant,
dated
January
26,
2017,
issued
to
Gregory
Bailey
(incorporated
by
reference
to
Exhibit
4.5
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017).
155
Table
of
Contents
Exhibit
Number
4.5
Warrants,
dated
August
15,
2015,
issued
to
ALS
Biopharma,
LLC
(incorporated
by
reference
to
Exhibit
4.6
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017).
Description
of
Document
10.1# License
Agreement,
by
and
between
the
registrant
and
Bristol-Myers
Squibb
Company,
dated
as
of
July
8,
2016
(incorporated
by
reference
to
Exhibit
10.1
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-
217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017).
10.2# ALS
Biopharma
Agreement,
by
and
among
the
registrant,
ALS
Biopharma,
LLC
and
Fox
Chase
Chemical
Diversity
Center
Inc.,
dated
as
of
August
10,
2015,
as
amended
to
date
(incorporated
by
reference
to
Exhibit
10.2
to
the
Registrant's
Amendment
No.
1
to
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
24,
2017).
10.3# License
Agreement,
by
and
between
the
registrant
and
AstraZeneca
AB,
dated
as
of
October
5,
2016
(incorporated
by
reference
to
Exhibit
10.3
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017).
10.4# Agreement,
by
and
between
the
registrant
and
Yale
University,
dated
as
of
September
30,
2013,
as
amended
to
date
(incorporated
by
reference
to
Exhibit
10.4
to
the
Registrant's
Amendment
No.
1
to
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
24,
2017).
10.5# Zydis®
Development
and
License
Agreement,
by
and
between
the
registrant
and
Catalent
U.K.
Swindon
Zydis
Limited,
dated
as
of
March
9,
2015
(incorporated
by
reference
to
Exhibit
10.5
to
the
Registrant's
Amendment
No.
1
to
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
24,
2017).
10.6# Exclusive
Patent
License
Agreement,
by
and
between
the
registrant
and
The
General
Hospital
Corporation
d/b/a
Massachusetts
General
Hospital,
dated
as
of
September
13,
2014
(incorporated
by
reference
to
Exhibit
10.6
to
the
Registrant's
Amendment
No.
1
to
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
24,
2017).
10.7# Exclusive
License
Agreement,
by
and
between
the
registrant
and
Rutgers,
the
State
University
of
New
Jersey,
dated
as
of
June
15,
2016
(incorporated
by
reference
to
Exhibit
10.7
to
the
Registrant's
Amendment
No.
1
to
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
24,
2017).
10.8
Credit
Agreement,
by
and
between
the
registrant
and
Wells
Fargo
Bank,
National
Association,
dated
as
of
August
30,
2016
(incorporated
by
reference
to
Exhibit
10.8
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017).
10.9+ 2014
Equity
Incentive
Plan
(incorporated
by
reference
to
Exhibit
10.9
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017).
156
Table
of
Contents
Exhibit
Number
Description
of
Document
10.10+ Form
of
Share
Option
Agreement
under
2014
Equity
Incentive
Plan
(incorporated
by
reference
to
Exhibit
10.10
to
the
Registrant's
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
7,
2017).
10.11+ 2017
Equity
Incentive
Plan
(incorporated
by
reference
to
Exhibit
4.4
to
the
Registrant's
Registration
Statement
on
Form
S-8
(File
No.
333-218193)
filed
with
the
Securities
and
Exchange
Commission
on
May
23,
2017).
10.12+ Form
of
Stock
Option
Grant
Notice
and
Stock
Option
Agreement
under
2017
Equity
Incentive
Plan
(incorporated
by
reference
to
Exhibit
10.12
to
the
Registrant's
Amendment
No.
1
to
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
24,
2017).
10.13+ Form
of
Restricted
Stock
Unit
Grant
Notice
and
Restricted
Stock
Unit
Award
Agreement
under
2017
Equity
Incentive
Plan
(incorporated
by
reference
to
Exhibit
10.13
to
the
Registrant's
Amendment
No.
1
to
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
April
24,
2017).
10.14+ 2017
Employee
Share
Purchase
Plan
(incorporated
by
reference
to
Exhibit
4.7
to
the
Registrant's
Registration
Statement
on
Form
S-8
(File
No.
333-218193)
filed
with
the
Securities
and
Exchange
Commission
on
May
23,
2017).
10.15+ Form
of
Indemnification
Agreement
with
non-employee
directors
(incorporated
by
reference
to
Exhibit
10.15
to
the
Registrant's
Amendment
No.
2
to
Registration
Statement
on
Form
S-1
(File
No.
333-217214)
filed
with
the
Securities
and
Exchange
Commission
on
May
1,
2017).
21.1
Subsidiaries
of
the
Registrant.
23.1
Consent
of
PricewaterhouseCoopers
LLP.
24.1
Power
of
Attorney
(contained
on
signature
page
hereto).
31.1
Certification
of
Principal
Executive
Officer
under
Section
302
of
the
Sarbanes-Oxley
Act.
31.2
Certification
of
Principal
Financial
Officer
under
Section
302
of
the
Sarbanes-Oxley
Act.
32.1^ Certifications
of
Principal
Executive
Officer
and
Principal
Financial
Officer
under
Section
906
of
the
Sarbanes-
Oxley
Act.
101.INS
XBRL
Instance
Document
101.SCH
XBRL
Taxonomy
Extension
Schema
Document
101.CAL
XBRL
Taxonomy
Extension
Calculation
Linkbase
Document
101.DEF
XBRL
Taxonomy
Extension
Definition
Linkbase
Document
101.LAB
XBRL
Taxonomy
Extension
Label
Linkbase
Document
101.PRE
XBRL
Taxonomy
Extension
Presentation
Linkbase
Document
#
+
Portions
of
this
exhibit
(indicated
by
asterisks)
have
been
omitted
pursuant
to
a
request
for
confidential
treatment
and
have
been
separately
filed
with
the
Securities
and
Exchange
Commission.
Indicates
management
contract
or
compensatory
plan.
157
Table
of
Contents
^
These
certifications
are
being
furnished
solely
to
accompany
this
Annual
Report
pursuant
to
18
U.S.C.
Section
1350,
and
are
not
being
filed
for
purposes
of
Section
18
of
the
Securities
Exchange
Act
of
1934,
as
amended,
and
are
not
to
be
incorporated
by
reference
into
any
filing
of
the
Registrant,
whether
made
before
or
after
the
date
hereof,
regardless
of
any
general
incorporation
language
in
such
filing.
Item
16.
Form
10-K
Summary
Not
applicable.
158
Table
of
Contents
Pursuant
to
the
requirements
of
the
Securities
Exchange
Act
of
1934,
the
Registrant
has
duly
caused
this
report
to
be
signed
on
its
behalf
by
the
undersigned
thereunto
duly
authorized.
SIGNATURES
Dated:
March
6,
2018
By:
/s/
VLAD
CORIC,
M.D.
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
Vlad
Coric,
M.D.
Chief Executive Officer
(On behalf of the Registrant and as the Principal
Executive Officer)
By:
/s/
JIM
ENGELHART
Jim
Engelhart
Chief Financial Officer
(Principal Financial Officer)
KNOW
ALL
PERSONS
BY
THESE
PRESENTS,
that
each
person
whose
signature
appears
below
constitutes
and
appoints
Vlad
Coric
as
his
or
her
true
and
lawful
attorney-in-fact
and
agent,
with
full
power
of
substitution
and
resubstitution,
for
him
or
her
and
in
his
or
her
name,
place
and
stead,
in
any
and
all
capacities,
to
sign
this
Annual
Report
on
Form
10-K
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.,
and
any
or
all
amendments
thereto,
and
to
file
the
same,
with
all
exhibits
thereto,
and
other
documents
in
connection
therewith,
with
the
Securities
and
Exchange
Commission,
granting
unto
said
attorney-in-fact
and
agent
full
power
and
authority
to
do
and
perform
each
and
every
act
and
thing
requisite
or
necessary
to
be
done
in
and
about
the
premises
hereby
ratifying
and
confirming
all
that
said
attorney-in-fact
and
agent,
or
his
substitute
or
substitutes,
may
lawfully
do
or
cause
to
be
done
by
virtue
hereof.
159
Table
of
Contents
Pursuant
to
the
requirements
of
the
Securities
Exchange
Act
of
1934,
as
amended,
this
report
has
been
signed
below
by
the
following
persons
on
behalf
of
the
registrant
and
in
the
capacities
and
on
the
dates
indicated.
Signature
Title
Date
/s/
VLAD
CORIC,
M.D.
Vlad
Coric,
M.D.
/s/
JAMES
ENGELHART
James
Engelhart
/s/
DECLAN
DOOGAN,
M.D.
Declan
Doogan,
M.D.
/s/
ERIC
AGUIAR,
M.D.
Eric
Aguiar,
M.D.
/s/
GREGORY
H.
BAILEY,
M.D.
Gregory
H.
Bailey,
M.D.
/s/
ALBERT
CHA,
M.D.,
PH.D.
Albert
Cha,
M.D.,
Ph.D.
/s/
JOHN
W.
CHILDS
John
W.
Childs
/s/
JULIA
P.
GREGORY
Julia
P.
Gregory
Chief
Executive
Officer
and
Director
(Principal
Executive
Officer)
March
6,
2018
Chief
Financial
Officer
(Principal
Financial
Officer
and
Principal
Accounting
Officer)
March
6,
2018
Director
Director
Director
Director
Director
Director
160
March
6,
2018
March
6,
2018
March
6,
2018
March
6,
2018
March
6,
2018
March
6,
2018
Table
of
Contents
Biohaven
Pharmaceutical
Holding
Company
Ltd.
Financial
Statements
For
the
Years
Ended
December
31,
2017,
2016
and
2015
Report
of
Independent
Registered
Public
Accounting
Firm
Consolidated
Balance
Sheets
Consolidated
Statements
of
Operations
and
Comprehensive
Loss
Consolidated
Statements
of
Convertible
Preferred
Shares
and
Shareholders'
Equity
(Deficit)
Consolidated
Statements
of
Cash
Flows
Notes
to
Consolidated
Financial
Statements
F-1
Page
F-2
F-3
F-4
F-5
F-6
F-7
Table
of
Contents
To
the
Board
of
Directors
and
Stockholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
Opinion on the Financial Statements
Report
of
Independent
Registered
Public
Accounting
Firm
We
have
audited
the
accompanying
consolidated
balance
sheets
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
and
its
subsidiaries
as
of
December
31,
2017
and
2016,
and
the
related
consolidated
statements
of
operations
and
comprehensive
loss,
convertible
preferred
shares
and
shareholders'
equity
(deficit),
and
cash
flows
for
each
of
the
three
years
in
the
period
ended
December
31,
2017,
including
the
related
notes
(collectively
referred
to
as
the
"consolidated
financial
statements").
In
our
opinion,
the
consolidated
financial
statements
present
fairly,
in
all
material
respects,
the
financial
position
of
the
Company
as
of
December
31,
2017
and
2016,
and
the
results
of
their
operations
and
their
cash
flows
for
each
of
the
three
years
in
the
period
ended
December
31,
2017
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
of
America.
Substantial Doubt About the Company's Ability to Continue as a Going Concern
The
accompanying
consolidated
financial
statements
have
been
prepared
assuming
that
the
Company
will
continue
as
a
going
concern.
As
discussed
in
Note
1
to
the
consolidated
financial
statements,
the
Company
has
incurred
recurring
losses
from
operations
since
inception
and
will
require
additional
financing
to
fund
future
operations
that
raise
substantial
doubt
about
its
ability
to
continue
as
a
going
concern.
Management's
plans
in
regard
to
these
matters
are
also
described
in
Note
1.
The
financial
statements
do
not
include
any
adjustments
that
might
result
from
the
outcome
of
this
uncertainty.
Basis for Opinion
These
consolidated
financial
statements
are
the
responsibility
of
the
Company's
management.
Our
responsibility
is
to
express
an
opinion
on
the
Company's
consolidated
financial
statements
based
on
our
audits.
We
are
a
public
accounting
firm
registered
with
the
Public
Company
Accounting
Oversight
Board
(United
States)
("PCAOB")
and
are
required
to
be
independent
with
respect
to
the
Company
in
accordance
with
the
U.S.
federal
securities
laws
and
the
applicable
rules
and
regulations
of
the
Securities
and
Exchange
Commission
and
the
PCAOB.
We
conducted
our
audits
of
these
consolidated
financial
statements
in
accordance
with
the
standards
of
the
PCAOB.
Those
standards
require
that
we
plan
and
perform
the
audit
to
obtain
reasonable
assurance
about
whether
the
consolidated
financial
statements
are
free
of
material
misstatement,
whether
due
to
error
or
fraud.
The
Company
is
not
required
to
have,
nor
were
we
engaged
to
perform,
an
audit
of
its
internal
control
over
financial
reporting.
As
part
of
our
audits
we
are
required
to
obtain
an
understanding
of
internal
control
over
financial
reporting
but
not
for
the
purpose
of
expressing
an
opinion
on
the
effectiveness
of
the
Company's
internal
control
over
financial
reporting.
Accordingly,
we
express
no
such
opinion.
Our
audits
included
performing
procedures
to
assess
the
risks
of
material
misstatement
of
the
consolidated
financial
statements,
whether
due
to
error
or
fraud,
and
performing
procedures
that
respond
to
those
risks.
Such
procedures
included
examining,
on
a
test
basis,
evidence
regarding
the
amounts
and
disclosures
in
the
consolidated
financial
statements.
Our
audits
also
included
evaluating
the
accounting
principles
used
and
significant
estimates
made
by
management,
as
well
as
evaluating
the
overall
presentation
of
the
consolidated
financial
statements.
We
believe
that
our
audits
provide
a
reasonable
basis
for
our
opinion.
/s/
PricewaterhouseCoopers
LLP
Hartford,
Connecticut
March
6,
2018
We
have
served
as
the
Company's
auditor
since
2017.
F-2
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
CONSOLIDATED
BALANCE
SHEETS
(Amounts
in
thousands,
except
share
and
per
share
amounts)
Assets
Current
assets:
Cash
Prepaid
expenses
and
other
current
assets
Total
current
assets
Property
and
equipment,
net
Equity
method
investment
(Note
5)
Other
assets
Total
assets
Liabilities,
Convertible
Preferred
Shares
and
Shareholders'
Equity
(Deficit)
Current
liabilities:
Notes
payable,
net
of
discount
Accounts
payable
Accrued
expenses
Total
current
liabilities
Warrant
liability
Derivative
liability
Contingent
equity
liability,
non-current
Notes
payable
to
related
parties
Other
long-term
liabilities
Total
liabilities
Commitments
and
contingencies
(Note
16)
Series
A
convertible
preferred
shares,
no
par
value,
0
and
11,242,172
shares
authorized
as
of
December
31,
2017
and
December
31,
2016,
respectively;
0
and
4,948,369
shares
issued
and
outstanding
as
of
December
31,
2017
and
December
31,
2016,
respectively;
aggregate
liquidation
preference
of
$0
and
$45,976
as
of
December
31,
2017
and
December
31,
2016,
respectively
Shareholders'
equity
(deficit):
December
31,
2017
2016
$
131,468
$
5,197
136,665
2,344
7,847
32
$
146,888
$
$
—
$
4,721
4,708
9,429
4,021
—
—
—
1,467
14,917
23,565
470
24,035
26
2,753
203
27,017
4,216
746
2,980
7,942
780
512
18,938
595
13
28,780
—
43,270
Common
shares,
no
par
value;
200,000,000
and
38,000,000
shares
authorized
as
of
December
31,
2017
and
December
31,
2016
,
respectively;
36,057,748
and
13,088,500
shares
issued
and
outstanding
as
of
December
31,
2017
and
December
31,
2016,
respectively
Additional
paid-in
capital
Accumulated
deficit
Total
shareholders'
equity
(deficit)
Total
liabilities,
convertible
preferred
shares
and
shareholders'
equity
(deficit)
$
311,061
23,556
(202,646)
131,971
146,888
$
19,944
10,479
(75,456)
(45,033)
27,017
The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.
F-3
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
CONSOLIDATED
STATEMENTS
OF
OPERATIONS
AND
COMPREHENSIVE
LOSS
(Amounts
in
thousands,
except
share
and
per
share
amounts)
Operating
expenses:
Research
and
development
General
and
administrative
Total
operating
expenses
Loss
from
operations
Other
income
(expense):
Interest
expense
Change
in
fair
value
of
warrant
liability
Change
in
fair
value
of
derivative
liability
Change
in
fair
value
of
contingent
equity
liability
Loss
from
equity
method
investment
Total
other
income
(expense),
net
Loss
before
provision
for
income
taxes
Provision
for
income
taxes
Net
loss
and
comprehensive
loss
Net
(income)
loss
attributable
to
non-controlling
interests
Accretion
of
beneficial
conversion
feature
on
Series
A
preferred
shares
Net
loss
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
$
2017
Year
Ended
December
31,
2016
2015
89,441
$
18,141
107,582
(107,582)
(906)
(3,241)
512
(13,082)
(1,885)
(18,602)
(126,184)
1,006
(127,190)
—
(12,006)
55,529
$
5,109
60,638
(60,638)
(385)
154
(65)
(2,263)
(247)
(2,806)
(63,444)
90
(63,534)
143
—
7,559
2,137
9,696
(9,696)
—
—
(370)
—
—
(370)
(10,066)
—
(10,066)
(4)
—
Holding
Company
Ltd.
$
(139,196) $
(63,677) $
(10,062)
Net
loss
per
share
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.—basic
and
diluted
Weighted
average
common
shares
outstanding—basic
and
diluted
$
(5.00) $
(5.05) $
27,845,576
12,608,366
(0.91)
11,009,277
The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.
F-4
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
CONSOLIDATED
STATEMENT
OF
CONVERTIBLE
PREFERRED
SHARES
AND
SHAREHOLDERS'
EQUITY
(DEFICIT)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
Series
A
Convertible
Preferred
Shares
Common
Shares
Shares
Amount
Shares
Amount
Additional
Paid-in
Capital
Note
Receivable
from
Shareholder
Accumulated
Deficit
Total
Biohaven
Pharmaceutical
Holding
Company
Ltd.
Shareholders'
Equity
(Deficit)
Non-
Controlling
Interests
Total
Shareholders'
Equity
(Deficit)
Balances
as
of
December
31,
2014
Issuance
of
common
shares,
net
of
offering
costs
of
$37
Issuance
of
common
shares
in
connection
with
license
agreement
(Note
13)
Issuance
of
common
share
warrant
in
connection
with
license
agreement
(Note
13)
Collection
of
note
receivable
from
shareholder
Share-based
compensation
expense
Net
loss
Balances
as
of
December
31,
2015
Issuance
of
common
shares,
net
of
offering
costs
of
$120
Issuance
of
common
share
warrant
in
connection
with
license
agreement
(Note
13)
Issuance
of
Series
A
Issuance
of
Series
A
convertible
preferred
shares
as
payment
of
related
offering
costs
Issuance
of
Series
A
convertible
preferred
shares
in
settlement
of
contingent
equity
liability
(Note
13)
Acquisition
of
BPI
(Note
18)
Share-based
—
$
—
10,652,000
$
3,587
$
190
$
(500) $
(1,717) $
1,560
$
(53) $
1,507
—
—
867,000
4,816
—
—
—
4,816
—
4,816
—
—
50,000
262
—
—
—
262
—
262
—
—
—
—
1,231
—
—
—
—
—
—
—
—
—
—
—
—
—
—
500
2,837
—
—
—
—
(10,062)
—
—
1,231
—
1,231
500
2,837
(10,062)
—
—
(4)
500
2,837
(10,066)
—
—
11,569,000
8,665
4,258
—
(11,779)
1,144
(57)
1,087
—
—
1,519,500
11,279
—
—
—
11,279
—
11,279
—
—
—
—
2,127
—
—
2,127
—
2,127
convertible
preferred
shares,
net
of
cash
offering
costs
of
$1,730
4,305,209
38,270
—
—
—
—
—
—
—
105,010
—
—
—
—
—
—
—
—
—
—
538,150
5,000
—
—
—
—
—
—
—
—
—
(509)
4,603
—
—
—
—
—
—
—
—
(509)
—
(63,677)
4,603
(63,677)
—
(86)
—
143
—
(595)
4,603
(63,534)
compensation
expense
Net
loss
Balances
as
of
—
—
—
—
December
31,
2016
4,948,369
43,270
13,088,500
19,944
10,479
—
(75,456)
(45,033)
—
(45,033)
Issuance
of
Series
A
convertible
preferred
shares,
net
of
offering
costs
of
$1,334
Issuance
of
Series
A
convertible
preferred
shares
as
payment
of
offering
costs
Beneficial
conversion
feature
on
Series
A
convertible
preferred
shares
Accretion
of
beneficial
conversion
feature
on
Series
A
convertible
preferred
shares
Issuance
of
common
shares
as
payment
for
equity
investment
(Note
5)
Conversion
of
Seris
A
convertible
preferred
shares
to
common
shares
Issuance
of
common
shares
in
settlement
of
contingent
equity
liability
Issuance
of
common
shares
upon
completion
of
initial
public
offering,
net
of
offering
costs
Issuance
of
common
share
warrant
as
4,305,182
38,666
—
—
—
—
—
—
105,009
—
—
—
—
—
—
—
—
—
—
(12,006)
—
—
12,006
—
12,006
—
12,006
—
12,006
—
—
(12,006)
—
(12,006)
—
(12,006)
—
—
32,500
352
—
—
352
—
352
(9,358,560)
(81,936)
9,358,560
81,936
—
—
81,936
—
81,936
—
—
1,883,523
32,020
—
—
32,020
—
32,020
—
—
11,385,000
176,128
—
—
176,128
—
176,128
consideration
for
services
Exercise
of
stock
options
Share-based
compensation
expense
Net
loss
Balances
as
of
—
—
—
—
—
—
—
309,665
—
681
93
(255)
—
—
93
426
—
—
—
—
—
—
13,239
—
—
(127,190)
13,239
(127,190)
—
—
—
—
93
426
13,239
(127,190)
December
31,
2017
—
$
—
36,057,748
$311,061
$
23,556
$
—
$
(202,646) $
131,971
$
—
$
131,971
The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.
