UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
____________________________________________________________________________
WASHINGTON, DC 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
____________________________________________________________________________
For the fiscal year ended December 31, 2022
or
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _____ to ______
Commission File Number: 001-41477
Biohaven Ltd.
(Exact Name of Registrant as Specified in its Charter)
British Virgin Islands
(State or other jurisdiction of incorporation or organization)
Not applicable
(I.R.S. Employer Identification No.)
____________________________________________________________________________
c/o Biohaven Pharmaceuticals, Inc.
215 Church Street, New Haven, Connecticut
(Address of principal executive offices)
06510
(Zip Code)
(203) 404-0410
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Shares, without par value
Trading Symbol
BHVN
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 ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No ☒
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 ☒ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No 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.
Large accelerated filer
Non-accelerated filer
☐
☒
Accelerated filer
Small reporting company
Emerging growth company
☐
☒
☒
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. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant's executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The registrant's common shares began trading on the New York Stock Exchange on October 4, 2022. The registrant's common shares were not listed on any exchange as of
the last business day of its most recently completed second fiscal quarter and, therefore, it cannot calculate the aggregate market value of its common shares held by non-affiliates
as of such date.
As of March 20, 2023, there were 68,212,479 common shares, no par value per share, outstanding.
Documents Incorporated by Reference
Portions of the registrant's definitive Proxy Statement to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934 for its 2023 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Annual Report on Form 10-K.
Unless the context requires otherwise, references in this report to “Biohaven,” the “Company,” “we,” “our” or “us” refer to Biohaven Ltd. and its subsidiaries.
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 “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “design,” “intend,” “expect,” “could,” “plan,” “potential,” “predict,” “seek,” “should,”
“would”, or the negative of these terms or other comparable terminology. Forward-looking statements are not guarantees of performance and are based on
certain assumptions, discuss future expectations, describe plans and strategies or state other forward-looking information. These forward-looking statements
include, but are not limited to, statements about:
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disruption from the separation from Biohaven Pharmaceutical Holding Company Ltd. (the "Separation") making it more difficult to maintain business and
operational relationships;
unknown liabilities;
the risk of litigation and/or regulatory actions related to the separation from Biohaven Pharmaceutical Holding Company Ltd. or our business;
risks and costs related to the implementation of the Separation, including any changes to the configuration of the businesses included in the Separation,
if implemented;
future business combinations or disposals;
risks related to diverting management’s attention from the Company’s ongoing business operation;
our ongoing and planned clinical trials, including discovery and proof of concept trials, the status of our ongoing clinical trials, commencement dates for
new clinical trials, and the timing of clinical trial results;
our plans to pursue research and development of other products;
our ability to enter into additional collaborations with third parties;
anticipated future milestones, contingent and royalty payments and lease payments (and, in each case, their expected impact on liquidity);
the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;
our commercialization, marketing and manufacturing capabilities and strategy;
our intellectual property position;
the rate and degree of market acceptance of our products or product candidates, and our estimates regarding the potential market opportunity for our
product candidates;
our competitive position, including our competitors and competing products (including biosimilars);
the impact of economic conditions, including increases in interest rates and inflation, on the costs of raw materials, wages, manufacturing and clinical
trials and on borrowing costs;
the timing and anticipated amounts of future tax payments and benefits (including the potential recognition of unrecognized tax benefits), as well as
timing of conclusion of tax audits; and
our estimates regarding future revenues, expenses and needs for additional financing.
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, Part II, Item 7. Management’s Discussion
and Analysis of Financial Condition and Results of Operations, and elsewhere in this report. Given these uncertainties, you should not place undue reliance on
any forward-looking statements. Except as required by law, we assume no obligation to update or revise any 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 analyses that may, in the future, not prove to have been accurate.
Part I
Item 1:
Item 1A:
Item 1B:
Item 2:
Item 3:
Item 4:
Part II
Item 5:
Item 6:
Item 7:
Item 7A:
Item 8:
Item 9:
Item 9A:
Item 9B:
Item 9C:
Part III
Item 10:
Item 11:
Item 12:
Item 13:
Item 14:
Part IV
Item 15:
Item 16:
TABLE OF CONTENTS
Business
Risk Factors
Unresolved Staff Comments
Properties
Legal Proceedings
Mine Safety Disclosures
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Reserved
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
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
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 Accountant Fees and Services
Exhibit and Financial Statement Schedules
Form 10-K Summary
Signatures
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Item 1. Business
Overview
PART I
We are a global clinical-stage biopharmaceutical company focused on the discovery, development and commercialization of life-changing therapies
for people with debilitating neurological and neuropsychiatric diseases, including rare disorders. Our experienced management team brings with it a track
record of delivering new drug approvals for products for diseases such as migraine, depression, bipolar and schizophrenia. We are advancing a pipeline
of therapies for diseases with little or no treatment options, leveraging our proven drug development capabilities and proprietary platforms, including Kv7
ion channel modulation for epilepsy and neuronal hyperexcitability, glutamate modulation for Obsessive-Compulsive Disorder (“OCD”) and
Spinocerebellar Ataxia ("SCA"), myostatin inhibition for neuromuscular diseases, and brain-penetrant Tyrosine Kinase 2/Janus Kinase 1 ("TYK2/JAK1")
inhibition for immune-mediated brain disorders. Our portfolio of early- and late-stage product candidates also includes discovery research programs
focused on TRPM3 channel activation for neuropathic pain, CD-38 antibody recruiting, bispecific molecules for multiple myeloma, antibody drug
conjugates ("ADCs"), and extracellular target degrader platform technology ("MoDE") with potential application in neurological disorders, cancer, and
autoimmune diseases.
We are advancing our broad and diverse pipeline, across early and late stage development, including three Phase 3 clinical programs. We have
built a highly experienced team of senior leaders and neuroscience drug developers who combine a nimble, results-driven biotech mindset with
capabilities in drug discovery and development. In addition, we have several preclinical assets in our early discovery program, targeting indications in
neuroscience and immunology.
Separation from Biohaven Pharmaceutical Holding Company Ltd.
On May 9, 2022, the Board of Directors of Biohaven Pharmaceutical Holding Company Ltd. (the “Former Parent”) approved and directed Former
Parent’s management to effect the spin-off of the Kv7 ion channel activators, glutamate modulation and myostatin inhibition platforms, preclinical product
candidates, and certain corporate infrastructure then owned by Former Parent, or collectively the “Biohaven Business”.
On October 3, 2022, the Former Parent completed the distribution (the “Distribution”) to holders of its common shares of all of the outstanding
common shares of Biohaven Ltd. and the spin-off of Biohaven Ltd. from the Former Parent (the “Spin-Off”) described in Biohaven’s Information
Statement attached as Exhibit 99.1 to Biohaven’s Registration Statement on Form 10, as amended (Reg. No. 001-41477), which was declared effective
by the Securities and Exchange Commission ("SEC") on September 22, 2022 (the “Form 10”). Each holder of Former Parent common shares received
one common share of Biohaven for every two of the Former Parent common shares held of record as of the close of business on September 26, 2022.
To implement the Spin-Off, the Former Parent transferred the related license agreements, intellectual property and the Former Parent’s corporate
infrastructure, including certain non-commercial employee agreements, share-based awards and other corporate agreements to Biohaven Ltd.
Collectively, we refer to the Distribution and Spin-Off throughout this Annual Report on Form 10-K as the "Separation." As a result of the
Separation, Biohaven Ltd. is an independent, publicly traded company, effective as of October 3, 2022, and commenced regular way trading under the
symbol “BHVN”’ on the New York Stock Exchange ("NYSE") on October 4, 2022. Where we describe historical business activities in this report, we do so
as if Former Parent’s activities related to such assets and liabilities had been performed by the Company.
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Product Candidates
The following table summarizes some of our key clinical programs in addition to upcoming clinical development milestones for our product
candidates. We hold the worldwide rights to all of our product candidates.
Kv7
Kv7 Platform Acquisition
In February 2022, we announced that we entered into a definitive agreement with Channel Biosciences, LLC, a subsidiary of Knopp Biosciences,
LLC, to acquire a drug discovery platform targeting Kv7 ion channels, adding the latest advances in ion channel modulation to our growing neuroscience
portfolio. BHV-7000 (formerly known as KB-3061), the lead asset from the Kv7 platform is an activator of Kv7.2/Kv7.3, a key ion channel involved in
neuronal signaling and in regulating the hyperexcitable state in epilepsy. In the second quarter of 2022, our Clinical Trial Application for BHV-7000 was
approved by Health Canada, and we subsequently began phase 1 clinical development, including a SAD/MAD study. The Company is evaluating and
has not yet finalized potential future clinical trial designs, including trial size, and primary and secondary endpoints and expects to initiate an EEG study
in the first half of 2023 and expects to initiate phase 2/3 studies in focal epilepsy patients and bipolar disorder patients in the second half of 2023.
Kv7’s Role in Epilepsy and Other Central Nervous System Disorders
Epilepsy
Because of their fundamental role in health and their aberrant role in disease, ion channels in cell membranes represent a broad and important
class of drug targets. Sodium channels and potassium channels form the ionic basis of the action potential in electrically charged cells throughout the
body (see figures below). The Kv7 protein in particular forms a channel that exquisitely regulates the flow of charged potassium ions (K+) across cell
membranes, repolarizing nerve cells and resetting them for normal action potential firing. Kv7 channels include a family of channel subtypes, designated
as Kv7.1 through Kv7.5, and they are formed by tetramers of identical or compatible subunits. Some of these channel subtypes localize in nerve cells
(neurons) while others can be found in cardiac muscle, smooth muscle, and other tissue types.
The Kv7 subunits, Kv7.2 and Kv7.3, are widely expressed in the brain, notably in the cortex and hippocampus, and together they form Kv7.2/7.3
heteromeric channels that produce the M-current (I
perform a natural “braking” function by regulating the electrical excitability and hyperexcitability of brain cells. Dysfunction of these channels, due to
genetic mutations or other factors, increases seizure risk, while augmenting the ‘open’ activity of these channels has been demonstrated to reduce
), a critical regulator of neuronal excitability (see figures below). Kv7.2/7.3 channels normally
KM
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neuronal hyperexcitability and seizure frequency in electrophysiology laboratories, in animal models, and, most importantly, in patients.
White, Role of Potassium Channel Ions in Epilepsy, Medscape.org
We are synthesizing novel Kv7.2/7.3 activators that improve on the selectivity, potency, and other characteristics of ezogabine (Potiga in the U.S.
and Trobalt (retigabine) in Europe), a drug approved in 2011 for the treatment of refractory epilepsy and voluntarily withdrawn from the market in 2017
because of poor tolerability and structure-related toxicities that limited its use, and ezogabine-like compounds while averting its negative attributes,
including off-target activity at a different brain ion channel, gamma-aminobutyric acid (“GABA”) A receptor (“GABA -R”).
A
Using a structure-based approach, supplemented by in silico modeling, we have identified structural features of our molecules critical to Kv7
activation. We have applied these analyses to the generation of proprietary chemical leads structurally distinct from known Kv7 activators, including
ezogabine and flupirtine, the only other approved Kv7 modulator, approved in Europe for the treatment of acute pain. Our team has synthesized a large
library of Kv7-activating molecules and are advancing them according to stringent criteria requiring improvements over ezogabine, including chemical
stability, synthetic tractability, the avoidance of structural motifs associated with the generation of reactive metabolites and other unwanted, off-target
activity, including GABA -R activation.
A
Epilepsy is the initial disease we are targeting with activators from our Kv7 platform. Epilepsy affects approximately 3.5 million Americans, or more
than 1.2% of adults and 0.6% of children in the U.S., and more than 50 million patients worldwide, according to the World Health Organization (“WHO”).
It is the fourth most common neurological disorder, and many patients struggle to achieve freedom from seizures, with more than one third of patients
requiring two or more medications to manage their epilepsy. While the use of anti-seizure medications is often accompanied by dose-limiting side effects,
our clinical candidate BHV-7000 is specifically designed to target subtypes of Kv7 potassium channels without engagement of GABA receptors. The
lack of GABA -R activity potentially gives BHV-7000 a wide therapeutic window and is expected to result in an improved side effect profile, limiting the
somnolence and fatigue often seen in patients receiving anti-seizure medications. This preclinical profile is supported by preliminary safety data from our
Phase 1 SAD/MAD trial of BHV-7000 in healthy volunteers, which showed a favorable CNS tolerability profile. By adding BHV-7000 to our pipeline, we
aim to bring this potassium channel modulator as a potential solution to patients with epilepsy who remain uncontrolled on their current regimens.
A
A
BHV-7000 is a Kv7.2/7.3 channel activator from a novel, bicyclic imidazole class with significant in vivo anticonvulsant activity and a wide
therapeutic index. In the most widely used and positively-predictive preclinical model of epilepsy, the maximal electroshock (“MES”) model, data for BHV-
7000 and ezogabine were collected in independent experiments (see figures below), measuring the activity of both compounds in preventing seizures
(ED50) and recording the neurologic deficit five minutes prior to the MES test to calculate the tolerability index (“TI”). The neurologic deficit is a
behavioral index ranging from normal activity (score of 0) to a loss of righting reflex (score of 3). As shown below, BHV-7000 was demonstrated to have
an ED50 = 0.5 mg/kg with almost no impact on behavior producing a TI > 40x. In contrast, ezogabine was 40x less potent (ED50 = 20 mg/kg) in the MES
model with a narrow TI < 3x. The narrow preclinical TI for ezogabine is consistent with the clinical experience with the drug where side effects such as
somnolence and dizziness limited its use at doses that prevented seizures in patients.
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KCNQ2 Epileptic Encephalopathy
KCNQ2 epileptic encephalopathy (“KCNQ2-EE”) is a rare pediatric epileptic encephalopathy first described in 2012 resulting from dominant-
negative mutations in the KCNQ2 gene. Epileptic encephalopathies (“EE”) comprise a group of epilepsy syndromes in which onset of recurrent and
medically refractory seizures are associated with cognitive and broader developmental delay or regression. Early infantile epileptic encephalopathy, also
called Ohtahara syndrome, and early myoclonic encephalopathy are the earliest-presenting of these age-dependent syndromes, clinically defined by
onset within the first three months after birth. Although only recently described, heterozygous de novo variants in KCNQ2 are a highly validated cause of
early onset epileptic encephalopathy, and KCNQ2-EE has emerged as a well-defined clinical entity with a characteristic neonatal presentation, including
hypotonia, treatment-resistant tonic seizures, a profoundly abnormal interictal electroencephalogram (“EEG”) with prominent burst-suppression, and
most often with moderate-to-profound global developmental delay, resulting from a defined subset of missense variants in the gene. KCNQ2-EE is thus
both a seizure disorder and a developmental disorder caused by pathogenic, dominant-negative KCNQ2 mutations.
Identification of genetic etiologies has created the opportunity to treat not just the symptoms of KCNQ2-EE, including seizures, but also the
underlying causes, including attenuating or reversing the effects of the dominant-negative variants responsible for KCNQ2-EE. Developmental delay is
an intractable feature of KCNQ2-EE even though seizure frequency tends to diminish after infancy and EEG organization tends to improve. Importantly,
limited clinical evidence, including a case series of four infants with KCNQ2-EE, suggests that pharmacological augmentation of reduced Kv7.2 channel
current with ezogabine reduces seizures and may improve developmental milestone attainment.
Severe pathogenic KCNQ2 mutations disrupt the function of the KCNQ2 gene product, Kv7.2, a voltage-gated potassium channel subunit which, in
addition to being a critical regulator of neuronal excitability, plays a fundamental role in early brain development. Kv7.2 polypeptides are co-assembled in
either homotetrameric channels, or, in combination with Kv7.3 subunits, to form heterotetrameric channels. Both subunit configurations contribute to IKM.
Significant reduction of Kv7.2/7.2 activity or Kv7.2/7.3 activity with loss of 50% of more of current density through these channels abrogate these
functions, leading to neuronal hyperexcitability and impaired brain development.
In addition to its activity in the MES model, we explored the ability of BHV-7000 to reverse the reduced current density associated with KCNQ2-EE
and support its use as potential treatment for the disease. Most encephalopathy-associated pathogenic KCNQ2 variants identified to date disrupt
channel function in any of four distinct “hot spots” of the protein, including the S4 voltage sensor, the ion channel pore, and the proximal and distal
regions of the C-terminal domain (see figure below).
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Millichap, Neurol Genet (2016)
To determine the effects of BHV-7000 on the function of Kv7.2 and Kv7.2/7.3 channels poisoned by dominant-negative KCNQ2 mutations, four
highly recurrent human missense variants representative of the “hot spot” domains were introduced into KCNQ2 cDNA by site-directed mutagenesis.
Using lipid-mediated transfection, plasmids including the pathogenic variants were co-expressed with wild-type (“wt”) KCNQ2 subunits or wt KCNQ2 and
wt KCNQ3 subunits in Chinese hamster ovary cells.
The figure below shows the effects of BHV-7000 on current density of wt/wt Kv7.2 channels and those formed by 1:1 coexpression of wt KCNQ2
genes with either of two KCNQ2 pore domain variants (T274M, A294V), a C-terminal variant (R581L), or a voltage-sensing variant (R210H). In the
control condition, all pathogenic variants produced a marked reduction in current density to below wt/wt levels. BHV-7000 at 0.3µM restored current
density in mutated pore and C-terminal channels to or beyond wt control current density (**<0.01). Similarly, application of BHV-7000 at 1 µM restores
function to mutated channels expressing the R210H KCNQ2 S4 voltage sensor domain pathogenic variant in the heterotetrameric (wt/R210H)
configuration, to above wt/wt levels of activation.
BHV-7000 has been granted Rare Pediatric Disease Designation by the U.S. Food and Drug Administration ("FDA") for the treatment of KCNQ2-
EE.
Neuropathic Pain
Neuropathic pain, as defined by the International Association for the Study of Pain, is pain caused by a lesion or disease of the somatosensory
nervous system and includes a collection of heterogeneous conditions that are often chronic and debilitating and for which long term therapy is difficult.
In the United States, over 30 million adults are estimated to be living with neuropathic pain. Pharmacological treatments for neuropathic pain vary
according to patient needs, although recommendations such as the WHO analgesic ladder, United States Centers for Disease Control (“CDC”), and FDA
guidelines are in use. Initial or first line treatment for neuropathic pain includes non-opioid analgesics, in particular, antidepressants, anticonvulsants,
steroids, and anxiolytics. Second line treatment of persistent, severe pain
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may require escalation to opiates, often less potent ones at first, followed by more potent opiates for intense refractory pain.
Thus, an urgent need exists for effective, non-addictive pain therapies. Flupirtine, a non-selective Kv7 activator, was previously approved in several
European countries and indicated for the treatment of pain. However, the European Medicines Agency recommended withdrawal of its marketing
authorization in 2018 because of the risk of serious liver injury. Selective Kv7 potassium channel activators represent a new approach in the
development of non-opioid therapeutic options for neuropathic pain. In addition to leveraging reduced abuse and addiction risk potential of potassium
channel activators, our Kv7 potassium channel platform addresses the complexities of channel subtype physiology through targeted pharmacology to
overcome the limitations inherent in unbiased Kv7 activators and is intended to deliver a well-tolerated, highly effective, non-opioid treatment for
neuropathic pain.
Our Kv7 program research was supported in part with funding from the National Institutes of Health (“NIH”) to advance the development of novel
Kv7 non-opioid therapies for the treatment of chronic pain. The NIH funding is by the NIH Helping to End Addiction Long-term Initiative (“NIH HEAL
Initiative”), which aims to improve treatments for chronic pain, curb the rates of opioid use disorder and overdose, and achieve long-term recovery from
opioid addiction.The goal of our Kv7 program is to discover a small-molecule activator of the Kv7.2/7.3 voltage-gated potassium channel to treat
neuropathic pain. Similar to our epilepsy program, we are targeting compounds with these characteristics:
• Biased for Kv7.2/3 activation vs. Kv7.4 activation to minimize potential adverse smooth muscle effects
• Selective against GABA receptors to minimize potential tolerability issues
A
• Selective against Kv7.1/KCNE1 (IKs) and hERG (IKr) to minimize cardiac side-effects
• Potent and effective across animal models of neuropathic pain
A fundamental program hypothesis is that creating Kv7.2/3 activators with minimal activation of Kv7.4 and GABA receptors will greatly improve the
A
tolerability profile of a successful candidate compound. Ezogabine has known effects on the GABA system, both directly as a GABA positive allosteric
modulator, and indirectly by affecting GABA synthesis or metabolism, a pharmacology consistent with the dose-related increases in somnolence and
dizziness reported in ezogabine clinical trials. Our program is directed to reducing this potential source of poor tolerability by selecting compounds with
no or minimal activity for the GABA receptor.
A
A
Axonal excitability and neurotransmitter release are altered in neuropathic pain due to sodium channel plasticity, increased voltage-gated calcium
channels in the spinal cord, and diminished potassium channel activity in dorsal root ganglion (“DRG”) neurons. These changes in ion channel number,
distribution, and function are common to many neuropathic pain subtypes. The functional density of Kv7.2/3 channels is a key variable governing
sensory DRG control of intrinsic excitability. There are some reports that demonstrate downregulation of Kv7 potassium channel mRNA, protein and
function in experimental neuropathic pain models.
Using human induced pluripotent stem cell (“iPSC”)-derived DRG sensory neurons, we have assessed the physiological activity of these neurons
by modulating Kv7 channels across three electrophysiologic parameters: resting membrane potential (Vm), rheobase = the current required to stimulate
an action potential (“AP”), and the number of APs elicited by a suprathreshold stimulus (3x rheobase). We are currently evaluating the activity of various
compounds from our proprietary series of selective Kv7.2/7.3 activators in multiple preclinical models of neuropathic pain.
Mood disorders
Approximately 1 in 5 adults in the U.S. are living with neuropsychiatric illnesses that are, in turn, associated with inadequate treatment, poor quality
of life, disability, and considerable direct and indirect costs. There is significant unmet need for novel and effective therapeutic options that are not limited
by long latency periods to clinical effects, low response rates, and significant risks and side effects. Increasing evidence from animal models and clinical
trials now suggests that Kv7.2/7.3 targeting drugs offer the potential to treat a spectrum of these neuropsychiatric diseases including, but not limited to,
mood disorders such as major depressive disorder, bipolar disorder and anxiety.
Bipolar disorder is the initial mood disorder that we intend to target with activators from our Kv7 platform. Bipolar disorder affects approximately 7-
11 million Americans, with an estimated 4.4% of US adults having bipolar disorder over their lifetime. Bipolar disorder is associated with significant
morbidity, decreased quality of life and economic burden. Treatment guidelines recommend patients receive life-long treatment for bipolar disorder.
However, medication adherence is typically very low in this population, due in large part to undesirable side effects that are poorly tolerated by patients.
The mainstays of treatment include mood stabilizing agents that are also used as anti-seizure medicines (i.e., valproic acid, lamotrigine, and topiramate).
Preclinical and pilot clinical data similarly suggest a potential therapeutic role for Kv7 activation in bipolar disorder, which is expected to result in an
improved side effect profile compared to other anti-
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seizure medications. We plan to advance BHV-7000 as a potential treatment for patients with bipolar disorder and intend to start a clinical trial targeting
this indication by the end of 2023.
BHV-7010
BHV-7010 is being developed as a next generation Kv7.2/7.3 activator with improved selectivity over Kv7.4 and differentiated absorption,
distribution, metabolism, and excretion ("ADME") properties that provide flexibility for the treatment of different neurological diseases. The IND is
expected to be submitted in the second half of 2023.
TYK2/JAK1
Agreement with Hangzhou Highlightll Pharmaceutical Co. Ltd.
In March 2023, we entered into an exclusive, worldwide (excluding People’s Republic of China and its territories and possessions) license
agreement with Hangzhou Highlightll Pharmaceutical Co. Ltd. ("Highlightll") (the "Highlightll Agreement"), whereby we obtained the right to research,
develop, manufacture and commercialize Highlightll’s brain penetrant dual TYK2/JAK1 inhibitor program. Refer to 15, "Subsequent Events," of the Notes
to the Consolidated Financial Statements appearing elsewhere in this Annual Report on Form 10-K for further discussion of the Highlightll Agreement.
BHV-8000
Dysregulation of the immune system has been implicated in several neurodegenerative and neuroinflammatory disorders including Parkinson's
Disease, Multiple Sclerosis, Alzheimer's Disease, Amyotrophic Lateral Sclerosis and Autoimmune Encephalitis. Over-active immune cells and microglia
driving chronic neuroinflammation results in release of cytokines with activation of leukocytes and is thought to contribute to neuronal injury, death,
gliosis, and demyelination. The tyrosine kinase 2 ("TYK2") and janus jinase 1 ("JAK1") signal transduction pathways mediate highly complementary
immune and inflammatory signaling events. Targeted, small-molecule therapies that inhibit TYK2 or JAK kinases have separately demonstrated robust
efficacy in autoimmune, dermatologic and gastrointestinal disorders. TYK2 is a validated immune target as evidenced by a recent peripheral program
that gained FDA approval, and there are multiple additional peripheral non-CNS programs in clinical development. Brain penetrant inhibitors of
TYK2/JAK1 have the potential to bring this validated immune target to brain disorders.
There are currently no brain penetrant, selective, dual TYK2/JAK1 inhibitors approved for brain disorders. We expect to advance BHV-8000
(previously TLL-041) into a Phase 1 study in 2023. The Company is evaluating and has not yet finalized potential clinical trial designs, including trial size,
and primary and secondary endpoints.
Glutamate
The most advanced product candidate from our glutamate receptor antagonist platform is troriluzole (previously referred to as trigriluzole and BHV-
4157), which is in two Phase 3 trials in OCD. Other product candidates include BHV-5500, which is an antagonist of the glutamate N-methyl-D-aspartate
(“NMDA”) receptor.
Glutamate is an important neurotransmitter present in over 90% of all brain synapses. Glutamate plays an essential role in normal brain functioning
and its levels must be tightly regulated. Abnormalities in glutamate levels 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, amyotrophic lateral sclerosis (“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. It acts as a signaling neurotransmitter to stimulate the post-synaptic neuron via glutamate receptors (e.g., NMDA, alpha-amino-3-hydroxy-5-
methyl-4-isoxazole-propionic acid (“AMPA”) or Kainate receptors). Glial cells surrounding the synaptic junction are predominantly responsible for clearing
glutamate through transporters, specifically the EAATs. There are five distinct types of glutamate transporters. The figure below depicts the areas of
modulation that are affected by our product candidates. (1) As depicted in the glial cell to the right in the figure below, troriluzole increases the activity
and expression of the EAATs to increase the clearance of glutamate released from the pre-synaptic neuron. Troriluzole also inhibits 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-5500 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”) which are endogenous molecules
that help to support the survival of existing neurons, and encourage the growth and differentiation of new neurons and synapses.
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Adapted from Glutamate abnormalities in obsessive compulsive disorder: Neurobiology, pathophysiology, and treatment, C. Pittenger,
M. Bloch, and K. Williams
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 and other glutamate modulators in the treatment of a range of neurological diseases, these approved drugs have serious
side effects and other drawbacks that we have attempted to solve with our development of troriluzole.
Troriluzole
Troriluzole 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, troriluzole 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.
Ristori et al. reported a randomized, double-blind, placebo-controlled trial of 40 patients presenting with cerebellar ataxias of diverse etiologies,
including SCA. Subjects were randomized to receive 8 weeks treatment with either placebo or riluzole (50 mg Riluzole tablets, twice daily). Statistically
significant improvement in the riluzole treated group was demonstrated on the International Cooperative Ataxia Rating Scale (“ICARS”). The number of
patients with a 5-point ICARS drop was higher in the riluzole group than in the placebo group after 4 weeks (9/19 vs 1/19; odds ratio [“OR”] =16.2; 95%
confidence interval [“CI”] 1.8–147.1) and 8 weeks (13/19 vs 1/19; OR = 39.0; 95% CI 4.2– 364.2). The mean change in the riluzole group ICARS after
treatment revealed a decrease (p < 0.001) in the total score (-7.05 [4.96] vs 0.16 [2.65]).
Romano et al. described results of a second randomized, placebo-controlled trial subjects diagnosed with a hereditary ataxia (including SCAs)
randomized to receive 12 months of treatment with either placebo or riluzole (50 mg, twice daily). 60 patients were randomized. Statistically significant
improvement in the riluzole treated group was demonstrated on the Scale for the Assessment of Ataxia (“SARA”). The proportion with decreased SARA
score was 14 (50%) of 28 patients in the riluzole group versus three (11%) of 27 in the placebo group (OR 8.00, 95% CI 1.95– 32.83; p=0.002).
We acquired troriluzole 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. Troriluzole 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, troriluzole is cleaved by enzymes in the blood to the parent, riluzole. To mitigate the limitations of riluzole,
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several classes of prodrugs were designed, synthesized, and evaluated in multiple in vitro stability assays that predict in vivo drug levels. Troriluzole 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, difficulty swallowing due to tablet formulation, food reducing efficacy, liver toxicity, pharmacokinetic variability, and oral
numbness.
The prodrug design and selected administration pathway that was pursued with troriluzole 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 troriluzole
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; limiting 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 troriluzole. Troriluzole
is chemically comprised of riluzole linked via an amide bond to a tripeptide that is a substrate for 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 protection for our innovations. Troriluzole is stable in fluids from the gastrointestinal tract and expected to
have a differentiated profile with regard to any liability for hepatic effects.
Our Clinical Program for Troriluzole
Phase 1 Studies with Troriluzole
In July 2016, we began a Phase 1 randomized, double-blind, placebo-controlled study to evaluate the safety, tolerability and pharmacokinetics
(“PK”) of single and multiple ascending doses of troriluzole in normal healthy volunteers. 58 healthy volunteers were dosed with troriluzole and 20 were
dosed with placebo. Both single and multiple doses up to 200 mg were well tolerated without evidence of novel, clinically significant safety signals or lab
abnormalities. There was no apparent dose response regarding the frequency or severity of adverse events (“AEs”). In the blinded group, including
subjects treated with both placebo and troriluzole, 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 were apparent to provide specific cautions or to suggest cautions
beyond what is appropriate for the active metabolite, riluzole. 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 (eight active; two placebo). The results
supported adequate safety and tolerability and yielded mean exposures comparable to what would be expected from a 200 mg dose, 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.
Troriluzole for 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 behavioral
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 and some seek invasive neurosurgical procedures to ameliorate symptoms.
We are currently developing troriluzole as a potential treatment option for patients suffering from OCD. Despite the significant public health burden,
no novel mechanisms of action have been approved by the FDA for OCD in over two decades. The rationale for use of troriluzole 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.
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 adults with OCD conducted by a third party showed favorable trends for the use of riluzole in an
outpatient setting. Another randomized controlled third-party study demonstrated statistically significant therapeutic effects with the adjunctive use of
riluzole as compared to
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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 believed
there was a clear rationale for advancement of troriluzole, a prodrug of riluzole, into a Phase 2 proof-of-concept trial in OCD.
We commenced a Phase 2/3 double-blind, randomized controlled trial on the use of troriluzole in adults with OCD in late 2017. Results from the
Phase 2/3 trial were announced in June 2020. Troriluzole 200 mg administered once daily as adjunctive therapy in OCD patients with inadequate
response to standard of care treatment showed consistent numerical improvement over placebo on the Yale-Brown Obsessive Compulsive Scale (“Y-
BOCS”) at all study timepoints (weeks 4 to 12) but did not meet the primary endpoint at week 12. Troriluzole treated subjects (n = 111) had a mean Y-
BOCS improvement of -3.4 points from baseline versus -2.9 for placebo-treated (n = 115) subjects [difference -0.5 and p-value = 0.451] at week 4, -5.1
points (n = 96) versus -3.6 for placebo-treated (n = 108) subjects [difference -1.5 and p-value = 0.041] at week 8, and -5.9 points (n = 99) versus -4.9 for
placebo-treated (n = 102) subjects [difference -1.0 and p-value = 0.220] at week 12. Troriluzole’s safety profile was generally consistent with past clinical
trial experience with its active metabolite, riluzole. Treatment emergent adverse events (“TEAE”s) were mostly reported to be mild in intensity. TEAEs
that occurred in at least 5% of patients in the troriluzole group, and more frequently in the troriluzole group than in the placebo group, were headache,
dizziness, fatigue, somnolence, nausea and nasopharyngitis.
Given the strong signal in the Phase 2/3 proof of concept study and after receiving feedback from the FDA in an End of Phase 2 meeting, in
December 2020 we initiated enrollment in a Phase 3 program. The Phase 3 program will have an estimated total enrollment of 1,300 participants with a
primary endpoint of change from baseline on the Y-BOCS total score at week 4, 8 and 10. The two Phase 3 randomized, double-blind, placebo-
controlled trials that make-up our Phase 3 program for OCD are currently ongoing with enrollment expected to be completed in the second half of 2023.
Troriluzole for Glioblastoma
Preclinical and small-scale pilot studies are underway to explore troriluzole’s use in the treatment of a pipeline of other indications such as some
cancers whose spread is thought mediated by glutamate transmission, such as melanoma and glioblastoma ("GBM").
In collaboration with Johns Hopkins University, we explored the potential applicability of troriluzole for GBM. The oncology collaboration Johns
Hopkins was based upon the mechanistic rationale that some tumors over express glutamate receptors, the central role that glutamate may have in
cancer metabolism and the effect of glutamate on the tumor microenvironment.
In December 2021, the Global Coalition for Adaptive Research ("GCAR") selected troriluzole for evaluation in Glioblastoma Adaptive Global
Innovative Learning Environment - NCT03970447 ("GBM AGILE"). GBM AGILE is a revolutionary patient-centered, adaptive platform trial for registration
that tests multiple therapies for patients with newly-diagnosed and recurrent GBM, the most fatal form of brain cancer. Troriluzole will be evaluated in all
patient subgroups of the trial which include newly-diagnosed methylated O6-methylguanine DNA methyltransferase (“MGMT”), newly-diagnosed
unmethylated MGMT, and recurrent GBM. Troriluzole was selected for inclusion in GBM AGILE based on compelling evidence showing deregulation of
glutamate in GBM. The therapeutic potential of troriluzole in GBM and other oncology indications is supported by several recent clinical and translational
research studies conducted with troriluzole and its active moiety. For example, Medikonda et al. showed a survival benefit with troriluzole, alone and in
combination with anti-programmed cell death protein-1 (“PD-1”) immunotherapy, utilizing a frequently used murine brain tumor model. C57BL/6J mice
were intracranially implanted with luciferase-tagged GL261 glioma cells. Mice were randomly assigned to the control, anti-PD-1, troriluzole or
combination anti-PD-1 plus troriluzole treatment arms, and median overall survival was assessed. The troriluzole treatment arm demonstrated improved
survival compared with the control arm (median survival of 36% vs. 0%; p < 0.0001), as did the combination anti-PD-1 plus troriluzole treatment arm
(overall survival of 80% vs. 0; p = 0.0007).
In July 2022, the Company and GCAR announced that enrollment has commenced in GBM AGILE for the evaluation of troriluzole. GBM AGILE is
a multi-arm, platform trial. The evaluation of each therapy in GBM AGILE proceeds in 2 possible stages. A therapy's Stage 1 is an adaptively randomized
screening stage for evaluating the therapy within patient signatures compared against a common control. A therapy in Stage 1 will stop accruing patients
if it reaches its maximal sample size, drops for futility, or evinces inadequate safety. If a therapy reaches an efficacy threshold for graduation from Stage
1, it will move into Stage 2 within one of the prospectively defined signatures. The maximum sample size in Stage 1 is 150 patients. For a therapy
graduating to Stage 2 there is a fixed randomization, expansion cohort. The maximum sample size in Stage 2 is 50 experimental patients in the
graduating signature. The primary analysis of a regimen's effect on overall survival (“OS”) uses all patients in both its stages and all control patients in
the trial in the graduating signature, suitably adjusted for any possible time trends.
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Troriluzole for SCA
Based on the results of our Phase 1 trial with troriluzole and two third-party academic trials that have shown preliminary efficacy of riluzole in
cerebellar ataxias, we advanced troriluzole into a Phase 2/3 clinical trial for SCA. Initially, we had conducted a Phase 2b/3, randomized, double-blind,
placebo-controlled, parallel-group study to assess the safety and efficacy of troriluzole over 8 weeks in subjects with SCA. In October 2017, we
announced that troriluzole at a dose of 140 mg once daily (“QD”) did not differentiate from placebo on the primary endpoint of the mean change from
baseline on the SARA total score after 8 weeks of treatment. After eight weeks of treatment, troriluzole treated subjects (n = 63) 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-treated (n = 68), p-
value = 0.52. In this trial, we observed a favorable safety and tolerability profile of troriluzole, with no drug-related serious adverse events (“SAEs”) and
low discontinuation rates due to AEs. During open-label treatment over the 48-week extension phase, however, troriluzole did show slowing of disease
progression in troriluzole-treated subjects in contrast to the measurable decline expected for a cohort of untreated subjects based on the natural history
of the disease. Based on our learnings from the Phase 2b/3 study, including analyses from the open-label extension phase, we advanced troriluzole into
a Phase 3, randomized, double-blind, placebo-controlled, parallel-group study to assess the safety and efficacy of troriluzole over 48 weeks in subjects
with SCA. We enriched this trial with specific SCA genotypes, extended the treatment period of this trial to 48 weeks, implemented the use of a modified
SARA scale (“f-SARA”), and increased the dose of troriluzole to 200 mg QD. Notably, the f-SARA is a novel, 16-point scale developed in collaboration
with FDA as the primary outcome measure for this trial; the scale was designed to limit subjectivity of the scale and focus on functional aspects of the
disease so that significant changes would be considered clinically meaningful.
In May 2022, the Company announced top-line results from the Phase 3 clinical trial evaluating the efficacy and safety of its investigational therapy,
troriluzole, in adult patients with SCA. The primary endpoint, change from baseline to week 48 on the f-SARA, did not reach statistical significance in the
overall SCA population as there was less than expected disease progression over the course of the study. In the overall study population (n = 213), the
troriluzole and placebo groups each had mean baseline scores of 4.9 on the f-SARA and the two groups showed minimal change at the 48-week
endpoint with f-SARA scores of 5.1 and 5.2, respectively (p=0.76). Troriluzole was well tolerated with an adverse event profile similar to placebo. The
frequency of subjects with any TEAE was 80.6% for troriluzole vs. 84.4% for placebo and the frequency of subjects with serious TEAEs was 5.6% for
troriluzole vs. 7.3% for placebo.
Post-hoc analysis of efficacy measures by genotype suggests a treatment effect in patients with the SCA Type 3 (“SCA3”) genotype, which
represents the most common form of SCA and accounted for 41% of the study population. In the SCA3 subgroup, troriluzole showed a numerical
treatment benefit on the change in f-SARA score from baseline to week 48 compared to placebo (least squares (“LS”) mean change difference -0.55,
nominal p-value = 0.053, 95% CI: -1.12, 0.01). SCA patients treated with troriluzole showed minimal disease progression over the study period. Further,
in patients in the SCA3 subgroup who were able to walk without assistance at baseline (i.e., f-SARA Gait Item score = 1), troriluzole demonstrated a
greater numerical treatment benefit on the change in f-SARA score from baseline to week 48 compared to placebo (LS mean change difference -0.71,
nominal p-value = 0.031, 95% CI: -1.36, -0.07).
Across all genotypes, patients who were able to ambulate at baseline (i.e., f-SARA Gait Item score = 1) showed a reduction in the relative risk of
falls in troriluzole-treated patients versus placebo. Patient reported falls, as measured by adverse events reveal an approximately 58% reduction of fall
risk in the troriluzole group (10% versus 23% AE incidence of falls in the troriluzole and placebo groups, respectively; nominal p=0.043).
The risk reduction of falls in the troriluzole group combined with the progression of f-SARA scores in the untreated SCA3 group compared to SCA3
patients on troriluzole demonstrates that SCA3 patients experienced a clinically meaningful improvement in ataxia symptoms on troriluzole treatment.
Given these findings and the debilitating nature of SCA, we intend to interact with the FDA and or European Medicines Agency ("EMA") in the first half of
2023. We have not yet decided on the format of such a regulatory interaction but we could seek advice through various formal or informal interactions
with regulatory agencies or we could choose to submit an NDA if we believe that is warranted from the results of our ongoing post-hoc analyses. 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.
Glutamate NMDA Receptor Antagonism and BHV-5500 for Neuropathic Pain
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 various
diseases that affect the brain. BHV-5500 (lanicemine) was in-licensed from AstraZeneca and is a 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, binds within the NMDA channel pore and functionally blocks the flow of charged ions through the
NMDA receptor complex.
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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-5500, that are not associated with the
psychotomimetic effects and abuse potential could lead to better management of neuropathic pain without causing serious side effects.
MPO
Verdiperstat
Verdiperstat is a selective, brain-permeable, irreversible myeloperoxidase (“MPO”) enzyme inhibitor that may have potential for the treatment of
neurological diseases. MPO generates an array of cytotoxic oxidants and is a key driver of oxidative and inflammatory processes that underlie a broad
range of disorders. MPO plays a key role in neurodegenerative, inflammatory, and immune-mediated diseases, including multiple system atrophy
(“MSA”), Alzheimer’s disease, Parkinson’s disease, multiple sclerosis, ischemic and hemorrhagic forms of stroke, epilepsy, depression and other
neuropsychiatric disorders. Clinical and experimental studies have revealed the detrimental role of MPO. Hence, suppressing MPO may be a novel
treatment approach for these disorders.
Verdiperstat (formerly named AZD3241) was in-licensed from AstraZeneca in September 2018.
Our Clinical Program for Verdiperstat for ALS
ALS is a progressive, life-threatening, and rare neuromuscular disease that affects approximately 30,000 people in the United States. The median
age of onset is 55 years and average survival is 3-5 years after onset of first symptoms. ALS is characterized by the loss of motor neurons in the brain,
brainstem, and spinal cord that leads to progressive muscle weakness and difficulties in speaking, swallowing, and breathing. There are currently limited
treatment options and no cure for ALS.
MPO may play a role in increasingly recognized ALS disease mechanisms mediated by peripheral myeloid cells, including those that migrate into
the brain as well as those that remain in the periphery, suggesting relevance of MPO as a therapeutic target. In September 2019, we announced that
verdiperstat was selected to be studied in the pivotal HEALEY ALS Platform Trial, which is being conducted by the Sean M. Healey & AMG Center for
ALS at MGH (“Healey Center”) in collaboration with the Northeast ALS Consortium (“NEALS”) clinical trial network. Promising investigational drugs were
chosen for the HEALEY ALS Platform Trial through a competitive process, with the Healey Center providing partial financial support to successful
applicants. The HEALEY ALS Platform Trial is a Phase 2/3 randomized, double-blind, placebo-controlled clinical trial evaluating the safety and efficacy of
investigational products for the treatment of ALS. HEALEY ALS Platform Trial Regimen B is evaluating the safety and efficacy of verdiperstat in
approximately 167 adults with ALS. Participants were randomized in a 3-to-1 ratio treated with verdiperstat 600 mg BID or placebo for 24 weeks. The
study's primary efficacy endpoint measures the change in disease severity from baseline to week 24 on the ALS Functional Rating Scale-Revised in
patients receiving treatment versus placebo. Secondary endpoints include change in respiratory function, muscle strength, and survival. In August 2020,
we announced that the first patients were enrolled in the pivotal HEALEY ALS Platform Trial Regimen B. Enrollment in the trial was completed in
November 2021.
In September 2022, the Company announced that verdiperstat did not statistically differentiate from placebo on the prespecified primary efficacy
outcome, disease progression measured by the ALS Functional Rating Scale-Revised and survival, nor the key secondary efficacy measures during the
24-week study period. Analysis of safety data was consistent with the overall profile of verdiperstat from prior clinical trial experience. The study results
have been presented at scientific meetings in 2022, including the NEALS Consortium meeting and the International Symposium on ALS/MND.
Publication of these study results in an academic medical journal is pending. At this time, we do not have plans to pursue any additional clinical trials
evaluating verdiperstat in ALS, and we may evaluate its potential in other disease indications.
Myostatin
Taldefgrobep Alfa (BHV-2000)
In February 2022, we announced a worldwide license agreement with BMS for the development and commercialization rights to taldefgrobep alfa
(also known as BMS-986089), a novel Phase 3 asset. Myostatin, a negative regulator of muscle growth, is a key member of the Transforming Growth
Factor ("TGF") (symbol Beta) family.
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Taldefgrobep novelty in a field of myostatin inhibitors is based on the mechanism where it binds to myostatin to both lower overall myostatin levels, but
also to function as a receptor antagonist to block myostatin signaling in skeletal muscles. Blocking myostatin activity and signaling has shown to improve
muscle function and strength in a number of disease models for neuromuscular wasting. Clinical studies have confirmed that taldefgrobep improved lean
body mass directly through increase in contractile muscle and loss of adipose tissue as demonstrated in both normal healthy volunteers and in patients
with Duchenne muscular dystrophy (“DMD”). The mechanism of improving overall muscle size and function opens the opportunity for taldefgrobep as a
monotherapy or combination therapy in a number of muscle-targeted neuromuscular diseases.
The addition of taldefgrobep alfa expanded our Neuroinnovation pipeline. The advanced taldefgrobep alfa anti-myostatin development program
offers extensive human safety data, especially in the pediatric population.
About Spinal Muscular Atrophy
SMA is a rare genetic neurodegenerative disorder characterized by the loss of motor neurons, atrophy of the voluntary muscles of the limbs and
trunk and progressive muscle weakness that is often fatal and typically diagnosed in young children. The underlying pathology of SMA is caused by
insufficient production of the survival of motor neuron (“SMN”) protein, essential for the survival of motor neurons, and is encoded by two genes, SMN1
and SMN2. In the U.S., SMA affects approximately 1 in 11,000 births, and about 1 in every 50 Americans is a genetic carrier. Newborn screening is now
available in 48 U.S. states and covers over 94% of all births.
