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, 2023
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 ☒ 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 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
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
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an 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 aggregate market value of the registrant's common shares held by non-affiliates of the registrant as of the last business day of the registrant's most recently completed
second fiscal quarter, June 30, 2023, based on the last reported sale price of the registrant's common shares on the New York Stock Exchange on June 30, 2023 of $23.92, was
$986.7 million. The calculation does not reflect a determination that certain persons are affiliates of the registrant for any other purpose. As of February 26, 2024, there were
81,579,914 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 2024 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, including statements regarding our future results of operations and financial position, strategy and
plans, and our expectations for future operations, 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:
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;
anticipated future milestones, contingent and royalty payments and lease payments (and, in each case, their expected impact on liquidity);
our commercialization, marketing and manufacturing capabilities and strategy; and
our estimates regarding future revenues, expenses and needs for additional financing.
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Important factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered
in evaluating our outlook include, but are not limited to, the following:
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the risk of litigation and/or regulatory actions related to the Separation or our business;
future business combinations or disposals;
our ability to enter into additional collaborations with third parties;
the timing of and our ability to obtain and maintain regulatory approvals for our product candidates;
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
other factors identified elsewhere in this Annual Report on Form 10-K and our other filings with the SEC.
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 1C:
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
Cybersecurity
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
Biohaven is a biopharmaceutical company focused on the discovery, development, and commercialization of life-changing treatments in key
therapeutic areas, including immunology, neuroscience, and oncology. We are advancing our innovative portfolio of therapeutics, leveraging our proven
drug development experience and multiple proprietary drug development platforms. Our extensive clinical and preclinical programs include Kv7 ion
channel modulation for epilepsy and mood disorders; extracellular protein degradation for immunological diseases; Transient Receptor Potential
Melastatin 3 ("TRPM3") antagonism for migraine and neuropathic pain; Tyrosine Kinase 2/Janus Kinase 1 ("TYK2/JAK1") inhibition for
neuroinflammatory disorders; glutamate modulation for obsessive-compulsive disorder (“OCD”) and spinocerebellar ataxia ("SCA"); myostatin inhibition
for neuromuscular and metabolic diseases, including spinal muscular atrophy ("SMA") and obesity; and antibody recruiting, bispecific molecules and
antibody drug conjugates ("ADCs") for cancer.
Separation from Biohaven Pharmaceutical Holding Company Ltd.
On October 3, 2022, Biohaven Pharmaceutical Holding Company Ltd. (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). 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. became an independent, publicly traded company as of October 3, 2022, and commenced regular way trading under the
symbol “BHVN”’ on the New York Stock Exchange (the "NYSE") on October 4, 2022. Where we describe historical business activities in this report, we
do so as if the Former Parent’s activities related to such assets and liabilities had been performed by the Company.
Product Candidates
The following table summarizes our programs for our product candidates. We hold the worldwide rights to substantially all of our product
candidates.
Glutamate Modulation Platform
The most advanced product candidate from our glutamate receptor antagonist platform is troriluzole (previously referred to as trigriluzole and BHV-
4157), which is currently in two Phase 3 trials in OCD and, for which the Company
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submitted a new drug application (“NDA”) in Spinocerebellar Ataxia Type 3 (“SCA3”) to the U.S. FDA and marketing authorisation application ("MAA") to
the European Medicines Agency ("EMA"). Troriluzole is also being evaluated by the Global Coalition for Adaptive Research ("GCAR") as part of
Glioblastoma Adaptive Global Innovative Learning Environment - NCT03970447 ("GBM AGILE"), a revolutionary patient-centered, adaptive platform trial
for registration that tests multiple therapies for patients with newly-diagnosed and recurrent glioblastoma ("GBM"). Other product candidates include
BHV-5500, which is an antagonist of the glutamate N-methyl-D-aspartate (“NMDA”) receptor and its oral prodrug BHV-5000.
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.
Adapted from Glutamate abnormalities in obsessive compulsive disorder: Neurobiology, pathophysiology, and treatment, C. Pittenger,
M. Bloch, and K. Williams
(1) As depicted in the glial cell to the right in the figure, 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, 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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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 in 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,
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. We believe that the estate of compounds we acquired, combined with our
internally developed intellectual property, will provide a significant protection for our innovations. The safety and tolerability of troriluzole has now been
demonstrated in approximately 2000 subjects in early- and late-stage clinical studies.
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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 SCA
Spinocerebellar Ataxias ("SCAs") are a group of ultra-rare, dominantly inherited neurodegenerative disorders predominantly characterized by
atrophy of the cerebellum, brainstem, and spinal cord. The disease course of SCA is one of relentless progression over years and inevitably leads to
clinical deterioration of motor function, gait imbalance with frequent falling, severe speech impairment, swallowing difficulties, and premature death.
SCAs are thought to be pathogenetically related but disease course and brain region involvement are known to vary between the different genotypes.
SCA3, also known as Machado-Joseph disease, is the most common genotype, with a prevalence of up to 6,000 in North America and 4,600 in the
European Union (“EU”) and Japan, and accounts for approximately 30% to 50% of SCAs worldwide. Currently, there are no approved symptomatic or
neuroprotective treatments for SCA.
Based on the results of our Phase 1 trial with troriluzole and two third-party academic trials (Ristori et al 2020, published in Neurology in 2010 and
Romano et al 2015, published in The Lancet in 2015) that have shown preliminary efficacy of riluzole in cerebellar ataxias, we advanced troriluzole into
development for SCA. Initially, we 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 (Study BHV4157-201). 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 = 64) 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 open-label extension phase, however, troriluzole did show slowing of disease progression in troriluzole-treated subjects in
contrast to the measurable decline expected as compared to a matched cohort of untreated patients from the US natural history study (Clinical Research
Consortium for Spinocerebellar Ataxias (“CRC-SCA”)).
Based on our learnings from the proof of concept Study BHV4157-201, including analyses from the open-label extension phase, we advanced
troriluzole into a pivotal 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 (Study BHV4157-206). Randomization was stratified by genotype (consisting of these three groupings: SCA1 and SCA2;
SCA3; and SCA6, SCA7, SCA8, and SCA10) in order to ensure balance within each of these subgroups. 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 and key opinion leaders 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 reflect a clinically meaningful change in function.
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 in the placebo arm 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). Preliminary post hoc analysis of
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efficacy measures by genotype suggested a treatment effect in patients with the SCA3 genotype. A risk reduction in falls was also observed in the SCA3
population, as well as across all SCA genotypes. Troriluzole was well tolerated with an adverse event profile similar to placebo.
In May 2023, the Company presented further analysis of Study BHV4157-206 (summarized in the figure below) by prespecified genotype strata
that revealed consistent treatment effects of troriluzole in SCA3, the most common genotype worldwide, which represented 41% of study participants. In
SCA3 subjects, troriluzole 200mg QD demonstrated benefit on the f-SARA compared with placebo at 48 weeks (LS mean treatment difference = -0.56;
95% CI = -1.11, -0.01; p = 0.0450). This genotype analysis was post hoc as the All SCA study population (SCA1, SCA2, SCA3, SCA6, SCA7, SCA8,
SCA 10) was the mITT population for the primary analysis. Results for the SCA3 group are based on a model with no covariates with fixed effects for
treatment, visit, and visit-by-treatment interaction; p-values are descriptive.
In addition to the beneficial effects observed on the f-SARA, the forest plot below demonstrates a consistent treatment benefit of troriluzole in SCA3
genotype subjects across multiple prespecified primary, secondary, and
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exploratory study outcome measures. The SCA3 genotype analysis of the clinician- and patient-rated endpoints in the table represent all of the
prespecified endpoints in the study protocol.
As shown in the figure below, safety data from Study BHV4157-206 showed that troriluzole-treated subjects showed a substantial risk reduction in
falls in the All SCA and SCA3 genotype study populations. Treatment with troriluzole for 48 weeks reduced the risk of fall events by approximately 53%
in subjects in the overall (All SCA) population (p = 0.005), by approximately 54% in subjects in the SCA3 population (p = 0.023), and by approximately
68% in subjects with SCA3 who were ambulatory (i.e., baseline Gait 1 or 2) (p = 0.009). This analysis, demonstrating that subjects who were more
ambulatory with less severe disease at baseline were more likely to show a benefit from troriluzole, is consistent with the early treatment paradigm for
other neurodegenerative diseases.
Two independent natural history cohorts for SCA, one in the US (CRC-SCA) and one in Europe (EUROSCA), have characterized disease
progression in this genetically defined neurodegenerative disorder. A Matching Adjusted Indirect Comparison (“MAIC”) was performed to match natural
history subjects to subjects in BHV4157-206. As demonstrated in the figure below, at years 1, 2, and 3 change from baseline in f-SARA scores was
significantly better among troriluzole patients vs the matched natural history referent (combined CRC-SCA and cross-European registry of SCA patients
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(“EUROSCA”) data - all p values ~0.0004). These results were consistent for both SCA3 only and All SCA analyses. Validation metrics from f-SARA
confirm that these changes are clinically relevant and meaningful to patients.
As seen in the figure below, an additional comparative study was conducted using OLE data from up to 3 years with subjects from BHV4157-201.
Using a matched control pooled from the same two independent natural history studies (US and European), troriluzole-treated All SCA subjects showed
clinically relevant benefit compared to expected progression from the external control at 1 year, 2 years, and 3 years. Of note, there was an
administrative gap in treatment in BHV4157-201 between the end of the 48-week OLE and the resumption of treatment at the start of the 96-week
period. This gap was observed to result in a decline in f-SARA scores. However, after resumption of treatment patients re-stabilized (did not progress)
resulting in the estimation of compelling treatment effects at years 2 and 3.
Given these findings and the debilitating nature of SCA, in May 2023 we announced that we submitted a New Drug Application ("NDA") to the FDA
for troriluzole for the treatment of SCA3. In July 2023, the FDA informed us that it would not review the recently submitted NDA application for troriluzole
given that the study's primary endpoint was not met and thus, would not permit a substantive review. In followup to the regulatory decision on the NDA
application, we held followup meetings with the FDA regarding the SCA data. We continue to have constructive dialogue with the FDA regarding our
SCA development program and potential future data analyses to address regulatory concerns in the previously issued refuse-to-file decision on it's NDA
application for SCA3. We will provide further updates on the SCA development program as warranted by any continued positive progress from the
outcome of future regulatory interactions
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on this topic. In October 2023, the European Medicines Agency ("EMA") informed us that our Marketing Authorization Application ("MAA") for troriluzole
(Dazluma) in the treatment of SCA has been validated and is now under review by EMA's Committee for Medicinal Products for Human Use ("CHMP").
We remain committed to working closely with the health authorities to bring troriluzole to people with SCA3, given no therapy is currently approved for
this ultra-rare genetic disorder.
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 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 (“TEAEs”) 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 up to 700 participants in
each trial 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.
In January 2024, we announced plans to conduct a pre-planned interim analysis ("IA") to evaluate efficacy in the first of our two Phase 3 studies in
OCD. The IA is planned to be conducted by an independent Data Monitoring Committee, after 350 subjects have had the opportunity to complete the
study (representing approximately 70% of subjects in the primary analysis population reach primary endpoint). The IA is powered to detect a clinically
meaningful difference between troriluzole and placebo on the Y-BOCS primary outcome that is based on the effect size observed in the Phase 2 proof of
concept ("POC") study. The potential results of the IA include (1) a highly statistically significant evidence of efficacy leading to stopping the study or (2)
continuation of the study, with possible sample size re-estimation. Last Patient Last Visit and database lock for the IA are anticipated in the first quarter of
2024, with expected IA topline results in the second quarter of 2024.
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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 GBM.
In collaboration with Johns Hopkins University, we explored the potential applicability of troriluzole for GBM. The oncology collaboration with 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, GCAR selected troriluzole for evaluation in 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 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. Enrollment in the study is ongoing.
Myostatin Platform
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-β") superfamily. Taldefgrobep's novelty in a field of myostatin inhibitors is based on the mechanism where it binds to myostatin to both
lower overall free myostatin levels, but also to function as a receptor antagonist to block myostatin signaling in skeletal muscles. Recently generated data
has shown that the taldefgrobep alfa-myostatin complex is stable, and blocks myostatin signaling to both myostatin and to a lesser extent to activin A
potentially for a protracted period after cessation of dosing. Blocking myostatin activity and signaling has shown to improve muscle function and strength
in a number of disease models for neuromuscular wasting along with physical and metabolic changes important to individuals living with overweight and
obesity. Blocking activin contributes to decreased adipose tissue and improved glucose homeostasis. Clinical studies have confirmed that taldefgrobep
improved lean body mass directly through increase on 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 increasing overall muscle size and reducing adipose tissue volume
provide development opportunities in both neuromuscular disease and individuals living with overweight and obesity.
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The advanced taldefgrobep alfa anti-myostatin development program offers extensive human safety data, especially in the pediatric population.
Previous Clinical Trials
Taldefgrobep was previously studied by Bristol Meyers Squibb ("BMS") and Roche in 4 completed clinical studies in healthy volunteers and
subjects with DMD. An estimated 360 subjects received taldefgrobep; 179 healthy subjects and 181 subjects with DMD.
Completed clinical pharmacology studies in healthy adult subjects included:
• CN001001 was a randomized, placebo-controlled, Phase 1 study designed to evaluate the safety, tolerability, PK, and PD of single and multiple
ascending subcutaneous doses of taldefgrobep (vial) in healthy adults.
• CN001023 was a randomized, open-label, single dose, parallel-group, Phase 1 study designed to compare the bioavailability of subcutaneous
injections in the arm, thigh, and abdomen and to evaluate the safety, tolerability, PK, and immunogenicity of taldefgrobep (pre-filled syringe) in
healthy adults.
Completed clinical studies in subjects with DMD included:
• CN001006 was a multi-site, randomized, placebo-controlled, double-blind, dose-ranging, Phase 1b/2 study to evaluate the safety, tolerability,
and PK of taldefgrobep in ambulatory boys with DMD aged ≥ 5 to < 11 years.
• CN001016 was a randomized, double-blind, placebo-controlled, Phase 2/3 study to assess the efficacy, safety, and tolerability of 2 doses of
taldefgrobep in ambulatory boys with DMD aged ≥ 6 to < 12 years.
All studies supported the safety and tolerability of taldefgrobep with fixed doses from 35 mg up to 180 mg administered weekly, subcutaneously
("SC"). The pharmacokinetics and safety data from the Phase 1 studies supported the continued development with doses of 35 mg and 50 mg
administered weekly SC.
In the Phase 3 Clinical Study, CN001016, a futility analysis based on this primary endpoint, conducted after approximately 30% of subjects had
completed 48 weeks of study drug treatment, did not show any statistically significant
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treatment differences. A summary of the development and outcome from these studies are published (Neurol Ther. 2024 Feb;13(1):183-219).
There are significant differences between a neuromuscular (DMD) and neurodegenerative disease (SMA). The differences in residual muscle in
SMA along with adjunctive survival of motor neuron (“SMN”) upregulation therapy support the continued development of taldefgrobep alfa in SMA.
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 September 2023, we completed 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 and is designed to randomize approximately 180 patients in
this randomized, double-blind, placebo-controlled global trial. We expect to report topline data from our Phase 3 study in the second half of 2024.
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 medical need. In December 2022, we received orphan drug designation from the FDA for taldefgrobep in the
treatment of SMA and from the European Commission in July 2023.
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 may be a fast follow-on for taldefgrobep along with other life-cycle
opportunities.
Metabolic Disorders
Obesity is a disease of excess and/or abnormal deposits of adipose tissue and a current global public health crisis. By 2030, it is expected that
nearly one billion people will be living with obesity, including 50% of the adult and 25% of the adolescent US population. The primary driver of obesity-
related morbidity and mortality is metabolically active visceral adipose tissue and associated deposits of adipose tissue in and around organs such as the
heart, liver, kidneys, and muscle.
Taldefgrobep Alfa’s Role in the Management of Overweight and Obesity
Preclinical and clinical data have demonstrated the potential for anti-myostatin therapies to produce physical and metabolic changes that are highly
relevant to individuals living with overweight and obesity, including reducing total body fat and visceral adiposity, and improving insulin sensitivity and
bone mineral density, while increasing lean muscle mass. Taldefgrobep’s novel mode of action and unique impact on body composition suggest it could
be used as monotherapy or in combination with other anti-obesity medications.
In October 2023, we announced preclinical data demonstrating the ability of taldefgrobep to significantly reduce fat mass while increasing lean
mass in an obese mouse model. In a mouse model of diet-induced obesity, untreated mice exhibited an increase in fat mass of 31%, while the mice
treated with taldefgrobep demonstrated increases in lean mass of 25% from baseline (p≤.0.001) and lost 11% of their baseline fat (p≤.0.001) compared
to vehicle (placebo) treated mice. Insulin and leptin levels were consistently lower in mice treated with taldefgrobep compared to the untreated mice.
There was no difference in food intake over time across the taldefgrobep and untreated mice, counter to what has been observed with incretin mimetics
(e.g., semaglutide) which are consistently associated with a reduction in energy intake.
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Our Clinical Trial for Taldefgrobep Alfa in Obesity
In a Phase 1 MAD study conducted by BMS in normal healthy volunteers, the cohort using the projected therapeutic 45mg dose of taldefgrobep
demonstrated a continued improvement in lean mass and a reduction in fat mass during the 29 day dosing period that continued to increase through the
observation period at 4 weeks post dosing (see figure below).
We plan to initiate a Phase 2 clinical trial of taldefgrobep in the management of metabolic disease in the second quarter of 2024. The study will
evaluate the ability of taldefgrobep to maintain lean mass muscle as an adjunctive to standard of care GLP-1 therapy in adults living with overweight and
obesity (see figure below for anticipated trial design).
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Ion Channel Platform
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.
Kv7’s Role in Epilepsy, Mood Disorders, and Other Central Nervous System Disorders
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
neuronal hyperexcitability and seizure frequency in electrophysiology laboratories, in animal models, and, most importantly, in patients.
), a critical regulator of neuronal excitability (see figures below). Kv7.2/7.3 channels normally
KM
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 clinical 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, Major Depressive Disorder ("MDD"), and Bipolar Disorder are the initial indications we are targeting with activators from our Kv7 platform.
In addition to their role in treating epilepsy, anti-seizure medications ("ASMs") are often
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used in the management of bipolar disorder and Kv7 activators have recently shown great promise in the the treatment of MDD. While the use of ASMs
is often accompanied by dose-limiting side effects, our Kv7 activators are specifically designed to target subtypes of Kv7 potassium channels without
engagement of GABA receptors. The lack of GABA -R activity potentially gives activators from our Kv7 platform 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 ASMs.
A
A
BHV-7000
BHV-7000 (formerly known as KB-3061), the lead asset from the Kv7 platform, is a potent Kv7.2/7.3 ion channel activator from a novel, bicyclic
imidazole class that is structurally-distinct from other Kv7 modulators (e.g., ezogabine and related aniline compounds) 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 a separate rotarod experiment of
preclinical tolerability, BHV-7000 had no impact on rat motor behavior up to 30 mg/kg, the highest dose tested. 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.
Phase 1 Clinical Development
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. First-in-human single ascending dose ("SAD") and multiple ascending dose ("MAD") studies have now been completed. In the SAD
and MAD cohorts, 77 subjects received BHV-7000 (N=58) or placebo (N= 19). Thirty-nine SAD subjects were randomized to BHV-7000 or placebo and
thirty-eight MAD subjects were
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randomized to BHV-7000 or placebo. The rates of adverse events ("AEs") by MedDRA System Organ Class across the pooled SAD and MAD cohorts
among subjects treated with BHV-7000 and placebo are presented in the tables below.
Table 1: Treatment‐emergent adverse events ("TEAEs") Occurring in ≥ 2 Subjects Receiving BHV-7000 in SAD Cohorts
All AEs reported in the SAD cohorts were mild in severity.
Table 2: TEAEs Occurring in ≥ 2 Subjects Receiving BHV-7000 in MAD Cohorts
All AEs reported in the MAD cohorts were mild in severity, except 1 case of back pain (moderate severity, 40 mg) and 1 case of dizziness
(moderate severity, 80 mg).
a
Data are included from a separate study evaluating higher MAD doses.
b
Data are pooled across studies.