F-5
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
CONSOLIDATED
STATEMENTS
OF
CASH
FLOWS
(Amounts
in
thousands,
except
share
and
per
share
amounts)
Year
Ended
December
31,
2016
2017
2015
Cash
flows
from
operating
activities:
Net
loss
Adjustments
to
reconcile
net
loss
to
net
cash
used
in
operating
activities:
Share-based
compensation
expense
Non-cash
interest
expense
Fair
value
of
contingent
equity
liability
under
license
agreements
Fair
value
of
warrants
issued
as
consideration
for
license
agreement
Change
in
fair
value
of
warrant
liability
Change
in
fair
value
of
derivative
liability
Change
in
fair
value
of
contingent
equity
liability
Loss
from
equity
method
investment
Defered
tax
assets
Other
non-cash
items
Changes
in
operating
assets
and
liabilities:
Prepaid
expenses
and
other
current
assets
Other
assets
Accounts
payable
Accrued
expenses
Other
long-term
liabilities
Net
cash
used
in
operating
activities
Cash
flows
from
investing
activities:
Purchases
of
property
and
equipment
Purchase
of
equity
method
investment
Decrease
in
restricted
cash
Net
cash
used
in
investing
activities
Cash
flows
from
financing
activities:
Proceeds
from
issuance
of
common
shares
Proceeds
from
issuance
of
common
shares
upon
completion
of
initial
public
offering,
net
of
underwriting
commissions
and
discounts
Proceeds
from
issuance
of
Series
A
preferred
shares
Proceeds
from
borrowings
Proceeds
from
exercise
of
stock
options
Payments
of
related
party
notes
payable
Repayment
of
notes
payable
Payments
of
offering
costs
Payments
of
debt
issuance
costs
Collection
of
note
receivable
from
shareholder
Advanced
payment
for
the
second
closing
of
Series
A
preferred
stock
Net
cash
provided
by
financing
activities
Net
increase
in
cash
Cash
at
beginning
of
period
Cash
at
end
of
period
Supplemental
disclosure
of
cash
flow
information:
Cash
paid
for
interest
Cash
paid
for
income
taxes
Supplemental
disclosure
of
non-cash
investing
and
financing
activities:
Deferred
offering
costs
included
in
accrued
expenses
Series
A
convertible
preferred
share
offering
costs
included
in
accrued
expenses
Issuance
of
warrants
to
guarantor
and
co-guarantor
of
notes
payable
Beneficial
conversion
feature
on
Series
A
preferred
shares
Accretion
of
beneficial
conversion
feature
on
Series
A
preferred
shares
Issuance
of
Series
A
preferred
shares
as
payment
of
offering
costs
Issuance
of
Series
A
preferred
shares
in
settlement
of
contingent
equity
liability
Issuance
of
common
shares
as
payment
of
equity
investment
Issuance
of
notes
payable
to
related
parties
in
connection
with
acquisition
of
BPI
Issuance
of
common
share
warrant
as
consideration
for
services
Exercise
of
stock
options
Purchases
of
property
and
equipment
included
in
accounts
payable
Purchases
of
property
and
equipment
under
financing
lease
$ (127,190) $ (63,534) $ (10,066)
13,239
784
—
—
3,241
(512)
13,082
1,885
9
64
4,603
374
21,675
2,127
(154)
65
2,263
247
—
(4)
(4,730)
(32)
3,975
1,341
29
(94,815)
24
—
678
2,148
(16)
(29,504)
(541)
(6,627)
127
(7,041)
(26)
(3,000)
(127)
(3,153)
2,837
—
—
1,231
—
370
—
—
—
264
(423)
—
23
132
7
(5,625)
(3)
—
—
(3)
—
11,399
4,853
179,996
40,000
—
426
(595)
(5,000)
(5,068)
—
—
—
209,759
107,903
23,565
—
40,000
5,000
—
—
—
(1,507)
(197)
—
67
54,762
22,105
1,460
$ 131,468
$ 23,565
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
$
122
$
1,049
$
11
$
—
$
—
$
—
$
—
$
12,006
$
12,006
$
1,242
$
—
$
352
$
—
$
93
$
255
$
25
$
1,787
$
134
$
343
$
934
$
—
$
—
$
975
$
5,000
$
—
$
595
$
—
$
—
$
—
$
—
$
—
—
—
—
—
—
(37)
—
500
—
5,316
(312)
1,772
1,460
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
The
accompanying
notes
are
an
integral
part
of
these
consolidated
financial
statements.
F-6
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Amounts
in
thousands,
except
share
and
per
share
amounts)
1.
Nature
of
the
Business
and
Basis
of
Presentation
Biohaven
Pharmaceutical
Holding
Company
Ltd.
(the
"Company")
was
incorporated
in
Tortola,
British
Virgin
Islands
in
September
2013.
The
Company
is
a
clinical-stage
biopharmaceutical
company
with
a
portfolio
of
innovative,
late-stage
product
candidates
targeting
neurological
diseases,
including
rare
disorders.
The
Company's
product
candidates
are
small
molecules
based
on
two
distinct
mechanistic
platforms—calcitonin
gene-related
peptide
("CGRP")
receptor
antagonists
and
glutamate
modulators—which
the
Company
believes
have
the
potential
to
alter
existing
treatment
approaches
across
a
diverse
set
of
neurological
indications
with
high
unmet
need
in
both
large
markets
and
orphan
indications.
The
most
advanced
product
candidate
from
the
Company's
CGRP
receptor
antagonist
platform
is
rimegepant,
which
the
Company
is
developing
for
the
acute
treatment
of
migraine
and
for
which
it
initiated
two
Phase
3
clinical
trials
in
July
2017,
with
topline
results
expected
in
the
first
quarter
2018.
The
Company
is
subject
to
risks
and
uncertainties
common
to
early-stage
companies
in
the
biotechnology
industry,
including,
but
not
limited
to,
development
by
competitors
of
new
technological
innovations,
dependence
on
key
personnel,
protection
of
proprietary
technology,
compliance
with
government
regulations
and
the
ability
to
secure
additional
capital
to
fund
operations.
Product
candidates
currently
under
development
will
require
significant
additional
research
and
development
efforts,
including
preclinical
and
clinical
testing
and
regulatory
approval,
prior
to
commercialization.
These
efforts
may
require
additional
capital,
additional
personnel
and
infrastructure,
and
further
regulatory
and
other
capabilities.
Even
if
the
Company's
product
development
efforts
are
successful,
it
is
uncertain
when,
if
ever,
the
Company
will
realize
significant
revenue
from
product
sales.
The
accompanying
consolidated
financial
statements
have
been
prepared
in
accordance
with
accounting
principles
generally
accepted
in
the
United
States
of
America
("GAAP")
and
include
the
accounts
of
the
Company
and
its
subsidiaries
after
elimination
of
all
significant
intercompany
accounts
and
transactions.
Investments
in
companies
in
which
the
Company
owns
less
than
a
50%
equity
interest
and
where
it
exercises
significant
influence
over
the
operating
and
financial
policies
of
the
investee
are
accounted
for
using
the
equity
method
of
accounting.
Biohaven Pharmaceuticals, Inc.
The
Company
has
historically
outsourced
all
of
the
research
and
clinical
development
for
its
programs
under
a
master
services
agreement
(the
"MSA")
with
Biohaven
Pharmaceuticals,
Inc.
("BPI").
BPI
was
incorporated
in
the
state
of
Delaware
in
July
2013.
The
three
founders
of
BPI,
each
of
whom
owned
one-third
of
the
equity
of
BPI
through
December
31,
2016,
are
related
parties
of
the
Company
(see
Note
17).
Substantially
all
of
the
operations
of
BPI
have
been
performed
in
service
to
the
Company
under
the
terms
of
the
MSA,
and
substantially
all
of
the
funding
for
the
operations
of
BPI
was
provided
by
the
Company.
From
inception,
the
Company
has
consolidated
the
results
of
BPI.
On
December
31,
2016,
the
Company
acquired
100%
of
the
issued
and
outstanding
shares
of
BPI
(see
Note
18).
From
inception
through
the
acquisition
of
BPI,
100%
of
the
equity
in
BPI
was
reflected
as
a
net
loss
attributable
to
non-controlling
interest
on
the
consolidated
statement
of
operations
and
comprehensive
loss.
Since
the
acquisition
of
BPI
on
December
31,
2016,
the
Company
no
longer
reports
any
non-controlling
interest
related
to
BPI.
F-7
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
1.
Nature
of
the
Business
and
Basis
of
Presentation
(Continued)
Stock Split
In
October
2016,
the
Company
effected
a
500-for-one
stock
split
of
its
issued
and
outstanding
common
shares.
Accordingly,
all
share
and
per
share
amounts
for
all
periods
presented
in
the
accompanying
consolidated
financial
statements
and
notes
thereto
have
been
adjusted
retroactively,
where
applicable,
to
reflect
this
stock
split.
Initial Public Offering
On
May
3,
2017,
the
Company's
registration
statement
on
Form
S-1
relating
to
its
initial
public
offering
of
its
common
shares
(the
"IPO")
was
declared
effective
by
the
Securities
and
Exchange
Commission
("SEC").
The
IPO
closed
on
May
9,
2017
and
the
Company
issued
and
sold
9,900,000
common
shares
at
a
public
offering
price
of
$17.00
per
share
for
net
proceeds
of
$152,651
after
deducting
underwriting
discounts
and
commissions
of
$11,781
and
other
offering
expenses
of
approximately
$3,868.
Upon
the
closing
of
the
IPO,
all
convertible
preferred
shares
then
outstanding
converted
into
an
aggregate
of
9,358,560
common
shares.
In
addition,
on
May
9,
2017,
the
underwriters
of
the
IPO
fully
exercised
their
option
to
purchase
additional
shares,
and
on
May
11,
2017,
the
Company
issued
and
sold
1,485,000
common
shares
for
net
proceeds
of
$23,478
after
deducting
underwriting
discounts
and
commissions
of
$1,767.
Thus,
the
aggregate
net
proceeds
to
the
Company
from
the
IPO,
after
deducting
underwriting
discounts
and
commissions
and
other
offering
costs,
were
$176,128.
In
connection
with
the
completion
of
its
IPO,
the
Company
issued
an
aggregate
of
1,883,523
common
shares
to
Bristol
Myers-Squibb
Company
("BMS")
and
AstraZeneca
AB
("AstraZeneca")
in
satisfaction
of
obligations
to
contingently
issue
equity
securities
pursuant
to
the
license
agreements
(see
Note
13)
for
no
additional
consideration.
Also
in
connection
with
the
completion
of
its
IPO
in
May
2017,
the
Company
amended
its
memorandum
and
articles
of
association
to
authorize
the
issuance
of
up
to
200,000,000
no
par
value
common
shares
and
10,000,000
no
par
value
undesignated
preferred
shares.
Going Concern
In
accordance
with
Accounting
Standards
Update
("ASU")
2014-15,
Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern
(Subtopic 205-40) ,
the
Company
has
evaluated
whether
there
are
conditions
and
events,
considered
in
the
aggregate,
that
raise
substantial
doubt
about
the
Company's
ability
to
continue
as
a
going
concern
within
one
year
after
the
date
that
the
consolidated
financial
statements
are
issued.
Through
December
31,
2017,
the
Company
has
funded
its
operations
primarily
with
proceeds
from
sales
of
preferred
and
common
shares
and
proceeds
from
the
IPO.
The
Company
has
incurred
recurring
losses
since
its
inception,
including
net
losses
of
$127,190,
$63,534
and
$10,066
during
the
years
ended
December
31,
2017,
2016
and
2015,
respectively.
In
addition,
as
of
December
31,
2017,
the
Company
had
an
accumulated
deficit
of
$202,646.
The
Company
expects
to
continue
to
generate
operating
losses
for
the
foreseeable
future.
As
of
March
6,
2018,
the
issuance
date
of
these
consolidated
financial
statements,
the
Company
expects
that
its
cash
of
$131,468
as
of
December
31,
2017
will
be
sufficient
to
fund
operating
expenses,
financial
commitments
and
other
cash
requirements
F-8
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
1.
Nature
of
the
Business
and
Basis
of
Presentation
(Continued)
through
December
31,
2018.
The
future
viability
of
the
Company
beyond
that
point
is
dependent
on
its
ability
to
raise
additional
capital
to
finance
its
operations.
To
execute
its
business
plans,
the
Company
will
require
funding
to
support
its
continuing
operations
and
pursue
its
growth
strategy.
Until
such
time
as
the
Company
can
generate
significant
revenue
from
product
sales,
if
ever,
it
expects
to
finance
its
operations
through
the
sale
of
public
or
private
equity,
debt
financings
or
other
capital
sources,
including
collaborations
with
other
companies
or
other
strategic
transactions.
The
Company
may
not
be
able
to
obtain
financing
on
acceptable
terms,
or
at
all.
The
terms
of
any
financing
may
adversely
affect
the
holdings
or
the
rights
of
the
Company's
shareholders.
If
the
Company
is
unable
to
obtain
funding,
the
Company
could
be
forced
to
delay,
reduce
or
eliminate
some
or
all
of
its
research
and
development
programs,
product
portfolio
expansion
or
commercialization
efforts,
which
could
adversely
affect
its
business
prospects.
If
the
Company
is
unable
to
obtain
funding,
the
Company
could
be
forced
to
delay,
reduce
or
eliminate
some
or
all
of
its
research
and
development
programs,
product
portfolio
expansion
or
commercialization
efforts,
which
could
adversely
affect
its
business
prospects,
or
the
Company
may
be
unable
to
continue
operations.
Although
management
continues
to
pursue
these
plans,
there
is
no
assurance
that
the
Company
will
be
successful
in
obtaining
sufficient
funding
on
terms
acceptable
to
the
Company
to
fund
continuing
operations,
if
at
all.
Based
on
its
recurring
losses
from
operations
incurred
since
inception,
expectation
of
continuing
operating
losses
for
the
foreseeable
future,
and
need
to
raise
additional
capital
to
finance
its
future
operations,
the
Company
has
concluded
that
there
is
substantial
doubt
about
its
ability
to
continue
as
a
going
concern
within
one
year
after
the
date
that
the
consolidated
financial
statements
are
issued.
The
accompanying
consolidated
financial
statements
do
not
include
any
adjustments
that
might
result
from
the
outcome
of
this
uncertainty.
Accordingly,
the
consolidated
financial
statements
have
been
prepared
on
a
basis
that
assumes
the
Company
will
continue
as
a
going
concern
and
which
contemplates
the
realization
of
assets
and
satisfaction
of
liabilities
and
commitments
in
the
ordinary
course
of
business.
2.
Summary
of
Significant
Accounting
Policies
Use of Estimates
The
preparation
of
consolidated
financial
statements
in
conformity
with
GAAP
requires
management
to
make
estimates
and
assumptions
that
affect
the
reported
amounts
of
assets
and
liabilities,
the
disclosure
of
contingent
assets
and
liabilities
at
the
date
of
the
consolidated
financial
statements
and
the
reported
amounts
of
income
and
expenses
during
the
reporting
periods.
Significant
estimates
and
assumptions
reflected
in
these
consolidated
financial
statements
include,
but
are
not
limited
to,
the
accrual
for
research
and
development
expenses
and
the
valuation
of
common
shares,
stock
options,
warrants,
derivative
instruments
and
contingent
equity
instruments.
In
addition,
management's
assessment
of
the
Company's
ability
to
continue
as
a
going
concern
involves
the
estimation
of
the
amount
and
timing
of
future
cash
inflows
and
outflows.
Estimates
are
periodically
reviewed
in
light
of
changes
in
circumstances,
facts
and
experience.
Changes
in
estimates
are
recorded
in
the
period
in
which
they
become
known.
Actual
results
could
differ
from
those
estimates.
F-9
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
Equity Method Investments
Investments
in
non-public
companies
in
which
the
Company
owns
less
than
a
50%
equity
interest
and
where
it
exercises
significant
influence
over
the
operating
and
financial
policies
of
the
investee
are
accounted
for
using
the
equity
method
of
accounting.
The
Company's
proportionate
share
of
the
net
income
or
loss
of
the
equity
method
investment
is
included
in
other
income
(expense),
net
in
the
consolidated
statement
of
operations
and
comprehensive
loss
and
results
in
a
corresponding
adjustment
to
the
carrying
value
of
the
investment
on
the
consolidated
balance
sheet.
Dividends
received
reduce
the
carrying
value
of
the
investment.
The
Company
periodically
reviews
the
carrying
value
of
its
investment
to
determine
if
there
has
been
an
other-than-temporary
decline
in
carrying
value.
A
variety
of
factors
are
considered
when
determining
if
a
decline
in
carrying
value
is
other
than
temporary,
including,
among
other
factors,
the
financial
condition
and
business
prospects
of
the
investee,
as
well
as
the
Company's
intent
with
regard
to
the
investment.
Property and Equipment
Property
and
equipment
are
recorded
at
cost
and
depreciated
or
amortized
using
the
straight-line
method
over
the
estimated
useful
lives
of
the
respective
assets.
As
of
December
31,
2017
and
2016,
the
Company's
property
and
equipment
consisted
of
office
equipment
and
computer
equipment,
as
well
as
construction
in
progress
comprised
of
computer
software
and
leasehold
improvements.
The
Company
is
also
a
deemed
owner
of
a
building
related
to
a
lease
agreement
which
has
been
accounted
for
as
a
financing
lease
(see
Note
16).
The
lease
represents
a
failed
sales-leaseback
due
to
the
non-normal
tenant
improvements
and
the
Company's
continuing
involvement
in
the
property.
The
fair
value
of
the
building
and
improvements
funded
by
the
landlord
will
be
recognized
on
the
balance
sheet
as
of
December
31,
2017.
Construction
costs
funded
by
the
Company
will
be
recognized
on
the
consolidated
balance
sheet
as
incurred.
These
assets
will
be
amortized
over
respective
depreciable
lives.
The
Company
will
record
rent
expense
based
on
the
estimated
fair
value
of
the
rental
for
land.
The
Company
will
recognize
a
financing
obligation
for
the
fair
value
of
the
property,
construction
costs
incurred
by
the
Company
and
the
landlord,
and
the
landlord
allowance.
The
liability
will
be
amortized
over
the
lease
term
based
on
the
minimum
lease
payments
required
under
the
lease
and
the
Company's
incremental
borrowing
rate.
The
minimum
lease
payments
are
recorded
as
interest
expense
and
in
part
as
a
payment
of
principal
reducing
the
financing
obligation.
The
fixed
assets
have
the
following
useful
lives:
Building
Leasehold
improvements
Office
equipment
Computer
software
Computer
equipment
30
years
Lesser
of
10
years
or
the
life
of
the
lease
3
-
5
years
3
-
5
years
3
years
Upon
retirement
or
sale,
the
cost
of
assets
disposed
of
and
the
related
accumulated
depreciation
are
removed
from
the
accounts
and
any
resulting
gain
or
loss
is
included
in
loss
from
operations.
Expenditures
for
repairs
and
maintenance
are
charged
to
expense
as
incurred.
Property
and
equipment
F-10
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
are
monitored
regularly
for
impairment
whenever
events
or
changes
in
business
circumstances
indicate
that
the
carrying
amount
of
the
assets
may
not
be
fully
recoverable.
Fair Value Measurements
Certain
assets
of
the
Company
are
carried
at
fair
value
under
GAAP.
Fair
value
is
defined
as
the
exchange
price
that
would
be
received
for
an
asset
or
paid
to
transfer
a
liability
(an
exit
price)
in
the
principal
or
most
advantageous
market
for
the
asset
or
liability
in
an
orderly
transaction
between
market
participants
on
the
measurement
date.
Valuation
techniques
used
to
measure
fair
value
must
maximize
the
use
of
observable
inputs
and
minimize
the
use
of
unobservable
inputs.
Financial
assets
and
liabilities
carried
at
fair
value
are
to
be
classified
and
disclosed
in
one
of
the
following
three
levels
of
the
fair
value
hierarchy,
of
which
the
first
two
are
considered
observable
and
the
last
is
considered
unobservable:
•
•
•
Level
1—Quoted
prices
in
active
markets
for
identical
assets
or
liabilities.
Level
2—Observable
inputs
(other
than
Level
1
quoted
prices),
such
as
quoted
prices
in
active
markets
for
similar
assets
or
liabilities,
quoted
prices
in
markets
that
are
not
active
for
identical
or
similar
assets
or
liabilities,
or
other
inputs
that
are
observable
or
can
be
corroborated
by
observable
market
data.
Level
3—Unobservable
inputs
that
are
supported
by
little
or
no
market
activity
that
are
significant
to
determining
the
fair
value
of
the
assets
or
liabilities,
including
pricing
models,
discounted
cash
flow
methodologies
and
similar
techniques.
The
Company's
warrant
liability,
derivative
liability
and
contingent
equity
liability
are
carried
at
fair
value,
based
upon
Level
3
inputs
described
above
(see
Note
3).