Our Clinical Trial for Taldefgrobep Alfa in SMA
In July 2022, we commenced enrollment in a Phase 3 clinical trial assessing the efficacy and safety of taldefgrobep alfa in SMA. The Phase 3
placebo-controlled, double-blind trial is designed to evaluate the efficacy and safety of taldefgrobep as an adjunctive therapy for participants who are
already taking a stable dose of nusinersen or risdiplam or have a history of treatment with onasemnogene abeparvovec-xioi, compared to placebo. The
primary outcome measures of the study will be efficacy of taldefgrobep alfa compared to placebo in the change in the 32 item Motor Function Measure
(“MFM-32”) total score from baseline to Week 48. Scores range from 0-3 on each item, with higher scores indicating higher functioning. The study is
neither restricted nor limited to patients based on ambulatory status or classification of SMA. We expect to randomize approximately 180 patients in this
randomized, double-blind, placebo-controlled global trial.
In February 2023, we received Fast Track designation from the FDA for taldefgrobep alfa for the treatment of SMA. Fast Track designation enables
important new drugs to reach patients earlier by facilitating more frequent communications with the FDA and expeditious review of a drug which treats a
serious condition and fills an unmet
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medical need. In December 2022, we received orphan drug designation from the FDA for taldefgrobep in the treatment of SMA.
Taldefgrobep Alfa’s Role in Spinal Muscular Atrophy
In the past three years, significant advancements were made to address the underlying cause of disease in SMA with the up-regulation of SMN1
and SMN2 expression which positions taldefgrobep as a potential combination therapy to enhance muscle performance. Data from both an SMA animal
model study that shows advantages of combination SMN therapy with taldefgrobep and the extensive clinical data in DMD support the advancement of
taldefgrobep into a SMA Phase 3 study. Other indications in muscle wasting diseases will be a fast follow-on for taldefgrobep along with other life-cycle
opportunities.
Discovery Research
The Company has laboratory facilities located in Science Park in New Haven, Connecticut, in Pittsburgh, Pennsylvania, and in Cambridge,
Massachusetts supporting our integrated chemistry and discovery research operations. We will continue to augment our discovery efforts through
research partnerships, including research agreements such as with KU Leuven and the Fox Chase Chemical Diversity Center Inc..
TRPM3 Antagonists
KU Leuven Agreement
In January 2022, we entered into the KU Leuven Agreement to develop and commercialize TRPM3 antagonists to address the growing proportion
of people worldwide living with chronic pain disorders (the "KU Leuven Agreement"). The TRPM3 antagonist platform was discovered at the Centre for
Drug Design and Discovery and the Laboratory of Ion Channel Research at KU Leuven. Under the KU Leuven Agreement, we receive exclusive global
rights to develop, manufacture and commercialize KU Leuven's portfolio of small-molecule TRPM3 antagonists. The portfolio includes the lead
candidate, BHV-2100, which we are evaluating in several preclinical pain models and advancing towards the clinic in 2023. We are continuing to support
further basic and translational research on the role of TRPM3 in pain and other disorders through our collaboration with Professors Joris Vriens and
Thomas Voets, world leaders in TRP biology at KU Leuven.
Efforts to target TRP Channels for pain
Since the Nobel Prize-winning discovery of the capsaicin receptor TRPV1 in 1997, members of the Transient Receptor Potential (“TRP”) cation
channel family have been elusive drug targets for the treatment of pain. Initially, there was much excitement and investment in TRPV1 antagonists due to
promising preclinical efficacy and some evidence of clinical pain reduction. However, trials of most TRPV1 antagonists were terminated after the class
consistently caused clinically-significant hyperthermia in study participants. Several companies then made efforts to progress antagonists of TRPA1, the
receptor for mustard oil. Though Glenmark’s GRC 17536 showed encouraging results in a subset of diabetic peripheral neuropathic pain subjects in a
Phase 2a study, it suffers from poor physiochemical properties and pharmacokinetics like many other TRPA1 antagonists. Due to the challenges with
drugging TRPA1, only Eli Lilly’s LY3526318 remains in active clinical development.
TRPM3 is a novel target in the TRP family. Like TRPV1 and TRPA1, preclinical data and human genetic validation support TRPM3’s role in
neuropathic pain. Unlike TRPV1 antagonists, TRPM3 antagonists are unlikely to possess significant thermal liabilities, and unlike TRPA1 antagonists,
Biohaven’s TRPM3 antagonists have desirable
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physiochemical properties and good pharmacokinetic profiles. The figure below illustrates TRPM3 as a differentiated target for the treatment of pain in
the TRP family.
Adapted from Efforts to target TRP channels for pain, Kovivisto et al. 2022
About TRPM3
Transient Receptor Potential Melastatin 3 (“TRPM3”) is a novel druggable target in the TRP cation channel family. TRPM3 is functionally expressed
in the human dorsal root ganglion, and several SNPs in TRPM3 are associated with altered pain sensation in response to UVB (see figure below).
Additionally, people with TRPM3 gain-of-function mutations experience altered pain sensation (de Sainte Agathe 2020, Dyment 2019, Van Hoeymissen
2020). Knocking out or antagonizing TRPM3 in animal models attenuates the development of various pain states, including those associated with nerve
injury, chemotherapy, and diabetic peripheral neuropathy, further indicating that TRPM3 is a promising target for neuropathic pain. Lastly, preclinical
evidence suggests that antagonizing TRPM3 may avoid the on-target body temperature effects and TRPV1 antagonist-induced malignant hyperthermia.
Vangeel et al, 2020
Lotsch et al, 2020
Our Development of BHV-2100 for the Treatment of Neuropathic Pain
BHV-2100 is an orally-bioavailable small molecule antagonist of TRPM3. TRPM3 is expressed in the relevant human tissue types for neuropathic
pain, and both preclinical models and human genetics implicate TRPM3 in pain signaling. BHV-2100 is our lead orally-bioavailable small molecule
TRPM3 antagonist which we are developing as a potential non-opioid treatment for neuropathic pain. We are evaluating the ability of BHV-2100 to
reduce pain behaviors across several
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preclinical models of neuropathic pain, including chemotherapy induced neuropathy, diabetic neuropathy, and nerve injury. We expect to submit an IND
application for BHV-2100 with the FDA in the second half of 2023, complementing our efforts with our Kv7 platform. The Company is evaluating and has
not yet finalized potential clinical trial designs, including trial size, and primary and secondary endpoints.
Additional research on TRPM3-mediated disorders
Under the KU Leuven agreement, Biohaven is supporting further basic and translational research at KU Leuven on the role of TRPM3 in pain and
other disorders. In addition to BHV-2100, we are optimizing other lead compounds for TRPM3-mediated disorders of the peripheral and central nervous
systems.
Bispecific Molecular Degraders of Extracellular Proteins
Molecular Degraders of Extracellular Proteins (“MoDEs”) are bispecific molecules that target pathologic circulating proteins and direct them to the
liver (or other organ systems) for degradation by the endosomal/lysosomal pathway. Our MoDE platform is being explored for use in a wide range of
therapeutic areas, including indications in autoimmune diseases, cancer and infectious disease. We are generally planning for MoDEs to be
administered as intravenous or subcutaneous formulations. The Company is evaluating and has not yet finalized potential clinical trial designs, including
trial size, and primary and secondary endpoints.
Antibody-based Galactose-deficient IgA (“Gd-IgA”) MoDEs
IgA nephropathy (“IgAN”) is the most common primary glomerulonephritis that can progress to renal failure and is characterized by immunoglobulin
deposits in the renal mesangium comprised exclusively of the IgA1 subclass. Patients with IgAN have increased serum levels of IgA1 with a hinge region
containing truncated galactose-deficient O-linked saccharides (“Gd-IgA”) and can present with a range of symptoms, from hematuria or proteinuria to
severe hypertension owing to renal damage. The clinical progression varies, with 30–40% of patients reaching end-stage renal disease 20–30
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years after the first clinical presentation. Currently, no IgAN-specific therapies are available. Patients are managed with the aim of controlling blood
pressure and maintaining renal function.
Lai, Nat Rev Dis Primers (2016)
We are leveraging our MoDE platform to develop novel bispecific molecules for the treatment of IgA nephropathy (“IgAN”) that remove potentially
disease-causing Gd-IgA or total IgA in patients and prevent harmful kidney deposits. We have taken a published rodent format IgG antibody that
recognizes Gd-IgA and converted it into a partially-humanized, liver-targeted degrader MoDE using Multimodal Antibody Therapy Enhancer ("MATE")
conjugation that potently binds Gd-IgA and causes its endocytosis in human liver cells. Further work is ongoing to progress this as a potential IgAN
treatment.
Therapeutic pan-IgG depletion
Analogous to the depletion of pan-IgA or dg-IgA with molecular degraders, hepatic asialoglycoprotein receptor ("ASGPR") ligand degraders able to
recognize all potentially pathogenic isoforms of IgG represent a novel, competitive platform with differentiated profile relative to FcRN inhibitors. FcRN
inhibitors such as efgartigimod (Vyvgart) and nipocalimab also deplete IgG. Specifically, high circulating levels of antibodies (monoclonal or polyclonal
gammopathy) drive conditions such as myasthenia gravis, rheumatoid arthritis, systemic lupus erythematosus, pemphigus vulgaris and many other
diseases. It is hypothesized that rapid and sustained lowering of pathogenic antibody titers in blood will significantly reduce disease symptoms. As this
has been shown with FcRN inhibitors for myasthenia gravis (Vyvgard), therapeutic pan-IgG depletion using Biohaven’s proprietary MoDE platform
technology is expected to have significant potential benefit for multiple diseases including but not limited to the conditions outlined above. Drug
candidates utilizing this technology are in nonclinical development, approaching IND.
The following graphic shows preclinical data validating this approach. The effect of a single dose of our IgG degrader MoDE, BHV-1300, was
evaluated in cynomolgus monkeys. BHV-1300 demonstrated robust reduction of IgG levels, with 75% depletion from baseline. This effect was rapid,
occurring by 3 days. For comparison, published data with the standard
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of care, efgartigimod, are included below, noting that reduction of IgG levels with efgartigimod is 50% and takes 5-7 days to achieve. The Company
expects to submit an IND application for BHV-1300 with the FDA in the second half of 2023.
MATE Conjugation Technology
Antibody Drug Conjugates
We are using the MATE conjugation technology to generate site-specific antibody drug conjugates (“ADC”s) from native IgG1 proteins that we
believe will show superior stability in comparison with those using current industry-standard cysteine maleimide conjugation. Our expectation is that the
enhanced in vivo stability and expected superior physicochemical properties of these ADCs will lead to increased therapeutic indices (more cytotoxic
payload reaching cancer cells and less reaching normal tissues). Over 15 site-specific ADCs using the well validated valine-citrulline monomethyl
auristatin E ("vcMMAE") payload linker system have been prepared and are undergoing biological testing in comparison with industry standard
maleimide conjugated ADCs.
MATE Molecule
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BHV-1100
Antibody Recruiting Molecules
Antibody Recruiting Molecules (“ARMs”) are bispecific molecules that recruit endogenous antibodies to target cancer, virally infected cells, and
disease-causing microorganisms for immune-mediated clearance. These molecules are engineered as modular components that are readily
interchangeable, giving the platform tremendous flexibility for a variety of indications and therapy areas.
By recruiting antibodies to coat the disease cell target, ARMs mark it for removal by the body’s innate antibody-mediated immune mechanisms
(antibody dependent cellular cytotoxicity and antibody dependent cellular phagocytosis).
Platform advantages
Similar to biologics, ARMs directly engage patients’ immune system to destroy disease cells by connecting target disease cells with components of
the immune system. However, unlike biologics, ARMs are smaller in size than an antibody potentially allowing for enhanced tumor penetration and
biodistribution, and may offer manufacturing advantages including enhanced shelf stability.
ARM™ NK Combination Therapy
ARMs provide target specificity to Natural Killer (“NK”) cell therapies without needing to design chimeric antigen receptors (“CARs”) or other
methods of genetic manipulation. NK cells are a type of immune effector cell that can recognize and destroy non-self targets and certain diseased cells.
NK cells do not target specific protein epitopes like T cells of the adaptive immune system. Our ARMs are being used to provide antigen target specificity
to NK cell therapies (both allogeneic and autologous) with the goal of enhancing efficacy and safety. ARM NK combination therapy directs NK cells to a
disease target of interest.
Our Clinical Trial for BHV-1100 in Newly Diagnosed Multiple Myeloma Patients
We have initiated dosing in a Phase 1a/1b trial in newly diagnosed multiple myeloma patients. Our ARM, BHV-1100, in combination with
autologous cytokine induced memory-like (“CIML”) NK cells and immune globulin (“Ig”), is expected to target and kill multiple myeloma cells expressing
the cell surface protein CD38. The trial is supported by compelling preclinical data showing that BHV-1100 enhanced recruitment of autologous CIML NK
cells increases killing of multiple myeloma cells.
This open-label single center Phase 1a/1b study assesses the safety and tolerability as well as exploratory efficacy endpoints in newly diagnosed
multiple myeloma patients who have tested positive for minimal residual disease (“MRD+”) in first remission prior to autologous stem cell transplant
(“ASCT”). We expect to enroll 30 newly diagnosed multiple
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myeloma patients. The primary outcome measures are dose limiting toxicities following combination product administration (time frame: 100 days post-
combination product administration) and incidence and severity of side effects related to the combination product (time frame: 90 to 100 days post-
combination product administration).
BHV-1100 Binds CD38 and lg to Create a Targeting Therapy to Kill Multiple Myeloma Cells
BHV-1100 Enhances Recruitment of NK Cells and Increases Killing of Multiple Myeloma Cells
University of Connecticut License Option
In October 2018, we signed an exclusive, worldwide option and license agreement with the University of Connecticut for the development and
commercialization rights to UC1MT, a therapeutic antibody targeting extracellular metallothionein ("MT"). Under this agreement, we had the option to
acquire an exclusive, worldwide license to UC1MT and its underlying patents to develop and commercialize throughout the world in all human
indications, which we exercised in September 2022.
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Extracellular MT has been implicated in the pathogenesis of autoimmune and inflammatory diseases. MTs are a family of low molecular weight,
cysteine-rich, metal-binding proteins that have a wide range of functions in cellular homeostasis and immunity. MT has traditionally been considered to
be an intracellular protein that can be found in both the cytoplasm and nucleus; however, MT also can be found in extracellular spaces, particularly in
disease states involving chronic cellular stress where intracellular MT production is upregulated by inflammatory cytokines, and extracellular MT acts as
a danger signal, attracting leukocytes and modulating the immune response. In preclinical studies, UC1MT has been observed to block this extracellular
pool of MT and the resulting MT-mediated inflammation and immunomodulation. The Company is evaluating and has not yet finalized potential clinical
trial designs, including trial size, and primary and secondary endpoints.
Artizan Biosciences Inc License Option
In December 2020, we entered into an Option and License Agreement with Artizan Biosciences Inc ("Artizan"), a biotechnology company focused
on creating new classes of precision therapies targeting chronic inflammation and immune dysregulation by leveraging the human gut as a drug
discovery tool. Pursuant to the agreement, we acquired an option to obtain a royalty-based license from Artizan to manufacture, use and commercialize
certain products. Artizan will use the proceeds to continue advancing the preclinical research and development of its lead program for inflammatory
bowel disease as well as to explore additional disease targets. In November 2021, we announced a collaborative therapeutic discovery and development
program in Parkinson’s disease (“PD”), to exploit recent scientific advances in the understanding of pathogenic roles played by the gut microbiome in PD.
In June 2022, we and Artizan executed a non-binding indication of interest (“Artizan Side Letter”) which describes terms under which we and Artizan
would amend the 2020 Artizan Agreement to eliminate certain milestone payments required by us in exchange for limiting our option to the selection of
the first (ARZC-001) licensed product. In the fourth quarter of 2022, Artizan was unable to secure additional financing to support it's ongoing operations,
and, as a result, began reviewing strategic options for the sale of its assets, and secured a small bridge financing to fund operations during the strategic
review. In January, Artizan severed substantially all of its employees and halted the PD program. Although Artizan anticipates bringing the inflammatory
bowel disease program to the clinic in 2023, its ability to do so will be dependent on its access to adequate funding.
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
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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.
Manufacturing
We have an experienced chemistry and manufacturing
leadership team that manages our relationships with third party
manufacturers. We currently rely, and expect to continue to rely, on
third parties for the development and manufacturing of our product
candidates for preclinical and clinical testing, as well as for commercial
manufacturing of our products if our product candidates receive
marketing approval.
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 our product
candidates, we currently intend to build a neurological specialty sales
force to manage commercialization for these product candidates,
potentially in combination with a larger pharmaceutical partner, to
maximize patient coverage in the United States and to support global
expansion.
Members of our management team and board of directors have
deep experience leading neuroscience research and have been
involved in the development and commercialization of drugs such as
Abilify, Opdivo and, most recently, Nurtec ODT.
Our Chief Executive Officer, Vlad Coric, M.D. was the Chief
Executive Officer of the Former Parent from 2015 through the
Separation, leading the Former Parent’s development and successful
commercial launch of Nurtec ODT (rimegepant) in the U.S., which
received FDA approval for the acute and preventative treatment of
migraine in February 2020 and May 2021, respectively. Under Dr.
Coric’s leadership, the Former Parent entered into several strategic
arrangements, including its Collaboration and License agreement with
Pfizer, Inc. for the development of rimegepant and zavegepant outside
of the United States.
Intellectual Property
We own or license patents in the U.S. and foreign countries that
protect our products, their methods of use and manufacture, as well as
other innovations relating to the advancement of our science to help
bring new therapies to patients. We also develop brand names and
trademarks for our products to differentiate them in the marketplace.
We consider the overall protection of our patents, trademarks, licenses
and other intellectual property rights to be of material value and act to
protect these rights from infringement. 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 other
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
development programs.
In the biopharmaceutical industry, a substantial portion of an
innovative product’s commercial value is usually realized during the
period in which the product has market exclusivity. A product’s market
exclusivity is generally determined by two forms of intellectual
property: patent rights held by the innovator company and any
regulatory forms of exclusivity to which the innovative drug is entitled.
Patents are a key determinant of market exclusivity for most
pharmaceuticals. Patents provide the innovator with the right to
exclude others from practicing an invention related to the medicine.
Patents may cover, among other things, the active ingredient(s),
various uses of a drug product, discovery tools, pharmaceutical
formulations, drug delivery mechanisms and processes for (or
intermediates useful in) the manufacture of products. Protection for
individual products extends for varying periods in accordance with the
expiration dates of patents in the various countries. The protection
afforded, which may also vary from country to country, depends upon
the type of patent, its scope of coverage and the availability of
meaningful legal remedies in the country.
Market exclusivity can also be influenced by regulatory data
protection ("RDP"). Many developed countries provide certain non-
patent incentives for the development of medicines. For example, in
the U.S., the EU, United Kingdom, Japan, and certain other countries,
RDP intellectual property rights are offered to: (i) provide a time period
of data protection during which a generic company is not allowed to
rely on the innovator’s data in seeking approval; (ii) restore patent term
lost during drug development and approval; and (iii) provide incentives
for research on medicines for rare diseases, or orphan drugs, and on
medicines useful in treating pediatric patients. These incentives can
extend the market exclusivity period on a product beyond the patent
term.
Patents and Patent Applications
We have many 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
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the U.S., Europe, Japan, Korea, China, Hong Kong and Australia.
Kv7
In April 2022, we acquired Channel Biosciences, LLC. This
acquisition included Channel’s Kv7 channel targeting platform and
related patents and patent applications. The patents and patent
applications are directed to the composition of matter of compounds
that are activators of Kv7.2/Kv7.3 and their use in treating diseases
such as epilepsy. U.S. Patent 10,851,067 (the “‘067 Patent”), issued
December 1, 2020, specifically claims BHV-7000 and will expire in
March 2039, not including possible patent term extensions. Ex-U.S.
counterparts to the ‘067 patent are pending in Australia, Brazil,
Canada, China, European Union, United Kingdom, Hong Kong, Israel,
India, Japan, Republic of Korea, Mexico, New Zealand, Singapore and
South Africa. If granted, the ex-U.S. patents will expire in March 2039,
not including possible patent term extensions in countries where such
extensions are available. In addition, U.S. Patent 9,481,653 (the “‘653
patent”), issued November 1, 2016, claims a class of compounds
including BHV-7000 and will expire in September 2035, not including
possible patent term extensions. Ex-US counterparts to the ‘653 patent
are granted in Belgium, Switzerland, Germany, Denmark, Spain,
Finland, France, United Kingdom, Ireland, Iceland, Italy, Netherlands,
Norway and Sweden. The ex-U.S. patents will expire in September
2035, not including possible patent term extensions in countries where
such extensions are available.
Troriluzole
We own a portfolio of patents and patent applications in the U.S.
and foreign countries directed to prodrugs of riluzole, including, among
others, U.S. Patent 10,485,791, issued November 26, 2019, which is
directed to troriluzole and other prodrugs of riluzole. This patent
expires in February 2036, not including possible patent term
extensions. Ex-US counterparts to the ‘791 patent have been granted
in Albania, Armenia, Austria, Australia, Azerbaijan, Belgium, Bulgaria,
Belarus, Canada, Switzerland, China, Cyprus, Czechia, Germany,
Denmark, Estonia, Spain, Finland, France, United Kingdom, Greece,
Hong Kong, Croatia, Hungary, Ireland, Israel, Italy, Japan, Kyrgyzstan,
Kazakhstan, Lithuania, Luxembourg, Latvia, Monaco, North
Macedonia, Malta, Mexico, Netherlands, Norway, Philippines, Poland,
Portugal, Romania, Serbia, Russia, Sweden, Slovenia, Slovakia,
Tajikistan, Turkmenistan, Turkey and South Africa, and patent
applications are pending in Brazil, India, Republic of Korea, Macao and
Singapore. The ex-US patents and patent applications will expire in
February 2036, not including possible patent term extensions in
countries where such extensions are available. In addition, the use of
these compounds for treating OCD, ALS, SCA, depression,
Alzheimer’s Disease and other diseases are described and claimed in
these patents and patent applications. We own these patent
applications subject to an
agreement with ALS Biopharma and FCCDC. In addition, we have filed
patent applications relating to drug product formulations containing
troriluzole and methods of using the formulations to treat various
diseases, including, for example, the use of troriluzole with
immunotherapies to treat cancer, including among others U.S. Patent
11,400,155, issued August 2, 2022, which expires in May 2037, not
including possible patent term extensions. Ex-US counterparts to the
‘155 patent have been granted in Albania, Austria, Australia, Belgium,
Bulgaria, Switzerland, China, Cyprus, Czechia, Germany, Denmark,
Estonia, Spain, Finland, France, United Kingdom, Greece, Hong Kong,
Croatia, Hungary, Ireland, Italy, Republic of Korea, Lithuania,
Luxembourg, Latvia, Monaco, North Macedonia, Malta, Netherlands,
Norway, Poland, Portugal, Romania, Serbia, Sweden, Slovenia and
Slovakia and patent applications are pending in Brazil, Canada, India,
Israel, Japan, Mexico, Philippines, Singapore and South Africa. The
ex-US patents and patent applications will expire in May 2037, not
including possible patent term extensions in countries where such
extensions are available.
Verdiperstat
In September 2018, we in-licensed patents from AstraZeneca
relating to the composition of matter of verdiperstat, pharmaceutical
compositions and various neurological diseases including muscular
system atrophy. U.S. Patent 7,829,707, issued November 9, 2010,
U.S. Patent 8,859,568, issued October 14, 2014, and U.S. Patent
9,580,429, issued February 28, 2017, are directed to compositions of
matter of verdiperstat and other compounds, pharmaceutical
compositions of verdiperstat and methods of treating diseases. The
U.S. patents expire in December 2025 not including patent term
adjustments and extensions. Ex-US counterparts to the U.S. patents
have been granted in Australia, Canada, Switzerland, China, Germany,
Spain, France, United Kingdom, Hong Kong, India, Italy, Japan,
Republic of Korea, Mexico, Russia, Sweden, and Turkey, and a patent
application is pending in Brazil. The ex-US patents and patent
applications will expire in December 2025, not including possible
patent term extensions in countries where such extensions are
available. U.S. Serial No. 17/766539, filed April 5, 2022, is directed to
novel prodrug forms of verdiperstat. Ex-US counterparts to the ‘539
application have been filed in Australia, Brazil, Canada, China,
European Union, United Kingdom, Israel, India, Japan, Republic of
Korea, Mexico, New Zealand, Singapore and South Africa. The ex-US
patents and patent applications will expire in October 2040, not
including possible patent term extensions in countries where such
extensions are available.
MoDEs Platform, ARMs, MATEs
In January 2021, we entered into a worldwide, exclusive license
agreement with Yale University for the development and
commercialization of a novel Molecular Degrader of Extracellular
Protein (MoDEs) platform. The platform pertains to the clearance of
disease-causing protein and other biomolecules by
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targeting them for lysosomal degradation using multi-functional
molecules. The platform is differentiated from existing approaches in
that it does not rely on ubiquitin ligases, and it allows for a broad range
of targets to be degraded. The patent portfolio is directed to the
composition of matter of bifunctional degraders and their use in
degrading circulating proteins and treating diseases. U.S. Serial No.
17/046221, filed October 8, 2020, relates to bifunctional small
molecules to target selective degradation of circulating proteins. Ex-US
counterparts to the '221 application have been filed in China, European
Union and Hong Kong and, if granted, will expire in April 2039, not
including possible patent term extensions in countries where such
extensions are available. U.S. Serial No. 17/768166, filed April 11,
2022, relates to bifunctional compounds as degraders of
autoantibodies. Ex-US counterparts to the '166 application have been
filed in the United Arab Emirates, Australia, Brazil, Canada, China,
European Union, Israel, Japan, Republic of Korea, Mexico, Philippines,
Saudi Arabia, Singapore, and South Africa and, if granted, will expire
in October 2040, not including possible patent term extensions in
countries where such extensions are available. U.S. Serial No.
17/046192, filed October 8, 202, relates to bifunctional molecules to
degrade circulating proteins. Ex-US counterparts to the '192
application have been filed in the European Union and Hong Kong,
and, if granted, will expire in April 2039, not including possible patent
term extensions in countries where such extensions are available. U.S.
Serial No. 17/768145, filed April 11, 2022 relates to engineered
antibodies as molecular degraders through cellular receptors. Ex-US
counterparts to the '145 application have been filed in the , was filed in
the United Arab Emirates, Australia, Brazil, Canada, China, countries
of the Eurasian Patent Organization, European Union, Israel, India,
Japan, Republic of Korea, Mexico, New Zealand, Philippines, Saudi
Arabia, South Africa and Singapore and, if granted, will expire in
October 2040, not including possible patent term extensions in
countries where such extensions are available. PCT/US2022/017319,
filed February 22, 2022, which relates to targeted bifunctional
degraders, is pending in the United States Receiving Office of the
Patent Cooperation Treaty and all countries were designated for filing.
The patent applications, if granted, will expire in February 2042, not
including possible patent term extensions in countries where such
extensions are available. PCT/US2022/019658, which relates to
bifunctional degraders of galactose deficient immunoglobulins, filed
March 10, 2022, is pending in the United States Receiving Office of the
Patent Cooperation Treaty and all countries were designated for filing.
The patent applications, if granted, will expire in March 2042, not
including possible patent term extensions in countries where such
extensions are available.
specified biological targets and combined with existing cell- or
antibody-based therapies. These include Antibody Recruiting
Molecules (ARMs) and Monoclonal Antibody Therapy Enhancers
(MATEs), which complement the MoDEs technology licensed from
Yale. U.S. Serial No. 17/769924, filed November 19, 2020, relates to
directed conjugation technologies. Ex-US counterparts to the '924
application have been filed in the United Arab Emirates, Australia,
Brazil, Canada, China, countries of the Eurasian Patent Organization,
European Union, Israel, India, Japan, Republic of Korea, Mexico, New
Zealand, Philippines, Saudi Arabia, South Africa and Singapore and, if
granted, will expire in November 2040, not including possible patent
term extensions in countries where such extensions are available. U.S.
Serial No. 17/912563, filed September 19, 2022, relates to
technologies for treating COVID infections. Ex-US counterparts to the
'563 application have been filed in the United Arab Emirates, Australia,
Brazil, Canada, China, countries of the Eurasian Patent Organization,
European Union, Israel, India, Japan, Republic of Korea, Mexico, New
Zealand, Philippines, Saudi Arabia, South Africa and Singapore and, if
granted, will expire in March 2042, not including possible patent term
extensions in countries where such extensions are available.
PCT/US2022/015390, filed February 6, 2022, which relates to
technologies for preventing or treating infections, is pending in the
United States Receiving Office of the Patent Cooperation Treaty and
all countries were designated for filing. The patent applications, if
granted, will expire in February 2042, not including possible patent
term extensions in countries where such extensions are available.
PCT/US2022/029533, filed May 17, 2022, which relates to
compositions including conjugated therapy enhancers, is pending in
the United States Receiving Office of the Patent Cooperation Treaty
and all countries were designated for filing. The patent applications, if
granted, will expire in May 2042, not including possible patent term
extensions in countries where such extensions are available.
PCT/US2022/029535, filed May 17, 2022, which relates to agents for
directed conjugation techniques and conjugated products, is pending
in the United States Receiving Office of the Patent Cooperation Treaty
and all countries were designated for filing. The patent applications, if
granted, will expire in May 2042, not including possible patent term
extensions in countries where such extensions are available.
PCT/US2022/030070, filed May 19, 2022, which relates to antibody
drug conjugates using MATE technology for delivering cytotoxic
agents, is pending in the United States Receiving Office of the Patent
Cooperation Treaty and all countries were designated for filing. The
patent applications, if granted, will expire in May 2042, not including
possible patent term extensions in countries where such extensions
are available.
We also acquired Kleo Pharmaceuticals, Inc. in January 2021.
TDP-43
This acquisition included Kleo’s proprietary technology platforms which
are modular in design and enable rapid generation of novel
immunotherapies that can be optimized against
We have pending patent applications covering the composition of
matter of compounds targeting TDP-43 in neurodegeneration. TDP-43,
transactive response
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(TAR)-DNA protein-43, is a multifunctional nucleic acid-binding protein
that is implicated in neurodegeneration. Mutations in the gene that
encodes for TDP-43 cause familial and sporadic amyotrophic lateral
sclerosis (“ALS”) and frontotemporal dementia (“FTD”). Cytoplasmic
TDP-43 aggregates are the neuropathological hallmark of ALS-FTD
spectrum disorders. U.S. Serial No. 17/635421, filed February 15,
2022, relates to compounds that target TDP-43. Ex-US counterparts to
the '421 application have been filed in Australia, Brazil, Canada, China,
countries of the Eurasian Patent Organization, European Union, Israel,
India, Japan, Republic of Korea, Mexico, Philippines, South Africa and
Singapore and, if granted, will expire in August 2040, not including
possible patent term extensions in countries where such extensions
are available. PCT/US2022/017116, filed February 20, 2022, which
relates to compounds that target TDP-43 for the treatment of ALS and
related disorders, is pending in the United States Receiving Office of
the Patent Cooperation Treaty and all countries were designated for
filing. The patent applications, if granted, will expire in February 2042,
not including possible patent term extensions in countries where such
extensions are available.
IBD and Parkinson’s Disease
In December 2020, we entered into an option and license
agreement with Artizan Biosciences directed toward the development
and commercialization of novel treatments for inflammatory bowel
disease (“IBD”) and other gastrointestinal inflammatory disorders, e.g.,
Crohn’s disease, in the U.S. Under the terms of the agreement, we
have the rights to exercise an option on up to three product
candidates. In June 2021, we entered into a separate worldwide,
exclusive license agreement under the IgA-SEQ patented technology
with Artizan to develop and commercialize certain of their compounds
for use in Parkinson’s Disease. U.S. Patent 9,758,838, issued
September 12, 2017, U.S. Patent 10,428,392, issued October 1, 2019,
U.S. Patent 10,774,392, issued September 15, 2020, and U.S. Patent
11,299,790, issued April 12, 2022, relate to compositions and methods
for identifying secretory antibody microbes. These patents expire in
March 2034, not including possible patent term extensions. U.S. Serial
No. 15/507357, filed February 28, 2017 and issued as U.S. Patent
10,925,953 on February 23, 2021, relates to compositions and
methods for treating an inflammatory disease or disorder. An ex-US
counterpart to the '953 application has also been filed in the European
Union and will expire in August 2035, not including possible patent
term extensions. U.S. Serial No. 17/253333, filed December 17, 2019,
relates to compositions and methods for treating inflammatory
diseases. Ex-US counterparts to the '333 application have been filed in
the United Arab Emirates, Australia, Brazil, Canada, China, European
Union, Hong Kong, Israel, Japan, Republic of Korea, Mexico, New
Zealand, Russia, South Africa and Singapore and, if granted, will
expire in July 2039, not including possible patent term extensions in
countries where such extensions are available. PCT/
US2021/050048, filed September 13, 2021, which relates to small
molecule inhibitors of bacterial toxins, is pending the United States
Receiving Office of the Patent Cooperation Treaty and all countries
were designated for filing. The counterpart application is also pending
in Taiwan. The patent applications, if granted, will expire in September
2041, not including possible patent term extensions in countries where
such extensions are available. PCT/US2022/012472, filed January 14,
2022, which relates to compositions and methods for treating and
preventing diseases or disorders using inter-species interactions, is
pending in the United States Receiving Office of the Patent
Cooperation Treaty and all countries were designated for filing.
TRPM3
In January 2022, we entered into an exclusive global license and
research agreement to develop and commercialize TRPM3
antagonists to address the growing proportion of people worldwide
living with chronic pain disorders. The TRPM3 antagonist platform was
discovered at the Centre for Drug Design and Discovery (“CD3”) and
the Laboratory of Ion Channel Research (“LICR”) at Katholieke
Universiteit Leuven (KU Leuven). PCT/EP2021/082853, filed
November 24, 2021, which relates to aryl derivatives for treating
TRPM3 mediated disorders, is pending in the European Receiving
Office of the Patent Cooperation Treaty and all countries were
designated for filing. A counterpart application is also pending in
Taiwan. The patent applications, if granted, will expire in November
2041, not including possible patent term extensions in countries where
such extensions are available. PCT/EP2021/082865, filed November
24, 2021, which relates to heterocycle derivatives for treating TRPM3
mediated disorders, is pending in the European Receiving Office of the
Patent Cooperation Treaty and all countries were designated for filing.
A counterpart application is also pending in Taiwan. The patent
applications, if granted, will expire in November 2041, not including
possible patent term extensions in countries where such extensions
are available. U.S. Patent 9,194,863, issued November 24, 2015,
which relates to screening methods for analgesic agents, has also
been granted in Belgium, Switzerland, Germany, Denmark, Spain,
Finland, France, United Kingdom, Ireland, Israel, Italy, Netherlands and
Sweden. The patents, will expire in May 2032, not including possible
patent term extensions in countries where such extensions are
available.
Myostatin
In December 2021, we entered into a worldwide license
agreement with Bristol Myers Squibb for the global development and
commercialization rights to taldefgrobep alfa (BHV-2000), a novel,
Phase 3-ready anti-myostatin adnectin. Myostatin is a natural protein
that limits skeletal muscle growth, an important process in healthy
muscular development.
U.S. Patent 8,853,154 issued October 7, 2014, U.S. Patent
8,933,199, issued January 13, 2015, U.S. Patent
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8,933,265, issued March 31, 2015, U.S. Patent 9,493,546, issued
November 15, 2016, U.S. Patent 9,662,373, issued May 30, 2017,
U.S. Patent 10,245,302, issued April 2, 2019, and U.S. Patent
10,406,212, issued September 10, 2019, are directed to fibronectin
based scaffold domain proteins that bind to myostatin. The U.S.
patents expire in September 2033, not including possible patent term
extensions. Ex-US counterparts to the U.S. patents have been granted
in Argentina, Austria, Australia, Belgium, Bulgaria, Brazil, Canada,
Switzerland, Chile, China, Colombia, Czechia, Germany, Denmark,
Algeria, Egypt, Spain, Finland, France, United Kingdom, Greece, Hong
Kong, Croatia, Hungary, Indonesia, Ireland, Israel, India, Italy, Japan,
Republic of Korea, Lithuania, Morocco, Macao, Mexico, Malaysia,
Netherlands, Norway, New Zealand, Peru, Philippines, Poland,
Portugal, Romania, Serbia, Russia, Sweden, Singapore, Slovenia,
Slovakia, Thailand, Tunisia, Turkey, Taiwan, Uruguay, Venezuela,
Vietnam and South Africa. The ex-US patents will expire in September
2033, not including possible patent term extensions in countries where
such extensions are available. U.S. Serial No. 16/607688, filed May 3,
2018, relates to stable formulations fibronectin based scaffold domain
proteins that bind to myostatin. Ex-US counterparts to the '688
application have been filed in Australia, Canada, China, European
Union, Hong Kong, Israel, Japan, Republic of Korea, Mexico,
Singapore and Taiwan and, if granted, will expire in May 2038, not
including possible patent term extensions in countries where such
extensions are available.
Licensing and Other Agreements
In addition to our independent efforts to develop and market
products, we enter into agreements such as licensing agreements,
option-to-license agreements and strategic collaborations. The
licensing and other agreements typically include, among other terms
and conditions, non-refundable upfront license fees, option fees and
option exercise payments, milestone payments and royalties. See
Note 11, "Licensing and Other Agreements," to the Consolidated
Financial Statements included in this report for additional information
regarding our licenses and other agreements.
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. Key steps required
before a drug may be approved for marketing in the United States
generally include:
• preclinical laboratory tests and animal tests conducted under
Good Laboratory Practices ("GLP");
•
the submission to the FDA of an investigational new drug
("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 a New Drug
Application ("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.
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 gather information
on the safety and activity 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
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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, a deficiency is found in the IND application.
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 Institutional Review Board ("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 with a specific disease or condition 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. These clinical studies are intended to establish the
overall risk/benefit ratio of the product and provide an adequate basis
for product approval and labeling.
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 have used in our troriluzole
development program, 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 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 an application if they determine that the data are 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. A standard review is 10 months from the date the
application is accepted for filing and a priority review is 6 months from
the date the application is accepted for filing. 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, as well as the Sponsor of the NDA, 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 post approval. 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
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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.
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.
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 ("CRL"), detailing the deficiencies
in the submission and the additional testing or information required for
reconsideration of the application. The deficiencies identified may be
minor, for example, requiring labeling changes, or major, for example,
requiring additional clinical studies. If a CRL is issued, the applicant
may either resubmit the NDA, addressing all of the deficiencies
identified in the letter, withdraw the application, or request a hearing.
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
program user fee requirements for marketed products.
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 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
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
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not conducted by, or for, the applicant and for which the applicant has
not obtained a right of reference or use from the company 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 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 program for troriluzole for the treatment of SCA and
the treatment of OCD is 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.
Product Exclusivity - United States
In the United States, biopharmaceutical products are protected
by patents with varying terms depending on the type of patent and the
filing date. A significant portion of a product’s patent life, however, is
lost during the time it takes an innovative company to develop and
obtain regulatory approval of a new drug. As compensation at least in
part for the lost patent term due to regulatory review periods, the
innovator may, depending on a number of factors, apply to the
government to restore lost patent term by extending the expiration date
of one patent up to a maximum term of five years, provided that the
extension cannot cause the patent to be in effect for more than 14
years from the date of drug approval. A company seeking to market an
innovative pharmaceutical in the U.S. must submit a complete set of
safety and efficacy data to the FDA. If the innovative pharmaceutical is
a chemical product, the company files an NDA. If the medicine is a
biological product, a Biologic License Application ("BLA") is filed. The
type of application filed affects regulatory data protection (“RDP”)
exclusivity rights.
Small Molecule Products
A competitor seeking to launch a generic substitute of small
molecule drug in the U.S. must file an Abbreviated New Drug
Application ("ANDA") with the FDA. In the ANDA, the generic
manufacturer needs to demonstrate only “bioequivalence” between the
generic substitute and the approved NDA drug. The ANDA relies upon
the safety and efficacy data previously filed by the innovator in its NDA.
An innovator company is required to list certain of its patents covering
the medicine with the FDA in what is commonly known as the FDA’s
Orange Book. The FDA cannot approve an ANDA until after the
innovator’s listed patents expire unless there is a successful patent
challenge. However, after the innovator has marketed its product for
four years, a generic manufacturer may file an ANDA and allege that
one or more of the patents listed in the Orange Book
under an innovator’s NDA is either invalid or not infringed (a Paragraph
IV certification). The innovator then must decide whether to file a
patent infringement suit against the generic manufacturer. From time to
time, ANDAs, including Paragraph IV certifications, could be filed with
respect to certain of our products.
In addition to patent protection, certain innovative pharmaceutical
products can receive periods of regulatory exclusivity. An NDA that is
designated as an orphan drug can receive seven years of exclusivity
for the orphan indication. During this time period, neither NDAs nor
ANDAs for the same drug product can be approved for the same
orphan use. A company may also earn six months of additional
exclusivity for a drug where specific clinical studies are conducted at
the written request of the FDA to study the use of the medicine to treat
pediatric patients, and submission to the FDA is made prior to the loss
of basic exclusivity. Medicines approved under an NDA can also
receive several types of RDP. An innovative chemical pharmaceutical
product is entitled to five years of RDP in the U.S., during which the
FDA cannot approve generic substitutes. If an innovator’s patent is
challenged, as described above, a generic manufacturer may file its
ANDA after the fourth year of the five-year RDP period. A
pharmaceutical drug product that contains an active ingredient that has
been previously approved in an NDA, but is approved in a new
formulation, but not for the drug itself, or for a new indication on the
basis of new clinical studies, may receive three years of RDP for that
formulation or indication.
Biologic products
The ACA, which includes a subtitle called the Biologics Price
Competition and Innovation Act of 2009, created an approval pathway
for biosimilar versions of innovative biological products that did not
previously exist. Prior to that time, innovative biologics had essentially
unlimited regulatory exclusivity. Under the new regulatory mechanism,
the FDA can approve products that are similar to (but not generic
copies of) innovative biologics on the basis of less extensive data than
is required by a full BLA. After an innovator has marketed its product
for four years, any manufacturer may file an application for approval of
a “biosimilar” version of the innovator product. However, although an
application for approval of a biosimilar version may be filed four years
after approval of the innovator product, qualified innovative biological
products will receive 12 years of regulatory exclusivity, meaning that
the FDA may not approve a biosimilar version until 12 years after the
innovative biological product was first approved by the FDA. The law
also provides a mechanism for innovators to enforce the patents that
protect innovative biological products and for biosimilar applicants to
challenge the patents. Such patent litigation may begin as early as four
years after the innovative biological product is first approved by the
FDA.
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In the U.S., the increased likelihood of generic and biosimilar
challenges to innovators’ intellectual property has increased the risk of
loss of innovators’ market exclusivity. First, generic companies have
increasingly sought to challenge innovators’ basic patents covering
major pharmaceutical products. Second, statutory and regulatory
provisions in the U.S. limit the ability of an innovator company to
prevent generic and biosimilar drugs from being approved and
launched while patent litigation is ongoing. As a result of all of these
developments, it is not possible to predict the length of market
exclusivity for a particular product with certainty based solely on the
expiration of the relevant patent(s) or the current forms of regulatory
exclusivity.
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. 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.
European Union
A typical route used by innovator companies to obtain marketing
authorization of pharmaceutical products in the EU is through the
“centralized procedure.” A company seeking to market an innovative
pharmaceutical product through the centralized procedure must file a
complete set of safety data and efficacy data as part of a Marketing
Authorization Application ("MAA") with the EMA. After the EMA
evaluates the MAA, it provides a recommendation to the European
Commission ("EC") and the EC then approves or denies the MAA.
Regulatory approval via the centralized procedure results in a
marketing authorization for the innovative pharmaceutical product in
each EU member state. It is also possible for new chemical products to
obtain marketing authorization in the EU through a “mutual recognition
procedure,” in which an application is made to a single member state,
and if the member state approves the pharmaceutical product under a
national procedure, then the applicant may submit that approval to the
mutual recognition procedure of some or all other member states. After
obtaining marketing authorization approval, a company must obtain
pricing and reimbursement for the pharmaceutical product, which is
typically subject to
member state law. In certain EU countries, this process can take place
simultaneously while the product is marketed but in other EU
countries, this process must be completed before the company can
market the new product. The pricing and reimbursement procedure
can take months and sometimes years to complete. Throughout the
EU, all products for which marketing authorizations have been filed
after October/November 2005 are subject to an “8+2+1” regime. Eight
years after the innovator has received its first community authorization
for a medicinal product, a generic company may file a MAA for that
product with the health authorities. If the MAA is approved, the generic
company may not commercialize the product until after either 10 or 11
years have elapsed from the initial marketing authorization granted to
the innovator. The possible extension to 11 years is available if the
innovator, during the first eight years of the marketing authorization,
obtains an additional indication that is of significant clinical benefit in
comparison with existing treatments. For products that were filed prior
to October/November 2005, there is a 10-year period of data
protection under the centralized procedures and a period of either six
or 10 years under the mutual recognition procedure (depending on the
member state). In contrast to the U.S., patents in the EU are not listed
with regulatory authorities. Generic versions of pharmaceutical
products can be approved after data protection expires, regardless of
whether the innovator holds patents covering its drug. Thus, it is
possible that an innovator may be seeking to enforce its patents
against a generic competitor that is already marketing its product. Also,
the European patent system has an opposition procedure in which
generic manufacturers may challenge the validity of patents covering
innovator products within nine months of grant. In general, EU law
treats chemically-synthesized drugs and biologically-derived drugs the
same with respect to intellectual property and data protection. In
addition to the relevant legislation and annexes related to biologic
medicinal products, the EMA has issued guidelines that outline the
additional information to be provided for biosimilar products, also
known as generic biologics, in order to review an application for
marketing approval.
Japan
In Japan, medicines of new chemical entities are generally
afforded eight years of data exclusivity for approved indications and
dosage. Patents on pharmaceutical products are enforceable. Generic
copies can receive regulatory approval after data exclusivity and
patent expirations. As in the U.S., patents in Japan may be extended
to compensate for the patent term lost during the regulatory review
process. In general, Japanese law treats chemically-synthesized and
biologically-derived drugs the same with respect to intellectual property
and market exclusivity.