In 2023, we initiated a Phase 1 open-label electroencephalogram ("EEG") study designed to evaluate the effects of BHV-7000 on EEG parameters
in healthy adults. The study’s objective was to demonstrate BHV-7000 target engagement in the cerebral cortex and to help refine dose selection for
Phase 3 trials. Study measures included continuous EEG monitoring, time locked pharmacokinetic ("PK") sampling, and changes in EEG spectral power
post dose.
The Phase 1 EEG study was designed to evaluate qualitative changes from baseline in EEG spectral power after administration of single doses of
BHV-7000 (10, 25, or 50 mg) to 11 healthy male and female adult volunteers. EEG spectral power is a measure derived from quantitative analysis of
EEG signals that assesses the amount of rhythmic activity in different frequency bands, including delta [1-3.5 Hz], theta [3.5-7.5 Hz], alpha [7.5-13 Hz],
beta [13-30 Hz], and gamma [30-100 Hz]. Changes in spectral power have been used to evaluate the risk, onset and progression of seizures, assess
cognitive and behavioral impairments, and characterize the effects of anti-seizure medications ("ASMs"); and, they may also have utility in refining dose
selection in clinical trials of ASMs. Spectral analysis was performed by Epilog (Ghent, Belgium), a global leader in EEG analytics.
Interim data from the Phase 1 EEG study were presented in December 2023 at the American Epilepsy Society meeting in Orlando, Florida. BHV-
7000 was well-tolerated at all doses studied, without the typical CNS AEs associated with other ASMs, such as somnolence or cognitive/mood
disturbances, and EEG data showed dose-dependent increases in brain spectral power in healthy subjects (Figure 1 below). Unlike prior reports where
EEG effects of a Kv7.2/7.3 activator showed the greatest power increase in the delta frequency band (Biondi et al. 2022), the highest spectral power
increases with BHV-7000 were seen in alpha, beta, and gamma frequency bands (Figure 2 below). While changes in spectral power were observed
across all frequency bands with BHV-7000, the minimal impact on slower frequencies (i.e., delta) is consistent with the low incidence of CNS adverse
events, in particular somnolence, seen in the BHV-7000 Phase 1
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SAD/MAD studies. EEG delta activity is associated with somnolence, an undesirable CNS adverse event often seen with other ASMs.
Figure 1: BHV-7000 shows dose-dependent increases
in spectral power over all brain regions.
Figure 2: BHV-7000 effect on spectral power in resting -
state EEGs. Greatest impact observed on alpha frequency
with minimal impact on delta and theta frequencies.
The preliminary EEG study results confirm the CNS activity of BHV-7000 at projected therapeutic concentrations, dose-dependent and time-
dependent changes in EEG spectral power, and are consistent with the quantitative EEG effects observed with other ASMs approved for the treatment of
epilepsy.
Based on the results from the EEG study and the safety profile in SAD/MAD trials, along with PK data from a new once-daily extended-release
(“ER”) formulation, Biohaven plans on exploring three oral doses of BHV-7000 (once daily 25 mg ER, once daily 50 mg ER, and once daily 75 mg ER) in
the Phase 2/3 clinical trials in epilepsy and mood disorders. This
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dosing approach with a Kv7 activator will allow for assessment of distinct target concentrations over a wide range, above and below projected efficacious
EC50 drug concentrations (Figure 3), not previously feasible with drugs in this class.
Figure 3: Predicted PK profile of BHV-7000 ER, mean predicted
concentration vs. time profiles for 25 mg ER, 50 mg ER and 75 mg ER once-
daily dosing at steady state relative to EC20 and EC50 (EC values from
preclinical MES models).
Epilepsy
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 safety data from our Phase 1 SAD/MAD trial of BHV-7000 in healthy volunteers, which showed a favorable CNS
tolerability profile. 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
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In January 2024, we completed our End-of-Phase 2 meeting with the FDA to advance to Phase 3 trials and announced that more than 110 global
clinical sites have been selected in the first of two focal epilepsy trials, with enrollment commencing in the first quarter of 2024. The two pivotal studies
evaluating the efficacy of BHV-7000 in refractory focal epilepsy are planned as randomized, double-blind, placebo-controlled, 8- and 12-week trials with a
primary endpoint of change from baseline in 28-day average seizure frequency in adults and adolescents with focal epilepsy. One of the focal epilepsy
studies will evaluate 25 mg and 50 mg doses of BHV-7000 and the second study will evaluate 50 mg and 75 mg doses of BHV-7000 (see figure below).
In addition to the focal epilepsy program, we anticipate initiating a Phase 2/3 study of BHV-7000 in idiopathic generalized epilepsy ("IGE") in the
second quarter of 2024. The pivotal study evaluating the efficacy of BHV-7000 with IGE is planned as a randomized, double-blind, placebo-controlled 24-
week time-to-event trial with a primary endpoint of time to second generalized seizure in adults and adolescents with IGE (see figure below).
Mood disorders
Approximately 1 in 5 adults in the U.S. are living with neuropsychiatric illnesses that are associated with inadequate treatment, poor quality of life,
disability, and considerable direct and indirect costs. There is significant unmet need for
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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.
Major Depressive Disorder
Major depressive disorder is a leading cause of morbidity. Prevalence estimates for MDD episodes in the U.S. are 7.1%; accordingly, there is an
urgent need for more effective treatments. Within the current armamentarium of treatments nearly one third of patients fail to respond. Kv7 activation has
emerged as a novel strategy to treat and prevent depressive episodes and holds significant potential as a novel treatment for patients with MDD. The
therapeutic role for Kv7 activation in MDD is supported by a broad range of epigenetic, mechanistic, preclinical, and clinical evidence. Multiple
depression models have demonstrated the antidepressant efficacy of enhancing potassium channel activity. As preclinical studies demonstrate
upregulation of Kv7 channels in mice subject to chronic stress, increasing potassium channel function either through genetic over expression or via
potassium channel activation (via ezogabine) reverses depressive and anhedonic behaviors in mice across multiple studies. Recent randomized,
controlled clinical trials of Kv7 activators demonstrated efficacy in MDD. Together, these data, coupled with the favorable clinical safety and tolerability
profile exhibited by BHV 7000 to date, provide a compelling rationale for the evaluation of Kv7 activation with BHV-7000 in MDD.
We plan to initiate a Phase 2 clinical trial with BHV-7000 for the treatment of MDD in the first half of 2024. We anticipate the study will be a 6 week,
randomized, double-blind, placebo-controlled trial in approximately 300 subjects, with a primary endpoint of measurement on the Montgomery-Asberg
Depression Rating Scale ("MADRS"). See below for expected trial design detail.
Bipolar disorder
Bipolar disorder affects approximately 7 to 11 million Americans, with an estimated 4.4% of U.S. 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-seizure medications.
We are advancing BHV-7000 as a potential treatment for patients with bipolar disorder and intend to start a Phase 2/3 clinical trial targeting this
indication in the first half of 2024. We expect the study to be a 3 week, randomized, double-
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blind, placebo-controlled trial in approximately 256 subjects, with a primary endpoint of measurement on the Young Mania Rating Scale ("YMRS"). See
below for expected trial design detail.
Developmental Epileptic Encephalopathies
KCNQ2 developmental epileptic encephalopathy (“KCNQ2-DEE”) 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. Although only recently
described, heterozygous de novo variants in KCNQ2 are a highly validated cause of early onset epileptic encephalopathy, and KCNQ2-DEE has
emerged as a well-defined clinical entity with a characteristic neonatal presentation, including hypotonia, treatment-resistant tonic seizures, a profoundly
abnormal EEG, and most often with moderate-to-profound global developmental delay. KCNQ2-DEE is thus both a seizure disorder and a developmental
disorder caused by pathogenic KCNQ2 mutations.
Identification of genetic etiologies has created the opportunity to treat not just the symptoms of KCNQ2-DEE, including seizures, but also the
underlying causes, including attenuating or reversing the effects of the disease-causing variants. 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-DEE and support its use as potential treatment for the disease).
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 known to cause KCNQ2-DEE were evaluated in an in vitro model measuring current density in cells expressing the
pathologic proteins.
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 four disease-causing KCNQ2 variants (T274M, A294V, R581L, R210H). In the control condition, all pathogenic variants produced a marked
reduction in current density to below wt/wt levels. BHV-7000 at either 0.3µM or 1.0 µM restored current density in all mutated channels to or beyond wt
control current density (**<0.01).
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BHV-7000 has been granted Rare Pediatric Disease Designation by the U.S. Food and Drug Administration ("FDA") for the treatment of KCNQ2-
DEE.
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 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 the 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 nonselective 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
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. Rose et. al demonstrated downregulation of Kv7 potassium channel mRNA in an experimental nerve injury
model and further showed alleviation of neuropathic hyperalgesia with administration of flupirtine.
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. The Company recently
initiated a sponsored research agreement with Yale to evaluate the activity of BHV-7000 in an iPSC model of inherited erythromelalgia, a severe rare
genetic neuropathy.
Migraine
We are currently exploring BHV-7000 as a potential treatment for migraine. Kv7.2/7.3 openers have shown significant activity in cortical spreading
depression models of migraine.
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TRPM3 Ion Channel Antagonists
KU Leuven Agreement
In January 2022, we entered into an agreement with KU Leuven ("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, 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 in Transient Receptor
Potential ("TRP") biology at KU Leuven.
Efforts to target TRP Ion Channels for pain
Since the Nobel Prize-winning discovery of the capsaicin receptor TRPV1 in 1997, members of the 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.
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 and migraine. Unlike TRPV1 antagonists, TRPM3 antagonists are unlikely to possess significant thermal liabilities, and unlike TRPA1
antagonists, Biohaven’s TRPM3 antagonists have desirable 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
TRPM3 is a novel druggable target in the TRP cation channel family. TRPM3 is functionally expressed in the human dorsal root ganglion, and
several single nucleotide polymorphisms ("SNPs") in TRPM3 are associated with altered pain sensation in response to ultraviolet B ("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
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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
BHV-2100
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.
Our Phase 1 Study with BHV-2100
We have an ongoing Phase 1 study of BHV-2100 in Canada. The Phase 1 study is a randomized, double-blind, placebo-controlled, SAD/MAD
study in healthy subjects to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of BHV-2100. Single ascending dose cohorts are
ongoing (including subjects randomized to placebo) with ascending dose levels. Each dose cohort will be initiated with sentinel dosing. Dose levels for
subsequent cohorts are determined based on available PK, PD, safety and tolerability from previous cohort(s). Up to approximately 88 subjects are
planned to be evaluated.
Our Development of BHV-2100 for the Treatment of Migraines
Nearly 40 million people in the U.S. suffer from migraine and the World Health Organization classifies migraine as one of the 10 most disabling
medical illnesses. Migraine is characterized by debilitating attacks lasting four to 72 hours with multiple symptoms, including pulsating headaches of
moderate to severe pain intensity that can be associated with nausea or vomiting, and/or sensitivity to sound (phonophobia) and sensitivity to light
(photophobia). There is a significant unmet need for new treatments as more than 90 percent of migraine sufferers are unable to work or function
normally during an attack. We expect to initiate a BHV-2100 Phase 2 study in acute migraine in the second half of 2024. We are evaluating and have not
yet finalized clinical trial design, including trial size, and primary and secondary endpoints for the anticipated clinical trial.
Our Development of BHV-2100 for the Treatment of Neuropathic Pain
BHV-2100 is also being developed as a potential non-opioid treatment for neuropathic pain. We are evaluating the ability of BHV-2100 to reduce
pain behaviors across several preclinical models of neuropathic pain, including chemotherapy induced neuropathy, diabetic neuropathy, and nerve
injury.The Company expects to conduct a proof of concept study for neuropathic pain in the second half of 2024.
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.
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Inflammation and Immunology Platform
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"), pursuant to which we obtained the right to
research, develop, manufacture and commercialize Highlightll’s brain penetrant dual TYK2/JAK1 inhibitor program.
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 kinase 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. In May 2023, we began dosing with BHV-
8000 (previously TLL-041), in a phase 1 study in normal healthy volunteers. The planned phase 1 study is a randomized, double-blind, placebo-
controlled, sequential parallel group, single ascending dose / multiple ascending dose study in healthy subjects to evaluate the safety, tolerability,
pharmacokinetics and pharmacodynamics of BHV-8000 following oral administration. In this study, single ascending dose cohorts are planned and
ongoing (including subjects randomized to placebo) with up to 6 dose levels. Each dose cohort will be initiated with sentinel dosing, e.g., one active and
placebo patient will be dosed simultaneously. Doses for subsequent cohorts are determined based on available PK, PD, safety and tolerability from
previous cohort(s). Up to 40 subjects are planned to be evaluated with approximately 30 subjects randomized to receive active drug and approximately
10 subjects randomized to receive placebo in a double-blind fashion.
In July 2023, we reported that we had successfully dosed three dose cohorts with single ascending doses of BHV-8000 in the ongoing Phase 1
study. Based on the preliminary data that are available, BHV-8000 achieved projected therapeutic concentrations and was well tolerated with only mild
adverse events reported.
We anticipate beginning clinical trials with BHV-8000 in the second half of 2024 targeting neuroinflammatory conditions, potentially including
Parkinson's disease, Amyloid-Related Imaging Abnormalities ("ARIA") in Alzheimer’s disease, Alzheimer's disease, and multiple sclerosis. We are
evaluating and have not yet finalized clinical trial designs, including trial size, and primary and secondary endpoints for these anticipated clinical trials.
MoDE Degraders
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 immune-mediated diseases, cancer and other diseases. We are planning for MoDEs to be administered as
intravenous or subcutaneous formulations. We expect to initiate a total of 4 INDs for the degrader program in 2024.
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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 years
after the first clinical presentation. Patients are managed by therapeutic immunosuppression, with the aim of controlling blood pressure and maintaining
renal function.
Lai, Nat Rev Dis Primers (2016)
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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 and associated immune complexes in patients and thereby prevent harmful kidney deposits. We have taken a published rodent
format IgG antibody that recognizes Gd-IgA and converted it into a partially-humanized antibody, then subsequently completed the molecule liver-
targeted degrader MoDE. This compound potently binds Gd-IgA and causes its endocytosis in human liver cells through its ASGPR binding motif.
Nonclinical development work is ongoing to progress this as a potential IgAN treatment.
BHV-1400
BHV-1400 is a MoDE which is being developed to target Gd-IgA for the treatment of IgA Nephropathy. Specific removal of pathogenic Gd-IgA and
associated circulating immune complexes with preservation of normal IgA potentially permits disease remission without incurring an infection risk. We
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, and that MoDE degraders successfully internalize and degrade these immune-complexes. We
expect to initiate Phase 1 studies of BHV-1400 in the second half of 2024. We are evaluating and have not yet finalized potential clinical trial designs,
including size and primary and secondary endpoints.
Therapeutic pan-IgG depletion
Analogous to the depletion of pan-IgA or dg-IgA with molecular degraders, hepatic asialoglycoprotein receptor ("ASGPR") ligand degraders are
able to recognize potentially pathogenic isoforms of immunoglobulin ("IgG") and represent a novel, competitive platform with differentiated and improved
profile relative to FcRN inhibitors. These molecules are specifically designed to spare the IgG3 subclass, to promote better host defense. FcRN inhibitors
such as efgartigimod (Vyvgart) and nipocalimab also deplete IgG, but are not selective and deplete all IgG subclasses. 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 (Vyvgart), 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.
BHV-1300
BHV-1300 is an IgG1, IgG2 and IgG4 bispecific degrader which we are initially developing for the treatment of rheumatoid arthritis ("RA"). RA is a
chronic autoimmune disease estimated to affect 1 to 2% of the global population. RA primarily affects the joints, causing pain, swelling, stiffness, and
loss of function.
We evaluated the effect of single and multiple doses of BHV-1300 in cynomolgus monkeys. In September 2023, we reported data from
confirmatory studies that showed a 75-80% reduction of IgG levels two days after a single dose and over 90% of IgG lowering after three doses.
Maximal lowering across FcRn inhibitors is 60-80% within approximately 7 to 21 days after initiation of single or multiple doses, respectively, in
cynomolgus. In contrast, a single dose of BHV-1300 lowers IgG by approximately 75 to 80% after approximately 2 days, and after three rapid doses to
greater than 90% lowering. The length of significant exposure to BHV-1300 is approximately one day within the dosage interval compared to continuous
exposure required of the FcRn inhibitors. Mechanism related liabilities of FcRn inhibitors seen in animals and man, including
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hypoalbuminemia and hypercholeresterolema, are not expected and do not occur with BHV-1300 in cynomolgus. See figures below comparing the
speed and depth of lowering to FcRn inhibitors.
In January 2024, we reported preclinical pharmacodynamic single dose data with BHV-1300 which demonstrated the Biohaven IgG degrader
technology allows for co-administration with Fc-containing biologics. The PK of Humira® was unaltered after being dosed 12 hours after BHV-1300
administration (see figure below).
* Adapted from BLA 761154, IND 116471, Study no. r-fkb327-01
The Phase 1 SAD study examining BHV-1300 in healthy subjects was initiated in the first quarter of 2024 and we expect preliminary results late in
the first quarter or early in the second quarter of 2024. The FDA indicated that the MAD assessment of BHV-1300 should be performed in a relevant
patient population. Upon completion of the SAD study, we are planning the MAD portion of the study in a relevant patient population with the possibility of
benefit from BHV-1300. The Phase 1 study is a randomized, open-label, placebo-controlled, SAD study in healthy subjects to evaluate the safety,
tolerability, pharmacokinetics, and pharmacodynamics of BHV-1300. Each dose cohort will be initiated with sentinel dosing. Dose levels for subsequent
cohorts will be determined based on available PK, PD, safety and tolerability from previous cohort(s). Up to approximately 32 subjects are planned to be
evaluated.
Phase 2 studies of BHV-1300 are anticipated to initiate in 2024. We are evaluating and have not yet finalized potential clinical trial designs,
including size and primary and secondary endpoints.
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BHV-1310
BHV-1310 is a next generation bispecific IgG degrader with the same specificity as BHV-1300 for IgG1, IgG2 and IgG4 which is initially being
developed for the treatment of generalized myasthenia gravis ("gMG") and potentially other acute conditions or conditions with acute exacerbations or
flares. MG is a chronic autoimmune disorder of the musculoskeletal system that is estimated to affect approximately 36,000 to 60,000 people in the
United States. Patients with gMG develop antibodies that attack critical signaling receptor proteins at the junction between nerve and muscle cells,
inhibiting communication between nerves and muscle and resulting in weakness of the skeletal muscles. GMG affects the voluntary muscles of the body,
especially those that control the eyes, mouth, throat and limbs.
In January 2024, we demonstrated optimization of degrader technology with BHV-1310 which allows for deeper reductions in IgG after single dose
(see figure below). The deep and rapid reductions observed suggest that BHV-1310 could have potential application in acute settings. We expect to
initiate Phase 1 studies of BHV-1310 in the second half of 2024. We are evaluating and have not yet finalized potential clinical trial designs, including
size and primary and secondary endpoints.
BHV-1600
BHV-1600 is a selective MoDE designed to remove circulating agonistic antibodies of all isotypes and subclasses directed against myocardial beta-
1 adrenergic receptor ("β-1 AR") through hepatic ASGPR binding and hepatocellular degradation. This molecule was created using a peptide that mimics
the antigenic epitope common to most patients with autoantibodies directed to β-1 AR. This peptide is sufficiently similar to the native sequence such
that circulating antibodies are efficiently trapped and subsequently removed by hepatic endocytosis through the ASGPR receptor. As these agonistic
antibodies will be markedly depleted, the rapid cessation of inappropriate agonism of the myocardial β-1 AR receptors should result in rapid reversal of
symptoms, as precedented with plasmapheresis.
We are developing BHV-1600 for the treatment of dilated cardiomyopathy. Dilated cardiomyopathy is a condition where the cardiac muscle
contracts less effectively, the chambers of the heart are enlarged and thinning of cardiac walls results. This can lead to cardiac valvular incompetency,
arrhythmias, thrombosis, and heart failure. We expect to initiate Phase 1 studies of BHV-1600 in the second half of 2024. We are evaluating and have
not yet finalized potential clinical trial designs, including size and primary and secondary endpoints.
