UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 001-38080
Biohaven Pharmaceutical Holding Company Ltd.
(Exact Name of Registrant as Specified in its Charter)
| British Virgin Islands | Not applicable | |||||||
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| c/o Biohaven Pharmaceuticals, Inc. | ||||||||
215 Church Street, New Haven, Connecticut | 06510 | |||||||
| (Address of principal executive offices) | (Zip Code) | |||||||
(203) 404-0410
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||||||
| Common Shares, no par value | BHVN | New York Stock Exchange | ||||||
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 ☐
1
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 | ☒ | Accelerated filer | ☐ | |||||||||||||||||
| Non-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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of May 6, 2022, the registrant had 71,043,181 common shares, without par value per share, outstanding.
2
| TABLE OF CONTENTS | ||||||||
| Page | ||||||||
| Part I | Financial Information | |||||||
Item 1: | Condensed Consolidated Financial Statements (Unaudited) | |||||||
Item 2: | ||||||||
Item 3: | ||||||||
Item 4: | ||||||||
| Part II | Other Information | |||||||
Item 1: | ||||||||
Item 1A: | ||||||||
Item 2: | ||||||||
Item 6: | ||||||||
Part I. Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
| Index to Condensed Consolidated Financial Statements (Unaudited) | ||||||||
| Page | ||||||||
| Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 | ||||||||
| Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021 | ||||||||
| Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 | ||||||||
| Notes to Condensed Consolidated Financial Statements | ||||||||
1
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share amounts)
| March 31, 2022 | December 31, 2021 | |||||||||||||
| (Unaudited) | ||||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 169,065 | $ | 171,945 | ||||||||||
| Marketable securities | 433,410 | 192,648 | ||||||||||||
| Trade receivable, net | 328,342 | 308,269 | ||||||||||||
| Inventory | 91,281 | 80,608 | ||||||||||||
| Prepaid expenses | 104,891 | 88,838 | ||||||||||||
| Other current assets | 44,096 | 33,946 | ||||||||||||
| Total current assets | 1,171,085 | 876,254 | ||||||||||||
| Property and equipment, net | 14,534 | 14,690 | ||||||||||||
| Intangible assets, net | 55,910 | 56,438 | ||||||||||||
| Other assets | 130,188 | 129,830 | ||||||||||||
| Total assets | $ | 1,371,717 | $ | 1,077,212 | ||||||||||
| Liabilities and Shareholders’ Deficit | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 56,202 | $ | 51,683 | ||||||||||
| Accrued expenses and other current liabilities | 457,412 | 420,019 | ||||||||||||
| Current portion of mandatorily redeemable preferred shares | 62,500 | 62,500 | ||||||||||||
| Total current liabilities | 576,114 | 534,202 | ||||||||||||
| Long-term debt | 634,106 | 626,720 | ||||||||||||
| Liability related to sale of future royalties, net | 377,998 | 367,645 | ||||||||||||
| Mandatorily redeemable preferred shares, net | 162,994 | 155,737 | ||||||||||||
| Derivative liability | 9,120 | 13,110 | ||||||||||||
| Obligation to perform R&D services | 36,016 | 50,571 | ||||||||||||
| Other long-term liabilities | 41,782 | 12,236 | ||||||||||||
| Total liabilities | 1,838,130 | 1,760,221 | ||||||||||||
Commitments and contingencies (Note 14) | ||||||||||||||
| Contingently redeemable non-controlling interests | — | 60,000 | ||||||||||||
| Shareholders’ deficit: | ||||||||||||||
Common shares, no par value; 200,000,000 shares authorized as of March 31, 2022 and December 31, 2021; 70,540,802 and 66,933,531 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively | 2,112,686 | 1,676,792 | ||||||||||||
| Additional paid-in capital | 129,580 | 169,656 | ||||||||||||
| Accumulated other comprehensive loss | (2,398) | (73) | ||||||||||||
| Accumulated deficit | (2,702,154) | (2,585,755) | ||||||||||||
| Total shareholders’ deficit attributable to Biohaven Pharmaceutical Holding Company Ltd. | (462,286) | (739,380) | ||||||||||||
| Non-controlling interests in consolidated subsidiaries | (4,127) | (3,629) | ||||||||||||
| Total shareholders' deficit | (466,413) | (743,009) | ||||||||||||
| Total liabilities and shareholders’ deficit | $ | 1,371,717 | $ | 1,077,212 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
Revenues: | ||||||||||||||
| Product revenue, net | $ | 123,590 | $ | 43,823 | ||||||||||
Collaboration and other revenue | 195,262 | — | ||||||||||||
| Total revenues | 318,852 | 43,823 | ||||||||||||
| Operating expenses: | ||||||||||||||
Cost of sales | 26,342 | 12,862 | ||||||||||||
| Research and development | 119,099 | 107,111 | ||||||||||||
| Selling, general and administrative | 227,243 | 159,523 | ||||||||||||
| Total operating expenses | 372,684 | 279,496 | ||||||||||||
| Loss from operations | (53,832) | (235,673) | ||||||||||||
| Other income (expense): | ||||||||||||||
| Interest expense | (17,216) | (7,731) | ||||||||||||
| Interest expense on mandatorily redeemable preferred shares | (7,917) | (7,943) | ||||||||||||
| Interest expense on liability related to sale of future royalties | (17,314) | (13,508) | ||||||||||||
| Change in fair value of derivatives | 3,604 | (210) | ||||||||||||
Gain from equity method investment | — | 5,261 | ||||||||||||
Other income (expense), net | 81 | (1,700) | ||||||||||||
Total other expense, net | (38,762) | (25,831) | ||||||||||||
Loss before provision for income taxes | (92,594) | (261,504) | ||||||||||||
Provision for income taxes | 24,303 | 3,824 | ||||||||||||
| Net loss | (116,897) | (265,328) | ||||||||||||
Net loss attributable to non-controlling interests | 498 | 360 | ||||||||||||
Deemed dividend upon repurchase of preferred shares in consolidated subsidiary | (92,673) | — | ||||||||||||
Net loss attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. | $ | (209,072) | $ | (264,968) | ||||||||||
Net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. — basic and diluted | $ | (2.97) | $ | (4.27) | ||||||||||
| Weighted average common shares outstanding—basic and diluted | 70,332,274 | 62,040,715 | ||||||||||||
| Comprehensive loss: | ||||||||||||||
| Net loss | $ | (116,897) | $ | (265,328) | ||||||||||
| Other comprehensive (loss) income, net of tax | (2,325) | 95 | ||||||||||||
| Comprehensive loss | (119,222) | (265,233) | ||||||||||||
| Less: comprehensive loss attributable to non-controlling interests | 498 | 360 | ||||||||||||
Comprehensive loss attributable to Biohaven Pharmaceutical Holding Company Ltd. | $ | (118,724) | $ | (264,873) | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Cash flows from operating activities: | ||||||||||||||
| Net loss | $ | (116,897) | $ | (265,328) | ||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||
| Non-cash share-based compensation expense | 81,828 | 48,726 | ||||||||||||
| Interest expense on mandatorily redeemable preferred shares | 7,917 | 7,943 | ||||||||||||
| Interest expense on liability related to sale of future royalties | 17,314 | 13,508 | ||||||||||||
| Deferred interest paid-in-kind on long-term debt | 6,450 | 2,795 | ||||||||||||
| Issuance of common shares as payment for license agreement | 1,779 | 4,243 | ||||||||||||
| Change in fair value of derivatives | (3,604) | 210 | ||||||||||||
Gain from equity method investment | — | (5,261) | ||||||||||||
| Depreciation and amortization | 4,402 | 5,054 | ||||||||||||
| Change in obligation to perform R&D services | (6,942) | — | ||||||||||||
| Other non-cash items | (646) | 461 | ||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||
Trade receivable, net | (20,073) | (36,658) | ||||||||||||
Inventory | (23,397) | (17,566) | ||||||||||||
| Prepaid expenses, other current assets, and other assets | (24,954) | (25,619) | ||||||||||||
| Accounts payable | 4,518 | 13,903 | ||||||||||||
| Accrued expenses, other current liabilities, and other liabilities | 48,661 | 47,915 | ||||||||||||
| Net cash used in operating activities | $ | (23,644) | $ | (205,674) | ||||||||||
| Cash flows from investing activities: | ||||||||||||||
| Purchases of marketable securities | (246,816) | — | ||||||||||||
| Sales of marketable securities | — | 113,441 | ||||||||||||
| Maturities of marketable securities | 3,058 | 7,515 | ||||||||||||
| Purchases of property and equipment | (512) | (1,187) | ||||||||||||
Net cash (used in) provided by investing activities | $ | (244,270) | $ | 119,769 | ||||||||||
| Cash flows from financing activities: | ||||||||||||||
| Proceeds from issuance of common shares | 252,000 | 308,743 | ||||||||||||
| Proceeds from obligation to perform R&D services | — | 100,000 | ||||||||||||
| Proceeds from the issuance of series B preferred shares | 14,579 | 17,585 | ||||||||||||
Proceeds from exercise of share options | 2,803 | 1,382 | ||||||||||||
| Payments for term loan, finance leases, and other | (1,391) | (6,695) | ||||||||||||
| Net cash provided by financing activities | $ | 267,991 | $ | 421,015 | ||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | (46) | 14 | ||||||||||||
Net increase in cash, cash equivalents and restricted cash | 31 | 335,124 | ||||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 174,343 | 134,231 | ||||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 174,374 | $ | 469,355 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
1. Nature of the Business and Basis of Presentation
Biohaven Pharmaceutical Holding Company Ltd. (“we,” “us," "our," "Biohaven" or the “Company”) was incorporated in Tortola, British Virgin Islands in September 2013. We are a biopharmaceutical company with a portfolio of innovative product candidates targeting neurological diseases, including rare disorders. The Company's lead product, NURTEC® ODT (rimegepant), was approved by the U.S. Food and Drug Administration ("FDA") in February 2020, for the acute treatment of migraine and was approved for the preventive treatment of migraine in May 2021. NURTEC ODT is the first and only calcitonin gene-related peptide ("CGRP") receptor antagonist available in a quick-dissolve orally dissolving tablet ("ODT") formulation that is approved by the FDA for both the acute and preventive treatment of migraine in adults. Our Neuroinnovation portfolio includes product candidates based on multiple mechanisms — CGRP receptor antagonists, glutamate modulators, myeloperoxidase inhibition, Kv7 ion channel activators ("Kv7"), and Myostatin inhibition — which we believe have the potential to significantly alter existing treatment approaches across a diverse set of neurological indications with high unmet need in both large and orphan indications.
On November 9, 2021, the Company entered into a strategic commercialization arrangement with Pfizer Inc. ("Pfizer"), including a collaboration and license agreement and a related sublicense agreement (the "Pfizer Collaboration"), pursuant to which Pfizer would commercialize product candidates containing the Company's proprietary compounds rimegepant (BHV-3000) and gains rights to zavegepant (BHV-3500) (the "Licensed Products") in all countries worldwide outside of the United States (the "Territory"). The Pfizer Collaboration became effective on January 4, 2022. Refer to Note 13, "Collaboration, License and Other Agreements" for further details.
The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including, but not limited to, the risks associated with developing product candidates at each stage of non-clinical and clinical development; the challenges associated with gaining regulatory approval of such product candidates; the risks associated with commercializing pharmaceutical products for marketing and sale; the potential for development by third parties of new technological innovations that may compete with the Company’s products; the dependence on key
personnel; the challenges of protecting proprietary technology; the need to comply with government regulations; the high costs of drug development; and the uncertainty of being able to secure additional capital when needed to fund operations.
The Company has incurred recurring losses since its inception, had an accumulated deficit as of March 31, 2022, and expects to continue to generate operating losses during the continued global commercial launch of rimegepant. Prior to the commercial launch of rimegepant the Company has primarily raised funds through sales of equity in private placements and public offerings, sale of revenue participation rights related to potential future royalties, and debt financings.
As of May 10, 2022, the issuance date of our condensed consolidated financial statements, the Company expects that its cash, cash equivalents and marketable securities as of March 31, 2022, our future operating cash flows from sales of NURTEC ODT, the funds available from the Sixth Street Financing Agreement, Series B Preferred Shares receipts, product sales and other proceeds from our Pfizer Collaboration will be sufficient to fund its current forecast for operating expenses, including commercialization of NURTEC ODT, financial commitments and other cash requirements for more than one year. The Company may need to raise additional capital to execute its business plans and growth strategy until it is 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, the Company 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 its operating costs and working capital needs.
2. Summary of Significant Accounting Policies
Our significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021 (the "2021 Form 10-K"). Updates to our accounting policies, including impacts from the adoption of new accounting standards, are discussed below in this Note 2.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in accordance
5
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its controlled subsidiaries after elimination of all significant intercompany accounts and transactions. Investments in companies in which the Company owns less than a 50% equity interest and where it exercises significant influence over the operating and financial policies of the investee are accounted for using the equity method of accounting.
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 (deficit) and weighted average exchange rates for operating results. Translation gains and losses are included in accumulated other comprehensive income, net of tax, in shareholders' deficit. Foreign currency transaction gains and losses are included in other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
Reclassifications
Certain items in the prior period’s condensed consolidated financial statements have been reclassified to conform to the current presentation.
Use of Estimates
The preparation of condensed 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 condensed consolidated financial statements and the reported amounts of income and expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, revenue recognition, interest expense on liability related to sale of future royalties, valuation of Series B preferred shares forward contracts and income taxes. 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.
Unaudited Interim Condensed Consolidated Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. The accompanying unaudited condensed consolidated financial statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete consolidated financial statements. The accompanying year-end condensed consolidated balance sheet was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of March 31, 2022 and the results of its operations for the three months ended March 31, 2022 and 2021 and its cash flows for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of results to be expected for the year ending December 31, 2022, any other interim periods or any future year or period. The financial information included herein should be read in conjunction with the financial statements and notes in the Company's Annual Report on Form 10-K for the year ended December 31, 2021.
Revenue Recognition - Collaboration and Other Revenue
The Company analyzes its collaboration arrangements to assess whether they are within the scope of ASC 808, Collaborative Arrangements (“ASC 808”) to determine whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards dependent on the commercial success of such activities. This assessment is performed throughout the life of the arrangement based on changes in the responsibilities of all parties in the arrangement. For collaboration arrangements within the scope of ASC 808 that contain multiple elements, the Company first determines which elements of the collaboration are deemed to be within the scope of ASC 808 and those that are more reflective of a vendor-customer relationship and, therefore, within the scope of ASC 606, Revenue from Contracts with Customers
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
("ASC 606"). For elements of collaboration arrangements that are accounted for pursuant to ASC 808, an appropriate recognition method is determined and applied consistently, generally by analogy to ASC 606. The accounting treatment pursuant to ASC 606 is outlined below.
The terms of licensing and collaboration agreements entered into typically include payment of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; payments for manufacturing supply and research and development services and royalties on net sales of licensed products. Each of these payments results in collaboration and other revenue, except for revenues related to manufacturing supply services, which are classified as product revenue. The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services.
In determining the appropriate amount of revenue to be recognized as the Company fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on estimated selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
Amounts received prior to recognizing revenue are recorded as contract liabilities in the Company’s condensed consolidated balance sheets.
At contract inception, the Company assesses the goods or services promised in a contract with a customer and identifies those distinct goods and services that represent a performance obligation. A promised good or service may not be identified as a performance obligation if it is immaterial in the context of the contract with the customer, if it is not separately identifiable from other promises in the contract (either because it is not capable of being separated or because it is not separable in the context of the contract), or if the promised good or service does not provide the customer with a material right.
The Company considers the terms of the contract to determine the transaction price. The transaction price
is the amount of consideration to which the Company expects to be entitled in exchange for transferring promised goods or services to a customer. The consideration promised in a contract with a customer may include fixed amounts, variable amounts, or both. Variable consideration will only be included in the transaction price when it is not considered constrained, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur.
If it is determined that multiple performance obligations exist, the transaction price is allocated at the inception of the agreement to all identified performance obligations based on the relative standalone selling prices ("SSP"). The relative SSP for each deliverable is estimated using external sourced evidence if it is available. If external sourced evidence is not available, the Company uses its best estimate of the SSP for the deliverable.
Revenue is recognized when, or as, the Company satisfies a performance obligation by transferring a promised good or service to a customer. An asset is transferred when, or as, the customer obtains control of that asset, which for a service is considered to be as the services are received and used. The Company recognizes revenue over time by measuring the progress toward complete satisfaction of the relevant performance obligation using an appropriate input or output method based on the nature of the service promised to the customer.
After contract inception, the transaction price is reassessed at every period end and updated for changes such as resolution of uncertain events. Any change in the transaction price is allocated to the performance obligations on the same basis as at contract inception, or to a single performance obligation as applicable.
Management may be required to exercise considerable judgment in estimating revenue to be recognized. Judgment is required in identifying performance obligations, estimating the transaction price, estimating the SSP of identified performance obligations, which may include forecasted revenue, development timelines, estimated future costs, discount rates and probabilities of technical and regulatory success, and estimating the progress towards satisfaction of performance obligations.
Recently Adopted Accounting Pronouncements
Effective January 1, 2022 the Company adopted ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The update addresses issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. The adoption of ASU 2020-06 did not have a material effect on the Company's consolidated financial statements.
Effective January 1, 2022 the Company adopted ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (a consensus of the FASB Emerging Issues Task Force), which provides guidance on modifications or exchanges of a freestanding equity-classified written call option that is not within the scope of another topic. An entity should treat a modification of the terms or conditions or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange as an exchange of the original instrument for a new instrument, and provides further guidance on measuring the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity
classified after modification or exchange. ASU 2021-04 also provides guidance on the recognition of the effect of a modification or an exchange of a freestanding equity-classified written call option that remains equity classified after modification or exchange on the basis of the substance of the transaction, in the same manner as if cash had been paid as consideration. The guidance has been applied prospectively and did not have a material effect on the consolidated financial statements of the Company.
Future Adoption of New Accounting Pronouncements
In January 2021 the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, providing temporary guidance to ease the burden in accounting for reference rate reform primarily resulting from the discontinuation of LIBOR, which is currently expected to occur in mid-2023 for legacy contracts. The amendments in ASU 2021-01 are elective immediately and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued. The Company does not expect that the adoption of ASU 2021-01 will have a material effect on its consolidated financial statements.
8
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
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 March 31, 2022 and December 31, 2021 was as follows:
| Amortized Cost | Allowance for Credit Losses | Net Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | |||||||||||||||||||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||||||||||||||
| U.S. | $ | 290,201 | $ | — | $ | 290,201 | $ | 2 | $ | (1,969) | $ | 288,234 | ||||||||||||||||||||||||||
| Foreign | 47,106 | — | 47,106 | — | (426) | 46,680 | ||||||||||||||||||||||||||||||||
| Government related obligations | ||||||||||||||||||||||||||||||||||||||
| U.S. | 98,707 | — | 98,707 | 1 | (212) | 98,496 | ||||||||||||||||||||||||||||||||
| Total | $ | 436,014 | $ | — | $ | 436,014 | $ | 3 | $ | (2,607) | $ | 433,410 | ||||||||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||||||||||||||
| U.S. | $ | 130,388 | $ | — | $ | 130,388 | $ | 1 | $ | (234) | $ | 130,155 | ||||||||||||||||||||||||||
| Foreign | 20,643 | — | 20,643 | — | (82) | 20,561 | ||||||||||||||||||||||||||||||||
| Government related obligations | ||||||||||||||||||||||||||||||||||||||
| U.S. | 41,939 | — | 41,939 | — | (8) | 41,931 | ||||||||||||||||||||||||||||||||
| Total | $ | 192,971 | $ | — | $ | 192,971 | $ | 1 | $ | (324) | $ | 192,648 | ||||||||||||||||||||||||||
The Company had 99 and 53 available-for-sale debt securities in an unrealized loss position, with an aggregate fair value of $412,366 and $185,296, as of March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022, the Company did not intend to sell these securities, and did not believe it was more likely than not that it would be required to sell these securities prior to the anticipated recovery of their amortized cost basis. We did not have any investments in a continuous unrealized loss position for more than twelve months as of March 31, 2022 and December 31, 2021.
The net amortized cost and fair value of debt securities available-for-sale at March 31, 2022 and December 31, 2021 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. The fair values of available for sale debt securities are classified as marketable securities in the condensed consolidated balance sheets at March 31, 2022 and December 31, 2021.
9
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
3. Marketable Securities (Continued)
Net Investment Income
Sources of net investment income included in other income (expense) in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021 were as follows:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Gross investment income from debt securities available-for-sale | $ | 140 | $ | 72 | ||||||||||
| Investment expenses | (18) | (52) | ||||||||||||
| Net investment income (excluding net realized capital gains or losses) | 122 | 20 | ||||||||||||
Net realized capital (losses) gains | (3) | 19 | ||||||||||||
| Net investment income | $ | 119 | $ | 39 | ||||||||||
We utilize the specific identification method in computing realized gains and losses. The proceeds from the sale of available-for-sale debt securities and the related gross realized capital gains and losses for the three months ended March 31, 2022 and 2021 were the following:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Proceeds from sales | $ | — | $ | 113,441 | ||||||||||
| Gross realized capital gains | — | 19 | ||||||||||||
| Gross realized capital losses | $ | — | — | |||||||||||
4. Fair Value of Financial Assets and Liabilities
The preparation of the Company’s condensed 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 Condensed Consolidated Balance Sheets
Certain assets of the Company are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
•Level 1 — Quoted prices in active markets for identical assets or liabilities.
•Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
•Level 3 — Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
For a description of the methods and assumptions that are used to estimate the fair value and determine the fair value hierarchy classification of each class of financial instrument, see (Note 4) “Fair Value of Financial Assets and Liabilities” in the 2021 Form 10-K. Financial assets and liabilities measured at fair value on a recurring basis on the condensed consolidated balance sheets at March 31, 2022 and December 31, 2021 were as follows:
10
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4. Fair Value of Financial Assets and Liabilities (Continued)
| Fair Value Measurement Using: | ||||||||||||||||||||||||||||||||
| Balance Sheet Classification | Type of Instrument | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||
| March 31, 2022 | ||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Cash equivalents | Money market funds | $ | 45,999 | $ | — | $ | — | $ | 45,999 | |||||||||||||||||||||||
| Cash equivalents | U.S. treasury bills | — | 8,497 | — | 8,497 | |||||||||||||||||||||||||||
| Marketable securities | U.S. treasury bills | 5,992 | 92,504 | — | 98,496 | |||||||||||||||||||||||||||
| Marketable securities | U.S. corporate bonds | — | 288,234 | — | 288,234 | |||||||||||||||||||||||||||
| Marketable securities | Foreign corporate bonds | — | 46,680 | — | 46,680 | |||||||||||||||||||||||||||
| Total assets | $ | 51,991 | $ | 435,915 | $ | — | $ | 487,906 | ||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Series B preferred shares forward contracts | $ | — | $ | — | $ | 9,120 | $ | 9,120 | ||||||||||||||||||||||||
| Total liabilities | $ | — | $ | — | $ | 9,120 | $ | 9,120 | ||||||||||||||||||||||||
| December 31, 2021 | ||||||||||||||||||||||||||||||||
| Assets: | ||||||||||||||||||||||||||||||||
| Cash equivalents | Money market funds | $ | 32,420 | $ | — | $ | — | $ | 32,420 | |||||||||||||||||||||||
| Marketable securities | U.S. treasury bills | 5,994 | 35,937 | — | 41,931 | |||||||||||||||||||||||||||
| Marketable securities | U.S. corporate bonds | — | 130,155 | — | 130,155 | |||||||||||||||||||||||||||
| Marketable securities | Foreign corporate bonds | — | 20,561 | — | 20,561 | |||||||||||||||||||||||||||
| Total assets | $ | 38,414 | $ | 186,653 | $ | — | $ | 225,067 | ||||||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||||||||||||||
| Series B preferred shares forward contracts | $ | — | $ | — | $ | 13,110 | $ | 13,110 | ||||||||||||||||||||||||
| Total liabilities | $ | — | $ | — | $ | 13,110 | $ | 13,110 | ||||||||||||||||||||||||
There were no securities transferred between Level 1, 2 and 3 during the three months ended March 31, 2022 or 2021.
11
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
4. Fair Value of Financial Assets and Liabilities (Continued)
Series B Preferred Shares Forward Contracts
The following tables provide roll forwards of the aggregate fair value of the Company's Series B Preferred Shares Forward Contracts for which fair value is determined by Level 3 inputs for the three months ended March 31, 2022 and 2021:
| Carrying Value | ||||||||
| Balance at December 31, 2021 | $ | 13,110 | ||||||
| Change in fair value of derivative liability | (3,604) | |||||||
| Partial settlement of derivative liability | (386) | |||||||
| Balance at March 31, 2022 | $ | 9,120 | ||||||
| Balance at December 31, 2020 | $ | 14,190 | ||||||
| Change in fair value of derivative liability | 835 | |||||||
| Partial settlement of derivative liability | (625) | |||||||
| Balance at March 31, 2021 | $ | 14,400 | ||||||
Contingent Value Right Liability
On January 4, 2021, the Company acquired Kleo Pharmaceuticals, Inc. (“Kleo”) (see Note 6). Included in the purchase consideration transferred was a contingent value right to receive one dollar in cash for each Kleo share if certain specified Kleo biopharmaceutical products or product candidates receive the approval of the FDA prior to the expiration of 30 months following the effective time of the transaction. The maximum amount payable pursuant to the contingent value right is approximately $17,300, and the fair value of the contingent value right was $1,457 as of the acquisition date. The Company recorded the contingent value right in other long-term liabilities on the condensed consolidated balance sheets.
The fair value of the contingent value right was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. The Company used a discounted cash flow approach to value the contingent value right liability. As inputs into the valuation, the Company considered the probability of FDA approval within the 30 month period, which we estimated at approximately 10%, the amount of the payment, and a discount rate of approximately 7% determined using an implied credit spread adjusted based on companies with similar credit risk.
At December 31, 2021, the Company determined the value of the contingent value right to be immaterial and recognized a gain of $1,457 related to the contingent value right in other income (expense) during the fourth quarter of 2021.
5. Balance Sheet Components
Restricted Cash
Restricted cash included in other current assets in the condensed consolidated balance sheets is primarily employee contributions to the Company's employee share purchase plan held for future purchases of the Company's outstanding shares.
Restricted cash included in other assets in the condensed consolidated balance sheets represents collateral held by a bank for a letter of credit ("LOC") issued in connection with the leased office space in Yardley, Pennsylvania. The following represents a reconciliation of cash and cash equivalents in the condensed consolidated balance sheets to total cash, cash equivalents and restricted cash as of March 31, 2022 and December 31, 2021, respectively, in the condensed consolidated statements of cash flows:
| March 31, 2022 | December 31, 2021 | |||||||||||||
| Cash and cash equivalents | $ | 169,065 | $ | 171,945 | ||||||||||
| Restricted cash (included in other current assets) | 4,559 | 1,648 | ||||||||||||
| Restricted cash (included in other assets) | 750 | 750 | ||||||||||||
| Cash, cash equivalents and restricted cash in the statements of cash flows | $ | 174,374 | $ | 174,343 | ||||||||||
Trade Receivable, Net
The Company’s trade accounts receivable consists of amounts due primarily from pharmacy wholesalers in the U.S. (collectively, its "Customers") related to sales of NURTEC ODT and have standard payment terms. For certain Customers, the trade accounts receivable for the Customer is net of distribution service fees, prompt pay discounts and other adjustments. The Company monitors the financial performance and creditworthiness of its Customers so that it can properly assess and respond to changes in their credit profile. The Company reserves against trade accounts receivable for estimated losses that may arise from a Customer’s inability to pay and any amounts determined to be uncollectible are written off against the reserve when it is probable that the receivable will not be collected. The allowance for doubtful accounts,
12
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
5. Balance Sheet Components (Continued)
including reserve amounts for estimated credit losses, was immaterial as of March 31, 2022 and December 31, 2021.
Inventory
Inventory consisted of the following:
| As of March 31, 2022 | As of December 31, 2021 | |||||||||||||
| Work-in-process | 169,390 | 159,075 | ||||||||||||
| Finished goods | 13,731 | 9,269 | ||||||||||||
| Total inventories | $ | 183,121 | $ | 168,344 | ||||||||||
Less noncurrent inventories(1) | 91,840 | 87,736 | ||||||||||||
| Total inventories classified as current | $ | 91,281 | $ | 80,608 | ||||||||||
(1) Included in other assets on the condensed consolidated balance sheets. There are no recoverability issues for these amounts.
Prepaid Expenses
Prepaid expenses consisted of the following:
| As of March 31, 2022 | As of December 31, 2021 | |||||||||||||
| Prepaid clinical trial costs | $ | 58,562 | $ | 42,578 | ||||||||||
| Prepaid manufacturing | 8,856 | 17,448 | ||||||||||||
| Prepaid commercial costs | 33,248 | 15,732 | ||||||||||||
| Other prepaid expenses | 4,225 | 13,080 | ||||||||||||
| Prepaid expenses | $ | 104,891 | $ | 88,838 | ||||||||||
Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following:
| As of March 31, 2022 | As of December 31, 2021 | |||||||||||||
| Accrued development milestones | $ | 5,000 | $ | 5,000 | ||||||||||
| Accrued employee compensation and benefits | 35,362 | 40,109 | ||||||||||||
| Accrued clinical trial costs | 36,051 | 37,477 | ||||||||||||
| Accrued commercialization and other professional fees | 22,744 | 19,994 | ||||||||||||
| Accrued sales discounts and allowances | 233,096 | 203,760 | ||||||||||||
| Current obligation to perform R&D services | 29,642 | 22,030 | ||||||||||||
| Other accrued expenses and other current liabilities | 95,517 | 91,649 | ||||||||||||
| Accrued expenses and other current liabilities | $ | 457,412 | $ | 420,019 | ||||||||||
6. Business Acquisition
On January 4, 2021, the Company acquired Kleo Pharmaceuticals, Inc. (“Kleo”). Kleo is a development-stage biopharmaceutical company focused on advancing the field of immunotherapy by developing small molecules that emulate biologics. The transaction was accounted for as the acquisition of a business using the acquisition method of accounting.
The total fair value of the consideration transferred was $20,043 which primarily consisted of the issuance of a total of 115,836 common shares of the Company to Kleo stockholders and contingent consideration in the form of a contingent value right to receive one dollar in cash for each Kleo share if certain specified Kleo biopharmaceutical products or product candidates receive the approval of the FDA prior to the expiration of 30 months following the effective time of the transaction. The maximum amount payable pursuant to the contingent value right was approximately $17,300. At December 31, 2021, the Company determined the value of the contingent value right to be immaterial and recognized a gain of $1,457 related to the contingent value right in other income (expense) during the fourth quarter of 2021. The value of the contingent value right continues to be immaterial with no value included on the condensed consolidated balance sheet as of March 31, 2022.
13
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
6. Business Acquisition (Continued)
Prior to the consummation of the transaction, the Company owned approximately 41.9% of the outstanding shares of Kleo and accounted for it as an equity method investment. As part of the transaction, the Company acquired the remainder of the shares of Kleo, and post-transaction the Company owns 100% of the outstanding shares of Kleo. The carrying value of the Company’s investment in Kleo was $1,176 immediately prior to the acquisition date. The Company determined the fair value of the existing interest was $6,437, and recognized a gain from our equity method investment during the first quarter of 2021 of $5,261 on the condensed consolidated statements of operations and comprehensive loss as a result of remeasuring to fair value the existing equity interest in Kleo.
In connection with the transaction, we recorded: net working capital of $573; property, plant and equipment of $1,257; intangible assets consisting of in progress research and development assets of $18,400 which include an oncology therapeutic candidate entering Phase I clinical trials and a COVID-19 therapeutic candidate in the planning stage for clinical development; debt assumed of $1,577; and goodwill of $1,390.
Kleo’s employees, other than its President and Chief Financial Officer, were retained as part of the transaction. In connection with the transaction agreement, the Company filed a registration statement permitting Kleo stockholders to offer and sell the common shares of the Company issued in the transaction.
7. Liability Related to Sale of Future Royalties, net
2018 RPI Funding Agreement
In June 2018, the Company entered into a funding agreement (the "2018 RPI Funding Agreement") to sell tiered, sales-based royalty rights on global net sales of pharmaceutical products containing the compounds rimegepant or zavegepant (previously known as BHV-3500 and vazegepant) and certain derivative compounds thereof ("Products") to RPI, a Delaware statutory trust. The Company issued to RPI the right to receive certain revenue participation payments, subject to certain reductions, based on the future global net sales of the Products for each calendar quarter during the royalty term contemplated by the 2018 RPI Funding Agreement, in exchange for $100,000 in cash. Specifically, the participation rate commences at 2.1% on annual global net sales of up to and equal to $1,500,000, declining to 1.5% on annual global net sales exceeding $1,500,000. Pursuant to the Pfizer Collaboration, Pfizer will compensate Biohaven for the
related royalties on net sales outside of the U.S. owed to RPI under the 2018 RPI Funding Agreement
Concurrent with the 2018 RPI Funding Agreement, the Company entered into a common stock purchase agreement (the "Purchase Agreement") with RPI. Pursuant to the Purchase Agreement, the Company sold 1,111,111 common shares of the Company to RPI at a price of $45.00 per share, for gross proceeds of $50,000.
The Company concluded that there were two units of account for the consideration received comprised of the liability related to sale of future royalties and the common shares. The Company allocated the $100,000 from the 2018 RPI Funding Agreement and $50,000 from the Purchase Agreement among the two units of account on a relative fair value basis at the time of the transaction. The Company allocated $106,047 in transaction consideration to the liability, and $43,953 to the common shares. The Company determined the fair value of the common shares based on the closing share price on the transaction date, adjusted for the trading restrictions. The transaction costs of $377 were allocated in proportion to the allocation of total consideration to the two units of account. The effective interest rate under the 2018 RPI Funding Agreement, including transaction costs, is approximately 27% as of March 31, 2022.
2020 RPI Funding Agreement
In August 2020, the Company entered into a funding agreement with RPI 2019 Intermediate Finance Trust (“RPI 2019 IFT”) providing for up to $250,000 of funding in exchange for rights to participation payments based on global net sales of products containing zavegepant and rimegepant and certain payments based on success-based milestones relating to zavegepant (the "2020 RPI Funding Agreement"). Under the 2020 RPI Funding Agreement, RPI 2019 IFT will be entitled to receive tiered, sales based participation rights up to 3.0% of future global net sales of products containing zavegepant, 0.4% of future global net sales of products containing rimegepant, and payments tied to success-based milestones as described below. Pursuant to the Pfizer Collaboration, Pfizer will compensate Biohaven for the related royalties on net sales outside of the U.S. owed to RPI under the 2020 RPI Funding Agreement. The Company received $150,000 in cash at closing in 2020 and $100,000 in cash upon achievement of the commencement of the oral zavegepant Phase 3 program in March 2021.
The success-based milestone payments range from 0.6x to 2.95x of the funded amount depending on the number of regulatory approvals achieved for
14
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
7. Liability Related to Sale of Future Royalties, net (Continued)
zavegepant (including 1.9x for the first zavegepant migraine regulatory approval) and would be paid over a 10-year period. If the Company consummates a Change of Control, RPI 2019 IFT has the option to accelerate each unpaid milestone payment which has or thereafter occurs.
The Company concluded that there were two units of account for the $150,000 in initial consideration received, which comprised of a liability related to sale of future royalties for products containing rimegepant and a research and development arrangement with RPI 2019 IFT for zavegepant. The Company allocated the $150,000 from the 2020 RPI Funding Agreement among the two units of account based on the present value of probability adjusted net sales at the time of the transaction. The Company allocated $147,876 in transaction consideration to the liability related to sale of future royalties and $2,124 to the obligation to perform R&D services liability in the condensed consolidated balance sheets. The transaction costs of $400 were allocated to the liability related to sale of future royalties. The effective interest rate under the 2020 RPI Funding Agreement, including transaction costs, is approximately 8% as of March 31, 2022.
In March 2021, the Company received $100,000 from RPI 2019 IFT, pursuant to the 2020 RPI Funding Agreement, for the commencement of the oral zavegepant Phase 3 clinical program. The Company allocated the proceeds to obligation to perform R&D services liability in the condensed consolidated balance sheets.
Since there is a substantive and genuine transfer of risk to RPI 2019 IFT for the development of zavegepant, the $102,124 of consideration allocated to the development of zavegepant is being recognized by the Company as an obligation to perform contractual services and therefore is a reduction of research and development expenses as incurred.
The following table shows the activity within the obligation to perform R&D services account for the three months ended March 31, 2022 and 2021, related to the 2020 RPI Funding Agreement.
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Reduction to research and development expenses | $ | 6,943 | 190 | |||||||||||
The following table shows the activity within the liability related to sales of future royalties account for
the three months ended March 31, 2022 and 2021, related to the 2018 and 2020 RPI Funding Agreements.
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
Liability related to sale of future royalties - beginning balance | $ | 384,283 | $ | 335,282 | ||||||||||
| Royalty revenues paid and payable to RPI | (3,090) | (1,096) | ||||||||||||
| Interest expense on liability related to sale of future royalties | 17,314 | 13,508 | ||||||||||||
Liability related to sale of future royalties - ending balance | $ | 398,507 | $ | 347,694 | ||||||||||
8. Mandatorily Redeemable Preferred Shares, net
RPI Series A Preferred Shares
In April 2019, the Company sold 2,495 Series A Preferred Shares (the "Series A Preferred Shares") to RPI at a price of $50,100 per preferred share pursuant to a Series A preferred share purchase agreement (the "Preferred Share Agreement"). The gross proceeds from the transaction with RPI were $125,000, with $105,000 of the proceeds used to purchase a priority review voucher ("PRV") issued by the United States Secretary of Health and Human Services to potentially expedite the regulatory review of the new drug application ("NDA") for the ODT formulation of rimegepant and the remainder of the proceeds to be used for other general corporate purposes.
The holders of the Company's outstanding Series A Preferred Shares will have the right to require redemption of the shares in certain circumstances. If a Change of Control, as defined in the Company's memorandum and article of association, occurs and the Series A Preferred Shares have not previously been redeemed, the Company must redeem the Series A Preferred Shares for two times (2x) the original purchase price of the Series A Preferred Shares payable in a lump sum at the closing of the Change of Control or in equal quarterly installments following the closing of the Change of Control through December 31, 2024.
The Company may redeem the Series A Preferred Shares at its option at any time for two times (2x) the original purchase price, which redemption price may be paid in a lump sum or in equal quarterly installments through December 31, 2024.
In the event that the Company defaults on any obligation to redeem Series A Preferred Shares when
15
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
8. Mandatorily Redeemable Preferred Shares, net (Continued)
required, the redemption amount shall accrue interest at the rate of eighteen percent (18%) per annum. If any such default continues for at least one year, the holders of such shares shall be entitled to convert, subject to certain limitations, such Series A Preferred Shares into common shares, with no waiver of their redemption rights.
The Company is required to redeem the Series A Preferred Shares for two times (2x) the original purchase price, payable beginning March 31, 2021 in equal quarterly installments through December 31, 2024. Accordingly, the Company has concluded the Series A Preferred Shares are mandatorily redeemable instruments and classified as a liability. The Company initially measured the liability at fair value, and will subsequently accrete the carrying value to the redemption value through interest expense using the effective interest rate method. The effective interest rate under the Preferred Share Agreement, including transaction costs, was determined to be approximately 20% as of March 31, 2022. The Company recognized $6,463 and $7,943 in interest expense for the three months ended March 31, 2022 and 2021, respectively. The Company had 1,715 and 1,871 Series A preferred shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively.
The following table shows the activity within the Series A preferred share liability for the three months ended March 31, 2022 and 2021, respectively:
| Carrying Value | ||||||||
| Gross balance at December 31, 2021 | $ | 141,740 | ||||||
| Interest expense recognized, excluding transaction cost amortization | 6,452 | |||||||
| Redemption of Series A preferred shares | (15,625) | |||||||
| Gross balance at March 31, 2022 | $ | 132,567 | ||||||
| Less: unamortized transaction costs | (120) | |||||||
| Net balance at March 31, 2022 | $ | 132,447 | ||||||
| Gross balance at December 31, 2020 | $ | 174,264 | ||||||
| Interest expense recognized, including transaction cost amortization | 7,932 | |||||||
| Redemption of Series A preferred shares | (15,625) | |||||||
| Gross balance at March 31, 2021 | $ | 166,571 | ||||||
| Less: unamortized transaction costs | (162) | |||||||
| Net balance at March 31, 2021 | $ | 166,409 | ||||||
RPI Series B Preferred Shares
On August 7, 2020, the Company entered into the RPI Series B Preferred Share Agreement, pursuant to which RPI agreed to invest in the Company through the purchase of up to 3,992 Series B Preferred Shares at a price of $50,100 per share. The shares will be issued in quarterly increments from March 31, 2021 to December 31, 2024. Upon issuance of the Series B Preferred Shares, they qualify as mandatorily redeemable instruments and are classified as a mandatorily redeemable preferred shares liability on the condensed consolidated balance sheet. The Company measures the liability at fair value, and subsequently accretes the carrying value to the redemption value through interest expense using the effective interest rate method. The effective interest rate under the Series B Preferred Share Agreement was determined to be approximately 8.7% as of March 31, 2022. The Company recognized $1,454 in interest expense for the three months ended March 31, 2022 and no interest expense for the three months ended March 31, 2021. The Company had 1,697 and 1,406 Series B preferred shares issued and outstanding, as of March 31, 2022 and December 31, 2021, respectively.