The
carrying
values
of
other
current
assets,
accounts
payable,
accrued
expenses
and
notes
payable
under
a
credit
agreement
approximate
their
fair
values
due
to
the
short-term
nature
of
these
assets
and
liabilities.
Segment Information
The
Company
manages
its
operations
as
a
single
segment,
the
development
of
therapies
targeting
neurological
diseases,
for
the
purposes
of
assessing
performance
and
making
operating
decisions.
All
of
the
Company's
tangible
assets
are
held
in
the
United
States.
Research and Development Costs
Research
and
development
costs
are
expensed
as
incurred.
Research
and
development
expenses
consist
of
costs
incurred
in
performing
research
and
development
activities,
including
salaries,
share-based
compensation
and
benefits,
third-party
license
fees,
and
external
costs
of
vendors
engaged
to
conduct
clinical
development
activities
and
clinical
trials
as
well
as
to
manufacture
clinical
trial
materials.
Non-refundable
prepayments
for
goods
or
services
that
will
be
used
or
rendered
for
future
research
and
development
activities
are
deferred
and
capitalized.
Such
amounts
are
recognized
as
an
expense
as
the
goods
are
delivered
or
the
related
services
are
performed,
or
until
it
is
no
longer
expected
that
the
goods
will
be
delivered
or
the
services
rendered.
F-11
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
The
Company
has
entered
into
various
research
and
development-related
contracts.
These
agreements
are
cancelable,
and
related
payments
are
recorded
as
research
and
development
expenses
as
incurred.
The
Company
records
accruals
for
estimated
ongoing
research
costs.
When
evaluating
the
adequacy
of
the
accrued
liabilities,
the
Company
analyzes
progress
of
the
studies
or
clinical
trials,
including
the
phase
or
completion
of
events,
invoices
received
and
contracted
costs.
Certain
judgments
and
estimates
are
made
in
determining
the
accrued
balances
at
the
end
of
any
reporting
period.
Actual
results
could
differ
from
the
Company's
estimates.
The
Company's
historical
accrual
estimates
have
not
been
materially
different
from
the
actual
costs.
Share-Based Compensation
The
Company
measures
stock
options
granted
to
employees
and
directors
based
on
the
fair
value
on
the
date
of
the
grant
and
recognizes
compensation
expense
of
those
awards,
over
the
requisite
service
period,
which
is
generally
the
vesting
period
of
the
respective
award.
Forfeitures
are
accounted
for
as
they
occur.
Generally,
the
Company
issues
stock
options
with
only
service-based
vesting
conditions
and
records
the
expense
for
these
awards
using
the
straight-line
method.
The
Company
also
issues,
from
time
to
time,
stock
options
with
performance-based
vesting
conditions
and
records
the
expense
for
these
awards
when
the
Company
concludes
that
it
is
probable
that
the
performance
condition
will
be
achieved.
For
share-based
awards
granted
to
non-employees
including
consultants,
compensation
expense
is
recognized
over
the
period
during
which
services
are
rendered
by
such
non-employees
until
completed.
At
the
end
of
each
financial
reporting
period
prior
to
completion
of
the
service,
the
fair
value
of
the
unvested
awards
are
remeasured
using
the
then-current
fair
value
of
the
Company's
common
shares
and
updated
assumption
inputs
in
the
Black-Scholes
option-pricing
model.
The
Company
classifies
share-based
compensation
expense
in
its
consolidated
statement
of
operations
and
comprehensive
loss
in
the
same
manner
in
which
the
award
recipient's
payroll
costs
are
classified
or
in
which
the
award
recipient's
service
payments
are
classified.
The
fair
value
of
each
stock
option
grant
is
estimated
on
the
date
of
grant
using
the
Black-Scholes
option-pricing
model.
Prior
to
May
2017,
the
Company
was
a
private
company
and,
accordingly,
lacks
a
history
of
company-specific
historical
and
implied
volatility
information
for
its
shares.
Therefore,
it
estimates
its
expected
share
price
volatility
based
on
the
historical
volatility
of
publicly
traded
peer
companies
and
expects
to
continue
to
do
so
until
such
time
as
it
has
adequate
historical
data
regarding
the
volatility
of
its
own
traded
share
price.
The
expected
term
of
the
Company's
stock
options
has
been
determined
utilizing
the
"simplified"
method
for
awards
that
qualify
as
"plain-vanilla"
options.
The
expected
term
of
stock
options
granted
to
non-employees
is
equal
to
the
contractual
term
of
the
option
award.
The
risk-free
interest
rate
is
determined
by
reference
to
the
U.S.
Treasury
yield
curve
in
effect
at
the
time
of
grant
of
the
award
for
time
periods
approximately
equal
to
the
expected
term
of
the
award.
Expected
dividend
yield
is
based
on
the
fact
that
the
Company
has
never
paid
cash
dividends
on
common
shares
and
does
not
expect
to
pay
any
cash
dividends
in
the
foreseeable
future.
F-12
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
Warrant Liability
In
connection
with
entering
into
a
credit
agreement,
the
Company
issued
warrants
to
purchase
common
shares
to
two
of
the
Company's
directors
in
connection
with
a
guarantee
of
its
obligations
under
the
agreement
(see
Note
8).
The
Company
classifies
the
warrants
as
a
liability
on
its
consolidated
balance
sheet
because
each
warrant
represents
a
freestanding
financial
instrument
that
is
not
indexed
to
the
Company's
own
shares.
The
warrant
liability
was
initially
recorded
at
fair
value
upon
entering
into
the
credit
agreement
and
is
subsequently
remeasured
to
fair
value
at
each
reporting
date.
Changes
in
the
fair
value
of
the
warrant
liability
are
recognized
as
a
component
of
other
income
(expense),
net
in
the
consolidated
statement
of
operations
and
comprehensive
loss.
Changes
in
the
fair
value
of
the
warrant
liability
will
continue
to
be
recognized
until
the
warrants
are
exercised,
expire
or
qualify
for
equity
classification.
Derivative Liability
The
Company's
license
agreement
with
Yale
University
("Yale")
(see
Note
13)
provides
for
a
change-of-control
payment
to
Yale
upon
the
occurrence
of
a
change-of-control
event,
as
defined
in
the
agreement,
including
an
IPO.
The
Company
classifies
the
change-of-control
payment
obligation
as
a
liability
on
its
consolidated
balance
sheet
because
it
represents
a
contingent
obligation
to
pay
a
variable
amount
of
cash
that
may
be
based,
in
part,
on
the
value
of
the
Company's
own
shares.
The
derivative
liability
was
initially
recorded
at
fair
value
upon
entering
into
the
license
agreement
and
was
subsequently
remeasured
to
fair
value
at
each
reporting
date.
Changes
in
the
fair
value
of
the
derivative
liability
were
recognized
as
a
component
of
other
income
(expense),
net
in
the
consolidated
statement
of
operations
and
comprehensive
loss
prior
to
its
expiration.
Contingent Equity Liability
The
Company's
license
agreements
with
AstraZeneca
and
BMS
(see
Note
13)
require
the
Company
to
issue
capital
shares
upon
the
occurrence
of
specified
financing
or
change-of-control
events
or
development
milestones.
In
each
agreement,
the
class
and
number
of
shares
to
be
issued
upon
a
triggering
event
were
not
known
upon
entering
into
the
license
agreements;
however,
the
dollar
amount
of
the
shares
to
be
issued
upon
a
triggering
event
is
fixed.
The
Company
classifies
these
contingent
obligations
to
issue
shares
as
a
liability
on
its
consolidated
balance
sheet
because
each
represents
an
obligation
to
issue
a
variable
number
of
shares
for
a
fixed
dollar
amount.
Each
contingent
equity
liability
was
initially
recorded
at
fair
value
upon
entering
into
each
respective
agreement
and
is
subsequently
remeasured
to
fair
value
at
each
reporting
date.
Changes
in
the
fair
values
of
the
contingent
equity
liabilities
are
recognized
as
a
component
of
other
income
(expense),
net
in
the
consolidated
statement
of
operations
and
comprehensive
loss.
Changes
in
the
fair
value
of
the
contingent
equity
liabilities
are
recognized
through
the
occurrence
of
the
respective
triggering
event.
Income Taxes
The
Company
accounts
for
income
taxes
using
the
asset
and
liability
method,
which
requires
the
recognition
of
deferred
tax
assets
and
liabilities
for
the
expected
future
tax
consequences
of
events
that
have
been
recognized
in
the
consolidated
financial
statements
or
in
the
Company's
tax
returns.
Deferred
tax
assets
and
liabilities
are
determined
on
the
basis
of
the
differences
between
the
F-13
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
consolidated
financial
statements
and
tax
basis
of
assets
and
liabilities
using
enacted
tax
rates
in
effect
for
the
year
in
which
the
differences
are
expected
to
reverse.
Changes
in
deferred
tax
assets
and
liabilities
are
recorded
in
the
provision
for
income
taxes.
The
Company
assesses
the
likelihood
that
its
deferred
tax
assets
will
be
recovered
from
future
taxable
income
and,
to
the
extent
it
believes,
based
upon
the
weight
of
available
evidence,
that
it
is
more
likely
than
not
that
all
or
a
portion
of
the
deferred
tax
assets
will
not
be
realized,
a
valuation
allowance
is
established
through
a
charge
to
income
tax
expense.
Potential
for
recovery
of
deferred
tax
assets
is
evaluated
by
estimating
the
future
taxable
profits
expected
and
considering
prudent
and
feasible
tax
planning
strategies.
The
provision
for
income
taxes
includes
the
effects
of
applicable
tax
reserves,
or
unrecognized
tax
benefits,
as
well
as
the
related
net
interest
and
penalties.
Net Income (Loss) per Share
The
Company
follows
the
two-class
method
when
computing
net
income
(loss)
per
share
as
the
Company
has
issued
shares
that
meet
the
definition
of
participating
securities.
The
two-class
method
determines
net
income
(loss)
per
share
for
each
class
of
common
and
participating
securities
according
to
dividends
declared
or
accumulated
and
participation
rights
in
undistributed
earnings.
The
two-class
method
requires
income
available
to
common
shareholders
for
the
period
to
be
allocated
between
common
and
participating
securities
based
upon
their
respective
rights
to
receive
dividends
as
if
all
income
for
the
period
had
been
distributed.
Net
income
(loss)
per
share
attributable
to
common
shareholders
is
calculated
based
on
net
income
(loss)
attributable
to
Biohaven
Pharmaceutical
Holding
Company
Ltd.
and
excludes
net
income
(loss)
attributable
to
non-controlling
interests
for
relevant
periods.
Basic
net
income
(loss)
per
share
attributable
to
common
shareholders
is
computed
by
dividing
the
net
income
(loss)
attributable
to
common
shareholders
by
the
weighted
average
number
of
common
shares
outstanding
for
the
period.
Diluted
net
income
(loss)
attributable
to
common
shareholders
is
computed
by
adjusting
net
income
(loss)
attributable
to
common
shareholders
to
reallocate
undistributed
earnings
based
on
the
potential
impact
of
dilutive
securities.
Diluted
net
income
(loss)
per
share
attributable
to
common
shareholders
is
computed
by
dividing
the
diluted
net
income
(loss)
attributable
to
common
shareholders
by
the
weighted
average
number
of
common
shares
outstanding
for
the
period,
including
potential
dilutive
common
shares.
For
purpose
of
this
calculation,
outstanding
options,
warrants
to
purchase
common
shares,
convertible
preferred
shares
and
contingently
issuable
equity
are
considered
potential
dilutive
common
shares.
The
Company's
convertible
preferred
shares
contractually
entitled
the
holders
of
such
shares
to
participate
in
dividends
but
contractually
did
not
require
the
holders
of
such
shares
to
participate
in
losses
of
the
Company.
In
periods
in
which
the
Company
reports
a
net
loss
attributable
to
common
shareholders,
diluted
net
loss
per
share
attributable
to
common
shareholders
is
the
same
as
basic
net
loss
per
share
attributable
to
common
shareholders,
since
potentially
dilutive
common
shares
are
considered
to
be
anti-dilutive.
Recently Adopted Accounting Pronouncements
In
March
2016,
the
Financial
Accounting
Standards
Board
("FASB")
issued
Accounting
Standards
Update
("ASU")
No.
2016-09,
Improvements
to
Employee
Share-Based
Payment
Accounting
F-14
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
("ASU
2016-09").
The
new
standard
involves
several
aspects
of
the
accounting
for
share-based
payment
transactions,
including
the
income
tax
consequences,
classification
of
awards
as
either
equity
or
liabilities
and
classification
on
the
statement
of
cash
flows.
Certain
of
these
changes
are
required
to
be
applied
retrospectively,
while
other
changes
are
required
to
be
applied
prospectively.
The
Company
has
elected
to
early
adopt
ASU
2016-09
on
January
1,
2017
and
has
reflected
the
adoption
in
the
consolidated
financial
statements
of
the
Company.
The
adoption
of
ASU
2016-09
had
no
material
impact
on
the
Company's
financial
position,
results
of
operations
or
cash
flows.
Recently Issued Accounting Pronouncements
In
May
2017,
the
FASB
issued
ASU
No.
2017-09,
Compensation—Stock
Compensation
(Topic
718):
Scope
of
Modification
Accounting
("ASU
2017-09"),
which
clarifies
when
to
account
for
a
change
to
the
terms
or
conditions
of
a
share-based
payment
award
as
a
modification.
Under
the
new
guidance,
modification
accounting
is
required
only
if
the
fair
value,
the
vesting
conditions,
or
the
classification
of
the
award
(as
equity
or
liability)
changes
as
a
result
of
the
change
in
terms
or
conditions.
The
standard
is
effective
for
annual
periods
beginning
after
December
15,
2017,
including
interim
periods
within
those
fiscal
years.
Early
adoption
is
permitted.
The
Company
is
currently
evaluating
the
impact
that
the
adoption
of
ASU
2017-09
will
have
on
its
consolidated
financial
statements.
In
November
2016,
the
FASB
issued
ASU
2016-18,
"Statement
of
Cash
Flows
(Topic
230):
Restricted
Cash,"
which
will
require
entities
to
show
the
change
in
the
total
of
cash,
cash
equivalents,
restricted
cash
and
restricted
cash
equivalents
within
the
statement
of
cash
flows.
As
a
result,
entities
will
no
longer
separately
present
transfers
between
unrestricted
cash
and
restricted
cash.
This
guidance
will
be
effective
for
annual
reporting
periods
beginning
after
December
15,
2017,
including
interim
periods
within
those
annual
reporting
periods,
and
early
adoption
is
permitted.
The
Company
does
not
anticipate
a
material
impact
to
the
consolidated
financial
statements
as
a
result
of
the
adoption
of
this
guidance.
In
August
2016,
the
FASB
issued
ASU
No.
2016-15,
Statement
of
Cash
Flows:
Classification
of
Certain
Cash
Receipts
and
Cash
Payments
("ASU
2016-15"),
to
address
diversity
in
practice
in
how
certain
cash
receipts
and
cash
payments
are
presented
and
classified
in
the
statement
of
cash
flows.
The
standard
is
effective
for
annual
periods
beginning
after
December
15,
2017,
including
interim
periods
within
those
fiscal
years.
The
Company
is
currently
evaluating
the
impact
that
the
adoption
of
ASU
2016-15
will
have
on
its
consolidated
financial
statements.
In
February
2016,
the
FASB
issued
ASU
No.
2016-02,
Leases (Topic 842) ("ASU
2016-02"),
which
sets
out
the
principles
for
the
recognition,
measurement,
presentation
and
disclosure
of
leases
for
both
parties
to
a
contract
(i.e.,
lessees
and
lessors).
The
new
standard
requires
lessees
to
apply
a
dual
approach,
classifying
leases
as
either
finance
or
operating
leases
based
on
the
principle
of
whether
or
not
the
lease
is
effectively
a
financed
purchase
by
the
lessee.
This
classification
will
determine
whether
lease
expense
is
recognized
based
on
an
effective
interest
method
or
on
a
straight-line
basis
over
the
term
of
the
lease,
respectively.
A
lessee
is
also
required
to
record
a
right-of-use
asset
and
a
lease
liability
for
all
leases
with
a
term
of
greater
than
12
months
regardless
of
their
classification.
ASU
2016-02
(Accounting
Standards
Codification
("ASC")
Topic
842)
supersedes
the
previous
leases
standard,
ASC
840,
Leases .
The
standard
is
effective
for
public
entities
for
annual
periods
beginning
F-15
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
2.
Summary
of
Significant
Accounting
Policies
(Continued)
after
December
15,
2018
and
for
interim
periods
within
those
fiscal
years.
Early
adoption
is
permitted.
The
Company
is
currently
evaluating
the
impact
that
the
adoption
of
ASU
2016-02
will
have
on
its
consolidated
financial
statements.
3.
Fair
Value
of
Financial
Assets
and
Liabilities
The
following
tables
present
information
about
the
Company's
financial
assets
and
liabilities
measured
at
fair
value
on
a
recurring
basis
and
indicate
the
level
of
the
fair
value
hierarchy
utilized
to
determine
such
fair
values:
Liabilities:
Warrant
liability
Liabilities:
Warrant
liability
Derivative
liability
Contingent
equity
liability
Fair
Value
Measurements
as
of
December
31,
2017
Using:
Level
2
Level
3
Total
Level
1
$ —
$ —
$ 4,021
$ 4,021
$ —
$ —
$ 4,021
$ 4,021
Fair
Value
Measurements
as
of
December
31,
2016
Using:
Level
1
Level
2
Level
3
Total
$ —
$ —
$
780
512
18,938
$ —
$ —
$ 20,230
$ 20,230
780
$
512
18,938
—
—
—
—
During
the
years
ended
December
31,
2017
and
2016
there
were
no
transfers
between
Level
1,
Level
2
and
Level
3.
Valuation of Warrant Liability
The
warrant
liability
in
the
tables
above
is
composed
of
the
fair
value
of
warrants
to
purchase
common
shares
that
the
Company
issued
to
two
of
its
directors
in
connection
with
a
guarantee
of
its
obligations
under
a
credit
agreement
(see
Note
8).
The
fair
value
of
the
warrant
liability
was
determined
based
on
significant
inputs
not
observable
in
the
market,
which
represents
a
Level
3
measurement
within
the
fair
value
hierarchy.
At
December
31,
2017,
the
Company
utilized
the
Black-Scholes
option
pricing
model
to
value
the
warrant
liability.
The
Black-Scholes
option
pricing
model
incorporated
assumptions
and
estimates
to
value
the
warrant
liability.
Estimates
and
assumptions
impacting
the
fair
value
measurement
included
the
number
of
shares
for
which
the
warrants
will
be
exercisable,
the
fair
value
per
share
of
the
underlying
common
shares
issuable
upon
exercise
of
the
warrants,
the
remaining
contractual
term
of
the
warrants,
the
risk-free
interest
rate,
the
expected
dividend
yield,
and
the
expected
volatility
of
the
price
of
the
underlying
common
shares.
The
fair
value
per
share
of
the
Company's
common
shares
was
based
on
the
closing
trading
price
of
the
shares
on
December
29,
2017,
the
last
trading
day
of
the
year,
F-16
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
3.
Fair
Value
of
Financial
Assets
and
Liabilities
(Continued)
and
the
increase
in
the
fair
value
of
the
common
shares
during
the
year
ended
December
31,
2017
is
the
primary
reason
for
the
increase
in
the
fair
value
of
the
warrant
liability
during
the
same
period.
The
Company
was
a
private
company
prior
to
its
IPO
in
May
2017
and
therefore
lacks
a
history
of
company-specific
volatility
information
of
its
shares.
Therefore,
it
estimated
its
expected
share
volatility
based
on
the
historical
volatility
of
publicly
traded
peer
companies
for
a
term
equal
to
the
remaining
contractual
term
of
the
warrants.
The
risk-free
interest
rate
was
determined
by
reference
to
the
U.S.
Treasury
yield
curve
for
time
periods
approximately
equal
to
the
remaining
contractual
term
of
the
warrants.
The
Company
estimated
a
0%
expected
dividend
yield
based
on
the
fact
that
the
Company
has
never
paid
or
declared
dividends
and
does
not
intend
to
do
so
in
the
foreseeable
future.
Valuation of Derivative Liability
The
fair
value
of
the
derivative
liability
recognized
in
connection
with
the
Company's
license
agreement
with
Yale
(see
Note
13)
was
determined
based
on
significant
inputs
not
observable
in
the
market,
which
represents
a
Level
3
measurement
within
the
fair
value
hierarchy.
At
December
31,
2016,
the
fair
value
of
the
derivative
liability
was
determined
using
a
Monte-Carlo
simulation,
which
is
a
statistical
method
used
to
generate
a
defined
number
of
share
price
paths
to
develop
a
reasonable
estimate
of
the
range
of
the
expected
share
prices.
The
Monte-Carlo
simulation
incorporated
assumptions
and
estimates
to
value
the
derivative
liability,
including
the
amount
of
the
payment,
the
settlement
date,
the
trading
price
of
the
Company's
common
shares,
the
risk-free
interest
rate
and
the
expected
volatility
of
the
price
of
the
underlying
common
shares.
The
Company
continued
to
remeasure
the
derivative
liability
to
fair
value
at
each
reporting
date
and
recognized
any
changes
in
the
fair
value
of
the
derivative
liability
through
October
31,
2017.
The
derivative
liability
upon
expiration
of
the
lock-up
period
was
determined
to
be
$0
based
on
the
value
of
the
Company's
shares
on
this
date.
