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3 Reasons Why Biohaven Pharmaceuticals' Stock Is Taking Off

By Jim Halley - May 28, 2020 at 6:46AM

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A hot new migraine drug, positive financials, and several promising drug candidates in late-stage trials are luring investors to this stock.

Shares of Biohaven Pharmaceutical (BHVN 0.14%) have nearly doubled since mid-March, including a jump of more than 11% since May 21, with the stock closing at $58.38 on Tuesday. Here are three reasons why investors are favoring the New Haven, Conn., commercial-stage biopharmaceutical company.

Pill bottles on a shelf.

IMAGE SOURCE: GETTY IMAGES

Reason No. 1: A profitable new drug

The biggest driver of this year's share price rise was the debut of the company's acute migraine drug, Nurtec ODT (rimegepant). It was approved by the Food and Drug Administration on Feb. 27, and posted net revenues of $1.2 million in March. More than 6,000 prescriptions have already been written for the drug.

"Our early prescription metrics show that NURTEC ODT has the potential to be a market leader in the class of new treatments for migraine and we believe it will be a key driver of revenue growth for Biohaven in the years to come," said CEO Vlad Coric.

The company deftly handled the difficulties of launching a drug during a pandemic by partnering with COVE, a migraine telemedicine platform. Instead of waiting for patients to begin visiting doctors in person again, Biohaven's partnership has brought Nurtec directly to customers.

Reason No. 2: Turning the corner on revenue

It didn't hurt that the Biohaven beat analysts' first-quarter estimates for non-GAAP earnings per share. While the average estimate had been for a loss of $2.39 per share, it reported a smaller $2.32 per share loss. In addition, the company's first-quarter revenue of $1.15 million beat analyst estimates by $940,000.

It's easy to understand why analysts were a little off in their numbers, as this was the first quarter the company has actually posted revenue since it was founded in 2013. Biohaven is also in a solid cash position with $428 million. 

Reason No. 3: Late-stage drugs in the pipeline 

Biohaven has high hopes for troriluzole, which is being studied in several late-stage trials: against obsessive-compulsive disorder; in fighting Alzheimer's disease; and against spinocerebellar ataxia, a progressive degenerative genetic neurological disease that affects motor control.

Phase 3 trials are also underway for vazegepant, a migraine treatment candidate that is delivered intranasally. The company is also looking at vazegepant in a phase 2 trial against COVID-19-related pulmonary complications.

Another drug Biohaven has in phase 3 trials is verdiperstat, for treating patients with multiple system atrophy, a rare neurodegenerative disorder. 

Turning the corner isn't the same as turning a profit

Those reasons may explain why people are rushing to buy the stock. However, just because Biohaven is finally pulling in some revenue doesn't mean it will turn a profit anytime soon.

The company went public in 2017. Since then, as it has developed its growing pipeline, it has lost money every year, including $528.2 million in 2019. Nurtec's debut has been promising, but it's a long way from turning Biohaven into a profit-making operation. Buying stock in Biohaven is a risk, -- as, indeed, investing in any company with only one drug on the market would be.

One hidden factor driving up the stock price

Biohaven's pipeline makes it an excellent takeover candidate, as its candidates -- should they win approval -- might perform better if they were being promoted by a company with a larger sales department.

The idea that it could be sold is not just a wild rumor, either -- according to Bloomberg, Biohaven has hired an advisor to field potential offers. 

However, Biohaven is trading within 14% of its 52-week high of $67.86, which may make it a less attractive acquisition target. That same point may discourage some regular investors as well. However,  the company's upside still could make it an enticing play for long-term investors who aren't risk-averse.

Jim Halley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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