Oncology Platform
CD-38
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
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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 recovering, post-myeloablative 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 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).
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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
Antibody Drug Conjugates
We are using the MATE conjugation technology to generate site-specific antibody drug conjugates (“ADC”s) from native IgG1 proteins and have
shown show superior stability in comparison with those using current industry-standard cysteine maleimide and click conjugation methodologies. Our
expectation is that the enhanced in vivo stability and expected superior physicochemical properties of these ADCs will lead to increased therapeutic
indices in patients (more cytotoxic payload reaching cancer cells and less reaching normal tissues, as has been shown in vitro, in mice and cynomolgus).
Several site-specific ADCs, including BHV-1500, 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.
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BHV-1510
In January 2024, we acquired BHV-1510 through our acquisition of Pyramid Biosciences, Inc. ("Pyramid"). BHV-1510 is a next-generation
Trophoblast Cell Surface Antigen 2 ("TROP-2") directed ADC employing an optimized next-generation construct with novel linker-payload and enzymatic,
site-specific conjugation, targeting TROP2-expressing carcinomas. Carcinoma refers to a malignant neoplasm of epithelial origin. Carcinomas account
for 80 to 90 percent of all cancer cases and several examples have been successfully treated with ADCs. Abundant TROP-2 expression has been
described for many carcinoma subtypes.
In preclinical TROP-2 expressing tumor models, BHV-1510 has shown improved antitumor activity versus other TROP-2 directed ADCs, in addition
to improved plasma stability, more potent in vitro cytotoxicity, superior bystander effect, and greater immunogenic cell death with the novel TopoIx
payload. Improved and differentiated safety has been seen in cynomolgus monkey GLP toxicology studies, suggesting a wife therapeutic index. BHV-
1510 has similar favorable characteristics to our proprietary MATE conjugation technology, which should allow highly stable site-specific conjugation,
resulting in a favorable PK, toxicity and manufacturability profile.
The IND for BHV-1510 was approved by the FDA in January 2024. The First-in Human trial evaluating BHV-1510 in patients with advanced solid
tumors is expected to start in the second quarter of 2024. This trial consists of two parts; Phase 1 dose escalation and Phase 2 dose expansion, in
patients with advanced incurable cancer that have progressed on or are intolerant to standard therapy. The primary objective of Phase 1 is safety, to
identify a recommended dose for expansion ("RDE") or maximum tolerated dose. Phase 1 dose escalation will be implemented based on a Bayesian
optimal interval design, with the lowest dose initiated as a single patient cohort. Patients are expected to be dosed in escalating cohorts, with dosing
regimens administered intravenously every three weeks. The Phase 2 dose expansion part of the study will consist of non-randomized efficacy finding
expansion cohorts, defined by specific tumor types that will be treated at the RDE to estimate the anti-tumor activity of BHV-1510. Up to approximately
170 subjects are planned to be evaluated.
BHV-1500
BHV-1500 is a next-generation CD30-directed ADC employing a Biohaven proprietary site-specific conjugation (MATE reagent), targeting CD30-
expressing tumors such as Hodgkin's and other lymphoma and the MMAE payload. Hodgkin's lymphoma, also referred to as Hodgkin's Disease, is a
malignant neoplasm of mesothelial origin. Approximately 9,000 new Hodgkin's disease cases are diagnosed each year. Hodgkin's disease and other
CD30-expressing lymphoma are characterized by the uncontrolled growth of malignant lymphocytes or lymphoblasts. Adcetris has demonstrated
effectiveness in the treatment of Hodgkin's Lymphoma.
In preclinical CD30 expressing murine tumor models, BHV-1500 has shown improved antitumor activity versus Adcetris (brentuximab vedotin), and
substantially improved safety, plasma stability and pharmacokinetics in monkeys. We expect to submit an IND for BHV-1500 in 2024.
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Clinical-Stage Milestones
Our clinical-stage milestones include the following:
Competition
The biotechnology and pharmaceutical industries are
characterized by rapidly advancing technologies, intense competition
and a strong emphasis on proprietary drugs. While we believe that our
knowledge, experience and scientific resources provide us with
competitive advantages, we face potential competition from many
different sources, including major pharmaceutical, specialty
pharmaceutical and biotechnology companies, academic institutions
and governmental agencies and public and private research
institutions. Any product candidates that we successfully develop and
commercialize will compete with existing therapies and new therapies
that may become available in the future.
The key competitive factors affecting the success of all of our
product candidates, if approved, are likely to be their safety, efficacy,
convenience, price, the level of generic competition and the availability
of coverage and reimbursement from government and other third-party
payors.
Many of the companies against which we are competing, or
against which we may compete in the future, have significantly greater
financial resources and expertise in research and development,
manufacturing, preclinical testing, conducting clinical trials, obtaining
regulatory approvals and marketing approved drugs than we do.
Mergers and acquisitions in the pharmaceutical and biotechnology
industries may result in even more resources being concentrated
among a smaller number of our competitors. Smaller or early-stage
companies may also prove to be significant
competitors, particularly through collaborative arrangements with large
and established companies. These competitors also compete with us
in recruiting and retaining qualified scientific and management
personnel and establishing clinical trial sites and patient registration for
clinical trials, as well as in acquiring technologies complementary to, or
necessary for, our programs.
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
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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 and Zavzpret.
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
the U.S., Europe, the United Kingdom, 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 have been granted in Australia and
Mexico, and patent applications to the ‘067 patent are pending in
Brazil, Canada, China, European Union, United Kingdom, Hong Kong,
Israel, India, Japan, Republic of Korea, New Zealand, Singapore and
South Africa. The ex-U.S. patents, and patent applications, if granted,
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,
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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. In
addition, PCT/US23/10295, PCT/US23/63111, PCT/US23/63113 and
PCT/US23/63115 directed to various Kv7 activator chemotypes were
filed in January and February 2023. These applications are 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 January/February 2043, not including possible
patent term extensions in countries where such extensions are
available. Other patent application directed to the combination
treatment with a Kv7 activator and N-methyl-D-aspartate ("NMDA")
receptor antagonist (PCT/US23/73125), a Kv7 activator and glutamate
modulator (PCT/US23/73504), and a Kv7 activator and TDP-43 binder
(PCT/US23/73491) were filed in August and September 2023. These
applications are 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 August/September
2043, not including possible patent term extensions in countries where
such extensions are available.
Troriluzole
We have 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, Brazil,
Bulgaria, Belarus, Canada, Switzerland, China, Cyprus, Czechia,
Germany, Denmark, Estonia, Spain, Finland, France, United Kingdom,
Greece, Hong Kong, Croatia, Hungary, India, Ireland, Israel, Italy,
Japan, Kyrgyzstan, Kazakhstan, Lithuania, Luxembourg, Latvia,
Monaco, North Macedonia, Macao, Malta, Mexico, Netherlands,
Norway, Philippines, Poland, Portugal, Republic of Korea, Romania,
Serbia, Russia, Sweden, Slovenia, Slovakia, Tajikistan, Turkmenistan,
Turkey and South Africa, and a patent application is pending in
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. These patent applications are
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, Israel, Ireland, Italy, Japan, Republic of Korea,
Lithuania, Luxembourg, Latvia, Mexico, Monaco, North Macedonia,
Malta, Netherlands, Norway, Poland, Portugal, Romania, Serbia,
Sweden, Slovenia, Slovakia and South Africa and patent applications
are pending in Brazil, Canada, India, Philippines and Singapore. 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. In addition, a patent application directed to
the use of troriluzole for treating various SCA genotypes was filed in
November 2018 (PCT/US18/60232) and national applications are
pending in major jurisdictions with patents granted in Japan and
Mexico. Another patent application directed to the treatment of SCA3
(PCT/US23/67326) was filed in May 2023 and is pending in the United
States Receiving Office of the Patent Cooperation Treaty and all
countries were designated for filing. These patents, if granted, will
expire in 2038 through 2043, not including possible patent term
extensions in countries where such extensions are available. Also, a
patent application directed to the use of troriluzole for treating OCD
was filed in June 2021 (PCT/US21/38789) and national applications
are pending in major jurisdictions. These patents, if granted, will expire
in 2041, not including possible patent term extensions in countries
where such extensions are available. Another patent application
directed to the treatment of glioblastoma (PCT/US23/69038) was filed
June 26, 2023 and is pending in the United States Receiving Office of
the Patent Cooperation Treaty and all PCT countries were designated
for filing.
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 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
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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, 2020 and issued as U.S. Patent No.
11,767,301 on September 26, 2023, 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 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, which relates to
targeted bifunctional degraders, was filed February 22, 2022, and
national applications are pending in the United States and major
jurisdictions worldwide. 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, was filed March 10, 2022, and is pending in the
United States and major jurisdictions worldwide. The patent
applications, if granted, will expire in March 2042, not including
possible patent term extensions in countries where such extensions
are available. PCT/US2022/075527 and PCT/US2022/075535, filed
August 26, 2022, which relate to difunctional degraders of pathogenic
anti-β1ECII (the second extracellular loop of the β1 adrenergic
receptor) autoantibodies, are pending in the United States Receiving
Office of the Patent Cooperation Treaty and all countries were
designated for filing.
We also acquired Kleo Pharmaceuticals, Inc. in January 2021.
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 specified biological
targets and combined with existing cell- or antibody-based therapies.
These include ARMs and MATEs, which complement the MoDEs
technology licensed from Yale. U.S. Serial No. 17/769924, filed April
18, 2022, 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 2041, not including
possible patent term extensions in countries where such extensions
are available. PCT/US2022/015390, which relates to technologies for
preventing or treating infections, was filed February 6, 2022 and
national applications are pending in the United States and major
jurisdictions worldwide. 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,
which relates to compositions including conjugated therapy enhancers,
was filed May 17, 2022 and national applications are pending in the
United States and major jurisdictions worldwide. 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, which relates to agents for directed
conjugation techniques and conjugated products, was filed May 17,
2022 and national applications are pending in the United States and
major jurisdictions worldwide. 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,
which relates to antibody drug conjugates using MATE technology for
delivering cytotoxic agents, was filed May 19, 2022 and national
applications are pending in the United States and major jurisdictions
worldwide. The patent applications, if granted, will expire in May 2042,
not including possible patent term extensions in countries where such
extensions are available.
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, which relates
to aryl derivatives for treating TRPM3 mediated disorders, was filed
November 24, 2021 and national applications are pending in the
United Arab Emirates, Australia, Brazil, Canada, China, countries of
the Eurasian Patent Organization, European Union, Israel, India,
Japan,
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Republic of Korea, Mexico, New Zealand, Philippines, Saudi Arabia,
South Africa, Singapore, Taiwan and the U.S. 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, which relates to heterocycle derivatives for
treating TRPM3 mediated disorders, was filed November 24, 2021 and
national applications are pending in the United Arab Emirates,
Australia, Brazil, Canada, China, Eurasia, European Union, Israel,
Japan, Republic of Korea, Mexico, New Zealand, Philippines, Saudi
Arabia, Singapore, Taiwan, South Africa and the U.S. 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, Italy, Netherlands and
Sweden. The patents, will expire in May 2032, not including possible
patent term extensions in countries where such extensions are
available. In addition, seven PCT applications directed to various
TRPM3 antagonist chemotypes were filed in May 2023
(PCT/EP2023/063992, PCT/EP2023/063994, PCT/EP2023/063996,
PCT/EP2023/063997, PCT/US2023/067443, PCT/US2023/067446,
PCT/US2023/067448). The patent applications, if granted, will expire
in May 2043, 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 8,993,265, 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, U.S. Patent 10,406,212, issued September 10,
2019, and U.S. Patent 11,813,315, issued November 14, 2023, 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 granted in Japan and are pending in Australia,
Canada, China, European Union, Hong Kong, Israel, Republic of
Korea, Mexico, Singapore and Taiwan. The ex-US patents and patent
applications, if granted, will expire in May 2038, not including possible
patent term extensions in countries where such extensions are
available.
TYK2 / JAK1
In March 2023, we entered into an exclusive, worldwide
(excluding People’s Republic of China and its territories and
possessions) license agreement with Highlightll pursuant to which we
obtained the right to research, develop, manufacture and
commercialize Highlightll’s brain penetrant dual TYK2/JAK1 inhibitor
program
U.S. Patent RE49834 (the “‘834 Patent”), having an issue date of
February 13, 2024, is directed to BHV-8000 and will expire in
September 2037, not including possible patent term extensions. Ex-
U.S. counterparts to the ‘834 patent have been granted in Australia,
European Union, Israel, Japan, Mexico, and New Zealand, and patent
applications to the ‘834 patent are pending in Brazil, Canada, Eurasia,
India, and Republic of Korea. The ex-U.S. patents and patent
applications, if granted, will expire in September 2037, not including
possible patent term extensions in countries where such extensions
are available. In addition, PCT/CN2022/113807, filed August 22, 2022,
which relate to methods of treating CNS disorders with dual
TYK2/JAK1 inhibitors, is pending in the CNIPA Receiving Office of the
Patent Cooperation Treaty and all countries were designated for filing.
The patent applications, if granted, will expire in August 2042, 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, "License 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
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("FDCA") and its implementing regulations. The process of obtaining
regulatory approvals and the subsequent compliance with appropriate
federal, state, local and foreign statutes and regulations requires the
expenditure of substantial time and financial resources. Failure to
comply with the applicable U.S. requirements at any time during the
product development process, approval process or after approval may
subject an applicant and/or sponsor to a variety of administrative or
judicial sanctions, including imposition of a clinical hold, refusal by the
FDA to approve applications, withdrawal of an approval, import/export
delays, issuance of warning letters and other types of enforcement
letters, product recalls, product seizures, total or partial suspension of
production or distribution, injunctions, fines, refusals of government
contracts, restitution, disgorgement of profits, or civil or criminal
investigations and penalties brought by the FDA and the Department
of Justice or other governmental entities.
The clinical testing, manufacturing, labeling, storage, distribution,
record keeping, advertising, promotion, import, export and marketing,
among other things, of our product candidates are governed by
extensive regulation by governmental authorities in the United States
and other countries. The FDA, under the FDCA, regulates
pharmaceutical products in the United States. The steps required
before a drug may be approved for marketing in the United States
generally include:
• nonclinical laboratory tests and animal tests conducted under
Good Laboratory Practices ("GLP");
•
the submission to the FDA of an IND application for human
clinical testing, which must become effective before human clinical
trials commence;
• approval by an independent institutional review board ("IRB"),
representing each clinical site before each clinical trial may be initiated;
• adequate and well-controlled human clinical trials to establish
the safety and efficacy of the product for each indication and
conducted in accordance with Good Clinical Practices ("GCP");
•
the preparation and submission to the FDA of an NDA;
• FDA acceptance, review and approval of the NDA, which
might include an Advisory Committee review;
• satisfactory completion of an FDA inspection of the
manufacturing facilities at which the product, or components thereof,
are made to assess compliance with current Good Manufacturing
Practices ("cGMPs").
The testing and approval process requires substantial time, effort
and financial resources, and the receipt and timing of any approval is
uncertain. The FDA may suspend clinical trials at any time on various
grounds, including a finding that the subjects or patients are being
exposed to an unacceptable health risk.
Nonclinical and Human Clinical Trials in Support of an NDA
Nonclinical studies include laboratory evaluations of the product
candidate, as well as in vitro and animal studies to gather information
on the safety and efficacy of the product candidate. The conduct of
nonclinical trials is subject to federal regulations and requirements
including GLP regulations. The results of the nonclinical studies,
together with manufacturing information and analytical data, among
other things, are submitted to the FDA as part of the IND, which must
become effective before clinical trials may be commenced. The IND
will become effective automatically 30 days after receipt by the FDA,
unless the FDA raises concerns or questions about the conduct of the
trials as outlined in the IND prior to that time. In this case, the IND
sponsor and the FDA must resolve any outstanding concerns before
clinical trials can proceed. The FDA may nevertheless initiate a clinical
hold after the 30 days if, for example, 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 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.
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Phase 4. Clinical trials may be conducted after approval to gain
During the approval process, the FDA also will determine
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. An 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 nonclinical 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 nonclinical, 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 typically takes 10 months from
the date that the application is accepted for filing by the FDA and a
priority review typically takes 6 months from the date that the
application is accepted by the FDA 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.
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 issues relating to risk, benefit
and interpretation of clinical trial data. The FDA may delay approval of
an NDA if applicable regulatory criteria are not satisfied and/or the
FDA requires additional testing or information. The FDA may require
post-marketing testing and surveillance to monitor safety or efficacy of
a product.
On the basis of the FDA's evaluation of the NDA and
accompanying information, including the results of the inspection of the
manufacturing facilities, the FDA will issue either an approval of the
NDA or a Complete Response Letter ("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
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guides, special trainings for prescribers and dispensers, patient
registries, and elements to assure safe use.
label uses may be subject to significant liability, including investigation
by federal and state authorities.
In addition, entities involved in the manufacture and distribution
Section 505(b)(2) NDAs
of approved drugs are required to register their establishments with the
FDA and state agencies, and are subject to periodic unannounced
inspections by the FDA and these state agencies for compliance with
cGMP requirements. The FDA has promulgated specific requirements
for drug cGMPs. Changes to the manufacturing process are strictly
regulated and often require prior FDA approval before being
implemented. FDA regulations also require investigation and correction
of any deviations from cGMP requirements and impose reporting and
documentation requirements upon the sponsor and any third-party
manufacturers that the sponsor may decide to use. Accordingly,
manufacturers must continue to expend time, money, and effort in the
area of production and quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may issue enforcement
letters or withdraw the approval if compliance with regulatory
requirements and standards is not maintained or if problems occur
after the product reaches the market. Corrective action could delay
product distribution and require significant time and financial
expenditures. Later discovery of previously unknown problems with a
product, including AEs of unanticipated severity or frequency, or with
manufacturing processes, or failure to comply with regulatory
requirements, may result in revisions to the approved labeling to add
new safety information; imposition of post-market studies or clinical
trials to assess new safety risks; or imposition of distribution or other
restrictions under a REMS program. Other potential consequences
include, among other things:
•
restrictions on the marketing or manufacturing of the product,
suspension of the approval, complete withdrawal of the product from
the market or product recalls;
•
•
fines, warning letters or holds on post-approval clinical trials;
refusal of the FDA to approve applications or supplements to
approved applications, or suspension or revocation of product
approvals;
• product seizure or detention, or refusal to permit the import or
export of products; or
•
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and
promotion of products that are placed on the market. Drugs may be
promoted only for the approved indications and in accordance with the
provisions of the approved label. The FDA and other agencies actively
enforce the laws and regulations prohibiting the promotion of off-label
uses, and a company that is found to have improperly promoted off-
As an alternative path to FDA approval for modifications to
formulations or uses of drugs previously approved by the FDA, an
applicant may submit an NDA under Section 505(b)(2) of the FDCA.
Section 505(b)(2) was enacted as part of the Hatch-Waxman
Amendments. A Section 505(b)(2) NDA is an application that contains
full reports of investigations of safety and effectiveness, but where at
least some of the information required for approval comes from studies
not conducted by, or for, the applicant and for which the applicant has
not obtained a right of reference or use from the 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
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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.
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 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
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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 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 six 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 six 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
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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 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. However,
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
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.
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Healthcare Laws and Regulations
health information from any unauthorized use or disclosures;
Physicians, other healthcare providers, and third-party payors will
• The federal transparency requirements under the Physician
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
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 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
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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 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;
•
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 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.
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.
Further, there have been several 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
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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 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. 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.
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 meets on a regular
basis and reports to the Board of Directors periodically. We also
maintain a Chief Talent & Sustainability Officer position who works
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.
Externally, we strive to reduce the overall impact of our product
on the environment by taking 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
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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 239 employees as of December
31, 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. Our efforts to achieve gender diversity in the workforce are
evidenced by a workforce that is approximately 57% 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
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.