Valuation of Contingent Equity Liability
BMS.
The
fair
value
of
the
contingent
equity
liability
recognized
in
connection
with
the
Company's
license
agreement
with
BMS
(see
Note
13)
was
determined
based
on
significant
inputs
not
observable
in
the
market,
which
represents
a
Level
3
measurement
within
the
fair
value
hierarchy.
The
fair
value
of
the
contingent
equity
liability
was
determined
using
the
PWERM,
which
considered
as
inputs
the
probability
of
occurrence
of
events
that
would
trigger
the
issuance
of
shares,
the
expected
timing
of
such
events,
the
value
of
the
contingently
issuable
equity
and
a
risk-adjusted
discount
rate.
As
of
December
31,
2016,
the
assumed
probability
of
occurrence
of
the
event
that
was
most
probable
of
triggering
the
issuance
of
shares
was
75%,
the
expected
timing
of
such
an
event
was
estimated
to
be
less
than
one
year,
the
value
of
the
contingently
issuable
equity
was
$18,750
and
the
discount
rate
was
assessed
to
be
0%.
In
connection
with
the
closing
of
the
IPO
in
May
2017,
the
conditions
for
issuing
shares
in
connection
with
the
contingent
equity
liability
were
satisfied,
and
accordingly,
the
Company
issued
1,345,374
common
shares
to
BMS.
The
contingent
equity
liability
was
adjusted
to
fair
value
immediately
prior
to
the
completion
of
the
IPO,
and
upon
issuance
of
the
common
shares,
the
contingent
equity
liability
was
reclassified
to
equity.
F-17
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
3.
Fair
Value
of
Financial
Assets
and
Liabilities
(Continued)
AstraZeneca.
The
fair
value
of
the
contingent
equity
liability
recognized
in
connection
with
the
Company's
license
agreement
with
AstraZeneca
(see
Note
13)
was
determined
based
on
significant
inputs
not
observable
in
the
market,
which
represents
a
Level
3
measurement
within
the
fair
value
hierarchy.
The
fair
value
of
the
contingent
equity
liability
was
determined
using
the
PWERM,
which
considered
as
inputs
the
probability
of
occurrence
of
events
that
would
trigger
the
issuance
of
shares,
the
expected
timing
of
such
events,
the
value
of
the
contingently
issuable
equity
and
a
risk-adjusted
discount
rate.
The
contingently
issuable
equity
is
issuable
in
two
tranches,
each
for
a
fixed
dollar
amount
of
$5,000,
for
a
total
amount
of
$10,000.
Using
the
PWERM,
the
Company
assessed
the
fair
value
of
each
tranche
of
the
contingent
equity
liability
separately.
In
October
2016,
upon
completion
of
the
Series
A
First
Closing
(see
Note
10),
the
first
tranche
of
contingently
issuable
equity
became
issuable
to
AstraZeneca.
As
a
result,
the
Company
issued
to
AstraZeneca
538,150
Series
A
preferred
shares
with
an
aggregate
fair
value
of
$5,000,
or
$9.2911
per
share,
in
satisfaction
of
the
obligation
to
issue
the
first
tranche
of
equity
under
the
agreement.
Upon
the
issuance
of
the
538,150
Series
A
preferred
shares
to
AstraZeneca
in
October
2016,
the
Company
reclassified
the
carrying
value
of
the
first
tranche
contingent
equity
liability,
equal
to
the
then-current
fair
value
of
$5,000,
to
the
carrying
value
of
Series
A
preferred
shares.
The
shares
related
to
the
second
tranche
became
issuable
upon
the
earlier
of
(i)
the
initiation
of
a
Phase
2b
or
equivalent
clinical
trial
of
a
product
candidate
based
on
the
licensed
patent
rights
and
(ii)
any
liquidity
event,
including
an
IPO,
any
change
of
control
or
any
assignment
of
the
Company's
rights
or
obligations
under
the
license
agreement.
As
of
December
31,
2016,
the
Company
determined
that
the
fair
value
of
the
second
tranche
contingent
equity
liability
was
$4,875.
In
determining
this
fair
value,
the
assumed
probability
of
occurrence
of
the
event
that
was
most
probable
of
triggering
the
issuance
of
shares
was
65%,
the
expected
timing
of
such
an
event
was
estimated
to
be
less
than
one
year,
the
value
of
the
contingently
issuable
equity
was
$7,500
and
the
discount
rate
was
assessed
to
be
0%.
In
connection
with
the
closing
of
the
IPO
in
May
2017,
the
conditions
for
issuing
shares
in
connection
with
the
contingent
equity
liability
were
satisfied,
and
accordingly,
the
Company
issued
538,149
common
shares
to
AstraZeneca.
The
contingent
equity
liability
was
adjusted
to
fair
value
immediately
prior
to
the
completion
of
the
IPO,
and
upon
issuance
of
the
common
shares,
the
contingent
equity
liability
was
reclassified
to
equity.
F-18
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
3.
Fair
Value
of
Financial
Assets
and
Liabilities
(Continued)
The
following
table
provides
a
roll
forward
of
the
aggregate
fair
values
of
the
Company's
warrant
liability,
derivative
liability
and
contingent
equity
liability,
for
which
fair
value
is
determined
by
Level
3
inputs:
Balance
at
December
31,
2014
Change
in
fair
value
Balance
at
December
31,
2015
Initial
fair
value
of
warrant
liability
Initial
fair
value
of
contingent
equity
liability
Issuance
of
Series
A
preferred
stock
as
consideration
for
license
agreements
Change
in
fair
value
Balance
at
December
31,
2016
Change
in
fair
value
Issuance
of
common
shares
in
settlement
of
contingent
equity
liability
Balance
at
December
31,
2017
Warrant
Liability
Derivative
Liability
Contingent
Equity
Liability
$
—
$
—
—
934
—
—
(154)
780
3,241
77
$
370
447
—
—
—
65
512
(512)
—
—
—
—
21,675
(5,000)
2,263
18,938
13,082
—
$ 4,021
$
—
—
$
(32,020)
—
Beneficial Conversion Feature
In
connection
with
the
second
tranche
closing
of
Series
A
preferred
shares
on
February
17,
2017,
the
Company
determined
that
the
conversion
option
associated
with
the
shares
sold
met
the
definition
of
a
beneficial
conversion
feature
("BCF")
as
the
fair
value
of
the
underlying
common
shares
exceeded
the
adjusted
conversion
price.
The
BCF
was
recognized
at
its
fair
value
of
$12,006
as
a
reduction
to
the
carrying
value
of
the
Series
A
preferred
shares
and
a
corresponding
adjustment
to
additional
paid-in
capital.
The
fair
value
was
determined
using
Level
3
inputs,
equal
to
the
product
of
the
number
of
shares
sold
in
the
second
tranche
closing
multiplied
by
the
difference
between
the
adjusted
conversion
price
and
the
per
share
value
of
common
shares
at
the
commitment
date
(see
Note
10).
In
May
2017,
upon
the
completion
of
the
Company's
IPO,
all
of
the
outstanding
Series
A
preferred
shares
were
automatically
converted
into
an
aggregate
of
9,358,560
common
shares.
Upon
conversion
of
the
Series
A
preferred
shares,
the
remaining
unamortized
BCF
was
reclassified
to
additional
paid-in
capital
as
a
deemed
dividend.
F-19
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
4.
Prepaid
Expenses
and
Other
Current
Assets
Prepaid
expenses
and
other
current
assets
consisted
of
the
following:
Prepaid
clinical
trial
costs
Prepaid
insurance
Other
5.
Equity
Method
Investment
December
31,
2017
2016
$ 4,642
$ 388
—
455
82
100
$ 5,197
$ 470
On
August
29,
2016,
the
Company
executed
a
stock
purchase
agreement
with
Kleo
Pharmaceuticals,
Inc.
("Kleo"),
a
privately
held
Delaware
corporation,
to
purchase
3,000,000
shares
of
Kleo's
common
stock
at
an
initial
closing,
with
a
commitment
to
purchase
an
aggregate
of
5,500,000
additional
shares
of
common
stock,
in
each
case
at
a
share
price
of
$1.00
per
share
(the
"Kleo
SPA").
Kleo
is
a
development-stage
biopharmaceutical
company
focused
on
advancing
the
field
of
immunotherapy
by
developing
small
molecules
that
emulate
biologics.
The
Company
purchased
3,000,000
shares
upon
the
initial
closing
on
August
31,
2016,
and
the
remaining
5,500,000
shares
were
to
be
purchased
in
four
equal
tranches
of
1,375,000
shares
beginning
six
months
from
the
initial
closing
and
then
every
three
months
thereafter.
In
connection
with
the
initial
investment,
the
Company
received
the
right
to
designate
two
of
the
members
of
Kleo's
board
of
directors.
The
Company
completed
all
four
of
remaining
tranche
purchases
in
March,
June,
October
2017
and
January
2018,
with
each
tranche
purchase
consisting
of
1,375,000
shares
for
cash
consideration
of
$1,375.
In
March
2017,
the
Company
purchased
500,000
shares
of
Kleo
common
stock
directly
from
a
co-founder
of
Kleo
for
consideration
of
$250
in
cash
and
32,500
common
shares
of
the
Company.
In
addition
to
these
purchases,
in
October
2017,
the
Company
purchased
an
additional
aggregate
of
2,049,543
shares
for
cash
consideration
of
$2,253
which
allowed
the
Company
to
maintain
its
relative
ownership
interest
in
Kleo.
As
of
December
31,
2017,
the
Company's
ownership
interest
in
the
outstanding
stock
of
Kleo
was
43.3%.
Upon
completion
of
the
fourth
and
final
tranche
investment
in
January
2018
(see
Note
20),
the
Company's
ownership
increased
to
46.6%.
The
Company
has
a
variable
interest
in
Kleo
through
its
equity
investment.
Kleo
is
a
variable
interest
entity
due
to
the
equity
investment
at
risk
being
insufficient
to
finance
its
activities.
An
assessment
of
whether
or
not
the
Company
has
the
power
to
direct
activities
that
most
significantly
impact
Kleo's
economic
performance
and
to
identify
the
party
that
obtains
the
majority
of
the
benefits
of
the
investment
was
performed
as
of
December
31,
2017
and
2016,
and
will
be
performed
as
of
each
subsequent
reporting
date.
After
each
of
these
assessments,
the
Company
concluded
that
the
activities
that
most
significantly
impact
Kleo's
economic
performance
are
the
ability
to
direct
the
research
activities,
the
ability
to
select
vendors
to
perform
the
research,
the
ability
to
maintain
research
staff
and
the
ability
to
raise
additional
funds,
each
of
which
are
directed
by
Kleo.
Based
on
the
outcome
of
these
assessments,
the
Company
concluded
that
the
investment
should
be
accounted
for
under
the
equity
method.
F-20
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
5.
Equity
Method
Investment
(Continued)
The
Company
has
recorded
its
investments
in
Kleo
to
date
based
on
the
costs
of
those
investments,
as
adjusted
for
the
Company's
proportional
share
of
Kleo's
net
income
or
loss
in
each
period.
The
difference
between
the
cost
of
the
Company's
investments
in
Kleo
and
its
proportionate
share
of
the
net
assets
of
Kleo
was
allocated
to
goodwill
and
indefinite-lived
intangible
assets.
The
Company
records
future
adjustments
to
the
carrying
value
of
its
investment
at
each
reporting
date
equal
to
its
proportionate
share
of
Kleo's
net
loss
for
the
corresponding
period.
The
Company
recorded
other
expense
and
a
corresponding
reduction
in
the
carrying
value
of
its
investment
in
Kleo
of
$1,885
and
$247
for
its
proportionate
share
of
Kleo's
net
loss
for
the
years
ended
December
31,
2017
and
2016,
respectively.
The
carrying
value
of
the
Company's
investment
in
Kleo
was
$7,847
and
$2,753
as
of
December
31,
2017
and
2016,
respectively,
and
is
reported
as
equity
method
investment
on
the
consolidated
balance
sheet.
The
carrying
value
of
the
investment
represents
the
Company's
maximum
loss
exposure
as
of
December
31,
2017.
The
following
table
provides
a
roll
forward
of
the
carrying
value
of
the
Company's
equity
method
investment:
Balance
at
December
31,
2015
Purchase
of
Kleo
common
stock
Loss
recognized
in
connection
with
equity
method
investment
Balance
at
December
31,
2016
Purchases
of
Kleo
common
stock
Loss
recognized
in
connection
with
equity
method
investment
Balance
at
December
31,
2017
Summarized
financial
information
for
Kleo
is
as
follows:
Current
assets
Total
assets
Current
liabilities
Total
liabilities
Revenue
Loss
from
Operations
Net
loss
Carrying
Value
$
$
—
3,000
(247)
2,753
6,979
(1,885)
7,847
December
31,
2017
2016
$ 8,388
$ 4,276
$ 8,746
$ 4,323
$ 1,415
$
413
$ 4,201
$ 1,554
Year
Ended
December
31,
2017
2016
$
—
—
$
$ (5,646) $ (3,764)
$ (5,658) $ (3,727)
The
summarized
financial
information
as
of
and
for
the
year
ended
December
31,
2016
has
been
revised
to
reflect
the
issuance
of
final
financial
statements
by
Kleo.
F-21
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
6.
Property
and
Equipment,
Net
Property
and
equipment,
net
consisted
of
the
following:
Computer
equipment
Office
equipment
Accumulated
depreciation
Construction
in
progress
December
31,
2017
2016
$
163
$ 34
—
26
34
189
(8)
(43)
—
$ 2,344
$ 26
2,198
Depreciation
expense
was
$35,
$5
and
$2
for
the
years
ended
December
31,
2017,
2016
and
2015,
respectively.
Assets
under
the
Company's
financing
lease
included
in
construction
in
progress
were
$1,787
and
$0
as
of
December
31,
2017
and
2016,
respectively
(see
Note
16).
7.
Accrued
Expenses
Accrued
expenses
consisted
of
the
following:
Accrued
employee
compensation
and
benefits
Accrued
clinical
trial
costs
Accrued
professional
fees
Lease
liability
Other
8.
Notes
Payable
Credit Agreement
December
31,
2017
2016
$
89
$
27
2,204
516
—
233
$ 4,708
$ 2,980
3,582
390
362
285
On
August
30,
2016,
the
Company
entered
into
a
one-year
credit
agreement
(the
"Credit
Agreement")
with
Wells
Fargo
Bank,
National
Association
("Wells
Fargo")
providing
for
a
term
loan
in
the
principal
amount
of
$5,000
(the
"Loan")
and
borrowed
the
full
$5,000
available
under
the
Credit
Agreement.
Borrowings
under
the
Credit
Agreement
bore
interest
at
a
rate
equal
to
monthly
LIBOR
plus
1.50%
per
annum,
and
the
Credit
Agreement
required
monthly,
interest-only
payments
beginning
on
September
30,
2016
and
continuing
through
August
30,
2017
(the
"Maturity
Date"),
when
all
amounts
of
unpaid
principal
and
interest
became
due.
The
monthly
LIBOR
rate
was
reset
each
month.
The
Credit
Agreement
was
fully
satisfied
with
a
principal
repayment
to
Wells
Fargo
of
$5,000
on
August
31,
2017.
In
connection
with
entering
into
the
Credit
Agreement
on
August
30,
2016,
the
Company
issued
warrants
to
purchase
107,500
common
shares
to
each
of
the
Guarantor
and
Co-Guarantor.
The
warrant
F-22
Table
of
Contents
8.
Notes
Payable
(Continued)
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
has
an
exercise
price
of
$9.2911,
the
price
per
share
paid
by
investors
in
the
Series
A
First
Closing
(see
Note
10)
In
January
2017,
the
Company
issued
the
warrants
to
the
Guarantor
and
Co-Guarantor
(see
Note
9).
The
Company
determined
that
the
obligation
to
issue
the
warrants
represented
a
liability
that
was
considered
outstanding
for
accounting
purposes
on
August
30,
2016,
the
date
of
the
Credit
Agreement.
The
fair
value
of
the
warrant
liability
upon
issuance
represented
a
premium
paid
for
the
guaranty
of
the
Loan,
and,
accordingly,
the
Company
recorded
the
issuance-date
fair
value
of
the
warrant
liability
of
$934
as
a
debt
discount
and
as
a
warrant
liability
in
the
Company's
consolidated
balance
sheet.
In
addition,
the
Company
paid
an
arrangement
fee
of
$150
to
the
lender
and
incurred
legal
costs
of
$47,
both
of
which
were
recorded
as
a
debt
discount.
The
debt
discount
was
reflected
as
a
reduction
of
the
carrying
value
of
the
notes
payable
on
the
Company's
consolidated
balance
sheet
and
was
amortized
to
interest
expense
over
the
term
of
the
note
using
the
effective
interest
method.
The
Company
recognized
interest
expense
of
$906
and
$385
during
the
years
ended
December
31,
2017
and
2016,
respectively.
The
Company
recognized
$784
and
$347
related
to
the
accretion
of
the
debt
discount
during
the
years
ended
December
31,
2017
and
2016,
respectively.
As
of
December
31,
2017,
the
unamortized
debt
discount
was
$0.
Notes Payable to Related Parties
On
December
31,
2016,
the
Company
entered
into
stock
purchase
agreements
with
each
of
the
stockholders
of
Biohaven
Pharmaceuticals,
Inc.
("BPI"),
acquiring
100%
of
the
issued
and
outstanding
shares
of
BPI
for
aggregate
purchase
consideration
of
$595.
The
Company
funded
the
acquisition
through
the
issuance
of
promissory
notes
to
each
of
the
former
stockholders
of
BPI.
The
former
stockholders
of
BPI
are
shareholders
of
the
Company
and
also
serve
as
the
Company's
Chairman
of
the
board
of
directors,
Chief
Executive
Officer,
and
Chief
Medical
Officer,
respectively.
The
notes
were
payable
in
five
annual
payments,
the
first
four
of
which
were
interest
only,
with
the
final
payment
to
include
the
principal
balance
outstanding
plus
any
accrued
and
unpaid
interest.
The
notes
bore
interest
at
a
rate
of
4.5%
per
annum
and
had
a
maturity
date
of
December
31,
2021.
The
notes
became
immediately
due
and
payable
upon
specified
events,
including
immediately
prior
to
the
consummation
of
an
initial
public
offering
of
the
Company's
common
shares
or
upon
the
occurrence
of
a
change
of
control
of
the
Company.
In
connection
with
the
closing
of
the
Company's
IPO
in
May
2017,
the
notes
were
paid
in
full
as
of
December
31,
2017,
including
principal
of
$595
and
interest
of
$9.
9.
Warrants
ALS Biopharma Warrants
On
August
10,
2015,
as
partial
consideration
issued
in
connection
with
a
license
agreement
with
ALS
Biopharma
LLC
("ALS
Biopharma")
(see
Note
13),
the
Company
issued
to
ALS
Biopharma
a
warrant
to
purchase
275,000
common
shares
at
an
exercise
price
of
$5.60
per
share.
The
warrant
was
immediately
exercisable
upon
issuance
and
expires
10
years
from
the
issuance
date.
The
warrant
was
classified
as
equity
and
recorded
at
its
fair
value
on
the
date
of
issuance.
These
warrants
were
exercised
in
January
2018.
F-23
Table
of
Contents
9.
Warrants
(Continued)
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
On
August
10,
2015,
in
connection
with
the
same
license
agreement,
the
Company
issued
to
ALS
Biopharma
a
warrant
to
purchase
325,000
common
shares
at
an
exercise
price
of
$5.60
per
share.
The
warrant
became
exercisable
upon
the
Company's
filing
of
an
investigational
new
drug
application
("IND")
for
a
patented
product
under
the
license
agreement,
and
expires
10
years
from
the
issuance
date.
On
May
31,
2016,
the
Company
filed
an
IND
for
a
patented
product
under
the
license
agreement.
The
warrant
was
classified
as
equity
and
recorded
at
its
fair
value
on
May
31,
2016.
Guarantor and Co-Guarantor Warrants
The
Company
agreed
to
issue
warrants
to
purchase
$1,000
of
common
shares
to
each
of
the
Guarantor
and
Co-Guarantor
of
the
Credit
Agreement
(see
Note
8),
who
are
members
of
the
Company's
board
of
directors
(see
Note
17).
The
warrant
has
an
exercise
price
of
$9.2911,
the
price
per
share
paid
by
investors
in
the
Series
A
First
Closing
(see
Note
10).
In
January
2017,
the
Company
issued
the
warrants
to
the
Guarantor
and
Co-Guarantor,
pursuant
to
which
each
director
received
a
warrant
to
purchase
107,500
common
shares
at
an
exercise
price
of
$9.2911
per
share.
The
warrants
are
immediately
exercisable
and
expire
upon
the
second
anniversary
of
the
Company's
IPO.
As
of
December
31,
2016,
the
Company
determined
that
the
obligation
to
issue
the
warrants
represented
a
liability
that
was
considered
outstanding
for
accounting
purposes
on
August
30,
2016,
the
date
the
Company
entered
into
the
Credit
Agreement.
The
Company
classified
the
warrants
as
a
liability
on
its
consolidated
balance
sheet
because
each
warrant
represents
a
freestanding
financial
instrument
that
is
not
indexed
to
the
Company's
own
shares.
As
of
December
31,
2017,
the
Company
continued
to
classify
these
warrants
as
a
liability
on
the
consolidated
balance
sheet
because
the
warrants
contain
anti-dilution
price
protection
provisions
through
January
26,
2018.