The following table shows the activity within the Series B preferred share liability for the three months ended March 31, 2022 and 2021, respectively:
| Carrying Value | ||||||||
| Balance at December 31, 2021 | $ | 76,627 | ||||||
| Interest expense recognized | 1,454 | |||||||
| Issuance of Series B preferred shares at fair value | 14,966 | |||||||
| Balance at March 31, 2022 | $ | 93,047 | ||||||
| Balance at December 31, 2020 | $ | — | ||||||
| Issuance of Series B preferred shares at fair value | 18,210 | |||||||
| Balance at March 31, 2021 | $ | 18,210 | ||||||
16
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
9. Shareholders' Deficit
Changes in shareholders’ deficit for the three months ended March 31, 2022 were as follows:
| Common Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Biohaven Shareholders' Equity (Deficit) | Non-controlling Interests | Total Shareholders' Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||
| Balances as of December 31, 2021 | 66,933,531 | $ | 1,676,792 | $ | 169,656 | $ | (2,585,755) | $ | (73) | $ | (739,380) | $ | (3,629) | $ | (743,009) | |||||||||||||||||||||||||||||||||||
| Repurchase of preferred shares in consolidated subsidiary | 1,232,629 | 152,673 | (92,673) | 60,000 | 60,000 | |||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares as payment for agreements | 2,037,921 | 253,779 | 253,779 | 253,779 | ||||||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares under equity incentive plan | 336,721 | 29,442 | (30,193) | (751) | (751) | |||||||||||||||||||||||||||||||||||||||||||||
| Non-cash share-based compensation expense | 82,790 | 82,790 | 82,790 | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | (116,399) | (116,399) | (498) | (116,897) | ||||||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive loss | (2,325) | (2,325) | (2,325) | |||||||||||||||||||||||||||||||||||||||||||||||
| Balances as of March 31, 2022 | 70,540,802 | $ | 2,112,686 | $ | 129,580 | $ | (2,702,154) | $ | (2,398) | $ | (462,286) | $ | (4,127) | $ | (466,413) | |||||||||||||||||||||||||||||||||||
Changes in shareholders’ equity (deficit) for the three months ended March 31, 2021 were as follows:
| Common Shares | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Income | Biohaven Shareholders' Equity (Deficit) | Non-controlling Interests | Total Shareholders' Equity (Deficit) | |||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2020 | 60,436,876 | $ | 1,249,547 | $ | 98,938 | $ | (1,739,169) | $ | 314 | $ | (390,370) | $ | (1,819) | $ | (392,189) | |||||||||||||||||||||||||||||||||||
| Issuance of common shares, net of offering costs | 4,037,204 | 308,243 | — | — | — | 308,243 | — | 308,243 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares as part of acquisition | 115,836 | 10,673 | — | — | — | 10,673 | — | 10,673 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares as payment for license agreements | 110,998 | 10,243 | — | — | — | 10,243 | — | 10,243 | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of common shares under equity incentive plan | 365,554 | 25,315 | (23,933) | — | — | 1,382 | — | 1,382 | ||||||||||||||||||||||||||||||||||||||||||
| Non-cash share-based compensation expense | — | — | 48,726 | — | — | 48,726 | — | 48,726 | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | (264,968) | — | (264,968) | (360) | (265,328) | ||||||||||||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | 95 | 95 | — | 95 | ||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2021 | 65,066,468 | $ | 1,604,021 | $ | 123,731 | $ | (2,004,137) | $ | 409 | $ | (275,976) | $ | (2,179) | $ | (278,155) | |||||||||||||||||||||||||||||||||||
Issuance of Common Shares for Pfizer Collaboration Agreement
In November 2021, the Company and Pfizer Inc. entered into a Subscription Agreement (the “Subscription Agreement”). In January 2022, upon expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Company closed the sale of 2,022,581
of its common shares to Pfizer Inc. for $350,000 (the “Share Purchase”), pursuant to the terms of the Subscription Agreement. The estimated fair market value of the shares issued to Pfizer was approximately $252,000, adjusted by a discount for lack of marketability due to certain holding period restrictions, which was valued using an option pricing model (see Note 13).
17
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
9. Shareholders' Deficit (Continued)
Issuance of Common Shares for KU Leuven Agreement
In January 2022, Biohaven and Katholieke Universiteit Leuven ("KU Leuven") entered into an Exclusive License and Research Collaboration Agreement (the "KU Leuven Agreement") to develop and commercialize first-in-class TRPM3 antagonists to address the growing proportion of people worldwide living with chronic pain disorders. As consideration, KU Leuven received an upfront cash payment of $3,000 and 15,340 shares valued at $1,779 which were both recorded as research and development expense on the Company’s condensed consolidated statements of operations.
Issuance of Common Shares for the March 2021 Offering
In March 2021, the Company issued and sold 2,686,409 common shares at a public offering price of $76.00 per share for net proceeds of approximately $199,500 after deducting underwriting discounts and commissions of approximately $4,167 and other offering expenses of approximately $500. In addition, in March 2021, the underwriter of the March follow-on offering exercised its option to purchase additional shares, and the Company issued and sold 402,961 common shares for net proceeds of approximately $30,000 after deducting underwriting discounts and commissions of approximately $625. Thus, the aggregate net proceeds to the Company from the follow-on offering, after deducting underwriting discounts and commissions and other offering costs, were approximately $229,500.
Issuance of Common Shares for Acquisition of Kleo Pharmaceuticals, Inc.
On January 4, 2021, the Company acquired Kleo Pharmaceuticals, Inc. In the merger, each share of Kleo common stock issued and outstanding immediately prior to the effective time of the merger was converted into the right to receive approximately 0.007 of a common share of the Company, rounded up to the nearest whole share. Prior to the consummation of the merger, the Company owned approximately 41.9% of the outstanding shares of Kleo through its subsidiary Therapeutics, resulting in 115,836 common shares of the Company being issued to Kleo stockholders in the merger.
Issuance of Common Shares for Yale MoDE Agreement
On January 1, 2021, the Company entered into a worldwide, exclusive license agreement for the
development and commercialization of a novel Molecular Degrader of Extracellular Protein (MoDEs) platform based on ground-breaking research conducted in the laboratory of Professor David Spiegel at Yale University. Under the agreement, the Company paid Yale University an upfront cash payment of $1,000 and 11,668 shares valued at $1,000, both of which were included in research and development expense in the condensed consolidated statements of operations and comprehensive loss.
Issuance of Common Shares for Consulting Agreement with Moda Pharmaceuticals LLC
On January 1, 2021, the Company entered into a consulting services agreement with Moda Pharmaceuticals LLC to further the scientific and commercial advancement of technology, drug discovery platforms, product candidates and related intellectual property owned or controlled by the Company (Note 13). Under the agreement, the Company paid Moda Pharmaceuticals LLC an upfront cash payment of $2,700 and 37,836 shares valued at $3,243, both of which were included in research and development expense in the condensed consolidated statements of operations and comprehensive loss.
Issuance of Common Shares for Equity Distribution Agreement
In December 2020, the Company entered into the Equity Distribution Agreement. In accordance with the terms of the Equity Distribution Agreement, we may offer and sell common shares having an aggregate offering price of up to $400,000 from time to time through or to the sales agents, acting as our agents or principals. Sales of our common shares, if any, will be made in sales deemed to be “at the market offerings” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, or the Securities Act, in ordinary brokers’ transactions, to or through a market maker, on or through the New York Stock Exchange or any other market venue where the securities may be traded, in the over-the-counter market, in privately negotiated transactions, or through a combination of any such methods of sale. The sales agents may also sell our common shares by any other method permitted by law. The sales agents are not required to sell any specific amount of securities but will act as our sales agents using commercially reasonable efforts consistent with their normal trading and sales practices, on mutually agreed terms between the sales agents and us. The Company issued and sold no shares in the three months ended March 31, 2022, and 939,328 common
18
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
9. Shareholders' Deficit (Continued)
shares for net proceeds of approximately $78,743 during the three months ended March 31, 2021.
Issuance of Series A Preferred Shares and Employee Share Options by Consolidated Subsidiary
In September 2020, the Company's Asia-Pacific Subsidiary, BioShin Limited, authorized, issued and sold 15,384,613 BioShin Series A Preferred Shares at a price of $3.90 per share for a total of $60,000 to a group of investors led by OrbiMed, with participation from Cormorant Asset Management LLC, HBM Healthcare Investments Ltd, Surveyor Capital (a Citadel Company), and Suvretta Capital Management, LLC (the "BioShin Investors"). The BioShin Series A Preferred Shares contained both a call option by the Company and a put option held by the BioShin Investors. Due to the contingently redeemable features, the Company had classified the BioShin Series A Preferred Shares in mezzanine equity since the redemption was out of the Company's control.
In connection with the BioShin Series A Preferred Shares issuance, BioShin Limited executed the 2020 Equity Incentive Plan ("BioShin 2020 Equity Incentive Plan") and granted options under the BioShin 2020 Equity Incentive Plan to certain employees. The compensation expense is measured 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. The Company is accounting for the expense being recognized over the requisite service period as non-controlling interest in shareholder's equity. The Company recognized $498 and $360 in non-controlling interest relating to the options for the three months ended March 31, 2022 and 2021, respectively.
In November 2021, the Company, Biohaven Therapeutics Ltd. Atlas Merger Sub ("Merger Sub") and BioShin entered into an Agreement and Plan of Merger (the "Bioshin Merger Agreement"). The Bioshin Merger Agreement provided for the merger of the Merger Sub with and into BioShin, with BioShin surviving the merger as a wholly owned indirect subsidiary of the Company, in accordance with Section 233 of the Cayman Islands Companies Act. As a result of the satisfaction of the closing conditions described in the Biohsin Merger Agreement, on January 6, 2022, each Series A convertible preferred share of BioShin, no par value, other than Excluded Shares (as defined in the Bioshin Merger Agreement) was converted into the right to receive 0.080121 of a common share of the Company and was removed from mezzanine equity. The
convertible Series A preferred shares of BioShin converted into 1,232,629 shares of the Company.
10. Accumulated Other Comprehensive Income (Loss)
Shareholders’ deficit included the following activity in accumulated other comprehensive income for the three months ended March 31, 2022:
| Three Months Ended March 31, 2022 | ||||||||
| Net unrealized investment gains (losses): | ||||||||
| Beginning of period balance | $ | (323) | ||||||
Other comprehensive loss(1) | (2,279) | |||||||
| End of period balance | (2,602) | |||||||
| Foreign currency translation adjustments: | ||||||||
| Beginning of period balance | 250 | |||||||
Other comprehensive loss(1) | (46) | |||||||
| End of period balance | 204 | |||||||
| Total beginning of period accumulated other comprehensive loss | (73) | |||||||
| Total other comprehensive loss | (2,325) | |||||||
| Total end of period accumulated other comprehensive loss | $ | (2,398) | ||||||
(1) There was no tax on other comprehensive loss or amounts reclassified from accumulated other comprehensive income during the period.
19
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
10. Accumulated Other Comprehensive Income (Loss) (Continued)
Shareholders’ deficit included the following activity in accumulated other comprehensive income for the three months ended March 31, 2021:
| Three Months Ended March 31, 2021 | ||||||||
| Net unrealized investment gains (losses): | ||||||||
| Beginning of period balance | $ | (125) | ||||||
Other comprehensive income(1) | 63 | |||||||
Amounts reclassified from accumulated other comprehensive income(1) | 19 | |||||||
| Other comprehensive income | 82 | |||||||
| End of period balance | (43) | |||||||
| Foreign currency translation adjustments: | ||||||||
| Beginning of period balance | 439 | |||||||
Other comprehensive income(1) | 13 | |||||||
| End of period balance | 452 | |||||||
| Total beginning of period accumulated other comprehensive income | 314 | |||||||
| Total other comprehensive income | 95 | |||||||
| Total end of period accumulated other comprehensive income | $ | 409 | ||||||
(1) There was no tax on other comprehensive income during the period or amounts reclassified from accumulated other comprehensive income during the period.
11. Share-Based Compensation
Non-Cash Share-Based Compensation Expense
Non-cash share-based compensation is measured 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 to four years) using the straight-line method. Non-cash share-based compensation expense, consisting of expense for stock options, Restricted Share Units ("RSUs"), Performance Share Units ("PSU"), and Employee Share Purchase Plan ("ESPP"), was classified in the condensed
consolidated statements of operations and comprehensive loss as follows:
| Three months ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Research and development expenses | $ | 33,953 | $ | 20,058 | ||||||||||
| Selling, general and administrative expenses | 47,875 | 28,668 | ||||||||||||
| Total non-cash share-based compensation expense | $ | 81,828 | $ | 48,726 | ||||||||||
| Less: Share-based compensation expense attributable to non-controlling interests | 498 | 360 | ||||||||||||
| Share-based compensation expense attributable to Biohaven Pharmaceutical Holding Company Ltd. | $ | 81,330 | $ | 48,366 | ||||||||||
Share-based compensation expense capitalized to inventory during the three months ended March 31, 2022 and 2021 was $962 and $0, respectively.
Stock Options
All stock option grants are awarded at fair value on the date of grant. The fair value of stock options is estimated using the Black-Scholes option pricing model and stock-based compensation is recognized on a straight-line basis over the requisite service period. Stock options granted generally become exercisable over a three-year or four-year period from the grant date. Stock options generally expire 10 years after the grant date.
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company's common shares for those stock options that had exercise prices lower than the fair value of the Company's common shares at March 31, 2022.
As of March 31, 2022, the Company's unrecognized compensation expense related to unvested stock options totaled $105,422, which the Company expects to be recognized over a weighted-average period of 2.23 years. The Company expects approximately 2,592,919 of the unvested stock options to vest over the requisite service period.
20
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
11. Share-Based Compensation (Continued)
The following table is a summary of the Company's stock option activity for the three months ended March 31, 2022:
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (in years) | Aggregate Intrinsic Value | |||||||||||||||||||||||
| Outstanding as of December 31, 2021 | 7,089,727 | $40.15 | ||||||||||||||||||||||||
| Granted | 1,243,000 | $128.09 | ||||||||||||||||||||||||
| Exercised | (46,665) | $60.06 | ||||||||||||||||||||||||
| Forfeited | (3,750) | $63.01 | ||||||||||||||||||||||||
| Outstanding as of March 31, 2022 | 8,282,312 | $53.22 | 7.01 | $ | 553,426 | |||||||||||||||||||||
| Options exercisable as of March 31, 2022 | 5,689,393 | $38.82 | 6.31 | $ | 456,699 | |||||||||||||||||||||
| Vested and expected to vest as of March 31, 2022 | 8,282,312 | $53.22 | 7.01 | $ | 553,426 | |||||||||||||||||||||
Restricted Share Units and Performance Share Units
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.
The Company’s PSUs contain performance vesting conditions in addition to a service vesting condition. Vesting of the Company’s PSUs is dependent upon the degree to which the Company achieves its performance goals, which are generally set for a three-year performance period and are approved at the time of grant by the Compensation Committee. The fair value of PSUs granted with service and performance vesting conditions is based on the market price of the Company's common stock on the grant date. Compensation expense is recognized on a straight-line basis over the vesting period, beginning when the accomplishment of the performance vesting conditions become probable. Certain of the PSUs also contain a market vesting condition based on the performance of the Company's common shares relative to a comparator group. The fair value of these PSUs is determined using a Monte Carlo simulation as of the grant date and is recognized over the vesting period.
As of March 31, 2022, there was $159,189 of total unrecognized compensation cost related to Company RSUs and PSUs that are expected to vest. These costs are expected to be recognized over a weighted-average period of 2.43 years. The total fair value of RSUs vested
during the three months ended March 31, 2022 was $52,844.
The following table is a summary of the RSU and PSU activity for the three months ended March 31, 2022:
| Number of Shares | Weighted Average Grant Date Fair Value | |||||||||||||
| Unvested as of December 31, 2021 | 1,218,070 | $78.98 | ||||||||||||
| Granted | 1,064,917 | $127.95 | ||||||||||||
| Forfeited | (14,085) | $97.19 | ||||||||||||
| Vested | (561,296) | $94.12 | ||||||||||||
| Unvested as of March 31, 2022 | 1,707,606 | $104.39 | ||||||||||||
21
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
12. Net Loss Per Share
Basic and diluted net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. was calculated as follows:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Numerator: | ||||||||||||||
| Net loss | $ | (116,897) | $ | (265,328) | ||||||||||
| Net loss attributable to non-controlling interests | 498 | 360 | ||||||||||||
Deemed dividend upon repurchase of preferred shares in consolidated subsidiary (1) | (92,673) | — | ||||||||||||
| Net loss attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. | $ | (209,072) | $ | (264,968) | ||||||||||
| Denominator: | ||||||||||||||
| Weighted average common shares outstanding—basic and diluted | 70,332,274 | 62,040,715 | ||||||||||||
| Net loss per share attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd.—basic and diluted | $ | (2.97) | $ | (4.27) | ||||||||||
(1) As part of the BioShin Merger Agreement, the Company repurchased the 15,384,613 BioShin Series A Preferred Shares previously classified as mezzanine equity on the condensed consolidated balance sheet in exchange for 1,232,629 shares of the Company with a fair value of $152,673 (see Note 9 for further detail).
The Company’s potential dilutive securities, which include stock options, restricted share units, performance share units, and warrants to purchase common shares, have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common shareholders of the Company is the same.
The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common
shareholders for the periods indicated because including them would have had an anti-dilutive effect:
| As of March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Options to purchase common shares | 8,282,312 | 8,549,583 | ||||||||||||
| Warrants to purchase common shares | 100,000 | 106,751 | ||||||||||||
| Restricted share units and performance share units | 1,707,606 | 1,045,519 | ||||||||||||
| Total | 10,089,918 | 9,701,853 | ||||||||||||
13. Collaboration, License and Other Agreements
Commercial and Late-stage Agreements
Pfizer Collaboration
In November 2021, the Company and Pfizer entered into a collaboration and license agreement and a related sublicense agreement (the "Pfizer Collaboration"), pursuant to which Pfizer was granted the exclusive right to commercialize product candidates containing Biohaven's proprietary compound rimegepant (BHV-3000) and may elect to commercialize zavegepant (BHV-3500) (the "Zavegepant Option"), in each case, in all countries worldwide outside of the United States. In January 2022, following the expiration or termination of applicable waiting periods under all applicable antitrust laws and the completion of the Share Purchase (as defined below), the Pfizer Collaboration became effective. In consideration therefor, Pfizer made an upfront cash payment to the Company of $150,000 and a $350,000 equity investment in the Company (as further discussed below).
In November 2021, in connection with the Pfizer Collaboration, the Company and Pfizer Inc. entered into the Subscription Agreement. In January 2022, upon expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, the Company closed the sale of 2,022,581 of its common shares to Pfizer Inc. for $350,000 (the “Share Purchase”), pursuant to the terms of the Subscription Agreement. The estimated fair market value of the shares issued to Pfizer was approximately $252,000, adjusted by a discount for lack of marketability due to certain holding period restrictions, which was valued using an option pricing model. The issuance resulted in a $98,000 premium paid to the Company above the estimated fair value of the Company's common stock (the "Share Purchase Premium"), which forms part of the transaction price for the Collaboration Agreement as discussed below.
22
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13. Collaboration, License and Other Agreements (Continued)
Under the terms of the arrangement, the Company will be eligible to receive an aggregate additional $740,000 in contingent payments based on specified commercial and sales-based milestones for the Licensed Products.
The Company is also entitled to tiered, escalating royalties from the upper teens to twenty percent of net sales of Licensed Products in the Territory. In general, Pfizer’s obligation to pay royalties continues on a product-by-product and country-by-country basis until the latest of ten years after the first commercial sale of such product in such country, the expiration of the patent rights covering such product in such country or the expiration of the period of exclusivity applicable to such product in such country. In addition to the upfront payments, contingent payments and royalties described above, Pfizer will also compensate Biohaven for a pro-rata share of certain of its sales-based milestone obligations owed to BMS under the BMS License, and related net sales royalties owed to BMS and RPI that result from Pfizer’s commercialization and sale, respectively, of the Licensed Products in the Territory.
Upon closing, the Company identified the following as material distinct performance obligations associated with the Pfizer Collaboration under ASC 606: (i) delivery of the license and sublicense to commercialize Rimegepant outside the U.S.; (ii) a material right for the delivery of the license and sublicense for Zavegepant in conjunction with the Zavegepant Option; (iii) certain future development activities to be performed by the Company, which include clinical development activities, regulatory affairs and the transfer of information required for manufacturing (the "initial development plan"); and (iv) a material right for the Company's obligation to provide product to Pfizer under the Supply Agreement.
The Company believes that the Pfizer Collaboration is a collaboration arrangement as defined in ASC 808, Collaborative Agreements. The Company also believes that Pfizer meets the definition of a customer as defined in ASC 606, Revenue From Contracts With Customers for all of the performance obligations identified at inception except for the initial development plan. As ASC 808 does not address recognition and measurement, the Company has accounted for the initial development plan performance obligation by analogy to ASC 606.
The transaction price at inception included fixed consideration consisting of the upfront cash payment of $150,000 and the $98,000 Share Purchase Premium. Potential development, regulatory, and sales-based
milestones, and royalties, will be accounted for as variable transaction price related to the Licensed Products under ASC 606. Given the uncertain nature of these payments, we determined they were fully constrained as of March 31, 2022 and not included in the transaction price for the collaboration arrangement. We will re-evaluate the transaction price at each reporting period as uncertain events are resolved or other changes in circumstances occur. From inception of the collaboration arrangement through March 31, 2022, there was no change to the transaction price.