China
To obtain marketing authorization of pharmaceutical products in
China, an NDA must be submitted to the National Medical Products
Administration ("NMPA") once safety and efficacy has been
established in Chinese patients. For imported
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drugs, this means issuance of an import license. The applicant must
submit evidence of foreign approval (certificate of pharmaceutical
product), unless it is an innovative drug that has never been approved
anywhere in the world.
In China, medicines of new chemical entities are generally
afforded 6 years of data exclusivity for approved indications and
dosage. Generic copies can receive regulatory approval after data
exclusivity and patent expirations.
South Korea
To obtain marketing authorization of pharmaceutical products in
South Korea, a marketing application must be submitted to the Ministry
of Food and Drug Safety ("MFDS"). The application must contain data
in South Korean patients, information regarding safety and efficacy,
quality, a good manufacturing practice certificate, and a certificate of
pharmaceutical product in an approved country to show that the drug
being imported is being sold in the approved country in accordance
with the with the relevant rules and regulations in that country.
In South Korea, medicines of new chemical entities are generally
afforded 6 years of data exclusivity for first approved indications and
dosage. Generic copies can receive regulatory approval after data
exclusivity and patent expirations.
Rest of the World
In countries outside of the U.S., the EU, Japan, China and South
Korea, there is a wide variety of legal systems with respect to
intellectual property and market exclusivity of pharmaceuticals. Most
other developed countries utilize systems similar to either the U.S. or
the EU. Among developing countries, some have adopted patent laws
and/or regulatory exclusivity laws, while others have not. Some
developing countries have formally adopted laws in order to comply
with World Trade Organization ("WTO") commitments, but have not
taken steps to implement these laws in a meaningful way. Enforcement
of WTO actions is a long process between governments, and there is
no assurance of the outcome.
Coverage, Reimbursement and Pricing
Challenges exist that pertain to the coverage and reimbursement
status of any products for which regulatory approval is sought. In the
United States and foreign markets, sales of any products that 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, such
as Medicare and Medicaid, 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. The
latter is often informed by entities such as the Institute for Clinical and
Economic Review ("ICER") which provides a reimbursement rate
based on a multifactorial value assessment. Third-party payors may
limit coverage to specific products on an approved list, or formulary,
which might not include all of the FDA-approved products for a
particular indication. Typically patients must "step through," or fail less
expensive therapies such as generics in order to be prescribed a
branded therapy. 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
patient co-payments that patients find unacceptably high. Additionally,
coverage and reimbursement for products can differ significantly from
one payor system to the next. Private payor systems set
reimbursement policy in accordance with their particular model. For
example, some payor systems mandate value based pricing wherein a
particular price point is premised upon achieving a particular goal.
These can include an improvement in patients’clinical course
(therapeutic effectiveness), or reductions in drug and health care
utilization and cost. Thus a third-party payor's decision to cover a
particular product does not ensure that other payors will also provide
the same level of 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.
Third-party payors payors require evidence of value that are
supplemental to the regulatory mandates of safety and efficacy in order
to support a particular price. To obtain coverage and reimbursement
for any product that might be approved for sale, there is often a need
to conduct expensive pharmacoeconomic studies to demonstrate the
medical necessity (based on evidence of disease burden and unmet
need) and cost-effectiveness of the therapy. As mentioned, the ICER
evidence review mandates such information.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, they may deem a
subpopulation of eligible patients based on greater unmet need as
eligible for reimbursement. Thus, obtaining and maintaining
reimbursement status can be time-consuming and costly.But drug
developers accept these requirements as a condition of
reimbursement, analogous to their acceptance of the level of evidence
needed to obtain regulatory approval.
The U.S. and foreign governments regularly consider reform
measures that affect health care coverage and costs. For example, the
U.S. and particularly state legislatures have implemented cost
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containment programs that include price controls, restrictions on
reimbursement and "first use" of generic products prior to access to
branded prescriptions. The Patient Protection and Affordable Care Act,
as amended by the Health Care and Education Reconciliation Act
("collectively, the ACA") contains provisions such as 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") moved 41% of Medicare fee-for-service
payments to alternative payment models ("APMs") tied to the quality or
value of services by the end of 2018. HHS had set a goal of moving
50% of such Medicare payments into these alternative payment
models by the end of 2018, but in 2019, this performance goal was
discontinued and replaced it with a new developmental goal to
increase the percentage of Medicare health care dollars tied to APMs
incorporating downside risk, with a target of 40% for fiscal year 2021.
These constitute significant challenges,which are analogous to the
regulatory hurdles in many aspects and drug developers acknowledge
these challenges as the path to providing safe and effective therapies
to the patients that require them.
European Union Coverage Reimbursement and Pricing
In the European Union, pricing and reimbursement requirements
can vary widely from country to country. Some countries link market
authorization to reimbursement decisions. Others may require the
completion of additional studies that assess the cost-effectiveness or
comparative effectiveness of novel approved drugs relative to standard
of care. These are compiled as health technology assessments
("HTAs"), that constitute a requisite for 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 access restrictions that typically
target sub populations with high unmet need.
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. 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, healthcare professionals who
participate in our clinical research programs, 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 ("HITECH") enacted as part of the
American Recovery and Reinvestment Act of 2009 and its
implementing regulations, which imposes certain obligations, including
mandatory contractual terms, on entities subject to the law, such as
healthcare providers, health plans, and healthcare clearinghouses and
their respective business associates to safeguard the privacy, security
and transmission of individually identifiable health information from any
unauthorized use or disclosures;
• 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, and other programs
such as CHIP to report to HHS information related to payments and
other transfers of value provided to physicians and
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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 some of which 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. Healthcare reform
legislation has strengthened these federal and state healthcare laws.
For example, the ACA amended 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. Since its
enactment, there have been judicial, executive and Congressional
challenges to certain aspects of the ACA. On June 17, 2021, the U.S.
Supreme Court dismissed the most recent judicial challenge to the
ACA brought by several states, without specifically ruling on the ACA’s
constitutionality.
The provisions of the ACA of importance to the pharmaceutical
and biotechnology industry are, among others, the following:
• 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 now agree to offer 70% 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;
• 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;
• a new Patient-Centered Outcomes Research Institute to
oversee, identify priorities in, and conduct
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comparative clinical effectiveness research, along with funding for such
research; and
• establishment of the Center for Medicare Innovation at the
Centers for Medicare and Medicaid Services ("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. In January of 2021, an Executive Order entitled
“Executive Order on Strengthening Medicaid and the Affordable Care
Act” repealed two previous Executive Orders delaying the
implementation of certain provisions of the ACA. Concurrently,
Congress has considered legislation that amend all or part of the ACA.
In addition, other federal health reform measures have been
proposed and adopted in the United States since the ACA was
enacted. These changes include aggregate reductions to Medicare
payments to providers of up to 2% per fiscal year pursuant to the
Budget Control Act of 2011 (known as Medicare sequestration) and
subsequent extensions, which began in 2013 and will remain in effect
through 2030 (with the exception of a temporary suspension from May
1, 2020 through March 31, 2022, with a subsequent one quarter
phase-in of 1%) 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 were scheduled to 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. The previous administration released a "Blueprint" to lower
drug prices and reduce out-of-pocket costs of drugs. HHS solicited
feedback on some of these measures and, concurrently, implemented
others under its existing authority. President Biden continues to push
for reforms that would address the high cost of drugs. In response to
an Executive Order from President Biden, the Secretary of HHS
recently
issued a comprehensive plan for addressing high drug prices that
describes a number of legislative approaches and identifies
administrative tools to address the high cost of drugs. And Democrats
recently included drug pricing reform provisions reflecting elements of
the plan in a broader spending package in late 2021—such as capping
Medicare Part D patients’ out-of-pocket costs, establishing penalties
for drug prices that increase faster than inflation in Medicare, and
authorizing the federal government to negotiate prices on certain
select, high-cost drugs under Medicare Parts B and D. While a number
of these and other proposed measures would require authorization
through additional legislation to become effective, Congress has
indicated that it will continue to seek new legislative and/or
administrative measures to control drug costs. In August 2022,
Congress passed the Inflation Reduction Act of 2022, which included,
among other things, a provision allowing Medicare to negotiate drug
prices directly with pharmaceutical manufacturers.
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.
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Environmental, Social, Governance, and Human Capital
Governance and Leadership
Our commitment to integrating sustainability across our
organization begins with our Board of Directors. The Nominating and
Governance Committee of the Board has oversight of strategy and risk
management related to Environmental, Social and Governance
(“ESG”). Applying NYSE’s listing standards for independence, six of
our eight directors are independent.
At the management level, we have implemented a cross-
functional Sustainability Working Group, which is set to meet on a
regular basis and report to the Board of Directors periodically. We also
maintain a Chief Talent & Sustainability Officer position to work closely
with the working group and coordinate efforts related to the
advancement of ESG capabilities across the organization.
Business Ethics
We are committed to creating an environment where we are able
to excel in our business while maintaining the highest standards of
conduct and ethics. Our Code of Business Conduct and Ethics (the
“Code of Conduct”) will reflect the business practices and principles of
behavior that support this commitment, including our policies on
bribery, corruption, conflicts of interest and our whistleblower program.
We expect every director, officer, and employee to read, understand,
and comply with the Code of Conduct and its application to the
performance of his or her business responsibilities.
We encourage employees to come to us with observations and
complaints, ensuring we understand the severity and frequency of an
event in order to escalate and assess accordingly. Our Chief
Compliance Officer strives to ensure accountability, objectivity, and
compliance with our Code of Conduct. If a complaint is financial in
nature, the Audit Committee Chair is notified concurrently, which
triggers an investigation, action, and report. All incidents are reported
up to the Board of Directors on a quarterly basis.
Environmental Commitment
We are committed to protecting the environment and attempt to
mitigate any negative impact of our operations. We monitor resource
use, improve efficiency, and at the same time reduce our emissions
and waste.
In order to reduce the overall impact of our product on the
environment, we have taken steps to enhance the sustainability of our
manufacturing processes for our drug substances.
In collaboration with our contract research organization partners,
we apply various green chemistry methodologies to our commercial
and development
pipeline. We have especially focused on using biocatalysis, a
technology that makes use of enzymes instead of chemicals to
accomplish specific chemical reactions used to construct organic small
molecules such as Active Pharmaceutical Ingredients.
We have also initiated work in removing hazardous organic
solvents from certain reactions and replacing them with water. This
green technology relies on the use of micelles to enable such reactions
to occur in water where they would normally not occur due in part to
the very poor solubility of most organic compounds in water. These
greener processes not only create less waste, but the waste that is
produced is much less hazardous, therefore reducing the
environmental impact of the manufacturing process.
Social Responsibility
For third-party vendor selection and oversight, we have adopted
standard operating procedures that apply to employees and
subcontractors who on our behalf, oversee and conduct research
regulated by the FDA. We retain ultimate authority and responsibility
for the conduct of regulated research, manufacturing, and testing and
we must ensure that contracted services are conducted in accordance
with Good Practice Guidelines and all applicable regulations.
Human Capital Management
We foster and encourage a workplace environment that holds
possibilities for everyone, with a commitment to respect and
acceptance without biases.
Development and continuous feedback are priorities for our
organization, which was comprised of 202 employees as of January 1,
2023. We believe each person is critical to our success and we invest
in our people by supporting continuous training programs and courses.
We encourage each employee to engage with their manager in
developmental discussions designed to focus on feedback rather than
a rating.
An important part of our talent recruitment is our robust paid
internship program for high school, college and graduate-level
students. This program offers opportunities to students in the
community and develops a roadmap for ‘entry-level’ candidates. We
evaluate the success of our recruitment program through metrics such
as time to hire, offer acceptance rate, turnover rate and business
results.
We strive to provide an inclusive workplace to foster growth and
innovation. Biohaven is committed to gender diversity in the workforce,
as evidenced by a workforce that is approximately 60% female and
includes a robust group of female leaders in the scientific and
associated fields.
Biohaven engages in forward-thinking people policies to allow for
our employees to thrive in our workforce. Regular attendance at an
office is only required of our lab professionals, allowing over 50% of
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our workforce to work remotely full-time. Our vacation policy is
unlimited, and is aimed at giving employees the ability to achieve
work/life balance in a way that is bespoke to their circumstances.
When the COVID-19 pandemic hit in early 2020, we quickly
established both an office-based and field-based response to protect
our employees. We first and foremost encouraged all office-based
employees to work from home and provided support for fully remote
work. In our offices, we follow health and safety protocols by providing
mandatory masks for anyone entering the building, foot-dispensing
hand sanitizer stations, and disinfecting wipes at each workstation. We
purchased high efficiency air filters to ensure air is not recirculated in
the facilities. We offer antibody testing and encourage employees to be
tested for COVID-19 frequently.
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.
Corporate Information
We are a business company limited by shares organized under
the laws of the British Virgin Islands. 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 is located at
215 Church Street, New Haven, Connecticut 06510 and our telephone
number is (203) 404-0410. Our website address is
www.biohavenpharma.com. The information contained on our website
is not incorporated by reference into this Annual Report, and you
should not consider any information contained on, or that can be
accessed through, our website as part of this Annual Report or in
making an investment decision regarding our common shares. On
September 16, 2022, the Company changed its name from “Biohaven
Research Ltd.” to “Biohaven Ltd.”
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"). A copy
of these reports is also available at the SEC's website (www.sec.gov).
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Item 1A. Risk Factors
In connection with any investment decision with respect to our
securities, 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 and in our other filings with the
SEC. 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.
SUMMARY
An investment in our common shares is subject to a number of
risks, including risks related to our product candidates, risks related to
our business and risks related to our common shares. The following
list of risk factors is not exhaustive. Please read the information in the
section captioned “Risk Factors” for a more thorough description of
these and other risks.
Risks Related to Our Financial Position and Need for
Additional Capital
• We have a limited operating history, have incurred significant
operating losses since inception and anticipate that we will
continue to incur substantial operating losses for the foreseeable
future.
• Deterioration in general economic conditions in the United States
and globally, including the effect of prolonged periods of inflation
on our suppliers, third-party service providers and potential
partners, may have a negative impact on our business and results
of operations.
•
An inability to raise capital when needed or on terms favorable to
us could force us to curtail our planned operations and growth
strategy.
• Credit risk with respect to our investments or the financial
institutions at which we deposit funds could adversely affect us.
Risks Related to the Development of Our Product Candidates
• We depend entirely on the success of a limited number of product
candidates.
• Clinical trials are very expensive, time consuming and difficult to
design and implement, involve uncertain outcomes and may not
be predictive of results of future trials.
• Regulatory approval processes in the U.S. and foreign jurisdictions
are lengthy, time consuming and unpredictable.
• Our product candidates may fail to demonstrate safety and efficacy
in clinical trials, or may cause serious adverse or unacceptable
side effects.
• We may become exposed to costly and damaging liability claims,
which may not be covered by insurance.
Risks Related to Commercialization of Our Product
Candidates
• We have never commercialized a product candidate and may lack
the necessary expertise, personnel and resources to successfully
commercialize any product candidate that may receive regulatory
approval.
• We operate in a highly competitive and rapidly changing industry.
•
Failure to obtain or maintain adequate coverage and
reimbursement for our approved product candidates could limit our
ability to market those products and decrease our ability to
generate revenue.
• Our product candidates, if approved, will be subject to ongoing
regulatory oversight.
• Our approved product candidates 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.
Risks Related to Our Dependence on Third Parties
• We rely on third parties to conduct our preclinical studies and
clinical trials and to supply, manufacture and distribute clinical drug
supplies for our product candidates, which may expose our
business to risks.
• We may not establish or maintain collaborations with third parties
to develop or commercialize product candidates.
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.
• Our business operations and relationships with investigators,
health care professionals, consultants, third-party payors and
customers are subject to federal and state healthcare and other
laws.
• We may not obtain or maintain orphan drug designation or
exclusivity for our product candidates.
Risks Related to Our Intellectual Property
• We could lose market exclusivity earlier than expected.
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•
•
•
•
If we were unable to obtain licenses from third parties on
commercially reasonable terms or lose our rights to licensed
intellectual property, we may not be able to continue developing or
commercializing our product candidates.
Patent terms may not provide exclusivity for our product
candidates for an adequate amount of time to realize sufficient
commercial benefits.
Third parties may seek to invalidate our patents.
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.
Risks Related to Our Business Operations, Employee Matters
and Managing Growth
• Our future growth and ability to compete depend on, among other
things, retaining key personnel and recruiting additional qualified
personnel and on our ability to penetrate foreign markets.
•
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.
• We may encounter difficulties in managing our growth, which could
disrupt our operations.
• Our employees, independent contractors, consultants, commercial
collaborators, principal investigators, CROs and vendors may
engage in improper activities.
Risks Related to Ownership of Our Common Shares
•
•
•
•
Substantially all of our total outstanding shares may be sold freely
into the market. This could cause the market price of our common
shares to drop significantly, even if our business is doing well.
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.
The trading price of our common shares may be volatile and may
fluctuate.
If we are or become a passive foreign investment company, there
could be adverse U.S. federal income tax consequences to U.S.
holders.
• Our historical financial results as a part of Former Parent may not
be representative of our results as a separate, stand-alone
company.
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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 on May 2, 2022 as a direct, wholly-owned
subsidiary of Former Parent. Our operations to date have been largely
focused on organizing and staffing, 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 obtain marketing approvals for any
product candidates, 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.
Deterioration in general economic conditions in the United
States and globally, including the effect of prolonged periods of
inflation on our suppliers, third-party service providers and
potential partners, may have a negative impact on our business
and results of operations.
Our business and results of operations could be adversely
affected by changes in national or global economic conditions. These
conditions include, but are not limited to, high levels of, and rising,
inflation, high and rising interest rates, any volatility in the capital
markets, energy availability and costs, the negative impacts from
pandemics and public health crises (including any lingering or
recurring adverse impacts from COVID-19), negative impacts resulting
from the military conflict between Russia and the Ukraine, and the
effects of governmental initiatives to manage economic conditions.
Impacts of such conditions could be passed on to our business in the
form of higher costs for labor and materials, higher investigator fees,
possible reductions in pharmaceutical industry-wide spending on
research and development and acquisitions and higher costs of
capital.
We have incurred significant operating losses since our
inception as a business of Former Parent 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 as a business of Former Parent, we have
incurred significant operating losses. Our net loss was $570.3
million, $213.8 million and $118.7 million for the years
ended December 31, 2022, 2021 and 2020, respectively. We expect to
continue to incur significant expenses and increasing operating losses
for the foreseeable future. None of our product candidates has 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:
•
initiate, continue, or complete planned or ongoing clinical trials
of our current product candidates, including related support activities;
• 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, medical, commercial, and development
personnel; and
•
incur additional legal, accounting and other expenses in
operating as a public company.
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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 could 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.
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 troriluzole clinical program,
we conducted a Phase 2/3 clinical trial in SCA incorporating feedback
from the FDA in response to discussion that we had with the FDA
regarding proposed modifications to the scale for
assessment and rating of Ataxia, the primary endpoint in the trial. The
clinical trial failed to meet the primary endpoints, however SCA3
patients experienced a clinically meaningful improvement in ataxia
symptoms on troriluzole treatment. Given these findings and the
debilitating nature of SCA, we intend to interact with the FDA and or
EMA in the first half of 2023. If the FDA requires us to conduct
additional clinical trials of troriluzole, 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, 2022, we had cash, cash equivalents and
marketable securities of $465.3 million, excluding restricted cash of
$37.7 million. We expect that our existing cash, cash equivalents and
marketable securities will be sufficient to fund our planned operating
expenses, financial commitments and other cash requirements for at
least 12 months from the date of filing of this report. 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;
•
including drug
the costs and timing of future commercialization activities,
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manufacturing, marketing, sales and distribution, for any of our product
candidates for which we receive marketing approval;
•
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 may 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. 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.
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 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, licensing or funding
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.
Credit risk with respect to our investments or the financial
institutions at which we deposit funds could adversely affect us.
Financial instruments that expose us to concentrations of credit
risk consist of cash, cash equivalents, and short-term debt securities.
Market conditions and changing circumstances, many of which are
beyond our control, could reduce the value of our investments or
impair our ability to access our existing cash, cash equivalents or other
investments. For example, rising interest rates could negatively impact
the value of investments that are not held to maturity.
We maintain cash deposits that are in excess of the Federal
Deposit Insurance Corporation (“FDIC”) insurance limit in FDIC-
insured financial institutions. If any financial institution with which we
have a banking relationship were to be placed into receivership or
become insolvent in the future, we may be unable to access,
temporarily or over a longer-term, or we may lose, a portion of our
funds on deposit with that institution. For example, on March 10, 2023
and March 12, 2023, Silicon Valley Bank and Signature Bank,
respectively, were placed into receivership with the FDIC, which
resulted in all funds held at those banks being temporarily inaccessible
by their customers.
While we have no relationship with the financial institutions
above, any delay in our ability to access our cash, cash equivalents
and investments, or the loss of some or all of such funds, could result
in us not being able to pay our employees, vendors or others on a
timely basis, or at all, and could hinder us from being able to enter into
commercial arrangements that could be advantageous to us.
Conversely, if any of our counterparties are impacted by any banking
failures, that could impact their ability to transact with us. Any of the
foregoing could adversely impact, possibly materially, our business and
operations.
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Risks Related to the Development of Our Product Candidates
•
the prevalence and severity of adverse events experienced
Our current business depends entirely on the success of a
limited number of product candidates, which are in clinical
development. If we do not obtain or are delayed in obtaining
regulatory approval for and successfully commercialize one or
more of our product candidates, our business, financial condition
and results of operations could be materially impacted and we
may never become profitable.
Biotechnology product development is a highly speculative
undertaking and involves a substantial degree of risk. We do not have
any products that have received regulatory approval, and therefore we
have never generated any revenue from product sales, and we may
never be able to develop product candidates that receive regulatory
approval or are successfully commercialized after regulatory approval
is received. Consequently, the revenue-generating potential of our
business is unproven and uncertain. 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,
completion of our Phase 3 clinical trials of troriluzole in OCD, execution
of clinical trials for BHV-7000, including late-stage studies in epilepsy
and mood disorders, completion of a Phase 2/3 clinical trial of
troriluzole in glioblastoma, and completion of a Phase 3 clinical trial of
BHV-2000 in SMA. 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 we will be able to submit a new drug application (“NDA”), biologics
license application (“BLA”) or comparable applications in other
jurisdictions for any of our product candidates within the timeframes we
expect, or that any NDA, BLA or similar application we submit will be
accepted by the FDA or comparable foreign regulators for filing in a
timely manner or at all. 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. The
success of our product candidates will depend on various factors,
including:
• completing clinical trials that demonstrate our product
candidates’ efficacy and safety;
•
authorities;
receiving marketing approvals from applicable regulatory
• completing any post-marketing studies required by applicable
regulatory authorities;
• establishing commercial manufacturing capabilities;
•
operations;
launching commercial sales, marketing and distribution
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.
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. Our failure to achieve one
or more of these factors in a timely manner or at all could 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.
Clinical testing is expensive and can take many years to
complete, and delay or failure can occur at any time during the clinical
trial process.
For example, in September 2021, we reported negative topline
results from our Phase 3 clinical trial evaluating verdiperstat compared
to placebo for the treatment of participants with MSA. In September
2022, we reported negative topline results from the Phase 2/3
HEALEY ALS Platform trial evaluating verdiperstat compared to
placebo for the treatment of participants with ALS.
In addition, 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 many 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. In later-
stage clinical trials, we will likely be subject to more rigorous statistical
analyses than in completed earlier stage clinical trials.
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
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and type of the patient populations, adherence to the dosing regimen,
and the rate of dropout among clinical trial participants.
If we fail to produce positive results in our planned preclinical
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.
Interim topline and preliminary data from our clinical trials
that we announce or publish from time to time may change as
more patient data become available and are subject to audit and
verification procedures that could result in material changes in
the final data.
From time to time, we may publish interim topline or preliminary
data from our clinical trials. Interim data from clinical trials that we may
complete are subject to the risk that one or more of the clinical
outcomes may materially change as patient enrollment continues and
more patient data become available. Preliminary or topline data also
remain subject to audit and verification procedures that may result in
the final data being materially different from the preliminary data we
previously published. As a result, interim and preliminary data should
be viewed with caution until the final data are available. Adverse
differences between preliminary or interim data and final data could
significantly harm our reputation and business prospects.
We have limited experience in drug discovery and drug
development.
Because we in-licensed some of our investigational agents from
other companies, including BHV-2000 from BMS and BHV-5000 and
verdiperstat 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 the other companies from which we
licensed our investigational agents to have conducted such research
and development in accordance with the applicable protocol, legal,
regulatory and scientific standards, accurately reported the results of
all clinical trials conducted prior to our acquisition of the applicable
product candidate, and 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 need to be redesigned, enroll an adequate
number of patients on time or begin 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 or other regulators disagreeing as to the design,
protocol or implementation of our clinical trials;
•
the delay or refusal of regulators (including the FDA) or
institutional review boards (“IRBs”) to authorize us to commence a
clinical trial;
•
regulators (including the FDA), IRBs, ethics committees of the
institutions at which trials are being conducted or the data safety
monitoring board for such trials requiring that we or our investigators
suspend or terminate clinical research for various reasons, including
noncompliance with regulatory requirements (including the FDA’s
current Good Clinical Practice (“GCP”) regulations) or our clinical
protocols, safety concerns, adverse side effects, or lack of adequate
funding to continue the clinical trial, among others;
• 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 (including due to reports from
testing of similar therapies) that could cause us to suspend or
terminate a trial if we find that the participants are being exposed to
unacceptable health risks;
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•
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;
• 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.
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.
The regulatory approval processes of the FDA and
comparable foreign regulatory agencies are lengthy, time-
consuming and unpredictable, and if we are ultimately unable to
obtain regulatory approval for our product candidates, our
business will be materially harmed.
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 an NDA or BLA from the FDA or
approval from the EMA, NMPA or other applicable foreign regulatory
agency. 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 those beyond our control, such as 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.
Prior to obtaining approval to commercialize a product candidate
in any jurisdiction, we must demonstrate to the satisfaction of the FDA,
EMA, NMPA or any comparable foreign regulatory agency, that such
product candidates are safe and effective for their intended uses. The
FDA, EMA, NMPA 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, NMPA 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, NMPA 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, NMPA or the applicable foreign regulatory agency that our
product candidates are safe and effective for their proposed
indications, or that the clinical and other benefits of our product
candidates outweigh any safety or other perceived risks;
•
the FDA’s, EMA’s, NMPA’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, NMPA’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, NMPA’s or the applicable foreign regulatory
agency’s failure to approve the manufacturing processes or facilities of
third-party manufacturers with which we contract; and
•
the potential for approval policies or regulations of the FDA,
EMA, NMPA 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 randomized, controlled clinical
trial of troriluzole for the treatment of SCA, we undertook discussions
with the FDA regarding the acceptability of the primary endpoint and
necessary
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secondary endpoints, including our proposal to use a modified SARA
scale. In our first Phase 2/3 clinical trial, the FDA stated that while
certain items measured by the SARA scale appeared capable of
reflecting a clinically meaningful benefit for patients depending on how
the scoring of those items is defined, the use of the SARA scale was
not appropriate as a primary endpoint in the trial. Based on our post-
hoc analyses of data from the open-label extension phase of the trial,
we proposed modifications to the SARA scale that we believe may
address some of these shortcomings. Based on feedback received
from the FDA, we incorporated trial design modifications that include
utilization of a modified SARA scale. However, notwithstanding the
feedback that we have received from the FDA, there remains
substantial risk that the FDA or any foreign regulatory agency may
nevertheless conclude that results obtained using the modified SARA
scale would not be an adequate basis for approval.
In addition, in our Phase 3 clinical trial evaluating the efficacy and
safety of troriluzole in adult patients with SCA, the primary endpoint,
change from baseline to week 48 on the modified SARA scale, did not
reach statistical significance in the overall SCA population as there
was less than expected disease progression over the course of the
study. Post-hoc analysis of efficacy measures by genotype suggests a
treatment effect in patients with the SCA Type 3 ("SCA3") genotype.
There is substantial risk that the FDA, EMA, NMPA or the applicable
foreign regulatory agency may disagree with the interpretation of our
data, and there can be no assurance that any such regulatory agency
will find the data sufficient to support approval, or that we will not be
required to conduct additional testing on the safety and efficacy of
troriluzole.
We intend to interact with the FDA and/or EMA in the first half of
2023 but have not yet decided on the format of such an interaction. We
could seek advice through various formal or informal interactions with
regulatory agencies or we could choose to submit an NDA if we
believe that is warranted from the results of our ongoing post-hoc
analyses.
We generally plan to seek regulatory approval to commercialize
our product candidates in the United States, the European Union and
other key global markets, which requires compliance 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. If we fail to obtain approval in any
jurisdiction, the geographic market for our product candidates could be
limited.
Moreover, even if we were to obtain approval to market any
product candidate we develop, regulatory
authorities may approve any of our product candidates for fewer or
more limited indications than we request, may not approve the price
we intend to charge for our products, may grant approval contingent on
the performance of costly post-marketing clinical trials, or may approve
a product candidate with a label that does not include the labeling
claims necessary or desirable for the successful commercialization of
that product candidate. Any of the foregoing scenarios could materially
harm the commercial prospects for our product candidates.
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 September 2021 we reported negative topline
results from a Phase 3 clinical trial to evaluate the efficacy and safety
of verdiperstat in participants with MSA. Results of the trial showed
that verdiperstat did not statistically differentiate from placebo on the
prespecified primary efficacy measure, nor on the key secondary
efficacy measures. In September 2022, we reported negative topline
results from the Phase 2/3 HEALEY ALS Platform trial evaluating
verdiperstat compared to placebo for the treatment of participants with
ALS. At this time, we do not have plans to pursue any additional
clinical trials evaluating verdiperstat in ALS, and we may evaluate its
potential in other disease indications.
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 or a foreign regulatory agency. 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 the development of certain product
candidates 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. 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
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prevented further development of the compound in the tested
indication.
•
initiation of regulatory investigations and government
enforcement actions;
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, delay the clinical trial, and
prevent receipt of regulatory approval from the FDA and other
regulators. 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 by their nature 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.
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. However, 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 that had not previously been identified, 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 similar program 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;
•
the product may become less competitive;
•
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.
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. 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:
•
•
trial;
the eligibility criteria for the trial in question;
the perceived risks and benefits of the product candidate in the
• 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;
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;
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•
•
•
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.
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. 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 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
or identify patients who should not use our product candidates.
Although we maintain product liability insurance coverage, such
insurance may not be adequate to cover all our liabilities. 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 suitable
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
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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 such product candidates or be able to
achieve or sustain profitability.
To the extent that we enter into collaboration agreements with
respect to marketing, sales or distribution of any approved product, our
product revenue may be lower than if we directly marketed or sold
such product. 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.
We operate in a highly competitive and rapidly changing
industry. Failure to compete successfully could adversely affect
our business, financial condition and results of operations.
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
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 troriluzole, 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 SCA in the United States. We are also developing troriluzole for the
potential treatment of OCD and other indications. If we continue to
pursue these indications,
we would face substantial competition from companies that develop or
sell products that treat OCD. With respect to BHV-5000, which we are
developing for the treatment of neuropsychiatric conditions the market
size and competition will depend on each indication.
Many of the companies which we are competing with or which
we may compete with 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. Mergers and
acquisitions in the biopharmaceutical industry could result in even
more resources being concentrated among 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 the biopharmaceutical industry. Our
competitors may succeed in developing, acquiring or licensing, on an
exclusive basis, products that are more effective or less costly than
any product candidates 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, and in
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
candidates 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
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and other third-party payors, are 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 third-party payors 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. 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 becomes 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. Our competitors may offer their products and services on a
less expensive basis to gain coverage and reimbursement from third-
party payors. 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.
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, 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 healthcare providers who use
such devices or therapies.
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. 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 healthcare services to contain or reduce costs of healthcare 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 adequate 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, promoting,
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 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
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Phase 4 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.
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. We may not be able to
adapt to changes in existing requirements or the adoption of new
requirements or policies. 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 requesting that we initiate a product recall;
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. Such efforts may require more resources than are typically
required due to the complexity and uniqueness of our product
candidates. 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. 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. 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, cost, convenience and ease of administration, and
other potential advantages compared to alternative treatments,
including any similar generic treatments;
• suspension or withdrawal of our marketing authorizations;
• effectiveness of sales and marketing efforts;
• suspension of any ongoing clinical trials;
•
refusal to approve pending applications or supplements to
applications submitted by us;
•
•
refusal to permit the import or export of products; or
requiring us to conduct additional clinical trials, change our
product labeling or submit additional applications for marketing
authorization.
Moreover, the FDA strictly regulates the promotional claims that
may be made about drug products. In particular, a product may not be
promoted for uses that are not approved by the FDA as reflected in the
product’s approved labeling. 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 civil, criminal and
administrative penalties.
If any of these events occurs, our ability to sell such product may
be impaired, and we may incur substantial additional expenses to
comply with regulatory requirements, which could adversely affect
•
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; and
• any restrictions on the use of our products, if approved,
together with other medications.
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
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market for our product candidates could be smaller than our estimates
of the potential market opportunity, our revenue from product sales
may be limited and we may be unable to achieve or maintain
profitability.
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.
If the FDA or comparable foreign regulatory authorities
Risks Related to Our Dependence on Third Parties
approve generic versions of any of our products that receive
marketing approval, or such authorities do not grant our products
sufficient 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
abbreviated new drug applications (“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 U.S. Federal Food, Drug, and Cosmetic Act
(“FDCA”) provides a period of five years of non-patent exclusivity for a
new drug containing a new chemical element (“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 troriluzole, a prodrug of riluzole will be
treated as NCEs under current FDA interpretations 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. 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.
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 have historically conducted, and we intend to continue to
conduct our clinical trials using our own clinical resources, while also
leveraging expertise and assistance from medical institutions, clinical
investigators, contract laboratories and other third parties, such as
contract research organizations (“CROs”) as appropriate. We are
reliant upon such third parties to 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-parties, 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 good laboratory practices (“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 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.
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While we will have agreements governing their activities, we are
not, and will not be able to control whether or not our CROs 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. If our CROs do not successfully carry out
their contractual duties or obligations, or 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 relationships with these CROs terminate, 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 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.
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 active pharmaceutical ingredients
(“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. In addition, our results of operations and cash flows could
be adversely impacted by any inability to obtain favorable terms from
our suppliers, including any acceleration of payment terms to our
suppliers and/or the imposition of more restrictive credit terms and
other contractual requirements.
While we have auditing rights with all our current manufacturing
counterparties, 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 our contract suppliers or manufacturers fail to achieve
and maintain compliance with applicable laws and regulatory
requirements, our business could be adversely affected in a number of
ways, and cause, among other things:
• 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.
Further, if the safety of any product or product candidate or
component is compromised due to a failure to adhere to applicable
laws and regulatory requirements, or for other reasons, we may not be
able
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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 may rely on certain third parties as the sole source of the
materials they supply or the finished products they manufacture. 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 or manufacturer fails to supply or
manufacture, as applicable, product on a timely basis or in the
requested amount, fails to meet regulatory requirements or our
specifications, 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 suppliers, 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 manufacturers, 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 or manufacturing facilities, which would
negatively impact
our ability to develop, obtain regulatory approval of or market our
product candidates, if approved.
We expect to continue to depend on third-party contract suppliers
and manufacturers for the foreseeable future, but supply and
manufacturing arrangements do not guarantee that a contract supplier
or manufacturer will provide services adequate for our needs. We and
our contract suppliers and manufacturers may attempt 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 damages 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.
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 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.
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
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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. 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 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 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 and commercialize our product candidates. If
these collaborations are not successful, or if we are not able to
establish or maintain these collaborations, our business could be
harmed.
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 candidates. Furthermore, we may
find 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.
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, and the terms of any collaborations or
other arrangements that we may establish may not be favorable to us.
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 regulatory authorities, the
potential market for the subject product candidate, the costs and
complexities of manufacturing and delivering such product candidate
to patients, competing or alternative 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.
We may also be restricted under existing license agreements from
entering into agreements on certain terms with potential collaborators.
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.
The success of our collaboration arrangements will depend
heavily on the efforts and activities of our collaborators. Collaborations
are subject to numerous risks, including for example, that the
collaborators may not: adequately perform their obligations under the
collaboration agreement; devote sufficient resources to the
collaboration to ensure success; or agree with us on the strategy or
tactical aspects of the collaboration.
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.
Risks Related to Regulatory Compliance
We are required to comply with a wide variety of laws and
regulations, and are subject to regulation by various federal, state
and foreign agencies, and our failure to comply with existing and
future regulatory requirements could adversely affect our results
of operations and financial condition. 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.
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Our operations are subject to a broad array of regulatory
• new requirements to report certain financial arrangements with
requirements globally. We are subject to federal, state, local,
international and transnational laws and regulations, including the
operating, quality and security standards of the FDA, the U.S.
Department of Health and Human Services (“HHS”), and other
regulatory authorities such as the EMA, and in the future, any changes
to such laws and regulations could adversely affect us. In particular,
changes in the FDA’s regulation of drug discovery and development or
manufacturing processes could adversely affect our results of
operations and financial condition. We may be required to register for
permits and/or licenses with the FDA, HHS, or other regulatory
authorities such as the EMA, and there can be no assurance that we
will be able to maintain or renew existing permits, licenses or other
regulatory approvals or obtain, without significant delay, future permits,
licenses or other approvals needed for the operation of our business.
Any noncompliance by us with applicable laws and regulations or the
failure to maintain, renew or obtain necessary permits and licenses
could have an adverse effect on our results of operations and financial
condition.
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 Affordable Care Act (“ACA”), as amended
by the Health Care and Education Reconciliation Act of 2010, or
collectively, ACA, was enacted, which substantially changed the way
healthcare is financed by both governmental and private insurers.
Since its enactment, there have been judicial, executive and
Congressional challenges to certain aspects of the ACA. On June 17,
2021, the U.S. Supreme Court dismissed the most recent judicial
challenge to the ACA brought by several states, without specifically
ruling on the ACA’s constitutionality. 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 70% 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;
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;
• 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 the Center for Medicare Innovation at the
Centers for Medicare and Medicaid Services (“CMS”), to test
innovative payment and service delivery models to lower Medicare and
Medicaid spending, potentially including prescription drug spending.
Moreover, payment methodologies may be subject to changes in
healthcare legislation and regulatory initiatives. For example, CMS is
developing new payment and delivery models, such as bundled
payment models. HHS moved 30% of Medicare payments to
alternative payment models tied to the quality or value of services in
2016. Additionally, HHS had set a goal of moving 50% of Medicare
payments into these alternative payment models by the end of 2018,
but in 2019, it discontinued this performance goal and replaced it with
a new developmental goal to increase the percentage of Medicare
health care dollars tied to APMs incorporating downside risk, with a
target of 40% for fiscal year 2021. 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.
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Further, there have been several U.S. congressional inquiries
and proposed and enacted state and federal legislation designed to,
among other things, bring more transparency to drug pricing, review
the relationship between pricing and manufacturer patient programs,
reduce the costs of drugs under Medicare and reform government
program reimbursement methodologies for drug products. HHS has
already started the process of soliciting feedback on some of these
measures and, at the same time, is immediately implementing others
under its existing authority. For example, CMS allows Medicare
Advantage Plans the option to use step therapy for Part B drugs in
2019, CMS finalized a new rule that would require direct-to-consumer
television advertisements of prescription drugs and biological products,
for which payment is available through or under Medicare or Medicaid,
to include in the advertisement the Wholesale Acquisition Cost, or list
price, of that drug or biological product. However, this rule was struck
down by a federal court before it went into effect. Although some of
these and other proposals will require authorization through additional
legislation to become effective, members of Congress and the Biden
Administration have stated that they will continue to seek new
legislative and administrative measures to control drug costs. In
response to an Executive Order from President Biden, the Secretary of
HHS issued a comprehensive plan for addressing high drug prices that
describes a number of legislative approaches and identifies
administrative tools to address the high cost of drugs. Democrats
included drug pricing reform provisions reflecting elements of the plan
in a broader spending package in late 2021—such as capping
Medicare Part D patients’ out-of-pocket costs, establishing penalties
for drug prices that increase faster than inflation in Medicare, and
authorizing the federal government to negotiate prices on certain
select, high-cost drugs under Medicare Parts B and D. 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.
On May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan
McLinn, and Matthew Bellina Right to
Try Act of 2017 was signed into law. The law, among other things,
provides a federal framework for patients to access certain
investigational new drug products that have completed a Phase 1
clinical trial. Under certain circumstances, eligible patients can seek
treatment without enrolling in clinical trials and without obtaining FDA
approval under the FDA expanded access program.
In the European Union (“EU”), 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 healthcare 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
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.
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Our business operations and current and future relationships
with investigators, healthcare 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 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 (“HITECH”) enacted as part of the
American Recovery and Reinvestment Act of 2009, 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, on
covered entities subject to HIPAA (i.e., health plans, healthcare
clearinghouses and certain 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, to safeguard the privacy, security and transmission of
individually identifiable health information from any unauthorized use
or disclosure;
•
the FDCA, which prohibits, among other things, the
adulteration or misbranding of drugs, biologics and medical devices;
•
the U.S. federal 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 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;
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• 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;
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.
We may not be able to obtain or maintain orphan drug
• state laws that require pharmaceutical companies to comply
designation or exclusivity for our product candidates.
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 and local laws that require the registration of
pharmaceutical sales representatives; and
• state laws governing the privacy and security of personal
information, including personal 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.
Ensuring that our internal operations and current 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
We have obtained orphan drug designation in the United States
for troriluzole in SCA. 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.
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.
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We are subject to changing law and regulations regarding
regulatory matters, corporate governance and public disclosure
that have increased both our costs and the risk of non-
compliance.
We are subject to rules and regulations by various governing
bodies, including, for example, the SEC, which is charged with the
protection of investors and the oversight of companies whose
securities are publicly traded, and to new and evolving regulatory
measures under applicable law, including the laws of the BVI. Our
efforts to comply with new and changing laws and regulations have
resulted in and are likely to continue to result in, increased general and
administrative expenses and a diversion of management time and
attention from revenue-generating activities to compliance activities.
Moreover, because these laws, regulations and standards are
subject to varying interpretations, their application in practice may
evolve over time as new guidance becomes available. This evolution
may result in continuing uncertainty regarding compliance matters and
additional costs necessitated by ongoing revisions to our disclosure
and governance practices. If we fail to address and comply with these
regulations and any subsequent changes, we may be subject to
penalty and our business may be harmed.
Potential changes to regulatory legislation in the British
Virgin Islands could lead to increased costs for us to comply with
additional regulatory and reporting requirements.
As the global regulatory and tax environment evolves, we may be
subject to new or different statutory and regulatory requirements. For
example, on January 1, 2019, the Economic Substance (Companies
and Limited Partnerships) Act, 2018 of the British Virgin Islands (the
“Economic Substance Act”) came into force and was amended on
October 1, 2019 and June 29, 2021 and remains subject to further
amendments, additional regulations and guidance on interpretation
from the regulator. It is difficult to predict what impact the Economic
Substance Act and its associated regulations and guidance or changes
in the interpretation of these laws or regulations could have on us.
However, compliance with various additional obligations may create
additional costs that may be borne by us or otherwise affect our
management and operation.
Risks Related to Our Intellectual Property
We could lose market exclusivity earlier than expected.
We own or license patents in the U.S. and foreign countries that
protect our products, their methods of use and manufacture, as well as
other innovations relating to the advancement of our science to help
bring new therapies to patients. We also develop brand names and
trademarks for our products to differentiate them in the marketplace.
We consider the overall protection of our patents, trademarks, licenses
and other intellectual property rights to be of material value and act to
protect
these rights from infringement. 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 other
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
development programs.
In the biopharmaceutical industry, a substantial portion of an
innovative product’s commercial value is usually realized during the
period in which the product has market exclusivity. A product’s market
exclusivity is generally determined by two forms of intellectual
property: patent rights held by the innovator company and any
regulatory forms of exclusivity to which the innovative drug is entitled.
Patents are a key determinant of market exclusivity for most
pharmaceuticals. Patents provide the innovator with the right to
exclude others from practicing an invention related to the medicine.
Patents may cover, among other things, the active ingredient(s),
various uses of a drug product, discovery tools, pharmaceutical
formulations, drug delivery mechanisms and processes for (or
intermediates useful in) the manufacture of products. Protection for
individual products extends for varying periods in accordance with the
expiration dates of patents in the various countries. The protection
afforded, which may also vary from country to country, depends upon
the type of patent, its scope of coverage and the availability of
meaningful legal remedies in the country.
Market exclusivity can also be influenced by regulatory data
protection (“RDP”). Many developed countries provide certain non-
patent incentives for the development of medicines. For example, in
the U.S., the EU, United Kingdom, Japan, and certain other countries,
RDP intellectual property rights are offered to: (i) provide a time period
of data protection during which a generic company is not allowed to
rely on the innovator’s data in seeking approval; (ii) restore patent term
lost during drug development and approval; and (iii) provide incentives
for research on medicines for rare diseases, or orphan drugs, and on
medicines useful in treating pediatric patients. These incentives can
extend the market exclusivity period on a product beyond the patent
term.
In the United States, biopharmaceutical products are protected
by patents with varying terms depending on the type of patent and the
filing date. A significant portion of a product’s patent life, however, is
lost during the time it takes an innovative company to develop and
obtain regulatory approval of a new drug. As
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compensation, at least in part, for the lost patent term due to regulatory
review periods, the innovator may, depending on a number of factors,
apply to the government to restore lost patent term by extending the
expiration date of one patent up to a maximum term of five years,
provided that the extension cannot cause the patent to be in effect for
more than 14 years from the date of drug approval. A company
seeking to market an innovative pharmaceutical in the U.S. must
submit a complete set of safety and efficacy data to the FDA. If the
innovative pharmaceutical is a chemical product, the company files an
NDA. If the medicine is a biological product, a BLA is filed. The type of
application filed affects RDP exclusivity rights.