Information about Segments
We currently operate in a single business segment developing a
portfolio of treatments in therapeutic areas including neuroscience,
immunology and oncology. 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. subsidiary's office is
located at 215 Church Street, New Haven, Connecticut 06510 and
telephone number is (203) 404-0410. Our website address is
www.biohaven.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.biohaven.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.
• Our business and operations may be materially adversely affected
in the event of computer system failures or security breaches.
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.
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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 the 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 the 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 the Former Parent, we have
incurred significant operating losses. Our net loss was $408.2
million, $570.3 million and $213.8 million for the years
ended December 31, 2023, 2022 and 2021, 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 have in the past and may in the future fluctuate
significantly from quarter to quarter and year to year. Our expenses
have increased, and we anticipate that our expenses will further
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 would decrease the value of our
company and could impair our ability to raise capital, maintain our
research and development efforts, expand our business or continue
our operations. A decline in the value of the 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.
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, 2023, we had cash, cash equivalents and
marketable securities of $381.8 million, excluding restricted cash of
$3.7 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;
•
the costs and timing of future commercialization activities,
including drug manufacturing, marketing, sales and distribution, for any
of our product candidates for which we receive marketing approval;
•
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.
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We will require additional capital to complete our planned clinical
development programs for our current product candidates to seek
regulatory approval. If we receive regulatory approval for any of our
product candidates, we expect to incur significant commercialization
expenses related to product manufacturing, sales, marketing and
distribution. Any additional capital-raising efforts may divert our
management from their day-to-day activities, which may adversely
affect our ability to develop and commercialize our current and future
product candidates, if approved.
In addition, we cannot guarantee that future financing will be
available on a timely basis, in sufficient amounts or on terms
acceptable to us, if at all. Moreover, the terms of any financing may
adversely affect the holdings or the rights of our shareholders and the
issuance of additional securities by us, whether equity or debt, or the
market perception that such issuances are likely to occur, could cause
the market price of our common shares to decline. As a result, we may
not be able to access the capital markets as frequently as comparable
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 securities, including through our "at-the-market" equity program,
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.
Risks Related to the Development of Our Product Candidates
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
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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 Phase 2/3 studies in epilepsy and bipolar disorder and
a Phase 2 study in MDD, completion of a Phase 2/3 clinical trial of
troriluzole in glioblastoma, execution of clinical trials for BHV-2000,
including a Phase 3 clinical trial in SMA and a Phase 2 clinical trial in
metabolic disorders, initiation of a Phase 1 clinical trial for BHV-1300 in
immune mediated diseases, and initiation of a Phase 2/3 clinical trial
for BHV-8000 in Parkinson's Disease. 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;
launching commercial sales, marketing and distribution
•
operations;
•
the prevalence and severity of adverse events experienced
with our product candidates;
• acceptance of our product candidates by patients, the medical
community and third-party payors;
• a continued acceptable safety profile following approval;
• obtaining and maintaining healthcare coverage and adequate
reimbursement for our product candidates;
• competing effectively with other therapies, including with
respect to the sales and marketing of our product candidates, if
approved; and
• qualifying for, maintaining, enforcing and defending our
intellectual property rights and claims.
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. At this time, we
have no plans to continue development of verdiperstat in ALS, and we
are evaluating whether or not to pursue any additional clinical trials
evaluating verdiperstat in other disease indications.
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 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.
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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, 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;
•
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;
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• delays in establishing the appropriate dosage levels;
• negative or ambiguous results from our clinical trials or results
•
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;
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 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
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results obtained using the modified SARA scale would not be an
adequate basis for approval.
In addition, in our Phase 3 clinical trial ("Study BHV4157-206")
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.
In May 2023, we presented further analysis of Study BHV4157-
206 by prespecified genotype strata that revealed consistent treatment
effects of troriluzole in SCA3, which represented 41% of study
participants. These results were further supported by consistent results
across the range of secondary and exploratory endpoints assessed in
the SCA3 subgroup. In July 2023, the FDA informed us that it would
not review the recently submitted NDA application for troriluzole given
that the study's primary endpoint was not met and thus, would not
permit a substantive review. In October, 2023, the EMA informed us
that our MAA for troriluzole (Dazluma) in the treatment of SCA has
been validated and is now under review by EMA's CHMP.
We generally plan to seek regulatory approval to commercialize
our product candidates in the United States, the EU 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, but we are evaluating 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
prevented further development of the compound in the tested
indication.
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
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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 regulatory investigations and government
enforcement actions;
•
initiation of legal action against us to hold us liable for harm
caused to patients; and
• harm to our reputation and resulting harm to physician or
patient acceptance of our products.
• Any of these events could prevent us from achieving or
maintaining market acceptance of the particular product candidate, if
approved, and could significantly harm our business, financial
condition, and results of operations.
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;
•
•
•
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.
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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 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 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
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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 EU 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 EU 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 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
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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 EU 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 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.
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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;
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
• seizure or detention of products, refusal to permit the import or
export of products, or requesting that we initiate a product recall;
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 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,
•
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 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.
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If the FDA or comparable foreign regulatory authorities
return on the investments we have made in those product candidates.
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 (the
“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 an NCE 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.
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
Risks Related to Our Dependence on Third Parties
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 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 EU 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, the EMA or any comparable foreign
regulatory agency may require us to perform additional preclinical
studies and clinical trials before approving our marketing applications.
We cannot assure you that upon inspection by a given regulatory
agency, such regulatory agency will determine that all of our clinical
trials comply with GCP regulations. In addition, our clinical trials must
be conducted with products produced under cGMP requirements. Our
failure to comply with these requirements may require us to repeat
clinical trials, which would delay the regulatory approval process.
While we will have agreements governing their activities, 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
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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.
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;
We do not currently have, nor do we plan to acquire, the internal
• suspension of manufacturing of our product candidates;
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
•
•
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 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
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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 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
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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.
Our operations are subject to a broad array of regulatory
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
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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 EU, 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, as amended by the Health Care
and Education Reconciliation Act of 2010 (together, the "ACA") was
enacted, which substantially changed the way healthcare is financed
by both governmental and private insurers.
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.
Further, there have been several recent 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, in September 2018,
CMS announced it will allow Medicare Advantage Plans the option to
use step therapy for Part B drugs beginning January 1, 2019, and in
May 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. In late 2021, Democrats included drug pricing reform
provisions reflecting elements of the plan in a broader spending
package—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.
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In the 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 EU or member state level may result in significant additional
requirements or obstacles that may increase our operating costs. The
delivery of healthcare in the EU, including the establishment and
operation of health services and the pricing and reimbursement of
medicines, is almost exclusively a matter for national, rather than EU,
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 EU and national regulatory burdens on those wishing to
develop and market products, this could prevent or delay marketing
approval of our product candidates, restrict or regulate post-approval
activities and affect our ability to commercialize any products for which
we obtain marketing approval. In international markets, reimbursement
and healthcare payment systems vary significantly by country, and
many countries have instituted price ceilings on specific products and
therapies.
We cannot predict the likelihood, nature or extent of government
regulation that may arise from future legislation or administrative
action, either in the United States or abroad. If we or our collaborators
are slow or unable to adapt to changes in existing requirements or the
adoption of new requirements or policies, or if we or our collaborators
are not able to maintain regulatory compliance, our product candidates
may lose any regulatory approval that may have been obtained and we
may not achieve or sustain profitability, which would adversely affect
our business.
Our business operations and current and future relationships
with investigators, 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
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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;
other remuneration and items of value provided to healthcare
professionals and entities;
• state and local laws that require the registration of
• HIPAA, as amended by the Health Information Technology for
pharmaceutical sales representatives; and
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;
• analogous state laws and regulations, including: state anti-
kickback and false claims laws, which may apply to our business
practices, including, but not limited to, research, distribution, sales and
marketing arrangements and claims involving healthcare items or
services reimbursed by any third-party payor, including private
insurers;
• state laws that require pharmaceutical companies to comply
with the pharmaceutical industry’s voluntary compliance guidelines and
the relevant compliance guidance promulgated by the U.S. federal
government, or otherwise restrict payments that may be made to
healthcare providers and other potential referral sources;
• state laws and regulations that require drug manufacturers to
file reports relating to pricing and marketing information, which requires
tracking gifts and
• 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 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
designation or exclusivity for our product candidates.
We have obtained orphan drug designation in the United States
for troriluzole in SCA and for taldefgrobep alfa in SMA and in the EU
for taldefgrobep alfa in SMA. We may seek orphan drug designation
for other product candidates in the future. Regulatory authorities in
some jurisdictions, including the United States and the EU, 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
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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 EU. 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.
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.
Changes to legislation or regulations 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. We strive to conduct our business in a manner that
is in compliance with the Economic Substance Act. However, the
imposition of additional requirements due to further amendments,
additional regulations or new guidance on interpretation of these laws
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
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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, the 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.
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 BLA is filed. The type of application filed affects
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 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.
Biologic products
The U.S. healthcare legislation enacted in 2010 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 Biologics License
Application
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("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.
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 EU 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 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. 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
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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.
Rest of the World
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, an agreement with ALS Biopharma
and Fox Chase Chemical Diversity Center, Inc., pursuant to which we
were assigned intellectual property rights relating to troriluzole, a
license agreement with Yale University, pursuant to which we were
granted certain patent rights to develop and commercialize riluzole-
based products, another license agreement with Yale University
pursuant to which we acquired exclusive, worldwide rights to Yale's
intellectual property directed to its MoDE platform, a license agreement
with Highlightll, pursuant to which we were granted exclusive rights to
develop and commercialize Highlightll’s brain penetrant dual
TYK2/JAK1 inhibitor program, a license agreement with Bristol-Myers
Squibb, pursuant to which we were granted exclusive rights to develop
and commercialize taldefgrobep alfa, license agreements with
AstraZeneca, pursuant to which we were granted exclusive licenses
relating to BHV-5500 and verdiperstat, a license agreement with
AstraZeneca, pursuant to which we were granted an exclusive license
to BHV-2200, 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 do not control prosecution of the
licensed intellectual property, or do 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 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;
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•
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 EU. 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 EU, 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.
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
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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.
investors regard these announcements as negative, the perceived
value of our product candidates, programs or intellectual property
could be diminished and the market price of our common stock could
decline. Such announcements could also harm our reputation or the
market for our future products, which could have a material adverse
effect on our business.
We are subject to other risks relating to our intellectual
Parties making claims against us may obtain injunctive or other
property.
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 have in the past and may again in the future file claims of
infringement and/or trade secret misappropriation against third parties
who infringe, or misappropriate, our patents and/or trade secrets 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.
During the course of any intellectual property litigation, there
could be public announcements of the results of hearings, rulings on
motions or other interim proceedings in the litigation. If securities
analysts or
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 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
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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 EU. If we commercialize our product candidates in
foreign markets, we will be subject to additional risks and uncertainties,
including:
• economic weakness, including inflation, or political instability in
particular economies and markets;
•
the burden of complying with complex and changing foreign
regulatory, tax, accounting and legal requirements, many of which vary
between countries;
• different medical practices and customs in foreign countries
affecting acceptance in the marketplace;
•
tariffs and trade barriers;
• other trade protection measures, import or export licensing
requirements or other restrictive actions by U.S. or foreign
governments;
•
•
longer accounts receivable collection times;
longer lead times for shipping;
• compliance with tax, employment, immigration and labor laws
for employees living or traveling abroad;
• workforce uncertainty in countries where labor unrest is
common;
•
•
language barriers for technical training;
reduced protection of intellectual property rights in some
foreign countries, and related prevalence of generic alternatives to
therapeutics;
•
foreign currency exchange rate fluctuations and currency
controls;
• differing foreign reimbursement landscapes;
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• 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.
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, CMOs 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. Although we have
not experienced a material security breach or disruption to date, we
may experience a material security breach or disruption in the future in
the event such security breach or disruption 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 are also vulnerable to
cybersecurity incidents through cyberattacks by hackers, user error,
phishing scams or other malfeasance, as well as cybersecurity
incidents involving our employees, business partners, collaborators or
other third parties. This type of breach of our cybersecurity may
compromise our confidential information or our financial information
and adversely affect our business, reputation, financial condition,
results of operations 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.
Various U.S. states and other governmental authorities around
the world have imposed or are considering similar types of laws and
regulations, data breach reporting and penalties for non-compliance
and increasing security requirements. These laws and regulations are
broad in scope and are subject to evolving interpretation and we have
in the past been, and in the future could be, required to incur
substantial costs to monitor compliance or to alter our practices.
Moreover, these new laws and regulations could diverge and conflict
with each other in certain respects. As new privacy-related laws and
regulations are implemented, the time and resources needed for us to
comply with such laws and regulations, as well as our potential liability
for non-compliance and reporting obligations in the case of data
breaches, have increased and may further increase.
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 Foreign Corrupt Practices Act (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
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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 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.
Risks Related to Ownership of Our Common Shares
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.
Our common shares began trading on the NYSE on October 4,
2022. Although trading in our common shares has developed, we
cannot assure you that an active trading market will be sustained or
that any trading
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market will continue to 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 has in the past been
and could in the future be volatile and fluctuate due to factors
beyond our control, and purchasers of our common shares could
incur substantial losses.
Our share price has in the past been and could in the future 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;
• announcements relating to our arrangements with strategic
partners;
•
community;
failure to meet or exceed expectations of the investment
• actual or anticipated variations in our operating results;
• changes in financial estimates by us or by any securities
analysts who might cover our shares;
• announcements by therapeutic drug product providers related
to pricing of therapeutics;
• announcements of significant licenses, acquisitions, strategic
partnerships or joint ventures by us or our competitors;
• publication of research reports or comments by securities or
industry analysts;
•
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.
If securities or industry analysts do not publish research, or
publish inaccurate or unfavorable research, about our business,
the price of our common shares and our trading volume could
decline.
The trading market for our common shares will depend in part on
the research and reports that securities or industry analysts publish
about us or our business. 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
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common shares, and such lack of research coverage may adversely
affect the market price of our common shares. Even if we do have
equity research analyst coverage, we will not have any control over the
analysts or the content and opinions 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;
•
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
meetings of members; and
• 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.
Substantially all of our common shares are 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.
Effective December 31, 2023, we are a large accelerated filer
and no longer qualify as a smaller reporting company or
emerging growth company, which will increase our costs and
demands on management.
Based on the Company’s public float as of June 30, 2023, we
became a “large accelerated filer” and lost “emerging growth company”
status on December 31, 2023. Additionally, due to the Company’s
public float as of June 30, 2023, we no longer qualify as a “smaller
reporting company.” However, we are not required to reflect the
change in our “smaller reporting company” status, or comply with the
associated increased
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disclosure obligations, until our quarterly report for the three-month
period ended March 31, 2024. Due to this upcoming transition, we are
devoting significant time and efforts to implement and comply with the
additional standards, rules and regulations that will apply to us upon
becoming a large accelerated filer and losing our smaller reporting
company and emerging growth company status, diverting such time
from the day-to-day conduct of our business operations. Compliance
with the additional requirements of being a large accelerated filer have
increased our legal, accounting and financial compliance costs as of
year-end, and these costs will continue to increase. These
requirements include, but are not limited to:
•
•
•
•
compliance with the auditor attestation requirements in the
assessment of our internal control over financial reporting;
compliance with any requirement that is adopted by the Public
Company Accounting Oversight Board regarding mandatory
audit firm rotation or a supplement to the auditor's report
providing additional information about the audit and the
financial statements;
full disclosure obligations regarding executive compensation in
our periodic reports and proxy statements; and
compliance with the requirements of holding a non-binding
advisory vote on executive compensation and stockholder
approval of any golden parachute payments not previously
approved.
Due to the complexity and logistical difficulty of implementing the
standards, rules and regulations that apply to a large accelerated filer,
there is an increased risk that we may be found to be in non-
compliance with such standards, rules and regulations or to have
significant deficiencies or material weaknesses in our internal controls
over financial reporting. Any failure to maintain effective disclosure
controls and internal control over financial reporting could materially
and adversely affect our business, results of operations, and financial
condition and could cause a decline in the trading price of our common
shares.
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 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
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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 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 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
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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 net operating loss
carryforwards to offset future taxable income and any adjustments to
the amount of the net operating loss carryforwards we can utilize; and
(5) changes in tax laws or the interpretation of such tax laws, and
changes in generally accepted accounting principles. 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 when we fall into the scope of the
rules.
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.
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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, and (ii) the application of certain
“look-through” rules. 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, 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
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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.
The market price and trading volume of our common shares
may 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.
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
are required to document and test our internal control procedures, our
management is required to assess and issue a report concerning our
internal control over financial reporting, and our independent auditors
is 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 1C. Cybersecurity
authentication, backup servers, threat monitoring, periodic strategy
review and penetration testing performed by a third-party advisory firm,
and coverage under an information security risk insurance policy.
Third-party suppliers are pre-screened as part of our vendor
onboarding process to evaluate their cybersecurity programs and
assess risk. As a part of our pre-screening process, we evaluate each
vendor's overall cybersecurity risk profile relative to the services they
provide for Biohaven, including questions relating to cybersecurity
insurance, security operations and access and management of our
data. Cybersecurity incidents involving third-party supplier systems are
evaluated for their impact on the Company and managed through our
cyber incident management process. In addition, our employees are
required to complete an annual cybersecurity training managed
through our internal compliance training system.
Governance
The Board recognizes the importance of cybersecurity in
maintaining the trust and confidence of our stakeholders, patients and
employees. Our Audit Committee is central to the Board's oversight of
cybersecurity and bears the primary responsibility for overseeing risks
associated with our information systems and technology, including
cybersecurity.
Our Chief Technology Officer ("CTO") is tasked with updating the
Board and Audit Committee on cybersecurity risks. Our CTO provides
comprehensive briefings to our Audit Committee on a quarterly basis
regarding our strategy for managing and mitigating cybersecurity and
technology-related risks. Beginning in 2024, our CTO will also provide
such comprehensive briefings to the Board on an annual basis. Our
CTO has been in the position for over three years and has over 35
years of industry experience focusing on large scale business
transformations leveraging technology, cybersecurity, and technical
operations excellence. Our CTO has held various senior technology
leadership roles at other companies prior to joining the Company.
Cybersecurity Risks
Although cybersecurity risks have not materially affected us,
including our business strategy, results of operations or financial
condition, to date, we are subject to various cybersecurity risks, which
could, in the future, be material. For more information about the
cybersecurity risks we face, see risk factor entitled "Our business and
operations may be materially adversely affected in the event of
computer system failures or security breaches" in Item 1A, "Risk
Factors."
Risk Management and Strategy
Item 2. Properties
We have strategically integrated cybersecurity risk management into
our broader risk management framework to promote a company-wide
culture of cybersecurity risk management. Our cybersecurity program
is aligned with industry standards and best practices, such as the
National Institute of Standards and Technology ("NIST") Cybersecurity
Framework. Our measures to prevent, detect and mitigate cyber
threats include training for employees, multi-factor
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
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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
Type
Office Space
Office & Lab
Space
Office Space
Office &
Research Space
Office Space
Chemistry &
Discovery
Facilities
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, 2024
6,000
April, 2027
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 February 26, 2024, there were 51 shareholders of record of
Agreement with Hangzhou Highlightll Pharmaceutical Co. Ltd.
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.
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"), pursuant to which we
obtained the right to research, develop, manufacture and
commercialize Highlightll’s brain penetrant dual TYK2/JAK1 inhibitor
program. In December 2023, we entered into a second amendment to
the Highlightll Agreement, which granted us an exclusive option and
right of first refusal to any Selective TYK2 Inhibitor being developed by
or on behalf of Highlightll or its affiliates. As a result of the second
amendment, we issued 721,136 of our common shares, valued at
$21.8 million, that were not registered under the Securities Act to
Highlightll in December 2023.
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Highlightll represented that, among other things, it is an institutional
accredited investor as defined in Rule 501(a) of Regulation D of the
Securities Act, and the foregoing shares were issued in reliance on the
private offering exemption provided by Section 4(a)(2) of the Securities
Act. See Note 11, "License Agreements," to the Consolidated Financial
Statements appearing elsewhere in this report for additional details on
this transaction.
Pyramid Acquisition
In January 2024, we acquired Pyramid Biosciences, Inc.