The respective standalone value for each of the performance obligations was determined by applying the SSP method and the transaction price was allocated based on the relative SSP method with revenue recognition timing to be determined either by the provision of services or execution or expiration of an option.
The Company used an income approach to estimate the SSP for the Rimegepant license and sublicense, Zavegepant Option, and the Supply Agreement, and a cost approach for estimating the SSP of the initial development plan. The Rimegepant license and sublicense was delivered on the closing date of the collaboration arrangement and revenue allocated to this performance obligation of $194,389 was recorded as collaboration and other revenue on the condensed consolidated statements of operations and comprehensive loss during the three months ended March 31, 2022. Revenue allocated to the Zavegepant Option is deferred as a contract liability until execution or expiration of the option occurs. The initial development plan activities are expected to be delivered over time as the services are performed, with the allocated revenue being recognized over time based on costs incurred to perform the services, since the level of costs incurred over time is thought to best reflect the transfer of services to Pfizer. Revenue allocated to the Supply Agreement is deferred, and will be recognized as product revenue on the condensed consolidated statement of operations over the estimated period of the services.
In January 2022, upon the effectiveness of the agreements, a total contract liability of $53,611 was recorded relating to the remaining performance obligations under the Pfizer Collaboration. Approximately $873 of the initial contract liability was recognized as collaboration and other revenue on the condensed consolidated statements of operations and comprehensive loss during the three months ended March 31, 2022. As of March 31, 2022, the total contract liability relating to the Pfizer Collaboration, which is
23
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13. Collaboration, License and Other Agreements (Continued)
primarily related to our obligations under the initial development plan was $52,738, of which $21,763 was classified as current and recorded to accrued expenses and other current liabilities on the condensed consolidated balance sheet. The remaining $30,975 was recorded to other long-term liabilities on the condensed consolidated balance sheet as of March 31, 2022, and expected to be recognized over several years.
In assessing the Pfizer Collaboration, management exercised considerable judgment in estimating revenue to be recognized, specifically related to estimating the discount for lack of marketability associated with the stock issuance, determining the separate performance obligations under the Collaboration Agreement, and estimating the standalone selling price of those performance obligations.
As of March 31, 2022 the Company had not achieved any milestones under the Pfizer Collaboration.
Yale University Agreement
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. As part of the consideration for this license, the Company issued Yale 250,000 common shares and granted Yale the right to purchase up to 10% of the securities issued in specified future equity offerings by the Company, in addition to the obligation to issue shares to prevent anti-dilution. The obligation to contingently issue equity to Yale was no longer outstanding as of December 31, 2019.
The Yale Agreement was amended and restated in May 2019. As amended, the Company agreed to pay Yale up to $2,000 upon the achievement of specified regulatory milestones and annual royalty payments of a low single-digit percentage based on net sales of 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 a low single-digit percentage of sublicense income that it receives.
For the three months ended March 31, 2022 and 2021, the Company did not record any material expense, or make any royalty or milestone payments under the Yale Agreement.
BMS Agreement
In July 2016, the Company entered into an exclusive, worldwide license agreement with BMS (the "BMS Agreement") for the development and commercialization rights to rimegepant and zavegepant, as well as other CGRP-related intellectual property. In exchange for these rights, the Company agreed to pay BMS initial payments, milestone payments and royalties on net sales of licensed products under the agreement.
The Company is obligated to make milestone payments to BMS upon the achievement of specified development and commercialization milestones. The development milestone payments due under the BMS Agreement depend on the licensed product being developed. With respect to rimegepant, the Company is obligated to pay up to $127,500 in the aggregate upon the achievement of the development milestones. For any product other than rimegepant, the Company is obligated to pay up to $74,500 in the aggregate upon the achievement of the development milestones. In addition, the Company is obligated to pay up to $150,000 for each licensed product upon the achievement of commercial milestones. If the Company receives revenue from sublicensing any of its rights under the BMS Agreement, it is also obligated to pay a portion of that revenue to BMS. The Company is also obligated to make tiered royalty payments to BMS based on annual worldwide net sales, with percentages in the low to mid-teens.
Under the BMS Agreement, the Company is obligated to use commercially reasonable efforts to develop licensed products and to commercialize at least one licensed product using the patent rights licensed from BMS and is solely responsible for all development, regulatory and commercial activities and costs. The Company is also required to reimburse BMS for any fees that BMS incurs related to the filing, prosecution, defending, and maintenance of patent rights licensed under the BMS Agreement. Under the BMS Agreement, BMS transferred to the Company manufactured licensed products, including certain materials that will be used by the Company to conduct clinical trials. The Company's right to sublicense its rights under the BMS agreement, other than to an affiliate or to certain third-party manufacturers, is subject to BMS's prior written
24
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13. Collaboration, License and Other Agreements (Continued)
consent, which cannot be unreasonably withheld or delayed.
The BMS Agreement will terminate on a licensed product-by-licensed product and country-by-country basis upon the expiration of the royalty term with respect to each licensed product in each country and can also be terminated if certain events occur, e.g., material breach or insolvency.
In March 2018, the Company entered into an amendment to the BMS Agreement (the “2018 BMS Amendment”). Under the 2018 BMS Amendment, the Company paid BMS an upfront payment of $50,000 in return for a low single-digit reduction in the royalties payable on net sales of rimegepant and a mid single-digit reduction in the royalties payable on net sales of zavegepant, which was recorded in research and development expense in the condensed consolidated statements of operations and comprehensive loss.
The 2018 BMS Amendment also removes BMS’s right of first negotiation to regain its intellectual property rights or enter into a license agreement with the Company following the Company’s receipt of topline data from its Phase 3 clinical trials with rimegepant, and clarifies that antibodies targeting CGRP are not prohibited as competitive compounds under the non-competition clause of the Original License Agreement.
In August 2020, the Company entered into a further amendment of the BMS Agreement (the “August 2020 BMS Amendment”). Under the August 2020 BMS Amendment, the Company paid BMS an upfront payment of $5,000 in return for a reduction in the royalties payable on net sales of rimegepant and zavegepant in China, with percentages in the low to mid-single digits. In addition, the Company is obligated to pay up to $22,500 for each licensed product upon the achievement of commercial milestones in China. The August 2020 BMS Amendment also amended the BMS Agreement to remove sales in China from the commercial milestone payment obligations.
In November 2020, the Company entered into a further amendment of the BMS Agreement (the “November 2020 BMS Amendment”). Under the November 2020 BMS Amendment, certain exclusivity provisions under the BMS Agreement are waived which permits the Company to develop certain CGRP compounds licensed by the Company from Heptares Therapeutics Limited (“Heptares”). Under the November 2020 Amendment, if the Company initiates clinical development of a Heptares compound prior to July 8, 2023, the Company is obligated to pay BMS certain fees based on net sales of the Heptares
compounds from low single percentage to 10% and pay up to $17,500 for each Heptares compound upon the achievement of certain development milestones and up to $150,000 for each Heptares compound upon the achievement of certain commercial milestones. As of March 31, 2022 the Company has not achieved any of the development or commercial milestones for the Heptares compounds. No fees or milestones are due by the Company to BMS for Heptares compounds that begin clinical trials after July 8, 2023.
The BMS Agreement continues to provide the Company with exclusive global development and commercialization rights to rimegepant, zavegepant and related CGRP molecules, as well as related know-how and intellectual property. The Company’s obligations to make development milestone payments to BMS under the BMS Agreement remain unchanged.
In connection with the BMS Agreement, upon FDA approval of NURTEC ODT on February 27, 2020, the Company became obligated to pay BMS $40,000 in milestone payments. The Company recorded the $40,000 in milestone payments as an intangible asset on its condensed consolidated balance sheet in the first quarter of 2020, and is amortizing the expense to cost of sales on its condensed consolidated statements of operations and comprehensive loss over the patent life. The Company paid the $40,000 in milestone payments to BMS during the year ended December 31, 2020.
In connection with the BMS Agreement, the Company was required to pay $2,000 to BMS on commencement of a Phase 1 clinical trial, $4,000 on commencement of a Phase 2 clinical trial, and $6,000 on commencement of a Phase 3 clinical trial, for certain milestones relating to the development of zavegepant. Accordingly, the Company recognized these liabilities in accrued expenses within the condensed consolidated balance sheets in the fourth quarter of 2018, first quarter of 2019, and fourth quarter of 2019, respectively. Per the BMS Agreement, the $2,000 and $4,000 payment obligations under the agreement were deferred until the earlier of FDA approval of rimegepant or the discontinuation of the rimegepant development program. Upon FDA approval of NURTEC ODT on February 27, 2020, the Company became obligated to pay BMS the $2,000 and $4,000 milestone payments for the commencement of the Phase 1 and Phase 2 clinical trials of zavegepant, respectively, and made the milestone payments in the second quarter of 2020. The Company paid the $6,000 milestone payment following the commencement of the Phase 3 clinical trial of zavegepant in the fourth quarter of 2020. In the first quarter of 2021, the Company accrued a $5,000
25
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13. Collaboration, License and Other Agreements (Continued)
development milestone expense following the regulatory filing for rimegepant in Europe, which was paid in the second quarter of 2021. In the fourth quarter of 2021, the Company accrued a $5,000 development milestone expense for the planned submission of a New Drug Application to the FDA for intranasal zavegepant in the first half of 2022.
The Company did not record research and development expense related to the BMS Agreement during the three months ended March 31, 2022 and 2021. In addition, for the three months ended March 31, 2022 and 2021, the Company recorded $12,355 and $4,384, respectively, in royalty expense in cost of sales on the condensed consolidated statements of operations and comprehensive loss under the BMS agreement.
RPI Agreements
In June 2018, pursuant to the 2018 RPI Funding Agreement entered into by the Company and RPI (Note 7), the Company granted to RPI the right to receive certain revenue participation payments, subject to certain reductions, based on the future global net sales of the Products, for each calendar quarter during the royalty term contemplated by the 2018 RPI Funding Agreement, in exchange for $100,000 in cash. Specifically, the participation rate commences at 2.1 percent on annual global net sales of up to and equal to $1,500,000, declining to 1.5 percent on annual global net sales exceeding $1,500,000.
In connection with the 2018 RPI Funding Agreement, the Company recorded, $14,096 in interest expense on its liability related to sale of future royalties for the three months ended March 31, 2022 and $11,419 in interest expense on its liability related to sale of future royalties for the three months ended March 31, 2021, respectively, The Company paid $4,025 and $736 under the 2018 RPI Funding Agreement during the three months ended March 31, 2022 and March 31, 2021, respectively.
In August 2020, pursuant to the 2020 RPI Funding Agreement, the Company sold sales-based participation rights on global net sales of products containing zavegepant and rimegepant to RPI 2019 IFT for aggregate funding of $250,000, payable in two tranches. For further details on the transaction see Note 7 “Liability Related to Sale of Future Royalties, net.”
In connection with the 2020 RPI Funding Agreement, the Company recorded $3,218 and $2,089 in interest expense for the three months ended March 31, 2022 and March 31, 2021, respectively. The Company recorded payments of $767 during the three months
ended March 31, 2022, and payments of $140 under the 2020 RPI Funding Agreement during the three months ended March 31, 2021.
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. 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, both of which were included in research and development expense, 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, we will pay AstraZeneca tiered royalties ranging from high single-digit to low double-digits based on net sales of specified approved products, subject to specified reductions.
The Company plans to conduct a Phase 3 clinical trial of this product candidate, which is now referred to as verdiperstat, for the treatment of multiple system atrophy (“MSA”), a rare, rapidly progressive and fatal neurodegenerative disease with no cure or effective treatments. 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 three months ended March 31, 2022 and 2021, the Company did not record any material expense or make any milestone or royalty payments under the 2018 AstraZeneca Agreement.
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
13. Collaboration, License and Other Agreements (Continued)
Taldefgrobep Alfa License Agreement
In February 2022, following the transfer of intellectual property, the Company announced that we entered into a worldwide license agreement with BMS for the development and commercialization rights to taldefgrobep alfa (also known as BMS-986089), 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.
Other Agreements
In addition to the agreements discussed above, the Company has entered into various other collaborations, including licensing and development programs, for assets which the Company considers to be early-stage (have not yet entered phase 3 clinical trials). The agreements generally include upfront fees, milestone payments which become payable upon achievement of certain clinical, development, regulatory and sales milestones, as well as royalties calculated as a percentage of product revenue, with rates that vary by agreement.
The Company records milestones and other payments, including funding for research arrangements, which become due under its early-stage agreements to research and development expense in the condensed consolidated statements of operations and comprehensive loss. Amounts recorded for the period were as follows:
| Three months ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Milestone payments | $ | — | $ | 962 | ||||||||||
| Other payments | 4,445 | 1,579 | ||||||||||||
For the three months ended March 31, 2022 the Company made upfront payments consisting of $3,000 cash and 15,340 shares valued at $1,779 in connection with new agreements. For the three months ended March 31, 2021 the Company made upfront payments consisting of $3,700 cash and 49,504 shares valued at $4,243 in connection with new agreements.
As of March 31, 2022, under these agreements the Company has potential future developmental,
regulatory, and commercial milestone payments of up to approximately $216,966, $279,325 and $573,121, respectively. Payments under these agreements generally become due and payable upon achievement of a specified milestone. Because the achievement of these milestones have not been considered probable as of March 31, 2022, such contingencies have not been recorded in our financial statements. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory or commercial milestones.
14. Commitments and Contingencies
Summarized below are the matters previously described in Note 17 of the Notes to the Consolidated Financial Statements in the Company's Form 10-K for the year ended December 31, 2021, updated as applicable.
Commercial Commitments
The Company's commercial commitments primarily relate to manufacturing preparation services that are enforceable and legally binding on us and that specify all significant terms, including applicable milestone payments and target completion dates, and its commercial car fleet.
Research Commitments
The Company has entered into agreements with several contract research organizations to provide services in connection with its preclinical studies and clinical trials. The Company commits to minimum payments under these arrangements.
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 certain executive officers and members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. The Company’s amended and restated memorandum and articles of association also provide
27
BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
14. Commitments and Contingencies (Continued)
for indemnification of directors and officers in specified 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 condensed consolidated financial statements as of March 31, 2022 or December 31, 2021.
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 March 31, 2022, there were no matters which would have a material impact on the Company’s financial results.
15. Income Taxes
The following table provides a comparative summary of the Company's income tax provision and effective income tax rate for the three months ended March 31, 2022 and 2021:
| Three Months Ended March 31, | ||||||||||||||
| 2022 | 2021 | |||||||||||||
| Income tax provision | $ | 24,303 | $ | 3,824 | ||||||||||
| Effective income tax rate | 26.2 | % | 1.5 | % | ||||||||||
The Company recorded an income tax provision of $24,303 for the three months ended March 31, 2022 compared to a provision for income taxes of $3,824 for the three months ended March 31, 2021. The increase in income tax expense of $20,479 was primarily attributable the mandatory capitalization of R&D expenses effective January 1, 2022 under the Tax Cuts and Jobs Act, offset by an increased benefit to the Company's foreign derived intangible income deduction.
16. Subsequent Events
Kv7 Platform Acquisition
On April 1, 2022, the Company closed the previously announced 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 “Transaction”), pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”), dated February 24, 2022.
In consideration for the Transaction, on April 4, 2022, Biohaven made an upfront payment comprised of $35,000 in cash and 493,254 common shares of the Company, valued at approximately $65,000, (“Biohaven Shares”) issued through a private placement. Biohaven 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. These contingent milestone payments may be paid in cash or Biohaven Shares at the election of Biohaven, but if Biohaven elects to pay in Biohaven Shares, such amounts are subject to increases of a mid-single-digit percentage increase (or in one case, a ten-percent increase). Additionally, Biohaven 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 double digits for the pipeline programs.
The Company has also given Knopp the option to request a one-time cash true-up payment from the Company in December 2022 in the event that Knopp continues to hold Biohaven Shares issued as a component of the upfront payment and the value of such shares has declined, subject to certain conditions.
Pfizer Acquisition
On May 9, 2022, the Company, Pfizer and Bulldog (BVI) Ltd., a wholly owned subsidiary of Pfizer (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Pfizer Merger Agreement”), pursuant to which, on the terms and subject to the conditions set forth in the Pfizer Merger Agreement, Pfizer will acquire all outstanding shares of Biohaven for $148.50 per share in cash and Merger Sub will merge with and into the Company (the “Pfizer Merger”), with the Company surviving the Pfizer Merger as a wholly owned subsidiary of Pfizer.
In connection with and as a condition to the Pfizer Merger, the Company and Biohaven Research Ltd. (“New Biohaven”) entered into a Separation and Distribution Agreement, dated as of May 9, 2022 (the “Separation Agreement”), pursuant to which, on the terms and subject to the conditions set forth in the Separation Agreement, immediately prior to the effective time of the Pfizer Merger: (i) the Company will
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BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in thousands, except share and per share amounts)
(Unaudited)
16. Subsequent Events (Continued)
effect a pre-closing reorganization, which will result in (x) New Biohaven owning, assuming or retaining certain assets and liabilities of the Company and its subsidiaries related to the Company’s pipeline assets and businesses, and (y) the Company owning, assuming or retaining all other assets and liabilities, including those associated with the Company’s platform for the research, development, manufacture and commercialization of calcitonin gene-related peptide receptor antagonists, including rimegepant, zavegepant and the Heptares Therapeutics Limited pre-clinical CGRP portfolio; and (ii) thereafter, the Company will distribute to its shareholders as of the record date all of the issued and outstanding common shares of New Biohaven, no par value, on a pro rata basis (the “Spin-Off”), at a ratio of one New Biohaven Common Share for every two common shares of the Company. Following the Spin-Off, New Biohaven will be a separate public company and the Company will have no continuing common share ownership interest in New Biohaven.
The boards of directors of both Biohaven and Pfizer have unanimously approved the Spin-Off and the Pfizer Merger. Pfizer will pay transaction consideration totaling approximately $11.6 billion in cash. Pfizer will also make payments at the closing of the Pfizer Merger to settle Biohaven’s third party debt and for the redemption of all outstanding shares of Biohaven’s redeemable preferred stock. Following the closing of the Pfizer Merger, New Biohaven will continue to operate under the Biohaven name. New Biohaven will be led by Vlad Coric, MD, as Chairman and CEO, and include other members of the current management team of Biohaven. New Biohaven will be capitalized with $275 million of cash. New Biohaven will also have the right to receive tiered royalties from Pfizer on any annual net sales of rimegepant and zavegepant in the United States in excess of $5.25 billion. Pfizer expects to finance the transaction with existing cash on hand. Pfizer’s acquisition of Biohaven is subject to the completion of the New Biohaven spin-off transaction and other customary closing conditions, including receipt of regulatory approvals and approval by Biohaven’s shareholders. The companies expect the transaction to close by early 2023.
Additional information about the Pfizer Merger Agreement and the Pfizer Merger will be set forth in the Company’s Definitive Proxy Statement on Schedule 14A that will be filed with the SEC.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”). Some of the statements contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business, constitute forward looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements on our current expectations and projections about future events. The following information and any forward-looking statements should be considered in light of factors discussed elsewhere in this Quarterly Report on Form 10-Q and our other filings with the SEC.
Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, the development of the industry in which we operate, the potential achievement of milestones and receipt of payments under our collaboration with Pfizer (“Pfizer”) entered into in November 2021 (the “Pfizer Collaboration”) and the proposed Pfizer Merger and Spin-Off, among other things, may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. Statements made herein are as of the date of the filing of this Form 10-Q with the SEC and should not be relied upon as of any subsequent date. Even if our results of operations, financial condition and liquidity, the development of the industry in which we operate, the potential achievement of milestones and receipt of payments under the Pfizer Collaboration are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods. We disclaim any obligation, except as specifically required by law and the rules of the SEC, to publicly update or revise any such statements to reflect any change in our expectations or in events, conditions or circumstances on which any such statements may be based, or that may affect the likelihood that actual results will differ from those set forth in the forward-looking statements.
We caution readers not to place undue reliance on any forward-looking statements made by us, which speak only as of the date they are made.
Overview
We are a commercial-stage biopharmaceutical company with a portfolio of innovative, best-in-class therapies to improve the lives of patients with debilitating neurological and neuropsychiatric diseases, including rare disorders. Our Neuroinnovation portfolio includes FDA-approved NURTEC ODT (rimegepant) for the acute and preventive treatment of migraine and a broad pipeline of product candidates across five distinct mechanistic platforms: calcitonin gene related peptide ("CGRP") receptor antagonism, glutamate modulation, myeloperoxidase ("MPO") inhibition, Kv7 ion channel activators ("Kv7"), and Myostatin inhibition.