A competitor seeking to launch a generic substitute of small
molecule drug in the U.S. must file an ANDA with the FDA. In the
ANDA, the generic manufacturer needs to demonstrate only
“bioequivalence” between the generic substitute and the approved
NDA drug. The ANDA relies upon the safety and efficacy data
previously filed by the innovator in its NDA. An innovator company is
required to list certain of its patents covering the medicine with the
FDA in what is commonly known as the FDA’s Orange Book. The FDA
cannot approve an ANDA until after the innovator’s listed patents
expire unless there is a successful patent challenge. However, after
the innovator has marketed its product for four years, a generic
manufacturer may file an ANDA and allege that one or more of the
patents listed in the Orange Book under an innovator’s NDA is either
invalid or not infringed (a Paragraph IV certification). The innovator
then must decide whether to file a patent infringement suit against the
generic manufacturer. From time to time, ANDAs, including Paragraph
IV certifications, are filed with respect to certain of our products.
In addition to patent protection, certain innovative pharmaceutical
products can receive periods of regulatory exclusivity. An NDA that is
designated as an orphan drug can receive seven years of exclusivity
for the orphan indication. During this time period, neither NDAs nor
ANDAs for the same drug product can be approved for the same
orphan use. A company may also earn six months of additional
exclusivity for a drug where specific clinical studies are conducted at
the written request of the FDA to study the use of the medicine to treat
pediatric patients, and submission to the FDA is made prior to the loss
of basic exclusivity. Medicines approved under an NDA can also
receive several types of RDP. An innovative chemical pharmaceutical
product is entitled to five years of RDP in the U.S., during which the
FDA cannot approve generic substitutes. If an innovator’s patent is
challenged, as described above, a generic manufacturer may file its
ANDA after the fourth year of the five-year RDP period. A
pharmaceutical drug product that contains an active ingredient that has
been previously approved in an NDA, but is approved in a new
formulation, but not for the drug itself, or for a new indication on the
basis of new clinical studies, may
receive three years of RDP for that formulation or indication.
In the U.S., the FDA can approve products that are similar to (but
not generic copies of) innovative biologics on the basis of less
extensive data than is required by a full BLA. After an innovator has
marketed its product for four years, any manufacturer may file an
application for approval of a “biosimilar” version of the innovator
product. However, although an application for approval of a biosimilar
version may be filed four years after approval of the innovator product,
qualified innovative biological products will receive 12 years of
regulatory exclusivity, meaning that the FDA may not approve a
biosimilar version until 12 years after the innovative biological product
was first approved by the FDA. The law also provides a mechanism for
innovators to enforce the patents that protect innovative biological
products and for biosimilar applicants to challenge the patents. Such
patent litigation may begin as early as four years after the innovative
biological product is first approved by the FDA.
In the U.S., the increased likelihood of generic and biosimilar
challenges to innovators’ intellectual property has increased the risk of
loss of innovators’ market exclusivity. First, generic companies have
increasingly sought to challenge innovators’ basic patents covering
major pharmaceutical products. Second, statutory and regulatory
provisions in the U.S. limit the ability of an innovator company to
prevent generic and biosimilar drugs from being approved and
launched while patent litigation is ongoing. As a result of all of these
developments, it is not possible to predict the length of market
exclusivity for a particular product with certainty based solely on the
expiration of the relevant patent(s) or the current forms of regulatory
exclusivity.
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. 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.
A typical route used by innovator companies to obtain marketing
authorization of pharmaceutical products in the EU is through the
“centralized procedure.” A company seeking to market an innovative
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pharmaceutical product through the centralized procedure must file a
complete set of safety data and efficacy data as part of a Marketing
Authorisation Application (“MAA”) with the EMA. After the EMA
evaluates the MAA, it provides a recommendation to the EC and the
EC then approves or denies the MAA. It is also possible for new
chemical products to obtain marketing authorization in the EU through
a “mutual recognition procedure,” in which an application is made to a
single member state, and if the member state approves the
pharmaceutical product under a national procedure, then the applicant
may submit that approval to the mutual recognition procedure of some
or all other member states. After obtaining marketing authorization
approval, a company must obtain pricing and reimbursement for the
pharmaceutical product, which is typically subject to member state law.
In certain EU countries, this process can take place simultaneously
while the product is marketed but in other EU countries, this process
must be completed before the company can market the new product.
The pricing and reimbursement procedure can take months and
sometimes years to complete. Throughout the EU, all products for
which marketing authorizations have been filed after
October/November 2005 are subject to an “8+2+1” regime. Eight years
after the innovator has received its first community authorization for a
medicinal product, a generic company may file a MAA for that product
with the health authorities. If the MAA is approved, the generic
company may not commercialize the product until after either 10 or 11
years have elapsed from the initial marketing authorization granted to
the innovator. The possible extension to 11 years is available if the
innovator, during the first eight years of the marketing authorization,
obtains an additional indication that is of significant clinical benefit in
comparison with existing treatments. In contrast to the U.S., patents in
the EU are not listed with regulatory authorities. Generic versions of
pharmaceutical products can be approved after data protection
expires, regardless of whether the innovator holds patents covering its
drug. Thus, it is possible that an innovator may be seeking to enforce
its patents against a generic competitor that is already marketing its
product. Also, the European patent system has an opposition
procedure in which generic manufacturers may challenge the validity
of patents covering innovator products within nine months of grant. In
general, EU law treats chemically-synthesized drugs and biologically-
derived drugs the same with respect to intellectual property and data
protection. In addition to the relevant legislation and annexes related to
biologic medicinal products, the EMA has issued guidelines that outline
the additional information to be provided for biosimilar products, also
known as generic biologics, in order to review an application for
marketing approval.
In Japan, medicines of new chemical entities are generally
afforded eight years of data exclusivity for approved indications and
dosage. Patents on pharmaceutical products are enforceable. Generic
copies can receive regulatory approval after data exclusivity and
patent expirations. As in the U.S., patents
in Japan may be extended to compensate for the patent term lost
during the regulatory review process. In general, Japanese law treats
chemically-synthesized and biologically-derived drugs the same with
respect to intellectual property and market exclusivity.
In countries outside of the U.S., the EU and Japan, there is a
wide variety of legal systems with respect to intellectual property and
market exclusivity of pharmaceuticals. Most other developed countries
utilize systems similar to either the U.S. or the EU. Among developing
countries, some have adopted patent laws and/or regulatory exclusivity
laws, while others have not. Some developing countries have formally
adopted laws in order to comply with World Trade Organization
(“WTO”) commitments, but have not taken steps to implement these
laws in a meaningful way. Enforcement of WTO actions is a long
process between governments, and there is no assurance of the
outcome.
We are dependent on licensed intellectual property in our
business. If we are unable to obtain licenses from third parties on
commercially reasonable terms or lose our rights to such
licensed intellectual property, or if our rights are determined to be
narrower than we understand them to be, we may not be able to
continue developing or commercializing our product candidates.
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, including, for example, a license agreement with ALS
Biopharma and Fox Chase Chemical Diversity Center, Inc., pursuant to
which we were assigned intellectual property rights relating to
troriluzole, license agreements with AstraZeneca, pursuant to which
we were granted exclusive licenses relating to BHV-5500, a license
agreement with Bristol-Myers Squibb, pursuant to which we were
granted an exclusive license to BHV-2000, and a license agreement
with KU Leuven, pursuant to which we were granted an exclusive
license to develop and commercialize the TRPM3 antagonist platform.
We may 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, such as non-compete periods for
certain collaboration targets and rights of first negotiation for
development of certain programs. Typically, in our licenses, we have
control over the filing, prosecution, maintenance and enforcement of
the licensed intellectual property. However, in some cases, we may not
control prosecution of the licensed intellectual property, or may not
have the first right to enforce such 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
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licensor may allege that we have breached our license agreement, and
may 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, manufacture or 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 of rights under
certain of our intellectual property and information related to the
product candidate being developed under the license, such as
regulatory information. If our licensors fail to comply with their
obligations under these agreements, such as, for example, by failing to
maintain or enforce patents licensed to us, exclusivity relating to the
products covered by the license may be diminished or lost. Our rights
under license agreements could be determined to be narrower than we
understand them to be. Also, if it is found that our licensors were not
the original inventors of the licensed intellectual property, or were not
the first to file patent applications, then we may lose rights to the
licensed intellectual property.
Licensing of intellectual property is important to our business and
involves complex legal, business and scientific issues. Disputes
between us and our licensors have arisen and may arise in the future.
For example, 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, including our right to sublicense
patents and other rights to third parties;
• 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 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.
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, manufacture or commercialize the affected product
candidates.
It may be necessary or desirable for us to use the patented or
proprietary technology of third parties to
commercialize our products, in which case we would seek 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 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
payment of 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.
Patent terms may not provide exclusivity for our product
candidates for an adequate amount of time for us to realize
commercial benefits.
Patents have a limited lifespan. In the United States and most of
the world, the statutory expiration of a patent is generally 20 years
from the first filing date. 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 products,
including generic products. Given the amount of time required for the
development, testing and regulatory review of new product candidates,
patents protecting such product candidates may not provide us with
exclusivity for an adequate amount of time for us to realize commercial
benefits.
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 restoration 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, subject
to a statutory maximum of fourteen (14) years from the regulatory
approval and an additional six months of pediatric exclusivity if
available. Similar regulations regarding patent term extensions, or
supplementary protection certificates, are available in some countries
such as the European Union, United Kingdom, Japan and Korea.
However, we may not receive a patent term restoration, a
supplementary protection certificate or extension if we fail to satisfy
applicable requirements. Moreover, the length of the extension could
be less than we request. If we are unable to obtain a patent term
restoration, a supplementary protection certificate or extension, or the
term 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.
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Third parties may seek to invalidate our patents.
Once granted, patents may remain open to invalidity challenges
including opposition, interference, re-examination, post-grant review,
inter partes review, nullification or derivation actions 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.
Generic manufacturers seeking to launch a generic substitute of
small molecule drug in the U.S. typically engage in patent challenges.
We expect that as early as four (4) years after the approval of our
products, one or more generic manufactures may allege that one or
more of the patents listed in the Orange Book under our NDA is either
invalid or not infringed (a Paragraph IV certification). We then must
decide whether to file a patent infringement suit against such generic
manufacturer(s). 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.
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.
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.
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,
in the context of seeking approval for one of our product candidates
subject to approval via Section
505(b)(2), we were required to file a Paragraph IV certification against
any patents of a third party, we would additionally be at risk of an
automatic stay if litigation is initiated, thereby potentially delaying our
approval or market entry. Defense of these claims, regardless of their
merit, would involve substantial litigation expense and would be a
substantial diversion of resources from our business.
In the event of a successful claim of infringement against us, we
may have to pay substantial damages, 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.
In addition to claims of infringement made by third parties against
us, we may file claims of infringement against third parties who
infringe, or misappropriate, our patents or those of our licensors. This
can occur as a counter claim in an infringement suit against us or as a
direct claim against the third party. 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. The outcome following
legal assertions of invalidity and unenforceability is unpredictable.
Other risk factors relating to our intellectual property.
In addition to the risk factors described above, we consider the
items below to be relevant for consideration in the assessment of the
Company’s intellectual property position.
• 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. For example, 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., 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
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uncertainty with regard to our ability to obtain patents in the future,
decisions by courts may lead to legislation impacting our ability to
obtain or enforce our intellectual property.
• Our ability to enforce our intellectual property outside of the
U.S. is dependent on the laws of jurisdiction in which the alleged
infringement occurred, the ability to engage in discovery to obtain
evidence and the availability of meaningful recoveries, e.g., damages
and injunctions. The laws of certain countries, particularly certain
developing countries, do not favor the enforcement of patents, trade
secrets and other intellectual property, particularly those relating to
biotechnology products, which could make it difficult for us to stop the
infringement of our patents or marketing of competing products in
violation of our proprietary rights. As a result, our business may be
harmed by limitations on our ability to protect our technology through
the enforcement of our intellectual property in certain countries outside
the U.S.
• The U.S. government may seek to exercise its rights under the
Bayh-Dole Act of 1980 in programs that have received government
funding. This exercise of rights could require us to grant exclusive,
partially exclusive, or non-exclusive licenses to any of these inventions
to a third party the U.S. Government 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”).
• We 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 confidentiality agreements with parties who have access
to them, such as our employees, third party collaborators, contract
manufacturers, consultants, advisors and other third parties. An
unauthorized disclosure or use of our trade secrets can have an
adverse impact on our business.
• Other innovator companies may independently develop
alternative technologies to our technologies without infringing our
intellectual property rights, such as, for example, by developing
compounds that function according to the same mechanism of action
as our compounds, but are chemically distinct from ours and are not
covered by the claims of the patents that we own or control.
• Litigation involving intellectual property can be generally time
consuming and expensive. Litigation or other legal proceedings
relating to intellectual property claims 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 effect on our
valuation.
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.
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;
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•
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. We are subject to U.S. laws governing international business
activities, including U.S. economic sanctions, export controls and anti-
corruption laws, including the 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. If our employees or agents
violate our policies or we fail to maintain adequate record keeping and
internal accounting practices to accurately record our transactions, we
may be subject to regulatory sanctions. 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 SEC also may suspend or bar issuers
from trading securities on U.S. exchanges for violations of the FCPA’s
accounting provisions. Violations of U.S. economic sanctions, export
controls and anti-corruption laws, or allegations of such acts, could
damage our reputation and subject us to civil or criminal investigations
in the United States and in other jurisdictions and related shareholder
lawsuits, could lead to substantial civil and criminal, monetary and
nonmonetary penalties and could cause us to incur significant legal
and investigatory fees which could adversely affect our business,
consolidated financial condition and results of operations.
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 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
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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 Medicaid, contractual damages, reputational harm, 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.
We may be subject to securities litigation, which is expensive
and could divert management attention.
Our share price may be volatile, and in the past companies that
have experienced volatility in the market price of their shares have
been subject to securities class action litigation. This risk is especially
relevant for us because biotechnology companies have experienced
significant share 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 individually identifiable
health information or the 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.
Additionally, the collection, use, disclosure, transfer, or other
processing of personal data regarding individuals in the EU, including
date concerning health, is subject to the EU General Data Protection
Regulation, or GDPR, which became effective on May 25, 2018. The
GDPR is wide-ranging in scope and imposes numerous requirements
on companies that process personal data, including requirements
relating to processing data concerning health and other sensitive data,
obtaining consent of the individuals to whom the personal data relates
to process their personal data, providing information to individuals
regarding data processing activities, implementing safeguards to
protect the security and confidentiality of personal data, providing
notification of data breaches, and taking certain measures when
engaging third-party processors. The GDPR also imposes strict rules
on the transfer of personal data to countries outside the EU, including
the United States, and permits data protection authorities to impose
large penalties for violations of the GDPR, including potential fines of
up to €20 million or 4% of annual global turnover, whichever is greater.
The GDPR also confers a private right of action on data subjects and
consumer associations to lodge complaints with supervisory
authorities, seek judicial remedies, and obtain compensation for
damages resulting from violations of the GDPR.
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Risks Related to Ownership of Our Common Shares
• announcements relating to our arrangements with
An active trading market for our common shares may not be
sustained, or be liquid enough for investors to resell our common
shares quickly or at the market price.
AstraZeneca;
•
community;
failure to meet or exceed expectations of the investment
Our common shares began trading on the NYSE on October 4,
• actual or anticipated variations in our operating results;
2022. Although trading in our common shares has developed, we
cannot assure you that an active trading market will continue to
develop or be sustained or that any trading market will be liquid. If an
active market for our common shares 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. An inactive
market may also impair our ability to raise capital to continue to fund
operations by selling our common shares and may impair our ability to
acquire other companies or technologies by using our common shares
as consideration.
The trading price of our common shares may be volatile and
may fluctuate due to factors beyond our control, and purchasers
of our common shares could incur substantial losses.
Our share price may 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, our shareholders and 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 progress or delay in the commencement, enrollment and
the ultimate completion of clinical trials;
•
technological innovations or commercial product introductions
by us or competitors;
•
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;
• 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;
•
failure to attract or retain 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;
• other events and factors, many of which are beyond our
control; and
• other factors described in this “Risk Factors” section and
elsewhere in this Annual Report on Form 10-K.
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.
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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.
•
require that shareholder actions must be effected at a duly
called shareholder meeting and prohibit actions by our shareholders by
written consent;
•
limit the ability of members to requisition and convene general
The trading market for our common shares will depend in part on
meetings of members; and
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. Additional
equity research analysts may elect not to initiate, and our current
equity research analysts may not elect 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. We do
not have any control over the analysts or the content and opinions
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.
Anti-takeover provisions in our amended memorandum and
articles of association (“Amended 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 Amended Memorandum and Articles of
Association 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 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. Among other things, these provisions:
• establish a classified Board 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;
•
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;
• authorize our Board to issue preferred shares in one or more
series and to designate the price, rights, preferences, privileges and
restrictions of such preferred shares without any further vote or action
by our members 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.
Any provision of our Amended 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.
Substantially all of our total outstanding shares may be sold
freely 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 substantially all 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.
Immediately following the Distribution, substantially all of our common
shares became freely tradable, without restrictions or further
registration under the Securities Act, subject to certain restrictions
applicable to shares held by our affiliates as defined in Rule 144 under
the Securities Act.
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 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.
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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 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, reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements
and 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 in certain Securities Act registration statements. We
may take advantage of these exemptions until we are no longer an
“emerging growth company.” We will remain an “emerging growth
company” for up to five years after the effective date of the Registration
Statement on Form S-1, filed by the Company with the SEC on
October 18, 2022 (Reg. No. 333-267928), although we will lose that
status sooner if our revenues exceed $1.235 billion, if we issue more
than $1 billion in non-convertible debt in a three-year period, or if the
market value of our common shares that are held by non-affiliates
exceeds $700 million as of June 30 of a fiscal year. 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 than that of an otherwise comparable company
that does not avail itself of the same or similar exemptions.
We are a smaller reporting company, and the reduced
reporting requirements applicable to smaller reporting companies
may make our common shares less attractive to investors.
We are a “smaller reporting company” as defined in Rule 12b-2
under the Exchange Act. For as long as we continue to be a smaller
reporting company, we may take advantage of exemptions from
various reporting requirements that are applicable to other public
companies that are not smaller reporting companies, including reduced
financial statement and other financial information disclosure, and
reduced disclosure obligations regarding executive compensation in
our annual and periodic reports and proxy statements. We will remain
a smaller reporting company as long as either (i) the market value of
our common shares held by non-affiliates is less than $250 million or
(ii) our annual revenue is less than $100 million during the most
recently completed fiscal year and the market value of our common
shares held by non-affiliates is less than $700 million. Our public float
is measured as
of the last business day of our most recently completed second fiscal
quarter, and annual revenues are as of the most recently completed
fiscal year for which audited financial statements are available. 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 our share price may be
more volatile than that of an otherwise comparable company that does
not avail itself of the same or similar exemptions.
We are a BVI business company limited by shares and, the
holders of our common shares may have fewer protections as a
shareholder of our company, because judicial precedent
regarding the rights of shareholders is more limited under BVI
law than that under U.S. law.
Our corporate affairs are governed by our Amended
Memorandum and Articles of Association as amended and restated
from time to time, the BVI Business Companies Act (As Revised) (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.
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
exhaustive 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 than the BVI. There is no
statutory recognition in the BVI of judgments obtained in the U.S.,
although the courts of the BVI will in certain circumstances recognize
and enforce a non-penal judgment of a foreign court of competent
jurisdiction without retrial on the merits.
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 controlling 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 the
BVI’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 Amended Memorandum and 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
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and acquisitions, dispositions of assets, 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
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. However, the courts of the BVI will in
certain circumstances recognize such a foreign judgment and treat it
as a cause of action in itself which may be sued upon as a debt at
common law so that no retrial of the issues would be necessary,
provided that:
•
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 is final and for a liquidated sum;
•
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 court;
•
recognition or enforcement of the judgment in the British Virgin
Islands would not be contrary to public policy; and
•
the proceedings pursuant to which judgment was obtained
were not contrary to natural justice.
The British Virgin Islands courts are unlikely:
•
to recognize or enforce against the Company, judgments of
courts of the U.S. predicated upon the civil liability provisions of the
securities law of the U.S.; and
•
to impose liabilities against the Company, predicated upon the
certain civil liability provisions of the securities laws of the U.S. so far
as the liabilities imposed by those provisions are penal in nature.
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
Amended 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 Amended
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 a 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 Amended Memorandum and Articles of Association.
• 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, in certain circumstances, apply for
liquidators to be appointed over the affairs of a company under the
BVI’s Insolvency Act 2003 (as amended) (the “BVI Insolvency Act”.).
Shareholders can
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also by resolution appoint a liquidator of a BVI business company
under the BVI Act if the company is solvent or under the BVI
Insolvency Act 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. 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 Amended 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.
Accordingly, it may be difficult or impossible for you to bring an action
against us in the BVI if you believe your rights under the U.S.
securities laws have been infringed. In addition, there is uncertainty as
to whether the courts of the BVI would recognize or enforce judgments
of U.S. courts against us or such persons predicated upon the civil
liability provisions of the securities laws of the U.S. or any state and it
is uncertain whether such British Virgin Islands courts would hear
original actions brought in the British Virgin Islands against us or such
persons predicated upon the securities laws of the U.S. or any state.
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 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 tax credit and
net operating loss carryforwards to reduce future tax liabilities; and
(5) changes in tax laws or the interpretation of such tax laws, and
changes in generally accepted accounting principles. 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. Since 2017, the
G20/OECD Inclusive Framework has been working on addressing the
tax challenges arising from the digitalization of the economy and has
proposed a two-pillar tax approach with pillar one referring to the re-
allocation of taxing rights, addressing issues such as where tax should
be paid and on what basis (i.e., where sustained and significant
business is conducted, regardless of a physical presence), and pillar
two ensuring a minimum tax to be paid by multinational enterprises.
We are unable to predict when and how the Inclusive Framework
agreement will be enacted into law in the countries in which we
operate, and it is possible that the implementation of the Inclusive
Framework agreement, including the global minimum corporate tax
rate, could have a material effect on our liability for corporate taxes and
our consolidated effective tax rate.
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If we are or become a passive foreign investment company,
there could be adverse U.S. federal income tax consequences to
U.S. holders.
If we are or become a passive foreign investment company
(“PFIC”) for any taxable year during which a U.S. holder holds our
shares, the U.S. holder would 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.
Under the Code, we would be a PFIC for any taxable year in
which (1) 75% or more of our gross income consisted of passive
income or (2) 50% or more of the average quarterly value of our assets
consisted of assets that produce, or are held for the production of,
passive income. For purposes of these tests, passive income includes,
but is not limited to, dividends, interest, gains from the sale or
exchange of investment property and certain rents and royalties. In
addition, for purposes of the above calculations and subject to certain
exceptions, 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.
Although we believe our common shares should not currently be
stock of a PFIC for U.S. federal income tax purposes and do not
expect to become a PFIC in the foreseeable future, we cannot provide
any assurances regarding our PFIC status for any 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 determination of
whether we are a PFIC and the characterization of our assets as active
or passive may depend in part on (i) our current and intended future
business plans which are subject to change, (ii) the application of
certain “look-through” rules and (iii) the applicability of the “start-up
exception.” Under the start-up exception, a foreign corporation that
would otherwise be treated as a PFIC will not be a PFIC for the first
taxable year the corporation has gross income (the “start-up year”), if:
(A) no predecessor of the corporation was a PFIC; (B) the corporation
satisfies the IRS that it will not be a PFIC for either of the first two
taxable years following the start-up year; and (C) the corporation is not
in fact a PFIC for either of those years. The applicability of the startup
exception to us is uncertain and will not be known until after the end of
the two taxable years following such startup year. In addition, for our
current and future taxable years, the total value of our assets for PFIC
testing purposes may fluctuate considerably from time to time, and is
dependent on our application (which inherently involves an element of
judgment) of the relevant valuation assumptions and methodologies.
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. Therefore, we
cannot provide any assurance regarding our PFIC status for any past,
current or future taxable years.
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 QEF 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 U.S.
holders of our common shares should assume that a QEF election will
not be available.
U.S. holders should consult their own tax advisors with respect to
the operation of the PFIC rules and related reporting requirements in
light of their particular circumstances, including the advisability of
making any election that may be available.
Mail addressed to us may not reach us in a timely manner.
Mail addressed to the Company and received at its registered
office will be forwarded unopened to the forwarding address supplied
by Company to be dealt with. None of the Company, its directors,
officers, advisors or service providers (including the organization which
provides registered office services in the BVI) will bear any
responsibility for any delay howsoever caused in mail reaching the
forwarding address. Such risk will be borne solely by the Company’s
shareholders.
Our Amended Memorandum and Articles of Association
provide that unless we consent in writing to the selection of an
alternative forum, the courts of the British Virgin Islands shall,
with certain limited exceptions, be the sole and exclusive forum
for certain disputes between us and our shareholders, which
could limit our shareholders’ ability to obtain a favorable judicial
forum for disputes with us or our directors, officers or employees.
Our Amended Memorandum and Articles of Association provide
that unless we consent in writing to the selection of an alternative
forum, the courts of the British Virgin Islands shall be the sole and
exclusive forum for (i) any derivative action or proceeding brought on
behalf of the Company, (ii) any action asserting a claim of breach of a
fiduciary duty owed by any director,
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officer or other employee of the Company to the Company or the
Company’s members, (iii) any action asserting a claim arising pursuant
to any provision of British Virgin Islands law or the Amended
Memorandum and Articles of Association, or (iv) any action asserting a
claim against the Company governed by the internal affairs doctrine,
and that each shareholder consents to the exclusive jurisdiction of the
courts of the British Virgin Islands over all such claims or disputes.
Section 22 of the Securities Act creates concurrent jurisdiction for
federal and state courts over actions brought under the Securities Act
or the rules and regulations promulgated thereunder. Furthermore,
Section 27 of the Exchange Act creates exclusive federal jurisdiction
over all suits brought to enforce any duty or liability created by the
Exchange Act or the rules and regulations thereunder. As a result, the
forum selection provision in our Amended Memorandum and Articles
of Association will not apply to actions or suits brought to enforce any
liability or duty created by the Securities Act, Exchange Act or any
claim for which the federal district courts of the United States of
America are, as a matter of the laws of the United States of America,
the sole and exclusive forum for determination of such a claim.
This choice of forum provision may increase a shareholder’s
cost, impose additional litigation costs and limit the shareholder’s
ability to bring a claim in a judicial forum that it finds favorable for
disputes with us or our directors, officers or other employees, which
may discourage lawsuits against us and our directors, officers and
other employees, although our shareholders will not be deemed to
have waived our compliance with federal securities laws and the rules
and regulations thereunder and may therefore bring certain claims in
another appropriate forum. Any person or entity purchasing or
otherwise acquiring any of our shares or other securities, whether by
transfer, sale, operation of law or otherwise, shall be deemed to have
notice of and have irrevocably agreed and consented to these
provisions. It is possible that a court could find such a choice of forum
provision to be inapplicable or unenforceable, and if a court were to
find this provision in our Amended Memorandum and Articles of
Association to be inapplicable or unenforceable in an action, we may
incur additional costs associated with resolving the dispute in other
jurisdictions, which could have an adverse effect on our business,
results of operations and financial condition.
Because our common shares have only traded on the public
market for a limited period of time, the market price and trading
volume of our common shares may be volatile.
Prior to the Distribution, there had not been a regular-way trading
market for our common shares. We cannot predict the extent to which
investors’ interest will lead to a liquid trading market or whether the
market price of our common shares will be volatile. The market price of
our common shares could fluctuate significantly for many reasons,
including in response to the risk factors listed in this Annual Report on
Form 10-K or for
reasons unrelated to our specific performance, such as reports by
industry analysts, investor perceptions, or negative developments for
our customers, competitors or suppliers, as well as general economic
and industry conditions.
Our historical financial results as a part of Former Parent may
not be representative of our results as a separate, stand-alone
company.
The historical financial information we have included in this
Annual Report on Form 10-K has been derived from the combined
financial statements and accounting records of Former Parent and
does not necessarily reflect what our financial position, results of
operations or cash flows would have been had we been a separate,
stand-alone company during the periods presented. The historical
costs and expenses reflected in our combined financial statements
include an allocation for certain corporate functions historically
provided by Former Parent, including general corporate expenses and
employee benefits and incentives. These allocations were based on
what we and Former Parent considered to be reasonable reflections of
the historical utilization levels of these services required in support of
our business. The historical information does not necessarily indicate
what our results of operations, financial position, cash flows or costs
and expenses will be in the future.
We have incurred, and expect to continue to incur, material
costs and expenses as a result of our separation from Former
Parent.
We have incurred, and will expect to continue to incur, costs and
expenses greater than those we previously incurred while part of
Former Parent as a result of our separation from Former Parent.
These increased costs and expenses arise from various factors,
including financial reporting and costs associated with complying with
federal securities laws (including compliance with the Sarbanes-Oxley
Act). In addition, we have increased corporate and administrative costs
and expenses compared to those we incurred while part of Former
Parent, even though we are now a smaller, stand-alone company.
These costs may be material to our business.
If we are unable to satisfy the requirements of Section 404 of
the Sarbanes-Oxley Act, or our internal control over financial
reporting is not effective, the reliability of our financial statements
may be questioned and our share price may suffer.
Section 404 of the Sarbanes-Oxley Act requires any company
subject to the reporting requirements of the U.S. securities laws to do a
comprehensive evaluation of its and its consolidated subsidiaries’
internal control over financial reporting. To comply with this statute, we
may eventually be required to document and test our internal control
procedures, our management will be required to assess and issue a
report concerning our internal control over financial reporting, and our
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independent auditors will be required to issue an opinion on the
Company’s internal controls over financial reporting. The rules
governing the standards that must be met for management to assess
our internal control over financial reporting are complex and require
significant documentation, testing and possible remediation to meet
the detailed standards under the rules. During the course of its testing,
our management may identify material weaknesses or deficiencies
which may not be remedied in time to meet the deadline imposed by
the Sarbanes-Oxley Act. If our management cannot favorably assess
the effectiveness of our internal control over financial reporting or our
auditors identify material weaknesses in our internal controls, investor
confidence in our financial results may weaken, and our share price
may suffer.
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
Our U.S. headquarters is located in New Haven, Connecticut.
Details of our leased and owned facilities, which include our U.S.
headquarters and consist of office, lab, research, chemistry, and
discovery facilities, are as follows:
Location
New Haven,
Connecticut
Cambridge,
Massachusetts
Yardley,
Pennsylvania
Pittsburgh,
Pennsylvania
New Haven,
Connecticut
New Haven,
Connecticut
Dublin, Ireland
Shanghai, China
Beijing, China
Type
Office Space
Office & Lab
Space
Office Space
Office &
Research Space
Office Space
Chemistry &
Discovery
Facilities
Office Space
Office Space
Office Space
Approximate
Square Feet
42,000
Lease
Expiration
N/A
27,000
October, 2032
21,000
September, 2027
20,000
October, 2024
10,000
N/A
10,000
December, 2023
6,000
4,600
1,700
April, 2027
March, 2023
February, 2023
We believe that our current facilities are suitable and adequate to
meet our current needs and we believe that suitable additional or
substitute space will be available as needed to accommodate any
future expansions.
Item 3. 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. 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, cash flows or financial condition.
Item 4. Mine Safety Disclosures
Not applicable.
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PART II
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities
Market Information
Our common shares began trading on the New York Stock Exchange under the symbol "BHVN" on October 4, 2022.
Stock Performance Graph
* $100 invested on October 4, 2022 in stock or index, including reinvestment of dividends. Fiscal year ending December 31.
_______________________________________________________________________________
Shareholders
Recent Sales of Unregistered Securities
As of March 20, 2023, there were 44 shareholders of record of
None.
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 expect to pay any cash dividends on our common shares in
the foreseeable future. All decisions regarding the payment of
dividends will be made by our Board of Directors from time to time in
accordance with applicable law.
Securities Authorized for Issuance Under Equity
Compensation Plans
See Part III, Item 12 "Security Ownership of Certain Beneficial
Owners and Management and Related Shareholder Matters" of this
report.
Issuer Purchases of Equity Securities
We did not purchase any of our registered equity securities
during the period covered by this report.
Use of Proceeds from Registered Securities
In October 2022, we commenced a public offering of 25,000,000
of our common shares at a price of $10.50 per share, pursuant to a
registration statement on Form S-1 filed with the SEC (the "S-1"). The
S-1 was declared
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effective by the SEC on October 20, 2022. We also granted the
underwriters a 30-day option to purchase up to an additional 3,750,000
common shares. On October 25, 2022, we closed the offering,
including a full exercise of the underwriters' option to purchase
additional shares. The net proceeds raised in the offering, after
deducting underwriting discounts and expenses of the offering payable
by Biohaven, were approximately $282,804.
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 October 20, 2022. During the period
from the closing of the offering to December 31, 2022, we used the
proceeds primarily for general corporate purposes, including funding
the continued development of our clinical programs and research and
development operations as well as costs associated with operating as
a public company.
Item 6. Reserved
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
inhibition platforms, preclinical product candidates, and certain
corporate infrastructure owned by Former Parent.
You should read the following discussion and analysis of our
On October 3, 2022, the Former Parent completed the
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 global clinical-stage biopharmaceutical company
focused on the discovery, development and commercialization of life-
changing therapies for people with debilitating neurological and
neuropsychiatric diseases, including rare disorders. Our experienced
management team brings with it a track record of delivering new drug
approvals for products for diseases such as migraine, depression,
bipolar and schizophrenia. We are advancing a pipeline of therapies
for diseases with little or no treatment options, leveraging our proven
drug development capabilities and proprietary platforms, including Kv7
ion channel modulation for epilepsy and neuronal hyperexcitability,
glutamate modulation for OCD and SCA, myostatin inhibition for
neuromuscular diseases, and brain-penetrant TYK2/JAK1 inhibition for
immune-mediated brain disorders. Our portfolio of early- and late-
stage product candidates also includes discovery research programs
focused on TRPM3 channel activation for neuropathic pain, CD-38
antibody recruiting, bispecific molecules for multiple myeloma, ADCs,
and extracellular target degrader platform technology (MoDE™) with
potential application in neurological disorders, cancer, and
autoimmune diseases.
We are advancing our broad and diverse pipeline, across early
and late stage development, including three Phase 3 clinical programs.
We have built a highly experienced team of senior leaders and
neuroscience drug developers who combine a nimble, results-driven
biotech mindset with capabilities in drug discovery and development.
In addition, we have several preclinical assets in our early discovery
program, targeting indications in neuroscience and immunology.
Separation from Biohaven Pharmaceutical Holding Company
Ltd.
On May 9, 2022, the Board of Directors of the Former Parent
approved and directed Former Parent’s management to effect the spin-
off of the Kv7 ion channel activators, glutamate modulation and
myostatin
Distribution to holders of its common shares of all of the outstanding
common shares of Biohaven Ltd. and the spin-off of Biohaven from the
Former Parent. Each holder of Former Parent common shares
received one common share of Biohaven for every two the Former
Parent common shares held of record as of the close of business, New
York City time, on September 26, 2022. To implement the Spin-Off, the
Former Parent transferred the related license agreements, intellectual
property and the Former Parent’s corporate infrastructure, including
certain non-commercial employee agreements, share-based awards
and other corporate agreements to Biohaven Ltd. Collectively, we refer
to the Distribution and Spin-Off throughout this Annual Report on Form
10-K as the "Separation."
In the Distribution, an aggregate of 35,840,459 common shares
of the Company were issued. The aggregate number of common
shares issued in connection with the Distribution did not include
2,611,392 common shares issued in connection with Former Parent
stock options that were exercised on October 3, 2022 and 924,093
common shares issued in connection with Former Parent restricted
stock units that vested on October 3, 2022.
Biohaven Ltd. is a British Virgin Islands ("BVI") corporation and
was a wholly owned subsidiary of Biohaven Pharmaceutical Holding
Company Ltd. prior to the Separation.
Prior to the Separation, the historical combined financial
statements of the Company prior to the distribution were prepared on a
stand-alone basis and are derived from the consolidated financial
statements and accounting records of Biohaven Pharmaceutical
Holding Company Ltd. The financial statements for all periods
presented, including the historical results of the Company prior to
October 3, 2022, are now referred to as "Consolidated Financial
Statements." Our financial statements are presented in conformity with
generally accepted accounting principles in the United States
("GAAP").
The financial position, results of operations and cash flows of the
Company historically operated as part of Biohaven Pharmaceutical
Holding Company Ltd.’s financial position, results of operations and
cash flows up until the Distribution. These historical combined financial
statements may not be indicative of the future performance of the
Company and do not necessarily reflect what our consolidated results
of operations, financial condition and cash flows would have been had
we operated as a separate, publicly traded company during the
periods presented.
Where we describe historical business activities in this Annual
Report on Form 10-K, we do so as if these
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transfers had already occurred and the Former Parent's activities
related to such assets and liabilities had been performed by Biohaven
Ltd.
Refer to Note 1, "Nature of the Business and Basis of
Presentation", of the Notes to the Consolidated Financial Statements
appearing elsewhere in this Annual Report on Form 10-K for further
discussion of the underlying basis used to prepare the consolidated
financial statements.
Transition from the Former Parent and Costs to Operate as an
Independent Company
The consolidated financial statements reflect the operating
results and financial position of the Company as it was operated by the
Former Parent prior to the Separation, rather than as an independent
company. We have incurred and will continue to incur ongoing
operating expenses to operate as an independent company. These
costs will include the cost of various corporate headquarters functions,
information technology-related costs and costs to operate stand-alone
accounting, legal and other administrative functions. We will also incur
non-recurring expenses and non-recurring capital expenditures. As an
independent company, our information technology operating costs may
be higher than the costs allocated in the historical combined financial
statements. It is not practicable to estimate the costs that would have
been
Clinical-Stage Milestones
Our clinical-stage milestones include the following:
incurred in each of the periods presented in the historical combined
financial statements for the functions described above. Actual costs
that would have been incurred if we operated as a stand-alone
company during these periods would have depended on various
factors, including the chosen organizational structure, what corporate
functions the Company might have performed directly or outsourced
and strategic decisions the Company might have made in areas such
as executive management, legal and other professional services, and
certain corporate overhead functions. During the transition from the
Former Parent, we may incur non-recurring expenses to expand our
infrastructure.
Transactions with the Former Parent
We have entered into a Distribution Agreement and various
agreements relating to transition services, licenses and certain other
matters with the Former Parent. These agreements govern our
relationship with the Former Parent and include the allocation of
employee benefits, taxes and certain other liabilities and obligations
attributable to periods prior to, at and after the Separation. For
additional information regarding these agreements, see Note 14,
"Related Party Transactions," of the Notes to the Consolidated
Financial Statements appearing elsewhere in this Annual Report on
Form 10-K.
Drug Name
Indication
2H2022
1H2023
2H2023
BHV-7000
Kv7 channel modulator
Focal Epilepsy
Initiated Phase 1
Phase 1
Topline
Initiate EEG
Study
Initiate Phase 2/3
Bipolar disorder
Initiated Phase 1
Initiate Phase 2/3
BHV-7010
Kv7 channel modulator
Epilepsy and mood disorder
BHV-8000
TYK2-JAK1
BHV-2100
TRPM3
Immune-Mediated Brain
Disorders
Chronic pain disorders
Troriluzole
NCE prodrug of riluzole
Taldefgrobep Alfa
Anti-myostatin adnectin
SCA
OCD
SMA
BHV-1300
IgG degrader
Undisclosed
Milestone Achieved
Initiate Phase 1
File IND
File IND
Regulatory Interaction
Complete Enrollment
File IND
Initiated Phase 3
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Kv7
BHV-7000
In April 2022, we closed the acquisition from Knopp Biosciences
LLC (“Knopp”) of Channel Biosciences, LLC, a wholly owned
subsidiary of Knopp owning the assets of Knopp’s Kv7 channel
targeting platform, pursuant to a Membership Interest Purchase
Agreement, dated February 24, 2022. The acquisition of the Kv7
channel targeting platform adds the latest advances in ion-channel
modulation to our growing neuroscience portfolio. BHV-7000 (formerly
known as KB-3061), the lead asset from the Kv7 platform is an
activator of Kv7.2/Kv7.3, a key ion channel involved in neuronal
signaling and in regulating the hyperexcitable state in epilepsy. In June
2022, our Clinical Trial Application for BHV-7000 was approved by
Health Canada, and in July we began clinical development. Dosing
has been completed in our Phase 1 SAD/MAD study with BHV-7000
and, in January 2023, the Company reported preliminary safety,
tolerability and pharmacokinetic ("PK") data. In the study, single doses
up to 100 mg and multiple doses up to 40 mg daily for 15 days were
safe and well-tolerated. In the pooled, blinded adverse events from the
SAD and MAD cohorts occurring in more than 1 subject, mild
headache was the most common adverse event reported across all
groups (including BHV-7000 and placebo), and a lack of CNS adverse
events were observed. Most adverse events were mild and resolved
spontaneously. No serious or severe adverse events and no dose
limiting toxicities were reported. With respect to preliminary PK results,
the Company exceeded target concentrations for efficacy based on the
preclinical maximal electroshock ("MES") model, which is clinically
validated and predictive of target concentration ranges in humans.
Epilepsy
Epilepsy is the initial disease we are targeting with activators
from our Kv7 platform. Epilepsy affects approximately 3.5 million
Americans, or more than 1.2% of adults and 0.6% of children in the
U.S., and more than 50 million patients worldwide, according to the
World Health Organization (“WHO”). It is the fourth most common
neurological disorder, and many patients struggle to achieve freedom
from seizures, with more than one third of patients requiring two or
more medications to manage their epilepsy. While the use of anti-
seizure medications is often accompanied by dose-limiting side effects,
our clinical candidate BHV-7000 is specifically designed to target
subtypes of Kv7 potassium channels without engagement of GABA
A
receptors. The lack of GABA -R activity potentially gives BHV-7000 a
wide therapeutic window which we expect to result in an improved side
effect profile, limiting the somnolence and fatigue often seen in
patients receiving anti-seizure medications. By adding BHV-7000 to
our pipeline, we aim to bring this potassium channel modulator as a
potential solution to patients with epilepsy who remain uncontrolled on
their current regimens. If our Phase 1 study with BHV-7000 is
A
successfully completed, we expect to initiate at least one pivotal trial in
patients with epilepsy in the second half of 2023.
KCNQ2 Developmental Epileptic Encephalopathy
We are currently exploring BHV-7000 as a potential treatment for
KCNQ2 developmental epileptic encephalopathy ("KCNQ2-DEE"), a
rare pediatric epileptic encephalopathy first described in 2012 resulting
from dominant-negative mutations in the KCNQ2 gene. BHV-7000 has
been granted Rare Pediatric Disease Designation by the FDA for the
treatment of KCNQ2-DEE.
Mood Disorders
Approximately 1 in 5 adults in the US are living with
neuropsychiatric illnesses that are, in turn, associated with inadequate
treatment, poor quality of life, disability, and considerable direct and
indirect costs. There is significant unmet need for novel and effective
therapeutic options that are not limited by long latency periods to
clinical effects, low response rates, and significant risks and side
effects. Increasing evidence from animal models and clinical trials now
suggests that Kv7.2/7.3 targeting drugs offer the potential to treat a
spectrum of these neuropsychiatric diseases including, but not limited
to, mood disorders, such as major depressive disorder, bipolar
disorder and anxiety. We plan to advance BHV-7000 as a potential
treatment for patients with bipolar disorder and intend to start a clinical
trial targeting this indication by the end of 2023.
Neuropathic Pain
Neuropathic pain, as defined by the International Association for
the Study of Pain, is pain caused by a lesion or disease of the
somatosensory nervous system and includes a collection of
heterogeneous conditions that are often chronic and debilitating and
for which long term therapy is difficult. In the United States, over 30
million adults are estimated to be living with neuropathic pain.
Previous studies have demonstrated the efficacy of Kv7 targeting
drugs in clinical trials for pain indications and in animal models.
Selective Kv7 potassium channel activators represent a promising new
approach in the development of non-opioid therapeutic options for
neuropathic pain. In addition to leveraging reduced abuse and
addiction risk potential of potassium channel activators, our Kv7
potassium channel platform addresses the complexities of channel
subtype physiology through targeted pharmacology to overcome the
limitations inherent in unbiased Kv7 activators and is intended to
deliver a well-tolerated, highly effective, non-opioid treatment for
neuropathic pain.
We are currently evaluating the activity of BHV-7000 and other
compounds from our proprietary
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series of selective Kv7.2/7.3 activators in multiple preclinical models of
neuropathic pain.
BHV-7010
BHV-7010 is being developed as a next generation Kv7.2/7.3
activator with improved selectivity over Kv7.4 and differentiated ADME
properties that provide flexibility for the treatment of different
neurological diseases. The IND is expected to be submitted in the
second half of 2023.
TYK2/JAK1
Glutamate
The most advanced product candidate from our glutamate
receptor antagonist platform is troriluzole (previously referred to as
trigriluzole and BHV-4157), which is in multiple Phase 3 trials. Other
product candidates include BHV-5500 (lanicemine), which is an
antagonist of the glutamate N-methyl-D-aspartate (“NMDA”) receptor,
and BHV-5000, which is a prodrug of lanicemine.
Troriluzole
Spinocerebellar Ataxia
Agreement with Hangzhou Highlightll Pharmaceutical Co. Ltd.
In May 2022, the Company announced top-line results from the
In March 2023, we entered into an exclusive, worldwide
(excluding People’s Republic of China and its territories and
possessions) license agreement with Highlightll, whereby we obtained
the right to research, develop, manufacture and commercialize
Highlightll’s brain penetrant dual TYK2/JAK1 inhibitor program. As
partial consideration for the Highlightll Agreement, we are obligated to
pay Highlightll a cash payment of $10,000 and common shares valued
at approximately $10,000 as of the agreement execution, upon the
completion of certain post-closing activities. See Note 15, "Subsequent
Events," for further detail on the Highlightll Agreement.