("Pyramid"), pursuant to an Agreement and Plan of Merger, dated
January 7, 2024 (the "Pyramid Agreement"). In consideration for the
Pyramid acquisition, we made an upfront payment of $10.0 million of
our common shares. We also agreed to make additional success-
based payments up to $40.0 million upon achievement of certain
regulatory milestones, which we may elect to pay in cash or our
common shares. In January 2024, a $5.0 million payment became due
to Pyramid related to achievement of a regulatory milestone under the
Pyramid Agreement, which we elected to pay in our common shares.
The shares related to both of these payments were not registered
under the Securities Act.
Pyramid represented that, among other things, it is an
institutional accredited investor as defined in Rule 501(a) of Regulation
D of the Securities Act. The foregoing shares shall be issued in
reliance on the private offering exemption provided by Section 4(a)(2)
of the Securities Act. See Note 6, "Acquisitions," to the Consolidated
Financial Statements appearing elsewhere in this report for additional
details on this transaction.
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.
Item 6. Reserved
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
You should read the following discussion and analysis of our
financial condition and results of operations together with our financial
statements and related notes appearing elsewhere in this Annual
Report on Form 10-K, or this Annual Report. Discussions of 2021
items and year-to-year comparisons between the years ended
December 31, 2022 and 2021 that are not included in this Form 10-K
can be found within “Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations” in our Annual Report
on Form 10-K for the year ended December 31, 2022. 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 biopharmaceutical company focused on the discovery,
development, and commercialization of life-changing treatments in key
therapeutic areas, including immunology, neuroscience, and oncology.
We are advancing our innovative portfolio of therapeutics, leveraging
our proven drug development experience and multiple proprietary drug
development platforms. Our extensive clinical and preclinical programs
include Kv7 ion channel modulation for epilepsy and mood disorders;
extracellular protein degradation for immunological diseases; TRPM3
antagonism for migraine and neuropathic pain; TYK2/JAK1 inhibition
for neuroinflammatory disorders; glutamate modulation for OCD and
SCA; myostatin inhibition for neuromuscular and metabolic diseases,
including SMA and obesity; and antibody recruiting, bispecific
molecules and ADCs for cancer.
For a full discussion of our programs, including recent
developments, refer to "Item 1. Business" included in this Annual
Report on Form 10-K.
Separation from Biohaven Pharmaceutical Holding Company
Ltd.
On October 3, 2022, the Former Parent completed the
Separation from Biohaven Ltd. As a result of the Separation, Biohaven
Ltd. became an independent, publicly traded company as of October 3,
2022, and commenced regular way trading under the symbol "BHVN"
on the NYSE on October 4, 2022.
Biohaven is a British Virgin Islands ("BVI") corporation and was a
wholly owned subsidiary of the Former Parent 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 the Former Parent. 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 the Former Parent’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 transfers had already
occurred and the Former Parent's activities related to such assets and
liabilities had been performed by Biohaven.
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 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
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decisions the Company might have made in areas such as executive
management, legal and other professional services, and certain
corporate overhead functions.
Agreements with the Former Parent
We had entered into a Distribution Agreement and various other
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.
Components of Our Results of Operations
Revenue
To date, 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 and 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.
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. 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 milestones 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;
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•
•
•
•
•
•
•
•
establishment of an appropriate safety profile with IND-enabling
studies;
successful patient enrollment in, and the initiation and completion
of, clinical trials;
the timing, receipt and terms of any marketing approvals from
applicable regulatory authorities;
establishment of commercial manufacturing capabilities or making
arrangements with third-party manufacturers;
development and timely delivery of commercial-grade drug
formulations that can be used in our clinical trials and for
commercial launch;
acquisition, maintenance, defense and enforcement of patent
claims and other intellectual property rights;
significant and changing government regulation;
initiation of commercial sales of our product candidates, if and
when approved, whether alone or in collaboration with others; and
Other Income (Expense)
Other Income (Expense), Net
Other income (expense), net during the year ended December
31, 2023 primarily consists of net investment income and service
revenue from the Transition Service Agreement we entered into with
the Former Parent. Refer to Note 14, "Related Party Transactions," for
further discussions of agreements entered into with the Former Parent.
Net investment income is comprised of interest income and net
accretion and amortization on investments in addition to realized gains
and losses. Refer to Note 3, "Marketable Securities," for further
discussion of our investments.
Other income (expense), 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
and service revenue from the Transition Service Agreement we
entered into with the Former Parent.
Provision for Income Taxes
• maintenance of a continued acceptable safety profile of the
The income tax expense in the consolidated financial statements
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 non-cash 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.
was calculated on a separate return method and 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 our 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, 2023, 2022, and 2021, and BPI is subject to
taxation in the United States. As such, in each reporting period, the tax
provision includes the effects of the results of operations of BPI.
At December 31, 2023 and 2022, we continued to maintain a full
valuation allowance against our net deferred tax assets, comprised
primarily of 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.
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Our income tax provision/benefit primarily represents Federal and
state taxes related to the profitable operations of our subsidiaries in the
United States and Ireland. The income tax benefit recorded during the
year ended December 31, 2023 was primarily attributable to our
adoption of the guidance contained in a Notice of Proposed Rule
Making issued by the United States Internal Revenue Service during
the third quarter of 2023 ("the Notice"). The Notice indicates that BPI
has the ability to immediately deduct R&D expenditures which were
incurred in the US and reimbursed by our foreign parent. Previously
these expenditures were capitalized, as was generally understood to
be required under the Tax Cuts and Jobs Act, which was effective for
tax years beginning on or after January 1, 2022. Based on this
guidance and its application to our specific facts, we deducted these
expenditures on our 2022 tax return, substantially reducing our taxable
income in the US and capitalized R&D expenditures, resulting in an
increase to our federal net operating loss carryforward of $598.7
million that can be carried forward indefinitely. Our adoption of the
Notice in 2023 also increased our State net operating losses, resulting
in the reversal of $0.8 million of state income taxes recorded in 2022.
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Results of Operations
Comparison of the Years Ended December 31, 2023 and 2022
The following table summarizes our results of operations for the years ended December 31, 2023 and 2022:
In thousands
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Other income (expense), net
Total other income (expense), net
Loss before (benefit) provision for income taxes
(Benefit) provision for income taxes
Net loss
Research and Development Expenses
In thousands
Direct research and development expenses by program:
BHV-7000 & BHV-7010
BHV-8000
BHV-2100 (TRPM3)
Troriluzole
BHV-2000
BHV-1300
BHV-1100
BHV-1200 (COVID 19)
Verdiperstat
Other programs
Unallocated research and development costs:
Personnel related (including non-cash share-based compensation)
Preclinical research programs
Other
Total research and development expenses
*Certain prior year amounts have been reclassified to conform to current year presentation
Year Ended December 31,
2023
2022
Change
$
$
373,281 $
62,770
436,051
(436,051)
26,500
26,500
(409,551)
(1,383)
(408,168) $
437,072 $
130,860
567,932
(567,932)
(1,909)
(1,909)
(569,841)
438
(570,279) $
(63,791)
(68,090)
(131,881)
131,881
28,409
28,409
160,290
(1,821)
162,111
Year Ended December 31,
2022*
2023
Change
$
$
47,327 $
39,025
12,864
73,080
40,870
22,239
1,951
—
3,064
600
78,608
35,093
18,560
373,281 $
131,956 $
—
8,255
58,769
16,799
—
852
6,033
13,654
668
170,122
18,116
11,848
437,072 $
(84,629)
39,025
4,609
14,311
24,071
22,239
1,099
(6,033)
(10,590)
(68)
(91,514)
16,977
6,712
(63,791)
R&D expenses, including non-cash share-based compensation
costs, were $373.3 million for the year ended December 31, 2023,
compared to $437.1 million for the year ended December 31, 2022.
The decrease of $63.8 million was primarily due to a one-time $93.7
million expense to BHV-7000 and BHV-7010 during 2022 for our Kv7
Platform acquisition, a $25.0 million milestone relating to BHV-7000, a
decrease of $91.5 million in personnel related costs, and reduced
program spend for BHV-1200 and verdiperstat in 2023
compared to 2022. The decrease was partially offset by increases in
direct program spend for additional and advancing clinical trials,
including late Phase 2/3 studies and preclinical research programs in
2023, as compared to the same period in the prior year. The increased
program spend in 2023 included recognition of one-time expenses of a
$10.0 million cash payment and a $21.8 million non-cash issuance of
common shares to acquire rights related to our Highlightll Agreement.
Refer to
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Note 11, "License Agreements" for further discussion of the payments
to Highlightll.
Non-cash share-based compensation expense was $16.0 million
for the year ended December 31, 2023, a decrease of $100.4 million
as compared to the same period in 2022. Non-cash share-based
compensation expense for the year ended December 31, 2022
included $108.7 million of expense allocated from the Former Parent,
including $61.7 million of expense recognized in connection with the
settlement of outstanding Former Parent stock options and RSUs upon
the effectiveness of the Separation in the fourth quarter of 2022. Non-
cash share-based compensation expense was higher in the year
ended December 31, 2022 primarily because expense allocated from
the Former Parent equity plan was based on equity awards with higher
grant date fair value.
General and Administrative Expenses
G&A expenses, including non-cash share-based compensation
costs, were $62.8 million for the year ended December 31, 2023,
compared to $130.9 million for the year ended December 31, 2022.
The decrease of $68.1 million was primarily due to decreased non-
cash share-based compensation costs.
Non-cash share-based compensation expense was $12.8 million
for the year ended December 31, 2023, a decrease of $64.4 million as
compared to the same period in 2022. Non-cash share-based
compensation expense for the year ended December 31, 2022
included $70.6 million 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 in the fourth quarter of 2022.
Non-cash share-based compensation expense was higher in the year
ended December 31, 2022 primarily because expense allocated from
the Former Parent equity plan was based on equity awards with higher
grant date fair value.
Other Income (Expense), Net
Other income (expense), net was other income of $26.5 million for
the year ended December 31, 2023, compared to other expense of
$1.9 million for the year ended December 31, 2022. The increase of
$28.4 million in other income (expense), net was primarily due to
increased net investment income of $14.5 million and increased
service revenue from the Transition Service Agreement we entered
into with the Former Parent of $5.2 million in 2023, as compared to the
same period in the prior year, as well as a $10.0 million impairment
loss recognized during the fourth quarter of 2022 on our Artizan Series
A-2 Preferred Stock Investment.
(Benefit) Provision for Income Taxes
We recorded a benefit for income taxes of $1.4 million for the
year ended December 31, 2023, compared
to a provision for income taxes of $0.4 million for the year ended
December 31, 2022. The decrease in the income tax provision as
compared to 2022 was primarily attributable to the Company adopting
the guidance contained in the Notice. See further discussion of the
Notice in "Components of Our Results of Operations" included in Item
7, "Management’s Discussion and Analysis of Financial Condition and
Results of Operations" of this report.
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, regulatory and
commercial milestones and royalty payments. We may also incur
expenses in connection with the in-license or acquisition of additional
product candidates.
Historically, for periods prior to the Separation, 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.
From the Separation through February 29, 2024, we have funded
our operations primarily with the cash contribution received from the
Former Parent at the Separation and proceeds from the public
offerings of our common shares. 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. We
have incurred recurring losses since our inception and expect to
continue to generate operating losses for the foreseeable future.
As of December 31, 2023, we had cash and cash equivalents of
$248.4 million and marketable securities of $133.4 million. 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 provided by (used in) 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,
2023
2022
(331,725) $
129,830
211,908
(497)
9,516 $
(297,689) $
(304,790)
767,597
429
165,547 $
$
$
2021
(145,840)
944
138,447
—
(6,449)
Operating Activities
Net cash used in operating activities was $331.7 million in 2023,
$297.7 million in 2022, and $145.8 million in 2021. The $34.0 million
increase in net cash used in operating activities in 2023 was driven
primarily by an increase in payments for clinical operations, clinical
supply, discovery operations and personnel costs to support our
acquired and late-stage programs partially offset by an increase in
collections of income tax refunds, collections related to the transition
services agreement with Pfizer, and interest received on cash and
restricted cash, cash equivalents, and debt securities.
Investing Activities
Net cash provided by investing activities was $129.8 million in
2023, and $0.9 million in 2021, and net cash used in investing
activities was $304.8 million in 2022. The $429.7 million increase in net
cash provided by investing activities in 2023 was driven primarily by an
increase in proceeds from sales and maturities of marketable
securities, a decrease in purchases of marketable securities (see Note
3, "Marketable Securities," to the Consolidated Financial Statements),
and a decrease in cash payments for IPR&D asset acquisition.
Financing Activities
Net cash provided by financing activities was $211.9 million in
2023, $767.6 million in 2022, and $138.4 million in 2021. The $555.7
million decrease in net cash provided by financing activities in 2023
was driven primarily by a decrease in proceeds from net transfers from
Parent due to the Company operating as a standalone entity for the
year ended December 31, 2023 and a decrease in 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, "Related Party Transactions," to the Consolidated
Financial Statements).
October 2023 Public Offering
On October 5, 2023, we closed an underwritten public offering of
11,761,363 of our common shares, which included the exercise in full
of the underwriters' option to purchase additional shares, at a price to
the
public of $22.00 per share. The net proceeds raised in the offering,
after deducting underwriting discounts and expenses of the offering
payable by us, were approximately $242.4 million. The net proceeds
received from the offering are being used for general corporate
purposes.
Equity Distribution Agreement
In October 2023, we entered into an equity distribution
agreement pursuant to which we may offer and sell common shares
having an aggregate offering price of up to $150.0 million from time to
time through or to the sales agent, acting as our agent or principal (the
"Equity Distribution Agreement"). Sales of our common shares, if any,
will be made in sales deemed to be “at-the-market offerings”. The
sales agent is not required to sell any specific amount of securities but
will act as our sales agent using commercially reasonable efforts
consistent with its normal trading and sales practices, on mutually
agreed terms between the sales agent and us. We currently plan to
use the net proceeds from any at-the-market offerings of our common
shares for general corporate purposes.
As of December 31, 2023, we have issued and sold no common
shares under the Equity Distribution Agreement.
October 2022 Public Offering
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. The net proceeds from
the offering are being used for general corporate purposes.
Funding Requirements
We expect our expenses to increase in connection with our
ongoing activities, particularly as we advance and expand preclinical
activities, clinical trials and
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potential commercialization of our product candidates. Our costs will
also increase as we:
marketing and distribution, 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
discovery programs and 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;
establish and 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 our product
candidates, we expect to incur commercialization expenses related to
product manufacturing, sales,
Because of the numerous risks and uncertainties associated with
research, development and commercialization of pharmaceutical
product candidates, we are unable to estimate the exact amount of our
working capital requirements. Our future funding requirements will
depend on and could increase significantly as a result of many factors,
including:
•
•
•
•
•
•
•
the scope, progress, results and costs of researching and
developing our product candidates, and conducting preclinical
studies and clinical trials;
the costs, timing and outcome of regulatory review of our
product candidates;
the costs and timing of hiring new employees to support our
continued growth;
the costs of preparing, filing, and prosecuting patent
applications, maintaining and enforcing our intellectual
property rights and defending intellectual property-related
claims;
the extent to which we acquire or in-license other product
candidates and technologies;
the timing, receipt and amount of sales of, or milestone
payments related to or royalties on, our current or future
product candidates, if any; and
other capital expenditures, working capital requirements, and
other general corporate activities.
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.
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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, 2023
and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:
In thousands
Total
2024
Payments Due by Period
2025-2026
2027-2028
Thereafter
(1)
Operating leases
Purchase obligations
Research commitments
(2)
Total
$
$
39,780 $
5,020 $
9,687 $
8,454 $
16,619
36,539
76,319 $
36,539
41,559 $
9,687 $
—
8,454 $
—
16,619
(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, 2023, the Company had
remaining maximum research commitments in excess of one year of approximately $9,025, 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 approximately one year.
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
Accrued Research and Development Expenses
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.
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:
• vendors, including central laboratories, in connection with
preclinical development activities;
• CROs and investigative sites in connection with preclinical and
clinical studies; and
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• CMOs in connection with drug substance and drug product
Recently Issued Accounting Pronouncements
formulation of preclinical and clinical trial materials.
We base expenses related to preclinical studies and clinical trials
on our estimates of the services received and efforts expended
pursuant to quotes and contracts with multiple research institutions
and CROs that conduct and manage preclinical studies and clinical
trials on our behalf as well as estimates of services and materials
consumed by CMOs that manufacture drug substances and products
on our behalf. The financial terms of these agreements are subject to
negotiation, vary from contract to contract and may result in uneven
payment flows. There may be instances in which payments made to
our vendors will exceed the level of services provided and result in a
prepayment of the expense. Payments under some of these contracts
depend on factors such as the successful enrollment of patients and
the completion of clinical trial milestones. In accruing service fees, we
estimate the time period over which services will be performed and the
level of effort to be expended in each period. If the actual timing of the
performance of services or the level of effort varies from the estimate,
we adjust the accrual or the amount of prepaid expenses accordingly.
Although we do not expect our estimates to be materially different from
amounts actually incurred, our understanding of the status and timing
of services performed relative to the actual status and timing of
services performed may vary and may result in reporting amounts that
are too high or too low in any particular period. To date, there have not
been any material adjustments to our prior estimates of accrued
research and development expenses.
A description of recently issued accounting pronouncements that
may potentially impact our financial position and results of operations
is disclosed in Note 2, "Summary of Significant Accounting Policies," to
our consolidated financial statements appearing at the end of this
Annual Report.
Emerging Growth Company Status
The Jumpstart Our Business Startups (JOBS) Act (the "JOBS
Act") permits an “emerging growth company” to take advantage of an
extended transition period to comply with new or revised financial
accounting standards applicable to public companies until those
standards would otherwise apply to nonpublic companies. As an
emerging growth company, we also were exempt from Section 404(b)
of the Sarbanes-Oxley Act of 2002 (Sarbanes-Oxley), which would
require independent auditors to report on the effectiveness of the
Company's internal control over financial reporting.
As of June 30, 2023, the market value of our common stock that
was held by non-affiliates exceeded $700 million, and as a result, we
no longer qualified as an emerging growth company as of December
31, 2023 when we became a large accelerated filer. Therefore, we are
required to comply with new or revised financial accounting standards
as of the effective dates applicable to public companies that are not
emerging growth companies. In addition, we are required to comply
with Section 404(b) of Sarbanes-Oxley.
Cost Allocations
Smaller Reporting Company Status
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.
A “smaller reporting company,” as defined in Rule 12b-2 under
the Exchange Act, is 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.
As of June 30, 2023, the aggregate market value of our common
shares held by non-affiliates exceeded $700 million. As a result, we
became a “large accelerated filer” and no longer qualify as a “smaller
reporting company.” However, we are not required to reflect the
change in our “smaller reporting company” status, or comply with the
associated increased disclosure obligations, until our quarterly report
for the three-month period ended March 31, 2024. We may continue to
take advantage of certain reduced disclosures available to smaller
reporting companies through the filing of this Annual Report on Form
10-K for the year ending December 31, 2023.
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Item 7A. Quantitative and Qualitative Disclosures about Market
Risks
investments in cash equivalents and short-term debt securities, to the
extent recorded on the consolidated balance sheet.
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, 2023 and 2022.
We do not engage in any hedging activities against changes in
foreign currency exchange rates.
Interest Rate Risk
As of December 31, 2023, 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 $(0.3)
million and $0.3 million, respectively. 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
We have not experienced any credit losses or recorded any
allowance for credit losses related to our cash, cash equivalents, and
short-term debt securities.
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.
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
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31, 2023, our disclosure controls and procedures were effective at the
reasonable assurance level.
Management's Report on Internal Control over Financial
Reporting
Management of the Company is responsible for establishing and
maintaining adequate internal control over financial reporting as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our
internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles.
Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods
are subject to the risk that controls may become inadequate because
of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
Management conducted an evaluation of the effectiveness of our
internal control over financial reporting as of December 31, 2023
based on the framework in Internal Control-Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the
Treadway Commission ("COSO"). Based on that evaluation,
management has concluded that the Company's internal control over
financial reporting was effective as of December 31, 2023.