As
a
result,
changes
in
the
fair
value
of
the
warrant
liability
will
continue
to
be
recognized
as
a
component
of
other
income
(expense),
net
until
the
earliest
of
(i)
the
exercise
of
the
warrants,
(ii)
the
expiration
of
the
warrants
or
(iii)
January
26,
2018.
The
warrant
liability
was
initially
recorded
at
fair
value
upon
entering
into
the
Credit
Agreement
and
is
subsequently
remeasured
to
fair
value
at
each
reporting
date.
Changes
in
the
fair
value
of
the
warrant
liability
are
recognized
as
a
component
of
other
income
(expense),
net
in
the
Company's
consolidated
statement
of
operations
and
comprehensive
loss.
The
fair
value
of
the
warrant
liability
was
determined
to
be
$934
on
the
date
of
issuance.
The
Company
remeasured
the
liability
as
of
December
31,
2017
and
2016
and
determined
that
the
fair
value
of
the
warrant
liability
was
$4,021
and
$780,
respectively.
The
Company
recorded
expense
of
$3,241
and
a
gain
of
$154
within
other
income
(expense),
net
in
the
consolidated
statements
of
operations
and
comprehensive
loss
for
the
years
ended
December
31,
2017
and
2016,
respectively.
10.
Convertible
Preferred
Shares
In
connection
with
the
completion
of
its
IPO
in
May
2017,
the
Company
amended
its
memorandum
and
articles
of
association
to
authorize
the
issuance
of
up
to
10,000,000
no
par
value
undesignated
preferred
shares.
Prior
to
the
completion
of
the
IPO,
the
Company's
memorandum
and
articles
of
association,
as
amended
and
restated,
authorized
the
Company
to
issue
11,242,172
Series
A
preferred
shares.
The
holders
of
Series
A
preferred
shares
had
liquidation
rights
in
the
event
of
a
deemed
liquidation
that,
in
F-24
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
10.
Convertible
Preferred
Shares
(Continued)
certain
situations,
was
not
solely
within
the
control
of
the
Company.
Therefore,
the
Series
A
preferred
shares
were
classified
outside
of
shareholders'
equity
(deficit).
In
October
2016,
the
Company
issued
and
sold
an
aggregate
of
4,305,209
Series
A
preferred
shares,
at
an
issuance
price
of
$9.2911
per
share,
for
proceeds
of
$37,295,
net
of
offering
costs
of
$2,705
(the
"Series
A
First
Closing").
The
$2,705
of
offering
costs
consisted
of
$1,730
payable
in
cash
and
105,010
shares
of
the
Company's
Series
A
preferred
shares
valued
at
$975,
or
$9.2911
per
share,
which
were
issued
directly
to
the
two
placement
agents
involved
in
the
Series
A
financing.
The
preferred
share
purchase
agreement
provided
for
the
issuance
of
additional
Series
A
preferred
shares
in
a
second
and
final
tranche
(the
"Series
A
Second
Closing").
Also,
in
October
2016,
the
Company
issued
to
AstraZeneca
538,150
Series
A
preferred
shares
with
an
aggregate
fair
value
of
$5,000,
or
$9.2911
per
share,
in
satisfaction
of
the
obligation
to
issue
the
first
tranche
of
contingently
issuable
equity
under
the
Company's
license
agreement
with
AstraZeneca
(see
Note
13).
In
February
2017,
the
Company
completed
the
Series
A
Second
Closing
through
the
issuance
and
sale
of
an
aggregate
of
4,305,182
Series
A
preferred
shares
at
an
issuance
price
of
$9.2911
per
share
for
cash
proceeds
of
$38,666,
net
of
offering
costs
of
$2,606.
The
$2,606
of
offering
costs
for
the
second
tranche
consisted
of
$1,334
payable
in
cash
and
105,009
shares
of
the
Company's
Series
A
preferred
shares
valued
at
$1,242,
or
$11.83
per
share,
which
were
issued
directly
to
the
two
placement
agents
involved
in
the
Series
A
financing.
The
conversion
option
associated
with
the
Series
A
preferred
shares
sold
in
the
second
closing
met
the
definition
of
a
BCF
as
the
fair
value
of
the
underlying
common
shares
of
$9.85
per
share
exceeded
the
stated
conversion
price
of
$9.2911
(or
$7.0613,
as
adjusted,
as
described
below
under
Conversion).
Upon
the
sale
and
issuance
of
the
Series
A
preferred
shares,
$2,406
of
the
BCF
was
immediately
accreted,
as
this
represented
the
difference
between
the
stated
conversion
price
and
per
share
value
of
the
common
shares.
The
remaining
portion
of
the
BCF
was
being
amortized
using
the
effective
interest
method
over
the
period
from
the
date
of
issuance
to
the
date
of
the
earliest
possible
conversion,
October
1,
2017.
In
May
2017,
upon
the
completion
of
the
Company's
IPO,
all
of
the
outstanding
Series
A
preferred
shares
were
automatically
converted
into
an
aggregate
of
9,358,560
common
shares.
Upon
conversion
of
the
Series
A
preferred
shares,
the
remaining
unamortized
BCF
was
reclassified
to
additional
paid-in
capital
as
a
deemed
dividend.
The
holders
of
the
Series
A
preferred
shares
had
voting
rights
commensurate
with
common
shares
and
also
preferential
liquidation
rights.
Additionally,
the
Series
A
preferred
shares
had
the
following
rights
and
preferences
prior
to
the
conversion
to
common
shares:
Conversion
Each
Series
A
preferred
share
was
convertible
into
common
shares
at
the
option
of
the
shareholder
at
any
time
after
the
date
of
issuance.
In
addition,
each
Series
A
preferred
share
would
be
automatically
converted
into
common
shares,
upon
the
earlier
of
(i)
a
firm
commitment
public
offering
with
proceeds
to
the
Company
of
at
least
$50,000,
before
deducting
underwriting
discounts
and
commissions
or
(ii)
the
date
specified
by
the
vote
or
written
consent
of
the
holders
of
a
majority
of
the
then
outstanding
Series
A
preferred
shares.
F-25
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
10.
Convertible
Preferred
Shares
(Continued)
The
conversion
ratio
of
Series
A
preferred
shares
was
determined
by
dividing
the
Original
Issue
Price
by
the
Conversion
Price.
The
Original
Issue
Price
of
the
Series
A
preferred
shares
was
$9.2911
per
share.
The
Conversion
Price
of
the
Series
A
preferred
shares
was
$9.2911
per
share.
On
the
date
of
issuance,
each
Series
A
preferred
share
was
convertible
into
one
common
share,
subject
to
adjustment
based
on
certain
events.
Dividends
The
holders
of
Series
A
preferred
shares
were
entitled
to
receive
dividends
in
preference
to
any
dividend
on
common
shares
at
the
rate
of
8.0%
per
year
of
the
Original
Issue
Price.
Dividends
accrued
daily
and
compounded
annually,
whether
or
not
declared,
would
be
payable
when,
as
and
if
declared
by
the
board
or
directors
of
the
Company
and
were
noncumulative.
The
Company
was
not
permitted
to
declare,
pay
or
set
aside
any
dividends
on
shares
of
any
other
class
or
series
of
capital
stock
of
the
Company
unless
the
holders
of
Series
A
preferred
shares
then
outstanding
first
received,
or
simultaneously
received,
dividends
on
each
outstanding
Series
A
preferred
share.
Accruing
dividends,
whether
or
not
declared,
were
payable
upon
any
liquidation
event.
Declared
but
unpaid
dividends
would
have
been
payable
upon
the
conversion
of
the
Series
A
preferred
shares
into
common
shares.
11.
Common
Shares
As
of
December
31,
2016,
the
Company
had
authorized
the
Company
to
issue
38,000,000
no
par
value
common
shares.
On
April
21,
2017,
the
Company
effected
an
increase
in
the
number
of
authorized
common
shares
to
50,000,000
shares.
Additionally,
in
connection
with
the
completion
of
its
IPO
in
May
2017,
the
Company
amended
its
memorandum
and
articles
of
association
to
authorize
the
issuance
of
up
to
200,000,000
no
par
value
common
shares.
Each
common
share
entitles
the
holder
to
one
vote
on
all
matters
submitted
to
a
vote
of
the
Company's
shareholders.
Common
shareholders
are
entitled
to
receive
dividends,
as
may
be
declared
by
the
board
of
directors.
In
February
2016,
the
Company
issued
429,000
common
shares
at
an
issuance
price
of
$7.00
per
share
for
proceeds
of
$2,980,
net
of
issuance
costs
of
$23.
In
May
2016
and
July
2016,
the
Company
issued
an
aggregate
of
1,090,500
common
shares
at
an
issuance
price
of
$7.70
per
share
for
proceeds
of
$8,299,
net
of
issuance
costs
of
$97.
In
July
2016,
concurrently
with
the
issuance
of
the
Company's
common
shares
to
Connecticut
Innovations
Incorporated
("CII"),
the
Company
and
CII
entered
into
a
put
agreement
(the
"Put
Agreement").
The
Put
Agreement
grants
CII
the
right
to
sell
(the
"Put
Option")
to
the
Company
all
or
any
part
of
CII's
warrant
rights
(if
any),
shares
(if
any)
or
notes
(if
any).
The
Put
Option
becomes
exercisable
upon
the
Company's
breach
of
the
covenant
to
maintain
a
presence
in
Connecticut,
as
defined
in
the
Put
Agreement.
The
right
to
put
the
shares
terminated
on
October
31,
2017,
upon
expiration
of
the
lock-up
period
following
the
completion
of
the
Company's
IPO.
On
May
3,
2017,
the
Company's
registration
statement
on
Form
S-1
relating
to
the
IPO
was
declared
effective
by
the
SEC.
The
IPO
closed
on
May
9,
2017
and
the
Company
issued
and
sold
F-26
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
11.
Common
Shares
(Continued)
9,900,000
common
shares
at
a
public
offering
price
of
$17.00
per
share
for
net
proceeds
of
$152,651
after
deducting
underwriting
discounts
and
commissions
of
$11,781
and
other
offering
expenses
of
$3,868.
Upon
the
closing
of
the
IPO,
all
convertible
preferred
shares
then
outstanding
converted
into
an
aggregate
of
9,358,560
common
shares.
In
addition,
on
May
9,
2017,
the
underwriters
of
the
IPO
fully
exercised
their
option
to
purchase
additional
shares,
and
on
May
11,
2017,
the
Company
issued
and
sold
1,485,000
common
shares
for
net
proceeds
of
$23,478
after
deducting
underwriting
discounts
and
commissions
of
$1,767.
The
aggregate
net
proceeds
to
the
Company
from
the
IPO,
after
deducting
underwriting
discounts
and
commissions
and
offering
expenses,
were
$176,128.
In
connection
with
the
completion
of
its
IPO,
the
Company
issued
an
aggregate
of
1,883,523
common
shares
to
BMS
and
AstraZeneca
in
satisfaction
of
obligations
to
contingently
issue
equity
securities
pursuant
to
the
license
agreements
(see
Note
13),
for
no
additional
consideration.
12.
Share-Based
Compensation
2014 Equity Incentive Plan
The
Company's
2014
Equity
Incentive
Plan,
as
amended
(the
"2014
Plan"),
provided
for
the
Company
to
sell
or
issue
common
shares
or
restricted
common
shares,
or
to
grant
incentive
stock
options
or
nonqualified
stock
options
for
the
purchase
of
common
shares,
to
employees,
members
of
the
board
of
directors
and
consultants
of
the
Company.
The
exercise
prices,
vesting
and
other
restrictions
are
determined
at
the
discretion
of
the
board
of
directors,
or
their
committee
if
so
delegated,
except
that
the
exercise
price
per
share
of
stock
options
may
not
be
less
than
100%
of
the
fair
market
value
of
the
common
share
on
the
date
of
grant
and
the
term
of
stock
option
may
not
be
greater
than
ten
years.
The
total
number
of
common
shares
that
may
be
issued
under
the
2014
Plan
was
4,000,000
shares
as
of
December
31,
2016.
In
January
2017,
the
Company
effected
an
increase,
effective
October
28,
2016,
in
the
number
of
common
shares
reserved
for
issuance
under
the
2014
Plan
from
4,000,000
to
4,899,230
shares.
Upon
effectiveness
of
the
2017
Plan,
there
are
no
further
shares
authorized
for
grant
under
the
2014
Plan.
2017 Equity Incentive Plan
In
April
2017,
the
Company's
shareholders
approved
the
2017
Equity
Incentive
Plan
(the
"2017
Plan"),
which
became
effective
on
May
3,
2017
in
connection
with
the
Company's
IPO.
The
2017
Plan
provides
for
the
grant
of
incentive
share
options,
nonstatutory
share
options,
share
appreciation
rights,
restricted
share
awards,
restricted
share
unit
awards,
performance-based
share
awards
and
other
share-based
awards.
Additionally,
the
2017
Plan
provides
for
the
grant
of
performance
cash
awards.
Upon
the
effectiveness
of
the
2017
Plan,
there
were
2,713,113
shares
authorized
for
issuance
under
the
2017
Plan.
As
of
December
31,
2017,
1,138,903
shares
remained
available
for
future
grant
under
the
2017
Plan.
In
January
2018,
the
Board
of
Directors
approved
an
additional
1,437,227
shares
to
be
issued
under
the
2017
Plan.
F-27
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
12.
Share-Based
Compensation
(Continued)
Vesting
periods
are
determined
at
the
discretion
of
the
board
of
directors.
Stock
options
typically
vest
over
three
or
four
years.
The
maximum
contractual
term
is
10
years.
During
the
years
ended
December
31,
2017,
2016
and
2015
the
Company
granted
options
to
purchase
2,335,106,
417,875
and
637,500
common
shares
to
employees
and
directors,
respectively.
The
Company
recorded
share-based
compensation
expense
for
options
granted
to
employees
and
directors
of
$5,210,
$2,284
and
$1,137
during
the
years
ended
December
31,
2017,
2016
and
2015,
respectively.
During
the
year
ended
December
31,
2017,
2016
and
2015
the
Company
granted
options
to
purchase
273,537,
199,050
and
610,000
common
shares
to
non-
employees,
respectively.
The
Company
recorded
share-based
compensation
expense
for
options
granted
to
non-employees
of
$8,029,
$2,319
and
$1,700
during
the
years
ended
December
31,
2017,
2016
and
2015,
respectively.
The
Company
measures
and
records
the
value
of
non-employee
options
over
the
period
of
time
services
are
provided
and,
as
such,
unvested
portions
are
subject
to
remeasurement
at
subsequent
reporting
periods.
Stock Option Valuation
The
assumptions
that
the
Company
used
to
determine
the
grant-date
fair
value
of
stock
options
granted
to
employees
and
directors
under
the
2014
Plan
and
the
2017
Plan
(collectively,
the
"Plans")
were
as
follows,
presented
on
a
weighted
average
basis:
Risk-free
interest
rate
Expected
term
(in
years)
Expected
volatility
Expected
dividend
yield
Exercise
price
Fair
value
of
common
share
2.10%
6.02
73.26%
0%
$ 18.47
$
$ 18.37
$
2.19%
5.75
70.58%
0%
9.29
$
6.73
$
1.62%
5.75
58.51%
0%
5.60
5.23
The
assumptions
that
the
Company
used
to
determine
the
grant-date
fair
value
of
stock
options
granted
to
non-employees
under
the
Plans
were
as
follows,
presented
on
a
weighted
average
basis:
Year
Ended
December
31,
2016
2015
2017
Year
Ended
December
31,
2016
2015
2017
Risk-free
interest
rate
Expected
term
(in
years)
Expected
volatility
Expected
dividend
yield
Exercise
price
Fair
value
of
common
share
2.35%
10.00
71.12%
0%
$ 18.23
$
$ 18.10
$
2.54%
10.00
67.16%
0%
9.29
$
6.73
$
2.09%
10.00
61.61%
0%
5.60
5.23
F-28
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
12.
Share-Based
Compensation
(Continued)
Stock Options
Stock
option
activity
under
the
Plans
is
summarized
as
follows:
Outstanding
as
of
December
31,
2016
Granted
Exercised
Forfeited
Outstanding
as
of
December
31,
2017
Options
exercisable
as
of
December
31,
2017
Options
unvested
as
of
December
31,
2017
Number
of
Shares
Weighted
Average
Exercise
Price
3,864,425
$
2,608,643
(309,665)
(11,760)
6,151,643
$
3,281,474
$
2,870,169
$
3.61
18.44
2.20
4.44
9.97
3.71
17.13
Weighted
Average
Remaining
Contractual
Term
(in
years)
Aggregate
Intrinsic
Value
9.21
$
9.59
15,991
8.42
$ 107,072
76,371
7.57
$
30,701
9.39
$
The
aggregate
intrinsic
value
of
stock
options
is
calculated
as
the
difference
between
the
exercise
price
of
the
stock
options
and
the
fair
value
of
the
Company's
common
shares
for
those
stock
options
that
had
exercise
prices
lower
than
the
fair
value
of
the
Company's
common
shares.
The
total
intrinsic
value
of
stock
options
for
the
years
ended
December
31,
2017,
2016
and
2015
was
$107,072,
$15,991
and
$9,983,
respectively.
The
weighted
average
grant-date
fair
value
per
share
of
stock
options
granted
for
the
years
ended
December
31,
2017,
2016
and
2015
was
$12.31,
$4.09
and
$3.22,
respectively.
The
total
fair
value
of
options
vested
for
the
years
ended
December
31,
2017,
2016
and
2015
was
$15,494,
3,381
and
$2,345,
respectively.
Share-Based Compensation
Share-based
compensation
expense
was
classified
in
the
consolidated
statements
of
operations
and
comprehensive
loss
as
follows:
Research
and
development
expenses
General
and
administrative
expenses
$
6,933
$ 2,382
$ 1,527
1,310
2,221
6,306
$ 13,239
$ 4,603
$ 2,837
As
of
December
31,
2017,
total
unrecognized
compensation
cost
related
to
the
unvested
share-based
awards
was
$32,400,
which
is
expected
to
be
recognized
over
a
weighted
average
period
3.37
years.
F-29
Year
Ended
December
31,
2016
2017
2015
Table
of
Contents
13.
License
and
Other
Agreements
Yale Agreement
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
In
September
2013,
the
Company
entered
into
an
exclusive
license
agreement
with
Yale
(the
"Yale
Agreement")
to
obtain
a
license
to
certain
patent
rights
for
the
commercial
development,
manufacture,
distribution,
use
and
sale
of
products
and
processes
resulting
from
the
development
of
those
patent
rights,
related
to
the
use
of
riluzole
in
treating
various
neurological
conditions,
such
as
general
anxiety
disorder,
post-traumatic
stress
disorder
and
depression.
As
part
of
the
consideration
for
this
license,
the
Company
issued
Yale
250,000
common
shares
and
granted
Yale
the
right
to
purchase
up
to
10%
of
the
securities
issued
in
specified
future
equity
offerings
by
the
Company,
in
addition
to
the
obligation
to
issue
shares
to
prevent
anti-dilution.
The
obligation
to
contingently
issue
equity
to
Yale,
which
was
no
longer
outstanding
at
December
31,
2017,
was
determined
to
be
a
liability,
which
was
accounted
for
at
its
fair
value
of
$0
at
each
reporting
date.
The
Yale
Agreement
provides
for
a
change-of-control
payment
to
Yale
upon
the
occurrence
of
a
change-of-control
event,
as
defined
in
the
agreement,
including
an
IPO.
Upon
the
occurrence
of
a
change-of-control
event,
the
Company
is
obligated
to
pay
to
Yale
the
lesser
of
(i)
5%
of
the
dollar
value
of
all
initial
and
future
potential
consideration
paid
or
payable
by
the
acquirer
and
(ii)
$1,500.
If
the
change-of-control
event
is
as
an
IPO,
the
amount
the
Company
will
be
obligated
to
pay
to
Yale
will
be
reduced
by
the
value
of
Yale's
equity
investment
in
the
Company
on
the
first
day
that
Yale
is
free
to
sell
its
equity
interest.
The
Company
classifies
the
change-of-control
payment
obligation
as
a
liability
on
its
consolidated
balance
sheet
because
it
represents
a
contingent
obligation
to
pay
a
variable
amount
of
cash
that
may
be
based,
in
part,
on
the
value
of
the
Company's
own
shares.
The
issuance
date
fair
value
of
the
derivative
liability
of
$14
was
recognized
as
a
research
and
development
expense
upon
entering
the
agreement
with
Yale.
The
Company
continued
to
remeasure
the
derivative
liability
to
fair
value
at
each
reporting
date
and
recognized
any
changes
in
the
fair
value
of
the
derivative
liability
through
October
31,
2017.
The
derivative
liability
upon
expiration
of
the
lock-up
period
was
determined
to
be
$0
based
on
the
value
of
the
Company's
shares
on
this
date.
The
Company
recorded
other
income
(expense)
of
$512,
$(65)
and
$(370),
during
the
years
ended
December
31,
2017,
2016
and
2015,
respectively,
for
the
change
in
the
fair
value
of
the
derivative
liability.
The
fair
value
of
the
derivative
liability
was
$0
and
$512
as
of
December
31,
2017
and
2016,
respectively
(see
Note
3).
In
addition,
the
Company
agreed
to
pay
Yale
up
to
$2,000
upon
the
achievement
of
specified
regulatory
milestones
and
annual
royalty
payments
of
a
low
single-digit
percentage
based
on
net
sales
of
products
from
the
licensed
patents,
subject
to
a
minimum
amount
of
up
to
$1,000
per
year.
If
the
Company
grants
any
sublicense
rights
under
the
Yale
Agreement,
it
must
pay
Yale
a
low
single-digit
percentage
of
sublicense
income
that
it
receives.
