It's easier to promise a fast biotech buck than to deliver one.
Biohaven Pharmaceutical Holding Co. Ltd., which raised nearly $ 200 million on an initial public offering last year, announced Monday that its premier migraine pill had met its primary targets in a late-stage test. But the drug did not have the effect that investors had hoped for and the company's stock retreated to its IPO price.
Getting a late-on-the-market drug in a crowded area is a difficult task – and it's not much more crowded than the migraine market. Biohaven is now an objective lesson in exactly how tough.
Patients would swallow a pill rather than a needle be stung. Unfortunately, pills are often less effective than injected biological (ie, live cell) alternatives. Oral competitors in a crowded market generally have to meet a high efficiency limit to form a niche and aggressively compete for the price to be covered by insurers.
Theoretically, this can be a profitable strategy. But it is not easy, especially if there are generic options for your medication. For example, Esperion Therapeutics Inc. is following this path with its cholesterol drug. On March 7, he reported comparatively better-received data, but since then his shares have fallen by 8 percent on issues of profitability.
Despite these risks, Biohaven made a lucrative IPO, thanks to an experienced leadership team and the fact that its leading drug would have final stage data and market access in a relatively short period of time.
But the company's main program would have had to raise additional red flags. Biohaven acquired his migraine drug from Bristol-Myers Squibb Co., which had given up on marketing the drug after a mid-stage test found that it was not as good as a generic option.
Meanwhile, four different injectable biologics, including drugs from Amgen Inc. and Eli Lilly & Co., could launch Biohaven's drug. The battle for market share among these drugs is likely to lead to price reductions that will make it more difficult for an oral alternative to become profitable. Allergan Inc. has an oral competitor who looks at least as good as Biohaven, if not better.
Every price war victory in pharmacy tends to be Pyrrhuss. This could be especially true for migraine medicines. In fact, there could be a three-front price war on this market, with more effective top-end drugs, cheap generic alternatives at the bottom, and Biohaven's drug with Allergan's middle.
Biohaven hopes for another phase 3 attempt to test a version of his pill that dissolves in the mouth will produce better results. It will probably have to be better if this drug is to move forward in this market.
Biohaven's offer to investors remains attractive. The potential for a quick return is always nice, and a good oral migraine drug option at a discount on biologics might work well in the migraine market.
But it's one of many biotech stories that sound better during an IPO roadshow than in the real world.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
Contact the publisher of this story:
Mark Gongloff at [email protected]