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Report of Independent Registered Public Accounting Firm
The effectiveness of our internal control over financial reporting as of December 31, 2023 has been audited by Ernst & Young LLP., an independent
registered public accounting firm, as stated in their report, which is included below.
To the Shareholders and the Board of Directors of Biohaven Ltd.
Opinion on Internal Control Over Financial Reporting
Report of Independent Registered Public Accounting Firm
We have audited Biohaven Ltd.’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control
—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In
our opinion, Biohaven Ltd. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023,
based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
consolidated balance sheets of the Company as of December 31, 2023 and 2022, 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, 2023, and the related notes and our report dated
February 29, 2024 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting.
Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm
registered with the 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing
and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s
internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide
reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
Hartford, Connecticut
February 29, 2024
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Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial
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, 2023 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
During the quarter ended December 31, 2023, none of our
directors or officers adopted or terminated a "Rule 10b5-1 trading
arrangement" or "non-Rule 10b5-1 trading arrangement," as each term
is defined in Item 408 of Regulation S-K.
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 2024 Annual Meeting of
Shareholders (the "2024 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 2024 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 2024 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 2024 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 2024 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 2024 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 2024 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
10.5
10.1 #
10.2 #
10.3 #
10.4 #
3.1
2.1
2.2
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).
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).
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).
10.9 +
10.8 +
10.6 +
10.7 +
10.11 +
10.12 +
10.13 +
10.10 +
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10.14 +
10.15 +
10.16 +
10.17 +
10.18 #
10.19 #
10.20 +
10.21 +
10.22 #
21.1
23.1
24.1
31.1
31.2
32.1 *
97
101
104
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 (Incorporated by reference t
Exhibit 10.18 to the Company's Form 10-K (File No. 001-41477) filed on March 23, 2023).
Development and License Agreement, dated as of March 21, 2023, by and between Hangzhou Highlightll Pharmaceutical Co. Ltd. and
Biohaven Therapeutics LTD. (incorporated by reference to Exhibit 10.1 to the Company's Form 10-Q (File No. 001-41477) filed on May 12,
2023).
Amendment to Development and License Agreement dated March 21, 2023, dated as of April 14, 2023, by and between Hangzhou
Highlightll Pharmaceutical Co. Ltd. and Biohaven Therapeutics LTD. (incorporated by reference to Exhibit 10.2 to the Company's Form 10-
(File No. 001-41477) filed on May 12, 2023).
Form of Nonstatutory Share Option Grant Notice (Early Exercise) and Share Option Agreement under the 2022 Equity Incentive Plan
(incorporated by reference to Exhibit 10.3 to the Company's Form 10-Q (File No. 001-41477) filed on May 12, 2023).
Form of Amendment to Share Option Grant Notice and Option Agreement under the 2022 Equity Incentive Plan (incorporated by reference
to Exhibit 10.4 to the Company's Form 10-Q (File No. 001-41477) filed on May 12, 2023).
Second Amendment to Development and License Agreement dated March 21, 2023, dated as of December 10, 2023, by and between
Hangzhou Highlightll Pharmaceutical Co. Ltd. and Biohaven Therapeutics LTD.
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.
Incentive Compensation Recovery Policy.
The following materials from the Registrant's Annual Report on Form 10-K for the year ended December 31, 2023 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, 2023, 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.
103
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: February 29, 2024
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.
104
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 Heffernan
/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)
February 29, 2024
Chief Financial Officer
(Principal Financial Officer)
February 29, 2024
Chief Accounting Officer
(Principal Accounting Officer)
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
February 29, 2024
Director
Director
Director
Director
Director
Director
Director
105
Table of Contents
Biohaven Ltd.
Financial Statements
For the Years Ended December 31, 2023, 2022 and 2021
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, 2023 and 2022, 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, 2023, 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, 2023 and 2022, and the results of its operations
and its cash flows for each of the three years in the period ended December 31, 2023, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the
Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control-Integrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 29, 2024
expressed an unqualified opinion thereon.
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 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. 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.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or
required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2)
involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a
separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
F-2
Table of Contents
Accounting for Research and Development Costs and Related Prepaid and Accrued Costs
Description of the
Matter
As discussed in Note 2 to the consolidated financial statements, the Company recognizes estimated ongoing research costs
based on management’s analysis of the progress of the studies or clinical trials, including the phase or completion of events,
invoices received and contracted costs. During 2023, the Company incurred $373.3 million in research and development
expense. As of December 31, 2023, the Company recorded prepaid expenses of $35.2 million which included prepayment for
certain clinical trial costs and recorded $29.5 million for accrued clinical trial costs.
Auditing management’s accounting for research and development costs was challenging due to the estimation required by
management to determine the cost incurred for the services rendered on or prior to the balance sheet date for preclinical
development activities, preclinical and clinical studies and drug substance and drug product formulation for preclinical and
clinical trial material. The Company has contracts with multiple clinical research organizations (“CROs”) that conduct and
manage studies on its behalf, as well as contract manufacturing organizations (“CMOs”) that perform manufacturing activities.
The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven
payment flows during the period.
How We Addressed
the Matter in Our
Audit
We obtained an understanding, evaluated the design, and tested the operating effectiveness of relevant controls over the
Company’s accounting for research and development costs, including controls over the determination of estimates of the
progress completed, expected milestones or expected service period and the completeness and accuracy of the data used in
determining prepaid and accrued research and development expenses estimate.
To evaluate the completeness, measurement and valuation of the research and development costs and related prepaid and
accrued costs, our audit procedures included, among others, reading certain contracts with CROs and CMOs to evaluate the
financial and other relevant contractual terms, testing the accuracy and completeness of the underlying data used by
management to estimate the recorded balances, and testing the mathematical accuracy of the calculation of the accrued or
prepaid balances. We also evaluated management’s estimates of progress, expected milestones, or expected service period
for a sample of clinical trials and manufacturing efforts by making direct inquiries of the Company’s research and development
personnel who oversee the research and development program. Further, we requested direct confirmation of total contract
value, costs incurred, amounts invoiced, invoices unpaid and expected service period as of December 31, 2023, from a
sample of CROs and CMOs. To evaluate the completeness of the accrued research and development costs we also examined
invoices received from a sample of vendors and a sample of cash disbursements made to third-party service providers
subsequent to December 31, 2023, to the extent such invoices were received, or payments were made prior to the date that
the financial statements were issued.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2022.
Hartford, Connecticut
February 29, 2024
F-3
BIOHAVEN LTD.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share amounts)
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)
Shareholders' Equity:
Preferred shares, no par value; 10,000,000 shares authorized, no shares issued and outstanding as of December 31,
2023 and 2022
Common shares, no par value; 200,000,000 shares authorized as of December 31, 2023 and 2022; 81,115,723 and
68,190,479 shares issued and outstanding as of December 31, 2023 and 2022, respectively
Additional paid-in capital
Accumulated deficit
Accumulated other comprehensive (loss) income
Total shareholders' equity
Total liabilities and shareholders' equity
December 31,
2023
2022
$
$
$
$
248,402 $
133,417
35,242
13,252
—
12,133
442,446
17,191
18,400
1,390
33,785
513,212 $
15,577 $
—
39,846
55,423
27,569
2,245
85,237
—
887,528
39,804
(499,292)
(65)
427,975
513,212 $
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
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
Operating expenses:
Research and development
General and administrative
Total operating expenses
Loss from operations
Other income (expense):
Gain from equity method investment
Other income (expense), net
Total other income (expense), net
Loss before (benefit) provision for income taxes
(Benefit) 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)
2023
Year Ended December 31,
2022
2021
$
$
$
373,281 $
62,770
436,051
(436,051)
—
26,500
26,500
(409,551)
(1,383)
(408,168) $
(5.73) $
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)
Weighted average common shares outstanding—basic and diluted
71,200,527
44,741,316
39,375,944
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
BIOHAVEN LTD.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Amounts in thousands)
Net loss
Other comprehensive (loss) income, net of tax:
Foreign currency translation adjustments
Net unrealized gain (loss) related to available-for-sale debt securities
Other comprehensive (loss) income
Comprehensive loss
2023
Year Ended December 31,
2022
2021
(408,168) $
(570,279) $
(213,796)
(497)
148
(349)
(408,517) $
429
(145)
284
(569,995) $
—
—
—
(213,796)
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-6
Table of Contents
BIOHAVEN LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Amounts in thousands, except share amounts)
Common Shares
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
Balances as of December 31, 2022
Net loss
Issuance of common shares, net of offering costs
Issuance of common shares as payment for license
agreement
Issuance of common shares under 2022 Equity
Incentive Plan and employee share purchase plan
Non-cash share-based compensation expense
Other comprehensive loss
Balances as of December 31, 2023
Shares
Amount
Net
Investment
from Former
Parent
Additional
Paid-in Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
(Loss) Income
Total
Shareholders'
Equity
— $
—
— $
—
—
—
—
—
—
—
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
—
—
68,190,479
—
11,761,363
772
—
—
615,742
—
242,425
721,136
21,814
442,745
—
—
7,547
—
—
—
—
—
—
—
—
—
—
—
—
— $
—
— $
—
— $
—
—
—
—
—
—
(321)
14,189
—
13,869
—
—
—
(2,852)
28,787
—
—
(91,124)
—
—
—
—
—
—
(91,124)
(408,168)
—
—
—
—
—
—
—
—
—
—
—
—
284
284
—
—
—
—
—
(349)
16,781
(213,796)
231,706
34,691
(570,279)
776,630
—
282,804
451
14,189
284
538,771
(408,168)
242,425
21,814
4,695
28,787
(349)
81,115,723 $
887,528 $
— $
39,804 $
(499,292) $
(65) $
427,975
The accompanying notes are an integral part of these consolidated financial statements.
F-7
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
Issuance of common shares as payment for license agreement
Gain from equity method investment
Other non-cash items
Changes in operating assets and liabilities:
Prepaid expenses, income tax receivable, and other current and non-current assets
Accounts payable
Accrued expenses and other current and non-current liabilities
Net cash used in operating activities
Cash flows from investing activities:
Proceeds from maturities of marketable securities
Proceeds from sales of marketable securities
Purchases of marketable securities
Purchases of property and equipment
Payment for IPR&D asset acquisition
Cash acquired in business acquisition
Purchase of Artizan preferred stock
Net cash provided by (used in) investing activities
Cash flows from financing activities:
Net transfers from Former Parent
Change in restricted cash due to Former Parent
Proceeds from issuance of common shares
Payments of issuance costs
Proceeds from issuance of common shares under 2022 Equity Incentive Plan and employee share purchase plan
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 (received) paid for income taxes
Year ended December 31,
2022
2021
2023
$
(408,168)
$
(570,279)
$
(213,796)
28,787
—
—
6,912
—
21,814
—
(5,683)
27,176
4,874
(7,437)
(331,725)
322,079
4,920
(194,121)
(3,048)
—
—
—
129,830
—
(35,212)
243,225
(800)
4,695
211,908
(497)
9,516
242,604
252,120
—
(33,300)
$
$
$
$
$
$
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)
(9,182)
1,025
9,821
(145,840)
—
—
—
(938)
—
1,882
—
944
138,052
—
—
—
395
138,447
—
(6,449)
83,506
77,057
107
16,594
$
$
$
$
$
$
The accompanying notes are an integral part of these consolidated financial statements.
F-8
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 biopharmaceutical company focused on the discovery, development,
and commercialization of life-changing treatments in key therapeutic
areas, including immunology, neuroscience, and oncology. The
Company is advancing its innovative therapeutic portfolio of
therapeutics, leveraging its proven drug development experience and
multiple, proprietary drug development platforms. Biohaven's extensive
clinical and preclinical programs include Kv7 ion channel modulation
for epilepsy and mood disorders; extracellular protein degradation for
immunological diseases; Transient Receptor Potential Melastatin 3
("TRPM3") antagonism for migraine and neuropathic pain; Tyrosine
Kinase 2/Janus Kinase 1 ("TYK2/JAK1") inhibition for
neuroinflammatory disorders; glutamate modulation for obsessive-
compulsive disorder (“OCD”); and spinocerebellar ataxia ("SCA");
myostatin inhibition for neuromuscular and metabolic diseases,
including spinal muscular atrophy ("SMA") and obesity; and antibody
recruiting, bispecific molecules and antibody drug conjugates ("ADCs")
for cancer.
The Company is subject to risks and uncertainties common to
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 Bulldog (BVI) Ltd.,
a wholly owned subsidiary of Pfizer (“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 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 (as defined below) of the business,
operations, and activities that are not the calcitonin gene-related
peptide ("CGRP") Business (as defined below), including the Kv7 ion
channel activators, glutamate modulation, myeloperoxidase ("MPO")
inhibition and myostatin inhibition platforms, preclinical product
candidates, and certain corporate infrastructure 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, through a series of internal restructuring
transactions. Descriptions of historical business activities in these
Notes to the 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.
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 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 (the "SEC") on September 22,
2022. 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 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 of the Legacy
Equity Award Settlement Plan. As a result of the Distribution, Biohaven
became an independent, publicly traded
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)
company. Collectively, we refer to the Distribution and Spin-Off
throughout this Annual Report on Form 10-K as the "Separation."
The Separation 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
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 SEC.
Periods Prior to the Separation
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.
For periods prior to the Separation, 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 for 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 for 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 amounts in the consolidated financial statements
for the periods prior to the Separation were calculated on a separate
return method and is presented as if the Company’s operations were
separate taxpayers in the respective jurisdiction. Therefore, tax
expense, cash tax payments, and items of current and deferred taxes
may not be reflective of the Company's actual tax balances prior to or
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 settled is reflected in the
consolidated statement of cash flows within financing activities as “Net
transfers from Former Parent.” See Note 14, "Related Party
F-10
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)
Transactions," for additional information regarding related party
transactions.
For periods prior to the Separation, the Company's equity
balance in these consolidated financial statements represents the
excess of total assets over liabilities. Net investment from Former
Parent is primarily impacted by contributions from the Former Parent,
which are the result of net funding provided by or distributed to the
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 during the fourth quarter of 2022 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.
Going Concern
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 February 29, 2024, the Company has funded its
operations primarily with funding from the Former Parent, proceeds
from the public offerings of its common shares (refer to Note 7,
"Shareholders' Equity"), and the cash contribution received from the
Former Parent at the Separation (refer to Note 14, "Related Party
Transactions.") The Company has incurred recurring losses since its
inception and expects to continue to generate operating losses for the
foreseeable future.
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
Use of Estimates
The preparation of consolidated financial statements in conformity
with GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure
of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of expenses during the
reporting periods. Significant estimates and assumptions reflected in
these consolidated financial statements include, but are not limited to,
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.
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 represents cash held
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)
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 continued to serve as the Former Parent’s distributor and
agent for the distribution of the pharmaceutical product Nurtec ODT in
the United States. The Distribution Services Agreement was
terminated during the second quarter of 2023, and, as such, restricted
cash held on behalf of the Former Parent on the consolidated balance
sheet was $0 as of December 31, 2023. 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 primarily
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.
Restricted cash included in other non-current 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,
2023, 2022 and 2021, respectively, in the consolidated statements of
cash flows:
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
2023
248,402 $
December 31,
2022
204,877 $
$
2021
76,057
—
35,212
1,318
2,400
117
2,398
—
250
750
$
252,120 $
242,604 $
77,057
Marketable Securities
We invest our excess cash balances in marketable securities of
highly rated financial institutions, which consist of 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 on the consolidated balance sheets. 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 shareholders’
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 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.
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, 2023 and
December 31, 2022, the
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)
Company's property and equipment consisted of building and land,
office and lab equipment, computer hardware and software, furniture
and fixtures, and leasehold improvements.
The Company did not record any impairment charges relating to
its acquired IPR&D for the years ended December 31, 2023, 2022 or
2021.
The fixed assets have the following useful lives:
Building
Office equipment
Computer hardware and
software
Lab equipment
Furniture and fixtures
Leasehold improvements
30 years
3 - 5 years
3 - 5 years
3 years
3 years
Shorter of the useful life or
remaining lease term
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 reviews amounts capitalized as acquired IPR&D for
impairment annually, as of November 30, and whenever events or
changes in circumstances indicate that the carrying value of the assets
might not be recoverable. If impairment indicators are present, the
Company performs 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.
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
Pharmaceuticals, Inc. (“Kleo”), we recorded intangible assets
consisting of IPR&D assets of $18,400, which included an oncology
therapeutic candidate entering Phase I clinical trials and a Multimodal
Antibody Therapy Enhancer ("MATE") conjugation asset in the
planning stage for clinical development, and goodwill of $1,390.
Impairment of Long-lived Assets
The Company reviews its long-lived assets for indicators of
impairment annually, as of November 30, and whenever events or
changes in circumstances indicate that the carrying value of an asset
may not be recoverable. 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 did not record any impairment charges relating to
its long-lived assets for the years ended December 31, 2023, 2022 or
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
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)
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, 2023, the Company had restricted cash of $2,400 included in other
non-current assets and $250 included in other 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.
Restricted cash is generally invested in time deposits and short-term
money market funds. See Note 12, "Commitments 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.
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 expenses are recorded as research and development
expenses are 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.
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)
Foreign Currency
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 shareholders’ equity and weighted average
exchange rates for operating results. The resulting translation gains
and losses are included in accumulated other comprehensive (loss)
income, net of tax, in shareholders’ equity.
For U.S. dollar functional currency subsidiaries, foreign currency
assets and liabilities are remeasured into U.S. dollars at end-of-period
exchange rates, except for nonmonetary balance sheet accounts
which are remeasured at historical exchange rates. Revenues and
expenses are remeasured at average exchange rates in effect during
each period, except for those expenses related to the nonmonetary
balance sheet amounts which are remeasured at historical exchange
rates. Gains or losses from foreign currency remeasurement are
included in other income (expense), net in the consolidated statement
of operations.
The Company's aggregate foreign currency transaction gains
and losses and effects of foreign currency remeasurements were
immaterial for the years ended December 31, 2023, 2022 and 2021.
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 share 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.
Share-Based Compensation for Periods Prior to the Separation
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.
Share-Based Compensation
Income Taxes
The Company measures share options and restricted share unit
awards granted to employees, non-employees, and directors based on
the fair value on the date of the grant and recognizes compensation
expense of those awards, over the requisite service period, which is
generally the vesting period of the respective award. Forfeitures are
accounted for as they occur. Generally, the Company issues share
options and restricted share units with only service-based vesting
conditions and records the expense for these awards using the
straight-line method. The Company also issues share options with
performance-based vesting conditions and records expense for these
awards when the Company concludes that it is probable that the
performance condition will be achieved.
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
The Company accounts for income taxes using the asset and
liability method, which requires the recognition of deferred tax assets
and liabilities for the expected future tax consequences of events that
have been recognized in the consolidated financial statements or in
the Company's tax returns. Deferred tax assets and liabilities are
determined on the basis of the differences between the 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
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)
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 sheets.
Segment Information
The Company manages its operations as a single segment, the
development of therapies targeting areas including neuroscience,
immunology and oncology. 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 2023 and 2022,
materially all the Company's long-lived assets were held in the United
States.
Recently Issued Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment
Reporting—Improvements to Reportable Segment Disclosures, which
improves reportable segment disclosure requirements, primarily
through enhanced disclosures about significant segment expenses.
The amendments in ASU No. 2023-07 apply to public entities,
including those with a single reportable segment, and are effective for
fiscal years beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024, with early
adoption permitted. The Company is currently evaluating the impact
ASU No. 2023-07 will have on its consolidated financial statements
In December 2023, the FASB issued ASU No. 2023-09, Income
Taxes (Topic 740): Improvements to Income Tax Disclosures, to
improve the transparency of income tax disclosures by requiring
consistent categories and greater disaggregation of information in the
rate reconciliation and income taxes paid disaggregated by jurisdiction.
The ASU also includes certain other amendments to improve the
effectiveness of income tax disclosures. The amendments in ASU
2023-09 are effective for fiscal years beginning after December 15,
2024, with early adoption permitted for annual financial statements that
have not yet been issued or made available for issuance. The
Company is currently evaluating the impact ASU No. 2023-09 will have
on its consolidated financial statements.