The
Yale
Agreement
also
requires
the
Company
to
meet
certain
due
diligence
requirements
based
upon
specified
milestones.
The
Company
can
elect
to
extend
the
deadline
for
its
compliance
with
the
due
diligence
requirements
by
a
maximum
of
one
year
upon
the
payment
to
Yale
of
up
to
$150.
The
Company
is
also
required
to
reimburse
Yale
for
any
fees
that
Yale
incurs
related
to
the
filing,
prosecution,
defending
and
maintenance
of
patent
rights
licensed
under
the
Yale
Agreement.
In
the
event
that
the
Company
fails
to
make
any
payments,
commits
a
material
breach,
fails
to
maintain
adequate
insurance
or
challenges
the
patent
rights
of
Yale,
Yale
can
terminate
the
Yale
Agreement.
F-30
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
13.
License
and
Other
Agreements
(Continued)
The
Company
can
terminate
the
Yale
Agreement
(i)
upon
90
days'
notice
to
Yale,
(ii)
if
Yale
commits
a
material
breach
of
the
Yale
Agreement
or
(iii)
as
to
a
specific
country
if
there
are
no
valid
patent
rights
in
such
country.
The
Yale
Agreement
expires
on
a
country-by-country
basis
upon
the
later
of
the
date
on
which
the
last
patent
rights
expire
in
such
country
or
ten
years
from
the
date
of
the
first
sale
of
a
product
incorporating
the
licensed
patents.
MGH Agreement
In
September
2014,
the
Company
entered
into
a
license
agreement
(the
"MGH
Agreement")
with
The
General
Hospital
Corporation
d/b/a
Massachusetts
General
Hospital
("MGH"),
pursuant
to
which
MGH
granted
the
Company
a
license
to
certain
patent
rights
for
the
commercial
development,
manufacture,
distribution
and
use
of
any
products
or
processes
resulting
from
development
of
those
patent
rights,
related
to
treating
depression
with
a
combination
of
ketamine
and
scopolamine.
The
Company
is
also
obligated
to
pay
MGH
annual
license
maintenance
fees
and
future
milestone
payments
of
up
to
$750
upon
the
achievement
of
specified
clinical
and
regulatory
milestones
and
up
to
$2,500
upon
the
achievement
of
specified
commercial
milestones.
The
Company
has
also
agreed
to
pay
MGH
royalties
of
a
low
single-digit
percentage
based
on
net
sales
of
products
licensed
under
the
agreement.
If
the
Company
receives
revenue
from
sublicensing
any
of
its
rights
under
the
agreement,
the
Company
is
also
obligated
to
pay
a
portion
of
that
revenue
to
MGH.
The
MGH
Agreement
also
requires
the
Company
to
meet
certain
due
diligence
requirements
based
upon
specified
milestones.
The
Company
can
elect
to
extend
the
deadline
for
its
compliance
with
the
due
diligence
requirements
by
a
maximum
of
one
year
by
making
payments
to
MGH
of
up
to
$300
in
the
aggregate.
The
Company
is
required
to
reimburse
MGH
for
any
fees
that
MGH
incurs
related
to
the
filing,
prosecution,
defending,
and
maintenance
of
patent
rights
licensed
under
the
agreement.
The
MGH
Agreement
expires
upon
expiration
of
the
patent
rights
under
the
MGH
Agreement,
unless
earlier
terminated
by
either
party.
ALS Biopharma Agreement
In
August
2015,
the
Company
entered
into
an
agreement
(the
"ALS
Biopharma
Agreement")
with
ALS
Biopharma
and
Fox
Chase
Chemical
Diversity
Center
Inc.
("FCCDC"),
pursuant
to
which
ALS
Biopharma
and
FCCDC
assigned
the
Company
their
worldwide
patent
rights
to
a
family
of
over
300
prodrugs
of
glutamate
modulating
agents,
including
trigriluzole,
as
well
as
other
innovative
technologies.
Under
the
ALS
Biopharma
Agreement,
the
Company
is
obligated
to
use
commercially
reasonable
efforts
to
commercialize
and
develop
markets
for
the
patent
products.
The
Company
is
obligated
to
pay
$3,000
upon
the
achievement
of
specified
regulatory
milestones
with
respect
to
the
first
licensed
product
and
$1,000
upon
the
achievement
of
specified
regulatory
milestones
with
respect
to
subsequently
developed
products,
as
well
as
royalty
payments
of
a
low
single-digit
percentage
based
on
net
sales
of
products
licensed
under
the
agreement,
payable
on
a
quarterly
basis.
In
connection
with
the
ALS
Biopharma
Agreement,
the
Company
also
issued
to
ALS
Biopharma
(i)
50,000
common
shares;
(ii)
an
immediately
exercisable
warrant
to
purchase
275,000
common
shares
at
an
exercise
price
of
$5.60
per
share;
and
(iii)
a
warrant
to
purchase
325,000
common
shares
at
an
exercise
price
of
$5.60
per
share,
which
warrant
would
become
exercisable
upon
the
Company's
achievement
of
a
specified
regulatory
milestone
which
was
met
in
May
2016
(see
Note
9).
The
ALS
F-31
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
13.
License
and
Other
Agreements
(Continued)
Biopharma
Agreement
terminates
on
a
country-by-country
basis
as
the
last
patent
rights
expire
in
each
such
country.
If
the
Company
abandons
its
development,
research,
licensing
or
sale
of
all
products
covered
by
one
or
more
claims
of
any
patent
or
patent
application
assigned
under
the
ALS
Biopharma
Agreement,
or
if
the
Company
ceases
operations,
it
has
agreed
to
reassign
the
applicable
patent
rights
back
to
ALS
Biopharma.
The
Company
recorded
research
and
development
expenses
of
$0,
$3,127
and
$2,836
during
the
years
ended
December
31,
2017,
2016
and
2015,
respectively,
as
a
result
of
the
ALS
Biopharma
Agreement,
which
amounts
consist
of
the
fair
value
of
the
shares
and
warrants
upon
their
issuance
to
ALS
Biopharma.
Rutgers Agreement
In
June
2016,
the
Company
entered
into
an
exclusive
license
agreement
(the
"Rutgers
Agreement")
with
Rutgers,
The
State
University
of
New
Jersey
("Rutgers"),
licensing
several
patents
and
patent
applications
related
to
the
use
of
riluzole
to
treat
various
cancers.
Under
the
Rutgers
Agreement,
the
Company
is
required
to
pay
Rutgers
annual
license
maintenance
fees
until
the
first
commercial
sale
of
a
licensed
product,
at
which
point
the
Company
will
pay
Rutgers
minimum
annual
royalties.
The
Company
is
also
obligated
to
pay
Rutgers
up
to
$825
in
the
aggregate
upon
the
achievement
of
specified
clinical
and
regulatory
milestones.
The
Company
agreed
to
pay
Rutgers
royalties
of
a
low
single-digit
percentage
of
net
sales
of
licensed
products
sold
by
the
Company,
its
affiliates
or
its
sublicensees,
subject
to
a
minimum
amount
of
up
to
$100
per
year.
If
the
Company
grants
any
sublicense
rights
under
the
Rutgers
Agreement,
the
Company
must
pay
Rutgers
a
low
double-digit
percentage
of
sublicense
income
it
receives.
Under
the
Rutgers
Agreement,
in
the
event
that
the
Company
experiences
a
change
of
control
or
sale
of
substantially
all
of
its
assets
prior
to
the
initiation
of
a
Phase
3
clinical
trial
related
to
products
licensed
under
the
agreement,
and
such
change
of
control
or
sale
results
in
a
full
liquidation
of
the
Company,
the
Company
will
be
obligated
to
pay
Rutgers
a
change-of-control
fee
equal
to
0.3%
of
the
total
value
of
the
transaction,
but
not
less
than
$100.
The
Company
determined
that
the
change-of-control
payment
should
be
accounted
for
as
a
liability.
The
fair
value
of
the
obligation
for
all
periods
presented
was
$0
based
on
the
Company's
assessment
that
the
probability
of
a
change-in-control
event
occurring
prior
to
the
initiation
of
a
Phase
3
clinical
trial
related
to
products
licensed
under
the
agreement
was
remote.
The
Rutgers
Agreement
also
requires
the
Company
to
meet
certain
due
diligence
requirements
based
upon
specified
milestones.
The
Company
can
elect
to
extend
the
deadline
for
its
compliance
with
the
due
diligence
requirements
by
a
maximum
of
one
year
upon
payments
to
Rutgers
of
up
to
$500
in
the
aggregate.
Under
the
Rutgers
Agreement,
the
Company
is
required
to
reimburse
Rutgers
for
any
fees
that
Rutgers
incurs
related
to
the
filing,
prosecution,
defending,
and
maintenance
of
patent
rights
licensed
under
the
agreement.
The
Rutgers
Agreement
expires
upon
expiration
of
the
patent
rights
under
the
agreement
or
ten
years
from
the
date
of
first
commercial
sale
of
a
licensed
product,
whichever
is
later,
unless
terminated
by
either
party.
F-32
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
13.
License
and
Other
Agreements
(Continued)
BMS Agreement
In
July
2016,
the
Company
entered
into
an
exclusive,
worldwide
license
agreement
(the
"BMS
Agreement")
with
BMS
for
the
development
and
commercialization
rights
to
rimegepant
and
BHV-3500,
as
well
as
other
CGRP-related
intellectual
property.
In
exchange
for
these
rights,
the
Company
agreed
to
pay
BMS
initial
payments,
milestone
payments
and
royalties
on
net
sales
of
licensed
products
under
the
agreement.
The
Company
is
obligated
to
make
milestone
payments
to
BMS
upon
the
achievement
of
specified
development
and
commercialization
milestones.
The
development
milestone
payments
due
under
the
agreement
depend
on
the
licensed
product
being
developed.
With
respect
to
rimegepant,
the
Company
is
obligated
to
pay
up
to
$127,500
in
the
aggregate
upon
the
achievement
of
the
development
milestones.
For
any
product
other
than
rimegepant,
the
Company
is
obligated
to
pay
up
to
$74,500
in
the
aggregate
upon
the
achievement
of
the
development
milestones.
In
addition,
the
Company
is
obligated
to
pay
up
to
$150,000
for
each
licensed
product
upon
the
achievement
of
commercial
milestones.
If
the
Company
receives
revenue
from
sublicensing
any
of
its
rights
under
the
agreement,
it
is
also
obligated
to
pay
a
portion
of
that
revenue
to
BMS.
The
Company
is
also
obligated
to
make
tiered
royalty
payments
to
BMS
based
on
annual
worldwide
net
sales,
with
percentages
in
the
low
to
mid-teens.
Under
the
BMS
Agreement,
the
Company
is
obligated
to
use
commercially
reasonable
efforts
to
develop
licensed
products
and
to
commercialize
at
least
one
licensed
product
using
the
patent
rights
licensed
from
BMS
and
is
solely
responsible
for
all
development,
regulatory
and
commercial
activities
and
costs.
The
Company
is
also
required
to
reimburse
BMS
for
any
fees
that
BMS
incurs
related
to
the
filing,
prosecution,
defending,
and
maintenance
of
patent
rights
licensed
under
the
BMS
Agreement.
Under
the
BMS
Agreement,
BMS
transferred
to
the
Company
manufactured
licensed
products,
including
certain
materials
that
will
be
used
by
the
Company
to
conduct
clinical
trials.
The
BMS
Agreement
will
terminate
on
a
licensed
product-by-licensed
product
and
country-by-country
basis
upon
the
expiration
of
the
royalty
term
with
respect
to
each
licensed
product
in
each
country.
BMS
has
the
right
to
terminate
the
agreement
upon
the
Company's
insolvency
or
bankruptcy,
the
Company's
uncured
material
breach
of
the
agreement,
including
the
failure
to
meet
its
development
and
commercialization
obligations,
or
if
the
Company
challenges
any
of
BMS's
patent
rights.
The
Company
has
the
right
to
terminate
the
BMS
Agreement
if
BMS
materially
breaches
the
agreement
or
if,
after
the
Company
provides
notice,
it
chooses
not
to
move
forward
with
development
and
commercialization
in
a
specific
country.
The
BMS
Agreement
required
the
Company
to
complete
a
financing
transaction
with
gross
proceeds
of
at
least
$30,000,
of
which
a
minimum
of
$22,000
was
to
be
from
investment
in
equity
prior
to
October
17,
2016,
unless
extended
by
mutual
agreement
of
the
Company
and
BMS.
The
BMS
Agreement
was
amended,
effective
October
14,
2016,
to
extend
the
deadline
for
completing
the
financing
transaction
to
October
31,
2016,
on
which
date
the
Series
A
First
Closing
was
completed
(see
Note
10).
Under
the
BMS
Agreement,
the
Company
also
agreed
to
issue
BMS
common
shares
in
the
amount
of
$12,500,
which
shares
are
contingently
issuable
upon
the
earliest
to
occur
of
(i)
the
initiation
of
a
Phase
3
trial
for
the
first
licensed
compound
to
reach
such
milestone,
(ii)
the
Company's
IPO
or
F-33
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
13.
License
and
Other
Agreements
(Continued)
(iii)
an
event
resulting
in
the
change
of
control
of
the
Company.
Under
the
terms
of
the
BMS
Agreement,
if
the
qualifying
financing
transaction
involves
the
issuance
of
preferred
shares,
BMS
is
entitled
to
receive
preferred
shares
instead
of
common
shares,
at
its
option.
BMS
also
had
the
right
to
purchase
up
to
8%,
on
a
fully
diluted
basis,
of
shares
issued
in
a
qualifying
financing
transaction
(as
defined
in
the
BMS
Agreement)
on
the
same
terms
and
rights
as
all
other
investors
involved
in
the
financing.
The
number
of
shares
issuable
to
BMS
under
the
agreement
will
be
determined
by
dividing
$12,500
by
a
price
per
share
equal
to
the
lower
of
(i)
the
price
per
share
paid
by
investors
in
the
Series
A
First
Closing,
or
$9.2911
(see
Note
10),
or
(ii)
the
price
per
share
paid
by
investors
in
any
subsequent
financing
event
that
occurs
prior
to
the
events
specified
above.
The
obligation
to
contingently
issue
equity
to
BMS
is
classified
as
a
liability
on
the
consolidated
balance
sheet
because
it
represents
an
obligation
to
issue
a
variable
number
of
shares
for
a
fixed
dollar
amount.
Upon
entering
into
the
BMS
Agreement,
the
issuance-date
fair
value
of
the
contingent
equity
liability
of
$13,125
was
recognized
as
research
and
development
expense
in
the
consolidated
statement
of
operations
and
comprehensive
loss.
The
Company
remeasured
the
fair
value
of
the
contingent
equity
liability
at
each
reporting
date
since
the
date
of
issuance,
recognizing
changes
in
the
fair
value
of
the
contingent
equity
liability
as
a
component
of
other
income
(expense),
net
in
the
consolidated
statement
of
operations
and
comprehensive
loss.
Changes
in
the
fair
value
of
the
contingent
equity
liability
continued
to
be
recognized
until
the
occurrence
of
a
triggering
event,
which
occurred
in
May
2017
with
the
completion
of
the
IPO.
In
May
2017,
in
connection
with
the
completion
of
its
IPO,
the
Company
issued
1,345,374
common
shares
to
BMS
in
satisfaction
of
its
obligation
to
contingently
issue
equity
securities
pursuant
to
the
license
agreement
and
remeasured
the
contingent
equity
liability
to
fair
value.
The
Company
recognized
expense
of
$8,809
and
$13,125
during
the
years
ended
December
31,
2017
and
2016,
respectively,
as
a
result
of
changes
to
the
fair
value
of
the
contingent
equity
liability
prior
to
its
extinguishment
in
May
2017.
The
Company
recorded
$5,000
of
research
and
development
expense
related
to
a
payment
made
in
connection
with
the
BMS
Agreement
during
the
year
ended
December
31,
2017
for
the
achievement
of
a
specified
milestone.
AstraZeneca Agreement
In
October
2016,
the
Company
entered
into
an
exclusive
license
agreement
(the
"AstraZeneca
Agreement")
with
AstraZeneca,
pursuant
to
which
AstraZeneca
granted
the
Company
a
license
to
certain
patent
rights
for
the
commercial
development,
manufacture,
distribution
and
use
of
any
products
or
processes
resulting
from
development
of
those
patent
rights,
including
BHV-5000
and
BHV-5500.
In
exchange
for
these
rights,
the
Company
agreed
to
pay
AstraZeneca
an
upfront
payment,
milestone
payments
and
royalties
on
net
sales
of
licensed
products
under
the
agreement.
The
regulatory
milestones
due
under
the
agreement
depend
on
the
indication
of
the
licensed
product
being
developed
as
well
as
the
territory
where
regulatory
approval
is
obtained.
Development
milestones
due
under
the
agreement
with
respect
to
Rett
syndrome
total
up
to
$30,000,
and,
for
any
indication
other
than
Rett
syndrome,
total
up
to
$60,000.
Commercial
milestones
are
based
on
net
sales
of
all
products
licensed
under
the
agreement
and
total
up
to
$120,000.
The
Company
has
also
agreed
to
pay
tiered
royalties
based
on
net
sales
of
all
products
licensed
under
the
agreement
of
mid-single-digit
to
low
double-digit
F-34
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
13.
License
and
Other
Agreements
(Continued)
percentages.
If
the
Company
receives
revenue
from
sublicensing
any
of
its
rights
under
the
AstraZeneca
Agreement,
the
Company
is
also
obligated
to
pay
a
portion
of
that
revenue
to
AstraZeneca.
The
Company
is
also
required
to
reimburse
AstraZeneca
for
any
fees
that
AstraZeneca
incurs
related
to
the
filing,
prosecution,
defending,
and
maintenance
of
patent
rights
licensed
under
the
AstraZeneca
Agreement.
The
AstraZeneca
Agreement
expires
upon
the
expiration
of
the
patent
rights
under
the
agreement,
unless
earlier
terminated
by
either
party,
or
on
a
country-by-
country
basis
ten
years
after
the
first
commercial
sale.
As
part
of
the
consideration
under
the
AstraZeneca
Agreement,
the
Company
agreed
to
issue
to
AstraZeneca
common
shares
in
the
amount
of
$10,000
if
the
Company
completed
a
qualifying
equity
financing
resulting
in
proceeds
of
at
least
$30,000
prior
to
December
29,
2016.
Under
the
terms
of
the
AstraZeneca
Agreement,
if
the
qualifying
financing
transaction
involved
the
issuance
of
preferred
shares,
AstraZeneca
would
be
entitled
to
receive
preferred
shares
instead
of
common
shares,
at
its
option.
The
number
of
shares
issued
would
be
determined
based
on
the
price
per
share
paid
by
investors
in
the
qualifying
financing
transaction.
Upon
the
occurrence
of
the
qualifying
financing
transaction,
50%
of
the
shares
would
be
issuable
upon
the
closing
of
the
transaction
(the
"First
Tranche")
and
the
other
50%
would
become
issuable
upon
the
earlier
of
(i)
the
initiation
of
a
Phase
2b
or
equivalent
clinical
trial
of
a
product
candidate
based
on
the
licensed
patent
rights
or
(ii)
any
liquidity
event,
including
an
IPO
of
the
Company,
any
change
of
control
of
the
Company
or
any
assignment
of
the
Company's
rights
and
obligations
under
the
AstraZeneca
Agreement
(the
"Second
Tranche").
The
number
of
shares
issuable
to
AstraZeneca
in
each
of
the
First
Tranche
and
the
Second
Tranche
is
determined
by
dividing
$5,000
by
the
price
per
share
paid
by
investors
in
the
Company's
Series
A
First
Closing,
or
$9.2911
(see
Note
10).
In
addition,
AstraZeneca
had
the
right
to
purchase
up
to
8%,
on
a
fully
diluted
basis,
of
shares
issued
in
such
qualifying
financing
transaction,
on
the
same
terms
and
rights
as
all
other
investors
involved
in
the
financing.
In
October
2016,
upon
completion
of
the
Series
A
First
Closing
(see
Note
10),
the
contingency
associated
with
the
First
Tranche
of
contingently
issuable
equity
related
to
the
occurrence
of
a
qualified
financing
was
satisfied.
As
a
result,
the
Company
issued
to
AstraZeneca
538,150
Series
A
preferred
shares
with
an
aggregate
fair
value
of
$5,000,
or
$9.2911
per
share.
Upon
issuance
of
the
538,150
Series
A
preferred
shares
to
AstraZeneca,
the
Company
reclassified
the
contingent
equity
liability
associated
with
the
First
Tranche
of
$5,000
to
the
carrying
value
of
Series
A
preferred
shares.
The
Company
determined
that
the
fair
value
of
the
contingent
equity
liability
associated
with
the
Second
Tranche
at
each
reporting
date
since
the
date
of
issuance,
recognizing
changes
in
the
fair
value
of
the
contingent
equity
liability
as
a
component
of
other
income
(expense),
net
in
the
consolidated
statement
of
operations
and
comprehensive
loss.
Changes
in
the
fair
value
of
the
contingent
equity
liability
continued
to
be
recognized
until
the
occurrence
of
a
triggering
event,
which
occurred
in
May
2017
with
the
completion
of
the
IPO.
In
May
2017,
in
connection
with
the
completion
of
its
IPO,
the
Company
issued
538,149
common
shares
to
AstraZeneca
in
satisfaction
of
its
obligation
to
contingently
issue
the
Second
Tranche
of
equity
securities
pursuant
to
the
license
agreement
and
remeasured
the
contingent
equity
liability
to
fair
value.
