Biohaven Pharmaceutical Holding Co. Has unexpectedly transformed from one of all biotech’s darlings into a cautionary story of overheated M&A hype. Shares of the developer of migraine treatments surged in April after Bloomberg News stated that the corporation is thinking about a sale; the inventory then took some other leg up in advance this month while Biohaven canceled plans to attend a Goldman Sachs healthcare convention, fueling the hypothesis a takeover was approaching. All those gains evaporated this week when the agency announced it became selling greater stocks, something that wouldn’t happen if a deal was in sight. As of midday Tuesday, the inventory turned down 35 percent from its highs:
Biohaven’s ongoing unmarried status shouldn’t have come as so much of a surprise. The corporation has arguably in no way been as compelling an M&A goal as a few traders and analysts seem to assume and face giant risks if it has to move it by itself. Deal hype isn’t a self-pleasing prophecy in biotech; in reality, it could once in a while backfire and result in the complete opposite. In the case of Biohaven, the organization’s lead drug in improvement is a migraine tablet that uses the same method as a group of three recently approved injectable medicines that may assist in preventing debilitating headaches. Biohaven’s drug is a fast-appearing opportunity. However, it should compete for a market subset with cheaper everyday options and an immediate rival from Allergan PLC.
The drug’s difficult path forward is one of the reasons Biohaven became probably open to a buyout; this launch can be even tougher and slower without the monetary resources and business expertise of a bigger organization. But that identical dynamic is likewise potentially what’s keeping capability suitors away. Biohaven isn’t the kind of corporation that pharma has been buying.
The candy spot of M&A inside the industry has targeted cancer pills and uncommon-ailment treatments that command very high expenses, partly by sidestepping the pricing and compensation issues that dog larger and extra aggressive markets, including the only for migraine treatments. Most recent biopharma acquisitions above $1.5 billion had been for businesses running in these regions or for capsules that already generate sales. It’s feasible that a drugmaker may want to determine to do something distinctive, but it’d need a compelling purpose, and the hype-driven ascent of BioHaven’s valuation doesn’t help.
This situation was one in which takeover excitement got nicely ahead of truth, which isn’t unusual in biotech. However, context matters, and any investment thesis that relies upon massive pharma expensively bucking an M&A trend to get itself into a likely charge war deserves a little greater skepticism.
To reach out to this tale’s writer, please get in touch with Max Nisen at mnisen@bloomberg.Internet. To find out who the editor responsible for this story is, contact Beth Williams at bewilliams@bloomberg.Internet. This column no longer always mirrors the opinion of the editorial board or Bloomberg LP and its owners. Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma, and health care. He formerly wrote about management and company approaches for Quartz and Business Insider.