F-16
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
3. Marketable Securities
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, 2023 and December 31, 2022 is as follows:
December 31, 2023
Debt securities
U.S. corporate bonds
Foreign corporate bonds
U.S. treasury bills
Total
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
$
$
$
$
46,228 $
7,180
113,908
167,316 $
142,697 $
36,766
89,308
41,734
310,505 $
— $
—
—
— $
— $
—
—
—
— $
46,228 $
7,180
113,908
167,316 $
142,697 $
36,766
89,308
41,734
310,505 $
7 $
—
27
34 $
25 $
9
17
—
51 $
(24) $
(7)
—
(31) $
46,211
7,173
113,935
167,319
(135) $
(32)
(5)
(24)
(196) $
142,587
36,743
89,320
41,710
310,360
The fair values of debt securities available-for-sale by classification in the consolidated balance sheets were as follows:
Cash and cash equivalents
Marketable securities
Total
December 31, 2023
December 31, 2022
$
$
33,902 $
133,417
167,319 $
49,896
260,464
310,360
The net amortized cost and fair value of debt securities available-for-sale at December 31, 2023 and 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
December 31, 2023
December 31, 2022
Net Amortized
Cost
Fair Value
Net Amortized
Cost
Fair Value
$
167,316 $
167,319 $
310,505 $
310,360
F-17
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, 2023 and 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, 2023
Debt securities
U.S. corporate bonds
Foreign corporate bonds
Total
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
6 $
1
7 $
29,537 $
7,173
36,710 $
16 $
3
1
4
24 $
104,508 $
31,886
9,762
41,710
187,866 $
(24)
(7)
(31)
(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, 2023 or
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, 2023, 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
Gross investment income includes interest income from debt securities available-for-sale, money-market funds, cash, and restricted cash. Net
investment income included in other income (expense), net in the consolidated statements of operations for the years ended December 31, 2023 and
December 31, 2022 were as follows:
Debt securities (including realized losses)
Other investments
Gross investment income (including realized losses)
Investment expenses
Net investment income
The Company had no net investment income during the year ended December 31, 2021.
F-18
2023
2022
$
$
10,490 $
7,432 $
17,922 $
(236)
17,686 $
1,454
1,781
3,235
(27)
3,208
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
3. Marketable Securities (Continued)
We utilize the specific identification method in computing realized gains and losses on sales of debt securities. The proceeds from the sale of debt
securities available-for-sale and the related gross realized losses for the year ended December 31, 2023 were as follows:
Proceeds from sales
Gross realized losses
$
$
2023
4,920
39
The Company had no sales of debt securities during the years ended December 31, 2022 or 2021.
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 sheets at December 31, 2023 and December 31, 2022
were as follows:
Balance Sheet Classification
Type of Instrument
Level 1
Fair Value Measurement Using:
Level 3
Level 2
Total
December 31, 2023
Assets:
Cash equivalents
Cash equivalents
Cash equivalents
Marketable securities
Marketable securities
Marketable securities
Other non-current assets
Total assets
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
Foreign corporate bonds
Money market funds
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
— $
27,901
6,001
76,160
40,210
7,173
—
157,445 $
— $
39,948
9,948
49,372
132,639
41,710
36,743
310,360 $
59,199 $
—
—
9,874
—
—
1,900
70,973 $
72,866 $
—
—
—
—
—
—
72,866 $
$
$
$
$
F-19
— $
—
—
—
—
—
—
— $
— $
—
—
—
—
—
—
— $
59,199
27,901
6,001
86,034
40,210
7,173
1,900
228,418
72,866
39,948
9,948
49,372
132,639
41,710
36,743
383,226
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)
The Company had no financial liabilities measured at fair value on a recurring basis as of December 31, 2023 or December 31, 2022.
There were no securities transferred between Level 1, 2, and 3 during the years ended December 31, 2023 or December 31, 2022.
The following is a description, including valuation methodology,
Depreciation expense was $3,369, $1,361 and $673 for the
of the financial assets and liabilities measured at fair value on a
recurring basis:
Cash Equivalents
Cash equivalents at December 31, 2023 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
Quoted prices for identical assets in active markets are
considered Level 1 and consist of on-the-run U.S. Treasury bills. 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.
5. Balance Sheet Components
Property and Equipment, Net
Property and equipment, net consisted of the following:
As of December
31, 2023
As of December
31, 2022
Building and land
Leasehold improvements
Computer hardware and software
Office and lab equipment
Furniture and fixtures
Accumulated depreciation
Equipment not yet in service
Property and equipment, net
$
$
$
11,728 $
802
875
9,961
1,550
24,916 $
(8,283)
16,633
558
17,191 $
12,297
—
780
5,501
1,202
19,780
(4,914)
14,866
2,646
17,512
years ended December 31, 2023, 2022 and 2021, respectively.
Equipment not yet in service primarily consisted of lab equipment
that had not been placed into service as of December 31, 2023 or
2022.
Other Non-current Assets
Other non-current assets consisted of the following:
As of December 31,
2023
As of December 31,
2022
Operating lease right-of-use assets
Other
Other non-current assets
$
$
31,385 $
2,400
33,785 $
34,928
2,585
37,513
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the
following:
As of December 31,
2023
As of December 31,
2022
Accrued employee compensation
and benefits
Accrued clinical trial costs
Operating lease liability - current
portion
Other accrued expenses and other
current liabilities
Accrued expenses and other current
liabilities
$
$
6. Acquisitions
Kv7 Platform Acquisition
837 $
29,501
3,308
6,200
14,603
17,788
3,019
8,696
39,846 $
44,106
In April 2022, the Company closed the acquisition from Knopp
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
F-20
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
6. Acquisitions (Continued)
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. 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 consolidated statement of
operations for a regulatory milestone payment which became due and
was paid to Knopp during 2022.
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, 2023.
Pyramid Acquisition
In January 2024, the Company acquired Pyramid Biosciences,
Inc. ("Pyramid"), pursuant to an Agreement and Plan of Merger, dated
January 7, 2024 ("the Pyramid Agreement"). In consideration for the
Pyramid acquisition, Biohaven made an upfront payment of $10,000 in
common shares of the Company.
Biohaven has also agreed to make additional success-based
payments comprised of (i) up to $10,000 based on developmental and
regulatory milestones for
the lead asset, BHV-1510 (formerly known as PBI-410), (ii) up to an
additional $30,000 based on developmental and regulatory milestones
for a second asset (formerly known as PBI-200) and (iii) up to $40,000
for commercial sales-based milestones of BHV-1510. Contingent
developmental and regulatory milestone payments may be paid in
cash or Biohaven common shares at the election of Biohaven and
commercial sales-based milestones are to be made in cash.
During the first quarter of 2024, the Company incurred $5,000 of
R&D expense related to a regulatory milestone which became due
under the Pyramid Agreement.
7. Shareholders' Equity
Issuance of common shares for the Highlightll Agreement
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") pursuant
to which Biohaven obtained the right to research, develop,
manufacture and commercialize Highlightll's brain penetrant dual
TYK2/JAK1 inhibitor program. In connection with the Highlightll
Agreement, in December 2023, the Company issued 721,136 common
shares valued at $21,814. See Note 11, "License Agreements," for
further detail on the Highlightll Agreement.
Issuance of Common Shares for the October 2023 Offering
In October 2023, the Company completed an underwritten public
offering of 11,761,363 of its common shares, including the exercise in
full of the underwriters' option to purchase additional common shares,
at a price to the public of $22.00 per share, pursuant to a registration
statement on Form S-3 filed with the SEC. The net proceeds raised in
the offering, after deducting underwriting discounts and expenses of
the offering payable by the Company, were approximately $242,425.
Equity Distribution Agreement
In October 2023, the Company entered into an equity distribution
agreement pursuant to which the Company may offer and sell common
shares having an aggregate offering price of up to $150,000 from time
to time through or to the sales agent, acting as its agent or principal
(the "Equity Distribution Agreement"). Sales of the Company's
common shares, if any, will be made in sales deemed to be “at-the-
market offerings”. The sales agent is not required to sell any specific
amount of securities but will act as the Company's sales agent
F-21
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
7. Shareholders' Equity (Continued)
using commercially reasonable efforts consistent with its normal
trading and sales practices, on mutually agreed terms between the
sales agent and the Company. The Company currently plans to use
the net proceeds from any at-the-market offerings of its common
shares for general corporate purposes.
As of December 31, 2023, the Company has issued and sold no
common shares under the Equity Distribution Agreement.
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.
Issuance of Common Shares in connection with the
Separation from the Former Parent
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 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 issued in connection with Former Parent share
options that were exercised on October 3, 2022 and 924,093 common
shares 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.
8. Accumulated Other Comprehensive (Loss) Income
Shareholders’ equity included the following activity in
accumulated other comprehensive (loss) income for the years ended
December 31, 2023 and 2022:
Net unrealized investment gains
(losses):
Beginning of period balance
1)
Other comprehensive income (loss)
Amounts reclassified from accumulated
other comprehensive income (loss)
Other comprehensive income (loss)
End of period balance
(2)
Foreign currency translation
adjustments:
Beginning of period balance
Other comprehensive (loss) income
(1)
End of period balance
Total beginning of period accumulated
other comprehensive income
Total other comprehensive (loss) income
Total end of period accumulated other
comprehensive (loss) income
2023
2022
$
(145) $
109
39
148
3
429
(497)
(68)
284
(349)
$
(65) $
—
(145)
—
(145)
(145)
—
429
429
—
284
284
(1) There was no tax on other comprehensive income (loss) and immaterial tax on
amounts reclassified from accumulated other comprehensive (loss) income during
the period.
(2) Amounts reclassified from accumulated other comprehensive (loss) income for
specifically identified debt securities are included in other income (expense), net in
the consolidated statements of operations.
No amounts were reclassified from accumulated other
comprehensive (loss) income during the years ended December 31,
2022 or 2021. The Company had no accumulated other
comprehensive (loss) income 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
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)
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, 2023, the 2022 Plan allows for a maximum of
11,917,619 shares of the Company's common shares to be reserved
and available for grants. Also as of December 31, 2023, there were
173,899 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 January 2024, the number of common shares
reserved for future issuance under the 2022 Plan automatically
increased by 3,244,628 common shares.
Legacy Equity Award Settlement Plan
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 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 years) using the straight-line method. Non-cash share-based
compensation expense, consisting of expense for stock options,
RSUs, and the 2022 Employee Share
F-23
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
9. Non-Cash Share-Based Compensation (Continued)
Purchase Plan (the "ESPP"), was classified in the consolidated
statements of operations as follows:
estimated using the Black-Scholes option pricing model. Share options
generally expire 10 years after the grant date.
Research and development
expenses
Allocated from the Former
Parent excluding the
Acceleration
Allocated from the Former
Parent related to the
Acceleration
2022 Equity Incentive Plan
Total research and
development expenses
General and administrative
expenses
Allocated from the Former
Parent excluding the
Acceleration
Allocated from the Former
Parent related to the
Acceleration
2022 Equity Incentive Plan
Total general and
administrative expenses
Total non-cash share-based
compensation expense
Year Ended December 31,
2022
2021
2023
$
— $
46,976 $
39,381
—
15,985
61,749
7,654
—
—
15,985
116,379
39,381
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, 2023. The total intrinsic value of
outstanding share options for the years ended December 31, 2023 and
2022 was $356,369 and $61,639, respectively. The total intrinsic value
of share options exercised for the year ended December 31, 2023 was
$7,756. The tax benefit from share options exercised for the years
ended December 31, 2023 and 2022 was not material.
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
—
12,802
39,691
6,535
—
—
12,802
77,177
26,258
$
28,787 $
193,556 $
65,639
Risk-free interest rate
Expected term (in years)
Expected volatility
Expected dividend yield
Exercise price
Year Ended December 31,
2022
2023
3.86%
4.32%
5.75
5.93
82.05%
84.60%
—%
—%
$7.00
$24.57
As of December 31, 2023, total unrecognized compensation cost
related to the unvested share-based awards was $52,190, which is
expected to be recognized over a weighted average period of
2.36 years.
Share Options
All share option grants are awarded at fair value on the date of
grant. The fair value of share options is
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)
The following table is a summary of the Company's share option activity for the year ended December 31, 2023:
Outstanding as of December 31, 2022
Granted
Exercised
Forfeited
Outstanding as of December 31, 2023
Options exercisable as of December 31, 2023
Vested and expected to vest as of December 31, 2023
Number of
Shares
Weighted
Average
Exercise
Price
8,959,215 $
2,929,616 $
(299,756) $
(209,646) $
11,379,429 $
4,746,876 $
11,379,429 $
7.00
24.57
7.68
8.17
11.48
9.46
11.48
Weighted
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value
8.99 $
8.88 $
8.99 $
356,369
158,284
356,369
The weighted average grant date fair value per share of share options granted under the Company’s share option plans during the years ended
December 31, 2023 and 2022 was $18.01 and $4.97, respectively. The Company expects approximately 6,632,553 of the unvested share options to vest
over the requisite service period.
Restricted Share Units
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 years
ended December 31, 2023 or 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.
There were no unvested restricted share units outstanding as of
December 31, 2023 and 2022. No restricted share units were granted,
forfeited, or vested, in the year ended December 31, 2023.
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
approved by shareholders of the Company on September 28, 2022.
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 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, 2023, the ESPP allows for a maximum of 1,075,673 shares of the
Company's common shares to be reserved and available for issuance
under the ESPP. As of December 31, 2023, 916,484 shares remained
available for future issuance under the ESPP. In January 2024,
811,157 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
F-25
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
9. Non-Cash Share-Based Compensation (Continued)
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 recognized compensation expense of $1,341 for
the year ended December 31, 2023. The Company did not recognize
material compensation expense related to the ESPP for the year
ended December 31, 2022.
As of December 31, 2023, there was $638 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, 2024. During the year ended December 31, 2023, 159,189
shares were issued under the ESPP.
10. Net Loss Per Share
common shareholders for the periods indicated because including
them would have had an anti-dilutive effect:
Options to purchase common
shares
11,379,429
8,959,215
Year Ended December 31,
2023
2022
11. License Agreements
The following is a summary of all license agreements that the
Company has entered into. As of December 31, 2023, the Company
has potential future developmental, regulatory, and commercial
milestone payments under these agreements of up to approximately
$101,800, $547,350, and $1,270,450, respectively.
Basic and diluted net loss per share attributable to common
shareholders of Biohaven was calculated as follows:
Yale Agreements
Numerator:
Net loss
Denominator:
Weighted
average common
shares
outstanding—
basic and diluted
(1)
Net loss per share—
basic and diluted
2023
Year Ended December 31,
2022
2021
$
(408,168) $
(570,279) $
(213,796)
71,200,527
44,741,316
39,375,944
$
(5.73) $
(12.75) $
(5.43)
(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
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, 2023, 2022 and 2021, 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
F-26
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
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.
The Company recorded research and development expense
related to the Yale MoDE SRA of $1,333, $2,666 and $150 for the
years ended December 31, 2023, 2022 and 2021, respectively. For the
years ended December 31, 2023, 2022 and 2021, the Company did
not make any milestone or royalty payments under the Yale MoDE
Agreement.
In May 2023, the Company entered into an additional sponsored
research agreement with Yale University (the "2023 Yale SRA"), which
included funding of up to $612 over the life of the agreement. For the
year ended December 31, 2023, the company recorded $367 in
research and development expense related to the 2023 Yale SRA.
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.
For the years ended December 31, 2023, 2022 and 2021, 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
F-27
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
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, 2023, 2022 and 2021, 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, 2023, 2022 and 2021, 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 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
F-28
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
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, 2023, 2022 and 2021.
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 in September 2022, for the years ended December
31, 2023, 2022 and 2021, 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 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 2023, the 2020 Artizan Agreement and 2021
Artizan Agreement were both terminated.
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.
F-29
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
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),net on the consolidated statements
of operations.
For the years ended December 31, 2023, 2022 and 2021,
excluding the upfront payments above, the Company did not record
any research and development expense or make any material
milestone payments related to the 2020 Artizan Agreement and the
2021 Artizan 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, 2023, 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 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.
For the year ended December 31, 2023, the Company recorded
$3,250 to R&D expense in the consolidated statements of operations
related to developmental milestones which became due to KU Leuven
during 2023. Excluding the upfront payments discussed above, for the
year 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 years ended December 31, 2023 and 2022, the
Company did not record any material expense or make any milestone
or royalty payments under the Taldefgrobep Alfa License Agreement.
Agreement with Hangzhou Highlightll Pharmaceutical Co. Ltd.
In March 2023, the Company entered into the Highlightll Agreement
pursuant to which Biohaven obtained the right to research, develop,
manufacture and commercialize Highlightll’s brain penetrant dual
TYK2/JAK1 inhibitor program. In connection with the Highlightll
Agreement, the Company was obligated to pay Highlightll a cash
payment of $10,000 and 721,136 common shares (collectively, "the
Highlightll Upfront Payments"), upon the completion of certain post-
closing activities. In December 2023, the Company entered into
F-30
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
11. License Agreements (Continued)
a second amendment to the Highlightll Agreement, which granted the
Company an exclusive option and right of first refusal to any Selective
TYK2 Inhibitor being developed by or on behalf of Highlightll or its
affiliates and provided for the payment of the Highlightll Upfront
Payments. As a result, the Company made a $10,000 cash payment
and issued 721,136 shares, valued at $21,814, to Highlightll during the
fourth quarter of 2023, which was recorded as R&D expense during
the year ended December 31, 2023.
Under the Highlightll Agreement, the Company is obligated to
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 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 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.
Excluding the Highlightll Upfront Payments discussed above, for
the year ended December 31, 2023, the Company did not record any
material milestone or royalty payments related to the Highlightll
Agreement.
12. Commitments and Contingencies
All consideration paid by the Former Parent in association with the
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.
Lease Agreements
The Company's leases primarily 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, 2023, 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. For periods prior to
Separation, lease costs were allocated to the Company based on a
proportional cost allocation method. Allocated operating lease cost for
periods prior to Separation and actual operating lease cost was
$5,874, $1,158 and $264 for the years ended December 31, 2023,
2022 and 2021, respectively.
The Company currently has one short-term real estate leases
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,
2022
2021
2023
Right-of-use assets
obtained in exchange
for new operating lease
liabilities
$
— $
31,342 $
478
Operating cash flows paid for operating leases were immaterial
for all periods prior to the Separation, and were $4,854 and $780 for
the years ended December 31, 2023 and December 31, 2022.
Supplemental balance sheet information related to leases is as
follows:
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,
2023
December 31,
2022
$
$
$
31,385
3,308
27,569
30,877
$
$
$
34,928
3,019
30,581
33,600
Weighted average remaining lease term
(in years)
Weighted average discount rate
8.21
6.47 %
9.08
6.55 %
F-31
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
12. Commitments and Contingencies (Continued)
The following table summarizes maturities of operating lease
liabilities as of December 31, 2023:
Operating leases
2024 $
2025
2026
2027
2028
Thereafter
Total lease payments
Less: imputed interest
Total lease liabilities $
5,020
4,782
4,905
4,509
3,945
16,619
39,780
(8,903)
30,877
West Palm Beach Lease Agreement
In June 2022, the Company entered into a lease agreement in
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 Company has entered into agreements with several CROs
to provide services in connection with the Company’s preclinical
studies and clinical trials. As of December 31, 2023, the Company had
remaining maximum research commitments in excess of one year of
approximately $9,025, 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 approximately one year.
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,
2023 or December 31, 2022.
License Agreements
The Company has entered into license agreements with various
parties for which it is obligated to make contingent and non-contingent
payments. See Note 11, "License Agreements," for additional details.
Other Agreements
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, 2023, 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.
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
F-32
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
12. Commitments and Contingencies (Continued)
December 31, 2023, 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 Company, including the Former Parent for periods prior to
the Separation, has 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, 2023, 2022 and 2021, 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, 2023 and 2022, 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 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.
The Company recorded an income tax benefit during the year
ended December 31, 2023 of $1,383 and income tax provisions of
$438 and $1,366 during the years ended December 31, 2022 and
2021, respectively, which primarily represent Federal and state taxes
related to the Company’s profitable operations in the U.S. and Ireland.