The
Company
recognized
expense
of
$4,273
and
$938
during
the
years
ended
December
31,
F-35
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
13.
License
and
Other
Agreements
(Continued)
2017
and
2016,
respectively,
as
a
result
of
changes
to
the
fair
value
of
the
contingent
equity
liability
prior
to
its
extinguishment
in
May
2017.
Catalent Agreement for BHV-0223
In
March
2015,
the
Company
entered
into
a
development
and
license
agreement
with
Catalent
U.K.
Swindon
Zydis
Limited
("Catalent")
pursuant
to
which
the
Company
obtained
license
rights
to
the
Zydis
technology
in
BHV-0223.
BHV-0223
was
developed
under
this
agreement,
and
Catalent
has
manufactured
BHV-
0223
for
clinical
testing.
Upon
entering
the
Catalent
Agreement,
the
Company
is
obligated
to
pay
Catalent
up
to
$1,575
upon
the
achievement
of
specified
regulatory
and
commercial
milestones.
The
Company
is
also
obligated
to
make
royalty
payments
of
a
low
single-digit
percentage
based
on
net
sales
of
products
licensed
under
the
Catalent
Agreement.
Under
this
Agreement,
the
Company
is
responsible
for
conducting
clinical
trials
and
for
preparing
and
filing
regulatory
submissions.
The
Company
has
the
right
to
sublicense
its
rights
under
the
Catalent
Agreement
subject
to
Catalent's
prior
written
consent.
Catalent
has
the
right
to
enforce
the
patents
covering
the
Zydis
Technology
and
to
defend
any
allegation
that
a
formulation
using
Zydis
technology,
such
as
BHV-0223,
infringes
a
third
party's
patent.
This
agreement
terminates
on
a
country-by-country
basis
upon
the
later
of
(i)
10
years
after
the
launch
of
the
most
recently
launched
product
in
such
country
and
(ii)
the
expiration
of
the
last
valid
claim
covering
each
product
in
such
country,
unless
earlier
voluntarily
terminated
by
the
Company.
This
agreement
automatically
extends
for
one-year
terms
unless
either
party
gives
advance
notice
of
intent
to
terminate.
In
addition,
Catalent
may
terminate
the
agreement
either
in
its
entirety
or
terminate
the
exclusive
nature
of
this
agreement
on
a
country-by-country
basis
if
the
Company
fails
to
meet
specified
development
timelines,
which
it
may
extend
in
certain
circumstances.
In
January
2018,
the
Company
entered
into
a
license
and
development
agreement
with
Catalent
related
to
rimegepant
(see
Note
20).
RPharm Agreement
In
November
2017,
the
Company
entered
into
a
consulting
agreement
with
R
PHARM
US
related
to
the
commercial
preparation
for
BHV-0223.
In
addition
to
fixed
quarterly
consulting
expenses
under
the
agreement,
the
Company
agreed
to
pay
up
to
$2,500,000
upon
achievement
of
specific
commercial
milestones.
14.
Income
taxes
As
a
company
incorporated
in
the
British
Virgin
Islands
("BVI"),
the
Company
is
principally
subject
to
taxation
in
the
BVI.
Under
the
current
laws
of
the
BVI,
tax
on
a
company's
income
is
assessed
at
a
zero
percent
tax
rate.
As
a
result,
the
Company
has
not
recorded
any
income
tax
benefits
from
its
losses
incurred
in
the
BVI
during
each
reporting
period,
and
no
net
operating
loss
carryforwards
will
be
available
to
the
Company
for
those
losses.
BVI
has
historically
outsourced
all
of
the
research
and
clinical
development
for
its
programs
under
a
master
services
agreement
with
BPI
(see
Note
18).
As
a
result
of
providing
services
under
this
agreement,
BPI
was
profitable
during
the
years
ended
December
31,
2017
and
2016,
and
BPI
is
subject
to
taxation
in
the
United
States.
F-36
Table
of
Contents
14.
Income
taxes
(Continued)
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
The
Company's
tax
provision
includes
the
effects
of
consolidating
the
results
of
operations
of
BPI,
either
as
a
variable
interest
entity
for
periods
through
the
acquisition
of
BPI
(see
Note
18)
or
as
of
December
31,
2017
and
2016
as
the
Company's
wholly
owned
subsidiary.
Due
to
BPI's
history
of
cumulative
losses
through
September
30,
2016,
the
Company
had
recorded
no
tax
benefits
for
the
losses
incurred
by
BPI
through
that
date
and
had
recorded
a
full
valuation
allowance
against
BPI's
deferred
tax
assets,
which
consisted
primarily
of
its
U.S.
net
operating
loss
carryforwards
for
all
periods
through
September
30,
2016.
As
of
December
31,
2016,
the
Company
fully
utilized
BPI's
remaining
U.S.
net
operating
loss
carryforwards
and
recorded
a
full
release
of
the
valuation
allowance,
which
did
not
result
in
a
material
impact
to
the
Company's
income
tax
provision.
As
of
December
31,
2017,
we
evaluated
our
deferred
tax
assets
and
determined
that
a
full
valuation
allowance
on
these
assets
was
appropriate
due
to
the
generation
of
tax
credits
in
excess
of
forecasted
taxes.
The
Company
recorded
an
income
tax
provision
during
the
year
ended
December
31,
2017
of
$1,006
which
primarily
represents
an
alternative
minimum
tax
liability
and
certain
state
taxes
for
the
period.
Income
(loss)
before
provision
for
income
taxes
consisted
of
the
following:
Year
Ended
December
31,
2016
2017
2015
BVI
Foreign
(U.S.)
Loss
before
provision
for
income
taxes
The
provision
for
income
taxes
consisted
of
the
following:
Current
income
tax
provision:
BVI
Foreign
(U.S.
federal
and
state)
Total
current
income
tax
provision
Deferred
income
tax
provision
(benefit):
BVI
Foreign
(U.S.
federal
and
state)
Total
deferred
income
tax
provision
(benefit)
Total
provision
for
income
taxes
F-37
$ (130,359) $ (63,677) $ (10,062)
(4)
$ (126,184) $ (63,444) $ (10,066)
4,175
233
Year
Ended
December
31,
2017
2016
2015
$
—
$ —
$ —
—
99
997
—
99
997
—
—
9
9
—
(9)
—
(9)
—
$ 1,006
$ 90
$ —
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
14.
Income
taxes
(Continued)
A
reconciliation
of
the
BVI
statutory
income
tax
rate
of
0%
to
the
Company's
effective
income
tax
rate
is
as
follows:
BVI
statutory
income
tax
rate
Foreign
tax
rate
differential
Tax
Credits
Change
in
valuation
allowance
Other
Effective
income
tax
rate
Net
deferred
tax
assets
(liabilities)
consisted
of
the
following:
Deferred
tax
assets:
Foreign
net
operating
loss
carryforwards
Tax
credits
Other
Total
deferred
tax
assets
Deferred
tax
liabilities:
Other
Total
deferred
tax
liabilities
Valuation
allowance
Net
deferred
tax
assets
2015
Year
Ended
December
31,
2017
2016
(0.0)%
(0.0)%
0.0%
(0.0)
0.1
1.2
0.0
0.0
(2.7)
0.0
(0.0)
2.2
0.1
0.0
0.0
0.8%
0.1%
0.0%
December
31,
2017
2016
$
—
$ —
—
9
9
2,790
1
2,791
(7)
(7)
(2,784)
—
—
—
9
$
—
$
As
of
December
31,
2017
and
2016,
the
Company
had
no
remaining
foreign
net
operating
loss
carryforwards.
The
Company
had
federal
and
state
research
and
development
credits
of
$2,463
and
$414
which
begin
to
expire
in
2037.
On
December
22,
2017,
the
Tax
Cuts
and
Jobs
Act
("The
Act"),
was
signed
into
law,
resulting
in
significant
changes
to
the
Internal
Revenue
Code
of
1986,
as
amended.
These
changes
include
a
federal
statutory
rate
reduction
from
35%
to
21%,
limitation
on
the
amount
of
research
and
development
expenses
deductible
per
year
beginning
in
years
after
2021,
reduction
of
the
Orphan
Drug
Credit
from
50%
to
25%
of
qualified
clinical
testing
expenditures,
increased
limitations
on
certain
executive
compensation,
elimination
of
the
Corporate
Alternative
Minimum
Tax,
and
modifying
or
repealing
other
business
deductions
and
credits.
The
revaluation
of
our
deferred
tax
assets
due
to
The
Act
was
not
material.
F-38
Table
of
Contents
14.
Income
taxes
(Continued)
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
Changes
in
the
valuation
allowance
for
deferred
tax
assets
during
the
years
ended
December
31,
2017
and
2016
were
due
primarily
to
the
utilization
of
U.S.
net
operating
loss
carryforwards
and
were
as
follows:
Year
Ended
December
31,
2017
2016
2015
Valuation
allowance
as
of
beginning
of
year
Decreases
recorded
as
benefit
to
income
tax
provision
Increases
recorded
to
income
tax
provision
Valuation
allowance
as
of
end
of
year
$
—
$
—
2,784
16
$ 21
(5)
(16)
—
$ 2,784
$ —
$ 16
—
The
Company
has
not
recorded
any
amounts
for
unrecognized
tax
benefits
as
of
December
31,
2017
or
2016.
The
Company's
policy
is
to
record
interest
and
penalties
related
to
income
taxes
as
part
of
its
income
tax
provision.
As
of
December
31,
2017
and
2016,
the
Company
had
no
accrued
interest
or
penalties
related
to
uncertain
tax
positions
and
no
amounts
had
been
recognized
in
the
Company's
statement
of
operations
and
comprehensive
loss.
BPI
files
income
tax
returns
in
the
U.S.
and
certain
state
jurisdictions.
BPI's
U.S.
federal
and
state
income
tax
returns
are
subject
to
tax
examinations
for
the
tax
year
ended
December
31,
2014
and
subsequent
years.
There
are
currently
no
income
tax
examinations
pending.
F-39
Table
of
Contents
15.
Net
Loss
per
Share
Net Loss per Share
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
Basic
and
diluted
net
loss
per
share
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
was
calculated
as
follows:
Numerator:
Net
loss
Net
(income)
loss
attributable
to
non-controlling
interests
Accretion
of
beneficial
conversion
feature
on
Series
A
preferred
shares
Net
loss
attributable
to
common
shareholders
of
2017
Year
Ended
December
31,
2016
2015
$
(127,190) $
—
(63,534) $
143
(10,066)
(4)
(12,006)
—
—
Biohaven
Pharmaceutical
Holding
Company
Ltd.
$
(139,196) $
(63,677) $
(10,062)
Denominator:
Weighted
average
common
shares
outstanding—basic
and
diluted
27,845,576
12,608,366
11,009,277
Net
loss
per
share
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.—basic
and
diluted
$
(5.00) $
(5.05) $
(0.91)
The
Company's
potential
dilutive
securities,
which
include
stock
options
and
warrants
to
purchase
common
shares,
have
been
excluded
from
the
computation
of
diluted
net
loss
per
share
as
the
effect
would
be
to
reduce
the
net
loss
per
share.
Therefore,
the
weighted
average
number
of
common
shares
outstanding
used
to
calculate
both
basic
and
diluted
net
loss
per
share
attributable
to
common
shareholders
is
the
same.
The
Company
excluded
the
following
potential
common
shares,
presented
based
on
amounts
outstanding
at
each
period
end,
from
the
computation
of
diluted
net
loss
per
share
attributable
to
common
shareholders
for
the
periods
indicated
because
including
them
would
have
had
an
anti-dilutive
effect:
Options
to
purchase
common
shares
Warrants
to
purchase
common
shares
2017
6,151,643
821,751
6,973,394
Year
Ended
December
31,
2016
3,864,425
600,000
4,464,425
2015
3,247,500
275,000
3,522,500
In
addition
to
the
potentially
dilutive
securities
noted
above,
as
of
September
30,
2016,
the
Company
agreed
to
issue
warrants
to
purchase
common
shares
to
each
of
the
Guarantor
and
F-40
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
15.
Net
Loss
per
Share
(Continued)
Co-Guarantor
of
the
Credit
Agreement
(see
Note
7).
In
January
2017,
the
Company
issued
the
warrants
to
the
Guarantor
and
Co-Guarantor,
pursuant
to
which
each
director
received
a
warrant
to
purchase
107,500
common
shares
at
an
exercise
price
of
$9.2911
per
share.
These
warrants
are
included
in
the
table
above
for
the
year
ended
December
31,
2017.
The
Company
had
also
agreed
under
its
agreements
with
AstraZeneca
and
BMS
to
issue
common
shares
upon
the
achievement
of
specified
milestones
or
upon
the
occurrence
of
specified
events
(see
Notes
3
and
12).
Because
the
necessary
conditions
for
issuance
of
the
shares
had
not
been
met
as
of
December
31,
2016,
the
Company
excluded
these
shares
from
the
table
above
and
from
the
calculation
of
diluted
net
loss
per
share
for
the
year
ended
December
31,
2016.
In
May
2017,
in
connection
with
the
completion
of
its
IPO,
the
Company
issued
538,149
common
shares
to
AstraZeneca
and
1,345,374
common
shares
to
BMS
in
full
satisfaction
of
its
obligations
to
contingently
issue
equity
securities
pursuant
to
the
license
agreements.
Accordingly,
the
table
above
does
not
include
any
shares
related
to
the
agreements
with
AstraZeneca
and
BMS
for
the
year
ended
December
31,
2017.
16.
Commitments
and
Contingencies
Lease Agreement
In
December
2016,
the
Company
entered
into
an
assignment
agreement
to
assume
an
operating
lease
for
its
office
space
in
New
Haven,
Connecticut.
The
lease
agreement
expires
in
October
2018,
and
the
Company
has
the
option
to
extend
the
term
through
October
2021.
In
addition,
the
Company
entered
into
a
lease
agreement
for
additional
space
which
expires
on
June
30,
2018.
During
the
year
ended
December
31,
2017,
the
Company
recorded
rent
expense
of
$73.
The
agreement
requires
future
minimum
lease
payments
for
the
years
ending
December
31,
2018
of
$44.
In
August
2017,
the
Company
entered
into
a
lease
agreement
for
office
space
and
the
related
property
for
its
new
headquarters
in
New
Haven,
Connecticut.
The
lease
commences
on
January
1,
2018
and
will
continue
for
a
term
of
85
months,
with
the
ability
to
extend
for
120
months.
The
Company
has
the
option
to
purchase
the
property
for
$2,700.
The
lease
will
be
accounted
for
under
the
financing
method
(see
Note
2).
During
the
year
ended
December
31,
2017,
the
Company
recorded
an
asset
of
$2,198
for
the
fair
value
of
the
building
of
$1,600,
landlord
improvements
of
$111
and
tenant
improvements
of
$487.
The
Company
has
recorded
a
financing
liability
of
$1,787
related
to
the
lease,
of
which
$362
is
recorded
within
accrued
expenses
and
$1,425
within
other
long-term
liabilities.
During
the
year
ended
December
31,
2017,
the
Company
recorded
$75
in
rent
expense
during
the
construction
period.
F-41
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
16.
Commitments
and
Contingencies
(Continued)
The
leases
requires
minimum
lease
payments
for
the
following
years
ended
December
31:
2018
2019
2020
2021
2022
Thereafter
License Agreements
$
220
197
202
207
212
458
$ 1,496
The
Company
has
entered
into
license
agreements
with
various
parties
under
which
it
is
obligated
to
make
contingent
and
non-contingent
payments
(see
Note
13).
Research Commitments
The
Company
has
entered
into
agreements
with
several
CROs
to
provide
services
in
connection
with
its
preclinical
studies
and
clinical
trials.
As
of
December
31,
2017,
the
Company
had
committed
to
minimum
payments
under
these
arrangements
of
$8,149,
of
which
substantially
all
are
due
in
the
year
ended
December
31,
2018.
Indemnification Agreements
In
the
ordinary
course
of
business,
the
Company
may
provide
indemnification
of
varying
scope
and
terms
to
vendors,
lessors,
business
partners
and
other
parties
with
respect
to
certain
matters
including,
but
not
limited
to,
losses
arising
out
of
breach
of
such
agreements
or
from
intellectual
property
infringement
claims
made
by
third
parties.
In
addition,
the
Company
has
entered
into
indemnification
agreements
with
members
of
its
board
of
directors
that
will
require
the
Company,
among
other
things,
to
indemnify
them
against
certain
liabilities
that
may
arise
by
reason
of
their
status
or
service
as
directors
or
officers.
The
maximum
potential
amount
of
future
payments
the
Company
could
be
required
to
make
under
these
indemnification
agreements
is,
in
many
cases,
unlimited.
The
Company's
amended
and
restated
memorandum
and
articles
of
association
also
provide
for
indemnification
of
directors
and
officers
in
specific
circumstances.
To
date,
the
Company
has
not
incurred
any
material
costs
as
a
result
of
such
indemnification
provisions.
The
Company
does
not
believe
that
the
outcome
of
any
claims
under
indemnification
arrangements
will
have
a
material
effect
on
its
financial
position,
results
of
operations
or
cash
flows,
and
it
has
not
accrued
any
liabilities
related
to
such
obligations
in
its
consolidated
financial
statements
as
of
December
31,
2017
or
2016.
Legal Proceedings
From
time
to
time,
in
the
ordinary
course
of
business,
the
Company
is
subject
to
litigation
and
regulatory
examinations
as
well
as
information
gathering
requests,
inquiries
and
investigations.
As
of
December
31,
2017,
there
were
no
matters
which
would
have
a
material
impact
on
the
Company's
financial
results.
F-42
Table
of
Contents
17.
Related
Party
Transactions
License Agreement with Yale
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
On
September
30,
2013,
the
Company
entered
into
the
Yale
Agreement
with
Yale
(see
Note
13).
Yale
is
a
related
party
because
the
Company's
Chief
Executive
Officer
is
one
of
the
inventors
of
the
patents
that
the
Company
has
licensed
from
Yale
and,
as
such,
is
entitled
to
a
specified
share
of
the
glutamate
product-related
royalty
revenues
that
may
be
received
by
Yale
under
the
Yale
Agreement.
As
partial
consideration
for
the
license
under
the
Yale
Agreement,
on
September
30,
2013,
the
Company
issued
to
Yale
250,000
common
shares,
representing
5.1%
of
the
Company's
then
outstanding
equity
on
a
fully
diluted
basis.
The
fair
value
of
the
shares,
totaling
$152,
was
recognized
as
research
and
development
expense
at
the
time
of
issuance
of
the
shares.
During
the
years
ended
December
31,
2017,
2016
and
2015,
the
Company
recognized
research
and
development
expense
under
the
Yale
Agreement
of
$38,
$4
and
$84,
respectively.
As
of
December
31,
2017
and
2016,
the
Company
owed
no
amounts
to
Yale.
Guarantor and Co-Guarantor Warrants
The
Guarantor
and
Co-Guarantor
of
the
Credit
Agreement
with
Wells
Fargo
are
each
shareholders
and
members
of
the
board
of
directors
of
the
Company.
The
Company
issued
warrants
to
the
Guarantor
and
Co-Guarantor
in
exchange
for
their
respective
guaranties
(see
Notes
8
and
9).
The
warrants
were
issued
on
January
26,
2017,
pursuant
to
which
each
director
received
a
warrant
to
purchase
107,500
common
shares
at
an
exercise
price
of
$9.2911
per
share.
Kleo Pharmaceuticals, Inc.
From
August
2016
through
December
2017
(see
Note
5),
the
Company
has
purchased
9,674,543
shares
of
Kleo
for
aggregate
consideration
of
$9,979.
As
part
of
the
purchases,
in
March
2017,
the
Company
purchased
500,000
shares
of
Kleo
common
stock
from
the
then
Chief
Executive
Officer
of
Kleo.
Kleo
is
a
related
party
because
the
Company
has
determined
that
it
exercises
significant
influence
over
the
operating
and
financial
policies
of
Kleo.
In
connection
with
its
investment
in
Kleo,
the
Company
received
the
right
to
designate
two
members
of
Kleo's
board
of
directors,
who
are
the
Chairman
of
the
Company's
board
of
directors
and
an
outside
director
of
the
Company.
Also,
the
President
and
controlling
stockholder
of
Kleo
is
a
shareholder
of
the
Company.
As
of
December
31,
2017,
the
Company
owned
43.3%
of
Kleo's
outstanding
capital
stock.
The
Company
has
also
entered
into
a
clinical
development
master
services
agreement
with
Kleo
to
assist
Kleo
with
clinical
development.
As
of
December
31,
2017,
the
Company
had
not
performed
any
services
or
received
any
payments
under
this
agreement.
Biohaven Pharmaceuticals, Inc.
BPI
is
a
related
party
because
the
three
founders,
each
of
whom
beneficially
owned
one-third
of
the
equity
of
BPI
prior
to
the
Company's
acquisition
of
BPI
on
December
31,
2016
(see
Note
8),
are
shareholders
of
the
Company
and
also
serve
as
the
Company's
Chairman
of
the
board
of
directors,
Chief
Executive
Officer
and
Chief
Medical
Officer,
respectively.
On
December
31,
2016,
the
Company
acquired
100%
of
the
capital
stock
of
BPI
for
aggregate
purchase
consideration
of
$595
in
the
form
of
promissory
notes
to
each
of
the
former
stockholders
of
BPI.
In
connection
with
the
closing
of
the
F-43
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
17.