BHV-8000
Dysregulation of the immune system has been implicated in
several neurodegenerative and neuroinflammatory disorders including
Parkinson's Disease, Multiple Sclerosis, Alzheimer's Disease,
Amyotrophic Lateral Sclerosis and Autoimmune Encephalitis. Over-
active immune cells and microglia driving chronic neuroinflammation
results in release of cytokines with activation of leukocytes and is
thought to contribute to neuronal injury, death, gliosis, and
demyelination. The TYK2 and JAK1 signal transduction pathways
mediate highly complementary immune and inflammatory signaling
events. Targeted, small-molecule therapies that inhibit TYK2 or JAK
kinases have separately demonstrated robust efficacy in autoimmune,
dermatologic and gastrointestinal disorders. TYK2 is a validated
immune target as evidenced by a recent peripheral program that
gained FDA approval, and there are multiple additional peripheral non-
CNS programs in clinical development. Brain penetrant inhibitors of
TYK2/JAK1 have the potential to bring this validated immune target to
brain disorders.
There are currently no brain penetrant, selective, dual
TYK2/JAK1 inhibitors approved for brain disorders. We expect to
advance BHV-8000 (previously TLL-041) into a Phase 1 study in 2023.
The Company is evaluating and has not yet finalized potential clinical
trial designs, including size and primary and secondary endpoints.
Phase 3 clinical trial evaluating the efficacy and safety of its
investigational therapy, troriluzole, in patients with SCA. The primary
endpoint, change from baseline to Week 48 on the modified functional
Scale for the Assessment and Rating of Ataxia (f-SARA), did not reach
statistical significance in the overall SCA population as there was less
than expected disease progression over the course of the study. In the
overall study population (N=213), the troriluzole and placebo groups
each had mean baseline scores of 4.9 on the f-SARA and the two
groups showed minimal change at the 48-week endpoint with f-SARA
scores of 5.1 and 5.2, respectively (p=0.76).
Post hoc analysis of efficacy measures by genotype suggests a
treatment effect in patients with the SCA Type 3 (“SCA3”) genotype,
which represents the most common form of SCA and accounted for
41% of the study population. In the SCA3 subgroup, troriluzole showed
a numerical treatment benefit on the change in f-SARA score from
baseline to Week 48 compared to placebo (least squares (“LS”) mean
change difference -0.55, nominal p-value = 0.053, 95% CI: -1.12,
0.01). SCA patients treated with troriluzole showed minimal disease
progression over the study period. Further, in patients in the SCA3
subgroup with mild disease severity at baseline, defined as those who
were able to walk without assistance at baseline (i.e., f-SARA Gait
Item score = 1), troriluzole demonstrated a greater numerical treatment
benefit on the change in f-SARA score from baseline to Week 48
compared to placebo (LS mean change difference -0.71, nominal p-
value = 0.031, 95% CI: -1.36, -0.07). Notably, the f-SARA is a novel,
16-point scale developed in collaboration with FDA as the primary
outcome measure for this trial; the scale was designed to limit
subjectivity of the scale and focus on functional aspects of the disease
so that significant changes would be considered clinically meaningful.
Across all SCA genotypes, and SCA3 specifically, patient
reported falls, as measured by adverse events, reveal reductions of fall
risk in the troriluzole group compared to the placebo.
The risk reduction of falls in the troriluzole group combined with
the progression of f-SARA scores in the untreated SCA3 group
compared to SCA3 patients on troriluzole demonstrates that SCA3
patients
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experienced a clinically meaningful improvement in ataxia symptoms
on troriluzole treatment. Given these findings and the debilitating
nature of SCA, we intend to interact with the FDA and/or European
Medicines Agency ("EMA") in the first half of 2023. We have not yet
decided on the format of such a regulatory interaction but we could
seek advice through various formal or informal interactions with
regulatory agencies or we could choose to submit an NDA if we
believe that is warranted from the results of our ongoing post-hoc
analyses. 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.
Obsessive Compulsive Disorder
We commenced a Phase 2/3 double-blind, randomized,
controlled trial to assess the efficacy of troriluzole in adults with OCD in
December 2017. The Phase 2/3 study results were announced in June
2020. Troriluzole 200 mg administered once daily as adjunctive
therapy in OCD patients with inadequate response to standard of care
treatment showed consistent numerical improvement over placebo on
the Yale-Brown Obsessive Compulsive Scale (Y-BOCS) at all study
timepoints (weeks 4 to 12) but did not meet the primary outcome
measure at week 12. Troriluzole treated subjects (n = 111) had a mean
Y-BOCS improvement of -3.4 points from baseline versus -2.9 for
placebo-treated (n = 115) subjects [difference -0.5 and p-value =
0.451] at week 4, -5.1 points (n = 96) versus -3.6 for placebo-treated (n
= 108) subjects [difference -1.5 and p-value = 0.041] at week 8, and
-5.9 points (n = 99) versus -4.9 for placebo-treated (n = 102) subjects
[difference -1.0 and p-value = 0.220] at week 12. Troriluzole’s safety
profile was generally consistent with past clinical trial experience with
its active metabolite, riluzole. Treatment emergent adverse events
(“TEAE”s) were mostly reported to be mild in intensity. TEAEs that
occurred in at least 5% of patients in the troriluzole group, and more
frequently in the troriluzole group than in the placebo group, were
headache, dizziness, fatigue, somnolence, nausea and
nasopharyngitis.
Given the strong signal in the Phase 2/3 proof of concept study
and after receiving feedback from the FDA in an End of Phase 2
meeting, in December 2020 we initiated enrollment in a Phase 3
program. The Phase 3 program will have an estimated total enrollment
of 1,300 participants with a primary endpoint of change from baseline
on the Y-BOCS total score at week 4, 8 and 10. The two Phase 3
randomized, double-blind, placebo-controlled trials that make-up our
Phase 3 program for OCD are currently ongoing with enrollment
expected to be completed in 2023.
Glioblastoma
In December 2021, the Global Coalition for Adaptive Research
("GCAR") selected troriluzole for
evaluation in Glioblastoma Adaptive Global Innovative Learning
Environment - NCT03970447 ("GBM AGILE"). GBM AGILE is a
revolutionary patient-centered, adaptive platform trial for registration
that tests multiple therapies for patients with newly-diagnosed and
recurrent glioblastoma ("GBM"), the most fatal form of brain cancer.
Troriluzole will be evaluated in all patient subgroups of the trial which
include newly-diagnosed methylated MGMT, newly-diagnosed
unmethylated MGMT, and recurrent GBM. Troriluzole was selected for
inclusion in GBM AGILE based on compelling evidence showing
deregulation of glutamate in GBM. The therapeutic potential of
troriluzole in GBM and other oncology indications is supported by
several recent clinical and translational research studies conducted
with troriluzole and its active moiety.
In July 2022, the Company and GCAR announced that
enrollment has commenced in GBM AGILE for the evaluation of
troriluzole.
Lanicemine
We are developing BHV-5500 (lanicemine), a low-trapping
NMDA receptor antagonist. One potential target indication is
neuropathic pain, potentially including Complex Regional Pain
Syndrome (“CRPS”). CRPS is a rare, chronic pain condition typically
affecting limbs and triggered by traumatic injury. Accompanying
symptoms also include chronic inflammation and reduced mobility in
the affected areas. Other disorders of interest include post-herpetic
neuralgia and diabetic peripheral neuropathy. We acquired worldwide
rights to BHV-5500 and its oral prodrug BHV-5000 under an exclusive
license agreement with AstraZeneca AB in October 2016. Current
work is focused on formulation development.
Myostatin Platform
Taldefgrobep Alfa (BHV-2000)
In February 2022, we announced that we entered into a
worldwide license agreement with BMS for the development and
commercialization rights to taldefgrobep alfa (also known as BMS-
986089 and now referred to as BHV-2000), a novel, Phase 3-ready
anti-myostatin adnectin. Myostatin is a natural protein that limits
skeletal muscle growth, an important process in healthy muscular
development. However, in patients with neuromuscular diseases,
active myostatin can critically limit the growth needed to achieve
developmental and functional milestones. Myostatin inhibition is a
promising therapeutic strategy for enhancing muscle mass and
strength in a range of pediatric and adult neuromuscular conditions.
Taldefgrobep is a muscle-targeted treatment for neuromuscular
disease and offers the opportunity for combination therapy.
In July 2022, we commenced enrollment in a Phase 3 clinical trial
of BHV-2000 assessing the efficacy and safety of taldefgrobep alfa in
Spinal Muscular Atrophy ("SMA"). SMA is a rare, progressively
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debilitating motor neuron disease in which development and growth of
muscle mass are compromised, resulting in progressive weakness and
muscle atrophy, reduced motor function, impaired quality of life and
often death. The Phase 3 placebo-controlled, double-blind trial is
designed to evaluate the efficacy and safety of taldefgrobep as an
adjunctive therapy for participants who are already taking a stable
dose of nusinersen or risdiplam or have a history of treatment with
onasemnogene abeparvovec-xioi, compared to placebo. The study is
not restricted nor limited to patients based on ambulatory status or
classification of SMA. We expect to enroll approximately 180 patients
in this randomized, double-blind, placebo-controlled global trial.
In February 2023, we received Fast Track designation from the
FDA for taldefgrobep alfa for the treatment of SMA. In December 2022,
we received orphan drug designation from the FDA for taldefgrobep in
the treatment of SMA.
CD-38
BHV-1100
In the fourth quarter of 2021, we initiated a Phase 1a/1b trial in
multiple myeloma patients using our antibody recruiting molecule BHV-
1100 in combination with autologous cytokine induced memory-like
natural killer cells and immune globulin to target and kill multiple
myeloma cells expressing the cell surface protein CD38. BHV-1100 is
the lead clinical asset from Biohaven’s Antibody Recruiting Molecule
("ARM™") Platform developed from a strategic alliance with
PeptiDream Inc. (TYO: 4587). This open-label single center Phase
1a/1b study will assess the safety and tolerability as well as
exploratory efficacy endpoints in newly diagnosed multiple myeloma
patients who have tested positive for minimal residual disease
(“MRD+”) in first or second remission prior to autologous stem cell
transplant (“ASCT”). We plan to enroll 30 newly diagnosed multiple
myeloma patients. The primary outcome measures are dose limiting
toxicities following combination product administration (time frame: 100
days post-combination product administration) and incidence and
severity of side effects related to the combination product (time frame:
90 to 100 days post-combination product administration).
MPO Platform
Verdiperstat
We were developing verdiperstat (previously BHV-3241), an oral
myeloperoxidase inhibitor for the treatment of neurodegenerative
diseases. One potential target indication is Amyotrophic Lateral
Sclerosis ("ALS"). In September 2019, we announced that verdiperstat
was selected to be studied in the Phase 3 HEALEY ALS Platform Trial,
which is being conducted by the Sean M. Healey & AMG Center for
ALS at Massachusetts General Hospital in collaboration with the
Northeast ALS Consortium clinical trial network. Promising
investigational drugs were chosen for the
HEALEY ALS Platform Trial through a competitive process, with the
Healey Center providing partial financial support to successful
applicants. The Phase 3 HEALEY ALS Platform Trial of verdiperstat
began enrollment in July 2020. Enrollment in the trial was completed in
November 2021.
In September 2022, the Company announced that verdiperstat
did not statistically differentiate from placebo on the prespecified
primary efficacy outcome, disease progression measured by the ALS
Functional Rating Scale-Revised and survival, nor the key secondary
efficacy measures during the 24-week study period. Initial analysis of
safety data was consistent with the overall profile of verdiperstat from
prior clinical trial experience. Additional analyses are ongoing, and
complete study results will be presented at an upcoming scientific
meeting. At this time, we do not have plans to pursue any additional
clinical trials evaluating verdiperstat in ALS and we may evaluate its
potential in other disease indications.
Verdiperstat was progressed through Phase 2 clinical trials by
AstraZeneca. Seven clinical studies have been completed by
AstraZeneca, including four Phase 1 studies in healthy subjects, two
Phase 2a studies in subjects with Parkinson’s disease, and one Phase
2b study in subjects with MSA. We have entered into an exclusive
license agreement with AstraZeneca for the product candidate.
Discovery Research
Kleo Pharmaceuticals, Inc. and Biohaven Labs
In January 2021, we acquired the remaining approximately 58%
of Kleo Pharmaceuticals, Inc. ("Kleo") that we did not previously own.
We have assumed Kleo's laboratory facilities located in Science Park
in New Haven, Connecticut. We are continuing several existing Kleo
discovery partnerships, including one with PeptiDream for the
development of immuno-oncology therapeutics (See Note 6).
TDP-43
Agreement with Fox Chase Chemical Diversity Center, Inc.
In May 2019, we entered into an agreement with Fox Chase
Chemical Diversity Center Inc. (“FCCDC”) for FCCDC’s TDP-43 assets
(the “FCCDC Agreement”). The FCCDC Agreement provides us with a
plan and goal to identify one or more new chemical entity candidates
for preclinical development for eventual clinical evaluation for the
treatment of one or more TDP-43 proteinopathies. In connection with
the FCCDC Agreement, Biohaven and FCCDC have established a
TDP-43 Research Plan that provides for certain milestones to be
achieved by FCCDC, and milestone payments to be made by us.
UC1MT
Agreement with University of Connecticut
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In October 2018, we entered into an exclusive, worldwide option
and license agreement (the "UConn Agreement") with the University of
Connecticut ("UConn") for the development and commercialization
rights to UC1MT, a therapeutic antibody targeting extracellular
metallothionein. Under this agreement, we had the option to acquire an
exclusive, worldwide license to UC1MT and its underlying patents to
develop and commercialize throughout the world in all human
indications (the "UConn Option"). In September 2022, the Company
exercised the UConn Option in exchange for a payment of $0.4 million.
Under the agreement, UConn will be entitled to milestone payments
upon the achievement of specified regulatory and commercial
milestones, and royalties of a low single-digit percentage of net sales
of licensed products.
Artizan Biosciences, Inc.
In December 2020, we entered into an Option and License
Agreement (the "2020 Artizan Agreement") with Artizan Biosciences
Inc. ("Artizan"), a biotechnology company focused on addressing
inflammatory diseases involving the human intestinal microbiota.
Pursuant to the 2020 Artizan Agreement, we acquired an option to
obtain a royalty-based license from Artizan to manufacture, use and
commercialize certain products. Artizan will use the proceeds to
continue advancing the preclinical research and development of its
lead program for inflammatory bowel disease as well as to explore
additional disease targets. In June 2022, we and Artizan executed a
non-binding indication of interest which described terms under which
we and Artizan would amend the 2020 Artizan Agreement to eliminate
certain milestone payments required by us in exchange for limiting our
option to the selection of the first licensed product. In the fourth quarter
of 2022, Artizan was unable to secure additional financing to support
it's ongoing operations, and, as a result, began reviewing strategic
options for the sale of its assets, and secured a small bridge financing
to fund operations during the strategic review. In January, Artizan
severed substantially all of its employees and halted the PD program.
Although Artizan anticipates bringing the inflammatory bowel disease
program to the clinic in 2023, its ability to do so will be dependent on
its access to adequate funding.
Reliant Glycosciences, LLC
In July 2021, we entered into a development and license
agreement with Reliant Glycosciences, LLC ("Reliant") for
collaboration on a program with Biohaven Labs’ multifunctional
molecules to develop and commercialize conjugated antibodies for
therapeutic uses relating to IgA nephropathy and treatment of other
diseases and conditions. Under the Agreement, Reliant was entitled to
an upfront share payment and will be eligible to receive development
milestone payments and royalties of net sales of licensed products.
TRPM3 Antagonists
In January 2022, we entered into an Exclusive License and
Research Collaboration Agreement with Katholieke Universiteit Leuven
("KU Leuven") to develop and commercialize TRPM3 antagonists to
address the growing proportion of people worldwide living with chronic
pain disorders (the "KU Leuven Agreement"). The TRPM3 antagonist
platform was discovered at the Centre for Drug Design and Discovery
and the Laboratory of Ion Channel Research at KU Leuven. Under the
KU Leuven Agreement,we receive exclusive global rights to develop,
manufacture and commercialize KU Leuven's portfolio of small-
molecule TRPM3 antagonists. The portfolio includes the lead
candidate, henceforth known as BHV-2100, which is being evaluated
in preclinical pain models and will be the first to advance towards
Phase 1 studies. We expect to submit an IND application for BHV-2100
with the FDA in the second half of 2023. We will support further basic
and translational research at KU Leuven on the role of TRPM3 in pain
and other disorders. The Company is evaluating and has not yet
finalized potential clinical trial designs, including size and primary and
secondary endpoints.
MoDE Platform
In January 2021, we entered into a worldwide, exclusive license
agreement with Yale University for the development and
commercialization of a novel Molecular Degrader of Extracellular
Protein ("MoDE") platform (the "Yale MoDE Agreement"). Under the
license agreement, we acquired exclusive, worldwide rights to Yale
University's intellectual property directed to its MoDE platform. The
platform pertains to the clearance of disease-causing protein and other
biomolecules by targeting them for lysosomal degradation using multi-
functional molecules.
In October 2022, we announced advancements in the
development of our MoDE extracellular target degrader platform
technology licensed from Yale University for various disease
indications, including, but not limited to, neurological disorders, cancer,
infectious and autoimmune diseases. Biohaven made further
innovations in this ground-breaking technology with new patent
applications covering additional targets and functionality.
The Company evaluated the effect of a single dose of
immunoglobulin gamma ("IgG") degrader, BHV-1300, in cynomolgus
monkeys. The Company reported 75% reduction of IgG levels from
baseline and noted the observation occurred in three days; the data in
this pre-clinical study compares favorably to standard of care therapy
efgartigimod, where reduction of IgG levels with efgartigimod was
observed to be 50% and had taken 5-7 days. The Company expects to
submit an IND application for BHV-1300 with the FDA in the second
half of 2023.
The Company presented preclinical data with a second MoDE
targeting galactose deficient IgA ("Gd-
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IgA"), which is believed to play a pathogenic role in IgA Nephropathy.
Specific removal of pathogenic Gd-IgA with preservation of normal IgA
potentially permits disease remission without incurring an infection risk.
The Company shared preliminary data demonstrating the chimeric
antibody-ASGPR ligand conjugate specifically mediated endocytosis of
Gd-IgA, as opposed to normal IgA, in an endocytosis assay with
HepG2 cells.
Components of Our Results of Operations
Revenue
To date, the we have not generated any revenue from product
sales and we 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, then we may generate
revenue in the future from product sales.
Operating Expenses
Research and Development Expenses
Research and development ("R&D") 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
non-cash share-based compensation expense for employees
engaged in research and development functions;
costs related to compliance with regulatory requirements;
development milestone payments incurred prior to regulatory
approval of the product candidate;
rent and operating expenses incurred for leased lab facilities and
equipment; and
payments made in cash, equity securities or other forms of
consideration under third-party licensing or other agreements prior
to regulatory approval of the product candidate.
We recognize external development costs based on an
evaluation of the progress to completion of specific tasks using
estimates from 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 and certain development
milestones 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.
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 remain significant over the
next several years as we increase personnel costs, conduct late-stage
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;
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;
•
•
•
•
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•
•
•
•
•
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 ("G&A") expenses consist primarily of
personnel costs, including salaries, benefits and travel expenses for
our executive, finance, business, corporate development and other
administrative functions; and share-based compensation expense.
General and administrative expenses also include facilities and other
related expenses, including rent, depreciation, maintenance of
facilities, insurance and supplies; and for public relations, audit, tax
and legal services, including legal expenses to pursue patent
protection of our intellectual property.
We anticipate that our general and administrative expenses,
including payroll and related expenses, will remain significant in the
future as we continue to support our research and development
activities and prepare for potential commercialization of our product
candidates, if successfully developed and approved. We also
anticipate increased expenses associated with general operations,
including costs related to accounting and legal services, director and
officer insurance premiums, facilities and other corporate
infrastructure, office-related costs, such as information technology
costs, and certain costs to establish ourself as a standalone public
company, as well as ongoing additional costs associated with
operating as an independent, publicly traded company.
Other Income (Expense)
Gain (Loss) from Equity Method Investment
Prior to our acquisition of Kleo in January 2021, we owned
approximately 41.9% of the outstanding shares as of December 31,
2020, and accounted 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 was included in other income
(expense), net, in our consolidated statement of operations and results
in a corresponding adjustment to the carrying value of the
equity method investment on our consolidated balance sheet.
On January 4, 2021, we acquired the rest of the shares of Kleo,
and post-transaction we own 100% of the outstanding shares of Kleo.
Other (Expense) Income, Net
Other (expense) income, net during the year ended December
31, 2022 primarily consisted of a $10.0 million impairment loss
recognized during the fourth quarter on our Artizan Series A-2
Preferred Stock Investment, partially offset by net investment income
of $3.2 million and service revenue from the Transition Service
Agreement we entered into with the Former Parent of $4.0 million.
Other (expense) income, net during the year ended December
31, 2021 primarily consisted of a gain recognized upon the Company’s
determination that the value of the contingent value right related to our
Kleo acquisition was immaterial as of December 31, 2021. The
consideration transferred for the Kleo acquisition included contingent
consideration in the form of a contingent value right to receive one
dollar in cash for each Kleo share if certain specified Kleo
biopharmaceutical products or product candidates receive the approval
of the FDA prior to the expiration of 30 months following the effective
time of the transaction. The maximum amount payable pursuant to the
contingent value right was approximately $17.3 million. At December
31, 2021, the Company determined the value of the contingent value
right to be immaterial and recognized a gain of $1.5 million related to
the contingent value right in other income, net.
Provision for Income Taxes
The income tax expense in the consolidated financial statements
has been calculated on a separate return method and is presented as
if the Company’s operations were separate taxpayers in the respective
jurisdictions up to and including the Separation. Cash tax payments,
income taxes receivable and deferred taxes, net of valuation
allowance, are reflective of our actual tax balances prior and
subsequent to the Separation.
As a company incorporated in the BVI, we are principally subject
to taxation in the BVI. Under the current laws of the BVI, the Company
and all dividends, interest, rents, royalties, compensation and other
amounts paid by the Company to persons who are not resident in the
BVI and any capital gains realized with respect to any shares, debt
obligations, or other securities of the Company by persons who are not
resident in the BVI are exempt from all provisions of the Income Tax
Ordinance in the BVI.
We have historically outsourced all of the research and clinical
development for its programs under a master services agreement with
Biohaven Pharmaceuticals, Inc. ("BPI"). As a result of providing
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services under this agreement, BPI was profitable during the years
ended December 31, 2022, 2021, and 2020, and BPI is subject to
taxation in the United States. As such, in each reporting period, the tax
provision includes the effects of combining the results of operations of
BPI.
At December 31, 2022 and 2021, we continued to maintain a full
valuation allowance against our net deferred tax assets, comprised
primarily of capitalized research and development deductions,
research and development tax credit carryforwards, and net operating
loss carryforwards, based on management’s assessment that it is
more likely than not that the deferred tax assets will not be realized.
We recorded an income tax expense for the year ended December 31,
2022 of $0.4 million and an expense of $1.4 million for the year ended
December 31, 2021, which primarily represents U.S. Federal and state
taxes related to BPI’s profitable operations in the United States.
In January 2021, we completed the acquisition of Kleo. We
recorded a full valuation allowance against our Kleo deferred tax
assets and periodically review our position. Due to Kleo's cumulative
loss history, we determined that a full valuation allowance on these
assets was appropriate. We will continue to evaluate the need for a
valuation allowance on our deferred tax assets until there is sufficient
positive evidence to support the reversal of all or some portion of these
allowances.
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Results of Operations
Comparison of the Years Ended December 31, 2022 and 2021
The following table summarizes our results of operations for the years ended December 31, 2022 and 2021:
In thousands
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other (expense) income :
Gain from equity method investment
Other (expense) income, net
Total other (expense) income, net
Loss before provision for income taxes
Provision for income taxes
Net loss
Research and Development Expenses
In thousands
Direct research and development expenses by program:
BHV-7000
Troriluzole
Verdiperstat
BHV-1100
BHV-1200 (COVID 19)
BHV-2000
Other programs
Unallocated research and development costs:
Personnel related (including non-cash share-based compensation)
Preclinical research programs
Other
Total research and development expenses
Year Ended December 31,
2022
2021
Change
437,072 $
130,860
567,932
(567,932)
—
(1,909)
(1,909)
(569,841)
438
(570,279) $
181,486 $
37,414
218,900
(218,900)
5,261
1,209
6,470
(212,430)
1,366
(213,796) $
255,586
93,446
349,032
(349,032)
(5,261)
(3,118)
(8,379)
(357,411)
(928)
(356,483)
$
$
Year Ended December 31,
2021
2022
Change
$
$
131,006 $
58,769
13,654
852
6,033
16,799
731
170,122
25,865
13,241
437,072 $
— $
50,637
30,664
1,476
3,023
820
288
64,308
22,592
7,678
181,486 $
131,006
8,132
(17,010)
(624)
3,010
15,979
443
105,814
3,273
5,563
255,586
R&D expenses, including non-cash share-based compensation
costs, were $437.1 million for the year ended December 31, 2022,
compared to $181.5 million for the year ended December 31, 2021.
The increase of $255.6 million was primarily due to an increase of
$131.0 million in expense for BHV-7000, an increase of $16.0 million in
expense for BHV-2000, and an increase of $105.8 million in personnel
costs. The $131.0 million increase in expense for BHV-7000 was
primarily due to the Kv7 Platform Acquisition which resulted in $93.7
million of expense recorded to R&D, and a $25.0 million milestone
expense, both recognized during the second quarter of 2022. The
increase of $105.8 million in personnel costs was primarily due to
increases in non-cash share-based compensation expense of $77.0
million, increased headcount to support acquired and late-stage
programs, and $5.2 million of one-time employee costs related to the
Pfizer acquisition of the Former Parent in the fourth quarter of 2022.
These increases were partially offset by a decrease in program
expense for verdiperstat of $17.0 million.
Non-cash share-based compensation expense was $116.4
million for the year ended December 31, 2022, an increase of $77.0
million as compared to the same period in 2021. Non-cash share-
based compensation expense for the year ended December 31, 2022
included $108.7 million amount of expense allocated from the Former
Parent, including $61.7 million of expense recognized in connection
with the settlement of
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outstanding Former Parent stock options and RSUs upon the
effectiveness of the Separation.
General and Administrative Expenses
G&A expenses, including non-cash share-based compensation
costs, were $130.9 million for the year ended December 31, 2022,
compared to $37.4 million for the year ended December 31, 2021. The
increase of $93.4 million was primarily due to increases of $50.9
million in non-cash share-based compensation expense, and $14.1
million of transaction expenses and $8.9 million of one-time personnel
expenses related to the Pfizer acquisition of the Former Parent and
spin-off of Biohaven Ltd. as an independent, publicly traded company
in 2022.
Non-cash share-based compensation expense was $77.2 million
for the year ended December 31, 2022, an increase of $50.9 million as
compared to the same period in 2021. Non-cash share-based
compensation expense for the year ended December 31, 2022
included $70.6 million amount of expense allocated from the Former
Parent, including $39.7 million of expense recognized in connection
with the settlement of each outstanding Former Parent stock option
and RSU upon the effectiveness of the Separation.
Other Income (Expense), Net
Other income (expense), net was a net expense of $1.9 million for
the year ended December 31, 2022, compared to other income of $6.5
million for the year ended December 31, 2021. The change of $8.4
million was primarily due to a $10.0 million impairment loss recognized
during the fourth quarter on our Artizan Series A-2 Preferred Stock
Investment and the acquisition of Kleo in January 2021, which resulted
in a gain of $5.3 million being recognized during 2021 upon our
remeasurement to fair value of the existing equity interest in Kleo,
partially offset by net investment income of $3.2 million and service
revenue from the Transition Service Agreement we entered into with
the Former Parent of $4.0 million.
Provision for Income Taxes
We recorded a provision for income taxes of $0.4 million for the
year ended December 31, 2022, compared to a provision for income
taxes of $1.4 million for the year ended December 31, 2021. The
decrease in income tax expense was primarily attributable to the
vesting of share based compensation awards to employees and the
Foreign-Derived Intangible Income ("FDII") deduction, offset by the
mandatory capitalization of R&D expenses effective January 1, 2022
under the Tax Cuts and Jobs Act.
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Comparison of the Years Ended December 31, 2021 and 2020
The following table summarizes our results of operations for the years ended December 31, 2021 and 2020:
In thousands
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other (expense) income :
Gain (loss) from equity method investment
Other income, net
Total other income (expense), net
Loss before provision for income taxes
Provision for income taxes
Net loss
Research and Development Expenses
In thousands
Direct research and development expenses by program:
Troriluzole
Verdiperstat
BHV-1100
BHV-1200 (COVID 19)
Other programs
Unallocated research and development costs:
Personnel related (including non-cash share-based compensation)
Preclinical research programs
Other
Total research and development expenses
Research and development expenses were $181.5 million for the
year ended December 31, 2021, compared to $98.5 million for the year
ended December 31, 2020. The increase of $83.0 million was primarily
due to increases of $8.5 million in direct costs for the troriluzole
program, $9.6 million in direct costs for the verdiperstat program, $33.2
million in personnel related costs, and $21.2 million in costs related to
our preclinical research programs.
The increase in personnel costs of $33.2 million was primarily a
result of hiring additional personnel to support the expanding number
of clinical trials and preclinical programs. Personnel-related costs for
the years ended December 31, 2021 and 2020 included non-cash
share-based compensation expense of $39.4 million and $18.5 million,
respectively.
The $21.2 million increase in preclinical research costs was
primarily due to the following: an upfront
Year Ended December 31,
2020
2021
Change
$
$
181,486 $
37,414
218,900
(218,900)
5,261
1,209
6,470
(212,430)
1,366
(213,796) $
98,460 $
16,046
114,506
(114,506)
(4,162)
—
(4,162)
(118,668)
—
(118,668) $
83,026
21,368
104,394
(104,394)
9,423
1,209
10,632
(93,762)
1,366
(95,128)
Year Ended December 31,
2020
2021
Change
$
$
50,637 $
30,664
1,476
3,023
288
64,308
22,592
7,678
180,666 $
42,101 $
21,036
—
—
390
31,060
1,434
2,439
98,460 $
8,536
9,628
1,476
3,023
(102)
33,248
21,158
5,239
82,206
payment of $2.0 million to Yale University in connection with the Yale
MoDE Agreement; an upfront payment of $5.9 million to Moda
Pharmaceuticals LLC in connection with a consulting agreement to
further the scientific advancement of technology, drug discovery
platforms (including the technology licensed under the Yale MoDE
Agreement), product candidates and related intellectual property
owned or controlled by the Company; and a $3.8 million upfront
payment to Reliant Glycosciences, LLC in connection with a
development and license agreement to develop and commercialize
conjugated antibodies for therapeutic uses relating to IgA nephropathy
and treatment of other diseases and conditions. The remainder of the
increase primarily related to the rise in the number of ongoing
preclinical research programs, including increased costs for
outsourced chemistry and research arrangements.
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General and Administrative Expenses
General and administrative expenses were $37.4 million for the
year ended December 31, 2021, compared to $16.0 million for the year
ended December 31, 2020 The increase of $21.4 million was primarily
due to increased personnel-related expenses of $16.4 million,
including non-cash share-based compensation expense, and a $2.0
million increase in expenses related to accounting, legal and other
professional fees. Non-cash share-based compensation expense
included in personnel-related costs increased $15.2 million, from $11.0
million for the year ended December 31, 2020 to $26.3 million for the
year ended December 31, 2021, primarily due to annual equity
incentive awards that were granted by the Formers Parent in the first
quarter of 2021.
Other Income (Expense), Net
Other income (expense), net was a net other income of $6.5
million for the year ended December 31, 2021, compared to net other
expense of $4.2 million for the year ended December 31, 2020. The
change of $10.6 million in net other income (expense) was primarily
due to a $9.4 million change in gain (loss) on equity investment,
primarily due to the acquisition of Kleo Pharmaceuticals, Inc. in
January 2021, which resulted in a gain of $5.3 million being recognized
during 2021 upon our remeasurement to fair value of the existing
equity interest in Kleo. The decrease was also due to a $1.2 million
increase in other income, net, which was primarily due to a $1.5 million
gain recognized in 2021 upon the Company’s determination that the
fair value of a contingent value right recorded relating to the acquisition
of Kleo Pharmaceuticals was immaterial as of December 31, 2021.
Provision for Income Taxes
We recorded a provision for income taxes of $1.4 million for
December 31, 2021 and $0.0 million for the year ended December 31,
2020. The increase in tax expense for the year ended December 31,
2021 is primarily related to the decrease in the tax deductions arising
from stock based compensation awards to employees.
Liquidity and Capital Resources
Since our inception as a business of the Former Parent, we have
not generated any revenue and have incurred significant operating
losses and negative cash flows from operations. We 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.
Historically, for periods prior to our separation from the Former
Parent, we have funded our operations primarily with proceeds
allocated to our business from financing arrangements entered into by
the Former Parent and through the one-time issuance of contingently
redeemable non-controlling interests. Prior to the Separation, transfers
of cash for general operating, investing, and financing activities and
net cost allocation from the Former Parent were reflected in net
investment from Former Parent in our consolidated balance sheets.
The cash reported on our consolidated balance sheet for periods prior
to the Separation represents cash held by Biohaven entities at the end
of the period presented.
Pursuant to the Distribution Agreement, immediately prior to the
Separation, the Former Parent made a cash contribution to the
Company which resulted in a cash balance of approximately $257.8
million as of October 3, 2022. Additionally, on October 25, 2022, we
completed a public offering of 28,750,000 of our common shares,
including the full exercise of the underwriters' option to purchase
additional shares, at a public offering price of $10.50 per share. The
offering resulted in net proceeds, after deducting underwriting
discounts and expenses of the offering payable by Biohaven, of
approximately $282.8 million.
As of December 31, 2022, we had cash and cash equivalents of
$204.9 million, excluding marketable securities of $260.5 million and
restricted cash of $37.7 million of which $35.2 million related to
restricted cash held on behalf of Former Parent and $2.5 million
related to collateral held by banks for letters of credit (“LOC”) issued in
connection with leased office space in Yardley, Pennsylvania and
Cambridge, Massachusetts. Cash in excess of immediate
requirements is invested in marketable securities and money market
funds with a view to liquidity and capital preservation. We continuously
assess our working capital needs, capital expenditure requirements,
and future investments or acquisitions.
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Cash Flows
The following table summarizes our cash flows for each of the periods presented:
In thousands
Net cash used in operating activities
Net cash (used in) provided by investing activities
Net cash provided by financing activities
Effect of exchange rate changes on cash and cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Year Ended December 31,
2022
2021
2020
(297,689) $
(304,790)
767,597
429
165,547 $
(145,840) $
944
138,447
—
(6,449) $
(75,957)
(2,697)
152,242
—
73,588
$
$
Operating Activities
Net cash used in operating activities was $297.7 million in 2022,
$145.8 million in 2021, and $76.0 million in 2020. The $151.9 million
increase in net cash used in operating activities in 2022 was driven
primarily by:
•
•
•
an increase in net loss primarily due to an increase in R&D
spending including a $25.0 million milestone payment to
Knopp Biosciences, LLC (see Note 6 to the Consolidated
Financial Statements), an increase in R&D headcount to
support acquired and late-stage programs, and an increase in
payments related to accounting, legal and other professional
fees associated with the Pfizer acquisition of the Former
Parent and spin-off of Biohaven Ltd;
an increase in prepaid R&D expenses to support our clinical
trials; and
increased cash payments for income taxes.
The $69.8 million increase in net cash used in operating activities in
2021 was unfavorably impacted by an increase in net loss primarily
due to:
•
•
an increase in R&D spending including upfront payments of
$3.7 million for various license agreements (see Note 11 to
the Consolidated Financial Statements); and
an increase in headcount to support the Company's growing
operations.
Investing Activities
Net cash used in investing activities was $304.8 million in 2022
and $2.7 million in 2020, and net cash provided by investing activities
was $0.9 million in 2021. The $305.7 million increase in net cash used
in investing activities in 2022 was driven primarily by:
•
•
payment for our acquisition of Channel Biosciences, LLC (see
Note 6 to the Consolidated Financial Statements); and
purchase of series A-2 preferred stock of Artizan Biosciences
Inc (see Note 11 to the Consolidated Financial Statements).
The $3.6 million increase in net cash provided by investing activities in
2021 was driven primarily by cash acquired from the business
acquisition of Kleo Pharmaceuticals, Inc (see Note 6 to the
Consolidated Financial Statements).
Financing Activities
Net cash provided by financing activities was $767.6 million in
2022, $138.4 million in 2021, and $152.2 million in 2020. The $629.2
million increase in net cash provided by financing activities in 2022
was driven primarily by:
•
•
•
an increase in proceeds from net transfers from Parent prior to
and at the Separation for our general operating, investing, and
financing activities and net cost allocations and initial
capitalization;
restricted cash held in connection with the execution of the
United States Distribution Services Agreement which is legally
payable to the Former Parent (see Note 14 to the
Consolidated Financial Statements); and
proceeds from the issuance of common shares related to a
public offering in October 2022 (see Note 7 to the
Consolidated Financial Statements).
The $13.8 million decrease in net cash provided by financing
activities in 2021 was driven primarily by a decrease in proceeds from
net transfers from Former Parent for our general operating, investing,
and financing activities and net cost allocations.
Funding Requirements
•
•
purchases of marketable securities with cash in excess of
immediate requirements (see Note 3 to the Consolidated
Financial Statements);
We expect our expenses to increase in connection with our
ongoing activities, particularly as we advance and expand preclinical
activities, clinical trials and
an increase in purchases of equipment to support our
discovery programs;
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potential commercialization of our product candidates. Our costs will
also increase as we:
depending on where we choose to commercialize or whether we
commercialize jointly or on our own.
•
•
•
•
•
•
•
•
•
continue to advance and expand the development of our
clinical-stage assets;
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;
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;
support our sales, marketing and distribution infrastructure to
commercialize any future product candidates for which we
may obtain marketing approval;
hire additional clinical, medical, commercial, and development
personnel; and
incur additional legal, accounting and other expenses in
operating as a public company.
We expect that our cash, cash equivalents and marketable
securities, as of the date of this Annual Report on Form 10-K, will be
sufficient to fund our current forecast for operating expenses, financial
commitments and other cash requirements for more than one year. We
expect we will need to raise additional capital until we are profitable. If
no additional capital is raised through either public or private equity
financings, debt financings, strategic relationships, alliances and
licensing agreements, or a combination thereof, we may delay, limit or
reduce discretionary spending in areas related to research and
development activities and other general and administrative expenses
in order to fund our operating costs and working capital needs.
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 pursue in-licenses or acquisitions of other product
candidates. If we receive regulatory approval for troriluzole, or our
other product candidates, we expect to incur commercialization
expenses related to product manufacturing, sales, marketing and
distribution,
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 effect of COVID-19 pandemic on our business operations
and funding needs;
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; and
the extent to which we acquire or in-license other product
candidates and technologies
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.
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Contractual Obligations and Commitments
The following table summarizes certain estimated future obligations by period under our various contractual obligations as of December 31, 2022
and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:
In thousands
Operating leases
Purchase obligations
(1)
Research commitments
(2)
Total
Total
2023
Payments Due by Period
2024-2025
2026-2027
Thereafter
$
$
44,579 $
4,929 $
9,723 $
9,364 $
20,563
16,457
61,036 $
16,457
21,386 $
—
9,723 $
—
9,364 $
—
20,563
(1) Refer to Note 12, "Commitments and Contingencies" to the consolidated financial statements included in this 10-K for additional information on future minimum rental commitments under
non-cancelable operating leases.
(2) Research commitments are primarily CRO 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. In addition to the amounts above, as of December 31, 2022, the Company had
remaining maximum research commitments in excess of one year of approximately $18,750, which are variable based on number of trial participants and contingent upon the achievement
of certain milestones of the clinical trials covered under the agreements. Since the achievement of these milestones is uncertain and the timing unpredictable, the Company did not include
the additional research commitments in the table above. If all related milestones are achieved, the Company expects these amounts to be paid over the next five years.
In addition to the contractual obligations in the table above, 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 license 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 annual
license maintenance payments related to our license agreements in the next 12 months.
Critical Accounting Policies and Significant Judgments and
Valuation and Impairment of Intangible Assets
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,
assumptions, and judgments that affect the reported amounts of
assets, liabilities, expenses, and related disclosures at the date of the
consolidated financial statements. We evaluate our estimates and
judgments on an ongoing basis. We base our estimates on historical
experience and on various other factors that we believe are
reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual
results could therefore differ materially from these estimates under
different assumptions or conditions.
While our significant accounting policies are described in more
detail in Note 2, "Summary of Significant Accounting Policies" 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.
In-Process Research and Development (“IPR&D”) that the
Company acquires in conjunction with the acquisition of a business
represents the fair value assigned to incomplete research projects
which, at the time of acquisition, have not reached technological
feasibility. The amounts are capitalized and accounted for as indefinite-
lived intangible assets, subject to impairment testing until completion
or abandonment of the projects. Upon successful completion of each
project, the Company will make a determination as to the then-useful
life of the intangible asset, generally determined by the period in which
the substantial majority of the cash flows are expected to be
generated, and begin amortization.
The fair value of acquired intangible assets is primarily
determined using an income-based approach referred to as the multi-
period excess earnings method utilizing Level 3 fair value inputs. The
market participant valuation assumes a global view considering all
potential jurisdictions and indications based on discounted after-tax
cash flow projections, risk adjusted for estimated probability of
technical and regulatory success.
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The Company evaluates IPR&D for impairment at least annually
in the fourth quarter and more frequently if impairment indicators exist,
by performing a quantitative test that compares the fair value of the
IPR&D intangible asset with its carrying value. If the fair value is less
than the carrying amount, an impairment loss is recognized in
operating results.
Accrued Research and Development Expenses
As part of the process of preparing the consolidated financial
statements, we are required to estimate 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 its behalf and estimating
the level of service performed and the associated cost incurred for the
service when it has not yet been invoiced or otherwise notified of
actual costs. The majority of our service providers invoice 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:
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.
Cost Allocations
Prior to the distribution on October 3, 2022, we have historically
operated as part of the Former Parent and not as separate, publicly
traded company. Accordingly, for periods prior to the distribution,
certain shared costs and non-cash share-based compensation
expenses have been allocated to us and are reflected as expenses in
the accompanying consolidated statement of operations. Management
considers the expense methodology and resulting allocation to be
reasonable for all periods presented; however, the allocations may not
be indicative of actual expenses that would have been incurred had we
operated as an independent, publicly traded company for the periods
presented. Actual costs that we may have incurred had we been a
stand-alone company would depend on a number of factors, including
the organizational structure, what corporate functions the Company
might have performed directly or outsourced and strategic decisions
the Company might have made in areas such as executive
management, legal and other professional services, and certain
corporate overhead functions.
• vendors, including central laboratories, in connection with
Recently Issued Accounting Pronouncements
preclinical development activities;
• CROs and investigative sites in connection with preclinical and
clinical studies; and
• CMOs in connection with drug substance and drug product
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.
formulation of preclinical and clinical trial materials.
Emerging Growth Company Status
We base expenses related to preclinical studies and clinical trials
We are an “emerging growth company,” as defined in the
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
Jumpstart Our Business Startups (JOBS) Act (the "JOBS Act"), and we
are eligible to take advantage of certain exemptions from various
reporting requirements that are applicable to other public companies
that are not “emerging growth companies.” These exemptions
generally include, but are not limited to, not being required to comply
with the auditor attestation requirements of Section 404 of the
Sarbanes-Oxley Act, reduced disclosure obligations regarding
executive compensation in our periodic reports and proxy statements
and exemptions from the requirements of holding a nonbinding
advisory vote on executive compensation and shareholder approval of
any golden parachute payments not previously approved.
We plan to take advantage of some or all of the reduced
regulatory and reporting requirements that will be available to us as
long as we qualify as an emerging growth company, except that we
have irrevocably elected not to take advantage of the extension of time
to comply with new or revised financial accounting
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standards available under Section 102(b) of the JOBS Act.
We do not engage in any hedging activities against changes in
We will, in general, remain as an emerging growth company for
up to five full fiscal years following the Distribution. We would cease to
be an emerging growth company and, therefore, become ineligible to
rely on the above exemptions, if we:
•
•
•
have more than $1.235 billion in annual revenue in a fiscal
year;
issue more than $1 billion of non-convertible debt during the
preceding three-year period; or
become a “large accelerated filer” as defined in Exchange Act
Rule 12b-2, which would occur after: (i) we have filed at least
one annual report pursuant to the Exchange Act; (ii) we have
been an SEC-reporting company for at least twelve months;
and (iii) the market value of our common shares that is held by
non-affiliates exceeds $700 million as of the last business day
of our most recently completed second fiscal quarter.
Smaller Reporting Company Status
Additionally, we are a “smaller reporting company,” as defined in
Rule 12b-2 under the Exchange Act. As such, we are eligible for
exemptions from various reporting requirements applicable to other
public companies that are not smaller reporting companies, including,
but not limited to, reduced disclosure obligations regarding executive
compensation.
We will remain a smaller reporting company as long as either:
(i) the market value of our common shares held by non-affiliates
is less than $250 million as of the last business day of our most
recently completed second fiscal quarter; or
(ii) our annual revenue is less than $100 million during the most
recently completed fiscal year and the market value of our common
shares held by non-affiliates is less than $700 million as of the last
business day of our most recently completed second fiscal quarter.
Item 7A. Quantitative and Qualitative Disclosures about Market
Risks
Foreign Currency Translation
Our operations include activities in countries outside the U.S. As
a result, our financial results are impacted by factors such as changes
in foreign currency exchange rates or weak economic conditions in the
foreign markets where we operate. Our monetary exposures on our
consolidated balance sheets were immaterial to our financial position
as of December 31, 2022 and 2021.
foreign currency exchange rates.
Interest Rate Risk
As of December 31, 2022, we invest our excess cash balances in
marketable securities of highly rated financial institutions and
investment-grade debt instruments. We seek to diversify our
investments and limit the amount of investment concentrations for
individual institutions, maturities and investment types. Most of our
interest-bearing securities are subject to interest rate risk and could
decline in value if interest rates fluctuate. Based on the type of
securities we hold, we do not believe a change in interest rates would
have a material impact on our financial statements. If interest rates
were to increase or decrease by 1.00%, the fair value of our
investment portfolio would (decrease) increase by approximately $(1.4)
million and $1.4 million, respectively. The Company did not have any
investments in marketable securities as of December 31, 2021. For
further discussion of our investments in marketable securities, refer to
Note 3, "Marketable Securities," of the Notes to the Consolidated
Financial Statements appearing elsewhere in this Annual Report on
Form 10-K.