Loss before provision for income taxes consisted of the following:
BVI
Foreign
Loss before provision for
income taxes
Year Ended December 31,
2022
(598,046) $
28,205
2023
(424,647) $
15,096
2021
(211,334)
(1,096)
(409,551) $
(569,841) $
(212,430)
$
$
The provision for income taxes consisted of the following:
Current income tax (benefit)
provision:
BVI
Foreign
Total current income tax
(benefit) provision
Deferred income tax provision
(benefit):
BVI
Foreign
Total deferred income tax
provision (benefit)
Total (benefit) provision for
income taxes
Year Ended December 31,
2022
2023
2021
$
— $
— $
(1,383)
(1,383)
—
—
—
438
438
—
—
—
—
1,366
1,366
—
—
—
$
(1,383) $
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:
BVI statutory income tax rate
Foreign tax rate differential
Tax credits
Change in valuation allowance
Other
Effective income tax rate
Year Ended December 31,
2022
2023
2021
0.0 %
1.3
(12.7)
10.6
0.5
(0.3)%
0.0 %
(12.6)
(5.8)
18.5
0.0
0.1 %
0.0 %
0.0
(5.0)
7.0
(1.0)
1.0 %
F-33
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
13. Income Taxes (Continued)
The Company's income tax (benefit) provision primarily
represents Federal and state taxes related to the profitable operations
of its subsidiaries in the United States and Ireland. The income tax
benefit recorded during the year ended December 31, 2023 was
primarily attributable to the adoption of the guidance contained in a
Notice of Proposed Rule Making issued by the United States Internal
Revenue Service during the third quarter of 2023 ("the Notice"). The
Notice indicates that BPI has the ability to immediately deduct R&D
expenditures which were incurred in the US and reimbursed by its
foreign parent. Previously these expenditures were capitalized, as was
generally required under the Tax Cuts and Jobs Act, which was
effective for tax years beginning on or after January 1, 2022. Based on
this guidance and its application to the Company's specific facts,
Biohaven deducted these expenditures on its 2022 tax return,
substantially reducing its taxable income in the US and capitalized
R&D expenditures, resulting in an increase to its federal net operating
loss carryforward of $598.7 million that can be carried forward
indefinitely. The Company's adoption of the Notice in 2023 also
increased its State net operating losses, resulting in the reversal of
$0.8 million of state income taxes recorded in 2022.
Net deferred tax assets (liabilities) consisted of the following:
Deferred tax assets:
Foreign net operating loss carryforwards
Tax credits
R&D capitalization
Other
Valuation allowance
$
Total deferred tax assets
Deferred tax liabilities:
Other
Total deferred tax liabilities
December 31,
2023
2022
138,480 $
111,660
887
15,944
(259,448)
7,523
8,895
60,340
142,269
5,205
(216,061)
648
(7,523)
(7,523)
(648)
(648)
—
Net deferred tax asset (liability)
$
— $
As of December 31, 2023, and 2022, the Company had foreign
net operating loss carryforwards of $847,582 and $69,214,
respectively. As of December 31, 2023, and 2022, the Company had
federal and state research and development and orphan drug credits
of $111,660 and $60,340, respectively, which begin to expire in 2039.
Changes in the valuation allowance for deferred tax assets
during the years ended December 31, 2023 and 2022 were due
primarily to generation of net operating losses and tax credit
carryforwards. 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.
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,
2022
2023
2021
$
216,061 $
54,224 $
32,970
—
50,905
6,449
43,387
110,932
14,805
$
259,448 $
216,061 $
54,224
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,
2022
2021
2023
Beginning of period balance
$
2,200 $
3,800 $
2,700
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
—
2,200 $
(1,600)
2,200 $
1,050
3,800
$
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, 2023 and 2022, 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
F-34
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
13. Income Taxes (Continued)
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, 2023, the
Company recorded $9,250 in other income (expense), net on the
consolidated statements of operations reflecting transition services
provided to the Former Parent, of which $396 was included as a
receivable in other current assets on the consolidated balance sheet
as of December 31, 2023. For the year ended December 31, 2022, the
Company recorded $4,024 in other income (expense), net on the
consolidated statements of operations 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 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.
As the Company was acting as an agent of the Former Parent for
services performed under the Distribution Services Agreement, no
amounts for revenues or expenses relating to the services performed
thereunder were 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 was legally payable to the
Former Parent. The Company did not hold any restricted cash on
behalf of the Former Parent as of December 31, 2023.
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
F-35
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
14. Related Party Transactions (Continued)
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
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.
Cost Allocations
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
$
$
146,521 $
82,744
229,265 $
70,929
33,928
104,857
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 in the consolidated statements of
operations for periods prior to the Separation.
F-36
BIOHAVEN LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
14. Related Party Transactions (Continued)
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:
Year Ended December 31,
2022
2021
(1)
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, "Nature of the Business and Basis of Presentation," for further details on separation related adjustments.
$
$
399,231 $
49,899
449,130
179,367
60,000
—
58,747
—
—
1,779
27,811
(204)
776,630 $
98,834
39,218
138,052
65,639
—
4,871
—
10,673
6,000
7,929
—
(1,458)
231,706
For the years ended December 31, 2023, 2022 and 2021, the
Company recorded $2,942, $3,420 and $458, respectively, in research
and development expense, including certain administrative expenses,
related to the Yale MoDE Agreement and the Yale MoDE SRA, the
Yale Agreement, and the 2023 Yale SRA (the "Yale Agreements"). As
of December 31, 2023, the Company did not owe any amounts to Yale.
Related Party Agreements
License Agreements with Yale
On September 30, 2013, the Company entered into the Yale
Agreement with Yale (see Note 11, "License Agreements," 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, "License Agreements," 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.
Under the Yale MoDE Agreement, the Company entered into the Yale
MoDE SRA (see Note 11, "License Agreements," for details), which
included funding of up to $4,000 over the life of the agreement. In May
2023, the Company entered into an additional sponsored research
agreement with Yale University (the "2023 Yale SRA"), which includes
funding of up to $612 over the life of the agreement.
F-37
Exhibit 10.22
Execu on Version
December 10, 2023
Hangzhou HighlightII Pharmaceu cal Co. Ltd.
RM 301/302, BLDG 4, Hexiang Sci & Tech Center,
Qiantang District
Hangzhou 310018, China
Re: Amendment No. 2 to Development and License Agreement dated March 21, 2023
Dear Sirs;
We refer to the Development and License Agreement dated March 21, 2023 between Biohaven Therapeu cs Ltd. (“Biohaven”) and
Hangzhou HighlightII Pharmaceu cal Co. Ltd. (“HighlightII”) rela ng to dual TYK2/JAK1 tyrosine kinase inhibitors, as amended
(“TYK2/JAK1 License Agreement”). Capitalized terms shall have the meanings ascribed to them in the TYK2/JAK1 License Agreement
unless otherwise defined herein.
On October 18, 2023, the FDA issued a le er (“October FDA Le er”) to Biohaven indica ng [***].
The issuance of the October FDA Le er [***] set forth in Sec ons 4.1 and 4.2 of the TYK2/JAK1 License Agreement regarding the
payment of the upfront fee and issuance of the common stock in Biohaven Ltd. (NYSE:BHVN). The Par es desire to provide for the
payment of the upfront fee and issuance of the License Shares, upon execu on of this Amendment No. 2 [***].
The Par es also desire to grant Biohaven an op on to acquire a license to Highlightll’s Selec ve TYK2 Inhibitor (defined below) and
clarify the scope of the compe ve ac vi es with respect to the Selec ve TYK2 Inhibitors.
Accordingly, we propose to amend the TYK2/JAK1 License Agreement as follows.
New Sec on 1.66 is added as follows:
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II)
THE TYPE THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
Exhibit 10.22
1.66 “Selec ve TYK2 Inhibitor” means a tyrosine kinase (“TKY2”) inhibitor with: (i) Ki <200nM ac vity inhibi on in the
Assay (for both allosteric and non-allosteric Tyk2 inhibitors, (ii) Brain Penetra on greater than or equal to ten percent (10%)
and (iii) 20x mes greater affinity to TYK2 in a cell free assay (ATP dependent and allosteric assays) over Jak1, Jak2 and Jak3,
and over 50x all other off-targets (including kinome and Eurofins secondary pharmacology panels).
New Sec on 2.1.4. is added as follows:
2.1.4. Highlightll hereby grants to Biohaven an exclusive op on and right of first refusal to acquire from Highlightll an
exclusive license to any Selec ve TYK2 Inhibitors that are being developed by or on behalf of Highlightll or its Affiliates (“the
TYK2 License”). The terms and condi ons for the TYK2 License (including but not limited to financial terms, the Field and
Territory, and non-compete clauses) shall be equivalent to the terms and condi ons under TYK2/JAK1 License Agreement.
The op on shall begin [***] days a er the date that Highlightll [***], and the op on shall expire [***] days therea er [***].
From the effec ve date of this Amendment No. 2 to the expira on of the [***] neither Biohaven nor its Affiliates shall itself
or through any Third Party, or in collabora on with any Third Party, engage, directly or indirectly in the Development of a
Selec ve TYK2 Inhibitor prior to the expira on of the [***].
From the effec ve date of this Amendment No. 2 to the expira on of the [***] neither Highlightll nor its Affiliates shall itself
or through any Third Party, or in collabora on with any Third Party, engage, directly or indirectly in the clinical Development
of a Selec ve TYK2 Inhibitor prior to the expira on of the [***].
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II)
THE TYPE THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
-2-
Exhibit 10.22
In considera on of making the above-described amendments to the TYK2/JAK1 License Agreement, the Par es further agree to the
following:
- Upfront Payment. Within two (2) Business Days a er execu on of this Amendment No. 2 by the Par es, Biohaven shall cause
its Affiliate, Biohaven Pharmaceu cals, Inc. (“BPI”), to provide instruc ons to the Escrow Agent (defined in the Escrow
Agreement between BPI, Highlightll and JPMorgan Chase Bank dated April 14, 2023, “Escrow Agreement”) to release the Fund
(as defined in the Escrow Agreement) to Highlightll.
Equity. Biohaven shall cause its Affiliate, Biohaven Ltd., to issue to HighlightII or its designated Affiliate, within fi een (15)
Business Days a er execu on of this Amendment No. 2 by the Par es, 721,136 Biohaven Ltd.’s common shares (“BHVN
Shares”). The issuance of the BHVN Shares to HighlightII shall be governed by a private placement agreement between
Biohaven Ltd. and HighlightII pursuant to Rule 144 under the Securi es Act of 1933.
-
Please indicate your agreement to this Amendment No. 2 by countersigning this le er below, effec ve as of the date of this le er.
Very truly yours;
/s/ Warren Volles
Biohaven Therapeu cs Ltd.
By: Warren Volles
Title: Chief Legal Officer
Agreed:
/s/ Chris Liang
Hangzhou Highlightll Pharmaceu cal Co. Ltd.
By: Chris Liang, Ph.D
Title: Chief Execu ve Officer
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II)
THE TYPE THE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
-3-
SUBSIDIARIES OF BIOHAVEN LTD.
As of December 31, 2023
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
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
1. Registration Statement (Form S-3 No. 333-274822) of Biohaven Ltd.,
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, and
3. Registration Statement (Form S-8 No. 333-271886) pertaining to the Biohaven Ltd. 2022 Equity Incentive Plan and Biohaven Ltd. 2022
Employee Share Purchase Plan;
of our reports dated February 29, 2024, with respect to the consolidated financial statements of Biohaven Ltd. and the effectiveness of internal
control over financial reporting of Biohaven Ltd. included in this Annual Report (Form 10-K) of Biohaven Ltd. for the year ended December 31,
2023.
/s/ Ernst & Young LLP
Hartford, Connecticut
February 29, 2024
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, 2023 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. 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
d. 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: February 29, 2024
/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, 2023 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles;
c. 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
d. 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: February 29, 2024
/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, 2023, 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 29 day of February 2024.
/s/ VLAD CORIC, M.D.
Vlad Coric, M.D.
President and Chief Executive Officer
(principal executive officer)
Chief Financial Officer
(principal financial officer)
/s/ MATTHEW BUTEN
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.
Exhibit 97
BIOHAVEN LTD.
INCENTIVE COMPENSATION RECOVERY POLICY
I.
Purpose
The Board of Directors (the “Board”) of Biohaven Ltd. (the “Company”) believes that it is in the best interests of the
Company and its shareholders to create and maintain a culture that emphasizes integrity and accountability. The Board
therefore adopts this Incentive Compensation Recovery Policy (this “Policy”) which requires the recoupment of certain
executive compensation in accordance with the terms herein. This Policy is designed to comply with, and shall be interpreted
in light of, the requirements of Section 10D of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), Rule
10D-1 adopted thereunder and the applicable listing rules of the New York Stock Exchange (“NYSE”).
II.
Administration
This Policy shall be administered by the Compensation Committee of the Board or, in the discretion of the Board, any other
committee or body of the Board consisting only of independent directors (the “Committee”). All determinations and
interpretations made by the Committee shall be final, binding and conclusive.
III.
Covered Persons
This Policy is applicable to any person who Receives Excess Compensation (each, a “Covered Person”). For the
avoidance of doubt, a Cover Person includes any person who Received Excess Compensation during the Applicable Period but
is no longer an employee of the Company at the time the determination to recoup compensation is made.
IV.
Defined Terms
The following terms shall have the meanings set forth below for purposes of this Policy: “Accounting Restatement” means
an accounting restatement of any of the Company’s financial statements due to the Company’s material noncompliance with any
financial reporting requirement under U.S. securities laws, including any required accounting restatement to correct an error in
previously issued financial statements that is material to the previously issued financial statements (often referred to as a “Big
R” restatement), or that would result in a material misstatement if the error were corrected in the current period or left
uncorrected in the current period (often referred to as a “little r” restatement). An Accounting Restatement does not include
situations in which financial statement changes did not result
Exhibit 97
from material non-compliance with financial reporting requirements, such as, but not limited to, retrospective: (i) application of
a change in accounting principles; (ii) revision to reportable segment information due to a change in the structure of the
Company’s internal organization; (iii) reclassification due to a discontinued operation; (iv) application of a change in reporting
entity, such as from a reorganization of entities under common control; or (v) revision for stock splits, stock dividends, reverse
stock splits or other changes in capital structure. An Accounting Restatement also does not include out-of-period adjustments
that are immaterial to both the current and prior periods. The determination of whether the restatement is due to material non-
compliance with any financial reporting requirement shall be based on facts and circumstances and existing judicial and
administrative interpretations.
“Applicable Period” means the three completed fiscal years preceding the earlier of: (i) the date that the Board, a
committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is not required,
concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement; or (ii)
the date a court, regulator, or other legally authorized body directs the Company to prepare an Accounting Restatement. To the
extent required under Section 303A.14 of the NYSE Listed Company Manual or other Exchange listing rules, the Applicable
Period also includes any transition period that results from a change in the Company’s fiscal year within or immediately
following those three completed fiscal years.
“Excess Compensation” means all Incentive-based Compensation (calculated on a pre- tax basis) Received by a person:
(i) after beginning service as an Executive Officer; (ii) who served as an Executive Officer at any time during the performance
period for that Incentive- based Compensation; (iii) while the Company had a class of securities listed on an Exchange; and (iv)
during the Applicable Period, that exceeded the amount of Incentive-based Compensation that otherwise would have been
Received had the amount been determined based on the Financial Performing Measures as reflected in the Accounting
Restatement. With respect to Incentive-based Compensation based on stock price or total shareholder return (“TSR”), when the
amount of erroneously awarded compensation is not subject to mathematical recalculation directly from the information in an
accounting restatement, the amount will be based on the Committee's reasonable estimate of the effect of the Accounting
Restatement on the stock price or TSR upon which the Incentive-based Compensation Received by the Covered Person
originally was based.
“Exchange” means any national securities exchange or national securities association on which the Company has a class of
securities listed.
“Executive Officer” means the Company’s president, principal financial officer, principal accounting officer (or if there is
no such accounting officer, the controller), any vice-president of the Company in charge of a principal business unit, division,
or function (such as sales, administration, or finance), any other officer who performs a policy-making function, or any other
person (including any executive officer of the Company’s subsidiaries or affiliates) who performs similar policy-making
functions for the Company.
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Exhibit 97
“Impracticable” means, after exercising a normal due process review of all the relevant facts and circumstances and
taking all steps required by Exchange Act Rule 10D-1 and any applicable Exchange listing standard, the Committee determines
that recovery of the Excess Compensation is impracticable because: (i) it has determined that the direct expense that the
Company would pay to a third party to assist in enforcing this Policy and recovering the Excess Compensation otherwise
recoverable would exceed the amount to be recovered; (ii) it has concluded that the recovery of the Excess Compensation
would violate home country law adopted prior to November 28, 2022; or (iii) it has determined that the recovery of the Excess
Compensation would cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to the
Company’s employees, to fail to meet the requirements of 26
U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
“Incentive-based Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon
the attainment of a Financial Reporting Measure; however it does not include: (i) base salaries; (ii) discretionary cash bonuses;
(iii) awards (either cash or equity) that are based upon subjective, strategic or operational standards; and
(iv) equity awards that vest solely based on the passage of time.
“Financial Reporting Measure” means a measure that is determined and presented in accordance with the accounting
principles used in preparing the Company’s financial statements, and any measure that is derived wholly or in part from such
measures (including “non-GAAP” financial measures, such as those appearing in earnings releases); provided, however, that
any such measure need not be presented within the Company’s financial statements or included in a filing made with the
Securities and Exchange Commission. Examples of Financial Reporting Measures include measures based on: revenues, net
income, operating income, financial ratios, EBITDA, liquidity measures (such as free cash flow), return measures (such as
return on assets or return on invested capital), profitability of one or more segments, and cost per employee. Stock price and
TSR also are Financial Reporting Measures.
“Received”: Incentive-based Compensation is deemed “Received” in any Company fiscal period during which the
Financial Reporting Measure specified in the Incentive-based Compensation award is attained, even if the payment or grant of
the Incentive-based Compensation occurs after the end of that period.
V. Recoupment
In the event that the Company is required to prepare an Accounting Restatement, then the Committee shall, unless the
Committee determines it to be Impracticable, take reasonably prompt action to recover all Excess Compensation from any
Covered Person, such recovery to be on a “no fault” basis and without regard to whether any misconduct occurred or to a
Covered Person’s responsibility for the noncompliance that lead to the Accounting Restatement. The Company’s obligation to
recover Recoverable Compensation is not dependent on if or when the restated financial statements are filed.
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Exhibit 97
VI. Method of Recovery
The Committee will determine, in its sole discretion, the form and method for recovering Excess Compensation hereunder
which may include, without limitation: (a) requiring reimbursement in cash of Excess Compensation previously paid; (b)
seeking recovery of any gain realized on the vesting, exercise, settlement, transfer or other disposition of any equity- based
awards; (c) offsetting the recovered amount from any compensation otherwise owed by the Company to the Covered Person;
(d) cancelling outstanding vested or unvested equity awards; (e) reducing future compensation or (f) taking any other remedial
and recovery action or combination of actions permitted by law, as determined by the Committee.
VII. No Indemnification
Notwithstanding the terms of any of the Company’s organizational documents, any corporate policy or any contract, no
Covered Person shall be indemnified against the loss of any Excess Compensation.
VIII. Other Recoupment Rights; Prior Policy
Any right of recovery under this Policy is in addition to, and not in lieu of, any other remedies or rights of recovery or
recoupment that may be available to the Company pursuant to the terms of any similar policy in any employment agreement,
severance or change in control agreement, equity award agreement or similar agreement and any other legal remedies available
to the Company.
This Policy supersedes and replaces the Company’s Clawback Policy approved by the Board on September 29, 2022 (the
“Prior Policy”), except that the Prior Policy and not this Policy shall continue to apply to Incentive-based Compensation
Received prior to October 2, 2023.
IX. Successors
This Policy shall be binding and enforceable against all Covered Persons and their beneficiaries, heirs, executors,
administrators or other legal representatives.
Adopted by the Board of Directors on August 8, 2023.
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