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Our clinical-stage milestones include the following:
| Drug Name | Indication | 1H2021 | 2H2021 | 1H2022 | 2H2022 | ||||||||||||||||||
 | Migraine prevention | Approval | |||||||||||||||||||||
| Migraine acute/prevention | Europe Filing 1Q | EU Approval | |||||||||||||||||||||
| Migraine acute (China/Korea) | Topline | China Filing | |||||||||||||||||||||
Zavegepant Small molecule/NCE | Migraine (intranasal) | Topline | US Filing | ||||||||||||||||||||
| Migraine (oral) | Start Phase 3 | ||||||||||||||||||||||
Troriluzole NCE prodrug of riluzole | Spinocerebellar ataxia | Expected Topline | |||||||||||||||||||||
| Obsessive-Compulsive Disorder (“OCD”) | Complete Enrollment | ||||||||||||||||||||||
Verdiperstat NCE oral MPO inhibitor | Amyotrophic Lateral Sclerosis ("ALS") | Complete Enrollment | Topline | ||||||||||||||||||||
Taldefgrobep Alfa Anti-myostatin adnectin | Spinal Muscular Atrophy ("SMA") | Start Phase 3 | |||||||||||||||||||||
BHV-7000 Kv7 channel modulator | Focal epilepsy | Start Phase 1 | |||||||||||||||||||||
BHV-1100 ARM combo | Multiple Myeloma | Start Phase 1 | |||||||||||||||||||||
| Milestone Achieved | |||||||||||||||||||||||
CGRP Platform
In July 2016, we acquired exclusive, worldwide rights to our CGRP receptor antagonist platform, including rimegepant and zavegepant (previously known as BHV-3500 and vazegepant), through a license agreement, as amended, with Bristol-Myers Squibb Company (“BMS”). In December 2020, Heptares Therapeutics Ltd. ("Sosei Heptares") and Biohaven entered a global collaboration and license agreement (the "Heptares Agreement") under which Biohaven received exclusive global rights to develop, manufacture and commercialize a portfolio of novel, small-molecule CGRP receptor antagonists discovered by Sosei Heptares for the treatment of CGRP-mediated disorders.
Rimegepant
The most advanced product candidate from our CGRP receptor antagonist platform is rimegepant, an orally available, potent and selective small molecule human CGRP receptor antagonist that we have developed for the acute and preventive treatment of migraine. During the second quarter of 2019, we submitted NDAs for the acute treatment of migraine to the FDA for the Zydis ODT and tablet formulations of rimegepant. The NDA submission for the Zydis ODT formulation of rimegepant was submitted using an FDA priority review voucher, purchased in March 2019, providing for an expedited 6-month review. The Zydis
ODT formulation of rimegepant (NURTEC ODT) was approved by the FDA for the acute treatment of migraine on February 27, 2020 and was available by prescription in U.S. pharmacies on March 12, 2020. During the fourth quarter of 2020, we submitted an sNDA for the preventive treatment of migraine to the FDA for NURTEC ODT. The FDA approved NURTEC ODT for the preventive treatment of episodic migraine on May 27, 2021.
We remain focused on investing in long-term success by driving new-to-brand prescriptions, and ultimately market share, in this rapidly growing oral CGRP market and are continuing to observe a positive return on investment with increasing physician advocacy and attracting a greater pool of patients. We believe that the rapid adoption of NURTEC ODT is evidence of significant unmet need among people with migraine and an associated large acute and preventive therapy market opportunity. We continue to expand commercial payer coverage, with NURTEC ODT now covered by insurance providers reflecting 96% of commercial lives.
A summary of key rimegepant studies is described below.
Study 301/Study 302
In March 2018, we announced positive topline data from our first two pivotal Phase 3 trials (“Study 301 and Study 302”) for the acute treatment of migraine. In each trial, treatment with a single 75 mg dose of rimegepant
31
met the co-primary efficacy endpoints of the trial, which were superior to placebo, at two hours post-dose, on measures of pain freedom and freedom from the patient’s most bothersome symptom ("MBS"). In addition to achieving both co-primary endpoints in each of the trials, rimegepant also was observed to be generally safe and well-tolerated in the trials, with a safety profile similar to placebo. The co-primary endpoints achieved in the Phase 3 trials were consistent with regulatory guidance from the FDA and provided the basis for the submission of an NDA to the FDA.
Study 303
A third Phase 3 clinical trial for the acute treatment of migraine with a bioequivalent ODT formulation of rimegepant was commenced in February 2018. On December 3, 2018, we announced positive topline data from this randomized, controlled Phase 3 clinical trial (“BHV3000-303” or “Study 303”) evaluating the efficacy and safety of our Zydis ODT formulation of rimegepant for the acute treatment of migraine. Rimegepant differentiated from placebo on the two co-primary endpoints using a single dose, pain freedom and freedom from the MBS at two hours. In total, rimegepant was significantly differentiated from the placebo in the first 21 consecutive primary and secondary outcome measures that were pre-specified. Patients treated with the rimegepant Zydis ODT formulation began to numerically separate from placebo on pain relief as early as 15 minutes, and this difference was statistically significant at 60 minutes. Additionally, a significantly greater percentage of patients treated with rimegepant Zydis ODT returned to normal functioning by 60 minutes and lasting clinical benefit compared to placebo was observed through 48 hours after a single dose of rimegepant on freedom from pain, pain relief, freedom from the MBS, and freedom from functional disability. The safety and tolerability observations of rimegepant in Study 303 were consistent with our previous observations. The overall rates of adverse events were similar to placebo (13.2% with respect to rimegepant compared to 10.5% with placebo). The co-primary endpoints achieved in the Phase 3 trials were consistent with regulatory guidance from the FDA and formed the basis of efficacy data required by the FDA for approval.
Study 305
In November 2018, we initiated a double-blind, placebo-controlled Phase 3 clinical trial examining regularly scheduled dosing of rimegepant 75 mg to evaluate its efficacy and safety as a preventive therapy for migraine (“BHV3000-305” or “Study 305”). In March 2020, we announced positive topline results from this study. Rimegepant 75 mg, dosed every other day, demonstrated statistically significant superiority, compared to placebo, on the primary endpoint of reduction in the mean number of migraine days per month in both episodic and chronic migraine patients. The safety profile seen in the 370 patients who received rimegepant 75 mg every other day was consistent with
prior clinical trial experience. With this trial, rimegepant has become the only CGRP targeted therapy to demonstrate efficacy in both the acute and preventive treatment of migraine. An sNDA for rimegepant for prevention of migraine was filed with the FDA and accepted for review in the fourth quarter of 2020. The FDA approved NURTEC ODT for the preventive treatment of migraine on May 27, 2021.
Pediatric Study Plan
In June 2019, the FDA agreed to our Pediatric Study Plan for the acute treatment of migraine. The pediatric program for the acute treatment of migraine was initiated in the fourth quarter of 2020.
Trigeminal Neuralgia
In the second quarter of 2019, we initiated a Phase 2 proof of concept trial to evaluate the safety and efficacy of rimegepant in patients with treatment refractory trigeminal neuralgia. Trigeminal neuralgia is a chronic facial pain syndrome characterized by paroxysmal, severe, and lancinating episodes of pain in the distribution of one or more branches of the trigeminal nerve. The trigeminal nerve, or fifth cranial nerve, is the largest of the 12 cranial nerves and provides sensory innervation to the head and neck, as well as motor innervation to the muscles of mastication. These episodic bouts of severe facial pain can last seconds to minutes, occur several times per day, and often result in significant disability. Over the long-term course of the disease, symptoms often become refractory to medical therapy and current treatment options remain suboptimal.
Plaque Psoriasis
In the fourth quarter of 2020, we announced a collaboration with Weill Cornell Medicine's Dr. Richard Granstein, Chairman of Dermatology, to initiate an investigator-led clinical trial, which will explore whether treatment with one of our CGRP receptor antagonists will reduce the severity of disease and percentage of area affected as measured by patients' Psoriasis Activity Severity Index (PASI) score after 16 weeks of treatment as compared to placebo. In addition, the study will assess the potential impact on itch and patient quality-of-life measures. Psoriasis is a chronic and painful autoimmune disease characterized by red patches of dry, cracked skin that may bleed, itch, and burn that affects approximately 7- 8 million people in the U.S.
Rhinosinusitis
In February 2022, we announced that we have begun enrollment in a Phase 2/3 clinical trial assessing the safety and efficacy of NURTEC ODT 75mg in patients with chronic rhinosinusitis ("CRS") with or without nasal polyps. CRS is a symptomatic inflammation of the paranasal sinuses and nasal cavity lasting more than 12 weeks. CRS typically manifests as facial pain/pressure/fullness, nasal obstruction (congestion), nasal discharge, and/or a decreased sense of smell. Both
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preclinical and human studies have indicated that increased CGRP levels are associated with CRS, and suggest that blocking CGRP receptors with NURTEC ODT may have beneficial effects for those suffering from CRS. We expect to enroll approximately 200 patients in a randomized, double-blind, placebo-controlled trial across approximately 25 sites in the U.S. Researchers will evaluate acute symptomatic treatment with rimegepant in patients with chronic rhinosinusitis with and without nasal polyps. The primary outcome measure is the change in a patient’s facial pain/pressure/fullness score on a Numerical Rating Scale (0-10). The trial will also assess the safety and tolerability of rimegepant.
Temporomandibular Disorder
In the first quarter of 2022, we received “Study May Proceed” communications from the FDA regarding our proposed clinical trial for the use of NURTEC ODT in temporomandibular disorder ("TMD"). TMD is a disorder of the jaw muscles, temporomandibular joints, and the nerves associated with chronic facial pain. We expect to commence a clinical trial during the second quarter of 2022.
International Health Authority Interactions
Scientific advice for rimegepant for acute and preventive migraine treatment was received from the CHMP, a committee of the European Medicines Agency, in June and December 2018, respectively. In the first quarter of 2021, we submitted the MAA for rimegepant dual indication, inclusive of acute treatment and prevention of migraine. In April 2022, the European Commission ("EC") approved rimegepant 75 mg (available as an orally dissolving tablet), intended for the prophylaxis and acute treatment of migraine. VYDURA™ (rimegepant) will be the commercial name for rimegepant in the EU. The full indication for VYDURA is the acute treatment of migraine with or without aura in adults and preventive treatment of episodic migraine in adults who have at least four migraine attacks per month. The Marketing Authorization follows the recommendation for approval by CHMP in February 2022. The EC approval will be valid for all 27 EU member states as well as Iceland, Liechtenstein and Norway and local reimbursement approval will follow. Assessment of the MAA by the Medicines & Healthcare products Regulatory Agency ("MHRA") is underway and approval is expected to shortly follow in the United Kingdom.
Filings in Israel and the Middle East began in 2020. In March 2021, we received approval for rimegepant in Israel and the UAE for the acute treatment of migraine. In the fourth quarter of 2021, we received approval for rimegepant in Israel for the preventive treatment of episodic migraine in adults and in Kuwait for the acute treatment of migraine in adults. We expect further approvals in 2022.
With respect to Japan, we have engaged the Pharmaceuticals and Medical Devices Agency ("PMDA")
on a path forward, and initiation of Phase 2/3 bridging studies are anticipated to begin mid-2022.
In January 2019, we and our subsidiary, BioShin (Shanghai) Consulting Services Company Ltd. (“BioShin Shanghai”), a Shanghai based limited liability company, jointly announced that the National Medical Products Administration (“NMPA,” formerly, the China FDA) had accepted the IND application for rimegepant for the treatment of migraine. As previously announced, BioShin Shanghai was established to develop and potentially commercialize our late-stage migraine and neurology portfolio in China and other Asia-Pacific markets. Following the results of Study 303, we submitted a second IND application to the NMPA for the Zydis ODT formulation of rimegepant for the acute treatment of migraine. The IND application for the Zydis ODT formulation of rimegepant was accepted by the NMPA in the fourth quarter of 2019. In September 2020, BioShin Limited ("BioShin"), our subsidiary and the parent organization of BioShin Shanghai, raised $60.0 million in series A funding (the "BioShin Funding") which was used to build out BioShin in China and advance our clinical portfolio in the Asia-Pacific region.
In November 2020, BioShin initiated a double-blind, randomized Phase 3 clinical trial evaluating the safety and efficacy of NURTEC ODT (rimegepant) for the acute treatment of migraine in China and South Korea. In February 2022, we announced positive topline results from the study. The study met its co-primary endpoints of freedom from pain (p<0.0001) and freedom from MBS including either nausea, phonophobia or photophobia (p<0.0001) at 2-hours following a single oral dose of rimegepant. The early onset and durable 48 hour efficacy observed in China and South Korea is consistent with previous clinical trial results. In addition to the positive results on the co-primary endpoints, NURTEC ODT demonstrated rapid onset efficacy that was superior to placebo on multiple clinically important outcomes, including: pain relief at 2 hours (p < 0.0001); normal functioning at 2 hours post-dose (p<0.0001); no need for rescue medication within 24 hrs of dosing (p < 0.0001), and showed lasting efficacy with sustained pain freedom from 2 through 24 hours (p < 0.0001) and sustained pain freedom from 2 through 48 hours (p < 0.0001). Initial analysis of topline data indicates NURTEC ODT was numerically advantaged compared to placebo on multiple early-onset measures, including: pain relief within 45 minutes and freedom from MBS within 45 minutes; return to normal function within 60 min; and pain freedom within 90 min. Rimegepant also showed a favorable safety and tolerability profile among study participants that was consistent with prior clinical trial results in the United States. Detailed data from the study will be presented at future medical meetings to help inform ongoing and future research. We expect to submit an NDA during the second half of 2022.
Pursuant to the terms of our Pfizer Collaboration, we will continue to perform development activities required for the regulatory approval of rimegepant and zavegepant in all countries outside of the U.S. ("the
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Territory"). The development activities are to be performed under a mutually agreed-upon development plan. In addition, Pfizer has the right to conduct certain development activities in the Territory and will be the marketing authorization holder in all countries in the Territory where permitted under applicable law.
Zavegepant
BHV-3500, formerly "vazegepant", is now referred to as "zavegepant" (za ve’ je pant). The World Health Organization (WHO) International Nonproprietary Names (INN) Expert Committee revised the name to "zavegepant" which was accepted by the United States Adopted Names Council for use in the U.S. and is pending formal adoption by the INN for international use.
Acute Treatment of Migraine
Administration of intranasal zavegepant in a Phase 1 clinical trial was initiated in October 2018 and achieved targeted therapeutic exposures. We advanced zavegepant into a Phase 2/3 trial to evaluate its efficacy for the acute treatment of migraine in the first quarter of 2019. We believed that intranasal zavegepant could provide an ultra-rapid onset of action that could be used in a complementary fashion with other migraine treatments when the speed of onset is critical to a patient and/or for patients experiencing severe nausea and/or vomiting symptoms. In December 2019, we announced positive topline results from the Phase 2/3 trial. Zavegepant 10 and 20 mg was statistically superior to placebo on the co-primary endpoints of pain freedom and freedom from the MBS at two hours using a single dose.
In January 2021, we announced the initiation of the Phase 3 clinical trial for the use of intranasal zavegepant for the acute treatment of migraine and in December 2021, we announced top-line results. The results of the study showed that zavegepant was statistically superior to placebo on the co-primary endpoints of pain freedom (24% vs 15%, p <.0001) and freedom from most bothersome symptom (40% vs 31%, p = 0.0012) at 2 hours. Zavegepant was superior to placebo demonstrating pain relief as early as 15 minutes, with patients achieving return to normal function as early as 30 minutes after dosing (p < 0.006). The efficacy benefits of zavegepant were durable, including superiority versus placebo (p < 0.05) on: sustained pain freedom 2 to 24 hours; sustained pain freedom 2 to 48 hours; sustained pain relief 2 to 24 hours; and sustained pain relief 2 to 48 hours. Based upon these results, combined with our prior positive Phase 2/3 trial, we plan to proceed with regulatory submissions in the United States and other countries and submitted an NDA for intranasal zavegepant with the FDA in the first quarter of 2022.
Preventative Treatment of Migraine
In September 2020, we announced that the FDA authorized the initiation of clinical trials for oral zavegepant and that we had achieved first in human
dosing in a Phase 1 trial designed to assess the safety and pharmacokinetics of oral formulations of zavegepant. In March 2021, we announced that our Phase 2/3 clinical program to assess the efficacy of oral zavegepant in the preventive treatment of migraine began enrollment. The Phase 2/3 trial is ongoing with enrollment expected to complete in the first half of 2023.
COVID-19
In April 2020, we announced our plan to study intranasal zavegepant in pulmonary complications of COVID-19 disease. The IND was approved by the Division of Pulmonary, Allergy, and Critical Care at FDA in April 2020, and a Phase 2 trial began in April 2020 in collaboration with Thomas Jefferson University and other academic medical institutions. The clinical trial will assess the potential benefits of CGRP receptor-blockade in mitigating an excessive immune response which in some cases can be fatal in COVID-19 patients.
Asthma
In October 2021, we began enrollment in a Phase 1b, double-blind, placebo-controlled, parallel-group study to evaluate the safety and efficacy of oral zavegepant for the treatment of subjects with mild allergic asthma. Enrollment in the trial is ongoing.
Next Generation CGRP Receptor Antagonists
Several clinical candidates are being developed through a global collaboration and license agreement between Biohaven and Sosei Heptares. Under the agreement, Biohaven received exclusive global rights to develop, manufacture and commercialize a portfolio of novel, small-molecule CGRP receptor antagonists discovered by Sosei Heptares for the treatment of CGRP-mediated disorders.
BHV-3100, previously known as HTL0022562, was developed successfully through preclinical trials by Sosei Heptares and demonstrated promising and differentiated properties in target CGRP-mediated disorders. During the fourth quarter of 2021, we decided to stop development of BHV-3100 based upon its emerging preclinical profile and will instead advance one of the portfolio's backup compounds in its place.
Glutamate Platform
The most advanced product candidate from our glutamate receptor antagonist platform is troriluzole (previously referred to as trigriluzole and BHV-4157), which is in multiple Phase 3 trials. Other product candidates include BHV-5500, which is an antagonist of the glutamate N-methyl-D-aspartate (“NMDA”) receptor.
Troriluzole
Ataxias
We are developing troriluzole for the treatment of ataxias; our initial focus has been spinocerebellar ataxia
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("SCA"). We have received both orphan drug designation and fast track designation from the FDA for troriluzole for the treatment of SCA. Orphan designation was also received from EMA. A Phase 3 trial began enrollment in March 2019 to evaluate the efficacy of troriluzole in SCA. We believe that the non-statistically significant clinical observations from our first Phase 2/3 trial and open-label extension phase in SCA support our decision to advance troriluzole into a Phase 3 trial that could provide the data needed to serve as the basis for an NDA. We completed enrollment in the Phase 3 trial of troriluzole in SCA in the first quarter of 2021. Results are expected in the second quarter of 2022.
Other Indications
A Phase 2/3 double-blind, randomized, controlled trial to assess the efficacy of troriluzole in OCD commenced in December 2017. The Phase 2/3 study results were announced in June 2020. Troriluzole 200 mg administered once daily as adjunctive therapy in OCD patients with inadequate response to standard of care treatment showed consistent numerical improvement over placebo on the Yale-Brown Obsessive Compulsive Scale (Y-BOCS) at all study timepoints (weeks 4 to 12) but did not meet the primary outcome measure at week 12 (p = 0.22 at week 12), including significant improvement at week 8 (p < 0.05). Troriluzole was well tolerated with a safety profile consistent with past clinical trial experience. 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 the Phase 3 program. Two Phase 3 studies are currently ongoing with enrollment expected to complete in the second half of 2022.
In addition, a Phase 2/3 double-blind, randomized, controlled trial of troriluzole in the treatment of mild-to-moderate Alzheimer’s disease ("AD") was advanced with the Alzheimer’s Disease Cooperative Study, a consortium of sites funded by the National Institutes of Health. In January 2021, topline data from the trial revealed that troriluzole did not statistically differentiate from placebo at 48 weeks on the study's prespecified co-primary endpoints on the Alzheimer's Disease Assessment Scale-Cognitive Subscale ("ADAS-cog") and the Clinical Dementia Rating Scale Sum of Boxes in study participants with mild-to-moderate AD. Troriluzole also did not differentiate from placebo on the key secondary measure of hippocampal volume assessed by magnetic resonance imaging (MRI) in the overall population. A subgroup analysis consisting only of mild AD patients did, however, reveal that troriluzole exhibited a nonsignificant numerical difference of a potential benefit at week 48 on both the ADAS-cog and hippocampal volumetric MRI. Although the numerical effects on the ADAS-cog and hippocampal MRI measured in mild AD patients suggests a potential biologic effect of troriluzole in patients with early stage disease, additional analyses and biomarker data will be informative and help determine whether any further study in early AD is warranted. With regard to safety and
tolerability, treatment with troriluzole at a dose of 280 mg once daily was relatively well tolerated and demonstrated a safety profile consistent with previous studies of troriluzole. In December 2021, we completed an ongoing long-term extension study of troriluzole in AD for mild AD patients.