We do not engage in any hedging activities against changes in
interest rates.
Credit Risk
Financial instruments that potentially expose the Company to
concentrations of credit risk consist of cash, cash equivalents, and
short-term debt securities. The Company maintains a portion of its
cash deposits in government insured institutions in excess of
government insured limits. The Company deposits its cash in financial
institutions that it believes have high credit quality and has not
experienced any losses on such accounts. The Company's cash
management policy permits investments in U.S. federal government
and federal agency securities, corporate bonds or commercial paper,
supranational and sovereign obligations, certain qualifying money
market mutual funds, certain repurchase agreements, and places
restrictions on credit ratings, maturities, and concentration by type and
issuer. The Company is exposed to credit risk in the event of a default
by the financial institutions holding its cash in excess of government
insured limits and in the event of default by corporations and
governments in which it holds investments in cash equivalents and
short-term debt securities, to the extent recorded on the consolidated
balance sheet.
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.
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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, our Chief Executive Officer and Chief Financial Officer
have concluded that, as of December 31, 2022, our disclosure controls
and procedures were effective at the reasonable assurance level.
Management's Report on Internal Control over Financial
Reporting
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
as allowed by the SEC during the transition period for newly public
companies.
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Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial
Biohaven is now solely responsible, and has agreed to use
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act) that occurred during the three months ended December
31, 2022 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
On March 21, 2023, Biohaven, through its wholly owned
subsidiary Biohaven Therapeutics Ltd., entered into a License
Agreement (the “Highlight II Agreement”) with Hangzhou Highlightll
Pharmaceutical Co. Ltd. (“Highlightll”). Pursuant to the Highlightll
Agreement, Highlightll granted Biohaven exclusive worldwide rights,
excluding the People’s Republic of China and its territories and
possessions, to research, develop, manufacture and commercialize
Highlightll’s brain penetrant dual TYK2/JAK1 tyrosine kinase
(“TYK2/JAK1”) inhibitor program. Biohaven plans to conduct a Phase 1
study of this product candidate, which will now be referred to as BHV-
8000, for the treatment of brain disorders.
As partial consideration for the Highlightll Agreement, the
Company is obligated to pay Highlightll a cash payment of $10 million
and common shares valued at approximately $10 million as of the
agreement execution, upon the completion of certain post-closing
activities. Under the terms of the Highlightll Agreement, Biohaven will
also be obligated to make milestone payments to Highlightll totaling up
to $200 million upon the achievement of specified developmental,
regulatory and commercial milestones for a first indication, up to $100
million upon the achievement of specified developmental, regulatory
and commercial milestones for a second indication, and up to $650
million upon the achievement of specified sales-based milestones. No
additional milestone payments will be due for any indications beyond
the first and second indications. In addition, Biohaven will pay
Highlightll tiered royalties ranging from mid single-digit to low teens
based on net sales of any approved products based on BHV-8000,
subject to specified reductions.
Under the terms of the Highlightll Agreement, Biohaven may
pursue development and commercialization of BHV-8000 for all
indications, except, for a period of five years from the date of the first
commercial sale of the first licensed product, the prevention, treatment
or diagnosis of any disorders that cause inflammation in the bones,
muscles, joints, respiratory system, gastro-intestinal system and skin.
Highlightll has agreed not to develop or commercialize, for a period of
five years from the date of the first commercial sale of the first licensed
product, any TYK2/JAK1inhibitor program for the prevention, treatment
or diagnosis of any neurological disorder.
commercially reasonable efforts, for all development, regulatory and
commercial activities related to BHV-8000. Biohaven may sublicense
its rights under the Highlightll Agreement, subject to Highlightll’s prior
written consent. Biohaven is also now responsible for the prosecution
and maintenance of the patents related to BHV-8000 and licensed
products, and has the first right to prosecute infringement of the
patents and defend challenges to the validity or enforceability of the
patents in all countries other than the People’s Republic of China and
its territories and possessions.
The Highlightll Agreement terminates on a country-by-country
basis and product-by-product basis upon the expiration of the royalty
term for a product in a country. Each royalty term begins on the date of
the first commercial sale of a licensed product in a particular 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 Highlightll Agreement may be terminated earlier in
specified situations, including termination for uncured material breach
of the Highlightll Agreement by either party, termination by Highlightll in
specified circumstances, termination by Biohaven in entirety or on a
country-by-country basis with advance notice and termination upon a
party’s insolvency or bankruptcy.
The Highlightll Agreement also contains customary
representations, warranties and covenants by both parties, as well as
customary provisions relating to indemnification, confidentiality and
other matters.
The foregoing description of the terms of the Highlightll
Agreement is qualified in its entirety by reference to the full text of the
Highlightll Agreement, which Biohaven expects to file as an exhibit to
its Quarterly Report on Form 10-Q for the three months ending March
31, 2023.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS
Not applicable.
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PART III
We will file a definitive Proxy Statement for our 2023 Annual Meeting of
Shareholders (the "2023 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 2023 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 2023 Proxy
Statement under the captions "Information Regarding the Board of
Directors and Corporate Governance," "Election of Directors,"
"Executive Officers" and "Delinquent Section 16(a) Reports."
Item 11. Executive Compensation
The information required by this Item is incorporated herein by
reference to the information that will be contained in the 2023 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 2023 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 2023 Proxy
Statement under the captions "Transactions with Related Persons" and
"Independence of the Board of Directors."
Item 14. Principal Accountant Fees and Services
The information required by this Item is incorporated herein by
reference to the information that will be contained in the 2023 Proxy
Statement under the caption "Ratification of Selection of Independent
Auditors."
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Item 15. Exhibit and Financial Statement Schedules
a. The following documents are filed as part of this report:
(1) Financial Statements:
PART IV
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
10.1 #
3.1
2.2
2.1
Separation and Distribution Agreement, dated as of May 9, 2022, by and among Pfizer Inc., Bulldog (BVI) Ltd. and Biohaven
Pharmaceutical Holding Company Ltd. (incorporated by reference to Exhibit 2.1 to the Company's Form 10 (File No. 001-41477) filed on
August 10, 2022).
Agreement and Plan of Merger, dated as of May 9, 2022, by and among Pfizer Inc., Bulldog (BVI) Ltd. and Biohaven Pharmaceutical
Holding Company Ltd. (incorporated by reference to Exhibit 2.2 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022) .
2.3 # Membership Interest Purchase Agreement, dated as of February 24, 2022, by and among Biohaven Therapeutics LTD., Knopp Biosciences
LLC, Channel Biosciences, LLC and Biohaven Pharmaceutical Holding Company Ltd., solely for the purpose of Section 9.14 (incorporated
by reference to Exhibit 2.3 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022).
Amended & Restated Memorandum and Articles of Association of Biohaven Ltd. (incorporated by reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K (File No. 001-41477) filed on October 3, 2022).
Amended and Restated Agreement, by and between the Registrant and Yale University, dated as of May 6, 2019 (incorporated by reference
to Exhibit 10.1 to the Company's Form 8-K (File No. 001-41477) filed on October 3, 2022).
License Agreement, by and between the Registrant and AstraZeneca AB, dated as of September 4, 2018 (incorporated by reference to
Exhibit 10.2 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022).
License Agreement between Biohaven Therapeutics LTD. and Bristol-Myers Squibb Company, dated as of December 23, 2021
(incorporated by reference to Exhibit 10.3 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022).
ALS Biopharma Agreement, by and among the registrant, ALS Biopharma, LLC and Fox Chase Chemical Diversity Center Inc., dated as of
August 10, 2015 (incorporated by reference to Exhibit 10.4 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022).
Amendment and Assignment, by and among the Registrant, ALS Biopharma, LLC, Fox Chase Chemical Diversity Center and Biohaven
Therapeutics Ltd, dated as of May 29, 2019 (incorporated by reference to Exhibit 10.5 to the Company's Form 10 (File No. 001-41477) filed
on August 10, 2022).
Employment Agreement dated May 9, 2017 by and between Biohaven Pharmaceuticals, Inc. and Vlad Coric (incorporated by reference to
Exhibit 10.6 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022).
Employment Agreement, dated December 8, 2021, between Biohaven Pharmaceuticals, Inc. and Matthew Buten (incorporated by reference
to Exhibit 10.7 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022).
10.2 #
10.3 #
10.4 #
10.6 +
10.7 +
10.5
10.8 + Offer Letter dated February 21, 2017 by and between Biohaven Pharmaceuticals, Inc. and Elyse Stock (incorporated by reference to Exhibit
10.9 +
10.10 +
10.11 +
10.12 +
10.8 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022).
Employment Agreement dated February 1, 2014 by and between Biohaven Pharmaceuticals, Inc. and Kimberly A. Gentile (incorporated by
reference to Exhibit 10.9 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022).
Employment Agreement, dated March 29, 2016, between Biohaven Pharmaceutical Holding Company Ltd. and John Tilton (incorporated by
reference to Exhibit 10.10 to the Company's Form 10 (File No. 001-41477) filed on August 10, 2022).
2022 Equity Incentive Plan (incorporated by reference to Exhibit 4.2 to Company’s Registration Statement on Form S-8 filed on October 11,
2022).
Form of Restricted Share Unit Grant Notice and Restricted Share Unit Award Agreement under 2022 Equity Incentive Plan (incorporated by
reference to Exhibit 10.12 to the Company's Form 10 (File No. 001-41477) filed on September 7, 2022).
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10.13 +
10.14 +
10.15 +
10.16 +
10.17 +
10.18 +
21.1
23.1
24.1
31.1
31.2
32.1 *
101
104
Form of Share Option Grant Notice and Share Option Agreement under 2022 Equity Incentive Plan (incorporated by reference to Exhibit
10.13 to the Company's Form 10 (File No. 001-41477) filed on September 7, 2022).
Legacy Equity Award Settlement Plan (incorporated by reference to Exhibit 4.4 to Company’s Registration Statement on Form S-8 filed on
October 11, 2022).
2022 Employee Share Purchase Plan (incorporated by reference to Exhibit 4.3 to Company’s Registration Statement on Form S-8 filed on
October 11, 2022).
Form of Employment Agreement by and between Biohaven Ltd. and Vladimir Coric Form of Employment Agreement by and between
Biohaven Ltd. and Matthew Buten (incorporated by reference to Exhibit 10.16 to the Company's Form 10 (File No. 001-41477) filed on
September 7, 2022).
Form of Employment Agreement by and between Biohaven Ltd. and Matthew Buten (incorporated by reference to Exhibit 10.17 to the
Company's Form 10 (File No. 001-41477) filed on September 7, 2022).
Amended and Restated Offer of Employment, by and between Biohaven Pharmaceuticals, Inc. and Bruce Car.
Subsidiaries of the Registrant.
Consent of Ernst & Young LLP.
Power of Attorney (contained on signature page hereto).
Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act.
Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act.
Certifications of Principal Executive Officer and Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act.
The following materials from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2022 formatted in Inline XBRL
(Extensible Business Reporting Language): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Operations, (iii) the
Consolidated Statements of Comprehensive Loss, (iv) the Consolidated Statements of Shareholders' Equity, (v) the Consolidated
Statements of Cash Flows, (vi) Notes to Consolidated Financial Statements, and (vi) Cover Page, tagged as blocks of text.
The cover page from the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2022, formatted in Inline XBRL
(included as Exhibit 101).
_______________________________________________________________________________
# Portions of this exhibit (indicated by asterisks) have been omitted as such information is (i) not material and (ii) would likely cause competitive harm to the Registrant if
publicly disclosed.
+ Indicates management contract or compensatory plan.
* 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.
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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
SIGNATURES
undersigned thereunto duly authorized.
Dated: March 23, 2023
BIOHAVEN LTD.
By:
By:
/s/ VLAD CORIC, M.D.
Vlad Coric, M.D.
Chief Executive Officer
(On behalf of the Registrant and as the Principal Executive Officer)
/s/ MATTHEW BUTEN
Matthew Buten
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 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.
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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/ MATTHEW BUTEN
Matthew Buten
/s/ GEORGE C. CLARK
George C. Clark
/s/ GREGORY H. BAILEY, M.D.
Gregory H. Bailey, M.D.
/s/ JOHN W. CHILDS
John W. Childs
/s/ JULIA P. GREGORY
Julia P. Gregory
/s/ MICHAEL HEFFERNAN
Michael Hefferenan
/s/ ROBERT J. HUGIN
Robert J. Hugin
/s/ KISHEN MEHTA
Kishen Mehta
/s/ IRINA ANTONIJEVIC
Irina Antonijevic
Chief Executive Officer and Director
(Principal Executive Officer)
March 23, 2023
March 23, 2023
March 23, 2023
March 23, 2023
March 23, 2023
March 23, 2023
March 23, 2023
March 23, 2023
March 23, 2023
March 23, 2023
Chief Financial Officer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
Director
Director
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Table of Contents
Biohaven Ltd.
Financial Statements
For the Years Ended December 31, 2022, 2021 and 2020
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Comprehensive Loss
Consolidated Statements of Shareholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
F-1
Page
Table of Contents
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Biohaven Ltd.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Biohaven Ltd. (the Company) as of December 31, 2022 and 2021, the related
consolidated statements of operations, comprehensive loss, shareholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2022, and 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 at December 31, 2022 and 2021, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's
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 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 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 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 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 financial statements. We believe that our audits provide a reasonable basis for our
opinion.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2022.
Hartford, Connecticut
March 23, 2023
F-2
Table of Contents
Assets
Current assets:
Cash and cash equivalents
Marketable securities
Prepaid expenses
Income tax receivable
Restricted cash held on behalf of Former Parent
Other current assets
Total current assets
Property and equipment, net
Intangible assets
Goodwill
Other non-current assets
Total assets
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable
Due to Former Parent
Accrued expenses and other current liabilities
Total current liabilities
Long-term operating lease liability
Other non-current liabilities
Total liabilities
Commitments and contingencies (Note 12)
Contingently redeemable non-controlling interests
Shareholders' Equity:
BIOHAVEN LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share amounts)
December 31,
2022
2021
$
$
$
$
204,877 $
260,464
20,945
46,139
35,212
19,331
586,968
17,512
18,400
1,390
37,513
661,783 $
10,703 $
35,212
44,106
90,021
30,581
2,410
123,012
—
—
—
615,742
13,869
(91,124)
284
538,771
661,783 $
76,057
—
6,734
9,911
—
2,121
94,823
13,010
18,400
1,390
14,438
142,061
4,775
—
37,160
41,935
2,797
2,638
47,370
60,000
34,691
—
—
—
—
—
34,691
142,061
Net investment from Former Parent
Preferred shares, no par value; 10,000,000 shares authorized, no shares issued and outstanding as of December 31,
2022; no shares authorized, issued and outstanding as of December 31, 2021
Common shares, no par value; 200,000,000 shares authorized, 68,190,479 shares issued and outstanding as of
December 31, 2022; no shares authorized, issued and outstanding as of December 31, 2021
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive income
Total shareholders' equity
Total liabilities and shareholders' equity
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Table of Contents
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other (expense) income :
Gain (loss) from equity method investment
Other (expense) income, net
Total other (expense) income, net
Loss before provision for income taxes
Provision for income taxes
Net loss
Net loss per share — basic and diluted
BIOHAVEN LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except share and per share amounts)
2022
Year Ended December 31,
2021
2020
$
$
$
437,072 $
130,860
567,932
(567,932)
—
(1,909)
(1,909)
(569,841)
438
(570,279) $
(12.75) $
181,486 $
37,414
218,900
(218,900)
5,261
1,209
6,470
(212,430)
1,366
(213,796) $
(5.43) $
98,460
16,046
114,506
(114,506)
(4,162)
—
(4,162)
(118,668)
—
(118,668)
(3.01)
Weighted average common shares outstanding—basic and diluted
44,741,316
39,375,944
39,375,944
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
BIOHAVEN LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands)
Net loss
Other comprehensive income, net of tax:
Foreign currency translation adjustments
Net unrealized losses related to available-for-sale debt securities
Other comprehensive income
Comprehensive loss
2022
Year Ended December 31,
2021
2020
(570,279) $
(213,796) $
(118,668)
429
(145)
284
(569,995) $
—
—
—
(213,796) $
—
—
—
(118,668)
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
BIOHAVEN LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands, except share amounts)
Common Shares
Shares
Amount
Net
Investment
from Former
Parent
Additional
Paid-in Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income
Total
Shareholders'
Equity
Balances as of December 31, 2019
Net loss
Net transfers from Former Parent
Balances as of December 31, 2020
Net loss
Net transfers from Former Parent
Balances as of December 31, 2021
Net loss
Net transfers from Former Parent, including
separation related adjustments
Issuance of common shares in connection with the
Separation and reclassification of Net investment
from Former Parent
Issuance of common shares, net of offering costs
Issuance of common shares under 2022 Equity
Incentive Plan
Non-cash share-based compensation expense
Other comprehensive income
— $
—
— $
—
—
—
—
—
—
—
—
—
—
—
14,451 $
(118,668)
120,998
16,781
(213,796)
231,706
34,691
(479,155)
776,630
39,375,944
28,750,000
332,166
282,804
(332,166)
—
64,535
—
—
772
—
—
—
—
—
— $
— $
—
—
—
—
—
—
—
—
(321)
14,189
—
— $
—
—
—
—
(91,124)
—
—
—
—
—
—
— $
—
—
—
—
—
—
—
—
—
—
284
14,451
(118,668)
120,998
16,781
(213,796)
231,706
34,691
(570,279)
776,630
—
282,804
451
14,189
284
13,869 $
(91,124) $
284 $
538,771
Balances as of December 31, 2022
68,190,479 $
615,742 $
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
BIOHAVEN LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash used in operating activities:
Non-cash share-based compensation
Acquisition of IPR&D asset
Impairment of Artizan preferred stock
Depreciation and amortization
Issuance of Former Parent common shares as payment for license and consulting agreements
Gain (loss) from equity method investment
Other non-cash items
Changes in operating assets and liabilities:
Prepaid expenses, income tax receivable, and other current assets
Other non-current assets
Accounts payable
Accrued expenses and other current liabilities
Other non-current liabilities
Net cash used in operating activities
Cash flows from investing activities:
Purchases of marketable securities
Purchases of property and equipment
Payment for IPR&D asset acquisition
Payments for leasehold improvements
Cash acquired in business acquisition
Purchase of Artizan preferred stock
Net cash (used in) provided by investing activities
Cash flows from financing activities:
Net transfers from Former Parent
Restricted cash due to Former Parent
Proceeds from issuance of common shares
Proceeds from sale of contingently redeemable non-controlling interests
Payments of issuance costs
Other
Net cash provided by financing activities
Effect of exchange rates on cash, cash equivalents and restricted cash
Net increase (decrease) in cash, cash equivalents and restricted cash
Cash, cash equivalents and restricted cash at beginning of period
Cash, cash equivalents and restricted cash at end of period
Supplemental disclosure of cash flow information:
Cash paid for interest
Cash paid for income taxes
Year ended December 31,
2021
2020
2022
$
(570,279)
$
(213,796)
$
(118,668)
193,556
93,747
10,000
1,386
1,779
—
726
(41,336)
—
5,928
6,804
—
(297,689)
(259,716)
(6,074)
(35,000)
—
—
(4,000)
(304,790)
449,130
35,212
283,804
—
(1,000)
451
767,597
429
165,547
77,057
242,604
—
38,165
$
$
$
$
$
$
65,639
—
—
1,393
7,929
(5,261)
(3,408)
(9,073)
(109)
1,025
7,882
1,939
(145,840)
—
(938)
—
—
1,882
—
944
138,052
—
—
—
—
395
138,447
—
(6,449)
83,506
77,057
107
16,594
$
$
$
$
$
$
$
$
$
$
$
$
29,500
—
—
72
—
4,162
—
(2,419)
(5,594)
222
14,855
1,913
(75,957)
—
(1,097)
—
(1,600)
—
—
(2,697)
92,242
—
—
60,000
—
—
152,242
—
73,588
9,918
83,506
—
2,758
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Table of Contents
BIOHAVEN 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 Ltd. (“we,” “us," "our," "Biohaven" or the “Company”) was
incorporated in Tortola, British Virgin Islands in May 2022. Biohaven is
a global clinical-stage biopharmaceutical company focused on the
discovery, development and commercialization of life-changing
therapies for people with debilitating neurological and neuropsychiatric
diseases, including rare disorders. Biohaven's experienced
management team brings with it a track record of delivering new drug
approvals for products for diseases such as migraine, depression,
bipolar and schizophrenia. The company is advancing a pipeline of
therapies for diseases with little or no treatment options, leveraging its
proven drug development capabilities and proprietary platforms,
including Kv7 ion channel modulation for epilepsy and neuronal
hyperexcitability, glutamate modulation for Obsessive-Compulsive
Disorder ("OCD") and spinocerebellar ataxia ("SCA"), myostatin
inhibition for neuromuscular diseases, and brain-penetrant Tyrosine
Kinase 2/Janus Kinase 1 ("TYK2/JAK1") inhibition for immune-
mediated brain disorders. Biohaven's portfolio of early- and late-stage
product candidates also includes discovery research programs
focused on TRPM3 channel activation for neuropathic pain, CD-38
antibody recruiting, bispecific molecules for multiple myeloma,
antibody drug conjugates ("ADCs"), and extracellular target degrader
platform technology ("MoDE") with potential application in neurological
disorders, cancer, and autoimmune diseases.
(“Merger Sub”), entered into an Agreement and Plan of Merger (the
“Merger Agreement”), which provided for the acquisition by Pfizer of
the Former Parent through the merger of Merger Sub with and into the
Former Parent (the “Merger”). In connection with the Merger
Agreement, the Former Parent and Biohaven Ltd. entered into a
Separation and Distribution Agreement, dated as of May 9, 2022 (the
“Distribution Agreement”). In connection with the Distribution
Agreement, the Board of Directors of the Former Parent approved and
directed the Former Parent’s management to effect the Spin-Off of the
business, operations, and activities that are not the CGRP Business
(as defined below), including the Kv7 ion channel activators, glutamate
modulation, MPO inhibition and myostatin inhibition platforms,
preclinical product candidates, and certain corporate infrastructure
currently owned by the Former Parent.
To implement the Spin-Off, the Former Parent transferred the
related license agreements, intellectual property and corporate
infrastructure, including certain non-commercial employee
agreements, share-based awards and other corporate agreements
(the "Business") to Biohaven Ltd., through a series of internal
restructuring transactions. Descriptions of historical business activities
in these Notes to Consolidated Financial Statements are presented as
if these transfers had already occurred, and the Former Parent’s
activities related to such assets and liabilities had been performed by
the Company.
The Company is subject to risks and uncertainties common to
On October 3, 2022, the Former Parent completed the distribution
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.
Separation from Biohaven Pharmaceutical Holding Company
Ltd.
On May 9, 2022, Biohaven Pharmaceutical Holding Company
Ltd. (the "Former Parent"), Pfizer Inc. (“Pfizer”) and a wholly owned
subsidiary of Pfizer
(the “Distribution”) to holders of its common shares of all of the
outstanding common shares of Biohaven Ltd. and the spin-off of
Biohaven from the Former Parent (the “Spin-Off”) described in
Biohaven’s Information Statement (the “Information Statement”)
attached as Exhibit 99.1 to Biohaven’s Registration Statement on Form
10, as amended (Reg. No. 001-41477), which was declared effective
by the Securities and Exchange Commission ("SEC") on September
22, 2022 (the “Form 10”). Each holder of Former Parent common
shares received one common share of Biohaven for every two Former
Parent common shares held of record as of the close of business on
September 26, 2022. In the Distribution, an aggregate of 35,840,459
Biohaven common shares were issued. The aggregate number of
common shares issued in connection with the Distribution did not
include 2,611,392 common shares to be issued in connection with
Former Parent stock options that were exercised on October 3, 2022
and 924,093 common shares to be issued in connection with Former
Parent restricted stock units that vested on October 3, 2022. See Note
9, "Non-Cash Share-Based Compensation" for discussion
F-8
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
1. Nature of the Business and Basis of Presentation (Continued)
of the Legacy Equity Award Settlement Plan. As a result of the
Distribution, Biohaven Ltd. became an independent, publicly traded
company. Collectively, we refer to the Distribution and Spin-Off
throughout this Annual Report on Form 10-K as the "Separation."
The Spin-Off generally resulted in (a) the Company directly or
indirectly owning, assuming, or retaining certain assets and liabilities of
the Former Parent and its subsidiaries related to the Former Parent’s
pipeline assets and businesses and (b) the Former Parent directly or
indirectly owning, assuming, or retaining all other assets and liabilities,
including those associated with the Former Parent’s platform for the
research, development, manufacture and commercialization of
calcitonin gene-related receptor antagonists, including rimegepant,
zavegepant and the Heptares Therapeutics Limited preclinical CGRP
portfolio and related assets (the “CGRP Business”).
In connection with the Separation, the Company entered into
various agreements relating to transition services, licenses and certain
other matters with the Former Parent. For additional information
regarding these agreements, see Note 14, "Related Party
Transactions."
Basis of Presentation
On October 3, 2022, the Company became a standalone publicly
traded company, and its financial statements are now presented on a
consolidated basis. Prior to the Separation on October 3, 2022, the
Company’s historical combined financial statements were prepared on
a standalone basis and were derived from the Former Parent's
consolidated financial statements and accounting records. The
financial statements for all periods presented, including the historical
results of the Company prior to October 3, 2022, are now referred to
as "Consolidated Financial Statements", and have been prepared in
accordance with accounting principles generally accepted in the United
States of America (“GAAP”) and pursuant to the rules and regulations
of the U.S. Securities and Exchange Commission (“SEC”).
Periods Prior to the Separation
For periods prior to the Separation from the Former Parent, the
consolidated financial statements present, on a historical basis, the
combined assets, liabilities, expenses and cash flows directly
attributable to the Business, which have been prepared from the
Former Parent’s consolidated financial statements and accounting
records, and are presented on a stand-alone basis as if the operations
had been conducted independently from the Former Parent. The
consolidated statements of operations for periods prior
to the Separation include all costs directly related to the Business,
including costs for facilities, functions and services utilized by the
Company. The consolidated statements of operations periods prior to
the Separation also include allocations for various expenses related to
the Former Parent’s corporate functions, including research and
development, human resources, information technology, facilities, tax,
shared services, accounting, finance and legal. These expenses were
allocated on the basis of direct usage or benefit when specifically
identifiable, with the remainder allocated on a proportional cost
allocation method primarily based on employee labor hours or direct
expenses. Management believes the assumptions underlying the
consolidated financial statements periods prior to the Separation,
including the expense methodology and resulting allocation, are
reasonable for all periods presented. However, the allocations may not
include all of the actual expenses that would have been incurred by the
Company and may not reflect its consolidated results of operations,
financial position and cash flows had it been a standalone company
during the periods presented. It is not practicable to estimate actual
costs that would have been incurred had the Company been a
standalone company and operated as an unaffiliated entity during the
periods presented. Actual costs that might have been incurred had the
Company been a standalone company would depend on a number of
factors, including the chosen organizational structure, what corporate
functions the Company might have performed directly or outsourced
and strategic decisions the Company might have made in areas such
as executive management, legal and other professional services, and
certain corporate overhead functions.
The income tax expense in the consolidated financial statements
has been calculated on a separate return method and is presented as
if the Company’s operations were separate taxpayers in the respective
jurisdictions up to and including the Distribution. Cash tax payments,
income taxes receivable and deferred taxes, net of valuation
allowance, are reflective of its actual tax balances prior and
subsequent to the Distribution.
The consolidated balance sheets for periods prior to the Separation
include assets and liabilities that have been determined to be
specifically identifiable or otherwise attributable to the Company,
including certain assets that were historically held at the corporate
level in the Former Parent. All intracompany transactions within the
Company have been eliminated. All intercompany transactions
between the Company and the Former Parent are considered to be
effectively settled in the consolidated financial statements at the time
the transactions are recorded. The total net effect of these
intercompany transactions considered to be
F-9
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
1. Nature of the Business and Basis of Presentation (Continued)
settled is reflected in the consolidated statement of cash flows within
financing activities and in the consolidated balance sheets as “Net
investment from Former Parent.” See Note 14, "Related Party
Transactions", for additional information regarding related party
transactions.
For periods prior to the Separation, our equity balance in these
consolidated financial statements represents the excess of total assets
over liabilities. Net investment from Former Parent was primarily
impacted by contributions from the Former Parent, which are the result
of net funding provided by or distributed to Former Parent. As a result
of the Separation, the Company’s Net investment from Former Parent
balance was reclassified to common shares. The Net investment from
Former Parent balance reclassified to common shares included
separation-related adjustments of $27,811. The adjustments related
primarily to differences in the amount of assets and liabilities
transferred to the Company upon the Separation and the amount of
the transferred assets and liabilities reported in the company’s
combined balance sheet as of September 30, 2022. Additional
separation-related adjustments could be recorded in future periods.
Cash on the consolidated balance sheet for periods prior to the
Separation represents cash balances from the standalone entities
established to operate the Business.
of approximately $282,804. See Note 7, "Shareholders' Equity", for
further detail on the public offering. Accordingly, as of the date of
issuance of these consolidated financial statements, the Company
expects its existing cash, cash equivalents and marketable securities
will be sufficient to fund operating expenses, financial commitments
and other cash requirements for at least one year after the issuance
date of these financial statements.
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 or royalties, 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, or the Company may be unable to continue operations.
2. Summary of Significant Accounting Policies
Going Concern
Use of Estimates
In accordance with Accounting Standards Codification (“ASC”)
205-40, Going Concern, 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 March 23, 2023, the Company has funded its operations
primarily with proceeds from its Former Parent, its recent public
offering as discussed in Note 7, "Shareholders' Equity", and the cash
contribution received from the Former Parent at the Separation as
discussed below. The Company has incurred recurring losses since its
inception and expects to continue to generate operating losses for the
foreseeable future.
Pursuant to the Distribution Agreement, immediately prior to the
Separation, the Former Parent made a cash contribution to the
Company which resulted in a cash balance of approximately $257,799
as of October 3, 2022. Additionally, on October 25, 2022, the Company
completed a public offering of its common shares which resulted in net
proceeds to the Company
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 valuation of intangible assets,
determining the allocations of costs and expenses from the Former
Parent and the accrual for research and development expenses. 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-10
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (Continued)
Reclassifications
Certain items in the prior period’s consolidated financial
statements have been reclassified to conform to the current year
presentation.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an
original maturity of 90 days or less at the date of purchase to be cash
equivalents. The Company's cash equivalents are comprised of short-
term money market funds and marketable securities that are highly
liquid and readily convertible to known amounts of cash.
Restricted Cash
Restricted cash held on behalf of the Former Parent on the
consolidated balance sheet as of December 31, 2022 represents cash
held by the Company on behalf of the Former Parent related to the
execution of the United States Distribution Services Agreement (the
“Distribution Services Agreement”). Pursuant to the terms of the
Distribution Services Agreement, which was entered into by the
Company and the Former Parent in connection with the Separation,
the Company is continuing to serve as the Former Parent’s distributor
and agent for the distribution of the pharmaceutical product Nurtec
ODT in the United States. As of December 31, 2022, the Company
recorded a related payable of $35,212 as Due to Former Parent on the
consolidated balance sheet as the balance was legally payable to the
Former Parent. Refer to Note 14, "Related Party Transactions" for
further information on the agreements entered into by the Company
and the Former Parent in connection with the Separation.
Restricted cash included in other current assets includes
employee contributions to the Company's employee share purchase
plan held for future purchases of the Company's outstanding shares.
See Note 9, "Non-Cash Share-Based Compensation" for additional
information on the Company's employee share purchase plan. The
Company did not have an employee share purchase plan as of
December 31, 2021.
Restricted cash included in other assets in the consolidated
balance sheets represents collateral held by banks for a letter of credit
("LOC") issued in connection with the leased office space in Yardley,
Pennsylvania and a LOC issued in connection with the leased office
space in Cambridge, Massachusetts. See Note 12, ‘‘Commitments and
Contingencies’’ for additional information on the real estate leases.
The following represents a reconciliation of cash and cash
equivalents in the consolidated balance sheets to total cash, cash
equivalents and restricted cash for the years ended December 31,
2022, 2021 and 2020, respectively, in the consolidated statements of
cash flows:
December 31,
2021
2020
2022
204,877 $
$
76,057 $
82,506
—
250
750
—
—
1,000
35,212
117
2,398
$
242,604 $
77,057 $
83,506
Cash and cash equivalents
Restricted cash held on behalf
of Former Parent
Restricted cash (included in
other current assets)
Restricted cash (included in
other non-current assets)
Total cash, cash equivalents
and restricted cash at the end
of the period in the
consolidated statement of cash
flows
Marketable Securities
We invest our excess cash balances in marketable securities of
highly rated financial institutions and investment-grade debt
instruments. We seek to diversify our investments and limit the amount
of investment concentrations for individual institutions, maturities and
investment types. We classify marketable debt securities as available-
for-sale and, accordingly, record such securities at fair value. We
classify these securities as current assets as these investments are
intended to be available to the Company for use in funding current
operations.
Unrealized gains and losses on our marketable debt securities
that are deemed temporary are included in accumulated other
comprehensive income as a separate component of stockholders’
equity. If any adjustment to fair value reflects a significant decline in the
value of the security, we evaluate the extent to which the decline is
determined to be other-than-temporary and would mark the security to
market through a charge to our consolidated statement of operations.
Credit losses are identified when we do not expect to receive cash
flows sufficient to recover the amortized cost basis of a security. In the
event of a credit loss, only the amount associated with the credit loss is
recognized in operating results, with the amount of loss relating to
other factors recorded in accumulated other comprehensive income.
Acquisitions
Our consolidated financial statements include the operations of
acquired businesses after the completion of the acquisitions. We
account for acquired businesses
F-11
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (Continued)
using the acquisition method of accounting, which requires, among
other things, that assets acquired and liabilities assumed be
recognized at their estimated fair values as of the acquisition date and
that the fair value of acquired In-Process Research and Development
("IPR&D") be recorded on the balance sheet. Transaction costs are
expensed as incurred. Any excess of the consideration transferred
over the assigned values of the net assets acquired is recorded as
goodwill. Contingent consideration in a business acquisition is included
as part of the consideration transferred and is recognized at fair value
as of the acquisition date. Fair value of IPR&D and contingent
consideration is generally estimated by using a probability-weighted
discounted cash flow approach.
Equity Method Investments
Investments in non-public companies in which the Company
owns less than a 50% equity interest and where it has the ability to
exercise 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 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.
As of December 31, 2020, the Company owned approximately
42% of the outstanding shares of Kleo Pharmaceuticals, Inc. ("Kleo"),
which was accounted for as an equity method investment. In January
2021, the Company acquired the remaining 58% of Kleo's common
shares that it did not previously own and ceased accounting for Kleo
as an equity method investment. See Note 6, "Acquisitions" for
additional details.
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, 2022 and
December 31, 2021, the Company's property and equipment consisted
of office buildings and land, office and lab equipment, computer
hardware and software, and furniture and fixtures.
The fixed assets have the following useful lives:
Building
Office equipment
Computer hardware and
software
Lab equipment
Furniture and fixtures
30 years
3 - 5 years
3 - 5 years
3 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 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.
Intangible Assets
Acquired In-Process Research and Development
IPR&D that the Company acquires in conjunction with the
acquisition of a business represents the fair value assigned to
incomplete research projects which, at the time of acquisition, have not
reached technological feasibility. The amounts are capitalized and
accounted for as indefinite-lived intangible assets, subject to
impairment testing until completion or abandonment of the projects.
Upon successful completion of each project, the asset is classified as
a definite-lived intangible and the Company will make a determination
as to the then-useful life of the intangible asset, generally determined
by the period in which the substantial majority of the cash flows are
expected to be generated, and begin amortization.
The Company evaluates IPR&D for impairment at least annually,
or more frequently if impairment indicators exist, by performing a
quantitative test that compares the fair value of the IPR&D intangible
asset with its carrying value. If the fair value is less than the carrying
amount, an impairment loss is recognized in operating results. The
Company believes no impairment of its acquired IPR&D existed as of
December 31, 2022 or December 31, 2021.
If we acquire an asset or group of assets that do not meet the
definition of a business under applicable accounting standards, the
acquired IPR&D is expensed on its acquisition date, unless it has an
alternative future use. Future costs to develop these assets are
recorded to research and development expense as they are incurred.
In January 2021, in connection with our acquisition of Kleo, we
recorded intangible assets consisting of
F-12
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (Continued)
IPR&D assets of $18,400, which included an oncology therapeutic
candidate entering Phase I clinical trials and a COVID-19 therapeutic
candidate in the planning stage for clinical development, and goodwill
of $1,390. See Note 6, "Acquisitions" for additional details.
Impairment of Long-lived Assets
The Company monitors its long-lived assets for indicators of
impairment. If such indicators are present, the Company assesses the
recoverability of affected assets by determining whether the carrying
value of such assets is less than the sum of the undiscounted future
cash flows of the assets. If such assets are found not to be
recoverable, the Company measures the amount of such impairment
by comparing the carrying value of the assets to the fair value of the
assets, with the fair value generally determined based on the present
value of the expected future cash flows associated with the assets.
The Company believes no impairment of long-lived assets existed as
of December 31, 2022 or December 31, 2021.
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 carrying values of other current assets, accounts payable,
and accrued expenses approximate
their fair values due to the short-term nature of these assets and
liabilities.
Leases
The Company determines if an arrangement contains a lease at
the inception of a contract. Right-of-use assets represent the
Company’s right to use an underlying asset for the lease term and
lease liabilities represent the Company’s obligation to make lease
payments arising from the lease. Right-of-use assets and lease
liabilities are recognized at the commencement date based on the
present value of the remaining future minimum lease payments. If the
interest rate implicit in the Company’s leases is not readily
determinable, the Company utilizes an estimate of its incremental
borrowing rate based on market sources including interest rates for
companies with similar credit quality for agreements of similar duration,
determined by class of underlying asset, to discount the lease
payments. The right-of-use assets also include lease payments made
before commencement and exclude lease incentives. The Company's
lease terms may include options to extend or terminate the lease when
it is reasonably certain that the Company will exercise that option.
Leases with an initial term of 12 months or less are not recorded on
the balance sheet. Lease expense for these short-term leases are
expensed as incurred over the term of the lease.
Certain real estate leases require additional payments including
reimbursement for real estate taxes, common area maintenance and
insurance, which are expensed as incurred as variable lease costs.
Other real estate leases contain one fixed lease payment that includes
real estate taxes, common area maintenance and insurance. These
fixed payments are considered part of the lease payment and included
in the right-of-use assets and lease liabilities.
For its real estate leases, which are accounted for as operating
leases, the Company has elected the practical expedient to include
both the lease and non-lease components as a single component. In
addition, payments made by the Company for improvements to the
underlying asset, if the payment relates to an asset of the lessor, are
recorded as prepaid rent within other non-current assets in the
consolidated balance sheets prior to lease commencement and on
commencement, reclassified to the right-of-use asset. As of December
31, 2022, the Company had restricted cash of $2,398 included in other
non-current assets in the consolidated financial statements, which
represents collateral held by banks for letters of credit issued in
connection with the leased office space in Yardley, Pennsylvania and
Cambridge, Massachusetts. All restricted cash is invested in time
deposits. See Note 12, ‘‘Commitments
F-13
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (Continued)
and Contingencies’’ for additional information on real estate leases.
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,
non-cash share-based compensation and benefits, third-party license
fees, rent and operating expenses for leased lab facilities, 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.
The Company has entered into various research and
development-related contracts. These agreements are cancellable,
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.
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 share options with only
service-based vesting conditions and records the expense for these
awards using the straight-line method.
The Company classifies non-cash share-based compensation
expense in its consolidated statement of operations 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 share option grant is estimated on the date
of grant using the Black-Scholes option-pricing model. The Company
lacks a sufficient 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 all of the Company's stock options
has been determined utilizing the "simplified" method. 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.
Management evaluates its award grants and modifications and
will adjust the fair value if any are determined to be spring-loaded.
Foreign Currency Translation
Share-Based Compensation for Periods Prior to the Separation
The financial statements of our subsidiaries with functional
currencies other than the U.S. dollar are translated into U.S. dollars
using period-end exchange rates for assets and liabilities, historical
exchange rates for stockholders’ equity and weighted average
exchange rates for operating results. Translation gains and losses are
included in accumulated other comprehensive income, net of tax, in
shareholders’ equity. Foreign currency transaction gains and losses
are included in other expense in the consolidated statement of
operations. The Company's aggregate foreign currency transaction
losses were immaterial for the years ended December 31, 2022, 2021
and 2020.
Share-Based Compensation
The Company measures share options and restricted share unit
awards granted to employees, non-employees, and directors based on
the fair value on the
Prior to the Separation from the Former Parent on October 3,
2022, certain of the Company’s employees have historically
participated in the Former Parent’s non-cash share-based
compensation plans. Non-cash share-based compensation expense
for periods prior to the Separation has been allocated to the Company
based on a combination of specific identification and a proportionate
cost allocation method.
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
F-14
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (Continued)
the differences between the 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 Loss per Share
Basic net loss per common share is calculated by dividing net
loss by the weighted-average shares outstanding during the period.
For purposes of the diluted net loss per share calculation, common
share options are considered to be common share equivalents but
have been excluded from the calculation of diluted net loss per share,
as their effect would be anti-dilutive for all periods presented.
Therefore, basic and diluted net loss per share were the same for all
periods presented.
Net Loss per Share for Periods Prior to the Separation
Net loss per share for periods prior to the Separation from the
Former Parent was calculated based on the 39,375,944 shares of the
Company's common shares distributed to the Former Parent's
shareholders at the time of the Distribution, including common shares
issued in connection with Former Parent share options that were
exercised on October 3, 2022 and common shares issued in
connection with Former Parent restricted share units that vested on
October 3, 2022. The same number of shares is being utilized for the
calculation of basic and diluted earnings per share for all periods
presented prior to the Spin-Off.
Concentrations of Credit Risk
Financial instruments that potentially expose the Company to
concentrations of credit risk consist of cash, cash equivalents, and
short-term debt securities. The Company maintains a portion of its
cash deposits in government insured institutions in excess of
government insured limits. The Company deposits its
cash in financial institutions that it believes have high credit quality and
has not experienced any losses on such accounts. The Company's
cash management policy permits investments in U.S. federal
government and federal agency securities, corporate bonds or
commercial paper, supranational and sovereign obligations, certain
qualifying money market mutual funds, certain repurchase
agreements, and places restrictions on credit ratings, maturities, and
concentration by type and issuer. The Company is exposed to credit
risk in the event of a default by the financial institutions holding its cash
in excess of government insured limits and in the event of default by
corporations and governments in which it holds investments in cash
equivalents and short-term debt securities, to the extent recorded on
the consolidated balance sheet.
Segment Information
The Company manages its operations as a single segment, the
development of therapies targeting neurological diseases, including
rare disorders, for the purposes of assessing performance and making
operating decisions. Consistent with our operational structure, the
Company's chief decision maker manages and allocates resources at
a consolidated level. Therefore, results of our operations are reported
on a consolidated basis for the purposes of assessing performance
and making operating decisions. In 2022 and 2021, materially all the
Company's long-lived assets were held in the United States.
Recently Adopted Accounting Pronouncements
Effective January 1, 2022 the Company adopted ASU No. 2021-
04, Earnings Per Share (Topic 260), Debt—Modifications and
Extinguishments (Subtopic 470-50), Compensation—Stock
Compensation (Topic 718), and Derivatives and Hedging—Contracts in
Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain
Modifications or Exchanges of Freestanding Equity-Classified Written
Call Options (a consensus of the Financial Accounting Standards
Board ("FASB") Emerging Issues Task Force), which provides
guidance on modifications or exchanges of a freestanding equity-
classified written call option that is not within the scope of another
topic. An entity should treat a modification of the terms or conditions or
an exchange of a freestanding equity-classified written call option that
remains equity classified after modification or exchange as an
exchange of the original instrument for a new instrument, and provides
further guidance on measuring the effect of a modification or an
exchange of a freestanding equity-classified written call option that
remains equity classified after modification or exchange. ASU 2021-04
also provides guidance on the recognition of the effect of a
modification or an exchange of a freestanding equity-
F-15
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
2. Summary of Significant Accounting Policies (Continued)
classified written call option that remains equity classified after
modification or exchange on the basis of the substance of the
transaction, in the same manner as if cash had been paid as
consideration. The guidance has been applied prospectively and did
not have a material effect on the consolidated financial statements of
the Company.
Recently Issued Accounting Pronouncements
In June 2022, the FASB issued ASU No. 2022-03, Fair Value
Measurement (Topic 820): Fair Value Measurement of Equity
Securities Subject to Contractual Sale Restrictions, to clarify the
guidance in Topic 820
3. Marketable Securities
when measuring the fair value of an equity security subject to
contractual restrictions that prohibit the sale of an equity security. The
ASU also introduced new disclosure requirements for equity securities
subject to contractual sale restrictions that are measured at fair value
in accordance with Topic 820. The amendments in ASU 2022-03 are
effective for fiscal years beginning after December 15, 2023. The
Company does not expect ASU No. 2022-03 to have a material effect
on its consolidated financial statements.
The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of debt securities available-for-sale by type of
security at December 31, 2022 was as follows:
December 31, 2022
Debt securities
U.S. corporate bonds
Foreign corporate bonds
U.S. treasury bills
U.S. agency bonds
Total
Amortized Cost
Allowance for
Credit Losses
Net Amortized
Cost
Gross Unrealized
Gains
Gross Unrealized
Losses
Fair Value
$
$
142,697 $
36,766
89,308
41,734
310,505 $
— $
—
—
—
— $
142,697 $
36,766
89,308
41,734
310,505 $
25 $
9
17
—
51 $
(135) $
(32)
(5)
(24)
(196) $
142,587
36,743
89,320
41,710
310,360
The Company had no available-for-sale debt securities at December 31, 2021.