Related
Party
Transactions
(Continued)
Company's
IPO
in
May
2017,
the
notes
were
paid
in
full,
including
principal
of
$595,
and
accrued
interest
of
$9.
AstraZeneca
The
Company
entered
into
an
exclusive
license
agreement
with
AstraZeneca
in
October
2016.
As
part
of
the
consideration
under
the
agreement
and
in
connection
with
the
completion
of
the
Series
A
First
Closing
in
October
2016
and
the
completion
of
the
IPO
in
May
2017,
AstraZeneca
received
shares
of
the
Company's
stock
(see
Notes
1
and
13).
Bristol Myers-Squibb Company
The
Company
entered
into
an
exclusive
license
agreement
with
BMS
in
July
2016.
As
part
of
the
consideration
under
the
agreement
and
in
connection
with
the
completion
of
the
Company's
IPO
in
May
2017,
BMS
received
shares
of
the
Company's
stock
(see
Notes
1
and
13).
The
Company
recorded
$5,000
of
research
and
development
expense
related
to
a
payment
made
during
the
year
ended
December
31,
2017
for
the
achievement
of
a
specified
milestone.
18.
Acquisition
of
Biohaven
Pharmaceuticals,
Inc.
The
Company
has
historically
outsourced
all
of
the
research
and
clinical
development
for
its
programs
under
a
master
services
agreement
(the
"MSA")
with
BPI.
The
three
founders
of
BPI,
each
of
whom
beneficially
owned
one-third
of
the
equity
of
BPI
prior
to
the
Company's
acquisition
of
BPI
on
December
31,
2016,
are
shareholders
of
the
Company
and
also
serve
as
the
Company's
Chairman
of
the
board
of
directors,
Chief
Executive
Officer,
and
Chief
Medical
Officer,
respectively
(see
Note
17).
BPI
is
a
contract
research
organization
whose
only
customer
is
the
Company.
Since
its
incorporation,
substantially
all
of
the
operations
of
BPI
have
been
performed
in
service
to
the
Company
under
the
terms
of
the
MSA,
and
substantially
all
of
the
funding
for
the
operations
of
BPI
was
provided
by
the
Company.
The
Company
determined
that
(i)
it
has
the
authority
to
direct
the
activities
of
BPI
that
most
significantly
impact
the
economics
of
the
entity
and
(ii)
the
equity
at
risk
in
BPI
is
insufficient
to
finance
its
operations.
As
a
result,
the
Company
is
deemed
to
have
had
a
variable
interest
in
BPI,
and
BPI
is
deemed
to
be
a
variable
interest
entity
("VIE")
of
which
the
Company
is
the
primary
beneficiary.
Since
the
date
of
the
Company's
incorporation
in
September
2013,
the
Company
has
consolidated
the
results
of
BPI.
Upon
original
consolidation,
the
Company
applied
purchase
accounting
by
recording
the
fair
values
of
BPI's
assets
acquired
and
liabilities
assumed,
which
were
determined
to
be
zero
because
BPI
had
not
yet
commenced
any
operations.
For
the
year
ended
December
31,
2016,
100%
of
the
equity
in
BPI
was
reflected
as
a
net
loss
attributable
to
non-controlling
interest
on
the
consolidated
statement
of
operations
and
comprehensive
loss.
On
December
31,
2016,
the
Company
entered
into
stock
purchase
agreements
with
each
of
the
stockholders
of
BPI,
acquiring
100%
of
the
issued
and
outstanding
shares
of
BPI
for
aggregate
purchase
consideration
of
$595,
and
as
a
result,
for
periods
subsequent
to
the
acquisition,
the
Company
no
longer
reports
any
non-controlling
interest
related
to
BPI.
F-44
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
18.
Acquisition
of
Biohaven
Pharmaceuticals,
Inc.
(Continued)
The
Company
funded
the
acquisition
through
the
issuance
of
promissory
notes
to
each
of
the
former
stockholders
of
BPI.
In
May
2017,
in
connection
with
the
completion
of
the
IPO,
the
notes
became
immediately
due
and
payable,
and
the
Company
paid
the
notes,
including
principal
and
unpaid
interest,
in
full.
Because
the
Company
consolidated
BPI
as
a
VIE
prior
to
the
acquisition,
the
acquisition
of
all
of
the
capital
stock
of
BPI
did
not
result
in
a
change
of
control
for
accounting
purposes
and
was
accounted
for
as
an
equity
transaction.
Accordingly,
as
of
the
acquisition
date,
the
$86
carrying
value
of
the
non-controlling
interest
on
December
31,
2016
was
derecognized
and
the
difference
between
the
carrying
value
of
the
non-controlling
interest
of
$86
and
the
purchase
price
of
$595
was
recorded
as
a
$509
reduction
to
additional
paid-in
capital.
There
were
no
changes
to
this
accounting
treatment
of
BPI
during
the
year
ended
December
31,
2017.
For
the
years
ended
December
31,
2016
and
2015
when
the
Company
consolidated
BPI
as
a
VIE,
the
Company
recorded
net
income
and
a
(loss)
of
$143
and
$(4),
respectively,
attributable
to
non-controlling
interests.
F-45
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
19.
Quarterly
Financial
Data
(Unaudited)
The
following
information
has
been
derived
from
unaudited
consolidated
financial
statements
that,
in
the
opinion
of
management,
include
all
recurring
adjustments
necessary
for
a
fair
statement
of
such
information.
March
31,
2017
June
30,
2017
September
30,
2017
December
31,
2017
Three
Months
Ended
Operating
expenses:
Research
and
development
General
and
administrative
Total
operating
expenses
Loss
from
operations
Other
income
(expense):
Interest
expense
Interest
income
Change
in
fair
value
of
warrant
liability
Change
in
fair
value
of
derivative
liability
Change
in
fair
value
of
contingent
equity
liability
Loss
from
equity
method
investment
Total
other
income
(expense),
net
Loss
before
provision
for
income
taxes
Provision
for
income
taxes
Net
loss
and
comprehensive
loss
Net
(income)
loss
attributable
to
non-controlling
interests
Accretion
of
beneficial
conversion
feature
on
Series
A
$
10,740
$
3,757
14,497
(14,497)
(305)
—
(454)
289
(3,375)
(218)
(4,063)
(18,560)
193
(18,753)
—
21,019
$
4,199
25,218
(25,218)
(362)
—
(2,629)
223
(9,707)
(348)
(12,823)
(38,041)
399
(38,440)
—
preferred
shares
(4,000)
(8,006)
Net
loss
attributable
to
common
shareholders
of
Biohaven
34,996
$
4,571
39,567
(39,567)
(239)
10
(2,426)
—
—
(638)
(3,293)
(42,860)
55
(42,915)
—
—
22,686
5,614
28,300
(28,300)
—
(10)
2,268
—
—
(681)
1,577
(26,723)
359
(27,082)
—
—
Pharmaceutical
Holding
Company
Ltd.
$
(22,753) $
(46,446) $
(42,915) $
(27,082)
Net
loss
per
share
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.—basic
and
diluted
Weighted
average
common
shares
outstanding—basic
and
$
(1.74) $
(1.78) $
(1.19) $
(0.75)
diluted
13,088,861
26,038,192
35,930,698
35,984,111
F-46
Table
of
Contents
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
19.
Quarterly
Financial
Data
(Unaudited)
(Continued)
Operating
expenses:
Research
and
development
General
and
administrative
Total
operating
expenses
Loss
from
operations
Other
income
(expense):
Interest
expense
Interest
income
Change
in
fair
value
of
warrant
liability
Change
in
fair
value
of
derivative
liability
Change
in
fair
value
of
contingent
equity
liability
Loss
from
equity
method
investment
Total
other
income
(expense),
net
Loss
before
provision
for
income
taxes
Provision
for
income
taxes
Net
loss
and
comprehensive
loss
Net
(income)
loss
attributable
to
non-controlling
interests
Accretion
of
beneficial
conversion
feature
on
Series
A
preferred
shares
Net
loss
attributable
to
common
shareholders
of
Biohaven
$
March
31,
2016
June
30,
2016
September
30,
2016
December
31,
2016
Three
Months
Ended
2,370
$
613
2,983
(2,983)
—
—
—
(3)
—
—
(3)
(2,986)
—
(2,986)
35
5,722
$
1,124
6,846
(6,846)
—
—
—
27
—
—
27
(6,819)
—
(6,819)
(16)
—
—
27,045
$
920
27,965
(27,965)
(93)
—
2
(129)
—
(75)
(295)
(28,260)
—
(28,260)
50
—
20,392
2,452
22,844
(22,844)
(292)
—
152
40
(2,263)
(172)
(2,535)
(25,379)
90
(25,469)
(212)
—
Pharmaceutical
Holding
Company
Ltd.
$
(2,951) $
(6,835) $
(28,210) $
(25,681)
Net
loss
per
share
attributable
to
common
shareholders
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.—basic
and
diluted
Weighted
average
common
shares
outstanding—basic
and
$
(0.25) $
(0.55) $
(2.16) $
(1.96)
diluted
11,776,429
12,507,956
13,050,446
13,088,500
During
the
quarter
ended
December
31,
2017,
the
Company
recorded
a
$3,294
out-of-period
adjustment
to
increase
share-based
compensation
expense.
Management
has
concluded
that
the
error
is
not
material
to
the
current
or
prior
period
financial
statements.
F-47
Table
of
Contents
20.
Subsequent
Events
Purchase of Kleo Common Stock
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
NOTES
TO
CONSOLIDATED
FINANCIAL
STATEMENTS
(Continued)
(Amounts
in
thousands,
except
share
and
per
share
amounts)
On
January
5,
2018,
the
Company
purchased
1,375,000
shares
of
Kleo
common
stock
for
cash
consideration
of
$1,375
in
satisfaction
of
the
fourth
and
final
of
a
series
of
The
Company's
purchase
commitments
pursuant
to
the
Securities
Purchase
Agreement
between
Kleo
and
the
Company.
The
Company's
purchase
of
1,375,000
shares
of
Kleo's
common
stock
in
January
2018
resulted
in
an
increase
in
its
ownership
interest
in
Kleo
to
46.6%
of
the
outstanding
stock
of
Kleo,
compared
with
43.3%
as
of
December
31,
2017
(see
Note
5).
Exercise of ALS Biopharma Warrant
In
January
2018,
ALS
Biopharma
exercised
a
warrant
for
the
purchase
of
275,000
shares
through
a
net
share
settlement.
The
Company
issued
228,119
shares
as
a
result
of
the
exercise
(see
Note
9).
Catalent Agreement for Rimegepant
In
January
2018,
the
Company
entered
into
a
development
and
license
agreement
with
Catalent
pursuant
to
which
we
obtained
certain
license
rights
to
the
Zydis
ODT
technology
for
use
with
rimegepant.
If
Company
obtains
regulatory
approval
or
launches
a
rimegepant
product
that
utilizes
the
Zydis
ODT
technology,
the
Company
is
obligated
to
pay
Catalent
up
to
$1,500
upon
the
achievement
of
specified
regulatory
and
commercial
milestones.
If
the
Company
commercializes
a
rimegepant
product
that
utilizes
the
Zydis
ODT
technology,
the
agreement
permits
the
Company
to
purchase
the
commercial
product
from
Catalent
at
a
fixed
price,
inclusive
of
a
royalty.
Under
the
agreement,
Catalent
will
not
develop
or
manufacture
a
formulation
of
any
oral
CGRP
compound
using
Zydis
ODT
technology
for
itself
or
a
third
party
until
2031,
subject
to
certain
minimum
commercial
revenues.
Under
this
agreement,
the
Company
is
responsible
for
conducting
clinical
trials
and
for
preparing
and
filing
regulatory
submissions.
The
Company
has
the
right
to
sublicense
its
rights
under
the
agreement
subject
to
Catalent's
prior
written
consent.
Catalent
has
the
right
to
enforce
the
patents
covering
the
Zydis
Technology
and
to
defend
any
allegation
that
a
formulation
using
Zydis
technology,
such
as
BHV-3000,
infringes
a
third
party's
patent.
This
agreement
terminates
on
a
country-by-country
basis
upon
the
later
of
(i)
10
years
after
the
launch
of
the
most
recently
launched
product
in
such
country
and
(ii)
the
expiration
of
the
last
valid
claim
covering
each
product
in
such
country,
unless
earlier
voluntarily
terminated
by
the
Company.
This
agreement
automatically
extends
for
one-year
terms
unless
either
party
gives
advance
notice
of
intent
to
terminate.
In
addition,
Catalent
may
terminate
the
agreement
either
in
its
entirety
or
terminate
the
exclusive
nature
of
this
agreement
on
a
country-by-country
basis
if
the
Company
fails
to
meet
specified
development
timelines,
which
it
may
extend
in
certain
circumstances.
F-48
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
document
SUBSIDIARIES
OF
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
Name
Biohaven
Pharmaceuticals,
Inc.
Biohaven
Pharmaceutical
Product
No.1000
Ltd
Biohaven
Pharmaceutical
Product
No.2000
Ltd
Jurisdiction
of
Incorporation
Delaware
British
Virgin
Islands
British
Virgin
Islands
Exhibit
21.1
QuickLinks
Exhibit
21.1
SUBSIDIARIES
OF
BIOHAVEN
PHARMACEUTICAL
HOLDING
COMPANY
LTD.
CONSENT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM
We
hereby
consent
to
the
incorporation
by
reference
in
the
Registration
Statement
on
Form
S-8
(No.
333-218193)
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
of
our
report
dated
March
6,
2018
relating
to
the
financial
statements,
which
appears
in
this
Form
10-K.
Exhibit
23.1
/s/
PricewaterhouseCoopers
LLP
Hartford,
Connecticut
March
6,
2018
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
document
Exhibit
31.1
CERTIFICATION
OF
PRINCIPAL
EXECUTIVE
OFFICER
PURSUANT
TO
SECTION
302
OF
THE
SARBANES-OXLEY
ACT
OF
2002
I,
Vlad
Coric,
certify
that:
1.
2.
3.
4.
5.
I
have
reviewed
this
Annual
Report
on
Form
10-K
for
the
year
ended
December
31,
2017
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
(the
"registrant");
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented
in
this
report;
The
registrant's
other
certifying
officer(s)
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
for
the
registrant
and
have:
(a)
(b)
(c)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
those
entities,
particularly
during
the
period
in
which
this
report
is
being
prepared;
Evaluated
the
effectiveness
of
the
registrant's
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
the
effectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and
Disclosed
in
this
report
any
change
in
the
registrant's
internal
control
over
financial
reporting
that
occurred
during
the
registrant's
most
recent
fiscal
quarter
(the
registrant's
fourth
fiscal
quarter
in
the
case
of
an
annual
report)
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
registrant's
internal
control
over
financial
reporting;
and
The
registrant's
other
certifying
officer(s)
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant's
auditors
and
the
audit
committee
of
the
registrant's
board
of
directors
(or
persons
performing
the
equivalent
functions):
(a)
(b)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonably
likely
to
adversely
affect
the
registrant's
ability
to
record,
process,
summarize
and
report
financial
information;
and
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
control
over
financial
reporting.
Date:
March
6,
2018
/s/
VLAD
CORIC,
M.D.
Vlad
Coric,
M.D.
Chief Executive Officer
(principal executive officer)
QuickLinks
Exhibit
31.1
CERTIFICATION
OF
PRINCIPAL
EXECUTIVE
OFFICER
PURSUANT
TO
SECTION
302
OF
THE
SARBANES-OXLEY
ACT
OF
2002
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
document
Exhibit
31.2
CERTIFICATION
OF
PRINCIPAL
EXECUTIVE
OFFICER
PURSUANT
TO
SECTION
302
OF
THE
SARBANES-OXLEY
ACT
OF
2002
I,
James
Engelhart,
certify
that:
1.
2.
3.
4.
5.
I
have
reviewed
this
Annual
Report
on
Form
10-K
for
the
year
ended
December
31,
2017
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
(the
"registrant");
Based
on
my
knowledge,
this
report
does
not
contain
any
untrue
statement
of
a
material
fact
or
omit
to
state
a
material
fact
necessary
to
make
the
statements
made,
in
light
of
the
circumstances
under
which
such
statements
were
made,
not
misleading
with
respect
to
the
period
covered
by
this
report;
Based
on
my
knowledge,
the
financial
statements,
and
other
financial
information
included
in
this
report,
fairly
present
in
all
material
respects
the
financial
condition,
results
of
operations
and
cash
flows
of
the
registrant
as
of,
and
for,
the
periods
presented
in
this
report;
The
registrant's
other
certifying
officer(s)
and
I
are
responsible
for
establishing
and
maintaining
disclosure
controls
and
procedures
(as
defined
in
Exchange
Act
Rules
13a-15(e)
and
15d-15(e))
for
the
registrant
and
have:
(a)
(b)
(c)
Designed
such
disclosure
controls
and
procedures,
or
caused
such
disclosure
controls
and
procedures
to
be
designed
under
our
supervision,
to
ensure
that
material
information
relating
to
the
registrant,
including
its
consolidated
subsidiaries,
is
made
known
to
us
by
others
within
those
entities,
particularly
during
the
period
in
which
this
report
is
being
prepared;
Evaluated
the
effectiveness
of
the
registrant's
disclosure
controls
and
procedures
and
presented
in
this
report
our
conclusions
about
the
effectiveness
of
the
disclosure
controls
and
procedures,
as
of
the
end
of
the
period
covered
by
this
report
based
on
such
evaluation;
and
Disclosed
in
this
report
any
change
in
the
registrant's
internal
control
over
financial
reporting
that
occurred
during
the
registrant's
most
recent
fiscal
quarter
(the
registrant's
fourth
fiscal
quarter
in
the
case
of
an
annual
report)
that
has
materially
affected,
or
is
reasonably
likely
to
materially
affect,
the
registrant's
internal
control
over
financial
reporting;
and
The
registrant's
other
certifying
officer(s)
and
I
have
disclosed,
based
on
our
most
recent
evaluation
of
internal
control
over
financial
reporting,
to
the
registrant's
auditors
and
the
audit
committee
of
the
registrant's
board
of
directors
(or
persons
performing
the
equivalent
functions):
(a)
(b)
All
significant
deficiencies
and
material
weaknesses
in
the
design
or
operation
of
internal
control
over
financial
reporting
which
are
reasonably
likely
to
adversely
affect
the
registrant's
ability
to
record,
process,
summarize
and
report
financial
information;
and
Any
fraud,
whether
or
not
material,
that
involves
management
or
other
employees
who
have
a
significant
role
in
the
registrant's
internal
control
over
financial
reporting.
Date:
March
6,
2018
/s/
JAMES
ENGELHART
James
Engelhart
Chief Financial Officer
(principal financial officer)
QuickLinks
Exhibit
31.2
CERTIFICATION
OF
PRINCIPAL
EXECUTIVE
OFFICER
PURSUANT
TO
SECTION
302
OF
THE
SARBANES-OXLEY
ACT
OF
2002
QuickLinks
--
Click
here
to
rapidly
navigate
through
this
document
CERTIFICATIONS
OF
PRINCIPAL
EXECUTIVE
OFFICER
AND
PRINCIPAL
FINANCIAL
OFFICER
PURSUANT
TO
18
U.S.C.
SECTION
1350,
AS
ADOPTED
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002
Exhibit
32.1
Pursuant
to
the
requirement
set
forth
in
Rule
13a-14(b)
of
the
Securities
Exchange
Act
of
1934,
as
amended,
(the
"Exchange
Act")
and
Section
1350
of
Chapter
63
of
Title
18
of
the
United
States
Code
(18
U.S.C.
§1350),
Vlad
Coric,
M.D.,
Chief
Executive
Officer
of
Biohaven
Pharmaceutical
Holding
Company
Ltd.
(the
"Company"),
and
James
Engelhart,
Chief
Financial
Officer
of
the
Company,
each
hereby
certifies
that,
to
the
best
of
his
knowledge:
1.
2.
The
Company's
Annual
Report
on
Form
10-K
for
the
year
ended
December
31,
2017,
to
which
this
Certification
is
attached
as
Exhibit
32.1
(the
"Periodic
Report"),
fully
complies
with
the
requirements
of
Section
13(a)
or
Section
15(d)
of
the
Exchange
Act;
and
The
information
contained
in
the
Periodic
Report
fairly
presents,
in
all
material
respects,
the
financial
condition
and
results
of
operations
of
the
Company.
IN
WITNESS
WHEREOF
,
the
undersigned
have
set
their
hands
hereto
as
of
the
6
th
day
of
March,
2018.
/s/
VLAD
CORIC,
M.D.
Vlad
Coric,
M.D.
Chief Executive Officer
(principal executive officer)
/s/
JAMES
ENGELHART
James
Engelhart
Chief Financial Officer
(principal financial officer)
*
This
certification
accompanies
the
Form
10-K
to
which
it
relates,
is
not
deemed
filed
with
the
Securities
and
Exchange
Commission
and
is
not
to
be
incorporated
by
reference
into
any
filing
of
the
Company
under
the
Securities
Act
of
1933,
as
amended,
or
the
Exchange
Act
(whether
made
before
or
after
the
date
of
the
Form
10-K),
irrespective
of
any
general
incorporation
language
contained
in
such
filing.
QuickLinks
Exhibit
32.1
CERTIFICATIONS
OF
PRINCIPAL
EXECUTIVE
OFFICER
AND
PRINCIPAL
FINANCIAL
OFFICER
PURSUANT
TO
18
U.S.C.
SECTION
1350,
AS
ADOPTED
PURSUANT
TO
SECTION
906
OF
THE
SARBANES-OXLEY
ACT
OF
2002