In December 2021, the Global Coalition for Adaptive Research ("GCAR") selected troriluzole for evaluation in Glioblastoma Adaptive Global Innovative Learning Environment - NCT03970447 ("GBM AGILE"). GBM AGILE is a revolutionary patient-centered, adaptive platform trial for registration that tests multiple therapies for patients with newly-diagnosed and recurrent glioblastoma ("GBM"), the most fatal form of brain cancer. Troriluzole will be evaluated in all patient subgroups of the trial which include newly-diagnosed methylated MGMT, newly-diagnosed unmethylated MGMT, and recurrent GBM. Troriluzole was selected for inclusion in GBM AGILE based on compelling evidence showing deregulation of glutamate in GBM. The therapeutic potential of troriluzole in GBM and other oncology indications is supported by several recent clinical and translational research studies conducted with troriluzole and its active moiety.
International Development
In the third quarter of 2020, BioShin raised $60.0 million in series A funding which will be used to build out BioShin Limited in China and advance our clinical portfolio in the Asia-Pacific region, including initiating sites in China to participate in the global registrational trial of troriluzole in SCA. In December 2021, in connection with entering into the Collaboration Agreement with Pfizer,we merged BioShin into a Biohaven subsidiary. BioShin completed enrollment for the SCA trial in China in the first quarter of 2021 with results expected in the first half of 2022.
BHV-5000 and BHV-5500
We are developing BHV-5500, a low-trapping NMDA receptor antagonist. One potential target indication includes Complex Regional Pain Syndrome (“CRPS”). CRPS is a rare, chronic pain condition typically affecting limbs and triggered by traumatic injury. Accompanying symptoms also include chronic inflammation and reduced mobility in the affected areas. Other disorders of interest include post-herpetic neuralgia and diabetic peripheral neuralgia. We acquired worldwide rights to BHV-5000 and BHV-5500 under an exclusive license agreement with AstraZeneca AB in October 2016. We selected a lead formulation at the end of 2017 and completed single dosing in a Phase 1 clinical trial of BHV-5000 in January 2018 to evaluate its pharmacokinetic properties. Results from nonclinical studies limiting clinical dose of BHV-5000 have led us to focus on BHV-5500 (lanicemine). Current work is focused on formulation development.
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MPO Platform
Verdiperstat
We are developing verdiperstat (previously BHV-3241), an oral myeloperoxidase inhibitor for the treatment of neurodegenerative diseases. One potential target indication is ALS. In September 2019, we announced that verdiperstat was selected to be studied in the Phase 3 HEALEY ALS Platform Trial, which is being conducted by the Sean M. Healey & AMG Center for ALS at Massachusetts General Hospital in collaboration with the Northeast ALS Consortium (“NEALS”) clinical trial network. Promising investigational drugs were chosen for the HEALEY ALS Platform Trial through a competitive process, with the Healey Center providing partial financial support to successful applicants. The Phase 3 HEALEY ALS Platform Trial of verdiperstat began enrollment in July 2020. Enrollment in the trial was completed in November 2021, with results expected in the second half of 2022.
Verdiperstat was progressed through Phase 2 clinical trials by AstraZeneca. Seven clinical studies have been completed by AstraZeneca, including four Phase 1 studies in healthy subjects, two Phase 2a studies in subjects with Parkinson’s disease, and one Phase 2b study in subjects with MSA. We have entered into an exclusive license agreement with AstraZeneca for the product candidate.
Myostatin Platform
Taldefgrobep Alfa
In February 2022, we announced that we entered into a worldwide license agreement with BMS for the development and commercialization rights to taldefgrobep alfa (also known as BMS-986089), a novel, Phase 3-ready anti-myostatin adnectin. Myostatin is a natural protein that limits skeletal muscle growth, an important process in healthy muscular development. However, in patients with neuromuscular diseases, active myostatin can critically limit the growth needed to achieve developmental and functional milestones. Myostatin inhibition is a promising therapeutic strategy for enhancing muscle mass and strength in a range of pediatric and adult neuromuscular conditions. Taldefgrobep is a muscle-targeted treatment for neuromuscular disease and offers the opportunity for combination therapy. We plan to initiate a Phase 3 clinical trial of taldefgrobep in SMA in mid-2022. SMA is a rare, progressively debilitating motor neuron disease in which development and growth of muscle mass are compromised, resulting in progressive weakness and muscle atrophy, reduced motor function, impaired quality of life and often death.
Kv7 Platform
BHV-7000
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 Kv7 channel targeting platform, adding the latest advances in ion-channel modulation to our growing neuroscience portfolio. BHV-7000 (formerly known as KB-3061) is the lead asset from the Kv7 platform and is a potentially best-in-class potassium channel activator with a preclinical profile suggestive of a wide therapeutic index, high selectivity, and significantly reduced GABA-ergic activity. We expect to bring BHV-7000 to the clinic in the second half 2022 in preparation for a development program in focal epilepsy.
Biohaven Labs
Kleo Pharmaceuticals, Inc. and Biohaven Labs
In January 2021, we acquired the remaining approximately 58% of Kleo that we did not previously own. We have assumed Kleo's laboratory facilities located in Science Park in New Haven, Connecticut and formed Biohaven Labs to serve as the integrated chemistry and discovery research arm of Biohaven. Biohaven Labs will continue several existing Kleo discovery partnerships, including one with the Bill and Melinda Gates Foundation for the development of a of a SARS-CoV-2 neutralizing therapy for COVID-19 and one with PeptiDream for the development of immuno-oncology therapeutics (See Note 6).
Biohaven's proprietary Multimodal Antibody Therapy Enhancer ("MATE") conjugation technology uses a new class of synthetic peptide binders to target the spike protein of SARS-CoV-2 that are then selectively conjugated to commercially available intravenous immunoglobulin. The Biohaven synthetic binders for SARS-CoV2 were designed to establish a much wider area and number of contacts with the spike protein that other agents like monoclonal antibodies. In February 2021, we announced that BHV-1200, developed with Biohaven's proprietary MATE platform, has demonstrated functional binding and neutralization of the SARS-CoV-2 virus, including the strains known as the "English" and "South African" variants (also known as B.1.1.7 and B.1.351, respectively). The preliminary experiments conducted by Biohaven Labs and an academic collaborator demonstrated that BHV-1200 substantially reduced viral entry into cells. We intend to advance BHV-1200 into a full clinical development program. Accelerated development of the COVID-19 MATE program has been supported by the Bill and Melinda Gates Foundation. In addition, the in vitro data indicated that BHV-1200 may activate important immune system components including antibody-dependent cellular phagocytosis and antibody dependent cellular cytotoxicity. We believe our proprietary MATE-conjugation technology could also be used against other infectious diseases by changing the targeting moiety of its antibody binders.
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Option and License Agreement with the University of Connecticut
In October 2018, we entered into an exclusive, worldwide option and license agreement (the "UConn Agreement") with the University of Connecticut ("UConn") for the development and commercialization rights to UC1MT, a therapeutic antibody targeting extracellular metallothionein. Under this agreement, we have 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. If we choose to exercise the option, we would be obligated to pay UConn milestone payments upon the achievement of specified regulatory and commercial milestones, and royalties of a low single-digit percentage of net sales of licensed products.
Fox Chase Chemical Diversity Center, Inc.
In May 2019, we entered into an agreement with Fox Chase Chemical Diversity Center Inc. (“FCCDC”) for FCCDC’s TDP-43 assets (the “FCCDC Agreement”). The FCCDC Agreement provides us with a plan and goal to identify one or more new chemical entity candidates for preclinical development for eventual clinical evaluation for the treatment of one or more TDP-43 proteinopathies. In connection with the FCCDC Agreement, Biohaven and FCCDC have established a TDP-43 Research Plan that provides for certain milestones to be achieved by FCCDC, and milestone payments to be made by us.
Sosei Heptares
In November 2020, we entered into a global collaboration and license agreement with Sosei Heptares, an international biopharmaceutical group focused on the discovery and early development of new medicines originating from their proprietary GPCR-targeted StaR technology and structure-based drug design platform capabilities. Under the agreement, Sosei Heptares will be eligible to receive development, regulatory and commercialization milestone payments, as well as tiered royalties on net sales of products resulting from the collaboration. In return, we will receive exclusive global rights to develop, manufacture and commercialize a portfolio of novel, small-molecule CGRP receptor antagonists discovered by Sosei Heptares for the treatment of CGRP-mediated disorders.
Artizan Biosciences, Inc.
In December 2020, we entered into an Option and License Agreement with Artizan Biosciences Inc. ("Artizan"), a biotechnology company focused on addressing inflammatory diseases involving the human intestinal microbiota. Pursuant to the agreement, we acquired an option to obtain a royalty-based license from Artizan to manufacture, use and commercialize certain products. Artizan will use the proceeds to continue advancing the preclinical research and
development of its lead program for inflammatory bowel disease, which is anticipated to enter the clinic in 2022, as well as to explore additional disease targets. In November 2021, we announced a collaborative therapeutic discovery and development program in Parkinson’s disease ("PD"), to exploit recent scientific advances in the understanding of pathogenic roles played by the gut microbiome in PD.
BHV-1100
In the fourth quarter of 2021, Biohaven initiated a Phase 1a/1b trial in multiple myeloma patients using its antibody recruiting molecule (ARM) BHV-1100 in combination with autologous cytokine induced memory-like (CIML) natural killer (NK) cells and immune globulin (IG) to target and kill multiple myeloma cells expressing the cell surface protein CD38. BHV-1100 is the lead clinical asset from Biohaven’s Antibody Recruiting Molecule (ARM™) Platform developed from a strategic alliance with PeptiDream Inc. (TYO: 4587). This clinical trial will assess the safety and tolerability as well as exploratory efficacy endpoints in newly diagnosed multiple myeloma patients who have tested positive for minimal residual disease (MRD+) in first remission prior to autologous stem cell transplant (ASCT).
Reliant Glycosciences, LLC
In July 2021, Biohaven entered into a development and license agreement with Reliant Glycosciences, LLC ("Reliant") for collaboration on a program with Biohaven Labs’ multifunctional molecules to develop and commercialize conjugated antibodies for therapeutic uses relating to IgA nephropathy and treatment of other diseases and conditions. Under the Agreement, Reliant was entitled to an upfront share payment and will be eligible to receive development milestone payments and royalties of net sales of licensed products.
KU Leuven
In January 2022, we entered into the KU Leuven Agreement to develop and commercialize first-in-class 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, henceforth known as BHV-2100, which has demonstrated promising efficacy in preclinical pain models and will be the first to advance towards Phase 1 studies. We will support further basic and translational research at KU Leuven on the role of TRPM3 in pain and other disorders.
Recent Developments
The following is a summary of key developments affecting our business in 2022.
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Pfizer Acquisition
On May 9, 2022, the Company, Pfizer and Bulldog (BVI) Ltd., a wholly owned subsidiary of Pfizer (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Pfizer Merger Agreement”), pursuant to which, on the terms and subject to the conditions set forth in the Pfizer Merger Agreement, Pfizer will acquire all outstanding shares of Biohaven for $148.50 per share in cash and Merger Sub will merge with and into the Company (the “Pfizer Merger”), with the Company surviving the Pfizer Merger as a wholly owned subsidiary of Parent.
In connection with and as a condition to the Pfizer Merger, the Company and Biohaven Research Ltd. (“New Biohaven”) entered into a Separation and Distribution Agreement, dated as of May 9, 2022 (the “Separation Agreement”), pursuant to which, on the terms and subject to the conditions set forth in the Separation Agreement, immediately prior to the effective time of the Pfizer Merger: (i) the Company will effect a pre-closing reorganization, which will result in (x) New Biohaven owning, assuming or retaining certain assets and liabilities of the Company and its subsidiaries related to the Company’s pipeline assets and businesses, and (y) the Company owning, assuming or retaining all other assets and liabilities, including those associated with the Company’s platform for the research, development, manufacture and commercialization of calcitonin gene-related peptide receptor antagonists, including rimegepant, zavegepant and the Heptares Therapeutics Limited pre-clinical CGRP portfolio; and (ii) thereafter, the Company will distribute to its shareholders as of the record date all of the issued and outstanding common shares of New Biohaven, no par value, on a pro rata basis (the “Spin-Off”), at a ratio of one New Biohaven Common Share for every two common shares of the Company. Following the Spin-Off, New Biohaven will be a separate public company and the Company will have no continuing common share ownership interest in New Biohaven.
Following the closing of the Pfizer Merger, New Biohaven will continue to operate under the Biohaven name. New Biohaven will be led by Vlad Coric, MD, as Chairman and CEO, and include other members of the current management team of Biohaven. At distribution, New Biohaven will be capitalized with $275 million in cash. New Biohaven will also have the right to receive tiered royalties from Pfizer on any annual net sales of rimegepant and zavegepant in the United States in excess of $5.25 billion. Pfizer expects to finance the transaction with existing cash on hand. Pfizer’s acquisition of Biohaven is subject to the completion of the New Biohaven spin-off transaction and other customary closing conditions, including receipt of regulatory approvals and approval by Biohaven’s shareholders. The companies expect the transaction to close by early 2023.
Pfizer Collaboration Agreement
In November 2021, we entered into the Pfizer Collaboration, pursuant to which Pfizer would commercialize the product candidates containing the Company's proprietary compounds rimegepant (BHV-3000) and gains rights to zavegepant (BHV-3500) (the "Licensed Products") in all countries worldwide outside of the United States. In consideration thereof, in January 2022 Pfizer made an upfront payment of $150.0 million to Biohaven upon receipt of the requisite regulatory approvals needed for the effectiveness of the Collaboration Agreement. In addition, in January 2022 Pfizer purchased $350.0 million worth of Biohaven common shares at approximately $173.05 per share, equal to 125% of the volume weighted average price per share for the 20 consecutive trading days prior to the signing. We will be eligible to receive an aggregate additional $740.0 million in contingent payments based on specified commercial and sales-based milestones for the Licensed Products.
We are also entitled to tiered, escalating royalties from the upper teens to twenty percent of net sales of Licensed Products in the Territory. In general, Pfizer’s obligation to pay royalties continues on a product-by-product and country-by-country basis until the latest of ten years after the first commercial sale of such product in such country, the expiration of the patent rights covering such product in such country or the expiration of the period of exclusivity applicable to such product in such country. In addition to the upfront payments, contingent payments and royalties described above, Pfizer will also compensate us for a pro-rata share of certain of its sales-based milestone obligations owed to BMS under the BMS License, and related net sales royalties owed to BMS and RPI that result from Pfizer’s commercialization and sale, respectively, of the Licensed Products in the Territory.
Merger Agreement with BioShin
On November 9, 2021, we entered into an agreement and plan of merger (the “Bioshin Merger Agreement”) with BioShin. The Bioshin Merger Agreement provides for the merger of a wholly owned indirect subsidiary of the Company with and into BioShin, with BioShin surviving the merger as a wholly owned indirect subsidiary of the Company (the “BioShin Merger”). As a result of the satisfaction of the closing conditions described in the BioShin Merger Agreement, on January 6, 2022, each Series A convertible preferred share of BioShin, no par value, other than Excluded Shares (as defined in the BioShin Merger Agreement), was converted into the right to receive 0.080121 of a Biohaven common share.
KU Leuven Agreement
In January 2022, we entered into the KU Leuven Agreement to develop and commercialize first-in-class TRPM3 antagonists to address the growing proportion of people worldwide living with chronic pain disorders. The
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TRPM3 antagonist platform was discovered at the Centre for Drug Design and Discovery ("CD3") and the Laboratory of Ion Channel Research ("LICR") at KU Leuven. Under the KU Leuven Agreement, we receive exclusive global rights to develop, manufacture and commercialize KU Leuven's portfolio of small-molecule TRPM3 antagonists. The portfolio includes the lead candidate, henceforth known as BHV-2100, which has demonstrated promising efficacy in preclinical pain models and will be the first to advance towards Phase 1 studies. We 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 an upfront cash payment of $3.0 million and 15,340 shares valued at $1.8 million, and is eligible to receive additional development, regulatory, and commercialization milestones payments of up to $327.8 million. In addition, KU Leuven will be eligible to receive mid-single digit royalties on net sales of products resulting from the collaboration.
Kv7 Platform Acquisition
On April 1, 2022, we closed the previously announced 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 “Transaction”), pursuant to a Membership Interest Purchase Agreement (the “Purchase Agreement”), dated February 24, 2022.
In consideration for the Transaction, on April 4, 2022, we made an upfront payment comprised of $35 million in cash and 493,254 Biohaven common shares, valued at approximately $65 million, (“Biohaven Shares”) issued through a private placement. We also agreed to pay additional success-based payments comprised of (i) up to $325 million 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 million based on developmental and regulatory milestones for the Kv7 pipeline development in other indications and additional country approvals, and (iii) up to $562.5 million for commercial sales-based milestones of BHV-7000. These contingent milestone payments may be paid in cash or Biohaven Shares at our election, but if we elect to pay in Biohaven Shares, such amounts are subject to increases of a mid-single-digit percentage increase (or in one case, a ten-percent increase). Additionally, we 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 double digits for the pipeline programs.
We have also given Knopp the option to request a one-time cash true-up payment from us in December 2022 in the event that Knopp continues to hold Biohaven Shares issued as a component of the upfront payment
and the value of such shares has declined, subject to certain conditions.
Taldefgrobep Alfa Platform License
In February 2022, following the transfer of intellectual property we announced that we entered into a worldwide license agreement with BMS for the development and commercialization rights to taldefgrobep alfa, a novel, Phase 3-ready anti-myostatin adnectin. The in-licensing of taldefgrobep expands our portfolio of innovative, late-stage product candidates for the treatment of neurologic, neuroinflammatory, and psychiatric indications. Under the terms of the agreement, we will receive worldwide rights to taldefgrobep alfa and BMS will be eligible for regulatory approval milestone payments, as well as tiered, sales-based royalty percentages from the high teens to the low twenties (see Note 13). We plan to initiate a Phase 3 clinical trial of taldefgrobep alfa in SMA in 2022.
Components of Our Results of Operations
Product Revenue, Net
We began to recognize revenue from product sales, net of rebates, chargebacks, discounts and other adjustments, in March 2020 in conjunction with the launch of our first product, NURTEC ODT. We will continue to evaluate trends related to revenue momentum for NURTEC ODT, including any discernible impacts of the COVID-19 pandemic. If our development efforts for our other product candidates are successful and result in regulatory approval, or additional license agreements with third parties, we may generate additional revenue in the future from product sales.
Collaboration and other revenue
We enter into licensing and collaboration agreements in which we are entitled to receive up-front payments, certain milestone payments and royalties. In November 2021, we entered into a collaboration and license agreement and related sublicense agreement with Pfizer, pursuant to which Pfizer would commercialize the Licensed Products in all countries worldwide outside of the United States (see Note 13).
Pursuant to ASC 606, during the three months ended March 31, 2022 we recorded a portion of the transaction price received in connection with the Collaboration Agreement to collaboration and other revenue on the condensed consolidated statements of operations and comprehensive loss for the amount representing performance obligations which had been satisfied during the period, including the transfer of intellectual property to Pfizer.
Operating Expenses
Cost of Sales
Cost of sales includes direct and indirect costs related to the manufacturing and distribution of NURTEC, including third-party manufacturing costs,
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packaging services, freight-in, third-party royalties payable on our net product revenues and amortization of intangible assets associated with NURTEC ODT.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred in connection with the development of our product candidates. We expense research and development costs as incurred. These expenses include:
•expenses incurred under agreements with contract research organizations (“CROs”) or contract manufacturing organizations (“CMOs”), as well as investigative sites and consultants that conduct our clinical trials, preclinical studies and other scientific development services;
•manufacturing scale-up expenses and the cost of acquiring and manufacturing preclinical and clinical trial materials and commercial materials, including manufacturing validation batches;
•employee-related expenses, including salaries, benefits, travel and 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;
•payments made in cash, equity securities or other forms of consideration under third-party licensing agreements prior to regulatory approval of the product candidate; and
We recognize external development costs based on an evaluation of the progress to completion of specific tasks using estimates of our clinical personnel or information provided to us by our service providers.
Our external direct research and development expenses are tracked on a program-by-program basis for our product candidates and consist primarily of external costs, such as fees paid to outside consultants, CROs, CMOs, and central laboratories in connection with our preclinical development, process development, manufacturing and clinical development activities. Our direct research and development expenses by program also include fees and certain development milestones incurred under license agreements. We do not allocate employee costs, or other indirect costs, to specific programs because these costs are deployed across multiple programs and, as such, are not separately classified. We use internal resources primarily to oversee the research and development as well as for
managing our preclinical development, process development, manufacturing and clinical development activities. Many employees work across multiple programs, and we do not track personnel costs by program.
Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will remain significant over the next several years as we increase personnel costs,conduct late-stage clinical trials, and prepare regulatory filings for our product candidates. We also expect to incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into license agreements to acquire the rights to our product candidates.
