Shares of Biohaven Pharmaceutical (BHVN) plunged in morning trading after the company filed to sell stock. The stock sale came after management confirmed to an analyst yesterday that there was "no news" they were aware of to account for the stock's weakness on Monday.
STOCK SALE: Biohaven Pharmaceuticals on Monday night announced a mixed shelf registration and $300M share offering. The company said in a regulatory filing that it planned to use the proceeds from the stock offering, together with existing cash, to advance the development of its CGRP receptor antagonist platform and its glutamate modulation platform product candidates, as well as for working capital and other corporate purposes. Goldman Sachs and Piper Jaffray acted as joint book-running managers of the offering, Biohaven said.
WHAT'S NOTABLE: Shares of Biohaven, which makes treatments for migraines, have been rising since April, when media reports said the company was exploring potential options, including a potential sale of the company after drawing interest from suitors. The company, which is working with a financial advisor, is in the preliminary stages of weighing a sale or partnership and the talks may not end up in a deal, Bloomberg said on April 12.
BIOHAVEN 'UNAWARE OF NEWS' TO ACCOUNT FOR WEAKNESS: Prior to Biohaven's filing, Canaccord analyst Sumant Kulkarni said there was no specific news that could explain yesterday's stock weakness, "other than there being no news" after the company recently cancelled from an investor conference. Kulkarni told investors in a research note that Biohaven management confirmed to him that there had been no news, stating if the company's stated timeline for a new drug application filing on rimegepant for the acute treatment of migraine were to change it would let investors know and if for some reason it received a non-acceptance from the FDA an investor update would be necessary.
EQUITY RAISE COULD BE NEGOTIATION TACTIC: SVB Leerink analyst Marc Goodman told investors in a research note of his own that in hindsight, the stock weakness was probably due to the equity raise, even though he noted that Pfizer (PFE), a potential acquirer, "turned elsewhere" for M&A by announcing on Monday a deal with Array BioPharma (ARRY).
Goodman noted that Biohaven was trading around $50 per share in early April before Bloomberg reported that the company was in early stages of considering a sale or partnerships, and the news brought the stock up 20% to around $60. It gained another 20% after Biohaven cancelled its scheduled attendance at a healthcare conference last week. While the $300M equity raise is likely to disappoint investors, Goodman said the offering could be a negotiation tactic whereby management is showing potential buyers that it is serious about possibly going it alone.
The analyst said he still "likes" the company's fundamentals and feels that the rimegepant dual-strategy should be a substantial franchise in the acute and preventive migraine space. Further, he contends that the non-CGRP platform assets get minimal attention from investors despite the fact that the company has multiple shots on goal with troriluzole, which is pursuing multiple indications in obsessive compulsive disorder, Alzheimer’s and generalized anxiety disorder, and with BHV-3241, which will start a Phase 3 study for multiple system atrophy in the third quarter.
PRICE ACTION: In morning trading, shares of Biohaven Pharmaceutical sunk nearly 29% to $41.28.