The fair values of debt securities available-for-sale by classification in the consolidated balance sheet were as follows:
Cash and cash equivalents
Marketable securities
Total
December 31, 2022
$
$
49,896
260,464
310,360
The net amortized cost and fair value of debt securities available-for-sale at December 31, 2022 are shown below by contractual maturity. Actual
maturities may differ from contractual maturities because securities may be restructured, called or prepaid, or the Company intends to sell a security prior
to maturity.
Due to mature:
Less than one year
Total
F-16
December 31, 2022
Net Amortized
Cost
Fair Value
$
$
310,505 $
310,505 $
310,360
310,360
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
3. Marketable Securities (Continued)
Summarized below are the debt securities available-for-sale the Company held at December 31, 2022 that were in an unrealized loss position,
aggregated by the length of time the investments have been in that position:
December 31, 2022
Debt securities
U.S. corporate bonds
Foreign corporate bonds
U.S. treasury bills
U.S. agency bonds
Total
Less than 12 months
Number of
Securities
Fair Value
Unrealized
Losses
16 $
3
1
4
20 $
104,508 $
31,886
9,762
41,710
187,866 $
(135)
(32)
(5)
(24)
(196)
The Company did not have any investments in a continuous unrealized loss position for more than twelve months as of December 31, 2022.
The Company reviewed the securities in the table above and concluded that they are performing assets generating investment income to support
the needs of the Company’s business. In performing this review, the Company considered factors such as the credit quality of the investment security
based on research performed by external rating agencies and the prospects of realizing the carrying value of the security based on the investment’s
current prospects for recovery. As of December 31, 2022, the Company did not intend to sell these securities and did not believe it was more likely than
not that it would be required to sell these securities prior to the anticipated recovery of their amortized cost basis.
Net Investment Income
Sources of net investment income included in other expense, net under other income (expense) in the consolidated statements of operations for
the years ended December 31, 2022 were as follows:
Gross interest income from debt securities available-for-sale, money-market funds, and cash
Investment expenses
Net investment income
2022
3,235
(27)
3,208
$
$
The Company had no net investment income during the year ended December 31, 2021 and 2020.
We utilize the specific identification method in computing realized gains and losses on sales of debt securities. The Company had no sales of debt
securities during the years ended December 31, 2022, 2021 or 2020.
4. Fair Value of Financial Assets and Liabilities
The preparation of the Company’s consolidated financial statements in accordance with GAAP requires certain assets and liabilities to be reflected
at their fair value and others to be reflected on another basis, such as an adjusted historical cost basis. In this note, the Company provides details on the
fair value of financial assets and liabilities and how it determines those fair values.
Financial Instruments Measured at Fair Value on the Consolidated Balance Sheets
Certain of the Company’s financial instruments are measured at fair value on the consolidated balance sheets on a recurring basis. The fair values
of these instruments are based on valuations that include inputs that can be classified within one of three levels of a hierarchy established by GAAP. See
Fair Value Measurements in Note 2, "Summary of Significant Accounting Policies" for a brief description of the type of valuation information (“valuation
inputs”) that qualifies a financial asset or liability for each level.
Financial assets measured at fair value on a recurring basis on the consolidated balance sheet at December 31, 2022 were as follows:
F-17
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
4. Fair Value of Financial Assets and Liabilities (Continued)
Balance Sheet Classification
Type of Instrument
Level 1
Fair Value Measurement Using:
Level 3
Level 2
Total
December 31, 2022
Assets:
Cash equivalents
Cash equivalents
Cash equivalents
Marketable securities
Marketable securities
Marketable securities
Marketable securities
Total assets
Money market funds
U.S. treasury bills
U.S. corporate bonds
U.S. treasury bills
U.S. corporate bonds
U.S. agency bonds
Foreign corporate bonds
$
$
72,866 $
—
—
—
—
—
—
72,866 $
— $
39,948
9,948
49,372
132,639
41,710
36,743
310,360 $
— $
—
—
—
—
—
—
— $
72,866
39,948
9,948
49,372
132,639
41,710
36,743
383,226
The Company had no financial liabilities measured at fair value on a recurring basis as of December 31, 2022 and no financial assets and liabilities
measured at fair value on a recurring basis as of December 31, 2021.
There were no securities transferred between Level 1, 2, and 3 during the year ended December 31, 2022.
The following is a description, including valuation methodology,
of the financial assets and liabilities measured at fair value on a
recurring basis:
Cash Equivalents
Cash equivalents at December 31, 2022 consisted of cash
invested in short-term money market funds and debt securities with an
original maturity of 90 days or less at the date of purchase. The
carrying value of cash equivalents approximates fair value as
maturities are less than three months. When quoted prices are
available in an active market, cash equivalents are classified in Level 1
of the fair value hierarchy. Fair values of cash equivalent instruments
that do not trade on a regular basis in active markets are classified as
Level 2.
Marketable Securities
The fair values of the Company’s Level 2 debt securities are
obtained from quoted market prices of debt securities with similar
characteristics, quoted prices from identical assets in inactive markets,
or discounted cash flows to estimate fair value. On a quarterly basis,
the Company compares the prices of its Level 2 debt securities to
prices provided by a secondary source. Variances over a specified
threshold are identified and reviewed to confirm the price provided by
the primary source represents an appropriate estimate of fair value.
The Company did not adjust any of the prices at December 31, 2022.
Contingent Value Right Liability
On January 4, 2021, the Company acquired Kleo
Pharmaceuticals, Inc. (“Kleo”) (see Note 6 for additional
information). Included in the purchase consideration transferred was a
contingent value right to receive one dollar in cash for each Kleo share
if certain specified Kleo biopharmaceutical products or product
candidates receive the approval of the FDA prior to the expiration of 30
months following the effective time of the transaction. The maximum
amount payable pursuant to the contingent value right is approximately
$17,300, and the fair value of the contingent value right was $1,457 as
of the acquisition date. The Company recorded the contingent value
right in other non-current liabilities on the consolidated balance sheets.
The fair value of the contingent value right was determined
based on significant inputs not observable in the market, which
represents a Level 3 measurement within the fair value hierarchy. The
Company used a discounted cash flow approach to value the
contingent value right liability. As inputs into the initial valuation, the
Company considered the probability of FDA approval within the 30
months period, which we estimated at approximately 10%, the amount
of the payment, and a discount rate of approximately 7% determined
using an implied credit spread adjusted based on companies with
similar credit risk.
At December 31, 2021,the Company determined the value of the
contingent value right to be immaterial and recognized a gain of
$1,457 related to the contingent value right in other income (expense)
in the consolidated statements of operations during the fourth quarter
of 2021. The value of the contingent value right continues to be
immaterial with no value included on the consolidated balance sheet
as of December 31, 2022.
F-18
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
4. Fair Value of Financial Assets and Liabilities (Continued)
Financial Instruments Not Measured at Fair Value on the Consolidated Balance Sheets
The carrying value and estimated fair value classified by level of fair value hierarchy for financial instruments carried on the consolidated balance
sheets at adjusted cost or contract value at December 31, 2022 and 2021 were as follows:
December 31, 2022
Assets:
Series A-2 Preferred Stock investment
(1)
December 31, 2021
Assets:
Series A-2 Preferred Stock investment
(1)
Carrying
Value
Level 1
Fair Value Measurement Using:
Level 3
Level 2
Total
—
6,000
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
(1) It was not practical to estimate the fair value of this investment as it represents Series A-2 Preferred Stock of an unlisted company. On a routine basis the Company determined if additional
preferred shares of the unlisted company had been issued and adjusted the carrying value of its Series A-2 Preferred Stock investment accordingly. The Series A-2 Preferred Stock
investment was recorded in other non-current assets on the consolidated balance sheet at December 31, 2021. As of December 31, 2022, due to concerns related to Artizan's inability to
fund its future operations, the Company determined its investment in Artizan to be fully impaired. Accordingly, the Company had no balance on its consolidated balance sheet relating to its
investment in Artizan as of December 31, 2022. See Artizan under Note 11, "License Agreements" for additional details on the Series A-2 Preferred Stock investment.
5. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consisted of the following:
As of December
31, 2022
As of December
31, 2021
Building and land
Computer hardware and software
Office and lab equipment
Furniture and fixtures
Accumulated depreciation
Equipment not yet in service
Property and equipment, net
$
$
$
12,297 $
780
5,501
1,202
19,780 $
(4,914)
14,866
2,646
17,512 $
12,297
1,200
1,653
1,202
16,352
(3,342)
13,010
—
13,010
Depreciation expense was $1,361, $673 and $72 for the years
ended December 31, 2022, 2021 and 2020, respectively.
As of both December 31, 2022 and 2021, computer software
costs included in property and equipment were $760 and $760,
respectively, net of accumulated amortization of $464 and $211,
respectively. Depreciation and amortization expense for capitalized
computer software costs were not material for the years ended
December 31, 2022 or 2021.
Equipment not yet in service primarily consisted of lab equipment
that had not been placed into service as of December 31, 2022.
Other Non-current Assets
Other non-current assets consisted of the following:
As of December 31,
2022
As of December 31,
2021
Series A-2 Preferred Stock
Investment
Operating lease right-of-use assets
Other
Other non-current assets
$
$
— $
34,928
2,585
37,513 $
6,000
5,222
3,216
14,438
In December 2020, the Company entered into a Series A-2
Preferred Stock Purchase Agreement with Artizan Biosciences Inc.
(“Artizan”). Under the agreement, the Company paid Artizan 61,494
shares of the Former Parent’s common shares valued at $6,000, which
were issued in January 2021. In exchange, the Company acquired
34,472,031 shares of series A-2 preferred stock of Artizan. In June
2022, the Company entered into an Amendment to the Series A-2
Preferred Stock Purchase Agreement with Artizan. Under the
Amendment, the Company made a cash payment of $4,000 in
exchange for 22,975,301 additional shares of series A-2 preferred
stock of Artizan. The Company determined that it was not practical to
estimate the fair
F-19
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
5. Balance Sheet Components (Continued)
value of this investment as it represents Series A-2 Preferred Stock of
an unlisted company.
As of December 31, 2022, due to concerns related to Artizan's
inability to fund its future operations, the Company determined its
investment in Artizan to be fully impaired. Accordingly, during the fourth
quarter of 2022 the Company recognized an impairment loss of
$10,000 in other income (expense) on the consolidated statement of
operations.
See Note 11, “License Agreements” for additional details on the
Artizan Agreement.
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the
following:
As of December 31,
2022
As of December 31,
2021
Accrued employee compensation
and benefits
Accrued clinical trial costs
Other accrued expenses and other
current liabilities
Accrued expenses and other current
liabilities
$
$
14,603 $
17,788
11,715
9,538
24,051
3,571
44,106 $
37,160
Contingently Redeemable Non-controlling Interest
In September 2020, the Company's Asia-Pacific subsidiary,
BioShin Limited (“BioShin”), authorized, issued and sold 15,384,613
BioShin Series A Preferred Shares at a price of $3.90 per share for a
total of $60,000 to a group of investors led by OrbiMed, with
participation from Cormorant Asset Management LLC, HBM
Healthcare Investments Ltd, Surveyor Capital (a Citadel Company),
and Suvretta Capital Management, LLC (the "BioShin Investors"). The
BioShin Series A Preferred Shares contained both a call option by the
Company and a put option held by the BioShin Investors. Due to the
contingently redeemable features, the Company had classified the
BioShin Series A Preferred Shares in mezzanine equity since the
redemption was out of the Company's control.
In November 2021, the Company, Biohaven Therapeutics Ltd.
(“BTL”), Atlas Merger Sub and BioShin entered into an Agreement and
Plan of Merger (the “BioShin Merger Agreement”). The BioShin Merger
Agreement provided for the merger of Atlas Merger Sub with and into
BioShin, with BioShin surviving the merger as a wholly owned indirect
subsidiary of the Former Parent, in accordance with Section 233 of the
Cayman Islands Companies Act. As a result of the satisfaction of the
closing conditions described in the BioShin Merger Agreement, on
January 6, 2022, each Series A
convertible preferred share of BioShin, no par value, other than
Excluded Shares (as defined in the BioShin Merger Agreement), was
converted into the right to receive 0.080121 of the Former Parent’s
common shares and was removed from mezzanine equity. No Series A
convertible preferred shares of BioShin were outstanding following the
closing.
6. Acquisitions
On January 4, 2021, the Company acquired Kleo
Pharmaceuticals, Inc. (“Kleo”). Kleo is a development-stage
biopharmaceutical company focused on advancing the field of
immunotherapy by developing small molecules that emulate biologics.
The transaction was accounted for as the acquisition of a business
using the acquisition method of accounting.
The total fair value of the consideration transferred was $20,043
which primarily consisted of the issuance of a total of 115,836 common
shares of the Former Parent to Kleo stockholders and contingent
consideration in the form of a contingent value right to receive one
dollar in cash for each Kleo share if certain specified Kleo
biopharmaceutical products or product candidates receive the approval
of the Food and Drug Administration (the "FDA") prior to the expiration
of 30 months following the effective time of the transaction. The
maximum amount payable pursuant to the contingent value right was
approximately $17,300. At December 31, 2021, the Company
determined the value of the contingent value right to be immaterial and
recognized a gain of $1,457 related to the contingent value right in
other income (expense) during the fourth quarter of 2021. The value of
the contingent value right continues to be immaterial with no value
included on the consolidated balance sheet as of December 31, 2022.
Prior to the consummation of the transaction, the Company
owned approximately 41.9% of the outstanding shares of Kleo and
accounted for it as an equity method investment. As part of the
transaction, the Company acquired the remainder of the shares of
Kleo, and post-transaction the Company owns 100% of the
outstanding shares of Kleo. The carrying value of the Company’s
investment in Kleo was $1,176 immediately prior to the acquisition
date. The Company determined the fair value of the existing interest
was $6,437, and recognized a gain from its equity method investment
during the first quarter of 2021 of $5,261 on the consolidated
statement of operations as a result of remeasuring to fair value the
existing equity interest in Kleo.
In connection with the transaction, we recorded: net working
capital of $573; property and equipment of $1,257; intangible assets
consisting of in progress research and development assets of $18,400
which include an oncology therapeutic candidate entering
F-20
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
6. Acquisitions (Continued)
Phase I clinical trials and a Multimodal Antibody Therapy Enhancer
("MATE") conjugation asset; debt assumed of $1,577; and goodwill of
$1,390.
Kleo’s employees, other than its President and Chief Financial
Officer, were retained as part of the transaction. In connection with the
transaction agreement, the Former Parent filed a registration
statement permitting Kleo stockholders to offer and sell the common
shares of the Former Parent issued in the transaction.
Kv7 Platform Acquisition
consolidated statement of operations for a regulatory milestone
payment which became due to Knopp during the second quarter.
Excluding the milestone payment noted above, the Company has
not recorded any of the possible contingent consideration payments to
Knopp as a liability in the accompanying consolidated balance sheet
as none of the future events which would trigger a milestone payment
were considered probable of occurring at December 31, 2022.
7. Shareholders' Equity
Issuance of Common Shares in connection with the
In April 2022, the Company closed the acquisition from Knopp
Separation from the Former Parent
Biosciences LLC (“Knopp”) of Channel Biosciences, LLC (“Channel”),
a wholly owned subsidiary of Knopp owning the assets of Knopp’s Kv7
channel targeting platform (the “Kv7 Platform Acquisition”), pursuant to
a Membership Interest Purchase Agreement (the “Purchase
Agreement”), dated February 24, 2022.
In consideration for the Kv7 Platform Acquisition, on April 4,
2022, the Company made an upfront payment comprised of $35,000 in
cash and 493,254 common shares of the Former Parent, valued at
approximately $58,747, issued through a private placement. The
Company has also agreed to pay additional success-based payments
comprised of (i) up to $325,000 based on developmental and
regulatory milestones through approvals in the United States, EMEA
and Japan for the lead asset, BHV-7000 (formerly known as KB-3061),
(ii) up to an additional $250,000 based on developmental and
regulatory milestones for the Kv7 pipeline development in other
indications and additional country approvals, and (iii) up to $562,500
for commercial sales-based milestones of BHV-7000. Additionally, the
Company has agreed to make scaled royalty payments in cash for
BHV-7000 and the pipeline programs, starting at high single digits and
peaking at low teens for BHV-7000 and starting at mid-single digits and
peaking at low tens digits for the pipeline programs.
The Company accounted for this purchase as an asset
acquisition as substantially all of the fair value of the gross assets
acquired was concentrated in a single identifiable asset, IPR&D. The
IPR&D asset has no alternative future use and relates to intellectual
property rights related to the Kv7 platform lead, now BHV-7000. There
was no material value assigned to any other assets or liabilities
acquired in the acquisition. As such, during the second quarter of
2022, the Company recorded a charge to research and development
("R&D") expense in the accompanying consolidated statement of
operations of $93,747.
During the year ended December 31, 2022, the Company
recorded $25,000 to R&D expense in the
On October 3, 2022, the Former Parent completed the
Distribution to holders of its common shares and the spin-off of
Biohaven. Each holder of Former Parent common shares received one
common share of Biohaven for every two the Former Parent common
shares held of record as of the close of business, New York City time,
on September 26, 2022.
In the Distribution, an aggregate of 35,840,459 common shares of
the Company were issued. The aggregate number of common shares
issued in connection with the Distribution did not include 2,611,392
common shares to be issued in connection with Former Parent share
options that were exercised on October 3, 2022 and 924,093 common
shares to be issued in connection with Former Parent restricted share
units that vested on October 3, 2022. See Note 9, "Non-Cash Share-
Based Compensation" for discussion of the Legacy Equity Award
Settlement Plan.
Issuance of Common Shares for the October 2022 Offering
In October 2022, the Company commenced a public offering of
25,000,000 of its common shares at a price of $10.50 per share,
pursuant to a registration statement on Form S-1 filed with the SEC,
which was declared effective by the SEC on October 20, 2022. The
Company also granted the underwriters a 30-day option to purchase
up to an additional 3,750,000 common shares. On October 25, 2022,
the Company closed the offering, including a full exercise of the
underwriters' option to purchase additional shares. The net proceeds
raised in the offering, after deducting underwriting discounts and
expenses of the offering payable by the Company, were approximately
$282,804.
F-21
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
8. Accumulated Other Comprehensive Income
Shareholders’ equity included the following activity in
accumulated other comprehensive income (loss) for the years ended
December 31, 2022:
January 2023, the number of common shares reserved for future
issuance under the 2022 Plan automatically increased by 2,727,619
common shares.
Legacy Equity Award Settlement Plan
Net unrealized investment gains (losses):
Beginning of period balance
Other comprehensive loss
(1)
End of period balance
Foreign currency translation adjustments:
Beginning of period balance
Other comprehensive income
(1)
End of period balance
Total beginning of period accumulated other
comprehensive income
Total other comprehensive income (loss)
Total end of period accumulated other comprehensive
income
2022
—
(145)
(145)
—
429
429
—
284
284
$
$
(1) There was no tax on other comprehensive income (loss) during the period.
No amounts were reclassified from accumulated other
comprehensive income during the years ended December 31, 2022,
2021 or 2020. The Company had no accumulated other
comprehensive income (loss) included in shareholders' equity as of
December 31, 2021.
9. Non-Cash Share-Based Compensation
2022 Equity Incentive Plan
In September 2022, the Company's shareholders approved the
2022 Equity Incentive Plan (the "2022 Plan"), which became effective
on October 3, 2022. The 2022 Plan provides for the grant of incentive
share options, nonstatutory share options, share appreciation rights,
restricted share awards, restricted share unit awards ("RSUs"),
performance-based share awards and other share-based awards.
Upon the effectiveness of the 2022 Plan, there were 9,190,000
common shares reserved for issuance under the 2022 Plan. As of
December 31, 2022, there were 166,250 shares of the Company's
common shares available for future grants under the 2022 Plan. The
number of shares reserved for issuance under the 2022 Plan
automatically increases on January 1 of each calendar year by 4% of
total common shares outstanding as of December 31 of the prior year,
beginning October 3, 2022 through January 1, 2032. In
In September 2022, the Company's shareholders approved the
Legacy Equity Award Settlement Plan (the "Legacy Plan"), which
became effective on September 29, 2022. The Legacy Plan is intended
solely to provide for the grant and settlement of nonstatutory share
options and RSUs, issued in respect of share options and RSUs
originally granted pursuant to the Former Parent's 2017 Equity
Incentive Plan and 2014 Equity Incentive Plan.
On October 3, 2022, the Former Parent completed the
Distribution and the Separation. Each Former Parent share option and
RSU outstanding prior to the Distribution was converted into .5 stock
options and RSUs in the Company. In total, 4,057,121 share options
and 924,093 RSUs were granted and settled into 2,611,392 and
924,093 common shares, respectively, under the Legacy Plan on
October 3, 2022.
Non-Cash Share-Based Compensation Expense
For periods prior to the Separation from the Former Parent, non-
cash share-based compensation has been allocated to the Company
by using a combination of specific identification and a proportionate
cost allocation method based on employee hours or directly identified
operating expenses, depending on the employee’s function. The
amounts presented are not necessarily indicative of future awards and
do not necessarily reflect the costs that the Company would have
incurred as an independent company for the periods presented.
Upon the effectiveness of the Company's Spin-off from the
Former Parent, each Former Parent share option and RSU
outstanding vested immediately (the "Acceleration") and converted into
.5 share options and RSUs in the Legacy Plan in the Company. The
non-cash share-based compensation expense related to the
Acceleration was then allocated to the Company using the same
methodology described above and recognized immediately, resulting in
$101,440 of non-cash share-based compensation expense recognized
related to to the Acceleration in the fourth quarter of 2022. The share
options and RSUs granted under the Legacy Plan also immediately
vested and settled as a result of the Spin-off, and the Company
determined that no incremental compensation should be recognized
related to these awards.
Non-cash share-based compensation under the Former Parent’s
non-cash share-based compensation plans was measured at the grant
date based on the fair
F-22
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
9. Non-Cash Share-Based Compensation (Continued)
value of the award and was recognized as expense over the requisite
service period of the award (generally three to four years) using the
straight-line method.
The Company measures non-cash share-based compensation at
the grant date based on the fair value of the award and is recognized
as expense over the requisite service period of the award (generally
three to four years) using the straight-line method. Non-cash share-
based compensation expense was classified in the consolidated
statements of operations as follows:
Year Ended December 31,
2021
2022
2020
$
46,976 $
39,381 $
18,475
61,749
7,654
—
—
—
—
116,379
39,381
18,475
Research and development
expenses
Allocated from Former
Parent excluding the
Acceleration
Allocated from Former
Parent related to the
Acceleration
2022 Equity Incentive Plan
Total research and
development expenses
General and administrative
expenses
Allocated from Former
Parent excluding the
Acceleration
Allocated from Former
Parent related to the
Acceleration
2022 Equity Incentive Plan
Total general and
administrative expenses
Total non-cash share-based
compensation expense
As of December 31, 2022, total unrecognized compensation cost
related to the unvested share-based awards was $31,080, which is
expected to be recognized over a weighted average period of
2.75 years.
Share Options
All share option grants are awarded at fair value on the date of
grant. The fair value of share options is estimated using the Black-
Scholes option pricing model. Stock options generally expire 10 years
after the grant date.
The aggregate intrinsic value of share options is calculated as
the difference between the exercise price of the share options and the
fair value of the Company's common shares for those share options
that had exercise prices lower than the fair value of the Company's
common shares at December 31, 2022. The total intrinsic value of
outstanding share options for the year ended December 31, 2022 was
$61,639. The total intrinsic value of share options exercised for the
year ended December 31, 2022 was $20,137.
The assumptions that the Company used to determine the grant-
date fair value of share options granted under the 2022 Plan were as
follows, presented on a weighted average basis:
30,951
26,258
11,025
39,691
6,535
—
—
—
—
77,177
26,258
11,025
$
193,556 $
65,639 $
29,500
Risk-free interest rate
Expected term (in years)
Expected volatility
Expected dividend yield
Exercise price
F-23
Year Ended December 31,
2022
3.86%
5.75
82.05%
—%
$7.00
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
9. Non-Cash Share-Based Compensation (Continued)
The following table is a summary of the Company's share option activity for the year ended December 31, 2022:
Outstanding as of October 3, 2022
(1)
Granted
Exercised
Forfeited
(1)
Outstanding as of December 31, 2022
Options exercisable as of December 31, 2022
Vested and expected to vest as of December 31, 2022
(1) Includes 4,057,121 share options that were granted and exercised under the Legacy Plan on October 3, 2022
Number of
Shares
Weighted
Average
Exercise
Price
0 $
13,167,121 $
(4,121,656) $
(86,250) $
8,959,215 $
2,212,965 $
8,959,215 $
—
5.67
2.74
7.00
7.00
7.00
7.00
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
9.75 $
9.75 $
9.75 $
61,639
15,225
61,639
The Company expects approximately 6,746,250 of the unvested share options to vest over the requisite service period.
Restricted Share Units
The following table is a summary of the RSU activity for the year
As discussed above, in connection with the Distribution, on
October 3, 2022, 924,093 RSUs were granted and settled into 924,093
common shares under the Legacy Equity Award Settlement Plan. No
additional RSUs were granted under the 2022 Plan during the year
ended December 31, 2022.
The Company’s RSUs are considered nonvested share awards
and require no payment from the employee. For each RSU, employees
receive one common share at the end of the vesting period. The
employee can elect to receive the one common share net of taxes or
pay for taxes separately and receive the entire share. Compensation
cost is recorded based on the market price of the Company’s common
shares on the grant date and is recognized on a straight-line basis
over the requisite service period.
As of December 31, 2022, there was no unrecognized
compensation cost related to Company RSUs that are expected to
vest. No fair value was assigned to the RSUs vested during the year
ended December 31, 2022, as all RSUs vested were related to the
RSUs granted and settled under the Legacy Equity Award Settlement
Plan.
ended December 31, 2022:
Unvested restricted shares
outstanding as of October 3, 2022
Granted
Forfeited
Vested
Unvested restricted shares
outstanding as of December 31,
2022
Number of
Shares
Weighted Average
Grant Date Fair
Value
— $
924,093 $
— $
(924,093) $
— $
—
—
—
—
—
Employee Share Purchase Plan
In September 2022, the Company's board of directors approved
the rules and procedures of the 2022 Employee Share Purchase Plan
(the "ESPP") approved by shareholders of the Company on
September 28, 2022. Upon the effectiveness of the ESPP, 393,769
shares were authorized to be issued under purchase rights granted to
eligible employees.
The ESPP allows each eligible employee who is participating in
the plan to purchase shares by authorizing payroll deductions of up to
15% of eligible earnings. Unless the participating employee has
previously withdrawn from the offering, accumulated payroll deductions
will be used to purchase shares on the last business day of the offering
period at a price equal to 85% of the fair market value of the shares on
the first business day or the last business day of the offering period,
whichever is lower. Under applicable tax rules, an employee may
purchase no more than $25
F-24
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
9. Non-Cash Share-Based Compensation (Continued)
worth of ordinary shares, valued at the start of the offering period,
under the ESPP in any calendar year. There is no minimum holding
period associated with shares purchased pursuant to this plan. An
employee’s purchase rights terminate immediately upon termination of
employment.
The number of shares reserved for issuance under the ESPP
automatically increases on January 1 of each calendar year by 1% of
total common shares outstanding as of December 31 of the prior year,
beginning October 3, 2022 through January 1, 2032. As of December
31, 2022, 393,769 shares remained available for future issuance under
the ESPP. In January 2023, 681,904 additional shares were authorized
to be issued under the ESPP.
The Company accounts for employee share purchases made
under its ESPP using an estimate of the grant date fair value, which is
determined in accordance with ASC 718, Stock Compensation. The
purchase price discount and the look-back feature cause the ESPP to
be compensatory and the Company to recognize compensation
expense. The compensation cost is recognized on a straight-line basis
over the requisite service period. The Company values ESPP shares
using the Black-Scholes model. The Company did not recognize
material compensation expense related to the ESPP for the year
ended December 31, 2022.
As of December 31, 2022, there was $221 of unrecognized non-
cash share-based compensation expense related to the ESPP, which
is expected to be recognized over the remaining offering period ending
May 31, 2022. During the year ended December 31, 2022, no shares
were issued under the ESPP.
10. Net Loss Per Share
Basic and diluted net loss per share attributable to common
shareholders of Biohaven Ltd. was calculated as follows:
2022
Year Ended December 31,
2021
2020
Numerator:
Net loss
attributable to
Biohaven Ltd.
Denominator:
Weighted
average common
shares
outstanding—
basic and diluted
(1)
Net loss per share
attributable to
Biohaven Ltd.—basic
and diluted
$
(570,279) $
(213,796) $
(118,668)
44,741,316
39,375,944
39,375,944
$
(12.75) $
(5.43) $
(3.01)
(1) Prior to the Spin-Off from the Former Parent on October 3, 2022, Biohaven Ltd. did
not operate as an independent company. At the time of the Distribution, 39,375,944
shares of the Company's common stock were distributed to the Former Parent's
shareholders, including common shares issued in connection with Former Parent
share options that were exercised on October 3, 2022 and common shares issued in
connection with Former Parent restricted share units that vested on October 3,
2022. This number of shares is being utilized for the calculation of basic and diluted
earnings per share for all periods presented prior to the Spin-Off.
The Company's potential dilutive securities include share options
which 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 of the Company 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
Year Ended
December 31,
2022
8,959,215
11. License Agreements
The following is a summary of all license agreements that the
Company has entered into. As of December 31, 2022, the Company
has potential future
developmental, regulatory, and commercial milestone payments under
these agreements of up to approximately $30,125, $529,850, and
$582,950,
F-25
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
respectively. As of December 31, 2022 the Company has not made
any developmental, regulatory, or commercial milestone payments
under these agreements.
Yale Agreements
In September 2013, the Company entered into an exclusive
license agreement (the "Yale Agreement") with Yale University 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.
The Yale Agreement was amended and restated in May 2019. As
amended, the Company agreed to pay Yale University 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
riluzole-based products from the licensed patents or from products
based on troriluzole. Under the amended and restated agreement, the
royalty rates are reduced as compared to the original agreement. In
addition, under the amended and restated agreement, the Company
may develop products based on riluzole or troriluzole. The amended
and restated agreement retains a minimum annual royalty of up to
$1,000 per year, beginning after the first sale of product under the
agreement. If the Company grants any sublicense rights under the
Yale Agreement, it must pay Yale University a low single-digit
percentage of sublicense income that it receives.
For the years ended December 31, 2022, 2021 and 2020, the
Company did not record any material expense or make any milestone
or royalty payments under the Yale Agreement.
In January 2021, the Company entered into a worldwide, exclusive
license agreement with Yale University for the development and
commercialization of a novel Molecular Degrader of Extracellular
Protein ("MoDE") platform (the "Yale MoDE Agreement"). Under the
Yale MoDE Agreement, the Company acquired exclusive, worldwide
rights to Yale University's intellectual property directed to its MoDE
platform. The platform pertains to the clearance of disease-causing
protein and other biomolecules by targeting them for lysosomal
degradation using multi-functional molecules. As part of consideration
for this license, the Company paid Yale University an upfront cash
payment of $1,000 and 11,668 common shares of the Former Parent
valued at approximately $1,000. Under the Yale MoDE Agreement, the
Company may develop products based on the MoDE platform. The
Yale MoDE Agreement
includes an obligation to pay a minimum annual royalty of up to $1,000
per year, and low single digit royalties on the net sales of licensed
products. If the Company grants any sublicense rights under the Yale
MoDE Agreement, it must pay Yale University a low single-digit
percentage of sublicense income that it receives. In addition, Yale
University will be eligible to receive additional development milestone
payments of up to $800 and commercial milestone payments of up to
$2,950. The Yale MoDE Agreement terminates on the later of twenty
years from the effective date, twenty years from the filing date of the
first investigational new drug application for a licensed product or the
last to expire of a licensed patent. Under the Yale MoDE Agreement,
the Company entered into a sponsored research agreement (the “Yale
MoDE SRA”), which included funding of up to $4,000 over the life of
the agreement.
Excluding the upfront payments above, the Company recorded
research and development expense related to the Yale MoDE
Agreement of $2,666 and $150 for the years ended December 31,
2022 and 2021, respectively. For the years ended December 31, 2022
and 2021, the Company did not make any milestone or royalty
payments under the Yale MoDE Agreement.
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 troriluzole, 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 ALS Biopharma
Agreement, payable on a quarterly basis.
The ALS 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.
F-26
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
For the years ended December 31, 2022, 2021 and 2020, the
Company did not record any expense or make any milestone or royalty
payments under the ALS Biopharma Agreement.
2016 AstraZeneca Agreement
In October 2016, the Company entered into an exclusive license
agreement (the "2016 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 2016 AstraZeneca Agreement depend on
the indication of the licensed product being developed as well as the
territory where regulatory approval is obtained.
Regulatory milestones due under the 2016 AstraZeneca
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 2016 AstraZeneca Agreement and total up to $120,000. The
Company has also agreed to pay royalties in two tiers, with each tiered
royalty in the range from 0-10% of net sales of products licensed under
the 2016 AstraZeneca Agreement. If the Company receives revenue
from sublicensing any of its rights under the 2016 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 2016 AstraZeneca Agreement.
The 2016 AstraZeneca Agreement expires upon the expiration of
the patent rights under the agreement or on a country-by-country basis
ten years after the first commercial sale and can also be terminated if
certain events occur, e.g., material breach or insolvency.
For the years ended December 31, 2022, 2021 and 2020, the
Company did not record any expense or make any milestone or royalty
payments under the 2016 AstraZeneca Agreement.
2018 AstraZeneca License Agreement
In September 2018, the Company entered into an exclusive
license agreement (the "2018 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-3241 (verdiperstat).
Under the 2018 AstraZeneca Agreement, the Company paid
AstraZeneca an upfront cash payment of $3,000 and 109,523 shares
valued at $4,080 on the date of settlement and is obligated to pay
milestone payments to AstraZeneca totaling up to $55,000 upon the
achievement of specified regulatory and commercial milestones and
up to $50,000 upon the achievement of specified sales-based
milestones. In addition, the Company will pay AstraZeneca royalties in
three tiers, with each tiered royalty in the range from 0-10% of net
sales of specified approved products, subject to specified reductions.
In November 2021, the Company completed enrollment in a
Phase 3 clinical trial of this product candidate, which is now referred to
as verdiperstat, for the treatment of Amyotrophic Lateral Sclerosis
("ALS").In September 2022, the Company announced negative topline
results from the Phase 3 clinical trial of verdiperstat for ALS. ALS is a
progressive, life-threatening, and rare neuromuscular disease for
which there are currently limited treatment options and no cure. The
Company is solely responsible, and has agreed to use commercially
reasonable efforts, for all development, regulatory and commercial
activities related to verdiperstat. The Company may sublicense its
rights under the agreement and, if it does so, will be obligated to pay a
portion of any milestone payments received from the sublicense to
AstraZeneca in addition to any milestone payments it would otherwise
be obligated to pay.
The 2018 AstraZeneca Agreement terminates on a country-by-
country basis and product-by-product basis upon the expiration of the
royalty term for such product in such country and can also be
terminated if certain events occur, e.g., material breach or insolvency.
For the years ended December 31, 2022, 2021 and 2020, the
Company did not record any material expense or make any milestone
or royalty payments under the 2018 AstraZeneca Agreement.
Fox Chase Chemical Diversity Center Inc. Agreement
In May 2019, the Company entered into an agreement with
FCCDC (the "FCCDC Agreement") pursuant to which the Company
purchased certain intellectual property relating to the TDP-43 protein
from FCCDC. The FCCDC Agreement provides the Company with a
plan and goal to identify one or more new chemical entity candidates
for preclinical development for eventual clinical evaluation for the
treatment of one or more TDP-43 proteinopathies. As consideration,
the
F-27
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
Company issued 100,000 of the Former Parent's common shares to
FCCDC valued at $5,646.
In addition, the Company is obligated to pay FCCDC milestone
payments totaling up to $3,000 with $1,000 for each additional NDA
filing. The Company also issued a warrant to FCCDC, granting
FCCDC the option to purchase up to 100,000 of the Former Parent’s
common shares, at a strike price of $56.46 per share, subject to
vesting upon achievement of certain milestones in development of
TDP-43. In connection with the Separation, the warrants issued to
FCCDC were vested and settled, resulting in $4,245 being recorded as
research and development expense for the year ended December 31,
2022.
In connection with the FCCDC Agreement, the Company and
FCCDC have established a TDP-43 Research Plan, which was
amended in November 2020, under which the Company will pay
FCCDC an earned royalty equal to 0% to 10% of net sales of any TD-
43 patent products with a valid claim as defined in the FCCDC
Agreement. The Company may also license the rights developed
under the FCCDC Agreement and, if it does so, will be obligated to pay
a portion of any payments received from such licensee to FCCDC in
addition to any milestones it would otherwise be obligated to pay. The
Company is also responsible for the prosecution and maintenance of
the patents related to the TDP-43 assets.
The FCCDC Agreement terminates on a country-by-country
basis and product-by-product basis upon expiration of the royalty term
for such product in such country and can also be terminated if certain
events occur, e.g., material breach or insolvency.
The Company did not record any material research and
development expense or make any milestone payments related to the
FCCDC Agreement in the consolidated statements of operations
during the years ended December 31, 2022, 2021 and 2020.
UConn
In October 2018, the Company announced it had signed an
exclusive, worldwide option and license agreement (the “UConn
Agreement”) with the University of Connecticut (“UConn”) for the
development and commercialization rights to UC1MT, a therapeutic
antibody targeting extracellular metallothionein. Under the UConn
Agreement, the Company had the option to acquire an exclusive,
worldwide license to UC1MT and its underlying patents to develop and
commercialize throughout the world in all human indications (the
"UConn Option"). In September 2022, the Company exercised the
UConn Option in exchange for a payment of $400. Under the UConn
Agreement, UConn is entitled
to milestone payments upon the achievement of specified
developmental and regulatory milestones of up to $30,100 and
commercial milestones of up to $50,000, and royalties of a low single-
digit percentage of net sales of licensed products.
Excluding the payment made in connection with the exercise of
the UConn Option, for the years ended December 31, 2022, 2021 and
2020, the Company did not record any research and development
expense or make any milestone payments related to the UConn
Agreement.
Artizan Agreement
In December 2020, the Company entered into an Option and
License Agreement (the "2020 Artizan Agreement") with Artizan
Biosciences Inc. ("Artizan"). Pursuant to the 2020 Artizan Agreement,
the Company acquired an option (“Biohaven Option”) to obtain a
royalty-based license from Artizan to manufacture, use and
commercialize certain products in the United States for the treatment
of diseases, including, for example, inflammatory bowel disease and
other gastrointestinal inflammatory disorders, e.g., Crohn’s disease.
The Biohaven Option is exercisable throughout the development
phase of the products at an exercise price of approximately $4,000 to
$8,000, which varies based on the market potential of the products.
The Company and Artizan have also formed a joint steering committee
to oversee, review and coordinate the product development activities
with regard to all products for which we have exercised (or will
exercise in the future) the Biohaven Option.
In December 2020, simultaneously with the 2020 Artizan
Agreement, the Company entered into a Series A-2 Preferred Stock
Purchase Agreement with Artizan. Under the agreement, the Company
paid Artizan 61,494 of the Former Parent’s common shares valued at
$6,000, which were issued in January 2021. In exchange, the
Company acquired 34,472,031 shares of series A-2 preferred stock of
Artizan.
In June 2021, the Company entered into a Development and
License Agreement with Artizan Biosciences Inc (the "2021 Artizan
Agreement"). Pursuant to the 2021 Artizan Agreement, the Company
acquired an exclusive, worldwide license under Artizan’s IgA-SEQ
patented technology and know-how to develop, manufacture and
commercialize certain of Artizan’s compounds for use in Parkinson’s
Disease. Under the 2021 Artizan Agreement, the Company is
responsible for funding the development of the compounds, obtaining
regulatory approvals, manufacturing the compounds and
commercializing the compounds. the Company is also responsible for
the prosecution, maintenance and enforcement of Artizan’s patents.
The Company will pay
F-28
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
Artizan development milestones of $20,000 for the first licensed
compound to achieve U.S. marketing authorization and $10,000 for
each subsequent U.S. approval. In addition, the Company will pay
Artizan commercialization milestones totaling up to $150,000 and
royalties in the low- to mid-single digits. The 2021 Artizan Agreement
terminates on a country-by-country basis on the later of 10 years from
the first commercial sale of licensed product in such country or the
expiration of Artizan’s patents in such country and can also be
terminated if certain events occur, e.g., material breach or insolvency.
In June 2022, the Company entered into an amendment (the
"Amendment") to the Series A-2 Preferred Stock Purchase Agreement
with Artizan. Under the Amendment, the Company made a cash
payment of $4,000 in exchange for 22,975,301 shares of series A-2
preferred stock of Artizan out of a total of 45,950,601 shares of series
A-2 preferred stock of Artizan for a total raise of $8,000 (the “A2
Extension Raise”). Along with the Amendment, the Company and
Artizan executed a non-binding indication of interest (“Artizan Side
Letter”), which describes terms under which the Company and Artizan
would amend the 2020 Artizan Agreement to eliminate certain
milestone payments required by us in exchange for limiting our option
to the selection of the first licensed product. The Artizan Side Letter
required Artizan to commit at least 80% of the funds raised in the A-2
Extension Raise to a certain program and to raise $35,000 of
additional capital within a certain time.
As of December 31, 2022, due to concerns related to Artizan's
inability to fund its future operations, the Company determined its
investment in Artizan to be fully impaired. Accordingly, during the fourth
quarter of 2022 the Company recognized an impairment loss of
$10,000 in other income (expense) on the consolidated statements of
operations.
For the years ended December 31, 2022, 2021 and 2020,
excluding the upfront payments above, the Company did not record
any research and development expense or make any milestone
payments related to the 2020 Artizan Agreement and the 2021 Artizan
Agreement.
Moda Agreement
On January 1, 2021, the Company entered into a consulting
services agreement (the "Moda Agreement") with Moda
Pharmaceuticals LLC ("Moda") to further the scientific advancement of
technology, drug discovery platforms (including the technology
licensed under the Yale MoDE Agreement), product candidates and
related intellectual property owned or controlled by the Company.
Under the Moda Agreement, the Company paid Moda an upfront
cash payment of $2,700 and 37,836 shares of the Former Parent
valued at approximately $3,243. In addition, Moda will be eligible to
receive additional development milestone payments of up to $81,612
and commercial milestone payments of up to $30,171. The Moda
Agreement has a term of four years and may be terminated earlier by
the Company or Moda under certain circumstances including, for
example, the Company's discontinuation of research on the MoDE
platform or default.
For the years ended December 31, 2022 and 2021, excluding the
upfront payments above, the Company did not record any material
research and development expense or make any milestone payments
related to the Moda Agreement.
Reliant Agreement
In July 2021, the Company entered into a development and
licensing agreement (the "Reliant Agreement") with Reliant
Glycosciences LLC ("Reliant"), pursuant to which the Company and
Reliant have agreed to collaborate on a program with Biohaven Labs’
multifunctional molecules to develop and commercialize conjugated
antibodies for therapeutic uses relating to IgA nephropathy and
treatment of other diseases and conditions. Under the Reliant
Agreement, the Company paid Reliant an upfront payment in the form
of issuance of common shares of the Former Parent valued at
approximately $3,686, which the Company recorded as research and
development expense on its consolidated statement of operations. In
addition, Reliant will be eligible to receive development and regulatory
milestone payments of up to $36,500, and royalties of a low single-digit
percentage of net sales of licensed products.
Excluding the upfront payment discussed above, for the years
ended December 31, 2022 and 2021, the Company did not record any
material research and development expense related to the Reliant
Agreement.
KU Leuven Agreement
In January 2022, the Company and Katholieke Universiteit
Leuven ("KU Leuven") entered into an Exclusive License and
Research Collaboration Agreement (the "KU Leuven Agreement") to
develop and commercialize TRPM3 antagonists to address the
growing proportion of people worldwide living with chronic pain
disorders. The TRPM3 antagonist platform was discovered at the
Centre for Drug Design and Discovery and the Laboratory of Ion
Channel Research at KU Leuven. Under the KU Leuven Agreement,
the Company receives exclusive global rights to develop, manufacture
and commercialize KU Leuven's portfolio
F-29
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
of small-molecule TRPM3 antagonists. The portfolio includes the lead
candidate, henceforth known as BHV-2100, which is being evaluated
in preclinical pain models and will be the first to advance towards
Phase 1 studies. The Company will support further basic and
translational research at KU Leuven on the role of TRPM3 in pain and
other disorders. As consideration, KU Leuven received an upfront cash
payment of $3,000 and 15,340 shares of the Former Parent valued at
$1,779, and is eligible to receive additional development, regulatory,
and commercialization milestones payments of up to $327,750. In
addition, KU Leuven will be eligible to receive mid-single digit royalties
on net sales of products resulting from the collaboration.
Company's leases post-separation consist of lab and office space for
use in its operations. Its leases generally have lease terms of 1 to 10
years, some of which include options to extend for up to 5 to 10 years
or on a month-to-month basis. The Company includes extension
options that are reasonably certain to be exercised as part of
determination of lease terms. As of December 31, 2022, none of the
Company's lease terms included the extension option as the Company
has determined that it is unlikely to exercise the extension option.
Allocated operating lease cost for periods prior to Separation and
actual operating lease cost was $1,158, $264 and $0 for the years
ended December 31, 2022, 2021 and 2020, respectively.
Excluding the upfront payments discussed above, for the year
The Company currently has three short-term real estate leases
ended December 31, 2022, the Company did not record any material
research and development expense related to the KU Leuven
Agreement.
Taldefgrobep Alfa License Agreement
In February 2022, following the transfer of intellectual property,
the Company announced that it entered into a worldwide license
agreement with BMS for the development and commercialization rights
to taldefgrobep alfa (also known as BMS-986089), a novel, Phase 3-
ready anti-myostatin adnectin (the "Taldefgrobep Alfa License
Agreement"). Under the terms of the Taldefgrobep Alfa License
Agreement, the Company will receive worldwide rights to taldefgrobep
alfa and BMS will be eligible for regulatory approval milestone
payments of up to $200,000, as well as tiered, sales-based royalty
percentages from the high teens to the low twenties. There were no
upfront or contingent payments to BMS related to the Taldefgrobep
Alfa License Agreement.