The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates or when, if ever, material net cash inflows may commence from any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:
•the scope, progress, outcome and costs of our preclinical development activities, clinical trials and other research and development activities;
•establishment of an appropriate safety profile with IND-enabling studies;
•successful patient enrollment in, and the initiation and completion of, clinical trials;
•the timing, receipt and terms of any marketing approvals from applicable regulatory authorities;
•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;
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•initiation of commercial sales of our product candidates, if and when approved, whether alone or in collaboration with others; and
•maintenance of a continued acceptable safety profile of the product candidates following approval.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of personnel costs, including salaries, benefits and travel expenses for our executive, commercial, finance, business, corporate development and other administrative functions; and non-cash share-based compensation expense. Selling, general and administrative expenses also include facilities and other related expenses, including rent, depreciation, maintenance of facilities, insurance and supplies; professional fees for expenses incurred under agreements with third parties relating to the commercialization of NURTEC ODT; and for public relations, audit, tax and legal services, including legal expenses to pursue patent protection of our intellectual property.
We anticipate that our selling, general and administrative expenses, including payroll and related expenses, will remain significant in the future as we continue to expand our operations and organizational capabilities, continue to support our commercial activities associated with NURTEC ODT, 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 and office-related costs, such as information technology costs.
Other Income (Expense)
Interest Expense
Interest expense primarily consists of interest on our outstanding term loan with Sixth Street Specialty Lending, Inc., which includes interest expense on the outstanding loan balance, accretion of the debt discount and amortization of issuance costs. Our interest expense also includes implied interest on our finance leases associated with our commercial car fleet. We utilize the effective interest method to determine our interest expense on the term loan and finance leases and the straight-line method for the amortization of the debt issuance costs.
Interest Expense on Mandatorily Redeemable Preferred Shares
Interest expense on mandatorily redeemable preferred shares is being recognized in connection with the issuance of series A preferred shares and series B preferred shares pursuant to the Series A preferred
share purchase agreement and Series B preferred shares forward contracts we entered into with RPI. Since we are required to redeem the series A preferred shares for 2x the original purchase price in equal quarterly installments by December 31, 2024 and the series B preferred shares for 1.77x the original purchase price in equal installments beginning on March 31, 2025 and ending December 31, 2030, we concluded that the Series A preferred shares and Series B preferred shares are mandatorily redeemable instruments and initially classified the preferred shares at their fair value as a liability. Interest expense on the mandatorily redeemable preferred shares represents the accretion of the carrying value of the preferred shares liability to its redemption value using the effective interest rate method.
Change in Fair Value of Derivatives
The fair value of the derivative liability recognized in connection with the Series B Preferred Shares Forward Contracts is determined using discounted cash flow and Monte Carlo valuation methods. As inputs into the valuation, we considered the probability of occurrence of certain change of control events, the amount of the payments, the expected timing of certain events, and a risk-adjusted discount rate. In accordance with ASC 815, Derivatives and Hedging, the fair value of the derivative is recorded on the condensed consolidated balance sheets as a Series B preferred shares forward contact with changes in fair value recorded in other income (expense) in the condensed consolidated statements of operations and comprehensive loss.
Interest Expense on Liability Related to Sale of Future Royalties
We have accounted for the 2018 RPI Funding Agreement and a unit of accounting of the 2020 RPI Funding Agreement with RPI Trust both as liability financings, primarily because they have significant continuing involvement in generating the future revenue on which the royalties are based. The liabilities related to sale of future royalties and the related interest expense are measured based on our current estimate of the timing and amount of future royalties expected to be paid over the estimated terms of the 2018 RPI Funding Agreement and 2020 RPI Funding Agreement. The liabilities are amortized using the effective interest rate method, resulting in recognition of interest expense over the estimated term of the agreement. Each reporting period, we assess the estimated timing and amount of future expected royalty payments over the estimated terms. If there is a change to one of the estimates, we recognize the impact to the liability’s amortization schedule and the related interest expense prospectively. Our estimate of the amount of expected future royalties to be paid considers the probability of success of compounds not yet approved for sale, and market penetration rates, compliance rate, and net pricing of both NURTEC ODT and compound not yet approved for sale. Additionally, the transaction costs associated with
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the liabilities will be amortized to interest expense over the estimated term of the 2018 RPI Funding Agreement and 2020 RPI Funding Agreement, respectively.
Gain from Equity Method Investment
Prior to our acquisition of Kleo in January 2021, we owned approximately 41.9% of the outstanding shares as of December 31, 2020, and accounted for our investment in Kleo under the equity method of accounting. As a result, our proportionate share of Kleo’s net income or loss each reporting period was included in other income (expense), net, in our condensed consolidated statements of operations and comprehensive loss and results in a corresponding adjustment to the carrying value of the equity method investment on our condensed consolidated balance sheet.
On January 4, 2021, we acquired the rest of the shares of Kleo, and post-transaction we own 100% of the outstanding shares of Kleo.
Provision for Income Taxes
As a company incorporated in the British Virgin Islands (“BVI”), we are principally subject to taxation in the BVI. Under the current laws of the BVI, tax on a company’s income is assessed at a zero percent tax rate. As a result, we have not recorded any income tax benefits from losses incurred in the BVI during each reporting period, and no net operating loss carryforwards will be available to us for those losses. We have historically outsourced all of the research and clinical development for our programs under a master services agreements with our wholly owned subsidiary, Biohaven Pharmaceuticals, Inc., a Delaware corporation (“BPI”). As a result of providing services under this agreement and profit from US commercial sales of NURTEC ODT, BPI was profitable during the three months ended March 31, 2022 and 2021, and BPI is subject to taxation in the United States.
In August 2020, we completed an intra-entity asset transfer of certain of our intellectual property to our Irish subsidiary. As a result of the transfer, we recorded a deferred tax asset of $875.0 million for the step up in tax basis received pursuant to Irish tax law. Based on our analysis of all available objective evidence, we concluded that it was more likely than not that the deferred tax asset from the intra-entity transfer will not
be realized due to the lack of net operating income history of our subsidiary. Therefore, we established a full valuation allowance against our net deferred tax asset in Ireland.
We continue to maintain a valuation allowance against our US deferred tax assets. We periodically review our position and have determined that a full valuation allowance on these assets was appropriate due to excess research and development ("R&D") credit carryforwards as of March 31, 2022. We will continue to evaluate the need for a valuation allowance on our deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances. We anticipate the commercialization of NURTEC ODT will result in future earnings and believe sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion, or all, of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release is subject to change on the basis of the level of profitability that we are able to actually achieve.
In January 2021, we completed the acquisition of Kleo. The acquisition and inclusion of Kleo did not result in a material impact on the provision for income taxes or the effective tax rate for the three months ended March 31, 2022 or 2021. We recorded a full valuation allowance against our Kleo US deferred tax assets and will periodically review our position and have determined that a full valuation allowance on these assets was appropriate due to Kleo’s cumulative loss history. We will continue to evaluate the need for a valuation allowance on our deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.
We recorded income tax provisions during the three months ended March 31, 2022 and 2021 of $24.3 million and $3.8 million. The income tax provisions recorded primarily represent certain state taxes for the period and US federal taxes due to general business credit limitations and the mandatory capitalization of R&D expenses effective January 1, 2022 under the Tax Cuts and Jobs Act.
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Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
The following tables summarize our results of operations for the three months ended March 31, 2022 and 2021:
| Three Months Ended March 31, | ||||||||||||||||||||
| 2022 | 2021 | Change | ||||||||||||||||||
| In thousands | ||||||||||||||||||||
| Revenues: | ||||||||||||||||||||
| Product revenue, net | $ | 123,590 | $ | 43,823 | $ | 79,767 | ||||||||||||||
| Collaboration and other revenue | 195,262 | — | 195,262 | |||||||||||||||||
| Total revenues | 318,852 | 43,823 | 275,029 | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||
| Cost of sales | 26,342 | 12,862 | 13,480 | |||||||||||||||||
| Research and development | 119,099 | 107,111 | 11,988 | |||||||||||||||||
| Selling, general and administrative | 227,243 | 159,523 | 67,720 | |||||||||||||||||
| Total operating expenses | 372,684 | 279,496 | 93,188 | |||||||||||||||||
| Loss from operations | (53,832) | (235,673) | 181,841 | |||||||||||||||||
| Other income (expense): | ||||||||||||||||||||
| Interest expense | (17,216) | (7,731) | (9,485) | |||||||||||||||||
| Interest expense on mandatorily redeemable preferred shares | (7,917) | (7,943) | 26 | |||||||||||||||||
| Interest expense on liability related to sale of future royalties | (17,314) | (13,508) | (3,806) | |||||||||||||||||
| Change in fair value of derivatives | 3,604 | (210) | 3,814 | |||||||||||||||||
| Gain from equity method investment | — | 5,261 | (5,261) | |||||||||||||||||
| Other income (expense), net | 81 | (1,700) | 1,781 | |||||||||||||||||
| Total other expense, net | (38,762) | (25,831) | (12,931) | |||||||||||||||||
| Loss before provision for income taxes | (92,594) | (261,504) | 168,910 | |||||||||||||||||
| Provision for income taxes | 24,303 | 3,824 | 20,479 | |||||||||||||||||
| Net loss | (116,897) | (265,328) | 148,431 | |||||||||||||||||
| Net loss attributable to non-controlling interests | 498 | 360 | 138 | |||||||||||||||||
| Deemed dividend upon repurchase of preferred shares in consolidated subsidiary | (92,673) | — | (92,673) | |||||||||||||||||
| Net loss attributable to common shareholders of Biohaven Pharmaceutical Holding Company Ltd. | $ | (209,072) | $ | (264,968) | $ | 55,896 | ||||||||||||||
Product revenue, net
Net product revenue was $123.6 million for the three months ended March 31, 2022, compared to $43.8 million for the three months ended March 31, 2021. The increase of $79.8 million in net product revenues is due to both increased NURTEC ODT sales volume and improvements in net price realization due to decreases in sales allowances during the three months ended March 31, 2022, compared to the three months ended March 31, 2021. Sales allowances and accruals mostly consisted of patient affordability programs, distribution fees and rebates.
Collaboration and other revenue
Collaboration and other revenue was $195.3 million for the three months ended March 31, 2022. No collaboration and other revenue was recognized for the three months ended March 31, 2021. The
collaboration and other revenue recognized during the three months ended March 31, 2022 was primarily due to $194.4 million recognized upon the satisfaction of our performance obligation for the delivery of the license and sublicense to commercialize Rimegepant outside the U.S. as part of our Collaboration Agreement with Pfizer (see Note 13).
Cost of Sales
Cost of sales was $26.3 million for the three months ended March 31, 2022, compared to $12.9 million for the three months ended March 31, 2021. Our cost of sales is related to royalties on net sales payable to BMS under a license agreement, manufacturing costs for NURTEC ODT, certain distribution costs and amortization of intangible assets related to milestone payments to BMS and Catalent, Inc. ("Catalent"). See Note 13 "Collaboration, License and Other Agreements"
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to our condensed consolidated financial statements for more information on the BMS agreements. The increase of $13.5 million in costs of goods sold was primarily due
to increased NURTEC ODT sales during the three months ended March 31, 2022, compared to the three months ended March 31, 2021.
Research and Development Expenses
| Three Months Ended March 31, | ||||||||||||||||||||
| 2022 | 2021 | Change | ||||||||||||||||||
| In thousands | ||||||||||||||||||||
| Direct research and development expenses by program: | ||||||||||||||||||||
| Rimegepant | $ | 19,116 | $ | 16,992 | $ | 2,124 | ||||||||||||||
| Troriluzole | 13,517 | 16,614 | (3,097) | |||||||||||||||||
| Zavegepant | 7,474 | 22,748 | (15,274) | |||||||||||||||||
| Verdiperstat | 5,079 | 6,788 | (1,709) | |||||||||||||||||
| TRPM3 | 5,877 | — | 5,877 | |||||||||||||||||
| Other programs | 5,668 | 4 | 5,664 | |||||||||||||||||
| Unallocated research and development costs: | ||||||||||||||||||||
| Personnel related (including non-cash share-based compensation) | 51,161 | 30,677 | 20,484 | |||||||||||||||||
| Preclinical research programs | 6,071 | 10,482 | (4,411) | |||||||||||||||||
| Other | 5,136 | 2,806 | 2,330 | |||||||||||||||||
| Total research and development expenses | $ | 119,099 | $ | 107,111 | $ | 11,988 | ||||||||||||||
R&D expenses, including non-cash share-based compensation costs, were $119.1 million for the three months ended March 31, 2022, compared to $107.1 million for the three months ended March 31, 2021. The increase of $12.0 million was primarily due to an increase of $20.5 million in personnel costs related to increases in headcount and $5.9 million related to TRPM3 program expenses resulting from our December 2021 agreement with KU Leuven to develop and commercialize TRPM3 antagonists. These increases were partially offset by a decrease in program expense for zavegepant of $15.3 million, primarily due to the conclusion of a Phase 3 clinical trial for the acute treatment of migraines in December 2021 with positive topline results. Non-cash share-based compensation expense was $34.0 million for the three months ended March 31, 2022, an increase of $13.9 million as compared to the same period in 2021. The increase in non-cash share-based compensation expense was primarily due to increases in headcount and our annual equity incentive awards granted in the first quarter of 2022 which had an increased fair value per award than the annual equity incentive awards granted in the first quarter of 2021.
Selling, General and Administrative Expenses
SG&A expenses, including non-cash share-based compensation costs, were $227.2 million for the three months ended March 31, 2022, compared to $159.5 million for the three months ended March 31, 2021. The increase of $67.7 million was primarily due to increases in spending to support the increased commercial sales of NURTEC ODT, including the launch of NURTEC ODT for the preventative treatment of migraine which was approved by the FDA in May of 2021. The increased spending included increases in marketing and
advertising expenses, professional fees and non-cash share based compensation. Less than half of the SG&A expense was for commercial organization personnel costs, excluding non-cash share-based compensation expense. Non-cash share-based compensation expense was $47.9 million for the three months ended March 31, 2022, an increase of $19.2 million as compared to the same period in 2021. The increase in non-cash share-based compensation expense was primarily due to increases in headcount and our annual equity incentive awards granted in the first quarter of 2022 which had an increased fair value per award than the annual equity incentive awards granted in the first quarter of 2021.
Other Expense, Net
Other expense, net was $38.8 million for the three months ended March 31, 2022, compared to net expense of $25.8 million for the three months ended March 31, 2021. The increase of $12.9 million in net expense was primarily due to increased interest expense as a result of additional borrowings under our debt facility and a gain from equity method investment recognized in the first quarter of 2021 related to the acquisition of Kleo Pharmaceuticals, Inc.
Provision for Income Taxes
We recorded an income tax provision of $24.3 million for the three months ended March 31, 2022, compared to a provision for income taxes of $3.8 million for the three months ended March 31, 2021. The increase in income tax expense of $20.5 million was primarily attributable the mandatory capitalization of R&D expenses effective January 1, 2022 under the Tax
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Cuts and Jobs Act, offset by an increased benefit to the Company's foreign derived intangible income deduction.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses and negative cash flows from our operations. We have funded our operations primarily with proceeds from sales of our common and preferred equity, sales of revenue participation rights related to future royalties, proceeds from a senior secured credit facility and the Collaboration Agreement with Pfizer. In addition, we began to generate net product revenue in
the first quarter of 2020 in conjunction with the launch of our first product, NURTEC ODT.
As of March 31, 2022, we had cash and cash equivalents of $169.1 million, excluding restricted cash of $5.3 million. Cash in excess of immediate requirements is invested in marketable securities with a view to liquidity and capital preservation. As of March 31, 2022, we had marketable securities of $433.4 million. We continuously assess our working capital needs, capital expenditure requirements, and future investments or acquisitions.
Cash Flows
The following table summarizes our cash flows for each of the periods presented:
| Three Months Ended March 31, | ||||||||||||||||||||
| 2022 | 2021 | Change | ||||||||||||||||||
| In thousands | ||||||||||||||||||||
| Net cash used in operating activities | $ | (23,644) | $ | (205,674) | $ | 182,030 | ||||||||||||||
| Net cash (used in) provided by investing activities | (244,270) | 119,769 | (364,039) | |||||||||||||||||
| Net cash provided by financing activities | 267,991 | 421,015 | (153,024) | |||||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents and restricted cash | (46) | 14 | (60) | |||||||||||||||||
| Net increase in cash, cash equivalents and restricted cash | $ | 31 | $ | 335,124 | $ | (335,093) | ||||||||||||||
Operating Activities
During the three months ended March 31, 2022, we used $23.6 million of cash in operating activities, a decrease of $182.0 million as compared to the three months ended March 31, 2021. The decrease in cash used in operations was primarily due to $248.0 million in upfront consideration received from Pfizer at the closing of the Collaboration Agreement, partially offset by increased costs related to commercial sales of NURTEC ODT.
Investing Activities
During the three months ended March 31, 2022, we used $244.3 million of cash in investing activities, an increase of $364.0 million as compared to the three months ended March 31, 2021. The increase in cash used in investing activities was primarily due to an increase of $246.8 million of purchases of marketable securities and a decrease of $113.4 million in sales of marketable securities during the three months ended March 31, 2022.
Financing Activities
During the three months ended March 31, 2022, net cash provided by financing activities was $268.0 million, a decrease of $153.0 million compared to the three months ended March 31, 2021. The decrease in cash provided by financing activities was primarily due to a decrease in proceeds from the issuance of common shares of $56.7 million and a decrease in proceeds from the obligation to perform R&D services of $100.0 million during the three months ended March 31, 2022.
Pfizer Collaboration Agreement
In November 2021, we entered into the Collaboration Agreement with Pfizer, pursuant to which Pfizer would commercialize the Licensed Products in all countries worldwide outside of the United States. In consideration thereof, in January 2022 Pfizer made an upfront payment of $150.0 million to Biohaven upon receipt of the requisite regulatory approvals needed for the effectiveness of the Collaboration Agreement. In addition, in January 2022 Pfizer purchased $350.0 million worth of Biohaven common shares at approximately $173.05 per share. We will be eligible to receive an aggregate additional $740.0 million in contingent payments based on specified commercial and sales-based milestones for the Licensed Products.
We are also entitled to tiered, escalating royalties from the upper teens to twenty percent of net sales of Licensed Products in the Territory. In general, Pfizer’s obligation to pay royalties continues on a product-by-product and country-by-country basis until the latest of ten years after the first commercial sale of such product in such country, the expiration of the patent rights covering such product in such country or the expiration of the period of exclusivity applicable to such product in such country. In addition to the upfront payments, contingent payments and royalties described above, Pfizer will also compensate us for a pro-rata share of certain of our sales-based milestone obligations owed to BMS under the BMS License, and related net sales royalties owed to BMS and RPI that result from Pfizer’s commercialization and sale, respectively, of the Licensed Products in the Territory. See Note 13,
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"Collaboration, License and Other Agreements" to the Condensed Consolidated Financial Statements included in this report for additional information regarding our Collaboration Agreement with Pfizer.
Credit Facility
In August 2020, we entered into a financing agreement, as amended, with the Lenders pursuant to which the Lenders agreed to extend a senior secured credit facility to the Company providing for term loans in an aggregate principal amount up to $500.0 million, plus any capitalized interest paid in kind. We drew an Initial Term Loan of $275.0 million at closing in August 2020 (the "Initial Term Loan" and had $100.0 million of immediately available delayed draw term loan commitments and $125.0 million of delayed draw term loans available upon achievement of the Delay Draw Sales Milestone (as defined in the Sixth Street Financing Agreement).
In March 2021, we entered into Amendment No. 1 (the "First Amendment") to the financing agreement pursuant to which the parties agreed to, among other things, remove the Delayed Draw Sales Milestone tied to the availability of the $125.0 million tranche of delayed draw term loans. In August 2021, we drew the $125.0 million tranche of delayed draw term loans (the "DDTL-2").
In September 2021, we entered into Amendment No. 2 (the “Second Amendment”) to the financing agreement. Pursuant to the Second Amendment, the parties agreed to, among other things, increase the size of the credit facility by providing for additional term loans in an aggregate principal amount of $250.0 million for a total facility size of $750.0 million plus any capitalized interest paid in kind. At the closing of the Second Amendment, we drew an initial term loan of $125.0 million (the "2021 Term Loan") and $100.0 million of delayed draw term loan commitments (the "DDTL-1"). The remaining $125.0 million in delayed draw term loan commitments (the "2021 DDTL Commitment") was available to be drawn by the Borrowers until December 31, 2021 (the "Delayed Draw Term Loan Commitment Termination Date").
In November 2021, we entered into Amendment No. 3 and Limited Consent to Financing Agreement (“the Third Amendment and Limited Consent”) to our Sixth Street Financing Agreement. Pursuant to the Third Amendment and Limited Consent, the Lenders consented to our entry into the Collaboration Agreement with Pfizer.
In December 2021, we entered into Amendment No. 4 (the "Fourth Amendment") to the financing agreement (as previously amended and as amended by the Fourth Amendment, the “Sixth Street Financing Agreement”), pursuant to which the parties agreed to, among other things, extend the Delayed Draw Term Loan Commitment Termination Date to June 30, 2022.