For the year ended December 31, 2022, the Company did not
record any material expense or make any milestone or royalty
payments under the Taldefgrobep Alfa License Agreement.
12. Commitments and Contingencies
with immaterial lease expense. The Company had immaterial sublease
income and there are no sale-leaseback transactions. Certain of the
Company’s lease agreements contain variable lease payments that are
adjusted for actual operating expense true-ups compared with
estimated amounts; however, these amounts are immaterial. The
Company’s lease agreements do not contain any material residual
value guarantees or material restrictive covenants.
The following table summarizes supplemental cash flow
information:
Years Ended December 31,
2021
2022
2020
Right-of-use assets
obtained in exchange
for new operating lease
liabilities
(1)
$
31,342 $
478 $
3,681
(1) This figure excludes $2,850 of opening adjustments to the right-of-use operating asset
due to leasehold improvements originally classified in other non-current assets and
transferred to the right-of-use operating asset at lease commencement in 2020.
Operating cash flows paid for operating leases were immaterial
for all periods prior to the Separation, and $780 for the year ended
December 31, 2022.
All consideration paid by the Former Parent in association with the
Supplemental balance sheet information related to leases is as
following agreements, certain of which were assigned by the Former
Parent to the Company in connection with the Spin-Off, during the
periods prior to the Separation is recorded in the consolidated financial
statements of the Company.
follows:
Lease Agreements
The Former Parent’s leases primarily consisted of lab and office
space that was attributed to the Company in connection with the Spin-
Off. For periods prior to Separation, lease costs were allocated to the
Company based on a proportional cost allocation method. The
F-30
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
12. Commitments and Contingencies (Continued)
In thousands, except remaining lease term
and discount rate
Assets
Other non-current assets
Liabilities
Other current liabilities
Long-term operating lease liability
December 31,
2022
December 31,
2021
$
$
$
34,928
3,019
30,581
33,600
$
$
$
5,222
439
2,797
3,236
Weighted average remaining lease term
(in years)
Weighted average discount rate
9.08
6.55 %
5.75
9.07 %
The following table summarizes maturities of operating lease
liabilities as of December 31, 2022:
2023
2024
2025
2026
2027
Thereafter
Total lease payments
Less: imputed interest
Total lease liabilities $
Operating leases
4,929
4,981
4,742
4,865
4,499
20,563
44,579
(10,979)
33,600
West Palm Beach Lease Agreement
$18,750, which are variable based on number of trial participants, and
contingent upon the achievement of certain milestones of the clinical
trials covered under the agreements. If all related milestones are
achieved, the Company expects these amounts to be paid over the
next five years.
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 and executive
officers that will require the Company, among other things, to indemnify
them against certain liabilities that may arise by reason of their status
or service. 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,
2022 or December 31, 2021.
In June 2022, the Company entered into a lease agreement in
License Agreements
West Palm Beach, Florida for office space (the "West Palm Beach
Lease"), which will be used for general office purposes. The lease is
expected to commence in late 2024 after substantial completion of
building improvements, and has a term of 120 months, with an option
to extend for two additional periods of 60 months each. The Company
expects to record the West Palm Beach Lease as an operating lease.
The Company has annual commitments relating to the West Palm
Beach Lease ranging from $1,263 to $1,649.
Research Commitments
The Former Parent has entered into agreements with several
CROs to provide services in connection with the Company’s preclinical
studies and clinical trials. Research commitments entered into by the
Former Parent and related to the Company were transferred to the
Company upon separation. As of December 31, 2022, the Company
had remaining maximum research commitments in excess of one year
of approximately
The Former Parent entered into license agreements with various
parties that are directly attributed to the Company under which it is
obligated to make contingent and non-contingent payments (see Note
11). Upon the October 3, 2022 separation from the Former Parent,
license agreements entered by the Former Parent and related to the
Company were transferred to the Company.
Sixth Street Financing Agreement
In August 2020, the Former Parent and Biohaven
Pharmaceuticals, Inc., (together with the Former Parent the
"Borrowers"), entered into a financing agreement, as amended, with
Sixth Street Specialty Lending, Inc., as administrative agent, and the
lenders party thereto (the "Lenders") pursuant to which the Lenders
agreed to extend a senior secured credit facility to the Borrowers (as
amended, the “Sixth Street Financing Agreement”). The Sixth Street
Financing Agreement provided for term
F-31
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
12. Commitments and Contingencies (Continued)
loans in an aggregate principal amount up to $750,000, plus any
capitalized interest paid in kind, and was accounted for as third-party,
long-term debt by the Former Parent.
The Company was a co-obligor, jointly and severally with the
Former Parent on its third-party long-term debt obligation under the
Sixth Street Financing Agreement. The Former Parent’s third-party
debt and related interest expense are not reflected in the consolidated
financial statements because the Company had not agreed to pay a
specified amount of the borrowings on the basis of its arrangement
with the Former Parent, nor was the Company expected to pay any
portion of the Former Parent’s third-party debt, and the borrowings
were not specifically identifiable to the Company. On October 3, 2022,
an affiliate of Pfizer, on behalf of the Former Parent, repaid in full all of
the indebtedness and other obligations and liabilities owed by the
Former Parent, including prepayment penalties. In connection with the
termination and repayment in full of the indebtedness and other
obligations and liabilities under the Sixth Street Financing Agreement,
all related liens and security interests granted by or arising under the
Sixth Street Financing Agreement were automatically released and
discharged.
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, 2022, there were no matters which would have a
material impact on the Company’s financial results.
13. Income Taxes
The income tax expense in the consolidated financial statements
has been calculated on a separate return method and is presented as
if the Company’s operations were separate taxpayers in the respective
jurisdictions up to and including the Separation. Cash tax payments,
income taxes receivable and deferred taxes, net of valuation
allowance, are reflective of its actual tax balances prior and
subsequent to the Distribution.
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, the Company and all dividends, interest, rents,
royalties, compensation and other amounts paid by the Company to
persons who are not resident in the BVI and any capital gains realized
with respect to any shares, debt obligations, or other securities of the
Company by
persons who are not resident in the BVI are exempt from all provisions
of the Income Tax Ordinance in the BVI.
The Former Parent historically outsourced all of the research and
clinical development for its programs under a master services
agreement with Biohaven Pharmaceuticals, Inc. (“BPI”). As a result of
providing services under this agreement, BPI was profitable during the
years ended December 31, 2022, 2021 and 2020, and BPI is subject
to taxation in the United States. As such, in each reporting period, the
Company's tax provision includes the effects of consolidating the
results of operations of BPI.
At December 31, 2022 and 2021, the Company continued to
maintain a full valuation allowance against its net deferred tax assets,
which are comprised primarily of capitalized research and
development deductions, research and development tax credit
carryforwards and net operating loss carryforwards, based on
management’s assessment that it is more likely than not that the
deferred tax assets will not be realized.
The Company recorded an income tax provision during the years
ended December 31, 2022, 2021 and 2020 of $438, $1,366 and $0
respectively, which primarily represents U.S. Federal and state taxes
related to the Company’s profitable operations of BPI in the U.S.
Loss before provision for income taxes consisted of the following:
BVI
Foreign
Loss before provision for
income taxes
Year Ended December 31,
2021
(211,334) $
(1,096)
2022
(598,046) $
28,205
2020
(123,468)
4,800
(569,841) $
(212,430) $
(118,668)
$
$
The provision for income taxes consisted of the following:
F-32
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
13. Income Taxes (Continued)
Current income tax provision:
BVI
Foreign
Total current income tax
provision
Deferred income tax provision
(benefit):
BVI
Foreign
Total deferred income tax
provision (benefit)
Total provision for income
taxes
Year Ended December 31,
2021
2020
2022
$
— $
— $
438
438
—
—
—
1,366
1,366
—
—
—
$
438 $
1,366 $
—
—
—
—
—
—
—
A reconciliation of the BVI statutory income tax rate of 0% to the
Company's effective income tax rate is as follows:
Year Ended December 31,
2021
2022
2020
BVI statutory income tax rate
Foreign tax rate differential
Tax credits
Change in valuation allowance
Other
Effective income tax rate
0.0 %
(12.6)
(5.8)
18.5
0.0
0.1 %
0.0 %
0.0
(5.0)
7.0
(1.0)
1.0 %
0.0 %
1.0
(6.0)
9.0
(4.0)
0.0 %
Net deferred tax assets (liabilities) consisted of the following:
December 31,
2022
2021
Deferred tax assets:
Foreign net operating loss carryforwards
Tax credits
Accrued bonus
Non-cash share-based compensation
R&D capitalization
Other
Valuation allowance
Total deferred tax assets
Deferred tax liabilities:
Depreciation
Intangible assets and other
Total deferred tax liabilities
$
8,895 $
60,340
3,440
1,298
142,269
467
(216,061)
648
(648)
—
(648)
Net deferred tax asset (liability)
$
— $
9,573
26,590
—
18,246
—
4,917
(54,224)
5,102
—
(5,102)
(5,102)
—
In January 2021, the Company completed the acquisition of Kleo.
The Company recorded a full valuation allowance against its Kleo
deferred tax assets and periodically reviews its position. Due to Kleo's
cumulative loss history, the Company determined that a full valuation
allowance on these assets was appropriate. The Company will
continue to evaluate the need for a valuation allowance on its deferred
tax assets until there is sufficient positive evidence to support the
reversal of all or some portion of these allowances.
As of December 31, 2022, and 2021, the Company had foreign
net operating loss carryforwards of $69,214 and $39,281, respectively.
As of December 31, 2022, and 2021, the Company had federal and
state research and development and orphan drug credits of $60,340
and $26,590, respectively, which begin to expire in 2039.
F-33
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
13. Income Taxes (Continued)
Changes in the valuation allowance for deferred tax assets
during the years ended December 31, 2022 and 2021 were due
primarily to generation of nondeductible research expenses and tax
credit carryforwards. Changes in the valuation allowance for deferred
tax assets during the years ended December 31, 2021 and 2020 were
due primarily to the acquisition of Kleo, an increase in the amount of
carryforward tax credits for research and development, and an
increase in future tax deductions for share awards to employees.
Valuation allowance as of
beginning of year
Increases recorded to
Purchase Accounting and
Net Investment from
Former Parent
Increases recorded to
income tax provision
Valuation allowance as of
end of year
Year Ended December 31,
2021
2022
2020
$
54,224 $
32,970 $
23,592
50,905
6,449
(1,089)
110,932
14,805
10,467
$
216,061 $
54,224 $
32,970
The Company followed the authoritative guidance for recognizing
and measuring uncertainty in income taxes for tax positions taken or
expected to be taken in a tax return.
The beginning and ending amounts of unrecognized tax benefits
reconciles as follows:
Year Ended December 31,
2021
2020
2022
Beginning of period balance
$
3,800 $
2,700 $
1,800
Increase for tax positions taken
during the current period
(Decreases) increases recorded
to Purchase Accounting and Net
Investment from Former Parent
End of period balance
—
50
—
(1,600)
2,200 $
$
1,050
3,800 $
900
2,700
The unrecognized tax benefits relate primarily to issues common
among multinational corporations. All of these unrecognized tax
benefits, if recognized, would impact the Company's effective income
tax rate. The Company's policy is to record interest and penalties
related to income taxes, if any, as part of its income tax provision. As of
December 31, 2022 and 2021, the total amount of accrued interest and
penalties was not significant.
BPI and Kleo file 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, 2019 and subsequent years. The federal tax
return for BPI is currently under audit by the IRS for the period ended
December 31, 2019.
14. Related Party Transactions
Relationship with the Former Parent
Upon the effectiveness of the Separation on October 3, 2022, the
Former Parent ceased to be a related party to the Company and
accordingly, no related party transactions or balances are reported
subsequent to October 3, 2022.
On October 3, 2022, the Company entered into agreements with
the Former Parent in connection with the Separation, including the
following:
Transition Services Agreement. The Company entered into a
Transition Services Agreement with the Former Parent (the “Transition
Services Agreement”) under which the Company or one of its affiliates
will provide the Former Parent, and the Former Parent or one of its
affiliates will provide the Company, with certain transition services for a
limited time to ensure an orderly transition following the Spin-Off. The
services that the Company and the Former Parent agreed to provide to
each other under the Transition Services Agreement include certain
finance, information technology, clinical study support, human
resources and compensation, facilities, financial reporting and
accounting and other services. The Company will pay the Former
Parent, and the Former Parent will pay the Company, for any such
services received by the Former Parent or the Company, as applicable,
at agreed amounts as set forth in the Transition Services Agreement.
Amounts received in connection with the Transition Services
Agreement are recorded as other income on the consolidated
statement of operations, as they are outside of the normal operating
business of the Company. For the year ended December 31, 2022, the
Company recorded $4,024 in other income reflecting transition
services provided to the Former Parent, of which $2,748 was included
as a receivable in other current assets on the consolidated balance
sheet as of December 31, 2022.
United States Distribution Services Agreement. The Company
entered into a United States Distribution Services Agreement with the
Former Parent, pursuant to which the Company shall continue to serve
as the Former Parent’s distributor and agent for the distribution of the
pharmaceutical product Nurtec ODT in the United States for a limited
period of time following the Spin-Off. Under the Distribution Services
F-34
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
14. Related Party Transactions (Continued)
Agreement, the Former Parent and Pfizer Inc. have agreed to
indemnify the Company for, among other things, losses resulting from
the conduct of the distribution business or actions taken at the
direction of the Former Parent.
records of the Former Parent. The following disclosure summarizes
activity between the Company and the Former Parent prior to the
Separation, including the affiliates of the Former Parent that were not
part of the Spin-Off.
As the Company is acting as an agent of the Former Parent for
Cost Allocations
services performed under the Distribution Services Agreement, no
amounts for revenues or expenses relating to the services performed
thereunder are included on the Company's consolidated financial
statements. As of December 31, 2022, the Company recorded
restricted cash held on behalf of Former Parent of $35,212 and Due to
Former Parent of $35,212 on the consolidated balance sheet primarily
relating to cash held in connection with the execution of the
Distribution Services Agreement which is legally payable to the Former
Parent.
Outsourcing & Employee Transfer Agreements. The Company
entered into Outsourcing & Employee Transfer Agreements, one with
Pfizer Inc., Bulldog (BVI) Ltd., the Former Parent and Biohaven
Pharmaceuticals, Inc. (“U.S. Employer”), and the other with Pfizer Inc.,
Bulldog (BVI) Ltd., the Former Parent, and BioShin (Shanghai)
Consulting Services Co., Ltd. (“Chinese Employer”), pursuant to which
the Chinese Employer and the U.S. Employer will, among other things,
provide Pfizer Inc. with the services of, and remain the employers of,
certain of their employees for a limited period of time following the
Spin-Off. During such period, Pfizer Inc. or one of its affiliates will pay
the U.S. Employer for employee-related expenses for its employees
(including the cost of salary and wages) and will pay the Chinese
Employer a service fee based on employee-related expenses for its
employees (including the cost of salary and wages).
Amounts received in connection with the Outsourcing &
Employee Transfer Agreements are recorded against their related
operating expenses as they represent reimbursements for operating
expenses incurred by the Company on behalf of the Former Parent.
Relationship with the Former Parent prior to the Separation
Pursuant to the Distribution Agreement, immediately prior to the
Separation the Former Parent made a cash contribution to the
Company which resulted in a cash balance of approximately $257,799
as of October 3, 2022.
Prior to the Separation, the Company did not historically operate
as a standalone business and the consolidated financial statements
are derived from the consolidated financial statements and accounting
The consolidated financial statements for periods prior to the
Separation reflect allocations of certain expenses from the financial
statements of the Former Parent, including research and development
expenses and general and administrative expenses. These allocations
include, but are not limited to, executive management, employee
compensation and benefits, facilities and operations, information
technology, business development, financial services (such as
accounting, audit, and tax), legal, insurance, and non-cash share-
based compensation.
For periods prior to the Separation, these allocations to the
Company are reflected in the consolidated statement of operations as
follows:
Research and
development
General and
administrative
Total
Year Ended December 31,
2021
2022
2020
$
$
146,521 $
70,929 $
33,482
82,744
229,265 $
33,928
104,857 $
14,646
48,128
Management believes these cost allocations are a reasonable
reflection of services provided to, or the benefit derived by, the
Company during the periods presented. The allocations may not,
however, be indicative of the actual expenses that would have been
incurred had the Company operated as a standalone public company.
Actual costs that may have been incurred if the Company had been a
standalone public company would depend on a number of factors,
including the chosen organizational structure, what corporate functions
the Company might have performed directly or outsourced and
strategic decisions the Company might have made in areas such as
executive management, legal and other professional services, and
certain corporate overhead functions.
Non-Cash Share-Based Compensation
As discussed in Note 9, "Non-Cash Share-Based Compensation",
prior to the Separation, Biohaven employees participated in the Former
Parent’s non-cash share-based compensation plans, the costs of
which, including those related to the Acceleration, have been allocated
to the Company and recorded in research and development and
general and administrative expenses
F-35
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
14. Related Party Transactions (Continued)
in the consolidated statements of operations for periods prior to the
Separation.
Net Transfers From Former Parent
Net transfers from Former Parent represent the net effect of transactions between the Company and the Former Parent prior to the Separation.
The components of net transfers from Former Parent are as follows:
General financing activities
Corporate cost allocations, excluding non-cash share-based compensation
Net transfers from Former Parent as reflected in the Consolidated Statement of Cash Flows
Non-cash share-based compensation
Issuance of Former Parent common shares to repurchase non-controlling interest in a subsidiary
Issuance of Former Parent common shares for building purchase
Issuance of Former Parent common shares as payment for IPR&D asset acquisition
Issuance of Former Parent common shares as payment for business acquisition
Issuance of Former Parent common shares as payment for Artizan investment
Issuance of Former Parent common shares as payment for license and consulting agreements
Separation related adjustments
Other non-cash adjustments
(2)
Net transfers from Former Parent as reflected in the Consolidated Statement of Changes in Equity
(1) The amounts for the year ended December 31, 2022 represent activity through the date of Separation.
(2) Refer to Note 1 for further details on separation related adjustments.
$
$
(1)
Year Ended December 31,
2021
98,834 $
39,218
138,052
65,639
—
4,871
—
10,673
6,000
7,929
—
(1,458)
231,706 $
2022
399,231 $
49,899
449,130
179,367
60,000
—
58,747
—
—
1,779
27,811
(204)
776,630 $
2020
73,614
18,628
92,242
29,500
—
—
—
—
—
—
(744)
120,998
Related Party Agreements
License Agreement with Yale
On September 30, 2013, the Company entered into the Yale
Agreement with Yale (see Note 11 for details). 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.
In January 2021, the Company entered into the Yale MoDE
Agreement with Yale (see Note 11 for details). Under the license
agreement, the Company acquired exclusive, worldwide rights to
Yale's intellectual property directed to its MoDE platform. As part of
consideration for this license, the Company paid Yale University an
upfront cash payment of $1,000 and 11,668 common shares of the
Former Parent valued at approximately $1,000.
2022, the Company did not owe any amounts to Yale, which is related
to the Yale MoDE SRA.
15. Subsequent Events
Agreement with Hangzhou Highlightll Pharmaceutical Co. Ltd.
In March 2023, the Company and Hangzhou Highlightll
Pharmaceutical Co. Ltd. ("Highlightll") entered into an exclusive,
worldwide (excluding People’s Republic of China and its territories and
possessions) license agreement (the "Highlightll Agreement") whereby
Biohaven obtained the right to research, develop, manufacture and
commercialize Highlightll’s brain penetrant dual TYK2/JAK1 inhibitor
program. As partial consideration for the Highlightll Agreement, the
Company is obligated to pay Highlightll a cash payment of $10,000
and common shares valued at approximately $10,000 as of the
agreement execution, upon the completion of certain post-closing
activities.
For the years ended December 31, 2022, 2021 and 2020, the
Under the Highlightll Agreement, the Company is obligated to
Company recorded $3,420, $458 and $138, respectively, in research
and development expense related to the Yale MoDE Agreement and
Yale Agreement (the "Yale Agreements"). As of December 31,
make milestone payments to Highlightll totaling up to $200,000 upon
the achievement of specified developmental, regulatory and
commercial milestones for a first indication, up to $100,000 upon the
achievement of pre-specified developmental, regulatory
F-36
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
15. Subsequent Events (Continued)
and commercial milestones for a second indication, and up to
$650,000 upon the achievement of specified sales-based milestones.
Additionally, the Company has agreed to make tiered royalty payments
as a percentage of net sales starting at mid single digits and peaking
at low teens digits. During the royalty term, if the Company offers to
include China clinical sites in its Phase 3 study sufficient for
submission to Chinese National Medical Products Administration
("NMPA") and Highlightll, at its sole discretion, agrees, then Highlightll
will pay royalties in the low tens digits to the Company on China sales
upon approval.
The Highlightll Agreement terminates on a country-by-country
basis upon expiration of the royalty term and can also be terminated if
certain events occur, e.g., material breach or insolvency.
F-37
Exhibit 10.18
RE: AMENDED AND RESTATED OFFER OF EMPLOYMENT
To: Bruce Car
[***]
We refer to the Offer of Employment between you (“Employee”) and Biohaven Pharmaceuticals, Inc. (“Biohaven”). dated August 1,
2022 (“Initial Agreement”). Following the closing of the merger of Biohaven Pharmaceutical Holding Company Ltd. with Pfizer
Inc. on October 3, 2022, we propose to amend and restate the Initial Agreement as follows. The following terms and conditions will
govern this employment (“Agreement”).
Title: Chief Scientific Officer
(Note: From the period beginning August 1, 2022 through October 2, 2022, the Employee’s title was Scientific Advisor and beginning
October 3, 2022, the Employee’s title became Chief Scientific Officer.)
Start date: August 1, 2022
Base Salary: $485,000 per year
• As part of your employment, Biohaven will provide the following benefits:
o Health & Dental Insurance. Aetna Health and Met Life Dental insurance (family plan) provided to the Employee with no additional
premium cost to the Employee (program co- pays, deductibles, etc. will apply). Short and long-term disability insurance.
o Employer contribution to company 401k plan, representing a 100% company match of up to 4% of Employee contribution.
Annual Merit and Incentives
•
45% Annual Target Bonus payable in cash by February 1 of following year depending on Employee performance (prorated for partial
year employment) and at the discretion of the Board of Directors.
• Yearly salary increases based on performance will be awarded upon approval of Board of Directors.
• One time issuance of an equity award of 300,000 stock options with a three-year vesting schedule (vesting of 25% on each of the start
date, first, second, and third anniversaries) of Biohaven’s parent company, Biohaven Ltd. (NYSE:BHVN) (“Parent”). The grant of all
options, or other forms of equity, are governed by the Biohaven Ltd. 2022 Equity Incentive Plan or other relevant equity plan and/or
award agreement of the Parent, unless specifically stated otherwise in this Agreement.
• Annual equity awards will be granted upon discretion of the Board of Directors.
215 Church Street, New Haven, CT 06510 | Phone: 203-404-0410 | www.biohavenpharma.com
Vacation/ Company Holidays / Sick Time
• Vacation time: Biohaven offers a flexible vacation plan that enables employees to schedule vacation with their
supervisor without a specific limitation. Further details are outlined in the Biohaven Pharmaceuticals’ Employee
Handbook.
• Company Holidays: Nine (9) company holidays.
•
Sick Time: To be managed at the discretion of the Employee’s direct manager.
Reporting relationship: Vlad Coric, M.D., Chief Executive Officer
This offer of employment is subject to the Additional Terms attached hereto. Employment at Biohaven is contingent upon successful
completion of a background screening. Consistent with our on boarding process, you will be required to review and acknowledge receipt of
Biohaven Pharmaceuticals’ Employee Handbook as well as our Code of Conduct.
[Additional Terms Follow]
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ADDITIONAL TERMS
To the
EMPLOYMENT OFFER
Between
Biohaven Pharmaceuticals, Inc.
And
Bruce Car
1.
TERM
a.
TERM. The term of this Agreement shall commence on the Start Date and shall continue for a period of three (3) years (the
“Initial Term”). Thereafter, this Agreement shall be automatically renewed for one-year periods, unless otherwise terminated by Employee
or Biohaven upon written notice to the other given not less than ninety (90) days prior to the next anniversary of the Agreement. The Initial
Term and any renewals thereof shall be referred to herein as the “Term.”
2.
TERMINATION OF EMPLOYMENT.
b.
TERMINATION BY THE COMPANY WITHOUT JUST CAUSE, BY VIRTUE OF DEATH OR DISABILITY OF
EMPLOYEE, OR RESIGNATION BY EMPLOYEE FOR GOOD REASON.
i.
Biohaven shall have the right to terminate Employee’s employment with Biohaven pursuant to this Section 2(a) at
any time, in accordance with Section 2(d), without “Just Cause” (as defined in Section 2(c)(ii) below) or by virtue of Employee’s death or
Disability (as defined herein). Employee shall have the right to terminate his employment for Good Reason in accordance with Section 2(a)
(vi).
ii.
If Biohaven terminates Employee’s employment at any time without Just Cause or by virtue of the death or
Disability of Employee or Employee terminates his employment with Biohaven for “Good Reason” (as defined in Section 2(a)(vi) below)
provided that such termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without
regard to any alternative definition thereunder, a “Separation from Service”), then Employee shall be entitled to receive the Accrued
Obligations (defined in 2(a)(iv) below). If Employee complies with the obligations in Section 2(a)(iii) below, Employee shall also be
eligible to receive the following “Severance Benefits”:
1.
Biohaven will pay Employee an amount equal to the sum of (a) Employee’s then-current Base Salary and
(b) Employee’s Annual Target Bonus in substantially equal installments over twelve (12) months following his Separation from Service
(the “Severance Period”), less all applicable withholdings and deductions required by law; provided, however, that any such installment
payable before the Release Effective Date (as defined in Section 2(a)(iii) below) shall not be paid until the first payroll following the
Release Effective Date.
if applicable, state insurance laws, for himself and his covered
2.
If Employee or his covered dependents timely elect continued health and dental coverage under COBRA or,
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dependents under Biohaven’s group health plans following such termination, then Biohaven shall pay the COBRA premiums or, if
applicable, premiums for continuation coverage under state insurance laws, necessary to continue Employee’s and/or his covered
dependents’ health and dental insurance coverage in effect for himself (and his covered dependents) on the termination date until the
earliest of: (i) twelve (12) months following the termination date (the “COBRA Severance Period”); (ii) the date when Employee becomes
eligible for substantially equivalent health insurance coverage in connection with new employment; or (iii) the date Employee ceases to be
eligible for COBRA or state continuation coverage (or, with respect to his covered dependents, the date they cease to be eligible for
COBRA or state continuation coverage) for any reason, including plan termination (such period from the termination date through the
earlier of (i)-(iii), (the “COBRA Payment Period”). Notwithstanding the foregoing, if at any time Biohaven determines that its payment of
COBRA premiums or, if applicable, premiums for continuation coverage under state insurance laws, on Employee’s behalf would result in
a violation of applicable law (including, but not limited to, the 2010 Patient Protection and Affordable Care Act, as amended by the 2010
Health Care and Education Reconciliation Act), then in lieu of paying such premiums pursuant to this Section, Biohaven shall pay
Employee on the last day of each remaining month of the COBRA Payment Period, a fully taxable cash payment equal to the COBRA
premium or, if applicable, premiums for continuation coverage under state insurance laws, for such month, subject to applicable tax
withholding (such amount, the “Special Severance Payment”), for the remainder of the COBRA Payment Period. Nothing in this
Agreement shall deprive Employee of his rights under COBRA or ERISA for benefits under plans and policies arising out of his
employment by Biohaven or the termination thereof.
3.
Payment of a pro-rata bonus payment for which Employee was eligible for the year that includes
Employee’s termination date, determined and made in the sole discretion of the Board, equal to the Annual Target Bonus which would
have been awarded to Employee if he had remained employed for the applicable performance period, multiplied by a fraction, the
numerator of which is the number of days in the year of termination during which Employee was employed, and the denominator of which
is 365 and payable at the time bonuses are paid to other similarly situated employees, but no later than March 15 of the year following
Employee’s termination date.
4.
Biohaven shall pay on Employee’s behalf the premiums for the continuation of Employee’s life insurance
benefits for a period of twelve (12) months from the date of termination, subject to any applicable withholdings and deductions required by
law, in monthly installments commencing on Biohaven’s first regular payroll date that is more than sixty (60) days following the date of
termination.
5.
Notwithstanding anything to the contrary set forth in any applicable equity incentive plans or award
agreements, effective as of Employee’s last day of employment (“Employment Termination Date”), the vesting and exercisability of
unvested time-based vesting equity awards, including without limitation, unvested shares subject to the RSUs and Options, then held by
Employee shall accelerate such that any shares that would have vested in the twelve (12) months following Employee’s termination shall
become immediately vested and exercisable, if applicable, by Employee upon such termination and Options held by Employee shall
remain exercisable, if applicable, for twelve (12) months following Employee’s termination. With respect to any performance-based
vesting equity award, such award shall continue to be governed in all respects by the terms of the applicable equity award documents.
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iii.
Employee will be paid all of the Accrued Obligations on Biohaven’s first payroll date after Employee’s date of
termination from employment or earlier if required by law. Employee shall receive the Severance Benefits pursuant to Section 2(a)(ii) or
Change in Control Severance Benefits pursuant to Section 2(b)(i) of this Agreement if by the 60th day following the date of Employee’s
Separation from Service, he or, in case of Employee’s death, his personal representative has signed and delivered to Biohaven a
commercially reasonable separation agreement that includes a general release in favor of Biohaven (the “Release”), which cannot be
revoked in whole or part by such date (the date that the Release can no longer be revoked is referred to as the “Release Effective Date”).
Such Release will not impose any additional restrictive covenants upon Employee beyond those imposed by this Agreement.
iv.
For purposes of this Agreement, “Accrued Obligations” are any accrued but unpaid portion of the applicable Base
Salary, plus any accrued but unused vacation time that has been earned by Employee as the date of such termination.
v.
For purposes of this Agreement, and subject to applicable state and federal law, termination by Biohaven on
account of Employee’s “Disability” shall mean termination because Employee is unable due to a physical or mental condition to perform
the essential functions of his position with or without reasonable accommodation for six (6) months in the aggregate during any twelve
(12) month period. This definition shall be interpreted and applied consistent with the Americans with Disabilities Act, the Family and
Medical Leave Act, and other applicable law. Whenever Severance Benefits or Change in Control Severance Benefits are payable to
Employee hereunder during a time when Employee is partially or totally disabled, and such Disability would entitle him to disability
income payments according to the terms of any plan or policy now or hereafter provided by Biohaven, the Severance Benefits or Change in
Control Severance Benefits payable to Employee hereunder shall be inclusive of any such disability income and shall not be in addition
thereto, even if such disability income is payable directly to Employee by an insurance company under a policy paid for by Biohaven.
vi.
For purposes of this Agreement, “Good Reason” shall mean the occurrence of any of the following events without
Employee’s consent: (1) a material reduction in Employee's Base Salary; (2) a material reduction in Employee’s duties, authority and
responsibilities relative to the Employee’s duties, authority, and responsibilities in effect immediately prior to such reduction; (3) the
relocation of Employee’s principal place of employment, without Employee's consent, in a manner that lengthens his one-way commute
distance by fifty (50) or more miles from his then-current principal place of employment immediately prior to such relocation; (4) any
material breach of the Agreement by Biohaven or its successors; or (5) the liquidation, dissolution, merger, consolidation or reorganization
of Biohaven or transfer of all or a significant portion of its business and/or assets, other than as a result of the Closing, unless the successor
or successors shall have assumed all duties and obligations of Biohaven under the Agreement; provided, however, that, any such termination by
Employee shall only be deemed for Good Reason pursuant to this definition if: (a) Employee gives Biohaven written notice to his supervisor of
his intent to terminate for Good Reason within thirty (30) days following the occurrence of the condition(s) that he believes constitute(s) Good
Reason, which notice shall describe such condition(s); (b) Biohaven fails to remedy such condition(s) within thirty (30) days following receipt of
the written notice (the “Cure Period”); (c) Biohaven has not, prior to receiving such notice from Employee, already informed Employee that his
employment with Biohaven is being terminated and (d) Employee voluntarily terminates his employment within thirty (30) days following the
end of the Cure Period.
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b.
TERMINATION BY THE COMPANY WITHOUT JUST CAUSE OR RESIGNATION BY EMPLOYEE FOR GOOD
REASON COINCIDENT WITH A CHANGE IN CONTROL.
i.
If Employee’s employment by Biohaven is terminated by Biohaven or any successor entity without “Just Cause” (as
defined in Section 2(c)(ii)) (not including termination by virtue of death or Disability) or by Employee for Good Reason within twelve (12)
months following the effective date of a “Change in Control” (as defined below), provided that such termination constitutes a Separation from
Service, then in addition to paying or providing Employee with the Accrued Obligations and subject to compliance with Section 2(a)(iii),
Biohaven will provide the following “Change in Control Severance Benefits”:
1.
2.
Biohaven will pay the benefits as described in Sections 2(a)(ii)(l), 2(a)(ii)(2), and 2(a)(ii)(3).
Biohaven will pay an additional amount equivalent to Employee’s full Annual Target Bonus, for the performance
year in which Employee’s termination occurs. This bonus will be payable subject to standard federal and state payroll withholding requirements
and paid in equal installments beginning on the first day of the month following the Release Effective Date (as defined in Section 2(a)(iii)), with
the remaining installments paid on the first day of the month for the eleven (11) months thereafter; and
3.
Notwithstanding anything to the contrary set forth in any applicable equity incentive plans or award agreements,
effective as of Employee’s Employment Termination Date, the vesting and exercisability of all unvested time-based vesting equity awards,
including without limitation, unvested shares subject to the RSUs and Options, then held by Employee shall accelerate such that all shares
become immediately vested and exercisable, if applicable, by Employee upon such termination and all Options held by Employee shall remain
exercisable, if applicable, for twelve (12) months following Employee’s termination. With respect to any performance-based vesting equity
award, such award shall continue to be governed in all respects by the terms of the applicable equity award documents.
ii.
For purposes of this Agreement, a “Change in Control” means the occurrence of any of the events set forth in clauses
(i), (ii) or (iii) with respect to either of Biohaven or the Parent, or the event set forth in clause (v) with respect to Biohaven, in each case of the
definition of Change in Control set forth in Biohaven’s 2017 Equity Incentive Plan, as may be amended from time to time.
c.
TERMINATION FOR JUST CAUSE OR VOLUNTARY TERMINATION.
i.
If Employee’s employment is terminated prior to the expiration of the Term for just cause or if Employee’s
employment is terminated as set forth in Section 2(d)(ii) or (iii) hereof (not including a resignation for Good Reason), Employee shall NOT
be entitled to receive any Severance Benefits (as defined in Section 2(a)(ii)) or Change in Control Severance Benefits (defined in Section
2(b)(i)) and will only be entitled to receive any accrued but unpaid portion of the applicable Base Salary, plus any accrued but unused
vacation that has been earned by Employee as the date of such termination.
ii.
For the purposes hereof, Biohaven shall have “Just Cause” to terminate Employee’s employment hereunder as a
result of Employee’s gross negligence, willful misconduct, conviction of a felony (including the entry of a plea of nolo contendere) for
illegal or criminal behavior in carrying out his duties as required pursuant to the terms of the Agreement.
215 Church Street, New Haven, CT 06510 | Phone: 203-404-0410 | www.biohavenpharma.com
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Notwithstanding any other provision contained herein, Biohaven shall have the right to terminate the Agreement and Employee’s
employment without just cause, and Employee’s remedies hereunder in the event of such termination shall be limited to the Severance
Benefits or Change in Control Severance Benefits, as applicable, set forth in Section 2(a)(ii) and 2(b)(i) hereof.
d.
EVENTS OF TERMINATION. This Agreement shall terminate on the earliest to occur of the following events:
i.
the expiration of the Term;
ii.
the mutual written agreement of Biohaven and Employee;
iii.
the voluntary termination of Employee other than as a result of a resignation for Good Reason (as defined in Section 2(a)(vi));
iv.
the death of Employee or Employee’s retirement;
v.
termination on account of a Disability (as defined above);
vi.
the termination of Employee by Biohaven with or without Just Cause (as defined in Section 2(c)(ii)) upon giving written
notice to Employee; or
vii. for a termination for Good Reason, immediately upon Employee's full satisfaction of the requirements of Section 2(a)(vi)
3.
RESTRICTIVE COVENANTS.
a.
EPIIA. As a condition of continued employment, Employee agrees to abide by the Employee Proprietary Information and
Inventions Agreement that he will execute upon the commencement of employment (the “EPIIA”). The EPIIA may be amended from time
to time without regard to this Agreement; provided, however, in the event of any conflict between this Agreement and the EPIIA, whether
now or hereafter, the terms of this Agreement shall control notwithstanding any contrary language in the EPIIA. The EPIIA contains
provisions that are intended by the parties to survive and do survive termination of this Agreement. The Employee also agrees to review,
acknowledge receipt of, and abide by Biohaven Pharmaceuticals’ Employee Handbook as well as our Code of Conduct upon the
commencement of employment; provided, however, that in case of any conflict between this Agreement and the Biohaven
Pharmaceuticals’ Employee Handbook or Code of Conduct, whether now or hereafter, the terms of this Agreement shall control
notwithstanding any contrary language in the Biohaven Pharmaceuticals’ Employee Handbook or Code of Conduct.
b.
NON-SOLICITATION AND NON-COMPETITION. Employee and Biohaven agree that Biohaven would suffer
irreparable harm and incur substantial damage if Employee were to enter into Competition (as defined herein) with Biohaven. Therefore, in
order for Biohaven to protect its legitimate business interests, Employee agrees as follows:
i.
Without the prior written consent of Biohaven, Employee shall not, during the period of employment with Biohaven,
directly or indirectly, invest or engage in any business that is Competitive (as defined herein) with the Business (as defined below) of
Biohaven or accept employment or render services to a Competitor (as defined herein) of Biohaven as a director, officer, agent, employee
or consultant or solicit or attempt to solicit or accept business that is Competitive
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with the Business of Biohaven, except that Employee may, subject to Employee’s obligations to Biohaven under this Agreement and the
EPIIA, (A) serve on the board of managers or directors (as applicable) of any of the companies or organizations listed on Schedule A
hereto, or any other Competitive companies or organizations with the consent of the Board of Directors; and (B) own up to five percent
(5%) of any outstanding class of securities of any company registered under Section 12 of the Securities Exchange Act of 1934, as
amended. For purposes of this Agreement, the “Business” of Biohaven shall be defined as the development and commercialization of
biopharmaceutical drug candidates and related technology based products. Employee is not bound by the terms of any agreement with any
previous employer or other party which would limit his abilities to perform his duties and obligations hereunder.
ii.
Without the prior written consent of Biohaven during the Term and upon any termination of Employee’s employment
with Biohaven and for a period of twelve (12) months thereafter, Employee shall not, either directly or indirectly, (A) invest or engage in
any business that is Competitive (as defined herein) with the Business of Biohaven, except that such restrictions do not apply to
Employee’s ownership of up to five percent (5%) of any outstanding class of securities of any company registered under Section 12 of the
Securities Exchange Act of 1934, as amended, (B) accept employment with or render services to a Competitor of Biohaven as a director,
officer, agent, employee or consultant unless he is serving in a capacity that has no relationship to that portion of the Competitor’s business
that is Competitive with the Business of Biohaven, or (C) solicit, attempt to solicit or accept business Competitive with the Business of
Biohaven from any of the customers of Biohaven at the time of his termination or within twelve (12) months prior thereto or from any
person or entity whose business Biohaven was soliciting at such time.
iii. Upon termination of his employment with Biohaven, and for a period of twelve (12) months thereafter, Employee shall
not, either directly or indirectly, engage, hire, or solicit in any manner whatsoever the employment of an employee of Biohaven.
iv. For purposes of this Agreement, a business or activity is in “Competition” or “Competitive” with the Business of
Biohaven if it involves, and a person or entity is a “Competitor”, if that person or entity is engaged in, or has publicly disclosed plans to
become engaged in, the research, development, design, manufacturing, marketing or selling of a specific product or technology that
resembles, competes, or is designed to compete, with, or has applications similar to any product or technology within the scope of the
Business and for which Biohaven has obtained or applied for a patent or made disclosures, or any product or technology involving any
other proprietary research or development engaged in or conducted by Biohaven with which the Employee worked or about which the
Employee had access to confidential information during the Term of Employee's employment with Biohaven.
4.
GENERAL PROVISIONS.
a.
ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto relating to the
subject matter hereof, and supersedes all prior agreements and understandings, whether oral or written, with respect to the same, including
the Initial Agreement. No modification, alteration, amendment or revision of or supplement to this Agreement shall be valid or effective
unless the same is in writing and signed by both parties hereto.
215 Church Street, New Haven, CT 06510 | Phone: 203-404-0410 | www.biohavenpharma.com
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b.
GOVERNING LAW. This Agreement and the rights and duties of the parties hereunder shall be governed by, construed
under and enforced in accordance with the laws of the State of Connecticut.
c.
ASSIGNMENT. The rights and obligations of the parties under this Agreement shall not be assignable without written
permission of the other party.
d.
SEVERABILITY. The invalidity of any provision of this Agreement under the applicable laws of the State of Connecticut
or any other jurisdiction, shall not affect the other provisions hereby declared to be severable from all other provisions. The intention of the
parties, as expressed in any provision held to be void or ineffective shall be given such full force and effect as may be permitted by law.
e.
DISPUTE RESOLUTION. Except for the right of either party to apply to a court of competent jurisdiction for a
temporary restraining order, a preliminary injunction, or other equitable relief to preserve the status quo or prevent irreparable harm, any
and all claims, disputes or controversies arising under, out of, or in connection with the Agreement, including any disputes relating to
production, use or commercialization, which the parties shall be unable to resolve within sixty (60) days shall be mediated in good faith.
The party raising such dispute shall promptly advise the other party of such claim, dispute or controversy in a writing, which describes in
reasonable detail the nature of such dispute. By not later than five (5) business days after the recipient has received such notice of dispute,
each party shall have selected for itself a representative who shall have the authority to bind such party, and shall additionally have advised
the other party in writing of the name and title of such representative. By not later than ten (10) business days after the date of such notice
of dispute, the party against whom the dispute shall be raised shall select a mediation firm with operations in Connecticut and such
representatives shall schedule a date with such firm for a mediation hearing. The parties shall enter into good faith mediation and shall
share the costs of the mediation equally, but each party will be responsible for its own attorneys’ fees and costs. If the representatives of the
parties have not been able to resolve the dispute within fifteen (15) business days after such mediation hearing, the parties shall have the
right to pursue any other remedies legally available to resolve such dispute in either the Courts of the State of Connecticut or in the United
States District Court for the District of Connecticut, to whose jurisdiction for such purposes Biohaven and Employee each hereby
irrevocably consents and submits.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Start Date.
Biohaven Pharmaceuticals, Inc.
/s/ Maryellen McQuade
By.
Name: Maryellen McQuade
Title: Chief Talent and Sustainability Officer
/s/ Bruce D. Car
Name: Bruce D. Car
215 Church Street, New Haven, CT 06510 | Phone: 203-404-0410 | www.biohavenpharma.com
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Companies and Organizations on which Employee serves as a Director or Advisor
Schedule A
Pathology AI, Boston, Scientific Advisory Board
Avanzaex Pharmaceuticals, Scientific Advisory Board
215 Church Street, New Haven, CT 06510 | Phone: 203-404-0410 | www.biohavenpharma.com
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SUBSIDIARIES OF BIOHAVEN LTD.
As of December 31, 2022
Exhibit 21.1
Name
Biohaven Specialty Pharmaceutical Ltd.
Biohaven Therapeutics Ltd.
Biohaven Pharmaceuticals, Inc.
BioShin Limited
BioShin Hong Kong Limited
BioShin (Shanghai) Consulting Services Co., Limited
Biohaven Bioscience Ireland Limited
Biohaven Therapeutics IP Ltd.
Biohaven CGRP IP Ltd.
BioShin (Singapore) PTE. LTD.
Kleo Pharmaceuticals, Inc.
Kleo Pharmaceuticals Pty Ltd.
PharmaHaven Ltd.
Jurisdiction of Incorporation
British Virgin Islands
British Virgin Islands
Delaware
Cayman Islands
Hong Kong
China
Ireland
British Virgin Islands
British Virgin Islands
Singapore
Delaware
Australia
British Virgin Islands
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
1. Registration Statement (Form S-1 Nos. 333-267928 and 333-267965) of Biohaven Ltd., and
2. Registration Statement (Form S-8 No. 333-267818) pertaining to the Biohaven Ltd. 2022 Equity Incentive Plan, Biohaven Ltd. 2022
Employee Share Purchase Plan, and Biohaven Ltd. Legacy Equity Award Settlement Plan
of our report dated March 23, 2023, with respect to the consolidated financial statements of Biohaven Ltd. included in this Annual Report (Form
10-K) of Biohaven Ltd. for the year ended December 31, 2022.
Exhibit 23.1
/s/ Ernst & Young LLP
Hartford, Connecticut
March 23, 2023
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Vlad Coric, certify that:
1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2022 of Biohaven Ltd. (the "registrant");
2. 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;
3. 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;
4. 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. 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;
b. 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
c. 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
5. 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. 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
b. 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 23, 2023
/s/ VLAD CORIC, M.D.
Vlad Coric, M.D.
President and Chief Executive Officer
(principal executive officer)
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Matthew Buten, certify that:
1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2022 of Biohaven Ltd. (the "registrant");
2. 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;
3. 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;
4. 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. 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;
b. 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
c. 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
5. 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. 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
b. 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 23, 2023
/s/ MATTHEW BUTEN
Matthew Buten
Chief Financial Officer
(principal financial officer)
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., President and Chief Executive Officer of Biohaven Ltd. (the "Company"),
and Matthew Buten, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:
1. The Company's Annual Report on Form 10-K for the year ended December 31, 2022, 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
2. 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 23 day of March 2023.
/s/ VLAD CORIC, M.D.
/s/ MATTHEW BUTEN
Vlad Coric, M.D.
President and Chief Executive Officer
(principal executive officer)
Chief Financial Officer
(principal financial officer)
Matthew Buten
* 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.