2020 Loans
In August 2020, we borrowed the Initial Term Loan for total proceeds of $262.2 million, net of discounts and issuance costs. In August 2021, we borrowed the DDTL-2 for total proceeds of $123.8 million, net of discounts and issuance costs. The DDTL-2 was borrowed under the same financing terms as the Initial Term Loan. The Initial Term Loan and the DDTL-2 (collectively, the "August 2020 Loans") become due and payable in August 2025. The August 2020 Loans accrue interest at a variable rate, with interest paid on a quarterly basis. The interest rate on the August 2020 Loans as of March 31, 2022 was 10.01%. We have the option to pay-in-kind up to 4.0% interest per annum for the first two years and have elected to pay-in-kind the maximum amount for all interest payments as of March 31, 2022. The proceeds from the August 2020 Loans are being used for general corporate purposes.
2021 Loans
In September 2021, we borrowed the 2021 Term Loan for total proceeds of $119.7 million and the DDTL-1 for total proceeds of $97.8 million, both net of discounts and issuance costs. The 2021 Term Loan and the DDTL-1 (collectively, the "September 2021 Loans") become due and payable in September 2026. The September 2021 Loans accrue interest at a variable rate, with interest paid on a quarterly basis. The interest rate on the September 2021 Loans as of March 31, 2022 was 9.26%. We have the option to pay-in-kind up to 4.0% interest per annum for the first two years that the loans are outstanding. The proceeds from the September 2021 Loans are being used for general corporate purposes.
As of March 31, 2022, we have $125.0 million in delayed draw term loan commitments still available to borrow under the Sixth Street Financing Agreement until June 30, 2022. If drawn, the loans will be borrowed under the same financing terms as the September 2021 Loans.
Equity Distribution Agreement
In December 2020, we entered into an equity distribution agreement in which we may offer and sell common shares having an aggregate offering price of up to $400.0 million from time to time through or to the sales agents, acting as our agents or principals (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 agents are not required to sell any specific amount of securities but will act as our sales agents using commercially reasonable efforts consistent with their normal trading and sales practices, on mutually agreed terms between the sales agents and us. We currently plan to use the net proceeds from the offering for general corporate purposes.
As of March 31, 2022, we have issued and sold 939,328 common shares for net proceeds of approximately $78.7 million all in the first quarter of 2021 under the Equity Distribution Agreement.
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Series B Preferred Shares Forward Contracts
In August 2020, we entered into the Series B preferred share agreement, whereby RPI will invest in the Company through the purchase of up to 3,992 Series B preferred shares at a price of $50,100 per share for aggregate proceeds of approximately $200.0 million (the "RPI Series B Preferred Share Agreement"). The shares will be issued in quarterly increments from March 31, 2021 to December 31, 2024. We are required to redeem the Series B Preferred Shares for 1.77 times the original purchase price, payable beginning March 31, 2025 in equal quarterly installments through December 31, 2030. The gross proceeds from the transaction with RPI will be used for the clinical development of zavegepant and other general corporate purposes
As of March 31, 2022, we have issued 1,697 Series B preferred shares to RPI for proceeds of $85.0 million.
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 commercialization of our product candidates. Our costs will also increase as we:
•continue and expand our commercial activities related to NURTEC ODT for the acute treatment of migraine;
•advance and expand the development of our CGRP and glutamate modulation platform product candidates and continue development of our MPO platform;
•conduct ongoing Phase 2 proof of concept trial to evaluate the safety and efficacy of rimegepant in patients with treatment refractory trigeminal neuralgia;
•complete the ongoing extension phase of the Phase 2/3 clinical trial of troriluzole in SCA and our ongoing Phase 3 trials of troriluzole in OCD, and complete our ongoing Phase 3 randomized controlled trial to assess the efficacy of troriluzole in SCA;
•conduct support activities for future clinical trials of BHV-5000;
•complete the Phase 3 clinical trial of oral zavegepant and related support activities, and continue other clinical trials of oral zavegepant;
•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;
•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.
As of May 10, 2022, the issuance date of our condensed consolidated financial statements, we expect that our cash, cash equivalents, and marketable securities as of March 31, 2022, our future operating cash flows from sales of NURTEC ODT, the funds available from the Sixth Street Financing Agreement, Series B Preferred Shares receipts, product sales and other proceeds from our Pfizer Collaboration will be sufficient to fund our current forecast for operating expenses, including commercialization of NURTEC ODT, financial commitments and other cash requirements for more than one year. We may need to raise additional capital until we are profitable. If no additional capital is raised through either public or private equity financings, debt financings, strategic relationships, alliances and licensing agreements, or a combination thereof, we may delay, limit or reduce discretionary spending in areas related to research and development activities and other general and administrative expenses in order to fund our operating costs and working capital needs.
We have based these estimates on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. We expect that we will require additional capital to pursue in-licenses or acquisitions of other product candidates. If we receive regulatory approval for troriluzole, or our other product candidates, we expect to incur additional commercialization expenses related to product manufacturing, sales, marketing and distribution,
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depending on whether we commercialize jointly or on our own.
Because of the numerous risks and uncertainties associated with research, development and commercialization of pharmaceutical product candidates, we are unable to estimate the exact amount of our working capital requirements. Our future funding requirements will depend on and could increase significantly as a result of many factors, including:
•the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinical trials;
•the costs, timing and outcome of regulatory review of our product candidates;
•the effect of COVID-19 pandemic on our business operations and funding needs;
•the costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for NURTEC ODT, in addition to any of our product candidates for which we receive marketing approval;
•the revenue from NURTEC ODT, and revenue, if any, received from commercial sale of our products, should any of our product candidates receive marketing approval;
•the costs and timing of hiring new employees to support our continued growth;
•the costs of preparing, filing, and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property-related claims;
•the extent to which we acquire or in-license other product candidates and technologies;
•the costs of manufacturing commercial-grade product and necessary inventory to support commercial launch;
•the costs associated with payment of milestones and royalties under existing contractual arrangements and/or in-licensing additional products candidates to augment our current pipeline; and
•the timing, receipt and amount of sales of, or milestone payments related to or royalties on, our current or future product candidates, if any.
Until such time, if ever, that we can generate product revenue sufficient to achieve profitability, we expect to finance our cash needs through a combination
of public and private equity offerings, debt financings, other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing shareholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we will be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market products or product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
The disclosure of our contractual obligations and commitments is set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Contractual Obligations and Commitments” in our Annual Report on Form 10-K for the year ended December 31, 2021. See Note 14, "Commitments and Contingencies" to our Condensed Consolidated Financial Statements included in Item 1, “Unaudited Condensed Consolidated Financial Statements,” of this Quarterly Report on Form 10-Q for further discussion of commitments and contingencies.
Critical Accounting Policies and Significant Judgments and Estimates
We have prepared our condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States ("GAAP"). Our preparation of our condensed consolidated financial statements 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 condensed consolidated financial statements, as well as revenue and expenses recorded during the reporting periods. 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
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could therefore differ materially from these estimates under different assumptions or conditions.
Excluding the discussion below, there have been no material changes to our critical accounting policies from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K filed by us with the SEC on February 25, 2022.
Revenue Recognition - Collaboration and other revenue
We recognize revenue associated with our collaboration arrangement, which may require us to exercise considerable judgment in estimating revenue to be recognized, including judgments made on initial accounting and judgments associated with the amount of revenue to be recognized over time as performance obligations are satisfied.
Significant judgment is required to apply the authoritative accounting guidance at the outset of a collaboration arrangement, and over time, as detailed below:
•Measurement of the transaction price - determining the transaction price includes varying levels of judgment. Where amounts are fixed and paid, such as upfront payments, estimation is not required. However, other elements of the transaction price do require estimation or assumptions by management. The calculation of a share issuance premium requires the use of a valuation model for purposes of determining the fair value of the shares for financial reporting purposes, with any resulting premium impacting the transaction price, which ultimately impacts the measurement of revenue.
•Allocation of the transaction price to the performance obligations - there is significant judgment required to allocate the transaction price to performance obligations. Generally, this is done by estimating the standalone selling price of identified performance obligations, and allocating on a relative value basis. The estimate of standalone selling price includes several assumptions that cannot be observed, which may include forecasted revenue, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success. The standalone selling price of performance obligations can be very sensitive to many of these underlying assumptions, which are based on management estimates since they cannot be observed. This is a point-in-time assessment performed at the outset of a collaboration arrangement.
•Recognition of revenue when (or as) we satisfy each performance obligation - determining the
timing of revenue recognition includes varying levels of judgment. For revenue recognized over time, this is often based on an underlying measure deemed to approximate the progress towards satisfaction of the performance obligations. These underlying measures, such as costs incurred to date compared with total forecasted costs for a service, may include inherent estimates, which in turn can impact the timing of revenue recognition. The satisfaction of performance obligations assessment is performed at each reporting period.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations, if applicable, is disclosed in Note 2 to our condensed consolidated financial statements appearing at the beginning of this Quarterly Report on Form 10-Q.
Item 3. Quantitative and Qualitative Disclosures about Market Risks
Foreign Currency Translation
Our operations include activities in countries outside the U.S. As a result, our financial results are impacted by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets where we operate. Our monetary exposures on our balance sheet are currently immaterial to our financial position.
We do not engage in any hedging activities against changes in foreign currency exchange rates.
Interest Rate Risk
As of March 31, 2022, we invest our excess cash balances in marketable securities of highly rated financial institutions and investment-grade debt instruments. We seek to diversify our investments and limit the amount of investment concentrations for individual institutions, maturities and investment types. Most of our interest-bearing securities are subject to interest rate risk and could decline in value if interest rates fluctuate. Based on the type of securities we hold, we do not believe a change in interest rates would have a material impact on our financial statements. If interest rates were to increase or decrease by 1.00%, the fair value of our investment portfolio would (decrease) increase by approximately $(2.9) million and $2.8 million, respectively.
In August 2020, we became subject to market risk in connection with borrowings under the Sixth Street Financing Agreement. The August 2020 Term Loans borrowed under the agreement accrue interest at the LIBOR Rate, subject to a floor of 1.00%, plus 9.00%. The September 2021 Term Loans borrowed under the agreement accrue interest at the LIBOR Rate, subject to
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a floor of 1.00%, plus 8.25%. Considering the total outstanding principal balance for all the loans drawn under the Sixth Street Financing Agreement of approximately $651.4 million at March 31, 2022, a 1.00% change in the LIBOR Rate would result in an impact to loss before income taxes of approximately $6.6 million per year.
We do not engage in any hedging activities against changes in interest rates.
Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of cash, cash equivalents, and marketable securities. Our 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. We are exposed to credit risk in the event of a default by the financial institutions holding our cash, cash equivalents and marketable securities to the extent recorded on the balance sheet.
We are also subject to credit risk from our accounts receivable related to our product sales. Our trade accounts receivable primarily consists of amounts due from pharmacy wholesalers in the U.S. (collectively, our "Customers") related to sales of NURTEC ODT and have standard payment terms. For certain Customers, the trade accounts receivable for the Customer is net of distribution service fees, prompt pay discounts and other adjustments. We monitor the financial performance and creditworthiness of our Customers so that we can properly assess and respond to changes in their credit profile. Our reserves against trade accounts receivable for estimated losses that may arise from a Customer’s inability to pay and any amounts determined to be uncollectible are written off against the reserve when it is probable that the receivable will not be collected. The reserve amount for estimated losses was not significant as of March 31, 2022, and we do not expect any such delays in collections to have a material impact on our financial condition or results of operations.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation,
controls and procedures designed to ensure that such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2022, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the three months ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
From time to time, we may be subject to litigation and claims arising in the ordinary course of business. 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 1A. Risk Factors
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. Our risk factors have not changed materially from thoseIn addition to the information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors described in "Part I, Item 1A. Risk Factors" of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the Securities and Exchange Commission on February 25, 2022.
The risks disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and information provided elsewhere in this report, could materially affect our business, financial condition or results of operations. Additional risks and uncertainties not currently known or we currently deem to be immaterial may materially adversely affect our business, financial condition or results of operations. Except for such additional information and the risk factors set forth below, we believe there have been no other material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
The consummation of the Pfizer Merger is subject to a number of conditions, many of which are largely outside of the parties’ control, and, if these conditions are not satisfied or waived on a timely basis, the Pfizer Merger Agreement may be terminated and the Pfizer Merger may not be completed.
The Pfizer Merger is subject to certain customary closing conditions, including: (i) adoption of the Merger Agreement by holders of a majority of the outstanding common shares and Series A preferred shares entitled to vote on such matters at the Company’s shareholders meeting and who are present at the shareholders meeting, in person or by proxy; (ii) the expiration, termination or receipt of any approval or clearances applicable to the consummation of the Merger under applicable antitrust laws, including the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the receipt of certain additional clearances or approvals of certain other governmental bodies applicable to the Merger; (iii) the absence of any law or order prohibiting or making illegal the consummation of the Merger; (iv) effectiveness of the registration statement to be filed with respect to registration of the common shares of New Biohaven; (v) completion of the Spin-Off; (vi) the
absence of certain legal proceedings by governmental authorities imposing certain limitations on Pfizer’s ownership or operation of the Company; (vii) subject to certain qualifications, the accuracy of representations and warranties of the Company, Pfizer and Merger Sub, as applicable, under the Merger Agreement and the performance in all material respects by the Company, Pfizer and Merger Sub, as applicable, of their obligations under the Merger Agreement; and (viii) the absence of any Company Material Adverse Effect (as defined in the Pfizer Merger Agreement).
The failure to satisfy all of the required conditions could delay the completion of the Pfizer Merger by a significant period of time or prevent it from occurring. Any delay in completing the Pfizer Merger could cause the parties to not realize some or all of the benefits that are expected to be achieved if the Pfizer Merger is successfully completed within the expected timeframe. There can be no assurance that the conditions to closing of the Pfizer Merger will be satisfied or waived or that the Pfizer Merger will be completed within the expected timeframe or at all.
Failure to complete the Pfizer Merger could adversely affect the stock price and future business and financial results of the Company.
There can be no assurance that the conditions to the closing of the Pfizer Merger will be satisfied or waived or that the Pfizer Merger will be completed. If the Pfizer Merger is not completed within the expected timeframe or at all, the ongoing business of the Company could be adversely affected and the Company will be subject to a variety of risks and possible consequences associated with the failure to complete the Merger, including the following: (i) upon termination of the Pfizer Merger Agreement under specified circumstances, the Company is required to pay Pfizer a termination fee of $450,000,000; (ii) the Company will incur certain transaction costs, including legal, accounting, financial advisor, filing, printing and mailing fees, regardless of whether the Pfizer Merger closes; (iii) under the Pfizer Merger Agreement, the Company is subject to certain restrictions on the conduct of its business prior to the closing of the Pfizer Merger, which may adversely affect its ability to execute certain of its business strategies; and (iv) the proposed Pfizer Merger, whether or not it closes, will divert the attention of certain management and other key employees of the Company from ongoing business activities, including the pursuit of other opportunities that could be beneficial to the Company as an independent company.
If the Pfizer Merger is not completed, these risks could materially affect the business and financial results of the Company and its stock price, including to the extent that the current market price of the Company’s common stock is positively affected by a market assumption that the Pfizer Merger will be completed.
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While the Pfizer Merger is pending, the Company will be subject to business uncertainties and certain contractual restrictions that could adversely affect the business and operations of the Company.
In connection with the pending Pfizer Merger, some customers, vendors or other third parties of the Company may react unfavorably, including by delaying or deferring decisions concerning their business relationships or transactions with the Company, which could adversely affect the revenues, earnings, funds from operations, cash flows and expenses of the Company, regardless of whether the Pfizer Merger is completed. In addition, due to certain restrictions in the Pfizer Merger Agreement on the conduct of business prior to completing the Pfizer Merger, the Company may be unable (without the other party’s prior written consent), during the pendency of the Pfizer Merger, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial and may cause the Company to forego certain opportunities it might otherwise pursue. In addition, the pendency of the Pfizer Merger may make it more difficult for the Company to effectively retain and incentivize key personnel and may cause distractions from the Company’s strategy and day-to-day operations for its current employees and management.
The Company will incur substantial transaction fees and Pfizer Merger-related costs in connection with the Pfizer Merger that could adversely affect the business and operations of the Company if the Pfizer Merger is not completed.
The Company expects to incur non-recurring transaction fees, which include legal and advisory fees and substantial Pfizer Merger-related costs associated with completing the Pfizer Merger, and which could adversely affect the business operations of the Company if the Pfizer Merger is not completed.
The termination fee and restrictions on solicitation contained in the Pfizer Merger Agreement may discourage other companies from trying to acquire the Company.
The Pfizer Merger Agreement prohibits the Company from initiating, soliciting, proposing or knowingly encouraging or knowingly facilitating any competing acquisition proposals, subject to certain limited exceptions. The Pfizer Merger Agreement also contains certain termination rights, including, but not limited to, the right of the Company to terminate the Pfizer Merger Agreement to accept a Superior Proposal (as defined in the Pfizer Merger Agreement), subject to and in accordance with the terms and conditions of the Pfizer Merger Agreement, and provides that, upon termination of the Pfizer Merger Agreement by the Company to enter into an alternative acquisition
agreement with respect to a Superior Proposal, the Company will be required to pay Pfizer a termination fee of $450,000,000 in cash. The termination fees and restrictions could discourage other companies from trying to acquire the Company even though those other companies might be willing to offer greater value to the Company’s stockholders than Pfizer has offered in the Pfizer Merger.
Litigation against the Company, Pfizer, or the members of their respective boards, could prevent or delay the completion of the Pfizer Merger or result in the payment of damages following completion of the Pfizer Merger.
It is a condition to the Pfizer Merger that no injunction or other order preventing the consummation of the Pfizer Merger shall have been issued by any court of competent jurisdiction or other governmental authority of competent jurisdiction and remain in effect. It is possible that lawsuits may be filed by the Company’s stockholders challenging the Pfizer Merger. The outcome of such lawsuits cannot be assured, including the amount of costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing the Pfizer Merger on the agreed-upon terms, such an injunction may delay the consummation of the Pfizer Merger in the expected timeframe, or may prevent the Pfizer Merger from being consummated at all. Whether or not any plaintiff’s claim is successful, this type of litigation can result in significant costs and divert management’s attention and resources from the closing of the Pfizer Merger and ongoing business activities, which could adversely affect the operations of the Company.
Uncertainty about the Pfizer Merger may adversely affect the relationships between the Company and its customers, vendors and employees, whether or not the Pfizer Merger is completed.
In response to the announcement of the Pfizer Merger, existing or prospective customers, vendors and other third party relationships of the Company may delay, defer or cease providing goods or services, delay or defer other decisions concerning the Company, refuse to extend credit to the Company, or otherwise seek to change the terms on which they do business with the Company. Any such delays or changes to terms could materially harm the Company’s business.
In addition, as a result of the Pfizer Merger, current and prospective employees could experience uncertainty about their future with the Company. These uncertainties may impair the Company’s ability to retain, recruit or motivate key management and technical, manufacturing, and other personnel.
If the Pfizer Merger is not consummated by May 9, 2023, either the Company or Pfizer may terminate the Pfizer Merger Agreement, subject to certain exceptions.
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Either the Company or Pfizer may terminate the Pfizer Merger Agreement if the Merger has not been consummated by May 9, 2023. However, this termination right will not be available to a party if that party failed to fulfill its obligations under the Pfizer Merger Agreement and that failure was the proximate cause of the failure to consummate the Pfizer Merger on time. In the event the Pfizer Merger Agreement is terminated by either party due to the failure of the Pfizer Merger to close by May 9, 2023, the Company will have incurred significant costs and will have diverted significant management focus and resources from other strategic opportunities and ongoing business activities without realizing the anticipated benefits of the Pfizer Merger.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
In January 2022, we and Katholieke Universiteit Leuven ("KU Leuven") entered into an Exclusive License and Research Collaboration Agreement (the "KU Leuven Agreement") to develop and commercialize first-in-class TRPM3 antagonists. As consideration under the KU Leuven Agreement, we issued 15,340 of our common shares, valued at $1.8 million, that were not registered under the Securities Act to KU Leuven in January 2022. KU Leuven 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.
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Item 6. Exhibits
Exhibit No. | Description | |||||||
| 2.1 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1‡ | ||||||||
| 101 | The following materials from the Registrant's Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Operations and Comprehensive Loss, (iii) the Condensed Consolidated Statements of Cash Flows and (iv) the Notes to Condensed Consolidated Financial Statements, tagged as blocks of text and including detailed tags. | |||||||
| 104 | Cover Page Interactive Data File (formatted in iXBRL in Exhibit 101). | |||||||
___________________________________________________
‡ These certifications are being furnished solely to accompany this quarterly 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.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| BIOHAVEN PHARMACEUTICAL HOLDING COMPANY LTD. | ||||||||
| Dated: May 10, 2022 | ||||||||
| By: | /s/ Vlad Coric, M.D. | |||||||
| Vlad Coric, M.D. | ||||||||
| Chief Executive Officer | ||||||||
| (On behalf of the Registrant and as the Principal Executive Officer) | ||||||||
| By: | /s/ Matthew Buten | |||||||
| Matthew Buten | ||||||||
| Chief Financial Officer | ||||||||
| (Principal Financial Officer) | ||||||||
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